|Destroying the economy one lawsuit at a time
By Alan Caruba
I suspect most Americans think that the $368 billion penalty extracted from the tobacco industry was inherently unfair. They sell a product that is legal. State governments benefit from the taxes on the sale of that product. Some States even invest in tobacco companies to benefit their pension funds. People may freely choose to either purchase the product or not. Smokers voluntarily assume the inherent and widely known risk of using that product. The verdict against the industry simply does not pass the smell test.
For years now we have been hearing about outrageous amounts of money being awarded to people who were too stupid to avoid spilling a hot cup of coffee on their lap in a moving car, but a far more insidious penalty is being paid by everyone as the result of the 20,000,000 civil lawsuits annually filed in America. That's right; twenty million!
A new book, The Lawsuit Lottery: The Hijacking of Justice in America, by Douglass S. Lodmell and Benjamin R. Lodmell ($15.95, World Connection Publishing, Phoenix, Arizona) is so astonishing that, were it not for its careful documentation, one would read it in a complete state of disbelief. "In less than 50 years," write the brothers Lodmell, "these increasingly powerful litigators transformed the lackluster tort business into more than a $200 billion a year industry. By the end of the 20th century, the litigating public was filing as many as 150 lawsuits every minute of every working day -- with a take-home pay for plaintiffs' lawyers approaching $45 billion a year in 2002."
The key word here is "public." This lawsuit industry would not exist if it were not for clients seeking to be paid for everything they thought was wrong with their lives and was presumed to be someone else's fault. Someone whose hard-earned wealth should be transferred to them!
"The harsh reality is that many, if not most, of the estimated 70,000 lawsuits filed every day in America target small business owners and mid-to-upper income Americans with less than $1 million in net worth."
This has become so abusive to the rule of law and the economic welfare of the nation that Congress, in February, passed legislation that would transfer most large, multistate class action lawsuits to federal courts. This has long been one of President Bush's goals. The legislation bans state courts from hearing such lawsuits, such as the one that resulted in the horrendous tobacco industry verdict. This may deter proposed lawsuits against, for example, the fast-food industry and food manufacturers who are charged by critics as responsible for people getting fat.
Democrat leaders denounced the bill. "It's the final payback to the tobacco industry, to the asbestos industry, to the oil industry, to the chemical industry at the expense of ordinary families who need to be able to go to court to protect their loved ones when their health has been compromised," said Rep. Ed Markey (D-Mass). This is pure sophistry and betrays the socialist theology that drives the Democrat Party, forever seeking the destruction of elements of the economy. House Democrat leader, Rep. Nancy Pelosi (D-CA) called it "a payback to big business at the expense of consumers."
In truth, these thousands of civil suits represent trillions of dollars in a "hidden tax" on the US economy as the result of being the most litigious nation on the face of the earth. It is consumers who pay this tax.
There was a time when lawyers could not advertise as we commonly see these days. They could not troll for "victims" or engage in "ambulance chasing." It was deemed unseemly and unprofessional to the point that those who did faced disbarment, if not jail.
So, how did this major change in the practice of law come about? Specifically, it occurred on June 27, 1977, when the US Supreme Court, under Chief Justice Warren Burger, ruled in Bates v. State Bar of Arizona. Yes, the top court overturned hundreds of years of legal opposition to lawsuits and/or law as a business. In time, the courts made such litigation even more attractive by introducing the concept of joint and several liability. Now, anyone cited as having contributed in any way to the payout a lawsuit demanded could be dragged into court.
Does anyone benefit? Yes, lawyers have pocketed millions in the process. While doing so, whole industries have been destroyed. Asbestos is one of them. Halfway through the construction of the Twin Towers, a law was passed prohibiting the use of asbestos to protect the steel beams that were the skeleton of those structures. When the two hijacked planes crashed into the North and South towers, the heat they generated brought them down. As for the asbestos industry, as many as 60,000 people lost their jobs and many more jobs were not created in the wake of the bankruptcies that followed.
If you want to know why the costs of healthcare have gone out of sight, you can again look at the insanity of civil lawsuits. "At $1.55 trillion in 2002," write the Lodmell brothers, "the annual cost of healthcare in America leaped by 9.3 per cent to about $5,400 per man, woman and child. That's 14.9 per cent of the US economy." By 1999, 40 per cent of physicians had been sued and 25 per cent of them had been sued more than once.
By 2002, the figure had climbed to 58 per cent! By then, the average jury award for medical malpractice had tripled to $3.5 million -- three times the average jury award for all torts combined! Little wonder insurance companies elected to stop insuring physicians or required premiums so high the practice of medicine was no longer possible. And in some parts of the nation people with real health problems often found they were unable to find a doctor to treat them.
Thus, we all pay a hidden tax on everything we purchase. Tort costs this year could approach $1,003 per US citizen. "Since 1950, (the earliest year for which comprehensive tort costs are available) the American people have paid an aggregate of about $3.3 trillion for the privilege of suing each other."
Americans are paying too high a price for being subject to too many laws, too many rules, and too much regulation. The law has become the enemy of the founding principle that we are all equally protected by the rule of law. The time for reform is overdue, but reform must come if the economy is to grow and the risks involved in providing products and services of every description are not protected against predatory lawsuits.
Alan Caruba writes a weekly column, "Warning Signs", posted on the Internet site of The National Anxiety Center. © Alan Caruba 2005
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