Abstract

http://ssrn.com/abstract=532682
 


 



Can Tort Reform and Federalism Coexist?


Michael I. Krauss


George Mason University School of Law

Robert A. Levy


Cato Institute

April 14, 2004

George Mason Law & Economics Research Paper No. 04-14

Abstract:     
Critics of federal tort reform have usually come from the political left and its allies among the trial lawyers, who favor a state-based system that can be exploited to redistribute income from deep-pocketed corporations to deserving individuals. We offer a totally different criticism - constitutional in origin - that embraces the need for reform but reaffirms this principle: The existence of a problem, however serious, does not justify federal remedies outside the scope of Congress's enumerated powers.

We begin with the Commerce Clause but find that interstate trade does not, by itself, justify federalizing tort law. On the basis of examples involving fast food, guns, and medical malpractice, we argue that substantive federal reforms are neither necessary nor proper. If states persist in imposing unjust rules on out-of-state defendants, federal procedural remedies are available.

Next, we consider the Due Process Clause of the Fourteenth Amendment and dissect the Supreme Court's recent State Farm decision covering punitive damages. We also discuss the controversies over judicial activism and substantive due process. Despite the limitations of substantive due process, we conclude that the Court was correct to rein in punitive awards.

Most important, we recommend reforms that are compatible with the tenets of federalism. Some reforms can be implemented at the state level - including solutions to excessive punitive awards, curbs on joint and several liability, payment of attorneys' fees when government is the losing party in a civil lawsuit, the prohibition of contingency fee contracts between government and private lawyers, and restraints on litigation by government to recover expenditures made on behalf of private parties.

At the federal level, we endorse two procedural reforms. The first involves state long-arm jurisdiction, which determines whether an out-of-state entity can be sued in a local court. Currently, out-of-state businesses find it exceedingly difficult to avoid oppressive state tort laws. A second federal reform concerns choice-of-law rules that determine which state's laws control a multistate suit. A federal choice-of-law rule would prevent states from exporting discriminatory tort regimes.

Taken together, state substantive reforms and federal procedural reforms can curtail abuses while respecting time-honored notions of dual-sovereignty federalism.

Number of Pages in PDF File: 32

Keywords: Tort law, product liability

JEL Classification: K13

working papers series


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Date posted: April 20, 2004  

Suggested Citation

Krauss, Michael I. and Levy, Robert A., Can Tort Reform and Federalism Coexist? (April 14, 2004). George Mason Law & Economics Research Paper No. 04-14. Available at SSRN: http://ssrn.com/abstract=532682 or http://dx.doi.org/10.2139/ssrn.532682

Contact Information

Michael I. Krauss (Contact Author)
George Mason University School of Law ( email )
3301 Fairfax Drive
Arlington, VA 22201
United States
703-993-8024 (Phone)
703-993-8124 (Fax)
Robert A. Levy
Cato Institute ( email )
1000 Massachusetts Avenue, N.W.
Washington, DC 20001-5403
United States
202-789-5253 (Phone)
202-842-3490 (Fax)
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