Republicans Reward Business With Lawsuit Limitations

For the last two decades, Larry Mocha has had a simple request for lawmakers in his home state of Oklahoma: make it harder for people to file lawsuits against businesses.

Mocha, the 65-year-old owner of APSCO, Inc., a small, Tulsa-based company that makes truck parts, has a personal reason for his pursuit. In the late 1980s, he faced a pair of lawsuits from people claiming that faulty parts made by Mocha’s firm had led to personal injuries. Mocha strongly denied the accusations, but he never had a chance to prove himself in court because his insurance company — fearful of a big payout if a jury sided with the plaintiffs — forced him to settle, costing the insurer $600,000. Later, the insurance company dropped him altogether, even though he insists he never did anything wrong in the first place.

The episode was a turning point for Mocha. He says it nearly cost him the business that his father had started in 1964. He joined the local, state and national chambers of commerce — even rising to the level of board member with the U.S. Chamber — and lobbied lawmakers relentlessly in Oklahoma City and Washington to do more to protect businesses from the threat of costly lawsuits. He says he visited the nation’s capital for the first time in the early 1990s and “knocked on every Senate door” in an attempt to draw attention to his cause.

This year, Oklahoma lawmakers gave Mocha a lot to be happy about. With Republicans in control of the governorship and the Legislature for the first time ever, they swiftly passed a series of changes to the civil justice system that will make it more difficult for people to file lawsuits — and less lucrative for the plaintiffs if those lawsuits succeed.

Lawmakers put a cap of $350,000 on the amount of money that plaintiffs can recoup for so-called “non-economic damages,” such as the pain and suffering caused by medical malpractice, faulty products or other forms of professional negligence. They eliminated most instances of “joint and several liability,” a legal principle that can hold people financially responsible for negligent behavior even if they had relatively little to do with that negligence themselves. The Legislature banned drivers from seeking damages for pain and suffering if they were injured while driving without car insurance, which everyone is required to purchase in Oklahoma.

In total, Governor Mary Fallin signed eight bills that limit lawsuits and lawsuit payouts, earning praise from the Oklahoma business community even as Democrats criticized the changes as a gift to the private sector coming at the expense of ordinary residents. The minority party, however, couldn’t have been surprised, since Fallin has stressed the need for lawsuit changes from the day she took office this year.

“We believe in justice for every Oklahoman,” Fallin told state lawmakers in February . “But we don’t believe in jackpot justice.”

A conservative priority

At least 18 states have passed legislation in 2011 changing the rules of the civil justice system to favor businesses, according to the American Tort Reform Association, a Washington, D.C.-based group that lobbies for such changes. The new laws run the gamut, from changes in the way class-action suits can be filed to new rules freeing property owners from liability for accidents or injuries that occur to people trespassing on their land.

Though legislators from both parties supported many of the new laws, the most sweeping and controversial policies have been passed in states where Republicans recently have come into power. That is no accident. Many leading conservative organizations — from state chambers of commerce to the American Legislative Exchange Council — have been pushing lawsuit limitations for years. Business groups, meanwhile, have contributed generously to Republican campaign accounts while making no secret of their distaste for expensive lawsuits. The result is that they are now finding a much more receptive audience in statehouses where Democrats previously dominated.

In Alabama, where Republicans control the governorship and took the Legislature from Democrats for the first time since Reconstruction, lawmakers approved several major changes, including a ban on liability lawsuits against those who sell faulty products but did not manufacture or cause any defect in them. In Tennessee, where Republicans took complete control of state government for the first time since 1869, Governor Bill Haslam last week signed legislation that in most instances places a $750,000 cap on non-economic damages and a $500,000 cap on punitive damages.

In Wisconsin — which, along with Maine, was one of just two states to go from all-Democratic to all-Republican control in November — Governor Scott Walker and the Legislature wasted no time in passing a lawsuit-limitation measure that a local radio station described at the time as “the most controversial bill of the current session” (though the state’s collective bargaining law took over that label a few weeks later). The lawsuit measure caps punitive damages at $200,000, or twice the amount of compensatory damages for economic loss, whichever is greater.

In South Carolina and Texas, where the GOP increased its command of state government, lawmakers also approved significant lawsuit limitations this year. Pennsylvania, another state that is now run entirely by Republicans, is pressing forward with its own legislation.

“No news here: Republicans tend to be more pro-business and the Democrats tend to be pro-trial lawyers,” says Darren McKinney, a spokesman for the American Tort Reform Association. “All of it boils down, not surprisingly, to campaign contributions.”

A race among states

But there may be other reasons why lawsuit limits are finding such success this year. The economy is still struggling, and Republicans and businesses have long argued that a predictable civil justice system — without huge lawsuit payouts — will help companies keep costs down and create more jobs.

A widely cited 2008 study by the Perryman Group, an economic and financial analysis firm in Waco, Texas, found that aggressive efforts to limit lawsuits in Texas over the last 15 years have helped the state create 500,000 permanent jobs. Texas Governor Rick Perry, a Republican who signed most of those measures into law, has been touting them as he weighs a potential presidential bid next year, and The Wall Street Journal ‘s editorial page linked the state’s tort policies to its economic growth in an editorial earlier this month .

Even opponents of tough lawsuit limits acknowledge that such measures may sound attractive to average people during difficult economic times. “You can convey that (jobs) message more effectively when the economy is in distress,” says Rex Travis, president of the Oklahoma Association for Justice, a group of trial lawyers that opposed the lawsuit changes approved by Republicans this year. Travis, however, sharply disputes the notion that such measures create new jobs, and he is skeptical of the positive attention that Texas is receiving for its lawsuit policies.

The assumption that tort changes have boosted hiring is “just not true,” he says. “Texas is doing well in this economy for the same reason that Oklahoma is: they’re very dependent on agriculture and oil, and agriculture and oil are riding high.”

Whether they are basing their assumptions on solid numbers or not, Republican lawmakers in many states clearly are watching what their neighbors are doing when it comes to the civil justice system. In that sense, lawsuit policies have become similar to taxation rates, with states competing against one another to set the most favorable terms for businesses.

Oklahoma, which has had a long rivalry with Texas in more than just college football, highlights that mindset. “Being the neighbor to the north of Texas is always a significant factor,” says state Representative Dan Sullivan, a Republican who sponsored several of this year’s lawsuit measures. “They’re a prime competitor of ours when it comes to attracting business, and we’re always keeping in the back of our minds what they’re doing.”

Mocha, the Tulsa businessman, is pleased that Oklahoma’s new laws will help prevent people in his state from filing what he sees as frivolous lawsuits. Ultimately, however, he believes state-by-state legislation can only go so far. “It’s like immigration,” he says. “The states can deal with it, but until it’s done nationally, we’re not going to get rid of the problem.”