• WisBusiness

Tuesday, December 20, 2011

Lawsuit reforms help Wisconsin's business climate


By Bill G. Smith


By James A. Buchen
Gov. Scott Walker has followed through with his promise to enhance Wisconsin's business climate through the adoption of common sense lawsuit reforms. Early in his tenure, Governor Walker signed comprehensive lawsuit reforms and most recently he signed three more needed legal reforms.

Coupled with tax relief, and regulatory reforms passed by the Legislature and signed into law, Governor Walker is ensuring that Wisconsin is open for business.

Lawsuit reforms protect small, medium, and large businesses from meritless lawsuits and ultimately reduce costs. For both employers and employees, this is welcomed news.

That is because our current tort system is too expensive. According to the actuarial firm Towers Watson, the cost of the U.S. lawsuit system in 2009 was $248.1 billion, which is 1.74% of the U.S. gross national product, or $808 per person.

Our state's small businesses, the backbone of our economy, are often disproportionately affected by excessive lawsuits.

One can argue that regulations, taxes, and insurance are the price of owning and operating a business, yet just one baseless lawsuit – or even the threat of a lawsuit – can be the unforeseen event that bankrupts a small business, putting people out of work, and personal assets in jeopardy.

Excessive, unpredictable lawsuits, whether decided in the courtroom or outside the courtroom regardless of guilt or responsibility, almost certainly means the loss of jobs, the loss of innovation, and the stifling of economic growth.

According to an Institute for Legal Reform study titled, Tort Liability Costs for Small Business, 62% of business owners and managers polled said they make decisions to avoid lawsuits. Sixty-one percent said these decisions make their products and services more expensive. More than a third surveyed had been sued, and 73% of those sued said that their business suffered due to the time-consuming nature of litigation.

Personal injury lawyers say lawsuit reforms are anti-consumer. That's not true. Rather, the recently enacted reforms place Wisconsin back into the mainstream compared to other states.

The comprehensive lawsuit reforms signed early this year addressed two 2005 Wisconsin Supreme Court decisions that harmed Wisconsin's business climate. One decision established a "guilty-until-proven-innocent" standard for businesses in certain cases, while the other made it easier for plaintiffs and their attorneys to win jackpots by lowering the standard for punitive damages. The new law overturned these poorly decided opinions.

Another reform put an end to unreliable expert testimony and evidence by requiring Wisconsin courts to adopt standards requiring testimony and evidence be based on sufficient facts and data. Known as the Daubert standards – named after the U.S. Supreme Court decision creating the protections – Wisconsin joined over 30 states plus the federal court system in adopting these new evidence requirements. The reform gets junk science out of Wisconsin court rooms.

In the most recent special session, Gov. Walker signed a bill into law which protects landowners – businesses, homeowners, renters, and non-profit organizations – from expanded liability for injuries to trespassers.

Another new law brings Wisconsin in line with other states relating to the interest rate charged against defendants for judgments paid to plaintiffs. Prior to the new law, defendants were forced to pay a plaintiff an exorbitant 12 percent interest from the time the case was filed to the time the final judgment was paid. The new law makes it a variable rate, which is based on the existing federal prime rate, plus one percent

In addition, Gov. Walker signed into law a number of criteria courts must consider when determining attorney fees awarded in certain types of cases. Prior to the new law, these "fee-shifting" cases – where a plaintiff attorney can obtain court mandated attorney fees from the defendant – resulted in a cottage industry for some plaintiff attorneys who have walked away with hundreds of thousands of dollars in attorney fees for relatively small claims.

Wisconsin's newly enacted legal reforms will go a long way in protecting employers for unjustified legal costs. This in turn allows employers to invest in their business, boost current employee benefits, and expand their businesses, and most importantly, hire new employees.

In the end, it's about jobs. And the new legal reforms are helping to pave the way to a better business climate in our state.

-- Smith is Wisconsin director of the National Federation of Independent Business and Buchen is senior vice president -- government relations for Wisconsin Manufacturers and Commerce. Both are executive officers of the Wisconsin Civil Justice Council.

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