U.S. court rules invite harassment and extortion. Here’s one way to fix them. Our March cover story.
It’s not news that countless bogus lawsuits are filed in this country every year. What’s less well known is that because of obscure procedural rules, even the most self-evidently absurd lawsuits typically cost blameless defendants plenty of money, time, and anguish before any judge even considers whether to throw them out.
Take the angry man who sued a Washington, D.C. cleaner for $67 million in 2007 for allegedly losing a pair of his pants. The damage claim was obviously absurd. In a sensible system the judge would have tossed it out without dragging the cleaner into court or forcing him to hire a lawyer. Indeed, the plaintiff never even proved that the cleaner had lost his pants. But the courts kept the case alive for more than two years of legal wrangling, at a reported cost of over $100,000 in legal fees to the store’s struggling Korean-born owners.
Or take the prison inmate who sued the owners of Arm & Hammer in federal court for $425 million for failing to warn that it’s illegal to mix their baking soda with cocaine to make crack. Before that one was dismissed in 2004, the defendant had to pay a big law firm tens of thousands of dollars to prepare responses.
Fighting a lawsuit can be costlier than settling out of court. Entrepreneurial plaintiffs’ lawyers know this, so they bring lawsuits that have no real chance of winning in order to extract thousands or sometimes millions of dollars from beleaguered defendants, who pay up simply to make the problem go away.
A 2004 Stanford Law Review study of employment discrimination suits, for example, concluded that although “many employers simply detest settling frivolous cases,” it “almost always makes good business sense to settle a case for $4,000.” Especially when the alternatives are to pay as much as $10,000 to defend at the Equal Employment Opportunity Commission, at least $75,000 to seek summary judgment in federal court, or between $125,000 and $500,000 to defend at trial.
This perverse logic applies to governments, too. Between 2007 and 2011, New York City jail inmates and their lawyers won $111 million in more than 8,000 lawsuits against the Department of Corrections, according to a New York Post report. That includes $35 million paid to settle a class-action lawsuit claiming corrections officers illegally strip-searched those arrested for misdemeanors.
Lawsuits can snowball to include hundreds or thousands of parties. In a tort extravaganza in northeast Texas, after the Lone Star Steel mill shut down, 3,000 former employees sued more than 500 of the company’s suppliers. Some of Lone Star’s former employees were sick with what the lawsuit called “chemical AIDS,” and others might someday become so. The enterprising lawyers behind the case charged that unspecified substances the suppliers sent to the plant created a toxic cloud, according to a 1996 Texas Monthly report. “The chemical fog would creep in ever so quietly on little cats’ feet, do its damage to the unsuspecting worker, and just as silently disappear,” the suit read. But everyone was pulled into the legal maelstrom, even firms that had sold the plant felt-tip markers, folding tables, ordinary gasoline, and hand soap.
Texas Monthly reported that Sam Fowler, a healthy worker who received about $22,000 from settlements, didn’t exactly offer a stunning indictment when deposed: “I heard that they were getting a suit up about stuff that we had breathed out here at the plant, and I figured I had been out there thirty-seven years and I breathed about everything everybody else breathed, and so I wanted to get in on the party.”
A sensible legal system would have thrown out the claims against most of these defendants without requiring them to respond. Instead, the law firm won more than $90 million in settlements without ever making a plausible case against most (if any) of the defendants.
Here’s my own story: I paid thousands of dollars about six years ago to rid my daughter and myself of a frivolous $200,000 lawsuit filed by her landlord for nonexistent damage to the landlord’s property. The only alternative was to pay thousands more in legal fees, deposition transcripts, and the like, while wasting countless hours of our own time. Learned Hand, one of our greatest judges, was not far off when he wrote that “as a litigant, I should dread a lawsuit beyond almost anything else short of sickness and death.”
ONE OF THE REASONS for such litigation horror stories is that federal and state civil court rules delegate to private individuals the governmental power to issue an official court summons. Anyone can, with little more than a court filing fee, require anyone else to respond to any charges—no matter how far-fetched—without even having a judge read them, let alone find them to be legitimate and in good faith.
This is very bad policy. It is also raises constitutional problems. In an article for the Florida Law Review last year, E. Donald Elliott, a longtime Yale law professor and former EPA general counsel, now a corporate attorney at Covington & Burling, calls the rules—in particular Federal Rule of Civil Procedure 4—a “strange departure from our usual approach of requiring safeguards against abuse of governmental power.”
The laws are supposed to protect us from the arbitrary exercise of government power, especially by those seeking to harass us or to enrich themselves at our expense. In the criminal justice system and many other contexts, the laws do protect against delegation of power to people seeking money from us.
FBI agents and cops cannot (absent exigent circumstances) search your home, for example, or summon you to face criminal charges unless a judge or magistrate has issued a warrant finding that there is evidence implicating you in possible wrongdoing.
But civil lawsuits are another story. Under the Federal Rules of Civil Procedure, anyone who pays $350 to file a complaint against you can unilaterally command you—by presenting a summons to the court clerk, who must sign it—to “appear and defend” or face “a default judgment…for the relief demanded in the complaint.”
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In Britain, defending your property can get you life.
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H/T to National Review Online