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February 2, 2006

Slowing the Recovery: Too Many Lawsuits

[originally appeared in the San Diego Union-Tribune, May 3, 1992]

Last fall Vice President Dan Quayle spoke out against our national mania for suing each other.

Even more amusing than the resulting spate of lawyer jokes has been the self-serving reaction of organized lawyerdom to Quayle's remarks. The American Bar Association, for example, rushed out an indignant fact sheet in response.

Remember the Veep's suggestion that America could do with a smaller number of lawyers?

The ABA doesn't deny that the United States has three times as many attorneys per capita as a country like Great Britain. But the primary reason for such differences, it declares, is not that America has too many lawyers. It's that "other countries with large populations have too few." It seems everyone's out of step but us.

Nothing enraged the lawsuit lobby more than Quayle's comment that -- when you count all the different effects -- litigation may be costing this country $300 billion a year.

Quayle's number doesn't pretend to be anything more than an educated guess on the cost of suing. What's curious are the counter-numbers his opponents keep offering. The ABA fact sheet cites a figure of $29 billion to $35 billion. So does the Association of Trial Lawyers of America. So does lawyer Joan Claybrook, speaking on PBS's "Adam Smith's Money World."

That's lower than Quayle's estimate by a factor of ten. Obviously something's wrong with one number or the other. And something is.

To get a handle on the costs of suing, it helps to start close to home, in the family driveway. More than 120 million cars are on the road. Most are insured. The portion of auto insurance that goes to liability (as opposed to theft, self-inflicted dents, and so on) varies a lot from state to state, depending on how much people sue. But the nationwide average is well over $350. Which brings the cost of liability to at least $35 billion right there, for private cars alone.

To that add a goodly sum for trucks and other commercial vehicles. Hertz recently disclosed that in whole areas of New York City it spends more to defend lawsuits than it collects in rental fees for its cars--which leaves less than no money to pay for the vehicle itself, its upkeep, employees and so forth.

Suits involving planes and trains are big business too, but let's move on to the doctors. By now four of five obstetricians have been sued; in some places those with good records pay more than $100,000 a year for insurance. If a baby is born in bad enough shape, cynical lawyers know that a suit will always have settlement value, no matter what the doctor and hospital have done.

How much does this cost per baby delivered? A study by the National Institute of Medicine reported a 1987 figure of $736 for California, less elsewhere ($527 for New Jersey, for instance, $319 for North Dakota). To be conservative, call it $400. Multiply that by roughly 4 million births a year, and you get $1.6 billion just for obstetrics, one specialty among many. For medicine as a whole, the direct cash cost of suits is thought to top $10 billion, maybe $15 billion.

We're now past $50 billion, and just getting started. Suits against City Hall are another big cash cow for the lawsuit industry. New York City juries alone recently voted $4.3 million to a thug shot by police during the brutal mugging of a 72-year-old man (upheld on appeal Feb. 20); $9.3 million to an inebriate who fell in front of an oncoming subway train; $6 million to another track totterer, and $2.5 million to a would-be suicide who jumped on purpose.

Some of these get reduced on appeal, but overall Gotham taxpayers shell out sums pushing $100 million a year even aside from suits against municipal hospitals and crashes of city-owned cars. Factor in other levels of government that get sued -- school districts, counties, states -- and the national totals have to reach well into the billions.

We haven't even mentioned workers' compensation ($50 billion, up tenfold in the past 20 years, in large part because lawyers have muscled in). Or the megabucks business of suing companies over allegedly defective products. Or environmental litigation, which dumps into lawyers' pockets vast sums that might otherwise go to cleanup: as one attorney puts it, we manage to spend 90 cents on grey flannel for every dime on blue jeans. Or "premises liability" after someone slips and falls in a store or gets mugged in a parking lot. Or liquor-serving liability.

Small wonder that Tillinghast, a big consulting firm that's been studying legal costs for years, estimates the direct cost of injury law for 1987 at $117 billion. And injury law itself is just one legal category among many. It doesn't include most disputes between businesses, a phenomenally expensive growth area. Or real estate, zoning and neighborhood wrangles. Or divorce and custody litigation, which can be the most destructive kind of all.

