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American Academy of Emergency Medicine

AAEM White Paper on Tort Reform

AAEM White Paper on Tort Reform
A Policy Paper of the American Academy of Emergency Medicine

J Emerg Med 2006; 30:473-475

Larry D. Weiss, M.D., J.D.
Albert J. Lauro Professor of Medicine
Louisiana State University School of Medicine
Department of Medicine, Section of Emergency Medicine
1532 Tulane Ave. Suite 1351, Charity Hospital
New Orleans, LA 70112
Tel: (504) 903-1006
FAX: (504) 903-0321
Email: lweiss@lsuhsc.edu

James Li, M.D.
Division of Emergency Medicine
Harvard Medical School
25 Shattuck Street
Boston, MA 02115
Email: jamesli@hms.harvard.edu

The Board of Directors of the American Academy of Emergency Medicine approved this policy paper at its May 25, 2005 meeting. This article represents AAEM policy. The editorial board of the Journal of Emergency Medicine did not review the content of this paper.

ABSTRACT
The American Academy of Emergency Medicine (the Academy) hereby adopts this advocacy paper, with the goal of providing long term resolution of the medical liability crisis. The Academy supports efforts to provide immediate relief, including malpractice caps, decreased statutes-of-limitation, screening panels for malpractice lawsuits, elimination of the collateral source rule, periodic payment of damages, and limiting punitive damages. The Academy also supports long-term measures to remove aberrancies from our tort system that have led to excessive litigation. Removing these aberrancies and instituting changes that modify attorney behavior, will bring lasting resolution to the unique maladies of our tort system. Therefore, the Academy supports a ban on contingency fees, a general "loser pays" rule for civil litigation, a general right to countersue plaintiffs and their attorneys for negligent institution and negligent prosecution of a lawsuit, and measures to enforce expert witness accountability. The Academy also supports efforts to eliminate new tort actions and to establish health courts. 

INTRODUCTION
The American Academy of Emergency Medicine (hereinafter "the Academy" or AAEM) board of directors, as an advocate for our patients, our members, and the medical profession in general, hereby adopts this White Paper on Tort Reform. Instead of merely focusing on short-term reforms that often limit patients’ rights, this white paper examines long-term solutions aimed at the root causes of the liability crisis in the United States. Long-term solutions will restore balance to our tort system by holding plaintiffs and their lawyers accountable for their actions. 

The Academy recognizes the necessity for short-term relief, and supports current efforts on the state and federal levels in the following areas: (1) institution of caps on medical malpractice awards, (2) decreasing the period of time during which a plaintiff must file suit (statutes of limitation), (3) screening panels for medical malpractice suits, (4) eliminating the collateral source rule (preventing juries from knowing about plaintiffs’ other means of recovery), (5) periodic payment of damages, and (6) limiting punitive damages and making such damages payable to the state. However, while necessary, many of these short-term reforms limit patient rights, and are not narrowly tailored toward the causes of the liability crisis. Therefore, AAEM prefers to focus on long-term changes, narrowly tailored to the causes of the liability crisis that will bring profound changes to our tort system and significant relief to society. 

DISCUSSION
Only the United States has a liability crisis. One may dismiss this fact to the reality of having more than 75 percent of the world’s lawyers. Unfortunately, we have unique liability problems in this country for reasons more complex and intractable. We have a remarkably aberrant tort system, unlike any other country in the world. This system leads to endless litigation, much of it groundless, distorting our economy and draining valuable resources in ways that harm society. We must reform our tort system by ridding ourselves of these aberrancies. These aberrancies relate to the aggressive, even reckless, manner in which many attorneys practice in the United States. Thus, instead of reforming our tort system in ways that may limit individual rights, we should focus our efforts on the primary cause of our liability crisis: attorney behavior. We must remove the unique protections that attorneys enjoy, exposing them to the same liability risks as the rest of society. Such leveling of the "playing field” may result in attorneys lowering their resistance to other reforms that will “normalize” our tort system. 

The tort system deals with civil wrongs, as opposed to crimes, for which the law provides a remedy. Nothing in our Constitution or Bill of Rights requires us to have such an unusual tort system. The legal profession in the U.S. developed and expanded the tort system to lead us to our current abyss. They largely did this through practices that exist no where else in the world, and by constantly creating new tort actions, thereby expanding general liability.

