Why America is not 'like America': debunking myths of the American legal system

"Indeed, a commonly expressed concern with our public is that the local jurisprudence may come to embrace outlandish US experience in the area of so-called compensation. . .

People who have to pay insurance premiums, together with others altruistically minded, read about these trends and worry: will this become a feature of the Australian compensation landscape?"

The above passage is an extract from a paper delivered by a Supreme Court Judge to a meeting of the legal profession. The statement reflects common community notions of the American legal system: a system flooded by spurious claims from vexatious litigants being rewarded with enormous awards of damages. Australians believe that Americans are over-litigious and their claims for compensation are out of control. The great fear of the Australian public is that Australia’s legal systems will ultimately become "like America".

This perception of the American legal system is misleading. It is a myth, fuelled by those who seek to reform tort law in the United States. These reforms are aimed at restricting the financial exposure and legal liability of interested parties for wrongs committed within the community. The reforms attempt to strip the community of their basic common law rights and replace them with a manageable and "fairer" justice system.

Myth No. 1 – The US civil justice system is overwhelmed with personal injury compensation law suits

A common perception among Australians is that the US civil justice system is overwhelmed with tort cases. The majority of Australians believe that claims for compensation in the United States are very common.

Research into the US justice system reveals that this conclusion is simply not correct. Tort cases, excluding small claims matters, account for less than two per cent of the total case load (civil and criminal) in State Courts. State Court records for 1994 show that 78 per cent of cases consisted of traffic, criminal and juvenile cases. Personal injury cases account for 6.2 per cent of the civil cases filed in the State Courts. In fact, there are four times as many domestic disputes filed in State Courts as personal injury tort claims.

Data from general jurisdiction Courts in sixteen states indicate that tort filings rose 43 per cent between 1975 and 1998. Most of this increase, however, occurred between 1975 and 1986. In fact, the volume of tort filings in State Courts has declined since 1990. In contrast, domestic relations filings have increased significantly.

The perception that Americans turn to the courts for compensation on the suffering of an injury is also misconceived. Many studies suggest that most Americans who are injured in accidents do not turn to the courts for compensation. According to a RAND Institute study, "with the exception of motor vehicle accident victims, only a minority, even among those who are quite seriously injured … use legal mechanisms. In this respect, American behaviour does not accord with the more extreme pictures of litigiousness that have been put forward by some".

A comprehensive 1990 study by the Harvard Medical Study Group estimated that, in 1984, eight times as many patients suffered an injury from negligent medical treatment as filed a malpractice claim in New York State. About 16 times as many patients suffered an injury from negligence as received compensation from the medical malpractice system.

Myth No. 2 – Americans seeking compensation simply start a law suit and win

A further misconception is that in the US civil justice system, juries award huge compensation payments to plaintiffs against hapless defendants for spurious claims. Medical practitioners and other professionals are regarded as being easy targets for plaintiffs before juries in the United States.

The statistical evidence in opposition to this notion is simply staggering.

In a US Department of Justice civil justice survey in 1996 Tort Trials and Verdicts in Large Counties, 1996, the Office of Justice Programs collected sample data about tort, contract and real property rights cases decided by Trial and State Courts of general jurisdiction in the nation’s 75 largest counties.

Most tort trial cases were decided by a jury (85 per cent) rather than a Judge (12 per cent). Forty-seven state constitutions guarantee the right to a jury trial in civil cases in State Courts. Most states require either the plaintiff or the defendant to demand a jury trial, otherwise they forfeit the right to a jury and the case is decided by a Judge.

Plaintiffs prevailed in less than half of all tort trials in the nation’s 75 largest counties during 1996. The total percentage plaintiff winners was 48.2 per cent. Plaintiffs won more often in tort trials decided by a Judge (57 per cent) than by a jury.

The likelihood of a plaintiff winning varied among the different kinds of torts. Plaintiffs were winners in more than half of the automobile accidents (58 per cent), intentional tort (57 per cent) and asbestos (56 per cent) tort trials. Verdicts were in favour of the plaintiff in 52 per cent of the premises liability cases decided by a bench trial and in 38 per cent of the jury trials. For other product liability torts, a similar difference is found between plaintiff win rates in bench trials (70 per cent) and in jury trials (31 per cent).

