In June of 2015, Governor Greg Abbott signed Senate Bill 735 and House Bill 1692 into law. Both bills impact personal injury and wrongful death litigation in Texas. Senate Bill 735 limits discovery of a defendant’s net worth in connection with a claim for exemplary damages. House Bill 1692 closes a loophole in Texas forum non conveniens law that previously allowed foreign plaintiffs to maintain lawsuits in Texas for claims arising outside of Texas.
Senate Bill 735
For the past twenty years, section 41.011 of the Texas Civil Practice and Remedies Code has required the trier of fact to consider evidence of a defendant’s net worth, if any, in awarding exemplary damages. The mandatory consideration of net worth evidence has often fostered intrusive and expensive pretrial discovery into a defendant's financial status. Further, with no guidance from the Legislature regarding the meaning of "net worth," confusion and inconsistencies have arisen as to what net worth encompasses and the breadth of financial materials that are discoverable. Considering exemplary damages are frequently sought but rarely awarded in Texas, the utility of allowing discovery into a defendant's net worth has been questionable and controversial.
Senate Bill 735 provides new protections for defendants faced with exemplary damages claims and discovery regarding the defendants' net worth. First, Senate Bill 735 amends section 41.001 of the Texas Civil Practice and Remedies Code to statutorily define "net worth." Now, under section 41.001(7-a), net worth is defined as "the total assets of a person minus the total liabilities of the person on a date determined appropriate by the trial court." Practically speaking, defining net worth in a way that zeros in on a specific court-determined date should reduce the burden and expenses of net worth discovery.
More significantly, under newly-codified section 41.0115, the discovery of net worth evidence is authorized only when, upon motion of the plaintiff and after a hearing, the plaintiff "has demonstrated a substantial likelihood of success on the merits of a claim for exemplary damages." In this regard, the trial court serves as a gatekeeper, protecting the defendant from cumbersome net worth discovery when the recovery of exemplary damages is unlikely. Further, under 41.0115(b), if the trial court authorizes discovery into a defendant's net worth, "the court's order may only authorize use of the least burdensome method available to obtain the net worth evidence." In sum, even if a plaintiff meets the "substantial likelihood" hurdle, the least burdensome method of net worth discovery must be utilized. This is a substantial and needed improvement to the law in this area.
Senate Bill 735 was signed into law on June 19, 2015 and applies to actions filed on or after September 1, 2015.
House Bill 1692
Under the doctrine of forum non conveniens, a court may dismiss a lawsuit if another court is a more appropriate forum to hear the case. This doctrine allows Texas courts to dismiss lawsuits that have little or no connection to the State of Texas.
In determining whether dismissal is warranted under the doctrine of forum non conveniens, most jurisdictions consider the legal residency of the plaintiff as one of many factors in a balancing test. However, Texas law has traditionally used residency alone as the basis for maintaining a lawsuit in Texas.
Prior to the recent passage of House Bill 1692, section 71.051 of the Texas Civil Practice and Remedies Code prohibited the dismissal of personal injury or wrongful death claims filed by nonresidents, so long as one plaintiff in the lawsuit was a legal resident of Texas. The broad statutory definitions of "legal resident" and "plaintiff" allowed resident intervenors or derivative plaintiffs to maintain a lawsuit originated by nonresidents in the State of Texas.
House Bill 1692 seeks to curb lawsuits brought by nonresidents for injuries sustained outside of Texas. The catalyst for House Bill 1692 is the Texas Supreme Court's opinion in In re Ford Motor Company, 442 S.W.3d 265 (Tex. 2014). In Ford, a resident of Mexico sued the estate of a Mexican decedent for injuries allegedly sustained in a car accident that occurred in Mexico. The lawsuit was filed in Hidalgo County, Texas. The decedent's estate then filed a third-party claim against Ford. Wrongful death beneficiaries—some of whom were legal residents of Texas—intervened and also filed claims against Ford. In sum, the only Texas residents involved in the lawsuit were the intervening wrongful death beneficiaries.
The Texas Supreme Court held that the intervening wrongful death beneficiaries constituted plaintiffs under section 71.051 of the Texas Civil Practice and Remedies Code. Pursuant to section 71.051(e),