Richard Davis's last line on lists, referring to ranking state legal climates, deserves a closer look since a state's tort environment is generally considered part of its "business friendliness" index. In this area, Washington faces some challenges and has a Supreme Court and Legislature poised to make things worse -- not better.
This spring, the US Chamber's Institute for Legal Reform (ILR) released the results of its Harris Interactive Poll of 1,599 senior attorneys across the country on the fairness of the states' litigation systems toward business. In determining a state's "lawsuit climate" the poll asked about twelve different factors -- ranging from handling of class action suits to punitive damages to reasonable limits on non-economic damages -- that, taken as a whole, give a picture of a state's legal system. Washington ranked 25th this year, up from 28th last year, but down from 15th in 2005. Similar rankings have Washington at 19th or 14th.
According to the ILR, perception of how Washington handles class action lawsuits, and timeliness of summary judgments are two indices that improved our score. Another factor that cannot be understated is that Washington tort law does not generally allow punitive damages -- the kinds of damages that turn well-running court systems into "judicial hellholes." But each of these factors buoying Washington's legal climate are likely to deteriorate given recent legislative and judicial events.
Take class actions. Last week, as we criticized at the time, the Washington Supreme Court usurped the legislative role of making public policy by declaring the consumer's right to a class action is a paramount policy goal of our legal system and is a rationale to strike down even a consumer friendly agreement to submit disputes to alternative dispute resolution. This plaintiff-friendly ruling frustrates what our friend of the court brief summarized as the sound policy of channeling commercial disputes to private resolution away from the cost, delay, hassle, and uncertainty of litigation. It only incentivizes the mass consolidation of so-called consumer protection lawsuits against corporations.
Take summary judgments -- a judge's resolution before trial of all or part of a case because the material facts are not in dispute or are not sufficient given the law to merit consideration by a jury. This procedure speeds up and narrows the process of litigation. But astute trial lawyers in Washington are getting bills passed that make summary judgment -- again, judgment on the law where facts are not in dispute -- an endangered procedure.
This summer's Referendum 67 is an excellent example of that trend. The underlying bill apparently headed to the voters for consideration imposes punitive damages on insurance companies for the "unreasonable denial" of a claim. This is not a legal standard. Whether or not a company has acted "reasonably" is going to be a fact in dispute. And it's going to be a question for the jury. And so companies will not be able to have even tenuous complaints dismissed on summary judgment.
And what about punitive damages? Again, take R-67. The underlying bill imposes what are in essence punitive damages -- imposed without regard to the actual economic or non-economic damages a claimant alleges or is found to have sustained. This last session of the Legislature, the Senate initiated a new Consumer Protection and Housing Committee, chaired by active trial lawyer Brian Weinstein, D-Mercer Island, a major focus of which is to move bills like this, this, and this, which significantly expand damages, including punitives, in Washington.
Steve Hantler, chairman of the AWB-supported American Justice Partnership, a national pro-business liability reform group, summarizes the situation nicely:
The Legislature passed several bills in 2007 that expanded liability in insurance law, wrongful death and employment discrimination law, creating a downward trajectory in Washington's liability climate. . . . Washington is clearly a state to watch as most of the factors affecting a state's liability climate are not promising.
