Knave of Torts

Cooler coffee for $3 million and other lawyer bargains


Why Lawsuits Are Good for America: Disciplined Democracy, Big Business, and the Common Law, by Carl T. Bogus, New York: NYU Press, 272 pages, $34.95

"What's good for the country is good for General Motors," Charles Wilson, a former chairman of G.M. and secretary of defense, once said. He added famously that "what's good for General Motors is good for the country." In Why Lawsuits Are Good for America, Carl Bogus, a professor at Rhode Island's Roger Williams University School of Law, says the same thing about lawyers.

A prominent opponent of tort reform, Bogus believes the current tort system is just fine. Horror stories from tort reformers about excessive jury verdicts are no more than corporate whining, he argues. What's more, eye-bulging awards simply represent the continued evolution of the common law as it adapts itself to changing times.

Judging from the complete failure of tort reform legislation at the national level, Bogus speaks for a special interest group that is politically more powerful than tort reformers: well-heeled plaintiffs' lawyers. They want the public to believe that the tort system that has evolved over the past 20 to 30 years—to the detriment of almost everyone but them—is fueled neither by their own greed nor by the greed of their clients. The Bogus spin on this theme is that the tort system is not about compensation at all. Really. See, if the tort system is not about compensation, then greed has nothing to do with how tort law has evolved.

This is a radical concept. Most people think the purpose of the tort system is precisely to provide compensation to individuals injured by the negligence of others. But Bogus has seen through this veil: "It is often said that the twin objectives of the tort system are compensation and deterrence. This book reflects a different view….If compensation were, in fact, one of its objectives, the system would make need a determining factor in whether it would give parties recoveries; but that is not the case….My thesis [is] that we should think of the tort system more as a regulatory than a compensation system….While [government] agencies must, admittedly, be the primary instruments of regulation, I argue that they cannot do the job alone….The people, after listening to evidence and reasoned arguments, work their will in the jury box as well." (Emphasis added.)

Got that? Tort law can't be about compensation for harm negligently inflicted because "need" (rather than negligence and injury) is not the "determining factor." If you can understand that, and if you agree with it, you should have no trouble with the Bogus thesis of juries as adjunct regulatory bodies rather than managers of lotteries in which a lucky few hit it big.

In the Bogus world, plaintiffs' lawyers have protected the public from "Corporate America" where the government has abysmally failed. Is there any evidence to support this contention?

In his 1995 book Simple Rules for a Complex World, legal scholar Richard Epstein notes that there are no studies that establish any correlation between the level of litigation and the level of product safety. He suggests that technology and wealth, not product liability suits, have made homes, workplaces, and roads safer than ever before. In other areas, Epstein writes, "the accident rate has risen just as the number of lawsuits has intensified: injuries requiring emergency room care were up for such products as playground equipment, ladders, power lawn mowers, swimming pools, and chain-saws, often by as much as 100 percent, even in the face of general technological advances."

Bogus knows better. Remember that lawsuit in which a woman initially won a $2.9 million jury verdict against McDonald's for burns she suffered after purchasing coffee at a drive-through window, unwisely placing the hot beverage between her legs, and removing the cover? Well, Bogus did some "field research" to prove that this jury verdict in fact resulted in product improvement. It wasn't easy. "For this book," he writes, "I wrote to several of the national fast-food restaurant chains to find whether they had reformulated their hot beverages as a result of the McDonald's case. Most ignored my letters. Burger King sent a vaguely threatening reply declining to furnish any information but stating I had better be sure whatever I said about Burger King was accurate."

Do you suppose the reason Epstein couldn't find studies showing a correlation between the level of litigation and the level of product safety was that Corporate America was stonewalling researchers? If so, Corporate America has met its match in Carl Bogus.

Here's what happened next: "I then dispatched my research assistant to eight local McDonald's, Burger King, Dunkin' Donuts, and Wendy's restaurants, armed with a candy thermometer and instructions to purchase cups of coffee and hot chocolate and measure their temperature immediately on receipt. He found that no beverage was hotter than 157 degrees Fahrenheit. Moreover, the hot chocolate at Burger King and Dunkin' Donuts was seven to nine degrees cooler than their coffee. The McDonald's case may still provide ammunition for tort reformers and late-night talk show hosts, but it may well have saved many people—children especially—from serious injury." In Epstein's defense, he didn't have the benefit of the Bogus field research when he published Simple Rules. No doubt a revision will be made in subsequent editions.

Bogus claims the asbestos issue as another victory for plaintiffs' lawyers in protecting the public. After recounting what he describes as the Environmental Protection Agency's unsuccessful efforts to ban asbestos in the 1980s, Bogus writes: "Fortunately, the common law saved the day. Lawyers began filing product liability actions against asbestos manufacturers in 1964, and the more than two hundred thousand cases that have been filed on behalf of workers and others with asbestosis, lung cancer, and mesothelioma have effectively driven asbestos from the market."

