3. Frivolous Lawsuits

“It's strange that men should take up crime when there are so many legal ways to be dishonest.”

-Author Unknown

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Every country developed a system of codified laws that define the legal relationships among people, businesses, and government. Codified laws come as four types and are defined as:

• English Common Law System: All former English colonies, except Malta have this type of system, such as Australia, Canada, India, Great Britain, and the United States.

• The Civil Law System: The civil law system is one of the oldest and most dominant legal systems, originating from the ancient Roman Empire. Most European and Latin American countries have a civil system. Many countries adopted the Napoleonic or Germanic civil code.

• Religious Legal System: Religion becomes the inspiration and source of law. All Christian nations moved away from this religious system of law, but several Muslim countries still use a Muslim religious legal system known as Sharia.

• Hybrid: A country could have a hybrid, usually a mixture of religious and common law or religious and civil law.

The United States has a common law system, where the court system provides additional checks and balances on the other two branches of government. Congress and the President can sign new laws into existence and these laws can be shaped by the court system. If Congress and the President passed a bad law, a court can remove the law through judicial review or re-shape the law. All states replicated the common law system except Louisiana. State of Louisiana has a civil system based on the Napoleonic code. Judges in a civil law system have to strictly follow the law and they are not allowed to alter it. The benefits of common law are:

• Courts provide an additional check on government. Most states and the federal government appoint judges and judges are free from the whim of the voters. The judges do not have to seek re-election or appease the voters. Some states like Michigan, Oklahoma, and Texas elect judges into office. Are judges in these states ensuring justice is served or running popularity contests?

• English common law is flexible. As society changes, courts can reshape laws. Therefore, laws could change when society changes. Further, a court can modify contracts under English common law, while civil systems tend to enforce all conditions of a contract.

• English common law system uses jury trials. Jury trials provide an immense check on the legal system. Attorneys on both sides of a trial have to present their case in front of a jury. Thus, attorneys have to do a lot of research, and to be well organized and prepared in order to sway a jury to their favor. A judge or a panel of judges is the sole decider in civil systems. Some countries with civil systems have incorporated juries.

The common law system has three disadvantages.

• If Congress and the President signed a bad law into existence, the court system has to wait for a court case that occurs from the bad law. The court system does not immediately strike down bad laws. If it did, it would have enormously more power. Thus, bad laws can be on the books for years before they are removed.

• The common law system is more complex. Courts refer to the laws passed by Congress and the President, but also refer to court cases that set legal precedents. A precedent is an important court case that starts a new interpretation of the law or re-shapes old laws.

• Government appoints judges based on their political views and not their abilities.

Is the common law system a good system? Higher income countries tend to have a common law system, even though the civil law system dominates. The 10 highest income per capita countries are shown in Table 3.1, and the type of legal structure they have. However, the issue is more complicated. Kuwait, Norway, Qatar, and United Arab Emirates are oil exporting countries. Governments in these countries own their petroleum industries and thus have large amounts of revenue coming in from oil exports. These countries except Norway have low taxes and still are able to provide many social benefits to their citizens. Countries like Luxembourg, Bermuda, United Arab Emirates, Singapore, and Ireland are rich because their economies are very pro-business and capitalistic.

Table 3.1. Highest Income Countries and the Type of Legal System in 2007

Sources: 2007 Central Intelligence Agency – The World Factbook; Wikipedia – Legal Systems of the World

Common law systems tend to have strong, pro-business legal structures. Further, judges in common law system have shown leadership and initiative by using a court case to re-shape society. Some examples are:

• The Bill of Rights originally applied to the federal government, and not the state governments. However, the Supreme Court expanded the Bill of Rights to the states through the case Gitlow versus New York (1925). The State of New York arrested Gitlow for criminal anarchy, because Gitlow was a socialist who advocated the overthrow of government. Gitlow wrote his views in the “Left Wing Manifesto,” and was caught distributing these pamphlets to the public. The Supreme Court upheld his conviction and stated the State of New York did not violate Gitlow’s right to free speech or freedom of the press, because his writings advocated the overthrow of government.

