Who Wins From Lawsuit Abuse? Hint: It’s Not You or Me.

by Steven Hantler on July 18, 2007

Some in the news media and elsewhere would have us believe that recent legal reforms have made it a tough time to be a plaintiff’s attorney.

Sounds good, but nobody told that to the trial bar.

The fact is, tort costs in the U.S. jumped 46% in just the pasts five years. As noted in this space yesterday, a new study by the Pacific Research Institute reports that the total direct and indirect costs of lawsuits are a staggering $865 billion (for context, the U.S. spends only about $108 billion a year fighting the war in Iraq).

And one need look no further than a few headlines of late to see our lawsuit happy culture is alive and well. Everyone knows about the $54 million “pantsuit” — that is but one of countless, lesser known meritless suits happening on any given day. Consider:

· “Injured Kid’s Mom Sues ‘Slide Fool’ Coach” A 12-year-old Little League player was injured sliding into second base and his mother filed a lawsuit claiming poor coaching.
· “Perfume Lawsuit.” A Detroit city employee is suing because she claims her co-worker’s perform makes her sick.
· “Cheerleader’s family to sue school district” A Texas couple plans to sue their local school board because their daughter did not make the cheerleading squad.

You and I pay for these abusive lawsuits through higher consumer costs, higher taxes, lost jobs and stifled innovation. And the trial lawyers? With apologies to Mark Twain, rumors of their deaths have been greatly exaggerated. They are alive and well…just ask the Little League coach, the perfume wearer or the Cheerleading captain. I wonder who will be next?

Steve Hantler

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Update: “Judge says perfume lawsuit can proceed”
11.30.08 at 1:36 pm

{ 21 comments }

1 throckmorton 07.18.07 at 7:37 am

How much would it cost to make things “idiot proof”? Those idiots can be pretty determined and stubborn you know. You wouldn’t believe how many people “Crazy Glue” thier lips shut by accident!

Honestly, what ever happened to people being responsible for their own actions. Oh, I forgot. There is no money in it!

2 thecaptain 07.18.07 at 8:14 am

Let me tell you about making things “idiot proof”

As a systems analyst, it is my job to make my application systems as “idiot proof” as possible.

The universe’s job is to create better idiots.

The universe wins every time.

3 Drew Drytellar 07.18.07 at 12:09 pm

“For context,” how about noting that the PRI study includes frivolous and non-frivolous lawsuits? Is it a “fact” that tort costs have risen 46% in the past five years? I can’t tell if that is from the same study as the $865 billion or not, but what are the assumptions there? If you don’t follow the assumptions that go into these numbers, it is misleading to cite them. To begin with, tort reform proposals have been more successful than not over the past five years (yes–it varies state by state but I think most observers would agree with that last statement). If those successes coincided with a 46% increase in tort costs, those laws may not be doing what they claim to do. Or maybe the laws are successful and these numbers are just flawed. Either way, you can’t just cry out $865 billion and PRI study and expect us to accept it as gospel.

4 Joe 07.18.07 at 12:51 pm

Drew, how about actually reading the article and addressing it on substance?

5 Lawrence J. McQuillan 07.18.07 at 2:08 pm

Our study “Jackpot Justice” includes costs associated with both excessive and meritorious lawsuits, but readers should note that the overall cost we present includes more than just direct tort costs. The $865 billion cost also includes second-order costs, such as defensive medicine and loss of innovation.

The cited increase in costs of 46% does not come from our study and we do not have a position as to whether frivolous or non-frivolous lawsuits are responsible for this increase in direct tort costs.

We do, however, divide our total into “excessive” and “legitimate” costs — a dichotomy we believe is important when discussing the tort system’s total costs.

