April 29th, 2013

The Fallacy of Loser Pays in Tort Litigation

OverlawyeredLast week at Overlawyered I had a little back and forth with its publisher, Walter Olson, on the concept of a loser-pays system. For those not familiar with the idea, this specifies that the loser of a lawsuit pays the legal fees of the winner. This is in contrast to the “American Rule” that says, generally, each side bears its own costs.

There are exceptions, of course, such as legal fees being part of a sanction for frivolous litigation, but we deal here today with the general rule.

There are two issues regarding the rule: The first is that it effectively closes the courthouse door to much of middle America. On one side in a typical tort case is likely to be a multi-billion dollar insurance company defending an auto collision or medical malpractice case, and on the other a person who may be struggling to work, or incapacitated and trying to figure out how to pay the mortgage or rent.

One side has incentive to run the meter and stall, and can readily afford to do so. If the litigant loses a simple issue of “who had the green light” then financial devastation may follow, but there is no such threat on the other side. The parties are not equal and the scales of justice unbalanced.

But the second issue is more interesting to me here because it deals with even broader public policy issues, and that came up with Olson’s comment responding to me:

A “legal system that only the wealthy can use” is not an accurate description of the pluses and minuses of the legal systems in the great majority of advanced democracies where loser-pays is the norm, such as Canada, the U.K., Scandinavia, the Netherlands, and so forth. It does, unfortunately, accurately describe some sectors of the American legal system (such as small high-merit claims and many injunctive matters) where neither fee shifts nor contingency fees are available. Oppose loser-pays if you like, but enough of the sloganeering.

The U.S. system here is compared to other nations with reputations for significant social service programs (and high taxes to pay for them). Universal health care is the most obvious example. The U.S., by contrast, has far less government involvement with our lives and some of the lowest taxes of any industrialized nation on earth.

If we close the court house door on people by making it more difficult to proceed, then what happens to those already injured? Well, they absorb the costs themselves until they are poor enough for the minimal social service programs that we have and then the taxpayer picks up the tab. And they remain poor, having now been victimized first by the negligence of others and then again by being forced to bear the financial burden.

The American Rule, as it now stands, is consistent with the parties working things out privately in court with minimal government intervention. Sure, verdicts can get tossed out if they are true outliers, but for the most part verdicts are respected.

The interesting part about this political discussion, I think, is that last week Overlawyered became affiliated with the Cato Institute, a libertarian think tank. While I certainly wouldn’t want to speak for them, it seems to me that a loser-pays system (and other tort “reform” measures that give protections and immunities to those who are negligent) garners greater government involvement in the lives of the populace, contrary to its own political philosophy.

If we want to shift the costs of injuries caused by negligence away from the tortfeasors and onto the backs of the taxpayers, then we need those Scandanavian government economies to accommodate that shift and provide the support.

The U.S., I think it’s clear, isn’t going that way.  We are faced with a choice as to whether we let parties duke things out privately or let the government come in with support. A nation can have one or the other. But what we can’t have, is both the stripping away of private rights at the same time that we have limited government support. That is not the model used by any industrialized nation that I know of.

 

March 20th, 2013

Sen. Rob Portman, Gay Rights, and Tort “Reform”

RobPortmanLast week Ohio Senator Rob Portman made headlines when he reversed his stance on gay marriage. For a Republican, that was pretty big news. He did it after finding out his son was gay and reflecting on the meaning of love, marriage and religion.

But that isn’t why I’m writing.

I’m writing because, in his explanation, he went beyond the love/marriage/religion elements to reflect on the proper role of government in society. He wrote:

British Prime Minister David Cameron has said he supports allowing gay couples to marry because he is a conservative, not in spite of it. I feel the same way. We conservatives believe in personal liberty and minimal government interference in people’s lives.

So if he, as a conservative, believes in minimal government interference in people’s lives, why does he campaign on giving big government protections and immunities with various tort “reform” proposals that close the courthouse doors to those seeking justice?

One of the first things he did as a freshman senator in 2011 was introduce legislation that would impose a new statute of limitations on medical liability lawsuits and cap punitive and noneconomic damages.

His political view is summarized here:

Medical malpractice costs and the mounting costs of defensive medicine must be reduced through sensible legal reform and better health information.
Source: www.robportman.com/1on-the-issues (11/22/2010)

Really Senator? Is that what limited government is all about? Interceding on the rights of people seeking justice by protecting big business and insurance companies?

If someone would be kind enough to forward this to Portman, he might also learn that the artificial caps he supports because of “defensive medicine” have been proven by empirical evidence to be a complete bust. Health care costs in Texas, which instituted artificial one-size-fits-all caps in 2003 didn’t go down. Costs have actually gone up.

So Portman gets a special twofer: His tort “reform” policy contradicts his stance on federal power, and the basis of his policy is factually wrong.

If Portman wants to reign in federal power, as he states in part of his argument favoring gay rights, he may wish to revisit his other positions that call for increasing that power. Especially when increasing it fails to support  his theories.

More on the hypocrisy between conservatism and tort reform  here: Does the Tea Party Believe in Conservatism or Tort “Reform”? (8 Questions)

 

 

December 13th, 2012

Tort “Reformers” Whine (Again) About Trial Lawyer Influence (#Hypocrisy)

In today’s New York Law Journal is another in a never-ending series of stock articles about big business whining about trial lawyer influence in the legislature.

This is the lede:

ALBANY – Bemoaning the clout of trial lawyers on New York government officials, a business-oriented group said yesterday that the lawyers spent nearly $20 million in the last six years to influence public policy.

