May 2006
Judge and Jury: American Tort Law on Trial
In the past three decades, a mounting wave of litigation has swept the United States, prompting Newsweek to describe America as “lawsuit hell.” Fear of litigation has reduced innovation, menaced the health-care industry, driven manufacturers out of lawsuit-prone specialties, and increased consumer costs. Other critics, however, insist that the tort crisis is a myth and that no evidence links tort awards to America’s economic ills. Is the tort system in crisis? What is driving the increase in tort awards? Do jury awards vary along lines of wealth and race? In Judge and Jury: American Tort Law on Trial (Independent Institute, 2006), economists Alexander Tabarrok and Eric Helland analyze tens of thousands of tort cases from across the United States to determine what drives the system, where it excels, and where it needs repair.
Alexander Tabarrok
George Mason University
Mr. Tabarrok started by outlining the focus of his book, Judge and Jury: American Tort Law on Trial. The book discusses:
- Is there a tort crisis?
- Does the Bronx jury redistribute the wealth?
- Are elected judges politicians in robes?
- Contingents fees
- Options for reform
In his talk at AEI, Mr. Tabarrok focused his remarks on the Bronx jury question and the elected judges question.
There has been anecdotal evidence that the Bronx jury redistributes wealth from large, wealthy organizations to poor, local individuals. However, until Judge and Jury, there had not been data to back the claim. In their research, Helland and Tabarrok use three different data sets to examine the number of cases and awards to determine if there really was a correlation between county poverty and tort award. Though one would expect awards to be lower in poor areas, since compensatory amounts in such areas would be below the national average, Helland and Tabarrok found that as poverty rates of a county increased, jury awards from that county increased dramatically. In fact, the award increased nearly four to fives times faster than the increase in the poverty rate. The greatest effect was in medical malpractice and product liability cases; there was less effect in auto cases. Using the Jury Verdict Research (JVR) database, they discovered a positive correlation between large tort awards and high black and Hispanic poverty rates. For areas with high white poverty, however, awards remained low. The conclusion: the Bronx jury does redistribute wealth, and awards are affected by poverty rates and race.
Juries were not the only liability to the civil justice system though. Mr. Tabarrok also discussed judges, specifically judges elected in partisan elections. Unlike federal judges who have life tenure and secure wages, many state judges are elected, have no tenure, no salary protection, and thus, are subject to the same incentives that motivate other politicians. For elected state judges, the plaintiffs are almost always their constituents while defendants are companies from out-of-state. Helland and Tabarrok hypothesize that it makes sense, then, for state judges to be biased towards the plaintiffs. After all, judges must raise campaign funds for their reelections and those funds come most often from local trial lawyers--those who represent the plaintiff. Helland and Tabarrok examine data on 52,000 personal injury trials, considering whether the defendant was from another state and whether the judge was elected; they found that there was a bias against out-of-state defendants in states where judges are elected. The result was robust, even when controlling for other variables.
Mr. Tabarrok concluded that there is not just compensation or deterrence in the U.S. civil justice system today. Awards vary across states and are higher in states with partisan-elected judges and in counties with poor blacks and Hispanics.
Theodore Eisenberg
Cornell Law School
Mr. Eisenberg pointed out that most reform is driven by politics, not data, so Judge and Jury is not filling as much of a policy gap as it purports to. In his talk, he examined award trends, the Class Action Fairness Act (CAFA), and Bronx effects. In a report from the RAND Corporation entitled “Forty Years of Civil Jury Verdicts,” the authors find that the median tort award increases much less dramatically than the average award Mr. Tabarrok cited. Mr. Eisenberg argued that the average is skewed by a handful of huge awards so the median is a more valid measure. The median award has not grown dramatically; in fact, it has grown by less than real income. Further, Mr. Eisenberg argued that the cost of medical inflation must be taken into consideration. He concluded that there is no evidence of a tort crisis.
Mr. Eisenberg also studied the Bronx effect, but using different data and finding very different results. He examined the redistribution effect of poor juries by considering discrimination cases, where he thought wealth and race would play a large role. He did not find persuasive evidence that juries in poor counties redistributed wealth. To back his claim, he referenced a study of Bronx jury cases by Rose and Vidmar in the Texas Law Review that found no “Bronx effect.”
Mr. Eisenberg was not persuaded by Helland and Tabarrok’s data about judge bias. He argued that the database they used examined mostly jury awards and that there were too few judge award cases to draw any conclusions. He urged Helland and Tabarrok to examine judge-award data alone, not in combination with jury awards, for a more realistic picture.
Jonathan Klick
AEI and Florida State University College of Law
Mr. Klick focused his discussion on the big-picture question in the current tort reform debate: what is the welfare effect of the U.S. tort system? It is expensive to operate and does not work well as insurance for injured parties. He was is not sure if there is much deterrence effect either, and agreed with Mr. Tabarrok that there have not been any good studies in the past to test for deterrent effect.
He proposed some specific research questions for Helland and Tabarrok:
- Is the poor minority effect really a poor female minority effect, since most poor black males are incarcerated and not part of the jury pool?
- If the poor minority effect is true, have jury consultants picked up on it?
Mr. Eisenberg claimed that the tests he conducted about such results were more powerful, but Mr. Klick was skeptical, claiming that discrimination cases might have more carefully selected juries, which would yield different results.
Mr. Klick noted that for the study of partisan judges in Helland and Tabarrok’s book, there is a data problem because no states have switched away from partisan judge elections, so the effect of elections alone on judges cannot be isolated. Mr. Klick thought it possible that there could be something else unique about areas with partisan judge elections that would yield the same results about plaintiff bias. He urged those in the field to continue working with this data.
James Copland
Manhattan Institute
Mr. Copland agreed with most of the points in Helland and Tabarrok’s book. He disagreed with Mr. Eisenberg’s criticisms of the data, claiming that even though the data might not be perfect, those in the policy world know that you have to make the best decisions you can with the information available. For that reason, he believed that Helland and Tabarrok’s book, which presents a wealth of new information, will be very valuable to the policy debate.
Chapter 1 in Helland and Tabarrok’s book builds the case that the litigation has become dramatically more expensive by analyzing claims, verdicts, and settlements. Mr. Copland thought that it maybe even underestimates the amount of growth in tort awards. There has not been much growth in average award since 1985, which he attributes to tort reform that began at that time. He was compelled by Helland and Tabarrok’s study on the Bronx effect. Their results match common sense; he thought it seems clear that plaintiffs seek out poor counties--that is why central Los Angeles is called “the bank.”
Acknowledging that the topic of race in such issues is taboo in the academy, Mr. Copland nevertheless believed that the Helland and Tabarrok data about diverging awards based on race and poverty makes sense. Mr. Copland thought it ironic that these communities’ huge awards intending to punish large, rich corporations usually end up hurting the poor communities themselves. He cited medical malpractice lawsuits as the reason Bronx hospitals are closing, leaving the poor minority residents without health care options. Mr. Copland believed the data that juries are more likely to rule in favor of plaintiffs and give large awards than are judges. He concluded that reform have worked and urged changes to venue selection and liability caps.
AEI research assistant Lauren Campbell prepared this summary.
