Tort Reform

The terminology tort reform describes a change in United States civil law system to improve litigation efficiency or reduce litigation's adverse effects on the economy.  While the phrase "tort reform" might imply any change in tort law or procedure, the commonly understood use in political and academic arenas describes a movement to limit tort litigation and damages. It does not include reforms that would expand liability, such as laws that create new causes of action or that increase damage awards. The term is also commonly applied to a political movement that advocates several such changes.

Tort Reform Agenda

In general, tort reform advocates contend that there are too many frivolous lawsuits.  The legal definition of a frivolous lawsuit is a legal action that cannot reasonably be supported under existing legal precedent or under a good-faith argument for a change in the law, or one that has no basis in fact.  The term has acquired a broader rhetorical definition in political debates about tort reform, where it is sometimes used by reform advocates to describe successful tort lawsuits that critics believe are without merit, or award high damages relative to actual damages.

Tort reform advocates argue that the present tort system is too expensive, that meritless lawsuits clog up the courts, that per capita tort costs vary significantly from state to state, and that trial attorneys customarily receive an unusually large percentage of the punitive damages awarded to plaintiffs in tort cases. High-profile tort cases are often portrayed by the media as the legal system's version of a lottery, where trial lawyers actively seek the magic combination of plaintiff, defendant, judge, and jury.  Advocates of tort reform also complain of unconstitutional regulation through litigation. Proponents further argue that litigation is used to circumvent the legislative process by achieving regulation that Congress is unwilling or unable to pass.

In response to lawsuits filed against gun manufacturers by several municipalities, a bill was proposed by the U.S. Congress in 2005 that would provide immunity to gun manufacturers for most negligence and product liability actions (and prohibit the Bureau of Alcohol, Tobacco, Firearms, and Explosives from revoking a dealer's license, even in cases where a dealer has been identified as selling a relatively high number of guns subsequently used in violent crimes).

In contrast, organizations such as the United States Conference of Mayors oppose gun manufacturer immunity legislation.  Others have argued that the legislation took "away the right of victims to be able to have their day in court," that the bill gave unprecedented immunity to a single industry, and that the law was unconstitutional to the extent that it conflicted with the Separation of powers.

A few of the changes frequently advocated include limits on punitive damages, limits on non-economic damages, limiting the collateral source doctrine, use of court-appointed expert witnesses, elimination of elections for judges, reducing appeal bond requirements for defendants faced with bankruptcy, "venue reform", which limits the jurisdictions within which one can file a lawsuit, limits on contingency fees, the adoption of the English Rule of "loser pays" (the defeated party must pay both the plaintiff's and the defendant's expenses), and requiring that class action lawsuits with nationwide plaintiffs be tried in federal courts, eliminating awards for pre-judgment interest.

Tort Reform Debate

How would tort reform affect safety?  Opponents of tort reform contend that supporters exaggerate the costs and ignore the benefits of the current tort system.  For example, opponents of tort reform contend that lawsuits encourage corporations to produce safer products, discourage them from selling dangerous products such as asbestos, and encourage more safe and effective medical practices.

Beginning in the early 1980s, Professor Stephen Teret and other faculty at The Johns Hopkins University School of Public Health argued that tort litigation was an important tool for the prevention of injuries.  Teret identified several ways that litigation can enhance safety for everyone, including:

1. to avoid paying future damages, the creators of dangerous products or conditions may voluntarily make them safer;
2. where conduct is particularly egregious, courts may award punitive damages to deter that conduct in the future; and
3. the process of gathering information prior to trial – called 'discovery' – can bring information to light that can be used by policy-makers to create new laws or regulations."

A 2006 study by Emory University professors Paul Rubin and Joanna Shepherd examined the effect of tort reforms on non-motor vehicle accidental death rates, and found that "caps on noneconomic damages, a higher evidence standard for punitive damages, product liability reform, and prejudgment interest reform lead to fewer accidental deaths, while reforms to the collateral source rule lead to increased deaths."

Controversy Over Job Loss Claims

Some advocates of tort reform posit that reforms can significantly reduce the costs of doing business, thus benefiting consumers and the public in the long run. Harvard Business School professor Michael E. Porter stated: "product liability is so extreme and uncertain as to retard innovation. The legal and regulatory climate places firms in constant jeopardy of costly and… lengthy product suits. The existing approach goes beyond any reasonable need to protect consumers, as other nations have demonstrated through more pragmatic approaches."  In contrast, critics dispute claims that the current tort system has a significant impact on national or global economies. The Economic Policy Institute wrote that the effect on the economy of job loss resulting from lawsuits is negligible.

