The practice of law has traditionally been regarded as a profession with clear guidelines, rather than a cutthroat commercial business sector.
But as the participants on the first panel discussed today, aspects of the legal industry have become much more like a business.
Roger Parloff of Fortune magazine discussed the activities of third-party litigation funders in the transnational tort case against Chevron. Some of these funders have close ties to the plaintiffs’ lawyers in the case, which has been plagued by allegations of fraud.
Former Georgia Attorney General Thurbert Baker discussed other areas of third-party financing “I’ve never seen a greater threat to the integrity of the judicial system than third-party financing,” he said.
Baker addressed the numerous ethical issues that arise from lending, such as the threats to the attorney-client relationship. He noted that lawsuit lenders in many states are seeking legislation to exempt the industry from laws and regulations applying to other lenders.
Pete Snyder of New Media Strategies discussed how the plaintiffs’ bar advertises online for clients. In 2011, trial lawyers will spend more than $52 million on key word advertising alone, which is three times the amount that the Obama 2008 presidential campaign spent on its entire online advertising program. Some firms even create online front groups that masquerade as nonprofit health or public interest organizations in order to recruit clients. Snyder’s presentation can be viewed here.
Ken Goldstein of the Campaign Media Analysis Group discussed the prevalence of trial lawyer television advertising. Last year, the plaintiffs’ bar spent $844 million on TV ads, and that figure is expected to increase this year. In fact, trial lawyer advertising on TV has increased by an average of 8.1% each year since 2004, while other advertising levels have been flat. Trial lawyer ads are especially prevalent on morning and daytime TV. Goldstein’s full presentation can be viewed here.
The presentations on this panel clearly demonstrated that some sectors of the legal industry operate as high dollar commercial enterprises, far removed from the idyllic Atticus Finch-like images they promote to the general public.
We’re thrilled to honor South Carolina Governor Nikki Haley with the 2011 State Leadership Award at ILR’s 12th Annual Legal Reform Summit for her unwavering commitment to legal reform in the Palmetto State. In 2011, Governor Haley signed the “South Carolina Fairness in Civil Justice Act,” a major step in reforming South Carolina’s legal standards and improving the business climate.
Her commitment to passing important legal reform legislation in South Carolina will make her state more competitive in recruiting new businesses while offering certainty and stability to current ones. The South Carolina Fairness in Civil Justice Act caps most punitive damage awards at $500,000 or three times actual costs, whichever is greater, with a special exception to raise the award in extraordinary circumstances.
The 2011 State Leadership Award is the latest addition to Governor Haley’s impressive list of acknowledgements. She has been named a “Friend of the Taxpayer” by the South Carolina Association of Taxpayers and the “Palmetto Leadership Award” from the South Carolina Policy Council for her expertise on policy matters.
Elected in 2010, Governor Haley has been a steadfast champion of job creation and revitalizing the economy.
It is our great privilege to present the 2011 Research and Policy Award at ILR’s 12th Annual Legal Reform Summit to John Beisner for his numerous publications on important legal reform issues and for his great skill at analyzing policy issues. John’s creative and thoughtful policy analysis sets him apart from other lawyers and has had a major impact on legal reform policy development.
John played an integral role in crafting the landmark Class Action Fairness Act of 2005, and his many policy papers cover important legal reform issues such as class action litigation, discovery, third-party litigation funding, and the cy pres doctrine. He is a frequent writer and lecturer on class action and complex litigation issues, and has been an active participant in litigation reform initiatives before Congress, state legislatures, judicial committees and the European Union. In recent years, John has testified numerous times on civil justice issues before the U.S. Senate and House Judiciary Committees and state legislative committees.
John is co-head of Skadden, Arps, Slate, Meagher & Flom’s Mass Torts and Insurance Group. He focuses on the defense of purported class actions, mass tort matters, and other complex civil litigation in both federal and state courts. He has advised on numerous high-visibility corporate crisis situations, including congressional hearings, federal agency investigations, state attorneys general inquiries, and Government Accountability Office reviews.
We’re thrilled to honor the Business Council of Alabama with our 2011 Outstanding Organization Award at the Legal Reform Summit today for its continuing contributions to the legal reform movement in Alabama. The BCA has been a partner to ILR in our legal reform efforts for many years, and its work this year was instrumental to passage of important legislation that will make Alabama more competitive for businesses and job growth.
