Legislators need a lawsuit diet

Originally published in Colorado Politics.

By Mark Hillman

Businesses that fuel Colorado’s economic engine can’t be blamed for cringing at the specter of the Colorado legislature’s return this month.  Plaintiffs lawyers, however, are not cringing.  Instead, the people who pay to put their faces on billboards along our busiest highways are licking their chops.

Last year, lawmakers went on a lawsuit binge, introducing a record 25 bills that used private lawsuits for enforcement, rather than entrusting enforcement to a government agency.  According to the Common Sense Institute, 43 similar bills have been introduced since 2019.

Using litigation for enforcement violates the constitutional separation of powers.  As most of us learned in school, the legislative branch writes the laws, the executive branch enforces the law, and the judicial branch applies or interprets the law.  Enforcement agencies are accountable to our elected officials; that’s why enforcement of state laws is typically their responsibility.  Billboard lawyers, by contrast, are accountable to no one except their clients, and both are given an incentive to sue by this misguided legislation.

Lawsuits should be a last resort, used when all other options are exhausted.  Instead, private lawsuits make litigation a primary means of enforcement.  A business owner’s first formal notification of a complaint shouldn’t be when served with a lawsuit.

Traditional lawsuits in which opposing parties resolve disputes involving injury or damages certainly have their place in our civil justice system.  Private enforcement lawsuits are a different mechanism entirely.  Instead of solving a dispute involving actual damages, laws that use private lawsuits for enforcement encourage litigation by creating “magic damages” – newly-defined monetary or liquidated damages that would not otherwise exist.  These magic damages are merely fines by another name, but rather than being enforced by a government agency, they provide a financial incentive for a billboard lawyer to file a lawsuit.

Private lawsuit enforcement bills typically include one-way fee-shifting (“loser pays,” but only for one side, the plaintiff).  Successful defendants rarely recover their costs, so it’s a lose-lose scenario for businesses who always bear the cost of their own defense, even when they’ve done nothing wrong, but can be ordered to pay the plaintiffs’ costs, as well.

Such laws also tend to set up legal presumptions that business defendants are at fault or deprive them of meaningful legal defenses.  Instead, businesses deserve the assumption that they intended to comply with the law unless ill-intent or habitual bad behavior can be proven.

With all of these legal advantages, it’s no wonder billboard lawyers favor these bills.  Handing the force of government over to a private attorney is intimidating to the Colorado business or individual facing such a lawsuit.  Private enforcement lawsuits allow billboard lawyers to use the force of government against businesses for their own profit.  When their client does win, the lawyer typically receives up to 40% of the damages.

Twenty years ago, Colorado boasted one of the most stable litigation climates in the nation.  That didn’t mean laws were stacked in favor of business.  Instead, laws were written by the legislature and applied by the courts in such a way as to make the outcome predictable for both plaintiffs and defendants.

Predictability creates a bright-line standard of expected conduct which discourages unsafe practices or products, protects businesses that operated on the bright side of that line, and rewards legitimate victims when businesses cross into shady conduct.

As recently as 2010, Colorado was among the ten best states in the U.S. Chamber of Commerce Lawsuit Climate Survey.

Now, Colorado is one of the most-expensive states for litigation.  U.S. Chamber rates Colorado’s tort system as ninth most-costly in the country at $4,044 per household.  That means Colorado residents are needlessly paying more for housing, transportation, health care, insurance and other basic household needs.  A study for the American Tort Reform Association found that excessive litigation costs reduced personal income of Colorado residents by $5.7 billion in 2020.

Litigation has a legitimate purpose – to resolve disputes when all else fails.  This year’s Colorado legislature should halt the lawsuit binge and use traditional means to enforce the laws it passes.