NCPA - National Center for Policy Analysis

Tort Awards Biased Against Out-Of-State Defendants

January 24, 2001

Observers have noted that tort awards in states where judges are popularly elected are significantly higher against out-of-state corporations. They liken this to "tax exporting," where state residents will vote for politicians who provide more services to residents without raising taxes by shifting the burden onto out-of-state residents.

Elected judges, like other politicians, have an incentive to shift costs from in-state plaintiffs to out-of-state defendants, because only in-state residents are potential voters. Also, trial lawyers prefer larger awards, because they receive larger fees. Consequently, trial lawyers are the single largest campaign contributors to elected judges.

Researchers who tested this reasoning using data on more than 7,000 personal injury lawsuits found little difference between awards in the 13 states that elect judges on nonpartisan ballots compared to the 27 states where judges are appointed. However, they found substantial differences between these states and the 10 states that elect judges on a partisan ballot.

  • In states with partisan judicial elections, the average award against an out-of-state corporation was more than twice as large as in states that use nonpartisan elections ($652,720 compared to $384,540).
  • But when the defendant was located in-state, awards were only slightly higher in states with partisan judicial elections.
  • On average, out-of-state corporations pay $376,400 more than in-state corporations in partisan states but only $176,583 more in non-partisan states.

While partisan and nonpartisan states have about the same percentage of cases in the $100,000 to $499,000 range, average awards are higher in partisan states because more cases in those states lead to exceptionally large awards. Thus moving a case from a nonpartisan to a partisan state raises the expected award by some 23 percent or about $233,000.

Limiting awards to scientifically proven compensatory damages could reduce the impact electoral systems might have on determining awards, say researchers.

Source: Eric Helland (Claremont McKenna College) and Alexander Tabarrok (Independent Institute), "Exporting Tort Awards," Regulation, Volume 23, Number 2, Cato Institute, 1000 Massachusetts Avenue, N.W., Washington D.C. 20001, (202) 842-0200.

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