Tort reform

The term tort reform is used by supporters of the controversial contention that reform of the American civil justice system is needed to reduce litigation's adverse effect on the economy to describe those proposed and enacted changes.

While the term "tort reform" would seem to imply any change in the tort law or procedure, the commonly understood usage of the term in the political and academic arena is to describe a movement that would reduce the amount of tort litigation. It thus does not include measures that expand liability, such as laws that create new causes of action. Opponents of tort reform sometimes object to the use of the term "reform" to describe the proposed changes to the law as a misnomer, because they believe tort reform proposals would make the civil justice system worse, rather than better.

Tort reform advocates' agenda

Though the term "tort reform" is broader than this, it is often reflected in advocates' contention that there are too many frivolous civil suits. Under the law, a frivolous lawsuit is one that cannot reasonably be supported under existing legal precedent or under a good-faith argument for a change in the law. However, the term has a broader rhetorical definition; in political debates "frivolous" is also used to describe tort lawsuits where there is no link between the conduct of the defendant and the injuries sustained by the plaintiff, or that the damages sought by the injured plaintiff are perceived to be too high for the injuries sustained. Tort reform advocates also complain about lawsuits that are brought based on purely hypothetical damages where the plaintiffs have suffered no tangible harm whatsoever. For example, in the case of Price v. Philip Morris, Inc., now on appeal, an Illinois awarded US$10.1 billion[1] against Philip Morris in purportedly compensatory and punitive damages over allegedly fraudulent cigarette advertising on behalf of a class of plaintiffs, expressly disclaiming that any damages were for personal injury.[2] The Court justified its award by claiming that "Philip Morris' motive was evil and [because] the acts showed a reckless disregard for consumers' rights." When Philip Morris sought to appeal the decision, it claimed it could not afford the appeal bond that Illinois law would normally require. The appeal bond requirement was reduced.

Advocates of tort reform also complain of regulation through litigation, the idea that litigation is being used to achieve regulatory ends that advocates would not be able to achieve through the democratic process. For example, reformers argued that some gun control supporters, unable to achieve success in Congress, adopted a strategy of attempting to use lawsuits to restrict the sale of guns before the federal government passed a law in 2005 to give immunity to gun manufacturers in certain lawsuits;[3] gun control supporters argued that litigation was needed to control the excesses of gun manufacturers.[4] In another example, eight state attorneys general unsuccessfully sued utility companies in an attempt to force implementation of global warming standards that the federal government has refused to adopt.[5]

Changes commonly advocated in the United States include: caps on non-economic damages (e.g., monetary compensation for pain and suffering), punitive damages, and sometimes even economic damages (e.g., medical expenses, lost income, etc.); otherwise limiting consumers' compensation in the courts; sanctions by courts against those who have filed baseless lawsuits; eliminating joint and several liability; and granting immunity to some types of defendants in certain circumstances. Other proposals are procedural in nature, such as restricting the admissibility of expert witness testimony to that which meets a narrower criteria; changes in other evidentiary rules, such as permitting the admission of evidence that a plaintiff was not wearing a seat-belt; eliminating the popular election of judges, which exists in some American states and localities; changing appeal bond requirements to permit defendants to file appeals without risking bankruptcy; improvements to jury selection; making discovery obligations less burdensome; adopting the "English rule" of "loser pays"; or ensuring that class actions with a nationwide class of plaintiffs are tried in federal courts, rather than state courts.

Many of these measures tend to benefit defendants; others, such as the English rule and sanctions for delay, could have benefits to plaintiffs in some cases. There is no debate that tort reform would help some businesses; there is a dispute over whether it would help or hurt consumers as well.

Not all tort reform supporters support all proposed tort reforms. For example, there is a split over whether the collateral source doctrine should be abolished, and there is a healthy debate over whether it would be beneficial to further restrict the ability of attorneys to charge contingent fees.[6],[7]

The tort reform debate

Critics of "tort reform" contend that real purpose of the proposed changes is to shield businesses, especially large corporations, from having to pay just compensation to consumers, patients and clients for damages incurred from fraud, negligence, medical malpractice or other legitimate tort claims. They contend that limitations on punitive damages and other restrictions on plaintiff's traditional rights will reduce corporate accountability. Because corporations typically engage in a cost-benefit analysis before considering whether to stop a wrongful action (such as polluting or not enacting proper measures for safety), they contend that corporations will decide that the cost of changing a wrongful practice would be greater than the cost of continuing it, unless there is the chance that the cost of continuing will be made greater by a successful lawsuit. In this view, the prospect of paying a small damage award would have little or no effect in correcting the wrongdoing, and would essentially allow the corporation to continue an unsafe practice unless state or federal regulators interceded.

