Haven't U.S. Jury Verdicts Driven Manufacturers Out of Business and Put People Out of Work?

No.

Tort reformers often argue that large jury verdicts and the high liability insurance rates they bring have forced U.S. manufacturers to shut their doors, thus putting people out of work and abandoning markets to foreign manufacturers.

However, there's a problem with that theory: Any foreign corporation that does business in America has consented to be sued in American courts. Thus, foreign manufacturers are also routinely sued in American courts, under American law, and subjected to American jury verdicts.

So, why aren't foreign manufacturers being driven out of business - or at least out of this country - by American jury verdicts?

There are two possibilities as I see it. The first possibility is that foreign manufacturers just make better, safer products than their American counterparts. If this is true - and I doubt it is - then American consumers are better off.

The second possibility is that other factors have caused manufacturers to shut their doors. Between our high taxes on gas and the ability of foreign competitors to pay .10 per hour for labor, it's easy to see why American manufacturers can't compete with their foreign competitors. And those factors have nothing to do with our justice system.

The "Lawsuits put people out of work!" argument is flawed because foreign manufacturers are able to flourish in the U.S. market, despite their exposure to the same "runaway verdicts" that are supposedly putting American manufacturers out of business.

So I'm left to wonder - Why aren't foreign corporations going out of business because of "runaway jury verdicts," and why aren't foreign insurance companies raising their liability rates because of "frivolous lawsuits?"

Could it be that American corporations are going out of business because of a poor economic climate, and that American insurers are raising their rates because they made bad investments? You decide.

Comments

[Michael Reynolds]

It's not so much that it drives companies out of business but that it drives up costs for all of us. We see this all the time in the medical industry. We pay dearly for all of the procedures and practices that need to take place because of the potential for lawsuits.

When insurance companies are forced to pay huge lawsuits the only ones that end up paying are the consumer.

[Ted]

Funny: trial lawyers happily take credit for driving unsafe products from the market through lawsuits. (Of course, given that nearly every product is being sued for being unsafe, it's natural that the plaintiffs will accidentally be correct from time to time. Even a stopped clock is right twice a day.) Now you're claiming that this has no effect on businesses? Fascinating (and all too typical) how trial lawyers try to have it both ways: claiming both that lawsuits have enormous deterrent effects, and then claiming that the effects of lawsuits are non-existent.

Either the benefits outweigh the costs or they don't, but to claim that there are no costs to the current system is awfully good evidence that trial lawyers don't think they can defend a fair cost-benefit analysis.

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