Tort reform in the United States

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The terminology tort reform describes a change in United States civil law system to improve litigation efficiency or reduce litigation's adverse effects on the economy.

While the phrase "tort reform" might imply any change in tort law or procedure, the commonly understood use in political and academic arenas describes a movement to limit tort litigation and damages. It does not include reforms that would expand liability, such as laws that create new causes of action or that increase damage awards. The term is also commonly applied to a political movement that advocates several such changes.

Tort reform is a controversial subject and has been one of the most debated policy issues in recent times.

Contents

[edit] The tort reform agenda

In general, tort reform advocates contend that there are too many frivolous lawsuits.

The legal definition of a frivolous lawsuit is a legal action that cannot reasonably be supported under existing legal precedent or under a good-faith argument for a change in the law, or one that has no basis in fact.[1] The term has acquired a broader rhetorical definition in political debates about tort reform, where it is sometimes used by reform advocates to describe successful tort lawsuits that critics believe are without merit, or award high damages relative to actual damages.

Tort reform advocates argue that the present tort system is too expensive, that meritless lawsuits clog up the courts, that per capita tort costs vary significantly from state to state, and that trial attorneys customarily receive an unusually large percentage of the punitive damages awarded to plaintiffs in tort cases. High-profile tort cases are often portrayed by the media as the legal system's version of a lottery, where trial lawyers actively seek the magic combination of plaintiff, defendant, judge, and jury.

Advocates of tort reform also complain of unconstitutional regulation through litigation. Proponents further argue that litigation is used to circumvent the legislative process by achieving regulation that Congress is unwilling or unable to pass.

In response to lawsuits filed against gun manufacturers by several municipalities, a bill was proposed by the U.S. Congress in 2005 that would provide immunity to gun manufacturers for most negligence and product liability actions (and prohibit the Bureau of Alcohol, Tobacco, Firearms, and Explosives from revoking a dealer's license, even in cases where a dealer has been identified as selling a relatively high number of guns subsequently used in violent crimes). In support of this bill, reform supporters argued that plaintiffs in gun lawsuits were illegally attempting to "sue [gun manufacturers] out of existence."[citations needed]

In contrast, organizations such as the United States Conference of Mayors envision lawsuits against gun manufacturers as a potential goldmine and vehemently oppose gun manufacturer immunity legislation.[2] Others have argued that the legislation took "away the right of victims to be able to have their day in court," that the bill gave unprecedented immunity to a single industry, and that the law was unconstitutional to the extent that it conflicted with the Separation of powers.[3]

A few of the changes frequently advocated include limits on punitive damages, limits on non-economic damages, limiting the collateral source doctrine, use of court-appointed expert witnesses, elimination of elections for judges, reducing appeal bond requirements for defendants faced with bankruptcy, "venue reform", which limits the jurisdictions within which one can file a lawsuit, limits on contingency fees, the adoption of the English Rule of "loser pays" (the defeated party must pay both the plaintiff's and the defendant's expenses), and requiring that class action lawsuits with nationwide plaintiffs be tried in federal courts, eliminating awards for pre-judgment interest.

[edit] The tort reform debate

[edit] How would tort reform affect safety?

Opponents of tort reform contend that supporters exaggerate the costs and ignore the benefits of the current tort system.[4] 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.[5]

Beginning in the early 1980s, Professor Stephen Teret and other faculty at The Johns Hopkins University School of Public Health argued that tort litigation was an important tool for the prevention of injuries. [6] Teret identified several ways that litigation can enhance safety for everyone, including:

1) to avoid paying future damages, the creators of dangerous products or conditions may voluntarily make them safer;
2) where conduct is particularly egregious, courts may award punitive damages to deter that conduct in the future;
3) the process of gathering information prior to trial – called 'discovery' – can bring information to light that can be used by policy-makers to create new laws or regulations."

