The Journal Editorial Report | August 5, 2005 | PBS
August 5, 2005
South Carolina Governor Mark Sanford, center, is surrounded by doctors from across the state during a news conference on tort reform, January 26, 2005, at the Statehouse in Columbia, S.C. (AP/Mary Ann Chastain)
Mention "tort reform," and a lot of people run for the nearest exit. But it often becomes a different matter if you talk about things like medical malpractice, and accidents, and defective or damaging products -- the most contentious kinds of tort cases, which wind up costing each of us more than 800 dollars a year according to one estimate.
Simply put, a "tort" is any civil matter in which the damaged party seeks legal redress, usually money, from those who caused the injury. There are three fundamental issues: the size of awards, the attorneys' fees, and the lawsuits' merit. Proponents of tort reform want to impose limits on court awards. A $250,000 cap is often proposed. They cite the case of a 79-year-old woman who was scalded by a cup of MacDonald's coffee, and was awarded 2.9 million dollars by a jury, although this was later reduced on appeal.
Opponents of a cap question whether $250,000 would be reasonable to compensate a severely injured person -- say, a teenager who lost two legs to a negligent driver, or an infant brain damaged by a negligent doctor. Proponents of tort reform also want to put limits on attorneys' fees.
Take the case of the lawyers who sued on behalf of American Airlines Frequent Flyers, and won. American agreed to give four million members a 25 to 75 dollar discount on a future flight, but American Airlines also agreed to give the winning lawyers about $25 million, their contingency fee. Pro reformers argue that the system encourages lawsuits, many of them without merit so-called frivolous lawsuits. Opponents claim that limiting attorneys' fees would make it more difficult for a victim to find a lawyer willing to take the risk on a contingency case, and would deny them their day in court. This, opponents claim, grants unfair protection to businesses and insurance companies.
Joining the panel is Philip Howard, who has written for the editorial page about legal reform. He is a lawyer who has written two books, THE DEATH OF COMMON SENSE and THE COLLAPSE OF THE COMMON GOOD. He argues that America is drowning in law and legality and bureaucracy, and we'd all be a lot better off if we gave up believing the law can save us from ourselves and just tried to resolve our differences by doing what we think is right.
PAUL GIGOT: We all know America has become this great litigious society. What's gone wrong with our legal system? How did we get here?
PHILIP HOWARD: justice is supposed to be the foundation of freedom, and provide a solid foundation for daily choices. Instead, it has become a free-for-all. There is a core flaw in modern legal orthodoxy: nobody has the authority to decide who can sue for what.
GIGOT: How did we get to this circumstance?
HOWARD: It really changed in the 1960s. We woke up to all these abuses -- racism and other things -- and we changed a lot of things we should have changed. But, we also changed our judicial philosophy because we figured we couldn't trust anyone in authority. We told judges that they should just be referees, let anybody make any claim for anything and let the juries decide.
GIGOT: So judges have in a sense abdicated their duty of judgment?
HOWARD: They have. They thought they were creating a neutral system, but in fact they left a vacuum. At first, people started suing for a million dollars. There was this moment in which a million-dollar verdict made the front page of THE MIAMI HERALD in the early 70s. Now a billion would not make the front page -- and not because of inflation.
GIGOT: What about the flaws of the system that we so often hear so much about, things like venue shopping, or contingency fees? Are those core problems that have developed in more recent times, or have they simply been there all along and subject to abuse?
HOWARD: Well, they are symptoms of this broader problem. The lawyers have learned that they can get away with almost any kind of argument, claiming for any amount of money. Any time there is an accident, it could not be easier to make up a theory of something that might have been done differently. There should have been a warning, you should have been more careful, etc. And the judges let all that into the courtroom.
GIGOT: Venue shopping is where lawyers find a nice jurisdiction that is sympathetic to what lawsuits tends to be, and bring their lawsuits there, like Madison County, Illinois.
