“No matter how successful your business,” says Bernie Marcus, co-founder of Home Depot, “one lawsuit can undo the work of years. Lawsuits cause endless grief for small business owners as well as community organizations and when you look at the numbers nationally, the losses are staggering. Americans are paying billions of dollars because companies and nonprofits—large and small—have to operate under the constant threat of a liability suit.”
Marcus revolutionized the hardware business with the launch of Home Depot in 1978 and became one of America’s great business success stories. “But,” as Marcus tells it, “things have changed a great deal since then. America’s tort litigation system has become one of the biggest threats to entrepreneurship and our free enterprise system. I believe that it would be extremely difficult to start the company in today’s legal and regulatory environment. I worry about the next generation of entrepreneurs.”
So Marcus brought his leadership to the cause against lawsuit abuse in America. The result is the American Justice Partnership (AJP), which in a matter of years has become one of the nation’s most effective advocates for state civil justice reform. “With AJP, we’re fighting back and winning,” Marcus says.
In all, the costs of tort litigation across America come to some $260 billion annually—or nearly $900 per person. And, Marcus adds, that figure covers only the direct costs paid by defendants or insurers in awards and settlements. Counting the indirect costs, such as loss in share value, loss in brand loyalty, higher insurance premiums or earnings lost after layoffs and bankruptcies, the number rises by tens of billions of dollars.
Altogether, according to a report by the Council of Economic Advisors, U.S. liability suits come to more than double the average cost in other industrialized nations. All this has a direct impact on the nonprofit sector because there is less money available for philanthropy and because insurance costs and litigation costs are increased.
Because even unmerited litigation has become so lucrative, trial lawyers have become a potent political force in Washington and in many state capitols across America. The trial lawyers lobby in recent years has invested millions of dollars in state and national political campaigns, supporting, for example, activist judges and opposing efforts to curb lawsuit abuse. In Washington, according to Marcus, trial-lawyer interest groups have blocked most reform efforts, especially in the U.S. Senate. This is one reason AJP’s strategy has focused on legal reform in the states.
The AJP coalition includes more than 60 national and state organizations working together to achieve tort reform at the state level. “AJP brings these partners together, for the first time, as an active network to leverage their resources to win legislative reforms and to build public support for pro-reform candidates for state office, especially state supreme courts,” Marcus said. “AJP helps create state-specific unifying plans and helps raise funding for state reform campaigns.”
“The nonprofit community is getting hammered by frivolous lawsuits,” says Marcus, who cites the increased difficulty in recruiting nonprofit directors and volunteers who are afraid of getting sued. “Nonprofits and even municipalities cannot afford the increased insurance premiums and litigation defense costs with the result being more and more community outreach programs, recreation facilities and summer camps are closing down. The trial bar is quick to sue nonprofits and municipalities when they see deep-pocket board members and insurance companies.”
“These trial lawyers long ago learned to combine their resources. Now we reformers have learned to work together, and that’s bad news for the tort lobby.”
Among AJP’s partners are some of the most influential policy organizations in America. They include the Heritage Foundation, the American Legislative Exchange Council, and legal policy divisions of the American Enterprise Institute and Manhattan Institute. Also involved are the American Tort Reform Association, the Council of State Chambers, the Council of State Manufacturing Organizations, the Federalist Society, the National Association of Manufacturers, and the Pacific Research Institute. As if that were not a formidable enough public policy force, AJP also works closely with state chambers of commerce, manufacturing organizations, and state legal reform groups across the country.
AJP has already achieved significant reforms in Florida, Georgia, South Carolina, Michigan, Illinois, Oklahoma, Wisconsin, and Alabama, among others. AJP’s leaders, who were involved in legal reform campaigns prior to founding AJP, have helped win legal reforms in many other states, notably Mississippi and Texas.
In founding AJP, Marcus found ready allies in former Michigan governor John Engler, who now serves as president of the National Association of Manufacturers, and DaimlerChrysler’s Steve Hantler, a longtime legal reform leader. Together they mapped out a strategy for AJP and recruited companies and foundations who shared their distaste for “lottery-style justice.”
AJP brings these groups together three or four times a year for “partners meetings,” at which they agree upon specific national and state plans to accomplish those objectives, coordinate their activities, and brainstorm new approaches to legal reform. AJP then provides grants and tort reform campaign expertise to its partner organizations to carry out national and state plans. Overseeing all of this activity is AJP’s president, Dan Pero, a former chief of staff to Gov. Engler, who is also charged with keeping performance to budget. “Direct donor accountability,” says Pero, “is one of the things that makes AJP different.”
As does its very low overheard. According to Marcus, “we didn’t want AJP to become yet one more of those big lobbying groups that spend most of their time and supporters’ money trying to meet their own operating costs. We kept it lean and mean, and we focused our efforts on building grassroots strength.”
Pero notes that he is not only president of the group—he is its only full-time employee. “AJP works with and through its partners,” he explains. “There is no need to reinvent the wheel—the resources to accomplish legal reform already exist in our partners. All that was missing was the coordination, the strategic planning, and the funding and oversight that AJP brings to reform.”
Hantler, the DaimlerChrysler attorney who serves as AJP’s volunteer chairman, explains that the group is actually two separate entities—one a 501(c)(3) and the other a 501(c)(6) not-for-profit corporation. Contributions from foundations fund AJP’s communications and education efforts, including the AJP website, Victims Project, state surveys, Trial Bar Watch, judicial education and research projects.
The AJP website has become, Hantler says, “communications central” of the legal reform movement. The website features early warning alerts about key legal reform developments; opinion columns, articles and speeches by business leaders; and links to research and law review articles. Also available—and widely used, according to Hantler—are audio and video interviews with leaders such as West Virginia Governor Joe Manchin, Oklahoma Lt. Governor Mary Fallin, Georgia Speaker of the House Glenn Richardson, and Oklahoma Speaker of the House Todd Hiett.
In addition, says Hantler, “judicial and media education projects have been undertaken by AJP and its partners, and our free e-mail newsletter is sent at least twice monthly to several thousand legal reform advocates, providing updated news and information about legal reform activities and leaders in states throughout the nation. Tailored versions of the newsletter are sent to more than 1,250 legislators periodically when legislatures are in session and to more than 2,400 journalists who regularly cover politics, business and legal issues. Several national business publications have told us they check our site every few days for new legal reform story ideas.”
The site carries profiles and contact information on state and national advocacy organizations; profiles of liability laws in key states for quick reference; and links to state legislators and office holders.
Another influential feature is AJP’s Speakers Resource, a comprehensive collection of facts and arguments widely used by researchers and reporters. There is also a Victims Project to collect data from and about victims of lawsuit abuse—all of which is independently verified by AJP before being publicized.
AJP also recently launched a series of web-based surveys of state leaders to determine the impact of liability laws so as to provide legislators and the media with evidence of the need for legal reform.
With all of AJP’s many partners and their cumulative strength, however, comes a challenge. The key, Marcus says, is to “keep overhead at a minimum, and stay focused on measurable results. Our results have been excellent, and the reason is that AJP is every bit as demanding of our partner organizations as I was of my associates when I ran the Home Depot. The companies and foundations that invest in legal reform have the right to insist that their funds be productively and efficiently spent. They don’t want committee meetings. They want legal reform victories, and that’s what AJP delivers.”