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Are Lawyers Ruining America?



Think Tank Transcripts:Are Lawyers Ruining America?



ANNOUNCER: 'Think Tank' has been made possible by Amgen, arecipient of the Presidential National Medal of Technology. Amgen,bringing better, healthier lives to people worldwide throughbiotechnology.

Additional funding is provided by the John M. Olin Foundation, theRandolph Foundation and the Lynde and Harry Bradley Foundation.

MR. WATTENBERG: Hello. I'm Ben Wattenberg. There has been a lot ofattention focused on America's criminal justice system lately, butwhat about our civil justice system? Americans and American companiesspend billions of dollars suing each other every year. Does thissystem protect average Americans, or is it just a legal lottery inwhich the lawyers win big?

Joining us to sort through the conflict and consensus are: PhilipHoward, author of the best-selling 'The Death of Common Sense: HowLaw Is Suffocating America'; Paul Rothstein, professor of law atGeorgetown University; Michael Horowitz, senior fellow at the HudsonInstitute and coauthor of 'Rethinking Contingency Fees'; and JonathanTurley, professor of law at George Washington University.

The topic before this house: Are lawyers ruining America? Thisweek on 'Think Tank.'

Americans have been suing each other since the founding of therepublic, but today many fear that lawsuits are getting out of hand.Some recent examples explain why.

In 1994, McDonald's was told to pay a woman $2.7 million after shewas burned by spilling McDonald's coffee on herself. Her lawyerspersuaded the jury that the coffee was too damned hot.

The Supreme Court is considering a recent case about BMW ofAmerica. A jury decided that the carmakers should pay $4,000 incompensatory damages to the buyer of a $40,000 car. The charge: BMWdid not disclose that they had painted over a $600 blemish beforeselling it. Fair enough. But the jury also hit BMW with $4 million inpunitive damages.

Defenders of the system say consumers are protected by suchlawsuits. Without punitive damages, there would be no incentive forcorporations to improve safety or truth in labeling.

But critics say we can no longer afford a system which encouragesdrop-of-a-hat lawsuits. For example, the estimate cited by authorPhilip Howard says America spends up to $200 billion per year onmedical procedures performed largely to avoid malpractice suits.Defenders say this results in better medical care. As part of theContract with America, the House and Senate are considering limitingthe damages injured parties can receive as well as forcing the losersto pay the legal costs for both sides. But some fear this wouldunfairly prevent poor people from bringing legitimate cases againstbig corporations. So the question that taunts us is, is there abetter way?

First question. Let's go around the room quickly, starting withyou, Philip Howard. There is obviously something wrong. Do we need anoverhaul or a tuneup?

MR. HOWARD: Well, I think it's closer to an overhaul, but not formost of the reasons people state. The numbers are hard to get ahandle on. Even that medicine number, most people -- many people sayit's a hundred million (dollars), not 200. Some people argue 50.

MR. WATTENBERG: Billion.

MR. HOWARD: Billion, I'm sorry. Billion. But it's a big number.But the problem I feel that requires changing is that a fear has comeacross the land. It's a fear because people don't trust courtsanymore to ensure the reasonable result, so what one expert calls a'catastrophobia' has descended. Teachers are scared to kick kids outof classrooms, doctors do defensive medicine. People go to worktrying to avoid legal risk instead of trying to get somewhere, andthat's the reason I believe we need reform.

MR. WATTENBERG: Okay. Michael Horowitz, tuneup or overhaul?

MR. HOROWITZ: Overhaul, and I agree with Philip. What's at riskhere is Americans' respect for the rule of law. This is a countrywhere lawyers have played a great role, as de Tocqueville pointedout, but the excesses are extraordinary.

And I'm less worried about the McDonald's coffee cup case than Iam about the doctor who drunkenly saws off the wrong leg who intoday's system automatically makes a lawyer a multimillionaire.Lawyers are using our monopoly of access to the courts to take 40percent out of every single injury whether or not they assume risks,whether or not it's a tough case. That's crazy; it's costly.

MR. WATTENBERG: Okay, overhaul. Paul Rothstein.

