I don’t agree with every one of the suggestions proposed by this Chamber of Commerce Institute for Legal Reform document authored by Victor Schwartz and Cary Silverman, but I agree with more than 90% of them, and it’s a good starting point for any discussion of tort reform.
As I discussed in recent testimony on Capitol Hill, if one takes conservative estimates from these economic studies and adds it all up, the total cost to the economy from excessive litigation can be estimated to be between $600 billion and $900 billion a year, the vast majority of which is simply wealth destruction. That is between 4 and 6 percent of GNP, a tort tax of between $8,000 and $12,000 a year for an average family of four.
In 2007, the Texas Supreme Court unanimously decided Borg-Warner v. Flores, holding that a defendant in an asbestos case was not liable unless its product was a “substantial factor” in causing injury.
But there are now bills in the Texas House and Senate, SB 1123 (recently reported out of Senate committee) and HB 1811, that seek to undo this by defining “substantial factor” to merely mean that a product “contributed to the [plaintiff’s] cumulative exposure”—whether or not other defendants’ products were far more responsible for a plaintiff’s injury. The effect of this rollback would be to return Texas to the role of asbestos magnet, since it could conceivably create indiscriminate liability for hundreds of innocent businesses in any given case. The effect will be very similar to the infamous Lipke rule in Madison County, Illinois that extracted billions of dollars from the innocent this decade.
Today I testified before the Senate Republican Conference about the effect on the economy of excessive litigation. A podcast is available on-line and, for the insomniacs among you, the hearing will be broadcast on C-SPAN tonight at 10:56 PM Eastern and again at 2:09 AM Eastern. Also testifying was Life Without Lawyers author Philip Howard; Crystal Chodes, who lost her job because of the expense of a meritless ADA filing mill suit; Texas doctor David Teuscher; and arbitration expert and University of Kansas law professor Christopher Drahozal.
If you just prefer reading what I have to say, my written testimony is on-line also:
The total loss to the economy from excessive tort litigation above and beyond a baseline of an employment at will regime and an average industrialized tort system can be estimated at between over $600 billion and over $900 billion a year, 4.3% to 6.5% of GNP, or a tort tax of between $8,000 and $12,000/year for an average family of four. And this is very much a conservative estimate, as other economists find much stronger effects than I have estimated here, as I have not tried to estimate a number of identifiable secondary and tertiary effects of excessive tort litigation on allocation of economic resources, and as I have not tried to estimate the likely effect of recent Congressional expansions of tort liability in the last twelve months.
I was pleased to hear from multiple Congressional staffers who are regular Overlawyered readers: one even surreptitiously added the website into my official biography. Carter Wood talks about the hearing and Senator Cornyn’s remarks over at Point of Law.
Update: video on-line at C-SPAN; my segment begins at 43:15 or so. And C-SPAN2 is rebroadcasting at 4:16 pm Eastern on Tuesday, March 17, which suggests that my appearance will be at about 5 pm Eastern.
Carter Wood notes that the incoming White House chief of staff cast votes in Congress in support of some legal reform measures (and against some others). (Point of Law, Nov. 9).
- Lots of coverage of litigation-reform angles of the election over at my other website, Point of Law (here, here, here, and here). For me the heartbreaker of the evening reform-wise was the surprise defeat of the very fine Chief Justice of the Michigan Supreme Court, Clifford Taylor. He will be sorely missed.
- Interesting perspective from Bill Marler, the Seattle plaintiff’s attorney who’s become well-known for virtually “owning” the issue of food poisoning in the press: “Obama may actually see tort reform as a way to show he is a moderate”. [Jane Genova, Law and More]
- Voters in California and elsewhere ignored the urgings of this site and wrote anti-same-sex-marriage provisions into their constitutions. There are many possible interpretations, but one is that the California Supreme Court will be Exhibit #2,971 toward the proposition that judicial activism does not always improve the well-being of its intended beneficiaries. Garrison Keillor titled one of his Lake Wobegon books We Are Still Married, and Eugene Volokh looks at the question of whether same-sex couples previously wed in California can say that (Nov. 5; more, Dale Carpenter, Jonathan Rauch). In other news, “Yesterday, 57 percent of Arkansas voters decided that the state’s 9,000 children in foster care are better off there than adopted by a gay couple.” [Radley Balko, Reason “Hit and Run”]
- As to Topic A, the presidential election, I’ve decided to retire to the countryside and raise heirloom eggplants. Just kidding! Actually, as one who sat the election out after Giuliani quit the race, I’m happy for my friends and colleagues who are happy, awestruck by the historic moment like everyone else, and hoping for the best (i.e., centrist governance) policy-wise.
“McCain challenged Obama on where he’s broken with his party, and Obama offered some specifics: A vote for tort reform, ‘which wasn’t very popular with trial lawyers’ and which divided Democrats, and support for charter schools and clean coal technology.” (Ben Smith, The Politico, Oct. 15).
