Corp Reform - Not Tort Reform

The next chapter..

1. You acknowledge your first four distinctions are invalid, so you suggest a fifth: an admission supposedly made by McDonald's.

I never made such an acknowledgement.  The first distinction, about the defective cup, is valid.  You questioned whether a jury could have apportioned fault between Bunn and the cupmaker - I believe it could have, if the facts support a theory that the coffee contributed to the collapse of the cup.  The second and third distinctions I made are valid only if Bunn isn't in the shoes of Mobil.  (I'm completely befuddled by the strategic decisions of both parties in Bunn.  This case looks like a great example of what not to do in court.) 

I seriously doubt McDonald's admitted that their coffee was unfit for human consumption.  Why would they even litigate the case if they believed that?  (I know the plaintiff's lawyer said that McDonald's said that.  I suspect he's taking a misleading deposition question out of context.  It's certainly not true in the legal sense.)

I wish someone would donate the cost of getting copies of everything from that case, including deposition transcripts and court transcripts so I could scan them and put them on the site.  Having the entirety of the case available would make analysis much more enlightening.

There's no point in arguing about what someone may have said; neither of us knows for certain.  Assuming arguendo that a McDonald's representative testified "The cup of coffee we sold Mrs. Liebeck was unfit for human consumption," doesn't that firmly establish that McDonald's at least breached the implied warranty of merchantability and of fitness for a particular purpose?

But let's go back to your distinction: are you admitting that McMahon v. Bunn-O-Matic was correctly decided?  If Liebeck had spilled equally hot Starbucks coffee on herself, with the same injuries, and Starbucks refused to make the admission you allege happened, should the case be thrown out before trial?

I don't think I've ever tried to imply that Bunn wasn't correctly decided - it was, for several reasons:

• The defective cup was the proximate cause of the injuries.
• The plaintiffs admitted knowing the coffee was "scalding," "too hot," and "very hot" prior to purchasing it. 
• The plaintiffs had firsthand knowledge that the coffee was extremely hot, as they served it themselves.
• But most importantly, the Bunn plaintiffs had the burden of proving the coffee was unreasonably dangerous.  They didn't.

2. To recover for personal injury from a "defective" product design, most states require the design to be unreasonably dangerous.  The New Mexico statute (13-1406) says "unreasonable risk of injury."  Your acknowledgment that McDonald's coffee was not unreasonably dangerous demonstrates you agree that McDonald's coffee was not "defective."  So we're one third of the way there. 

Unreasonably dangerous and unreasonable risk of injury are two different things.  Unreasonable risk of injury in New Mexico means, "An unreasonable risk of injury is a risk which a reasonably prudent person having full knowledge of the risk would find unacceptable. UJI 13-1407; Fernandez, 118 N.M. at 112, 879 P.2d at 113." 

I now have full knowledge that Liebeck's coffee was served between 180 and 190 degrees, a temperature capable of causing 3rd-degree burns in a few seconds of contact with skin.  I think that's an unacceptable risk for two reasons: First, the Specialty Coffee Association of America recommends serving drip coffee between 155 and 175 degrees.  Second, if McDonald's had served the coffee at 170 degrees, it would have greatly reduced the chances of severely burning their customers, and that reduction would have come with little or no change to the quality of the coffee.

The second point is important, because under New Mexico law, an important factor in determing whether a product poses an unreasonable risk of injury is whether the risk can be eliminated without seriously impairing the usefullness of the product.

Of course, if the coffee wasn't unreasonably dangerous, it can hardly be said to have breached its warranties--the same coffee Liebeck purchased was sold billions of times without incident, and there was no difference between that coffee and what Liebeck purchased.  Coffee is supposed to be hot.

That analysis ignores what I said about the bucket earlier: A bucket with a hole in it breaches its warranty without being unreasonably dangerous.

3. Please e-mail me links to the studies you're talking about.

You've Got Mail!

5. You seem to be saying that caps are not inherently unreasonable.  I certainly would find $250k problematic in certain situations, though not the case of minor negligence in medical malpractice.  I think the correct number is worthy of societal debate.  Better we do it uniformly across the board (at least, in any particular state) through the democratic process than have one jury decide it should be $50 million and another decide it should be $100,000. (Emphasis added.)

The problem is that the figure wouldn't be decided through the democratic process.  It would be decided upon by an interest group that most likely has profit as a motive, not social justice.

Massachusetts has a damage cap I'm ok with - $500k in med mal cases except in cases of death or disfigurement, in which case there are no caps.  I wholeheartedly agree that few, if any, injuries that aren't disfiguring are worth $500k in noneconomic damages.  What's your take on that?

