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Press Release

    Activist Handbook 2000: Tort Reform

    07/19/2000

    Ending Lawsuit Abuse

    Why CSE Cares
    The Issue:

    CSE believes that markets are the most efficient way to allocate scarce resources. A market cannot operate in a void; it requires a complex set of institutions—such as social norms, cultural values, political structures, and so forth—that protect property and guide individual behavior. Perhaps the most important institution for any market is a set of legal rules that allows people to resolve private disputes and enforce contracts. (Legal rules deter people from breaking contracts and injuring others, and they protect the property owned by individuals. The legal system also provides rules that guide behavior and create a sense of personal responsibility: people drive the speed limit, they buy insurance, they don’t destroy the property of others, and they avoid activities that may harm others.)

    To have a sound economy, we must have a system that settles disputes between private parties fairly and efficiently. The legal system has traditionally fostered personal responsibility while providing compensation for those who are injured by careless actions of others.

    The Problem:

    The courts have distorted traditional legal rules to the point that sometimes when individuals play by the rules, they are still on the hook for liability (with deep pockets rather than actual wrongdoing often determining fault). This makes the system unfair and unpredictable.

    By basing liability on ability to pay, rather than actual fault, the legal rules no longer provide clear incentives to guide behavior. People do not know if their contract will be enforced, or if they’ll be paid if injured. And businesses don’t know if investing in proper precautions will make them less likely to be sued in court.

    Facts:

    1. In 1999, a Los Angeles jury ordered GM to pay $4.9 billion after a family was severely burned when their car was hit by a drunk driver.
    2. In March of 2000, a drunk man in Florida broke into and climbed a transformer, receiving 13,000 volts of electricity. He in turn sued the 6 bars that served him and the electric company.
    3. A lawsuit was filed in Georgia against Ford Motor Co. in 1999, after a 3 year old boy died in a van that he had been left in for 3 hours in 95 degree weather by a day care center. The family claimed that Ford should have installed a safety device that would cool down parked cars.
    The Solution:

    CSE advocates a legal system with clearly established rules, that honors contracts and allocates liability based on fault, not ability to pay.

    Ending Lawsuit Abuse Talking Points

    We need to save our legal system from exploitation by an elite group of greedy trial lawyers

    · Between 1/90 and 6/94, trial lawyers gave $17.3 million to state candidates in Texas, California, and Alabama – more than the contributions that the DNC, RNC, and labor and auto companies, gave to federal candidates. (Roll Call 6/21/99)
    · Trial lawyers declared themselves the de facto fourth branch of government. (The American Lawyer, June 1999)
    · In a May 17 New Yorker article, Peter Boyle noted that trial lawyers “are guiding the national agenda—a new means of public policy making that can’t be found in any civics book.”
    Trial lawyers are robbing decent, honest, Americans of their money, trust, freedom and peace of mind.

    · The lawsuit tax costs each American $616 per year. (A Dollar and A Dream, The Public Policy Institute)
    · People become afraid to volunteer for church and other community groups. “Once volunteers become preoccupied with the potential of being sued, everyone loses parents and communities, but especially the children.” (Asheville Citizen-Times, Asheville, NC)
    Sample Headlines
    - "Losing Season Prompts Dad to Sue Son's Coach" Cleveland Plain Dealer 1/9/00
    - "Lawsuit: Universal Studios' haunted house too scary, caused emotional distress," CNN.com 1/5/00
    - "Florida man sues theme park for restricting his prizes" St. Petersburg Times 1/5/00
    - "Athlete Sues School for Letting Him Pass" San Francisco Daily Journal 12/99
    We can give back our legal system to decent, honest Americans with real grievances.

    · We need to pass reforms at the state and federal level, ensure that trial lawyer dollars don’t determine state, federal, judicial and presidential elections, and we need to show the judiciary that citizens are watching their decisions and that they won’t put up with activist courts
    · CSE helped pass tort reforms in Florida, Alabama and Texas in 1999.
    · CSE was successful in making tort reform an issue in the presidential primaries.
    CSE’s Ending Lawsuit Abuse Agenda

