FOR IMMEDIATE RELEASE—May 21, 2007
Contact: Larry Akey
202-463-5824
West Virginia Small Business Owners Fear 'Unfair' Lawsuits
U.S. Chamber: 'Broken System' Leads to Lower Wages, Higher Prices
CHARLESTON, WV.-Sixty percent of West Virginia small business owners say they are very or somewhat concerned about the impact of frivolous lawsuits on their businesses, and many alter business decisions as a result, according to a study by the nonpartisan market research firm Harris Interactive released today by the US Chamber Institute for Legal Reform.
According to the researchers, concerned business owners respond to their fears about the lawsuit climate by increasing prices for goods and services, reducing or eliminating products, and reducing employee benefits or employee layoffs.
"Some people have tried to characterize West Virginia's lawsuit crisis as a problem only for large corporations. But this new study shows frivolous and unfair lawsuits are a serious concern for all West Virginians, especially small businesses," said ILR president Lisa Rickard.
Harris Interactive surveyed owners and managers of West Virginia small businesses who were most concerned about the tort liability system in the state.
Eighty-four percent of those polled said West Virginia needs to pass new laws to protect businesses from frivolous or unfair lawsuits, 76 called frivolous or unfair lawsuits a "major problem," and 47 percent described the overall fairness of the lawsuit system in West Virginia as poor.
The survey found that, if they felt like they would be protected from lawsuit abuse, 59 percent of these concerned owners say they could grow their businesses. The owners would use the increased revenue to improve their facilities or buying new equipment (86 percent), increase wages and benefits for their current employees (84 percent), or by hiring new employees (71%).
The Harris study polled 237 owners and managers for businesses in West Virginia with $10 million or less in annual revenues who had at least one employee, and who were very or somewhat concerned about being sued in a frivolous or unfair lawsuit.
Among all small business owners in West Virginia, 85 percent are concerned they might be the target of a frivolous or unfair lawsuit, with 60 percent being "very" or "somewhat" concerned. The researchers considered those who said "very" or "somewhat" concerned to be "qualified respondents." A survey with this sample size has a theoretical sampling error of plus or minus 6 percentage points.
"Although some liability costs represent legitimate compensation for damages sustained, these studies leave no question that West Virginia small businesses pay an extremely high price for the excesses of our lawsuit system-money that the business owners could use to expand operations, develop new products, hire additional employees and grow the Mountaineer state's economy," Rickard said.
The new study confirms the state liability ranking report released by ILR last month, which showed West Virginia falling dead last nationwide on all 12 factors considered in a survey of lawyers for companies with annual revenues of at least $100 million.
The study of the impact of lawsuits on West Virginia small businesses was done in conjunction with a national small business impact study, as well as a study measuring the national economic impact of lawsuits to small businesses.
The Tort Liability Costs for Small Businesses study, conducted by NERA Economic Consulting, found that small businesses nationally (those with $10 million or less in annual revenue) paid $98 billion in tort-related costs in 2005, the latest year for which data is available, with $20 billion coming from the assets of the businesses rather than through insurance. For a small business with just under $5 million in annual revenue, that translates into about $120,000 a year that it will pay out in tort-related costs, the study says.
"Given that the lawsuit culture transfers billions of dollars in assets critical to the continued survival of small businesses into the bank accounts of trial lawyers, it's no wonder so many West Virginia business owners worry about their broken lawsuit system" Rickard said.
The mission of the Institute for Legal Reform is to make America's legal system simpler, fairer and faster for everyone. It seeks to promote civil justice reform through legislative, political, judicial and educational activities at the national, state and local levels. The U.S. Chamber of Commerce is the world's largest business federation representing more than 3 million businesses and organizations of every size, sector and region.
Copies of the NERA Consulting study and the West Virginia small business survey are available online at www.instituteforlegalreform.com.