October 2004
Can States Reform Torts?
While Congress has failed to enact meaningful tort reform in the last four years, individual states have passed a surprising number of reforms. Even states containing the so-called "hellhole jurisdictions" like Texas, Mississippi, and Ohio are moving to curb the tort explosion. What have these states done and why have they done it? Leading advocates of tort reform at the state level and an economist with expertise in mass torts reviewed the recent history and examined the potential and the limitations of state-based reforms at an October 5 AEI conference.
Michael Greve
AEI
It is common to think of the tort crisis as a crisis of substantive tort doctrines--for instance, the invention of enterprise liability, as described by George Priest. However, I would argue that the crisis has as much to do with the crisis of federalism as it has to do with the crisis of torts themselves. Given the number of multi-state transactions in a federal system, the degree to which a plaintiff may choose his forum and his law governs the degree to which out-of-state defendants are exploited by instate plaintiffs. Federalism was set up to preclude these strategies, but the erosion of constitutional and sub-constitutional doctrines to protect against this kind of exploitation creates vast opportunities for trial lawyers. This race to the bottom seems unstoppable by anything subordinate to the federal government, but, miraculously, some states have managed to enact meaningful tort reforms. The potential of these reforms to significantly remedy the entire tort crisis remains to be seen, but they are a welcomed start.
Hugh Rice Kelly
Texans for Lawsuit Reform
Texas passed several significant reforms in 2003. Among these is class action reform, which allows the Supreme Court of Texas to review class certification decisions. Contingency fee agreements are no longer permitted; instead, attorneys must be paid according to the lodestar method. Other reforms include loser pay rules, proportionate liability, and an extension of the rules that restrict choice of venue. As for the remaining problems, one of the largest is the election of judges to the lower judiciary. This method for choosing judges selects out very good young lawyers in favor of lawyers who wish to make names for themselves and go back into private practice or older, less successful lawyers for whom a judge's salary is a pay increase. The likelihood of solving this problem is slim and may require something approaching a judicial scandal to generate the political will necessary to enact this reform.
Significant reform was accomplished by focusing on specific political races rather than on national or on statewide efforts. As an example, Texans for Lawsuit Reform helped spend over one million dollars in a midterm state senate election to maintain a one-vote Republican margin. State tort reform organizations can expect the help of large corporations and trade group alliances, but our experience is that they have many other legislative concerns and alone cannot be counted on to expend the political effort required for tort reform. We structured our organization outside of corporate America with the support of wealthy, civic-minded individuals who had political connections and the requisite focus on tort reform.
Linda S. Woggon
Ohio Chamber of Commerce
Unlike Texans for Lawsuit Reform, we are a trade group organization, but we did form Ohio Alliance for Civil Justice, an organization with a single focus and its own staff, legal and public relations counsel, and grassroots counsel. We began work in 1987 by helping to pass a comprehensive tort reform bill, but in Ohio, as in other states, the interplay between the legislature and the court determines the form and the pace of tort reform. In the case of Ohio, the court chipped away at the 1987 comprehensive tort reform bill. With increasing Republican membership in the legislature throughout the 1990s, tort reform passed again, only to be invalidated by the Ohio Supreme Court.
The tactical decision, then, was to get involved in Supreme Court races, which led to the formation of a four-to-three conservative majority with the November 2002 election. We found that Ohio newspapers care about tort reform and were receptive to our message, but we also found that the political influence required with a term-limited legislature is significant because of the constant turnover. The legislature passed two major reforms that have not been struck down: a silica and mixed dust bill and an asbestos bill. Other minor reforms passed and some major reforms are still pending, such as a cap on punitive damages, contingent fee reform, and collateral source provisions.
Andrew R. Stephens
U.S. Chamber Institute for Legal Reform
Hard work, good luck, and Haley Barbour helped pass significant tort reform in Mississippi. The process began in 2000 with some changes in the Mississippi Supreme Court, but Haley Barbour's election was the most significant catalyst. The business environment was so afflicted by lawsuits that Governor Barbour and Lieutenant Governor Tuck made tort reform the centerpiece of their campaign. The recent bill passed in a special session abolished joint liability, restricted access to favorable venues, capped non-economic damages and punitive damages, created an innocent seller protection, and improved jury service. During the special session, devoted entirely to the tort reform bill, statewide radio ads generated tens of thousands of constituent phone calls jamming the switchboards. Also, to help make the case for tort reform the business community remained united rather than splintering as usual.
Despite the good news in Mississippi, there is bad news in Illinois. Madison County, Illinois, is such a haven for class actions and asbestos suits that the Justice Department is investigating. Also, medical liability suits are driving doctors out of the southern part of the state. For example, there are no longer any neurosurgeons south of Springfield--which is geographically more than half of the state. The good news is that if Mississippi can do it anyone can, and with a Supreme Court election in Illinois this fall, perhaps some progress can be made.
Michelle J. White
University of California-San Diego and NBER
The statistical evidence on asbestos claims for the past fifteen years indicates a sizable difference in awards depending on where the claim is filed. Controlling for various factors, including disease, a typical per plaintiff award in an asbestos suit in Mississippi is $2.6 million more than the average asbestos award nationwide; whereas the average award in Pennsylvania is $700,000 lower than the mean award. The statistics show that the number filed in Pennsylvania and California, where claims used to be most numerous, has declined substantially, and the number of claims is rising in more lucrative states like Texas and Mississippi. Also, the statistics show that asbestos cases, which used to be filed in federal courts, are now migrating to state courts. Forum shopping has another element, the choice of forum within the state. In these smaller venues plaintiffs' lawyers are entrenched and have relationships with the judges, but defense lawyers have to rush in and quickly familiarize themselves with the jurisdiction and the judge. In conclusion, as certain states enact tort reform, it is likely that plaintiffs' lawyers will migrate to another jurisdiction, work to entrench themselves, and make the climate there more favorable to plaintiffs than it otherwise would be.
AEI research assistant Michael Petrino prepared this summary.
