Tag: civil justice reform

Tort Costs, a Competitive Disadvantage

The House Judiciary Subcommittee on the Constitution held a hearing Tuesday, “ Can We Sue Our Way to Prosperity?: Litigation’s Effect on America’s Global Competitiveness.” The testimony by Paul J. Hinton, vice president of NERA Economic Consulting, proved the answer to be, “No. No we cannot sue our way to prosperity. But we can sue ourselves into a global competitive disadvantage.”

From Hinton’s prepared statement:

One NERA study I directed on Tort Liability Costs for Small Businesses shows that tort costs are not borne evenly throughout the economy. Small businesses bear a relatively larger share of tort costs than larger businesses. For example, businesses with less than $10 million in revenues in 2008 represented

Paul Hinton

only 22 percent of U.S. business revenues but incurred 83 percent of tort costs. This is economically important because small businesses generate the majority of net new jobs, 65 percent over the past 17 years.The costs of the U.S. tort system may have effects on businesses similar to an implicit tax. The economic literature on the effects of taxes on business activity is instructive in identifying the effects of higher costs of business on economic development. This literature as well as surveys of business attitudes describe how business decisions on where to make investments and add jobs are sensitive to local costs of doing business. Tort liability costs may also affect the growth of existing businesses within the 50 states.

In another NERA study, I worked with colleagues to examine how relatively higher tort costs in the U.S. affect international competitiveness. We compared the growth of productivity in the manufacturing industries affected by asbestos litigation in the U.S. since the late 1980s to productivity growth of the same industries in other industrialized countries. We found that productivity growth in the U.S. industries affected by asbestos litigation was 0.5 percent per year slower than their counterparts in other countries. Over the period of study from 1987 to 2000, the lower U.S. productivity growth amounted to lost GDP of over $300bn, with $51bn of that loss realized in 2000. (continue reading…)

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In Oklahoma, an Improved Business Climate via Tort Reform

Gov. Mary Fallin of Oklahoma has signed three major pieces of tort reform legislation to law, discouraging abusive and frivolous lawsuits and improving the state’s business climate. From her April 5 statement:

For too long, inflated legal fees have been an unnecessary cost-driver in the private sector and a burden on the medical community. As a result, we’ve seen businesses and doctors choose to locate in other states, depriving our citizens of good jobs, reducing access to medical care and driving up the costs for medical treatment.

I’m thrilled to be able to sign into law measures which will directly address skyrocketing legal fees, protect our doctors, and help to bring more jobs and businesses into Oklahoma while still protecting the rights of plaintiffs and those who have suffered injuries. This is a great day for anyone who is committed to building a more prosperous state and a stronger economy.

The three bills she signed: (continue reading…)

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States Pursue Tort Reform to Boost Economy, Jobs

Legislatures across the country are working to enact civil justice reforms to improve their business climates, attract investment and encourage job creation. A round-up:

TENNESSEE

Gov. Bill Haslam of Tennessee included a package of reforms in his legislative recommendations, calling for a $750,000 cap on non-economic damages, such as pain and emotional suffering, and limiting punitive damages to $500,00. The bill also discourages venue shopping.

The bill (SB1522) was heard in committee on Wednesday, and the media predictably highlighted the comments of former Sen. Fred Thompson, hired by the trial lawyers to lobby against the bill. A new business group, Tennesseans for Economic Growth, has formed to promote the reforms. From its release:

“Our current civil justice system in Tennessee is seriously flawed because it threatens current business owners and jobs creators with unlimited exposure to litigation,” said Doug Buttrey, who has been named Executive Director of TEG. “This flaw in our civil justice system also puts Tennessee at a competitive disadvantage when it comes to attracting new businesses and jobs, especially since our state is one of the few in the Southeast which has yet to rein in lawsuit abuse through tort reform.”

“Tennesseans for Economic Growth believes it is critical that every citizen has access to the civil courts and that medical expenses be fully compensated. It is equally critical that damage awards do not spin out of control and become beyond reason,” Buttrey continued.

Doctors are also advocates for the reforms.

