Trial Lawyers Should Stick to Real Problems

There’s a great new report from the Manhattan Institute emphasizing the role of tort law as a supplement (and alternative) to regulation. If fishermen in the Gulf coast had a right to be free from pollution, perhaps BP would have invested more in preventing the recent disastrous spill. Unfortunately, as the MI piece points out, trial lawyers have tended to focus not on these genuine – and objectively verifiable – harms but instead on hypothetical and highly subjective concerns. A series of class action suits resulting in essentially arbitrary payouts has enriched the trial lawyers but done little if anything to protect individuals or the environment from harm. Indeed, arguably these suits have been counterproductive as they have often led to the elimination of beneficial substances, while diverting resources to lawyers and plaintiffs and away from more productive uses.

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One of the examples given in the MI report is MTBE, an additive used in gasoline to make vehicles run more efficiently (and thereby produce less pollution). Oil companies started adding MTBE to fuel in 1979 but its use was increased after 1990 – as the MI report points out “Congress had reached the policy judgement that adding MTBE to motor fuel produced a net benefit, even though the chemical can affect the taste of drinking water if it enters the water supply.” The EPA also evaluated MTBE and concluded in 1997 that “there is little likelihood that MTBE in drinking water will cause adverse health effects” in the quantities present. Given that the EPA tends to err on the side of caution (demanding very wide margins of safety), it seems fair to conclude that MTBE in drinking water really was most unlikely to pose a danger to health.

If historic tort standards were applied, there would be no case: MTBE might have an impact on taste, but that is of course subjective. It does not – according to the EPA at least – cause an “objective” harm to human health. This distinction is important. For the law to act as a guide to human behaviour, it must be based on objective standards. If judges apply subjective standards after the fact, how are we to know the standard against which we will be judged? Taken to its logical conclusion, we enter the world of Kafka’s Josef K, who is tried with crimes he didn’t even know he had committed.

In the case of MTBE, as the MI report points out, “more than seventy suits have been filed against oil companies for using MTBE, many by states and municipalities alleging a public nuisance and seeking money for facilities to eliminate the additive from drinking water (with a large chunk of the proceeds going to the contingency fees of plaintiffs’ lawyers hired to handle the cases). In May, 2008, several oil companies settled suites for $423 million, and in October 2009, New York City won the first of these cases to come to trial, hitting Exxon-Mobil with a $104.7 million verdict.” Unsurprisingly, in 2006 oil companies stopped using MTBE.

Following their success with MTBE, the trial lawyers are now going after atrazine, a herbicide that has a very benign environmental profile. Used by farmers for over 40 years, atrazine enhances crop yields by reducing competition from weeds and – more recently – has been used as an alternative to ploughing, thereby reducing soil erosion (and pollution from tractors). Atrazine was reviewed by the EPA in 2006 and found to pose no hazard to health. Nevertheless, trial lawyers acting for municipal water authorities have launched a series of lawsuits against atrazine, seeking damages to cover the cost of its removal from drinking water.

I am a big fan of the application of tort law to protect the environment (see e.g. my contribution to this book), but when lawyers use tort law in egregious ways to line their own pockets, it results in perverse consequences: good products are outlawed and innovation is discouraged. When the rules are unclear, it is impossible to know what will be the next product on the trial lawyers’ list. That discourages companies and inventors from developing new products. In the end we all lose (except the trial lawyers).

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