December 6, 2010
The Over-Lawyered Society
Inside a pine toybox at the foot of my son’s bed, there are a few plastic helmets. One is a bronze colored piece: a child-size Roman Centurion’s helmet. The helmet is perhaps a 1/8 inch of stamped, flexible plastic, inside of which is inscribed some useful advice: ”Not for Uses in Actual Combat.“ Presumably, this warning by a Chinese manufacturer is to prevent an errant shipment arriving at a distant outpost in Afghanistan to be mistaken for Kevlar. Some gentle readers might disbelieve me, but I assure you, I could not make this stuff up.
Somehow, makers of plastic toys have decided that, to prevent lawsuits, they should clearly mark their goods against the possibility that someone would don a toy plastic helmet to ward off an AK-47 round. How much does this silliness cost? How have we descended into such madness? How can we extricate ourselves from this insanity? Good questions without easy answers.
Estimates of the private sector costs of civil litigation top out at about 2 percent of our GDP, so for every $50 spent in the U.S., $1 goes to support legal costs and settlements. I think this estimate is a little high, but if this estimate is twice, or even four times too much, it is a tragedy.
Lawyers are an easy target, but they are not to blame. A good lawyer (that is one who isn’t out simply to make a short-term buck) will readily assess risks with a client. This process, if done well, will reduce costs, and not surprisingly get the lawyer more long-term business.
Lawyers who are insulated from the profit motive are perhaps the worst offenders. In the dozen years I have worked at university research centers, overseeing hundreds of studies for close to $10 million, I have only delivered four completed reports that were longer than the university contract for the project. These contracts are largely meaningless because no one who matters could swear under oath that he read the contract and understood it. In contrast, through my small consulting firm, I have performed hundreds of thousands of dollars of work, for dozens of clients (including law firms), without a single agreement extending past two pages. So who’s to blame and how can we fix it?
It is really managers without leadership skills or the capacity to undertake simple benefit cost analyses who burden us with the inanities of over-lawyering. The legal system is merely a costly instrument of their inadequacy.
Good leadership, both public and private, could do much to cut legal costs, but good leadership is not oversupplied. Instead we might turn to extensive tort reform. We could limit civil judgments, cut contingency fees, and place restrictions on types of injuries. Sadly, this carries the very real worry that those truly wronged will have less recourse to litigation. Whatever course we take, we must craft a legal environment that doesn’t scare a business into warning us that we shouldn’t wear its toy helmet into combat.
About the Author
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