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A Message from the Director
America’s litigation-friendly legal system continues to
impose a heavy burden on our economy. The annual direct cost of American tort
litigation—excluding much securities litigation, punitive damages, and
the multibillion-dollar settlement reached between the tobacco companies and
the states in 1998—exceeds $250 billion, almost 2 percent of gross domestic
product.[1] The indirect costs of excessive litigiousness
(for example, the unnecessary tests and procedures characterizing the practice
of “defensive” medicine, or the loss of the fruits of research never
undertaken on account of the risk of abusive lawsuits) are probably much greater
than the direct costs themselves.[2]
Of course, tort litigation does do some good, and it does deter some bad behavior.
The problem is that it deters a lot of good behavior, too. Indeed, the legal
system does such a poor job of distinguishing between good and bad behavior
that the high cost of litigation is effectively a “tort tax” paid
by every American. The share of America’s economy devoted to lawsuits is
far higher than that of other developed nations such as Germany and Japan (see
graph, left). Yet America is hardly safer as a result.
 As
this report details, the causes of the staggering growth in the overall economic
costs of litigation in America (see graph, right) are somewhat complex. A series
of writings by academics and decisions by judges from the 1930s through the
1960s—many of which were well-intentioned—changed our legal rules
to make it much easier to file and win lawsuits.[3]
Alongside these doctrinal changes, the modern trial-lawyer lobby emerged. As
the plaintiffs’ bar became wealthier, more organized, and more like an
industry—we like to call it Trial Lawyers, Inc.—it grew into a major
political force. Combining large-scale political giving with K-Street
lobbying sophistication, the lawyers worked to maintain the legal shifts that
had enriched them, as well as to initiate changes that would enrich them still
more.
 The
litigation industry’s political strategy is multifaceted. Because tort
law is state law in the United States, the states have been the focus of Trial
Lawyers, Inc.’s political efforts. And because tort law is, for the most
part, crafted by state judges rather than enacted by state legislatures, these
efforts have centered on ensuring a friendly judiciary, whether appointed or
elected.
With business groups now fighting back against Trial Lawyers,
Inc.’s longtime grip on state judiciaries, the litigation lobby has turned
its attention to state legislatures, where it is not only blocking tort reforms
but working to expand its portfolio of litigation opportunities. Among other
things, state legislators are authorizing new kinds of lawsuits, raising damage
caps, and giving private lawyers authority to sue on behalf of the state.
Of course, the growth in federal regulation and law has made it necessary for
Trial Lawyers, Inc. to lobby Congress as well. Thanks to large contributions,
both to the Democratic Party and to individual legislators, lawyers have not
only blocked most federal efforts at tort reform but are also working to coax
goodies from Congress that pad their bottom line. Such efforts include:
- Lengthening statutes of limitations in employment law to make it easier
to file discrimination suits;[4]
- Spurring securities litigation by allowing suits to be filed against the
vendors of corporations accused of fraud;[5]
- Cutting contingent-fee lawyers a tax break worth over a billion dollars;[6]
- Gutting arbitration contracts designed to encourage resolution of disputes
that are too expensive to take to trial;[7] and
- Allowing state juries to override federal regulations.[8]
The litigation industry isn’t making political headway because it is popular.
Eighty-three percent of Americans think that the legal system makes it too easy
to assert invalid claims.[9] The plaintiffs’ bar became
so nervous about its public image that it changed its name: in 2006, the Association
of Trial Lawyers of America rebranded itself the American Association for Justice.[10]
But general public unease over the conduct of litigation today cannot combat
the overwhelming influence that Trial Lawyers, Inc. has obtained in the halls
of power. In the last decade, lawyers and law firms—excluding lobbyists—have
injected $780 million into federal campaigns,[11] on top
of $725 million donated to state races.[12] Lawyers’
giving is so lavish that it exceeds all other industries’, and likely would
do so even if donations by defense firms were backed out of total contribution
figures (see note [36]).[13]
Moreover, the plaintiffs’ bar strategically concentrates its giving, wielding
disproportionate influence in contested state supreme court elections and over
the leadership of both the U.S. Senate and key state legislatures.
 The
progress of the plaintiffs’ bar has not been entirely unimpeded. Since
the Manhattan Institute issued, in 2003, its first report entitled Trial
Lawyers, Inc., major tort-reform legislation in states such as Texas and
Mississippi has forced plaintiffs’ lawyers to look for friendly new jurisdictions.[14]
Judges such as Janis Graham Jack have blown the doors off a program of manufactured
testimony and medical examinations in the asbestos-lawsuit industry, producing
a sharp drop in new case filings in that line of litigation.[15]
From 2004 through 2008, the cost of litigation to the economy rose more slowly
than overall economic growth. And four key members of our original Trial
Lawyers, Inc.’s “leadership team” have left the business
altogether: federal prosecutors uncovered bribery and kickback schemes that
led to the imprisonment of Dickie Scruggs,[16] Bill Lerach,[17]
and Mel Weiss;[18] and former U.S. Senator John Edwards
has retreated from the public scene in ignominy.[19]
But make no mistake: trial lawyers are reacting to recent setbacks not by licking
their wounds but by flexing their political muscle. Newly enlarged Democratic
majorities—swept into office by financial crisis, disaffection with the
war in Iraq, and enthusiasm for “hope and change”—seem intent
on rewarding their political benefactors. I hope that this report, by shedding
light on their shenanigans, can help stem the damage.
