Public opinion surveys show that, as low as the President's approval rating is, and as low as public approval of Congress is, the civil justice system scores lowest of all. Almost no one in America thinks our current legal system does a good job.
Given the facts, this should come as no surprise. There are 260 million people in America. And each year, there is enough litigation for every one of them to have his or her own lawsuit. In 1990, there were over 100 million lawsuits filed in state courts alone.
Is this too much litigation? Many lawyers say no. On the other hand, while America represents a tiny fraction of the world's population, we have the vast majority of the world's lawyers. Our nation now has more than twice as many lawyers as it did 20 years ago. If all of America's lawyers were to physically attend the American Bar Association's annual convention, it would have to be held simultaneously in the Astrodome, the Super Dome, the Metro Dome, the L.A. Coliseum, RFK Stadium, Wrigley Field, Dodger Stadium, Candlestick Park, The Rose Bowl, The Cotton Bowl, and the Orange Bowl.
In my home state of California, in 1987, just a few years ago, there were 107,000 lawyers. In the next five years, while businesses and providers were leaving California, the state gained 28,000 lawyers, an increase of more than 25% . And as fast as the number of lawyers have been growing, their legal fees have been growing faster still. In 1992, California lawyers took in $16 billion in fees. That is up 57% in five years.
Needless to say, not all of these lawsuits and not all of these legal fees are socially beneficial. In a recent issue of Newsweek, columnist Robert J. Samuel son had this to say:
[Lawyers] have an economic interest in cultivating and prolonging conflict. This means they are fundamentally at odds with the purposes of the legal system. Courts and lawyers exist only to explain and enforce the rules society sets for itself--and settle disputes arising from these rules.... The trouble is that lawyer's well-being runs in the opposite direction. The more conflict, the better. The more cumbersome and ambiguous society's rules, the better. I
Ambiguous, cumbersome, unpredictable, burdensome, and expensive. That, unfortunately, describes our current civil justice system. Today, far too many people believe that instead of the maxim "Equal Justice Under Law," our legal system merits the admonition from Dante's Inferno: "Abandon hope, all ye who enter here."
One tragic result of all these lawsuits is that America is fast becoming a nation of victims. Individual responsibility for the consequences of ordinary living is becoming a lost virtue. It seems as if no injury, real or imagined, can occur in America today without its own lawyer and lawsuit. These days, even a spilled cup of hot coffee in a woman's lap in a moving car can be worth more than half a million dollars, if only you're willing to sue. Our legal system is in fact a great Wheel of Fortune.
Unfortunately, unlike the TV game show, our legal system inflicts serious injury on many of its unwilling contestants. In an age when damages are routinely awarded not just for real injuries--like the cost of fixing a broken car, or lost wages--but also millions more for "pain and suffering" and "emotional distress," it is ironic that the one kind of serious injury that can occur without any legal remedy at all is injury inflicted by lawyers themselves.
Just as Congress so long exempted itself from the laws that apply to every American, the legal system is exempted from any responsibility for the pain and suffering, the emotional distress, the lost wages, and the lost jobs that it causes.
The filing of a lawsuit doesn't tell us anything about who is right and who is wrong. But it does give enormous power to the person who files it. Simply by filing a lawsuit, any person and his or her lawyer can take depositions of every worker in a company. They can turn your home or your office upside down, and require you to produce thousands of documents. They can force you to spend hundreds of thousands of dollars in legal fees. And if you, the hapless victim of a baseless lawsuit, decide to fight to prove you're right, and if you pay your own legal fees to the very end of the lawsuit, when finally you are completely vindicated, where does that leave you? What is your remedy at law for the money damages, the lost productivity, the emotional distress, and the loss of reputation? The answer is, you have no remedy. No recourse. Nothing, absolutely nothing.
This is a tragic and absurd result from a system that presumes to go by the name of "justice." But it is the necessary product of our unique "winner pays" system. Almost everywhere else in the world, if you win your case, you are made whole. Yet in our system, strangely, the loser doesn't have to pay. So even if you win, you lose. Indeed, the only sure winners in today's legal Lot to are the lawyers. No wonder a majority of Americans, according to a survey published January 30, 1995, in U.S. News and World Report, think lawyers simply use the system to make themselves rich.
