“SHEDDING LIGHT ON THE LITIGATION INDUSTRY:
THE CASE FOR CIVIL JUSTICE REFORM”
Remarks by
Dick Thornburgh
Former Attorney General of the United States
Counsel, Kirkpatrick & Lockhart LLP
To A Conference on Understanding and Addressing
Threats to American Free Enterprise and Prosperity
Sponsored by Koch Industries
Aspen, Colorado
Monday, June 28, 2004
DC-650209 v1
Judge Learned Hand, one of America’s most revered jurists, once observed that
“litigation is to be dreaded beyond almost anything short of sickness or death.” Despite this
stern admonition, the United States has become the most litigious society on earth. We seem to
seek a totally risk-free environment and when anything untoward occurs, the first question likely
to be asked is “Whom do I sue?” Our courts are clogged. Litigation has become increasingly
costly, complicated and lengthy. Public dissatisfaction with lawyers and our justice system is
widespread. While we have not quite reached the state where the Shakespearian call to “Kill all
the lawyers” is forthcoming, the signs across our society are ominous.
Our tort law system, in particular, has become something of a legal lottery, propelled by
visions of huge damage awards and equally outsize legal fees. It imposes what amounts to a
liability tax on all providers of goods and services and hampers innovation and scientific advance
in many key areas. Mega-fees are recycled back into the political process to preserve the status
quo and stifle attempts at even modest reform. A “victim syndrome” eats away at the very
concept of individual responsibility which has made this nation what it is.
Now, I do not wish to be misunderstood. With all its faults, I still believe our civil justice
system constitutes the finest vehicle for dispute resolution in the world today. I support the
concept of adequate compensation for harm done. I believe in our jury system. And I do not
seek to undermine the concept of a just fee for legal services rendered. None of these basic
tenets should be threatened by suggested reform. But our system is not perfect and it deserves
careful attention to its faults lest those who oppose these basic tenets be given the opportunity to
carry the day.
What I will discuss today is the need for some common-sense changes at the margins. I
offer the view of one who has been a litigator for both plaintiffs and defendants. I will also refer
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back to the recommendations made by a Department of Justice Task Force chaired by then
Solicitor General Ken Starr while I served as attorney general. And I will draw on experiences
and conversations over the last decade or so in travels to over two-dozen states in the cause of
civil justice reform.
I hasten to add that what follows is my own “laundry list” – a bill of particulars not
drafted by any special interests or with anything more in mind than to fine tune a system that, by
and large, serves this nation well. Perhaps some of these suggestions will resonate with those of
you who are also interested in tort reform. Some will not. But my hope is to focus your
attention upon what my observations have led me to conclude are real faults in our present civil
justice system.
I.
Let me begin with money. Big money. And in our system that means punitive damage
awards. As the name suggests, punitive damages are meant to punish. They are awarded over
and above what is needed to make plaintiffs whole. By the end of the last century, punitive
damage awards had skyrocketed in the United States. Various remedies have been proposed, but
it took a truly outlandish case from the state of Alabama to bring things to a boil. An Alabama
doctor purchased a BMW automobile, only to later discover that his new car had undergone an
undisclosed touch-up paint job while in the dealer’s hands. He sued. Eventually he was to be
awarded $4,000 to compensate him for the harm done and a whopping $4 million (later reduced
to $2 million) in punitive damages. On ultimate appeal to the United States Supreme Court, the
award was struck down as “grossly excessive” and thus unconstitutionally violative of the
defendant’s right to due process and the case was sent back for reconsideration of the damage
issue.
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Incidentally, my own view is that the Court’s 5-4 decision in this case is somewhat shaky
in its legal reasoning and raises the specter of having every punitive damage award potentially
subject to Supreme Court review. But it clearly evidenced the high court’s dismay at the loss of
proportion inherent in such awards. My own reading of the case is that it was, in fact, an open
invitation to the Congress and state legislatures to deal with the problem by establishing some
limitations on punitive damage awards by legislative enactment. If so, the invitation has thus far,
with few exceptions, been politely declined.
It has always seemed odd to me that in dealing with the most anti-social acts which occur
in our society – criminal conduct – legislatures regularly establish the outer limits of punishment.
