We have reported at length this session about the explosion of bills proposing new or expanded civil penalties, private rights of action, and attorney general enforcement power. The number of such bills has increased tenfold since last session and account for nearly one in every eight bills filed this session (and there have been a record number of those). We have seen this trend coming for several years, but we never expected the magnitude of the problem to get so big so fast.
Clearly, there are simply too many of these bills to offer individual comments about them. It could well be that a handful might be justified, but even so, there can’t be more than 1,000 new and never before encountered abuses that require this particular pattern of violation and punishment by both public and private litigation. We can debate why this format has become so popular and ubiquitous, but whether we chalk it up to legislating to individual or outlier examples of an alleged abuse or simply a political desire to target certain industries and health care providers for exemplary treatment doesn’t really matter in the end. Either way, we are doing incalculable damage both to the civil justice system and to the future of the Texas business climate. Since 1995, when the Texas economy truly began to take off, the “conservative” position was pretty simple: low taxes, minimal business regulation, and a fair and stable litigation environment constituted the recipe for economic growth. By any reckoning, it has worked spectacularly well.
But somewhere along the line, the position has changed. Whereas we used to associate higher taxes, a more burdensome regulatory structure, and expansive litigation opportunities with a subgroup of one political party, that is no longer the case. While lip service to the original conservative principles is much in evidence, a thousand bills from across the political spectrum that raise taxes, produce a more burdensome regulatory structure, and proliferate litigation don’t lie. And, yes, we mean that these bills raise taxes because they put a surcharge on every good and service they affect. This charge will be paid by somebody, and that somebody is the consumer and the taxpayer. This is particularly true of the bills that waive sovereign or governmental immunity. Those bills directly increase the tax burden because taxpayers have to pay the penalties, settlements, judgments, costs, and attorney’s fees associated with almost every single one of them. They also have the affect of making insurance more costly to get, if local governmental entities will even be able to get it at all. In other words, taxpayers are not only the insurer of last resort but increasingly primary insurers in the governmental market. Any representation of the overall Texas tax burden that omits these costs is misleading at best.
The indirect costs of penalties, including the massive litigation costs that they entail, will likewise be borne by consumers (who are also taxpayers). The list of the good and services that will necessarily see cost increases is a long one, but every one of these bills imposes a new duty (and sometimes a whole laundry list of new duties) with an enforcement mechanism (and sometimes multiple mechanisms). We are certainly not saying that businesses or health care providers shouldn’t be regulated in certain ways. Some of these bills try to address legitimate concerns. But in the vast majority of cases, an enforcement mechanism either already exists or the targeted conduct or activity could readily be brought under the umbrella of an existing regulatory agency with the necessary expertise to develop rules that would be enforced through the existing administrative process.
Instead, these bills commonly refer enforcement to the attorney general, who has to pour state resources into investigating alleged violations, all for the opportunity to sue people, hail them into court, conduct expensive discovery, try the case to a judge or jury, get a judgment (or settlement), defend it on appeal, and, if all of that works out, try to collect not only the penalty, but all the costs and attorney’s fees incurred along the way. Perhaps there are reasons for the attorney general to want to do that (there is, after all, a national association of them that frequently pursues new litigation opportunities in all states), but we do not believe that making the attorney general’s office the largest plaintiff’s law firm on the planet and encouraging a regulation by litigation environment are good for anybody.
We also have a more fundamental concern with turning over the regulation of business activities to the courts. That’s exactly what these bills do. Instead of a comprehensive approach to regulating such activities through a standard administrative process that everybody understands and in which everybody can participate, regulation is carried out on an ad hoc, case-by-case basis in courtrooms all over the state, a system few people undertand and in which almost nobody participates. This represents a serious shift away from legislative and executive authority over policy matters to what we believe to be an unhealthy reliance on judges to make decisions in individual cases that really should be made by lawmakers and the people the governor puts on boards and commissions after careful consideration and public input.
Finally, these bills completely undermine the rule of law and introduce an unfair, “gotcha” philosophy into business regulation. It permits businesses and industries to be targeted because they may be politically unpopular or because, for whatever reason, we don’t like where they come from, who owns them, or what their business philosophy is. It also produces a regulatory system that is subject to sudden change every two years based on swings in political opinion. We have said this until we are blue in the face, but businesses cannot operate for long in an unstable and wildly unpredictable liability climate. For the past 30 years the Legislature has taken that maxim to heart and wisely chosen the path of predictability and stability, but that legacy is in serious jeopardy.
What scares us the most is that we are entering into an entirely different liability climate that targets business and health care providers rather than fostering them by establishing clear and reasonable liability standards with which they can actually comply. This has happened before. In the 1980s the Texas Supreme Court comprehensively dismantled traditional liability rules in ways that made their businesses and practices uninsurable and unsustainable. It took about a decade for that to happen, so the effects didn’t become apparent until the building lay in ruins before us. Could that be happening again? Wouldn’t it be prudent to tap the brakes and really analyze what is happening, what is necessary, and how things could be done in a way that preserves the business climate that we have come to take for granted? Can we muster the same political fortitude that the Legislature developed in the 1990s and early 2000s? Now would be a good time to start.
