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Business Has Not Trounced the Trial Lawyers Just Yet

March 12, 2007

By Walter Olson

America's litigation fever is cooling off, or so one hears. Merck & Co is doing reasonably well defending suits over its painkiller Vioxx, while actions blaming food makers for obesity have sputtered. Doctors' malpractice—suit payouts are said to be flat (at what by other countries' standards are still unthinkably high levels). Last month, the Supreme Court ruled on a punitive damage case in favor of tobacco giant Philip Morris, which has become a Wall Street favorite after wrestling down its perceived legal risks. Nearly every American politician claims to be on board with reform, even the nation's most famous plaintiff's-lawyer-made-good: "We do have too many lawsuits", said John Edwards during the 2004 Presidential debates. A recent Business Week cover sums it up: "How Business Trounced the Trial Lawyers".

And yet one wonders whether a contest is being called prematurely. In New Orleans last week, claimants lined up for blocks as a deadline approached for suing the federal Government over the Katrina levee breaks; until a recent court ruling, it had been widely assumed that the Government was not open to suit over the calamity at all. The sums demanded soon mounted to fabulous levels, including $77 billion for losses to the municipal Government alone: the city "just kind of piled it on," conceded Mayor Ray Nagin. "We got some advice from some attorneys to be aggressive with the number, and we'll see what happens." In nearby Mississippi, meanwhile, insurers besieged by the state's politico-legal tag teams are offering billions to settle Katrina flood damage claims, notwithstanding clear flood exclusions in their policies.

As for the recent high court decision on punitive damages, Justice Breyer's majority opinion set forth a standard that most legal observers saw as confusing and not terribly helpful to defendants. (It seems juries are supposed to ignore harm done to non-parties in assessing a punitive damage sum, but are free to consider such harm in assessing the badness of conduct, which in turn feeds into the scope of punitives). And it was noted that the Court majority keen on protecting business from excessive awards has slipped from 6-3 to 5-4, with liberal justice Stevens crossing to the minority side.

What of the supposedly favorable courtroom outlook for tobacco companies? Three rulings in recent weeks confirm that the industry's legal woes have not gone away. In one, the California Supreme Court took a liberal view of the statute of limitations, inviting more residents to sue over nicotine habits formed in the Eisenhower era. A Massachusetts judge green-lighted a suit blaming addiction on the giving away of cigarettes as free samples. And a Louisiana appeals court pared by more than half a $1 billion award on behalf of smokers in that state, but still left enough of the award's reasoning intact that plaintiffs with some plausibility claimed victory.

There's no doubt that there are parts of the country where you can find the advertised litigation implosion. Business Week could have made its headline more accurate (at the cost of national newsstand appeal) by amending it to read "How Business Trounced the Trial Lawyers in Texas". In the President's home state, once the nation's most litigation-mad, a Republican-run High Court and legislature have cracked down hard enough that injury law firms have in fact laid off staffers en masse.

Note, however, that when one state draws a firm line opportunistic suit-filing usually just moves elsewhere. Asbestos lawsuits on behalf of workers in faraway states were once brought to wide-open Texas and Alabama; now they're shipped to unreformed Illinois instead. Michigan enacted a pioneering law limiting suits against prescription drug makers, but it's had scant impact since lawyers representing Detroit pill-takers can still head for, say, New Jersey, to sue over claimed side effects.

Back in 1986, Business Week rather spoiled its reputation for trend-spotting on this topic by proclaiming in a confident headline that "The explosion of liability lawsuits is nothing but a myth". In retrospect that was just around the time the levees were bursting, so to speak, to usher in the modern era of mass tort litigation. To call a high-water mark is going to require more evidence than we've seen so far.

Original Source:



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