Mr. Shank spotted a big issue in a new Texas law that aims to cut back on what our lawmakers and governor deemed "frivolous" lawsuits. Does the law really import from federal law a subjective standard of plausibility, he asks.
Let us see what Mr. Shank has to say.
Last May, Texas Governor Rick Perry signed into law a bill that adopts a form of “loser pays” for “causes of action that have no basis in law or fact”. Last month, a branch of the Texas Supreme Court Advisory Committee drafted a new rule to implement that part of House Bill 274. But guess what? The draft would import a kind of Twombly test into Texas practice – a cure worse than the disease.
HB 274 requires the Supreme Court in Austin to “create rules to provide for the dismissal” of baseless claims “on motion and without evidence.” It also provides that, upon deciding such a motion, “the court shall award costs and reasonable and necessary attorney’s fees to the prevailing party.” So far so good.
To many Texas lawyers, the phrase “no basis in law or fact” will look familiar. Texas Rule of Civil Procedure 13, which provides for sanctions against attorneys who submit groundless pleadings and motions, defines the term “groundless” as having “no basis in law or fact and not warranted by good faith argument for the extension, modification, or reversal of existing law.”
By using the same phrase to define baseless claims in HB 274 as the Supreme Court used in Rule 13, the legislature seems to have done most of the Supreme Court’s work for it. A voluntary working group of lawyers, on both sides of the docket, thought so. Members from the Texas Association of Defense Counsel, the Texas Trial Lawyers Association, and the Texas chapters of the American Board of Trial Advocates, with help from the Texas Bar’s Section of Litigation, unanimously approved a draft rule that used the “without basis in law or fact” language with no change.
But, as Texas Lawyer’s Tex Parte blog reports, a subcommittee of the Texas Supreme Court Advisory Committee sees things differently. The relevant parts of the committee’s draft rule, which it recently finalized and submitted to the Supreme Court, provide as follows (with our emphasis):
A. Grounds and content of motion.
(1) On motion a court must dismiss a claim that has no basis in fact or that is not supported by existing law or by a reasonable argument for extending, modifying, or reversing existing law.
(2) In deciding the motion to dismiss the court must not consider evidence, except as to attorneys’ fees, and must accept as true all allegations in the challenged pleading unless a reasonable person could not believe them.
. . . .
G. Attorneys’ fees. Upon granting or denying the motion in whole or in part, the court must award costs and reasonable and necessary attorneys’ fees to the prevailing party for preparing and presenting, or responding to, the motion.
The subcommittee’s decision to alter the statutory language “no basis in law or fact” looks curious, since that language incorporates a standard already in the rules. Tex Parte reports that the committee engaged in “hours of discussion” about how the rules should “define a claim with ‘no basis in law or fact.” But the post sheds no light on why the group dropped “no basis in law or fact” in favor of a wordier test.
Nor does it explain why the subcommittee chose to instruct courts to disregard factual allegations that “a reasonable person could not believe.” That sounds an awful lot like the plausibility standard that the United States Supreme Court created for federal Rule 12(b)(6) motions to dismiss in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)—a standard the Texas solons avoided by specifically removing the original bill’s reference to federal Rule 12 and replacing it with Texas Rule 13’s standard for groundless claims.
Did the subcommittee have a choice? The final bill expressly provides that a court must decide the motion to dismiss “without evidence.” If a judge cannot review evidence, the subcommittee seems to have thought, how can she determine a claim lacks a basis in fact? But granting trial judges license to disregard factual allegations they deem unreasonable would defy the long-standing Texas rule that requires courts to accept all factual allegations as true.
The working group had the better idea. Put the exact words the legislature used in the rule and no more. We don’t need no stinkin’ Twombly badges in Texas.