How did ABA-'n'-ATLA come up with their low-ball $30 billion? They cite the Rand Corp., a respected source. Trouble is, Rand never intended its number to stand for the system's full cost.

To start with, Rand excluded the vast category of cases where money changes hands on a threat to sue without the formal filing of papers. Nor did it try to count the full costs of running liability insurance. Its figures are also from 1985, two years earlier than Tillinghast's.

Ask people at Rand, and they'll tell you they know of nothing wrong with the Tillinghast numbers. James Kakalik, co-author of the Rand study, says the two studies are just trying to measure different things, that's all.

Neither Rand nor Tillinghast takes into account the non-monetary costs that are much of the nightmare for persons caught up in litigation: name-calling and privacy-invasion, acrimony and bullying. Psychiatrist Sara Charles writes that a four-year lawsuit by a former patient "swallowed up my own life completely" before she finally won at trial. "It took over my life," agrees New York University professor Jan Moor-Jankowski of a defamation suit against him that was finally dismissed after seven years. Trial lawyers, who swear that emotional distress is worth a small fortune when their own clients are suing over it, are happy to value it at zero when they inflict it on their opponents.

Even the vice president's $300 billion estimate doesn't include these intangible torments. What it does add in is the tangible but indirect cost of suits. We've all heard of "defensive medicine," where doctors feel they must order extra tests and hospital stays to protect themselves from charges of not having done all they could. A quarter of all births are now by Caesarean section, far more than good medicine would dictate, simply because we've made it so easy to sue doctors for not performing them. An American Medical Association study found that much more is spent indirectly in this way than on direct malpractice litigation, by a factor of three.

No one really knows whether the comparable multiplier for other kinds of lawsuits is higher or lower. So the Veep's figure may be too high -- or, quite possibly, too low. Which is one definition of a reasonable guess.

Will Trial-Lawyer Cash Corrupt Our Courts?

[originally appeared in Investor’s Business Daily, November 14, 1996]

Drug money isn’t the only threat to the honesty of our judiciary, as the recent convictions of three San Diego judges and a prominent trial lawyer make clear.

On Oct. 18, a San Diego jury convicted plaintiff’s attorney Patrick Frega and former California Superior Court judges James Malkus and G. Dennis Adams of racketeering, conspiracy and mail fraud. Former presiding Superior Court judge Michael Greer had already pleaded guilty to bribery based on his dealings with Frega. Appeals are likely after sentencing in January. All three judges are off the bench.

To paraphrase Oscar Wilde: Losing one local judge in a corruption scandal is a misfortune. Losing two looks rather like carelessness. Losing three suggests a pattern.

The pattern here, contrary to some early reports, is not that prosecutors have launched a puritanical crackdown on everyday socializing, the occasional lunch or Christmas sweater. Greer admitted taking $75,000 in Frega gifts. Favors to the other judges mounted far past $10,000 each. That included thousands Frega slipped to a former client so he could put Malkus’s son on his payroll.

Known for a string of million-dollar victories, Frega had been named Trial Attorney of the Year by his peers. He had an intimidating tough-guy style out of Central Casting, complete with samurai sword and nunchukas on his office wall and a fondness for fancy cars, parties, and publicity.

Part of his flamboyance, suggested his lawyer during the five-week trial, took the form of “nutty acts of generosity -- things that you or I might not do but Mr. Frega does.”

The “nutty acts” included shelling out $12,000 to help Judge Greer get a Mercedes, and $6,000 each toward cars for family members of Judges Adams and Malkus.

Frega had jolted the banking world in the pioneering 1986 lender-liability case of Williams v. Security Pacific. Judge Adams handed his client, car dealer Jim Williams, an award that mounted to $7.5 million by the time it was paid in 1990.

And who should turn up before long as a shopper at Williams’ Rancho Jeep-Eagle dealership? Why, Judge Adams. As the judge later explained: “I felt that he would give me a fair deal.”

