TorteDeForm

Cyrus Dugger

Businesses More Likely to Sue – More Likely to Sue Frivolously

Tort “reform” advocates, often funded and supported by corporate interests, are constantly complaining that there are too many lawsuits. The theory goes that if we could just make it harder to sue, society would be a better place.

If people filed less lawsuits against corporations we’d have more jobs, products would cost less, and we’d have less expensive insurance premiums. Moreover, if people just filed less frivolous lawsuits, we’d be all the better off still.

Ironically, a report by Public Citizen demonstrates that despite their opposition to lawsuits by individuals (often filed against corporations) corporations were found to have filed more lawsuits, and more than that, to have filed more frivolous lawsuits than individual people.

"A recent study by Public Citizen found that in 2001 in Arkansas, Mississippi, Cook County Illinois., and Philadelphia, corporations were 3.3-5.8 times more likely to bring a lawsuit than individual tort plaintiffs. The study also found that when these corporations did file lawsuits, they and their attorneys were 69% more likely than individual tort plaintiffs and their attorneys to be sanctioned by federal judges for filing frivolous claims or defenses." (Cyrus Dugger, The Next Victims of 9/11, TomPaine, September 29, 2006) (click here for the full report)

That's something to think about the next time you read something claiming that lawsuits are "out of control."

If you or your organization is interested in learning more about or working on these types of civil justice issues, please feel free to contact me at cdugger@drummajorinstitute.org.

Cyrus Dugger
Senior Fellow in Civil Justice
Drum Major Institute for Public Policy

Cyrus Dugger: Author Bio | Other Posts
Posted at 5:15 PM, Sep 29, 2006 in
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Comments

Yet for some reason, "reformers" attack contingent fees and plantiffs' lawyers, when hourly defense firms are more likely to file a frivolous lawsuit. More "reform" hypocrisy.

Posted by: Justinian Lane | September 30, 2006 1:37 PM

If Public Citizen really believed their own methodology, they would support reform as another means to help consumers versus businesses.

Interestingly, Public Citizen gets their math wrong, since their own study does not support the claim that "corporations were 3.3-5.8 times more likely to bring a lawsuit than individual tort plaintiffs." That's a fundamental misrepresentation of what the study measured.

Posted by: Ted | September 30, 2006 7:09 PM

Leaving aside whether a two year old study with five year old data actually qualifies as a "recent study,"

1) Since the subject is "tort reform," why are you bringing up a study that talks about litigation generally, rather than tort litigation? The study itself makes clear that it includes such litigation as landlord-tenant and mortgage foreclosures, not to mention routine collection cases. Indeed, businesses almost never file tort suits, if you check the data at the back of the study.

2) Why you think "hourly defense firms," rather than trial lawyers, are filing these suits on behalf of businesses is beyond me. You think "hourly defense firms" are handling routine collection work or landlord-tenant cases?

3) Counting the number of suits is pretty misleading, since suits can have different numbers of parties. One class action may have thousands of plaintiffs. If we're trying to measure the rate at which individuals sue, such a suit should count as thousands of suits, not one; the fact that those are consolidated tells you nothing about how likely individuals are to sue.

4) Putting all those caveats aside, it's not clear why you think it's interesting that businesses sue more than individuals. It's tort reform opponents, such as you guys at Tort Deform, who keep trying to turn this into a Businesses-vs-People fight. Tort reformers want to eliminate all meritless suits, not just ones filed by individuals.


Oh, and

5) The study did not track how often frivolous suits were filed; it tracked how often lawyers were sanctioned. The two are not by any means the same. The problem is that the data set for this study bore no relation to the data set for the rest of the study. The rest of the study looked at four jurisdictions (two state, two local), which may or may not have been representative; the sanctions issue looked at the last 100 sanction grants in the federal courts.

Posted by: David Nieporent | October 1, 2006 2:06 AM

Hi Ted,

Please explain your concern regarding Public Citizen's report.

Posted by: Cyrus Dugger | October 1, 2006 4:20 AM

It is hard to file too many frivolous lawsuits on contingency fee arrangements. But, in the corporate world hourly attorney fees put a premium on them and on frivolous defenses. Billable hours give the corporate lawyer the incentive to file, file, file.

Posted by: Greedy Trial Lawyer | October 1, 2006 7:37 AM

David, with respect to your fourth comment: Then why is it the vast majority of "reform" legislation is targeted towards personal injury lawsuits, and not financial injury lawsuits? Could it be, as you say, businesses almost never file personal injury tort suits, but often file financial injury tort suits?

Posted by: Justinian Lane | October 1, 2006 11:17 AM

Cyrus: Is the Drum Major Institute affiliated with or supported by the ATLA? Your points and theirs have 100% overlap. This cannot be by chance alone.

Posted by: Supremacy Claus | October 1, 2006 11:22 AM

Cyrus: Is the Drum Major Institute affiliated with or supported by the ATLA? Your points and theirs have 100% overlap. This cannot be by chance.

Posted by: Supremacy Claus | October 1, 2006 11:26 AM

Cyrus, I have explained my concern. The press release says "corporations were 3.3-5.8 times more likely to bring a lawsuit than individual tort plaintiffs." The data in the study does not say that; nor can it, since the study didn't even try to measure the relevant data that would lead to such a conclusion. Anyone who says otherwise is either innumerate or dishonest, though I've met enough innumerate attorneys who didn't understand statistics or probability to recognize that Public Citizen's error may have been an honest mistake.

