Are there too many lawsuits in the U.S.?

Americans spend billions of dollars every year for the sole purpose of resolving disputes with one another. It’s great for lawyers, but it adds nothing of value to the country’s gross national product. In reality, the enormous amount of money spent on lawsuits actually reduces our overall productivity as a country. And as a result, many American companies are uncompetitive with foreign companies who do not have these litigation expenses, and this of course contributes to the loss of jobs in the United States.

No other country in the world devotes so much of its gross national product to this process of resolving disputes with one another. To make the point, let’s remove from consideration all of the countries that provide very few rights to their citizens and make the comparison only between countries with similarly sophisticated judicial systems – the United States, Canada, England, Australia, Western Europe, and Japan. Of all these countries only the United States has any significant amount of civil lawsuits. Why? Is everyone in all these other countries less happy? Does everyone in other countries think they live in an unjust environment where their complaints go unheard? The next time you have an opportunity to talk with someone from one of these countries ask them if they feel they live in an unjust land with an ineffective legal system. I have asked these questions, and no one I have spoken with can frankly understand the American fixation on lawsuits.

Under the Microscope: Sensationalized Celebrity Crimes

“Do you think the press sensationalizes celebrity court cases in order to sell ads?”

I frequently get asked this question by friends who want to get my take on the latest perceived celebrity indiscretion that has made it into our court system. Of course the answer is, “absolutely.” That’s just the economic reality of the media business—too much media, too little news.

But if we take a closer look, we realize that the press is actually playing a far more important role than this accurate, albeit cynical, response to the question would have us assume. Were it not for the close media attention these cases receive, most celebrities would likely escape their day of judgment entirely. Of course, not all of them are guilty, but virtually none of them would be found guilty were it not for the American press. That is because men and women of wealth and influence are often capable of buying their freedom if no one is watching the process. Consider the justice system in virtually every country where the media are excluded from the courtroom. Without a doubt, corruption trumps justice, and corruption breeds more corruption. The very same thing would happen in the United States if not for the freedom of the press to tell the world what is going on in these cases, moment by nausea-inducing moment.

We all tend to view the court system through a wide-angle lens, but if we examine it under the microscope, we see things from a rather different perspective.

Step seven in how to win a lawsuit: Demands for documents

Every United States court permits full discovery, including complete production of all documents that have any potential bearing on the issues before the court. This means that both parties can be required to turn over all documentary evidence (including digital records and e-mails) regardless of whether the evidence supports or harms the other side’s case. The trick is that you have to ask for it in the right way. If you don’t use exactly the right words to describe what you want, you won’t get what you need. The responding lawyer will justify a decision not to produce a record on the basis that it was not properly identified and therefore not properly requested. The converse problem is asking for more than you really need. In this age of digital records and e-mails, a simple request could generate tens of thousands of pages of records and totally inundate you and your lawyer. Lawyers sometimes gladly produce such large volumes of records just to harass the other side or to bury an important document hoping that it might not get found if it is tucked in the middle of thousands of other documents.

Step six in how to win a lawsuit: Depositions

A deposition is when all attorneys require an opposing party or a witness to answer questions under oath in the presence of a court reporter. It is a very formal proceeding, much like testimony in open court, except there is no judge or jury present. Attorneys use this process in order to require witnesses with critical information to commit themselves under oath before trial. This gives both sides an opportunity to plan their responses to the witnesses’ testimony and to avoid surprises at trial. This process is extremely effective in gathering evidence, but it is also very inefficient. In truth, a typical witness with relevant information that could be discovered in a 15-minute phone conversation may be subjected to 4 or 5 hours of intense questioning at a deposition. Because it is so inefficient, it is also extremely expensive. Clients must pay their lawyers to prepare for the deposition; then they must pay them to spend a day at the deposition; then they pay for the court reporter to attend the deposition and type up a lengthy transcript of the proceedings; and then they pay for the lawyers to read and analyze the transcript. It can cost anywhere from $2,000 to $10,000 for a single deposition. Really this is a hugely wasteful endeavor, but it is also an essential one under the rules of discovery in the United States.

Step five in how to win a lawsuit: Controlling your costs

Almost all lawsuits are about money, either winning the best settlement or paying the least settlement. To achieve that goal, the costs you spend litigating the case must be properly controlled – spend too little and you lose the case, spend too much and you still lose because you have not optimized the results you could have obtained. Let me give you some examples. As I mentioned in my last blog, I have defended many cases where a highly skilled and aggressive lawyer for the plaintiff has spent an enormous amount of money building the best possible case he can for his client. Then he comes to me, bragging about all the great evidence he has developed and wants to settle the case. Unfortunately, the lawyer has spent too much, more than his case is worth, so a settlement becomes impossible. Lawyers like these do not understand the meaning of the word “win,” and their clients never win, even if they get a verdict in their favor.