MR. ROTHSTEIN: I'm very reluctant to do very much at all to thesystem because what usually happens is, protections for theindividual are removed in the name of reforms or tuneups and nocomplementary protections of another kind are put in. This is thesafest country in the world largely because of the tort system. It'sa beautiful system in the sense that it links up the lawyer'sself-interest with helping poor, unfortunate people. No one's goingto help anybody really very much just out of charity. Charities don'twork that well. Now, you can say that doctors, for example, andcompanies are trying to avoid legal risk and that's a bad idea, butin trying to avoid legal risk, what they're really doing, another wayto say that, is that they're trying to avoid safety risks, and thatis a good thing.

MR. WATTENBERG: Jonathan Turley.

MR. TURLEY: Well, I don't even agree that we necessarily need atuneup in the system. I think that there's a parade of horribles thathave been brought to us, but I'm not sure in reality this bears out.There's a good reason why a doctor who cracks open my chest isfearful of a suit. I want him to be fearful. I want him to beconcerned about me and about what he might do to me throughnegligence.

There's a ceratin reason why we have a legal system that tellspeople that they have to take special care. And it also tellsindustry that they can't externalize the cost of their activities toothers, cannot force us to bear the cost of their activity.

The tort system is vital in that sense. It's a vital check. Andwhen Congress is removing regulatory controls off corporations andreducing enforcement of environmental laws and safety laws, the lastthing we have is our ability to protect ourselves, and suddenly wefind that even that is being reduced.

MR. WATTENBERG: All right. Let me ask just one definitionalquestion, which is about the word tort. We know it is not a piece ofbakery, but will somebody describe for me what a tort is, just astraight definition.

MR. ROTHSTEIN: A tort is a civil lawsuit by one party againstanother where the defendant has done something wrong and has injuredthe plaintiff, the claimant, and has to pay for it to make him whole.

MR. HOROWITZ: Well, it's not quite as simple as that. What we haveare two bodies of common law. One is contracts, where what the courtsdo is try to figure out what you and I agreed to and enforce ouragreement. Tort law is the body of law where the courts figure outwhat your duty is to me and what you ought to pay to me.

One tries to do and enforce what people want, where there's a muchmore passive role that the judges play. The other is a system inwhich the judges define one's duty to the next and what one's paymentought to be to the other. And there's a tension between the two, andover the last 20 years, if you and I agree to share risk in acontract, tort law has just overwhelmed that because the courts say,'There, there, Ben, you didn't really mean to get in that agreement.Horowitz will have to pay you whatever you agreed at the start.'

MR. TURLEY: Oh, that's just not true. I mean, tort law recognizesthings like assumption of risk. It also recognizes consensualagreements.

MR. HOROWITZ: Sure. MR. TURLEY: There are limitations to what youcan agree to, limitations to what you can contract to.

MR. HOROWITZ: Jonathan, there isn't a question about that. Inmodern-day tort law -- we're talking about developments over the last20, 25 years, we have had what the academics would call tort lawconverted into a social insurance mechanism. That is, payment by andlarge and increasingly without fault by the actor who injures aparty, whatever the parties may have agreed to between themselves.That's a recent development.

MR. TURLEY: What's wrong with that?

MR. HOROWITZ: Ah.

MR. TURLEY: What's wrong with that until we get a better system?Now, in any system as large as ours, we're going to have occasionalaberrations, like the woman that spilled coffee.

MR. HOROWITZ: I'll tell you what's wrong with it, Ben. The history-- Maitland (ph) and other historians have said that the essence ofour march to democracy in the West is the rule of contract. That is,we've moved from a feudal society to a contract society becausecourts enforce agreements. And the smart poor guy who can gauge riskand gain better than the dumb rich guy quickly becomes a rich guy.

MR. TURLEY: Oh, no, but --

MR. HOROWITZ: And we don't have a feudal system because we'verespected notions of contract. We've let parties make their own dealsand enforce them. Tort law is the system by which the courts come inand say, 'Whatever you guys have agreed to, we have a better notionabout who should bear risks and costs.' It's dangerous in that sense.

