NCPA - National Center for Policy Analysis


April 28, 2010

As policymakers consider ways to put Americans back to work, they should keep this simple formula in mind: More lawsuits equal less job growth, says Tom Donohue, President and CEO of the U.S. Chamber of Commerce. 

The business community has long warned that increased litigation can suck the life out of a state's economy.  For businesses both large and small, one frivolous lawsuit can mean the difference between job creation and stagnation, according to Donohue. 

To document America's legal climate on a state-by-state basis, the U.S. Chamber's Institute for Legal Reform (ILR) commissioned the nonpartisan research firm Harris Interactive to ask senior litigators and general counsels at some of America's largest employers to offer their impressions of state legal climates.  Here are the results: 

  • Two-thirds of those surveyed said that the litigation environment in a state is likely to impact corporate decisions such as where to locate a company or do business.
  • However, it is not just larger companies that are impacted by a hostile legal climate -- small businesses also suffer.
  • In fact, another study found that small businesses shoulder 69 percent of all business lawsuit costs and pay $98 billion in tort liability costs per year. 

It should come as no surprise that many of the states at the bottom of the survey -- including Illinois, California and Louisiana -- have high unemployment rates, with some in excess of the national average.  What should be even more discouraging for residents of these states is the fact that the problem is only getting worse, says Donohue. 

To stem this tide, state officials need to step up and take action.  There's no time to waste -- we must create 20 million new jobs by the end of this decade to put unemployed Americans back to work and keep up with a growing population.  Once states can halt the expansion of lawsuits, businesses will have the freedom to focus on growing jobs, instead of fighting in court, says Donohue. 

Source: Tom Donohue, "America Needs More Jobs, Not More Lawsuits," U.S. Chamber of Commerce, April 20, 2010. 

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