Not exactly. Bogus leaves an uninformed reader with the distinct impression that the only government agency involved with asbestos was the EPA; that the EPA didn't begin "to explore ways to reduce exposure to asbestos" until 1979; that it spent 10 years after that coming up with a rule limiting exposure to asbestos; that in 1991 the U.S. Court of Appeals for the 5th Circuit overturned the EPA's rule because the courts had been packed by Reagan with judges who shared his abhorrent "commitment to libertarianism"; that the EPA, "exhausted from a twelve-year process" that came to naught, simply "gave up" and left workers unprotected; and that, but for America's trial lawyers, workers would still be sucking asbestos dust into their lungs on a daily basis.

Bogus doesn't tell you that the Occupational Safety and Health Administration first established and began to enforce strict limits on asbestos exposure in the workplace in 1971. Serious asbestosis, over the course of the next 20 years, became what the 1994 edition of Occupational Lung Disorders termed "a disappearing disease." The Bogus claim notwithstanding, plaintiffs' lawyers didn't have much to do with it. In fact, many plaintiffs' lawyers today are doing their best to make sure those employees with serious medical conditions caused by exposure to asbestos dust, such as mesothelioma and other cancers, won't receive any compensation.

That's a current target for tort reformers that Bogus remains silent about. As Roger Parloff reported in the March 4 issue of Fortune, plaintiffs' lawyers have filed hundreds of thousands of new asbestos cases in the past three years on behalf of relatively unimpaired clients with no malignant conditions. On April 1, the U.S. Supreme Court agreed to hear one in which a West Virginia jury had awarded $5.8 million in damages, including compensation for emotional distress arising from the fear of sometime in the future developing asbestos-related cancer, notwithstanding the absence of any objective medical corroboration of that fear.

Parloff explains that the consequences of such suits for those few who have been stricken with asbestos-related cancer is a dwindling number of solvent manufacturers able to pay any adverse verdicts. Fifty-five asbestos defendants have filed for bankruptcy since 1979, 16 in the last two years alone. The sheer greed of tort lawyers who represent unimpaired clients has driven asbestos lawyers who represent only very sick plaintiffs to support tort reform designed to curb this abuse—if only to make sure there are some solvent defendants left standing at the end of the day. Parloff writes that such tort reform legislation would require plaintiffs to prove actual injury based on objective medical criteria before they could sue. It would also require them to file their suits where they lived or where they were exposed to asbestos, a provision that would discourage forum shopping.

It's difficult to imagine writing a book touting tort law as a regulatory regime and opposing all tort reform while avoiding any reference to the organized plaintiffs' bar, the American Trial Lawyers Association (ATLA), especially when you're constantly bashing the less politically influential American Tort Reform Association. But Bogus has done it. Not to mention (which Bogus doesn't) the astounding growth in class action litigation that has made many ATLA members wealthy and, in the process, the single biggest benefactor of the Democratic Party, surpassing even organized labor.

The only plaintiffs' lawyers Bogus writes about as a group are those poor souls who early on sued evil tobacco companies that vengefully "pursued a deliberate strategy of litigating so fiercely as to drive plaintiffs' attorneys into bankruptcy." You won't find out from Bogus that Democratic Party committees in 2000 received $11.6 million in contributions from well-off trial lawyers and their lobbyists, eclipsing the $11.3 million the Democrats received from labor unions.

Where did all this trial lawyer political money come from? That's something else Bogus doesn't mention: huge attorneys' fees from class actions typically filed in state courts. Curbing class action abuse is one of the hottest areas of tort reform, but Bogus doesn't mention that either. So you don't learn from Bogus why class action reform would be bad for America.

Here's how one federal appellate judge, John Nangle, described the current class action problem in a concurring opinion he filed as part of a recent decision that reluctantly sent a large interstate class action back to state court. "Plaintiffs' attorneys," he wrote, "are increasingly filing nationwide class actions in various state courts, carefully crafting language…to avoid …the federal courts. Existing federal precedent [permits] this practice…, although most of these cases…will be disposed of through 'coupon' or 'paper' settlements…virtually always accompanied by munificent grants of or requests for attorneys' fees for class counsel….[T]he present [jurisdictional] case law does not…accommodate the reality of modern class action litigation and settlements."

You would think that Bogus, as someone whose thesis is that tort law should be viewed as an adjunct regulatory system, would be eager to tell us about the selfless efforts of the plaintiffs' class action bar over the past decade to establish nationwide standards using the juries of Madison County, a small rural area in southwest Illinois. The largest towns in Madison County are Granite City (31,301) and Alton (30,496). Yet it is a mecca for lawyers far and wide. As a recent Manhattan Institute report by John Beisner and Jessica Miller notes, "of the 66 plaintiffs' firms that were listed on the Madison County case files, 56 (or 85 percent) listed office addresses outside Madison County. These attorneys reside and practice in far-flung locations, such as New Orleans, Louisiana; Lexington, Mississippi; Washington, D.C.; Houston, Texas; San Francisco, California; and Mobile, Alabama."

