California’s legal system is costly, inefficient, and hinders job growth. Indeed, the United States Chamber of Commerce ranks California as having one of the “worst” legal liability systems in the United States (44th out of 50). (Source: 2008 US Chamber of Commerce State Liability Ranking Study “2008 Chamber Study”, page 15)

The Chamber further notes that businesses evaluate legal liability systems when they make major business decisions, such as locating in a particular state (Id. at p. 9). Every frivolous court case strains our legal system and imposes unnecessary costs on small, medium-sized and large businesses. We can reduce these unnecessary court cases very simply: if someone starts a court case and loses, that loser should pay the winner’s court expenses. We should apply this rule to cases between parties that have contracts and consequently encourage businesses to settle their disputes out of court. In applying it to tort lawsuits, we should be mindful that access to justice not be precluded by the prospect of paying huge attorneys’ fees run up by the other side. So, some portion of the other side’s legal costs should shift to the losing party, with the judge able to decide what is appropriate in each case.

California’s present legal system is like a lottery ticket, but with almost no price to enter. Thus, many frivolous lawsuits are filed. Why not? There’s no downside. The “loser-pays” rule will immediately reduce unnecessary frivolous litigation and promote a more efficient legal system.

This idea is not theoretical. Our neighboring state Arizona has implemented this very concept (Arizona Revised Statutes §12-341.01). Not surprisingly, the US Chamber of Commerce ranks Arizona as having one of the “best” legal liability systems in the country (14th out of 50) (Id. at 15). States that have enacted litigation reform show improved economic and job performance. (“The Link Between Liability Reforms and Productivity: Some Empirical Evidence/ Comments,” Brookings Papers on Economic Activity (1998) (Kessler, Shepherd, Klevorick and Campbell).

The above are statements on several public policy issues drafted by Tom Campbell, former US Congressman, former California State Senator, former Director of Finance for California, and currently Interim Chairman of the Common Sense Party. They are meant to initiate consideration of several important issues; they are not the official views of the Common Sense Party. Please feel free to submit your own thoughts on these issues on the Open Policy Discussion Page.