GM case illustrates why tort reform is a terrible idea

By Ethan January 26, 2015 Lawyering, News, Politics, The Practical Lawyer No Comments

Back in the 1990s when I first started practicing law, there were state and national attempts to enact tort reform legislation to curb alleged abuses of the courts system. Those efforts continue and could prove harmful to consumers.

Tort law has traditionally been the means through which companies that make things that hurt people are held accountable for their actions. When too many limits are put on how much people can recover in injury cases, that accountability can go out the window and the public suffers as a result.

Take the sad case of the Chevy Cobalt as an example. Back in 2006, two teens in Wisconsin were killed when a defective ignition switch in a Cobalt caused a fatal car crash. The families of those two teens tried to hire lawyers working on contingency (the familiar “no win, no fee” arrangement), but the New York Times reports they couldn’t find anyone to take the case because damages in Wisconsin were capped at $350,000 by a state law.

Taking on a massive company like General Motors that flings lawyers at plaintiffs is a daunting undertaking, indeed. A law firm that takes on such a case is going to wind up spending a lot of time and a lot of hours suing General Motors, and $350,000 might not even cover the legal expenses involved in such an undertaking.

The New York Times reports at least 42 people were killed due to defective switching in Cobalts, and it wasn’t until a case was filed in Georgia against GM that the auto manufacture was forced to recall 2.2 million of the vehicles. Lawyers in the Georgia case filed a suit against GM in 2011. There are no damage caps in Georgia, so that action led to a $5 million settlement for the family of a person killed in a Cobalt and, eventually, the public disclosure of the defect and the aforementioned recall.

The lesson here is simple. Money motivates companies to do the right things. We saw that back in the 1970s when evidence was introduced at a trial following the 1972 death of a Ford Pinto owner that the auto company new some of those cars would explode on impact but decided to not redesign the vehicle because it would be cheaper to pay off claims filed by accident victims or their survivors.

Ford had to pay millions of dollars in damages in that case and part of that judgment was meant to punish the company for essentially deciding that saving money was more important than saving lives.

It is important to mention tort reform from time to time because there are typically attempts to put caps on damages in Arkansas. There are some measures that will be debated in the upcoming Legislative session and we did see a 2003 Arkansas law that capped punitive damages (those damages meant to punish bad acts) at $1 million. That provision was tossed out by the Arkansas Supreme Court in 2011, but the issue is clearly not dead.

Here’s hoping that attempts to put caps on damages in tort cases run out of steam eventually. Should we allow those, we are essentially saying that lives of Arkansans are worth less than those of people in other states and inviting companies to sell us defective, harmful products. That is the wrong message to send the citizens of this fine state.

This column was authored by Ethan C. Nobles and originally appeared in the Jan. 6, 2015, edition of the Daily Record in Little Rock.