Top Sub-Industries: Banks, Telecommunications, Technology, Health Care Equipment, Semiconductors
If Not for Two Massive Verdicts, State Courts Would Account For Half of Total Federal Court Verdicts
85% of Federal Verdicts Were Intellectual Property Cases, Mostly Filed in the Eastern District (EDTX)
EDTX Attracts Patent Plaintiffs Due to Its Patent Rules, A Fast Docket, And High Likelihood of Trial
Though IP Cases Have Been Moving to Western District (WDTX), July 2022 Order Likely to Curtail This Momentum
State Verdicts Mostly Concentrated in Dallas (71%) and Harris (7%) Counties
Legal Services Ads in Texas Increased 40% From 2017 to 2021
Litigation Finance-Favorable Jurisdiction
Texas is the top state for nuclear verdicts due to two extraordinary awards ordered by state juries as well as a consistent flow of intellectual property cases to the US District Court for the Eastern District of Texas (EDTX).
Among the top state awards, the first historic case was Hopper v. JP Morgan Chase Bank, NA (2017), a probate matter with an $8 billion nuclear verdict. In that case, a Dallas jury found that the bank mishandled the estate of a former American Airlines executive. The second was Goff v. Holden (2022), a Dallas County Court at Law wrongful death case that led to a preliminary $7.3 billion jury verdict.
Texas differs from other states in that it has a generally applicable statutory limit on punitive damages, and under state law, courts will reduce an extraordinary punitive damage award to no more than the amount of economic damages plus two times the amount of noneconomic damages. However, these post-trial reductions are not reflected in the overall state total of $16 billion in nuclear verdicts. The $8 billion in Hopper v. JP Morgan Chase Bank, for instance, consisted largely of punitive damages and was later reduced to $7 million.
Marathon’s analysis found that federal corporate nuclear verdicts in Texas were largely driven by intellectual property cases. These matters accounted for 85% of identified federal nuclear verdicts, for a total of $14.36 billion with 69%, or $9.9 billion, of verdicts issued in the Eastern District. The Western District of Texas (WDTX) followed with $3.6 billion, the Northern with $535 million, and the Southern with $224 million.
Verdicts in intellectual property matters were the largest case category in 2022, with a total of $1.67 billion ordered by juries in EDTX ($218 million) and WDTX ($1.45 billion). Though cases have recently surged in WDTX, this trend was largely dominated at first by the EDTX over the past decade.
Why the Eastern District of Texas?
EDTX is made up of 43 of Texas’ 254 counties. Though it comprises relatively sparsely populated areas of Beaumont, Lufkin, Marshall, Sherman, Texarkana, and Tyler, it also includes three cities among the state’s 20 most populous: Plano, McKinney, and Frisco.
As it has risen in popularity, the Eastern District has drawn accusations of being “a haven for patent pirates” as well as a “hotbed for ‘patent trolls.’” In 2006, the late US Supreme Court Justice Antonin Scalia famously dubbed the court a “renegade jurisdiction,” while other critics chastised its jury pools. According to a December 2017 Science and Technology Law Review study, the court earned an “undeserved yet frequent” reputation for drawing unsophisticated juries from rural areas that were predisposed to rule in favor of plaintiffs. That reputation included explanations such as:
East Texas jurors have a general distrust of large corporations because few such companies are based in the area;
East Texans are strong believers in property rights, due to a history of fighting with oil companies over royalties for mineral rights;
East Texas jurors are generally older, so they come into technology cases with less experience than in younger venues.
In truth, however, the 2017 study found little evidence that EDTX’s popularity for patent cases was due to its jury pool. Rather, the authors argued, the court draws patent cases due to the presence of local patent rules, judges well-versed in patent litigation, a docket that allows cases to be resolved quickly and efficiently, and a higher likelihood of jury trial, which favors the patentee on average, yielding a high contested-win rate.
Additionally, East Texas judges have tended to disfavor granting summary judgments, which generally favor the accused. Overall, the study found that it is not the jury that primarily drives the perceived advantage for patent plaintiffs in East Texas, and that juries appear to render results in-line with the rest of the country and other popular patent venues. Other studies of the court have similar findings, including one conducted by the Tulane Law Review in 2008.
Patent Cases Also Surging in the Western District of Texas
The Western District of Texas (WDTX) has seen an explosion in patent litigation over the past four years, and overtook EDTX in 2022, with a total of $1.45 billion in nuclear verdicts ordered in these cases.
This court spans from Waco, Austin, and San Antonio in central Texas to El Paso in the west. In 2018, WDTX received 90 patent cases, or 2.5% of such filings nationwide. In 2020, the court received some 850 patent cases, or 22% of filings nationwide, more than any other district in the country.
Nearly all of the cases appeared on the docket of U.S. District Judge Alan Albright, who presided over nearly 2,400 patent matters between his confirmation in 2018 until recently. Albright made concerted efforts to attract patent plaintiffs, including presentations to patent lawyers and in public comments. Studies considering why the WDTX invites so many patent cases have also cited Judge Albright’s courtroom procedures as well as actual decisions favorable to plaintiff’s lawyers in cases. Albright’s plaintiff-friendly processes included rarely transferring cases out of WDTX, a reluctance to stay litigation pending related disputes in other forums, and never invalidating a patent on eligibility grounds, among other procedures.
