In Defense (sort of) of Trial Lawyers
From the December 15, 2003 issue: Their excuses are well known, their virtues less so.
Dec 15, 2003, Vol. 9, No. 14 • By WILLIAM TUCKER
Now that has changed. What the trial lawyer juggernaut has achieved is a kind of parity. They are now able to match corporate giants through long litigation. "The tobacco companies had never lost a case, partly because they were experts at making plaintiffs spend all their money," says Reaud, who was on the Texas team in the 46-state litigation. "We put in $12.5 million from this state when the initial litigation bogged down in Mississippi and Florida. Then there were several more 'capital calls.' I know one attorney who sold his farm in order to stay in the game." The payoff, of course, was worth it. The 80-odd law firms that won the 1998 settlement divided fees of $20 billion--money that is now available for new pursuits.
Indeed, the trial lawyers have themselves become masters at bankrupting opponents--although not necessarily to their advantage, since bankruptcy leaves less money for their fees. More than 60 major companies have been put in Chapter 11 by asbestos litigation. The search for a solvent bystander has now led plaintiff attorneys to target such companies as General Motors, General Electric, and Vivendi, whose involvement in injuries to asbestos workers was completely incidental (GM, for instance, used asbestos brake pads in its cars) but whose deep pockets can be reached through the doctrine of "joint-and-several liability." Silicon breast-implant litigation bankrupted Dow Corning--even though the entire theory of the harm from implants is now recognized as junk science, and the Food and Drug Administration is about to allow implants back on the market.
And so, as these two superpowers--armed with their nuclear arsenals of the law--reach a kind of parity, the question arises: Is any kind of détente possible? Or will the mutually assured destruction of American civil justice lay waste the entire economic landscape?
It is possible to imagine such a détente. To begin, corporate America and its Republican allies must grant diplomatic recognition to the trial bar and admit that injury lawsuits are a permanent and acceptable part of the economic landscape. Critics such as the Manhattan Institute talk of a $200 billion "tort tax"--as if money spent on lawsuits were simply being burned. This is not the case. Damages paid in many legal settlements serve a distinct purpose in buying improvements in health and safety that would not be possible through any other channels.
Like it or not (and conservatives should like it), government regulation is inefficient in improving health and safety. But personal injury lawsuits, as in Mark Bocci's football helmet case, can deftly reach into remote corners of the economy that would never be visited by a government inspector. What's more, large transfers of money are an effective means of inducing these improvements. Although some jury verdicts may seem absurd, large damage awards can be an effective way of getting the attention of corporate giants.
A case in point: Ford designed the Pinto in haste by shrinking an earlier model. Cramped for space, it left the car's gas tank outside the rear frame, exposing it to rear-end collisions. The company recognized the danger but decided not to take any one of several corrective measures, most of which cost no more than $12 per car. An internal memo later justified this decision by estimating the number of wrongful death suits and costing them out at $200,000 per fatality, then the standard established by the National Highway Traffic Safety Administration. When damage awards starting coming in, however, jury verdicts averaged $6 million. The company had grievously miscalculated. When it became clear that litigation costs would far exceed the original estimates, Ford did a massive recall and later withdrew the car from the market.
Says Richard Epstein, author of "Principles for a Free Society: Reconciling Individual Liberty with the Common Good": "Tort law is indispensable to any modern system of safety regulation. When directed toward the uncovering of fraud or incompetence, it works well. The problem comes when, in a search for deep pockets, it misdirects attention to some remote third party who is in a poor position to protect anyone from harm. We should be as skeptical of people who call for wholesale abolition of the tort system as we are of people who want to maintain the status quo."
Like them or not, lawyers are here to stay. On the one hand, it is easy to agree when articulate critics such as Walter Olson and Philip Howard complain that America is "overlawyered" and lament an age when everyone runs to the courthouse to solve grievances. But having a lot of lawyers is as inevitable as having a lot of people with college degrees. And there are compensations in being able to take grievances before a neutral arbitrator. Lawsuits, like war, are policy carried out by other means. Although personal injuries, consumer claims, mass torts, and class actions occupy a growing portion of the docket, the vast majority of time in American courtrooms is still occupied by one corporation suing another. That's what makes America such a great place to do business (unless you prefer to see such disputes settled with payoffs, collusion, or violence).
A détente would also require conceding that America's judiciary is capable of curbing many of the litigation excesses by its own means. The common law moves slowly but surely. In the early 1970s, for example, courts were inundated with civil antitrust cases. Every time the newly active Interstate Commerce Commission charged a company with anticompetitive behavior, private plaintiffs up and down the line began suing for triple damages under the 1914 Clayton Antitrust Act. For a while it appeared the entire economy might drown in private antitrust litigation. Then in 1977 the U.S. Supreme Court decided Illinois Brick v. Illinois, in which it laid down the principle that only parties that bought directly from the offending company could sue under Clayton. Antitrust suits quickly subsided to manageable proportions.
Many of the absurdities that emerge from the jury box are later rectified. The Arizona woman who infamously won $3 million for spilling McDonald's hot coffee in her lap eventually had the verdict reduced to $480,000. (She did spend a week in the hospital and required skin grafts.) When Joe Jamail convinced a hometown jury that Texaco (a New York company) had tortiously interfered when Pennzoil (of Houston) thought it had purchased Getty Oil, the $11 billion verdict (representing Texaco's entire net worth) was eventually whittled down to $3 billion. Newspapers report stories like the prison inmate who sues himself for $5 million and then asks the state to pay since he has no source of income--but never note that filing a lawsuit means nothing. All it reflects, in fact, is the growing awareness among trial lawyers that the bigger the numbers they post on the docket, the better chance the story will land in the papers.