WISCONSIN

Wisconsin Gov. Scott Walker made tort reform the keystone of his early legislative efforts, winning passage of a package of civil justice improvements during the special session. (Shopfloor, Jan. 28, “Gov. Walker Signs Tort Reform Package in Wisconsin.” However, union groups have turned the April 5th Supreme Court race into a referendum on Gov. Walker’s collective bargaining reforms, and the trial lawyers are joining in the hopes their hand-picked candidate will overturn the tort reform law from the bench. (See our Point of Law post, “Wisconsin Supreme Court election: a referendum on tort reform, too.“)

OKLAHOMA

In Oklahoma, long-frustrated reforms now appear headed for passage in the Legislature and signing into law by new Gov. Mary Fallin. Last week, the major measure, passed the House by a vote of 57-40, the State Chamber of Oklahoma reports: (continue reading…)

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Circumnetting Civil Justice Reform and Other Legal Things

The House Judiciary Subcommittee on the Constitution holds a hearing this Friday on the major piece of civil justice reform legislation this Congress, the Lawsuit Abuse Reduction Act, which will amend the Federal Rules of Civil Procedure to discourage the filing of frivolous lawsuits. We have more on the legislation at Point of Law.

Bill McCollum, the former attorney general of Florida, argues in The Wall Street Journal for more transparency when state attorneys general hire outside legal counsel on contingency to sue people (mostly businesses) on behalf of the state. From “States and Lawyers’ Fees: Transparency Needed“:

Since the 2007 financial crisis, state attorneys general have stepped up consumer-protection enforcement and are well on their way to displacing federal authorities as the nation’s chief consumer-protection watchdogs.

As the former attorney general of Florida, I understand both the power and potential pitfalls of the job. This increased role and the increased visibility that comes with it mean that attorneys general must (and should) work that much harder to maintain public confidence in the integrity of their office.

The Supreme Court this week denied to hear the Competitive Enterprise Institute’s challenge to the 1998 tobacco settlement based on Congress’ failure to approve the deal as required by the Constitution’s compact clause. From CEI’s news release, “Supreme Court Declines to Hear Case Challenging Tobacco Settlement“:

“We regret the court’s decision not to take up a case of major constitutional and policy importance,” said Sam Kazman, CEI General Counsel. “The tobacco settlement imposed a massive national sales tax on cigarettes, without a single elected legislator at any level of government voting for it. This was a major power grab by state attorneys general at the expense of both citizens and our structure of government.”

Former Sen. Fred Thompson (R-TN) is lobbying for the Tennessee Justice Association against Gov. Bill Haslam’s legislative tort reform proposals. In the cover story for the Tennessee publication, CityView Magazine, he explains his reasoning and argues against damage caps in medical malpractice suits. We appreciated his comments about the misuse of the word “reform”:

I don’t know that there is a rush for tort reform but tort reform has kind of taken on an air of its own and you’re either for it or against it. There is no such thing as finance reform, there is no such thing as health care reform, there is no such thing as tort reform; it is only what is in the bill. It may be reform or it may just be change and not really reform. So everybody thinks all Republicans ought be for tort reform, and that if you’re not a Republican, than you should be against tort reform. I think both of those are fallacious. We ought to look at what’s being proposed.

And two interviews well worth reading

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Gov. Walker Signs Tort Reform Package in Wisconsin

Wisconsin Gov. Scott Walker, who took office just this month, has an early victory in his effort to improve the state’s business climate, the major tort reform package introduced in the special session of the Legislature he called to pass jobs and economic growth bills. He signed the bill, SB1, in the governor’s conference room on Thursday.

From The Milwaukee Journal-Sentinel story, “Walker signs bill limiting court awards in injury cases“:

“This is a balance we are trying to create, to make sure certainly those who do damage and do harm are rightfully going to be penalized, even when this act becomes law,” Walker said. “But for those who have been . . .  threatened with frivolous lawsuits, particularly for small business, they’re going to receive relief today because . . .  we move forward in cutting back on frivolous lawsuits and out-of-control lawsuit abuse in the state of Wisconsin.”

Credit also goes to the state Senate and Assembly, which passed the legislation.