Did he ever. The dealership’s bookkeeper said Frega kept a special charge account to cover car purchases, repairs and loaners for the three judges’ families. His automotive outlays mounted to what prosecutors said was an eventual $65,000. (Williams eventually cooperated with authorities and pleaded guilty to obstructing justice).

A key to Frega’s success was getting cases sent to his favorite jurists. (Judge Greer was in charge of San Diego case assignment; the county has since moved to a random system.) The judges then twisted arms in conferences to get opponents to settle cases favorably before trial. Frega concocted scripts” for this, and even told the judges to feign anger with him. He also hid his involvement in some cases.

At least one unwitting opponent, Bank of America, gladly accepted Frega’s proposal to dispense with jury uncertainties in favor of a bench trial. Oops: Judge Malkus, once named “Trial Judge of the Year” by the San Diego Trial Lawyers Association, bestowed a tentative $4 million award including $750,000 in punitive damages. (The bank managed to get a new trial after it sniffed out Malkus’s ties to Frega.)

A bailiff testified that Frega was given a special circuitous route along back halls to Malkus chambers so opposing lawyers wouldn’t run into him.

Even San Diego’s most famous lawyer, class-actioneer William Lerach, secretly brought in Frega to handle a case. “Greer presided over five hearings and assigned the lawsuit to Malkus,” reported the San Diego Union-Tribune, whose superb coverage helped break the scandal. “The case was settled for $2 million after settlement conferences before Adams”.

Lerach was not charged with any wrongdoing. But his four hours spent on the stand helped reveal some embarrassing facts: Frega had arranged for Judge Adams’ daughter to get a job at Lerach’s firm, Milberg Weiss Bershad Hynes & Lerach. She was working there when Adams got picked as the settlement judge for Lerach’s case.

Should we consider this a one-of-a-kind scandal? While careful to cover some tracks, the conspirators were careless in other respects. Frega let bystanders see him requesting particular judges and picking up car repair tabs, which meant prosecutors could call a parade of damning eyewitnesses. Had all been more circumspect, the scheme might continue today.

Pat always came on like he had control of the judges, like he was a Miami lawyer or something,” said a former colleague. (Miamians, please note what this comment implies about your back yard.)

Though editorialists complain about “clubby” courthouses, the problem here wasn’t undue peer pressure or politeness. “Pat has always been very un-San Diego,” one attorney told the Los Angeles Times. “This is a town where opposing counsel are friendly. Pat would not shake your hand. He preferred to go for your jugular.”

Politically active in trial-lawyer causes, Frega favored combative denunciations of the banks, businesses and doctors he sued. To get justice, “you have to use commando-type tactics,” he told one reporter. “We go to war for our clients.” Perhaps such rhetoric helped convince him he was entitled to use any means necessary.

Even after his conviction he appeared utterly unrepentant, telling reporters as he left the courtroom: I’m proud of what I’ve done for my clients.”

That remark deserves to be chiseled on a stone monument to remind every court reformer and honest judge how shamelessly abusive parts of our legal system are getting to be.

A Country Named Sue

[Originally appeared in CEO International Strategies, October/November 1992]

There are two points of view about civil litigation, one fantastic and one realistic.

The fantastic view, put out by the press offices of the American Bar Association, the Association of Trial Lawyers of America, and the Consumers' Union, is that litigation is a method by which society rights wrongs and metes out justice, and that unless you've done something wrong, you needn't worry about getting sued.

The realistic view is that of Jerome K. Jerome, the turn-of-the-century British humorist (Three Men in a Boat):

"If a man stopped me in the street, and demanded of me my watch," observed Jerome, "I should refuse to give it to him. If he threatened to take it by force, I feel I should, though not a fighting man, do my best to protect it.

"If, on the other hand, he should assert his intention of trying to obtain it by means of an action in any court of law, I should take it out of my pocket and hand it to him, and think I had got off cheaply."

Plenty of American business people these days feel the same way. They know that just about any employee they fire, for good cause or bad, can (if possessed of a sharp lawyer and a dull conscience) use the leverage of a lawsuit threat to demand a whopping severance packet.

