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Commentary

How lawsuit abuse hurts businesses and raises unemployment

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Consdier this paper from the Heritage Foundation, featuring a variety of views on lawsuit abuse.

Excerpt:

LAWRENCE J. McQUILLAN, Ph.D.: I am an economist. I focus on this issue as an economic issue, an economic problem. I have been working on this issue for about four years as a full-time project, and the first study that we did in 2006 was Jackpot Justice, which Hans mentioned earlier.

In this study, what we set out to do is measure the total cost of the U.S. tort liability system and put that cost in perspective. Hans mentioned a figure of $252 billion a year. That is the direct cost of the tort liability system, but what we wanted to do in this study is also measure the indirect cost. When we crunched the numbers, we arrived at a total of $865 billion annually as the cost.

It is a lawsuit industry. That’s really the way to look at it. It truly is an industry in terms of the size, scope, and amount of resources devoted to it. To put it in perspective, it’s roughly the size of the U.S. restaurant industry: About 6.5 percent of GDP would be the equivalent. It is about 30 times what the National Institutes of Health spends each year on finding cures for deadly diseases. It’s a huge amount of resources that are diverted toward, basically, a transfer system.

The Costs of Lawsuit Abuse

Every year, lawsuit abuse costs each American about $2,000. That is the cost that is factored into all the goods and services that we buy, from ladders to lawnmowers. Built into every price is a component to pay for liability insurance and lawsuit defense.

We estimated the wasteful part of that $865 billion to be about $589 billion a year. In other words, you could remove that part from this total cost and not change manufacturers’ incentives to produce safe products. You could still fully compensate truly injured individuals.

Here is one of the ways that lawsuit abuse changes the free market:

Indirect Costs: Defensive Medicine[…]The first one that gets talked about a lot these days is defensive medicine. Ninety-three percent of all physicians report practicing defensive medicine. These are basically unnecessary tests, procedures, referrals that they know are not really medically necessary to protect the patient, but they do them anyway to protect themselves from litigation. About 25 percent of all procedures, according to a survey last year by the Massachusetts Medical Society, are deemed by the physicians themselves to be unnecessary defensive medicine procedures.

We crunched the numbers in terms of how much this defensive medicine costs the economy. We arrived, in 2007, at $124 billion a year, which is about 8 percent of total health care expenditures. Today, that number would be roughly about $191 billion a year.

You also have to remember that these defensive medicine expenditures get passed along to all of us. We all end up paying for this in terms of our insurance. So insurance premiums go up, which then crowds out a lot of people from being able to afford insurance that they normally would be able to afford. We wanted to estimate what that costs. After crunching the numbers, we estimate that about 3.4 million Americans would have insurance today but do not because of the higher premiums due to just defensive medicine: today about $191 billion.

I think yesterday there was a report that came out that showed something like 14,000 people a year die because they do not have health insurance. It would not surprise me if a lot of these 14,000 people that die every year are part of those 3.4 million people.

And one more:

Indirect Costs: Research and Development

Another indirect cost of the excessive tort liability system is R&D impact. Of course, businesses have to spend a lot more money on legal defense that would otherwise go to product research and development, new product innovation, and new products being introduced. We estimated that total at about $367 billion a year of lost sales of new products that would otherwise come to market but do not because of the diversion of resources basically away from R&D and new product development toward legal defense: again, another huge indirect cost where it is hard to measure what would have been but is not.

Basically, the vaccine industry has fled the country. It is hard to find a manufacturer anymore in the U.S. that does vaccine development and manufacturing, primarily because of liability concerns. It was reported that the FDA granted the H1N1 virus vaccine to four companies to be manufactured, and without much of a surprise, three of the four companies are actually located outside the U.S.: Swiss, Australian, and French companies were all awarded the vaccine licenses.

There is one company in the U.S in Maryland, but I think it got the license to manufacture only because they have a technological advantage. They are going to produce an inhalable version of the vaccine rather than the standard injectable version. I think that is probably why they got a license. Otherwise, I think all of the manufacturers would have come from Europe or Australia.

That is a great example of how it really does impact U.S. business and how the liability system is forcing more and more business overseas. As a result, it hurts us in terms of the economy and job growth.

As another example, Volkswagen was going to introduce a three-wheel vehicle, very green technology, that gets about 49 miles per gallon. They were going to sell it in the U.S. for about $17,000 a vehicle. Probably most people in this room would not want to drive this vehicle, but I can tell you that where I come from in California, it would have sold well. It would have had a big market. It actually got qualified, too, to use the HOV lanes in California.