Tort reform supporters argue that this precisely describes the problem: lawsuits over socially beneficial practices increase the costs of those practices, and thus improperly deter innovation and other economically desireable activity. They further suggest that small businesses are hurt worse by the threat of litigation than large corporations are, because the legal expenses from a single lawsuit can bankrupt a small businessperson.

Caps on non-economic damages

Opponents of tort reform have contended that damages should be assessed on a case-by-case basis by conscientious and impartial jurors who have carefully heard all of the evidence during the course of a civil trial and should not be arbitrarily capped by a legislature. Some opponents of tort reform contend that limiting non-economic damages to $250,000, as U.S. President George W. Bush has advocated, would fail to provide just compensation to people who are "crippled, disfigured, blinded or live in severe pain or humiliation" as a result of a negligent hospital or doctor. [[8]] For example, in some jurisdictions with $250,000 caps on non-economic damages, a judge would be required to reduce an award of $1,000,000 in damages for pain and suffering down to $250,000 even in a case where a victim was rendered quadriplegic by a drunk driver or by a dangerously defective product. Opponents of tort reform have contended that such caps are arbitrary in that they offer "one size fits all" justice. Tort reform opponents have often cited the case of Linda McDougal, an accountant from Woodville, Wisconsin, who was diagnosed in May 2002 with an advanced stage of breast cancer and had both breasts removed three weeks later. [[9]] Two days after the surgery, her surgeon informed her that biopsy results showed she did not have cancer. "There was an accidental switch. Two patients' slides were switched," said Terri Dresen, a spokeswoman for United Hospital in Saint Paul, Minnesota. Opponents of damage caps contend that $250,000 would neither adequately compensate McDougal for her non-econonic damages nor adequately punish the hospital for an error of this magnitude.

How would tort reform affect safety?

Opponents of "tort reform" contend that "tort reformers" exaggerate the costs and ignore the benefits of the current tort system.[10] For example, opponents of "tort reform" contend that lawsuits encourage corporations to produce safer products, discourage them from selling dangerous products such as asbestos, and encourage more safe and effective medical practices. A 1990 study of auto safety improvements by Harvard University professor John D. Graham for a conference at the Brookings Institution found that

"The case studies provide little evidence that expanded product liability risk was necessary to achieve the safety improvements that have been made. In the absence of liability risk, the combined effects of consumer demand, regulation, and professional responsibility would have been sufficient to achieve improved safety. In some cases, however, liability seemed to cause safety improvements to occur more quickly than they would have in the absence of liability."

Graham further notes that "there is no evidence that expanded liability for design choices has been a significant cause of the passenger safety improvements witnessed since World War II." Graham concludes by endorsing reform, noting that case studies of the current product liability system "suggest that manufacturers may be inclined to delay design improvements when they fear that improvements will be used against them [in court]." Another presenter at the conference, Murray Mackey of the University of Birmingham, came to a similar conclusion:

"[S]trict liability has had a negative influence on innovation. It has held back new designs, consumed resources that might otherwise have been directed at design improvement, and added on costs to the consumer. ... [I]n Western European countries ... liability risks are low and the marketplace pays a premium for innovative technology in safety as well as other areas. As a result, most safety-related advances in recent years have come from European manufacturers and, more recently, from the Japanese. ...

"Perhaps the most obvious test is to reverse the argument. If there were a positive effect of strict liability on [safety] innovation, then surely those companies most exposed to liability verdicts would be the most innovative. But no evidence for that exists at all. Ford, General Motors, and Chrysler have the biggest exposure to litigation for alleged product defects. Those companies devote most resources to defending their current product designs; they are also the most cautious about their new products. It must follow that the product liability doctrine has had a negative influence on innovation in the car industry."