They know that if their company's stock price falls (or rises) too sharply, some supposedly disgruntled shareholder whose name may have been stamped on dozens of similar lawsuits against other companies will take them to court and then step aside while the law firm that really controls the action negotiates its million-dollar fee award.

We sometimes speak as if America's lawsuit crisis were mostly a matter of personal injury suits, affecting those few companies so foolish as to go on making two-seater planes or football helmets or medications for expectant mothers even after our legal system's disapproval of such activity has been made clear.

That's part of it, of course. The direct constant-dollar cost of American tort law, in insurance and related expenses, doubled in the ten years to 1987. Compared with the average advanced democracy with which we compete on world markets, we in America manage to spend from three to five times as much on tort law as a share of our GNP. The gap has been getting wider, too, not narrower.

But the litigation problem is not just a matter of the parents who sue because their 7-year-old spilled hot mashed potatoes on his lap, as in a recent case against the Fresno schools for allegedly negligent lunchroom supervision.

It's also the free-for-all (or, differently put, expensive-for-all) strife within the business world itself, the mounting legal sniping and sharkery between suppliers and purchasers, lenders and borrowers, franchisees and franchisors, commercial tenants and building owners -- not to mention the lawsuits everyone files against their competitors.

Some observers believe that commercial litigation is growing faster than tort litigation. Be that as it may, it's a common complaint that the deal that would get done with a handshake in Japan, and a four-page contract in Europe, lumbers to completion in the United States after the hammering out of a hundred-page contract that tries to anticipate every contingency and stave off every hostile judicial interpretation. The expense is astounding, to say nothing of the delay. And then you can get sued anyway.

It wasn't always this way. Until not long ago, our legal system aimed to keep lawsuits an exception, a last resort. Protecting innocent targets from unfounded or speculative accusations was considered just as important as getting to the bottom of well-founded claims. Those who wanted to sue were expected to offer a plausible account at the start of what their opponent had done wrong, and then stand or fall on that account, as a prosecutor must.

"Discovery" powers to compel adversaries to release information were strictly regulated, lest they turn into fishing expeditions. Canons of legal ethics forbade lawyers to stir up suits for their own profit.

If litigation is relatively uncommon, and the stakes have not spiraled to the terrifying bet-your-company level, then the fear of litigation will not have to drive the way deals are done. Hence the short contract, or the handshake.

It was only fairly recently, as historical trends go, that the climate in our legal culture changed. Not until roughly the 1960s or 1970s did our law schools really begin to buy into the idea that the way for a country to get more justice (as well as more safety, ethics and so forth) was for more and more people to sue over more and more things.

Once that change of ideas had taken place, all the rest was a matter of time. Our legal rules, which for so long had sought to constrain and curb the litigious passion, began enthusiastically stoking it.

Reformers vastly liberalized procedure, making it easier for lawyers to shop around for favorable courts in which to file suits, to get the testimony of a dubious hired expert witness admitted to keep a weak case alive, and so forth. Legislators and courts enacted vague laws and standards providing plenty of new grounds to sue, and new chances to collect triple, punitive and intangible damages for such things as emotional distress and humiliation.

Meanwhile we were deregulating lawyering as an industry, and encouraging a bottom-line approach to legal practice. One legal ethicist accurately captured the new mood when he wrote of an "ethical responsibility to chase ambulances". We forgot to ask how well the policy of laissez-faire would work for society when the service being deregulated is that of subpoenaing people as opposed to, say, installing their telephones.

What can we do about it all at this late date? A great deal, actually. And we don't have to design a new legal system from scratch. The key is to learn first from history and secondly from how things are done in other countries.

Discourage Litigation

The most important lesson is one of spirit and approach. "Discourage litigation," wrote Abraham Lincoln, in a view typical of his day. "Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often the real loser in fees, expenses and waste of time."

It's a lesson business people can take to heart in their own activities. That way they might not boast, as did one Hollywood CEO notorious for hardball lawyering, of having turned litigation into a profit center for their companies.

