- The Washington Times - Thursday, January 27, 2005

As he begins his second term, President Bush has spotlighted the urgent need for tort reform to restore predictability and fairness to the U.S. civil justice system.

We actively support that effort at the federal level and, with today’s launch of the American Justice Partnership, intend to match it with a similar push in the states. As important as it is, federal reform is just one battle in the ongoing war to rein in frivolous lawsuits and out-of-control awards against reputable companies that create jobs and drive our economy.

Jackpot justice has saddled America with the most expensive tort system in the world, costing $246 billion a year — or 2.23 percent of GDP, compared to less than 1 percent in Japan, France, Canada and the United Kingdom.

Our lawsuit-happy culture is a growing disadvantage for U.S. businesses that must compete in a global marketplace. The system is a drag on our entire economy except for the trial lawyers industry, which rakes in $40 billion annually — more than Microsoft or Intel and nearly double Coca-Cola revenues.

Enough is enough. These economic factors are at the heart of why the National Association of Manufacturers is establishing the American Justice Partnership. This new group will focus on legal reform at the state level by helping coordinate various pro-reform organizations under an integrated plan.

The Partnership will provide leadership and funding to help shape the environment so the public will support pro-reform candidates and common-sense legislation (or court rules) that reverse the trend of outrageous lawsuits and verdicts. The Partnership will initially focus its efforts on a dozen battleground states where needed legal reforms are achievable or where reforms need to be defended.

More than 16 million lawsuits are filed annually in state courts — one about every two seconds. The judicial systems in certain states and local jurisdictions are so far out of balance it is almost impossible for corporate defendants to get a fair trial. And these jurisdictions have become magnets for lawsuits from other areas around the country.

Hampton County, S.C., is one such jurisdiction where favorable treatment and large verdicts attract plaintiffs’ lawyers. Residents of other counties and states filed two-thirds of the lawsuits initiated in Hampton County in 2002. In one instance, a woman from outside the county — allegedly injured on a flight from Georgia to New Jersey — filed suit against Continental Airlines in Hampton County on the basis that one could buy the airline’s tickets over the Internet there.

A crucial part of the Partnership’s mission is to educate the public about its huge stake in the outcome of reform efforts. The average U.S. family of four pays a “tort tax” of $3,380 a year in higher prices, insurance rates and health-care costs.

When U.S. businesses incur the price of an unfair liability system, it is eventually passed on to all Americans when they pay more for nearly everything they buy, take home smaller paychecks from their employers and earn less as shareholders. The cost of frivolous lawsuits also discourages companies from hiring more people and launching new ventures.

What’s needed is a legal system that fairly balances the interests of consumers and producers. Today, while many lawyers hit the jackpot on lawsuits, less than 50 cents of every dollar spent on litigation actually goes to plaintiffs.

A good example is a recent proposed nationwide settlement in a class-action lawsuit against American Express for alleged problems with the company’s Membership Rewards Program. Like many companies facing years of possible litigation and related high costs, American Express decided to settle.

Under the proposed settlement, the members of the “class” who properly submit claim forms will each get 2,500 rewards points (enough for a $25 gift card to selected retailers). And what about the plaintiffs’ lawyers? The four of them will divvy up $1.4 million (they convinced the judge to let them bill this case at twice their usual rates). They’ll also get 50 million American Express Rewards points — with a retail value of about $500,000 — that they can redeem for ocean cruises, flat-screen TVs, entertainment, fine dining and other luxury perks. By contrast, the cardholders these lawyers supposedly helped will be lucky to afford a new pair of jeans with each plaintiff’s share of the giant settlement.

This legal system lotto run by the trial bar is a scandal that costs our citizens every day. With President Bush bringing unprecedented attention to the issue at the national level, the American Justice Partnership will seize a unique opportunity to seek state reforms by engaging the public’s interest. For judicial reformers everywhere, now is the time to act.

John Engler, former Michigan governor, is president of the National Association of Manufacturers. Dan Pero is president of the American Justice Partnership.

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