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THE TIME FOR LEGAL REFORM IS NOW

By Bill Simon

Nearly 170 years ago, a young Abraham Lincoln delivered an impassioned speech in Springfield, Illinois. Summarizing his theme, he said:

“Let reverence for the laws be breathed by every American mother. Let it be taught in schools, in seminars, and in colleges… written in primers, spelling books and almanacs… preached from the pulpit, proclaimed in legislative halls and enforced in the courts of justice. In short, let reverence for the law become the political religion of the nation.”

Lincoln was troubled that law-abiding citizens were losing their respect for the rule of law and losing confidence in their system of justice. He knew that failure to restore this respect would undermine the very foundation of America’s democracy and civil society.

Today, likewise, our system of civil justice is out of control.  It has been hijacked by a relatively small group of lawyers—enabled by a growing and troubling public attitude that ducks personal responsibility and seeks profits from every misfortune—who have gamed the system for their own gain.

America’s tort system costs our economy $246 billion dollars per year. It’s a sum that amounts to a tax of $3,300 on the average American family.  

Where does this money go?

A Rand study of state class actions found that, on average, attorneys’ fees and administrative costs account for nearly half of any settlement. Recently, a class action suit filed in Texas sought $10 billion for a “defect” in the floppy disk controllers of Toshiba laptops. Even though not one customer reported a problem or injury, Toshiba settled the case with cash distributions of $597 million with consumers receiving cash or coupons worth from $210 to $443. The lawyers received $147.5 million in fees.

The abuses seen in the class action system are reflected throughout our tort system. Over the last decade, class actions at the state level have skyrocketed 1000 percent. This litigation explosion is impacting the cost and quality of health care, the vibrancy of our capital markets, small businesses and cutting- edge industries, and our competitiveness in an increasingly tough global economy. With the rapid emergence of new economic competitors like China and India, this is a handicap we simply cannot afford.

The effects have been particularly severe here in California , where there are more lawyers per capita than any developed nation (apart from the United States ) and where escalating costs of lawsuit abuse are hampering our economic prosperity and stifling job growth.

However, there are signs that we are on the cusp of serious reform as all three branches of government have been weighing in on the issue.

In the Legislature and Executive branch, several bills have been introduced or signed into law within the past year, including the Class Action Fairness Act, which prohibits settlements that benefit class members based on their proximity to the courthouse, and discourages settlements that would result in a net loss for class members. The Supreme Court weighed in as well when it issued a landmark decision in the State Farm case creating a template for the reduction of excessive punitive damage awards.

The momentum for reform is with those who want to make our country’s legal system simpler, fairer, and faster. Yet, a great deal of work remains to be done starting with the election of the judiciary. In the last several years, the business community has led a number of successful efforts to educate voters in key state supreme court and attorney general races. But, this year there are 46 state supreme court and 28 attorney general elections whose outcome will have an enormous impact on the legal environment across the nation.

Speaking as a lawyer, I know that lawyers can be real agents for change in reforming the legal system here in California and throughout America by advocating for such things as tightening class action standards and stopping unscrupulous attorneys from taking advantage of unsophisticated clients. They can and should be our first defense.

Reverence for the law is and must always be a cornerstone of life in America . To make this happen, we need a justice system that not only acts swiftly on behalf of the genuine victims, but also embraces the uniquely American values of personal responsibility, fairness, and simple common sense.

Bill Simon