Sunday, July 21, 2024

Report: Excessive litigation costs Louisiana economy $5.17B per year

by BIZ Magazine

By Victor Skinner | The Center Square contributor

(The Center Square) — Louisiana’s civil justice system is costing the state’s economy billions and tens of thousands of jobs, particularly in major metropolitan areas, according to new reports.

Citizens Against Lawsuit Abuse, a nonpartisan group focused on tort reform, recently released a series of city-specific economic impact reports for 2023 that provide a snapshot of the cost of frivolous lawsuits in Baton Rouge and New Orleans.

The reports follow an annual Judicial Hellholes report from the American Tort Reform Foundation in December that ranked Louisiana as the seventh worst state in the nation for “places where judges in civil cases systematically apply laws and court procedures in an unfair and unbalanced manner.”

The Citizens Against Lawsuit Abuse reports, complied by The Perryman Group, shows the gross product lost to excessive tort litigation in Louisiana is about $5.17 billion each year, with $3.54 billion in direct costs.

The losses equate to $268.6 million in lost state revenues, and $224.2 million in local revenues lost across the state. The excessive tort costs compute to a “tort tax” of $1,263 per Louisianan, and translate to 48,696 jobs lost, according to the reports.

“A flawed civil justice system which generates exorbitant levels of damages or numbers of awards and which is unpredictable in its outcomes may result in negative impacts through the misallocation of society’s scarce economic and human resources,” the reports read. “Tort reform can lead to substantial economic benefits, and states which have implemented reforms have seen improved judicial efficiency and measurable advancement in economic performance.”

Much of the tort costs in Louisiana stem from the New Orleans-Metairie metropolitan area, which is defined as Jefferson, Orleans, Plaquemines, St. Bernard, St. Charles, St. James, St. John the Baptist and St. Tammany parishes.

There, excessive tort litigation comes with a direct cost of $2.647 billion a year, a hit to gross product of $3.866 billion a year, and the loss of $2.459 in personal income. Citizens Against Lawsuit Abuse estimate the region losses 36,410 jobs to excessive tort litigation, which costs residents about $3,039 per person.

In the Baton Rouge metropolitan area, direct costs total $742.4 million per year, lost gross product totals $1.084 billion a year, and lost personal income is $689.8 million annually, according to the report.

The “tort tax” for the region is $1,263 per person, while jobs lost is pegged at 10,211. The report defines the Baton Rouge region as Ascension, East Baton Rouge, East Feliciana, Iberville, Livingston, Pointe Coupee, St. Helena, West Baton Rouge and West Feliciana parishes.

“All major industry groups are negatively affected, with retail trade, business services, health services, and other services industries typically experiencing the greatest losses,” the report read.

The Judicial Hellholes report from December points to a variety of legal issues driving the dynamic in Louisiana, from coastal litigation against more than 200 energy companies, to car insurance scams, to lawsuits following hurricanes, to third-party litigation financing.

“Our legal climate is a problem that drives away jobs and opportunity,” Sarah Harbison, general counsel for the Pelican Institute, recently told The Center Square.

The Judicial Hellholes report, also produced with the help of analysts at The Perryman Group, notes that Democratic Gov. John Bel Edwards, “an attorney with deep ties to the plaintiffs’ bar, was a roadblock for reforms, vetoing several pieces of legislation during his governorship” aimed at addressing the problems.

Harbison is optimistic Republican Governor-elect Jeff Landry will now provide the will to change the state’s direction after years of inaction.

“The solutions are obvious,” she said. “I’m hopeful a reform-minded Legislature and business-focused governor will be able to … move us down or off the (Judicial Hellholes) list in the next few years.”

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