Acadiana Business

Survey: La.'s legal climate 2nd worst in nation

by Leslie Turk

A new national survey ranks Louisiana's lawsuit climate 49th in the country.

A new national survey ranks Louisiana's lawsuit climate 49th in the country. In the survey, released today by the U.S. Chamber Institute for Legal Reform, respondents also named New Orleans as one of the worst court systems in the nation. It's tied for 10th.

The Lawsuit Climate 2010: Ranking the States survey, conducted by Harris Interactive by telephone and online from October 2009 to January 2010, reflects the opinions of 1,482 general counsels and senior attorneys or executives in companies with annual revenues of at least $100 million. Two-thirds, or 67 percent, of those questioned said a state's lawsuit environment is likely to impact important business decisions at their company, such as where to locate or expand their business - up 10 percent from just three years ago.

"A state's poor legal climate negatively impacts its economic environment, discourages business expansion and slows the creation of new jobs," said Lisa A. Rickard, president of the U.S. Chamber Institute for Legal Reform. "At a time when state leaders are working to spur economic development, they must remember that Louisiana needs more jobs, not more lawsuits."

This year's survey is the eighth such ranking of the 50 state lawsuit climates since 2002. Louisiana has never been ranked above 47. Joining Louisiana in the bottom five states for legal fairness are California (46th), Alabama (47th), Mississippi (48th), and West Virginia (50th). Survey respondents have consistently placed Louisiana among the five worst states for judges' impartiality (49th in 2010), judges' competence (49th), and juries' fairness (49th).

The survey isn't sitting well with some of the state's leaders, including Louisiana Economic Development Secretary Stephen Moret, whose department has worked to lift the state's legal, tax and ethics climate rankings. Moret told The Advocate the latest ranking is of Louisiana's perceived legal climate, not its actual one.

The American Association for Justice (formerly the Association of Trial Lawyers of America) also fired off its own release this morning, saying ILR's study is "long on corporate spin and short on facts" and that the methodology has been debunked and ridiculed year after year by academics, scholars, media, and independent experts. "After its policies drove our country to economic collapse, the U.S. Chamber of Commerce wants more of the same," AAJ writes. "The annual 'lawsuit climate' rankings released today by its Institute for Legal Reform are yet another call for less oversight and accountability for the Wall Street, drug, and insurance companies that fund this corporate front group.

The AAJ notes that the survey relies on the opinions of corporate defense attorneys who profit when they shield their corporations after injuring American consumers.

"The Chamber's report is just another shallow attempt to weaken the civil justice system to help its Wall Street and big business financers," says AAJ spokesman Ray De Lorenzi. "The American people have seen what happens when the Chamber's largest clients like AIG, insurance and drug companies are not held accountable. This is just one more call from the corporate lobby to bail out negligent corporations while everyday Americans are left holding the bag."

Year after year, academics, consumer groups, and independent media have ridiculed the report for its errors and lack of methodology, claims AAJ. In September 2009, Theodore Eisenberg of Cornell Law released a study calling the rankings "inaccurate, unfair, and bad for business."

For a detailed analysis of all errors and criticisms of previous U.S. Chamber rankings, click here.

The ILR also announced a new national advertising campaign called "Jobs, Not Lawsuits," which will include movie trailers to be shown on more than 300 movie screens throughout the country, including in Louisiana. The two-minute trailers feature the stories of small businesses that were the subject of costly lawsuits that had a material impact on their companies.

In one trailer, Monroe small business owner Mike Carter tells the story of his company's fight against more than 100 asbestos lawsuits. Carter explains that the suits against Monroe Rubber and Gasket have been filed despite the fact that the company has not handled anything related to asbestos in more than 20 years. Even then, the company was an intermediary seller of a small amount of materials containing encapsulated asbestos, a non-airborne material that remains legal to this day.

Those who believe the study is flawed point to remedies in Louisiana's laws for defendants like Carter to be dismissed from lawsuits, along with the fact that state law requires that damages be proportionate to a defendant's responsibility.

Senate president offers up health care fix

Senate President Joel Chaisson has filed legislation that could create a new revenue source for the state's health care budget and Gov. Bobby Jindal announced last week that he is backing the plan. Chaisson, D-Destrehan, wants to rearrange how money flows in and out of certain protected funds.

He says his proposed constitutional amendment would eventually allow greater flexibility in the state's fledgling budget process and aid in protecting critical services. And that's important right now for the fiscal year that begins July 1, the state is facing a $1 billion budget shortfall. The following fiscal year is expected to produce a similar $1.7 billion gap.
"At this time we are facing unprecedented mid-year budget reductions," Chaisson says. "We need all options on the table with the opportunity to have an open discussion about the proposals and their impact on our efforts to move our state forward."

More so than any other area of the state budget, however, health care is on the rocks, which is why the governor says is throwing his support behind Chaisson's proposal. "Our state faces a multi-billion dollar budget shortfall over the next two fiscal years that is uniquely challenging due, in part, to the faulty federal (Federal Medical Assistance Percentages) formula causing a decrease in our Medicaid funding and federal cuts to the hospital funding formula," Jindal said.

Chaisson's Senate Bill 434 would decrease the amount of money deposited into the Millennium Trust Fund and shift those savings to the Louisiana Fund. In all, Chaisson says the change would yield about $30 million in additional cash for qualifying health and human service expenditures. Both of the funds targeted in his legislation presently get cash from the national landmark tobacco settlement agreement that Louisiana executed in 1998.

The Millennium Trust has varied purposes and actually contains three other trust funds: the Health Excellence Fund, which supports children's health initiatives and university research; the Education Excellence Fund, which supports public and private schools; and the TOPS Fund, which is the backbone of the state's collegiate scholarship program.

The Louisiana Fund, meanwhile, which Chaisson and Jindal want to inject with additional money, is used for children's health programs, health care sciences, chronic disease management services and capital improvements for state health care facilities.

Beckoning back to where the money originally came from, the Louisiana Fund also bolsters direct health care services for tobacco-related illnesses and bankrolls "initiatives to diminish tobacco-related injury and death to Louisiana's citizens through educational efforts and other requirements."

When the national tobacco settlement was finalized more than 10 years ago, many states issued stand-alone bonds to generate proceeds for budgetary or capital needs during the U.S. recession that was then raging. Only Louisiana and South Carolina executed so-called trust fund transactions, whereby the bond proceeds were invested into an account that was invested into the financial markets.

Louisiana, in particular, sold 60 percent of its revenue stream from the tobacco settlement and kept 40 percent, meaning that 60 percent of the annual tobacco settlement revenues now go toward debt service on the tobacco bonds and 40 percent is allocated directly to the state. Of that 40 percent, 25 percent around $15 million is dedicated to the Louisiana Fund and 75 percent around $45.8 million goes back into the Millennium Trust Fund. Today, the balance of the Millennium Trust Fund stands at $1.38 billion

Chaisson's proposed constitutional amendment would decreases the mandated annual deposit into the Millennium Trust Fund by 50 percent from 75 percent to 25 percent. As a result, the annual deposit into the Louisiana Fund would increase by 50 percent from 25 percent to 75 percent. If approved by the Legislature, Chaisson's constitutional amendment would face voters later this fall on Nov. 2 ballot.