Tort reform one route to restoration of a more civil society

A woman at McDonald’s spills hot coffee in her lap and a jury awards her $2.7 million. Another jury awards a man $4 million from BMW because he wasn’t told that his new car had received a minor paint touch-up before he bought it. Yet another man is awarded $12.3 million, most of it in “punitive” damages,” because he fractured his neck on a Slip ‘n Slide lawn toy whose wrapper, he charges, did not warn him adequately that adults could get hurt playing with such a thing. (It just shows that we must keep toys out of the hands of grown ups.)

Winning the lawsuit sweepstakes in today’s America is a lot easier than winning the lottery, and while news of enormous legal awards arouse amazement and anger in most of us, it evidently incites a drooling appetite to sue in the rest. No wonder we now have 14 million lawsuits a year, one for every 17 Americans. No wonder people believe the legal system is failing us.

It isn’t just big businesses that get hit, but also mom and pop stores, charitable groups, local governments and myriad individuals–anyone, however remotely connected to a problem, who has “deep pockets” that can be invaded when the real source of a grievance is poor.

When lawsuits hit the jackpot, who do you think benefits almost as much as the alleged victim (who gets an average of 43 percent of awards)? That’s right, the lawyers get about 33 percent, and the rest goes to administrative and other costs. Top corporate lawyers in America do very well in life, but the top trial lawyers eclipse them, some raking in $15-$90 million a year, a recent review inForbes magazine shows. Especially well-rewarded are those who figure out how to get a parade of new clients to sue the same company for the same problem over and over and to get “punitive damages” each time in order to “send a message”–a message that sometimes reads “bankruptcy.” Juries are not allowed to learn about this tactic, or they would rebel more often.

And who, in addition to the manufacturer or store owner, pays? Right again: you do–in higher insurance premiums, higher consumer prices and lowered stock values in your personal or pension portfolio. Even though some of the most outrageous suits are later reduced by judges, (as in the McDonald’s coffee case), the whole litigious system in this country, according to a study by the management consulting firm of Tillinghast/ Perrin Towers, is freighting our economy with a burden $140 billion annually. That is money that otherwise could create new jobs, raise pay and productivity.

Let us readily acknowledge that businesses and ordinary citizens sometimes do commit terrible blunders that harm others, and that “tort law” is an entirely proper corrective. Lawsuits often have forced negligent companies, doctors and other entities and individuals to accept proper financial responsibilities and to improve safety standards. Even the “contingency fee” arrangement that assures a plaintiff that he will not pay the lawyer unless he wins the case can be defended on the basis that it allows poor people access to justice in a system that favors wealth.

The trouble is that the system has slowly gone overboard, turning a legal corrective into a new form of abuse. Trial attorneys may have motivated some otherwise indifferent firms to act more responsibly, but at least as often the fear of legal action forces businesses and individuals to make uneconomic decisions with no other justification and, in some cases, it drives companies out of business altogether. Doctors stop entering certain fields, and, in lawsuit0happy Alabama, national concerns are loathe to enter local markets. In some states without “Good Samaritan” laws, people who might otherwise assist an accident victim or other person in distress, instead hold back because of a wholly valid fear of being sued.

Recognition of these consequences of over-litigation has finally created a backlash. Some 20 states have passed tort reforms this year. A study by the National Bureau of Economic Research shows considerable stimulus of economic growth in those states where tort reforms have been enacted, and a drag on the economies of states where lawsuits hobble enterprise; and that kind of study will encourage still more reform. Nationally, trial attorneys are used to calling the shots in Washington, D.C., perhaps because they are generous campaign contributors, last year, for example, donating $14 million. But they are conspicuously apprehensive that Congress might pass serious tort reform legislation in this session; indeed, in the next few weeks.

The Republican-controlled House, following its Contract with America, adopted a fairly broad bill that includes caps on punitive damages and much-needed malpractice limitations. But the Senate, where floor-leader Slade Gorton of Washington feared that too narrow a victory would invite a Presidential veto, came up with a much more limited reform bill that mainly covers product liability.

But, while the trial attorney lobby believed that House-Senate differences were too great to allow any bill to pass this year, the two houses’ “Conference Committee” suddenly appears close to a resolution. Reform-minded senators now think that their present veto-proof majority might be willing to accept certain obviously reasonable aspects of the House bill–for example, a financial limit on civil actions that don’t involve physical injury or suffering, and a limit on actions taken against non-profit organizations and local governments.

The trial attorney lobby apparently believed that House-Senate differences were too great to allow any bill to pass this year, but the two houses’ “conference committee” may pull out a resolution yet. Reform-minded senators now think that their present veto-proof but diffident majority might be willing to accept certain obviously reasonable aspects of the House bill–for example, a financial limit on civil actions that don’t involve physical injury or suffering, and a limit on legal actions taken against nonprofit organizations and local governments.

Some reformers fear that if Congress adopts a bill making only such modest improvements, the cause of tort reform will be drained of energy. But more likely it will be reinvigorated. A public appetite for suing one another produced the present situation, and an appetite for restoration of a more civil society can now be stimulated through the steady introduction of successive and successful legislative measures. It took a generation of utopian thinking to get us into the present condition, we certainly can give reform a couple of years to help the law recover its common sense.