Thursday, May 29, 2003
DEFENDING PLAINTIFFS
Ron Bailey Takes the Bait
There's an article at Reason magazine this morning by "science and society" correspondent Ron Bailey (with whom I've had the pleasure of sharing a podium, and whose work I usually find to be very worthwhile and well thought-out) leveling some of the usual attacks against plaintiffs' lawyers. I'm afraid Bailey's got it wrong this time. His piece collects the usual complaints: Jury awards are getting bigger, allegations are getting wilder (e.g. McDonald's failure to warn about the fat in their foods), the proliferation of ridiculous warning labels. This is the standard litany of complaints against the civil justice system in America, but it suffers from the same flaws that recitation of that litany always fails to address. Here's an example:
In 1999, the top ten jury awards totaled nearly $9 billion, up from a mere $750 million in 1997. Given the current contingency fee system, the lawyers got around $3 billion of the take. More recently, the total of the top 100 jury verdicts in 2002 was 3 ½ times higher than the amount awarded in 2001.
Shocking! Well, the source Bailey cites notes that "large awards are frequently changed," without further details. This is typical. Citation of a jury verdict is all but meaningless without a rigorous follow-up to determine what happened on appeal. This is an example of something I've been saying for years, and I feel so strongly about it that I'll quote myself: "Anyone who quotes statistics to support their position one way or another about 'tort reform' is either ignorant or intentionally deceptive." What do I mean by that? The U.S. civil justice system does not and never has been set up to allow the collection of systematic data on the quantity or quality of economic transfers effected through litigation. There are tens of thousands of courts working in thousands of more or less independent jurisdictions in the U.S. If you count arbitral panels, the numbers go up by perhaps another order of magnitude. Most of these distinct authorities have no method whatsoever established for the on-going compilation of meaningful data, and what data does exist cannot be accessed by anyone seeking to undertake any kind of rigorous analysis. Add to this the fact that the vast majority (from personal experience, more than 90%) of disputes are settled before any kind of publicly-available resolution is reached, and those settlements are almost all strictly confidential. As a result, all information that comes out of the U.S. civil justice system is by its nature anecdotal. Therefore there is no way at all to filter out or even be systematically aware of selection effects or bias in the collection or analysis of data.
This is the empirical aspect of the problem. Now, look at the political/policy questions. Foremost to me is the basic question, "Compared to what?" As a libertarian, I have to ask whether the system of private enforcement of legal rights is preferable to enforcement by the state, which is the only alternative. For me, the answer is clear: Better to let individuals judge for themselves when to invest resources and how much of their resources to invest in the enforcement or defense of their rights than to leave that decision to the state. I make that judgment on "Hayekian" grounds: Only the individuals involved can know enough about all of the factors effecting the cost/benefit equation to make a rational choice. (In fact, even they will often make mistakes, over-investing or under-investing in the enforcement process. But they are in a better position than the state to make these decisions.) The rejoinder from critics of the system is that the profit to be made by plaintiffs' lawyers (through contingency fees) skews the equation in favor of over-enforcement. Bailey's comment here is typical:
Anyone negligently or intentionally injured deserves his or her day in court and just compensation. However, many Americans are now recognizing that the civil courts have become a lottery in which far too many people win much more than their cases merit. Trial lawyer avarice is at the heart of this dysfunctional system, and fortunately it looks like many states are finally taking steps to rein in their greed.
But this is an inherently anti-capitalist and anti-libertarian argument. Capitalism is premised on the specialization of effort through the market. Plaintiffs' lawyers are, in essence, professional valuators of claims. In a free market for legal services and claims, sellers and buyers will match themselves based on expected returns. In other words, successful plaintiffs' lawyers will seek out good claims and meritorious claims will find their way to successful plaintiffs' lawyers. The discipline imposed on the system comes from the self-interest of the plaintiffs' lawyers: Why waste time and effort on worthless claims? Now, this is the theory. In practice, things don't work out so well, and the reason is that information does not flow in a completely free and open way between people who possess claims (potential plaintiffs) and those who are in the best position to bring those claims to a final, enforceable judgment (plaintiffs' lawyers). I'll close this already-too-long post with this observation: People who find problems in the current system of civil justice in America would do much better to work to improve information transfer about claims than to use state power to artificially limit the market value of claims, which almost all tort reform consists of.
[Ron Bailey wrote more on this topic, referring to this blog entry, and then I responded again.
Since then, I've also written this and this.
I welcome correspondence on the subject, but please take a look at everything I've written before you write to tell me I'm an idiot. Then you can still call me an idiot.
GB, THHotA
posted by Greg 7:19 AM