    · Abolishing Joint and Several Liability In Most Cases. The current rules of law on joint and several liability are grossly unfair and inefficient. Requiring a person one percent at fault to pay an entire judgment creates higher insurance and product costs, and is destructive of property rights. The only instance where joint and several liability is appropriate is where it is impossible to apportion fault between those who cause the harm.
    · Reforming Class-Action Rules. The current use of Rule 23 of the Federal Rules of Civil Procedure has created a treasure-trove for plaintiffs’ class-action lawyers. The lawyers sometimes do not even need a client to collect millions from productive sectors of the economy. Moreover, if the goal of these actions is to put the plaintiff back in his original position but for the wrong, why is it that lawyers receive far more than plaintiffs? CSE supports changes to Rule 23 that mandate that a lawyer have an actual class that has sustained an actual injury.
    · Mandating a Higher Burden of Proof for Punitive Damages. Punitive damages are meant to punish defendants for engaging in harmful behavior. Just as in criminal cases, before a court can punish someone, it must satisfy a higher burden of proof.
    · Creating a Presumptive Cap for Non-Economic/Pain-and-Suffering Damages. Pain-and-suffering damages are highly speculative and vary greatly from person to person. For these reasons, it is difficult, if not impossible for defendants to predict these costs and change their behavior accordingly. Moreover, the excessively high pain-and-suffering awards often over-deter individuals and corporations from engaging in what normally would be socially valuable activities.
    · Eliminating Junk Science in the Court Room. State courts are allowing non-scientific evidence into the court room at an alarming rate. Plaintiffs’ lawyers use this “junk science” to prove causation that does not actually exist. CSE supports reining in the use of these junk scientists in the courtroom.
    · Adopting a Reasonable Statute of Repose. A statute of repose will encourage people to depend upon the safety or reliability of a product for only its useful life. Moreover, manufacturers will be able to devote more money to research and development instead of to lawsuit defense and insurance.
    · Strengthening Individuals’ Ability to Enter Contracts. This is at the heart of the tort-reform debate. If individuals can enter into court-recognized and court-sanctioned contracts that allocate risk and decide liability, billions could be saved in transaction costs.
    Frequently Asked Questions
    About Lawsuit Abuse

    Question #1:

    Claims that excessive punitive damage awards are costing consumers higher prices at the check-out counter are unfounded. Punitive damages are awarded in less than five percent of civil jury verdicts, according to a 1990 American Bar Foundation study of 25,000 jury verdicts in 11 states over a four-year period. Between 1965 and 1990 there were only 355 such awards in product liability cases, more than half of which were reduced or overturned on appeal.

    Response:

    Trial lawyers often tell the media that between 1965 and 1990, punitive damages were awarded only 355 times in product liability cases. Further, a recent study found that in 15 state court jurisdictions punitive damages are rarely awarded.

    What these studies do not take into account is that punitive damages are asked for in nearly all product liability cases. In Alabama, known as “tort-hell” according to Time, the proportion of tort cases including a claim for punitive damages in Bullock County was 95.6 percent. In Harris County, Texas, the number of claims for punitive damages rose 50 percent between 1987-1992.

    More important than the number of claims for punitive damages are the effects they have on settlements. Plaintiffs use these punitive damages claims as powerful leverage in settlement negotiations. Defendants know that even though they may not be guilty of any wrong doing, they must cry “uncle” and settle their case out of court to avoid the possibility of a crippling punitive damage award.

    In 1968 through 1971 there were 91 punitive damage awards in California, Texas, New York, Illinois and Florida totaling $6,994,000. Twenty years later, in 1989-91, there were 433 punitive damage verdicts totaling $790,247,000, a ten-fold increase. These figures do not even include any of the cases where a jury verdict was not appealed or where the case was settled before the appeal process was complete.

    Contrary to what the trial lawyers tell us, punitive damage claims are on the rise. Each excessive award chips away at the predictability and legitimacy of our legal system.

    Question #2:

    America's ability to compete in the global marketplace is undiminished by our legal system. If critics of our current system are correct, why then are Japan and the European Economic Community embracing US-style liability laws?

    Response:

    In fact, the Harvard Business School found that innovation is the key to success in global markets and that in the United States, “[lawsuits] [are] so extreme and uncertain as to retard innovation.” Another study found that 47 percent of United States companies withdrew products from the marketplace and 39 percent decided not to introduce new product lines because of fear of lawsuits.

    These studies and the testimonials of countless business persons all indicate that America's civil justice system adds to the cost of U.S. goods overseas, putting us at a competitive disadvantage in the global marketplace.

    Question #3:

    Only lawsuits can force big business to act responsibly. Lawsuits have led to, among other things, safer infant cribs, back-up warning devices on trucks, the removal of cancer-causing asbestos from schools and places of work, and more crash-resistant fuel tanks on family cars.

    Response:

    Lawyers are arguing that lawsuits are the consumers’ only guardian against unsafe products. This simply is not true. If trial lawyers disappeared tomorrow, safe products would still be around. The United States’ and State Governments over-see hundreds of regulatory agencies. The purpose of these agencies, like the Food and Drug Administration, the Federal Trade Commission and others, is to protect consumers.

    For instance, the Food and Drug Administration has over 10,000 employees and spends over a billion dollars a year to make sure that products are safe. The FDA and the other state and federal agencies spend billions researching products to make sure they’re safe for consumers.

    Click here to return to the CSE Activist Handbook for 2000.