Ramsey Abarca Law Firm

During the last legislative session the Texas Legislature passed a law changing the Texas Rules of Civil Procedure which apply to lawsuits in Texas.  House Bill 274 has received a lot of attention for creating a fee shifting mechanism for dismissals of lawsuits determined to be unsupported by law or evidence. Texas Supreme Court Justice Nathan Hecht aptly referred to it as the "popularly or unpopularly known 'loser pay' bill" during a spring meeting of the supreme court committee that oversees the development of new procedural rules. Legal pundits from all sides are correct in stating that these new "loser pay" provisions will have a significant impact on civil litigation in Texas.

But, another part of the bill has been overlooked that will impact microlitigation in Texas, otherwise known as those cases valued at $100,000 or less. 

Specifically, HB 274 directs the Texas Supreme Court to adopt rules to promote the "prompt, efficient, and cost-effective resolution" of lawsuits in which the amount in controversy, including all damages, does not exceed $100,000.

The rules are supposed to lower the discovery costs in microlitigation and establish procedures to expedite microlitigation through the justice system. These new rules are going to apply to all microlitigation except for medical malpractice actions, family law cases, property cases, and property tax disputes. It seems that the Texas Legislature agrees with me that the price of lawsuits can be too expensive for ordinary business people.

Too often the cost of filing or defending a lawsuit can exceed the value of a case, particularly when it comes to attorney fees accrued at a billable hourly rate. This reality has usually made it impracticable for traditional law firms, who charge clients by the billable hour, to take these small cases.  But a law firm with an effective and efficient practice design that is comfortable operating with limitations of time and resources will be able to take advantage of the new rules.

The problem has been that even when you have legitimate business interests at stake in a lawsuit and you know you are right, you often cannot afford to pursue your rights and available legal remedies under the current rules. When the legal costs, including attorneys fees, needed to engage in litigation match or exceed the value of the case, the best business advice is sometimes to drop your legal claims, or admit liability, and simply buy your way out of the dispute.

It appears the new rules will force the preparation of a lawsuit for trial to be much simpler. Perhaps paper discovery and depositions will be severely limited. Depositions are generally a big expense in litigation and I expect the number of hours of deposition to be severly limited under the new rules.

Although the new rules may create potential costs savings to litigants, it may also limit the potential attorneys fees for a traditional law firm and, thus, make microlitigation cases even more unprofitable for them.

Under the current rules, another complicating factor in microlitigation is whether a client has the time to invest in pursuing a case. For instance, suppose your microbusiness customer breaches a contract and does not pay your invoice, and this interrupts your cash flow. It's great if you file a lawsuit to recover and you win. Unfortunately, even a diligent litigant may not get that win for almost a year. That's not much solace when you look at your cash flow today.

The new rules are supposed to expedite these actions.  It remains to be seen what exact time frames will be applied to microlitigation under the new rules. But, reviewing the legislative history of HB274 it appears "expedited" means aggressively brief timelines to develop a case.  This is good news because I find clients are often discouraged and disappointed by how long it takes to get a final judgment in a lawsuit.  Regardless of whether it is favorable or not, clients often just want the issue resolved.

Hopefully, the new rules will address these issues.  It will be interesting to see what the rules the committee develops for the types of lawsuits I have dubbed microlitigation.

When people discover I am a lawyer they sometimes ask what type of law I practice. I'll say that I practice microbusiness law and microlitigation, that I help microbusiness owners protect their profits, limit their risks, and solve their legal problems so that they can achieve their definition of success.

If the person asking is genuinely interested, they will ask me what a microbusiness is.  I always define a microbusiness as a business with one to nine employees.

It is just my definition and it is admittedly simplistic. Strictly speaking, a microbusiness can encompass any industry.  I usually apply the term to service industries because micro operations generally are not producing a a high volume of products, but they may be.

I don't use the term small business because a "small business," as defined by the U.S. Small Business Administration, can employee between 100 and 1,500 employes or have annual receipts between $500,000 and $21.5 million, depending on the industry. Regardless of whether you think companies of that size are "small," you can see how defining terms is important. 

Although I use the term microbusiness, the following words are just as descriptive: entrepreneur, independent contractor, small business owner, owner & proprietor, consultant, family-owned business, or self-employed. Many microbusinesses are one- or two-person operations. Many of these  businesses use traditinal office space but some operate our of their homes, or even trucks. 

In my view, microbusinesses are owned and operated by entrepreneurial individuals that decided to take a risk, build a dream, and create a career all their own. I think a microbusiness owner is interested in creating a successful business venture and independent lifestyle design that places a premium on autonomy and personal responsibility.

Sometimes people assume a microbusiness is a "start-up." But, to me, a start-up describes a business that actually wants to be a big business. Being in Austin, when I hear "start-up" I think "tech company."   To me a start-up is interested in obtaining venture capital, being first-to-market,  and scaling its operations in order to position itself for an IPO or merger with an established company.

I think a microbusiness in interested in developing a client list that will sustain the enterprise and provide a healthy profit.

What I like best about microbusiness people is that they are more interested in getting things done than what their nameplate says, if they even have nameplates.  When you own a microbusiness you are not just the CEO but also the CFO, CIO, and every other C-whatever-O.  You are the salesperson, the quality control and the after-sales service,  You are in the back room and on the frontline.  You are a Starter, a Closer, and a DIYer.