• After the North won the civil war, President Abraham Lincoln freed the slaves in the south. However, the large plantation owners relied on slavery as cheap labor. Thus, the southern state governments initiated a new system that perpetuated slavery without calling it slavery, giving birth to the “Separate but Equal Laws.” The south could keep African Americans and whites separate and provided separate facilities, such as segregated schools, restrooms, parks, or separate seating for buses and restaurants. The condition was facilities for both races had to be equal. Of course, African Americans were short changed and given inferior facilities and schooling. Further, they were kept poor and could not leave the plantations. In 1954, the Supreme Court removed these Laws from the south through the case Brown versus Board of Education of Topeka, Kansas. The Supreme Court legally ended segregation and helped initiate the civil rights movement.

Some judges did great things for this country and helped improved society. However, the problem is many judges including several Supreme Court justices are currently pro-government. They are currently expanding government and restricting citizens’ rights. Some prominent examples are:

• The Supreme Court intervened in the 2000 Presidential Election. The election between George W. Bush and Al Gore was so close, one state, Florida, became the deciding factor. Bush (supposedly) beat Gore by only several hundred votes. The Supreme Court halted the recount of punch-card ballots in Florida, because a recount could violate George Bush’s right to the “equal protection of the laws.” The justices voted in a 5-4 decision [1]. Did the conservatives on the Supreme Court stand behind Bush, because he was conservative or were they protecting Bush’s rights? What happened to the rights of Al Gore?

• U.S. Congress and the President passed the Clean Air Act of 1990 giving the Environment Protection Agency (EPA) the legal authority to regulate pollution emissions of 188 chemicals. Public awareness of global warming has focused attention on carbon dioxide emissions and the U.S. Supreme Court ruled that carbon dioxide must be added to the pollution list. The lawsuit that started it all was Massachusetts versus the EPA (2006). The problem is carbon dioxide is involved in the cycle of life. Humans and animals breathe out carbon dioxide, while plants recycle the carbon and breathe out oxygen. Thus, regulation of carbon dioxide gas expands the EPA’s sphere of power to all human and animal activities and the combustion of fossil fuels, like gasoline, diesel fuel, and coal. In the EPA’s defense, they were sued to add carbon dioxide. They did not actively seek out to add this carbon dioxide to their list. However, the EPA was given vast authority over the U.S. economy [2].

This is how crazy the lawsuit became. Massachusetts sued the EPA, because computer simulation models show some of Massachusetts’ coast could be under water in 50 years. However, global warming is a theory! We do not know if we are experiencing a current warming trend or if greenhouse gases like carbon dioxide are warming the earth. The scientists who build these models, program their beliefs into the computer model. If the scientists believe in the global warming, then their models will reflect that. (Economists used to build large simulation models of the economy during the 1960s, but they stopped doing it because the economic forecasts were horrible. Now they are building these models for the whole planet!)

The pundits of global warming ignore the fact that the sun is going through an active period of sunspot activity. A more active sun may be warming the earth. How do we know? The 17th century experienced little sunspot activity and historians refer this to the mini-Ice Age. Moreover, if you were around in the 1960s, the fear for humanity was the dawn of a new Ice Age, because the world was experiencing a slight cooling trend.

Torts

The common law system is a strong system, if courts are teeming with good judges with common sense. Many people do not realize common law judges defined the modern laws for property rights, contract law, and torts. A tort is one person or party harms another party, and a judge or jury compensates the victim for the harm.

The current detrimental image of the legal system resorts from torts. Torts can be extremely efficient to compensate for harms. The role of compensation is to make the harmed party “whole again,” so the harmed party is just as well off as if the harm did not occur. The problem is “whole again” is a value judgment. For example, a person owned a car for 5 years until his relative wrecked the car. The person has already gotten five years out of the car, so “whole again” does not mean he should get a new car. He only gets the current value of the car at the time of the accident. Thus, harmed parties will over-appraise the harm, while the harmer (tort feasor) undervalues the harm. Judges (or juries) have to determine if the plaintiff is at fault and if he is, then place a value on the harm. Torts arise from three situations.

1. One party harms another party intentionally. These types of harms can also be defined as crimes, such as assault, attempted murder, or murder.

2. One party accidentally harms another party. Usually this harm is not a crime, except extreme cases like manslaughter, maiming, or causing a permanent injury.

3. One party is accidentally harmed from a defective product.

The problem is modern courts expanded the definition of harms, and apply tort law to parties that are not responsible for the harm. Moreover, courts can assess punitive damages. Punitive damages punish the plaintiff for the harm, thus teaching him a lesson. Some problems of torts are:

• Judges and juries have a difficult task of placing a true value on the harm. Somewhere down the line, every harm becomes worth a million dollars. In one case, Pennzoil versus Texaco, the court initially awarded $11.12 billion in damages and $1 billion in punitive damages [3]. Thus, one lawsuit can easily bankrupt a company or small corporation.