History holds lessons on a level of society-wide policy as well. We know, for example, that the present pro-litigation rules are not graven in stone, simply because we did without them so recently in our past as a nation. Even the lawyers' contingency fee -- which, for drummers-up of litigation, is like the battery in the Energizer bunny -- did not become legal everywhere in this country until the 1960s. (It is still flatly prohibited by legal-ethics rules in most countries, as giving lawyers too sharp an incentive to stir up suits and to overplay their clients' hand once in court.)

We can also learn from experience abroad. Virtually all the proposals of today's legal reform movement, from the curbing of pre-trial discovery to judicial control of expert testimony, would simply move this country closer to the longstanding legal practice in other industrial democracies.

This is emphatically true of the proposal to introduce a "loser-pays" principle, by requiring litigants whose position is not vindicated to compensate their opponents for at least some of the financial harm done by the litigation.

The principle of shifting legal fees in this way is firmly rooted in Roman as well as Anglo-Saxon law; it is the rule not only in Britain and Canada but also in France, Germany, Switzerland and other countries whose legal systems descend from Roman models.

The "loser-pays" rule has some interesting features that help align litigants' incentives with the wider interests of society. In many countries, for example, a plaintiff who succeeds in proving liability, but then is awarded a much lower sum than he asked for, is considered to have mostly lost his case, because he exaggerated its value and probably frightened the other side into overly costly preparations for trial. And so a sizable fee shift can be deducted from his award -- strong motive to set a reasonable money demand from the start. That is one reason the hundred-thousand-dollar claim for a broken arm is unknown in most countries.

Now, if there is anything that can be said about a legal practice that prevails in nearly every civilized country, that has centuries and indeed millennia of experience behind it, that is considered wholesome and necessary by political leaders abroad ranging from the most progressive to the most conservative, it is that such a practice would not spell the end of the world for Americans who find themselves involved with the courts.

Even so, much of our legal establishment has reacted to the idea with the open-mouthed horror of that fellow on the bridge in the Edvard Munch painting. Even the remote fluke chance of an adverse fee shift, they object, would frighten people with valid cases out of justice. (As if the certainty of not being compensated for money spent in a valid defense does not do exactly that now.) Holding those who sue accountable for the damage they do, we are told, runs counter to the American spirit of suing with impunity. It is -- the ultimate insult -- "radical".

Maybe it is, if one remembers that "radical" means getting to the root of something. If the root of our lawsuit mania is our power to inflict uncompensated costs on each other through legal process, then a loser-pays rule certainly does strike at that root.

Frightening lawyers

One may pass over briefly the irony of seeing a legal establishment that usually resembles an overly trendy clergyman in its undignified eagerness to change and grow with the times, suddenly become the soul of caution and conservatism when the question is one of constraining rather than expanding litigators' powers.

The point to make is that the harder our bar associations and law schools dig in their heels against even modest reform, the surer the prospect that before long they will be confronted with demands for change that truly will be radical.

The public, after all, is well on its way to figuring out that something has gone terribly wrong in our legal system. And once grass-roots activists get mobilized they do not tend to fool around with halfway measures. When they noticed that Congress was getting arrogant, for instance, grass-rootsers did not bother trying to refine the already incomprehensible laws on campaign finance or the budget process. They went for a swing of the well-aimed two-by-four, in the form of term limits.

It's remarkable how often talk-show callers and audience questioners around the country advance a similar proposal. Isn't reform impossible, they ask, so long as our legislatures are dominated by members who are lawyers? And isn't the answer, then, to prohibit lawyers from sitting in legislative bodies?

Any sober policy analyst could offer a number of plausible reasons why such a ban might be a bad idea: lawyers are among the most skillful drafters of legislation; not all lawyers vote in favor of bills that expand opportunities to sue; many lawyers in fact are eloquent critics of today's excesses. But one can't deny the insight behind the question, a radical insight if you will: there's a deep conflict of interest between the two jobs, and what are we going to do about it?

