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.”
Even if the lawsuit is frivolous. Even if it was filed to extract a nuisance settlement, on the theory that submitting to (legal) extortion would cost less than fighting to get the case dismissed. And even if “appearing and defending” would include months of costly and vexatious depositions and other discovery.
Are bogus lawsuits a rarity, and are the costs they impose on all of us a reasonable price to pay to keep courthouse doors open wide for genuinely wronged plaintiffs? Not when, for example, the courts are so clogged with bogus asbestos-poisoning claims brought by plaintiffs who are not sick that the limited pool of money available to compensate those with asbestos-caused cancers is severely depleted.
General Electric Vice President and Senior Counsel Alexander Dimitrief told judges at a conference in October that 80 percent of the company’s settlement decisions are made on the basis of the costs rather than the merits. Self-serving? Sure. Exaggerated? Perhaps. But not that hard to believe.
Even the most ethical of lawyers sometimes has incentives to file far-fetched claims (and defenses). “I have made claims myself that were very unlikely to prevail,” Don Elliott told me in an interview, “in order to impose discovery costs on the other side and get a better settlement—which I did.”
In fact, Elliott believes he had an obligation to file such claims. Legal ethics emphasize a lawyer’s duty to resolve every doubt in his client’s favor and take every possible legal step to promote the client’s interests. It is in part because of the powerful economic incentives for zealous advocacy, combined with the lack of any real penalty for bringing forth bogus claims, that judges should be required to screen out weak lawsuits before they start wasting the money and time of blameless defendants.
ELLIOTT’S REMEDY for this state of affairs is for judges to do just that. Specifically, he suggests amending the federal rules so that a defendant is summoned only when a judge, having reviewed the complaint and asked probing questions about the evidence, determines it reasonable to require a response. Many or most civil lawsuits would easily clear this modest hurdle.
But far-fetched claims filed to extort nuisance settlements—which have leached hundreds of millions of dollars from defendants over the years—would (or could) be dismissed at the outset. So would many lawsuits filed for purposes of harassment, including some brought by powerful organizations. The late L. Ron Hubbard, founder of the notoriously litigious Church of Scientology, once wrote that the purpose of a lawsuit is “to harass and discourage rather than to win.”
When plaintiffs’ lawyers looking for culpable parties cast their net too wide, such as in the Lone Star Steel mill case, judges could immediately release those defendants that clearly have no business being involved in the suit. In our interview, Elliott said that his proposal would not “necessarily get rid of a lot of cases, but it would get a lot of defendants out of cases when there is no evidence that they had anything to do with the plaintiffs’ alleged injuries.”
The vast majority of judges and litigators—for both plaintiffs and defendants—would probably dismiss Elliott’s proposal as impractical and unworkable. But judges in Germany and most other European countries routinely do something very much like what Elliott proposes, apparently with good results. And federal judges and magistrates are already required by law to dismiss, without requiring any defendant to respond, every lawsuit that appears on its face to be “frivolous or malicious” or otherwise flawed—but only if it was filed by a person poor enough to be exempt from the usual $350 filing fee (“in forma pauperis,” in legal jargon).
“[I]t is unfair and humiliating,” asserts Elliott, “to subject poor people to pre-service review of their lawsuits but exempt those wealthy enough to pay a filing fee.” Indeed, if two plaintiffs file frivolous lawsuits that are identical in every particular except that one is in forma pauperis, only that one will be dismissed without requiring the defendants to respond.
The most persuasive critique of Elliott’s proposal is that it is too vaguely worded and would be applied very differently depending on the inclinations of the judge or magistrate involved. That’s cause for concern, and perhaps an argument for defining more narrowly the category of lawsuits to be rejected out of hand. Nevertheless, in my view, something like Elliott’s proposal would be a vast improvement on the awful status quo.
ELLIOTT’S PROPOSAL WILL sound familiar to those aware of the Supreme Court’s 2007 decision in Bell Atlantic v. Twombly. Because of precedent set in Twombly, in order to surmount a motion to dismiss in a federal civil case, plaintiffs must now plead enough specific facts to show that their claims are plausible—not just conceivable.
But Elliott faults Twombly for failing to block implausible claims earlier in the process, before defendants are saddled with large legal costs. “My personal experience as a litigator,” his article notes, “is that hundreds of thousands of dollars, and sometimes even millions, in defense costs can be incurred before judges rule on motions to dismiss.”
In our interview, he added that judges typically stretch out cases for months or years by giving plaintiffs several chances to amend defective complaints; in one of his own cases the defense costs ran to $165,000 before it was finally dismissed.
(On the other hand, Elliott agrees to some extent with plaintiffs’ lawyers and scholars who assail the Twombly requirement of detailed fact-pleading. He stresses that to avoid killing potentially valid lawsuits prematurely, the courts should not require “that the plaintiff be in possession of all the facts necessary to take a case to trial as a pre-condition to bringing a claim.”)
