Certain New Jersey businesses have a hard time appealing verdicts against them because it is simply too expensive to do so. The cost comes not just from the expense of hiring attorneys, but from having to post a bond for the full amount of an adverse verdict before being allowed to appeal. In this day and age, eye-popping jury verdicts are not uncommon, but financial regulations and the nature of certain businesses makes it challenging to get funding for appeal bonds.
This issue was highlighted in a recent article in the business newspaper NJBIZ. The article points out that professional services firms, technology companies, and other businesses that lack hard assets they can use for appeal bond collateral are being priced out of the market for justice.
New Jersey is one of a handful of states that has taken action to make appeal bonds fairer, but only for the tobacco industry.
“We think the cap that industry enjoys should be extended to all businesses,” Rayner said. “Companies should be able to appeal up to the Supreme Court and their bank account shouldn’t be a limiting factor.”
An example Rayner believes demonstrates its potential impact is a 2007 case involving BDO International, an accounting firm that has a United States arm with an office in Woodbridge. The firm was held liable for $522 million in a Florida court ruling that was later overturned at the state’s Supreme Court level.
The firm, which had around 2,700 employees, was able to appeal with a bond capped at $50 million instead of the full $522 million due to legislation that had been enacted in Florida only the previous year.
Ralph Thomas, CEO and executive director at New Jersey Society of CPAs, said firms in similar situations in New Jersey would likely have been closing the doors instead of getting their day in court.
Balancing the state budget and funding all of the programs the state thinks are important is not an easy task. Revenue growth is steady, but slow, and we are already one of the highest taxed states in the nation, so there is little room to maneuver.
In order to attract business investment and spur economic growth, the government must look at innovative policies that improve the economy without depleting needed revenue. One promising solution is legal reform. Improving our state’s legal climate could improve our economy as well.
75% of attorneys at U.S. companies say a state’s lawsuit environment is likely to impact important business decisions at their company, including where to locate or expand.
States with predictable legal systems that discourage lawsuit abuse allow businesses to more accurately project what future legal expenses will be, allowing them to free up capital for business expansion and job creation.
Right now, the same attorneys that said a state’s lawsuit environment is likely to impact important business decisions ranked New Jersey’s legal climate as 38th in the nation. That is a drop of six spots from 2012, when the survey was last conducted.
We must work on improving our state’s legal climate and repairing our reputation.
When businesses fear lawsuits, they are overly cautious about launching new ventures and bringing innovative products to market.
New Jersey currently ranks 7th on the Kauffman Foundation’s Startup Activity Index, which is designed to measure new business creation activity and people engaging in business startup activity. Improving the state’s litigation climate would reassure entrepreneurs, inventors, and investors that New Jersey is open for business.
Contrary to popular belief, most companies being sued are not “deep pockets.” Lawsuits are frequently filed against small businesses. In fact, 43% of small business owners report having either been threatened with or involved in a civil lawsuit.
According to the U.S. government’s Small Business Administration, “The impact of litigation on businesses goes well beyond the purely financial impact of legal fees and damages. Most small business owners are invested personally in their businesses; litigation causes not just financial loss, but also substantial emotional hardship, and often changes the tone of the business.”
Legal reform is a win-win when it comes to the state budget.
In the short run, legal reform can provide an economic stimulus without loss of tax receipts or an increase in spending. In the long run, states with improved litigation climates see more economic activity, leading to increased revenue collections.
On February 28, Gov. Christie delivered his eighth and final budget address to a joint session of the legislature, officially kicking off negotiations on the state’s FY 2018 budget. The legislature’s focus for the next few months will essentially be on the budget, as it must be passed by July 1.
The Governor’s plan calls for $35.5 billion in State appropriations, a 2.6% increase over the fiscal year 2017 adjusted appropriation. The judicial branch would get $9.3 million more than last year under the Governor’s plan, bringing total spending on the third branch up to $747,755,000.
Several items on NJCJI’s policy agenda are budget neutral changes that would help to improve New Jersey’s economy and could reduce future spending by the courts.