Lawyers representing defendants have their own set of problems. I have actually seen cases where the legal fees spent defending a case far exceed the value of the case itself. I once got a call from a disillusioned client who had received a bill from his lawyer for over $400,000 for defending him successfully on a case where the worst possible result would have required him to pay only $250,000. The lawyer actually sued him for his fee, which is how I got involved. To my astonishment, the lawyer did not even recognize he had done anything wrong. He just kept telling me it was a very complex case with difficult legal issues that required him to expend an enormous amount of time preparing the case properly. Obviously this lawyer does not understand the meaning of the word “win.” The lawyer really thought he had “won” because his client did not have to pay anything to the other side. His client, however, considered the result nothing short of a total disaster.

Step four in how to win a lawsuit: Get the case settled

The biggest mistake most lawyers make is not even trying to get the case settled before they spend a lot of money – your money – preparing the case for trial. Notice that I said “most lawyers,” and I really mean that. Most lawyers in the United States today make this mistake day in and day out, on virtually every case they handle. Lawyers are taught in law school the importance of careful, thorough preparation. They are taught how to use the Rules of Civil Procedure to force the other side to provide every detail about their case, every document that supports their case, every witness who will testify and every piece of evidence they will present in court. So lawyers do everything the rules allow them to do. And that is often very expensive and wasteful.

What I find to be truly amazing is that most lawyers do not even consider discussing settlement until they have spent a lot of money building their case. Nor, for that matter, do the clients themselves. I mostly represent defendants, and in a substantial number of the cases I see, the very first notice my clients receive about a potential claim is when some Deputy Sheriff shows up at their door and serves them with the lawsuit papers. The people bringing these lawsuits, and their lawyers, have never even taken the time to write a letter or call my clients to discuss the nature of their claim.

Why is it that Americans are so intent on running off to their lawyers to resolve all their disputes for them? And why is it that lawyers are so intent on filing a lawsuit and commencing expensive discovery? Isn’t it at least worth a try to get the case settled at the outset? So make your lawyer tells you how he intends to get your case settled and what he can do to get it settled quickly.

I’ve been involved in a lot of cases where it is practically impossible to get the case settled because my opponents have spent too much money building up their cases. If I have a case that is worth $100,000 to my client to get settled, but the other lawyer has already spent $50,000 doing discovery, it is very hard to settle that case.

What does the digital age mean for the American Legal System?

Has the digital age adversely impacted the quality of justice in the United States? The easy short answer is a resounding “yes.”

The legal process is governed by the Rules of Civil Procedure, adopted about 60 years ago in most states. Before then, the legal system could best be described as “Justice by Ambush,” because neither party was obligated to tell the other party anything about his case, his evidence, or his witnesses. Everyone just showed up in court and presented whatever evidence and witnesses they had, of course trying as hard as possible to create major surprises to which the other side could not quickly react and rebut. To correct this obvious problem, the Rules of Civil Procedure were adopted, basically requiring “full disclosure” of all evidence well in advance of trial so both parties could be properly prepared. That process worked very well for a while, but “full disclosure” 60 years ago meant something far different than it does today.

When I first started practicing law in 1969, there were no computers; indeed there was no photocopying equipment, no post-it notes, no portable dictating equipment, really no electronics of any kind. When we wanted to look at records maintained by other parties, we had to go over to their offices, read the documents while they were there (often in dingy basements shifting through boxes and boxes of junk). We then made handwritten notes about the documents (lawyers could not type in 1969), and put paper clips on documents we wanted the other side to bring to court (and hoped that the clips would not fall off accidentally or intentionally). We completed our document discovery usually in a day or two. It didn’t cost much, took very little time to complete, and was a reasonable approach to equalize the playing field for both sides.

Why clients are told to "keep quiet"

It is practically axiomatic in legal circles these days that lawyers instruct their clients to have no contact with the other side. Is this really good advice? Most lawyers take the position that their clients should not speak with anyone about the subject of the legal dispute to prevent the unwary client from sticking his foot in his mouth. This surely makes sense in a criminal matter where the potential defendant is clearly outgunned by the many years of experience of interrogating police officers and prosecutors. It may also be true where an injured claimant is contacted by a seasoned insurance adjustor who knows how to get information that will harm any future potential claim.

But it is not true for the vast majority of other civil cases that are filed, including divorces and other family matters, probate disputes, business disputes, real estate disputes, medical malpractice and a host of other claims that routinely end up in court without any conversations ever having been held between the two parties with the dispute. And why is it that this process only occurs in the United States? Are Americans that much dumber than the rest of the world where such secrecy is not the standard practice and where the parties actually try to resolve their disputes before they run off to the courthouse?

