Resident Fellow Ted Frank
Statutes of limitations, the rules that set a time limit on when a plaintiff may bring an action, play an important role in ensuring fairness in the justice system. As Supreme Court Justice Oliver Wendell Holmes noted, statutes of limitations are "designed to promote justice by preventing surprises through the revival of claims that have been allowed to slumber until evidence has been lost, memories have faded, and witnesses have disappeared."
Without being able to rely on a statute of limitations, a purchaser doing due diligence on a target will need to worry about buried landmines of liability in decades-old files.
A bright-line limit on bringing suit is important to legal certainty, and legal certainty is important to the economy. Businesses and third parties routinely rely on statutes of limitations to evaluate and manage risks and design their business models. The likelihood of lawsuits and liability stemming from any aspect of standard operations is weighed in decision-making. But laws that retroactively change the statute of limitations (called "reviver" statutes, because they revive dead claims) change the rules the mid-game and eliminate predictability. If dead lawsuits can, like zombies in horror movies, be brought back to life to inflict damage on defendants, the loss of legal certainty would be devastating to the ability of businesses to gauge risk.
Too, a large danger of permitting litigation over stale claims is the possibility that they will be fraudulent. Where corroborating or refuting evidence is not readily available, a plaintiff's perjury may be all that is needed to recover in the mass tort context, where a defendant is often unable to use litigation mechanisms effectively to screen legitimate from illegitimate claims. The archetypical example is that of "bus jumping"--pedestrians leaping onto a bus after an accident, hoping to bring a claim against the municipality--but larger-scale frauds have happened in the asbestos and fen-phen contexts. And claims of long-ago wrongs are far easier to fake than those of recent events.
Judging by statistics of abuse claims made against the Los Angeles Archdiocese, at least some of the plaintiffs were making fraudulent claims of abuse--including one who claimed to be abused by a priest who was only five years old at the time of the alleged incident. A large proportion of plaintiffs were molested by a handful of priests, each of whom was allegedly responsible for dozens of victims. But the number of plaintiffs claiming to be the unique victims of deceased priests was statistically unlikely, given that the majority of pedophiles are repeat offenders. Of the 244 accused officials in Los Angeles, 150 were accused of a single incident of molestation. The vast majority of allegations were made only after reviver legislation was passed by the California legislature in 2002. While a good number of the plaintiffs were tragic victims of molestation, there were almost certainly a sizable number of "bus jumpers" who took advantage of the confusion to bring claims.
Defending itself against the hundreds of newly discovered claims was a public relations nightmare for the Los Angeles Archdiocese. A litigation process that attempted to distinguish meritorious claims from fraudulent ones was widely criticized as insensitive. The archdiocese eventually settled the hundreds of claims for over $1 million each, at a total cost of $774 million. The Roman Catholic Church has paid out over $2 billion nationwide, with trial lawyers collecting nearly $1 billion of that and five dioceses filing for bankruptcy protection.
Bad facts have resulted in bad legislation; reviver bills are pending today in Alaska, Illinois, Minnesota, and Pennsylvania, and have been discussed in many other states. The Church isn't the only target of trial lawyers. An Alabama bill would retroactively revive dead lawsuits over "exposure to toxic substances." And the Michigan house has passed a package of bills that would loosen the standards for bringing product liability lawsuits against drug companies, and then allow suits that lost under the old rules to be revived and brought again under the new trial-lawyer-friendly standards; the usual suspects are lobbying the Michigan Senate to pass this abomination.
Certainly, one has little sympathy for the way the Roman Catholic Church protected pedophiles in its midst for decades, and compensation was justifiably due to some of the settling plaintiffs. But just as certainly, the Church was defrauded by other plaintiffs with unverifiable claims. There was never a gap in the law that allowed priests to molest children, and statutes of limitations are often already especially lenient injured children, often permitting them to toll the running of the statute until after they reach the age of majority and can bring suit in their own names. (For example, for someone injured at the age of ten in the year 2000, the time-limits to sue will not start running until he turns eighteen in 2008.) If lawsuits were time-barred, it was because hundreds of victims voluntarily chose never to come forward when they could have made a difference. One would prefer to see the Church come forward and voluntarily compensate those it injured, but the reviver legislation traded a perceived injustice of a false negative for other injustices of false positives. This might be viewed as rough justice--between molested children and abusive priests, it is certainly easier to side with the former. But the effects of reviver legislation go far beyond the parties to the suits targeted by the laws because they increase legal uncertainty in the community at large.
Insurers modeling risk in California now have to account for the possibility that the legislature will retroactively create new or revive old liabilities; they will raise their rates accordingly. Without being able to rely on a statute of limitations, a purchaser doing due diligence on a target will need to worry about buried landmines of liability in decades-old files. Investment will drop. That increased uncertainty will raise prices and hurt the public at large for a far greater sum than the few hundred million dollars awarded to a few hundred California plaintiffs.
Ted Frank is a resident fellow at AEI and the director of the AEI Legal Center for the Public Interest.