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Business Litigation Alert: "Is the Litigation Climate in Texas Really Business Friendly?"

The U.S. Chamber of Commerce recently released its 2017 Lawsuit Climate Survey.  The survey ranks each state according to how “litigation-friendly” it is towards businesses based on the “perception” of those businesses.  Specifically, the rankings explore “how reasonable and balanced the states’ tort liability systems are perceived to be by U.S. businesses.”  This year, South Dakota ranked number 1.  Texas ranked number 39, moving up one spot from its 2015 ranking at number 40, but down three spots from its 2012 ranking of 36. 

So, what does this ranking really mean?  It means that – despite decades of tort-reform – companies continue to look at Texas as a state where large jury awards still happen.  In fact, the report claims that Jefferson County, Texas is one of the top ten cities or counties with the “least fair and reasonable” litigation environments.

A recent Texas case seems to prove the point.  Last week, a Dallas jury ordered JPMorgan Chase to pay more than $4 billion in punitive damages for allegedly mishandling the estate of an American Airlines executive.  While this award will likely not survive the appeals process, it provides fodder for those who view Texas as a less than ideal venue for litigation.

In addition to releasing the rankings, the Chamber of Commerce also released a report on 101 Ways to Improve State Legal Systems, looking at fair and effective measures that would safeguard the integrity of the litigation process, promote rational liability rules, address over-regulation and enforcement, improve product liability law, and rein in excessive awards. 

Some of the suggested improvements include:

  1. Class actions that benefit the public, not just attorneys, suggesting that the attorney’s fees awards have a relationship to the money received by class members.
  2. Reduce the rising costs of e-discovery by ensuring that document production demands correspond directly to the needs of the case.
  3. Eliminate “gotcha” lawsuits that can harm small businesses by requiring plaintiffs to provide notice and an opportunity to settle before filing a lawsuit.

As 85% of respondents for this survey indicated that a state’s litigation environment impacts decisions such as where to do business, these rankings can have a direct impact on a state’s ability to attract and retain businesses. 

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