6. Why don't principles of supply and demand apply to insurers?  It's clear that they do--lots of medical malpractice insurers have stopped writing new insurance because they can't charge rates high enough to cover their costs.  Lots of medical malpractice insurers have entered the Texas market, because they think they can win customers by charging less than the incumbents.

But insurers don't just take in premiums, put them in a pot, and pay claims from them.  They invest the premiums and use the profits from those investments to pay claims.  Maybe it's just post hoc reasoning, but I see a pattern: The stock market takes a dive in the late 80's, and then there's a malpractice crisis.  The dot-com bubble bursts, and then there's another malpractice crisis. 

Much of my knowledge of how the insurance industry operates comes from "Premium Deceit."  If you've got another source besides Tillinghast, I'd love to take a look.

GE Medical Protective's request for a rate increase was denied.  I don't think their rate request shows anything other than that, in a regulated market where a public agency, rather than competition, sets prices, insurance companies have an incentive to make high rate requests.  If they're poorly run (as their recent S&P ratings decline perhaps indicates--they're down to A- from AA- in late 2003), the ten new medical malpractice insurers who have entered Texas since reforms have been passed will take their customers.  Also, the 19% was a lot less than the 90% it raised rates in Connecticut.

The main point I wanted to make about GE was that they said damage caps gave them a 1% savings.  That's proof that damage caps aren't the answer to rising malpractice premiums.

http://www.insurancejournal.com/news/southcentral/2004/04/16/41290.htm

Note that Texas is facing a backlog of medical malpractice suits, because lawyers rushed to file many before the tort reforms took place to take advantage of the old laws.

Tell me about it.  When I was there, I saw lawyers literally racing to the courthouse on the last day to file.  Hell, I even saw one woman try to protect her rights by filing a "lawsuit" that said, "I sue Dr. So-and-So for malpractice."

Again, in 2003, medical malpractice costs with $1.375 for every $1.00 in premiums collected across all insurers: Hunter is simply wrong when he claims that the current crisis is the fault of insurers.  (Indeed, his reasoning is that insurers charged TOO LITTLE a few years ago, and are now doing a better job of classifying high-risk professions.  This is small solace to doctors.)  Most medical malpractice insurers are mutual societies consisting of the insured doctors.  Are the doctors conspiring to charge themselves too much?

If doctors are conspiring to do anything, it's to keep the quacks practicing medicine: The National Practitioner Data Bank shows that less than 1/3rd of doctors with ten or more malpractice payouts have been disciplined. 

Take Texas, for example: From January of 2001 to May of 2002, 6,038 claims of malpractice were reported to the state medical board.  How many doctors were disciplined?  None.  How many of the claims were even investigated?  NONE.  That's a broken system.  Doesn't the NPDB also show that around 50% of malpractice payouts come from about 5% of doctors? 

Continuing the discussion with Mr. Frank again

Same drill - Mr. Frank in Black, me in Red.

1. Is Bunn-O-Matic distinguishable from Liebeck? You give four reasons.

Your first reason is the most fascinating. You suggest Bunn should not be liable because the coffee cup was the cause of the injury, not the coffee. But how does that differ from Liebeck? In Liebeck, Liebeck was the cause of the injury, not the coffee. If the intervening cause of the cup is enough to insulate Bunn from liability, why is it not enough to insulate McDonald's? Why couldn't a jury divide the liability between the cup manufacturer and Bunn (standing in the shoes of the retailer).

Liebeck was the cause of 20% of the injury, according to the jury.  The other 80% was the fault of McDonald's for selling a product they admitted was unfit for its intended purpose and was therefore defective.  Did the jury apportion fault incorrectly?  I don't know - I wasn't present at the trial, I don't know what evidence was introduced or excluded, I don't know what the parties stipulated to, and I don't know what the witnessess testified to.  Without having access to the same information the jurors had, I'm not qualified to substitute my own judgment for theirs. 

Why couldn't the jury have divided liability between the manufacturer of the cup and Bunn (standing in Mobil's shoes)?  None that I can see.

So you haven't distinguished the cases yet. Three of the four reasons ignores the court's reasoning in Bunn, and the fourth applies equally to Bunn and McD. Nor have you explained why Bunn is wrong.

To me, the easiest way to distinguish the cases is the fact that McDonald's admitted the coffee was unfit for human consumption - defective - and Bunn did not.  It's pretty hard to convince a jury your product isn't defective when your own executives say it is. 