A USA Today story delves deeply into how Biden’s done the bidding of the litigation lobby special interest group, particularly with respect to the bipartisan asbestos litigation reform bill.
Daniel Fisher usually understands legal issues and has done some good reporting about trial-lawyer abuses, so I was very disappointed in today’s Forbes.com story (which quotes me about Obama and CAFA). Most notably, it’s not true that tort reform is a “catchall phrase for legislative measures designed to make it harder for individuals to sue businesses”–many tort reforms make it easier for individuals with legitimate claims to sue businesses. Tort reforms are simply measures to improve the accuracy and efficiency of the civil justice system; they’re opposed by trial lawyers because they derive billions of dollars of wealth from inaccuracies and inefficiencies in the civil justice system, and supported by businesses and consumers that are the victims of such inaccuracies and inefficiencies.
The article also inaccurately characterizes the Obama-Clinton medical malpractice legislation, and furthers the idea of “Kennedy is a moderate,” blurring the role of the Supreme Court by implicitly endorsing the liberal idea of it as a political superlegislature rather than a judicial body with an obligation to follow the law. The focus on anti-preemption legislation, as opposed to some of the dozens of other pro-trial-lawyer-lobby bills pending in this Congress and likely to be renewed next Congress, is unusual. (Separately, I disagree with Jim Copland; I don’t think McCain would hesitate to veto the giveaways to the trial-lawyer lobby if they’re in single-purpose bills and not attached as hidden amendments to omnibus legislation.)
I’m less surprised than Fisher and Bill Childs that Obama is getting money from defense firms, or, more accurately, attorneys who work at defense firms. The legal establishment is overwhelmingly liberal (hence the 3:1 fundraising advantage Obama has), and many defense attorneys are perfectly happy with a status quo that requires companies to pay them millions of dollars to continue doing business. (Some are too happy, and have vocally supported ABA resolutions that would harm their clients–something their clients should pay closer attention to.)
While plaintiffs’ law firm contributions are often coordinated (sometimes a bit illegally, as when Tab Turner’s firm and Geoffrey Fieger’s firm were caught reimbursing their employees for donating to John Edwards), it’s a mistake to think the same thing happens in the defense bar, where attorneys are donating on an individual basis because they perceive future government administration (or Article III) jobs of a certain political caliber as pay-to-play or because they’re otherwise simply interested in the political process. Kirkland & Ellis may have tobacco and asbestos defense in its portfolio, and many alumni in the Bush administration, but most Kirkland attorneys are doing other things, and a disproportionate number of them at the Chicago-based firm are going to be former classmates of or students of Harvard Law graduate and Chicago Law lecturer Obama, and have the six- and seven-digit incomes to give maximum contributions–and it only takes a few dozen $4600 contributions to make a firm look like a big contributor. (And, on the other hand, as if to demonstrate the bipartisan nature of most law firms, John McCain turned to a Republican attorney, former Reagan White House Counsel A.B. Culvahouse, at the largely Democratic O’Melveny & Myers to lead his vice presidential search.) During the primaries, the trial lawyers were giving most of their money to Edwards, Clinton, and Biden, but those fundraisers are now doing business with Obama, as the recent press coverage of Fred Baron shows.
But the article is correct that the outlook for federal tort reform is grim, and that reformers are looking at rearguard actions defending against numerous attempts to make the system worse.
- As I type this post, I’m listening to Andrew Frey argue Conrad Black’s appeal before Judge Posner and the Seventh Circuit. Posner seems to be confused over whether incorrect jury instructions can be prejudicial in a general verdict. [Bashman roundup; earlier]
- “For years families bogged down in Harris County [Texas] probate courts have accused judges of bleeding estates of tens of thousands of dollars to pay high-priced lawyers for unnecessary work.” [Houston Chronicle; Alpert v. Riley (Tex. App. Jun. 5, 2008) (via)]
- Company sets policy. Employee violates policy. Is corporation criminally responsible for employee’s act? [POL; FCPA blog; Podgor]
- Merrill Lynch banker asks for investigation of Enron Task Force withholding of exculpatory evidence [Bloomberg]
- When calculating the costs of medical malpractice suits, let’s not forget the noneconomic costs. “In the [John] Ritter case, the jury agreed with the defendant physicians and exonerated them of any liability. They were lucky. How lucky? They were able to spend four years with attorneys worrying about their future, including the potential that they would be ordered to pay tens of millions of dollars and be left penniless. So, they didn’t really win. They just lost less.” [EM News via Kevin MD via Dr. RW]
- Nor should we forget the defensive medicine costs. [Kevin MD]
- Legal reform = job creation. [American Courthouse]
- According to Justinian Lane, if you’re reading this post, you’re a “spineless sycophant.” [Bizarro-Overlawyered]