Texas Best, Vermont Worst Tort Climate for Jobs, Capital Investment, Claims New Study

May 16, 2006

In the competition for jobs and capital investment among the states, those states that suffer from high tort costs will continue to lose jobs and businesses to states with superior tort systems, according to a new report by the Pacific Research Institute (PRI), a corporate-backed, free-market think tank based in California. .

“What’s unique about this study is that it uses objective data, and with that data, can predict the winners and losers in the race for jobs and business investment. For states that don’t institute reforms – a metric factored into the ranking – the writing is on the wall,” said Dr. Lawrence J. McQuillan, co-author of the study and director of Business and Economic Studies at PRI. “We hope that governors and state legislators will use the Index as a tool to assess their tort systems and enact laws that will improve their ranking, and as a consequence, the business climate of their state.”

The PRI report was quickly attacked by a pro-tort system, consumer group, The Center for Justice & Democracy, as “unscientific and meaningless, relying on a combination of discredited studies from other corporate front groups and self-serving categories that have no bearing on a state’s business climate.”

Texas on Top; Vermont at the Bottom
“Our study found that Texas has the best overall tort climate in terms of relative burdens and relative reforms, Vermont has the worst,” said PRI’s McQuillan. “By placing monetary caps on damages and instituting a wide range of tort reforms, state officials have made Texas very attractive for businesses – it’s no surprise that the state has had a strong economy.”

In addition to Texas, the top five states were Colorado, North Dakota, Ohio, and Michigan. At the bottom were Vermont, Rhode Island, New York, Pennsylvania, and Maryland. The higher-ranking states tended to be in the Rocky Mountains and Great Plains, with some top performers – New Hampshire, Ohio, Texas, and Virginia – distributed across the country. The poorest-ranking states tended to be clustered in the Northeast and southern border. The Deep South and parts of the Southeast also ranked poorly.

The Saints, Sinners, and Salvageables
The study also categorized the states in terms of their prospective outlook. “But keep in mind that a state’s fate isn’t sealed. The ‘salvageables’ that have enacted reforms should move up in the rankings, and the ‘saints’ shouldn’t rest on their halos. With the trial bar always searching for legal loopholes and favorable forums, even the saints have to vigilantly guard their reforms,” said McQuillan.

Saints: The states that the reserachers believe are well positioned to stay at the top in future rankings are states with relatively low monetary tort losses that have also enacted some “significant reforms that will lower future losses.” These states include Kansas, Michigan, Texas, Utah, and Virginia.

Salvageables: The states that are poised to move up in future rankings are those with medium or high relative monetary tort losses that have recently enacted meaningful reforms that will cut future losses. These states include Arizona, Georgia, Idaho, Louisiana, Mississippi, Missouri, New Hampshire, Rhode Island, and South Carolina. Of course, these states will move up only if they don’t enact subsequent laws that counteract the beneficial reforms and if they keep pace with other beneficial reforms enacted by other states, according to PRI.

Sinners: The states that are poised to fall in future rankings or stay at the bottom are those with relatively high monetary tort losses and “significant threats” and that have enacted few if any comprehensive reforms. These states include Alabama, Florida, Illinois, Pennsylvania, and Vermont.

“A poor civil-justice system lowers the standard of living for ordinary citizens,” said co-author Hovannes Abramyan, a PRI public policy fellow. “By limiting job and business opportunities, imposing excessive costs on consumers, and inhibiting innovation in products and services, the many are suffering for the few who gain from unnecessary civil lawsuits,” he said.

The Center for Justice & Democracy dismissed the study as another anti-consumer report by a corporate think tank.

In formulating its rankings, PRI says it consulted “dozens of legal experts.” However, the Center disputes that, claiming that such “experts” were largely top defense firms that defend corporate wrongdoers in court, but not a single consumer group, public interest organization, or attorney who represents average people.

In ranking states’ business environments, PRI praises states that have passed what the Center labels anti-consumer laws. “To the extent that this study measures anything, it is the degree to which corporations guilty of egregious wrongs are able to get off the hook for their actions in a particular state,” said Joanne Doroshow, CJ&D’s executive director.

Doroshow maintains that the PRI includes a “number of irrelevant and absurd factors” in its rankings. “Notably, PRI fails to mention that tort cases are a small percentage of civil cases. Most civil cases are either contractual cases, which are usually brought by businesses against other businesses, or education, taxation or property-related,” said Doroshow.

The study considers the number of lawyers residing in a given state, which the Center argues is irrelevant because, it claims, most lawyers work in the corporate sector.

“This report is nothing more than another attempt by yet another corporate front group to intimidate state officials who stand up for consumers’ rights and honor their juries and judges,” said Doroshow.

The U.S. Tort Liability Index: 2006 Report (available at www.pacificresearch.org) ranks all 50 states in terms of relative tort burdens and relative tort reforms.

PRI is a non-profit, non-partisan organization. For more information please visit www.pacificresearch.org.

Source: PRI

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