Game Over For The Litigation Lottery?

Richard “Dickie” Scruggs, the inspiration for the “King of Torts” in the John Grisham novel of the same name, will soon begin serving a five-year federal sentence for bribing a judge. Scruggs, who won billions suing tobacco and asbestos companies, was a principal architect behind welding fume litigation. William Lerach, who won billions in class action litigation against public companies, was sentenced earlier this year for paying illegal kickbacks to plaintiffs. The jailing of these two lawyers may mark more than the end of their legal careers; it may signal the end of the mass litigation boom they personified.

Until the emergence of mass tort litigation in the 1970s, civil tort litigation was fairly uncontroversial. For decades, courts routinely presided over legitimate lawsuits brought by individual plaintiffs to resolve legitimate claims. By 1980, things had begun to change. Mass tort litigation involving hundreds, or even tens of thousands of plaintiffs, began to take root. Mass tort litigation derives its power from the sheer numbers of plaintiffs and the staggering costs associated with defending the claims.

The other trend that arose during this period was inflation of jury awards, particularly punitive damages. The size and frequency of large verdicts awarded against big companies spoke to the vindictive mood of juries in the 1980s and 1990s. Increasingly, jurors were persuaded to punish corporate America. The phrase coined for this phenomenon was “The Litigation Lottery” with the “jackpot” being a personal injury claim against a large, deep-pocketed defendant. Verdicts awarded to plaintiffs routinely reached tens and even hundreds of millions of dollars, vastly exceeding amounts necessary to provide just compensation.

Through mass tort litigation, plaintiff lawyers forced whole industries to their knees, enriching themselves in the process. Ultimately, the costs are passed onto consumers through price increases. In the meantime, the costs of litigation can have an immediate impact on the employees of affected industries, whose jobs, savings and retirement plans are jeopardized. A 2002 study estimated that asbestos bankruptcies have eliminated nearly 130,000 jobs. Another study estimated that for every 10 asbestos jobs eliminated, a community loses eight additional jobs. The cumulative costs inflicted on the broader economy by asbestos litigation is estimated to exceed $1 trillion.

Many question whether the benefits attained through mass tort litigation justify the tremendous costs. A recent RAND study estimated that for every dollar paid to asbestos claimants, more than 57 cents are spent in litigation costs.

The American public seems to have taken notice. Developments over the last several years suggest that the lottery mentality may be coming to an end. Tort reform legislation successfully enacted in a number of states has limited the extent of punitive and non-economic damages plaintiffs can recover. The Class Action Fairness Act of 2005 has made it easier for defendants to remove class action lawsuits to federal courts. These reforms are having an effect. New civil case filings are down. More important, juries seem to have become more skeptical of questionable claims brought by plaintiffs.

Defendants besieged by mass tort litigation are successfully fighting back. The welding industry has won 20 of the 23 cases tried to date in welding fume litigation, with two of the plaintiff verdicts on appeal. Plaintiffs have fared little better in Vioxx litigation, having won just five of the 16 cases that have gone to trial. Three of the five Vioxx verdicts were recently thrown out on appeal. Silica litigation has been largely abandoned after widespread fraud was uncovered. The “next asbestos” continues to elude the plaintiffs’ bar.

It is uncertain whether these favorable trends will continue. One wonders whether Scruggs and Lerach would resort to crime if they were bullish on the future. Perhaps the King of Torts concluded that shaking down corporations is no longer as easy or lucrative as it once was.

The welding fume litigation Scruggs helped launch will go on without him. The industry remains confident that juries will continue rejecting welding fume claims on their merits due to the lack of evidence establishing an injury caused by exposure to welding fumes.

(Disclaimer: The information provided in this column is a service provided by GAWDA for informational purposes only and should not be considered legal advice.)

Gases and Welding Distributors Association
Meet the Author
Michael Degan is GAWDA’s Joint Defense Fund Coordinating Counsel for welding fume litigation and a partner with Husch Blackwell Sanders LLP. Members can reach him 402-964-5000 and at mdegan@blackwellsanders.com.