Orange County Register, June 29, 2007
Odessa American (TX), July 6, 2007
(More versions of this publication below)

How our sue-happy culture is costing the U.S. billions, and the competitive edge.

Not surprisingly, the wrangling over Mr. Pearson's pants is only the latest in a long line of such lawsuits. America's "out-of-control legal system imposes a staggering economic cost of over $865 billion a year" on business and the economy, according to a study released in March based on figures from 2006 by the Pacific Research Institute, a free-market think tank in San Francisco. That figure includes all costs related to tort law, including administrative and legal fees as well as the cost of lost innovation for businesses. A "tort" is wrongful conduct or negligence by one person that results in injury to another.

One particularly striking consequence of our nation being sue-happy (remember the McDonald's hot-coffee incident?) is that it's hurting U.S. businesses' ability to compete overseasbecause it unnecessarily raises costs. PRI found that the U.S. spends 2.2 percent of gross domestic product on direct tort costs, whereas other advanced countries spend an average 0.9 percent. This means that more than half of all U.S. tort costs are excessive, if compared with other advanced countries, PRI estimates. When our rivals don't face a constant barrage of absurd lawsuits, they gain a competitive advantage.

Of course, access to the courts is necessary for consumers and businesses as a system of checks and balances in the marketplace for serious misdeeds and product failures. However, lawsuits too often become the first-reach response to compensate for even the smallest misfortune, and sympathetic juries too often order companies to pay large sums to individuals who see the court system as little more than an ATM.

The situation in California is among the worst nationally; the state ranks in the bottom 15 of states for its overall tort system, based on a variety of factors such as cost, according to PRI.

What are the potential reforms? In the U.K., as in other developedcountries around the world, losing plaintiffs are required to pay the court costs. This allows for serious allegations of business negligence and the like to surface, supported by strong evidence, while keeping citizens from taking advantage of the system to score a big payday.

PRI's research gives credence to a growing movement for legal reform in the U.S. "If tort reforms that eliminate waste are enacted in the United States, the U.S. economy will approach its full productive potential," PRI argues, adding that roughly $684 billion in annual wealth is lost to U.S. stockholders because of tort lawsuits.

In California, one potential improvement is Assembly Bill 1505, which is currently in committee. It would bring balance to standards for class-action lawsuits, making it more difficult for " 'get rich quick' nuisance suits" to be filed, supporter Allan Zaremberg, president of the California Chamber of Commerce, said in a statement.

AB1505 would be an important first step in tort reform, and perhaps it's time to examine seriously a similar policy to that of the U.K. Then people may have to start taking responsibility for their own risks.