Gov. Perdue On The Move In Georgia
January 14, 2009
Georgia Governor Sonny Perdue demonstrated why he’s a hero to tort reformers and a bane to trial lawyers yesterday when he pledged to introduce major new tort reform legislation before the end of the month. Gov. Perdue’s new proposals, which will significantly strengthen tort reforms he signed into law four years ago, have two main elements:
1. A proposal that would protect pharmaceutical and health care companies whose products have been tested and approved by the U.S. Food and Drug Administration from state torts. (see my earlier post on FDA preemption of state torts for medical devices)
2. A “loser-pays” provision that would discourage meritless lawsuits by requiring the losing side in cases where a claim is quickly dismissed in court to pay the legal fees of the winning side. (see my post on the new “loser pays” study by Manhattan Institute’s Marie Gryphon)
Gov. Perdue’s plan elicited the usual howls of protest from Georgia trial lawyers who profit from the litigation mill. William Clark, who lobbies for the Georgia Trial Lawyers Association, says a “loser pays” proposal is not needed because the 2005 tort reform legislation included an “offer of settlement” provision that requires the losing side to pay the winning side’s legal fees if it rejects a settlement offer, then receives a similarly-sized judgment at trial.
The “offer of settlement” provision is a good one. But in today’s litigation climate, where every lawsuit is a “bet-the-company” proposition, defendants are often forced to offer big settlements in cases with little or no merit, especially in tort-friendly jurisdictions. Gov. Perdue’s “loser pays” proposal will help prevent frivolous claims from being filed and curb settlement offers made merely as a form of legalized blackmail.
The Atlanta Journal-Constitution has weighed in with an editorial opposing the pharmaceutical provision on the grounds that “FDA approval doesn’t guarantee that a drug will be 100 percent safe.” Earth to the AJC: no drug is 100 percent safe. All drugs, even aspirin, have risks.
The AJC thinks that the FDA and the tort system “should be seen as dual regulators” of the industry. But the fact is that Congress decided that there should be one national agency - the FDA - which has the medical expertise to make difficult decisions balancing concerns on safety and efficiency and ultimately deciding whether a new drug gets approved or not. Does the AJC really believe trial lawyers, arguing before a non-expert jury, should have an equal hand with federal experts in setting scientific standards for the entire country?
Approval of a new drug takes up to 12 years. It includes three separate phases of trials, with boxes of clinical trial data filling rooms once an application is filed. Then an expert committee appointed by FDA reviews all the data before making a recommendation to the agency itself. If the AJC gets its way, then drugmakers will be forced to market their products to the requirements of the trial bar, not the scientists and doctors at FDA. And that not only means that power will shift from scientists to lawyers; it means fewer new drugs for everyone.
There will be time to debate all this as Gov. Perdue makes his case for another round of legal reform in Georgia.
More On Loser Pays
December 24, 2008
I’ve had a few posts in recent weeks on the “loser pays” reform and a new report by Marie Gryphon of the Manhattan Institute promoting this idea. “Loser pays” – which is used by virtually every economic competitor of the U.S. – cuts down on frivolous lawsuits by requiring the losing side to pay the winning side’s court costs, including attorney’s fees.
Trial lawyers argue that “loser pays” reform would limit access to the courts by plaintiffs with low incomes. But, as a Wall Street Journal article pointed out yesterday, Ms. Gryphon’s report “zeroe[d] in on a long-overlooked component of the loser-pays system: insurance that covers legal fees.” In the process, she has exposed the trial bar’s main argument against “loser pays” as a canard.
Countries that use loser pays, including Germany, Canada and the U.K., allow people to purchase insurance policies to cover the cost of legal fees. That way, “if people need to file suit, they know their costs are covered – even if they lose.”
“Insurance definitely strengthens the argument for ‘loser pays,’” says Richard Nagareda, a professor at Vanderbilt Law School. Mr. Nagareda says that interest-group politics might explain the suspicion of the plaintiffs’ bar toward a loser-pays system.
Professor Nagareda is right, but the real explanation for trial bar opposition is even simpler: greed. By curtailing frivolous lawsuits, “loser pays” has proven to dramatically lower overall litigation expenses, which cuts the trial bar’s rake. And that’s a reform Trial Lawyers Inc. simply can’t stomach.
More on Loser Pays
December 17, 2008
ShopFloor – the blog for the National Association of Manufacturers – takes another look at “loser pays.” This is where the losing party in a lawsuit pays the legal expenses of the winner, including legal fees. This is a rule that most other countries in the world use to cut down on frivolous lawsuits and could be very effective here in the U.S. I had a post on the same report by the Manhattan Institute’s Marie Gryphon earlier this month.
Reining In Abusive Lawsuits While Delivering Greater Justice
December 3, 2008
Marie Gryphon, Senior Fellow at the Manhattan Institute’s Center for Legal Policy has just published an important new report that examines the impact a “loser pays” rule would have on America’s tort system. Under a “loser pays” rule, the loser in a lawsuit must reimburse the winner’s legal expenses, including attorneys’ fees. The report should be required reading for everyone concerned about the high cost abusive litigation imposes on the U.S. economy. Among the highlights:
- Abusive litigation imposes huge costs on our economy. Tort costs in the U.S. as a percentage of GDP “are far higher than those in the rest of the developed world – double the cost in Germany and more than three times the cost in France or the United Kingdom.” Direct tort costs “reached $247 billion in 2006, or $825 per person in the United States” – an annual tort tax of $3,300 for a family of four.
- Only the U.S. punishes winners in lawsuits. “Virtually every other civil justice system in the world has a loser pays rule… for attorneys’ fees” including Canada, the United Kingdom, Germany, France and Australia.
- “Winner pays” encourages abusive lawsuits. “The American rule makes the civil justice system as a whole unnecessarily costly by encouraging the filing of dubious lawsuits, which defendants must either settle quickly or defend against at significant cost. Such low-merit legal cases clog the American legal system and raise the cost of goods and services to consumers by forcing businesses that are sued to cover their legal expenses by raising prices.”
- The current system benefits lawyers, not plaintiffs. “The fees and expenses incurred by lawyers on both sides of a lawsuit are almost as costly as transfer payments to plaintiffs claiming injury.” Contingency fees and litigation costs paid by the plaintiff “frequently soak up 40 percent or more of any judgment or settlement.”
- A loser pays rule in the U.S. would cut down on abusive lawsuits and deliver greater justice to plaintiffs. “Almost every economist who has studied loser pays predicts that it would, if adopted, reduce the number of low-merit lawsuits. A loser-pays rule would encourage business owners and other potential defendants to try harder to comply with the law. Doing so should produce fewer injuries.