Sept 28 (Reuters) - Texas Gov. Rick Perry's much-touted "loser pays" law, which makes the losing side pay the winner's legal costs in some cases, may be a triumph more of political packaging than of legal reform.
While Perry has played up the law as he seeks the Republican presidential nomination, attorneys and legal experts say it will have little impact on the ability of trial lawyers to bring cases in Texas.
The law is narrowly written, will only affect a small number of lawsuits, and hardly rises to the name "loser pays," these experts say.
"It's a triumph of labeling," said Walter Olson, a fellow at the libertarian Cato Institute in Washington, and an expert on legal reform. "This is not a 'loser pays' system -- not even close. It is one little slice of 'loser pays' that wouldn't have been given national attention if the label hadn't been slapped on it."
Perry has said the law will not only reform Texas' legal system, but will also create jobs -- by reducing frivolous lawsuits and attracting businesses to the state. The measure will build on the medical malpractice reforms he signed into law in 2003, which he says brought more doctors to Texas.
In a nationally televised Republican presidential debate this month, Perry boasted that the law, coupled with previous reform efforts, would go a long way to "tell the trial lawyers to get out of your state."
But experts predict that the "loser pays" provision likely will be invoked only occasionally because it applies only to cases thrown out in the early stages. And, to be dismissed, a complaint would have to fail to properly articulate legal allegations against defendants -- an uncommon occurrence.
"To call it 'loser pays' is a misnomer," said Bradley Parker, a partner at law firm Parker McDonald in Fort Worth and vice president of legislative affairs at the Texas Trial Lawyers Association. The final product "doesn't do violence to the civil justice system," said Parker, who had opposed an earlier, more far-reaching form of the law.
David Chamberlain, an attorney at Chamberlain McHaney in Austin and president of the Texas chapter of the American Board of Trial Advocates -- an association of both plaintiff and defense attorneys, estimated that the new rule will apply only to about 5 percent of civil cases filed in Texas.
Perry's supporters maintain that the law will streamline litigation. Allison Castle, the governor's spokeswoman, said it will keep defendants from being "dragged through months, or even years, of expensive discovery before the court can dismiss the case."
As an example, Sherry Sylvester, a spokeswoman for advocacy group Texans for Lawsuit Reform, points to a 2001 lawsuit against the publishers of a newspaper in Harlingen, Texas, for an allegedly defamatory article it did not print.
The plaintiff, Dallas attorney Samuel Boyd, asserted that because the Valley Morning Star newspaper subscribed to the Associated Press, which published the article, the paper was liable. Although the case was ultimately dismissed, the defendants spent a year in court and spent $50,000 in legal fees, Sylvester said.
THE ENGLISH RULE
By allowing a judge to declare an early dismissal of a lawsuit, the Texas law, which went into effect on Sept. 1, brings the state in line with other U.S. states. Previously in Texas, lawyers could not file motions to dismiss, but could file "no evidence" motions that could have the same effect.
The provision of the law known as "loser pays" awards attorneys' fees to the prevailing party when a judge throws out a case because it has "no basis in law or fact."
Generally, the term "loser pays" refers to a more sweeping legal practice in Britain, Canada, Australia and other countries where the loser of a lawsuit pays the winner's legal costs.
Often called the "English Rule," it contrasts with the "American Rule," under which each party bears its own litigation costs. The U.S. tradition dates to a 1796 Supreme Court decision in a maritime case. The practice remains in effect on the federal level and in all states except Alaska, which gives a judge discretion on when to invoke "loser pays."
"Loser pays" is not currently a legislative priority for the American Tort Reform Association, a lobbying group.
Though the Texas law is limited in scope, it still has critics. The new rules could make it tougher for plaintiffs to prove their cases have merit, said Alex Winslow, executive director of Texas Watch, a consumer advocacy group. That could keep legitimate cases from getting a fair hearing, he added.
Still, Winslow is more concerned with another part of the law: changes to a provision that might be nicknamed "winner pays."
Under the prevailing Texas statute, if a plaintiff rejects a settlement offer and subsequently wins an award worth less than 80 percent of the rejected offer, the defendants can recover litigation costs. Under the new law, the winning party can now be required to pay the opponent up to the entire value of the jury award for its legal costs.
Winslow said this part of the law is the "most dangerous" because it will discourage individuals and small businesses from bringing legitimate lawsuits against large corporations with plenty of resources.
Pure "loser pays" laws give deep-pocketed parties a strategic advantage, said John Langdoc, a plaintiffs' attorney at Baron and Budd in Dallas.
But the law passed in Texas is too narrow to have a noticeable impact, he predicted.
"'Loser pays' is an interesting theoretical concept, but it hasn't been applied in practice," said Langdoc. "The Texas rule is not even mini-'loser pays'; it's micro."
(Reporting by Moira Herbst)