Beware of “Junk Lawsuits” Hype

Citizens’ right to hold corporations accountable is the real target

By Jeff Milchen
Published October 27, 2004

“We think lawsuit abuse is a serious problem in this country,” proclaimed Dick Cheney while debating John Edwards in early October. The “runaway lawsuits” theme is repeated at almost every Bush/Cheney campaign stop.

Knowing the record of his own company, I can’t help wondering whether Cheney is like an alcoholic seeking help, for during his five-year reign as CEO, Halliburton and its subsidiaries filed more than 150 separate court actions (documented by Halliburton Watch). Those lawsuits pursued injunctions, evictions, and attempted to collect alleged debts from other corporations and individuals, sometimes for as little as $1,500.

But Halliburton is just part of a larger pattern. A recent study by Public Citizen indicates that the 7 million U.S. corporations file four times as many lawsuits as the 281 million individual Americans, so corporations are 160 times as likely to sue as an average person.

The study covered the only four U.S. jurisdictions that require records with enough detail to distinguish corporate-initiated lawsuits from those filed on behalf of individuals: Mississippi, Arkansas, Philadelphia and Cook County (Chicago and vicinity).

And what about the “frivolous lawsuits” we hear about constantly? The same Public Citizen study noted, “businesses and their attorneys were 69 percent more likely than individual tort plaintiffs and their attorneys to be sanctioned by federal judges for filing frivolous claims or defenses.”

Scrolling down big business’ hit list, next up is “runaway awards.” Here again, if large awards are a serious problem, corporations seem to be the primary cause. Last November, National Law Journal reported that eight of the year’s 10 largest awards to date involved corporations suing each other.

And while Cheney blamed frivolous lawsuits for their “devastating impact” on health-care costs during the VP debate, perhaps he should focus on suits filed by pharmaceutical corporations, rather than injured citizens.

In 2001, a federal court ruled that Bristol-Myers Squibb (BMS) filed frivolous patent-infringement lawsuits to block the introduction of generic competition for its lucrative anti-anxiety drug, BuSpar. Despite “losing” the claim, BMS delayed competition for four months, during which it gouged Americans for about four times the price it could charge in a competitive market.

BMS’s actions were so egregious that the Federal Trade Commission ordered the company to halt “any fraudulent or objectively baseless claim or otherwise engage in sham litigation.”

Again, this is an example of systemic abuse. As Merrill Goozner documents in his exhaustively-researched book, “The $800 Million Pill,” baseless claims to extend patent monopolies are routine practice for BMS and other drug manufacturers.

Of course, the corporate lobbyists behind calls for “tort reform” aren’t so concerned by these cases. Class-action lawsuits — which help average citizens harmed by corporate negligence or malevolence to gain compensation and punish the offender — are their target. So while Congress considers capping class-action punitive damages (awards in such cases have not increased over the past decade) at $250,000, the bill wouldn’t touch frivolous suits like those filed by BMS.

I’ve worked for years organizing and advocating for independent business owners, and learned there are indeed a few unscrupulous lawyers filing sleazy lawsuits. Since large corporations generally will fight any questionable lawsuit, small businesses that can’t afford the time or risk of fighting are the usual targets.

We should strive to eliminate such suits and rid the legal profession of those who file them, but a $250,000 cap on punitive damages would do little to discourage the offenders. Their aim is to coerce smaller out-of-court settlements, not go to trial.

That cap on damages, however, would endanger every American, because the amount is inadequate to deter or change criminal practices at large companies. Consider that BMS voluntarily paid more than $500 million to victims of its fraudulent patent claim, and you quickly see that a $250,000 punishment is insufficient to deter large corporate criminals.

When asked during the debate if he thought Senator Edwards, a former trial lawyer, was part of the lawsuit problem, Cheney responded, “I’m not familiar with his cases.” (As if Bush campaign staffers didn’t scrutinize every lawsuit the man ever filed). But as The Washington Post noted, Edwards’ previous political opponents seeking dirt “came away frustrated because Edwards’ clients were almost universally sympathetic figures.” Like most trial lawyers, he helped genuine victims get justified compensation and deter wrongdoers from harming others.

The attack on trial lawyers is really an attack on citizens’ ability to sue corporations, and it goes far beyond this election cycle; it’s part of a long-term assault on the rights of citizens and small business owners to hold corporations accountable via the courts. Having successfully undermined or dismantled regulations on big business in many realms, the next corporate agenda item is to regulate us — to strip citizens of our right to punish corporate crime and criminals.

We can and should find ways to curb groundless lawsuits, including disbarring lawyers deemed by judges and peers to have repeatedly filed unjustified lawsuits (and nobody despises unscrupulous attorneys more than honest ones). Genuine improvements, however, must work narrowly to discourage the small fraction of suits that truly are frivolous, not shield giant corporations from one of our few functioning tools to hold them accountable.

Jeff Milchen directs