Under the leadership of President and CEO William (Billy) Canary and Chairman William Brooke, BCA has played an integral role in the passage of legislation on expert evidence, venue reform, post-judgment interest, and products liability.
In 2011, BCA backed a series of legal reform bills that were approved by the Alabama legislature, including a bill that protects retailers, wholesalers, and other distributors of products from being sued in product liability actions where the product comes in a "sealed container."
Since its founding in 1985, BCA has been an outspoken advocate of business and industry in Alabama. Its 5,000 member companies employ over 750,000 Alabamans. They are Alabama’s affiliate organization to the United States Chamber of Commerce and the National Association of Manufacturers.
The U.S. Supreme Court has considered several important business cases in recent years, with several more on the docket for the current term. But despite some high profile victories, the current Supreme Court is not uniformly pro-business, according to a panel on Supreme Court cases at ILR’s 12th Annual Legal Reform Summit.
On the panel, former U.S. Solicitor General Paul Clement and noted Supreme Court litigator Lisa Blatt discussed several recent cases, such as last year’s decision in Wal-Mart v. Dukes that severely restricted certain types of class actions. Clement noted that the Wal-Mart decision is already being cited in dozens of lower court decisions on class actions. Blatt discussed a few cases from last term where businesses did not get the outcome they were looking for, noting that federalism and states’ right issues can swing some justices against the business position.
Clement and Blatt also discussed several key cases that will be considered by the Court in the current term, including ones dealing with federal preemption, private property rights, standing, patent law, transnational torts and last year’s health care law.
The theme of the Institute for Legal Reform’s 12th Annual Legal Reform Summit today is hard to miss: “Jobs, Not Lawsuits.” Everyone in the country is focused on getting our economy growing and helping the millions of unemployed or underemployed Americans find jobs.
We all know the statistics: 14 million Americans unemployed; over 6 million of them long-term; over 9 million – or 19 percent – underemployed.
Job creation is the critical issue of our day, and the U.S. Chamber of Commerce has been on the front lines. In fact, a giant “JOBS” banner hangs in the front of the Chamber. It went up a few years ago and I wondered how long it would be there. Well, it’s still there. And getting people back to work is still the top priority of the Chamber.
Where do lawsuits fit into this? How does America’s legal climate affect job creation? Lawsuit abuse is simply one ingredient added to a potent mixture of job killers like over-regulation, high tax burdens, high costs, and volatility on Wall Street.
Looking at litigation from a broader perspective, we see a few troubling trends:
First, the fear of lawsuits is discouraging economic growth, suppressing innovation and preventing new or lifesaving products from reaching the market.
Ask small business owner Mike Carter, for example, how litigation uncertainty is impacting his business. His story was featured in ILR’s Faces of Lawsuit Abuse campaign.
Carter owns Monroe Rubber & Gasket Co., a small family business based in Louisiana. He testified this year that due to hundreds of asbestos claims his company is facing, he cannot hire more employees, though he needs about ten more workers.
The tragedy of his story is that Monroe Rubber & Gasket never manufactured any kind of asbestos product, yet since most manufacturers of asbestos have gone bankrupt, plaintiffs’ lawyers are casting a wider net, targeting solvent companies like his in the hope of finding plaintiff-friendly court systems to extort settlements from business.
This is just one example of a much broader problem. More than a third of small business owners have been sued or threatened with a lawsuit.
If targeted in a lawsuit, 71 percent of small business owners say, like Mike Carter, that they would have to hold back on hiring new employees. Small businesses employ two-thirds of the private workforce, so this could add up to quite a few jobs lost to lawsuits or the threat of lawsuits.
We’re also finding that we can no longer afford to look at U.S. litigation developments in a vacuum.
Plaintiffs’ lawyers are increasingly cooperating across borders, and they’re actively pushing for the loosening of rules here in the U.S. and abroad.
One result of this is we’re seeing the migration of non-US claimants and claims into the U.S. courts to take advantage of the liberal features of the U.S. system.
Another is the spread of global third-party litigation financing, which:
- Incentivizes frivolous lawsuits;
- Raises ethical questions about who controls the lawsuit;
- Weakens the attorney-client relationship;
- Artificially inflates settlement values; and
- Increases the volume of litigation, burdening the legal system. It’s a simple fundamental of economics 101. If you pour more money into the system, there will be more litigation.
