RAND Corp. Is Changing the Face of ‘Liability Crisis’

Until the Institute for Civil Justice came along, the American urge to sue was the subject of a lot of rhetoric and educated guessing but little factual information, says Kevin McCarthy, director of the RAND Corp. program.

“There were anecdotes, people arguing moral imperatives, but not much quantitative research,” McCarthy said.

Much of that has changed after eight years of scrutiny by the institute. Researchers from the Santa Monica-based think tank have not only compiled a smorgasbord of data on the almost 1 million lawsuits filed every year in this country (not counting small-claims actions), McCarthy said, but they have also begun to challenge some of the conventional wisdom about the so-called “liability crisis.”

The Catherine T. MacArthur Foundation announced earlier this month a $2.5-million grant to the institute to help in its studies of the liability system. Along with $1 million from the Ford Foundation, the grant will provide the institute with an equity fund, providing interest revenue for special studies, McCarthy said.

The tort system, the legal system that deals with personal injury or damage litigation, has taken its lumps in recent years, institute researchers acknowledge.

There is a widely held jaundiced view of liability litigation, which has been translating into state liability law reforms across the country in recent years, they say. It goes something like this: Your hair will turn white while you wait for your case to be resolved. Win or lose, all the money goes to lawyers. Juries are irrational in the way they hand out awards. But more suit-crazy Americans than ever are taking out papers.

Generalizations like that make people at the institute edgy.

The institute would rather collect and analyze data, letting others draw the sweeping conclusions. “If you want to be effective, you have to be neutral,” McCarthy says.

But institute research has shown that there is some truth to all of those assertions about costs and delays, he adds. Among other things, institute reports have shown that “time-to-trial” and court caseloads and million-dollar jury awards are up sharply for complex cases, such as those involving product liability, malpractice or mass latent injury (such as the Dalkon Shield or asbestos injuries). Institute research also shows that lawyers are getting about half the total take in all tort cases.

These are potent conclusions. The depth of feeling about the so-called liability crisis is apparent from what has been happening in state legislatures all across the country. According to the American Tort Reform Assn., 37 states have enacted wide-ranging tort reforms in the past two years, often after hearing testimony from institute experts.

“You could call it a legislative miracle,” said Blair Childs, executive director of the advocacy group.

Though the institute has stayed out of the partisan debate, it has been a central part in the tort reform movement, Childs said. “They’ve provided some very authoritative and well-documented research,” he said.

Law scholars also have benefited from institute research. “There’s nothing like it,” said UCLA law professor Gary Schwartz, a tort specialist, of the institute. “It’s the source of empirical information as to how the tort system is working.”

Before the institute was born, some law professors and foundations did empirical research and organizations such as the National Center for State Courts gathered statistics. But no organization has taken as broad a view as the institute, McCarthy contends.

All the reviews have not been raves. When the institute reported in 1984 that most of the $1 billion awarded so far for asbestos-related injuries has gone to lawyers, trial lawyers groused that the results were “skewed.”

“We’ve handled 850 clients involved with asbestos over a period of almost 10 years,” said R. Browne Greene. Greene is a former president of the California Trial Lawyers Assn. and a partner in the Los Angeles firm of Greene, O’Reilly, Broillet, Paul, Simon & Wheeler, which specializes in liability cases. “We borrowed hundreds of thousands of dollars to finance projects on behalf of clients. To imply that we were compensated far beyond our clients is totally false.”

Findings ‘Non-Objective’

Some trial lawyers charged that institute findings are “non-objective” because it receives funding from private enterprise, notably major insurance companies.

“We do get money from insurance companies, but also from the trial associations,” McCarthy said. About 75% of its $3-million annual operating budget comes from corporations, he added. “But we never do special projects that our sponsors have an interest in,” he said. “Their money goes into our general operating funds.”

For a high-powered research organization, the institute appears as laid-back as a college English department. A gathering of senior staff in McCarthy’s modest office at RAND Corp. headquarters, across the street from Santa Monica City Hall, is a casual, shirt-sleeved affair, with participants sitting informally around an oak table.

The institute has a staff of about 20--or, as McCarthy puts it, the “equivalent of 20 full-time people, though we have about 50 who work for us in one capacity or another.” Most of the staff are economists, political scientists or social psychologists, said McCarthy, himself a demographer.

Most are passionate about their work. Liability is not for them just an academic study but a soul-satisfying pursuit, says James Kakalik, the institute’s premier cost analyst. “Our work has had significant impact in helping people to make informed decisions,” he said. “Before we published information about what the system really cost, there were numbers all over the map. There was no way of sorting out the truth from the rhetoric.”

Though the 100 or so reports churned out by the institute since 1980 have provided a lot of grist for the tort reform mill, the facts they report tend to be scrupulously impartial, says Schwartz, who has worked as a consultant for the institute. “From time to time, they’re a little bit timid in suggesting what the possible implications are,” he said. “I suspect that to preserve their integrity, they’re very careful to reach only conclusions that are not justified.”

Among the findings which have had wide-ranging impact:

- Plaintiffs are winning increasingly large jury awards in complex cases, such as those involving malpractice and product liability. For example, average awards in malpractice cases in San Francisco jumped more than 800% between 1980 and 1984, from $52,000 to $1.2 million. But victorious plaintiffs hardly ever get the full amount of those big awards. As a result of post-trial motions, appeals or negotiations, plaintiffs get only an average of 71 cents per dollar, with the big money awards taking the biggest bites.

- About half of the gross costs of tort litigation goes to sustaining the system. In 1985, of the estimated $29 billion to $36 billion spent in the United States for tort lawsuits, about 54% went for legal fees, court costs and compensation for the litigants’ time. “In sum, the system spent $16-19 billion in transactions costs to deliver $14-16 billion to plaintiffs in net compensation,” an institute report said.

- A huge group of suits in which plaintiffs claimed health-related injuries because of exposure to asbestos has already resulted in $1-billion worth of expenditures. A little more than one-third of that--or 37%--has gone to victims, while the rest has been spent on lawyers’ fees. The final price tag on the asbestos cases is expected to be anywhere between $4 billion and $87 billion.