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THE LITIGATION EXPLOSION: WHAT HAPPENED WHEN AMERICA UNLEASHED THE LAWSUIT

By Walter K. Olson

Dutton -- 388pp -- $24.95

When Gloria Grayson, a 21-year-old opera student, tripped over a hole at a sidewalk work site, she broke her leg--and killed her chances of becoming a famous diva. Or so her lawyer argued in a 1959 negligence suit against the site's owners and contractors. Grayson claimed she hit her head in the spill and afterward had trouble staying on pitch. She sought compensation for her injuries and the loss of what might have been a lucrative career. A Bronx jury awarded her the then-sizable sum of $50,000. An appeals court cut the award to $20,000, but upheld the precedent.

Grayson's suit, writes Walter K. Olson in The Litigation Explosion: What Happened When America Unleashed the Lawsuit, highlights one way U. S. courts and lawmakers have "deregulated" litigation. The consequence, in his view, is an eruption of needless and destructive lawsuits that only make lawyers rich.

Given Olson's prominence as a senior fellow of the influential Manhattan Institute, a conservative think tank, The Litigation Explosion is being hailed as an authoritative look at our troubled liability system. To be sure, Olson adds an articulate voice to a charged debate and suggests some provocative solutions. His reasoning, however, tends to be one-sided and thinly supported.

Until some 30 years ago, Olson writes, suits were seen as evil, a last resort. The law was full of rules that discouraged frivolous filings, kept litigants within tight bounds, restricted expert testimony, and narrowed the courts' discretion. But Americans gradually came to believe that settling private quarrels in court could make society better and fairer, and the law was relaxed.

One big shift came in the law of damages. Courts used to award damages only if they were "direct and certain"--not speculative, as in Grayson's case. But after her suit, "one formalistic damage limitation after another collapsed in similar fashion," Olson writes. People began comparing lawsuits to "crapshoots, roulette wheels, keno lounges and fan-tan parlors."

As the law of damages broke down, other traditional safeguards crumbled at the hands of the increasingly powerful litigation industry. In Olson's view, lawyer advertising, court-shopping, and sweeping pretrial discovery are examples of dubious reforms promoted by the contingency bar--a growing group of greedy attorneys who gamble on the outcome of suits, usually by fronting expenses in return for a piece of the action. "The unleashing of litigation in its full fury," he writes, "has done cruel, grave harm and little lasting good."

Olson tackles some important and elusive questions: Why does America have so many lawsuits? Why are lawyers so numerous, powerful, and feared? Should anything be done to change matters?

Litigation's "parade of horribles"--expense, acrimony, destruction ef privacy, and corruption of the participants--can, he concludes, be stopped. The key is to make lawyers answer for their excesses and pay for their mistakes. He calls this solution "strict liability for lawyering." His main proposal is to force losers in suits to foot the winners' legal bills. (He suggests charging lawyers but letting clients commit by contract to pay.) Such "two-way fee-shifting" exists in England and other European countries, he notes. Instituting similar rules here, he writes, "is the single most important and constructive legal reform ordinary citizens can fight for over the long term."

Olson packs his book with generalizations about the evils of contingency-fee lawyers but offers little hard data or original research to back up his diatribes. He cites cases and studies, but mostly he recycles facts and opinion from newspapers and magazines.

More disturbing, he fails to take on and discredit the growing body of evidence that contradicts him. He stresses, for example, that the number of injury suits is spiraling out of control. But federal court records from 1985 to 1989 show that personal-injury product-liability filings, with the exception of asbestos cases, decreased by 37.5%. And while Olson correctly notes a rise in gigantic punitive-damage awards, he overstates the case. Michael Rustad, a professor at Boston's Suffolk University law school who is studying punitive product-liability awards from 1965 to 1990, has found that the increase involves an extremely small number of verdicts and that huge awards are frequently overturned on appeal.

Olson's main remedy--making losers pay--isn't as fair as it sounds. It doesn't work when the playing field is uneven, as when an individual opposes a corporation. And even suits with merit can be lost on technicalities. Olson's plan would simply scare away many plaintiffs who have in fact been wronged.

Still, there's no question that our liability system is overloaded and sometimes abused. One good starting point for change is a new study commissioned by the American Law Institute, an organization of lawyers, academics, and judges. The study urges uniform, scaled awards for pain and suffering, clear criteria for punitive awards, and other changes that would make tort litigation cheaper and more predictable for sued companies. For plaintiffs, it suggests alternatives to the tort system, including a no-fault, workers'-compensation-like system for medical and pharmaceutical injuries, that would make it easier and less costly to get restitution. In contrast to Olson's passionate but ultimately unsatisfying argument for reform, the ALI report offers a documented, evenhanded analysis and prescription for change.MICHELE GALEN


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