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EXCESSIVE LITIGATION’S IMPACT ON AMERICA’S 

GLOBAL COMPETITIVENESS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON THE CONSTITUTION 

AND CIVIL JUSTICE 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

MARCH 5, 2013 

Serial No. 113–7 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 
(II) 

COMMITTEE ON THE JUDICIARY 

BOB GOODLATTE, Virginia, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

LAMAR SMITH, Texas 

STEVE CHABOT, Ohio 

SPENCER BACHUS, Alabama 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

MARK AMODEI, Nevada 

RAU ́ L LABRADOR, Idaho 

BLAKE FARENTHOLD, Texas 

GEORGE HOLDING, North Carolina 

DOUG COLLINS, Georgia 

RON DeSANTIS, Florida 

KEITH ROTHFUS, Pennsylvania 

JOHN CONYERS, JR., Michigan 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

JUDY CHU, California 

TED DEUTCH, Florida 

LUIS V. GUTIERREZ, Illinois 

KAREN BASS, California 

CEDRIC RICHMOND, Louisiana 

SUZAN DelBENE, Washington 

JOE GARCIA, Florida 

HAKEEM JEFFRIES, New York 

SHELLEY HUSBAND, Chief of Staff & General Counsel 

PERRY APELBAUM, Minority Staff Director & Chief Counsel 

SUBCOMMITTEE ON THE CONSTITUTION AND CIVIL JUSTICE

TRENT FRANKS, Arizona, Chairman 

JIM JORDAN, Ohio, Vice-Chairman 

STEVE CHABOT, Ohio 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

LOUIE GOHMERT, Texas 

RON DeSANTIS, Florida 

KEITH ROTHFUS, Pennsylvania 

JERROLD NADLER, New York 

JOHN CONYERS, JR., Michigan 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

STEVE COHEN, Tennessee 

TED DEUTCH, Florida 

PAUL B. TAYLOR, Chief Counsel 

DAVID LACHMANN, Minority Staff Director 
(III) 

C O N T E N T S 

MARCH 5, 2013 

Page 

OPENING STATEMENTS 

The Honorable Trent Franks, a Representative in Congress from the State 

of Arizona, and Chairman, Subcommittee on the Constitution and Civil 

Justice ................................................................................................................... 1 

The Honorable Jerrold Nadler, a Representative in Congress from the State 

of New York, and Ranking Member, Subcommittee on the Constitution 

and Civil Justice ................................................................................................... 2 

The Honorable Bob Goodlatte, a Representative in Congress from the State 

of Virginia, and Chairman, Committee on the Judiciary ................................. 7 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, Ranking Member, Committee on the Judiciary, and 

Member, Subcommittee on the Constitution and Civil Justice ........................ 9 

WITNESSES 

Paul J. Hinton, NERA Economic Consulting 

Oral Testimony ..................................................................................................... 11 

Prepared Statement ............................................................................................. 13 

Rocky Flick, Miami, OK 

Oral Testimony ..................................................................................................... 16 

Prepared Statement ............................................................................................. 18 

Neil Vidmar, Ph.D., Russell M. Robinson II Professor of Law, Duke University School of Law, and Professor of Psychology, Duke University 

Oral Testimony ..................................................................................................... 23 

Prepared Statement ............................................................................................. 26 

Henry N. Butler, GMU Foundation Professor of Law, and Executive Director, 

Law & Economics Center, George Mason University School of Law 

Oral Testimony ..................................................................................................... 34 

Prepared Statement ............................................................................................. 37 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Material submitted by the Honorable Jerrold Nadler, a Representative in 

Congress from the State of New York, and Ranking Member, Subcommittee 

on the Constitution and Civil Justice ................................................................. 5 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Honorable Bob Goodlatte, a Representative in 

Congress from the State of Virginia, and Chairman, Committee on the 

Judiciary ............................................................................................................... 59 

Material submitted by the Honorable Trent Franks, a Representative in 

Congress from the State of Arizona, and Chairman, Subcommittee on the 

Constitution and Civil Justice ............................................................................ 61 

Supplemental Material submitted by Neil Vidmar, Ph.D., Russell M. Robinson 

II Professor of Law, Duke University School of Law, and Professor of 

Psychology, Duke University ............................................................................... 64 

(1) 

EXCESSIVE LITIGATION’S IMPACT ON 

AMERICA’S GLOBAL COMPETITIVENESS 

TUESDAY, MARCH 5, 2013 

HOUSE OF REPRESENTATIVES

SUBCOMMITTEE ON THE CONSTITUTION

AND CIVIL JUSTICE

COMMITTEE ON THE JUDICIARY

Washington, DC. 