• The courts include mental anguish and suffering as damages. Not only do judges and juries have a hard time placing a value on the harm, but also they are asked to place a value on suffering. Of course, defendants receive damages as money, so they tend to exaggerate their suffering.

• The courts are expanding cause and effect. The tort should remain close to the affected parties at hand. For instance, a drunk driver harmed an innocent bystander, because he drove home drunk. Not only did the drunk driver commit a crime, but also the innocent bystander has every right to sue the drunk driver for damages. However, alcoholics usually do not have much money, so attorneys follow the alcohol and go after the parties with money like bars or liquor stores. If the bar or store did not sell the alcohol, then the innocent bystander would not be harmed. The problem is where do you stop with a chain of causality? In this case, the chain of causality is the drunk caused the harm (immediate), but the drunk drank alcohol, the store sold the alcohol to the drunk, a company sold alcohol to the store, the farmers sold the ingredients to the company to make alcohol, and God created the yeasts that allow sugars to be converted to alcohol. Lawyers have gotten good at following the causality chain until they reach a party with deep pockets. Fortunately, God’s checkbook is not available to the court system; otherwise, all the lawyers would be suing God, since he is at the beginning of all causality chains.

• The courts do not assigning responsibility correctly and ignore the notion of free choice. For example, everybody knows which foods are healthy and which ones are not. It is universal; fast food is not healthy food. However, two teenagers sued McDonald’s in New York, blaming McDonald’s for their weight gains and health problems. McDonald’s did not force anyone at gun point to eat their food. The teenagers freely chose which foods to eat and which place. (McDonald’s does sell good salads too, but salads are not a customer’s favorite). Surprisingly, the court correctly dismissed the lawsuit. Remember, McDonald’s still had to hire attorneys to fight his lawsuit, which costs money.

The rise of frivolous torts and lawsuits is leading to a crisis in America. Innocent parties can be sued for the most ridiculous reasons. Out-of-control lawsuits can harm the U.S. economy. Lawsuits suck money away from businesses and families, and even cause bankruptcies. Further, some people are determined to play the lawsuit lottery game. The public is well aware of high profile lawsuits, where defendants won millions of dollars from a court case. Some people try to injure themselves or tilt the lawsuit in their favor. Some examples are:

• Obstetricians are switching their specialties to lower risk ones. If a patient is accidentally harmed, an insurance company pays the compensation to the patient. Thus, all doctors are required to carry malpractice insurance. Unfortunately, these doctors are hit with so many lawsuits and large damage awards, the insurance companies greatly increased the premiums. Thus, obstetricians can no longer afford their malpractice insurance. It is better for the doctor to go into another specialty than fight a wave of lawsuits. If a baby is born with some defect, then somehow this defect is always the doctor’s fault. This problem has become so severe, pregnant mothers have to drive to the next county or the nearest largest city to find an obstetrician. For example, one doctor who has never been sued has seen his malpractice insurance jump to $84,000 per year in 2004. He only paid $23,000 in 2002 [4].

• The infamous McDonald’s Coffee Case. In 1992, Stella Liebeck and her grandson went to McDonald’s, buying breakfast from the drive thru. Her grandson parked the car, allowing Stella to add cream and sugar to her coffee. She accidentally spilled coffee all over her lap, causing third degree burns. Stella was in the hospital for two weeks and required skin grafts. The pain and suffering was real, but the problem with this case is with the definition of a tort. Stella burned herself and McDonald’s was not at fault. If a person accidentally hurts himself, then it is their fault, not somebody else. Her lawyer claimed McDonald’s was selling a harmful product, because McDonald’s coffee tends to be hotter than other restaurants. A jury awarded Stella $2.86 million, but the trial judge lowered the amount to $640,000. McDonald’s and Stella settled for a lower, undisclosed amount [5].

• A federal judge sued a dry cleaner for $65 million, because the dry cleaner lost his pants. The dry cleaner found the pants a week later. The dry cleaners are from Seoul, South Korea and came to this country to live the American dream. Now, the owners became so disenchanted with the U.S. legal system that they are considering going back to South Korea [6].

