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News
April 25, 2007

How’s Your Lawsuit Climate?

Is your state a good one in which to do business?

How you answer that question could be affected by a number of factors, but in our increasingly lawsuit-happy society, many companies are looking at the fairness of a state’s court system when deciding where to do business. Their decision affects jobs, tax revenue, and other economic development opportunities.

Each year, the Institute for Legal Reform joins with Harris Interactive to survey practicing corporate attorneys and general counsel, asking them a comprehensive battery of questions to determine what they think of each state’s lawsuit climate. And once again this year the majority of our respondents affirmed that the litigation environment in a state is likely to impact their important business decisions, such as where to do business or locate their facilities.

So, what does our report, titled Lawsuit Climate 2007: Rating the States, tell us? Beyond revealing which states are viewed as having the best lawsuit climates (Delaware, Minnesota, Nebraska, Iowa, and Maine) and which as having the worst (West Virginia, Mississippi, Louisiana, Alabama, and Illinois), the report reveals that a state is only as good as its worst jurisdiction. And, in an increasingly global economy, it also reveals that the United States is only as good as its worst state.

Which inevitably brings us to West Virginia. The states were judged using twelve criteria, which ranged from the overall treatment of tort and contract litigation to juries’ predictability and fairness. On each one, West Virginia ranked at the very bottom. In fact, West Virginia has languished while those states ranked near the bottom have improved, opening up a gap of more than 8 points between the raw scores of West Virginia and 49th-ranked Mississippi.

It’s surely no coincidence that as the fairness of West Virginia’s lawsuit system has languished, so has its economy. According to the Bureau of Business and Economic Research at West Virginia University, the economic outlook for West Virginia “calls for slow state growth during the next five years, at rates well below the national average.” West Virginia’s business climate is not keeping step with the progress made by other states across the nation. They conclude that “Overall, the state is not likely to make much progress in closing the income gap with the nation during the forecast, without fundamental changes in the state’s business climate…”

The state of Texas serves as an illustration of how bad lawsuit climates within a few jurisdictions can drag down an entire state. Despite comprehensive legal reform passed in 2003, several jurisdictions have failed to get the news. As a result, Beaumont, Houston, and Dallas-Fort Worth are considered some of the worst courts in which to litigate, and Texas itself landed on the list at 44.

So how is your lawsuit climate? Check it out. Lawsuit Climate 2007 shines a light on the worst — and best — jurisdictions, pointing the way toward the need for continued reforms.

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