TCS Daily

Legal Tyrannies

By Duane D. Freese - February 6, 2003 12:00 AM

An important question is raised by two new books on the nation's legal outrages: What are trial lawyers costing the economy and prospects for future growth?

The timing for the books by Catherine Crier, The Case Against Lawyers, and Walter Olson, The Rule of Lawyers, couldn't be better. Environmental groups have decided to use lawsuits to enforce their ideas about global warming, and some consumer groups are legally targeting the fast food industry in an effort they claim is to fight obesity. All of this makes the law look less a tool for settling differences than a means by which cliques of people can impose their standards on society.

These two commentators on the nation's legal landscape do a good job of cataloguing how we came to this peculiar juncture.

Crier, a former Texas judge who now has her own Court TV show notes that the law:

  • Has become unknowable in such matters as taxes and occupational safety, thanks to myriad special rules and obtuse interpretations lacking any semblance of common sense.

  • Has become unfair, locking up drug users for their addictions while doling out billions for cigarette smokers who didn't kick theirs.

  • Has become unreasonable by demanding businesses account for every stupid thing a customer might do with their product, leading to such silly labels as that on a baby stroller warning parents "Remove child before folding" and a household iron to "Never iron clothes while they are being warn."

  • Has become a gold-digger operation, rather than a source of legitimate compensation, by paying off plaintiffs for injuries that never occurred in class action suits involving asbestos, software and auto problems, mostly enriching trial lawyers who walk off with huge contingency fees.

And she is right on target when she cites trial lawyers for attempting to sidestep the democratic process for pet projects.

No quote is more telling in her litany than that by Richard "Dickie" Scruggs, the Mississippi trial lawyer who masterminded the tobacco litigation. Regarding a potential suit against Wal-Mart, she quotes him as saying: "They've damaged the fabric of American life. It offends me."

This attitude was evident in a Time magazine profile in 2000, in which Scruggs said Wal-Mart could become a legal target because it puts so many mom-and-pop stores out of business.

In other words, because Wal-Mart serves people's needs, providing them a wide variety of products they like at prices they can afford in a convenient way, it deserves to be sued.

This is the height of legal arrogance, the precursor to a legal tyranny, which Olson, in his own book, demonstrates is epidemic in the current trial bar.

Olson punctures the primary premise by which the trial bar justifies the proliferation of class action lawsuits and its contingency fee system. That is, as consumer activists and legislation-by-litigation advocates Ralph Nader and Wesley Smith argued in their book, No Contest: Corporate Lawyers and the Perversion of Justice In America, "tort litigation ... provides substantial societal benefits beyond the effects of damage awards."

By taking on some the favorite cases cited by Nader and Smith - tobacco, gun, breast implant, lead paint and asbestos litigation -- Olson demonstrates how trial lawyers are turning themselves into a Fourth, higher, Branch of government, without the constraints democracy imposes on the other branches.

For example, the ostensible purpose of tobacco litigation was to deter smoking, reduce the cost to taxpayers of Medicaid costs for smoking related illnesses and punish Big Tobacco for deceiving smokers. But what really happened? Adult smoking stayed on an existing downward trend that existed prior to the tobacco settlement. Smoking among teens actually rose. There's been almost no relief for taxpayers. And Big Tobacco? It's as big as ever.

The big winners from the tobacco deal were the trial lawyers. The sweet deals worked out by the State Attorneys General with their favored private law partners were done without bidding or full disclosure. Only public protest led to them cutting back on the contingency fees that otherwise might have let them walk off with a third of the huge $246 billion tobacco settlement. Instead, the issue of their fees was put before arbitration panels. How fair were they? Well, most state panels included a relative of a lawyer with a law firm in the state that had the largest portfolio of tobacco suits. In Texas, it included the dean of the Texas Tech law school, who, prior to serving on the panel, solicited a $12.5 million donation to his university from trial lawyer Wayne Reaud. The panel awarded Reaud and five other tobacco lawyers $3.3 billion in fees.

Some societal benefit.

Meanwhile, the big loser in all this was representative democracy. The penalties extracted by the AGs and trial bar from Big Tobacco amounted to a tax on cigarettes that legislatures and Congress - the people's representatives - could have imposed. By using the courts and the threat of continuous litigation instead, the lawyers hijacked policy making - even creating a separate antitrust regime for the cigarette industry - from elected representatives.

The lawyers then used their winnings in this area to increase their influence, becoming the biggest money interests in the 2000 election cycle. And they exacted tribute from other industries. Targets included lead paint, cell phone companies and health maintenance organizations.

It was intentional. The Time magazine article detailed Scruggs meeting with insurance lawyers and suggesting that they tell HMOs to settle rather than go to trial. "One of these days, one of the industry's lawyers in court someplace like Jefferson County, Miss., is going to call headquarters and say, 'This jury just returned a $1 billion verdict,'" Scruggs said. "Just think what that will do to the company's stock."

How would he know that a jury would side with him? Not on the legal merits. As Olson points out, trial lawyers are adept at forum shopping - Jefferson County is noted for juries favoring the trial bar. They are also adept at packing juries - making sure that people that serve on them have the least knowledge and capacity to sort out difficult issues.

Furthermore, as the chief contributors to state judicial campaigns, they've guaranteed they'll get a favorable hearing in many courts across the land.

