Curbing frivolous lawsuits, class actions, and runaway damage awards has long been the goal of small business groups, which have campaigned against such legal abuses under the broad guise of “tort reform.”
While they scored some successes in the Republican Congress, both time and tide appear to be working against further reform, at least for now.
I say time because the Democratic majority that now controls Congress has always had close ties to trial lawyers. Major law firms and lawyers who make up what’s known as the “Plaintiffs’ Bar” contribute millions of dollars a year, mostly to Democratic political campaigns.
And I say “tide” because a recent survey by the law firm of Fulbright & Jaworski found that lawsuits, both filed by and against corporations, declined in the past year by a significant amount. The trend doesn’t suggest that companies are behaving any better or becoming friendlier. Filing a lawsuit is now considered a business strategy just like almost everything else, according to experts. But the fact that companies were sued and filed suit less frequently last year will likely cause the sense of urgency to ebb on this issue in Congress.
That’s not to suggest that frivolous lawsuits are any less of a menace for small businesses. In June I was part of the media horde that covered the infamous “lost pants” lawsuit . A Washington, D.C.-area administrative law judge had sued a small, family-owned dry cleaner. The grave injustice? The proprietor lost a pair of pants and wasn’t contrite enough about it for the judge.
The case, the butt of late-night TV jokes, was thrown out of court, but it was no laughing matter for the defendants. Although they won, they had to sell the store to pay their legal bills. The case provoked well-deserved outrage among small business groups. (You may also want to check out my follow-up column on states that are lawsuit happy playgrounds for lawyers).
The case of the lost pants, however, pales in comparison to the questionable alliance between trial lawyers and lawmakers. The New York Times reported recently that 26 Democratic lawmakers, including four presidential candidates, had accepted $150,000 in campaign contributions from people connected to the law firm of Milberg Weiss. And that’s just since the firm was indicted for fraud and bribery last year! Milberg, one of the nation’s leading class action law firms, was accused of paying kickbacks to people to become plaintiffs in their cases.
One partner, William S. Lerach, was a fund-raiser for John Edwards’s presidential campaign until his guilty plea last month, the Times reported. Melvyn I. Weiss, a founder of the firm, gave the maximum $4,600 to Sen. Hillary Rodham Clinton in June. Other firm members contributed to the presidential campaigns of Sens. Barack Obama and Joseph R. Biden, Jr.
According to the Times, “the reluctance of Democrats to shut off the cash spigot, even in the face of scandal, underscores how the pressure to raise money creates marriages of political interests that can be difficult to break up.” And those marriages clearly buy influence on legislation.
Susan Eckerly, a lobbyist for the National Federation of Independent Business (NFIB), complained bitterly in 2004 that a cabal of Democrats in the Senate was effectively blocking every effort at tort reform through procedural maneuvering. “Nothing will change in our litigious society without reforming our nation’s legal system — something that doesn’t seem to appeal to many U.S. senators whose reelection campaigns are funded in large part by the trial lawyers themselves,” she wrote.
You could argue, as Democrats do, that such lawsuits are one of the few ways that the “little guy” can fight big-business chicanery and malfeasance. But that is surely little consolation for small business owners, who often see their life’s work threatened by a frivolous lawsuit.