by By James Kwak There’s a story you hear often these days. The story is that America has too many lawsuits: too many lawyers, too many people filing frivolous suits, too many excessive damages awards by juries, and so on. This story is the reason for all the “litigation reform” in recent decades: the Private Securities Litigation Reform Act of 1995, Prison Litigation Reform Act of 1996, the state-level tort reform movement, Bell Atlantic v. Twombly, Ashcroft v. Iqbal, and so on. There are two problems with this story. The first is that it isn’t true. Take medical malpractice, for example—a frequent target of tort reform advocates. Only a tiny fraction—probably under 2%—of people harmed by negligent medical care actually file suit. Of suits that are filed, according to an after-the-fact
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James Kwak considers the following as important: Books, inequality, law, litigation, syndication
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By James Kwak
There’s a story you hear often these days. The story is that America has too many lawsuits: too many lawyers, too many people filing frivolous suits, too many excessive damages awards by juries, and so on. This story is the reason for all the “litigation reform” in recent decades: the Private Securities Litigation Reform Act of 1995, Prison Litigation Reform Act of 1996, the state-level tort reform movement, Bell Atlantic v. Twombly, Ashcroft v. Iqbal, and so on.
There are two problems with this story. The first is that it isn’t true. Take medical malpractice, for example—a frequent target of tort reform advocates. Only a tiny fraction—probably under 2%—of people harmed by negligent medical care actually file suit. Of suits that are filed, according to an after-the-fact review by unaffiliated doctors, 63% involved errors by doctors, and another 17% showed some evidence of error. According to the most basic economic theory of torts, we want people harmed by negligence to sue, because otherwise potential defendants (doctors, companies, etc.) will not have sufficient incentive to make the efficient level of investments in preventing injuries. In short, it is highly likely that we suffer from not enough lawsuits, not from too many lawsuits.
The second problem is more important, however. That problem is that while the costs of litigation are real—not just money but also defensive medicine, intimidation of startups by patent trolls, intimidation of the media by billionaires—the exclusive focus on costs overlooks the crucial role of litigation in our democracy. That is the focus of the new book In Praise of Litigation by Alexandra Lahav, a colleague of mine at the University of Connecticut School of Law. (The book is also where I got the statistics in the previous paragraph.)
Most people probably think it’s good that we have laws. As Lahav points out, there are three ways those laws actually get enforced: administrative agency regulation (e.g., the Office of the Comptroller of the Currency telling Wells Fargo not to foreclose on homeowners without proper documentation); lawsuits by administrative agencies (e.g., the OCC or the Department of Justice suing Wells for foreclosing on homeowners without proper documentation); and, when authorized, lawsuits by private parties (e.g., a class action by homeowners against Wells for foreclosing on them without proper documentation). Now, I didn’t choose those examples at random. We know that the federal regulatory agencies didn’t stop illegal foreclosures; then, after belatedly threatened to sue, they settled with the big banks for with largely illusory penalties; and the settlements insulated the banks from private liability for fraudulent foreclosures. (For the definitive word on that whole topic, see Chain of Title by David Dayen.) If you are skeptical about the ability or inclination of the federal government to enforce the law, you should be particularly protective of the ability to file a lawsuit on your own.
This is even more true if you care about individual rights. If you think that your rights have been violated, you can sue to enforce them. This is particularly important if your rights have been violated by a state or by the federal government, because in that case it’s unlikely that a government agency is going to take your side. The right to sue is arguably the most fundamental right that exists, because it is the right to have rights in the first place. For example, the Sixth Amendment (as interpreted in Gideon v. Wainwright) says that you have the right to an attorney if you are charged with a felony. But many states and localities refuse to pay for lawyers for the poor; see Dylan Walsh in The Atlantic, or the story of Jack Bailey on This American Life, for example. So you have to sue. A series of lawsuits by the Southern Center for Human Rights led to the creation of the Georgia public defender system, and the Southern Center continues to challenge judicial circuits that fail to provide sufficient representation for poor defendants.
But the right to sue is slowly being limited, not just by “litigation reform” acts but particularly by Supreme Court decisions that made it harder for plaintiffs to challenge secret wrongdoing by companies (Bell Atlantic), enhanced government officials’ immunity from private lawsuits (Iqbal), enforced mandatory arbitration clauses in standard form contracts (AT&T Mobility v. Concepcion, American Express v. Italian Colors Restaurant), limited the jurisdictional reach of federal courts (J. McIntyre Mach. v. Nicastro), and prevented plaintiffs from obtaining injunctions against illegal government actions unless they could prove that they were likely to be harmed by those actions again in the future (City of Los Angeles v. Lyon). The common theme is increasing restrictions on the ability of ordinary people (or small businesses in some cases) to challenge illegal actions by large companies and governments. But no one ever said, “Your rights are being limited.” Instead, changes in legal procedure effectively increased the cost of enforcing those rights—in some cases to infinity.
The importance of lawsuits is something that conservatives have long understood. While conservatives are all in favor of restricting lawsuits against their investors (corporations, rich professionals other than lawyers)—which has the side benefit of taking money away from the trial lawyers, who tend to lean Democratic—litigation has been a central part of their strategy for decades. Think, for example, of the rewriting of the Second Amendment in District of Columbia v. Heller or the D.C. Circuit’s campaign against federal financial regulation (Business Roundtable v. SEC, MetLife v. FSOC).
In Praise of Litigation is only 149 pages (not including the copious notes that demonstrate Lahav’s command of the underlying material), and it’s simply written, because at the end of the day none of this is rocket science. We have three branches of government for a reason. The transformation of the judicial branch into a tool that is primarily accessible to the rich and the powerful is a serious problem in our democratic system of government. Sure, there are lawsuits that are only intended to harass people or extort settlements from companies that can’t afford millions of dollars in legal fees. But closing the door to the courthouse makes it harder both to enforce the law and to protect people’s rights.