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Hearing of the Constitution and Civil Justice Subcommittee of the House Judiciary Committee - Excessive Litigation's Impact on America's Global Competitiveness


Location: Washington, DC

Chairman Goodlatte: With America's facing high unemployment and stagnant economic growth, it is the role of every congressional committee to do its part to get America moving again. For the Judiciary Committee this means, in part, doing what we can to remove the crushing burden that excessive litigation costs impose on our global competitiveness, economic growth, and our ability to create and retain jobs.

Judge Learned Hand observed that "litigation is to be dreaded beyond almost anything short of sickness or death." Unfortunately, the United States has become the world's most litigious country.

This litigiousness has created what amounts to a "tort tax," which imposes an added cost on every product Americans purchase and every service we consume.

We need a civil justice system that deters wrongdoers and fully compensates victims. But a prosperous free enterprise economy also depends on a tort system that is efficient and free of meritless litigation and excessive damage awards. As economists have pointed out, "an efficient tort system produces greater trust among market participants through the fair and systematic resolution of disputes, thereby encouraging more production and exchange, creating a higher standard of living for individuals within a society."

In other words, we can ensure that all injured parties have their day in court while at the same time enhancing our global economic competitiveness and creating and maintaining jobs for American workers.

Regrettably, our civil justice system is not functioning toward this end. It's not fairly compensating victims, who have to wait too long to get a case to trial and receive an average of only 46 cents of every dollar spent in litigation even when they win. And it's hurting the economy.

America's runaway litigation system harms the economy in at least four ways. First, the specter of undeserved, ruinous litigation makes it more difficult for small businesses to grow and become competitive on a global scale.

Second, even those American businesses that are large enough to compete globally are saddled with litigation liabilities that their foreign rivals do not face.

Third, America's lawsuit climate discourages foreign direct investment in the U.S. economy.

And finally, American companies' domestic liability for their actions abroad places them at a competitive disadvantage relative to foreign competitors seeking to do business in the same foreign markets.

The real losers in all of this are ordinary Americans. American consumers are hurt in the form of higher prices, U.S. workers in the form of lower wages, and American retirees in the form of lower returns on retirement accounts and pension funds.

Those hurt by excessive litigation costs include people like the former employees of Blitz USA, the company Rocky Flick, the second witness on our panel today, used to run. At its peak, Blitz USA, produced three out of every four portable gas cans nationwide and employed 350 people in the small town of Miami, Oklahoma.

But over the last decade, a wave of costly litigation driven by the misuse of its products by others--a misuse over which the company had no effective control-- took its toll. And lawsuits finally drove the company out of business.

Blitz USA is gone, but the lesson of the devastating impact lawsuits can have on real lives and real communities lives on.

I'm sure that Rocky will share much more with us today about the real life impact excessive litigation costs had on Blitz and its employees.

I look forward to our witnesses' testimony; I believe that it will be invaluable as we move forward this Congress with reforms to improve our civil justice system.

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