The Cost of Legal Extortion

Risky Business

In movies like Erin Brockovich and A Civil Action, we see lawyers (or in Erin Brockovich, a legal secretary) bravely sacrificing their careers and their financial resources to sue evil, polluting corporations on behalf of cancer-stricken children. Naturally, we root for the families and for their plucky lawyers over the attorneys for the corporations, who are portrayed as either wily and corrupt or idiotic and corrupt. While the movies end differently, we’re meant to see that justice involves large punitive damages for the families of the sick children.

If only every plaintiff in every personal injury lawsuit really were cancer-stricken as a result of some company’s misdeeds, these movies might be an accurate picture of the current legal system. Unfortunately, that’s not the case. Everyone is familiar with the stereotype of personal injury lawyers as ambulance chasers, but few people realize just how pervasively these lawyers are damaging American business. In this age of Enron, decent, profitable companies are being driven out of business by the costs of settling thousands of spurious lawsuits.

Take asbestos litigation, currently the hottest field for zealous lawyers. Though asbestos products have been removed from circulation for decades, and notwithstanding the fact that most sick patients filed lawsuits against corporations decades ago, there are currently more than 200,000 asbestos cases awaiting trial nationwide. Fortune magazine estimates that total damages could eventually top $200 billion. To put that in context, last year total corporate profits were only $767 billion, according to the National Bureau of Economic Research. That means that one type of lawsuit, filed against a small minority of firms, could wipe out more than 25 percent of last year’s corporate profits.

Worse yet, most plaintiffs in these cases are not sick—they exhibit some lung damage that comes with age or smoking, but is difficult to separate from harmful asbestos exposure. Claimants like these, unlike the truly sick who most often seek out their lawsuits, are rounded up in mass screenings by lawyers looking to add to the roles of plaintiffs; after all, such lawyers take 25 to 40 percent of the damages. In a sadistic twist, these kind of lawsuits prevent the truly sick from being compensated and having their care paid for, because the corporations that made them sick are all being driven into bankruptcy or out of business by the illegitimate lawsuits. With the true offenders like Raymark now out of business, most lawyers target suits against companies that have acquired asbestos-related subsidiaries, though these businesses often used asbestos only in incidental ways. Thus, the shareholders—just about everybody these days, because of widespread mutual fund ownership—of companies that never made asbestos are now losing money to settle these lawsuits.

Then there’s medical malpractice claims. In states known to award high punitive damages like Florida, general practitioners must carry hundreds of thousands of dollars of malpractice insurance, and the rates are rising in some places at higher than 20 percent per year. Doctors, who still make only a few hundred thousand dollars per year, are being driven out of the business. Earlier this month, 600 doctors in Texas closed their offices for a day to protest this treatment, all the result of lawyers who know a well-insured doctor to be a sitting duck. Even if the claim against a doctor is specious, it can be cheaper for the medical insurance companies to settle quickly, rather than pay court expenses and risk losing a lawsuit—even doctors who have done nothing wrong are losing claims all the time.

Harvard has its own overzealous lawyer, Climenko Professor of Law Charles J. Ogletree, who has announced his intention to sue Harvard and other universities for reparations for slavery. The claim is not only morally specious—primarily because of the distance in time from the crimes in question and because of the lack of anyone identifiable who was even indirectly complicit—but also hatefully disingenuous in its target of Harvard, an institution that through affirmative action has benefited thousands of living African-Americans, and whose Afro-American studies department is the world leader. More important for my argument, however, are the enormous potential costs of a lawsuit like this for Harvard. People like Ogletree must realize that institutions like Harvard will have to find ways to pay for the costs of defense and for potential settlements, if the suits advance that far. I propose that all such expenses faced by Harvard be taken first from Professor Ogletree’s salary and second from the budget of the Afro-American studies department. Perhaps then Ogletree will realize the costs of his lawsuit.

The rise of lawsuits against doctors, corporations and now Harvard—just about anyone with good insurance—threatens to create a culture of victimhood in this country, driven by lawyers who know how to game the system to collect their 40 percent. As is chronicled on websites like Overlawyered.com, the range of cases is breathtaking. Congress is perennially debating tort reform to stop lawsuits like these, but there is little indication that anything will happen soon, with the financial committees of Congress preoccupied with accounting reform. Meanwhile, lawsuits continue to drag down the American economy from all directions.

Alex F. Rubalcava ’02 is a government concentrator in Eliot House. His column appears on alternate Wednesdays.

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