James R. Copland
Director, Center for Legal Policy
Manhattan Institute for Policy Research
next section>>
1. See Towers Perrin, 2009 Update on U.S. Tort Cost Trends 5 (2009),
http://www.towersperrin.com/tp/getwebcachedoc?webc=USA/2009/200912/2009_tort_trend_report_12-8_09.pdf
(costs as of 2008). As noted by Manhattan Institute fellow Walter Olson:
[The Towers Perrin] studies are particularly useful in assessing
long-term trends in liability-cost burdens (since long-term data will tend to
transcend the vagaries of passing hard/soft markets) and in international comparisons
(since well-defined liability insurance markets exist in other advanced countries
and can be subjected to comparable metrics). Perhaps for those very reasons,
and because the figures are widely acknowledged within the industry as having
a high degree of accuracy in measuring what they set out to measure, the [Towers
Perrin] numbers have been furiously attacked by organized trial lawyers and
their allies.
Posting of Walter K. Olson to PointofLaw.com, http://www.pointoflaw.com/archives/2008/11/tillinghasttowe.php
(Nov. 21, 2008, 11:14 EST). For a response to these criticisms, see Posting of
James R. Copland to PointofLaw.com, http://www.pointoflaw.com/archives/000877.php
(Jan. 19, 2005, 19:11 EST); see also Towers Perrin, Corrections and Clarifications
(2005), http://www.towersperrin.com/tillinghast/pdf/response_0517.pdf.
2. See, e.g., Ronen Avraham et al., The Impact of Tort Reform on Employer-Sponsored
Health Insurance Premiums (Nat’l Bureau of Econ. Research, Working Paper
No. 15371, 2009), available at http://ssrn.com/abstract=1478789
(finding that various state-level tort reforms reduce employer-sponsored health-plan
premiums one to two percent each).
3. See infra.
4. See Lilly Ledbetter Fair Pay Act of 2009, Pub. L. No. 111-2, 123 Stat.
5 (2009).
5. See Liability for Aiding and Abetting Securities Violations Act of 2009,
S. 1551, 111th Cong. (2009).
6. See H.R. 2519, 111th Cong. (2009); S. 437, 111th Cong. (2009).
7. See, e.g., Arbitration Fairness Act of 2009, H.R. 1020, 111th Cong.
(2009); S. 931, 111th Cong. (2009).
8. See, e.g., Medical Device Safety Act of 2009, H.R. 1346, 111th Cong.
(2009); S. 540, 111th Cong. (2009).
9. See Press Release, Common Good, New Survey Finds That Only Sixteen Percent
Of American Adults Trust The Legal System To Defend Them Against Baseless Claims
(June 27, 2005), available at http://commongood.org/assets/attachments/140.pdf.
10. See Al Kamen, Just Don’t Call Them the Suers, Wash. Post,
July 14, 2006, at A19.
11. See Center for Responsive Politics, http://www.opensecrets.org/industries/indus.php?ind=K01
(last visited Jan. 13, 2010).
12. See National Institute on Money in State Politics, Table 1: Attorneys
& Law Firms Contributions to All Candidates and Committees, http://www.followthemoney.org/database/IndustryTotals.phtml?f=0&s=0&b%5B%5D=K1000
(last visited Jan. 13, 2010).
13. See Center for Responsive Politics, supra note 11. As the “Rank”
column indicates, lawyers and law firms, not including lobbyists, rank first for
every election cycle, except for 2004 and 2008. The “industry” ranking
first in those cycles is “retired persons,” so lawyers are the largest
givers among industries and professions in each election cycle. See also
infra note 36.
14. In 2003, Texas passed comprehensive tort reform, the Med-Mal & Tort Reform
Act of 2003, H.B. 4, 78th Leg. (Tex. 2003) (enacted), and Mississippi passed comprehensive
reform in 2004, see H.B. 13, 2004 Ext. Sess. (Miss.) (enacted). Both states
have seen a subsequent reduction in excessive litigation. See, e.g., James
Tanella, Presentation at Mealey’s Asbestos Super Conference, Sept. 26, 2007,
p. 11 of hard copy and Oct. 11, 2007 e-mail correspondence.
15. See In Re: Silica Products Liability Litigation, MDL No. 1553 (S.D.
Tex.) (June 30, 2005) (Order No. 29 at 116) (“[T]hese diagnoses were driven
by neither health nor justice; they were manufactured for money.”). New asbestos
filings fell dramatically: from a high of 70,412 nonmalignant and 6,435 malignant
claims filed in 2002 to 2,462 malignant and 2,596 nonmalignant claims in 2007.
See Tanella, supra note 14 at 12 and e-mail.
16. See Richard Fausset, Bribery Case Brings Down Legal Legend,
L.A. Times, Mar. 15, 2008.
17. See Michael Parrish, Leading Class-Action Lawyer Is Sentenced to
Two Years in Kickback Scheme, N.Y. Times, Feb. 12, 2008.
18. See Jonathan D. Glater, High-Profile Trial Lawyer Agrees to Guilty
Plea, N.Y. Times, Mar. 21, 2008.
19. See Neil A. Lewis, For Edwards, Drama Builds Toward a Denouement,
N.Y. Times, Sept. 19, 2009.
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