Terms in prison or monetary fines are always stated in flat terms or in maxima and minima under
sentencing guidelines. No criminal jury is ever set loose in uncharted waters and told to impose
whatever they wish in the way of penalties. Yet that is precisely what it done in many states with
regard to punitive damages in civil cases. The sky is literally the limit – and that limit is often
approached!
The answer? Why not legislatively limit punitive damages to a multiple – two, three or
four times, for example – of the compensatory award? The punitive character of these damages
would be retained as a deterrent to the kinds of egregious conduct sought to be deterred on public
policy grounds while the temptation to simply raid “deep pockets” would be restrained.
Moreover, it is worth considering what eight states have already provided in allocating part or all
of punitive damages which are, after all, quasi-criminal in nature, to the state rather than the
individual plaintiff, as is the case with criminal fines.
I am well aware that it is often observed that many truly outrageous punitive damage
awards are eventually reversed in the appellate courts or settled out of court after the verdict.
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The argument is therefore made “no harm, no foul” in that a just result is ultimately reached. My
answer? Why not cure the problem at the front end of the process rather than at the back end,
which uses up valuable trial and appellate court time in game-playing over the size of a punitive
damage award in a particular case. Statutory limits would accomplish this.
II.
Big money also figures in the oft-expressed misgivings about the size of lawyers’ fees in
civil litigation. This complaint is often coupled with observations criticizing frivolous or socalled “strike” suits brought by contingent fee lawyers to virtually extort a settlement from the
defendant. Settlement is seen as the lesser of two evils – the alternative being the expenditure of
time and money in defending even a frivolous claim. This analogy in the medical world is the
claimed practice of defensive medicine – unnecessary tests or treatments to forestall a
malpractice claim for failure to do so. In both cases, even the average layperson can see through
any attempt to justify these practices.
What to do? Many suggest an application of the so-called “English Rule” which imposes
the prevailing party’s legal fees in any civil suit upon the loser. This “loser pays” rule, as has
been pointed out by Judge Starr is, in fact, not an “English Rule” at all, but is, in fact, ‘the
everywhere but in America Rule,” being the standard practice around the world. Such a rule, by
whatever name, would surely inhibit frivolous suits, but, as critics astutely observe, it might well
deter truly impecunious plaintiffs from bringing suit at all, faced with the prospect of loss of the
case and a staggering legal bill for the defendant’s lawyers as well. Moreover, many countries
with such a rule have more broadly available government-funded legal services for low-income
plaintiffs than exist in our country.
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So is there no room for a “loser pays” rule in our system? One answer is that set forth in
the federal product liability bill vetoed by President Clinton in 1996. This modified “English
Rule” would use as a benchmark the final settlement offer made by a defendant before trial. If
refused by the plaintiff and a lesser verdict resulted, then the fees incurred by the defendant
following the settlement offer would be imposed on the plaintiff. This makes good sense to me.
It would both serve to winnow out frivolous suits and to promote the notion of advancing the
time of settlement by forcing the parties to make a more realistic assessment of their cases prior
to trial.
Another suggested remedy speaks to the problem of the high proportion of damage
awards (often 40 to 50 percent) which go to the lawyer in contingent fees rather than to the
claimant. The tobacco cases, which made millionaires our of many and billionaires out of some
at the trial bar, brought home vividly to the average American just how generously the system
treats the lawyers working for a contingent fee. Suggested remedies on this score would provide
a sliding scale of contingency payments by statute or court rule, e.g., 40% on the first $100,000,
30% on the next $400,000, 20% on the next $500,000 and a flat 10% on any amount over
$1,000,000. Or absolute limits on fees could cap them in the same manner as has been suggested
for punitive damages.
III.
A lot of the controversy surrounding civil suits these days results from the recent
predominance of the class action suit. Indeed, the Washington Post editorialized, “No portion of
the American civil justice system is more of a mess than the world of class actions.”
This mechanism was originally conceived as a vehicle for resolving large numbers of
similar claims in a single forum in order to reduce costs and relieve the courts of the burden of
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trying these claims separately. Today they have matured into often-contrived mega-actions
which are routinely forum-shopped into friendly jurisdictions to provide a potentially big payoff
for voracious plaintiffs’ lawyers.
