Lawsuit reforms equal job protection
As appeared in Atlanta Business Chronicle, January 23, 2009
Shannon L. Goessling
Goessling is (former) executive director of Southeastern Legal Foundation, an Atlanta-based constitutional public interest law firm and policy center.
Launching his lawsuit reform agenda for 2009, Gov. Sonny Perdue is proposing not only to level the litigation playing field in Georgia — he’s proposing to protect jobs and make Georgia a better state in which to do business.
As Washington lawmakers search for ways to spur business investment, it makes sense that we revisit one of the most expensive, wasteful, and economically damaging items on the national landscape — lawsuit abuse.
Perdue proposes to protect companies from frivolous lawsuits if their products have already met the stringent and costly U.S. Food and Drug Administration approval process. This measure has met with a great deal of success in Michigan, where life-sciences companies have invested $355 million on research and development since the law’s passage in 1996, and the pharmaceutical industry’s 12,000 jobs in the state have a healthy average yearly wage of over $60,000, according to a Manhattan Institute report.
Another proposal promises even more predictability and efficiency for our courts, companies, insurers and citizens. Under this proposal, damage claims dismissed at an early stage of litigation would require the plaintiff to pay for the defendant’s attorneys’ fees. Failing to notify the plaintiff that he or she might be on the hook for fees, the attorney would be responsible to pay the fees. This would streamline the litigation process by securing a court’s determination of a lawsuit’s merit before the lengthy and costly discovery process begins.
Perdue’s statement that “meritless litigation is not a viable business strategy in Georgia” rings particularly true in today’s economy. The President’s Council of Economic Advisors concluded in 2006 that excessive U.S. tort costs exceed $187 billion per year. According to Pacific Research Institute chief economist Dr. Lawrence McQuillan, the total annual accounting cost of the U.S. tort liability system is $865.37 billion — more than the recent total TARP stimulus/bailout package.
For Georgia, the facts play out as expected. McQuillan reports that Georgia can expect per-capita gross state product to increase 0.75 for every 10 percent improvement in the state’s legal ranking.
Lawsuits with merit should absolutely see the inside of a courtroom, and Perdue’s proposals do nothing to interfere with that right. On the other hand, predatory and frivolous lawsuits create unpredictability, which raises insurance rates and the cost of goods and services, while also discouraging bold innovation and employer re-investment, as scarce resources are directed to litigation costs and avoidance.
The facts are clear — employers are attracted to states with healthy legal systems. Just ask Texas and Mississippi.
Georgia and the nation need fair courts, and we need an end to abusive litigation that costs jobs and innovation. The proposals are a good set of steps in the right direction.