In the News - Full Article
National Public Radio
LINK BETWEEN LITIGATION AND THE ECONOMY
Weekend All Things Considered
Anchor: Jennifer Ludden
JENNIFER LUDDEN, host:
Both President Bush and Senator John Kerry have taken the weekend off from campaigning to prepare for their upcoming debates. One bloc of voters President Bush hopes he can count on is business owners. At stump speeches across the country, the president strikes a sympathetic chord with this line.
President GEORGE W. BUSH: If you want to find jobs here in America, if you want people being able to realize their dreams by working, America must be the best place in the entire world for people to do business. That means less regulations on our business. That means we gotta do something about these lawsuits that are making it awfully hard for employers to expand.
(Soundbite of applause)
LUDDEN: We wanted to try to assess the actual impact of lawsuits on the American economy, so we've called three academics who study litigation. We start with Walter Olson, a senior fellow at The Manhattan Institute.
Welcome.
Mr. WALTER OLSON (Senior Fellow, The Manhattan Institute): Thanks.
LUDDEN: So, first, what kind of lawsuits is the president talking about?
Mr. OLSON: Well, he is talking mostly about injury lawsuits, although it's really wider than that. It is also employment lawsuits, and to some extent it's commercial and business lawsuits, too, all of the things that make someone doing business or practicing medicine or practicing a profession in the United States think that the law is unpredictable and that they could lose it all tomorrow by getting the wrong sort of case filed against them.
LUDDEN: And is this type of litigation on the rise in the US?
Mr. OLSON: Most of the numbers indicate that we spend more and more on it every year. And it spreads to new areas, like the tobacco settlement, which now has sucked billions of dollars out of consumers' pockets. They add to the impression, which is shared all around the world, that the United States has a problem with its business climate because of its courts.
LUDDEN: But now how do you quantify the impact of this kind of litigation on the American economy, as President Bush makes the link?
Mr. OLSON: Well, if--we have in this country set up one business success story after another: Microsoft, Wal-Mart. And each of them has become a target for relentless litigation in a way that if you think you've got the next great idea, maybe you'd be better off trying it off in some other country first.
LUDDEN: Walter Olson is with the Manhattan Institute.
Thank you.
Mr. OLSON: My pleasure.
LUDDEN: We turn now to Frank Cross, a professor of law at Northwestern University.
Welcome.
Professor FRANK CROSS (Northwestern University): Welcome.
LUDDEN: We've just heard what sounds like a persuasive argument that excessive lawsuits may hinder the economy. Do you agree?
Prof. CROSS: In general, no. You have to understand the bigger picture. The US does have more tort liability than other comparable countries, but what that loses sight of is that we have much less government regulation than those other countries. And I think that's a good tradeoff, and I think the evidence shows it. In fact, while he says that our business climate suffers, if you look at the international surveys, you'll find the United States at the very top in terms of the rating for business climate ahead of all the Western European nations, which have less tort actions but have much more regulations. And I was particularly intrigued by his comparison of Microsoft and Wal-Mart. Yes, they have been targets for lawsuits; they've been targets for very justified lawsuits. Wal-Mart was pretty much busted with hiring illegally. Microsoft was pretty much busted with failing to pay overtime. And neither company seems to have suffered too greatly from lawsuits. They both seem to have done quite well.
LUDDEN: Can one actually calculate the cost of lawsuits on the economy?
Prof. CROSS: You can calculate how much money is paid out in lawsuit damages. What you can't calculate is all of the effects of litigation, and a lot of those are positive. If you can't sue people for fraud, there will be more fraud. And, in fact, you find that the stronger the laws against securities fraud, the stronger and healthier the securities markets are. Also, you have to look at the health benefits. Litigation has undeniably produced some areas of major health benefits. One good example is anesthesia. Anesthesia used to be a dangerous procedure; there were a lot of lawsuits that resulted, perhaps not all of them justified. But those lawsuits motivated much safer practice of anesthesia.
LUDDEN: Frank Cross is a professor of law at Northwestern University.
Thank you.
Prof. CROSS: Thanks for having me.
LUDDEN: Finally, we turn to Michael McCann, a professor at the University of Washington in Seattle. His newest book is called "Distorting the Law: Politics, Media, and the Litigation Crisis."
Welcome.
Professor MICHAEL McCANN (University of Washington, Seattle; Author, "Distorting the Law: Politics, Media, and the Litigation Crisis"): Thank you.
LUDDEN: Mr. McCann, you write about what you call `pop torts.' Can you tell me, what is a pop tort, and how does that relate to the political debate on litigation?
Prof. McCANN: Well, pop torts are essentially anecdotes, they're stories, sometimes grounded in actual events; sometimes it seems totally fabricated. They are widely disseminated throughout the mass media.
LUDDEN: So I could say that McDonald's case.
Prof. McCANN: Yeah, the McDonald's coffee case was one of the very classic...
LUDDEN: A woman spilled McDonald's coffee on herself, it was incredibly hot, and she won a big award.
Prof. McCANN: Initially won a big award.
LUDDEN: And you studied it in your book and found a lot of distortions in the way it was covered.
Prof. McCANN: We went back and looked at the trial record itself, and we know that the jurors entered the case with a great amount of skepticism. The evidence that they heard at the trial was never really disseminated as part of the story that made it into the mass media, the fact that there had been over 700 complaints about McDonald's coffee in the couple years before this case, most of which had been settled. None of that was really transmitted--a long story--so a pop tort, the McDonald's case, was, `Woman burns herself with coffee, sues, wins $3 million,' leaving out the story that the jury heard and which ultimately changed the minds of the jurors.
LUDDEN: As we heard earlier, President Bush draws big applause on the campaign trail when he says, `Too many lawsuits hurt business.' From you research, are you saying that the average person actually has a misguided notion about the extent to which that may be true?
Prof. McCANN: The focus of much of that has been tort litigation, products liability and medical malpractice in particular, which is interesting because one of the primary areas of increasing litigation sic)
LUDDEN: This is NPR, National Public Radio.
