Office of the Governor Rick Perry

Gov. Rick Perry's Remarks To The Manhattan Institute

*Note - Gov. Perry frequently departs from prepared remarks.
Tuesday, January 20, 2004  •  Speech

Thank you Judge (Andrew Napolitano, FOX News contributor.)  I am honored by this invitation to appear before one of the premiere public policy think tanks in America, the Manhattan Institute.  I am in New York City this week to visit with opinion leaders and CEO’s about the opportunities to do business in Texas.  As different as Texas is from New York, you might call it a trade mission.  And I will consider it a success if we could make a trade for Derek Jeter and Andy Pettitte.  To those of you who are Mets fans, if you think it’s tough being a Mets fan in New York, keep in mind that a Texas team has yet to win a playoff series, ever. 

New Yorkers, like a lot of Americans, are very familiar with our last two governors, Governor Richards now splits her time between New York City and Austin, and of course my predecessor is now president.  It can be tough to follow in the footsteps of a national figure.  After serving in public office for almost 19 years, I have the great distinction of being known as “the guy who followed George W. Bush.” 
Perhaps the only thing similar would be to follow into office Rudy Giuliani.  Please tell Mayor Bloomberg that “I feel his pain.”

I am honored to be here, in a great American city, and in the presence of men and women whose mission it is to create opportunity here and across this nation.  The work done by the Manhattan Institute has helped transform how we address important issues like education, crime reduction, welfare reform and legal reform.  It is that last subject that I want to discuss in detail today because, to paraphrase economist Steve Forbes we’re “tackling toxic torts in Texas.”

I do not speak to you today as a legal expert.  I’m a farmer and a former Air Force pilot, not a lawyer.  But I understand, as someone who has helped run a small business, that there is no greater threat posed to prosperity and growth than the triple threat of over-regulation, over-taxation and frivolous litigation.  Lawsuit abuse is one of the greatest job killers in America today.  Personal injury trial lawyers have turned a legal system designed to resolve disputes into their own personal investment vehicles to strike it rich, from a system intended to dispense justice to a new kind of lottery that dispenses jackpot justice.  Nothing illustrates this phenomenon more than the outstanding report recently prepared by the Manhattan Institute, “Trial Lawyers Inc.”

The predatory practices of the trial bar are so pervasive that it can now be distinguished as its own industry an industry that costs businesses and our economy more than $200 billion each year.  The trial bar has preyed on doctors, hospitals and businesses even unsuspecting clients to make their mint while the rest of us pay the price.  Prior to the enactment of meaningful tort reform a few months ago, the U.S. Chamber ranked Texas among the five worst states in terms of the litigation climate for business. 

The American Tort Reform Association last year named four Texas counties “judicial hellholes” – areas where normal rules of balance and fair play under the law often don’t apply.  (NOTE: these are Jefferson, Nueces, Hidalgo and Starr counties.)  Nowhere is the evidence of lawsuit abuse more clear than in the medical profession.  50 percent of all Texas doctors indicated, as of the Year 2000, that they have had a claim filed against them.  7 out of every 8 medical claims in Texas are dismissed without payment because they are deemed meritless or questionable.  The threat of litigation has had a domino effect, causing malpractice carriers to raise rates, which in turn has forced many doctors to leave Texas, or the practice of medicine, altogether.  And ultimately, this hurts patient access to care the most.

In the last three years, the number of malpractice carriers offering policies in Texas has declined from 17 to three.  Between 2001 and 2002, 6,500 doctors had their liability policies cancelled…in many cases not because of negligence on their part, but because of the high-risk nature of the procedures they perform.  We have seen neurosurgeons leave hospitals in medically under-served communities and women in 3 out of 5 Texas counties do not have access to an obstetrician in their county.  Imagine the hardship this creates for many pregnant women in our state, but especially women with high-risk pregnancies.

The problem has not been a lack of compassion among our medical community, but a lack of protection from abusive lawsuits.  Imagine going to work every day at the children’s hospital in South Texas that is just across the street from a trial lawyer who prominently advertises his expertise in birth injury cases.  Our good doctors and nurses should be spending more time examining patients and less time being cross-examined in the courtroom.

The practice of law is a noble profession.  We all want to have the services of a good lawyer when we have been wronged.  But I will suggest that as smart as many lawyers are, they won’t be able to perform brain surgery or deliver our newborn children once all the neurosurgeons and obstetricians are forced out of medicine.  The statistics hit home when you find out it is your doctor that is hanging up his or her stethoscope. 

Orthopedic surgeon Donald Malone is a good example.  He wrote his local newspaper that his insurance premiums doubled every year during the last three years.  He writes, “it was going to cost $72,000 to renew my policy, I am not the first physician in Fort Worth faced with a difficult decision about his practice, and I most certainly won’t be the last.  Some of my colleagues are choosing to retire early, change careers or discontinue complicated, more risky, but needed, medical procedures.  Our community’s access to health care is being compromised.”

Corpus Christi family practitioner Evelyn Tobias-Merrill quit her practice at age 36 when her medical liability premiums went up 300% - even though she’d never been sued.  Her new premiums would have constituted a third of her income.

These are the stories we heard all across Texas, stories that compelled us to take action despite the opposition of the powerful Texas trial bar.  First, legislators passed caps on arbitrary non-economic damages.  Individual health care providers are no longer subject to non-economic damages above $250,000 per case.  Health care institutions are subject to a separate $250,000 cap with an entire claim not to exceed a total of $750,000 in non-economic damages.  Texans who have been harmed will still have access to all economic damages, including lost wages and medical expenses.  We have simply capped the arbitrary awards for categories like pain and suffering and mental anguish.  These damage awards have quadrupled over the last decade in Texas, and now comprise two-thirds of the total damages awarded in medical liability cases in Texas.

