• The civil justice system and holding corporate wrongdoers accountable Wednesday, June 23, 2010

    Three recent opinion pieces related to the civil justice system caught our eye…

    Former New York attorney general and governor Eliot Spitzer wrote on Salon about the dual roles played by the tort system and government regulation to help keep consumers safe.

    The law of incentives is what links the Wall Street cataclysm and BP‘s ongoing eco-disaster:  In each case, we socialized risk and privatized gain, creating an asymmetry that created an incentive for private actors to accept and create too much risk in their business model, believing that at the end of the day, somebody else would bear the burden of that risk, should it metastasize into a disaster….

    A system of litigation permitting parties to recover damages linked to dangerous behavior is designed to force actors to take rational precautionary steps.  This system of tort litigation, premised on the obligation and the capacity to compensate injured parties fully, is actually a market mechanism that forces actors to calculate properly likely risks and likely returns.  This is often mediated through the obligation to acquire insurance.  If the risks are high, insurance will be expensive, and companies will take as many precautions as they can to minimize the possibility of a huge loss in court….

    A regime of full tort damages and recoveries is one way to balance safety and exploration, or investment and risk, or whatever economic activity we are discussing….

    At a political level, big business over the past 30 years superficially won by limiting liability and neutering the effectiveness of regulatory supervision.  And the public has ended up absorbing the enormous costs of two disasters—one financial, one ecological.  We will reclaim the proper balance and protection for the public only when we remedy these errors.  Eliminate false caps on liability that distort incentives and behavior, or re-establish the effectiveness of the oversight agencies…

    At a time when governments often don’t have the resources, or leaders with the will, to adequately monitor business activities, the civil justice system then becomes consumers’ last line of defense against dangerous behavior.

    Iowa Association for Justice executive director Brad Lint makes a similar case in an op-ed commentary that was published in several Iowa newspapers.  Lint lists a number of industries that have been in the news for transgressions–banks, insurance, automakers, mining and Big Oil–that “exercise outsized influence over the government regulators that are supposed to make sure they follow the rules..”

    Federal and state regulatory agencies are tasked with keeping corporations honest–and keeping us safe–and they were once the envy of the world.  But we’ve learned the hard way that these agencies do not always work effectively to protect our health, safety and financial wellbeing.  Some of them have become lap dogs instead of watchdogs, and they need to find their bark (and bite) again….

    Limiting the legal and financial responsibility of corporate wrongdoers is a bad idea in the best of times.  But in times like these–when corporate malfeasance is waxing and government oversight is waning–it is almost unthinkable.  The American civil justice system will make certain that justice is served, and that even the most powerful corporate entities in the world are held accountable for their actions…

    Lint points to Exxon as an example of how the civil justice system promotes good corporate behavior and consumer safety.

    When the Exxon-Valdez tanker spill despoiled Alaska seas and shores 21 years ago, Exxon was called to account by our civil justice system.  This compelled the company to clean up its act and transform its operations.  (Exxon is now the acknowledged industry leader in accident prevention and mitigation.)

    Then there was Minnesota Senator Al Franken, who addressed the American Constitution Society‘s national convention last week in Washington, D.C.  Franken used the occasion to take the U.S. Supreme Court to task for what he believes is an excessively pro-business stance.

    I don’t think you need to be a lawyer to recognize that the Roberts Court has, consistently and intentionally, protected and promoted the interests of the powerful over those of individual Americans.

    And you certainly don’t need to be a lawyer to understand what that means for the working people who are losing their rights, one 5-4 decision at a time….

    Justice Souter once said: “The first lesson, simple as it is, is that whatever court we’re in, whatever we are doing, at the end of our task some human being is going to be affected.”

    Conservatives would like us to forget this lesson.

    They’ve distorted our constitutional discourse to make it sound like the Court’s rulings don’t matter to ordinary people, but only to the undeserving riff-raff at the margins of society….

    By defining the terms of constitutional debate such that it doesn’t involve the lives of ordinary people, conservatives have disconnected Americans from their legal system.  And that leaves room for lots of shenanigans….

    If you have a credit card, if you watch TV, if you file insurance claims, if you work–-in other words, if you participate in American daily life at all–-then you interact with corporations that are more powerful than you are.

    The degree to which those corporations’ rights are protected over yours, well, that’s extremely relevant to your life.

    And in case after case after case, the Roberts Court has put not just a thumb, but a fist, on the scale in favor of those corporations….

    In our narrative, the legal system doesn’t exist to help the powerful grow more powerful–it exists to guarantee that every American is entitled to justice.

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