Two years ago, the U.S. Chamber of Commerce’s Institute for Legal Reform released a study showing that the cost of tort litigation nationwide in 2016 was $429 billion: nearly three-quarters the size of the U.S. defense budget and $100 billion more than Americans spent on retail drugs in 2016. Roughly half of that amount went to plaintiffs, the balance to lawyers’ fees and insurance and administrative costs.
Divide that vast figure by the number of households in America and you’ll find that the average yearly cost of litigation for every household is $3,300! Needless to say, most of those households are not involved in litigation in any given year, but they’re still paying the price for it. How does that work?
Simple: The costs incurred by the targets of lawsuits and by all businesses paying for insurance to protect themselves against lawsuits are passed on, one way or another, in the prices of consumer goods and services. It’s another one of those hidden taxes beloved by politicians, because taxpayers don’t see them and don’t blame politicians for them. Trial lawyers do see them, however, and express their appreciation with generous donations during campaign seasons.
Last week, a LexisNexis company called Lex Machina released its inaugural Torts Litigation Report documenting trends in federal district courts over the last ten years. Like the Chamber report from 2018, this one too paints a dispiriting picture of the damage done to our economy and American consumers by the ravenous rush to “justice.”
Outside of mass torts cases, three of the five defendants encountering the most claims were retail stores with mostly premises liability cases: Walmart, Target, and Carnival. Johnson & Johnson and Janssen Pharmaceuticals were also frequently targeted, as was the National Collegiate Athletic Association (defending against an MDL class action for concussive injuries).
One bright spot in the report: Courts found no negligence almost four times as often as negligence, generally in summary judgments, which goes to show how many claims were frivolous – and how much more our hidden tax might have been.