At the last minute, Volkswagen decided to pull it from the U.S. and not market it here because of liability concerns, but it is available in Europe. So once again, another example where European markets are perceived to be more favorable in terms of liability than the U.S.

I do not think it is any accident, too, that they tend not to have punitive damages in Europe and, also, that they have the loser pay system. This is another example of the indirect costs, fewer products available in the U.S. A lot of people probably would have loved to buy this car, but it is not available.

In terms of how expensive the U.S. system is compared to other countries of comparable standards of living, the estimate is that we have about 59 percent higher tort costs. These are direct costs. These are awards, attorneys’ fees, and administrative expenses. This does not include the indirect costs that I just talked about, but it gives you a good indication of our system compared to other systems in the world. It is just much more expensive for compensating injured individuals.

That is just one of the perspectives provided in this excellent article.

If we expect to have jobs in the future, then we should be thinking about who we expect to hire us. Tacking on frivolous costs onto business owners who develop products and services that we need means that there will be fewer businesses to hire us when we are looking for jobs and less choice and competition when we make purchases.

Keep in mind that trial lawyers are one of the pillars of the Democrat party, and they fight against any regulation of lawsuit abuse.

I noticed that Hans Bader published an article here talking about how the Supreme Court has been attacking businesses. This is one of the reasons why we are bleeding jobs to other countries. Judicial activism is hostile to business and the free market.

News

What happens when same-sex marriage conflicts with religious liberty?

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From the left-wing Globe and Mail.

Excerpt:

Saskatchewan’s top court has said marriage commissioners cannot use religion to say no to nuptials for same-sex couples.

The Court of Appeal had been asked by the government to rule on a proposed provincial law that would have allowed commissioners to cite religious grounds in refusing to marry gays or lesbians.

The appeal panel’s unanimous decision released on Monday said the law would be unconstitutional and amount to discrimination.

And more from the judge:

“Accordingly, putting gays and lesbians in a situation where a marriage commissioner can refuse to provide his or her services solely because of their sexual orientation would clearly be a retrograde step – a step that would perpetuate disadvantage and involve stereotypes about the worthiness of same-sex unions,” the justice wrote.

Judge Richards rejected suggestions that the number of gay marriages would be small and those affected could simply seek out someone else to perform the ceremony. That would overlook the impact a refusal would have on gay or lesbian couples, he noted.

“As can be easily understood, such effects can be expected to be very significant and genuinely offensive. It is not difficult for most people to imagine the personal hurt involved in a situation where an individual is told by a governmental officer, ‘I won’t help you because you are black (or Asian or First Nations) but someone else will,’ or ‘I won’t help you because you are Jewish (or Muslim or Buddhist) but someone else will,’ ” Judge Richards wrote.

As you might expect, the Human Rights Commission was involved:

The proposed law was crafted after a conflict arose when commissioner Orville Nichols, a devout Baptist, refused to marry a gay couple in 2005.

The two men laid a discrimination complaint with the Saskatchewan Human Rights Commission. The case went before the human rights tribunal, which ruled in 2008 that Mr. Nichols discriminated against the couple. It found that as a public servant he was obligated to marry them once they approached him.

Mr. Nichols, who has been a marriage commissioner for almost 30 years, was fined $2,500.

He asked the Court of Queen’s Bench to reverse the decision, but it upheld the tribunal’s ruling. A further appeal is still before the Saskatchewan Court of Appeal.

Comments to this post will be strictly filtered in accordance with Barack Obama’s laws restricting free speech on these issues.

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News

Woman recants rape charge after man spends 2 years in jail

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Political Map of Canada

Story from Calgary, Alberta, the most conservative province in Canada.

Excerpt:

Charges against a Calgary man accused of raping a woman over a 10-hour period nearly two years ago have been unexpectedly stayed.

Crown prosecutor Karuna Ramakrishnan issued the stay after the 44-year-old complainant, who recanted her story under cross-examination by defence lawyer Rebecca Snukal on Wednesday, failed to show up in court on Friday for further questioning.

She had been ordered to do so by Court of Queen’s Bench Justice Sandy Park, so Ramakrishnan could reconsider her position.

John Francis Dionne, 43, had faced charges of sexual assault causing bodily harm, kidnapping, assault causing bodily harm and uttering death threats in connection with the alleged incident on Oct. 28, 2008.