HOWARD: It became very cynical in certain parts of the country. The judges were elected, the plaintiffs' lawyers would finance their elections and then bring cases, national cases, in some rural county in Mississippi. They were called "magic jurisdictions" where the defendants did not have a chance.
GIGOT: To try to stop that, you end up playing a kind of "Whack-a-Mole." When you push one thing down, it pops up somewhere else. What are the consequences of this? Let's start with the economic consequences. Has anybody done an estimate of the economic costs of runaway litigation?
HOWARD: They have and the direct costs are fairly significant. It is many billions of dollars. Tillinghast estimates about $300 billion a year, but the indirect costs dwarf the direct costs. For example, in health care, the direct costs of liability and medical malpractice cases, all insurance, etc. are $15 to 20 billion. The indirect costs, like defensive medicine, are a multiple of that. Some people estimate between $50 and 100 billion.
GIGOT: By defensive medicine, you mean the practices that doctors will pursue to make sure that they don't get sued, just to cover themselves against any possible lawsuit.
HOWARD: Right. A group that I chair did a Harris poll of all the doctors. Seventy-nine percent said that they regularly ordered tests that they didn't think were needed and 90 something percent said that all the other doctors did it.
GIGOT: You've also talked about the cost of lack of trust in the system that develops when we have an overly litigious society. What do you mean by that?
HOWARD: People have forgotten why law is so important to freedom. What has happened in America today is that people no longer feel free to put an arm around a crying child. That is the rule in America. The other day a five-year-old girl in St. Petersburg got handcuffed. Why? Because the rule was, they couldn't touch her. What was the remedy? They called the police. They have it all on video. It is completely absurd. City playgrounds have been stripped of all athletic equipment, because someone might have an accident on a seesaw, or a jungle gym, or a climbing rope. New York City chopped the trees, the limbs of trees, so no one would climb them.
GIGOT: Even on charitable giving. Explain to us how that has been affected by this culture.
HOWARD: Well, charities, particularly ones who have volunteers, are now scared that they will be liable for some ordinary accident that occurs by a volunteer. Just a month or two ago there was a case in Wisconsin where a volunteer for the Legion of Mary was taking a statue of the Virgin Mary to an invalid. She ran a red light, injured a man, an 82-year-old man who was paralyzed. A fair enough lawsuit against the person who ran the red light. They sued the Catholic archdiocese, which doesn't even actually run the Legion of Mary, because they had meetings in the church. Got a $17 million verdict against the Catholic Church. The effect of that will be that many churches will no longer allow volunteer activities in the churches now. There is this chilling effect, like a great wave of defensiveness has come over our country -- when dealing with children, when dealing with volunteers, dealing with anybody. Businesses no longer give job references.
GIGOT: That is a tangible loss of freedom, the ability to act aside. Let me play devil's advocate for a second. Every time we raise the subject of tort reform, or I get in a conversation with somebody about it, they say the following: "You are trying to deny average Americans their day in court. The opportunity to address a wrong in a court of law is a fundamental American right, and you are trying to deny it to them." How do you respond to that?
HOWARD: Actually, we are trying to protect people's rights. Everyone should have their right to go to court. The question is how long they stay there. If somebody sues because their child fell off the seesaw, the judge should lean back and say, just making this claim will mean that people will get rid of the seesaw. It affects people not in the court rooms. It is my job to hold, as a matter of policy, whether seesaws are a reasonable risk for our society. I think he should say, "Case dismissed." Judges don't do that any more. They don't say, "Case dismissed." They just let it all go. So people will have their day in court. It is a question of how far they go. What we are doing is protecting the rights of the millions of kids who want to play on seesaws.
GIGOT: Another example might be the asbestos litigation, where you have people who really did suffer a wrong from exposure to asbestos, who are sick from exposure to asbestos, but can't get their day or court or can't get compensated because the system has been so flooded with frivolous suits or suits by people who are not sick.
