The U.S. judicial system, already beset by overcrowded dockets and frivolous litigation, faces a new peril that demands more public attention.
That emerging menace comes from third-party financiers working alongside opportunistic attorneys who file mass tort lawsuits against private corporations.
It’s essential to draw more attention to this emerging problem and consider reasonable measures to protect our judicial system against potential threats.
Here’s the background. Increasingly, many legal claims, often generated through misleading mass media advertisements, are consolidated into a “multi-district litigation” before a single judge for pretrial proceedings before each case is returned to the original jurisdiction. The third-party funders and participating lawyers behind these lawsuits know that their odds of obtaining a lucrative settlement — even if the underlying facts and allegations are dubious — are improved by the sheer size of the aggregated client base.
The fundamental problem with multi-district litigations is that they tend to attract weak or frivolous claims, clogging the court system with lawsuits that might otherwise have never been filed. The dubious promises of lucrative awards made by the advertisements can draw in hopeful claimants in what has been called a “Field of Dreams” legal strategy: If you build it, they will come. Some estimates find that multi-district litigations now comprise more than half of all pending civil cases on the federal docket.
Wall Street financiers support this emerging mass tort litigation trend, who provide the seed money for cases in return for an agreed-upon share of any awards or settlements. According to the General Accounting Office, such funding more than doubled from 2017 to 2020. Separate research from Switzerland found that in 2020, more than half of all the $17 billion invested globally in litigation financing was deployed in the United States.
While this form of mass tort litigation funding isn’t widely covered in the news, it should be. It constitutes a growing and potentially serious threat to American businesses, U.S. competitiveness and our economy.
Aggravating matters, many companies targeted by mass tort litigators occupy industries such as pharmaceuticals, medical devices, the chemicals that support American farm production, and other sectors that make products essential to the health and well-being of consumers. Even the potential threat of litigation forces these companies to rethink investments in innovative new products because they might later be vilified in legal advertising and court. That stifles hiring and expansion of existing businesses or investments in new ones.
More broadly, the billion-dollar costs to our economy have reached such heights that Americans must increasingly pick up the tab. Specifically, data show that those costs, if divided by the number of U.S. households, amount to a loss of $3,621 annually for every family in America. Families in some states, where courts see disproportionately high tort claims, pay even more. In New York, Florida and New Jersey, the per-household cost is more than $5,000 yearly.
Common-sense reforms to largely unregulated third-party funding of mass tort litigation could help minimize that damage. Most important, requiring the disclosure of funding agreements, which are often negotiated in secret, would make it more difficult for financial backers to privately influence the substantive outcomes of cases. That reform would also prevent potentially adversarial foreign nations from using the U.S. court system to harm their American competitors or gain access to confidential industrial or military information.
This illustrates why the growing threat of mass tort litigation deserves a much more prominent place among news headlines. By making the public more aware of this problem, we might find common-sense ways to address it before its problems become more acute.
