Sue More Lawyers

As I listened to the very entrepreneurial attorney talk through possible justifications for a class-action suit against banks it occurred to me yet again that the U.S. would be a different place if the attorney had the same exposure to lawsuits that the banks did.  And there’s really no reason he shouldn’t.  Maybe there is a (partial) free market response to tort-reform – maybe we need to sue more lawyers.

Lawyers that sue on a contingency basis are not independent officers of the court but participants in an economic activity, just like a company that produces asbestos or silicon breast implants.  And just like those other economic participants they need to have the same exposure to liability that every other profit-seeking business has.

The increase in litigation over the past forty years is partially attributable to a changing view of who can be held liable if something bad happens.  Liability used to be limited to the party directly responsible for the harm.  Now courts generally recognize the concept of strict liability, in which any party involved in an economic activity which causes harm can be sued whether that party directly caused the harm or not. Strict liability increased the number of companies that could be sued in any situation.

Added to these changes in liability was a change in how lawyers are paid.  Lawyers used to be paid an hourly fee for their work, whether they won the lawsuit for their clients or not.  This need to pay legal fees was a significant barrier to filing a lawsuit – most people couldn’t afford the tens of thousands in legal fees it took to sue a company that had caused them harm.  Now of course, most plaintiff’s lawyers work on a contingency basis – they only get paid if they win the lawsuit, and usually get a significant percentage of any award to the plaintiff.

Undoubtedly these changes have had many positive effects, giving middle class and poor people far greater access to the legal system and making it harder for careless corporations to avoid responsibility for their actions.  But arguably there is now an imbalance in the other direction. Companies can now get sued for almost anything, and are regularly forced to spend money to defend themselves against questionable lawsuits. And if they do lose a suit, they can be hit with punitive damage awards far greater that any actual harm caused. Little wonder a great many companies choose to settle what are essentially nuisance lawsuits – it is often cheaper than defending against the lawsuit.

The imbalance exists because the concepts of strict liability hasn’t been uniformly applied – plaintiff’s attorney’s aren’t currently considered to be participants in an economic activity and so can’t be held liable for any harm caused by their actions.  Technology has significantly lowered the cost of filing lawsuits – a process that once took dozens or hundreds of hours of typing now takes thirty minutes of find and replace.  For attorneys, there almost no downsides to filing a suit – it doesn’t take much of their time to initiate a lawsuit, if they win it could be huge, and if they lose they can’t be held liable for the legal costs of the other side.

Applying the concepts of strict liability to the legal profession would restore some needed balance to our legal system. Those entrepreneurial lawyers that initiate lawsuits for plaintiffs on a contingency basis should share liability for the other side’s legal expenses.  It seems counter intuitive, but this is a counter balance to frivolous lawsuits – more lawsuits, against plaintiffs and their lawyers.  We need a free market response to the cost of frivolous lawsuits. We need to sue more lawyers.

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