September 9, 2012

Pennsylvania’s Poor Lawsuit Climate Puts Keystone State at Crossroads

The problem is not going unnoticed. For a decade now, my organization, the U.S. Chamber Institute for Legal Reform, has been measuring how businesses view the litigation climates in the fifty states. In the latest survey, conducted by Harris Interactive, a leading global polling firm, Pennsylvania is ranked 40th out of 50, a six-place drop from 2010 and a record low for the Commonwealth. And most of the blame for this decline can be laid at the doorstep of Philadelphia’s courts, which are ranked as the fifth worst in the entire country.

The biggest problems in the Philadelphia court relate to lawsuits brought by out-of-state plaintiffs. It’s a general principle of the civil justice system that cases should be tried in the jurisdiction where the injury occurred or where the plaintiff or defendant resides. Yet in today’s Philadelphia courts, lawsuits are routinely filed by plaintiffs who have little or no connection to the city against defendants with only a tangential presence.

In fact, a few years ago, some Philadelphia judges publicly encouraged out-of-state plaintiffs to file in Philadelphia. As a result, in 2011, nearly half of all asbestos cases and more than 80% of pharmaceutical cases filed in Philadelphia were from out-of-state plaintiffs.

The contrast could not be more dramatic from the courts just a short drive away in Delaware. For the ninth straight time, Delaware’s lawsuit climate was ranked as the nation’s best in the Harris survey. The state’s courts received high marks in many areas, including overall fairness and enforcing venue requirements.

At the opposite end of the spectrum is another state bordering Pennsylvania, West Virginia. That state, ranked dead last in our past four surveys, has been plagued by a legal system that features massive verdicts and no meaningful appellate review for civil cases.

So Pennsylvania has the unique distinction of bordering both the highest and lowest ranked states in the survey. Unfortunately, because of the problems in the Philadelphia court, the Commonwealth’s legal climate has more similarities to last-ranked West Virginia than top-ranked Delaware.

A bad lawsuit environment has real costs for states trying to grow their economies and create jobs. Seventy percent of those questioned in this year’s survey said their companies look at a state’s legal environment as one of the factors when deciding where to locate or expand their business, the highest percentage in five years.

Luckily, there are many ways for Pennsylvania to improve its legal climate. Already, the new leadership of the Philadelphia court has taken initial steps to limit out-of-state cases, though much more needs to be done. In addition, the Pennsylvania legislature is considering a variety of legal reforms that could lead to a fairer legal system.

A better legal environment could produce a real dividend for Pennsylvania. According to a study conducted last year by NERA Economic Consulting, improving Pennsylvania’s legal climate to the level of Delaware could reduce tort costs by up to $1.7 billion per year, translating to as many as 90,000 new jobs.

Those benefits are real and substantial. But they will not be realized unless Pennsylvania takes action to improve its legal environment. Only then will the birthplace of the American republic have a justice system that would make the Founders proud.


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