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Research Memorandum
July 1995 No. 8


Litigation, Incorporated

Richard A. Hazleton is Chairman and Chief Executive Officer of Dow Corning Corporation. The following was adapted from remarks by Mr. Hazleton at a conference on “Junk Science and the Courts,” in Washington, D.C. on June 12, 1995. The conference was sponsored by The Manhattan Institute.

There is only one word to describe the effect of junk science on the American economy: Devastating.

Imagine a court system that allowed more than 75 trials on a single product to be tried against your company during a six-month period. And each trial has as many as 14 plaintiffs in it, often with dissimilar claims. Imagine that your defense team doesn’t even know the names of the plaintiffs sometimes until three days before opening arguments.

Imagine that the expert witnesses testifying against your company have either weak or irrelevant credentials and they posit theories that they claim show causation, despite no peer-reviewed studies to back up these claims. And when it comes time to mount your defense, plaintiffs' attorneys have been successful in keeping out of the courtroom—and away from the jury—scientific studies that support your position that are performed by the likes of the Mayo Clinic, Harvard, Johns Hopkins and the University of Michigan, to name just a few. Imagine that your company faced 7,000 lawsuits despite the fact that you have committed to pay more than $2 billion over 30 years to try to deal with your problems in a responsible manner.

Am I describing the justice system in the former Soviet Union, China, or some third-world dictatorship? No. I am talking about our own court system. It is a system badly in need of reform and not the kind of half steps that are currently under consideration by Congress.

I have done a lot of media interviews over the past few weeks since Dow Corning filed for Chapter 11 protection. Almost invariably, I am asked what one thing would I change about the current tort system to make it more fair.

I have some favorites that I could list, but in so doing, I am not really getting at what’s wrong with our civil justice system today. And what is that one thing? It isn’t the fact that "junk science" is often given more credence in the courtroom than scientifically valid studies—although this is a huge problem that must be addressed. Nor is it that judges often pay scant attention to the principles outlined in the famous Daubert decision. No. What I am talking about is the change that has taken place in this country over the past 20 years almost imperceptibly, but is nonetheless devastating for the American economy.

The problem with the civil justice system today is what I call “Litigation, Incorporated.” And what I mean is that litigation, as it is practiced today, has evolved from a process to provide justice in accordance with professional principles into a business predicated on economic incentives.

Is this inherently bad? I think so.

Wasn’t the original intention of the civil justice system to adjudicate the alleged damages incurred by a plaintiff? I don’t think that’s the intention today. In 1995, it is just another business seeking the richest market offering the greatest returns. When you think about it, it’s frightening how Litigation, Incorporated has distorted one of the fundamental principles of this nation: fair and equitable justice.

Let’s compare Litigation, Incorporated with my company, Dow Corning. We at Dow Corning are always looking for another new market for silicone products. From lifesaving medical devices to making your car safer to drive or from bathtub caulk to silly putty, we invest a great deal of time and resources into looking for these new applications. We have successfully developed more than 5,000 products.

The plaintiffs' attorneys are also good market researchers. When breast implants were identified as the next litigation target, the American Trial Lawyers Association formed the Breast Implant Litigation Group. For years and years before our situation exploded, the Breast Implant Litigation Group was developing and sharing information and techniques about how best to sue implant manufacturers. Public Citizen, aligned with the plaintiffs' bar, began selling kits on how to sue a breast implant manufacturer.

I would imagine that the plaintiffs' attorneys choose new litigation targets the same way most companies decide which markets to pursue. They need to believe that their R&D investment will offer an adequate return—and in their world an adequate return is a three- or four-digit profit margin. What constitutes R&D to Litigation, Incorporated? It includes deposing hundreds of people and reviewing millions of documents, now using the latest information processing technology, just as any forward-looking business would.

Finally, it involves preparing a case that can be marketed in courtrooms across the country. To make the “short list” of litigation targets, a product must meet a number of key standards: While automobiles, airplanes, and even steaming hot coffee offer tempting targets, the granddaddy of all litigation targets is products used in health care. Health care is an attractive market for plaintiffs' attorneys for a number of reasons.

First, there are no stakes higher than human health.

Second, juries are understandably very sympathetic to plaintiffs who appear injured, regardless of what caused the injury or illness.

Health care also provides the greatest return because it is a market that is constantly innovating—or, in plaintiffs' attorneys’ parlance, is constantly taking risks.