The Subcommittee met, pursuant to call, at 2:50 p.m., in room 

2141, Rayburn House Office Building, the Honorable Trent Franks 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Franks, Goodlatte, Jordan, Chabot, 

King, DeSantis, Rothfus, Nadler, Conyers, Scott, Cohen, and 

Deutch. 

Staff Present: (Majority) Zach Somers, Counsel; Sarah Vance, 

Clerk; (Minority) David Lachmann, Subcommittee Staff Director; 

and Veronica Eligan, Professional Staff Member. 

Mr. FRANKS. The Subcommittee on the Constitution and Civil 

Justice will come to order. Without objection, the Chair is authorized to declare a recess of the Committee at any time. 

And I will say good afternoon to all of you. Thank you for being 

here. I apologize for the delay. There were votes on the floor, and 

we appreciate you being here. 

Welcome to the first hearing of the Subcommittee on the Constitution and Civil Justice for the 113th Congress. The topic for today’s hearing is Excessive Litigation’s Impact on America’s Global 

Competitiveness. 

During this Congress, this Subcommittee will examine various 

proposals to reform our Nation’s civil justice system. One of the 

animating factors behind all of these proposals will be how excessive litigation creates huge costs that unnecessarily burden and diminish the American economy, job creation and our global competitiveness. 

The unemployment rate today remains around 9 percent. And 

economic growth actually contracted in the last quarter. I believe 

that this hearing will reveal that part of the reason for America’s 

high unemployment and sluggish economy is the excessive cost our 

litigation system imposes on U.S. job creators. 

Americans face the highest lawsuit costs of any developed country. Our tort lawsuit costs are at least double those of Germany, 

Japan, and Switzerland, and triple those of France and the United 
2 

Kingdom. According to a recent study by economists at the Pacific 

Research Institute, America’s tort system imposes a total cost on 

the U.S. economy of about $865 billion per year, which is equal for 

the total annual output of all six New England States or the yearly 

sales of the entire U.S. restaurant industry. This amounts to an 

annual tort tax of $9,827 on a family of four, and is equivalent to 

an 8 percent tax on consumption or a 13 percent tax on wages. 

Excessive tort costs hurt U.S. global competitiveness in at least 

three ways. First, excessive lawsuit costs leave less money for 

American companies to invest. Money that America spends on its 

litigation system is money that cannot be spent on research, innovation, expansion and job creation. 

Second, our lawsuit system puts U.S. companies at a disadvantage when they are doing business abroad. American companies 

are increasingly being sued in U.S. courts for wrongs allegedly 

committed abroad. Many of these suits have been marred by disturbing evidence of fraud, misrepresentation, and corruption by 

American and foreign trial lawyers. 

Third, our lawsuit system discourages foreign investment in the 

U.S. economy. A 2008 study by the Department of Commerce concluded that the U.S. Litigation environment harmed our competitiveness by discouraging foreign investment. This study found that 

for international businesses, ‘‘The United States is increasingly 

seen as a Nation where lawsuits are too commonplace.’’ This discourages foreign-owned companies from expanding business and in 

creating jobs in the United States. 

Despite the high costs of our tort system, it does not always appear that the system is promoting consumer safety or delivering 

fair and appropriate outcomes. In terms of safety, there is little evidence that additional tort lawsuits make Americans safer. 

According to World Health Organization statistics, Americans die 

from unintentional injuries at a higher rate than our peers in other 

developed countries. And in terms of fair outcomes, the U.S. Tort 

system returns less than $0.50 of every tort cost dollar to injured 

claimants, those it was designed to help. In other words, the 

United States is shouldering the burden of excessive litigation costs 

without receiving any perceivable benefit from those costs. 

Now, I look forward to the witnesses’ testimony. I believe that 

this hearing will help shine more light on how our tort system burdens the U.S. economy, reduces job creation, inhibits capital investment, and stifles innovation. I hope that with this knowledge, we 

can moved forward in this Congress with civil justice reforms that 

enable American companies to better compete in the global marketplace and raise our productivity and the standard of living for all 

Americans. 

And with that, I want to thank again everyone in the new year 

for coming to the Committee and I would yield to the Ranking 

Member of the Subcommittee, Mr. Nadler, from New York. 

Mr. NADLER. Thank you, Mr. Chairman. Mr. Chairman, before 

we begin, I want to congratulate you on another Congress as Chairman of this Subcommittee. 