The growth of third-party litigation financing will put more pressure on our legal system by bogging down our courtrooms. The last thing we need is America’s courtrooms becoming investment markets, further overwhelming judicial resources and slowing the administration of justice in our country.
Our state judiciaries are struggling enough as it is, receiving roughly only one percent of state budgets. And in 2010, 40 of the 50 states reduced state court funding.
These reductions threaten to paralyze state judiciaries. As a result, individuals and businesses throughout the country will find it increasingly difficult to access justice – and the consequent delays and interruptions of state judiciaries will wreak havoc on state economies.
Some have estimated, for example, that the national cost of inadequately funded judiciaries is around $28.5 billion dollars per year.
As a consequence, we need to make our courts more efficient – by taking such actions as creating specialized business courts in more states and increasing the use of alternative-dispute resolution or “ADR.”
I’ve mentioned a few of our ongoing challenges; however, there is good news. For example, 2011 was a great year for many important legal reforms, particularly in the states. In fact, comprehensive bills encompassing a number of core reforms passed in Alabama, Oklahoma, Tennessee, Texas, Wisconsin and South Carolina this year.
We’ve also seen great progress in multiple states on legislation that puts some sensible parameters around state attorney general retention of outside counsel for contingency fee litigation – with Arizona, Indiana, and Missouri following Florida in passing bills.
Legal reform in the states is important because it has critical economic implications.
This was brought to light this year by the president of the Federal Reserve Bank of Dallas, Richard Fisher.
Dallas Federal Reserve Bank economists looked at state-by-state employment changes since June 2009 and discovered that Texas added 37 percent of all net U.S. jobs since the recovery began (265,300 net jobs, out of the 722,200 nationwide.)
When asked how Texas added 265,000 jobs while California lost 11,400 during the same period, Fisher said that Texas’s legal reforms and resulting record-low litigation costs were one of its biggest competitive advantages for creating and attracting jobs.
With all this in mind, we organized this year’s Legal Reform Summit and panel discussions to explore and understand today’s litigation and regulatory environment, how they play a role in hindering job growth in America, and what can be done about it.
Today, House Speaker John Boehner, South Carolina Governor Nikki Haley and Virginia Governor Bob McDonnell will join dozens of leaders from business, government and the legal profession for the U.S. Chamber Institute for Legal Reform’s 12th Annual Legal Reform Summit. The Summit will focus on key legal, regulatory, and political issues that impact the ability of the American economy to grow and to create jobs.
“Americans are rightly frustrated about the current state of the economy,” said ILR President Lisa A. Rickard. “Unfortunately, America’s broken lawsuit system hampers the ability of American businesses to create jobs and drive much-needed economic growth.”
One of the event’s highlights will be the release of a report that estimates the economic savings each state can realize by improving its legal environment. Commissioned by ILR and conducted by NERA Economic Consulting, the new working paper, Creating Conditions for Economic Growth: The Role of the Legal Environment (available here), uses a one-of-its-kind econometric model to establish a benchmark for identifying excessive tort costs.
“At a time when states are facing tight budgets and sluggish economic growth, this new study shows that actions by states to improve their legal environments can produce real economic dividends,” said Rickard.
Two additional studies are also being released at the summit: Preventing Government Overpayments to Qui Tam Plaintiffs (available here) proposes amendments to improve the False Claims Act, while Confronting the New Breed of Transnational Litigation: Abusive Foreign Judgments (available here) discusses the legal arguments regarding enforcement of foreign judgments against businesses in U.S. courts.
ILR will also honor key individuals and organizations who are working to improve America’s litigation environment with the ILR Legal Reform Awards. Governor Nikki Haley of South Carolina will receive the 2011 State Leadership Award, while the Business Council of Alabama will be honored with the Outstanding Organization Award. In addition, John Beisner of Skadden, Arps, Slate, Meagher & Flom will be honored for his outstanding contributions to legal reform research and policy development with the 2011 Research and Policy Award.
