There is a business war raging among the states, a competition of bare knuckles and sharp elbows. Every state runs a marketing operation euphemistically termed "business development" meant to divert jobs from its 49 peers.

As the judges, CEOs assess many metrics, some subject to change (taxation levels, regulatory simplicity), some indelible (climate, mountains and beaches). But recently CEOs have taken to turning to their general counsels for legal advice on site selection. Why? America has 50 civil justice systems and even the best suffer from some dysfunction.

It's largely because of the condition of state civil justice that direct U.S. tort costs, measured by business consulting firm of Tillinghast, hit a record $260 billion in 2004, or $886 per person. Driving the trend are skyrocketing medical malpractice tort costs.

Companies are sensitive to the risk of subjecting their brands to absurd judgments in litigious jurisdictions. In recent years, asbestos lawsuits have bankrupted companies with little or no link to asbestos, and car companies have been slammed with multimillion-dollar verdicts from plaintiffs who didn't wear seat belts or might even have been driving drunk.

CEOs need a comparative legal metric to evaluate states. A new study, the U.S. Tort Liability Index, published by the California-based Pacific Research Institute, ranks all 50 state civil justice systems, taking into account those that have relatively high tort costs and those that have enacted reforms.

Taking first place is Texas. In last, having the nation's worst tort system, is Vermont (see chart). Numerous factors are weighed to come up with the national rankings, from monetary tort losses to the ratio of attorneys per dollar of gross state product.

Are these findings real world or just mathematical gamesmanship?

After enacting sweeping reforms in 2003, Texas won the Governor's Cup for the largest number of job creation announcements by Site Selection magazine. At a time when underwriters are fleeing the medical liability market, 15 new insurance firms entered Texas. Its job growth rate last year was more than triple Vermont's.

In categorizing states, we thought it useful to rank their prospective outlook. Some are saints -- such as Kansas, Michigan, Texas, Utah and Virginia -- well positioned due to their relatively low monetary tort losses and meaningful reforms.

Some are sinners -- such as Alabama, Florida, Illinois, New Jersey, Pennsylvania and Vermont -- positioned to drop in future rankings or stay at bottom.

Then there are salvageables, states with medium or high relative monetary tort losses, but that have enacted meaningful reforms likely to propel them upward. Leading this pack are Georgia, Mississippi and South Carolina, where strong governors and legislative leaders have recently pushed through wide-ranging civil-justice reforms.

But with the trial bar always searching for legal loopholes and favorable forums, even the saints will have to improve their tort systems to maintain a competitive advantage.

Their efforts will be well worth it. A recent study by scholars Todd Buchholz and Robert Hahn finds that per-capita gross state product increased by 0.75% for every 10% improvement in a state's legal ranking, boosting wage-growth opportunities.

When you consider that U.S. tort costs far exceed other major countries, you'd think the U.S. as a whole would reassess its place as the ultimate legal sinner. Yet for the foreseeable future, federal civil justice reform will likely remain locked up by Senate filibusters. Thus, the battleground for change will continue to be in the states.

The path to sainthood is never easy. But, as the philosopher Eric Hoffer said, "passionate sinning has not infrequently been an apprenticeship to sainthood."