Of note, over the past few years, Judge Albright has overseen three high-profile intellectual property disputes between VLSI Technology and Intel Corp. Most recently, a jury in Albright’s court ordered Intel to pay $948 million to VLSI in November 2022, finding that the chipmaker infringed on a VLSI patent designed to improve computer processor performance. Marathon’s analysis found that this was the largest 2022 Texas federal court nuclear verdict against a company.
Until July 2022, plaintiffs in WDTX could select the division where they filed their case. Since Albright was the only district judge in the Waco division, plaintiffs could effectively choose him as their judge. But that changed in July, when the WDTX chief judge issued a standing order likely to significantly curtail Albright’s purview of patent infringement cases. The order requires random assignment of cases filed in Waco to any one of a dozen district judges throughout the WDTX, which will make it impossible for patent plaintiffs to easily select Albright to oversee their case.
Two nuclear verdicts by juries in WDTX in 2021 included $2.17 billion in VLSI Technology LLC v. Intel Corp. and $25.9 million in VideoShare LLC v. Google LLC. WDTX notably did not see a decline in cases during the COVID-19 pandemic like some other patent-heavy courts, including the District of Delaware, due to the respective states’ handling of the court cases during pandemic.
In 2022, WDTX was once again a top venue for IP litigation against Big Tech companies, particularly as those companies expanded on and innovated their platforms. For example, in September, a jury ordered Facebook parent Meta Platforms to pay nearly $175 million for allegedly infringing on two patents owned by walkie-talkie app maker Voxer Inc. In that case, Voxer Inc. v. Meta Platforms Inc., jurors found that both Meta’s Facebook Live and Instagram Live streaming features used Voxer’s patented technology.
State Court Trends
Marathon’s analysis found that 38 state courts in Texas have issued a nuclear verdict against a corporate defendant since 2009.
The majority of state court verdicts emerged from Texas’ two most populous and Democratic counties: Dallas (71%, $16.8 billion) and Harris, which contains Houston (7.6%, $1.8 billion). However, without the outlier $8 billion verdict in Hopper v. JP Morgan Chase and $7.3 billion verdict in Goff v. Holden, Dallas courts would have accounted for 6.5% of identified state verdicts.
State court verdicts spanned a variety of case types, including motor vehicle, breach of contract, products liability, worker/workplace safety, legal malpractice, consumer protection, insurance, fraudulent inducement, RICO, contracts, premises liability, admiralty/maritime, eminent domain, and more.
According to the US Chamber of Commerce, nuclear verdicts in Texas largely stem from auto accident claims, particularly against the trucking industry. Marathon’s analysis corroborated this finding, as motor vehicle cases accounted for 14% of all identified state verdicts for a total of $2.3 billion. Of these cases, $1.2 billion were against trucking companies, including over $500 million ordered by juries in Harris County alone.
In State Court Trucking Verdicts, Deep Corporate Pockets Equal Big Verdicts
According to the Chamber, liability in some of the trucking cases “appears to be more about who is perceived as able to pay an astounding figure for a tragic injury than about who was actually responsible for the accident.” According to the Texas Tribune, these verdicts are generally higher because jurors are more likely to find a corporation liable for damages than an individual driver. For instance, if jurors were aware that a commercial vehicle driver worked for a large corporation like Amazon, punitive damages would likely be higher due to the company’s vast resources. The largest trucking verdict identified by Marathon was $730 million in November 2021 awarded to survivors of a woman killed in a 2016 collision with an oversized cargo truck hauling a propeller. That case included $480 million in compensatory damages and $250 million in punitive damages against Landstar Ranger, which operates one of the most extensive transportation services networks in the U.S.
In response to escalating nuclear verdicts against the industry, the Texas legislature passed a bill in 2021 with some protection for motor carriers in post-crash litigation. Signed into law by Gov. Greg Abbott, the measure requires a jury to find a trucking company or driver liable for a crash before exemplary damages can be sought in a civil case. The law seeks to curtail plaintiff’s attorneys use of the “reptile theory” to go after trucking companies, regardless of whether the company was at fault for the accident. As detailed in this report’s executive summary, this trial strategy attempts to cast defendants as bad actors rather than focusing on details of the matter.
Marathon’s analysis found that the new law may have been effective. No nuclear verdicts against trucking or automobile companies by state court juries were identified in 2022. Only one federal verdict was identified, for $21.5 million in Kim v. American Honda Motor Co., a product liability case filed in the Eastern District.
Overall, the top industries in Texas for nuclear verdicts (including state and federal courts) are banks, telecommunications, technology hardware, and semiconductors.
Legal Services Advertising
According to the ATR Foundation and Kantar, between 2017 and 2021, spending on local advertisements for legal services and/or soliciting legal claims in Texas increased by 28%, while the quantity of ads increased by 40%. Texas is also among the top-five states where, between 2017 and 2021, viewers saw the most legal services ads on television.
Litigation Finance-Favorable Jurisdiction
Texas has been identified as among the top four most attractive states for investing in litigation by the American Transportation Research Institute as the financing of cases is not regulated by statutes. Case law has held that litigation finance agreements are enforceable and not subject to usury laws. There is a very low risk that a litigation funding transaction would be invalidated or subject to usury laws in Texas in the near future, according to the ATRI.
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Corporate Verdicts Go Thermonuclear
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