Something must be done to stop the virulent spread of such abusive and wasteful litigation. That's why the central element of the Common Sense Legal Reform Act is the "full recovery" rule. It is also known as the "loser pays" rule, or the English Rule, or the "Everywhere But America Rule." Under the full recovery rule, if you win your case, you win.
The full recovery rule is a necessary part of the cure to America's lawsuit epidemic. It expedites the resolution of strong cases, and deters the filing of frivolous ones. To see why, consider two examples.
In the first case, let's say you're sued for $100. The plaintiff's case is weak, but defending it will cost you $20. So you know that even if you go to court and win, you'll lose $20. Under the current "winner pays" system, there's a powerful incentive for you to settle for $19.99 and get the whole thing over with. In this way, the present system actually encourages the filing of "nuisance suits" designed to extort so-called "settlements."
The full recovery rule, on the other hand, would discourage the filing of this particular lawsuit. Under the full recovery rule, you might be willing to pursue your case, because you'll come out better if you win. The loser will have to pay all of your damages, including your attorneys' fees. Most important of all, by eliminating the opportunity for legal extortion, the chances are that this weak case wouldn't be filed in the first place.
Now let's take the opposite scenario. You sue Hazard Industries for $100. Your case is strong--and the defendant knows it. Under the current system, Hazard Industries is tempted to stretch out the case for years, increasing your costs in order to force a smaller settlement for, say, $50. This needless delay clogs up our legal system. It also results in you, the injured party, receiving less than the amount to which you should be entitled.
The full recovery rule, on the other hand, would encourage the speedy resolution of your meritorious case--with a higher award for your injury. If Hazard Industries stretched out the litigation to delay the inevitable result, it would have to pay the full amount of your damages, including your attorney's fees.
The goal of our civil justice system should be to restore the prevailing litigant to the same position he or she would have had if the challenged action (or the losing lawsuit) had never occurred. Under the current system, neither plaintiffs nor defendants have that opportunity. But the full recovery rule in the Common Sense Legal Reform Act will guarantee that the winner in a lawsuit actually wins.
One final point: the full recovery rule in Title I of the Common Sense Legal Reform Act is purposely designed to advantage plaintiffs with good cases. By applying the rule only to diversity cases, we will always be giving plaintiffs the opportunity to decide whether they wish to use it or not. Since diversity cases can always be brought in state court under the current "winner pays" system, plaintiffs and their lawyers will be able to choose the option of full recovery or avoid it. Currently, full recovery is unavailable in either state or federal court. But if this bill is enacted, plaintiffs will, for the first time, have the option of choosing the full recovery rule.
This question of expanded options is a critical one. If I am a plaintiff, and I believe my claim is strong, I can file even my state claims in Federal court in diversity cases. By doing so, I can ensure that I will be made whole if the courts vindicate my claim.
On the other hand, if I am more risk averse, I can avoid the loser pays rule by filing in state court. In fact, under the Common Sense Legal Reform Act, I can even prevent diverse defendants from removing to federal court to obtain the benefit of the loser pays rule. That's because the loser pays rule in the bill applies only to cases commenced in federal court not to those removed there.
In addition, there is the limitation that the award of fees to the prevailing party cannot be greater than the legal fees of the losing party itself. No one in a potentially winning position should be beggared by legal expenses necessary to vindicate their position. To this end, the caps on attorneys' fees in the bill ensures that the fees owed by losing litigants will always be basically proportional to the losers' financial resources--not the winners'.
The lessons of experience weigh heavily in favor of the full recovery rule. Various forms of "loser pays" have for decades been successfully implemented in virtually every jurisdiction in the world--except ours. It's not just the "English Rule"--it really is the "Everywhere But America Rule." These reforms are long overdue, and much needed to restore the people's faith in our oft-maligned legal system.
1 Robert J. Samuelson, "I am a big lawyer basher, Newsweek, April 27, 1992.