The "litigation explosion" or "liability crisis" has cost the United States economy more than a trillion dollars over the last decade, causing dozens of bankruptcies and tens of thousands of lost jobs. While there have been significant victories for reform in the last few years (such as the Class Action Fairness Act, numerous state-level reforms, and a signal from the Illinois Supreme Court in Avery v. State Farm that the worst abuses of the system will not be tolerated), the detrimental effect on the economy is still growing. Over the last quarter century, this crisis has evolved into a new and more dangerous phenomenon, distinguishable from that of the 1980s by means, ends, scope, and participants. As it becomes increasingly divorced from its original purpose of compensating injured claimants, the liability system threatens to be converted into a special-interest mechanism for transferring wealth from businesses and consumers to lawyers. Today's liability crisis has several distinctive characteristics:
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Plaintiffs' attorneys are suing on claims without tangible harms, with billions of dollars of judgments and settlements for injuries that are purely hypothetical;
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Courts and legal scholars are systematically eroding the fundamental requirement of "proximate cause," and defendants are finding themselves liable for conduct only tangentially related to alleged injuries;
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Mass liability actions often aggregate divergent and conflicting claims, with procedures that violate long-understood constitutional protections;
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Plaintiffs' attorneys and activists are using liability litigation to further explicitly regulatory ends in lieu of legislation, seeking industry-wide settlements that result in cartels that stifle competition and hurt consumers;
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An organized and powerful litigation lobby now protects the trial lawyers' bar, with a leading plaintiffs' attorney openly boasting of the lobby running the Senate;
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Public claimants, including state attorneys general, are joining the fray;
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Regulators and federal and state prosecutors are competing for the opportunity to criminalize the ordinary course of business; and
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Courts are holding corporations liable for punitive damages for socially beneficial behavior, to the detriment of consumers and society.
The AEI Liability Project, directed by Resident Fellow Ted Frank, explores these and related trends through research, publications, and conferences. The program focuses on all aspects of the liability crisis, including empirical research on medical malpractice litigation, class actions, products liability suits, and other liability controversies; the disposition of mass tort claims; civil procedure and evidentiary rules; corporate regulation; antitrust; patent litigation; lifestyle litigation; judicial selection; the pedagogy of liability in law schools; the effect of interest groups on the political system and media coverage; and the use of state judicial systems to regulate the multinational conduct of corporations or supersede existing federal regulation.
The program seeks to promote a better understanding of the scope and consequences of the liability crisis and to help ensure that political or legal reform efforts are aimed at the appropriate targets.
Contact Information
The Liability Project
The American Enterprise Institute
1150 Seventeenth Street, NW
Washington, DC 20036
tfrank@aei.org
Phone: (202) 862-5820
Fax: (202) 862-7171