Fascinating that you point out the deep pockets; isn't that the reason McDonald's was sued, rather than Liebeck acknowledging it was her own fault for spilling coffee on herself?

Again, Liebeck was 20% at fault.  McDonald's was sued because they manufactured and sold the product.  Their deep pockets were just an added bonus.  If deep pockets were the goal, Liebeck would have also sued the coffee pot manufacturer, which may well have been Bunn.

2. To be defective, a product must be "unreasonably dangerous." And the judge reduced, not eliminated, the punitive damages. If the coffee is so "unfit", how come billions of cups are served? You try to create a new theory of liability over the lid, but, even aside from the reasons why that is improper, that wasn't the basis of the lawsuit.

A product doesn't have to be "unreasonably dangerous" to be defective.  You used buckets and cars as examples; a bucket sold with a hole in it is defective, and a car that won't start is defective.  The coffee was sold as a beverage to drink.  McDonald's admitted it was unfit as sold for that purpose.  Thus, the jury found McDonald's breached the implied warranty of merchantability and implied warranty of fitness for a particular purpose.  Was their coffee dangerous?  Probably.  Unreasonably dangerous?  Probably not.

3. You dodged the question of loser pays. You haven't identified a single case where tort reform prevents a plaintiff from recovering economic (as opposed to non-economic) damages. In loser pays, the loser would pay for the other side's experts.

You're advocating a different model of loser pays than what I often hear suggested - many tort reformers don't think the defendant should have to pay expert fees in addition to a jury verdict.

I oppose a loser pays model for the usual reasons:

1: Plaintiffs would be discouraged from suing in any instance where liability could reasonably be questioned.

2: It would benefit those who hire attorneys on an hourly basis at the expense of those who hire attorneys on a contingency basis.  Unless you're suggesting a loser should have to tack on another 1/3rd of the verdict to cover a contingency fee.

3: Unscrupulous insurance adjusters would use loser pays as a way to discourage injured persons from hiring an attorney or suing. "You should really take this offer, because if you go to court and lose, it might cost you your home.  Do you really want to take that risk?"

As for tort reform and economic damages?  Tort reform itself isn't the culprit, but at least two studies I'm aware of have shown that the "runaway juries" and "frivolous lawsuits" campaigns have reduced the willingness of juries to fully award economic damages.  However, I'd like to once more state that to the best of my knowledge, I've never claimed that tort reform will cap economic damages.  If you've seen a post where I have, please let me know and I'll certainly correct it. 

4. "The difference here is that I gamble on the chance of death or injury when I do 70.  That has nothing to do with the monetary value of my life. "

It has EVERYTHING to do with the monetary value you place on your life. If you valued your life at a trillion dollars, you wouldn't drive 70, because the benefit of driving 70 would be outweighed by the increased risk of death from the increased speed.

Everything I do in life is a risk: I could fall down the stairs, drown in the bathtub, be hit by a bus, etc.  But if I died, and God gave me an opportunity to undo my death in exchange for every penny I have, I'd gladly do it.  Or in a more realistic example, there's no dollar amount I wouldn't give someone holding me hostage.  I think most people feel the same way.

If life is immeasurably valuable, then how would you propose damages to be established?

By letting juries decide on a case-by-case basis.  I'll spare you the standard rhetoric about noneconomic damage caps being unfair to women, minorities, students, etc.  Instead, I'll ask you what you think a fair cap is, and why?

5. The example of the horse is fascinating. But why stop at horses? If I set fire to an office building and do $200 million dollars worth of economic damages, I'd be liable for $200 million dollars. Is it immoral to say that a person's life is worth less than an office building? If so, does that mean that there should be a floor of $200 million for any death caused, because it would be immoral to value a person's life less than an office building? You make a nice rhetorical trick, but the horse isn't being valued as a horse, it's being valued as an economic asset in the litigation you mention.

My rhetorical trick is no worse than your efforts to force me into arguing coffee is unreasonably dangerous.  ;)

Should noneconomic damages have a floor of $200 million?  No - that would bankrupt society in a hurry.  But $250k is a joke.  Again, what cap would you suggest?

6. "None of the casinos ever passed the savings onto their guests in the form of lower prices or increased payout frequencies."

Again, you misunderstand how prices are set. Prices are set by supply and demand. If costs go down, insurers cannot make unusually high profits, because other insurers will want their business, and compete the high prices down. Can I guess that you haven't had Econ 101 yet?

Yes, I've been through Econ 101 and 102.  But basic principles of supply and demand don't apply to the insurance industry as they do to the rest of the world.  Have you read "Premium Deceit" by J. Robert Hunter? 

