American Families Pay The Price For Excessive Litigation 

Over the last five years, inflation has crushed American families. Despite great progress over the past year thanks to President Donald Trump, many household budgets are still stretched too thin. To make things even worse, the American economy is losing hundreds of billions each year due to out-of-control tort litigation. To address America’s affordability crisis, legislators, regulators, and courts can and must curb the expansion of costly, profit-driven lawsuits. 

For years, the U.S. Chamber of Commerce Institute for Legal Reform has been sounding the alarm on the costs of such lawsuits. The total cost of the abuse amounted to $529 billion in 2022, equal to about 2% of America’s entire economic output. For businesses, tort costs are increasing by an average of 8.7% a year.  

These litigation-related costs currently equate to $4,207 per American family each year, with households in some states paying far more. Californians are hit with an annual “tort tax” of $5,429 and New Yorkers face a tort burden of more than $7,000 each year. This increasingly high economic cost can be seen in rising prices, fewer jobs, and lost innovation and product choices.  

Out-of-control tort litigation makes American businesses less competitive, decreases worker productivity, and discourages companies from investing in their operations – instead having to hold money back for the potential of a rent-seeking lawsuit. 

However, some states are demonstrating that it’s possible to greatly reduce excessive tort costs. West Virginia legislators passed reforms that introduced more transparency in predatory third-party litigation financing (TPLF). The measure also addressed the consequences of misleading legal advertising. These and other reforms resulted in a 20% reduction in West Virginia tort costs from 2016 to 2022, giving the state the lowest per-household cost in the nation – at about half the national average.  

TPLF is just one of the many tools in trial lawyers’ playbook, and it is a significant driver of expensive mass tort litigations. Mass torts promoted by plaintiff firms cost targeted corporate defendants billions of dollars in settlements. Hedge funds, financial endowments, and other big-money investors provide monetary backing for widespread advertising campaigns to bring in individual claimants and cover the other upfront costs of filing suits. In return, they share in the proceeds of the decision, splitting their profits with attorneys before the actual claimants are paid. 

The tactics of trial lawyers, which can include junk science spurred by lax evidentiary standards, is seldom checked by lawmakers, allowing trial lawyers to abuse U.S. courts. At the same time, investors fund litigations, seeking profits, not justice. States need to address these evidentiary standards to ensure judgments are based on sound facts, rather than conjecture or selectively curated statistics. 

There is hope for nationwide fixes to America’s excessive legal environment, with several TPLF-reform bills introduced in Congress this year. On Nov. 18, Protecting Our Courts from Foreign Manipulation Act, sponsored by Rep. Ben Cline, R-Va., passed out of the House Judiciary Committee and now awaits a vote on the House floor. While changes may need to be made to Rep. Cline’s bill in the coming months in order for it to pass into law, it is encouraging that members of Congress have taken note of the pressing nature of this issue.  

Such is the case with another TPLF bill, Litigation Transparency Act, sponsored by California Republican Rep. Darrell Issa. Ensuring this bill is ready for passage would underscore Congress’s commitment to addressing the issue.  

Excessive tort litigation is undermining the U.S. legal system, harming consumers, and fueling inflation. Commonsense reforms would bring more transparency in the legal process, reducing the financial burden of litigation and giving consumers and businesses a much-needed break. Americans struggling to pay their bills deserve better than regulation by litigation.  

David Williams is the president of the Taxpayers Protection Alliance.