Another criterion is that the product must be used by a lot of people. To be sufficiently lucrative, a litigation target must be used by around a million people, or it isn’t worth developing.

The alleged injuries suffered by the plaintiffs must be fairly general. Joint aches and pain, fatigue, headaches, stiffness, loss of memory—all are good injuries to work with in court because they can be the result of myriad causes. Of course, the assumption to which plaintiffs’ lawyers cling is that there must be a single cause, the product on trial.

So, like Dow Corning or any other smart company, the plaintiffs' attorneys carefully study a market before they enter it. In our case, the ongoing strategy is clear. Having successfully attacked silicone breast implants, the plaintiffs’ attorneys now have their sights set on another product: Norplant. It meets most of the criteria I mentioned a moment ago. It’s used in health care; it represents real innovation in a needed area: reproductive health, and about a million women use the device.

What are some other similarities between Litigation, Incorporated, and any other industry? The plaintiffs' attorneys deal successfully with customers, suppliers, and even elected officials. Like any good marketer, plaintiffs' attorneys are very sophisticated in attracting new customers.

Through advertising, direct mail solicitation tied to 800 numbers, and even workshops, plaintiffs' attorneys have no problem in amassing thousands of lawsuits against a corporation in a very brief period of time. They offer the promise of large cash awards if you “act now.” They are irresistible to many people.

Plaintiffs' attorneys are also very skilled in keeping their suppliers happy. Suppliers to Litigation, Incorporated, are principally the bevy of expert witnesses they employ for about $500 an hour. One of the things that makes it so attractive to be an expert witness for the plaintiffs' attorneys is you don’t have to have any training in a particular field. They say: “If you’re a doctor, you must know something about the injury suffered by my client.” And, what’s worse, the courts often buy this line of reasoning.

One doctor has been instrumental in helping plaintiffs' attorneys win millions of dollars in jury awards in breast implant cases alleging these devices cause autoimmune illness. Is this doctor an autoimmune specialist? No. He has studied cancer for the past 30 years and hasn’t seen a patient since the mid-1950s. In addition, out of the nearly one thousand medical papers he has written and published during his career, only one dealt with autoimmune illnesses and that was after he had started testifying as an expert witness.

All of us in business could take a lesson from the plaintiffs' attorneys when it comes to working with Congress. In a recent study performed by the American Tort Reform Association, it was shown that plaintiffs' attorneys gave more money to political candidates in four states during a four-year period than either the Republican or Democratic National Committees gave in all 50 states.

The plaintiffs' attorneys have been very successful in frustrating the advocates of tort reform for the past 25 years and appear still to be holding their own with the current Congress.

What’s wrong with this situation? After all, aren’t all of us in business to make money and provide for our families? The answer is yes, but there is a crucial difference between what most companies do and what Litigation, Incorporated, does. We are in business to produce products that make our customers more productive and profitable and, directly or indirectly, improve the quality of life for consumers. When we succeed, our customers succeed, our suppliers succeed, our employees succeed, and the American economy succeeds. In short, we all benefit by a vibrant, innovative economy.

When Litigation, Incorporated, succeeds, almost the exact opposite occurs. Undoubtedly, some people who have been injured by a dangerous product or service are compensated, although often more in the fashion of a lottery or on the basis of who can get to the head of the queue, rather than on the basis of who is most deserving. There has got to be a better and more efficient way to accomplish that without the problems that we’ve created.

I believe that, increasingly, you, me, and the rest of the American economy are losers under the current system. When the endgame of litigation becomes simply the largest economic prize—rather than protecting the rights of those who have been truly injured by a dangerous product—we all lose. Products that play a valuable role—such as breast implants or pharmaceuticals like Bendectin—are no longer available to the people who need them. And money that could be spent on medical research instead goes into the pockets of plaintiffs' attorneys.

Once more, let me illustrate with our experience. Since 20 studies performed by renowned medical institutions show no higher incidence of autoimmune illness among women with implants versus those without implants, we clearly don’t believe that our implants cause these illnesses.

The real question is: what does cause these illnesses? Wouldn’t the $1 billion that the plaintiffs' attorneys stand to collect from the global settlement of all breast implant claims be better spent on medical research? I think so.

