Think tanks wrap-up II

WASHINGTON, Jan. 22 (UPI) -- The UPI think tank wrap-up is a daily digest covering opinion pieces, reactions to recent news events and position statements released by various think tanks. This is the second of two wrap-ups for Jan. 22.

The Acton Institute

(The Acton Institute works to promote a free and virtuous society characterized by individual liberty and sustained by religious principles. Its goal is to help build prosperity and progress on a foundation of religious liberty, economic freedom, and personal moral responsibility.)

GRAND RAPIDS, Mich.-- Lawsuit Reform ... A class (in)act(ion)

By Phillip W. De Vous

"You must not take the side of the greater number in the cause of wrong doing, nor side with the majority and give evidence in a lawsuit in defiance of justice; nor in a lawsuit must you show partiality to the poor." Exodus 23: 2-3

Needless to say, the above Old Testament injunction is not to be found displayed in the offices the American Trial Lawyer's Association. Rather, it seems that trial lawyers are pocketing millions showing partiality to, as the senior trial lawyer from the state of North Carolina very often reminds us, the "regular people".

Much of modern tort cases are, however, based precisely on a lawyer's ability to "take the side of the greater number in the cause of wrong doing" and impose the costs of such wrong doing on the rest of society. As a result, out-of-control litigation is undermining the rule law, thwarting real justice for those who require it, and imposing a steep "tort premium" on economic activity.

The seminal insight of the Exodus text is an important one regarding the administration of justice. It is obvious to the Old Testament writer that the claims of a lawsuit are to be corrective, discerned by well-established norms, applied equitably to all, and administered in a transparent way. In other words, the rule of law governs and binds equally, trumping even sympathy for the plight of the poor should their claims be false.

Paradoxically, it is in rejecting partiality for the poor and sympathy for the regular guy that ctually safeguards the right to justice for rich, poor, and regular, alike -- something lost on the opponents of tort reform today.

Previous to the 1960 Supreme Court case, Henigsen vs. Bloomfield Motors, the corrective justice model of tort litigation was typically followed. In this model a defendant was liable if and only if he wrongfully caused a plaintiff's injury. If a defendant didn't behave unreasonably, or if his unreasonable behavior was not the cause of the plaintiff's injuries, the tort suit was dismissed. Awards were based on judgments about behavior.

Following Henigsen, a new model began to emerge as the norm for tort suits, the distributive-punitive model. This model divorces tort law from corrective justice. In this understanding tort liability is viewed as a means of achieving a fairer distribution of economic resources, with "fairness," of course, being arbitrarily determined by the government.

With the goal of tort law established as distributed and punitive, a defendant may be held liable without establishing wrongfulness, without legal causation, and even without proof of damages. Such modern day class action suits involving asbestos (expected to cost the U.S. economy $200 billion), the state budget balancing tobacco litigation, and "Mc Lawsuits" likely to be waged against the fast food industry, serve as perfect illustrations of the distributive-punitive model.

Contemporary class action lawsuits seek to exact massive monetary judgments out of corporations, judgments often greatly out of proportion to the actual harm done. Such massive monetary awards are usually sought under the rubric of punitive damages -- compensating the injured to punish the injurer, or non-pecuniary damages -- the most common of which compensate for pain and suffering, or the relatively new and controversial category of hedonic losses -- compensation for the lost pleasures of life.

Specifically, these massive legal actions are accomplished by "classing" large groups of plaintiffs together. Before 1966, Federal Rule of Civil Procedure 23, the rule governing class action suits in federal courts, individuals had to indicate affirmatively that they wished to be part of a plaintiff's case. This rule, however, was significantly amended; so that now the rule presumes that anyone assumed to be qualified for class membership in a lawsuit is part of the class unless they expressly opt out. The implications of this change were enormous -- the scope of money damages skyrocketed and the financial exposure of defendants increased to astronomical levels.

The amended rule places a premium on lumping large groups of people together, discouraging the exercise of individual rights. In the famous Engle tobacco case, a jury awarded $145 billion in punitive damages to a disparate group of plaintiffs including some with terminal cancer, some merely with sore throats, and some who had ceased smoking twenty years ago and showed no symptoms of illness.

In such an environment it is hard to imagine that individual claims to harm would be taken seriously -- settling becomes more important than discerning justice. A minimum level of tort reform would be to make sure that a group of plaintiffs must experience similar injuries arising out of, at least, a common set of facts.

Much of this stems from the belief that every victim -- a very loose concept -- should be compensated by the deep pockets of corporate America. In many instances, though, real and presumed victims receive little compensation. This usurpation of individual rights in favor of group presumption has made it very difficult for individuals who actually experience harm to successfully litigate their claim.