Activists in various states are beginning to prepare initiatives that, if nothing else, should help get the legal establishment's attention. Rob Spooner of Oregonians to Limit Lawyers in the town of Florence has launched a ballot drive aimed at shutting down the state university's law school. His reasoning is that since there are already too many lawyers practicing in the state, why turn out more? He points out that Alaska has gotten along just fine without an in-state law school, as did other states in the relatively recent past.

Come to think of it, Mr. Spooner may be on to something. If America stopped its production of lawyers tomorrow, it might peg along for decades before the number practicing per capita fell to the levels of other leading countries. (The U.S. has 281 lawyers per 100,000 residents; Germany 111; Britain 82; and Japan 11. The A.B.A. has responded with some heat that these numbers are terribly misleading because in Japan non-lawyers prepare tax returns, seemingly unaware that they do so here, too.)

Interestingly, Dean Mark Yudof of the University of Texas Law School, a scholar of repute as well as an administrator, has proposed slashing the number of students admitted to that state's law schools. (Lone Star lawyers now number 50,000, up 55 percent since 1980.) Even the A.B.A., at its last convention, was forced to consider a resolution submitted by Omaha lawyer David Begley calling on law schools to cut their intake by a third. It was voted down, but the sheer presumption of Begley's getting such a measure to the floor is news in itself.

Here's my free advice to the litigation industry: start paying at least lip service to legal reform, instead of rejecting it as haughtily as you've been doing. If the public decides you're never going to clean your own house, it might step in and do the cleaning itself. And then it might do something...radical.

Why Business Loses In Court

[originally appeared in Fortune, May 23, 1988]

Evita Peron, if one believes the stories, used to carry out a rousingly popular form of case-by-case wealth redistribution. On her radio program she would field pathetic calls from destitute widows and Buenos Aires slum dwellers. Then she would call merchants more or less at random and order them to send a refrigerator or stove to the needy household. The voters loved it.

Richard Neely is in a similar line of work. He is a modern judge. "As a state court judge," he reports, "much of my time is devoted to designing elaborate new ways to make business pay for everyone else's bad luck." He is happy to sustain an award of several hundred thousand dollars against the Michelin company even though the one-car crash in question was of "unexplainable" origin. After all, "Michelin will somehow survive (and if they don't, only the French will care), but my disabled constituent won't make it the rest of her life without Michelin's money."

The unsettling thing here is that for all his willingness to plunder a possibly innocent defendant, Neely is no cardboard demagogue. Far from it: He is thoughtful and well informed, in no way hostile to business, and keenly aware that "my microproblem as a judge who wants to sleep at night has begun to create a macroproblem for the entire economy." He explores this clash between his private incentives as a judge and society's well-being in The Product Liability Mess: How Business Can Be Rescued From the Politics of State Courts (Free Press, $24.95). The prolific judge (author of How Courts Govern America and Judicial Jeopardy) is in his best writing form. He lays out his dilemma with clarity and wit, not to mention a candor that begins on page one and never lets up.

Lawsuits alleging injury by products, Neely explains, typically pit a hometown consumer against an out-of-state manufacturer and insurer. The one who benefits from an award is a neighbor, right there in the courtroom; the potential losers are anonymous workers, investors, and managers from all the far corners of the earth, hidden behind the insensate mask of the Michelin Man or some other corporate symbol. Neely says state judges would have trouble getting reelected or reappointed if they tried to be entirely impartial between the home team and the visitors. Instead they develop a sense that it's their duty to help out their local "constituents."

This strong incentive to bestow mammoth awards is not offset by any disincentive. Dishing out home cooking to an auto accident victim in West Virginia courts will not necessarily raise prices at Wheeling tire stores. Reason: If manufacturers charge a higher price in one state to cover that state's known propensity for lawless verdicts, middlemen will simply bring lower-priced stocks in from neighboring states. So the most pro-plaintiff states will get a free ride as big liability verdicts are in effect paid by consumers nationwide. Imagine Evita's success if she could have helped her followers in Argentina by zapping merchants in Uruguay and Brazil. Of course, other states eventually catch on and try to get ahead of the pack with their own increasingly pro-plaintiff laws and pro-plaintiff rulings -- what Neely calls "the race to the bottom."