Controversy over job loss claims

Opponents of tort reform dispute claims that the current tort system causes job losses, is an economic drag or has any significant impact on national or global economies. Supporters of tort reform posit that reforms can significantly reduce the costs of doing business, thus benefiting consumers and the public in the long run. Tort reform supporters point to a study by Nobel Prize winner Joseph Stiglitz that shows that bankruptcies from asbestos litigation alone has cost the economy over 52,000 jobs.[11] A study by Harvard Business School professor Michael E. Porter on U.S. competitiveness, The Competitive Advantage of Nations ISBN 0684841479, found that "product liability is so extreme and uncertain as to retard innovation. The legal and regulatory climate places firms in constant jeopardy of costly and … lengthy product suits. The existing approach goes beyond any reasonable need to protect consumers, as other nations have demonstrated through more pragmatic approaches."[12]

In the area of medical malpractice, it is argued that insurance premiums would decrease, both making medical care more affordable for everyone and eliminating a disincentive for doctors to practice. A study by the U.S. Congressional Budget Office published in 2004 found that “Malpractice costs account for less than 2 percent of health care spending." The CBO further found that proposed malpractice reforms would reduce those costs 25-30%. Because malpractice insurance is a significant component of doctors' costs, large variations in the legal environment and malpractice insurance costs from state to state has caused doctors to migrate away from what the American Medical Association calls "crisis" states, with adverse effects on health-care availability in those states, especially in rural areas. Some studies have suggested that the costs of defensive medicine induced by malpractice liability fears are as much as 10% of total medical costs; others dispute this notion.

Dispute over "litigation explosion" claims

Opponents of "tort reform" deny claims of "tort reform" advocates that there is "litigation explosion" or "liability crisis", and they contend that the changes proposed by "tort reform" advocates are unjustified. [[13]] They point to records maintained by the National Center for State Courts which show that population-adjusted tort filings declined from 1992 to 2001. The average change in tort filings was a 15% decrease. [[14]] The Bureau of Justice Statistics, a division of the Department of Justice (DOJ), found that the number of civil trials dropped by 47% between 1992 and 2001. [[15]]. The DOJ also found that the median inflation-adjusted award in all tort cases dropped 56.3% between 1992 and 2001 to $28,000.

Tort reform supporters argue that these numbers are misleading. Supporters note that most liability costs come from pre-trial settlements caused by the threat of trial, so the number of trials is irrelevant. Supporters further note that the number of "filings" is a misleading statistic, because modern filings are much more likely to be class actions with many more joined claims than the cases of decades ago. They also note that the choice of the 1992 start date is misleading, because the largest increase in the number of tort cases occurred between 1970 and 1992. They also argue that the use of the median, rather than the mean, is a misleading statistic for measuring the magnitude of the litigation problem. Supporters point to a study by Tillinghast/Towers Perrin, a major consultant to the insurance industry, that shows the cost of liability litigation outpacing the rate of inflation consistently over the last half century, representing 2.2% of GDP in 2003 vs. just 0.6% in 1950 and 1.3% in 1970.[16] Tort reform opponents dispute these numbers, which have been controversial.[17]

Corporate lawsuit abuse

Some tort reform opponents argue that corporations and insurance companies are the worst abusers of the litigation system. In particular, they contend, corporations often use their enormous resources to unfairly delay trial, pursue frivolous appeals, and contest claims in which liability is clear. In response, a number of "tort reform" supporters argue that that criticism is not a reason to oppose "tort reform"; such abuse would be deterred by proposed tort reforms such as "loser pays," which would prevent large corporations from using litigation as a cudgel against individuals and small businesses who cannot afford to defend themselves in court by providing an incentive for law firms to provide contingent defense. Opponents of "tort reform" contend that most private citizens would be afraid to sue wealthy corporations or insurers if they could be bankrupted by an award of the defendant's legal fees if they lost. The loser pays system advocated by "tort reform" supporters would undermine the private attorney general provisions of many statutes and would be an invitation to corporate lawsuit abuse, some opponents contend.

