As tort reformers and trial lawyers resume their arcane battles, the costs of and damage done by our burgeoning lawsuit industry are mounting up, all around us. The total dollar amount awarded in the 100 largest jury verdicts in 2002 was more than three times the 2001 total, reports The National Law Journal. The direct costs to society from the tort liability system jumped by an inflation-adjusted 11 percent from 2000 to 2001, to $205 billion-"the equivalent of a 5 percent tax on wages"-according to a study released on February 11 by the actuarial firm Tillinghast-Towers Perrin (whose clients include most large insurers).
The study projects further increases of 7 to 11 percent for each of the next few years. Less than a quarter of this $205 billion goes to compensate plaintiffs for actual economic losses, the study says; about a quarter pays pain-and-suffering and punitive awards; more than half is eaten up by legal fees and costs. Despite a modest decline during the 1990s in the inflation-adjusted "tort cost per citizen," the study adds, that cost "has risen by a factor of more than eight since 1950."
In some states, women are having trouble finding doctors to deliver their babies, because soaring jury awards and malpractice insurance premiums (now $166,000 a year in Miami) are driving doctors out of obstetrics. Other physicians and surgeons are moving out of state or getting out of medicine or staging protests, for similar reasons. Fear of ruinous liability has long stalled companies from developing new contraceptives and vaccines.
Multimillionaire trial lawyers have rounded up more than 600,000 plaintiffs-the majority of whom are not sick or impaired, by any reasonable definition-to sue thousands of companies that once made or used asbestos products, bankrupting more than 60 of them and depleting the resources available to compensate the small percentage of plaintiffs suffering from asbestos-induced cancers. Lawyers are financing their private jets on the backs of the smokers who ultimately pay the billions that the law firms have collected in tobacco litigation fees. Some of them are rounding up fat people to sue fast-food companies. A law review article calls for tort lawsuits against those who contribute to global warming. (Who doesn’t?) A college baseball pitcher seriously injured by a line drive sues (among others) the maker of the hitter’s bat. A high school student sues school officials to raise his A to an A-plus. And so on, and on.
But one group deserves a special niche in the annals of those who have perverted the legal system for personal and political gain at the expense of everyone else: the politically connected trial lawyers who have signed up Rhode Island, Chicago, San Francisco, St. Louis, and dozens of other governments, school districts, and housing authorities to sue over health hazards associated with sales of lead pigment and paint for indoor use. The last of those sales took place more than 45 years ago.
Rhode Island’s pending suit against Sherwin-Williams, DuPont, Arco, American Cyanamid, ConAgra Foods, and three other big companies is representative. It got started in 1999, when a law firm then called Ness, Motley, Loadholt, Richardson & Poole-a South-Carolina-based firm flush with hundreds of millions of dollars from suing tobacco companies for state attorneys general-approached then-Attorney General Sheldon Whitehouse of Rhode Island, a Democrat who was interested in running for governor. (He ran, and lost, last year.) The approach was made, Whitehouse has testified, by John J. McConnell Jr., of Ness Motley’s office in Providence; McConnell is also the state Democratic Party’s treasurer. Ness Motley has been among the biggest campaign contributors in Rhode Island.
Whitehouse signed an unusual "retainer agreement" with Ness Motley and another firm. It not only guaranteed the lawyers a contingent fee of 16.67 percent of any money recovered, plus all litigation expenses; it also gave them considerable control over whom to sue, what to claim, whether to settle, and on what terms. In other words, Whitehouse delegated a share of the state’s sovereign power to a law firm whose best-known partner, Ronald L. Motley, had vowed that he would bring the paint industry to its knees within three years or give up his 156-foot yacht. Never mind the conflict between the interests of the lawyers in huge fees and the interests of Rhode Island’s people, who might, for example, be misled and alarmed by the lawyers for their state, who claim that old lead paint in school buildings is a big threat to the students.
When lead paint chips or crumbles into dust, it can cause terrible brain damage to children who eat or breathe large amounts. But no victim of lead poisoning will get a dime in compensation from Rhode Island’s lawsuit. Its ostensible purpose is to force the companies to pay for stripping any and all lead paint that remains in more than 300,000 homes, apartments, schools, and other buildings. (Cost of removal: as much as $10,000 per home.) Old lead paint is perfectly safe if properly maintained, however, and stripping it can actually make it more dangerous by spewing hazardous particles into the air. The most cost-effective, and arguably the safest, remedy is for homeowners and landlords to clean up any crumbling or flaking lead paint and periodically seal surfaces with a new coat of paint or sealant.
For these reasons, few homeowners or public officials choose to strip lead paint from their buildings. And even if plaintiffs win big awards, it seems questionable how much (if any) of their winnings they would use to strip old paint. Indeed, one law firm assured Texas school districts from which it was seeking a 40 percent contingent-fee deal that "it doesn’t matter at this point" whether their school buildings actually contained any lead paint, and that officials would be free to spend winnings "for any appropriate purpose," leaving any lead paint right where it is.
Whether any of these lawsuits will succeed remains to be seen. More than 50 have already been dismissed, on various legal grounds. But the paint companies are still worried, and their stocks have been depressed by fear that one or more angry juries could scapegoat them for the suffering of lead-poisoned children and hit them with ruinous verdicts.
Where would these millions of dollars come from? Ultimately from American consumers, in the form of higher insurance premiums and prices; from stockholders, including the pension plans that invest the savings of many middle-income Americans; and from the employees who would lose their jobs if companies were driven into bankruptcy.
Where would the money go? About half or more, including the defense costs already incurred, would probably go for legal expenses. The rest would go into public treasuries. That might seem like free money for the government and an indirect benefit to taxpayers. But in effect, the trial lawyers would be taking two dollars out of the pockets of consumers for every dollar they won for taxpayers. And all taxpayers are also consumers.
These lawsuits seek punitive damages based on claims that company executives downplayed and failed to give customers adequate warning of the health hazards of lead paint. But there is no evidence that company executives ever actually concealed any hazards of which they were aware. Indeed, they helped uncover the hazards by funding independent research. And these companies had all stopped selling the stuff for interior use by 1955, when a voluntary industry-wide ban took effect. That was more than 15 years before the government imposed any restrictions on sales of lead paint.
In any event, the whole argument among the lawyers about what executives should or should not have done 50, 60, 70, or 80 years ago seems a bit beside the point. You cannot punish a dead man by mulcting the company he once ran. And you cannot deter today’s executives from selling unsafe products by engineering legal precedents that might be invoked against their companies 50 years hence. That’s one reason for statutes of limitation, which were written to bar lawsuits over long-past events and have been invoked by some judges to dismiss lead-paint suits. But these and other restrictions on stale litigation have become riddled with exceptions.
The legal system rightly treats corporations as fictitious "persons" who should ordinarily pay damages for the harms they cause, for two reasons: to compensate victims and to deter unsafe conduct in the future. But this legal fiction cannot justify lawsuits that will neither deter any unsafe conduct nor compensate any victims. Corporations are collections of employees, executives, and stockholders. The defendants in these cases include none of the employees or executives, and few of the stockholders, who made or sold or profited from lead paint. The notion that the law should penalize people for ancient wrongs in which they played no part is deeply irrational. It is also, alas, deeply ingrained in our legal culture.