A 2006 study by Emory University professors Paul Rubin and Joanna Shepherd examined the effect of tort reforms on non-motor vehicle accidental death rates, and found that "caps on noneconomic damages, a higher evidence standard for punitive damages, product liability reform, and prejudgment interest reform lead to fewer accidental deaths, while reforms to the collateral source rule lead to increased deaths." [7]

[edit] Controversy over job loss claims

Some advocates of tort reform posit that reforms can significantly reduce the costs of doing business, thus benefiting consumers and the public in the long run. Harvard Business School professor Michael E. Porter stated: "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."[8]

In contrast, critics dispute claims that the current tort system has a significant impact on national or global economies. The Economic Policy Institute wrote that the effect on the economy of job loss resulting from lawsuits is negligible[4]:

In an April 2002 paper, the CEA (President Bush's Council of Economic Advisors) examined the economic impacts of the tort system in somewhat greater depth. But that paper, too, failed to demonstrate any employment effects of the tort system and made no prediction about the impact of tort law change. Even if we assume that asbestos liability legislation could somehow have prevented the loss of 2,500 jobs per year resulting from asbestos-related bankruptcies (by, for example, limiting compensation for non-economic damages to the victims or their survivors, or by denying awards of punitive damages), the effect on overall employment and the national unemployment rate in an economy with more than 130 million payroll jobs would have been imperceptible (a change of less than two-thousandths of 1%).

[edit] 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. Records maintained by the National Center for State Courts show that population-adjusted tort filings declined from 1992 to 2001. The average change in tort filings was a 15% decrease.[2] 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.[3]. 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 allege that these numbers are misleading. They claim that most liability costs come from pre-trial settlements, so the number of trials is irrelevant, and that the largest increase in the number of tort cases occurred between 1970 and 1992.[citations needed] A study by Tillinghast/Towers Perrin claimed the cost of liability litigation outpaced the rate of inflation over the last half century, and represented 2.2% of GDP in 2004 vs. just 0.6% in 1950 and 1.3% in 1970.[4]. It should be noted that Tillinghast/Towers Perrin is an interested party in the politics of tort reform with its operations as a major consultant to the insurance industry and as an insurance company itself with its reinsurance business. The Tillinghast/Towers Perrin study has been criticized by the Economic Policy Institute as unverifiable:[4]

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. This would limit legitimate claims, and effectively deny many citizens a forum to redress the harm caused them.

[edit] Controversy over individual proposals

A number of proposals have been made by advocates of tort reform. These proposals are not agreed on by all 'tort reformers' and are considered by many opponents a roll-back of the reforms of the twentieth century. The collateral source rule, for example, dates back to 1854.[9]

[edit] Non-economic damages caps

Main article: Non-economic damages caps

Non-economic damages caps places limits on a jury's ability to award damages to victims for pain and suffering and loss of enjoyment of life as well as punitive damages.

For example, if a drunk driver runs down a pedestrian who receives massive head injuries and is a vegetable for the rest of her life, non-economic damages caps limits the amount the jury could award the pedestrian who receives such catastrophic injuries. Typically, non-economic damages cap will limit the drunk driver’s liability to $250,000.00 for non-economic damages, regardless of the damages caused by the drunk driver.[citation needed]

Proposals to cap non-economic damages are one of the most frequently proposed tort reforms, and have generated controversy over their fairness, efficacy, and constitutionality. Critics complain that limitations on punitive damages and other restrictions on plaintiff's traditional rights will reduce corporate accountability. Because corporations engage in a cost-benefit analysis before considering whether to stop a wrongful action (such as polluting or not enacting proper measures for safety), caps on damages may well encourage corporate malfeasance. They contend that the prospect of paying a small damage award provides too little incentive to correct the wrongdoing, and would allow the corporation to profitably continue an unsafe practice.

For example, tort reform critics point to the Ford Pinto Case, where accountants determined that the expected payout in wrongful death suits would be less than making a design change to prevent the gas tanks from blowing up on minimum impact. The value of human life was not factored into the equation.[dubious — see talk page]

[edit] Joint and several liability

Main article: Joint and several liability

Tort reformers have had the most legislative success in limiting the common law rule of joint and several liability, often replacing it with a rule of proportionate liability. Of the forty-six states that had a joint and several liability rule, thirty-three states have abolished or limited the rule.[5] Opponents of tort reform contend that the elimination of the rule would undercompensate people who had the misfortune to be hurt by more than one person, if at least one of the defendants does not have the financial means to pay his or her share of proportionate liability.

[edit] Tort reform in American politics

[edit] Political Issue

George W. Bush 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.[citation needed] In the 2004 presidential election, Democratic vice presidential nominee John Edwards, a successful trial attorney, 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.[6] Edwards profits from the stated lawsuits were substantial and are not a subject of dispute.