HOWARD: Right. It is one of the most abusive examples of our courts in history, because you have hundreds of thousands of people who are not injured taking money out of legitimate employers, driving over 60 of them bankrupt, while people who are legitimately injured are standing in line, some of them not getting any money. It is literally justice upside down. While, by the way, the lawyers are more than 50 percent of the total cost.
GIGOT: What do we do about this? If I'm inferring correctly from what you have been saying, judges, if they asserted themselves more, could do something about it. Would it be that simple or do we need much larger change?
HOWARD: First of all, I think we need to get beyond tort reform. It is not about stopping this kind of lawsuit or that kind of lawsuit. It is developing a principle of a system of justice that is fair to whoever is right. If somebody has injured by some corporate behavior, they ought to be able to get redressed more quickly and at less cost. But if some doctor is sued when he didn't do anything wrong, he should be affirmatively protected by the system. We think it needs an entirely new approach. The biggest change will be judges taking back the responsibility. It is a kind of defensive activism, if you will.
GIGOT: Can they do that on their own?
HOWARD: Yes, they could, but they don't think they can now.
GIGOT: Why not?
HOWARD: Because the appellate courts will reverse them. And they are right. They will.
GIGOT: But are you talking about educating the appellate judges as well? Is it merely a process of educating them to go back to first principles or back to a system where they took control?
HOWARD: I think we probably need a statute that tells them that it is their job, something like: "Judges shall take the responsibility to draw the lines of reasonable dispute, applying common-law principles and statutory guidelines." Give them the job back. It is really amazing. I give speeches to judges all the time. They say, "What a great idea."
GIGOT: You have talked about an idea called health courts to particularly deal with the medical malpractice problem. How would that work?
HOWARD: Health care is so complicated now. You could not expect a normal judge to take some case with neurosurgery and write a sensible ruling about whether it complied with the standard of care or not.
GIGOT: Much less a jury.
HOWARD: Nuch less a jury. But juries don't have any authority to make binding precedent. That is the problem with juries. It is not that they are not sensible most of the time -- most of the time. It is that there is no consistency. Every jury is different. So the current system basically encourages wildly inconsistent verdicts. That is what is wrong. That is exactly what the rule of law is not supposed to do.
GIGOT: Dan, what do you take away from this conversation?
DANIEL HENNINGER: One thing I take away is this point that Philip makes about judges waving these lawsuits into courts. I have heard you talk about this, and I wonder if you could very briefly and succinctly describe the philosophy that existed before they came to believe that everyone should have their day in court. This is not an idea that has existed since the 13th century, it is very new. What was the judicial philosophy prior to this anybody-can-sue?
HOWARD: If somebody had an ordinary accident and they went into a court in the 1950's, or the 1910's and they sued for $20 million for pain and suffering, the judge would say, "Well maybe you have a claim for your accident, but I'm not going to allow my courtroom to be used for extortion or to get rich. That's not the point of the system of justice. It's not a lottery, it's there to address your injuries. So come back when you've got a claim that's reasonable."
HENNINGER: When did that change? In the 60s or 70s?
HOWARD: It started in the 60s. It really changed in the 70s. There is something called the Legal Process Movement. There was this intellectual change.
HENNINGER: You have pointed out that this is not a liberal versus conservative. It is conservative judges as well that feel that it is not their job to be gatekeeper any more.
HOWARD: Yeah, absolutely. Because conservative judges correctly were leery of taking over school systems, and re-making the jails, the so--called judicial activism or busing and such. But they confuse that kind of activism with their job of protecting society as a whole from claims that will tend to undermine everyone's freedom.
JASON RILEY: You seem to be explaining a two-fold problem. You have got plaintiffs' trial lawyers who won't police themselves, and you have got judges who won't throw out frivolous suits. Is there a legislative role here for a loser pays sort of a law, or a penalizing lawyers who bring frivolous suits? Can the legislature do something constructive to cut down on this?
