BUSINESS ANALYSIS: America's Class-Action Culture in the Dock ; Wall Street and Washington Draw Battle Lines over Reform of US Tort Liability Rules
Cornwell, Rupert, The Independent (London, England)
THE EYES of legal storms don't come much more unlikely than this prosperous little town just across the Mississippi river from St Louis. But, for corporate America, the Madison County Courthouse on Edwardsville's Main Street has become the symbol of everything it believes is wrong with America's tort liability system - the class- action lawsuits and crippling ten-zero damage awards, the rich and powerful trial lawyers and the ever- rising cost of insurance.
A "judicial hellhole" is how Tom Donohue, the President of the US Chamber of Commerce and the American Tort Reform Association, describes the place - living proof of how "even courts in a small rural county can wreak havoc on companies". Madison County has achieved this celebrity because of one simple fact - under US law, attorneys may pursue a multi-state class action wherever success seems most likely. For reasons rooted in its unhappy industrial past, Madison County is the anti-business plaintiff's heaven.
In proportion to population, more lawsuits are pending at the Edwardsville courthouse than in any other US jurisdiction: 43 on target for over 90 this year, led by a $10.1bn verdict against cigarette-maker Philip Morris,and a $250m asbestos damages award against US Steel.
But now, to the delight of the corporations - and the alarm of Eedwardsville's bars and restaurants - all this may change. The chances are higher than at any time in 30 years that Congress will enact serious reform to US tort liability laws.
If that should happen it would not be a moment too soon for Jean- Pierre Garnier, chief executive of UK-based pharmaceuticals giant GlaxoSmithKline, who recently made a scathing attack on the US system. He said that, to stop costs flying out of control, "we have to settle cases that in Europe you would call frivolous. It makes us mad."
The pharmaceutical industry has found itself particularly at the mercy of the litigious US system. Patients routinely seek redress through class actions for side-effects from drugs, even though medicine safety is highly regulated by the Food & Drug Administration. Product liability insurance is now so expensive that the biggest companies are no longer taking out cover.
The struggle to reform the legal system is both financial and political. It pits Democrats and their traditional allies and benefactors, the trial lawyers, against Republicans and their allies in boardrooms, with important implications for both Wall Street and the 2004 presidential campaign. Tort reform is a top priority for corporations desperate to control legal costs. It is also prominent in the platform on which President Bush will seek re-election. For Republicans the wind could not be set more fair.
For one thing, the party has simultaneous control of the White House and both houses of Congress for the first time since 1952, giving the Republicans power to shape the entire legislative agenda. Even more importantly, Americans are growing increasingly fed up with the vast fees garnered by lawyers in contrast with the often derisory individual payouts in class-action cases.
People also realise that while the lawyers' fees can run into the tens or hundreds of millions of dollars, the costs will almost certainly be passed back to the consumer, in the form of higher insurance and other costs. …