MR. TURLEY: Well, that's not true.

MR. WATTENBERG: Now, wait a minute. Why -- I mean, if the surgeoncutting into Jonathan's chest makes a major error, I mean there wasno contract there. I mean, he is negligent. Why shouldn't he besuable?

MR. HOROWITZ: He ought to. He ought to, and we ought to return toclassic notions of tort law as we knew it 25 years ago, before itbecame this mass income redistribution machine with lawyers takingmost of the --

MR. WATTENBERG: Let -- we have Philip Howard here. You have beennoticeably silent, sir.

MR. HOWARD: Right. Well, the problem -- I get stuck in theseideological battles. The problem is one of how it works. I don'tbelieve we should do away with the tort system. I think people shouldbe able to sue each other, obviously, when someone else makes amistake, if a surgeon makes a mistake. The question is whether theresult is then a reasonable result.

And what's happened in this country, and it's happened enough sothat people are scared, is that the result isn't reasonable notbecause someone shouldn't be liable, but because you tag on a $10million or $20 million punitive damages verdict where it's notwarranted in the circumstances, warranted as defined by communitymores.

And judges exercising no control over the reasonableness ofresults, they're acting like referees, let the lawyers argue anythingto the juries.

MR. WATTENBERG: Don't juries represent community mores? I mean,who --

MR. TURLEY: They're the ultimate democratic institution.

MR. WATTENBERG: Who better?

MR. HOWARD: No. Judges, in fact, have an important role in themanagement of the courtroom. I happen to have an advantage in thatI'm a practicing lawyer. I believe strongly that judges have beentraditionally -- traditionally they have and should define the limitsof community mores. If I trip on the sidewalk and go in and try tosue for $100 million for writer's block, the judge shouldn't allowthat to go to the jury.

MR. TURLEY: Wait, but you don't want the judge to define mores.You want the judge to define standards. I mean, God help us if thejudge defines mores.

MR. HOWARD: I want him to define the limits of community mores. Idon't think that someone without any objective evidence or clearevidence of malice should have a punitive damage claim going to thejury because the in terrorem effect of that is huge.

MR. TURLEY: The judges do exercise that role. In your favoriteMcDonald's case, the judge exercised that role and cut down thedamages.

MR. HOROWITZ: To two million.

MR. TURLEY: And by the way, I think --

MR. WATTENBERG: Right, but still gave the woman $2 million. Imean, that is --

MR. TURLEY: But the fact is --

MR. WATTENBERG: -- for spilling coffee on herself.

MR. TURLEY: Well, but this is an example of the parade ofhorribles.

MR. HOROWITZ: It's an aberration.

MR. TURLEY: I think that was a terrific --

MR. WATTENBERG: Well, but wait.

MR. TURLEY: -- but I think that was a terrific case.

MR. HOWARD: The question is, is the system -- the question to meat least is, is the system working reasonably? Do the people haveconfidence in it? And I believe, in the case of the McDonald's case-- I happened to have debated the judge in the McDonald's case --what he did wrong is letting it go to the jury. There is a huge interrorem effect of letting a huge claim go to jury. People settle --

MR. TURLEY: Well, let's talk about that case.

MR. HOWARD: -- settle cases just because of the downside risk. Heshould have cut it off at the outset.

MR. WATTENBERG: Just one moment. I just want to pick up one thingfrom Jonathan Turley. Tell us -- I find it mind-boggling, but tell uswhy you think that the McDonald's case, where a woman got $2 millionfor spilling coffee on herself, was a justifiable verdict.

MR. HOROWITZ: While driving her car, Ben.

MR. TURLEY: Because in this parade of horribles, certain facts areleft out. One of the facts left out is the fact that McDonald's hadover 700 such claims brought against it. Another fact is thatMcDonald's --

MR. WATTENBERG: The parade of horribles.

