Lawsuit Climate 2010

The 2010 State Liability Systems Ranking Study was conducted for the U.S. Chamber Institute for Legal Reform to explore how reasonable and balanced the states’ tort liability systems are perceived to be by U.S. business. Participants in the survey were comprised of a sample of 1,482 in-house general counsel, senior litigators or attorneys, and other senior executives who indicated they are knowledgeable about litigation matters at companies with at least $100 million in annual revenues. The 2010 ranking builds on seven previous surveys[1] in which all 50 states were ranked by those familiar with the litigation environment in that state. Prior to these rankings, information regarding the attitudes of the business world toward the legal systems in each of the states had been largely anecdotal. The State Liability Systems Ranking Study aims to quantify how corporate attorneys view the state systems.

More than two in five (44%) senior attorneys view the fairness and reasonableness of state court liability systems in America as excellent or pretty good, up slightly from the last survey in 2008 (41%). A majority (56%) view the systems as only fair or poor. Two-thirds (67%) report that the litigation environment in a state is likely to impact important business decisions at their companies, for instance, where to locate or do business, an increase from 63% in 2008 and 57% in 2007.

Respondents were first selected for their familiarity with states, and those who indicated they were very or somewhat familiar with the litigation environment in a given state were then asked to evaluate that state. It is important to remember that courts and localities within a state may vary a great deal in fairness and reasonableness. However, respondents had to evaluate the state as a whole. To explore the detailed nuances within each state would have required extensive questioning about each state and was beyond the scope and purpose of this study. Other studies have also demonstrated this variability within a state. For example, several studies have documented very high litigation activity in certain county courts such as Madison County, Illinois and Jefferson County, Texas, revealing that these counties have “magnet courts” that are extremely hospitable to plaintiffs. Thus, it is possible that some states received low grades due to the negative reputation of one or two of their counties or jurisdictions.

Overall Rankings of States

Year	Average Score
2010	57.9
2008	59.4
2007	58.1
2006	55.3
2005	52.8
2004	53.2
2003	50.7
2002	52.7

Most Important Issues to Focus on to Improve the Litigation Environment

The study also asked respondents to name the most important issue that policymakers who care about economic development should focus on to improve the litigation environment in their states. Tort reform issues in general were mentioned by 9% of respondents as were caps/limits on damages, up significantly from 3% in 2008. Other top issues named were timeliness of decisions (8%), elimination of unnecessary lawsuits (7%), limits on discovery (7%), and speeding up of the trial process (5%).

Worst Local Jurisdictions

In order to understand if there are any cities or counties that might impact a state’s ranking, respondents were asked which five cities or counties have the least fair and reasonable litigation environments. The worst jurisdiction was Chicago/Cook County, Illinois (14%), followed by Los Angeles, California (12%), the state of California in general (10%), the state of Texas in general (9%), and Madison County, Illinois (8%).

To understand why respondents feel negatively about particular jurisdictions, a follow-up question was asked to those who cited a jurisdiction. More than a third (37%) of respondents mentioned that the reason why a city or county has the least fair and reasonable litigation environment is because of biased or partial juries/judges. This is the number one reason by a large margin. The next tier includes corrupt/unfair system (8%), excessive damage awards (6%), unfair juries/judges, incompetent juries/judges, a slow process, nonadherence to the laws/rules, and personal experience (each mentioned by 5% of respondents).

Conclusion

Several organizations[2] have conducted surveys among various constituencies of state courts to determine and understand how the state courts are perceived by these audiences. Until the annual State Liability Systems Ranking Study was initiated in 2002, there were no data on one important constituency: senior lawyers in large companies. This, the eighth State Liability Systems Ranking Study, finds that senior lawyers in large corporations have mixed perceptions about the fairness and reasonableness of state liability systems overall, with a significant plurality saying that they are excellent or pretty good, but the majority saying that they are only fair or poor. On average, general counsel and senior litigators give state courts more A’s and B’s than D’s and F’s on the various elements. Although recent scores reveal a material improvement in perceptions over the early years of the survey, the trend toward improvement has flattened.
An examination of individual state evaluations, however, reveals wide disparity among those states that are doing the best job and those states that are doing the worst job, with the highest performing state scoring 77 out of a possible 100 and the poorest performing state scoring only 35 out of 100. Clearly, corporate counsel see specific areas needing improvement in the individual states, and the perceptions of senior lawyers and executives in large companies matter. This survey reveals that the litigation environment in a state is likely to impact important business decisions, which could have economic consequences for the states. The challenge for the states is to focus on areas where they received the lowest score and then make improvements where they are needed. If improvements are not needed, then the states must educate corporate counsel in ways that will change these perceptions.

[FOOTNOTES]
1. 2008, 2007, 2006, 2005, 2004, 2003, and 2002.
2. This includes the Public Perceptions of the State Courts: A Primer, National Center for State Courts (2000); Perceptions of the U.S. Justice System, American Bar Association (1998);Public Trust and Confidence in the Courts: What Public Opinion Surveys Mean to Judges, National Center for State Courts and University of Nebraska (1999); and Level of Public Trust and Confidence: Utah State Courts, State Justice Institute (2000).

The 2010 State Liability Systems Ranking Study was conducted for the U.S. Chamber Institute for Legal Reform by Harris Interactive. The final results are based on interviews with a nationally representative sample of 1,482 in-house general counsel, senior litigators or attorneys, and other senior executives who are knowledgeable about litigation matters at public and private companies with annual revenues of at least $100 million.

