Pennsylvania Businesses Can Now Spend Less Time In The Courtroom
By their very nature, businesspeople are willing to take significant risks to compete in the marketplace. Indeed, every day the profit motive compels people to invest their life savings in an idea that will hopefully bring financial returns that provide for their families, their children’s education, and their retirement.
Businesspeople also understand that they could lose it all if the public rejects their product or service. Yet these people continue to enter the competition. Few businesspeople, however, understand that it could be the legal system that drives them out of the marketplace. But that is exactly what has been happening to businesses across Pennsylvania.
The Lancaster-based firm A C and S, Inc. is just one example. A C and S was purchased with the life savings of Kirk Liddell’s father and 30 other investors in 1969. At one point, A C and S employed thousands and paid significant taxes to the Commonwealth of Pennsylvania. In early 2002, Mr. Liddell had the difficult task of announcing that A C and S will likely be filing for bankruptcy due to increasing costs of asbestos litigation.
No, this is not a case of a negligent company finally getting its due. A C and S never manufactured any asbestos-containing products; it merely installed items purchased from other reputable manufacturers and distributors. At first, A C and S was brought into the lawsuits to help determine who manufactured the products to which the plaintiff had been exposed. But since litigation began more than twenty years ago, more than 50 asbestos defendants have filed for bankruptcy. This has caused trial lawyers to seek new “deep pockets” from which to extract millions of dollars.
Despite A C and S’s tangential involvement with asbestos, trial lawyers have successfully used the legal doctrine of “joint and several liability” to reduce this company from an employer of 1,500 union construction workers to a two-person shop: an attorney serving as its president and a clerk who handles new lawsuits and complies with discovery requests.
Joint and several liability allows a defendant in a lawsuit to be held responsible for paying full monetary damages, even if found only partially at fault in a lawsuit. In other words, a person or firm who is 1 percent responsible for the cause of an injury may be forced to pay 100 percent of the damages.
This legal “loophole” hurts more than wealthy individuals and corporations; it also costs Pennsylvania taxpayers. About 80 percent of the lawsuits defended by the Attorney General’s Tort Litigation Section involve PennDOT. On average, eleven tort suits are filed against the Commonwealth each week, and the AG’s office reports that it is currently defending over 3,300 active cases. The Senate Judiciary Committee was informed in May 2002 that the “average annual tort payout is $17 million.” That’s $17 million taxpayer dollars.
For too many years, joint and several liability has been a financial albatross for both Pennsylvania businesses and taxpayers alike. There is good news for Pennsylvania, however. After decades of legislative inaction on tort reform, the General Assembly and governor have embraced a watered-down version of “proportional liability”—whereby percentage of fault equals percentage of financial responsibility.
On June 19, 2002, Gov. Mark Schweiker signed the “Fair Share Act” after it passed the Senate 40-9 and the House 153-43. The act abolishes joint and several liability for most defendants found to be less than 60 percent liable for causing an injury. It remains in place for defendants found to be fraudulent or intentional in their actions, or in cases involving driving under the influence or environmental violations.
The passage of this legislation—despite the aggressive opposition of the Pennsylvania Trial Lawyers Association and labor unions—represents an important first step toward improving the business climate in Pennsylvania and protecting taxpayers. Although this reform will not rescue A C and S and other companies from bankruptcy, it will mean that Pennsylvania businesses will be able to focus more on competing in the marketplace and less time in the courtroom.
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Matthew J. Brouillette is president of the Commonwealth Foundation, a non-partisan, nonprofit public policy research and educational institute based in Harrisburg, Pa.