I am a recent newcomer to this field. Prior to June 2006, which is when I took over the Lost Compensation practice group, I was just a lay citizen. I heard of the tort reform debate, but frankly did not burn too many mental BTUs giving it much thought. Tangentially, the debate seemed too polarized to maintain my trust. With few exceptions, I am wary of those who believe so fervently in something that they refuse the debate (certain truisms aside, such as let's not argue whether 2+2 is 4, or that they sky is blue, or excess carbon emissions leads to climate change (oops, did I go too far?)).
This is an op-ed piece, first of all, so I think it is important to understand a little about me so that my opinions are framed within context. I am a man with no party. Do not color me red or blue. I am a fiscal conservative, an investor, and a believer in free markets; in short, "government stay out of business; busy yourself with providing for the common defense and such." Conversely, I am a social liberal which also ties into my small government mentality. This does not mean I am a practicing liberal, mind you, only that I do not believe it is the government's job to legislate moral issues. This all means that I am rejected by both political parties which have any dog in the hunt.
I mention this so that you all realize that I have zero political grist to grind. Back to the issue.
President Bush talks about how there is a need for tort reform, which will result in job growth, productivity, and corporations flourishing in a virtuous cycle. The Economic Policy Institute issued a Nov 2006 paper which debunks each of these assertions using data and analysis.
And yet I am not here to endorse the EPI's paper. I'm just saying.
As an investor, I would love the President to be right on. Lawsuits cost money, which lowers profits, which pinches my pocketbook. But, I also believe in accountability and believe that those who inflict harm upon another ought be held to account for their misdeeds. If there was no threat of lawsuit damages, or that the threat was reduced to de minimus levels, what incentive do companies have to invest in quality necessary to avoid harm?
For example, I am reminded of the infamous McDonald's hot coffee lawsuit from the 1990's. The jury awarded damages equal to about, what was it, 3 days of profit due to coffee sales? (Someone please correct me if this is wrong, I do not want to be accused of exaggeration. This is my recollection from the top of my head, and this may be off by a day or two.) Such a penalty hardly seems overly punitive, but one which obviously grabbed headlines -- a good thing, to raise awareness and send a message to corporate "e-ba-do-ahs" -- and MickeyD's attention.
Look, not everyone out there in Corporate America is out to hurt The Little Guy. But here are the facts:
- Companies are not philanthropies: they exist to make money (which is fine).
- And quality / safety cost money.
And right there lay the push-pull of it all. If the threat of suit for wrong-doing is not there, we are left solely to rely upon the good moral hygiene of *all* corporate stewards in any market of interest. Why all of the leaders? Because as soon as one starts cutting corners, they all must find ways to lower costs to remain competitive. Quality assurance costs money. So, all it really takes is one bad apple for the house of cards to come a-tumblin' down.
If companies are saying "it hurts when I do this", then stop doing "this." If lawsuits hurt, stop the actions which lead to the injury, which leads to the lawsuits. The justice system should filter out the frivolous lawsuits much like the wheat from the chaff. I am just not sold on tort reform being necessary or effecting the outcomes which are promised by its supporters.
