Sen. John Kerry (D-Mass.) has nudged the oil and gas industry, along with the rest of American business, toward a showdown over a problem that hurts commerce, burdens individuals, and undermines politics. With his choice of a running mate in his US presidential campaign, Kerry has reinvigorated calls for tort reform.
A proliferation of personal-injury lawsuits, many of them filed on behalf of whole classes of defendants, and lavish awards for successful plaintiffs and their lawyers have turned an important part of the US legal system expensively haywire. The inescapable threat of ruinous judgment sabotages energy companies, among others, in at least three ways:
• It imposes costs that dampen economic growth and therefore demand for oil, gas, and other energy. The Institute for Legal Reform of the US Chamber of Commerce estimates that the tort system costs businesses of all size $129 billion/ year.
• It forces companies to make lawsuit avoidance—which is not the same as responsible behavior—a bigger factor in business decisions than it should be.
• It makes protection against legal feeding frenzies, such as the one devastating the asbestos industry, a political priority.
Perverse leverage
Recently, the tort system's perverse leverage in politics has helped stymie comprehensive energy legislation. Makers of methyl tertiary butyl ether, a gasoline oxygenate, turned to the complex energy bill for liability protection when hit by a tsunami of product-defect lawsuits. The litigation spree began when MTBE appeared in drinking-water supplies across the country, nearly always in harmless concentrations.
MTBE manufacturers ask only for protection against product-defect liability, arguing that the substance found in water supplies isn't defective and is essential to compliance with air-quality laws. Their proposal, however, meets powerful resistance. Proscription of product-defect lawsuits would force plaintiffs' lawyers to pursue negligence cases, which are more difficult to win. Trial lawyers and their trade associations, perennially generous with political contributors and reluctant to cede any lucrative field of litigation, naturally oppose the measure.
So an energy bill supported by several segments of the industry stalls. Whatever the measure's merits, it shouldn't die on the lance of a narrow—however potentially costly—legal issue. MTBE makers weren't wrong to seek relief in the energy bill. What's wrong is an omnivorous tort system that left them no choice.
The Democrat who would be vice-president made a personal fortune from that system. Before he entered politics, Sen. John Edwards of North Carolina prospered from cases involving medical malpractice. He was especially skillful at persuading juries to blame gynecologists, hospitals, and insurance companies for cerebral palsy in infants.
It's of course possible that mishandled deliveries caused the illness and suffering behind every case Edwards argued, winning judgments and settlements reported to total $150 million. The senator claims to have no regrets about his legal career and insists he was helping people. Fine. The fact remains that malpractice litigation, much of it spurious, is driving up medical costs and forcing doctors out of business. The fact also remains that as a senator Edwards has opposed efforts to control the victimization-for-profit industry—including, so far, the Class Action Fairness Act, which the Senate was to have considered last week.
Whether or not Edwards personally abused the system that enriched him, tort abuse is rampant. It's compensating a relatively few victims of real misconduct—often excessively—and in various ways oppressing everyone else. Lawyers who call this justice have lost their sense of balance. Money will do that. In his new role as Kerry's running mate, Edwards will give these concerns fresh prominence at the highest level of politics.
Reform push
This is an opportunity that anyone troubled by the tort stampede should welcome. Revival of the push for reform doesn't have to be an attack on Edwards or Kerry. In fact, measures such as the Class Action Fairness Act usually receive bipartisan support—just not from the tort bar and its congressional friends, most of whom happen to be Democrats.
The energy industry should find this chance to fix a broken legal system especially appealing. Legal excess is not only distorting its operations but also usurping energy politics. It's a strong motive for the industry to help Americans rescue their legal system from lawyers. If he's wise, Edwards will lead the effort.