Tort Reform
One subject Stossel touched on last night was the evils engendered by trial lawyers, a topic always near and dear to the hearts even of non-trial lawyers like us.

The problem is how to reform the problems with the tort system without making matters worse by further government tampering. Of course, the tort system uses the power of government to enforce its results, but it has a certain market element which ought to be maximized. If it were properly run, it would be a much better means of regulation of dangerous activity than alphabet soup agencies.

But few people besides trial lawyers would argue that it is properly run today. I won't bother to repeat the litany of complaints, but will plunge in to analyzing proposed fixes.

First, a framework. The goal of the tort system should be justice. In an ideal scenario, the injured party recovers from the guilty party a sum corresponding to the amount of his damage. The guilty party is punished in proportion to his culpability--but no more. The tort system should be set up to seek this result.

Unfortunately, it seems that the current tort system is set up to seek the result that the "injured" (or not) party recover as much as the "guilty" (or not) party can afford to pay.

Now to proposed fixes:

Loser Pays: If a person brings a lawsuit that fails, they must pay the costs of the party they sued. This has a lot going for it. Right now, the tort system works rather like a gambler being given someone else's credit card in a casino. They might not win, but they really haven't got much to lose. This distorts incentives for bringing a suit. A true free market in lawsuits would provide consequences for bad choices in lawsuits as well as rewards for good ones. "Loser pays" would do this.

Theoretically "loser pays" could dissuade some legitimate plaintiffs from bringing suits that they would have a hard time proving; but it would prevent the much more widespread evil of innocent defendants being compelled to pay up rather than face the costs of a hollow victory after a drawn-out lawsuit.

It's also the rule in every other country. And it seems analogous to the rule about false witnesses in the Bible: If you bear false witness against someone else, you suffer the punishment you would have brought upon them.

Capping Damages: If actual damages are proven, they should be paid, no matter how high they are. That is part of recompensing the innocent and punishing the guilty. Arbitrary caps on nebulous items like pain and suffering might be less problematic, since you cannot put a monetary value on those anyway.

But capping punitive damages is less important than seeing that they are used only in appropriate cases. Punitive damages are supposed to be used only when evil conduct is shown. They should never be used for mere negligence. Nor should they be used except for personal injuries; for economic injuries, compensation is enough.

Abolishing Joint and Several Liability: Joint and several liability means that if four people caused you damage, and you only sue one of them (who was at most 10% at fault), you can recover 100% of your damages from them. They then have the possibility of recovering the rest of those damages from the other culpable parties, but in reality probably won't because whatever considerations kept you from suing the others (they don't have any money or aren't easily subject to suit) will probably keep the defendant from recovering, too.

Here the two objectives of justice come into conflict. We can either ensure full compensation of the victim, or punish the guilty party only in proportion to his fault, but not both. In my opinion (I think DOB still differs with me on this) the latter goal is more important. Life sometimes prevents us from recovering all that justice might demand. But if we force a party to pay damages of which he is not guilty, we have used our legal system to perpetuate a second injustice. And remember that these "evil corporations" that are always being held liable because they have the money are employers and producers of goods--damage to them creates damage to countless others. If they deserve to be put out of business because of their malfeasance, fine. But businesses should not be punished merely because they have money and are easy to sue.

This all reminds me of the story of an American lawyer who was guest teaching a class in an Italian law school. At the end, a group of students approached him and one asked, "Is it true that in America if you fall down on the sidewalk you can sue and win a lot of money?" The American replied that it was. The students began talking excitedly in Italian. The American asked, "What--do you all want to go to America to be lawyers now?" "No," replied the spokesman, "We want to go to America and fall down on sidewalks!"