Critical Section


how to fix the tort system

Thursday,  08/04/05  10:46 PM

BusinessWeek had a great cover story: How to Fix the Tort System.  If you're a regular reader you know this is a subject near and dear to my heart.

BW offers a four-point plan:

  1. Pay for Performance.  "Solution: Reverse the economics of class-action settlements. Plaintiffs' lawyers should be paid after victims collect their money -- not before."  This has been my favorite; make behavior which is undesirable unprofitable, and people won't engage in it.  Even lawyers.
  2. Penalties that Sting.  "Simply rewriting the rules only solves part of this problem, though.  An equally important step is for judges to rise to the challenge and use their disciplinary powers.  For too long, a cozy, protect-the-guild mentality has protected exploitative attorneys from serious punishment."  Okay, I'll buy that.  But I think (1) is a better driver than (2).  {People don't wait at green lights because they'll get a ticket, they wait because otherwise they'll hit other cars.}
  3. Curb the Duplication.  "The first [idea] would be eliminating punitive damages for injuries caused by products that have been approved by regulators.  A second idea is giving judges explicit authority to reject class actions that duplicate ongoing regulatory initiatives."  This helps businesses by eliminating multiple jeopardy.
  4. Exiting the Tort System.  "These three changes would solve many of the tort system's genuine problems, but not all of them.  There are rare issues that need to be removed from the courts -- with all of their elaborate procedural rules -- and directed into specialized administrative tribunals."  So be it.

These are good suggestions, but I think they missed one, too:

  1. Loser Pays.  Make the party which brings a frivolous suit pay the legal expenses of the defendant, and there will be fewer frivolous suits, because there will be fewer lawyers willing to take such suits on contingency.  Make the party which loses a legitimate suit pay the legal expenses of the plaintiff, and there will be more reasonable settlements, resulting in lower legal fees for the representing lawyers.

I sure hope something changes.  This is the biggest problem we have in American business today.

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