Tort
reform is high on the Republican and corporate agendas. It is
also on the table in many states, unless, of course, it has already
passed. Tort reform advocates say that their goal is to restore
balance in the civil justice system, to end frivolous lawsuits
and the excesses of “trial lawyers”. But beware: all
the talk about those evil, greedy trial lawyers is a smokescreen.
What the tort reformers really want to eliminate the risk of being
held liable and punished by a civil jury.
Consider
the tort system from the perspective of a plaintiff's lawyer.
The plaintiff's lawyer only gets paid if he wins, and then he
receives a percentage of the jury award. This is called a contingency
fee. The lawyer puts a great deal of time into the case, and usually
advances the funds to pay experts. This can quickly run into very
large sums of money. If the case is lost, so is that money. Obviously,
plaintiff's law is a high risk business - like drilling oil wells.
You sometimes win big – and sometimes lose big.
Reduce
the possible gains and you reduce the willingness of plaintiff’s
lawyers (for the most part small businessmen) to take big risks.
So, the corporate tort reform agenda is to raise the raise the
risks and void the gains. When tort reforms put caps on the wins,
with no similar caps on the losses, what happens? Difficult or
expensive cases will not be litigated, because the downside risk
will be more than the potential reward. Now mind you, we're not
talking about frivolous cases here (good lawyers don't take frivolous
cases, because they are by definition losers). We are talking
about substantial cases, in which real people have suffered real
injuries, often life-altering ones. These are cases, which thanks
to tort reform, will never result in jury verdicts adequate to
cover the risks of litigation.
Is
the Jury System Dying? A Few Statistics
Chief
U.S. District Court Judge William G. Young of Boston has said
that “the American jury system is dying. It is dying faster
in civil cases than in criminal cases. It is dying faster in Federal
courts than in State courts. But it is dying, nonetheless”.
In 1962, 11.5% of federal civil cases were decided by a jury trial;
by 2002, it was 1.8%. In 1962, 15% of federal criminal cases were
decided by a jury trial; by 2002, it was 5%. Both civil and criminal
trials have shrunk in absolute numbers, while the number of cases
filed has continued to increase. In 1962, each federal district
court judge heard 39 trials a year; by 2002, the number was down
to 13.2.
If
the jury system is dying, tort reform is one huge nail in its
coffin. By arbitrarily limiting the compensation a jury can give
injured people for their injuries, tort reform reduces jury power
and authority in those non-frivolous cases that are tried, while
keeping many more cases from being litigated at all. The conscience
of the community, as the jury is often called, is silenced - and
technocratic cost/benefit analysis is expected to take its place.
The
Flawed Theory Behind Tort Reform
What
the tort reformers, who are by and large conservatives, fail to
realize is that tort reform is paternalist, if not downright totalitarian.
We limit the individual responsibility of tortfeasors to their
victims in the name of “public good”, while forcing
their victims to bear the costs of the injuries the tortfeasors
caused, because society thinks it is too expensive to give them
justice. In essence, we are redistributing wealth from victims
to tortfeasors, by not holding the tortfeasors responsible for
the damages they have caused.
The
ends (say, reducing health care costs) cannot justify these means
(eviscerating individual rights and responsibilities in the civil
justice system.) Nor, of course, are health care costs lower in
states with tort reform than those without. Or insurance costs.
In fact, none of the numerous things our allegedly litigious society
has raised the costs of have become cheaper as a result of tort
reform.
The
theoretical premise behind tort reform comes from a group of law
professors called “behavioralists”, who argue juries
are incapable of rendering rational punitive damage awards. They
would prefer to see schedules of fines and penalties, overseen
by technocratic administrators, take the place of juries. Some
might think it relevant that their major work, a volume called
Punitive Damages: How Juries Decide, was funded primarily
by Exxon and other large corporations. Not surprisingly, the arguments
in Punitive Damages support the corporate desire to take punitive
damage awards away from juries.
What
the “Behavioralists” claim is that punitive damages
awards given by juries have no relationship to the harm or wrongdoing
by corporate defendants. The niggardly interpretations of harm
and wrongdoing accepted by the “Behavioralists” are
unsatisfying (except, of course, to corporate counsel.) Moreover,
their view of what juries should do would require completely eliminating
the jury role in determining punishment in tort cases.
Could
a jury rationally believe a cost/benefit analysis cannot rationally
justify placing a known dangerous product in the stream of commerce
- and punish the company that did so? Not according to the “Behavioralists”.
The “Behavioralists” want the legal system to provide
economically efficient deterrence of corporate misconduct. Juries,
on the other hand, want fairness and justice.
A
number of articles have shown that the “Behavioralist”
research is logically flawed. Perhaps Temple Law School’s
David A. Hoffman’s article How Relevant is Jury Rationality?
does perhaps the best job of surveying the available literature
showing that the cost-benefit analysis behavioralists uses as
the sole test of jury rationality is only one of many factors
juries and society must take into account. Prof. Hoffman’s
is far from the only such critique.
If
punitive damages are cost-efficient, they may fail to provide
the degree of deterrence that juries find necessary. Furthermore,
juries may find it justified to flat-out punish tortious conduct
that was willful, reckless, or dishonest. It seems outrageous
to take such decisions away from juries merely because a few law-and-economics
types find it cost-effective to do so. Yet that is what the tort
reform movement is attempting to do.
A
criminal who kills many people may be given the death penalty
in criminal courts. A corporate tortfeasor whose actions kill
many people should risk the same penalty: bankruptcy, corporate
death.
