Tort reform

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Lawyer jokes from 1900. Top-hatted lawyer to workman falling off scaffolding: "Take this card, my man, and if you're not killed call on me and I'll deliver big damages to you."

While the phrase "tort reform" might imply any beneficial change in tort law or procedure, it has become a catch phrase used to refer only to proposed changes in the civil justice system that would reduce tort litigation or damages.

According to Daniel Fisher (Forbes): "A catchall phrase for legislative measures designed to make it harder for individuals to sue businesses, tort reform has long been a pet project of Republicans. Not coincidentally, it reduces the earning power of plaintiff lawyers, some of the biggest contributors to the Democratic Party."[1] Tort reform proponent and American Enterprise Institute fellow Ted Frank disagrees with Fisher's characterization, claiming that "many tort reforms make it easier for individuals with legitimate claims to sue businesses. Tort reforms are simply measures to improve the accuracy and efficiency of the civil justice system; they’re opposed by trial lawyers because they derive billions of dollars of wealth from inaccuracies and inefficiencies in the civil justice system, and supported by businesses and consumers that are the victims of such inaccuracies and inefficiencies."[2]

Tort reform advocates' agenda

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; enforcement of arbitration clauses and other contractual waivers; stricter statutes of limitations and statutes of repose; and granting immunity to some types of defendants in certain circumstances, such as immunity from claims of alleged violations of state common law for actions that were required by federal regulation. Other proposals are procedural in nature, such as venue restrictions; higher standards for the filing of a complaint; limits on the admissibility of expert witness testimony to that which meets a narrower criteria; the establishment of procedures for the regular use of neutral, court-appointed, expert witnesses; changes in other evidentiary rules, such as permitting the admission of evidence that a plaintiff was not wearing a seatbelt; eliminating the popular election of judges, which exists in some American states and localities; changing appeal bond requirements to permit defendants to file appeals when faced with potentially bankrupting judgments; improvements to jury selection and voir dire; making discovery obligations less burdensome; adopting the "English rule" of "loser pays"; limits on attorney's fees; due process protection for defendants and unnamed plaintiffs in class action litigation; 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, sanctions for delay, and early-offer settlement requirements, could have benefits to plaintiffs in some cases.

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.[1],[2]

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 desirable 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.

Claimed inefficiency of legal system

What are the goals of tort (accident) law, and how efficiently does the current system meet them? Would the changes proposed by tort reformers provide similar or improved benefits at a lower cost?

According to economist Reed Neil Olsen, "...tort law generally and medical malpractice specifically serve two legitimate purposes. First, the law serves to compensate victims for their losses. Second, the threat of liability serves to deter future accidents." [3] Tort reformers maintain that the present tort system is an expensive and inefficient way to compensate those injured.

According to a 2004 study of medical malpractice costs, "program administration -- defense and underwriting costs -- accounts for approximately 60 percent of total malpractice costs, and only 50 percent of total malpractice costs are returned to patients. These costs are high even when compared with other tort-based systems, such as automobile litigation or airplane crashes, that determine fault and compensate victims. Moreover, most patients that receive negligent care never receive any compensation. The Harvard Medical Practice Study found that only one malpractice claim was filed for every eight negligent medical injuries." Of the legal changes proposed by tort reformers, this study found that states capping payouts and restricting non-economic damages saw an average decrease of 17.1% in malpractice insurance premiums.[4] Similarly, Klick/Stratman (2005) found that capping economic damages saw an increase in doctors per capita. [5]

There is no guarantee, however, that any savings from tort reform would be efficiently distributed. Tort reform in Texas during the 1990s created $600 million in savings for insurance companies but liability policy rates stayed flat while the fraction of policy dollars needed to cover losses fell from 70.1 cents in losses in 1993 to 58.2 cents in 1998.[6]

Opponents of these tort reform measures contend that reduced insurance premiums are not the only result when you cap malpractice payouts and bar non-economic damages. They may act against the other goal of liability law, deterring injurious behavior.

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.[3] 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.[4] 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. [5] While Teret acknowledged that the primary purpose of tort lawsuits usually is to recover money damages for the injured persons, as compensation for their medical and other costs, he identified several ways that litigation can also 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."

In contrast, a 2006 study by Emory University professors Paul Rubin and Joanna Shepherd argued that tort reform actually saved tens of thousands of lives because "lower expected liability costs result in lower prices, enabling consumers to buy more risk-reducing products such as medicines, safety equipment, and medical services, and as consumers take additional precautions to avoid accidents."[6]

Tort reform advocates cite 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]."[7]

Another presenter at the same Brooking Institution conference, Murray Mackay of the University of Birmingham, claimed safety (and other) innovations were inhibited by fear of lawsuits:

"[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. ...[8]

The effect of tort reform on medical outcomes has been studied with mixed results. A 2008 study found worse childbirth outcomes for mothers and infants in states with caps on non-economic damages. [9] The Klick/Stratman paper cited above found several effects of specific tort reforms on infant mortality that lost statistical significance when looked at more closely -- that is, correlation with other state-specific factors wiped out apparent increases in mortality from joint and several liability reform but also wiped out apparent decreases in mortality from capping economic damages and restrictions on contingency fees. The only tort reform effect that proved robust was a negative effect of collateral source reform on black infant mortality.[5]

