By DAVID HOUSTON
Legislators are elected to represent the interests of their constituents while in office, and based on approval ratings, most people feel they are not doing this job well. To better do their jobs, and to help lift California out of this economic mess, our legislators could start by listening to what voters had to say about legal reform.
A recent poll by California Citizens Against Lawsuit Abuse (CALA) indicates voters are now making the connection between unwarranted lawsuits and lost jobs. Eighty-one percent of people in Southern California surveyed believe the number of lawsuits filed against California businesses hurt our economy and 63 percent believe lawsuit reform will make it easier for California to keep businesses in our state.
This poll indicates that voters understand the consequences of lawsuit abuse are widespread and serious, negatively impacting both the private and public sectors. A recent study by Tillinghast-Tower Perrin found that every American pays an extra $880 each year to offset the costs of lawsuits.
Local governments in just five Southern California cities and counties spent more than $276 million on settlements, verdicts and outside counsel costs in just two fiscal years. This substantial expenditure could have been used for much-needed public services or infrastructure. Our cities and counties continue to hurt in this economy, but one expense they are not able to cut is litigation. The taxpayers suffer, through higher taxes and a reduction in services.
Turning to health care, “defensive medicine,” those unnecessary tests and procedures given just to avoid lawsuits, adds $60 billion to $120 billion to our nation’s health care costs annually, enough money to have insured hundreds of thousands of people. And yet trial lawyers routinely challenge California’s laws that keep abusive medical malpractice claims in check. When they do so, patients suffer, through higher insurance premiums and fewer doctors from which to choose.
Startup sting
It is the startup entrepreneurs least able to pay for tort actions that bear the greatest costs of abusive lawsuits. It is difficult to calculate the full costs of frivolous lawsuits to small businesses because we cannot estimate the economic losses caused by out-of-state relocations, slashed payrolls or investments that are never realized. Consumers also suffer, through the higher cost of goods and services and less competition.
But ultimately, it is California that suffers the most. Other states are seeking to capitalize on California’s hostile business climate and our reputation as a “sue happy” state. Recently, the governor of Texas was trying to convince Automobile Club of Southern California CEO Tom McKernan to bring his jobs to Texas at the very same time McKernan was working to turn around California’s economy. Texas has created such a strong commercial climate especially through a package of legal reforms that businesses are rapidly relocating to that state. Nevada recently spent more than $1 million on an ad campaign encouraging California companies to relocate to that state, touting the fact that it has much lower workers’ compensation costs and a reputation as a reasonable liability environment.
It is beyond time for California legislators to act on legal reform. Ninety-seven percent of the people CALA surveyed in Southern California want the Legislature to enact reforms to attract more jobs to California and to retain the jobs we have. Unfortunately, our Legislature often ignores both the public will and the interests of small businesses and our economy suffers the consequences of their inaction. It is not too late to revive California’s business climate, but it is absolutely time that our lawmakers demonstrate some political will and some economic sense and stop making abusive lawsuits a cost of doing business in the Golden State.
David Houston is chairman of California Citizens Against Lawsuit Abuse. He owns four Barney’s Beanery restaurants in Los Angeles County. He lives in Pacific Palisades.
