Tuesday, September 23, 2003

Trial lawyers raked in $40 billion last year from lawsuits, according to a report released yesterday by a New York think tank.

Lawsuits over issues such as asbestos, mold and medical malpractice — but not tobacco settlement payments — cost a total of $205.4 billion last year, according to the report by the Manhattan Institute, which promotes free-market economics.

The study surveyed the lawsuit industry’s size, scope and reach in the U.S. economy, reporting that lawsuits from 1975 through 2001 had cost $2.8 trillion.

“Most Americans can point to a wacky lawsuit, but many aren’t aware just how large of a big business” the industry is, said James Copland, director of the institute’s Center for Legal Policy.

Attorney fees at large firms have jumped from $500 an hour to as high as $30,000 in the last decade, according to figures from global management consulting firm Tillinghast-Towers Perrin.

Plaintiffs’ attorneys take home 19 percent of an average settlement, while defense attorneys net 14 percent. Plaintiffs receive 22 percent for economic losses and 24 percent for other injuries. The rest goes toward administrative costs.

The high legal fees and large settlements have turned some lawyers into overnight millionaires.

About 300 lawyers from 86 firms were projected to earn up to $30 billion total over the next 25 years from the 1998 tobacco settlement, in which four big tobacco companies agreed to pay the states $246 billion.

Those lawyers have turned their interests to other industries “with deep pockets,” the report said.

Baltimore trial lawyer Peter Angelos, who claimed $1.1 billion after representing Maryland in the tobacco settlement, led the movement for asbestos lawsuits. He now is suing manufacturers of cell phones for failing to warn consumers about the risks of brain tumors.

Lawyers so far have brought 600,000 asbestos lawsuits, which have bankrupted 67 companies and resulted in $54 billion in settlements. The final price tag is projected to reach $275 billion, the report said.

Congress is considering legislation to limit asbestos-related lawsuits. The plan would establish a trust fund for victims and set defined medical standards for claims.

Medical malpractice awards have risen to an average of $1 million, while insurance premiums have jumped 30 percent to 75 percent nationwide in the last two years.

While Maryland and Virginia have caps on medical malpractice lawsuits, no limits have been set in the District. Maryland limits pain and suffering damages this year to $620,000 per case with an increase of $15,000 per year. Virginia sets a total cap at $1.7 million.

Trial lawyers have expanded into new markets by targeting industries like food companies, lead-paint manufacturers, pharmaceutical companies, health care firms, toy makers and security services.

They also contribute to political campaigns, use “consumer action groups to improve their media image and seek new plaintiffs through direct mailings, the Internet and television commercials,” the report said.

The lawyers argue that lawsuits are part of an individual’s fundamental right to seek justice in the courts.

“This is another recycled study financed by the insurance industry and put out by organizations supported by the insurance, tobacco, chemical and other industries,” said Carlton Carl, spokesman for the Association of Trial Lawyers in America.

The report, backed by the U.S. Chamber of Commerce and Sen. Jeff Sessions, Alabama Republican, comes as Congress has introduced a wide array of tort-reform bills.

While the Senate rejected a proposal to cap medical malpractice awards, other legislation is pending, including a bill that would keep more class-action lawsuits in the state courts and a measure prohibiting obesity-related lawsuits against the food industry.

“When we talk about a $40 billion operation that is bigger than Coca-Cola or Microsoft, we’re talking about a big business that deserves the same scrutiny and regulation like any other big business,” Mr. Sessions said yesterday at the Manhattan Institute’s press conference in Washington.

Mr. Carl argued that the legislation would cause further harm to victims of fraudulent health maintenance organizations, credit-card billing practices, toxic substances and corporate accounting scandals.

“At the end of the day, that sort of legislation takes away the legal rights and says the sponsors don’t trust the juries — the American people — to decide on cases,” he added.

Former U.S. Attorney General Dick Thornburgh said the report highlights the need for legislation to prevent “frivolous” lawsuits from clogging the court system.

“Litigation reform won’t happen overnight, but there is a growing public support to fix what has become a very broken system,” he said.

When calculating the costs of the litigation, Tillinghast-Towers Perrin included insured costs and overhead, self-insured costs and medical costs. The measures did not include tobacco settlement costs, most contract and shareholder litigation costs, most punitive damages costs or indirect costs like reduced innovation or investment.

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