MR. TURLEY: -- that McDonald's also was keeping the temperature ofits coffee a good 50 degrees over its competitors. Also left out isthe fact that she did offer to settle, something that I would thinkwould be delightful to two of our panelists. She was willing tosettle for $20,000, and McDonald's told her to take a walk. And soshe sued. And then the jury found out this evidence and they werevery, very upset.

But the interesting thing about the model presented here is thatthis tort system apparently has lawyers acting irrationally by notaccepting early settlement offers, and instead going for big damageawards where the costs come out of their own pocket; judges actingirrationally by allowing them to go to juries; juries actingirrationally. Apparently, the only people not acting irrationally inthis system are corporations that make bad, defective products anddecisions.

MR. HOROWITZ: Let's get a few things straight. The first is thatthe American people think that the system is irrational, and this isPhil's point. We're not talking about historic lawyer-bashing, whichis a great American sport. Over 50 percent of the American peoplethink lawyers are less honest than most people, and what's strikingabout it is that those numbers have doubled within the last 5 to 10years.

Over two-thirds of the American people think that lawyers are inthe system for their own advantage to the benefit of their clients.That's the American people speaking.

MR. ROTHSTEIN: That's because people only contact lawyers whenthey're in trouble, so they associate lawyers with trouble. But Itell you, it's a good system until we design something better. Tolink up the greed of one group of people to helping others who havebeen injured, that's a perfect wedding of interests. That seems to meto not be a bad thing at all.

MR. WATTENBERG: Well, why do we have -- I think I saw the figure,what, either a hundred times more lawyers than the Japanese or athousand times more lawyers than the Japanese?

MR. ROTHSTEIN: Because we have more frictions. We're a lot ofdifferent peoples, different kinds of people living under the sameumbrella, and there's going to be frictions. Those other societiesare homogenous.

MR. WATTENBERG: You do not believe that there has been much Iguess what is called in the trade over-litigiousness, that we've goneon a legal binge generally in this country? The number of lawyers hassoared, the number of cases has soared, the amount of settlementshave soared.

MR. ROTHSTEIN: No, I really don't think so. I think they're mightbe a better way to structure it, but nobody's talking about it.They're just talking about removing what we have and leavingindividual --

MR. WATTENBERG: We're going to talk about that in a minute. Goahead.

MR. HOROWITZ: That's not fair, and it's not true. I think oneneeds to get it from two perspectives. The first is, over the last 20years, the risk to defendants from things like punitive damages areso great in terms of what they may lose in a case, you got to betyour company you got a gun to your head in order to play the game, sothat the justice system for many defendants is a kabuki to reduce thesize of the ransom. No rational defendant facing the end of hiscompany in one jury trial will do anything other than settle. Sothat's a problem at one end. Defendants are now confronted withexcessive risks and they must settle, and they do.

The second side of the point --

MR. WATTENBERG: Some have gone out of business, like Dow Corning.

MR. HOROWITZ: Precisely. And the good example you gave: the guydidn't settle for 20,000 bucks; he's hit now with $4 million. Well,plenty of people take that message and they settle because they can'tbear that crazy kind of risk that the system imposes.

But there's a second part, Ben, if I can get it in. And that is,on the cases where there is no substantial dispute, where we allagree there should be a suit, where we all agree that there should bea payment, lawyers are still getting 40 percent of the take.

MR. WATTENBERG: Phil Howard, the case that Jonathan Turley makes,that doctors will perform better because of this pressure on them andmake you more safe and his chest more safe, is that a valid argument?

MR. HOWARD: Life is complicated. If people are scared --

MR. WATTENBERG: Boy, we have four lawyers around here andeverybody's saying it's complicated. Right.

MR. HOWARD: If people are scared too much, no, it'scounterproductive. They perform unnecessary procedures, as manydoctors do unnecessary tests, at a time -- the other day, an employeeof a friend of mine had a headache for a few days, went to thedoctor, who ordered an MRI test. It cost $1200. Sure enough, itturned out to be sinusitis.

That reaction times tens of thousands of times is wasting socialresources. We need people to make reasonable judgments, which meansthat they should be scared if they mess up, but they shouldn't be soterrified of ruination that they retire from the practice, which alot of doctors are doing.