Rarely
do juries decide corporate misconduct was so bad as to justify
this death penalty. However, having it available does more to
deter corporate misconduct than the criminal death penalty can
to deter murder. Unlike most murderers, corporations are rational
actors with the self-control to act in their own interest.
What
About the Problems Tort Reformers Complain Of?
Tort
reformers claim that excesses by those dreaded “trial lawyers”,
(which somehow only includes plaintiff’s counsel, but not
the lawyers defending corporations) make tort reform necessary.
But is the solution to excesses by lawyers to reduce jury awards
when they are justified? Such excesses exist (e.g., television
commercials with cash-register sounds in the background), and
they are, at best, tacky. But why should tort victims be the ones
to pay for them?
Sometimes,
it is argued. mass-tort litigation takes too much of a toll on
our courts, as thousands of asbestos and fen-phen cases wind their
way to a verdict. Our legislatures have not drafted procedures
to properly handle such litigation. But is the solution to reduce
jury power to punish tortfeasors in favor of those who are injured,
killed or maimed?
There
are problems with our procedural codes. And I would suggest that
corporate defendants in these cases do not want to face expedited
procedures, in which one loss may open the doorway to hundreds,
thousands, or millions of claimants. As the public cost of a district
court, on average, is about $1000 an hour, corporate lobbyists
should be forced to take a backseat to public economy.
And
in any event, is the way to handle the failure of the legislature
to draft and enact appropriate procedures to handle mass-tort
litigation to gut the power of juries to award damages to real
victims?
Most
tort reform bills that have either passed or been proposed do
little or nothing to rein in actual lawsuit abuse. They deal with
reducing damages to actual, bona fide victims. I would suggest
this is because the corporate sponsors of tort reform are more
concerned with the awards they have to pay REAL victims than they
are with the costs of frivolous litigation.
If
the latter was the concern, their goal would be a system to require
plaintiffs or their counsel to reimburse defendants if a case
is dismissed as frivolous. We are not hearing many cries for those
sorts of reforms. Yes, there are some, but they are certainly
not the focus. Those behind tort reform are not trying to streamline
litigation (they benefit as the rising costs of litigation make
it onerous to file suit.) They are not trying to punish lawyers
who file frivolous lawsuits, but to avoid seeing corporations
punished for their misconduct.
Arbitration:
The Tort Reform Movement’s First Success
If
anyone doubts that the goal of the tort reform movement is to
eliminate juries, one has only to look at the success of their
first effort, the movement towards arbitration in the place of
litigation.
The
Federal Arbitration Act encourages corporations to include arbitration
clauses in form contracts. Often hidden in the small print at
paragraph 37, arbitration clauses exist in credit card agreements,
pest control service agreements, internet service agreements,
etc. If you’ve signed a contract with a large or medium
size corporation (and even some small ones), you have probably
signed an arbitration agreement.
When
you sign such an agreement, you give up your right to sue the
entity you contract with. If the company defrauds you, burns your
house down, gives your family cancer, or recklessly employs rapists
who assault your children, your recourse is to take them to binding
arbitration. No judge, no jury: just a lawyer, often retired,
who decides who he thinks should win and how much.
Forget
about hiring yourself a lawyer at no up-front expense. Arbitration
requires that the party initiating proceedings pay a huge lump
sum, often well over $10,000, to begin proceedings. And, no matter
how willful, wrongful, and knowing the tortious action is, arbitrators
cannot give punitive damages, and their awards can rarely be appealed.
The
dirty little secret is that arbitration is no cheaper than litigation.
It is loaded with up-front costs that prevent many disputes from
ever being filed. There has been no more dishonest anti-consumer
legislation ever passed than the Federal Arbitration Act and its
many state siblings. These laws disempower consumers, especially
poor ones.
Of
course, because an arbitration award, if any, will be much smaller,
good lawyers probably won’t want to handle an arbitration
claim on a contingency fee. You want a lawyer? You have to pay
a retainer and an hourly fee. Consumers are on their own.
Arbitration
is supposed to put corporations and their consumers on an equal
footing. How? Both are required to come up with the up-front costs
to initiate a case; both are required to pay their lawyers out
of their own pockets. Is this equal? Certainly – if the
consumer has pockets as deep as those of corporate America. For
the rest of us, we just got priced out of the market. Goodbye,
so long, see you later.
Arbitration
agreements are contractual, and do not cover all tort victims
– only the customers of the corporations that put arbitration
clauses into their contracts. Now that their customers are precluded
from suing them, these corporations are out to ensure that they
cannot be held fully liable to third-parties who are injured by
their faulty products, services or employees. And for this, they
depend on “tort reform”.
Greedy
Trial Lawyers: A Perfect Smokescreen
For
the most part, the general public has failed to see the dire threat
tort reform poses. By demonizing “trial lawyers”,
the tort reformers have found an easy and unpopular target. But
tort reform isn’t aimed at lawyers; it is aimed at reducing
jury power and limiting victim recovery. It is only by hiding
what tort reform actually does that its proponents hope to succeed.
Few of us yearn to abandon our Seventh Amendment rights to a civil
jury trial; few of us want to see companies who injure or kill
our loved ones escape with no meaningful punishment. But hey,
who doesn’t want to knock those arrogant trial lawyers down
a notch?
The
tort reform battles have not yet exhaustecd themselves. It is
important, however, to recognize them for what they are: a smokescreen
for an attack on the civil jury system. And a dishonest attack,
at that.
Clay
S. Conrad is an attorney with the law firm of Lamson
& Looney, P.C. (www.lamsonlooney.com)
and operates the Jurygeek blawg (www.jurygeek.blogspot.com)