Civil Litigation Is Still Broken

I had the opportunity over the holidays to roam with family through my alma mater Ole Miss, including the requisite stroll around Oxford’s picturesque Courthouse Square.

For all my good memories there, I still wince a bit to look up at the building that for many years housed the Scruggs Law Firm. As in: Dickie Scruggs, the onetime “King of Torts,” who raked in almost $2 billion in fees from insurers (post-Katrina), asbestos companies, and (most of all) Big Tobacco.

Here was Scruggs, speaking openly at a conference sponsored by Prudential Financial in 2002:

“What I call the ‘magic jurisdiction’…is where the judiciary is elected with verdict money. The trial lawyers have established relationships with the judges that are elected; they’re state court judges; they’re populists. They’ve got large populations of voters who are in on the deal, they’re getting their [piece] in many cases. And so, it’s a political force in their jurisdiction, and it’s almost impossible to get a fair trial if you’re a defendant in some of these places. The plaintiff lawyer walks in there and writes the number on the blackboard, and the first juror meets the last one coming out the door with that amount of money…. These cases are not won in the courtroom. They’re won on the back roads long before the case goes to trial. Any lawyer fresh out of law school can walk in there and win the case, so it doesn’t matter what the evidence or law is.”

And we wonder why America’s civil litigation system has become a horrible mess?

Dickie Scruggs went from Jackpot Justice to just justice. He spent six years in prison following conviction in two separate federal cases of bribery and corruption of a public official, including trying to bribe a judge in 2008 for $40,000 in a case involving a measly dispute over attorneys’ fees. The Scruggs firm is no more. But the system is largely the same.

Following Scruggs’s fall from grace, and other revelations of legal abuse—along with the 2010 elevation of reform-minded Republicans in Congress and statehouses—there was optimism that the tide would turn. And in some states, reforms have been achieved. Notably, Texas enacted liability caps in 2010. In 2023, Florida enacted a major bill that modifies the bad faith framework, eliminates one-way attorney’s fees and fee multipliers, and ensures that Floridians can’t be held liable for damages if the person suing is more at fault.

But the United States remains one of the most litigious countries in the world, with more than 40 million lawsuits filed annually. Businesses are regularly hit with massive nuclear verdicts of $10 million or more—1,288 from 2013 to 2022, according to the U.S. Chamber of Commerce’s Institute for Legal Reform. The cost of defending claims continues to rise (more than $23 billion annual cost to businesses). Legal costs are rising much faster than inflation. Congress, meanwhile, has done nothing.

Democrats uniformly support the trial bar, and pockets of Republicans are likewise friendly to the plaintiffs’ lawyers. This helps explain why some judicial “hellholes”— areas known for civil court judges that systematically apply laws and procedures in an unfair and unbalanced manner generally favoring plaintiffs—are in the GOP-led South. States including Georgia, Louisiana, and South Carolina made the Association for Tort Reform’s 2024-2025 Top 10 judicial hellholes list, as did both New York City and Philadelphia.

In a recent report, Munich Re said legal system abuse is being pushed by assignment of benefits, polarization of the public driven by shifting attitudes toward corporations, and changes in jury pools from the older generation to younger millennials and Gen Z. “It also does not help that lawyers are skilled at tapping into jurors’ emotions to make their arguments resonate, allowing them to secure larger verdicts,” the report notes.

A closely divided Congress in 2025 is unlikely to enact preemptive legal reforms. Meanwhile, the business community and insurers are increasingly focused on the abusive practice of third-party litigation funding (TPLF), a tool that allows hedge funds and international investors (think private wealth funds and oligarchs) to fund massive lawsuits. Whenever you read that a product has been recalled, you can bet a litigation funder is racing to file a class action.

“Third-party litigation funding has devastatingly become a multibillion-dollar global industry, turning lawsuits into investments at the expense of societal good,” says Sean Kevelighan, CEO of the Insurance Information Institute. “It is unconscionable that plaintiffs are able to further exploit the legal system by proactively seeking unassociated third parties to finance their lawsuits.”

Kevelighan notes that concerns with TPLF primarily stem from the opaque nature of the industry’s practices, particularly the lack of disclosure as to whether outside funding is involved in a given case. Few states require attorneys or their clients to disclose TPLF agreements to the opposing side.

One certainty for 2025 is that a massive congressional tax battle looms on Capitol Hill as key provisions of President-elect Donald Trump’s first-term Tax Cuts and Jobs Act near expiration. There is an evolution of thought that the tax code might be a means to trim the sails of TPLF. Stay tuned. As for Dickie Scruggs, he’s disbarred for life. In prison, to be fair, he is credited with helping scores of inmates get their GED. He is contrite about his corruption conviction. And he’s probably doing fine: reports are that his last $20 million check from a tobacco settlement was set to land at the end of 2024.