Tort Turns Toxic

Wednesday, February 26th, 2003

Tort Turns Toxic, by Steven Malanga, summarizes what has happened to our legal system, and why we’re so “sue happy” these days:

The tort mess began with a radical change in our civil justice system, presented as compassionate by its advocates. From colonial times, civil justice lawsuits required allegations of real negligence or broken contracts. But beginning in the 1950s, activist lawyers and judges succeeded in replacing the old tort system with a new one, based on the idea that people who had suffered harm while using a product or service should receive compensation regardless of whether negligence had anything to do with their misfortune. Over time, negligence all but disappeared as a legal concept, replaced by “strict liability,” which meant that anyone remotely linked to a product or service that caused harm might have to pay the injured parties, even if he’d done nothing wrong. Under strict liability, doctors and hospitals guilty of no demonstrable negligence, for example, now found themselves facing — and losing — birth-defect lawsuits. The courts simply assumed that insurers would pack the costs of such judgments into the premiums doctors paid, and that the doctors in turn would pass those costs on to the rest of us in the form of higher medical fees. Misfortune would be compensated, and the cost would be spread across society.

Sounds reasonable, but what kind of incentive system does this set up?

One reason the trial lawyers have so much to spend on politics is the contingency-fee system. Under this system, lawyers get paid only for cases they win — typically 15 to 40 percent of each judgment. But as awards have grown humongous, fees increasingly bear little relation to any actual work the lawyers have done. In a Texas case that produced a $122 million payment to the families of victims of a fatal bus accident, for example, lawyers merely participated in settlement negotiations and never set foot in court — but scooped up $40 million in fees, or about $25,000 an hour, estimates Cardozo law professor Brickman. But even such mammoth sums seem tiny when compared with the fees from tobacco litigation. To date, lawyers have won nearly $13 billion for themselves, with some estimates of their hourly rates running as high as $100,000.

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