Orthopedists, look to Texas tort reform: Loser pays legal fees

Douglas W. Jackson

The American judicial system differs from other democracies in the Western world in that the losing side in litigation may recover the reasonable costs of defending themselves. But, imagine a scenario in which the attorney and plaintiff who lose a medical liability case would have to pay the reasonable expenses of the prevailing doctor. Texas Governor Rick Perry recently suggested using loser-pays modifications as part of furthering tort reform in his state. Borrowing from the British legal System, Perry proposed that attorneys filing cases on a contingency basis would have to pick up the reasonable legal costs of the defense if they lose their suits. I agree with the governor that this would certainly add disincentives for bringing suits that are “groundless” and frivolous which are fueled by current contingency incentives.

According to Perry’s website, his proposal includes:

• creating an early dismissal option for frivolous lawsuits;
• ensuring victims of frivolous lawsuits do not bear the financial burden of defending themselves;
• ensuring new laws cannot create causes of action unless expressly established by the state legislature; and
• setting up expedited trials and limited discovery for lawsuits with claims between $10,000 and $100,000.

Bar opposition

The bar associations have argued that frivolous suits are not a significant problem. They say that the most egregious cases are thrown out or discontinued. They argue that because frivolous cases represent only a small percentage of cases that actually go to trial they do not contribute significantly to higher costs of litigation in this country. While that statement may be partially correct, from a physician’s perspective there is more at stake in lawsuits then monetary consequences. We know well that the cost of litigation to us may involve ensuing outrageous premiums, the loss of revenue and countless hours and expenses in preparing for a case and giving depositions, and, what may be the greatest cost, the emotional toll a malpractice case takes on a physician. All of these activities interfere with, and take time away from, caring for patients and being with one’s family. Even though only a small percentage of these cases actually end up going to trial, frivolous cases involve time for preparation. These transaction costs of resolving a case often exceed the value of the damages sought in the lawsuit.

A frequently used argument against losers-pay initiatives is that it may deter lawyers and individuals from pursuing legitimate cases. Many of our politicians, judges and as well as attorneys feel the ability to bring suits needs to be preserved especially for the poor and disadvantaged. Justice in the courts represents an opportunity for injured parties to be compensated by their perceived wrongdoer. A loser-pays system would limit a perceived fundamental right, they claim.

Losing a case does not necessarily mean it was a frivolous lawsuit, a number of reasons combine to determine outcomes in a courtroom. The court is a place where justice “may” occur. There are many incentives in the system that push plaintiffs to consider a settlement, such as the costs involved with defending a case or the uncertainty of the outcome. In addition, many cases may take up to 5 years to work through the judicial process. This delayed resolution can lead to higher costs as the longer a case goes unresolved, the higher the cost generated by lawyers’ fees. When, or if, a case settles, often the cost of the plaintiff’s lawyer’s contingency fee and expenses when added to the defense cost may gobble up more than half the settlement.

Debate remains, lawyers fight

A Texas-style loser-pays rule will be defined further by Perry and no doubt be debated in the state. Since it reformed its medical malpractice laws, Texas has a $250,000 cap on noneconomic damages for pain and suffering. Partly because of this reform, high-risk physician specialties in Texas have seen their liability rates decreased by more than 25% since 2003. Members of the bar admit that since the medical liability reform, Texans have enjoyed increased access to health care as the number of physicians practicing in high-risk specialties, like orthopedics, and neurosurgery has increased significantly — especially in areas of the state that were underserved by these specialties in the past.

Bar associations across the country are aligning their voices, votes and funding behind movements to block the governor’s proposed changes. Their hefty donations will be focused on Texas during the discussions with much of this money coming from large legal firms. They will go to no ends to limit and block any state that would try to place limits on frivolous lawsuits. Texas has the opportunity to make a definitive statement on this type of tort reform, but never underestimate the legal professions lobbying and spending efforts to prevent any change this bold.

Compromise

One proposed compromise would be for the losing plaintiff to be absolved from paying the victorious defendant’s fees if he or she agrees to a binding arbitration. If one litigant will not agree to arbitration the plaintiff faces the risk of loser-pays.

Under health care reform — whatever form it ends up taking — the frivolous and groundless suits will have to be limited. See my commentary from the November 2009 issue of Orthopedics Today on specialty courts as a better approach for medical litigation. These courts can more efficiently compensate deserving individuals and not have judgments subjected to a lay group of jurors with widely varying and sometimes questionable abilities to understand complex medical issues. We would all benefit from a system designed to resolve disputes and alter the costs of our current litigious lawyer-driven system.

A note from the editors

For more on malpractice litigation reform, see the Round Table discussion.

• Douglas W. Jackson, MD, is chief medical editor of Orthopedics Today. He can be reached at Orthopedics Today, 6900 Grove Road, Thorofare, NJ 08086; e-mail: OT@slackinc.com.