Acton Commentary

Lawsuit Reform...A class (in)act(ion)


Needless to say, the above Old Testament injunction is not to be found displayed in the offices the American Trial Lawyer’s Association. Rather, it seems that trial lawyers are pocketing millions showing partiality to, as the senior trial lawyer from the state of North Carolina very often reminds us, the “regular people”. Much of modern tort cases are, however, based precisely on a lawyer’s ability to “take the side of the greater number in the cause of wrong doing” and impose the costs of such wrong doing on the rest of society. As a result, out of control litigation is undermining the rule of law, thwarting real justice for those who require it, and imposing a steep “tort premium” on economic activity.

The seminal insight of the Exodus text is an important one regarding the administration of justice. It is obvious to the Old Testament writer that the claims of a lawsuit are to be corrective, discerned by well-established norms, applied equitably to all, and administered in a transparent way. In other words, the rule of law governs and binds equally, trumping even sympathy for the plight of the poor should their claims be false. Paradoxically, it is in rejecting partiality for the poor and sympathy for the regular guy that actually safeguards the right to justice for rich, poor, and regular, alike—something lost on the opponents of tort reform today.

Previous to the 1960 Supreme Court case, Henigsen v. Bloomfield Motors, the corrective justice model of tort litigation was typically followed. In this model a defendant was liable if and only if he wrongfully caused a plaintiff’s injury. If a defendant didn’t behave unreasonably, or if his unreasonable behavior was not the cause of the plaintiff’s injuries, the tort suit was dismissed. Awards were based on judgments about behavior.

Following Henigsen, a new model began to emerge as the norm for tort suits, the distributive-punitive model. This model divorces tort law from corrective justice. In this understanding tort liability is viewed as a means of achieving a fairer distribution of economic resources, with “fairness”, of course, being arbitrarily determined by the government. With the goal of tort law established as distributed and punitive, a defendant may be held liable without establishing wrongfulness, without legal causation, and even without proof of damages. Such modern day class action suits involving asbestos (expected to cost the U.S. economy $200 billion), the state budget balancing tobacco litigation, and “McLawsuits” likely to be waged against the fast food industry, serve as perfect illustrations of the distributive-punitive model.

Contemporary class action lawsuits seek to exact massive monetary judgments out of corporations, judgments often greatly out of proportion to the actual harm done. Such massive monetary awards are usually sought under the rubric of punitive damages—compensating the injured to punish the injurer, or non-pecuniary damages—the most common of which compensate for pain and suffering, or the relatively new and controversial category of hedonic losses—compensation for the lost pleasures of life.

Specifically, these massive legal actions are accomplished by “classing” large groups of plaintiffs together. Before 1966, Federal Rule of Civil Procedure 23, the rule governing class action suits in federal courts, individuals had to indicate affirmatively that they wished to be part of a plaintiff’s case. This rule, however, was significantly amended; so that now the rule presumes that anyone assumed to be qualified for class membership in a lawsuit is part of the class unless they expressly opt out. The implications of this change were enormous—the scope of money damages skyrocketed and the financial exposure of defendants increased to astronomical levels.

The amended rule places a premium on lumping large groups of people together, discouraging the exercise of individual rights. In the famous Engle tobacco case, a jury awarded $145 billion in punitive damages to a disparate group of plaintiffs including some with terminal cancer, some merely with sore throats, and some who had ceased smoking twenty years ago and showed no symptoms of illness. In such an environment it is hard to imagine that individual claims to harm would be taken seriously—settling becomes more important than discerning justice. A minimum level of tort reform would be to make sure that a group of plaintiffs must experience similar injuries arising out of, at least, a common set of facts.

Much of this stems from the belief that every victim—a very loose concept—should be compensated by the deep pockets of corporate America. In many instances, though, real and presumed victims receive little compensation. This usurpation of individual rights in favor of group presumption has made it very difficult for individuals who actually experience harm to successfully litigate their claim. The injustice of class action lawsuits is further demonstrated in the fact that the benefits to the plaintiffs themselves are often miniscule (a coupon for a free hamburger or something), while the trial lawyer pockets millions. So, even as a mechanism for redistribution, the system fails, unless you're talking about redistribution from wealthy capitalists to wealthy trial lawyers. The sad fact of this situation is that the price of goods and services now includes a tort premium far exceeding the cost of misbehavior and malfeasance.

All of this has exacted an enormous tort premium on the economy that is suffocating American businesses. Moreover, such massive punitive and hedonic damage awards have, in most instances, only punished consumers. The reality is that businesses, in an attempt to hedge against potential liabilities, will simply raise the price of goods and services, costing consumers more. In many jurisdictions around the country unreasonable malpractice judgments have forced many doctors to charge higher fees or have simply driven them out of business.

The counter argument aimed at those advocating tort reform usually involves some version of the “you can’t put a price on people’s suffering” claim. Then why sue at all? Tort law exists in order to adjudicate the claims of those harmed and to decide appropriate damages—in other words, to put a price on people’s suffering. Even in a clear case of malfeasance, malpractice, or malevolence, it is the duty of tort law officials to approximate justice for all parties involved to the best of their ability.

Justice, this side of the kingdom, is never perfectly realized, but that doesn’t negate our duty to strive to meets its demands. The best way to accomplish this is to adhere to the rule of law, hold behavior accountable, and reject economic redistribution by judicial fiat. Biblical wisdom may not be popular at the trial lawyer’s headquarters, but it wouldn’t hurt to see a little in the courtroom once in a while.