OOIDA backs Texas tort reform legislation, litigation financing

An effort underway at the Texas statehouse addresses “misguided, excessive, and expensive litigation” because of third-party litigation financing.

Third-party litigation financing companies pay for lawsuits they feel have a good chance of winning. The problem is, in many cases, it makes reaching a reasonable agreement much more difficult because of the anonymous third-party’s financial stake in the case.

Sponsored by Rep. Matt Krause, R-Fort Worth, and Sen. Pat Fallon, R-Prosper, the legislation would mandate disclosure of third-party litigation financing agreements.

Fallon stated in a bill analysis that financing of lawsuits has “skewed the litigation system.” He said it has changed the incentives to favor repayment of the lender rather than the provision of justice.

“In many cases, parties are being coerced to accept settlements they do not feel are in their best interests in order to ensure that the lenders are repaid,” Fallon stated. “This has the effect of wresting control of the plaintiff’s own lawsuit away from the plaintiff.”

The House and Senate bill would require the Texas Supreme Court to adopt rules by the end of this year to require parties in a civil action to disclose third-party litigation financing agreements.

The bills – HB2096 and SB1567 – are in committee.

OOIDA supports the legislation

The Owner-Operator Independent Drivers Association supports the legislative effort. OOIDA has more than 17,600 members who reside in Texas, and thousands more who regularly operate on roadways throughout the state.

Mike Matousek, OOIDA manager of government affairs, said the revision to Texas statute would “rightfully increase transparency in civil actions without impacting the ability of any plaintiff from pursuing a civil action.”

He says that truckers – and the people who employ, represent, and insure them – are often the target of “misguided, excessive, and expensive litigation” related to personal injury cases.

“Many of these cases are funded by outside parties with exploitative motives.”

At the very least, he says plaintiffs should be required to disclose any financing agreement associated with a civil action.

Matousek adds that third parties also can negatively affect what would otherwise be considered productive negotiations, because they inevitably control the case, and significantly and unnecessarily increase the cost of a settlement.