The Truth About Frivolous Lawsuits

For most of the 44 years I have been practicing law corporations have complained that they are subjected to an unending maelstrom of frivolous litigation and need protection. Big corporations don’t suffer in silence. Rather, they hire media relations people to shape public opinion and lobbyists to persuade politicians to pass laws that tilt the legal playing field in their favor. Whenever they succeed, a new law is passed that is sure to have the word “reform” somewhere in its title and the justification for the law is likely to be that there are too many lawsuits which cost the taxpayers and consumers and unduly burden the scarce resources of our judicial system.

Nobody likes frivolous lawsuits. How could anyone argue for frivolous lawsuits? But, it is worth asking if the underlying justification for laws that take away your legal rights is, in fact, true. In other words, is there an avalanche of frivolous lawsuits that hurt corporations?

The Houston law firm Norton Rose Fulbright conducts a yearly survey of corporate general counsel. General counsel are lawyers that represent corporations which are large enough to justify the hiring of a full-time, in-house legal staff.

This year’s Norton Rose study found that companies spend less than one tenth of 1% of their annual revenue fighting legal disputes. Of those legal disputes, 43% of Texas companies said that labor and employment suits are their primary concern followed by contract disputes with other businesses at 36%. 97% of companies said government regulators are a major concern, but only 35% said they currently face some sort of regulatory action. More than 56% of the companies surveyed said they had instituted suit against another company in the preceding year.

The most common allegation of frivolous lawsuits has to do with personal injury and wrongful death claims. The facts are that just over 900 personal injury and wrongful death cases were tried to a jury in all of Texas’ 254 counties in 2015. The overwhelming majority of cases tried to a jury in Texas are criminal, divorce and family disputes, and corporations suing individuals and other corporations. The total number of cases filed also reflects this imbalance.

The true crisis is that the civil jury trial, guaranteed by the 7^th Amendment to the U.S. Constitution, is vanishing. This problem is due, in large part, to mandatory arbitration agreements contained in almost all consumer contracts and that trend is expanding to virtually every contract ordinary people have to sign to obtain goods and services. As a practical matter, the pervasiveness of arbitration has created a parallel private judicial system that is heavily influenced by the corporations that are responsible for its creation and financial support.

By any measure, there is no civil litigation crisis. Nevertheless, and as political campaign managers will tell you, the best way to get the public to believe a lie is to tell it over and over again.