Tort reform isn’t silver bullet for jobs

By Andy Brack, Publisher

FEB. 4, 2011 – A lot of lawyer bashing is on tap next week in the S.C. House where members are expected to pass a new tort bill.

Proponents say they’re just trying to move forward with a pro-business measure to make our job-starved state more competitive so it can land more jobs. That’s a similar rationale to what they said in 2005 when they passed another tort reform bill.

The civil justice system allows citizens to sue companies that act poorly. So what’s worrying with what the legislature wants to do is how the bill could take away citizen rights and protect bad companies. In the bill, lawmakers are trying to cap punitive damages – monetary awards for companies acting recklessly – to $350,000. Can you imagine if you were a shrimper in Louisiana that you would want BP’s exposure to be capped at $350,000?

Many plaintiff’s lawyers will tell you to watch out if punitive damages are capped. Why? Because for a small percentage of businesses, that’s a write-off, which could encourage them to be less careful with what they do.

“We have all been taught in houses of worship that you cannot selectively choose the parts of the Bible you prefer and ignore the rest,” said Columbia trial lawyer and former U.S. Attorney Pete Strom. “The same is true with our Constitution.  

“The 7th Amendment right to a trial by jury is just as important as our 1st Amendment right to freedom of religion.  Hopefully, the social conservatives will stay firmly committed to our Constitutional rights and oppose ‘tort reform’ to protect our 7th Amendment right to a trial by jury.”

What is most worrisome about this new rush to reform the tort system is the intellectual foundation upon which the case is being built. To say capping damages is needed to “develop the environment” to make the state more attractive to businesses is disingenuous in three ways.

First, good companies don’t worry all that much about being involved in civil lawsuits that seek huge punitive damages. Why? Because they’re good companies. So having a punitive damages cap for a good company that may be interested in moving here really isn’t that much of an incentive. But capping punitive damages may attract companies that could get in trouble. Do we really want to help create an environment for more Enrons?

Second, South Carolina is very competitive in many business sectors. On Oct. 28, 2010, House Speaker Bobby Harrell, who sponsored the tort reform bill, highlighted 18 areas where South Carolina was in the top 10 most competitive business climates. Among the rankings: Economic growth potential, 2010 (#1 nationally); Health care policy cost index 2009 (#1); Average state gas prices, 2010 (#1 lowest); Automotive manufacturing strength (#3); Best business climate according to Business Facilities ranking, August 2010 (#4); Pro-business ranking, 2010 Pollina study (#4); and Workforce, 2010 CNBC “Top States for Business” rankings (#5).

So if we’re already very competitive according to various measures, then why is it so important to take away people’s rights to make a slightly better business climate?

Third, there are better ways to improve the business climate than fiddling with the civil justice system. The Beacon Hill Institute’s 8thannual report on state competitiveness ranked South Carolina low – 46th – not because of its civil justice system, but because it had high rates of crime, unemployment, people without health insurance, infant mortality and unprepared students, as well as low rates of technological prowess, venture capital, bank deposits per capita, air quality and infrastructure development.

In other words, the state ranked low not because of businesses being sued, but because South Carolina had not made the basic investments in education, infrastructure, technology and health care that are needed for it to excel and succeed, and attract and grow jobs.

Over the next week as you hear a lot of politicking and hot air about lawyers and the tort system, what should be as clear as the nose on your face is that politicians again are talking about another non-issue instead of leading and focusing on real issues that will grow real jobs. 

Andy Brack, publisher of Statehouse Report, can be reached at:brack@statehousereport.com.