Published
October 29, 2018
The largest ever lottery prize in U.S. history grabbed headlines last week as one lucky winner walked away with a cool $1.6 billion. But there’s another billion-dollar figure making news – and in this case, it’s the plaintiffs’ lawyers who are hitting the jackpot.
According to a new study released by the U.S. Chamber Institute for Legal Reform (ILR), the U.S. tort system racked up $429 billion in total costs and compensation associated with lawsuits in 2016 alone. Our nation has long had the most expensive civil justice system in the world, but this is a new record!
For the amount of money that went to lawsuit costs and compensation that year, we could have paid for three-quarters of U.S. defense spending or covered the U.S. Department of Education’s budget six times over. This is equivalent to 2.3% of U.S. GDP, which translates to $3,300 per household – almost double what the average household spent on gas in 2016.
What isn’t equivalent is cost and value. Victims receive just 57 cents on the dollar of reward settlements. Much of the rest goes straight into the pockets of the plaintiffs’ lawyers.
And that’s only part of the story. Class action lawsuits account for a portion of tort costs. But a 2017 report by ILR shows that very few potential class members ever see a dime from class actions supposedly brought on their behalf. A 2015 Consumer Financial Protection Bureau study found that out of a sample of 562 cases, 87% of resolved class actions resulted in no benefit to absent class members. Even when relief is made available to class members, its impact is often negligible.
Soaring tort costs and diminished value for those who have truly been harmed are symptoms of bigger problems in our legal system. The class action lawsuit system is broken, fraud permeates asbestos litigation, third-party litigation financing is rampant, and entrepreneurial plaintiffs’ lawyers are continually pioneering new ways to hijack the system for their own gain. The U.S. Chamber of Commerce spotlighted many of those issues and explored new trends in litigation at ILR’s annual Legal Reform Summit last week, bringing together top legal minds and business and industry leaders.
The bottom line is that in a deeply flawed legal system, there are few winners and many losers. Lawsuit abuse harms American businesses, shortchanges legitimate victims, saps economic vitality, and undermines justice. The Chamber and ILR remain committed to rooting out abuse, restoring balance, and ensuring justice through commonsense legal reforms.
About the authors
Thomas J. Donohue
Thomas J. Donohue is advisor and former chief executive officer of the U.S. Chamber of Commerce.