Proponents of tort reform counter by pointing to data from New Zealand, which has abolished its medical tort system but has medical error rates close to those in the United States. [10]

Tort reform advocates, including Paul Offit, also argue that litigation has driven from the U.S. marketplace many useful and safe medical advances, including Bendectin (the withdrawal of which has led to a doubling of hospital admissions for morning sickness) and vaccines for Lyme disease and Group B Streptococcal disease, which kills 100 infants a year.[7]

Frivolous lawsuits

Under some interpretations of 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 only a remote link between the conduct of the defendant and the injuries alleged by the plaintiff or where 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, or where the harm caused could be traced to elements of excessive neglience or irresponsibility on the part of the claimant. {Fact} Real or fictional frivolous lawsuits are a popular target of American humor. [11][12] Claims by proponents of tort reform that frivolous lawsuits are common, costly, and based on the contingent-fee system of paying lawyers have been contradicted by others. [13]

Regulation through litigation

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, Rep. Rick Boucher (D-VA) argued in support of a 2005 federal tort reform that gave immunity to gun manufacturers in certain lawsuits because such lawsuits were "nothing more than thinly veiled attempts to circumvent the legislative process and achieve gun control through litigation"; reform supporters complained that (and the Pentagon supported the bill on the grounds that) the plaintiffs were trying to "sue [gun manufacturers] out of existence" by forcing them to incur $250 million in legal defense expenses, while gun control supporters 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.LA Times (October 21, 2005) "Bill to Shield Gun Makers Is Approved"

Healthcare industry

Liability suits for medical malpractice issues have been of particular concern to many tort reform advocates, who advocate imposing caps on non-ecomonic losses and punitive damages, as well as on "contingent fees", or fees set by the plaintiff's attorney as a percentage of damages awarded to the plaintiff. Tort reform advocates argue that such caps would benefit those plaintiffs with legitimate lawsuits by reducing the number of "nuisance" suits and thereby improving the overall efficiency of the system. This area of tort reform reflects a broader ideological claim of the tort reform movement; that unrestricted litigation - particularly in the realms of personal liability and class-action suits - has a widespread and damaging effect on important social institutions and services beyond the scope of individual claims. [citation needed]

As an argument against the current system, tort reformers link the rising costs of premiums for physicians' medical malpractice insurance[14] to the rising cost of personal and group policy health insurance coverage.

Others deny that medical malpractice suits play a significant role in the cost of health care. Including legal fees, insurance costs, and payouts, the cost of all US malpractice suits comes to less than one-half of 1 percent of health-care spending.[15] Other recent research suggests that malpractice pressure makes hospitals more efficient, not less so: "The recent focus by the American Medical Association and physicians about the dramatic increases in medical malpractice insurance premiums, and their suggestion of a cap on non-economic damages, deserves a closer look. According to Baicker and Chandra (2004), increases in premiums are not affected by past or present malpractice payments, but may increase due to other unrelated factors. Chandra, Nundy, and Seabury (2005) find that the rising cost of medical services may explain the bulk of the growth of “compensatory awards”. They also find that the greatest ten percent of the malpractice payments have grown at a smaller pace than the average payment for the years 1991 and 2003. This means that the “medical malpractice crisis” is not necessarily fueled by the growth in malpractice payments. Furthermore, malpractice pressure actually forces our hospitals to be technically more efficient. This implies that existence of the medical malpractice system is beneficial, and its strength should not be diluted by either putting caps on non-economic damages or by decreasing the statute of limitations."Conference of the American Society of Health Economists (June 4, 2006) "Medical Malpractice: Examining its Effect on Hospital Efficiency"</ref>


Controversy over job loss claims

Some 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. [citation needed] Tort reform supporters point to a study commission by the American Insurance Association and co-authored by Nobel Prize winner Joseph Stiglitz to look at the effects of bankruptcies from asbestos litigation on workers in the asbestos industry; the study estimated that 52,000 jobs were lost.[16]

Some 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. The Economic Policy Institute reports that: "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." [17] During the 1990's, a period in which tort reform on a national level made little progress, a record number of jobs were added to the economy.

Dispute over "litigation explosion" claims

The American Tort Reform Association (ATRA) claims that "The cost of the U.S. tort system for 2003 was $246 billion, or $845 per citizen or $3,380 for a family of four" and "The Growth of U.S. tort costs have exceeded the Gross Domestic Product (GDP) by 2-3 percentage points in the past 50 years." [8] This claim is based on a 2002 study by Tillinghast-Towers Perrin.[9]

Others deny that there is "litigation explosion" or "liability crisis." 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.[18] 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.[19]. 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 claim 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. [citation needed]

Supporters frequently base their claims of an "explosion" in the costs of tort litigation based on annual studies by Tillinghast/Towers Perrin, a major consultant to the insurance industry. In 2008, Towers Perrin reported that the cost of liability litigation has outpaced the growth of the GDP ( growth of 9% in estimated annual tort costs between 1951 and 2007 as opposed to a 7% average annual growth in GDP)[20] [21] Tort reform opponents dispute the reliability of Towers-Perrin figures for litigation costs; tort reform supporters claim that the Towers Perrin numbers are underestimates in many ways. [22] [23]

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.[citation needed]

Debates over individual reforms

Non-economic damages caps

Main article: Non-economic damages caps

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.[citation needed]

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.[10] 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.

