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Tort Reform

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I said many years ago that the plaintiffs' bar attitude of being able to sue anybody for anything for whatever amount of money they can convince a jury to award would bite them in the ass. This BusinessWeek article says it's happened:


The American Lawyer, an influential trade publication, recently declared an end to the era of mass-injury class actions, but the changes are far broader than that. Courthouse doors have slammed shut on a wide variety of claims. Michigan, for example, has virtually wiped out all lawsuits against drugmakers in the state. Six states have passed laws seriously restricting the kinds of asbestos suits that can be filed, and 23 now have statutes saying you can't sue the likes of McDonald's (MCD ) for making you fat. Damage limits in many states have rendered medical malpractice litigation nearly comatose.

Both federal and state courts are reinforcing the trend. In December a U.S. appeals court in New York nixed a class action accusing investment firms of manipulating the price of initial public offerings. That was a big loss for securities fraud plaintiffs' lawyers, especially in a year when the total number of shareholder suits filed was about half the level of prior years, according to statistics compiled by Stanford Law School. In 2005 the Illinois Supreme Court struck down a $10.1 billion judgment against Philip Morris (MO ), saying a state law protects the company from suits alleging that its marketing of "light" cigarettes was deceptive.

It all adds up to an extraordinary turnabout for the plaintiffs' bar, which has reveled in public-savior images of its top guns hauling Ford (F ) and Firestone into court for disintegrating tires; standing side by side with state attorneys general to extract $300 billion from cigarette makers; and trotting up courthouse steps with smoking-gun Enron documents. These days the law firm that once was the nation's most prolific filer of shareholder lawsuits is under indictment, thousands of asbestos and silicosis claims are being probed for fraud, and Vioxx litigation, once thought to be a gravy train express, is chugging in reverse. (Of 12 cases tried to verdict involving the painkiller, Merck & Co. (MRK ) has won 8.)

Even many victories are evanescent. According to a report issued by Beasley, Allen, Crow, Methvin, Portis & Miles, an Alabama personal-injury firm, the Alabama Supreme Court reversed 27 of 31 plaintiffs' verdicts during its 2004-05 session. Thomas J. Methvin of the firm asserts: "It's a tough time to be a plaintiffs' lawyer, and it's a tough time for consumers."

Of course, when plaintiffs' attorneys see a falloff in business, lawyers opposing them do, too, and in Texas both sides are feeling the pain. Surprisingly, even businesses may occasionally feel the sting of lawsuit reform. Plaintiffs' lawyers, closed out of their traditional pursuits, are working harder to drum up claims companies can bring against one another. Additionally, the conservative legal climate may be making it harder for companies that believe they have legitimate claims to get what they feel they're entitled to when they file a lawsuit.

If the plaintiffs' bar had been proactive and sought to reduce the most ridiculous, high profile cases from coming to fruition, this might not have happened. The problem is that they have no way of stopping cases without tort reform since each laywer acts as an individual agent. In other words, coordinated action would be beneficial to trial lawyers overall, but each individual acting alone makes decisions which negatively affect the whole. If I'm not mistaken I think this is called the common agent problem.

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