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.

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.

Step one in how to win a lawsuit: Choose a lawyer

The one question I am constantly asked as a lawyer is: How do I win a lawsuit? So that all of you can benefit from this answer (and also with the hope that less people will be asking it!) I am dedicating the next ten blogs to this subject. This first blog offers my perspectives on how to select a lawyer to represent you.

Perhaps the first question is whether to use a lawyer at all, since court records today indicate that a much larger group of people are choosing to represent themselves. There is an old axiom that “lawyers who represent themselves have a fool for a client.” This axiom is based on the notion that a client is too close to his case, too emotional about his case, too involved in his case to appreciate the risks in the case and fairly and responsibly assess and respond to those risks. I might also ask whether you would feel comfortable diagnosing your own medical complaints, deciding which medications were most appropriate or performing surgery on yourself. Probably not if you care much about your personal health. In fact, there is an enormous difference in the quality of lawyers in the United States. So, the question is not whether to get a lawyer but how to find the best lawyer available.

Let’s start by saying what not to do. Do not, I repeat, do not hire a lawyer based on advertising you have seen. There is absolutely no relationship between lawyers who put out enticing television ads and the level of their legal expertise. Indeed, if there is any relationship at all, it is a negative one. Why is it, one might ask, that a lawyer needs to advertise to stay busy? The vast majority of lawyers do not advertise and instead rely on word of mouth from their current and former clients to refer new clients to their attention. If these lawyers advertised as well, they’d have too much to do.

Then does this mean that lawyers who put their pictures on TV, in newspaper ads and magazine ads don’t have enough clients? But why wouldn’t they have enough clients from referrals from all the clients they have represented in the past? Especially lawyers who advertise almost incessantly...why aren’t all the clients they get from previous ads sending new clients to them? There are only two explanations for this – either they do not have enough clients because they are not very good or they just want to get you into their office and then turn your case over to some other lawyer in their office, someone who does not have enough clients on his own. Trust me on this; I have been trying lawsuits for over 42 years, and far and away the best lawyers I go up against have never advertised once in their lives.

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 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.

Do lawyers ignore their clients' best interests?

Do lawyers’ fee agreements create an inevitable conflict of interest with their own clients? In 42 years of trying lawsuits I have seen just about everything. And some of the things I have seen worry me that lawyers are not doing enough to make sure that their clients’ best interests are protected. Part of the problem is that lawyers see client’s interests differently than the clients see them, a problem that I have addressed in a previous blog.

Another part of the problem is that lawyers’ fee agreements create incentives that do not necessarily benefit the clients’ real best interests. How often do lawyers working on contingency fee agreements for plaintiffs “underwork” their clients’ cases because a quick, even improvident, settlement increases their own earnings? How about lawyers working on hourly fee agreements for defendants, where their temptation is to overwork cases because an early settlement reduces their overall fees? I have seen law firms I characterize as “Litigation Mills” pushing cases through their offices like widgets on an assembly line. Their business success depends on client volume and turnover, not on maximizing any individual client’s recovery – more akin to the Walmart approach than the Nordstrom’s approach. If a case can be settled quickly, even for an amount that is less than what the client really deserves, the lawyer’s “productivity” improves, that is, his actual earnings per hour go up, while the client’s settlement goes down.

I have also seen other law firms who take the opposite approach and pursue a very aggressive strategy of demanding far more than the cases are actually worth and simply “rolling the dice” in hopes of a big verdict. These lawyers’ business success depends upon winning big every once in a while. They try cases that should be settled because of challenging liability problems to go for the big verdict that fattens their wallets and gives them nice publicity in the newspaper. It does not really matter to the lawyer if he loses 75% of his cases as long as he scores really big once in a while. Of course it does matter very much to the client, whose sole chance of success is the one case his lawyer decides to gamble away on a crapshoot.

The theory of justice

Why is it that when a lawsuit is filed even the people who win often come away with a sense that they actually lost? In the United States we have what lawyers call the "adversary system.” The theory behind this approach to justice is that if both parties fight equally hard to persuade a judge or jury of the virtues of their respective positions, eventually the truth will come out and justice will be done. This theory of course presumes that that battle at hand is not between the local high school football team and the Green Bay Packers, or between Bill Gates and some homeless chap. Unfortunately, any system of justice that is dependent on the equality of financial resources and the equality of the respective lawyers is fundamentally flawed. True, much of the time the battles are between relative equals, but often they are not, and in these latter cases justice is not possible in our adversary system.

Another flaw in the theory favoring an adversarial system is that it presumes that everyone with a dispute actually wants to spend the money needed to support the adversary system. By its very nature, the adversary system is an extremely expensive way of resolving disputes because, to achieve equality of bargaining position, both sides must take every conceivable step to improve their positions. If one side does more than the other, the likelihood that a just result will be realized diminishes drastically. So both sides fight as hard as possible. Not only does this dramatically increase the costs of resolving the underlying disputes, it also dramatically increases the stresses imposed on parties who are forced to spend their energies attacking each other. No wonder even the winners leave court questioning whether justice has been done; after they have been ravaged financially and raked over the coals personally.

This is why I wrote my novel The Litigators – to bring to the forefront the enormous wastefulness of the American system of dispute resolution. If this topic interests you, I suggest you read the novel and then ask this question when you are done: Who won the lawsuit? The answer you give may surprise you.

Join me next week for What does it mean to “win” a lawsuit?