Saturday, February 21, 1998

The myth of
frivolous lawsuits

Tort reformers can pick another cause;
Hawaii doesn't have a problem
with rampant litigation

By Richard Turbin
Special to the Star-Bulletin

One of the great myths in Hawaii's political culture is that legislation is needed to limit lawsuits. Big business and insurance interests are lobbying fast and furious for such litigation, using slogans like, "In order to make Hawaii business competitive, we must eliminate frivolous lawsuits!"

We hear rumors that "we are in the midst of a 'litigation explosion' with 'runaway juries.'" We are told of a "crisis" in the availability and affordability of medicine because of glitches in the medical liability system.

Punitive damage awards are said to be "skyrocketing!"

Current facts, however, reflect a far different scenario. Recent statistics reveal that a frivolous lawsuit problem simply does not exist in Hawaii or in any state.

The most comprehensive analysis on the subject, completed by one of the most respected "think-tanks" in America, the RAND Institute for Civil Justice, surfaced in the early '90s.

The evidence in the RAND report, bolstered by subsequent reports on the subject, demonstrates that only 10 percent of people who are injured ever use the tort system to seek compensation for their injuries.

According to the studies, between 1960 and 1990, average and median jury verdicts barely kept pace with inflation.

In 1993, 61 percent of all new cases filed in state courts involved traffic and ordinance violations; only 27 percent were civil cases, of which only 9 percent involved torts. Of those cases, only 3.85 percent "clogged the courts" by requiring a jury verdict.

While big business and insurance interests would have you believe that frivolous lawsuits plague our courts, the truth is that, since 1991, tort cases reflect only 6 percent of cases filed. Further, the number of tort cases filed in Hawaii falls far below the national average.

If there is a problem with a litigation explosion, the cause of it more accurately lies with America's big business interests, rather than with the ordinary citizen. For example, Texas businessmen sue Oprah Winfrey for millions of dollars because she criticizes their beef industry.

This is not an isolated incident. Between 1985 and 1991, business disagreements made up nearly half of all federal litigation, with suits over contract disputes outpacing any other single category.

Lawsuits between big businesses over contracts more than tripled in federal courts between 1960 and 1988, while suits filed against them by ordinary citizens declined 21 percent. Since 1986, lawsuits by average citizens against small business operations and individuals have declined 12 percent.

Ironically, despite their efforts to encourage legislation that would curtail lawsuit filings, big business interests are adamant that such restrictions should not apply to them. They argue that any constraint over their right to file lawsuits against debtors and other businesses would be unfair, as it would interfere with their right to earn a profit.

Big business and insurance want a double standard. They want the right to use our court system for themselves, but not for you and me.

American businesses are now the most competitive in the world. Yet big business owners claim that escalating product liability lawsuits in this country threaten their industrial might. Again, the facts clearly do not support this allegation.

For example, federal courts products liability cases against Fortune 1000 companies have dropped from a high of 3,500 in 1985 to 1,500 in 1991. Moreover, in 1991, product liability insurance premiums amounted to less than 1 percent of product retail sales, and between 1987 and 1993 product liability premiums fell 45 percent.

Over the last decade, the average payout per product liability claim by insurance companies has been less than $6,000.

Large companies, while complaining about the threats of frivolous lawsuits, are, in fact, realizing a downward trend in corporate liability risk.

The Wall Street Journal reported that, in 1993, the total corporate liability risk for all lawsuits, including product liability, shareholder and employee discrimination lawsuits, totaled only $3.29 per $1,000 of revenue. Total corporate risk was down nearly 7 percent for the previous year, with larger companies enjoying the largest savings.

There is also heated debate surrounding the rising costs of the medical liability system in this country. Erroneously, malpractice claims are often blamed for the skyrocketing costs of health care.

To the contrary, available evidence indicates that changing the current medical liability system would have very little effect on total health-care spending. Only about 2 percent of those injured by a physician's negligence ever seek compensation through a lawsuit.

In fact, medical malpractice claims have been declining since 1985 at an average annual rate of 8.9 percent. Of the cases filed, doctors have been winning in court 70.7 percent of the time. The bottom line is that medical malpractice premiums amount to less than 1 percent of national health-care costs.

This is not to say that frivolous lawsuits are never filed. Certainly, for a minimal fee, any citizen can go down to the state courts and file his or her lawsuit. After all, it is a free country. The question is, what happens once a lawsuit is filed?

Under Rule 11 of the Hawaii and Federal Rules of Civil Procedure, the lawyer and/or plaintiff who file a lawsuit can be fined substantial monetary penalties if the judge finds that the filing was frivolous.

As a result, the plaintiff (and in certain cases the plaintiff's attorney) can be sued for malicious prosecution.

Even when the lawsuit has merit, the litigation costs of the prevailing party are the responsibility of the losing party. The losing party rarely pays less than $10,000 to the winner. According to statistics, the ordinary citizen usually loses the cases against a business; hence, the poorer party ends up paying the litigation costs of the wealthier party!

As the facts reveal, the public is being misled by claims that there is a frivolous lawsuit problem escalating in America. Clearly, the driving force behind the fallacy are powerful insurance and business interests that finance lobbying efforts for legislation to limit consumer lawsuits.

Fortunately, our civil justice system offers a way for ordinary people to hold Hawaii's power elite accountable. Our civil justice system is a system of restraint on those, who by virtue of economic power, do not want to be restrained.

America's legal system is a linchpin of democracy. If we restrict citizen's access to the courts, we are crippling the democratic order.

This country's judiciary system is one of the best in the world. Still, there is clearly room for improvement. Litigation costs must be reduced, and the explosion of expensive expert witnesses should be contained.

In an attempt to curtail the soaring costs of litigation in our courts today, various means of settling cases are being tested.

Arbitration, a positive innovation pioneered by Hawaii's Supreme Court, is effective and a true cost-saving factor for Hawaii's citizens. In use more and more across the country, arbitration is now mandatory for most cases filed in state courts. In fact, most tort cases in Hawaii now are being settled through arbitration. Mediation, another alternative, is working to resolve still more cases across the land.

Also, some federal courts are experimenting with limiting expert witnesses through a system of court-appointed experts, which results in reduced litigation costs.

Every trial lawyer and judge knows that more needs to be done to reduce the cost of litigation. But the worst thing we can possibly do is to enact more legislation that prevents the average citizen hiring a lawyer and using the courts.

Our tax dollar finances our court system. It would be unfair if only Hawaii's wealthiest could afford access to it.

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Richard Turbin is a Honolulu attorney and
chairman-elect of the Tort and Insurance Section of the American Bar
Association, with 35,000 members the largest organization of insurance
and personal injury lawyers in the world.