We Don’t Need American-Style Litigation

Politicians in this country love to take advantage of Canadians’ knee-jerk antipathy to all things American—witness their frequent references to “American-style health care” when they’re trying to vilify private medicine or “the American-style gun lobby” when they’re responding to critics of the gun registry. 

Strangely, however, many Canadian politicians have chosen to welcome with open arms the one American import they should vigorously resist:  American-style litigation.  They were jubilant last week after the B.C. Court of Appeal upheld the constitutionality of the Tobacco Damages and Health Care Costs Recovery Act.  The law will allow the province to sue “big tobacco” for billions, as U.S. states have done.  Said B.C. cabinet minister Susan Brice, “I think you can hear a cheer at this decision from everyone involved in health care across the country.”

Maybe now that the cheering has died down, Canadians will be able to give this legislation sober second thought.  Many Americans, having witnessed the damage and corruption it has caused to their legal system, have begun to express their misgivings about it.

The B.C. legislation follows a pattern initiated by Florida.  Fearing that lawsuits such as these would be tossed out of court, the Florida legislature simply rewrote the law to guarantee its desired outcome.  Other states followed suit.  “We changed centuries of precedent to assure a win in this case,” boasted one Maryland state senator.

Mimicking Florida, the B.C. legislation overturns the traditional courtroom requirement that a plaintiff prove his case or the amount of his damages.  The law directs the judge to presume liability and permits him to rely upon statistical evidence to determine both causation and the amount of the award. 

In fact, the legislation sets up an elaborate charade, to be played out in a courtroom, to disguise what is really just a new tax.  Boiled down to its essence, it says: 

1.                  When the government sues the tobacco industry to recover health care costs, the government shall win.

2.                  Whatever amount the government says its health care costs have been or will be in future is the amount the tobacco industry shall pay. 

The tobacco companies are deprived of most traditional defences and are reduced to arguing among themselves over their respective shares of the damages. 

B.C. hopes to grab $10 billion from its lawsuit—perhaps a trifle ambitious, since the U.S. state governments ultimately settled their fifty lawsuits for a combined total of $243 billion.

But what of the taxes the province already receives from the tobacco industry?  In fiscal 2000-2001, this was $460 million, not counting income tax paid by tobacco companies.  The province’s total health expenditures that year—for everything, not just for tobacco-related illnesses—were $8.3 billion.  So tobacco taxes already funded more than 5 percent of the province’s total health care budget.  If that’s not enough to satisfy it, the province could simply raise the existing tobacco tax.  Why waste millions on legal fees while destroying traditional legal rules and precedents into the bargain? 

In fact, numerous studies have concluded that excise taxes on tobacco already contribute more to government coffers than the cost of treating tobacco-related illnesses.   This becomes very credible when one examines what has actually happened to the multi-billion dollar windfalls received by U.S. states since their 1998 settlement with tobacco companies.  

Although the states originally claimed the money would be used to defray Medicaid costs or to fund stop-smoking programs, much of it is now used simply as part of states’ general budgets, in some instances to cover budget deficits.  The U.S. Centers for Disease Control and Prevention had recommended that 20 to 25 percent of the settlement money be used on smoking prevention.  A 2002 survey showed only five percent of the money being used that way.  At least seven states are investing a portion of their settlement money in tobacco stocks.  North Carolina diverts 25 of its tobacco settlement revenue to a trust fund “for direct aid to tobacco farmers, quota holders, tobacco manufacturing workers and tobacco-related businesses.”

In The Rule of Lawyers—How the New Litigation Elite Threatens America’s Rule of Law, author Walter K. Olson reveals the true beneficiaries of this type of litigation:  lawyers and politicians.  “In Texas, an official estimated that the [legal] fee award in his state exceeded $105,000 an hour.”   In other states, lawyers claimed in excess of $30,000 an hour.   A total of $11 billion in legal fees was paid in 21 states alone.   Much of the legal work was awarded in sweetheart deals to law firms who were big contributors to the election campaigns of the politicians who later retained them.

But the most revealing and most repugnant statement of all was that of the chief justice of the West Virginia Supreme Court, who wrote:  “As long as I am allowed to redistribute wealth from out-of-state companies to injured in-state plaintiffs, I shall continue to do so.  Not only is my sleep enhanced when I give someone else’s money away, but so is my job security, because the in-state plaintiffs, their families, and their friends will reelect me.”

This kind of blatant political manipulation is one American import Canadians can certainly do without. 

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