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The Litigation Explosion

The Litigation Explosion
It has been estimated that 50,000 lawsuits are filed in this country every day of the week. This has come to be known as the “litigation explosion.” Whatever the causes—a breakdown of traditional values, the loss of a sense of community, too many hungry lawyers, wasteful insurance companies—the impact on each of us is significant. When patients sue doctors, the cost of healthcare rises. To compensate for products liability claims, manufacturers add a premium to the price of their products. Litigation cripples business. It is time consuming, expensive, and emotionally charged. It detracts from our ability to focus on productive matters, as attention is directed away from matters of efficiency and innovation. Parties to a lawsuit spend so much time meeting with lawyers and fighting with the other side that nothing gets accomplished. As businesses are dragged under by the burdens of litigation, our whole society suffers.

If you are engaged in any business activity or if you have a professional practice, chances are that sooner or later you will be sued. And if you are sued, everything that you have worked hard to create will be placed in jeopardy. The costs of defending even a frivolous suit can easily reach $50,000 to $100,000. Once you get to court, you will find that the system is heavily weighted toward the sympathetic plaintiff, as judges and juries play Robin Hood with your money. These judges and juries are continually expanding theories of liability, and stratospheric damage and punitive damage awards are now routine. It is no longer uncommon for awards in negligence cases to exceed $1 million.

Our legal system should hold people responsible for their acts. If someone causes injury, that person should be required to fairly compensate the victim for his loss. Not many people would seriously object to this principle. The problem is that this general principle bears no relationship to what is actually occurring in the legal system today.

The Ability to Pay
The reality of our legal system is that people are named as defendants in lawsuits not because of their degree of fault but because of their ability to pay. When an attorney is approached by a potential client who is claiming injury or economic loss, the attorney will consider whether a theory of liability can be developed against a party who can pay a judgment. This is called the search for the “Deep Pocket Defendant.” The Deep Pocket Defendant will have substantial insurance coverage or significant personal assets. The measure of an attorney’s skill is his ability to create a theory of liability which will connect a Deep Pocket Defendant to the facts of a particular case.

Case Example
Here is an example of what might happen in a particular case. Mr. Woodrow is driving in his car. Mr. Fishbrain runs through a stop sign at an intersection, smashing into Woodrow’s car and causing Woodrow severe injury.

From his hospital bed, Woodrow looks through the Yellow Pages and calls the first attorney he sees, the famous Alan Aardvark. He is what is known as a “contingent fee” lawyer. He works for a percentage of the ultimate recovery and determines whether to invest his time and money in a case based upon what his expected return will be. Since the time and expense of preparing for litigation can be considerable, an attorney cannot afford to take a case that is not likely to pay off. Remember—no recovery, no fee. Usually the attorney advances all costs and expenses, and in exchange, he recovers these costs plus 30 percent to 40 percent of any amounts which he can get from the defendant.

Before Aardvark decides to take Woodrow’s case, he will want to do some serious research to determine the merits of the case. Not the legal merits—the financial ones. He will want to know whether Fishbrain has substantial assets in order to make the case worthwhile.

Aardvark runs a financial search and determines that Fishbrain has no insurance and no significant assets such as a home or a retirement nest egg. What happens? Is that the end of the case? As for Fishbrain, it probably is the end of the case. Aardvark is not going to waste his time suing someone who can’t pay. But Aardvark is not going to give up so easily. He has a client with substantial injuries and that means a large damage award—big bucks. But first he has to find someone who can pay.

Here is how a good lawyer would analyze the case to try to draw in a Deep Pocket Defendant:

Was Fishbrain on an errand for his employer at the time of the crash? If so, the employer can be sued.
Did Fishbrain have any alcohol in his system? The restaurant that served him may have liability.
Was Fishbrain on any medication? The pharmacist, drug company, or physician may have potential liability for failure to provide proper warnings, or for writing or filling the prescription improperly.
The stop sign Fishbrain ran through was in a residential neighborhood in front of someone’s house. Did the homeowner properly maintain his property and clear his foliage to provide an unobstructed view of the stop sign? If not, there is a case against the homeowner for negligence.
Did the municipality take due care in the placement of the stop sign? Should it have used a traffic light instead? There may be a case against the city or county.
The driver’s side door of Woodward’s car collapsed on impact. There is a possible case against the manufacturer for not making a more crash resistant frame.

Do you see how far we are moving away from Fishbrain—the person responsible for the accident—in an effort to tie in a remote Deep Pocket Defendant? In any rational legal system, Fishbrain would be regarded as the wrongdoer—he disobeyed the traffic law and he caused the injury. Instead, we have an attorney trying to force the blame onto someone else—who wasn’t at the scene and doesn’t even know the people involved. The example that we just gave you is taken from a real case. Guess who ended up as the defendant.

In the actual case, the defendant was Fishbrain’s ninety-two-year-old widowed great-aunt Ellen. As it turned out, she had purchased the car for Fishbrain as a gift to him. Aardvark’s private investigator searched the assets of Fishbrain’s relatives and found that Aunt Ellen had a house that she owned and some savings in the bank. She was named as the defendant in the case and was found liable on a theory called Negligent Entrustment. The jury found that she should not have bought the car for him. She should have known that he was a careless driver and might cause an accident. She caused the accident by buying him the car. The verdict was for $932,000, and Aunt Ellen lost nearly everything she owned.

The point of all this is that the foundation of every lawsuit is a defendant who can pay. Once such a defendant is located, it is easy enough to construct a theory of why that defendant should be responsible. Judges and juries often act on their emotions—not on the law. And when the contest is between an injured or a sympathetic plaintiff and a wealthy or comparatively wealthy defendant, the plaintiff will win virtually every time, regardless of the defendant’s actual degree of fault.

As a result, the plaintiff’s attorney will search for a party who can pay a hefty judgment. In the old days, it was said that ” He who has the gold makes the rules.” Now the saying goes: ” He who has the gold pays the plaintiff.” The fact is that no matter how remote your connection to an injury, if you have even modest assets, an attorney for the injured party will attempt to show that you are somehow legally at fault and you will be named as a defendant in the case.

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