Another statistical mistake made by both Public Citizen and Greedy Attorney: corporations filed 4 times as many lawsuits, but had only 1.69 times as many sanctions against them. That demonstrates the reverse of what Public Citizen claims: plaintiffs's attorneys are far more likely than corporate hourly attorneys to be sanctioned for litigation abuse in any given suit.

As David Nieporent suggests, the study singles out many business lawsuits that have been criticized on Overlawyered. E.g., April 2000; Jun. 29, 2004; Nov. 22, 2003. It's almost as if they got the cases from Overlawyered itself. The study also criticizes the number of subrogation suits without mentioning that many reformers wish to abolish the collateral source rule that makes subrogation suits necessary. (I'm not one of those reformers, though I believe in other reforms that would reduce the need for separate subrogation litigation.)

Nieporent makes many other good points, though I'm less concerned than he is about the five-year old data. I don't have any reason to think that 2006 is substantially different than 2001.

There are many other concerns I have about the Public Citizen report, but I don't particularly see any good reason to take it seriously: it's arguing against a straw man, rather than a real reformer position.

Posted by: Ted | October 1, 2006 11:51 AM

Forgive me if I've missed you saying this already, but is it correct to assume that you are defining frivolous as a case that has been dismissed? Or is there another measure?
Thanks.

Posted by: Tanya Elena Balsky | October 2, 2006 12:43 AM

David, with respect to your fourth comment: Then why is it the vast majority of "reform" legislation is targeted towards personal injury lawsuits, and not financial injury lawsuits? Could it be, as you say, businesses almost never file personal injury tort suits, but often file financial injury tort suits?Frankly, I'm not even sure what you mean by "financial injury tort suits." Businesses often file lawsuits based on contract. (The data from the study shows that almost all business-initiated lawsuits are foreclosures, debt collection, landlord-tenant, or contract actions.) None of those are "financial injury torts." Breach of contract is not a tort.

And presumably the reason tort reformers are more concerned about tort suits than contractually-based lawsuits is because the latter do not pose the same problems as the former. Generally speaking, a lawsuit based on a contract offers predictability, both before and after the fact.

Before the fact: Whether you're going to be sued. Unless you had direct business dealings with someone, you can feel pretty confident you're not going to find a process server at your door handing you a summons. The fact that you owned the office building where Bob and Fred met to sign a contract, or manufactured the pen they used when they signed it, or served them several drinks before they signed it, doesn't allow you to be dragged into the suit when Bob breaches the contract. And you can be reasonably certain that, once a contract is over and done with, it's over and done with, not grounds for a future suit. If decades after you sold a product, people decide there's a better product out there or that the product is dangerous or whatever, they can't sue you for breach of contract.

(Moreover, you can via careful contractual drafting avoid lawsuits for breach of contract, in a way you never can with torts. No matter how many disclaimers you provide, how many warnings, someone may sue you if he's injured. The law presumes that people read contracts that they sign, in a way it never seems to with warning labels or instruction manuals they purchase.)

After the fact: Damages. Generally speaking, judgments in contract lawsuits do not offer either punitive damages or damages for pain and suffering. In other words, a potential defendant in a contract suit knows what the measure of damages is, and knows his potential exposure. If you fail to pay back a loan, you owe the principal and interest. You're not going to be surprised with a $1 million verdict on a $10,000 contract.

Posted by: David Nieporent | October 2, 2006 4:43 AM

Hi David,

Thank you for your post on Tort Deform.

Interesting discussion. Two questions...

If contract law is so predictable why do corporations and people waste millions of dollars litigating contractual issues when the ultimate outcome is know to both sides?

If a corporation can just carefully draft contracts, why can't they more carefully operate and/or oversee its business?

Posted by: Cyrus | October 2, 2006 12:12 PM

David, I consider financial injury torts to be tort such as: Libel/defamation, tortious interference, theft of intellectual property, patent/copyright infringement, etc.

Rather than jumping to conclusions, I'll ask you a question: Would you support applying the same "reform" measures to financial injury cases as you apparently do to personal injury cases?

Posted by: Justinian Lane | October 2, 2006 12:18 PM

Justinian,

1. Those are torts, but (as per the study which is the subject of this thread) they make up a tiny tiny percentage of the lawsuits initiated by businesses.

2. I am not aware that I've endorsed any specific tort reform measures here, but I certainly think that the same reforms ought to apply to the causes of action you identify as to PI cases.

(Of course, some of them already apply; for instance, "loser pays" is at least potentially available in IP cases, in a way that it isn't in PI cases. Though it could still be expanded.)

Posted by: David Nieporent | October 2, 2006 2:24 PM

David, I would agree that contract disputes make up the lion's share of business lawsuits, but I'm not sure I agree that the torts I listed make up a "tiny tiny" percentage of cases filed. Maybe I'm a bit biased because I come from a technology background, but I see IP theft/infringement lawsuits all the time. There's also the thousands of lawsuits filed by the RIAA, too.


I'm glad you agree that *if* any "reforms" are passed, they need to apply to financial injury cases, too. I've heard reformers argue that punitive damages are too important of a deterrent to IP theft cases to put limits on them... even though they support caps in personal injury cases.

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