Friday, January 14, 2005

On January 6, there was a train crash in South Carolina that resulted in the leaking of chlorine gas and the death of nine people. One train had been parked on a side track, and the track switch was not moved back to the main line. The next train to come along was therefore diverted to the same side track, causing the crash.

I heard on NPR the other day that lawsuits were possible (and an article on Yahoo! today confirmed that two lawsuits have been filed).

My first reaction to this was "those damn, greedy lawyers" and, no less importantly "those damn, greedy people." Accidents happen, after all. Why does every accident seem to lead to lawsuits? It almost makes you want to support the Republican effort at "tort reform."

The idea of tort reform is to cap the amount of punitive damages that a person can sue for (that is, the amount intended to punish the offender beyond the actual damages). This will make lawsuits less attractive to lawyers (who will not be able to profit as much) and also less of a pain for businesses.

The problem here should be clear to anyone who has seen Fight Club. In this movie (which I coincidentally watched tonight for the fourth or fifth time), the character played by Ed Norton works for a car company. He explains his job thusly:

You take the number of vehicles in the field (A) and multiply it by the probable rate of failure (B), multiply the result by the average out-of-court settlement (C). A times B times C equals X. If X is less than the cost of a recall, we don't do one.

With a cap on punitive damages, a business has an upper limit for "C" in Ed Norton's equation, making "X" easier to calculate with certainty. After these caps are put in place, "C" is also going to be much lower than it was before.

So businesses will find it easier to calculate how much they will have to pay out--and discover that they have to pay out much less than now--instead of fixing something that could cost lives or otherwise harm people.

In the case of the train wreck, there is technology to provide an electronic warning system to alert the train conductor about the switch position ahead on the track. Why weren't these put in place? I'm guessing that there was a cost associated with it that the Norfolk Southern (the railroad company) decided it was just not worth paying. Also, why weren't the tanks that held the chlorine reinforced so they wouldn't puncture so easily? These preventive measures cost money, and businesses want to spend as little money as possible (businesses after all are "in business" to make a profit). If businesses have less to fear from lawsuits when something they do causes death and destruction, then there will continue to be incidents like this in the future.

Apart from government regulation, the civil legal system is one of the few checks society puts on businesses. (Sure, in theory the "invisible hand" or "market forces" could force a business to act responsibly, lest they lose customers--but Norfolk Southern does most of their business with other businesses, who also care about profit margins. Consumer pressure on Norfolk Southern is too diluted to have any effect.)

Unfortunately, there are a few notorious cases that on their surface sound ridiculous. Everyone knows about the grandmother who sued McDonald's because she spilled hot coffee on herself, and probably thinks that this is the epitome of a frivolous lawsuit. Of course, as with so much of what people assume they know, this case wasn't entirely frivolous.

After learning that 700 people had complained to the company about the heat of its coffee, safety consultant Robert Knaff calculated that that equaled one problem for every 24 million cups sold. This was, he said, "basically trivially different from zero." One juror explained the decision to award millions in punitives: "It was our way of saying, 'Hey, open your eyes. People are getting burned.'"
(This may change the minds of those who think that companies don't actually do the type of calculations described in Fight Club.)

Regardless of the merits, cases like this sound bad when given as a news nugget or a late-night joke. There are also some really stupid cases that get a lot of attention. These make it easy for Republicans to make torts into one of the many "crises" from which they must protect Americans. (Of course the Republicans who support this would never have ulterior motives like, say, cutting off Democratic funding.) And it makes it easy for the average American to think that all tort cases are about greedy lawyers and fake grievances.

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