But it’s not just the lack of pre-lawsuit discussions between the parties that’s a problem; the lawyers themselves rarely discuss an early resolution. Most lawyers will tell you they don’t know enough about their cases in the early stages to advise their clients properly about a fair resolution. They need to spend lots of money doing discovery first. But is that what the clients really want? Would most clients rather have their cases resolved early on before all the money has been spent? Believe it or not, that is just not the mentality of the legal community, and, to put ultimate blame where it ought to be, it is also not the mentality of most Americans who would rather wash their hands of the dispute and turn everything over to the lawyers.

Too easy to file a lawsuit in the United States?

Is it too easy to file lawsuits in the United States? Should good faith settlement discussions or mediation be a prerequisite to the filing of a lawsuit? Lawsuits, like marriages, are easy to get into, but much harder to get out of. It costs practically nothing to start a lawsuit, and any minimally competent trial lawyer could draft all the paperwork in an hour or less. But once the lawsuit is started, it sets in motion a chain of events that, like nuclear fission, is not always easy to stop.

It also forces the defendant to incur the expense of incurring substantial legal expenses that the plaintiff, whose lawyer is on a contingency fee basis, does not incur. Then the discovery process kicks in, which initiates the real costs of litigation as lawyers bombard each other with demands for document production and interrogatories, followed by depositions, hiring of expert witnesses, and trial preparation activities. It’s not easy to stop this process. For one thing, once the attorney for the plaintiff has incurred costs, the only way to recoup them is by a settlement, something the defendant may have no interest in, at least before discovery is completed, when even more costs have been incurred and the case has become even more difficult to settle.

The cost of justice (part 2)

Let me ask again the same question I asked in my last blog – Is the cost of justice in the United States worth the price we pay? Here are some interesting statistics. In 1970, just after I started practicing law in Minnesota, the state’s population was 3,800,000; by 2000 it had grown to 4,900,000, a growth of 29%. During the same period the number of registered lawyers in Minnesota grew by over 400% to a total of 25,100 in 2005, which comes out to about 1 lawyer for every 200 people.

In the year 2000, over 2,000,000 lawsuits were filed in Minnesota, 700,000 alone in Minneapolis. Simply put, the citizens of Minnesota are paying 400% more for legal services today than they were just 30 years ago. Does anyone really believe that the quality of justice has improved by 400% during this time period? I would argue that in many respects, the quality of justice is far inferior today because the cost of justice is far higher. I’ll give you more information about this in a future blog, but let me make it absolutely clear – in my 42 years of trying lawsuits in Minnesota and many other states throughout the United States – the cost in absolute dollars of having a dispute heard in court has totally skyrocketed.

In 1970, a really big case would produce fees around $10,000; today virtually identical cases now routinely produce around $250,000 in fees, and many, many cases cost well over $1 million in legal fees to get resolved. And that’s only the fee on one side. Some cases have 3 or 4 parties each paying that amount in legal fees. I have been involved in many cases where the total fees paid to the attorneys involved far exceeded the amount actually paid to settle the case. How can that kind of expense possibly be justified merely to resolve a single dispute with another person?

My novel, The Litigators takes a real-life look at this issue. Look into it, you may be surprised by what you see really going on inside the legal community.

Join me next week for Is it too easy to file lawsuits in the United States?

The cost of justice (part 1)

Is the cost of justice in the United States worth the price we pay? The United States invests more of its gross national product than any other country in resolving our disputes with one another. In my own personal experience, I handle products liability cases throughout North America, that is, in both the United States and Canada. The same products I represent are sold in both countries in comparable volumes, but there is almost never a lawsuit filed against those products in Canada, whereas I keep extremely busy defending the same products in the United States. Presumably, the same incidents occur in Canada as in the United States, but no one seems to bring a lawsuit there. Does anyone believe the Canadians feel they are receiving less justice than we are in the United States?

My favorite story comes from a dinner conversation with a Chinese law professor when I asked him how a personal injury claim would be handled in China. He did not even understand my question, so I posed a typical hypothetical case to him and asked him first how the medical bills would be paid to the injured worker? He responded that in China there were no medical bills because everyone had free health care (a topic worthy of a future blog). So I asked him about payment of lost wages, to which he pointed out that all employers in China continued a worker’s salary while he was sick or injured so he would never lose any income from an accident. Finally I asked him about “pain and suffering,” to which he replied with a deep smile that betrayed my cultural ignorance, “For pain and suffering we have acupuncture.”

So, are Americans better off than the citizens of every other country in the world because we sue each other every day for wage loss, medical bills, and pain and suffering? I suggest that this question would likely be answered very differently by a group of lawyers than by a group of their clients who have gone through the American legal system.

In my novel, The Litigators, the lawsuit, which is the focus of the book, is entirely typical of lawsuits filed every day in the United States, and the process in which my characters find themselves enmeshed is also highly typical. If you decide to read the book, I suggest you ask yourself this question all over again. You may be surprised at your answer.

Join me next week for More about the cost of justice in America.