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The Plaintiffs' Bar
New York’s Huge Hidden Tax
As if excessive spending, union giveaways, high taxes,
and dysfunctional government processes weren’t
enough, New Yorkers must endure another sustained siege on
their prosperity: job-killing lawsuit abuse.
The U.S. tort system is the world’s costliest, with a drain on
GDP more than twice the average of other industrialized nations’[203]—nearly a quarter of a trillion dollars as of 2003.[204] While
this sophisticated (and—thanks to attorney-client privilege—mostly unregulated) $200 billion industry is a scourge to most
states, the “tort tax” is particularly devastating in New York.[205]
As of 1996, total liability costs in New York were $14.3 billion a year. That
amounts to a tort tax of $787 per person, about 28 percent above the national
average.[206] That burden is more than all of New York’s
state and local sales taxes combined, and more than twice the total raised
by all of New York’s business taxes.[207] Contrary
to trial-lawyer spin, the tort tax hurts not just big businesses, but ordinary
New Yorkers: the lawsuit industry inflates the cost of having a baby (by about
$600) and the annual cost of insuring a car (by some $400).[208]
 What’s
more, New York’s lawsuit industry is constantly metastasizing. Tort filings
in New York increased by 58 percent between 1988 and 1996, even as tort filings
were declining in the rest of the nation.[209]
New York’s tort problem is especially stark in automobilerelated
claims. By the late 1990s, New York’s rate of personalinjury
accidents nationwide had been plummeting steadily for a
decade. In fact, the absolute number of accidents also dropped,
even with more vehicles on the road. Nonetheless, average autoinsurance
expenditures in New York increased by 36 percent between
1990 and 1996. This helped make New York’s auto-insurance
rates the nation’s third-highest,[210] an unenviable distinction
the state still holds in 2005.
This lawsuit abuse is especially draining on the economy of
New York City. In 1998, taxpayers paid New York City liability
costs in excess of a quarter-billion dollars, more than the city
spent on parks and libraries combined.[211] Between 1978 and
2003, the city’s tort payouts increased by 2,500 percent, from
$21.4 million to more than half a billion dollars in fiscal 2003.[212]
The city’s swarming trial bar is so aggressive that some of its lawyers created “the Big Apple Pothole and Sidewalk Protection Corporation”—
which exists solely to document sidewalk defects and irregularities for which the city can later be sued.
Why is tort abuse bad and worsening in New York?
- New York has more lawyers than other states. In the decade prior to 1998, when the state’s population grew by only about 1.5 percent,
the number of practicing lawyers in New York grew by 40 percent.[213] This made New York’s per-capita infestation of lawyers
bigger than all but two other states, and 66 percent above the national average.[214]
- New York is also home to some of the nation’s most plaintiff-friendly juries, notably in the Bronx and Brooklyn. Even Ron Kuby,
well-known left-wing activist and one of the nation’s highest-profile litigators, has acknowledged that “the Bronx civil jury is the
greatest tool of wealth redistribution since the Red Army.[215]
- New York’s aggressive trial bar benefits from trial lawyer–friendly laws that other states have either never enacted or have long since
repealed.
- New York’s infamous, one-of-a-kind “Scaffold Law”[216] holds contractors and site owners absolutely liable for worksite injuries, even
in cases of gross negligence on the part of the employee-plaintiff—ignoring safety warnings, taking drugs, or drinking himself into a
stupor.[217]
- Until it was repealed by a fine-print provision of a 2005 federal highway-funds bill, New York’s unique “vicarious liability” law let
New York State trial lawyers extract damages from companies that lease cars involved in accidents—even if those companies were
blameless. Under the law, leasing of automobiles in New York fell by 32 percent in 2004—even as leasing nationwide increased by
12 percent.[218] In one high-profile case,[219] the estate of late New York Yankees manager Billy Martin got a settlement in a multimillion-dollar tort case from Ford Motor Credit—because it owned the leased pickup truck in which Martin died in an alcohol-related
auto accident.[220]
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"Year in and year out, trial lawyers are among the top ten
spenders on lobbying in Albany."
