A new state study on the benefits of tort reform shows that if California were to enact reforms, the result would be nearly $23 billion in savings for the residents and businesses of the state, according to Citizens Against Lawsuit Abuse (CALA). Without the reforms, frivolous legal cases and those resulting in excessive damages will cost, in effect, state residents a “tort tax” of $574 per person.
The CALA report, titled the Impact of Tort Costs and the Potential Economic Benefits of Tort Reform in the United States, further shows that the savings from tort reform would flow through the state’s economy and support more than 206,000 new jobs and more than $46 billion in increased economic activity. California’s government would also benefit with increased tax revenues of more than $2.5 billion.
The report, conducted by John Dunham & Associates, a Florida-based public policy modeling and economic analysis firm, explains how laws to reform torts, which are defined as an act or omission that harms another person either intentionally or through negligence, can lead to economic benefits, innovation, productivity, and employment. Tort law reform can help provide protection and relief for business owners from abusive shakedown lawsuits — and CALA believes these same reforms may provide relief to struggling businesses trying to recover from the COVID-19 pandemic.
“When tort laws are misused, it results in closed businesses, lower wages, lost jobs, a decrease in productivity and higher prices, which are harmful for everyone,” said CA CALA Executive Director Victor Gomez. “The report shows that California could reap the benefits of a more efficient judicial system while growing the state’s economy at a time when the state needs it the most.”
CALA officials believe that all industries across California are impacted by excessive tort costs and that the burdens associated with these costs lead to the decline of investments in businesses. Enacting tort reform, the officials say, would help businesses avoid spending their time and money on litigation, and lead to a variety of benefits including higher productivity rates and job innovation.
“Rather than investing in their business by purchasing new equipment or hiring more employees to increase their productivity,” said Gomez about tort costs, “businesses are forced to pay out huge sums of money when faced with an unwarranted lawsuit.”
Last year, the Governor and Legislature had an opportunity to pass legislation to provide COVID-19 liability protections for those business owners who took the Governor’s challenge to remain open and provide essential services, so Californians could stay safer at home. The bill, AB 1035, would have offered relief providing the business complied with and implemented all the relevant county and state COVID-19 protocols. Unfortunately, the bill did not pass, and these businesses are left subject to a new wave of potentially abusive pandemic lawsuits, which could become class action cases.
In addition to torts, further reforms are needed to give business owners time to correct technical issues resulting from the Private Attorney General Act (PAGA) and Americans with Disabilities Act lawsuits that showed an increase last year with more than 2,700 cases filed in federal court in the first six months of 2020 alone. During the week of March 12, 2020, for example, there were 159 PAGA notices distributed, according to the California Building and Industry Alliance.
CALA believes that a key legal reform that can aid both state and national economies is the “cap” on punitive and non-economic damages. A cap can provide specific guidance on awards and place limits on the monetary amount in settlements.
“The purpose of tort reform is never to take away the right to sue or the rights of the plaintiff, but rather to put in to place a common sense, responsible civil justice system that will not drain the U.S. economy,” said Gomez. “One of the most important and needed reforms in terms of the benefit to the economy is the damage cap, which can help ensure fair and reasonable outcomes for all.”