Tort reform and right of trial by jury

Tort reform opponents also argue that measures to place caps on the amount of damages jurors can award are an unconstitutional invasion of the right to a trial by jury and other fundamental rights.[18] They contend that the right to trial by jury is violated when a legislature places an arbitrary cap on the amount of damages that a jury can award, regardless of the facts involved in the case. No federal court has endorsed this theory, although a substantial minority of state appellate courts have struck down damages caps under their interpretation of state constitutions. Tort reform supporters have criticized such decisions as a violation of the concept of separation of powers.[19] Opponents of tort reform contend that legislatures violate the principle of separation of powers when they attempt to impose arbitrary damage caps on juries, who function as part of the judicial branch of government. Some states, such as Texas, have responded to these court decisions by amending their state constitution.

Joint and several liability

Opponents of "tort reform" contend that the elimination of the common law rule of joint and several liability would arbitrarily act to undercompensate people who had the misfortune to be hurt by more than one person. They favor the principle of joint and several liability based on the premise that, when two defendants together cause an injury to a third person, and one of the defendants cannot pay damages, it is fairer for the remaining defendant to have to pay the whole amount, rather than allowing an innocent victim to suffer the further injury of not receiving the full compensation owed. Supporters of the change note that the use of joint and several liability instead of proportionate responsibility can lead to absurdly unfair results. The classic example is the uninsured drunk driver who injures someone; the plaintiff will sue both the insolvent drunk driver and the state highway department, hoping to hold the latter 1% or 2% responsible. This sometimes forces the "deep pocket" to settle rather than risk trial. According to Richard Wehe, Assistant Chief Counsel at the California Department of Transportation, (Caltrans), "I can tell you that in many, many settlement conferences or mediations I am confronted with plaintiff's lawyer's statements that, 'I only need to establish that the state is 1 percent at fault and I can recover all of my economic damages.'"[20] Joint and several liability, reform supporters argue, leads to litigants search for "deep pockets" to sue, even though those defendants may only be remotely related to an incident.

McDonald's coffee case

One of the cases most often cited on both sides of the tort reform debate is the McDonald's coffee case. An elderly woman, Stella Liebeck, accidentally spilled coffee on her legs and groin when she removed the lid of the cup while she was a passenger in a car, causing severe burns. She sued McDonald's, the company that owned the restauraunt that sold her the coffee. Although the cup contained a warning about the heat of the coffee, the lawsuit was successful. The jury agreed that the restauraunt's coffee was unreasonably dangerous. It awarded her US$2.9 million, which the trial judge reduced to $640,000; McDonald's settled rather than risk appeal. The litigation case received widespread media attention, which some opponents of tort reform have criticized as misleading.

Tort reform in American politics

Tort reform is controversial. George W. Bush has made tort reform a centerpiece of his successful run for Texas governor and of his second-term domestic policy agenda. This has led to the issue becoming more of a major rift between the Republicans and Democrats. In the 2004 presidential election, Democratic vice presidential nominee John Edwards, a successful plaintiffs' lawyer, was criticized by tort reform advocates for lawsuits that he brought against obstetricians on behalf of children who suffered severe birth injuries; reformers criticized the suits as relying on junk science, while Edwards denied the allegation.[21]

Grover Norquist, a leading Republican operative, has suggested a politically partisan motivation for "tort reform", writing in the American Spectator magazine that "Modest tort reform, much of which has been actively considered by committees in both houses, would defund the trial lawyers, now second only to the unions, and this is debatable, as the funding source of the Left in America." He has also written, "In some states trial lawyers give more to Democrats than union leaders do." The Democrats have acted in ways that suggest that the trial lawyers' special interest group is more important to the party than traditional Democratic constituencies. For example, Democratic Senate Minority Leader Harry Reid proposed that Bush name one of four fervently pro-life Republican senators--Lindsey Graham of South Carolina (who promptly said he wasn't interested), Mike DeWine of Ohio, Mel Martinez of Florida and Mike Crapo of Idaho--to fill the seat on the Supreme Court vacated by Sandra Day O'Connor. Because the first three of those senators are former plaintiffs' attorneys, writer and tort reform proponent Walter Olson suggested that Reid was "ready to sell out the interests of his party's social-liberal faction in order to protect the interests of its organized-lawyer faction."[22]

The debate over tort reform was not always a Democrats vs. Republicans or liberals vs. conservatives affair. In the 2000 presidential election, the Democrats' vice presidential nominee, Senator Joe Lieberman, was a leading supporter of tort reform; former New Republic and Slate editor Michael Kinsley has often criticized products liability law.[23] And on the Republican side, Senators Mel Martinez, Mike Crapo, Lindsey Graham, and Mike DeWine frequently oppose tort reform; the first three were plaintiffs' attorneys before joining the Senate. The conservative pro-life group Center for a Just Society opposes many tort reform measures, arguing that litigation can be used to keep RU-486 off the market.

