Subject: (Editorial): American Competitiveness
Date: Published: 8/14/91 (94 lines)
Source: Wall Street Journal. Copyright Dow Jones & Co. Inc.

    REVIEW & OUTLOOK (Editorial):
    American Competitiveness

    The Bush administration has a domestic agenda after all.
 Yesterday Dan Quayle went into the lion's den to tell members
 of the American Bar Association they're it.  He presented the
 most ambitious proposals for legal reform since the
 litigation explosion began 30 years ago.  If he and President
 Bush spend the political muscle to make good on these
 proposals, the U. S. could again have a legal system that
 protects instead of undermines prosperity.
    The baleful influence of the legal system goes well beyond
 lawyers and courts.  The world's businessmen understand that
 the U. S. legal system is a running joke, and trade tales that
 start, have-you-heard-this-one-yet?  From Pennzoil v. Texaco
 to multi-million dollar verdicts for thimble-sized chemical
 spills, everyone knows that the U. S. is a dangerous place to
 do business.  With a series of perverse in,Xwive@toward
 lawsuits, we alone in the world turned the tort liability
 system into a whole parasitic industry.
    So it's no coincidence that Vice President Quayle's
 proposals come from the Competitiveness Council he chairs in
 the White House.  The report Mr. Quayle excerpts alongside,
 Agenda for Civil Justice Reform in America, includes the fact
 that foreign manufacturers can have product liability
 insurance rates as little as 2% of the rates U. S. 
 manufacturers must pay.  It's only in the U. S. that safe
 products, notably drugs, are yanked from markets simply
 because the profit margin doesn't cover the cost of defending
 frivolous lawsuits.
    More insidious still, our litigiousness stokes the trend
 toward risk phobia.  The U. S. has somehow moved from a
 tradition of rugged individualism and responsibility to Alar
 scares and radon kits.  Every injury is supposed to have
 someone to blame, preferably for punitive damages.  As the
 Quayle report notes, recent court cases have claimed
 "connections between automobile accidents and breast cancer
 or environmental pollutants and `chemically induced AIDS'."
 In truth, the myth of a riskless society is a costly chimera.
    It's no coincidence, either, that the first group to rush
 forward yesterday to bash the Vice President was Ralph
 Nader's Public Citizen, which has appointed itself to the
 task of stoking up scares of this and that.  Though Mr. Nader
 claims to represent consumers, many of these scares find
 their way into lawsuits, and we have never heard him complain
 about the higher consumer prices that result.  Some 30% to 40%
 of the tab for litigiousness ends up in the pockets of
 contingencyfee lawyers.  While their alliance with Mr. Nader
 is transparent, he's always stonewalled on who finances his
 various "public interest" groups.  Mr. Nader should come clean
 or shut up.
    The tort liability specialists are only one species of
 lawyer, of course, but they're still members of the club,
 which has blocked all prevZ+@>hx:tempts at reform.  Mr. Quayle
 got a stony silence from the lawyers group when he said,
 "Let's ask ourselves, does America really need 70 percent of
 the world's lawyers?  " It's equally unsurprising that the main
 proposals would reverse uniquely American incentives to sue.
    Punitive damages are contingency-fee lawyers' best
 friends, encouraging pot-of-gold legal claims based on the
 depth of the defendant's pockets and not the heinousness of
 an injury.  These quasi-criminal fines are often assessed
 where there is no actual negligence at all, as in the wide
 category of strict and absolute liability cases.  They can run
 as much as 100 times the actual harm to the plaintiff.  The
 Quayle proposal would limit these damages to cases of bad
 intent, and punitives couldn't exceed twice the amount of
 actual harm.
    We think the quickest way to get a handle on the
 litigation explosion is a second Quayle proposal, the
 so-called English Rule -- really the Everywhere-but-America
 Rule.  It simply says that the party losing the lawsuit must
 pay the legal costs of the winner.  This is fair since there
 is no redress in "winning" a lawsuit only to be saddled with
 huge legal bills.  In contrast, the U. S. system encourages not
 only bigpot speculations but also harassment suits.  Many
 RICO, libel and auto accident lawsuits are really shakedowns
 for out-of-court settlements for less than the expected cost
 of defending the case in court.
    Most Americans by now understand that when it comes to
 litigation, less is more.  The Quayle proposals would separate
 good cases from bad, make it easier for people of moderate
 means to find lawyers and reassure people at home and abroad
 that they will not be ruined by abusive lawsuits.  In short
 these reforms should please everyone, except lawyers.

[This article is made available here by Dow Jones Co. for the
 personal and non-commercial use of callers to this bbs, in the
 hope that it will be of some help to those who are suffering
 from the disease and others who are seeking to help them.]