If construction costs go down, then more casinos will be built, and the casinos will compete for the pool of customers with lower prices or increased payout frequencies. So there is a relationship. It won't be direct, but it will be there. I've been to Las Vegas a dozen times, and only had to pay for a room once.

My argument is that businesses do not lower their prices as an automatic response to a cost savings.  They lower their prices if it will benefit them financially.  I'll again bring up "Premium Deceit," as it makes a strong case for the argument that insurers won't lower premiums in response to tort reform.

"Such tort reform supporters as Sherman Joyce, Victor Schwartz, and Donald Zuk, have all publically stated in one way or another that tort reform will not lower insurance premiums."

This is absolutely false, and was refuted on pointoflaw. http://energycommerce.house.gov/107/hearings/07172002Hearing648/Schwartz1122.htm

I'm going to the library this weekend and see if I can track down Schwartz' and Joyce's purported quotes.  If they don't exist, or are used in an improper context, I'll thank you for pointing that out to me. 

However, GE Medical Protective filed for a 19 % rate increase in Texas after the 2003 tort reforms, stating that "Capping non-economic damages will show loss savings of 1%."  Are they lying?

The saga continues...

Mr. Frank's comments in black, mine in red.

1. Q. How did you determine the jury was instructed incorrectly?

A. Because the jury was instructed at all. Again, read Bunn-O-Matic. It's not worth discussing this further until you can tell me why you disagree with the court's ruling in that case. And I have yet to meet someone who can explain why the Bunn-O-Matic case isn't dispositive of the Liebeck lawsuit.

Bunn-O-Matic (Bunn, hereafter because I'm lazy) is distinguishable from and not dispositive of Liebeck for a litany of reasons.  Here are four:

1: McMahon's injuries were clearly caused by a defective coffee cup that Bunn did not manufacture. 

2: Bunn didn't serve McMahon the coffee. 

3: Bunn didn't even make the coffee, a Mobil employee did.  In my mind, the suit against Bunn would be akin to suing the manufacturer of the machine that manufactured Vioxx or a defective Firestone tire.

4: This is speculation, but I'm confident that the machine that brewed the coffee in Bunn was an industrial model, not a home model.  As such, its intended market was for a more sophisticated purchaser than the average consumer: restaurant owners.  I have no way of knowing what warnings, if any, were included in the instructions for the coffee maker.  Bunn's instruction manual may have explicitly warned the purchaser of the coffee maker about the potential for third-degree burns.  If Bunn was liable to anyone, it would have been to Mobil, but that's probably a stretch, too. 

If I had to hazard a guess, I'd say that Bunn was a defendant only because it had deep pockets. 

2. "700 people were injured by the product" [in ten years]

A. McDonald's isn't liable unless their product is unreasonably dangerous. If the number of injuries from the product is statistically insignificant, it's not unreasonably dangerous. That's the end of the story. Noting this fact is a reason to throw out the case, not to impose punitive damages.

But the question in Liebeck was if the product was defective, not if it was unreasonably dangerous.  What did McDonald's sell the coffee for?  To drink.  A McDonald's executive testified the coffee was unfit to drink.  That's prima facie evidence the product was defective.

Were punitive damages warranted?  The jury thought so, but the judge didn't.  Hence, they were thrown out.  The checks and balances inherent in our justice system worked.

In the last ten years, over FOUR HUNDRED THOUSAND people were KILLED by automobiles. Not injured. Killed. Are automobiles inherently unreasonably dangerous?

In the last ten years, about one hundred children have been KILLED by five-gallon buckets. Not just injured. Killed. Are five-gallon buckets unreasonably dangerous?

I'm not going to fall for the diversion.  McDonald's was liable in Liebeck because they admitted their product was unfit for its intended purpose; it was found to be defective not unreasonably dangerous.

The point is that 700 burns--the vast majority of which were minor--is not that many. It's not a reason for a company to change its behavior when the attribute that is causing the injury--the heat of the coffee--is precisely the attribute that makes the coffee commercially desireable. People don't have to buy hot coffee. (I don't. I don't like hot beverages.) There's orange juice, there's diet soda, there's water, there are all sorts of other items to quaff. It's not like McDonald's is adding a tasteless, odorless chemical that burns seventy people a year; the coffee burns because coffee is hot. If a McDonald's employee spills the coffee on someone, they should be liable for that. If a McDonald's coffee spills and burns because the cup breaks, that's McDonald's fault, and they should pay. If a McDonald's customer spills coffee on herself, however, it's her fault, not McDonald's, no matter how badly she's burned.