His first trial ended in a mistrial in June, because of an issue with one of the jurors, and was rescheduled for this week.

The woman initially outlined in detail what she says occurred during the ordeal, but when cross-examined, she couldn’t remember specific details.

Then, when asked why she would accept a ride from the man she claimed had raped her for 10 hours she became frustrated and denied it even happened.

“I’m lying about everything,” she told Snukal.

“Hurry along because I’m lying about everything. He’s not a rapist . . . so there, that’s it. End of it . . . he didn’t rape me.

“Let Mr. John Francis go free. He’s not a rapist. It’s over. That’s all I have to say. Let him out.”

Dionne, who had been in custody since his arrest, was to be released some time later on Friday.

Her name has not been released – but his name was released. His life is therefore ruined. And she will probably not be charged, since it is very rare that women are charged for making false accusations. The man spent 2 years of his life in jail. Was there any evidence? She says she was lying about EVERYTHING. How could there be any evidence? And yet he spent two years in jail.

What effect will this have on men? What should men believe about women when things like this happen? What does this tell us about the court system?

Why do women make false accusations of rape?

One recent study listed three reasons why women invent false rape accusations.

Excerpt:

A study of rape allegations in Indiana over a nine-year period revealed that over 40% were shown to be false — not merely unproven. According to the author, “These false allegations appear to serve three major functions for the complainants: providing an alibi, seeking revenge, and obtaining sympathy and attention. False rape allegations are not the consequence of a gender-linked aberration, as frequently claimed, but reflect impulsive and desperate efforts to cope with personal and social stress situations.” ( Kanin EJ. Arch Sex Behav. 1994 Feb;23(1):81-92 False rape allegations. )

In 1985, a study of 556 rape allegations found that 27% accusers recanted when faced with a polygraph (which can be ordered in the military), and independent evaluation showed a false accusation rate of 60%. (McDowell, Charles P., Ph.D. “False Allegations.” Forensic Science Digest, (publication of the U.S. Air Force Office of Special Investigations), Vol. 11, No. 4 (December 1985), p. 64.)

And this also happens in divorce trials in order to get custody.

False accusations in divorce trials

Consider this article from Touchstone magazine, by Stephen Baskerville.

Excerpt:

Today it is not clear that we have learned anything from these miscarriages of justice. If anything, the hysteria has been institutionalized in the divorce courts, where false allegations have become routine.

What is ironic about these witch-hunts is the fact that it is easily demonstrable that the child abuse epidemic—which is very real—is almost entirely the creation of feminism and the welfare bureaucracies themselves. It is well established by scholars that an intact family is the safest place for women and children and that very little abuse takes place in married families. Child abuse overwhelmingly occurs in single-parent homes, homes from which the father has been removed. Domestic violence, too, is far more likely during or after the breakup of a marriage than among married couples.

Yet patently false accusations of both child abuse and domestic violence are rampant in divorce courts, almost always for purposes of breaking up families, securing child custody, and eliminating fathers. “With child abuse and spouse abuse you don’t have to prove anything,” the leader of a legal seminar tells divorcing mothers, according to the Chicago Tribune. “You just have to accuse.”

Among scholars and legal practitioners it is common knowledge that patently trumped-up accusations are routinely used, and virtually never punished, in divorce and custody proceedings. Elaine Epstein, president of the Massachusetts Women’s Bar Association, writes that “allegations of abuse are now used for tactical advantage” in custody cases. The Illinois Bar Journal describes how abuse accusations readily “become part of the gamesmanship of divorce.” The UMKC Law Review reports on a survey of judges and attorneys revealing that disregard for due process and allegations of domestic violence are used as a “litigation strategy.” In the Yale Law Review, Jeannie Suk calls domestic violence accusations a system of “state-imposed de facto divorce” and documents how courts use unsupported accusations to justify evicting Americans from their homes and children.

The multi-billion dollar abuse industry has become “an area of law mired in intellectual dishonesty and injustice” writes David Heleniak in the Rutgers Law Review. Domestic violence has become “a backwater of tautological pseudo-theory,” write Donald Dutton and Kenneth Corvo in the scholarly journal Aggression and Violent Behavior. “No other area of established social welfare, criminal justice, public health, or behavioral intervention has such weak evidence in support of mandated practice.”

If we care about justice for all, then we have to care about this, too.

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