Commentary

Cause for Trial Bar Celebration

By Stephen Moore
This article appeared in the Washington Times, November 26, 1999.
In the wake of the Microsoft antitrust lawsuit decision it seems the only clearcut winner is the trial bar. The trial lawyers now are falling over each other to launch class action lawsuits on behalf of millions of aggrieved purchasers of Windows. Funny, but I know a whole lot of Windows users, but not one who feels that they were victimized by Microsoft. But the lawyers will rush to our rescue nonetheless.

A strong argument can be made that the single greatest threat to our current prosperity and the bull market is the trial bar. No industry is safe from class action witch hunts. In the 1980s in was lead paint and asbestos companies. Next, it was the tobacco industry, which has agreed to cough up $246 billion over the next 25 years in ransom payments to the states. Now it is the gun industry and Microsoft. After that, it may be the producers of high-fat, “junk foods.”

We have here one of the greatest wealth transfers in American history. This is a multibillion-dollar redistribution of income each and every year from the shareholders of U.S. corporations to the wallets of a few hundred parasitic lawyers -who have the temerity to pretend that they are acting in the public interest by safeguarding the health and welfare of children, consumers and workers.

These multibillion ransom payments imposed on industry are bad news for consumers and investors. The suits are in a sense a tax on business and thus will reduce the return for investors and increase costs to consumers. The inability of investors to predict which industry may be plundered next adds a whole new risk premium into the investment equation, as well.

What is worse, this orgy of lawsuits is self-perpetuating. Class action lawyers have become spectacularly and frighteningly well-funded, thanks to recent victories in the courts. This money is being rechanneled back into the political system - to buy off politicians, special interest groups and even judges.

The trial bar now has the financing in hand to fundamentally transform American politics - pulling it further to the left and on the way gradually burying the Republican Party. Example: Since 1988 about 90 percent of the contributions of the Association of Trial Lawyers have gone to Democrats opposed to tort reform. The American Tort Reform Association finds that over the period 1988-96 the trial lawyers and their allies gave some $60 million to anti-tort reform candidates - more than was given by the Republican National Committee or the Democratic National Committee to candidates in those years.

But the political patronage of the past was just chicken feed compared to the dollars that will soon flow from the coffers of the trial lawyers to their anti-business political zealots in the near future. Michael Horowitz of the Hudson Institute, and the leading adversary of the plaintiff’s bar, tells me that “tobacco case fees of $20 billion will alone soon give a small group of attorneys more disposable income to invest in politics than is now spent in all U.S. elections in any given year.”

By the way, that’s $20 billion the lawyers will gather into their coffers. George W. Bush has raised $50 million for his campaign, and all of Washington is squeeling about what a vast mountain of money that is. The trial lawyers are going to receive 400 times that amount over the next 25 years. Where are the campaign finance reformers when we need them?

Tobacco is just the tip of the iceberg. The left-wing Center to Prevent Handgun violence recently declared: “Guns must now become the next tobacco.” Russ Herman, a tobacco trial lawyer told the New York Times earlier this year that “My guess is that in five years you will see a massive lawsuit to destroy and dismember the managed care industry as it currently operates.” Any industry that can be easily demonized by the press and the politicians is susceptible to this extortion racket.

Will someone please stop this madness? The legal profession is now simply bullying industries into paying hefty ransoms in order to keep themselves out of court. After witnessing the beating tobacco has taken in these lawsuits, many industries will no doubt pay the ransom no matter how baseless the claims are, rather than fight.

A series of potential litigation reforms could have a healthy deterrent effect on these baseless lawsuits. First, states and the feds should place reasonable fee restrictions on the lawyers in these class action suits. Second, adopt a loser pays rule for legal fees in civil cases where the plaintiff is the government. This could put an end to the more frivolous suits and would give industry an incentive to fight back in court.

Third, and finally, ban contingency fee contracts between lawyers and the government. My Cato colleague Robert Levy has correctly noted the injustice of these contingency fee arrangements: “In effect, members of the private bar were hired as government subcontractors with a huge financial stake in the outcome. Imagine a state attorney general corralling criminals on a contingency fee basis, or state troopers paid a percentage of all the tickets they write. The potential for corruption is enormous.”

The trial lawyers are a clear and present danger to continued American prosperity. Litigation reform is an absolutely critical plank to any GOP pro-growth agenda. It has to happen soon. If it doesn’t, the trial lawyers will have amassed a bounty so massive they will have successfully bought off the politicians, the judges,and the courts. They are busy corrupting our political system as we speak.

Stephen Moore is director of fiscal policy studies at the Cato Institute.