You know as well as I that whether a person buys a product voluntarily instead of through coercion has nothing to do with the seller's liability. 

One theory of liability I would have investigated is this: Liebeck was injured trying to remove the lid to add cream (or was it sugar) to her coffee.  It's obviously foreseeable that consumers would do this.  Should McDonald's have specified a lid that would have allowed consumers to add cream or sugar without removing the whole lid?  I know many vendors have flaps on their lids today for that very reason.  I don't know if McDonald's did back then.

If McDonald's coffee is unreasonably dangerous because 70 people a year out of over a billion suffered some sort of burn from it (heck, I burn myself at restaurants or cooking two or three times a year), then EVERYTHING is unreasonably dangerous, and the concept is meaningless. No reasonable jury, correctly instructed on the concept of "unreasonably dangerous" can find McDonald's coffee unreasonably dangerous: so the case shouldn't even go to the jury.

Here are the relevant excerpts from the McDonald's verdict:

"1. On Plaintiff's claim for product defect, for Plaintiff;

2. On Plaintiff's claim for breach of the implied warranty of merchantability, for Plaintiff;

3. On Plaintiff's claim for breach of the implied warranty of fitness for particular purpose, for Plaintiff;"

Nowhere do I see "unreasonably dangerous."  Instead, I see the jury found that McDonald's intended its coffee to be consumed by a human, and that they believed the executive who testified the coffee was unfit for human consumption. 

So what exactly is the benefit of refusing to implement the straightforward reform of loser pays?

Again: it's balancing costs and benefits.

How about because we don't even have a winner pays system?  It's not uncommon for a plaintiff to win its case, but not even have all of its economic damages covered by the verdict.  And expert witness fees also have to be deducted from the verdict, too.  So why should we implement a system where a losing plaintiff has to pay the defendant's expert witness costs, if a losing defendant doesn't have to pay a winning plaintiff's expert witness costs?

A. Sure you can. You, Justinian, do it all the time. Do you drive 70, or do you drive 55, or do you stay off of the highway entirely? Did you spend a little extra to buy a car with side air bags? Do you spend a little extra to fly, instead of drive, a long distance? Did you pay a little extra to live in a neighborhood where you'd be less likely to be murdered? Do you use your cell phone in the car?

Every day, you're making implicit economic decisions that reveal that an X% chance of death is worth more than or less than Y dollars to you. Every day, the government (and the voters that chose that government) is making the same calculus in deciding between the wealth and health of its people. We could save 10,000 lives a year by a national 30 mph speed limit, but society clearly agrees that those lives wouldn't be worth the cost--as demonstrated by the celebration when the 55 mph speed limit was lifted.

The difference here is that I gamble on the chance of death or injury when I do 70.  That has nothing to do with the monetary value of my life. 

You'd agree that we should not tax the citizenry to spend a trillion dollars to save one life, right? Fifty billion, right? Probably not even fifty million--I'd be surprised if your own set of life choices showed a revealed preference that a life was worth more than seven digits.

In any event, you misrepresent the caps. No one is proposing to cap total damages at $250,000.

A trillion dollars is fine if it's my life. :) 

I know that no one is trying to cap economic damages.  I don't think I've ever made a claim to the contrary.  But economic damages have nothing to do with the value of a human life.  I personally believe that all men are created equal, and as such, each life has an equal value - priceless. 

Putting a price on human life via capping damages demeans us all and steals our humanity.  It could also lead to a situation like this:

Imagine that a doctor horribly botches surgery on a young housewife and renders her sterile.  She doesn't have a job, so her economic damages are limited to her medical expenses.  Her noneconomic damages are capped at $250k - that's what the law says her loss of the ability to have children is worth.  Now imagine that a veterinarian botches a surgery on the mare Santa Catarina, rendering her sterile.  In 2004, that mare sold for $4.8 million dollars.  Santa Catarina's owner could collect nearly $5 million in economic damages because the horse is worthless.

Any law that places greater value on a horse's ability to reproduce than a human's is unjust, unfair, and unconscionable.

7. Q. I'm confident that [insurers] pocket whatever savings tort reform enacted.

A. This reflects a fundamental misunderstanding of economic principles. At any rate, it's simply not true. Premiums are directly related to loss rates. As you should know from pointoflaw.com, nationwide in 2003, medical malpractice insurers faced $1.375 in defense costs, judgments, and settlements for every $1.00 in premiums they collected. Reforms in Texas reduced malpractice insurance rates there 17% off the bat. Premiums are high because the tort system is ridiculously expensive and inefficient.