As Beisner and Miller report, 70 class actions were filed in Madison County between 1990 and 2000, a 1,850 percent increase over the previous decade. These lawsuits, all with national implications, dealt with issues such as automobile repair (30 million consumers); telephone bills (20 million consumers); cell phone connections (10.8 million consumers); clogged drains (consumers in 31 states); auto insurance (4.7 million consumers in 48 states); Barbie dolls ("thousands" throughout the country); cable late fees (7 million consumers in 40 states); fiber optic trespassing (millions of property holders nationwide). That the juries of Madison County should be establishing national standards in all these industries is a bad joke.

Most lawyers outside of the ATLA agree that federal courts are better equipped than state courts to handle national class actions in a competent and consistent manner. Proposed tort reform legislation, supported by the Bush administration, would amend current law to permit any defendant to transfer a large, multistate class action from a state court to federal court when 1) at least one plaintiff and one defendant are from different states and 2) the total amount in controversy is at least $2 million. (Current law bars federal courts from hearing class actions where any of the named plaintiffs and named defendants are from the same state and requires that each proposed class member have a claim exceeding $75,000.)

The proposed reform also would require federal judges to scrutinize settlements where coupons are offered instead of monetary damages; where plaintiffs suffer a net loss; and where named plaintiffs receive larger recoveries than other class members. In addition, class action settlement notices would have to be written in "plain English," a foreign language to most lawyers.

As you can tell, Bogus doesn't trust Corporate America. Nor does he trust free markets, and he doesn't much like libertarians either. He sets up this straw man to explain why: "The libertarian view is: let the free market reign. If consumers want style rather than safety, let them have it. It should not be government's role to force people to buy what they do not want. The market decides whether cars have contiguous frames, shatterproof windshields, protected gas tanks, air bags or seatbelts, and what the height of SUV bumpers ought to be. But of course, it is more complicated than that."

Considerably more complicated. As Richard Epstein explains in Simple Rules, "the American experience with product liability law turned bad when judges and legislators lost faith in the ability of consumers to deal competently with the mix and quality of ordinary products. No longer is it sufficient to provide a consumer with enough information about a product to decide whether or how to use it, or indeed whether to inquire further before making that decision. There has been no acknowledgment of the mistaken assumptions on which the modern edifice rests.

Instead of seeking to supply information, product liability law, with legislative support, still seeks to govern production, but always after the fact and in a standardless way. In its former role, the law aided the operation of the market by helping market actors make informed decisions. In its modern incarnation, the law has powerful antimarket origins and consequences. The rules are designed to override consumer preferences and to allow judges and juries to assume the role of design and warning experts. They have not been good at their job; nor could we expect them to be."

The Bogus hostility to libertarians manifests itself in other ways as well. He contends GOP senators engaged in "loathsome…racial politics" by opposing two black Clinton nominees to the U.S. Court of Appeals for the 4th Circuit. As sole proof for this ugly charge, Bogus tells us that Judiciary Committee Chairman Orrin Hatch "did not even schedule confirmation hearings" for the two nominees.

Imagine that. I'll bet that doesn't happen now that the Democrats are in charge of the Senate. Oh, wait. In May 2001, Bush sent the Senate 11 nominees for federal appellate courts; over a year later the Democrats still hadn't scheduled hearings for eight of them. One of them is Hispanic heavyweight Miguel Estrada, nominated for the prestigious D.C. Circuit and thought to be on Bush's short list for the first Supreme Court vacancy. Do you suppose Bogus would find the anti-Hispanic politics here to be as "loathsome"?

Anyway, Bogus claims that as a consequence of the Republicans' racial politics, libertarians were the winners because "Clinton had to compromise to move nominees through the Senate. In short, Clinton …did little to temper the laissez-faire, libertarian, anti-regulatory disposition of the federal courts."

Speaking of federal judges and libertarians, here's Bogus taking on the federal appellate court judge Richard Posner and the legal school he helped pioneer: "Law-and-economics emerges not merely as a field of knowledge but as a system of belief. It has its own values, and like all creeds it seeks to have its values prevail over competing values. Suffice it to say that (1) the tradition of the common law, and especially American common law, is pragmatism; (2) the antithesis of pragmatism is dogmatism; and (3) whatever truths it may or may not have discovered, law-and-economics is dogma."

Apparently, a statist is a pragmatist because he calls for control over choice and believes product safety is best provided by government micro-regulation backed up by a horde of tort lawyers. A libertarian is a dogmatist because he believes devolved decision making by manufacturers and consumers leads to a more free, efficient, and safe society. After the empirical evidence from the Bogus field research on coffee temperatures, who could argue with that?