In an April 2002 paper, the CEA (President Bush's Council of Economic Advisors) examined the economic impacts of the tort system in somewhat greater depth. But that paper, too, failed to demonstrate any employment effects of the tort system and made no prediction about the impact of tort law change. Even if we assume that asbestos liability legislation could somehow have prevented the loss of 2,500 jobs per year resulting from asbestos-related bankruptcies (by, for example, limiting compensation for non-economic damages to the victims or their survivors, or by denying awards of punitive damages), the effect on overall employment and the national unemployment rate in an economy with more than 130 million payroll jobs would have been imperceptible (a change of less than two-thousandths of 1%).

Dispute Over Litigation Explosion Claims

Opponents of tort reform deny claims of tort reform advocates that there is "litigation explosion" or "liability crisis", and they contend that the changes proposed by tort reform advocates are unjustified. Records maintained by the National Center for State Courts show that population-adjusted tort filings declined from 1992 to 2001. The average change in tort filings was a 15% decrease.  The Bureau of Justice Statistics, a division of the Department of Justice (DOJ), found that the number of civil trials dropped by 47% between 1992 and 2001. The DOJ also found that the median inflation-adjusted award in all tort cases dropped 56.3% between 1992 and 2001 to $28,000.

Tort reform supporters allege that these numbers are misleading. They claim that most liability costs come from pre-trial settlements, so the number of trials is irrelevant, and that the largest increase in the number of tort cases occurred between 1970 and 1992.  A study by Tillinghast/Towers Perrin claimed the cost of liability litigation outpaced the rate of inflation over the last half century, and represented 2.2% of GDP in 2004 vs. just 0.6% in 1950 and 1.3% in 1970.  It should be noted that Tillinghast/Towers Perrin is an interested party in the politics of tort reform with its operations as a major consultant to the insurance industry and as an insurance company itself with its reinsurance business. The Tillinghast/Towers Perrin study has been criticized by the Economic Policy Institute as unverifiable.

Tort reform opponents argue that corporations and insurance companies are the worst abusers of the litigation system. In particular, they contend, corporations often use their enormous resources to unfairly delay trial, pursue frivolous appeals, and contest claims in which liability is clear. In response, a number of tort reform supporters argue that that criticism is not a reason to oppose tort reform; such abuse would be deterred by proposed tort reforms such as "loser pays," which would prevent large corporations from using litigation as a cudgel against individuals and small businesses who cannot afford to defend themselves in court by providing an incentive for law firms to provide contingent defense. Opponents of tort reform contend that most private citizens would be afraid to sue wealthy corporations or insurers if they could be bankrupted by an award of the defendant's legal fees if they lost. This would limit legitimate claims, and effectively deny many citizens a forum to redress the harm caused them.

Controversy Over Individual Proposals

A number of proposals have been made by advocates of tort reform. These proposals are not agreed on by all 'tort reformers' and are considered by many opponents a roll-back of the reforms of the twentieth century. The collateral source rule, for example, dates back to 1854.

Non-Economic Damages Caps

Non-economic damages caps places limits on a jury's ability to award damages to victims for pain and suffering and loss of enjoyment of life as well as punitive damages.

For example, if a drunk driver runs down a pedestrian who receives massive head injuries and is a vegetable for the rest of their life, non-economic damages caps limits the amount the jury could award the pedestrian who receives such catastrophic injuries. Typically, non-economic damages cap will limit the drunk driver’s liability to $250,000.00 for non-economic damages, regardless of the damages caused by the drunk driver.

Proposals to cap non-economic damages are one of the most frequently proposed tort reforms, and have generated controversy over their fairness, efficacy, and constitutionality. Critics complain that limitations on punitive damages and other restrictions on plaintiff's traditional rights will reduce corporate accountability. Because corporations engage in a cost-benefit analysis before considering whether to stop a wrongful action (such as polluting or not enacting proper measures for safety), caps on damages may well encourage corporate malfeasance. They contend that the prospect of paying a small damage award provides too little incentive to correct the wrongdoing, and would allow the corporation to profitably continue an unsafe practice.

For example, tort reform critics point to the Ford Pinto Case, where accountants determined that the expected payout in wrongful death suits would be less than making a design change to prevent the gas tanks from blowing up on minimum impact. The value of human life was not factored into the equation.

Joint & Several Liability

Tort reformers have had the most legislative success in limiting the common law rule of joint and several liability, often replacing it with a rule of proportionate liability. Of the forty-six states that had a joint and several liability rule, thirty-three states have abolished or limited the rule. Opponents of tort reform contend that the elimination of the rule would undercompensate people who had the misfortune to be hurt by more than one person, if at least one of the defendants does not have the financial means to pay his or her share of proportionate liability.

Erie Doctrine Issues

One significant problem with a federally initiated tort reform bill is Congress' inability to regulate state court procedural and substantive rules. The federal government's judicial rulemaking purview extends only towards federal courts, and as such, if Congress were to enact a tort reform measure, state courts would not be subject to the new rules (unless individual state legislatures chose to modify their own state court rules to mirror federal tort reform).