Class actions have become a fungible commodity as plaintiffs’ lawyers seek “favorable”
jurisdictions in which to bring these actions to maximize their chances of prevailing and reaping
a large damage award. Often, numerous out-of-state plaintiffs can sue an out-of-state defendant
so long as a single plaintiff lives in the state.
It is in the class action suit where the fee system truly goes haywire. Lawyers’
compensation is often totally unrelated to the awards to individual plaintiffs – many of whom are
actually unaware of the action brought in their name as a class member. Frequently, multimillion dollar legal fees to the litigators are coupled with the award of a coupon to each of their
clients entitling them to a discount on some future purchase of a product sold by the offending
defendant. Even when a cash award is forthcoming, the result can be outrageous. My favorite
example is an Alabama federal antitrust class action suit where the jury found for the plaintiffs,
but awarded only a token one dollar in damages. The attorneys’ fee allowed by the court? Two
million dollars!
These actions have an even more sinister characteristic in their capacity to influence
public policy in entire industries or for the nation as a whole. Recent lawsuits targeting the
pharmaceutical industry are a good example. Others involve lawful products such as tobacco,
firearms and lead-based paint. This kind of “regulation by litigation” where trial lawyers take
the place of legislators, is a development decried by Economist Robert Samuelson who notes,
“Government by litigation subverts democracy; litigation as politics subverts the law.”
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Various proposals have been forthcoming to deal with class action abuse. Federal
legislation awaits action in the congress which would facilitate removal of such suits to federal
courts, vastly reducing state court jurisdiction and the frequent forum-shopping that accompanies
interstate actions. Cost-benefit tests for class certification; a requirement that plaintiffs “opt in”
rather than being forced to “opt out” of the class; and a prohibition on settlement classes are
other suggested remedies. In the final analysis, the best cure of all would be for judges to give
more careful scrutiny to settlement terms, to reward attorneys only on the basis of actual
accomplishments and to make more frequent use of neutral experts.
IV.
This leads to my final substantive area of concern. Here, I speak of so-called “junk
science,” the use of self-identified “experts” to establish sometimes-bizarre connections between
various products or practices and an equally dubious myriad of bodily injuries. If a so-called
expert’s curriculum vita demonstrates general expertise in a particular field, then almost anything
that person offers an opinion on – whether based on science or pure speculation – can constitute
legitimate testimony.
Junk science all too often provides a basis for enormous damage awards or settlements –
only to be proved utterly groundless when the dust has settled.
Consider the breast implant litigation. In 1982, a single plaintiff sued Dow Corning,
claiming, without any clear medical proof, that breast implants had caused a wide array of
ailments. Thereafter, a noted television journalist aired a story on breast implants which
included inflammatory statements based on the opinions of two doctors with no medical research
experience in the area of breast implantation. Members of Congress – and later the Food and
Drug Administration – picked up the issue and a series of public hearings roused public concern
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to a fever pitch. Years of litigation followed, millions of dollars were paid out in settlements and
the product’s principal manufacturer went bankrupt.
By now, however, the evidence seems overwhelming that there is, in fact, no causal
connection between implants and the injuries and ailments alleged by the claimants. Most
recently, the basis for these claims was soundly rejected by the prestigious National Academy of
Sciences. Yet, throughout this litigation, junk science experts were ready to stake their
reputations, at a price, on bogus theories linking breast implants to a host of bodily injuries.
And the beat goes on. We read today of claims that power transmission lines cause
cancer. Experts concocted the Audi 5000 phantom acceleration threat and a Baltimore lawyer
recently sued cell phone manufacturers – not because his clients have been injured, but because
they “may” someday fall victim to an as-yet undesignated danger!
Here again, the problem reached such proportions that the United States Supreme Court
had to step in. The Daubert and Joiner cases re-emphasized the importance of the trial judge
acting as a “gatekeeper” with respect to expert testimony. Under these holdings, it is the trial
judge who must ensure that juries receive only relevant and reliable evidence of causation that
passes minimal standards of scientific credibility and acceptability. Only an abuse of discretion
would warrant an appellate court to second-guess a trial judge’s ruling.