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New York has steadfastly avoided tort reform, which no doubt partly reflects
the fact that key state legislators are prominently associated with personal-injury
law firms—including Assembly Speaker Sheldon Silver and the chairs of
both houses’ judiciary committees, Assemblywoman Helene Weinstein (D-Brooklyn)
and Senator John DeFrancisco (R-Syracuse). Because of the cozy professional
courtesy between Albany, Inc. and the plaintiffs’ bar, the state’s
powerful trial lawyers’ lobby not only can resist change fiercely but
can also pursue policy changes that would make lawsuit abuse even easier. For
example, the trial lawyers’ lobby routinely seeks new “wrongful
death” cause of action and removal of the cap on contingency fees in medical
malpractice cases.[221]
Nationally, trial lawyers throw more money into the political arena than any
other special interest, having led all other groups in campaign contributions
over the last decade by giving $357 million to federal candidates.[222]
Year in and year out, the New York State Trial Lawyers Association is among
the top ten spenders on lobbying in Albany. In 2004, the group ranked ninth
in this spending.[223]
At least 20 states have enacted significant tort reform since 1990.[224] The list includes
some of New York’s industrial competitors, such as Ohio, Illinois, California,
and Texas, but it does not include New York.[225] Little wonder these states generally
have less tort litigation and lower tort taxes than New York.[226] States with policies
that encourage lawsuits tend to discourage economic growth; conversely, states that
have implemented reforms designed to restrain lawsuit abuse are likelier to increase
productivity and employment faster.[227]
Tort reform in New York will be an uphill battle. When Congress saved New York
from its vicarious-liability folly, it stunned a state trial bar that was confident that its
allies in the Assembly would ensure no state action on the law. (True to form,
the New York trial lawyers association responded to the federal bill by posting
on its website an urgent notice to its members: sue now, before the federal
law takes effect.)[228]
But New York has enacted tort reform before. In the 1970s, the state adopted
both no-fault auto insurance and several medical-malpractice reforms. But the trial
lawyers’ dominance in Albany, Inc. is much stronger now than it was then—stronger
than ever. And unless Albany finally stands up to New York’s powerful trial bar,
that’s unlikely to change.
<<previous section | next section>>
203. Who Pays for Tort Liability Claims? An Economic Analysis
of the U.S. Tort Liability System, President’s Council of Economic
Advisers, April 2002, available at http://www.whitehouse.gov/cea/tortliabilitysystem_apr02.pdf.
204. U.S. Tort Costs: 2004 Update: Trends and Findings on the Cost of the
U.S. Court System, Towers Perrin Tillinghast, available at http://www.towersperrin.com/tillinghast/publications/reports/Tort_2004/Tort.pdf.
205. See a detailed assessment of the nation’s lawsuit industry in Trial
Lawyers, Inc.: A Report on the Lawsuit Industry in America 2003 (Center
for Legal Policy at the Manhattan Institute, 2003), p. 5, available at http://www.triallawyersinc.com/html/part01.html.
206. Ibid.
207. Ibid.
208. Ibid.
209. Ibid.
210. Driving Force: The Role of Lawsuits in Pushing Up the Cost of Car Insurance
in New York State (Public Policy Institute of New YorkState, October 28,
1998), p. 1, available at http://www.bcnys.org/ppi/drive.htm.
211. An Accident and a Dream: How the Lawsuit Lottery Is Distorting Justice,
and Costing New Yorkers Billions of Dollars Every Year, Public Policy Institute
of New York State, March 1998,
available at http://www.bcnys.org/ppiaccont.htm.
212.“Tort Reform,” a brief by the New York City Law Department,
available at http://www.nyc.gov/html/law/html/reform.html.
213. An Accident and a Dream.
214. Ibid.
215. Larry McShane, “Bronx Residents Divided over Juries,”
Associated Press, December 1999, available at http://www.amarillo.com/stories/122799/usn_bronx.shtml.
216. The law was enacted in the 1800s to help injured workers; when the state
created workers’ comp early in the twentieth century, the Scaffold Law
fell into disuse and was considered obsolete. But cunning trial lawyers resurrected
it in the 1970s, using it to gain new leverage in suing contractors and property
owners. See Annemarie Francyk, “Taking the Fall,” Business First
(business weekly newspaper based in Buffalo), November 8, 2004.
217. An Accident and a Dream.
218. “ ‘Vicarious Liability’ Law Assailed by Auto Manufacturers,”
Business Review (business weekly newspaper based in Albany), May 2, 2005,
available at www.bizjournals.com/albany/stories.2005/05/02/daily2.html.
219. “The New York Yankees and the World of Hurt,” commentary
by Michael E. Ross, MSNBC, October 20, 2004, available
at http://www.msnbc.msn.com/id/6229184.
220. “Ford and GMC Try to Avoid Billy Martin–Type Suits,”
Detroit News, Doron Levin/Bloomberg News, May 1, 2003, available at http://www.detnews.com/2003/insiders/0305/20/autos-152652.htm.
221. Matthew Maguire, “Will Albany Ever Say No to the Legal Sharks?,”
New York Post op-ed, Business Council of New York State, May 7, 2001.
222. Steven B. Hantler, “The Seven Myths of Highly Effective Plaintiff’s
Lawyers,” Michigan Forward, Michigan Chamber of Commerce, January/February
2004, available at http://www.atra.org/wrap/files.cgi/7792_7myths.htm.
223. Data from the state’s Temporary Commission on Lobbying,
available at www.nylobby.state.ny.us/app_grev.html.
224. An Accident and a Dream.
225. Ibid.
226. Ibid.
227. “The Seven Myths of Highly Effective Plaintiff’s Lawyers,”
supra.
228. Brian McGuire, “Federal Action Likely to Boost N.Y. Auto Leases,”
New York Sun, August 3, 2005.
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