BOSTON–(BUSINESS WIRE)–Illinois and West Virginia are about the last states in which you would want your company to do business. Following close behind are California and Pennsylvania as among the states with the worst litigation climates for business and the highest risk for lawsuits.
These are just some of the findings in Directorship’s second Annual Boardroom Guide to State Litigation Climates published in the June/July 2008 issue of Directorship and produced in collaboration with the American Justice Partnership Foundation and its team of nationwide legal reform experts.
“No subject is so divisive, distracting, or erodes shareholder value more than frivolous but costly litigation,” says Jeffrey M. Cunningham, chairman and CEO of Directorship.com. “Conversely, we all recognize the need for a legal system that dispenses justice and penalties when and where appropriate. But our system of torts has become a feeding trough for the worst breed of legal huckster and the threat is compounded by the flow of political contributions to candidates who are more than willing to ease the way for this kind of litigation at the legislative level.”
Nor is it time for companies who do business in states with positive litigation reputations to become complacent about tort reform, writes author Steven B. Hantler, chairman of the American Justice Partnership Foundation. In fact, 10 of the 18 states in this year’s Guide with positive liability climates are trending downward at a time when tort costs continue to rise.
“The plaintiffs’ bar counts on being able to take company CEOs and directors by surprise when they file major lawsuits that are based on expanded or previously overlooked state liability laws,” says Hantler. “These plaintiffs’ lawyers try to create the ‘perfect storm’ by filing lawsuits with unwarranted high demands while encouraging the news media to publicize sensational allegations of wrongdoing. Their goal is to create severe pressure in the marketplace and thus extort companies into agreeing to settle the claims for outrageous amounts. The solution is for CEOs and directors to understand the plaintiffs’ lawyers playbook and how to beat them before there is a litigation crisis.”
There are some encouraging notes on this year’s findings, however. Savvy directors and business executives should take second looks at Tennessee, Utah, Indiana, Ohio, Nebraska, Virginia, and Texas which have among the best litigation climates for business.
The high-level risk analysis–intended for busy board directors and their advisers as they make strategic business decisions such as where to open an office or plant–is based on the expertise of the AJP Foundation combined with the results of two national research indices: the Pacific Research Institute’s 2008 U.S. Tort Liability Index and the 2008 ILR/Harris State Liability Systems Ranking.