And I'd like to respond to Jonathan's point about people actingirrationally. I don't think juries act irrationally at all, becausecourts -- and I am a courtroom lawyer -- have become a kind oftheater, where the people go in, they act out these horrible things.'Look at the burns this lady suffered,' in the McDonald's case,'third-degree burns.' And if you were the -- all these people aretaking the argument seriously -- if you're on the jury and the caseis going on for awhile, you're going to take it seriously, too.

MR. TURLEY: But, Philip, there's another lawyer there. He can makethese arguments. This jury wasn't selected from the family of theplaintiff's counsel.

MR. HOWARD: More argument is not more justice. If judges don't sitthere and allocate -- in the case of McDonald's, where I do know thefacts, there were 700 complaints out of over 7 billion cups of coffeesold. It wasn't 50 degrees hotter. It was 10 or 15 degrees hotter,and it was 32 degrees less hot than the boiling water you and I makeevery morning.

It is a silly case, but the court -- my point is, the court, in acase like that, should have said, 'It's an extraordinary risk oflife. Case dismissed.'

MR. TURLEY: But, Philip, what we have here is that -- you say it'sa silly case. I don't believe it is a silly case. I think thatMcDonald's was outrageous in its decision.

MR. WATTENBERG: Do you accept his facts, which are contrary toyour facts?

MR. TURLEY: I don't accept the -- no, I don't.

MR. HOWARD: 180 degrees. I know the --

MR. TURLEY: No, but the difference is that there was significantevidence that was given at the court that McDonald's could servecoffee at a lower temperature. Now, the question, though, is ifMcDonald's wants to serve coffee at a higher temperature, they haveto realize that the tort system will force them to internalize thosecosts. If they conclude that billions of cups of coffee are morevaluable than protecting those lives, fine, but they can't avoid thedamages.

MR. WATTENBERG: Philip --

MR. HOWARD: You know, one point that hasn't been raised here whichis a very important point in the tort system is that the reason thisproblem exists is because of the rise of unquantifiable damages, likepain and suffering, punitive damages, emotional distress, things thathave no objective yardstick. If someone breaks their leg in anaccident and they miss work and such, you can count up the damages,and that is what used to be known as compensatory damages.

In the last -- since World War II, there's been this rise of thisother kind of damage that courts allow, and they are legitimate insome cases, but they have no yardstick.

MR. WATTENBERG: All right. Let's close this out briefly now withthis question. What should we do about it? Mike Horowitz.

MR. HOROWITZ: Well, Philip raises just the right point. It's theuncalculable damages -- pain and suffering is the real engine. It'sthe cash that gets added to your real damages that, for the mostpart, goes to pay the plaintiff's lawyer's fee. The way it works is,for every dollar of medical injuries you have, there's a $3multiplier that largely goes to pay the lawyer. It's called pain andsuffering damages.

We have a system, therefore, that for every dollar of medicalsthat I run up, the rest of you pay the bill through the insurancesystem, and for every dollar of my bills you pay, me and my lawyer --mostly my lawyer -- get three dollars.

MR. WATTENBERG: What should we do?

MR. HOROWITZ: We've got to deal with this so-called pain andsuffering system. We've got to give people the choice, thecontractual choice to opt out of the racket world of pain andsuffering. One statistic --

MR. WATTENBERG: Well, how could they do that if that's the law?

MR. HOROWITZ: Ah. Well, we've got to change the law, to be sure.We've got to allow people to say, 'As I drive, I know the hazards ofdriving. I may have medical damages, I may have death, I may havelost wages if I get in an accident, and I may have pain andsuffering. But I want to pay an insurance premium that is on thewhole 40 percent lower than what I'm paying now in order to give upthe right to sue for, quote, 'pain and suffering.''

MR. WATTENBERG: Okay, all right, that's one idea. Philip Howard,do you have an idea?

MR. HOWARD: I do have an idea.

