Illinois and West Virginia have the worst litigation climates for business, with Pennsylvania and California following close behind. The rankings come courtesy of the Annual Boardroom Guide to State Litigation Climates published by Directorship in collaboration with the American Justice Partnership Foundation (full disclosure: I am President of the AJP Foundation).

“The plaintiffs’ bar counts on being able to take company CEOs and directors by surprise when they file major lawsuits that are based on expanded or previously overlooked state liability laws,” says AJP Foundation Chairman Steve Hantler, the author of the report.

The 10 worst states are: Illinois, West Virginia, Rhode Island, Pennsylvania, California, Florida, Montana, New York, Maryland, Alabama.

Plaintiffs’ lawyers often file lawsuits in these states “to create the ‘perfect storm’ [of] unwarranted high demands while encouraging the news media to publicize sensational allegations of wrongdoing,” Hantler says. “Their goal is to create severe pressure in the marketplace and thus extort companies into agreeing to settle the claims for outrageous amounts.”

“No subject is so divisive, distracting, or erodes shareholder value more than frivolous but costly litigation,” says Jeffrey M. Cunningham, chairman and CEO of Directorship.com.

In an era where every lawsuit is potentially a bet-the-company proposition, company boards of directors and strategic advisers increasingly look at a state’s legal climate when determining where to open a new plant or office.