Olson tells the story of how gun makers became alarmed when a suit by the City of Detroit was before a Wayne County judge whose major contributor was from the law firm suing them. When questions were raised about a potential conflict, the judge's boss, Executive Chief Judge Michael Sapala told the Detroit News, "This happens all the time. Who do you think donates to judicial campaigns? It isn't Aunt Susie - it's lawyers."

Interestingly, Sapala was judge in cases involving the building of the MGM Grand casino in Detroit. Michigan campaign contribution laws strictly limit political contributions by casinos and by construction companies involved in building them out of fear of the influence they might yield. But judges, apparently, are so pure of soul that they can avoid such blandishments. Or not.

Olson later cites a study by the Independent Institute. It "found civil awards ran substantially higher where judges faced partisan election than where selections were nonpartisan." Out of state defendants faced substantially higher awards than in-state ones. One now former West Virginia state justice excused this, saying: "As long as I am allowed to redistribute wealth from out-of-state companies to injured in-state plaintiffs, I shall continue to do so. Not only is my sleep enhanced when I give someone else's money away, but so is my job security, because the in-state plaintiffs, their families, and their friends will re-elect me."

It only takes a few outrageous courts in a few key states to make the tort system, as Crier points out, unfair, unreasonable and unjust in its delivery of compensation. And just one unfair, unreasonable or unjust reward can bankrupt many businesses. Dozens of lawsuits can force any to its knees.

Olson provides the example of what happened to Dow Corning in breast implant litigation. Using all the techniques of scientific distortion at their disposal, the trial bar, with a big boost from a woefully inept Food and Drug Administration commissioner, David Kessler, succeeded in demonizing silicone - one of the most vital and safest materials for medical implant devices. As subsequent studies demonstrated, there was no real danger except those trumped up by the lawyers, media and Kessler. By scare mongering, though, they encouraged women to go to doctors to have safe implants removed, putting their health in danger.

By the time the smoke cleared, though, the trial lawyers had their money and Dow Corning was bankrupt. No wonder that gun maker Smith & Wesson sought to settle so quickly when faced with a plethora of suits instigated by trial lawyers who signed up cities to bring them.

It is more than a little disturbing. As Olson notes, "Once upon a time it was considered grossly unethical to inflict litigation costs on an opponent for tactical advantage." Nader and Smith in their book rightly condemn SLAPP suits - Strategic Lawsuits Against Political Participation - as used by some corporations to silence critics or inhibit competitors by "forcing opponents to spend time and money on lawsuits." Anti-SLAPP laws are eliminating that threat.

So how can anyone condone boasts like that of Washington trial lawyer John Coale that "the legal fees alone are enough to bankrupt the (gun making) industry"? Or the threat, detailed by TCS host James Glassman at the time and repeated in Crier's book, by then Attorney General now Michigan Gov. Jennifer Granholm in 2000 that the trial bar and AGs would join to perform "a Smith & Wesson-type thing" against Internet marketing firm Double Click?

The usurpation of the law by trial lawyers for such extortion puts them on a par with leg-breakers and window bashers who threaten to make life miserable for someone unless he or she pays them off.

Such actions, as Crier and Olson write, ought to be a call to arms for the American citizenry and ethical lawyers everywhere. "Somehow we allow the Fourth Branch to seize the historic powers of government while escaping the long-evolved constraints on the abuse of that power," writes Olson. "We must actively rescue our liberties from those who would tyrannize us," Crier concludes.


They are right. Unfortunately, what is lacking in their rendition of the evils caused by litigation abuse are more specifics on the costs. Crier sites $27 billion collected by the top 100 law firms. There are other proxies as well, such as the costs of automobile insurance in states where tort lawyers practice.

States and patients know excessive litigation is having some effect on the availability and cost of medicine, because doctors are leaving practice. The Bush administration has readied legislation to limit damage awards in medical malpractice cases as a result.

But Nader and Smith in their book chide tort critics for exaggerating claims of the cost of the tort system. They dismissed Philip K. Howard's statement in The Death of Common Sense that "the cost of 'defensive medicine' has been estimated as high as $200 billion annually" as just "part of tort deform lore." They instead cite a study extrapolating from a Harvard study of New York hospitals that gives a number of $20 billion to $30 billion for the cost of the whole liability system. That, of course, was before the tobacco settlement and other massive tort cases.

The real point is, as Olson states, that we don't really have good numbers on the cost of the liability system, and thus its effect on the economy. "How much money each year flows through trial lawyers' offices? How much of it goes to them, and how much to clients? Which firms make the most money? ... We know next to nothing reliable about these matters, and ... these gaps in our knowledge are by design rather than inadvertence." While other industries have to fully disclose their finances publicly, the trial bar claims privileges over their financial operations. Sort of like the mafia.

In the 1950s, though, Congress shed a light on the mafia. It can do the same now on the trial bar. America was lucky in the 1990s. High technology was able to bring about vast improvements in productivity and produce a boom. The massive torts at the end of the 1990s, though, may now be one big reason the economy has found it hard for the current recovery to gain traction.

We can't afford not to know. Americans need to find out whether the civil justice system is producing the benefits it claims and at what costs. As their jobs and livelihoods are affected, they deserve an accounting of the Fourth Branch of Government.

Only through providing such accountability can reforms be tailored to promote justice for all, rather than just big fees for trial lawyers.

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