The Road to Reform - How the trial lawyers can be fought - tort system reform

National Review, August 20, 2001 by MICHAEL J. Horowitz

Imagine yourself the CEO of a major corporation approached by your chief marketer with plans for next year's sales campaign. "Let's save lots of money by putting fewer features on next year's widgets," he says. "Then let's ask our customers to buy lots of them by promising we'll make them happier after our profits increase." How long would it take you to fire that guy?

Amazingly, conservative Republicans, moderate Democrats, and the American business community have spent hundreds of millions of dollars- and precious political capital-on tort-reform campaigns that differ little from the widget marketer's scheme. Here's the pitch: "Because tort judgments are too high, Congress should limit the amount of damages its constituents can recover. Because there are too many tort claims, congressmen should vote to limit their constituents' right to sue."

It's not surprising that these multimillion-dollar campaigns have abysmally failed to restrain the growing power of the tort system to mow down whole industries in single cases. It's equally obvious that they've been unable to limit the growing number of tort-lawyer billionaires soon likely to have more disposable income to "invest" in politics than all candidates now spend on all elections in any given year. Voters know that the tort system is counterproductive and corrupt, but they've managed to restrain their enthusiasm for reforms asking them to sacrifice their rights to make the world safer for the Fortune 500.

Fortunately, there are better and more far-reaching routes to change. Strategically designed "new agenda" tort reforms increase rather than diminish consumer rights, benefit only those corporate defendants who first offer significant benefits to tort claimants, and require lawyers to comply with ethics rules mandating that they return unreasonable fees to their clients.

These reforms make political as well as policy sense: They provide immediate and tangible benefits to consumers-the reverse of traditional tort-reform proposals, whose direct savings go to corporate defendants. Also, importantly, they focus less on what injured parties receive than on the system's transaction costs-its growing, astonishing propensity to give more money to lawyers than to injured parties. For these reasons alone, new-agenda reforms enjoy strong support from both parties, from liberals as well as conservatives, and from overwhelming numbers of editorial boards and commentators.

A small number of business leaders have seen the need to shift to new- agenda reforms. They have been less concerned with eye-catching outrages like the McDonald's hot-cup-of-coffee case, and more focused on why, when a drunken doctor saws off the wrong leg, the tort system awards multimillion-dollar fees to lawyers who take few meaningful risks and add little value to their clients' claims. The reformers have been most interested in altering perverse incentives that encourage lawsuits rather than settlements. They have understood the value of broad, bipartisan reform coalitions-and the folly of waging wars that pit businesses against consumers. Unfortunately, however, they have yet to convince most of their business colleagues to abandon the old take- rights-away reform strategies.

The Bush administration has paid lip service to new-agenda reforms, but-sadly and surprisingly-has reverted to the old, failed scripts when the chips have been down. Here's what's available on the tort-reform front and what the Bush administration has done-or more accurately failed to do-in three critical areas.

Malpractice reform. Not surprisingly, Tom Daschle has eaten the administration's lunch on the patients' bill of rights. In the debate, the White House has taken the classic loser's position: accepting the Democrats' emphasis on lawsuits, but also calling for such "responsible" restrictions as capped pain-and-suffering damages and procedural barriers against getting to court. Predictably, the White House position hasn't held, and the president has been tagged with the classic Republican caricature: "too close to big business" and "no friend of the little guy."

A better approach to malpractice reform was proposed more than 15 years ago by-remarkably-Richard Gephardt. His reform required malpractice claimants seeking pain-and-suffering damages to prove their cases under a near-impossible "beyond any reasonable doubt" standard-but only if they had first received and rejected defendant offers to pay all of their lost wages, unreimbursed medical costs, and reasonable hourly attorney fees.

Had the White House gone with the Gephardt bill-or with a more consumer-friendly version introduced in 1995 by Sens. Mitch McConnell and Spencer Abraham-it could have seized the initiative in the patients'-rights debate. It would have been on the side of quickly reimbursing malpractice victims for their actual losses. It would have been able to exploit Rep. Gephardt's claim that the reform created a "preferable system [that] makes . . . recovery . . . cheaper, more rational, and . . . fairer." Gephardt, now the House minority leader, would surely have opposed the legislation he once championed-and Republicans would have been able to exploit that opposition as evidence of the tort bar's veto power over Democratic-party policies. Ironically, the reform would have effectively abolished-not merely capped-most malpractice pain-and-suffering claims; it also would have achieved massive attorney-fee reductions, and far greater health-care cost savings than the administration's current proposal will ever produce.