But instead, the current system will make a group of plaintiffs' attorneys millionaires for a few years’ work, and women, whose interest they purport to represent, will continue to have questions about the real causes of their illnesses. Just as the plaintiffs' attorneys analyze the economy for good litigation targets, companies such as mine do the same analyses but reach opposite conclusions. A good litigation target is a bad business to be in.

As a responsible manager of my business, I cannot put at risk the jobs of thousands of fellow employees, and the assets that have been entrusted to me by my shareholders, and that now, in the context of our Chapter 11 case, I must safeguard for our creditors. I am left with no options. I simply cannot participate in markets that are attractive litigation targets. And while my company and its people are deprived of the opportunity of developing innovative new products, the American people are deprived of lifesaving and life-enhancing new products. What should be the driving force behind innovation? Should it be the betterment of society or should it be the fear of litigation? I think the answer is clear.

So, how do we fix the current system so that it works for all of us? First and foremost, we need to make our civil justice system a level playing field for everyone: consumers, companies, retailers, and attorneys. We need one national, uniform product liability law—instead of more than 50 jurisdictions. Without a return of some predictability to the court system, innovation will be stifled in this country because the risks of developing new products, particularly in the health care area, are simply too great.

If Congress was going to take some action that was truly responsive to the current situation, it would have to include the following:

Excluding biomaterials suppliers from litigation brought against medical device manufacturers; otherwise the current exodus from the medical market of biomaterial suppliers will continue.

Capping punitive damages.

Eliminating joint and several liability where the company with the deepest pockets pays the most, regardless of its degree of liability.

Requiring courts to adhere more strictly to Daubert principles, which require judges to act as “gatekeepers” with respect to the admissibility of scientific evidence in the courtroom.

Flowing from this, tightening requirements when it comes to expert witnesses’ credentials. Simply being a medical doctor does not qualify you to testify about diseases unrelated to your field.

Limiting the grounds for claims in accordance with generally accepted medical illnesses and their causes. Most of the claims against Dow Corning are for diseases that are not even recognized in medical textbooks. They also happen to be ailments that primarily affect women during, and shortly after, childbearing age, the same group most likely to have breast implants.

Finally, stop the mass marketing of tort litigation. Class actions should not be formed as the result of the most effective marketing campaigns. They should be formed only for their intended purpose, which is to efficiently address the legitimate claims of a large group of people who have been harmed in similar circumstances.

The recent tragedy in Oklahoma City exemplifies my point. I read a story in USA Today about a lawyer who calls himself a mass disaster litigation specialist. He was quoted as saying that he didn’t yet have any plaintiffs to represent nor did he know who to name as defendant, but he did think a class action should be pursued against some fertilizer manufacturer on behalf of some of the victims of the bombing. It’s clear to me that what he really meant was that here was a market opportunity ripe for development by Litigation, Incorporated.

Those who derive their livelihoods from the current system howl at the notion that the system needs reform. They argue that the changes I have suggested will hurt consumers. I believe the only ones hurt by these changes will be the plaintiffs' attorneys. Based on how the civil justice system operated in this country until about 20 years ago, and on how it operates in most other places in the world, it is ludicrous to claim that the only way to compensate those with legitimate grievances is by maintaining the hegemony of Litigation, Incorporated.

I think I speak for all my peers in the business community when I say that anyone who has been harmed should be legitimately compensated. Tort reform is not about evading either ethical or financial responsibility. It is about making changes to a system wildly out of control that benefits the few at the expense of the many.

Let me be clear about who I believe the real victim is in this situation. My company is not the real victim here. Dow Corning will resolve this issue, survive this controversy, and continue to provide thousands of innovative products to our customers. The real victims are women with breast implants, and the American economy.

It is my firm belief that the hundreds of thousands of healthy women with implants have been unnecessarily frightened by this controversy. And a billion dollars that could be directed to research women’s health issues will instead enrich the plaintiffs' bar.

The price that all of us pay as Americans is an economy that will continue to be less and less competitive because of the burden placed on all of us through what many have called a “tort tax.” And future generations will not enjoy the same level of innovation and ready availability of new lifesaving devices that we have enjoyed, because inherent in every new product decision will be the fear of becoming a litigation target.

 


Center for Legal Policy.

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SUMMARY:
Future generations will not enjoy the same level of innovation and ready availability of new lifesaving devices that we have enjoyed, because inherent in every new product decision will be the fear of becoming a litigation target.

 


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