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September 16, 2007
Tort Law and Reform
What is the problem and how do we fix it?
by Tina Grazer
Bring up tort reform and you get an argument that ends in stalemate. The opposing sides are “never say die” partisans representing two distinct groups of people. Lawyers, union leaders, consumer advocates and most democrats argue that tort reform would give too much power and leeway to business while putting the consumer at risk. Business leaders, medical professionals, insurance companies and most republicans argue that frivolous lawsuits and excessive rewards are affecting the price of goods and healthcare and putting many doctors out of business. Both arguments seem valid and as usual the public is ill-served in the ongoing argument. But tough problems are what our representatives in congress are paid to unravel and address. We expect in the process they will find solutions that are workable and that serve all Americans.
Jack’s post sent me off on another web journey and I discovered a Business Week article from March 2005 that at least offers some positive suggestions in the form of a four part plan. I reference it here to give you, the voter, some background from which to judge candidates' positions should the subject come up in future elections. The more we understand the issues the easier it becomes to weed out the weasels.
Tort reform, then, is more than simply an economic policy debate. It's also about justice -- the ultimate values issue. How people feel about the subject directly depends on how they feel about things like individual responsibility and the public obligations of private companies.
…the real crisis lies in the proliferation of specific types of bogus cases -- ones in which nobody has been injured, no malfeasance has occurred, or regulators have already taken care of the problem. Despite their claims of being selfless safety advocates, plaintiffs' attorneys in 2005 are analogous to chief executives in 1999: Most of the players are making an honest living. But an unacceptably high percentage of them are stretching the rules.
Business Week's four-part solution to the problem is based on a set of pragmatic principles, with some parallels to those being used to clean up Corporate America. Like CEOs, lawyers should, first of all, be paid for performance. They shouldn't be allowed to take home multimillion-dollar paychecks if clients get pennies. Second, they shouldn't be able to cash in when they're merely piling on to government crackdowns. Third: When attorneys break the rules, the punishment should sting. *** The right way to reform the U.S. tort system is not to put most plaintiffs' lawyers on the streets but to ensure that they do a better job at their two key roles: compensating victims and deterring corporate wrongdoing. The crisis is not that ambulance chasers are wrecking the economy, but that too many entrepreneurial personal-injury attorneys have found illegitimate ways to earn money.
The Business Week four part plan:
1. Pay for Performance - This fix would eliminate a big chunk of the most abusive cases. The main target would be cases like a 1996 false advertising suit against Intel Corp. (INTC ), which awarded 500,000 people the right to claim a $50 discount off a new microprocessor. Only 150, or 0.0003%, took advantage of the offer. The plaintiffs' lawyers, meanwhile, walked off with nearly $1.5 million.
2. Penalties That Sting - The Christie's-Sotheby's story raises a point often overlooked: The players in the best position to resolve the problem are often judges, not legislators. Judges can figure out when attorneys in their courtrooms are acting in bad faith. In contrast, politicians can only police the system from afar by rewriting laws, which always produces unintended consequences.
3. Curb the Duplication - The third reform targets one of Corporate America's biggest complaints: duplicative litigation. This problem arises in a wide variety of settings. Think of the lawsuits involving cigarettes, Vioxx, or the Windows operating system. The companies at the center of the storms -- Philip Morris (now Altria Group (MO )), Merck (MRK ), and Microsoft, (MSFT ) respectively -- each faced administrative inquiries, individual cases, and class actions filed by private lawyers, state attorneys general, and federal regulators.
4. Exiting the Tort System - These three changes would solve many of the tort system's genuine problems, but not all of them. There are rare issues that need to be removed from the courts -- with all of their elaborate procedural rules -- and directed into specialized administrative tribunals. One of them, clearly, is asbestos. Aggressive plaintiffs' lawyers are overloading the judiciary with thousands of dubious cases that don't even involve sick people. Congress' plan to create a trust fund to handle this problem makes sense. *** Asbestos is the easy case. The tougher one is medical malpractice. Evidence of massive systemic malfunction is starting to accumulate. Only about 2% of the people who are genuinely injured even bother to file lawsuits, according to most studies. When people do go to court, only 40% of every dollar spent on litigation goes to victims. Then there's the spreading damage to doctors. For some specialists, medical malpractice premiums can eat up between 20% and 50% of annual income. That's why neurosurgeons are avoiding trauma cases and orthopedic surgeons are eliminating emergency room calls.
The bottom line for me is that we need representatives who are serious about designing solutions that work for all Americans and American institutions and businesses. We are tired of payback legislation for special interests that favor some and do harm to others. We are tired of political posturing that ends in deadlock. There are workable solutions to problems…but we need legislators who are interested in serving the public. In today’s political climate it’s highly unlikely that anything positive will be advanced. Politicians seem more concerned with their own political well-being, and the ongoing battle for political power, than they are with the real problems that face the public. As the article has shown it is possible to define the problem and come up with workable solutions. We need a congress willing to make it so.
The Business Week online article is very good. It not only explains the issue in great detail but also gives a history regarding tort law. Those of you who are interested can find it here:
http://www.businessweek.com/magazine/toc/05_11/B39240511tortreform.htm
Posted by Post Scripts at September 16, 2007 12:20 AM