As this article shows, so-called tort reform (a move to shield businesses from consumer lawsuits or doctors for being held liable for medical mistakes) was always about reducing exposure, not about the law. The head of a major tort reform organization just brought a pretty baseless class action out of pique over a towed car. He even sued under Section 17200 of the California Bus & Prof code, which was the subject of a major reform effort he led (Prop 64) to take away a consumer's right to sue when companies break consumer protection laws. This is just typical. My lawsuit is about justice, yours is frivolous. My incumbent should be re-elected, yours should be termed out. I could go on and on. It's not just about hypocrisy, although that is real enough. I am reminded of the line from Lawrence of Arabia where the French ambassador says that "a man who lies to others has merely misplaced the truth; a man who lies to himself has forgotten where he put it."
Friday, August 14, 2009
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I've mentioned before that the US regulatory system has been effectively privatized by putting the enforcement emphasis on liability law suits instead of direct government enforcement. In that context, tort reform is really code for deregulation. That is, in one fell swoop, tort reform could gut much of the environmental and labor safety regulation in this country.
Yet another reason to oppose it.
I also believe that the fear of lawsuits has been generated by the defense bar (of which my firm is a part, btw) to extract rents from lawsuits. We have managed to work up businesses into a frenzy over the dreaded "Liability" word so that many of them (often the good ones, unfortunately) are scared to death of lawsuits. However, most frivolous lawsuits can be disposed of fairly early at relatively low cost in terms of money and worry. I'm not saying that $25-$100K in costs is nothing - I'm saying that most businesses would and should not be treating them like the armageddon moments, particularly when they can (and are) often insured against.
I do think that insurance companies are part of the problem in this, because they are so risk-averse they tend to settle rather than combat meritless lawsuits. This is often because they hire poor lawyers and have no tolerance for adverse verdicts as part of the cost of doing business.
A better solution than liability insurance would be attorney-fee insurance where you sort of pre-pay for attorneys. We normally call that "hiring in-house counsel" - having an attorney on staff with a fixed (salary) cost up front. For reasons that boggle my mind, companies almost never trust their in-house counsel to handle lawsuits for them - indeed, they hire transactional attorneys, almost never litigators.
I should add that my experience as a lawyer teaches five things that I wish every businessman understood:
(1) there is enormous diversity in the quality and competence of counsel you can hire.
(2) Don't mistake billing rates or firm size/prestige with quality of counsel. Interview the individual lawyers who you are hiring (not just the partner) and insist on that particular team working with you. Getting the right lawyers will save you a lot of money in the long run.
(3) Hiring a "pit bull" for a lawyer and playing "no quarter to the enemy" at every turn is bad lawyering. You are free to think "F*ck you!" as much as you like, but don't just pay for a lawyer who will echo you. You want thoughtful, creative, intelligent, ethical lawyers who will command the respect of the court, their peers and, hopefully, of you.
(4) Trust your counsel or find someone else. Listen to your lawyer if they advise settlement.
If you think your attorneys are overbilling you, rather than doing the work they think is necessary, don't hire them. Scrutinizing bills doesn't poison a relationship so much as indicate that it's already bad.
(5) In most cases, general competence is more important than a "specialty." A good lawyer will get the help and do the research she needs. It is cheaper to pay to train a good lawyer in a specialized area of law than hire a mediocre lawyer with a "specialty." The sole advantage of a mediocre lawyer with a specialty is that they can handle plain vanilla cases faster and more cheaply. But you can do that even faster and cheaper just by picking up the phone and settling them.
I think it is interesting that executives see legal fees as a part of doing business but aren't willing to see government inspections to ensure compliance with regs the same way.
The calculation seems to be that (legal fees) + (cost of losing)*(probability of losing) costs less than compliance with the regulation. Of course as you pointed out, LTG, the trick is to pay legal fees to good enough lawyers that your probability of losing a case goes down enough to mitigate the costs of losing.
I would point out that moving from regualtion to tort has shut many middle class people out of the justice system.
We had a woman visit us the other night who is in a real pickle. She makes too much to qualify for pro-bono work and to little to pay $300/hour to an attorney.
And who is going to take on a big business when they can hire more, and perhaps better lawyers than you?
I don't think we ever had regulation, USWest. We didn't move, in other words. That's why the tort system developed.
The real tragedy is the 'mandatory arbitration' provisions because arbitrators get paid for doing cases, and big businesses with many potential cases have a lot of sway over them, whereas individual plaintiffs don't. A bad arbitration ruling means you'll never be picked again by businesses. That was why it was headline news last year when an arbitrator made an award of punitive damages against an insurance company. Every lawyer knew that the arbitrator had just sacrificed his career because he was so angry at how this person had been treated.
LTG is mostly right. By comparison with other industrial countries, we have always relied on torts more than regulations.
But US West is also right that there has been some noticeable change. In the 50's, 60's and 70's we had a lot more regulatory enforcement across the board than we do now.
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