GIGOT: Loser pays exists in England. If you bring a lawsuit and you lose, then you would be responsible for paying the court costs of the person that you sued.
HOWARD: There is clearly a role for the legislature here. I think that people who bring a claim that is baseless should be fined, or they bring frivolous claims or it's a fraud, which happens all the time. I don't think you will ever get a flat loser pays because it tends to favor the deep pocket. So a big company can afford my law firm, but the little guy can't. But I think it is very important to penalize people who abuse the system, like the parent who sued in Wisconsin recently because the son had homework assigned over the summer. He should be fined. It is an abuse of the court system.
There clearly is a role for legislatures to re-establish principles that the courts never should have lost in the first place. But it is not blocking lawsuits, it is trying to make them reliable. It is trying to set the boundaries for a free society.
KIM STRASSEL: But doesn't it even go farther than that in terms of what the legislature needs to do? I think of asbestos. I think a lot of judges out there would say, "We don't know, it is a lot to ask us to delve into very complicated medical criteria and to decide who should get paid and who is disabled and who is not? You need to give us some guidance here.
HOWARD: You are absolutely right. Something like asbestos, that is not a litigation problem. That is a national social problem. We had material that was mandated by statutes to be used in building codes and it turns out that it is terribly injured hundreds of thousands of people. The legislature ought to take care of it. It is a social problem, balancing the interests of the corporations and their employees and other stakeholders against the needs of the people who are actually injured. Instead, for over 10 years, Congress has not acted because members did not want to "interfere with the right to sue." What about the rights of all the workers of the companies that went bankrupt? It is just crying for a legislative solution.
HENNINGER: There almost seems like there is a kind of interstate commerce clause issue here. Sixty-seven companies have gone bankrupt over the asbestos issue. Very few had anything to do with asbestos. Now they are going on to sue food companies because of the fat content. You are talking about attacking whole industries, and literally undermining sectors of the economy. There is almost a commerce-type issue there.
HOWARD: Absolutely. You could go industry by industry and talk about the frictions imposed by this system, the cost and the frictions. It costs over a billion dollars to get a new drug approved. What that means is that we don't have people doing research on orphan drugs, and drugs that might help only save the lives of, say, 20,000 people, because it is too costly to get them approved.
RILEY: To follow up on Dan's point. Don't you also have government that is sometimes part of the problem. You had the government partnering with contingency fee lawyers to bring suits against entire industries. We saw it with tobacco, we see it with guns now. Sometimes government is part of the problem here, right?
HOWARD: What has happened is the attorneys general of the states got on the bandwagon in tobacco and said, "Great. Let's make money." Again, it is so antithetical to the rule of law. If we don't want smoking in our society, that is a legislative judgment that can be made by a legislature. The notion that government teams up with plaintiffs' lawyers, lets them become billionaires, and then gets a lot of money to sort of shore up the budget this year in this or that state, is outrageous.
GIGOT: Earlier this year Congress passed a class-action reform. It is mostly a jurisdiction, venue change from state courts to federal courts. Is that going to make much difference?
HOWARD: It will make a little difference. It gets rid of most of the problem of these magic jurisdictions in Madison County, Illinois. It means that interstate class actions can go into federal court. Federal court does not have elected judges. It is a more reasonable forum -- even though they still don't make the value judgments we are talking about. Nonetheless, the game is not rigged. We were talking about justice with a stacked deck. It was really kangaroo courts in these jurisdictions.
GIGOT: Briefly, Philip, are we seeing a broader recognition here of the problem, and seeing momentum for change? Are we moving in the right direction?
HOWARD: Well, I think we have to get beyond tort reform. I'm chairing this group called Common Good, and we're getting prominent people on the left and right to go on our board to get to the point of saying, the public understanding, it's my school, it's the cost of my health care that's at stake here. Let's come up with a system, not that blocks lawsuits, but that actually is a system of justice, that makes deliberate choices and judgments about who can sue for what. That's what it's supposed to be.