Justice Breyer, concurring in the Joiner case, referred to a further possible safeguard as
well. Reviving a proposal first made by Judge Learned Hand over a century ago, he suggested
the use of court-appointed “neutral” experts in lieu of the parties’ “kept” experts whose
conflicting testimony often completely confuses a lay jury. These “neutral” experts have been
available under federal rules since 1975 and their use would go a long way toward unraveling
complex scientific claims in the courtroom. In 1999, the American Association for the
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Advancement of Science launched a program to make independent experts available to federal
judges concerned about admitting “unreliable” evidence in their courtrooms and this movement
appears to be gathering a full head of steam.
V.
My final recommendation would be to revisit the effort to enact a federal product liability
law in recognition that our economy has become truly national and, indeed international, in its
character. Most American manufacturers produce their products to customers in one or more
states. They maintain distribution centers in a variety of others and sell those products in nearly
every state of the union. But they must put up with a crazy-quilt collection of 50 different state
laws which leave them often baffled as to what liability risks they must face.
And the costs keep going up and up – for all of us. Litigation not only increases the costs
to American businesses and, ultimately the American consumer, but it impedes our international
competitiveness as well. And this can cost jobs. Former Commerce Secretary Peter Peterson
notes that product liability is the area of law that poses the greatest threat to American
competitiveness and overall economic prosperity. Liability risks also have a negative impact on
the innovative process which has always been the distinguishing attribute of the American
research and development community. The drug Bendectin, a morning sickness remedy, for
example, was actually pulled from the market because annual sales could not support
expenditures for litigation and insurance, despite the fact that no claimant had ever prevailed
against its manufacturer. Who knows what other promising medical research leads have been
forgone for similar reasons?
A national product liability law incorporating the features I have discussed here today
would go a long way to dealing with this problem. The bill passed in 1996 with strong bi-
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partisan support would have accomplished this, but it was vetoed by President Clinton, an action
largely conceded to have been bought and paid for by the plaintiffs’ bar. As noted at the time by
a fellow Democrat, West Virginia Senator Jay Rockefeller:
“Special interests and raw political considerations in the White House have
overridden sound policy judgment. . . . The President needs these lawyers and
their money more than he needs good public policy.”
A renewed and measured bill would likely get a more favorable treatment this time, particularly
from a President who has already proved his mettle as a supporter of civil justice reform as
Governor of Texas.
VI.
Just what obstacles exist to reform efforts, however, is underscored in a recent
publication of the Manhattan Institute entitled Trial Lawyers, Inc., cast in the format of an
“Annual Report” on this thriving industry. After pointing out that annual tort costs, according to
the President’s Council of Economic Advisers, now top $200 billion -- $40 billion of which is
reaped by plaintiff’s trial lawyers in legal fees – the Report notes that the American Association
of Trial Lawyers was the third most generous PAC in the nation in the 2002 elections,
contributing some $2.8 million to federal candidates, 89% of which, incidentally, went to
Democrats. All told, the litigation industry has contributed a total of $370 million to federal
campaigns since 1990. And this is not to mention the vast sums contributed to state judicial
campaigns to insure continued “safe havens” for lucrative lawsuits. With war chests like this and
vested interests to protect, it can readily be seen that no reform will come easy.
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One final observation. Many Americans appear to think that issues of civil justice reform
are of concern only to lawyers, judges and law professors. Ordinary citizens find it hard to relate
controversy over legal principles to their everyday lives. I would suggest, however, that, in at
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least three areas, all Americans have a real stake in reform: enhancing our economic
competitiveness and ensuring job security; preserving our health care system and the viability of
medical research; and guaranteeing to all citizens a timely day in court. All of these interests are
adversely affected by present shortcomings in our civil justice system.
In the final analysis, perhaps the best piece of advice in this area came from a seasoned
litigator over a century and a half ago. It was Abraham Lincoln who observed:
“Discourage litigation. Persuade your neighbors to compromise whenever you
can. Point out to them how the nominal winner is often a real loser – in fees,
expenses and waste of time.”
In truth, the real losers from a failure to reform our costly tort system may well be
American working men and women. Our lessened ability to compete in world markets and
slower economic growth at home will generate fewer high-quality jobs and will result in a lesser
quality of life. Defending a system that promotes such a result does no favor to this country or
its citizenry.
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