Durrett Law Firm Legal Blog | Houston Texas Legal Blog

Texas Offer of Settlement Rule

An article on Law.com discusses the unintended consequences of Florida's procedural offer of settlement law in tobacco litigation. As originally enacted, the procedural rule was designed to encourage settlements. However, in practice, the tobacco companies are using the rule to shift the defense costs of tobacco litigation from the manufacturers to the smokers.

Litigants suing tobacco companies for wrongful death, negligence, fraud and deceit in cases potentially worth millions of dollars are receiving nominal settlement offers on their claims. The typical settlement offers are less than $1,000. If the claimants refuse to accept the nominal settlement and lose at trial, pursuant to the procedural rules, they become liable for the tobacco companies attorney's fees and litigation costs. The result of the rule is that smokers are refusing to prosecute lawsuits against tobacco companies for fear of being forced into financial ruin, if they lose.

In 2004, the Texas Supreme Court enacted procedural rules governing post filing offers of settlement similar to Florida's statute. In Texas, if a plaintiff rejects a settlement offer and does not recover a judgment that is at least 120% more than the rejected offer, the plaintiff can be liable for the defendant's reasonable attorney's fees, up to the cost of two expert witnesses and court costs. In my practice, I have not seen the offer of settlement rule used extensively. Accordingly, I do not have an opinion on it. However, in high stakes litigation, whether there is a significant chance of losing at trial, such as smoker litigation, the offer of settlement rule operates to effectively close the courthouse door to any would be plaintiffs.