We have jurisdiction over some of the most important matters 

Congress is ever called upon to consider. It is a tremendous responsibility, and I know all our Members take the responsibility very 
3 

seriously. I also want to welcome our Members from both sides of 

the aisle. I am sure we will have some very spirited debates, as we 

always do. That is appropriate. Many of the issues we tackle raise 

our most fundamental values. I am confident we will approach 

these debates with goodwill and mutual respect. 

Today’s hearing revisits a perennial issue before our Subcommittee; namely, the question of the impact of the tort system 

on our economy. It is a fair question, and one we have debated for 

years. At its core, the purpose of the tort system is to apportion responsibility and to allocate costs based on how each of us observes 

or fails to observe our legal duties to one another. When someone 

is harmed because of another’s negligence or wrongdoing, it is fair 

that the person whose negligence inflicted that harm compensate 

the injured party. This is not a cost to society, but, rather, a transfer to the injured party. It also ensures that there was an economic 

incentive for all of us to be careful, to take steps needed to ensure 

that our products are safe, that our property is safe, that the food 

we sell is safe, even if those steps involve some costs. It is also a 

way to ensure that when someone is wrongly harmed and faces 

medical bills or lost work that the responsible party will pay those 

bills. In other countries, there is less need to resort to the courts 

because the healthcare system, the social safety net, and government regulation address many of those concerns. I am not sure 

how many of the proponents of restricting the rights of plaintiffs 

would prefer that approach, but it is certainly an alternative. 

There have been some often cited studies that purport to demonstrate that the tort system as it is currently structured imposes 

a significant cost on society and on our competitiveness. Studies, 

most especially the series of reports by Towers Watson and the Pacific Research Institute’s ‘‘Jackpot Justice,’’ have met with a great 

deal of criticism, some of which we will hear today. As Judge Richard Posner has observed, ‘‘The aim of liability is to induce potential 

injurers to spend more on safely, and so the fact that they do spend 

more cannot be judged a failure to improve social welfare.’’ And, indeed, the authors of the Towers Watson report admit, ‘‘We examine 

only one side of the tort system, the costs. No attempt has been 

made to measure or quantify the benefits of the tort system or to 

conclude that the costs of the U.S. tort system outweigh the benefits or vice versa.’’ And, as Judge Posner correctly points out, there 

is a, ‘‘difference between a cost, which in economic terms is a reduction of the amount of valuable resources, and a transfer of 

wealth from one person to another that doesn’t reduce the total 

amount of resources but merely redistributes them.’’ 

We have also heard some real horror stories about the impact on 

lawsuits on businesses. But we don’t always get all the facts or 

even accurate facts. So I hope that we will continue to look at those 

examples carefully to make sure that we draw the correct conclusions. 

Today, for example, we have as one of our witnesses, a CEO of 

Blitz, USA, a manufacturer of gas cans. Mr. Flick is being presented as a victim of excessive litigation and will tell the Subcommittee that his company was driven out of business by greedy 

trial lawyers representing people who poured gas on open flames, 

and that the people who were crippled, disfigured, and killed, in-
4 

cluding small children, were not really victims, but were actually 

predators destroying a blameless company. What Mr. Flick’s testimony does not mention is that many of these victims did nothing 

more than fill a chain saw; or, in the case of 3-year-old Jenna 

Bullen, knocked over a can. She suffered second-degree burns on 

95 percent of her body. She lost her fingers, her toes, and almost 

all of her skin. The can exploded when leaking fumes ignited on 

an open flame in a hot water tank. The fact that a simple device 

costing only pennies called a flame arrester could have prevented 

these tragedies. When gas outside a gas can ignites, the gas can 

will explode if the flame ignites the gas inside. Flame arresters 

have been used for years to prevent such explosions. According to 

a report by Consumers Union, ‘‘Should fumes outside the can ignite 

as you pour or fill, a flashback is possible that could ignite the contents of the can itself. Such accidents can be prevented by a flame 

arrester, which we think should be legally required in all openings 

of containers like these. As it is, only the makers of the Jerry Jug 

and the Eagle Safety have bothered to provide an arrester. The 

Eagle Safety is a strainer-like wire mesh device in a single fill pour 

opening does give full-time protection.’’ Mr. Flick understood this. 