The injustice of class action lawsuits is further demonstrated in the fact that the benefits to the plaintiffs themselves are often minuscule (a coupon for a free hamburger or something), while the trial lawyer pockets millions. So, even as a mechanism for redistribution, the system fails, unless you're talking about redistribution from wealthy capitalists to wealthy trial lawyers. The sad fact of this situation is that the price of goods and services now includes a tort premium far exceeding the cost misbehavior and malfeasance.

All of this has exacted an enormous tort premium on the economy that is suffocating American businesses. Moreover, such massive punitive and hedonic damage awards have, in most instances, only punished consumers. The reality is that businesses, in an attempt to hedge against potential liabilities, will simply raise the price of goods and services, costing consumers more. In many jurisdictions around the country unreasonable malpractice judgments have forced many doctors to charge higher fees or have simply driven them out of business.

The counterargument aimed at those advocating tort reform usually involves some version of the "you can't put a price on people's suffering" claim. Then why sue at all? Tort law exists in order to adjudicate the claims of those harmed and to decide appropriate damages -- in other words, to put a price on people's suffering. Even in a case of clear case malfeasance, malpractice, or malevolence, it is the duty of tort law officials to approximate justice for all parties involved to the best of their ability.

Justice, this side of the kingdom, is never perfectly realized, but that doesn't negate our duty to strive to meets its demands. The best way to accomplish this is to adhere to the rule of law, hold behavior accountable, and reject economic redistribution by judicial fiat. Biblical wisdom may not be popular at the trial lawyer's headquarters, but it wouldn't hurt to see a little in the courtroom once in a while.

(Phillip W. De Vous is the public policy manager of the Acton Institute.)

The Competitive Enterprise Institute

(CEI is a conservative, free-market think tank that supports principles of free enterprise and limited government, opposes government regulation, and actively engages in public policy debate.)

WASHINGTON -- C:\Spin -- Regulation roulette: e-commerce and terrorism.

By Braden Cox

On Jan. 7, Rep. James Leach, R-Iowa, introduced yet another Internet gambling bill, the "Unlawful Internet Gambling Funding Prohibition Act" (H.R. 21 -- surely just a coincidence to the card game 21, otherwise known as blackjack). The bill is the same text as H.R. 556, a bill passed by voice vote in the House during the last Congress, that failed to move in the Senate before the end of session.

The bill does not prohibit Internet gambling outright. Rather, it indirectly shuts down online gambling by prohibiting banks from processing bank instrument transactions that involve "unlawful Internet gambling" web sites. Those in the technology industry should follow the movements of this bill because it attempts to regulate electronic commerce in the name of fighting terrorism.

The means by which consumers and gambling site owners interact -- credit card payments and wire transfers -- also happens to be a medium open to abuse by those with criminal intentions. If you prohibit the credit card payments, then you negate the possibility that some of these payments will go to terrorists. According to Rep. Joseph Pitt, R-Pa., "It may be impossible to keep illegal gambling sites off the World Wide Web, but it is entirely possible to prevent American credit card companies from completing these transactions that these crooks need to make their money."

The text of the bill states that law enforcement has identified internet gambling as "a significant money laundering vulnerability."

The bill's line of reasoning goes something like this: Internet gambling consumers pay by use of credit cards and wire transfers; credit cards and wire transfers are payment mechanisms often utilized by criminal money laundering operations; terrorists utilize money laundering schemes; therefore, some consumers of internet gambling may in fact be criminals laundering money to further terrorism.

Casual references to an activity's potential link to terrorism are the latest vogue among advocates of regulation, whether the target is sport utility vehicles, illegal drugs, or internet gambling. Certain industries are more at risk than others to regulation in the name of preventing terrorism. Carried to its logical conclusion, though, the areas of technology and e-commerce are especially vulnerable to regulation in the name of terrorism.

E-commerce by its very nature is a simple business channel for almost anyone to make a buck (if not a profit). Web sites such as eBay have turned millions of individuals into entrepreneurs and small business owners. However, what facilitates legitimate business concerns also makes it opportune for those with illegal motives. Anonymity and the easy flow of funds are a boon to those surreptitiously conducting illegal activity.

Leach doesn't mind that this bill would in effect prohibit internet gambling. His recent press release states that "internet gambling serves no legitimate purpose in our society." The millions of individuals that use these sites, whether it is for traditional casino style gambling, fantasy leagues, or the ubiquitous Super Bowl office pool, might disagree with Leach about the value of internet gambling.

Legislators and the public should be wary of the tactic of prohibiting ordinary business activities just because there might be remote and indirect links to terrorism. Terrorism is a life or death concern that should not be used by those with regulatory agendas in an emotionally manipulative way. E-commerce furthers the advancement of commercial dealings between consumers, their banks, and business owners so that transactions happen in real time between strangers without knowledge of one another's motives.

Regulation because someone "might" use the benefits of e-commerce for illegal purposes is a bad idea.

(Braden Cox is the technology counsel for the Project on Technology and Innovation at the Competitive Enterprise Institute.)