Although most members of Congress were far from Capitol Hill when the Fourth of July fireworks lit up the skies, their return to the Nation’s Capital could be cause for small-business owners to celebrate if lawmakers declare their independence and stand firm against one of the greatest threats facing America today: lawsuit abuse.
Just before recessing for the holiday, the U.S. House of Representatives had an opportunity to hear first-hand about the fears of small-business owners who are often easy targets for trial lawyers who game the legal system with frivolous lawsuits.
Currently, the nation’s tort system is allowing these abusers to dig into American’s pockets to the tune of more than $200 billion a year. According to research by the National Federation of Independent Business, half of those who own small firms are worried about the possibility of being sued.
Today, the typical American small-business owner earns less than $50,000 a year. One frivolous lawsuit could wipe out his or her business. And business owners have reason to be concerned, especially those who operate the smallest firms, because according to estimates, one lawsuit that goes to trial costs a small business about $100,000.
It takes courage to stand against the powerful trial lawyers. They have made it known that they are planning to put the power of their campaign donations into the coffers of those willing to keep their hands off the broken legal system.
Texas Congressman Lamar Smith has no shortage of courage. He introduced the Lawsuit Abuse Reduction Act, designed to discourage frivolous suits by reinstating several provisions of the Federal Rules of Civil Procedures that were changed a decade ago to favor trial lawyers. What’s more, Smith’s bill would protect cases that involve interstate commerce and pull the plug on “forum shopping” by letting plaintiffs sue only where they live, where they were injured or in the defendant’s location.
Mississippi Gov. Haley Barbour and the state’s legislature showed some backbone too. Earlier this summer, they passed a reform bill that will bring some sense back to that state’s legal system. The measure could be a model for other states: It includes key changes in the areas of venue, joint and several liability, capped non-economic damages and protection of innocent parties.
Small-business owners were hoping for examples of courage in the U.S. Senate in early July. It was thought that senators would take action on S 2062, the Class Action Fairness Act. So far that hasn’t happened. The proposal has been in the works for five years and would, if enacted, curb abuses in those state courts which have been attractive to trial lawyers shopping around to find the easiest places to win their bogus lawsuits—and come away with huge settlements. Typically, the lawyers get huge legal fees and those listed in the class action wind up dividing a much smaller pot—or in some cases settling for coupons.
On the Fourth of July we celebrated our nation’s Independence Day. But small-business owners are still waiting to celebrate Freedom from Lawsuit Abuse Day. Senators better hope they can deliver before the November elections.