BUT D TENTE requires both combatants to stand down. So looking at the other side of the ledger, what can we ask from the trial lawyers?
The first thing is an admission that there is a vast amount of overreach in the demands of the plaintiff bar. Trial lawyers, for instance, like to get juries to hit defendants with huge punitive damages on the principle that it will "teach them a lesson" and "send them a message." But punishment is a public function and should be subject to the Eighth Amendment's prohibition of "excessive fines." It is irrational that the trial bar should tout the public benefits of its work and then deliver windfall profits to a single plaintiff who is only one of hundreds or thousands of wronged individuals. (Oregon now requires 60 percent of punitive damages go into the state Crime Victims' Compensation Fund, a reform that could easily be extended to other states.)
In fact, the longest-running litigation marathons have exposed the civil justice infrastructure as a vast Ponzi scheme. Millions of people may have been harmed by inhaling asbestos fibers, but there is not enough money in the world to compensate them all at the price being set by jury verdicts. One Texas jury recently awarded $200 million to an oil field worker who feared he had suffered lung damage, even though he had no visible impairments. The system now rewards those who file first with the best lawyers; everyone else is left holding the bag. Legitimate asbestos victims with claims on bankrupt companies are now receiving less than 10 cents on the dollar for their damages.
Second, trial lawyers must admit that among their numbers are those who have turned class actions and mass torts into a racket. In California, as Walter Olson recently reported, attorneys sent letters to thousands of businesses citing their recent violations of the state's draconic consumer-protection laws and demanding payment for not suing. It is hard to imagine a plainer example of "racketeering." The New York State Trial Lawyers Association has created a nonprofit Big Apple Pothole and Sidewalk Protection Committee, which hires students to inspect New York City sidewalks and mark up maps with thousands of squiggles that supposedly represent pavement damage. These maps are then used as proof of prior notice in slip-and-fall cases that currently cost New York City $60 million a year.
Asbestos claims now number 90,000 a year and are still climbing--even though the epidemic of the lung cancer mesothelioma, the principal disease from asbestos exposure, has been declining since 1991. This is because tort firms now run screening clinics at factories, often rewarding doctors for each positive diagnosis. This blatant recruitment of plaintiffs has turned many of the pioneering asbestos attorneys into opponents of the current campaign.
"We had a 79-year-old former refinery worker come into our offices two years ago asking us to represent him," says Wayne Reaud of Reaud, Morgan & Quinn. "We sent him to our doctor, who told us the man didn't have anything wrong with him. We told him this, but the guy kept insisting he was sick. 'I know I got it, I know I got it,' he said. What we didn't realize is that he had been recruited by one of these advertising firms in Dallas, and they had told him he had asbestos damage."
On the morning of June 13, 2002, the 79-year-old showed up at the firm's offices in Beaumont, Texas, with a shotgun concealed in a cardboard box and murdered Reaud's partner, 47-year-old Chris Quinn, a former Baylor football player and father of five children. Quinn's picture--coaching his son's soccer team--still hangs prominently in the hallway. "These advertising firms that file fraudulent asbestos cases don't have a bigger enemy in the world than me," says Reaud grimly. (The 79-year-old, Richard Joseph Gerzine, was convicted of murder by a Beaumont jury on October 27, 2003.)
Critics on both sides agree that while the American civil justice system is very fair at settling disputes between contending parties, it takes little note of the effect of courtroom decisions on interested third parties--i.e., society at large.
"American justice is conceived as a sporting contest between rival contestants," says Deborah Rhode, director of the Keck Center on Legal Ethics and the Legal Profession at Stanford Law School. "The question is how far lawyers should go in representing their clients' interest. Values such as good faith, honesty, and fair dealing that are essential for efficient markets and regulatory systems rely on shared restraint. Over the long run, the single-minded pursuit of clients' self-interest can be self-defeating, not only for clients but for society as a whole."
Author Philip Howard, who has founded a nonprofit called Common Good to reform "America's lawsuit culture," cites a recent decision in the House of Lords--Britain's equivalent of our Supreme Court--where the judges dismissed the claim of a young man who had broken his neck diving into a lake at a park where 160,000 visitors swim each year. Noting that the only way to achieve safety would be to prohibit swimming altogether, the Lords asked, "Does the law require all trees to be cut down because some youths may climb them and fall?"
"This is the missing link in American justice," says Howard. "Judges have lost sight of the idea that lawsuits concern not only the parties in the dispute but everyone in society."
Trial attorneys are now like the capitalist Robber Barons who sparked the reforms of the Progressive Era. Just as the Robber Barons built America into an industrial giant, so the trial lawyers have made America into a healthier, safer, fairer place to live. That many of them have become billionaires in the process may prove only that they were the first to recognize the need for action. Like their industrial predecessors, however, the new Robber Barons may require public restraint. As Theodore Roosevelt knew, the outsized success of any business endeavor presents problems to the rest of society.
If they are to play TR, Republicans will need to begin by granting that Trial Lawyers, Inc., has a critical role to play in promoting health and safety and policing corporate America. Trial lawyers, for their part, will have to begin by recognizing that corporate America is not indestructible and that their litigious successes could end up doing great harm to the nation.
William Tucker is a fellow with the Discovery Institute, which supported this investigation.