MR. WATTENBERG: Is it in your --

MR. HOWARD: My ultimate idea is to change the culture of judges,which is not an overnight idea. I would change the presumption. Iwould say that you cannot have unquantifiable, so-called non-economicdamages below -- maybe you'd have a cap, unless -- then I would aphrase.

MR. WATTENBERG: That cap is embodied in the Contract with Americathat is now being considered by the Congress.

MR. HOWARD: They have a cap of $250 for non-economic damages.

MR. WATTENBERG: And you approve of that, generally?

MR. HOWARD: Well, generally, except that it's too rigid, so Iwould add a comma and a phrase that says, 'unless the judge, in theinterest of justice, decides that the cap should be waived.' So Iwould change the presumption -- I would give judges the power becausethere are outrageous cases where people should suffer -- or getpunitive damages, but I would change the presumption and make judgesactually affirmatively permit the claims to be made because to now --now the presumption is much too much in the other direction, wherethey let any claim, no matter how ridiculous, go to jury.

MR. WATTENBERG: Okay. Jonathan Turley are you going to be Dr.Fix-it for us?

MR. TURLEY: Well, the problem is, I think the diagnosis is wrong.And that is, first of all, pain and suffering are not simply amultiplier used in every case. In many cases, pain and sufferingdamages are not found by the jury. Moreover, it's not money that goesdirectly to the attorney. There are real pain and suffering findingsby the jury. Just dismissing them all as a gift to attorneys is justspeculation. There are real cases of pain and suffering.

In terms of punitive damages, do you know how many punitive damagesuits have been brought in a 25-year period? Three hundred andthirty-five punitive damage cases have been brought.

MR. WATTENBERG: This is in the whole country?

MR. HOROWITZ: No, no, not brought. You mean awards.

MR. TURLEY: That have been awarded, 335 awards of punitive damagesin a system --

MR. WATTENBERG: For one year?

MR. TURLEY: That's for -- no, that's for a 25-year period.

MR. HOROWITZ: No.

MR. TURLEY: Yes, it is. It's a figure that has appeared in all ofthe reports which you rely on.

MR. HOROWITZ: It's an irrelevant figure anyway because the issue-- most cases are resolved through settlement, and if you've got thatgun to your head where you're confronting --

MR. TURLEY: Michael --

MR. HOROWITZ: -- $20 million as a judgment in a $2,000 case,you're going to settle.

MR. TURLEY: Michael, the figures that you put forward in terms oftaking out transactional costs, which frankly I don't see any supportfor, are very, very speculative.

MR. WATTENBERG: Okay, Paul Rothstein.

MR. ROTHSTEIN: Pain and suffering is a real thing. Who's to sayhow much it's worth to be rendered a -- to be the breadwinner of afamily and be rendered a quadriplegic with all the infinite amount oftrouble and pain that causes your life for all those moments of yourlife that you have left, mkillions and millions of moments -- who'sto say how much that is worth, some judge or the voice of thecommunity? I would say that if the populace will not vote for somekind of sensible insurance that pays people who are injured and whoneed it, then we should leave the present tort system intact, but Ido realize that Philip is making some sense, that there could be akind of presumptive limit on damages as long as there's an escapehatch that allows the judge to open it wider.

MR. WATTENBERG: Okay. Thank you. Four distinguished attorneys and,not surprisingly, several different opinions. Thank you, PhilipHoward, Jonathan Turley, Michael Horowitz, and Paul Rothstein.

And thank you. We enjoy hearing from you. Please send yourcomments and questions to: New River Media, 1150 17th Street, NW,Suite 1050, Washington, DC, 20036. Or we can be reached via e-mail atthinktank@aol.com, or on the World Wide Web at www.thinktank.com.

For 'Think Tank,' I'm Ben Wattenberg.

ANNOUNCER: This has been a production of BJW, Incorporated, inassociation with New River Media, which are solely responsible forits content.

'Think Tank' has been made possible by Amgen, a recipient of thepresidential National Medal of Technology. Amgen, unlocking thesecrets of life through cellular and molecular biology.

Additional funding is provided by the John M. Olin Foundation, theRandolph Foundation and the Lynde and Harry Bradley Foundation. END



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