I grew up in Vegas, and it always made the news when a casino would finish paying off its construction loans.  Funny thing, though: None of the casinos ever passed the savings onto their guests in the form of lower prices or increased payout frequencies.  Instead, they passed the savings on to their shareholders or owners in the form of profit.  I guess the casino owners had a fundamental misunderstanding of economic principles. 

Such tort reform supporters as Sherman Joyce, Victor Schwartz, and Donald Zuk, have all publically stated in one way or another that tort reform will not lower insurance premiums.  Numerous malpractice insurers have filed for rate increases after tort reform went into effect because they saw little or no savings from tort reform.  Other insurers have even said that damage caps raise costs because it gives plaintiffs a target to shoot for.

So if neither the American Tort Reform Association nor malpractice insurers claim that tort reform will lower premiums, why should I think it will?

8. I'm aware of Toro's program. I'm working on an article about it, the gist of which I won't discuss yet. But even if I'm wrong, and Toro is adopting the appropriate approach, they're in a relatively favorable situation where their products are responsible for a low number of relatively uncontroversial and relatively minor discrete injuries from discrete incidents. It doesn't work in the case of asbestos, or drug interactions, or complex torts.

I'll be on the lookout for the article.

Continuing the Discussion with Mr. Frank

His comments in blue, my response in red.

1. The jury was instructed incorrectly. The case should've been thrown out before it got to the jury. Again, I refer you to McMahon v. Bunn-O-Matic, where the court got it right. I'd link to it, but your site doesn't permit hyperlinks in comments.

I'd like to allow hyperlinks in comments, but I don't have the time or energy to deal with people hawking "male enhancement" products. 

How did you determine the jury was instructed incorrectly?  I ask because when I had access to Westlaw and Lexis, neither the jury instructions nor the transcripts were available.  If you have either of these, I'd appreciate the opportunity to take a look at them.

The comprehensive Wall Street Journal article on the subject also showed that the jury misunderstood the evidence: a McDonald's expert used the technical term "statistically insignificant", which has a specific mathematical meaning that he was using correctly, and the jury thought that McDonald's was calling the injury insignificant.

From my readings about the case, I found that the jury understood the meaning of "statistically insignificant."  Instead, it appears that the jury was inflamed that McDonald's didn't show any concern or remorse over the fact that no matter how "statistically insignificant" the occurence of injuries was, over 700 people were still injured by the product.

As best I can tell, the plaintiff's lawyer made at least one (and probably more) argument(s) that shouldn't have been allowed to have been made because they were irrelevant to the question of liability.

Of course, that's a flaw in our entire justice system: Lawyers make mistakes, opposing counsel doesn't always catch them, and even when opposing counsel does, judges don't always make correct rulings.  I can't imagine that there will ever be a way to eliminate error from trials.  Isn't that why we have appellate courts?

2. My answer (addressing solely product liability) doesn't distinguish between foreign and US manufacturers. If a US corporation is large enough, it's on the same footing as a foreign manufacturer, because a certain portion of its sales are international. The tort burden falls heaviest on small businesses. Small businesses have to pay a risk premium because they can't diversify their liability risk and self-insure as many large corporations do; moreover, a small business that sells mainly to US consumers will be at a disadvantage to one that can subsidize its US tort costs by foreign sales.

Saying that tort reform will protect small businesses implies one of the following:

1: Tort reform will lower insurance premiums.  I believe that insurers won't voluntarily lower premiums by a meaningful amount.  And I won't bore you with the standard quotes from insurers about why tort reform hasn't and won't lower rates.

2: It's important to make sure small businesses don't close because of lawsuits.  Small businesses fail every day.  Why is it more of a tragedy if one fails because of a lawsuit than if it fails because it isn't competitive?  Either way, people are out of work. 

Also, you state that small businesses are at a disadvantage compared to those that can subsidize their U.S. tort costs with foreign sales.  Almost all businesses that can do so aren't small businesses, so what you've really said is that small businesses are at a disadvantage to large foreign businesses.  That's true, and that has nothing to do with tort law.

Of course, to the extent the tort system raises labor costs in the US (and it clearly does that), that hurts American competitiveness. That has additional effects at the margins that I didn't address.

Lot's of things raise labor costs in the U.S.  Minimum-wage laws, for example.  But we passed those because we determined that the benefit to workers offset the loss of profits.  So while our tort system undoubtedly raises labor costs by some extent, the benefit to injured persons outweighs the loss of profits. 