Phone interviews averaging 16 minutes in length were conducted with a total of 821 respondents and took place between October 23, 2009 and January 21, 2010. Online interviews using the same questionnaire and averaging 14 minutes in length were conducted with a total of 661 respondents that took place between October 22, 2009 and January 21, 2010. The previous research was conducted during similar time frames in the years 2002-2008. A pilot survey was conducted in 2009 among 104 respondents to pre-test and validate the methodology.

Sample Design

For the telephone sample, a comprehensive list of general counsel at companies with annual revenues of at least $100 million was compiled using idExec, Dun & Bradstreet, AMI, and Aggressive List. An alert letter was sent to the general counsel at each company. This letter provided general information about the study, notified them of the option to take the survey online or by phone, and told them that an interviewer from Harris Interactive would be contacting them to request their participation if they chose not to take the survey online. The letter included an 800 number for respondents to call and schedule a survey appointment, and it also alerted the general counsel to a $50 charitable incentive or check in exchange for qualified participation in the study.

For the online sample, a representative sample of general counsel and other senior attorneys was drawn from the Association of Corporate Counsel and LinkedIn. These respondents received an electronic version of the alert letter, which included a password-protected link to take the survey. They were screened to ensure that they worked for companies with more than $100 million in annual revenues.

Sample Characteristics

An overwhelming majority (92%) of respondents were general counsel, corporate counsel, associate or assistant counsel or some other senior litigator or attorney. The remaining respondents were senior executives knowledgeable about or responsible for litigation at their companies. Respondents had an average of 20 years of relevant legal experience, including their current position, and had been involved in or were familiar with litigation at their current companies for an average of 8.6 years. Most respondents (82%) were familiar with or had litigated in the states they rated within the past three years. The most common industry represented was manufacturing, followed by services.

Telephone Interviewing Procedures

The telephone interviews utilized a computer-assisted telephone interviewing (CATI) system, whereby trained interviewers call and immediately input responses into the computer. This system greatly enhances reporting reliability. It reduces clerical error by eliminating the need for keypunching, since interviewers enter respondent answers directly into a computer terminal during the interview itself. This data entry program does not permit interviewers to inadvertently skip questions, since each question must be answered before the computer moves on to the next question. The data entry program also ensures that all skip patterns are correctly followed. The online data editing system refuses to accept punches that are out-of-range, demands confirmation of responses that exceed expected ranges, and asks for explanations for inconsistencies between certain key responses.
To achieve high participation, in addition to the alert letters, numerous telephone callbacks were made to reach respondents and conduct the interviews at a convenient time. Interviewers also offered to send respondents an e-mail invitation so that respondents could take the survey online on their own time.

Online Interviewing Procedures

All online interviews were hosted on Harris Interactive’s server and were conducted using a self-administered, online questionnaire via proprietary Web-assisted interviewing software. The mail version of the alert letter directed respondents to a URL and provided participants with a unique ID and password that they were required to enter on the landing page of the survey. Those who received an e-mail version of the alert letter accessed the survey by clicking on the password-protected URL included in the e-mail. Due to password protection, it was not possible for a respondent to answer the survey more than once. Respondents for whom we had e-mail addresses received an initial invitation as well as one to two reminder e-mails that were sent roughly two to three days after the previous invitation.

Interviewing Protocol

After determining that respondents were qualified, they identified which states’ liability systems they were familiar with. Then the respondents were asked to identify the last time they litigated in or were familiar with the states’ liability systems. From there, respondents were given the opportunity to evaluate the states’ liability systems, prioritized by most recent litigation experience. On average, respondents evaluated three states via telephone and four states online.

Rating and Scoring of States

States were given a grade (A, B, C, D or F) by respondents for each of the key elements of their liability systems. The Overall Ranking of State Liability Systems table was developed by creating an index using the grades given on each of the key elements plus the overall performance grade. All of the key elements were highly correlated with one another and with overall performance. The differences in the relationship between each element and overall performance were trivial, so it was determined that each element should contribute equally to the index score. To create the index, each grade across the elements plus the overall performance grade were rescaled from 0 to 100 (A = 100, B = 75, C = 50, D = 25, and F = 0). Then, any evaluation that contained 5 or more “not sure” or “decline to answer” responses per state was removed. A total of 6.5% of state evaluations were unusable. From the usable evaluations, the scores on the elements were then averaged together to create the index score from 0 to 100.

The scores displayed in this report have been rounded to one decimal point. However, when developing the ranking, scores were evaluated based on two decimal points. Therefore, states that appear tied based upon the scores in this report were not tied when two decimal points were taken into consideration. The scores for states that appear tied based on one decimal place are Massachusetts (65.64) and South Dakota (65.62), Vermont (61.62) and Washington (61.57), Alaska (56.58) and Pennsylvania (56.56), and New Mexico (53.89) and Florida (53.86).
For the Ranking on Key Elements, a score was calculated per element for each state based on the 0 to 100 rescaled performance grades. The states were then ranked by their mean scores on that element.

Reliability of Survey Percentages

The results from any sample survey are subject to sampling variation. The sampling variation (or error) that applies to the results for this survey of 1,482 respondents is plus or minus 2.5 percentage points. That is, the chances are 95 in 100 that a survey result does not vary, plus or minus, by more than 2.5 percentage points from the result that would have been obtained if interviews were conducted with all persons in the universe represented by the sample. Note that survey results based on subgroups of smaller sizes can be subject to larger sampling error.
Sampling error of the type so far discussed is only one type of error. Survey research is also susceptible to other types of error, such as refusals to be interviewed (nonresponse error), question wording and question order, interviewer error, and weighting by demographic control data. Although it is difficult or impossible to quantify these types of error, the procedures followed by Harris Interactive keep errors of these types to a minimum.