Lawrence J. McQuillan, Ph.D.
Hovannes Abramyan
Authors of “Jackpot Justice”
Pacific Research Institute
San Francisco, California

6 Blaise MacLean 07.18.07 at 2:12 pm

As a Canadian lawyer (or former lawyer who is now teaching) I never understood why the US simply didn’t adopt the “costs” approach that we have in Canada, UK etc. It simply provides that the losing pary NORMALLY pays the winners “costs”.

This doesn’t mean that you simply send you account to the other side. Rather, there are a couple of “scales” of costs which apply depending upon how meritorious the case was, whether a fair offer to settle was ignored etc. Further, the Judge has the discretion (in most Canadian jurisdictions, at least) to relieve the loser of paying the costs, or a portion of them, if the suit was meritorious, or if there was an important issue to be tried etc.

To me it always seemed a bit common-sensical, and I never understood why the US didn’t adopt it. To me, it would require lawyers to take a very serious look at a case before filing it. It seems very much like a good short-cut to tort reform.

7 Ima Fish 07.18.07 at 2:33 pm

I love this quote from attorney in the cheerleader story:

“The school district nor the superintendent has offered a satisfactory explanation as to why Wycoda was singled out,” said Duke.

The school had a tryout for six positions. Seven girls tried out. One lost. Does anyone really need an explanation as to what happened? Apparently so, so here it is: She lost! She was not as good! The other girls were better!

8 Dimitri Young 07.18.07 at 3:11 pm

The DC cleaners case was more than just a frivolous lawsuit. It is baffling to see the lengths that people will go to merely “prove a point,” (which seems to be the common mantra for all these frivolous cases).

The time, effort, legal work, and money that is spent on such an absurd issue is fairly remarkable – especially considering the cleaners offered the plaintiff a settlement that was nearly 100 times more than the value of his pants! Indeed, the “pantsuit” case is one of the most offensive and frivolous lawsuits in recent years, but it just goes to show that the current legal climate is so poor and dysfunctional that it would allow such cases to even be considered.

9 Erisian23 07.18.07 at 4:16 pm

If the pants, cheerleading, and slide fool cases are booted out and the plaintiffs made to pay defendant’s costs, I’ll be right there with you guys cheering. And the more states we can get to adopt laws to discourage that type of abusive self-psychotherapy, the better.

But if the ladies who seemingly bathe in their perfume can have ordinances passed to keep my from smoking in public, I could live with one that involves citing them for their olfactory offenses.

Sure, the libertarian in my chafes at the idea of such a law. And the tort reformer in me doesn’t believe a lawsuit is even remotely the correct way to arrive at that political conclusion.

But, man, there are some real stinkers out there. I’m just saying.

10 jb 07.18.07 at 4:28 pm

Blaise:
The US doesn’t run on common sense. If we put in a system as you describe, judges wanting to look “tough” would refuse to exempt obviously meritorious suits, or would exempt obviously frivolous ones based on their caprice. It would make the system even more lottery-like.

Also, since I read every day on this site about how some suit was decided the obviously wrong way, I’m wary of allowing this obviously broken system to assign further cost categories.

11 Anonymous Attorney 07.18.07 at 5:05 pm

The almost-a-trillion figure from the study is one I’m inclined to believe, though I don’t know the methodology of it.

In a culture where everyone wants a million for their boo-boo, and there’s no disincentive to seeking that (say, shame), and any citizen with a law degree can “have at it,” this is what you get. Like taxing and spending, the beneficiaries are sharply incentivized, whereas those who suffer (taxpayers, the general public, etc.) aren’t. So reform doesn’t have a champion, except at the theoretical level. Big business just sighs and folds it in to the cost of doing business.

There is no “reforming” this entitlement mindset. More cohesive societies, like Japan, apparently don’t suffer similarly. But this may not be the whole story, I don’t know. At the end of the day, it comes down to a potential litigant thinking to himself, “Do I really need to file this lawsuit and cause the problems and expense for others that will necessarily follow, even if I do have some colorable grievance?” I doubt most even ask that question of themselves. And that says a lot about our current society. Because the incredible power vested in litigants to prosecute their cases, I think, was designed for a society in which that question IS asked.

