A Response To Bernie Marcus' Tirade About Tort Reform

Bernie Marcus, one of the founders of Home Depot, had a few things to say about why America needs tort reform. I felt the need to respond and point out the flaws in his argument. Below is a paragraph by paragraph response to his arguments. I would welcome a response by Bernie Marcus, but I won't expect one.

Excessive litigation has created a crisis in America. The time has come to recognize this crisis and demand that our elected officials work together to achieve a solution. I am astounded by the extraordinary increase in lawsuits filed in recent years. At one time, we were a people who took pride in our ability to work out solutions among ourselves. Now, the solution of first choice is to sue. The result is staggering: some 16.5 million lawsuits in a typical year. Class-action lawsuit filings rose more than 1,000 percent in state courts and 300 percent in federal courts during the 1990s.

I couldn’t find where you got your source for this figure, so I’ll assume that it’s the total of all lawsuits filed. When you consider that small claims suits, divorces, child support enforcements, debt collection actions, and business v. business suits fall into this category, 16.5 million lawsuits isn’t a lot.

The costs, too, have been staggering and are reflected in higher prices for products and services — about $233 billion a year, or $3,200 for every family of four.

American businesses will spend $248 billion on advertising this year, which means that using your logic, the average family of four spends $3,406 to support the out of control advertising industry.

That's just the tip of the iceberg. Excessive litigation is putting companies out of business. Some 60,000 jobs have been lost due just to bankruptcies caused by asbestos litigation, which ripple through state and local economies. For every 10 jobs directly lost due to these bankruptcies, another eight are lost in local economies.

By the end of the decade, over 200,000 people will have died from asbestos. Or put another way, over 200,000 jobs have been lost due to asbestos deaths. The tragedy isn’t that asbestos litigation has bankrupted corporations; it’s that over 200,000 people were killed in the name of corporate greed.

The crisis is taking its toll at every level of society. Americans are afraid to volunteer for charitable organizations because they have seen charity board members dragged into nuisance suits. Americans are seeing their profits and dividends dry up, and as a result are giving less to charities. Years ago, when you were at fault you accepted responsibility for your actions. Today, we blame someone else. Today we sue and the costs to state and local economies are staggering. Taxpayers end up carrying the burden.

As of 08/17/2004, your company, Home Depot reported “record sales,” with profit up 19%, on sales of $20 billion dollars, and profit of $1.5 billion dollars. Those figures puzzle me because you claimed that profits and dividends have been drying up. Perhaps drying up is slang for record sales? But what I’m really curious about is your claim that “taxpayers end up carrying the burden.” Filing a lawsuit doesn’t cost taxpayers anything – states charge for the privilege of suing in their courts. What does cost the taxpayers is the way in which your company uses a Delaware subsidiary to avoid paying millions of dollars in corporate taxes.

Doctors, meanwhile, have to charge patients more to cover insurance bills that have been driven through the roof by unfair punitive damage awards and settlements. An Institute for Legal Reform study found that 8 out of 10 physicians have ordered unnecessary tests because they fear malpractice lawsuits. It is shocking that 43 percent of doctors have considered leaving their medical practices.

I’ll be the first to admit that I don’t think “unnecessary” tests are unnecessary: If I’m ill, I want the doctor to find out what’s wrong with me, and not risk misdiagnosis. Honestly, I couldn’t care less if my HMO spends a million dollars to find out that I have cancer and cure it. Of course, that would be if I had an HMO – like millions of Americans, I’m uninsured. But even so, if a doctor suggested that an expensive test might help him diagnose me, I’d pay it out of my own pocket. And that’s because I can’t put a fixed price on my own health – it’s worth every penny I have. I suspect you feel the same about your health, and the health of your loved ones.

Before we lose more talented doctors, we need to admit that the justice system is broken and fix it. A big part of the solution is to put fair and reasonable limits on punitive damage awards. Many of these awards are excessive and out of control. In 2002, the top 10 jury awards alone totaled $32.7 billion. Again, that's the take from only 10 lawsuits. Reasonable limits could save as much as $44 billion.

