All Texans deserve to be protected from people and businesses who act unfairly or in bad faith when selling goods or services. But before tort reform, Texas’ consumer protection laws were being used by attorneys pursuing all kinds of civil cases, not just lawsuits involving ordinary consumers.
In fact, in some cases, all parties were multi-billion-dollar international corporations. Texas had lost the focus on consumers in its consumer protection laws. Even in true consumer cases, very few defendants could afford the risk inherent in fighting one of these lawsuits. The burden to prove a violation of Texas’ main consumer protection statute was very low, while the damages the plaintiff might recover—such as tripled actual damages and mental anguish damages—could be crippling to a business. For more than two decades, the Texas Legislature has worked to reach a balance in its consumer protection laws that allows Texans (not giant corporations) to recover from bad actors when cheated in the marketplace, without creating an incentive for unnecessary litigation that hurts economic growth and imposes a hidden tort tax on all goods and services.
1995, 2019: DTPA Revisions
In 1995, the Texas Legislature amended Texas’ primary consumer protection statute, the Texas Deceptive Trade Practices–Consumer Protection Act (DTPA), in House Bill 668 in order to:
- restore the DTPA’s role as a true consumer protection statute by prohibiting its use in:
- matters with a total value of more than $500,000, or
- matters with a value of more than $100,000 if the parties have a written contract and the plaintiff received independent legal advice prior to signing the contract (except for claims related to the consumer’s residence, which are not subject to the $100,000 limit);
- allow the DTPA to be used against professionals only when the claim involves misrepresentation, unconscionable conduct or breach of warranty;
- prohibit the DTPA from being used for personal injury or wrongful death claims, which have their own well-developed area of law;
- allow actual damages to be tripled and allow recovery of mental anguish damages only if the defendant acted knowingly; and
- allow any party to require mediation of a claim brought under the DTPA.
This bill also amended both the DTPA and a similar statute—the Unfair Claim-Settlement Practices Act, which is found in the Texas Insurance Code—to allow a defendant to make a pre-suit offer to settle a dispute any time a person threatens a DTPA or Unfair Claim-Settlement Practices Act lawsuit. Under these laws, if the settlement offer made by the defendant is rejected by the plaintiff, but the final judgment awarded to the plaintiff is substantially the same as the rejected offer, the plaintiff’s damages are limited to the amount of the defendant’s pre-suit offer. This offer-of-settlement procedure encourages parties to resolve disputes prior to trial.
Under the DTPA, Texas’ attorney general had tremendous authority to seek civil penalties, including a per-violation penalty of $20,000. Realizing this authority could be subject to serious abuse, in 2019 the Legislature passed Senate Bill 2140, which reduced the per-violation penalty to $10,000.
See also Hail/Windstorm/TWIA