3. I know you're not a trial lawyer; but you're buying ATLA's message hook, line, and sinker without giving fair consideration to the tort reform position. Not that I blame you: when I was ten, I was reading Consumer Reports cover to cover, held my Marvin Zindler autograph close to my heart, and grew up admiring Ralph Nader. We're inclined to root for plaintiffs, because we like the underdog storyline: from Spartacus, David & Goliath, and Star Wars to Grisham novels, A Civil Action, and Erin Brockovich. (The last two, however, featured bogus environmental claims, not that you'd learn that from the movies.)

Actually, when I was a kid, I was a conservative Republican that religiously listened to Rush Limbaugh and hated liberals with a passion.  I slowly moved left because I hated hypocrisy even more than tree-huggers.  And tort reform is full of hypocrisy: When a corporate defendant is hit with punitive damages, it's "an egregious injustice" based upon a lawsuit that was "wholly without merit."  But if that defendant becomes a plaintiff and is awarded punitive damages, "justice prevailed."

I'd shut Corpreform.com down tomorrow if the ATRA just came out and admitted that their members, by and large, simply want to be able to conduct business the way they see fit, and not be held accountable if their conduct injures or kills.  I get really irritated when corporations pretend claim they want to protect consumers from greedy trial lawyers by limiting contingent fees.

If you scour the right places on the Internet, you can probably find posts I made twelve years ago when I was in law school defending the current tort system. It wasn't until I actually started working on products liability and class action cases that I learned first-hand how little the organized plaintiff's bar has to do with consumer safety or protection in the real world.

Does that mean that OMM won't hold Corpreform against me when it's time for me to look for a summer associate job?  :)

4. Because there isn't "loser pays" and because damages are, for the most part, untrammelled, the incentive is for lawyers to manufacture long-shot cases and force big corporations to play Russian roulette. Last June, Overlawyered covered a car company that won at least ten consecutive cases alleging a particular kind of defect, but the n-th time, the same theory found a judge that excluded evidence of safety and a jury that was willing to ignore the fault of the drivers involved and awarded over $300 million. The plaintiffs' bar can make a very comfortable living rolling the dice like that, but that doesn't provide equitable compensation to injured people (ten-plus plaintiffs get nothing, one speeder gets a windfall, all after giving up years of their lives to the stress of litigation), and is a wealth transfer from consumers and workers and pensioners to "rent-seeking" lawyers who aren't adding any social value, because there's nothing the corporations can do to prevent liability in these cases other than stop selling cars.

I laughed out loud at your extension of "rent-seeking" to lawyers.  It has much more flair than "greedy."  I like it.

I agree with you that it's unfair for 9 victims to get nothing, but the 10th to get a windfall.  But that's the way the system works: One jury may find for the plaintiff, while another jury would have found for the defendant in the same case.  In that respect, every case is a roll of the dice.  It seems the only way to eliminate the unpredictability of juries is to eliminate the jury system - something I think we're both opposed to. 

Are you familiar with the lawnmower manufacturer Toro?  They aggressively settle their cases.  They've found that most injured people want their bills paid, and a few dollars in their pocket.  So Toro dispatches adjusters that have authority to settle cases for (I believe) $50k on the spot.  By making reasonable settlement offers as soon as an injured party contacts them, Toro has virtually eliminated litigation over their products.  Those people that do go to trial generally lose.  Toro figured it out: Most injured plaintiffs aren't greedy.  There's a good article about them I can track down for you if you haven't seen it.

Read overlawyered. Read pointoflaw. My co-authors make them well-written and often entertaining sites, and I just try to keep up with them. What is it that we're saying that's so incorrect?

You're right - the sites are well-witten, and often entertaining.  I find myself in agreement with them on many issues.  But here are a couple I disagree with:

1: Damage caps.  You can't put a fixed price on human life.  I understand that juries are often called on to do that, but those decisions must be made on a case-by-case basis.  Capping damages, especially at a ridiculously low figure of $250k, devalues human life.

2: Caps on attorney fees. I'm not sure what your hourly rate is, but I am sure you'd vociferously object to any law that tried to cap it.  If you get to charge your clients whatever you want, so should plaintiff's lawyers. 

3: Tort reform as a way to lower costs or insurance premiums.  Sorry, I don't believe that businesses will automatically lower prices or premiums if their tort costs go down.  Instead, I'm confident that they'd pocket whatever savings tort reform enacted. 

A Quick Response to Ted at Overlawyered

Hi Ted, glad to see you've found my site.  I've got a really busy day today, so I don't have time to give your comments the response they deserve.  But until I do - Friday, probably - I've got a couple of quick questions I'd love you to answer.