Loser pays

Nearly every Western democracy follows the "English rule," which requires the loser of a civil suit to compensate the winner for his or her attorney's fees.[11] For example, after authors Michael Baigent and Richard Leigh lost their the plagiarism litigation over The Da Vinci Code in a British court, they were ordered to pay the defendants' $1.75 million in attorneys' fees. [citation needed]

The "American rule" differs; in most cases, each party bears its own expense of litigation. Supporters of tort reform argue that loser-pays rules are fairer, would compensate winners of lawsuits against the costs of litigation, would deter marginal lawsuits and tactical litigation, and would create proper incentives for litigation, and argue for reforms that would require compensation of winning defendants some or all the time.[12] In federal courts, debate has focused on the scope of Federal Rule of Civil Procedure Rule 11, which sanctions attorneys in some situations for making frivolous filings. [citation needed]

Opponents argue that such rules would have had a chilling effect on civil rights litigation. Proposals to limit frivolous lawsuits have been criticized on the grounds that the restrictions could be used to impede individuals attempting to enforce civil rights laws, according to The Federal Judicial Center's Study of Rule 11. Robert L. Carter, United States District Court Judge for the Southern District of New York, and Rep. Sheila Jackson Lee have both argued that Brown v. Board of Education would have been called frivolous.[24] In response, reform supporters note that victorious civil rights litigation could hardly be deemed "frivolous"; that desegregation was accomplished through legislative, rather than judicial action; and that reform opponents overstate the importance of litigation in the civil rights movement.

Tort reform in American politics

Tort reform is controversial. 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. 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.[13]

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." Controversial trial lawyers such as Frederick Baron have become major funders and fundraisers of the Democratic Party, and some have argued that the party is merely carrying water for the special interest of the plaintiffs' bar. 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, 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."[14]

The debate over tort reform is not always a Democrats vs. Republicans or liberals vs. conservatives affair. President Barack Obama voted for the Class Action Fairness Act of 2005 and the FISA Amendments Act, which grants civil immunity to telecommunications companies that cooperated with NSA warrantless wiretapping operations.[1] 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.[15] 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.

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[16], 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.[17]

References

  1. ^ a b Daniel Fisher (11 August 2008). "November Election A Lawyer's Delight". Forbes Magazine. Retrieved 2009-01-11.
  2. ^ Overlawyered.com blog (August 11, 2008)
  3. ^ "The Efficiency of Medical Malpractice Law: Theory and Empirical Evidence" (October, 2000)
  4. ^ "The Medical Malpractice ‘Crisis’: Recent Trends And The Impact Of State Tort Reforms" by Kenneth E. Thorpe (January 21, 2004)
  5. ^ a b "Does Medical Malpractice Reform Help States Retain Physicians and Does it Matter?" by Jonathan Klick and Thomas Stratman (2005)
  6. ^ "Bush Calls Himself Reformer; the Record Shows the Label May Be a Stretch" by Richard A Oppel Jr. and Jim Yardley, NY Times, March 20, 2000
  7. ^ John D. Graham. Peter Huber and Robert Litan (ed.). The Liability Maze. p. 184.
  8. ^ John D. Graham. Peter Huber and Robert Litan (ed.). The Liability Maze. p. 220-21.
  9. ^ "First Do No Harm? Tort Reform and Birth Outcomes" by Janet Currie and W. Bentley McLeod (May, 2008)
  10. ^ "Survey Finds High Rate of Medical Errors and Lack of Communication Between Doctor and Patient" (2003)
  11. ^ Frivolous lawsuit contest
  12. ^ [http://www.snopes.com/legal/lawsuits.asp Snopes.com list of fictional frivolous lawsuits]
  13. ^ "The Myth Of The Frivolous Lawsuit"
  14. ^ Congressional Budget Office (January 8, 2004) "Limiting Tort Liability for Medical Malpractice"
  15. ^ Slate (July 11, 2006) "The Medical Malpractice Myth"
  16. ^ (August, 2002) "The impact of asbestos liabilities on workers in bankrupt firms"
  17. ^ EPI Briefing Paper (May, 2005) ""The frivolous case for tort law change: Opponents of the legal system exaggerate its costs, ignore its benefits
  18. ^ National Center for State Courts
  19. ^ Department of Justice abstract
  20. ^ Towers Perrin report on tort costs through 2007
  21. ^ Economist
  22. ^ Economic Policy Institute (May, 2005)
  23. ^ Walter Olson summary, with links (May, 2005)
  24. ^ Description of legislation

See also

External links

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