A 9/11 Tort-Fest
August 10, 2002
By Paul Howard
LAST week, the first award from the Sept. 11 fund was made public: $1.04 million to the family of a young financial-services employee.
Nonetheless, as of July 25, only 620 people have applied to the fund. Applicants must relinquish their right to file suit for damages stemming from the attacks. Many victims are waiting to see how generous the awards are before they decide whether to take their chances in court.
However, final judgment on the details of the fund should be tempered by the manifest fact that civil litigation in America is more apt to inflict new wounds than heal old ones.
Congress rightly recognized that litigation could drive firms into bankruptcy and annihilate the jobs of thousands of Americans, while not making America safer or punishing the people responsible for mass murder. They knew that unfettered litigation would wreak more collateral damage on the American economy from the attacks.
In addition to creating the victim compensation fund, Congress capped the liability of the airlines at $15 billion - the limits of its insurance. Trial lawyers labeled this cap an industry bailout, but the reality of America's civil-liability system is that an unforeseeable, unpredictable event like Sept. 11 can bankrupt an entire industry.
Ideally, tort litigation should compensate victims, deter wrongdoing and spur safety innovation. In reality, financial incentives encourage plaintiffs' attorneys to turn America's legal system into a minefield without a map.
Trial lawyers paint themselves as the champions of the underdog, and sometimes they are. But research has consistently shown that attorneys' fees and administrative costs consume the lion's share of compensation available to victims in tort cases. This begs the question: Who benefits from litigation?
Trial lawyers are, above all, human beings, not angels. When 25 percent to 40 percent contingency fees are combined with unlimited non-economic and punitive damages, there are irresistible incentives for attorneys to turn litigation into big business - let's call it Trial Lawyers Inc.
Trial Lawyers Inc. comes complete with Web sites, recruitment drives, mass mailings and lobbyists prowling the halls of Congress. Trial Lawyers Inc. is the largest and most powerful donor to the Democratic Party. Lawyers have the unique ability to harness pliant courts as a means of private wealth redistribution, and they have become very adept at it.
Who ultimately foots the bill for Trial Lawyers Inc.? We do - through lost jobs, higher insurance, and poorer returns from our 401k's.
This leads us back to the Sept. 11 fund. Feinberg is right to point out that the purpose of civil litigation should be "swift, predictable and efficient resolution of claims," and he has engineered a system designed to reach that end.
Unfortunately, Trial Lawyers Inc. wants litigation to be an uncertain, inefficient business. That way they can create an environment where damage awards in the tens or even hundreds of millions of dollars are commonplace - and go directly into their pockets.
Trial lawyers have been so successful over the past two decades that there is not one field of American life - from tobacco to fast food - that is immune from their "business model." Attorneys who defend an unlimited right to sue are gambling that they - and their clients - will win lottery-style awards from juries.
When they win multi-million- or billion-dollar awards, they trumpet that the innocent were compensated and the guilty punished. The reality is much more complex, because litigation is more like tossing a grenade at a problem than using a laser scalpel to remove it. More often than not, innocent bystanders are hurt.
Litigation in America is expensive, time-consuming, emotionally draining and unpredictable for all the parties involved. And this is perhaps its worst feature. If corporations, doctors and investors can't predict their exposure to liability, they can't plan for the future. They can't effectively learn from tragedies and rebuild productive, vibrant lives and communities.
The truth is that Feinberg's plan aims not only at the honorable intention of compensating victims for their loss, but at allowing the entire nation to heal its wounds without inflicting new ones on itself.
Paul Howard is deputy director of the Manhattan Institute's Center for Legal Policy.
©2002 New York Post