I like the British system, which is: loser pays. If you lose the lawsuit, you pay for all legal fees including the costs incurred by your adversary. This would give the large companies more incentive to fight frivolous lawsuits rather than settle out of court. In addition, it would make many people take a second look before filing a frivolous lawsuit. With the "no fee if we don't win" system that we have now, lawyers seek out people and try to get them to sue.
You file a suit, you lose, you pay ALL costs. (then follow that up by a Federal law prohibiting law school graduates from holding public office).
I think you're misreading that, Tom. I believe the operative phrase is "win before juries". Lawyers like to settle (Yay! We both won!).
RAnother factoid.
I was involved as defendant in a law suit where a kid had the end of one finger cut off because he ran into a fire extinguisher cabinet and caught his finger in it. There were 5 defendants, and it was settled on the court house steps. The kid got about $25,000, less probably 1/3 for his lawyers. Each defendant ended up paying about $10,000 in settlement and legal costs.
So, $50,000 had to change hands, so the injured party could get $17,000. Not very efficient, but that's what happens when you can't agree on a settlement.
Old Guy
Yes, my thoughts are that your "knowledgeable" people are in error.
Anticipated legal expense is usually expressed in a "Company's" overhead expense as a liability reserve. That reserve changes based on actual occurance and payout.
I will not quote figures, but, as an ex maker of an inherently dangerous product, I would say your figure is far, far, far, overstated.
A company's liability in an accident is based on several factors. 1. Failure to manufacture the product to established safety standards. 2. failure of the product through some flaw in the manufacturing process.
Stupidity that leads to improper use of the product does not constitute a liability for the manufacture, although many settle cases of that nature in order to stay out of court.
But maybe the ladder business is different.
Frank
You left out
The expense of this until some legislative relief was a major factor (not the only one, but certainly a major contributor) to a period of time not so long ago wherein there were _no_ manufacturers of single-engine prop aircraft in the US. Simply to costly/risky as opposed to the potential market. Happily, that has turned around.
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A few years back there was a segment of 60 Minutes or Dateline about a ladder company going out of business because of lawsuits. I don't recall the details, but the ladders were not defective according to your description, but were modified, damaged, and mis-used, but the lawsuits went on. I can easily believe the 30% figure from what I saw.
I have read that or a similar "fact" many times, but that does not make it true, But I'll bet it's some significant money.
According to Peter Huber in "Galileo's Revenge" all this rot/rort started with Yale law professor Guido Calabresi and his book "The Costs of Accidents" Maybe a sticker on the ladder:- "If you have a problem with the cost of this ladder, ring this lawyer asshole on xxx xxxx xxxx"
Or, change to the British method of legal billing, the loser pays all. That tends to make you pretty sure you have a good case.
Wal-Mart has a policy of never settling a "slip-and-fall" lawsuit. It might cost them $50,000 to defend a claim that could be settled for $5,000, but the lawyers know they can't make a dime on a meritless claim.
Wonder if the Yale club has a similar policy. Bit ironic that one of the prime proponents of curbing lawsuit abuse is suing the Yale club because he tripped trying to jump up on the stage....
All he had to do was ask for help.
cf. Bork v. Yale Club
scott
Easy enough to prove or disprove. Do you know of a publicly traded company that makes ladders? Look up their annual report and see what the reserve is as a percent of cost of goods sold.
I just went on the Werner bancruptcy site and quickly waded through a bunch of the court documents. In the overview, no mention was made of excessive litigation being a cause of bancruptcy. The loss of a Home Depot contract, the unanticipated increase in the price of aluminum, etc. but no mention of litigation, pending or otherwise. Werner is a private holding company, (recently sold as part of the restructuring required from chapter 11, and remaining private), so they do not have to report their financials publicly, but maybe there are others.
I still disbelieve the 30% figure, but not interested enough to go on with this.
Frank
Just for funzies, checked out Bauer Ladder, Wooster, Ohio.
They seem to be doing quite nicely along with their neighbor, The Wooster Brush Company.
Both are still under local ownership as far as I know, and have been around forever or at least it seems that way.
OTOH, RubberMaid, a Wooster institution, got greedy, got in trouble, got sucked up by Newell, who then used an excuse to close them down, go to China, and also building a plant out in the SoCal desert.
BTW, Wayne County, of which Wooster is the county seat, is a VERY rich agricultural community.
Maybe those "Wayne Country Farmers" know something about how to run a business.
Lew
Some number of years back, frontline did a piece on wal-mart. They claimed RubberMaid had a price increase due to increases in raw materials. Wal-mart refused to pay the increased prices and by this time Wal-mart was big enough that by not selling to them, RubberMaid was unable to sell enough to stay in business without moving manufacturing overseas to meet the price Wal-mart was willing to pay. Don't know how much truth there is in that.
ron
I think that's right. I know I only use Wooster and Purdy brushes. Wince at the cash register, but they make finishing a joy (if that's possible); clean them well and they will last indefintely.
You can borrow my Unisaw, but don't ask for my brushes. :~)
Frank
Well, it's the story but not the whole story... :)
RubberMaid had done a number on themselves by over-committing to the Wal_Mart contract and backed themselves into a corner from which they couldn't recover. There was pressure from W-M but RM was a too willing accomplice out of what initially looked like easy pickings...
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Interesting story how The Wooster Brush was founded.
Shortly after the end of the Civil War, the brothers bought a couple of trunks at an unclaimed freight sale.
When they opened them up, they were full of Chinese Hog Bristles.
What to do. Make paint brushes. What else.
Lew
As I said, they got greedy.
I once worked for a company that went to the market only thru manufacturers representatives.
The US Gov't, during WWII, wanted to buy direct.
The old man said thank you, but he ONLY did business thru his reps.
This is the same guy that told one of the BIG 3, that he couldn't accept an order that would have doubled the size of the company.
The old man knew how to keep his company in working order.
Lew
One of the wisest, and smartest, businessmen I've ever known owned a small (relatively) chair making plant. He took over in '59, and retired about seven years ago. In the process, he tripled the size of the employee base (40 years or so), while getting production up more, and not once had a layoff in that period of time. Family owned company. 500 chairs a day was it, quality was superb (he aimed for 0% quality control and came close to achieving it), prices decent to high. Profits were very reasonable for him and his family. When he finally retired, well into his 70s, he had to sell out as no one in his family wanted to company. A big recliner maker bought it, and now all the employees wonder from day to day when the lay-offs will hit. They haven't yet, but it has been very, very close several times.
Probably 85% of the furniture business on which this area used to depend is gone, along with textile manufacturing (about 99.4% gone). Large companies outsource.
My point being, John always refused to deal with Sears or WalMart. Their requirements were too restrictive, prices way too low, and, IMS, he once told me that they wanted to get into your books and make sure your expense allocation for a particular item followed THEIR rules. He refused to play.
Wrong.... I have an in-law that they settled with for medical expenses and lost time
And the result? Wal-Mart - and their customers - got a product of similar quality at a lower price. Rubbermaid should get a prize.
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