Contingency fees.  Contingency fee contracts serve as an example of a uniquely American legal practice. (1) Plaintiff attorneys in the U.S. routinely sign contingency fee contracts with their clients. Under this arrangement, plaintiffs pay nothing to their attorneys unless they win their case. In that event, the attorney will typically receive 30 to 40 percent of the proceeds. The plaintiff will receive the remainder after reimbursing
the attorney for all expenses.  

In 1995 the British began a limited experiment with contingency fees. (2) With that one limited exception, no other country in the world allows contingency fees.  Attorneys, judges, and legal systems around the world consider contingency fees unethical. In reality, contingency fee contracts allow the plaintiff attorney to act like a party to the lawsuit, as the attorney in such cases owns 30 to 40 percent of the property rights under litigation. Obvious conflicts of interest may occur between plaintiff attorneys and their clients. Furthermore, the coercive nature of this arrangement, along with the bargaining advantages attorneys have over their clients, may lead to unethical and exploitative results. 

For example, the Louisiana Supreme Court rendered a landmark decision in 1921 that established the right of attorneys to use contingency fee contracts. (3) In that case, the parties argued about ownership of mineral rights. The plaintiff had little money, but had a claim to valuable mineral rights. He hired a young attorney named Huey P. Long, later to become the “Kingfish” of Louisiana politics. Mr. Long signed a contingency fee contract with the plaintiff awarding him half of his property if he won the suit. The Louisiana Supreme Court allowed the contingency fee contract and established the right of attorneys to charge contingency fees in Louisiana. Other professions do not tolerate such behavior. Would the medical profession allow a physician to make a similar offer to a dying patient? The legal profession in the U.S. defends this practice because it perpetuates endless litigation. It usually costs a plaintiff nothing to file and prosecute a lawsuit, even if that lawsuit has no merit.

The "American Rule."  The “American Rule” serves as another example of a practice that makes our tort system unique. Under this rule, each party pays for its own legal expenses. Attorneys refer to this as the American Rule because no other country with a modern legal system follows this rule. (4), (5) The rest of the world follows the “English Rule” whereby the loser in a lawsuit pays everyone’s legal expenses. Plaintiffs would not file so many groundless lawsuits if they knew they had to pay the other parties’ legal expenses. How often does groundless litigation occur? In a study often quoted by the Association of Trial Lawyers of America (ATLA), the national plaintiff attorney organization, 83 percent of lawsuits filed against physicians had no basis in fact. (6) These researchers also found that the ability of a plaintiff to recover money had no correlation with negligence. (7) The ability to recover money only correlated with the presence of a disability. ATLA selectively quotes other aspects of this study but conveniently does not mention these findings. (8) Much groundless litigation would disappear if we adopted the English Rule and banned contingency fees. 

Plaintiff attorneys argue that the American Rule and the contingency system open the courthouse to all people in our society and allow them to recover damages for their losses and injuries.(9), (10) However, not every claimant has a valid case. Opening the floodgates of litigation has inundated our legal system with groundless lawsuits. Also, the contingency fee system functions in a wasteful and inefficient manner. In a 1996 study from the Detroit Medical Center, only 12 percent of expended funds actually went to plaintiffs. (11) Therefore, the tort system essentially had an 88 percent overhead rate. If our tort system already functions in a manner that does not correlate with fault, then we should adopt a no-fault system and get rid of the “middlemen” who consume 88 percent of the resources. (12) Alternatively, getting rid of contingency fees and adopting the English Rule would create the proper ethical incentives for plaintiff attorneys and their clients. An indigent plaintiff with a worthwhile claim would have no difficulty finding an attorney. When plaintiffs win their cases, the loser will pay the plaintiffs’ Attorneys fees and court costs. On the other hand, when plaintiffs lose their cases, they and their attorneys should pay the defendants’ attorney fees and court costs. (5), (13) If plaintiff attorneys sign contingency fee contracts with their clients, they acquire a property interest in the lawsuits. Therefore, attorneys who sign contingency fee contracts should share in the obligations of their clients under a "loser pays" rule.