Even if a state does adopt a self-denying rule refusing liability, its citizens can take advantage of the more generous laws in other states through so-called forum shopping. Suppose just one state -- say New Jersey -- accepts the theory that tobacco companies are liable for tobacco-caused damage to their customers' health. Then tobacco companies can expect to face suits not only from current residents of New Jersey but also from those who work there while living elsewhere, and those who used to live or work there. Add to that people in distant states who perhaps smoked cigarettes made there and many others who can claim some arguable "nexus" with the Garden State -- maybe conductors who smoked regularly on Northeast corridor trains, or Delaware radio fans who heard Winston jingles played on Jersey stations back when. Some smokers will even move into the state in order to sue. The propensity of plaintiffs to head for happier hunting grounds -- what writer Peter Huber has called the have-lawsuit, will-travel syndrome -- is another reason the most pro-plaintiff states tend to set the pace for the whole nation, while pro-defendant states can find their laws a dead letter.

BUT ISN'T TORT REFORM -- the rewriting of often old laws concerning injury and damage -- supposed to be making the law more reasonable? Maybe, but there's a small problem. The folks who get to implement tort reform are the same ones it is meant to constrain: the judges on state courts. As skilled lawyers, they know a hundred ways over, under, and around mere parchment barriers. Have lawmakers limited awards for such noneconomic harm as emotional distress? Make way for creative new claims of economic injury. Does the law exclude liability for obvious hazards? The meaning of that term is, well, less than obvious. And jurists can always throw out tort reforms as contrary to their state constitutions, a tactic by which they disposed of many of the medical malpractice reforms of the 1970s.

The only ones who can stop the race to the bottom, in Neely's view, are the federal courts, which do not answer to an electorate. He believes the federal courts should simply seize control of product liability law. This display of jurisdiction-grabbing might be as audacious as anything the states themselves have done, but Neely does not shrink from the charge of judicial activism.

WOULDN'T A FEDERAL role in tort law mean sending every barroom brawl and fender-bender to an expensive and often distant U.S. courthouse? Not to worry, Neely says. Federal judges wouldn't handle most cases themselves; they would just review what state courts have done, now and then proclaiming a broad new principle or correcting an outrage of the Pennzoil variety, much as they oversee the workings of state criminal law under the Warren Court decisions of the 1960s (an analogy in which many conservatives will not take comfort). Any number of issues could serve as entering wedges for the federal supervision Neely seeks, including a case this term in which the Supreme Court is expected to decide whether a state's punitive damage awards can ever be so outrageous as to be unconstitutional.

Although Neely eschews high theory in favor of his own brand of pragmatism, many academics share his interest in correcting the system's externalities -- the misplaced incentives that encourage states to try to live at one another's expense. But few seem prepared to go as far as he toward wholesale federalization. Some are looking for the least restrictive ways of restoring proper incentives to states. Edmund Kitch of the University of Virginia suggests a general law permitting manufacturers to opt out of notorious liability states: By stamping "not for sale or use in Texas" on their products, they could escape that state's law. Michael McConnell of the University of Chicago wants to reduce the scope of forum shopping by returning to so-called choice-of-law rules, such as "the law of the place of sale governs." They have generally been part of common law and have been worn away by court rulings.

It is worth paying attention when a leading state court jurist asserts that he and his colleagues are really not up to the task of exercising the vast redistributive powers they possess. After this stop-me-before-I-rule cry for help, not many readers will remain confident that the current system can deliver the right legal answers on product liability.

One might wish, however, that the author did not share quite so many of the assumptions of the system whose workings he explains. For all that he (like most people) is troubled by the obvious excesses of the liability revolution, his critique is narrow: Just call off the states' race to the bottom, and the runners will take care of themselves. Sharing as he does the widespread view that judges are no more than politicians in robes, he merely wishes to widen, from the state to the nation, the circle of constituents whose interests they consult in making decisions. That is not really the same thing as doing impartial justice.