[edit] Political Agenda

Grover Norquist, a leading Republican operative, has shown 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." Trial lawyers such as Frederick Baron are major fundraisers of the Democratic Party.[citations needed]

[edit] Other political agendas

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.[7] And 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.[citation needed]

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.[dubious — see talk page] In the seminal case of BMW v. Gore[10], 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 Antonin Scalia and Ruth Bader Ginsburg, 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.[8]

[edit] Players in the tort reform debate

[edit] Pro tort reform

The tort reform movement and opposition in the United States is mostly funded by large insurance companies, manufacturers, the tobacco industry, and other industries; the United States Chamber of Commerce and National Association of Manufacturers; and others that have a financial interest in the litigation system.[9], [10], [11] A number of billionaires have given money in support of tort reform; for example, Bernie Marcus, the retired co-founder of Home Depot, has donated millions to tort reform because he's "concerned for the next generation of entrepreneurs whose creativity, risk-taking and innovation are stifled by the current legal and regulatory climate."[12]

A number of libertarian and conservative think tanks such as the American Enterprise Institute, the Cato Institute, the Heritage Foundation and the Manhattan Institute have pursued tort reform campaigns.

The American Tort Reform Association (ATRA) -- The ATRA is a Washington-DC-based group that was formed in 1986 to represent hundreds of U.S. and foreign corporations in their bid to overhaul civil liability laws at the state and national levels.[13]. It is "a coalition of more than 300 major corporations and trade associations"; according to a study called "The CALA Files," published by the anti-tort-reform group Center for Justice and Democracy. ATRA helps coordinate the activities of numerous state groups such as "Citizens Against Lawsuit Abuse" (CALA) that are alleged to be sham front groups, rather than real citizens' groups. ATRA's members are largely Fortune 500 companies with a direct financial stake in restricting lawsuits. Members have included representatives of the tobacco, insurance, chemical, auto and pharmaceutical industries. Corporate giants like Philip Morris, Dow Chemical, Exxon, General Electric, Aetna, Geico and Nationwide have all supported ATRA. [14]

The Manhattan Institute -- The Manhattan Institute has been a recipient of grants totaling $7,875,060 between the years 1985 to 1999, from Castle Rock Foundation [Coors, CNP], Olin Foundation, Sarah Scaife Foundation, Bradley Foundation, Scaife Family Foundation, Carthage Foundation [Scaife], Earhart Foundation. The Shelby Cullom Davis Foundation gave the Manhattan Institute $100,000 in 2003 for "Tort Reform Initiatives," and $100,000 in 2004 for support of the Center for Legal Policy's online magazine focusing on tort reform. [15]. Other 'tort reform' advocates who are contributors to the Manhattan Institute include:
1. Billionaire Richard Mellon Scaife, who inherited his millions from the Mellon industrial foundation. A CNN article quoted Burton Hersh, author of "The Mellon Family": "Even as a child, he always saw the correlation between the media and the reputation of politicians. That's certainly been a sub-theme of his life." [16] The article concludes with this statement: "[I]t is a fact this billionaire has spent millions in tax-free money attacking the current occupants of the White House." (then President Clinton). According to this link at Media Transparency, Scaife and his foundations have given $565,000.00 to the Manhattan Institute since 2000 alone. [17].

2. The Lynde and Harry Bradley Foundation. In 1968, Allen-Bradley (where the money came from) had over 7,000 employees, but only 32 black or Hispanic workers. The federal government forced them to integrate. It's currently run by a former executive of the John Olin Foundation, which helped fund the book "The Bell Curve", which espoused that poverty was caused by genetic inferiority. This article, also at Media Transparency, details the agenda of the organization and its efforts to reduce affirmative action. Since 2000, this foundation has given $585,000 to the Manhattan Institute. [18]

3. The John M. Olin Foundation: This foundation is financed by chemical and munitions money, which are strong advocates of tort reform.[citations needed] An article in the People For The American Way had this quote: "Explaining his efforts to convince corporations to halt grants to university programs deemed "liberal," Olin president William Simon argues that many businesses are "financing their own destruction." "Why should businessmen," Simon asks, "be financing left-wing intellectuals and institutions which espouse the exact opposite of what they believe in?"[citation needed]

[edit] Anti-tort reform

A number of groups oppose 'tort reform'. These include civil rights organizations, attorneys, labor groups, consumer organizations, environmental groups and many state attorneys general. [19]. Also opposing tort reform are various law professors, lawyers groups and bar associations, citizen groups such as The Oregon State Council of Senior Citizens, and Mothers Against Drunk Drivers (MADD) [20][21].

