01-05-2002

LEGAL AFFAIRS: How 9/11 Shines a Spotlight on Litigation Lottery

It was obvious to almost everybody after the twin towers came down that
the foreseeable plague of lawsuits against the airline industry and the
owners of the destroyed World Trade Center-as well as its architects,
engineers, builders, insulation suppliers, and every other solvent company
that had anything to do with the place, not to mention Boeing Co. and the
City of New York-would be a repugnant spectacle.


Hence, Congress has essentially immunized the airlines (by limiting their
liabilities to their insurance coverage) and other possible defendants
while appropriating more than $4.5 billion for a victims fund, governed by
an administrative process designed to afford swift and adequate
compensation by channeling claims away from the courts and awards away
from the lawyers. Even the head of the lawsuit-happy Association of Trial
Lawyers of America, apparently anxious to keep the rapacity of its members
and the irrationalities of the civil justice system out of the spotlight,
called for "a moratorium on civil lawsuits that might arise out of
these awful events."


While spurred by the unparalleled enormity of these mass murders, these
adaptations also reflect an implicit recognition of the deep flaws in our
tort litigation system. And the impulse to avoid litigation over September
11 should spur deeper thought about how to remedy these flaws: The system
leaves most accident victims uncompensated, is most generous to those
least in need, "compensates" some who are not victims, and often
soaks corporate defendants that did little or nothing wrong. It also
squanders most of the money exacted from defendants and insurers-more than
60 percent, in most cases-on legal costs, including fees so large as to
make many lawyers fabulously rich.


Perverse as it may seem to sue airlines and building owners for failing to
prevent mass murders, these lawsuits-and there will be lawsuits, plenty of
them, mostly by affluent plaintiffs unsatisfied with their shares of the
congressionally appropriated fund-will be little more far-fetched than
many other suits. They will represent a reductio ad absurdum of a system
already awash in absurdities.


The major chemical companies that had sold Agent Orange to the government
for use in Vietnam were forced in 1984 to pay $180 million to settle suits
by thousands of sick veterans who were almost certainly mistaken in
attributing their ailments to Agent Orange. The manufacturers of silicon
breast implants have paid more than $7 billion to women with terrible
illnesses that almost certainly were not caused by breast implants. Crime
victims routinely sue motels, schools, and others for failing to do enough
to protect them from criminals. Lawsuits and threatened lawsuits have
depressed the stocks of entire industries, especially the managed care
industry.


The lawyers who became rich from the initially justifiable lawsuits that
bankrupted virtually every company in the asbestos industry have enlarged
the pot by launching massive litigation wars against other companies that
had only the most glancing connection to the stuff, and no reason to know
of its dangers. Many and perhaps most of the clients recruited by these
lawyers as plaintiffs in recent years have not been and never will be made
sick by asbestos. Those who do become sick will have fewer and fewer
solvent defendants left to sue. And so on, and on.


Two popular illusions sustain this litigation lottery: that ever-wider
corporate liability is a good way to compensate injured people in need,
and that the system punishes malefactors of wealth. In fact, only a small
minority of accident victims (excepting those hurt in auto accidents) have
the resources to sue and win. Most receive no compensation at all. And in
some areas, the correlation between persons harmed by negligent conduct
and those who win compensation seems almost random, with outcomes turning
less upon moral desert than upon legal technicalities, the skills of the
lawyers, and the whims of judges and juries.


At the same time, the urge to find someone to compensate accident victims
has stretched the concepts of negligence and legal fault to the point of
imposing liability upon many corporate defendants that have done little or
nothing wrong. And even when companies have done wrong, the responsible
officials are rarely affected by lawsuits, and the companies themselves
and their insurers usually pass the costs along to the rest of us through
higher prices. So tenuous has the connection between fault and liability
become that companies are reluctant to develop products-such as
contraceptives and the new vaccines that we need to protect us from
bioterrorism-that may become targets for lawsuits.


The outlines of the federal government's September 11 compensation plan,
ably crafted by Kenneth Feinberg, the special master appointed to
distribute the funds, show how an administrative program can improve on
the litigation system, at least in mass-injury cases. People seriously
hurt in the September 11 attacks and survivors of the approximately 3,000
who were killed can get swift, certain governmental payments if they give
up the right to sue anybody but the terrorists. The specific amounts,
ranging from about $300,000 to more than $4 million for next of kin, will
be determined by formulas depending on the murdered victim's age, income
level, number of dependents, and other factors. None of the money will be
spent assigning blame, and little will be spent on determining who gets
how much. There also will be no punitive damages and relatively limited
payments to families for the pain and suffering of dead victims.


Critics have no shortage of complaints: that Feinberg's unavoidably
cold-blooded charts place a far higher dollar value on the life of an
investment banker than on that of a janitor; that the plan guarantees the
investment banker's survivors far less than they might hope to win in
successful lawsuits if Congress had not shielded potential defendants;
that it reduces awards to people who receive life insurance payments or
pensions but not to those who get generous amounts from private charities.
Such complaints reflect the inherent arbitrariness of all efforts to place
monetary values on human lives. But Feinberg's chart is far less
arbitrary, and more egalitarian, than are litigated court awards and
settlements, which are typically more generous to affluent plaintiffs
(whose lost income is larger) and skewed by the luck of the draw inherent
in the litigation lottery.


Largely lost in the unedifying squabbles over who should get how much is
the unfairness inherent in the plan itself, which was propelled into law
by a (justifiable) one-time rush of national generosity to those most
directly affected by an attack on the nation itself. Most of the survivors
would have received little or nothing (excepting any private life
insurance) had their loved ones died in the Oklahoma City bombing, for
example. They have no more compelling a moral or legal claim to
compensation from the government or anyone else-except the terrorists-than
do the victims of other acts of terrorism, ordinary murders, or freak
events such as tornados. The reason that Congress needed to shield the
airlines and others from lawsuits was simply that the courts cannot be
relied upon to shield blameless defendants.


It is easier to identify the litigation system's flaws than to come up
with workable fixes, let alone get them past the trial lawyers' lobby.
Junking the tort system, barring contingency fees, or putting arbitrary
caps on real (economic) damages would leave victims even worse off than
they are now. For all its inadequacy as a compensation system, the threat
of liability for real negligence is reasonably effective at motivating
companies and individuals to make safety a priority. And removing or
blunting that threat would offend most people's sense of justice.


But the system is badly in need of reforms, which should be carefully
crafted to serve the same general purposes that Congress and Feinberg seek
to serve in the case of the September 11 victims. The most-obvious
benefits to possible defendants would come from shielding those who did
little or nothing wrong, eliminating (or at least curbing) runaway
punitive damages, avoiding double payments to privately insured
plaintiffs, and holding down legal costs. But a balanced reform program
would also benefit deserving accident victims, by adopting incentives to
spur prompt, reasonable settlements without years of litigation, and by
judiciously curbing unreasonably large contingency fees. The September 11
fund also provides a precedent for Congress to provide a safety net for
other injured people who lack legitimate legal remedies or private
insurance, by moving closer to a governmentally funded social insurance
program for all innocent, seriously injured victims of accidents and
criminal violence.


In the past, most tort reform proposals supported by the corporate sector
and conservatives have been solely for the benefit of defendants. The
congressional response to September 11 could be a step toward an
enlightened liberal-conservative coalition to help injured people too, by
providing prompt, efficient compensation and by attacking legal
waste.


Stuart Taylor Jr.

National Journal