Wisconsin Manufacturers and Commerce, an effective and energetic supporter of the legislation hailed the bill’s signing. “These reforms will add certainty, fairness and predictability to our legal system,” said James A. Buchen, WMC vice president of government relations. The key provisions, according to WMC: (continue reading…)

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Wisconsin Assembly Passes Tort Reform Package, Sends it to Gov. Walker

From Wisconsin Manufacturers and Commerce, “WMC Hails Legislature for Passage of Common Sense Legal Reforms“:

MADISONWisconsin’s largest business group Friday hailed the Wisconsin Legislature for swift final passage of common sense legal reforms that will improve the state’s business climate. We look forward to Governor Scott Walker signing his reforms into law.

“The swift, decisive action on common sense legal reforms is sending a message from Platteville to Wall Street that Wisconsin is open for business,” said James A. Buchen, WMC vice president of government relations. “With other states raising taxes, and passing other anti-business legislation, Wisconsin can stand apart and encourage businesses to create jobs.

The Assembly vote Thursday was 57-36 along party lines to approve without amendment the Senate’s version of the bill . The Senate passed the bill on Tuesday,19-14, also with Republican in support and Democrats opposed.

The WMC identified the most important legal reforms for manufacturers.

  • Adoption of various changes to product liability law to bring Wisconsin in line with other states and assist Wisconsin manufacturers and small businesses.
  • Requiring expert witnesses to base their opinions on sound science and well-established theories.
  • Elimination of the “risk contribution” theory in manufacturing lawsuits. The Wisconsin Supreme Court created the standard allowing plaintiffs to sue any lead paint manufacturer that sold paint in the state without proving which product caused the harm.
  • A cap on punitive damage awards. [Twice economic damages or $200,000, whichever is larger.]

The State Bar of Wisconsin, which opposes several major provisions, has done a credible job reporting on the legislation’s passage. See “Assembly sends omnibus tort reform bill to governor.”

The civil justice reform package was one of five jobs-oriented bills new Gov. Scott Walker introduced upon taking office and for which he called a special session of the Legislature to act upon. See the Jan. 4 news release, “Governor Walker Releases Five Pieces of Legislation to Get Wisconsin Working.”

More coverage …

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In Wisconsin and Texas, Liability Reform

Upon taking office, Wisconsin Gov. Scott Walker quickly called the Legislature into special session to pass jobs-related legislation, including a major tort reform package. As we report at Point of Law, the Senate is expected to debate the bill on the floor today, the House could act on Thursday, and the legislation could go to the governof for his signature by the end of the week.

Wisconsin Manufacturers and Commerce, representing the people who create jobs, is proving an effective advocate for the reforms, testifying last week before the Senate Judiciary Committee. From WCM, “Lawsuit Reforms Needed to Help Job Creation

MADISON– Lawsuit reforms proposed by Governor Scott Walker and lawmakers will send a signal to employers that Wisconsin is open for business and is a great place to create jobs, WMC said Tuesday.

“Wisconsin businesses need to know that our legal system is fair and predictable,” said James A. Buchen, vice president of government relations for Wisconsin Manufacturers & Commerce. “Governor Walker has put forward a common sense set of legal reforms that send a message to employers that our state is serious about improving our business climate.”

After being amended by the Senate committee, the bill would impose a cap of punitive damages of twice compensatory damages or $200,000, whichever is greater. State standards of proof would now reflect the Daubert standard, discouraging suits based on “junk science,” and the law’s provisions would be applied prospectively only. The bill would eliminate “risk contribution” theory in manufacturing lawsuits. The Wisconsin Supreme Court created the standard allowing plaintiffs to sue any lead paint manufacturer that sold paint in the state without proving which product caused the harm.

In Texas, similar issues — and the results of the 2010 gubernatorial and legislative elections — are encouraging passage of tort reform, as well. From the Office of Gov. Rick Perry, news release, Jan. 13, “Gov. Perry Calls for Expanded Lawsuit Reform in Texas”: (continue reading…)

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Engler: How Tort Reform Can Improve States’ Business Climates

John Engler, president of the National Association of Manufacturers, was a guest on the Hugh Hewitt Show last night to discuss what steps new governors can take to improve their states’ business climates.