Moreover, to a limited extent the U.S. legal system has already accepted the principle of "loser pays." The state of Alaska has had a general loser pays rule for civil litigation for over 100 years, long before it became a state. Also, dozens of federal laws and hundreds of state laws provide for fee-shifting, a "loser pays" provision for specific circumstances. For example, if a plaintiff alleges discrimination under the federal Civil Rights Act, the court may order the losing party to pay reasonable attorney fees to the prevailing party. (14) Therefore, to a considerable extent, Congress and the state legislatures have already approved “loser pays” in principle. The only remaining step would involve the application of this principle as a general rule in civil litigation. 

Plaintiff attorneys argue that a general "loser pays" rule would put poor parties at a disadvantage, and would give advantages to large corporations when sued by smaller parties.(4) However, in many countries indigent parties have no obligation to pay the expenses of other parties. Also, some countries do not apply the "loser pays" rule to cases that involve large corporations. In Alaska, judges may decide whether to apply the "loser pays" rule.(5) Therefore, many variations of the "loser pays" rule exist, and if the United States had such a rule, it could be fashioned in a fair manner.(4), (5)

Countersuits.   Another tort reform sorely needed in the U.S. would establish the right of defendants to countersue plaintiffs and their attorneys for negligence. (15), (16), (17) Currently, no state in the U.S. allows such an action. Defendants must prove malice to countersue a plaintiff or his attorney. This involves proving that plaintiffs or their attorneys actually intended to use the court for illicit reasons, an element almost impossible to prove. Defendants cannot countersue for negligence because of the ancient rule of “privity”, a rule that courts have overturned in almost all other contexts. The privity rule states that only parties who sign a contract may sue each other for negligence.  Therefore, when plaintiffs sign contracts with their attorneys, only they may sue their own attorneys for negligence. With regard to the contract, the defendant in the lawsuit acts as a third-party and therefore may not sue for negligence. When plaintiff attorneys negligently file groundless lawsuits, the defendant is the party that suffers damages from the attorney’s negligence. Currently, courts deny this large group of potential litigants their right to sue for negligence. Allowing such lawsuits would expand the rights of individuals in our society. By not allowing such suits, our tort system currently disenfranchises most victims of attorney negligence. 

Attorneys argue that allowing countersuits would have a “chilling effect” on litigation. In other words, plaintiffs should pay nothing to litigate and such litigation should be risk-free. How many things in society cost nothing and have no risks?  Certainly no other acts of hostility have such absolute protection under the law. One can readily understand why we have so much groundless litigation in the U.S. Similarly, we could maximize consumption of automobiles by distributing them for free and create laws that would make driving risk free, regardless of how much damage one causes. The legal profession refers to the elimination of risk as “immunity.” ATLA generally decries immunity because it results in reckless behavior. People do not act carefully when they know they will not have liability for their mistakes. However, ATLA does not object to the near-immunity given to trial lawyers. Perhaps if our legal system removed this near immunity, attorneys would not recklessly file so many groundless lawsuits. Plaintiff attorneys and their clients would act more responsibly if they knew that a defendant could hold them liable for their actions. Society holds virtually everyone else liable for their actions. The legal profession does not act fairly when it carefully protects itself from the same havoc it has wreaked on the rest of society. 

In addition to the near-immunity from countersuits, attorneys have other unique protections. In some jurisdictions, the doctrine of judgmental immunity protects attorneys. (18) This doctrine protects attorneys from liability due to “mere mistakes of judgment.” No other profession enjoys such blanket protection from their own decisions. Ordinarily, damages resulting from someone else’s poor sense of judgment constitute negligence. No justification exists to uniquely protect attorneys in this manner. 

Another unique rule protecting only attorneys prohibits clients from suing their own attorneys unless they can prove that they would have won the underlying litigation.(19) This burden, often impossible to meet, prevents many legal malpractice claims. No other potential plaintiffs have this burden. Patients in a medical malpractice case do not have to prove that absent malpractice they would have had a perfect medical outcome.

New Tort Actions.  Attorney behavior has distorted our tort system in another fundamental way, through the creation of an ever-expanding list of new torts. The new torts include negligent infliction of emotional distress, bystander emotional distress, expanded vicarious liability, res ipsa loquitur (proving liability without demonstrating an act of negligence), strict liability, liability to third parties, special circumstances (e.g.: fear of cancer, fear of AIDS), and the “lost chance” doctrine. These new torts serve to expand the liability of society in general, and to provide further grist for the mill of endless litigation. If western civilization went through thousands of years without needing a tort action for bystander emotional distress, we can probably survive quite well in today’s world without such litigation.