• A woman wanted to sue Wendy’s restaurants because she found a severed, human finger in their chili. Police discovered that the woman planted the finger in the chili, hoping to be compensated by Wendy’s. This woman had a history of filing lawsuits. Unfortunately, this incident tarnished Wendy’s reputation that persists to this day [7].

These incredibly large damage awards have attracted schools of sharks to the legal profession. These schools of sharks swim around the economy, searching for victims with money. These sharks are known as lawyers and lawsuits have been a very profitable business, or at least until the 2008 Financial Crisis. Now, even attorneys are being laid off.

The Festering Growth of Attorneys

The United State has an unbelievably complex legal structure. With too many laws, it is impossible for an individual to understand them all or even follow them. An overly complex legal structure automatically creates a demand for lawyers. Of course, lawyers cannot remember all the laws, so even lawyers have to specialize. The common specialties are criminal, civil, divorce, immigration, or tax. Why do we have so many laws? Congress and state legislatures are packed with lawyers. That is what lawyers do. They dream up and pass new laws, expanding the demand for the legal profession.

Does the United States have too many lawyers? In 2008, the American Bar Association reported that the United States had 1,162,124 practicing attorneys. This statistic does not include law school graduates that are not practicing law. Furthermore, the number of practicing attorneys increased 18,000 from 2007. This number does not seem very large when compared to the U.S. population of approximately 300 million Americans. However, the U.S. has one lawyer for every 300 men, women, and children.

The job of a lawyer is to provide legal services, like suing people and businesses for money. If there is 1 lawyer for every 300 men, women, and children, then a lawyer's options are limited. How much legal services do an American family needs? A lawyer has to work at least 40 hours a week for 52 weeks per year. This may be the reason why lawyers are creative in filing lawsuits. They are opening new avenues that can provide a new source of money. The courts have not been helpful either, as we have seen from the expansion of tort laws with multi-million dollar awards.

The U.S. economy is teeming with ravenous attorneys. Thus, attorneys have come up with ways to extort money from businesses and people, or create a demand for their services. For instance, one method is to file a nuisance lawsuit. A lawyer can sue a person for a silly reason, but the cost of preparing and going to trial is so great; it is cheaper for the defendant to settle out of court. Some people and businesses have principles and will fight any lawsuit regardless the amount of money. Thus, the defendants will have to hire a lawyer or a team of lawyers to fight the lawsuit.

Another problem is lawyers do not have an incentive to get any work done, because they charge by the hour. During a lawsuit, both the plaintiffs and defendants have lawyers and the lawyers have a financial incentive to delay the court case, racking up more time and larger legal bills. Thus, lawyers love messy cases, because messy cases involve more time and hence more money. Consequently, lawyers do not get any work done.

Lawyers sue to get paid and payoffs can be large if they win. Thus, lawyers came up with ingenious ways to increase the odds of winning. Some examples are:

• Lawyers pick the courts, where they want their case to be heard. Some court districts are located in regions that are very liberal and jurors are favorable to the plaintiffs.

• Class action lawsuits clearly provide large financial compensation to lawyers, even from minor harms. For example, if a lawyer has one client with a $1,000 lawsuit, the lawyer may earn 40% or $400 if they win. This is not a large financial incentive. However, if the lawyer can represent 1,000 clients at the same time for $400 per client, then his stake rises to $400,000. Thus, this lawsuit becomes worth time and effort.

• Some lawyers create rackets. For example, an attorney finds people with good car insurance and has two people artificially create a car accident. Then the lawyer sends the people to his network of doctors who find whiplash and all sorts of injuries, and then the lawyer files a claim (or sues) the car insurance companies for damages. The doctor, attorney, and the clients all get a cut of the insurance check; everyone gets a piece of the pie. Unfortunately, everyone in society has to pay higher insurance premiums.

Conclusion

Out-of-control lawsuits impose many problems on a society. First, lawsuits are expensive. A company has to spend thousands of dollars to fight even a frivolous lawsuit. Second, some companies have multiple lawsuits filed against them. For example, Wal-Mart is currently fighting 5,000 lawsuits. Imagine the legal bill, having lawyers fly all over the United States filing paperwork with the courts! Third, all organizations, even small ones, have to hire one or more attorneys. The attorneys give legal advice to the business leaders, but do not directly produce goods and services for the business. Thus, businesses are hiring people that do not contribute directly to the bottom line. Fourth, large damage awards can bankrupt businesses, or cause a business to flee to a country with a more hospitable legal environment. Finally, lawsuits can halt economic development. For example, local government and the majority of citizens want a company to build a factory in their community. The factory will bring jobs, create wealth, and expand the tax base, boosting local tax revenues. One person can halt this progress by filing a lawsuit against the company, stopping development!