The American Association For Justice (AAJ) (Formerly ATLA) a national organization of lawyers representing injured people who are victims of negligence or misconduct, is an active opponent of many efforts of so-called "tort reformers" to curtail the rights of accident victims. The mission of the AAJ is "to promote a fair and effective justice system – and to support the work of attorneys in their efforts to ensure that any person who is injured by the misconduct or negligence of others can obtain justice in America’s courtrooms, even when taking on the most powerful interests." So right wing individuals have accused of operating 'Astroturf', or front groups disguising their real purpose. Walter Olson of the Manhattan Institute alleges that the Alliance for Consumer Rights is such a sham group, operating from the offices of the New York State Trial Lawyers Association. He also criticizes the ATLA Civil Justice Foundation, which is a non-profit group consumer advocacy groups which awards grants to grassroots consumer advocacy groups (presumably including anti-tort reform groups). To date, the Foundation has awarded more than $1,000,000 to more than 100 organizations. The Foundation is funded through contributions from individual AAJ members, state trial lawyer associations, and its Memorial Grant Program.[22] In 2002, the The American Association For Justice became the single largest contributor to federal candidates and the Democratic Party.

[edit] 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.[citation needed] 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 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;[23] 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.[24].

[edit] Erie Doctrine Issues

One significant problem with a federally initiated tort reform bill is Congress' inability to regulate state court procedural and substantive rules. The federal government's judicial rulemaking purview extends only towards federal courts, and as such, if Congress were to enact a tort reform measure, state courts would not be subject to the new rules (unless individual state legislatures chose to modify their own state court rules to mirror federal tort reform). Therefore, the only tort cases that might be affected by Congressional action would be tort cases heard through federal question jurisdiction (a very small minority of tort cases heard in the U.S.) or cases initiated in federal courts through diversity jurisdiction. However, even diversity cases may not be subject to federal tort reform ( see Windsor v. Guarantee Trust Life Insurance Co., where a federal court sitting in diversity ruled that Idaho's tort damages procedural law was substantive in nature and should trump the federal court's respective rule). The Erie Doctrine, which seeks to limit forum shopping and inequitable administration of laws, would prevent federal courts from applying grey area procedural/substantive federal tort reform rules to state tort actions appealed to federal courts, and it would destroy the massive forum shopping incentive of plaintiffs to seek the fruits of state court tort rules by avoiding less lucrative federal courts.

Like the Presidential Line Item Veto, legal challenges to the validity of such a reform measure would be quickly brought and would likely nullify the reform because of Erie doctrine entaglements. Regardless of the moral or policy merits of tort reform, this begs the question of whether it is prudent for Congress to enact a bill that could reasonably be negated as unconstitutional by the SCOTUS.

[edit] References

  1. ^ For example, see Federal Rules of Civil Procedure rule 11(b)
  2. ^ Ed Somers, "Gun Immunity Considered by Congress," U.S. Mayor Newspaper, The United States Conference of Mayors, May 9, 2005
  3. ^ "Gun Industry Buys Bulletproof Political Protection" The Nation. 25 October 2006. Retrieved July 15, 2006.
  4. ^ a b c Lawrence Chimerine and Ross Eisenbrey, The frivolous case for tort law change: Opponents of the legal system exaggerate its costs, ignore its benefits, Economic Policy Institute, May 17, 2005 (EPI Briefing Paper #157), retrieved March 31, 2007
  5. ^ "Cases That Made a Difference" ATLA
  6. ^ [1] "Litigation is an Important Tool for Injury and Gun Violence Prevention." Johns-Hopkins University Center for Gun Policy and Research Retrieved July 15, 2006
  7. ^ "Tort Reform and Accidental Deaths" Rubin, Paul H. and Shepherd, Joanna, (February 20, 2006). Emory Law and Economics Research Paper No. 05-17 Available at SSRN: http://ssrn.com/abstract=781424
  8. ^ Michael E. Porter, The Competitive Advantage of Nations, p. 649, ISBN 0684841479
  9. ^ First promulgated in The Propeller Monticello v. Mollison, 58 U.S. (17 How.) 152 (1854)
  10. ^ BMW v. Gore, 517 U.S. 559 (1996)

[edit] See also

[edit] Uncited references

[edit] External links

[edit] Pro

[edit] Con

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