“The correlation between legal reform and economic growth is clear,” said Marcus Rayner, President of the New Jersey Civil Justice Institute. “Civil justice reform is a way to capture the money we waste on lawyer’s fees and litigation costs – without raising taxes or cutting essential services.”
A selection of the need-to-know civil justice news for the week of January 14-20. Continue reading
Why? Because numerous state laws explicitly encourage litigation when other means of dispute resolution would be quicker and more cost effective; poorly drafted statutes invite endless lawsuits over their interpretation; and antiquated policies limit the ability of our state to improve its legal climate.
Things have gotten so far off track, New Jersey has been named one of the nation’s worst “judicial hellholes.” At this point, there is nowhere to go but up, and the time is right to make changes, both legislatively and via judicial action.
A selection of the need-to-know civil justice news for the week of December 3-9. Continue reading
A selection of the need-to-know civil justice news for the week of November 12-18.
Katie Jacobson | Legal Newsline
A recent study says medical liability reform at the state level reduced total health care premiums by 2.6 percent, and that if those same reforms were made on a national level, insured Americans could save more than $15 billion.
Julia Marsh | NY Post
The family of a man who claimed his lung-cancer death was caused by asbestos exposure was awarded $12.5 million by a Manhattan jury — despite the fact that he smoked two packs of cigarettes a day.
In a recent issue of the New Jersey Law Journal, the Editorial Board hailed the work of the U.S. District Court judge in California that quickly disposed of the headline-generating case over the amount of ice Starbucks puts in its iced coffees. Wonderful. As the Board notes, the case “comes dangerously close to warranting Rule 11 sanctions.”
What is disappointing, however, is that the Law Journal’s Editorial Board seems to think this single case, which even they admit is an outlier, is evidence that our system is working, that legal reform is not necessary, and that “courts can flag frivolous suits all on their own.”
Courts should certainly be applauded when they are able to efficiently work through their dockets, separating the wheat from the chaff, and tossing meritless claims. But even quick legal work is not cost free. Starbucks undoubtedly had to spend money fighting this case. Money which could have been spent hiring more baristas, opening additional stores, or developing new products. The court still had to spend time and taxpayer dollars dealing with a lawsuit that would have benefited no consumers, and only enriched the attorneys who brought it.
Rather than seeing meritless cases quickly dismissed, we more often see them drag on, and drag down our economy. What is happening in the Subway “Footlong” lawsuit, which was first filed in New Jersey under our state’s Consumer Fraud Act (CFA), is more representative of the treatment lawsuits that don’t pass the “laugh test” receive. Rather than being dismissed, the suit was allowed to proceed. So, Subway settled the claims against it, agreeing to pay the named plaintiffs $500 apiece and the attorneys $525,000. All the rest of us get is the death of the $5 Footlong deal and assurances that Subway will improve its quality control program. They already apportion the dough by weight, and the standardization of toppings ensures all customers get the same amount of food, so basically we all get to pay more to ensure Subway keeps doing what it already does.
Wouldn’t it be great if instead of forcing our courts to waste time dealing with cases like the Starbucks iced coffee suit and the Subway sandwich suit, such lawsuits weren’t brought in the first place? Suits like these are filed because the skewed incentives of class actions encourages them, and because courts so infrequently impose sanctions, that there is little downside.
Removing the statutory incentives to sue when no one has been harmed, and only the attorney bringing the case stands to gain, is the type of legal reform we desperately need.
It is time to have a serious discussion about our legal system. Like any complex system it is not perfect and everyone, no matter what their current viewpoint, should be open to talking about ideas for improving it.
From the moment I heard Ralph Nader was opening a museum of tort law, I knew I had to go. I love visiting museums, and having worked on lawsuit reform issues for most of my post-law school career, this one really piqued my interest. So, I took a trip to the American Museum of Tort Law to see what it had to offer. What I found was a fledgling operation that needs to reevaluate either its name or its exhibits if it wants to take off. Continue reading