Memo to “Judicial Hellholes”: Your businesses are welcome here
The annual, national ranking of “Judicial Hellholes,” places where frivolous lawsuits thrive and courts produce uneven rulings that often favor plaintiffs, is out with California topping the list and Madison County, Illinois coming in third.
Their presence on the list is not surprising. Texas Governor Rick Perry recently called both California and Illinois “target-rich environments” for his efforts to lure businesses to the Lone Star State, as one of our great selling points is a reformed legal system that is based on common-sense and fairness.
Texas was once in the same boat as this illustrious top five (West Virginia; New York City and Albany, New York; and Baltimore, Maryland rounded out the list of worst offenders for 2012).
Aggressive personal injury trial lawyers in Texas played the courts like a litigation lottery. Businesses, as well as medical practices, were crushed by the costs of excessive litigation, and many simply stayed away, costing the state jobs and economic growth.
In response, Texas passed several significant legal reforms to introduce common sense into the civil justice system. These reforms have helped the state create and retain jobs, allowed small employers to prosper and improved access to health care. According to a report by the Perryman Group examining the Texas economy between 1995 and 2008, approximately 8.5 percent of Texas' economic growth and the creation of 499,000 permanent jobs are the result of lawsuit reform.
Texas stands in stark contrast to this year’s #1 “Hellhole” – California. While lawsuit reforms have played a key role in Texas’ economic boom, California, which has failed to pass such reforms, remains highly impacted by the economic downturn with consistently high unemployment and weak job creation. In their report, ATRA christened the Golden State the “undisputed heavyweight champion of the consumer class action,” noting that small businesses there are “under siege” from “trolling disability-access lawyers and their professional plaintiffs who look for technical rules violations, then demand thousands of dollars to settle.” In legal reform circles, the antics of aggressive personal injury lawyers in California are legendary.
The effect of the two states’ legal climates was laid bare last year when CKE Restaurants, which owns the Carl’s Jr. franchise, declared the company was planning to move its headquarters from California to Texas. What’s more, the company halted construction of new restaurants in California, but is expanding aggressively in Texas. When asked why, the CEO specifically cited California’s laws that encourage lawsuits against private businesses.
The good news for reform supporters is: Americans get it.
A recent national survey of registered voters conducted by ATRA and the grassroots Sick of Lawsuits campaign reaffirms that the public is concerned that an unbalanced civil justice system that imposes excessive liability, hurting economic growth, job creation and U.S. competitiveness. For example, the survey found that more than two-thirds of Americans believe that “our country's liability lawsuit system makes it harder for employers to do business and succeed,” while more than eight in 10 feel that the liability system needs to be improved.
In the end, you would be hard-pressed to find two more opposite states than Texas and California when it comes to job creation and economic opportunity. And with growing discontent over our nation’s economic woes, leaders in California – and other Hellhole areas -- would be wise to take a page from Texas’ playbook and make legal reform a central part of their legislative agendas in 2013 and beyond.