Thoughts on tort reform

Joe Kelly has some thoughts about a woman suing Coors Brewing Company after her nineteen year-old son was killed in a drunk-driving accident. This reminded me of a conversation I had last week where I speculated on tort reform and what a loser-pays system might look like.

Currently, if you bring a lawsuit against someone, as this woman is doing, the defendant must pay legal expenses even if he, she, or it (in the case of corporations) wins the case. This allows for abuse of the system in various ways. For example, if you want a company to stop doing something, you can sue them and they may stop because it would cost them more to defend against the suit then they're willing to pay in order to go ahead with their plans. Or you can file a suit expecting that the defendant will settle, again because it would cost less than to defend against the suit. The case mentioned above will likely turn out this way if it is not dismissed outright.

There are two reforms that I can think of that would significantly reduce this type of abuse.

1. Laws that prohibit lawsuits where the defendant is clearly not responsible for the misuse of their products. Two examples of such legislation already exist. The first would have provided protection to the firearms industry against lawsuits arising from criminal misuse of their products. If the gun was sold legally and was not defective, then lawsuits against the manufacturer and/or dealer would not be allowed to continue. They could still be filed but then they would be evaluated against certain objective criteria and then dismissed if it did not meet them. In cases of defective products or negligence, the case would be allowed to continue. Many opponents of this legislation claimed that it would grant immunity from lawsuits to the firearms industry. These people are flat-out lying, or are simply ignorant. The legislation passed the House in its original form but was so heavily amended in the Senate (extension of the assault-weapons ban and other amendments that were blatantly unconstitutional were tacked on by Senator Feinstein and her fellow gun-confiscation proponents) that the primary sponsor of the bill called for its defeat because it was too badly corrupted to be allowed to pass. It was voted down but may show up again next year. The second is, as far as I know, still pending and would provide similar protection to the fast-food industry.
   
   It's unfortunate that we need such legislation in the first place. However, if we are going to do it, I'd prefer to see a law that addresses the general case instead of focusing on particular industries.



2. A loser-pays system. If you bring a lawsuit against someone, and you lose, you pay all the legal costs of the defendant as well as your own. It would make it more likely that a defendant would defend against the suit instead of settle as they would have little or nothing to lose. The law could require that the plaintiff put up a bond of a certain amount which would be forfeit in case they lose. Should the costs be less than the bond, the plaintiff would get back the difference. Should the costs be more, they would be billed for the difference.
   
   In addition, I speculate that legal firms might change how they handle such cases. First of all, they would be less likely to take a case if they're not reasonably sure they can win. Second, they may offer, as part of their service, to pay in case they lose, or a form of insurance could be offered that does the same thing. This would add to the costs borne by the plaintiff in case they win but would protect them against a potentially crushing cost should they lose. In any case, the defendant would be spared potentially crushing legal costs to defend the case in the event they win.