In 2001, medical liability rate increases were three times larger in states without caps than states with caps.  We took our reforms one step further than any other state.  To prevent the legal delays that would have ensued for years as trial lawyers challenged the constitutionality of caps in court, we asked voters to clarify the legislature’s authority to do so in the Texas Constitution.  And despite a misleading $12 million advertising blitz by the trial bar, last month Texas voters protected their health care, saved their doctors, and restored balance to our system of civil justice by passing Proposition 12.  This constitutional amendment not only provides relief to medical providers, but will allow future legislatures to cap non-economic damages in other kinds of civil action, with a 3/5 vote of the House and Senate.  We also placed reasonable restrictions on the use of experts-for-hire.  To qualify as a medical expert, you must be currently practicing medicine, or teaching in a medical school. 

Our tort reforms extended greatly beyond the practice of medicine.  The Wall Street Journal said, “Texas not only provides an example for other states, but also for Republicans in Congress.”  Jim Copeland, the director of the Manhattan Institute’s Center for Legal Policy, recently pointed to a Texas case that illustrates the gross abuse perpetrated by lawyers who file class action suits.  In Texas, two auto insurers were sued for rounding up premium bills to the next dollar.  My quarrel is not with whether those insurance companies should have engaged in such a practice, but with the fact that the trial attorneys made $8 million while the clients made less than $6 each.  That is wrong. 

We passed two reforms to our class action laws.  First, we now allow defendants to appeal class certification decisions to the Texas Supreme Court to decide up front, not after years of litigation, if the plaintiff really has a legitimate class action.  This can save defendants years of headache, and thousands if not millions of dollars in legal costs, because they will receive a quick determination as to whether they are part of a class.  Second, we took on this scam where the lawyers receive a monetary payment while the clients receive payment in coupons.  From now on in Texas, if the clients get paid in coupons, so do the lawyers!

We passed a new offer-of-settlement law.  If a party refuses a settlement offer and receives significantly less from a jury than what was offered at settlement they will pay the other side’s legal fees and costs from the date of their refusal.  This reform will help unclog our court dockets, leaving valuable court time for cases with true merit.  In Texas we also created a new standard for proportionate responsibility to ensure everyone pays their fair share.  Sometimes the individual or entity that causes the damage isn’t in the lawsuit.  Under our new law, you don’t get blamed for what you didn’t do.  And if you’re a retailer, you will be protected from a manufacturer’s mistake.  Just because you have the deepest pockets, or possibly the only pockets left, doesn’t mean you should pay for someone else’s mistake.

We created a way for Texas courts to more efficiently and fairly handle large-scale litigation with a multi-district litigation rule.  And we made sure that parties will not be denied the right to appeal simple because they could not afford the required appeal bond.  In the past, defendants were forced to post bond for an amount equal to the jury verdict.  If a corporation was hit for a multi-millions dollar verdict, they would often have to liquidate their assets just to get their day in an appeals court.  That’s unfair, and detrimental to the preservation of jobs in Texas, so now we have instituted fair limits tied to the defendant’s net worth.

We enacted liability limits for good Samaritans, voluntary firefighters, charity volunteers and teachers who should not be sued for simply doing an important public service.  We closed a loophole that allow trial lawyers to venue shop, and we did something else that makes abundant sense: if it can be shown that failing to wear a seat belt contributed to a person’s injuries, it can now be admitted as evidence in a court of law.  These comprehensive reforms restore balance to the Texas system of justice while maintaining proper protections and compensation for Texans who are truly harmed.

As a leading Wall Street CEO told me earlier this year, there is no better way to create jobs than to pass tort reform.  Texas economist Ray Perryman estimates that our sweeping lawsuit reforms will create more than 240,000 permanent jobs and add $36 billion to the Texas economy.  I consider economic growth and job creation to be one of my top missions as governor.  I share the view of New York Governor George Pataki that you can’t create jobs by passing the tax hikes that kill jobs.

In Texas, we addressed tough economic times the way families do: we cut spending.  We bridged a $10 billion budget gap without raising one cent in new taxes.  We managed to spend $2.6 billion less in state general revenue while still investing $1.2 billion more in public education.  No government in the history of mankind has ever taxed and spent its way to greater prosperity.  But with the right fiscal policies, we can grow our way there.  Slowly but surely, good economic news is starting to appear in our state’s newspapers – a group sometimes accused of shunning good news.

In August we added more jobs in Texas than any month since May of 2000.  While California lost 30,000 jobs, we gained more than 28,000 jobs.  In Texas, we are building better schools, aggressively cultivating new jobs and companies, and avoiding the temptation to raise taxes.  And we are one of a handful of states with no personal income tax.  Our economy has diversified since the bust years of the 80’s, we are now the number one exporting state in the nation and with an old New York coach at the helm, even the Dallas Cowboys are starting to win football games again.  That’s why it was so important that we reformed our legal system and worked to rein in escalating tort taxes that are hidden in the price of every product we buy, every service we receive.

Texas is now wide-open for business, growth and opportunity because our courts are no longer under siege from the Texas trial bar.  We can look to the future with as much optimism as those who settled our vast plains and our bustling cities over the last two centuries.  When the private sector prospers, so do our public schools, our colleges and universities, our health clinics and hospitals.  A more prosperous Texas is essential to a more prosperous America.  And we’re doing our part to ensure that the economic recovery goes forward.

Thank you.

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