Editorial: Law’s Loophole Closed To Cure Texas Jones Act Woes

Over the past half decade, a not-so-funny situation developed in Texas that began to rein in progress and negatively impact a maritime industry that has meant $178 billion annually for the area. Plaintiff lawyers who filed Jones Act claims in Texas discovered that by venue shopping, they could increase the size of settlements for their clients by up to 75 percent.

On May 24, 2007, after more than a year in the making, Texas lawmakers passed HB 1602, which closed venue loopholes in Texas law and, hopefully, will bring an end to the financially devastating situation that has developed because of what some call abusive and frivolous lawsuits. The legislation enjoyed broad support. For marine companies to benefit from the law as now written, they must have a base of operations in Texas. The meat of the law, however, is that plaintiffs are no longer allowed to file suit in their county of residence unless the accident occurred in that county.

The cure—and the marine-industry folks hope it surely is that—sprouted from a seed planted in May 2006 during the Annual Marine and Energy Seminar in Lake Las Vegas, Nev. Tony Buzbee, an attorney whose firm has benefited prodigiously from lawsuits filed in four counties in South Texas, inadvertently spilled the beans. Believing that his comments were not being recorded, Buzbee spoke openly about why plaintiffs get such huge settlements in those counties and explained how defendants could reduce losses. But he was recorded, and the cat was out of the bag. (The counties at issue are Starr, Hidalgo, Cameron and Zapata.)

Buzbee claims that those who recorded his remarks violated anti-eavesdropping laws. One delegate to the seminar said he had recorded many seminar sessions and he knew of no agreement that prohibited recording. We’ll leave the solution of that argument to the principals. The fact is, Buzbee’s comments set off a firestorm, and marine industry leaders and state lawmakers decided to do something about it.

Thus was formed the entity Maritime Jobs for Texas, which set into motion the action or actions necessary to get the Texas law changed. As the name implies, the purpose of the group was to protect jobs for Texans. It took little convincing. The lawmakers were ever so serious about it, and the law became effective the day it was signed by Texas Gov. Rick Perry on May 24.

Now we hearken back to the Pandora’s-Box impact of the lawsuits and the very large settlements. Buzbee told the Nevada audience that when he could have a case tried in Starr County, Texas (one of the four at issue), he could reach settlements upwards of 75 percent higher than in other counties. As he explained it, when the injured worker was Hispanic, the jury was Hispanic and the judge was Hispanic, he couldn’t lose. Settlements sometimes topped $1 million or more. He also revealed that in Hidalgo County, he is able to find one judge who would give him sufficient time to seat a jury favorable to his client. (It has been reported that in the last five years, Buzbee’s firm has won nearly every case it has tried and that it has recovered more than $225 million for clients in complex personal injury or commercial litigation cases.)

Maritime companies from all over the world routinely hired Texas workers. When, during the past five years, the number of lawsuits and large settlements in South Texas mushroomed, insurance premiums rose sharply. They got so high that companies stopped hiring Texas workers. When insurance premiums soared, marine companies had to charge more for their work. It has gotten to the point where some work goes begging. The U.S. Army Corps of Engineers has advertised for dredging bids on projects and got no offers. In one case, a company scheduled a dredge to work on a Texas waterway. Because there were about 60 Texas workers on that dredge, the company moved in a different one and let the 60 workers go.

The lawsuit explosion centered in the four previously named counties. Many observers believe that when suits are filed there, the plaintiffs are able to get unjustified liability verdicts and unusually large damage awards. The number of lawsuits filed in those counties is larger, in recent years, than the number of lawsuits filed in other states. For the years 2003 and 2004, spokesmen for eight dredging companies were interviewed and revealed they had a total of 170 Jones Act lawsuits filed against them nationwide. Fully 98 of those (or 58 percent) were filed in South Texas. Fifty-nine of the 98 were filed by just one law firm.

The negative impact resulting from the former loophole has been devastating. When no one will take on dredging jobs, waterways go undredged. One waterway that requires 12 feet of depth, for example, now has but three.

There are more than 1,000 port facilities located along 1,000 miles of Texas channel maintained by the Corps. Annually, Texas ports handle nearly 15,000 vessels, the equivalent of 20 percent of the national total. Each year, 300 millions tons of cargo pass through Texas ports. Marine and intermodal transportation account for nearly $65 billion, or 10 percent of the Texas gross state product. Annually the ports bring in almost $5 billion in local and state tax revenue.

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