I wondered why you chose 2002, instead of 2003, so I looked. It turns out that in 2002, there was one tobacco verdict of $28 billion in punitive damages, and a $2.2 billion award against the evil pharmacist who diluted cancer drugs to make a buck. The $28 billion award was reduced to $28 million, which Philip Morris accepted, even though under several United States Supreme Court holdings, a proper amount would have been $3-4 million. So your $32.7 billion figure just dropped by about $28 billion dollars. And since the $2.2 billion award against the pharmacist was purely symbolic, we’ll drop it, too. That means that in 2002, the top ten jury awards were really $2.5 billion dollars. Compare this with the $58.2 billion in total sales that Home Depot had in 2002, and it doesn't appear that juries are out of control.

In 2003, the top ten verdicts totaled $1.2 billion dollars, without any reductions. And for the record, the top verdict - $255 million – was a breach of contract case decided under German law. While those could be why you chose 2002 for your argument, I think the main reason was this quote taken from the web page detailing the top ten awards of 2003:

"If this year's Top Ten verdicts are any indication, the tort reform movement has taken root in the hearts and minds of American jurors.

After six years of surging upwards into the stratosphere, the nation's Top Ten verdicts to individual plaintiffs came crashing back to earth this year, with the lowest total since 1997.

To give you an idea just how precipitous that drop has been, the total of the Top Ten verdicts of 2002 was 20 times larger than the total for 2003. “

We also have to recognize that trial lawyers have spent millions to stack the deck in favor of abusive lawsuits — $470 million alone on federal campaigns since 1990. They also spend heavily in state and local elections. They're spending tens of millions for one reason only: To thwart meaningful legal reform.

Your $470 million figure, presumably from Opensecrets, includes all lawyer contributions. Or, stated another way, you claim that all lawyers who contribute to any political campaign do so only to stop tort reform. You argue that lawyers don’t contribute based upon whether the candidates agree or disagree with other issues important to the lawyer, such as abortion, gun control, or tax policies. And you argue that ALL lawyers, even corporate lawyers who support tort reform, only contribute to candidates that oppose tort reform.

They are against damage limits. They also desperately want to keep laws on the books that help them reap huge jury awards. One example is laws that prevent juries from learning that injured plaintiffs were not wearing seat belts at the time of an accident. Why hide that fact? Because a jury is much less likely to reward people who can't be bothered to fasten their own seat belt, and who is instead blaming someone else — often the company that built their car — for their injuries.

I defy you to name one case decided in the last thirty years in which a plaintiff successfully sued an automaker for injuries that could have been avoided or reduced if the plaintiff would have worn a seatbelt. You see, the seatbelt anecdote that tort reformers are fond of is based upon a rule of evidence that holds that evidence cannot be shown to a jury if it’s more prejudicial than probative. More simply, that means that if evidence will unfairly bias the jury and won’t help them decide critical facts, the evidence doesn’t come in. And while you talk about a hypothetical application of the exclusion rule benefiting a plaintiff, more often than not, that rule benefits the defendant. A good example would be an auto accident case in which a defendant had been drinking, but wasn’t at or above the legal limit. In such a case, evidence that the defendant was drinking may not come before a jury.

We will not end this litigation crisis until we recognize it exists. We need to get back to the American idea that we, as free and responsible people, can settle our differences without lawyers who will drive doctors out of business and harass people who serve on charity boards.

I’ll assume you want these laws to go into effect after you finish your $1 billion dollar lawsuit against Mastercard, right? It's funny how corporations will bemoan billion dollar jury verdicts until they want one.

I must admit that it would have been so much more difficult to start The Home Depot if the legal climate then were as unfair and abusive as it is now. I'm proud that The Home Depot employs more than 300,000 people and contributes greatly to the local economies of thousands of communities. But I shudder to think how many tens of thousands of new jobs have been lost because would-be entrepreneurs have decided against starting companies because of our unfair legal climate.

I wonder if by “unfair legal climate” you mean a climate in which both State and Federal government agencies keep suing Home Depot for race and gender discrimination, and a climate that forces Home Depot to pay hundreds of millions of dollars for implementing racist and sexist policies? I’m presuming you support tort reform that would eliminate these suits.

It's time to tell our elected officials that they need to fix the broken legal system before we lose any more doctors and good jobs. We should not elect politicians who pay lip service to the American dream while accepting contributions from trial lawyers to keep the deck stacked in their favor.

Now that's some innovative campaign finance reform: Don't allow those who disagree with you to contribute to political campaigns!

Bernie Marcus managed to build a multibillion dollar corporation on a shoestring budget, make himself incredibly wealthy, and become an icon of the business world - all during a time of "runaway jury verdicts." Isn't his success proof that the justice system works?