The most surprising statistic is in respect of claims involving medical and professional malpractice cases decided by a jury. In jury trials, plaintiffs won a mere 23 per cent of cases in medical malpractice cases. In bench trials, plaintiffs won 38.2 per cent.

For those in Australia with the barest of knowledge of the general trend of plaintiff success at trial, the prospects of winning an action in Australia at trial are remarkably better than winning an action in the United States.

Myth No. 3 – Plaintiffs in law suits are routinely given huge damages awards

Final awards of damages to plaintiffs in the United States include compensatory awards for economic damages associated with actual financial losses, non-economic damages related to, for example, emotional pain and suffering, inconvenience or mental anguish and punitive damages that are intended to punish defendants whose actions were grossly negligent or intentional.

In 1996, the median final award in jury trials was $30,000 and $34,000 in judge trials. Final damages of over $250,000 were awarded to 17 per cent of plaintiff winners in tort trials. About six per cent of plaintiff winners were awarded over $1,000,000. It must be recalled that because plaintiffs were only winning less than half of the cases, less than three per cent of plaintiffs overall were awarded more than $1,000,000.

Myth No. 4 – Punitive damages are awarded routinely for minor injuries

The US Department of Justice research revealed that in 1996 about $463 million in punitive damages was awarded to 162 plaintiff winners in tort trials. The median punitive damage award was $38,000.

Plaintiff winners were more likely to be awarded punitive damages in judge trials (8 per cent) than jury trials (3 per cent). While Judges were more likely to award punitive damages, the amount they awarded did not differ from those of the jury.

The largest punitive damage amount of $138 million was awarded by a jury to 22 individual plaintiff winners in a negligence case against service seller defendants. The trial lasted 21 days, resulting in a final award amount of $143.4 million – the largest in the sample.

The largest punitive damage award in a bench verdict was $2 million to two plaintiff winners in a premises liability trial involving bodily injury claim against service seller defendants. The case lasted five years from filing to the final judgment.

Why the Perception?

Why are we led to believe the system in the United States is so bad? The major forces seeking to reform tort law in the United States are, predictably, those organizations with the most to lose from an unfettered common law system. Large corporations reaping profits from products channelled into the community are at significant risk should their products be defective. Importantly, they are at risk from awards of punitive damages should their conduct be seen, by a judge or panel of juries, to be in contumelious disregard of the plaintiff’s rights. These organizations are waging a well funded and well organised war against the rights of plaintiffs (and prospective plaintiffs) to limit their exposure should a product or their conduct not comply with what is expected of a reasonable person.

Much of the argument of the tort reform is based on examples of "horror" stories of the American legal system. Unusual or controversial verdicts are part of a flexible common law system. The Australian legal system produces many "unusual" verdicts and these are delivered by judges in the Australian legal system. For example, in Tame v. Morgan (1998) 27 MVR 387, the plaintiff was injured in a motor vehicle collision. The other driver was intoxicated. The police officer recorded the defendant’s blood alcohol level in the plaintiff’s details in the police report. When told of the contents of the police report by his solicitor, the plaintiff suffered psychiatric injury. Gowling DCJ held the police liable.

In essence, the tort reformers rely upon a fear campaign to reform tort law in the United States. That fear campaign has trickled across to Australia. The fear of a legal system out of control is not statistically supported in the United States or in Australia.

Lessons for Australia

When one delves into the reasons why the average person believes the American legal system is out of control, the response is based upon their knowledge of "horror stories" and a vague notion of the United States civil justice system. Unfortunately, the fear campaign of the tort reformers has been so successful, both in the United States and indirectly in Australia, that the tort reformers have persuaded many citizens of both countries that the US system of civil justice is out of control.

Any community or legislature considering changes to the rights of individuals to pursue claims for damages for wrongs committed within the community must be vigilant to avoid succumbing to public pressure or popularity based upon anecdotal evidence that Australia might be becoming "like America". Any changes restricting access to damages in a common law system must be based upon sound jurisprudential principles and objective statistical evidence.

Moreover, if a particular area of community activity proves to be a source of fruitful litigation for plaintiffs, it is likely that the conduct of the defendants or a group of defendants is objectively unacceptable to the community as a whole. Regulation of the rights and actions of the wrongdoer is a much fairer method of resolving the problem than removing the rights of the injured party to claim compensation for the injury.