1: You repeatedly state that McDonald's wasn't at fault in Stella's case.  But the jury found McDonald's to be 80% at fault.  To come to that decision, they sat through a seven or eight day trial and considered reams of evidence.  Were you present during the entirety of the trial?  If not, why should anyone disregard the jury's liability analysis?

2: With respect to your comments about lawyers driving manufacturers out of business:  First, your comment was written as if you're lumping me in with trial lawyers.  I'm not, and I'm not connected with any, either.  I wasn't sure if you knew that or not.

Second, the majority of that post pointed out the fact that foreign manufacturers don't problems doing business in the U.S.  I offered the theory that foreign manufacturers do fine here because their costs back home, labor especially, are cheaper than their American counterparts.  Do you disagree?  If so, why?

I hope to continue this discussion with you.

Justinian

Shouldn't we ban lawsuits over products approved by the Federal government?

No.

Many tort reformers want to prevent lawsuits over products that the Federal government approved.  They argue that any product that meets government safety standards can’t be unsafe or defective.  If we were to assume that was true – a big assumption – at least one problem remains: Corporate executives have been known to lie or conceal information to get products approved by the government.  Often, the only way their illegal actions are revealed is through product liability lawsuits.

Here’s just one example:

During the 1970’s, Eli Lilly spent a great deal of money to develop Oraflex, a drug designed to relieve arthritis symptoms.  (Just like Vioxx.)  Oraflex was put on the market in Europe about two years before the FDA approved it for sale in the U.S.  In those two years, 29 people died from using Oraflex. 

Eli Lilly was legally obligated to tell the FDA about those deaths.  But an Eli Lilly Vice-President decided to conceal the deaths from the FDA, because he knew that if the FDA found out Oraflex was deadly, it wouldn’t approve the drug.  Relying upon Eli Lilly’s false data, the FDA approved Oraflex for sale in the U.S.  Predictably, Oraflex killed people here, too.

The family of an American victim of Oraflex filed suit against Eli Lilly over the drug.  The attorney in that case discovered that Eli Lilly concealed the European deaths from the FDA, and was instrumental in getting the FDA to launch an investigation.  Due to this lawsuit, the FDA pulled Oraflex from the market just a few months after it was approved.  More importantly, the Federal government brought 25 criminal charges against the Eli Lilly Vice-President, to which he pled guilty.  Sadly, the charges and penalties were barely a slap on the wrist: Each of the 25 charges brought were misdemeanors, and carried only a $1,000 fine.

Several facts are clearly illustrated by the Oraflex story:

• When millions of dollars are on the line, some corporate executives will lie to get a product approved by the Federal government – even if that means people will die.
• Federal regulatory agencies have neither the time nor the resources to independently verify the data submitted by product manufacturers.  But “greedy lawyers” do.
• The penalties for submitting fraudulent data to regulatory agencies aren’t large enough to deter this kind of behavior.

No one is yet certain whether Merck executives lied to the FDA to get Vioxx approved.  But what is certain is that ending product liability lawsuits over products that meet Federal standards will quite literally enable corporations to get away with murder.

New Corpreform Product - Tort Reform Defined

I've got some new goodies at the Corpreform store with this definition of tort reform:

I'm looking for a good, cheap source of custom bumper stickers.  Let me know if you have any interest in these.

Doctor Refuses To Treat Patient That Doesn't Support Tort Reform

This article has made the rounds, but I wanted to comment on it:

"RICHLAND, Wash. - A doctor in Washington state has dropped a patient because she refused to sign an initiative to limit malpractice awards."

I believe that people should have the right to decide who they do business with on just about any grounds.  But I wonder where doctors like this will draw the line?  Will they refuse to treat Democrats?  Or Libertarians?  Or Ralph Nader?

Personally, I wouldn't want to be treated by a physician who is that terrified of being sued for malpractice.  Kind of sends the wrong message about his competence, doesn't it?

Hell Froze Over!

Can you believe it?  Now Corpreform doesn't look like it was designed by some goth kid in 1995.  Comments on the new site design are welcome.

New Site - What Is Tort Reform?

Like any subject, it's a lot easier to form an opinion about tort reform if you understand what it is.  So visit What Is Tort Reform? at www.whatistortreform.com.  It's a new site I've put up that explains common terms and concepts of tort reform. 

I'm adding to it daily, but if there's a particular term or concept you'd like explained, please let me know and I'll try and get it on the site. 

When appropriate, the site presents both sides of a tort reform measure, and links to more information about it.