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Risking a trial not so risky for a few companies

As I See It

Mississippi is mired in debate over reforming our judicial system to limit some of the outlandish punitive damage awards handed out by juries in recent years. This situation seems to be unique to Mississippi and is daily tainting our reputation in the global business community. Hopefully, reform can be passed and we can begin to repair the damage that has been done.

Companies in other states, though not facing our runaway jury awards, have also had their trouble with quick-draw trial lawyers. Over the years, corporate attorneys have frequently recommended their clients settle lawsuits rather than risk the unknown of going through with a trial.

Getting the smell of blood on the water, the sharks moved in for the kill. The trial lawyers learned that they could threaten frivolous lawsuits and companies would knuckle under and settle rather than face the exposure of a trial. Success begot success and the system got out of control.

In recent years, more and more companies have decided that slugging it out in court was a better choice than settling. This toughening up was the result of good intentions being rewarded by frivolous lawsuits.

DuPont is one company that has changed its legal strategy as a result of being abused by trial lawyers. Though it could find no defect in its Benlate-brand fungicide, DuPont elected to voluntarily reimburse some plant growers who claimed that their plants died after Benlate was applied. When word spread of DuPont’s generosity, trial lawyers filed hundreds of lawsuits. Instead of closure, each settlement brought more lawsuits.

Since plaintiffs’ lawyers have turned America’s tort system into a business, attempts to be good corporate citizens have repeatedly backfired. Accordingly, DuPont has joined the ranks of companies who rarely settle lawsuits.

DuPont is not alone.

DaimlerChrysler recently earned a big payoff from its decision to try, and then appeal, what in 1987 was the biggest punitive damage award ever assessed against an automaker in a product liability case. The case, which involved the death of an unbelted child thrown from a minivan, might have seemed ideal to plaintiffs’ lawyers seeking a quick settlement.

However, DaimlerChrysler has adopted a tough stance on settling lawsuits and refused to knuckle under in this case. They have a blanket policy against settling such cases. In this case, their policy paid big dividends when the Fourth U.S. Circuit Court of Appeals struck down and remanded for retrial the $250-million award given by the trial court.

Similarly, Wal-Mart recently adopted a policy of not settling.

Following that decision the sharks have moved on to other victims. Wal-Mart’s rate of new lawsuits has declined substantially over the past five years.

Is this toughening attitude toward settlement of lawsuits a good thing? Not necessarily. Required, no doubt, but not necessarily good. Settlement has always been an important tool for ending legal disputes — benefiting both plaintiffs and defendants, as well as the legal system itself. Last year, there were about 250,000 civil suits pending in federal courts. The only reason our courts have not buckled under the load of so many lawsuits is that about 95% of them settle out of court.

For real victims of harm, settlement provides a faster route to compensation than a trial. For those whose claims are a little shaky, settlement gives at least some compensation. For defendants, the avenue of settlement offers some degree of control over the financial outcome and provides a way to compensate real victims of corporate errors.

If everyone, or even most, litigants took a hard-line approach against settlement of lawsuits, the court system would crumble under the strain. It is unfortunate that the greedy few are threatening a system that works — and has worked for a long time. Such is life, I suppose.

Thought for the Moment — There’s no such thing as being Nobody or having Everything. More than enough is too much. Very often less is more. — “The Further Sayings of Chairman Malcolm,”

Malcolm Forbes (1919-1990)

Joe D. Jones, CPA, is publisher of the Mississippi Business Journal. Contact him at cpajones@msbusiness.com.

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