12th Annual Legal Reform Summit to Feature Speaker Boehner, SC Governor Haley, and VA Governor McDonnell
Join the U.S. Chamber Institute for Legal Reform next Wednesday in Washington, DC for the 12th Annual Legal Reform Summit! Recognized as the nation’s paramount comprehensive legal reform symposium, the event will feature a variety of speeches and panel discussions from prominent figures in the business, legal, and political communities, including:
- U.S. House Speaker John Boehner
- Governor Nikki Haley of South Carolina
- Governor Bob McDonnell of Virginia
- SEC Commissioner Troy A. Paredes
- U.S. Chamber of Commerce President Tom Donohue
- Business Roundtable President John Engler
- TIME Senior Political Analyst Mark Halperin
And many others!
The day’s agenda includes the following panels:
- Access to Justice or the Bottom Line? The Growing Commercialization of the Practice of Law
- The Supreme Court: Cases of Interest to Business
- Trends We Don’t Want to Continue: A Look at the Latest Lawsuits and Theories from the Trial Bar
- The Liability Climate in the States: Costs, Reforms and the Potential Impact on Jobs
- The Very Long Arm of the Law: A Look at the Impact of Federal Regulatory and Enforcement Practices
- Changes in Attitude: The Political Outlook, Mood of the Electorate, and What That Means for the Business Community
Also on the agenda is the release of research on:
- State legal environments
- The False Claims Act
- Transnational torts
Space is limited! To learn more and register, visit http://www.LegalReformSummit.com.
Today, the Government Accountability Office (GAO) released “Asbestos Injury Compensation: The Role and Administration of Asbestos Trusts,” a report to Rep. Lamar Smith (R-TX), the Chairman of the House Judiciary Committee.
I commend Chairman Smith for commissioning this report, which confirms that the asbestos trusts operate under a shroud of secrecy and without judicial or federal government oversight.
It is becoming clear that rather than acting to prevent abusive claims, the asbestos trusts are effectively encouraging fraud by inhibiting claims information sharing between the trusts and the tort system. We hope that Congress’s growing attention to this important issue will ensure that the trusts operate in a manner fair to asbestos victims and job-creating businesses, not plaintiffs’ lawyers and fraudulent claimants.
The GAO report explicitly acknowledges that the asbestos bankruptcy trusts, which are established by bankrupt companies and currently control over $36 billion in assets, do not make claimant filing information publicly available. The report also finds that 65% of trusts have implemented procedures that block the information sharing necessary to prevent fraudulent claims. In addition, only three of the eleven trusts interviewed by GAO have audited their claims, and only one has submitted medical evidence for external review.
You can read the report online here.
Last night, President Obama spoke to Americans – including the more than 14 million who are unemployed – about the need for more job creation. This morning, the U.S. House Judiciary Subcommittee on the Constitution held a hearing about one barrier to job creation, the broken asbestos litigation system. The hearing was entitled, “How Fraud and Abuse in the Asbestos Compensation System Affect Victims, Jobs, the Economy, and the Legal System.”
Mike Carter, president of Monroe Rubber & Gasket Co., a small family business based in Louisiana, testified and highlighted how an unchecked litigation environment can smother economic growth. In particular, meritless asbestos cases are playing havoc on small businesses in America.
“I can’t bring new staff on…until I’m certain that my company’s future is secure,” Carter stated in his testimony. “We’re currently facing hundreds of asbestos claims, and asbestos litigation may force us to close our doors.” This is incredible when you consider that Monroe Rubber & Gasket never manufactured any kind of asbestos product.
Carter and his company were featured on ILR’s Faces of Lawsuit Abuse website, which raises public awareness about the consequences of frivolous and unfair litigation. To see video of Carter sharing his story as part of our Faces of Lawsuit Abuse campaign, click here.
The plight of Monroe Rubber & Gasket Co. is not unique. There is a long history of fraud and abuse in asbestos litigation, which has led to the bankruptcies of nearly one hundred companies employing tens of thousands of workers.
Unfortunately, contrary to what many people believe today, meritless asbestos lawsuits are not a relic of the past. Unlike virtually every other sector of our economy, business in asbestos litigation is booming. Earlier this year, three of America’s largest insurance companies announced increases in asbestos claims against companies they insure.
This year also featured a number of record-setting asbestos verdicts, and plaintiffs’ lawyers have flooded the airwaves and Internet with an unprecedented volume of asbestos-related advertising.
“Somewhere along the way, asbestos suits stopped being about holding the businesses most responsible for asbestos diseases accountable and turned into a corrupt feeding frenzy,” Carter testified. “If Monroe Rubber & Gasket is bankrupted, you can be sure that the trial bar will find someone to sue in my place.”