Photo Credit: Joe Gratz
Photo Credit: Joe Gratz
Lawsuit Reform

The Best and Worst States for Lawsuits

For the past fifteen years, the Institute for Legal Reform has routinely conducted a survey involving corporate litigators and company senior executives. This survey has become a reliable benchmark for determining and ranking the fairness and reasonableness of the litigation climate in the United States.

The five highest performing states in this year’s survey are:

  1. South Dakota
  2. Vermont
  3. Idaho
  4. Minnesota
  5. New Hampshire

The five lowest performing states this year are:

  1. Florida
  2. California
  3. Illinois
  4. Missouri
  5. Louisiana.

Interestingly enough, the top five performing states have dramatically improved in their ranking over the past eight years whereas the bottom five have either remained in the same positions or worsened in their rankings. This phenomenon indicates which states are prioritizing legislation that promotes fairness and reasonableness in the courtroom and which are neglecting the issue, there are some exceptions to this. For instance, Missouri passed three bills last year regarding litigation reform and the implications of these changes are sure to be noticed in the coming years.

The aim of these surveys is to reveal how these individuals (and by default major businesses and corporations) view the litigation climate in each state, because it has become glaringly obvious in recent years how intimately the legal environment affects state –and ultimately national— economy. These observations and the data collected therefrom gives states the opportunity to see what trends companies look for in the litigation climate when determining where to practice business, and this year’s results do not disappoint in terms of delivering clarity on this issue.

This year’s survey report not only ranks each state 1-50 overall, it also ranks all 50 states in each specific area that was considered in the survey. This enables states to see where they land in relation to others from the broad and a narrowed perspectives. The survey also allows companies to weigh their options and tradeoffs across state lines. The Institute for Legal Reform’s survey reveals much in regards to how fair and reasonable litigation climates are perceived to be across the country, which states perform well or poorly in certain areas of civil litigation and how these nuances in a state’s legal environment affect its economy.

More specifically, it may be helpful to take a deeper look into the #1 state in the country. South Dakota climbed an impressive eight spots in the rankings from 2015-2017, and this increase is no doubt due (at least in part) to policy changes that South Dakota recently enacted in its litigation climates.

Perhaps the most notable change that South Dakota has made in recent years concerning their litigation climate occurred early in 2017 when South Dakota joined eight other states in combatting fraudulent asbestos claims. This decision may prove to be more economically significant than one might initially think. Consider that “The number of asbestos defendants now includes over 8,500 companies, including many small and medium-size companies, in industries that cover eighty-five percent of the U. S. economy.” Given the substantial financial liability that asbestos claims pose for companies, it is no surprise that South Dakota fighting against fraudulent asbestos claims helped in improving their overall ranking. The specific bill that South Dakota instituted was the model policy Asbestos Claims Transparency Act from the American Legislative Exchange Council which promotes both transparency and fairness by boosting communication between the litigation system and asbestos bankruptcy trusts to better identify fraudulent lawsuits.

It is policy implementation such as this (and many others) that result in major changes for state and national litigation climate and economy. Thanks to the Institute for Legal Reform there is an ability to map the litigation climate of any given state over the course of the past fifteen years. By tracing the trajectories of specific states in this way one may also determine what policy decisions have been made in each state in recent years that may have affected a change in their ranking.

The issue of policy reform in the litigation climate of America is paramount not merely for the sake of the legal system; these adjustments have a profound effect on state and national economy as well. In the ALEC Civil Justice Task Force work, Lawsuit Reform for Competitive State Economies, “In the United States, the tort system costs us about two percent of GDP, while in most developed nations, that number falls around one percent, a gap that cost the U.S. economy around $140 billion in 2009.” Conversely, if states prioritize instituting changes in liability apportionment, damage recovery, consumer protection lawsuits, and other areas of tort litigation, then the economy and the American people’s overall faith in their states’ fairness and reasonableness would be bolstered significantly.

Ultimately, the Institute for Legal Reform’s survey concerning state litigation climates and the corresponding grades awarded to each state convey a simple but profound message. That is, the degree to which states practice fairness and reasonability in their litigation policies will definitively affect whether companies will conduct business there. The statistics and answers that are provided by these findings afford opportunities for individual states to implement policy reforms in their areas requiring improvement. When this opportunity is realized and satisfied then the American people will be provided with more fairness and reasonability in their litigation climate and with a stronger economy.

In Depth: Lawsuit Reform

State legal systems and the liability they exert on businesses and individuals are a disincentive to bad behavior and allow fair players to succeed in the marketplace. When lawsuits inappropriately punish good actors, resources are sucked out of the business economy, away from research & development and job creation. Lawsuit …

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