Former D.C. administrative law judge Roy Pearson’s infamous $54 million lawsuit against his neighborhood dry cleaners over a missing pair of pants a few years back served as fodder for late-night comedians and drew incredulous national and international news coverage.
More recently, Maryland attorney Jimmy Bell sued a Landover nail salon because it charges generally bigger-footed men more than it does generally smaller-footed women for pedicures.
Costly attacks on small businesses, which operate within tight margins and provide area jobs, are all too common.
According to the National Federation of Independent Business, a small-business trade group, the constant threat of lawsuits consistently ranks among its members’ biggest concerns and is a significant influence on its regular index of small-business confidence. When that confidence is low, hiring slows. So it’s no coincidence that, in many plaintiff-friendly jurisdictions, rates of economic growth and job creation tend to lag behind national averages.
Regionally, June unemployment figures surged higher in the District, from 9.8 percent in May to 10.4 percent; increased from 6.8 to 7.0 percent in Maryland; and remained steady in Virginia at 6.0 percent after recently ticking downward. Many things influence state-by-state unemployment rates, of course, but civil liability is always among the factors employers, both large and small, note when deciding whether and where to expand operations.
Virginia’s liability climate is routinely ranked by business leaders among the nation’s best, and reflective of that, its economic prospects remain strong relative to its Mid-Atlantic neighbors and competitors. Policymakers in the District and Maryland, however, could and should take sensible steps to reduce liability and thereby boost their own competitive prospects.
The District could help protect its small businesses by reforming the Consumer Protection and Procedures Act, the well-intentioned but easily exploited law Roy Pearson used to attack his dry cleaners. Plaintiffs should be required to prove they actually relied on a supposedly fraudulent or deceptive advertisement or representation. (Remember, Pearson claimed that a basic “Satisfaction Guaranteed” sign somehow constituted a willful fraud punishable by a mind-boggling damages award.) Additionally, plaintiffs’ claims for damages should be limited to their out-of-pocket costs, except in cases when it can be proved that a defendant’s actions were knowingly and willfully fraudulent or deceptive.
A reasonable limit on noneconomic damages would also help make health care in the District more affordable and accessible.
In Maryland, where a significant percentage of the economy is based on world-class health care delivery and medical research (Johns Hopkins University is the state’s largest private-sector employer), additional medical liability reforms also would be quite helpful. Such reforms could include structured settlements that allow defendants to pay off winning plaintiffs over time, and more exacting standards and accountability for out-of-state expert witnesses.
More broadly, Maryland lawmakers’ generally firm resistance to liability-expanding legislation pushed by the plaintiffs’ bar has been laudable and should continue.
The D.C.-Maryland-Virginia region has done better than most in rebounding from recession. But it could do better, and reasonable tort reforms can help.
Tiger Joyce is president of the American Tort Reform Association in Washington.