The United States Supreme Court sometimes weighs in on tort reform debates, but here too, the Justices don't always vote according to their predicted ideological stereotypes. In the seminal case of BMW v. Gore[24], the Court voted 5-4 that the Constitution placed limits on punitive damages, with Justices Stephen Breyer and John Paul Stevens in the majority, and Justices William Rehnquist, Antonin Scalia, and Clarence Thomas, dissenting. It has been suggested that a Supreme Court under a Chief Justice John Roberts would be more likely to take cases that could resolve tort reform debates.[25]

Federalism debate

Republicans traditionally voice support for states' rights and say they oppose an excessive role for the federal government. Many of them, however, support federal tort reform legislation that would override state decisions. The supporters argue that this is not inconsistent for such matters as class actions and products liability, because they believe state courts should not be deciding cases that effectively regulate the nationwide economy and that Federalist Paper No. 80 explicitly contemplated the use of federal courts to resolve interstate claims. Concerns about federalism have resulted in modification of proposed federal medical malpractice reform to allow state legislatures to override the caps that the bill creates by default;[26] still, some conservatives make a distinction regarding the appropriate federal role in different types of reform, arguing that medical malpractice is inherently a state-law function.[27].

See also

• Class Action Fairness Act of 2005
• Medical malpractice

References

• American Tort Reform Association, "Facts on Tort Reform"
• Walter Olson, Point of Law, "Procedure"
• Walter Olson, Point of Law, "Regulation Through Litigation"
• Richard Epstein, Wall Street Journal, 2005 Aug. 22, "Rule of Law: Ambush In Angleton"
• CorpReform.com, 2003 Oct. 30, "What Is Tort Reform - and Why Is It Bad for the Public?"
• Ted Frank, Point of Law, 2004 Sep. 23, "What is 'frivolous'?"
• Jeff Milchen, 2004 Oct. 27, "Beware of 'Junk Lawsuits' Hype" (discusses corporate abuses of the American legal system)
• Public Citizen, 2004 Oct., "Corporate Hypocrisy in Accessing the Courts" (study asserting that corporations are the most frequent initiators of litigation in the U.S.A.)
• Commonweal Institute, "The Attack on Trial Lawyers and Tort Law" (examines use of front groups and funding sources for "tort reform")
• Carl Deal and Joanne Doroshow, "The CALA Files" (discusses funding of CALA)
• Walter Olson, "The Lawsuit Lobby" (discusses funding of tort reform opposition)
• Carl Geiger, testimony about Small Business Liability Reform Act before House Judiciary Committee
• John D. Graham, "Product Liability and Motor Vehicle Safety" and Myron Mackey, "Liability, Safety, and Innovation in the Automobile Industry" in Peter W. Huber and Robert E. Litan, eds., The Liability Maze: The Impact of Liability Law on Safety and Innovation. Washington, D.C.: Brookings Institution, ISBN 0-8157-3760-2
• Economic Policy Institute, "The Frivolous Case For Tort Law Change" (characterizes the costs and benefits of the current tort system)
• Tillinghast/Towers Perrin response to Economic Policy Institute

External links

• Overlawyered, the leading tort reform blog, http://www.overlawyered.com.
• Point of Law, the Manhattan Institute's blog on tort reform, http://www.pointoflaw.com.
• The American Tort Reform Association, a leading proponent of tort reform, http://www.atra.org.
• The AEI Liability Project, which researches the scope and consequences of the liability crisis, http://www.liabilityproject.org.
• The American Justice Partnership, an umbrella tort reform organization, http://www.americanjusticepartnership.org.
• Association of Trial Lawyers of America, a leading opponent of tort reform, http://www.atla.org.
• TomPaine.com, a leading opponent of tort reform, http://www.tompaine.com.
• Center for Justice and Democracy, a leading opponent of tort reform, http://www.centerjd.org.
• Commonweal Institute, advocates a robust tort system, http://www.commonwealinstitute.org.