CLASS ACTION LAWSUITS HURT ECONOMY
Class action lawsuits hurt competitiveness by increasing costs for businesses in three ways
Kane, Schaefer, and Fraser 04
(Tim Kane, Ph.D., Brett D. Schaefer, and Alison Acosta Fraser. “Myths and Realities: The False
Crisis of Outsourcing”. May 13, 2004. The Heritage Foundation.
Ending lawsuit abuse. Frivolous lawsuits cost the U. S. economy between $180 billion and $233 billion
in 2003, which is
enough to pay 1.8 million to 2.3 million additional six-figure salaries. According to one study, this is up 13.3 percent over 2002,
following a 14.4 percent increase over 2001, and strongly suggests continued double-digit growth unless steps are taken to end
frivolous and abusive lawsuits.
Congress should take steps to reform class-action lawsuits
and restrain the growth of medical
malpractice lawsuits. Since one-third of the increase in tort costs is driven by increasingly broad asbestos awards
, lawmakers should
limit damages for non-sick claimants.
Businesses pay these costs in three ways beyond payment of tort claims: through
increasing product and general liability insurance, higher employee health-care benefits due to medical liability costs, and
legal fees. The burden these costs impose on the economy is more than two times greater than the burden on some major U.S.
(e.g., Japan and Canada),
putting American businesses at a competitive disadvantage
Class action lawsuits drain labor from key companies while failing to stop the frauds that their cards talk
(Nancy Trejos-Washington Post Staff Writer. “Livid Investors Launch A Volley of Lawsuits”. January 18, 2009.
That said, many of the companies being sued are on the verge of bankruptcy or have been gobbled up by other firms
with 'deep pockets' are the ones who can afford big settlements," Plancich said. "However, the credit crisis has dramatically shrunk the
size of many defendants' pockets
. The financial distress faced by defendant companies could therefore pull median settlement values
." Whatever the outcomes of these cases, Grundfest argues that
class-action lawsuits do not fulfill one of their missions: to
deter securities fraud. Others argue that such lawsuits drain cash and manpower from already beleaguered companies, thus
hurting existing shareholders and investors.
"It's important to stop securities fraud. I'm the first person to say that," he said. "By the
we also need to keep an open mind and ask whether the multibillion-dollar securities fraud industry has been
effective in achieving that result.
Or has it been more effective at generating revenue for lawyers on the defendant and plaintiff
Lawsuits have spread to all sectors of the US economy and cause bankruptcies
Hensler et al, 02
(Stephen J. Carroll, Deborah Hensler, Allan Abrahamse, Jennifer Gross, Michelle White, Scott Ashwood