The Lawsuit Reform Alliance of New York reported that personal injury law firms and individual lawyers made $8.2 million in campaign contributions while the lawyers’ political action committees chipped in another $6.5 million between Jan. 1, 2006, and Nov. 26, 2012. Additionally, the lawyers’ groups spent $6.3 million on lobbying.

Really? How pathetic.

Shall we now tally up the amount spent by massive health care conglomerates? Insurance companies? Real estate and construction companies?

The answer, of course, is yes!

But I don’t have to really write a post about that, because I already did it earlier in March of this year:  Trial Lawyer Lobbying in Albany (A lot or a little?)

It would be nice if the press, when faced with these silly press releases from big business, that parade as news, would actually try to do a little apples-to-apples comparison of political contributions. Because if they did so, they would see that the forces of the big business and the Fortune 500 swamp those of consumer groups.

This is one of the two graphics I used in my piece from March. Note that the lead contributor, the comically named Committee to Save New York, is a consortium of real estate developers. And also note that this is only lobbying money, and does not include campaign contributions from companies or political action committees:

 

 

 

 

November 20th, 2012

A Graph is Worth a Thousand Words

I’ve spilled a lot of pixels here over the last six years on the issue of tort “reform” and the claims from business and the medical profession that personal injury suits are killing them.  I’ve made arguments, I’ve cited studies, I’ve pointed out hypocrisy.

But sometimes, nothing beats a good old fashioned graph, like the one at right. That’s right, just five percent of civil cases filed in the U.S. are tort cases. Most are contract matters, basically Business v. Business.

And then there is this other graph, at the left, showing the decline in medical malpractice payments over the last 10 years. You would think, if you listened to the doctors lobby, that the graph should be running the other way. But it doesn’t.

You can read more about the Facts v. Fiction of America’s ‘Litigation Explosion” at this link. It’s something to think about the next time the Chamber of Commerce comes out with its pseudo-scientific survey of….wait for it….corporate lawyers on their feelings about litigation. Seriously.  Or maybe the American Tort Reform Association equally laughable “Judicial Hellholes” report that members of the media distribute as if it was news, even though it has “no apparent methodology.”

 

August 30th, 2012

The RNC Tells A Whopper

I suppose I should be used to by now: A political party making statements that are demonstrably false. And yet it continues, perhaps because those that value the falsehood make political contributions in order to perpetuate it. If you tell a lie often enough, people will believe it.

And so we turn to the Republican National Committee’s political platform and we look up what they have to say about tort “reform.” And what do we find? Rehashed falsehoods disproved by empirical evidence.

Let’s leave aside, for the moment, that the very concept of giving Big Government  immunities and protections to those that injure others runs directly contrary to conservative political philosophy. Let’s deal with simple accuracy today, and turn directly to the Republican platform as it applies to tort “reform:”

Frivolous medical malpractice lawsuits have ballooned the cost of healthcare for the average American. Physicians are increasingly practicing defensive medicine because of the looming threat of malpractice liability. Moreover, some medical practitioners are avoiding patients with complex and high-risk medical problems because of the high costs of medical malpractice lawsuits. Rural America is hurt especially hard as obstetricians, surgeons, and other healthcare providers are moving to urban settings or retiring, causing a significant healthcare workforce shortage and subsequently decreasing access to care for all patients. We are committed to aggressively pursuing tort reform legislation to help avoid the practice of defensive medicine, to keep healthcare costs low, and improve healthcare quality.

The platform deals primarily with three issues:

  1. Frivolous malpractice suits
  2. “defensive medicine”
  3. Lack of doctors in rural areas.
First, frivolous malpractice suits are losers. Because of the contingency system, those lawyers that bring them are destined for bankruptcy. They are marked “no pay” by the insurance carriers, vigorously defended by some of the best trial lawyers around, and any one foolish enough to bring them will find himself at the door of the bankruptcy court. Are there occasional frivolous suits? Of course. In a nation of 300 million people you will find frivolous business suits (biz brings 4x as many suits as individuals), Orly Taitz birther suits, defamation suits and all other kinds. But there is no data to confirm that the isolated cases are a major problem for society.

The issue is tough to study in the medical malpractice context by merely looking at medical records, since medical practitioners aren’t too keen on documenting their mistakes. Often, there is a simple question of fact for a jury: The patient says they made a complaint (lump in breast, floaters in the eye, etc.) and the doctor said not to worry.

But a study was done that showed most malpractice suits came from very few doctors. The study has been around since George Bush was president, yet it doesn’t seem to stop the perpetuation of the hoax of a malpractice crisis.

Next up, the concept of “defensive medicine.” That was disproved in a recent study in Texas, in which costs went up faster than the national average, despite brutal “reform” that closes the courthouse door to so many.

Which brings us to the last claim, that of a lack of doctors in rural areas. Well, it seems that doctors (and many others) don’t like to live in rural areas and want to live in the big cities and suburbs. But that isn’t because of malpractice cases. This too, was disproved by the Texas 2003 experiment in “reform, as more doctors did not come to Texas on a per capita basis in response.

When Mitt Romney speaks tonight will he repeat the falsehoods? There are just two reasons he might do so:

  1. The healthcare and insurance businesses are some of the biggest in the nation, and they give tons of money to politicians;
  2. Bashing lawyers is fun for the general public, because when we set forth the evidence in response to false statements we sound, well, like lawyers.