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In September a new law went into effect in Texas, colloquially known as the “Loser Pays” law. This law institutes an analogue of the long term English tradition of requiring the loser in a civil suit to pay the court costs and attorney fees of the winner. The Texas law, however, slightly modifies this practice by only requiring the losing PLAINTIFF to pay defendant’s legal costs, and not the other way around, if the defendant loses.
Typically, the only way to obtain court costs and attorney fees in litigation is either by contract or by statute. This new law is a statutory mandate which awards legal costs to a party behind which the legislative intent is to deter frivolous legal actions, which are presumed to increase costs of just about everything, since businesses must include potential legal costs of defending lawsuits in their operational budgets, and then pass these costs on to consumers.
Furthermore, this new law penalizes the plaintiff for rejecting a settlement offer that is ultimately greater than what the judge or jury awards at the close of trial. In fact, if after trial, the award is less than 80% of the final settlement offer, the plaintiff will be required to pay defendant’s legal costs. So the plaintiff could actually lose a great deal of the entire recovery, if not nearly all of it, though the plaintiff cannot lose more than the final recovery itself.