A detailed explanation of each of these new torts lies beyond the scope of this paper. However, the lost chance doctrine bears mentioning. Most states have now adopted this doctrine in slightly different forms, and selectively apply it only to health care providers.(20), (21), (22) In its most extreme form, this egregious doctrine makes health care providers liable for any decrease in the chance of a better outcome.(23) In some states, once the plaintiff demonstrates an infinitesimal decrease in the chance of any better outcome, the jury has complete discretion to award damages. Of course, singling out health care providers and exposing them to unique handicaps violates our equal protection rights. Other traditional notions such as justice, fairness, and equity have yielded to the effort to expose society to ever-increasing liability. In the end, only the legal profession benefits. AAEM supports efforts to legislatively overrule the court-created “lost chance” doctrine, other new tort actions that expand liability, and other unfair devices such as "joint and several liability" that make defendants liable for the actions of others.

Expert Witness Accountability. The Academy supports measures to hold expert witnesses accountable for the veracity of their testimony. The Academy supports the resolution of the American Medical Association House of Delegates declaring that expert testimony constitutes the practice of medicine. (24) Therefore, state medical boards should have the authority to discipline experts who provide false or misleading testimony. (25), (26), (27) Likewise, state medical societies and specialty societies have the authority to discipline their members who provide false or misleading testimony.(28) Furthermore, AAEM supports the current trend in some courts to hold experts accountable to the parties in litigation for false, misleading, or negligent testimony. (29), (30), (31), (32) The Academy also supports the current use of “Daubert hearings” to allow only testimony that has a sound scientific basis.(33) Courts should only allow scientific evidence based on (1) tested hypotheses, (2) subjected to peer review, (3) with a known rate of error, and (4) generally accepted by the relevant scientific community.

Special Health Courts.  Common Good, a bipartisan organization of former federal government officials, legal scholars, and health policy leaders, advocates the creation of special health courts. (34) These special courts would use dedicated full time judges who would only resolve health care disputes. Like other similar administrative courts, health courts would not use juries. Theoretically, these courts would run more efficiently and more predictably. Patients injured by the negligence of health care providers would receive fair compensation. On the other hand, health courts would efficiently remove groundless cases from the court’s docket. The Academy supports the establishment of health courts.

Medical Error.  Finally, some organizations have attempted to focus on the elimination of medical error as a means to resolve the medical liability crisis. (35) However, while medical error remains an important issue for physicians and patients, it has little relevance to the liability crisis. Since liability in our tort system has no statistical correlation with fault, (7) and since 83% of all medical malpractice claims are groundless, (6) one cannot logically conclude that the complete elimination of medical error would have any significant impact on the liability crisis. However, attorney error is the single most important cause of medical malpractice litigation in the United States.  Therefore, by providing the proper incentives to the legal profession, perhaps attorneys would lower their error rate, file less groundless litigation, and thereby significantly resolve the liability crisis.

CONCLUSION
In sum, among all the countries of the world, only the U.S. has a liability crisis.  We have this unique malady because we have the world’s most aberrant tort system.  We should resolve the liability crisis by enacting “smart” reforms that focus on attorney behavior, the primary cause of the liability crisis. We will resolve this crisis by eliminating aberrancies in the way attorneys practice law in the U.S. Therefore, AAEM supports the following: (1) banning contingency fees, (2) adopting the English Rule (loser pays), (3) allowing defendants to countersue plaintiffs and their attorneys for negligence, (4) eliminating new tort actions that create endless liability for defendants, (5) regulations that hold expert witnesses accountable for negligent testimony, and (6) creation of special health courts. As an alternative to these reforms, AAEM would support a no-fault system if designed in a way to decrease overall costs. Our tort system requires profound changes, not mere reforms designed to tweak a highly flawed system.  These changes would restore balance to our tort system, yield more predictable results relating to fault and damages, and remove immunities that allow plaintiffs and their lawyers to act with near-impunity. Making plaintiffs and their attorneys liable for their actions like everyone else in our society, will level the playing field and remove the unique advantages that have allowed them to prey upon the rest of society.

