Since its inception, the American legal system has given its citizens the option of resolving disputes in civil court. All businesses rely on this right to collect accounts, cancel contracts and otherwise address perceived wrongs. As the civil justice system has evolved, the cost of pursuing a claim in civil court has risen and it now commonly takes 2-3 years to push even the simplest breach of contract case through the court system. Almost unlimited document production, depositions and the delay of the trial settings further increase costs.

The Texas Supreme Court recently amended four of the Texas Rules of Civil Procedure with the intention of reducing the time and costs associated with litigation. These amendments, which were enacted after considerable public debate, are important to the Texas business community for two reasons: (1) they simplify important steps of the litigation process when a plaintiff is seeking $100,000 or less in damages, and (2) they discourage the filing of frivolous or baseless causes of action. These amendments directly impact the options available to businesses in a Texas court as any business evaluates its options.

The new rule, titled “Expedited Actions,” was added by the Texas Supreme Court to govern all suits in which combined monetary relief of $100,000 or less is sought by the plaintiffs. The new expedited action rules do not apply to a claim governed by the Family Code, the Property Code, the Tax Code, or a healthcare liability claim, but the new rules are otherwise mandatory and a plaintiff can avoid the expedited process only by seeking non-monetary relief or relief in excess of $100,000.

Discovery, the process used to obtain information before trial, is significantly restricted in time and volume under the new expedited action rules. For example, under the previous rules, a party could serve an unlimited number of requests for production and requests for admission on an opposing party, but under the amended rule, a party is only allowed to serve 15 of each type of request. The amendments also make it possible for an expedited action to be filed and tried in less than a year by mandating that a court set an expedited action for trial within 90 days after the discovery process ends. And once trial begins, each side will be limited to five hours to try its case. The combined effect of these amendments will hopefully be a cheaper, faster and more effective litigation process that re-opens the courthouse doors to business litigants in Texas.  

However, to ensure that the courthouse doors do not open too far, the Texas Supreme Court also created a rule, titled Dismissal of Baseless Causes of Action, to allow for a party to move for dismissal of a cause of action on the grounds that it has no basis in law or fact.  This amendment is intended to prevent plaintiffs from blindly alleging causes of action and seeing if anything “sticks” in court. If a claim is dismissed as baseless, the losing party must pay the prevailing party for the costs and attorney’s fees it incurred in defending the frivolous cause of action. The payment of attorney’s fees by a losing plaintiff is a significant departure from the “American Rule,” which provides the default that all parties are responsible for their attorney’s fees.

While the actual effect of these amendments has yet to be determined, the new Texas rules could be beneficial for members of the Texas business community who find themselves involved as either a plaintiff or a defendant in a Texas court. The rules governing expedited action should make it cheaper and less time consuming for a Texas business to file an action and seek relief in a Texas court, while the “loser pays” scheme should make potential plaintiffs more hesitant to file baseless claims in a Texas court.

First published in Business Press