12 Paul 07.18.07 at 9:44 pm

Steve, supra:

A Detroit city employee is suing because she claims her co-worker’s perform makes her sick.

Well, sometimes my “co-worker’s perform” makes me sick, too. :)

13 Todd Rogers 07.18.07 at 10:06 pm

I guess as an Ayn Rand-type, I have faith that the market will eventually make such cash-grabs unattractive or impossible. I presume most or at least the majority of this blog’s readers are supporters and proponents of “The Invisible Hand.” But inasmuch as it pains me like a paper cut on my tongue, I believe there is exactly one area that I can think of that direly needs a swift dose of governmental attention: tort reform.

14 Tom T. 07.18.07 at 10:59 pm

The thing to remember about the “loser pays” rule is that the vast majority of civil cases end in a negotiated settlement, where there isn’t a winner or a loser.

15 John 07.19.07 at 8:15 am

Tom:

That is true. However, if there was a loser pays system in place, the defendant might be more likely to “fight” the allegations rather than throwing money at it to make it go away.

16 E-Bell 07.19.07 at 8:25 am

Tom T., the same could be said about civil cases in the United States as well.

17 Petri 07.19.07 at 9:00 am

So, if people think a loser pays system wouldn’t work because of the subjectiveness, why can’t other disincentives be enforced? If someone brings a tort lawsuit against you, for whatever reason, if it is found for the defendent why aren’t their legal reprercussions?

In the case of the pants why can’t they turn around and sue Pearson for malicious prosecution? If the verdict is in favor of the baseball coach why can’t he sue the parents for false accusation or slander?

The point is, that there should be some CONSEQUENCES for bringing litigation against another person. Something that makes a person stop and say, “Hmmm, how far do I want to take this?” If you bring litigation and you were wrong then it stands to reason that the suit shouldn’t have been brought. Why doesn’t that count as some form of dignitary tort under which the defendent can make claim for restitution?

18 Walter Olson 07.19.07 at 10:29 am

>The thing to remember about the “loser pays” rule is that the vast majority of civil cases end in a negotiated settlement, where there isn’t a winner or a loser.

It is likewise true that the vast majority of civil cases end in a negotiated settlement in the legal systems of other advanced democracies, nearly all of which practice some version of loser-pays. So whatever practical problems may arise with loser-pays, this isn’t one of them. As was noted earlier, the expected application of a fee-shifting rule casts a shadow on the negotiations which will tend to boost the settlement value of many well-founded claims while depressing the settlement value of many that are not so well-founded. So the high settlement rate actually illuminates one of the virtues of loser-pays, in that (assuming a 95 percent settlement rate) it deters wasteful behavior in nineteen other cases for every one case in which a judge actually has to spend time on a costs motion.

At the risk of being self-promotional, readers interested in a fuller treatment of the subject might want to check out the resources here, here, and here.

19 Tom T. 07.20.07 at 1:34 am

I’m not suggesting that it’s a problem, but rather that it’s not as big an advantage as many proponents suggest. Most settlements would simply have the parties bearing their own legal costs. Moreover, to the extent that they are working on a contingent fee basis, plaintiff’s lawyers in this country already do work on a system that provides some of the incentives of loser-pays, in that they only get paid if they recover.

Also, note that a loser-pays system would presumably generate some new ancillary litigation, since the amount and reasonableness of the winner’s fees would likely be challenged in most cases that go to judgment.

20 Matt 07.22.07 at 8:26 pm

Nearly every state in the country already has a form of loser pays. What the corporate defense bar and the associated lobbyists want to do is federalize it.

21 Deoxy 07.23.07 at 10:26 am

“Nearly every state in the country already has a form of loser pays.”

And most of those, most of the time, resolve to “loser pays… NOTHING (if it’s the plaintiff).”

Go get some real data before you shoot your mouth off.

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