  1. Aranson AF. The United States percentage contingent fee system: Ridicule and reform from an international perspective. Tex Int’l Law J 1992; 27:755-793

  2. Stansky L. Changing of the guard. ABA Journal 1996; 82(6):72-78

  3. McClung v. Atlas Oil, 87 So. 515 (La. 1921)

  4. Maggs GE, Weiss MD. Progress on attorney’s fees: Expanding the “loser pays” rule in Texas. Houston L Rev 1994; 30:1915-1944.

  5. Olson W, Bernstein D. Loser-pays: Where next? Maryland L Rev 1996: 55:1161-1189

  6. Localio AR, Lawthers AG, Brennan TA et al. Relation between malpractice claims and adverse events due to negligence. N Engl J Med 1991; 325:245-251

  7. Brennan TA, Sox CM, Burstin HR. Relation between negligent adverse events and the outcomes of medical-malpractice litigation. N Engl J Med 1996; 335:1963-1967

  8. Association of Trial Lawyers of America. Straight Talk on Medical Malpractice.  ATLA Press, 1994, Washington, DC

  9. Association of Trial Lawyers of America. Keys to the Courthouse: Quick Facts on the Contingent Fee System. ATLA Press, 1994, Washington, DC

  10. Nace BJ. The contingent fee: Breathing life into America’s justice system. Trial 1994; 30(10):59-61.

  11. Ransom SB, Dombrowski MP, Shephard R, Leonardi M. The economic cost of the medical-legal tort system. Am J Obstet Gynecol 1996; 174:1903-1909

  12. Studdert DM, Brennan TA. No-fault compensation for medical injuries. JAMA 2001; 286:217-223.

  13. American Medical Association, Board of Trustees Report 9, I-99.

  14. 42 U.S.C. § 1988(b)

  15. Palmisano DJ. A quest for justice against the wrongful medical malpractice suit: Louisiana’s unique advantage. Loy L Rev 1981; 27:325-367

  16. Segal SC. Is it time to end the lawyers’ immunity from countersuit? UCLA L Rev 1987; 35:99-158

  17. Sharp LA. Medical-malpractice countersuits. ALR5th 1998; 61:307-374

  18. See, e.g.:   Hodges v. Carter, 80 S.E.2d 144 (N.C. 1954)

  19. Harvard Law Review Association. Lawyers’ responsibilities to the client: Legal malpractice and tort reform. Harvard L Rev 1994; 107:1557-1581

  20. McMahon MJ. Medical malpractice: Measure and elements of damages in actions based on loss of chance. ALR4th 1990: 81:485-619

  21. Gordon v. Kemper, No. 2002-CA-001983-MR, ___ S.W.3d ___ (Ky. 2005) (a very recent case that summarizes the positions of other state supreme courts)

  22. Alexander v. Scheid, 726 N.E.2d 272 (Ind. 2000) (another recent case that summarizes the law in many other states)

  23. See, e.g.: Smith v. State, 676 So. 2d 543 (La. 1996)

  24. First passed as Resolution 221 of the A.M.A. House of Delegates and codified as Policy H-265.993 (A.M.A. Policy Compendium 1998).

  25. Sacopulos MJ. Addressing false expert witness testimony in medical malpractice litigation. Health Law Analysis 2005; 9(5):24-29

  26. Deatherage v. State of Washington, 948 P.2d 828 (Wash. 1997).

  27. Joseph v. District of Columbia Board of Medicine, 587 A.2d 1085 (D.C. 1991).

  28. Austin v. American Ass'n of Neurological Surgeons, 252 F.3d 967 (7th Cir. 2001).

  29. Davis v. Wallace, 565 S.E.2d 386 (W.Va. 2002)

  30. Marrogi v. Howard, 805 So.2d 1118 (La. 2002)

  31. LLMD v. Jackson-Cross Co., 740 A.2d 186 (Pa. 1999)

  32. James v. Brown, 637 S.W.2d 914 (Tex. 1982)

  33. Daubert v. Merrell Dow, 509 U.S. 579 (1993)

  34. www.cgood.org/healthcare.html

  35. Health Care at the Crossroads: Strategies for Improving the Medical Liability System and Preventing Patient Injury. JCAHO, 2005, Oak Brook Terrace