Hewitt booked Engler, a former Republican governor of Michigan, as a follow-up to Hewitt’s column, “Where The Action Ought To Be: A Once in a Generation Chance for the Midwest,” which proposed a course of action for new governors in Pennsylvania, Ohio, Wisconsin and Michigan: reforms to business taxes, education and the state legal systems.

Here’s a transcript of a portion of the conversation on tort reform, slightly cleaned up for clarity.

Hugh Hewitt: If you’re talking to Kasich or Walker or Corbett, any of these new governors, what ought they to focus on when it comes to asking their legislatures to give them some tort reform?

John Engler: There have been a number of state-level reforms that have worked that need to be replicated everywhere. They’re sort of nitty-gritty, getting down in to how we run the legal system, but clearly, some of the venue issues, so they can keep these cases from being shopped into the more favorable venues. That’s part of it.

Cleaning up the expert witness mess that sometimes exists, where you have people showing up purporting to be an expert who really have no credentials and no special expertise, but yet they’re on the circuit.

I think there’s also a case to be made in certain areas for absolute caps on damages on the non-economic loss.

And you have to get into workers comp laws. That’s a specialty area, but there are many abuses that were there in states, and some I’m sure still remain, where injuries way outside the course of employment are being compensated in that system, driving up costs.

So, each state has peculiarities and subtleties in their system, but in almost all cases there are groups, there are centers for legal reform in the nation, that are helping out at the state level. ALEC [American Legislative Exchange Council] has some recommendations. The American Justice Partnership has recommendations. There are people willing to help when we’ve got leaders who are willing to step up on those issues.

The payoff doesn’t come immediately, but it’s important. … (continue reading…)

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After Fixing the Budget, Tort Reform in New Jersey

The trial lawyer lobby occasionally tries to sell the argument that business owners are not that troubled by the burdens and costs of being sued. We’ll concede that there may be a difference in attitude between employers who have been sued versus those who have not been…yet. Small businesses are keenly aware of the consequences of being sued.

Indeed, the New Jersey Lawsuit Reform Alliance last week released results of a survey of small business owners on the state’s legal climate. Monmouth University Polling Institute interviewed owners and senior operators of small businesses (2 – 50 employees) in July 2010. Results were released at a news conference with NJLRA’s executive director,  Marcus Rayner, and Assemblywoman Amy Handlin (R-Monmouth). Highlights:

  • Most (70%) of New Jersey’s small business owners agree that the state’s liability laws make it less attractive than other states for business.
  • Nearly two-thirds (64%) say that lawsuits are a problem for New Jersey’s overall business climate.
  • One-in-five small businesses have had a lawsuit filed against them by a client or customer in the past five years.  One-in-three think it is more likely than not that they will be sued in the next five years.
  • The majority of New Jersey’s small business owners (55%) say that reforming our liability laws would improve our business climate. 
  • Among the small business owners who were sued in the past five years, many were forced to make changes to their business.
  • Liability insurance, which is necessary for most businesses, increased for at least 55% of New Jerseyís small businesses in the past five years.


NJLRA’s news release is available here, and you can download the full report here. NJBiz covered the release, “Study: Small business wants tort reform.

Reform-minded Gov. Chris Christie has devoted most of his energies to solving the state’s budget crisis, obviously a priority. But he included tort reform as a plank for economic growth in his 2009 campaign platform, and he’s willing to shake up the state’s legal system. Fix the budget, then fix New Jersey’s legal system, governor!

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A Pretty Quiet Congress on Tort Reform, Liability Front

At the Manhattan Institute’s Point of Law blog, we have two reports on the 111th Congress, the absence of tort reform and the general failure of bills to expand liability and litigation. It was pretty quiet in the world of civil justice reform.

Also at Point of Law, we  noted the claims of the American Association for Justice, the trial lawyer lobby, that it had achieved some notable successes during the session. Notice AAJ’s emphasis on preemption.

Congress returns for its lame-duck session on Nov. 15, and it would be a good thing for Congress not to push for action on civil justice or liability-related legislation. There is one priority, and one priority only for the lame duck: Taxes.

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