How did lawsuits get out of control? It starts with judges. The type of judges in courts today is different from the judges a century ago. During the 19th, judges were pro-business and their decisions reflected that. For example, citizens filed lawsuits against factories, because factories are a source of pollution and noise. Yes, the common law system has nuisance laws, but citizens usually lost their court cases. Judges knew these factories created products, were a source of jobs, and hence created wealth. Now, the tables have turned. Businesses and law-abiding citizens usually lose court cases, even for frivolous matters. Unfortunately, they do not have perfect foresight. They do not know the infinite ways for idiots to abuse their products or predict future problems. Some silly prominent lawsuits are:

• Two people mowing their lawn had a bright idea. They picked up a running lawnmower to hedge bushes. Consequently, the lawnmower chopped off their fingers. Then these idiots sued the company, because the company did not provide any disclaimer for using a lawnmower to hedge bushes.

• A burglary was going to break into someone’s home by climbing onto the roof. Unfortunately, the burglar fell through, landed on the floor, and was shot by the homeowner. Even though the burglar committed a crime, he is suing the homeowner for using excessive force [8].

• The largest and most expensive litigation in U.S. history is from asbestos. Asbestos was a common building material, because it is an excellent fire retardant and insulator. The problem is people with constant exposure. People who breathe in the asbestos fibers can develop respiratory illnesses like mesothelioma, lung cancer, and asbestosis. These conditions are real and the industry was rightly sued for it. However, the asbestos industry started a fund to pay for future lawsuits. Unfortunately, everybody likes to play the lawsuit lottery. Even people who thought they have seen asbestos sued for a piece of pie, because they thought they could develop an illness relating to asbestos. The industry has not used asbestos since the 1980s, but in 2002, more than 8,400 defendants and 730,000 claimants sued or plan to sue the industry [9].

What happened to the common law system? The English common law system is an excellent system, but the system depends on good judges. Judges set the tone in a courtroom and how they interpret the law. Good judges can help rein in the legal system, putting a stop to out-of-control attorneys and zealous prosecutors. If a judge truly believes in truth, justice, and the law, then he makes sure truth and justice is found. The guilty are punished and the innocent are let free. However, if a judge does not want to appear weak on crime or appear politically incorrect, then truth and justice will be swept under a rug.

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References

[1] Savage, David G. October 22, 2008. “Roe vs. Wade? Bush vs. Gore? What are the worst Supreme Court decisions?” Los Angeles Times, Available at http://www.latimes.com/news/nationworld/nation/la-na-scotus23-2008oct23,0,1693757.story (access date 12/12/08).

[2] U.S. Supreme Court. 2006. “Massachusetts et al. v. Environmental Protection Agency et al.” Available at http://www.supremecourtus.gov/opinions/06pdf/05-1120.pdf (01/03/09).

[3] Sherman, Stratford P. March 17, 1986. “The Man Who Got Hit for $10.5 Billion.” CNN Money. Available at http://money.cnn.com/magazines/fortune/fortune_archive/1986/03/17/67302/index.htm (access date: 01/03/09).

[4] Attkisson, Sharyl. April 2, 2004. “High Cost of Malpractice Insurance.” CBS Broadcasting, Inc.

[5] Wikipedia. May 2008. “Liebeck v. McDonald's Restaurants.” Available at www.wikipedia.org (access date 5/10/08).

[6] Associated Press. May 3, 2007. “Judge: Cleaner owes me $65 million for pants - 2 years of litigation x 1 pair of trousers = headaches for family business.” MSNBC.

[7] Associated Press. April 13, 2005. “Finger-in-chili accuser has litigious history.” MSNBC.

[8] Channel 3000. September 21, 2006. “Accused Burglar Sues Homeowner Who Shot Him.” Available at http://www.channel3000.com/news/9905807/detail.html?rss=c3k&psp=news (access date 01/03/09).

[9] Wikipedia. December 2008. “Asbestos.” Available at www.wikipedia.org (access date 12/31/08).