How to explain the fact that virtually nobody but Elliott has questioned the power of every plaintiff to impose costs on every defendant before any judge has looked at the lawsuit?
First, some history:
Until about 75 years ago, wrote Elliott, “federal courts reviewed the grounds proposed for suit prior to service of a summons ordering someone to come to court to answer charges,” although the review appears to have often been conducted by court clerks, not judges, and perhaps to have been rather cursory.
It was the adoption in 1938 of the Federal Rules of Civil Procedure that quietly eliminated any semblance of initial judicial scrutiny of plaintiffs’ complaints. At the time hardly anyone seemed to notice the new rule—dressed up as a mere technical change concerning service of process—that handed over the government’s power to order people to respond to lawsuits to private plaintiffs with a financial interest in coercing settlements.
One reason for the lack of attention to this shift, Elliott wrote, was that as of 1938, the cost of filing an answer to a lawsuit was minimal. Nothing remotely like the elaborate discovery process that would gradually push the complexity and cost of litigation through the roof existed. Over time, wrote Elliott, like “the fish that does not see the water that surrounds it,” we came to see this as the natural order of things.
But in my view, perhaps the most important reason for our legal culture’s comfort with the status quo is that waste serves the interests of the most important players in the system, including both the corporate defense lawyers and the plaintiffs’ lawyers. After all, all that money defendants spend ends up in someone’s pockets. Even the companies that pay for most of this in the first instance, along with their in-house lawyers, may have a muted sense of outrage because litigation costs are passed on to all of us in higher prices and insurance premiums, and thus have little effect on profits—other than to increase insurers’ profits. And most consumers (and jurors) are at best dimly aware that the waste comes at their own expense.
As for the judges, many were once plaintiffs’ lawyers themselves and have become habituated to legal waste. Almost all would see as unwelcome tedium any rule change requiring them to read and think about every lawsuit at the outset. Indeed, Elliott suggested to me that “many judges sit on the motion to dismiss for long periods (sometimes years) and rather than decide difficult legal issues, many of them use the costs of discovery to coerce settlements.”
In addition, the pro-plaintiff slant of the rules has long been in tune with popular-culture portrayals of corporate defendants as wealthy malefactors who seek to deny justice to injured workers and consumers, and who are easily able to absorb litigation costs as routine business expenses. The fact that bogus lawsuits end up costing the general public many billions of dollars via higher prices and insurance premiums receives little attention.
IS THE IMBALANCE between plaintiffs and defendants unconstitutional? No and yes. Not many federal judges will be receptive to the idea that they have been unwittingly violating the Constitution in virtually every civil case for the past 75 years. But Elliott makes a strong case that the current rules do violence to our values and constitutional traditions.
His strongest argument comes from the Fifth Amendment’s requirement that “No person shall…be deprived of life, liberty, or property, without due process of law.” The rules effectively require civil defendants to spend money (a form of property) to respond to even the most frivolous lawsuits, with no process at all, let alone “due process.”
Elliott’s second argument is that the Constitution assigns the judicial power to the courts, and that, as a general principle, government power should never be delegated to private actors to enrich themselves at others’ expense.
His third constitutional argument is that a frivolous summons is an unreasonable seizure of the defendant’s person, because the government requires no evidence that the suit has a reasonable basis in law and fact before ordering the defendant to spend time, effort, and money responding. “The government shouldn’t give plaintiffs’ lawyers a free hand to conduct investigations using government powers when the government itself would have to show a neutral magistrate that it was acting reasonably to get the same information,” Elliott told me.
While this third point finds little direct support in Supreme Court precedent, it resonates with Justice Louis Brandeis’ assertion that “every unjustifiable intrusion by the government upon the privacy of the individual, whatever the means employed,” violates the “right to be let alone.”
In theory, notes Elliott, the rule might be constitutional if it were accompanied by a requirement that plaintiffs whose lawsuits are found to be unreasonable eventually reimburse defendants’ attorneys fees and court costs, something which is done in all the world’s developed nations except Japan and China. But in practice, our legal culture has long been unwilling to require this, no matter how far-fetched the plaintiffs’ claims.
So the only hope for progress on this front is to screen out claims that are implausible on their face without requiring defendants to respond. No doubt this would make more work in the short run for judges and magistrates, though not, I suspect, in the long run. It might trip up a few deserving plaintiffs, though these could then appeal. But the alternative is less appealing still: standing idly by as thousands of people—who have done nothing wrong—founder in a sea of costly legal bills and frivolous court filings.
Stuart Taylor, Jr. is a Washington, D.C., author and journalist, a Brookings Institution nonresident fellow, and a National Journal contributing editor.
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