He wrote a memo in which he said that within the next 2 years, 

his company should ‘‘develop and introduce a device to eliminate 

flashback from a flame source. Water heater incidents should be 

the test case for this. Once this is developed, we should advocate 

the device be standardized under ASTM’s regs or law.’’ That certainly places these accidents and Mr. Flick’s victim claim in a different light. Perhaps that is why the company was ordered to pay 

$250,000 in sanctions for failing to produce this memo when sued 

by the heirs of Jonathan Green. The court found that ‘‘The settlement would not have been not less than $250,000 higher if the 

plaintiff would have had the document. Particularly the court finds 

that the ‘wish list,’ Mr. Flick’s memo, which was not disclosed to 

the plaintiff, would have drastically increased the settlement value. 

The wish list would have hurt if not potentially eliminated the defense that they did not aid a flame arrester because it would not 

have been useful.’’ 

I ask unanimous consent for a copy of Mr. Flick’s wish list memo 

be placed in the record. 

This is the victim the Chamber of Commerce has held up as 

proof that our legal system is broken. I would suggest they find 

someone else. 

Another of today’s witnesses has this to say: ‘‘Alternative legal 

rules should be evaluated in terms of how they guide behavior. A 

straightforward normative implication of this analysis is that we 

should create legal rules that provide businesses incentive to invest 

in injury avoidance so long as the marginal costs of achieving additional safety is less than the expected marginal benefit of increased 

safety.’’ I am sure that little Jenna Bullen will be interested in that 

theory. 

I look forward to today’s testimony, and I yield back the balance 

of my time. 

Mr. FRANKS. I thank the gentleman. And his mentioned document will be placed into the record. 

[The material referred to follows:] 
5 
6 
7 

Mr. FRANKS. And I would now yield to the distinguished Chairman of the full Committee, Mr. Goodlatte, from Virginia. 

Mr. GOODLATTE. Thank you, Mr. Chairman. And I very much appreciate you holding this hearing on a very important subject. Before I give my opening statement, I would like to recognize and 

welcome a good friend and fellow Virginian, Professor Henry Butler, who has something in common with a former Member of this 
8 

Committee. His father and my former employer without whose help 

and guidance, I would not be serving in the Congress today. So he 

is a good representative of great work done by the Butler family 

in an earlier generation. And, Henry, you are always welcome here. 

And thank you also for the good work you do at the Center for Civil 

Justice Reform at George Mason Law School, another great contribution to our whole effort to address this issue. 

With Americans facing high unemployment and stagnant economic growth, it is the role of every Congressional Committee to 

do its part to get America moving again. For the Judiciary Committee, this means, in part, doing what we can to remove the 

crushing burden that excessive litigation costs impose on our global 

competitiveness, economic growth, and our ability to create and retain jobs. 

Judge Learned Hand observed that litigation is to be dreaded beyond almost anything short of sickness or death. Unfortunately, the 

United States has become the world’s most litigious country. This 

litigiousness has created what amounts to a tort tax which imposes 

an added cost on every product Americans purchase and every 

service we consume. 

We need a civil justice system that deters wrongdoers and fully 

compensates victims. But a prosperous free enterprise economy 

also depends on a tort system that is efficient and free of meritless 

litigation and excessive damage awards. As economists have pointed out, an efficient tort system produces greater trust among market participants through the fair and systematic resolution of disputes, thereby encouraging more production and exchange, creating 

a higher standard of living for individuals within a society. In other 

words, we can ensure that all injured parties have their day in 

court while at the same time enhancing our global economic competitiveness and creating and maintaining jobs for American workers. 

Regrettably, our civil justice system is not functioning toward 

this end. It is not fairly compensating victims who have to wait too 

long to get a case to trial and receive an average of only $0.46 of 

every dollar spent in litigation, even when they win. And it is hurting the economy. 

America’s runaway litigation system harms the economy in at 

least four ways. First, the specter of undeserved, ruinous litigation 

makes it more difficult for small businesses to grow and become 

competitive on a global scale. 

Second, even those American businesses that are large enough to 

compete globally are saddled with litigation liabilities that their 

foreign rivals do not face. 

Third, America’s lawsuit climate discourages foreign direct investment in the U.S. economy. 

And, finally, American companies’ domestic liability for their actions abroad places them at a competitive disadvantage relative to 

foreign competitors seeking to do business in the same foreign markets. 

The real losers in all of this are ordinary Americans. American 

consumers are hurt in the form of higher prices, U.S. workers in 

the form of lower wages, and American retirees in the form of low 

returns on retirement accounts and pension funds. Those hurt by 
9 

excessive litigation costs include people like the former employees 

of Blitz, USA, the company Rocky Flint, the second witness on our 

panel today, used to run. At its peak, Blitz, USA produced three 

out of every 4 portable gas cans nationwide and employed 350 people in the small town of Miami, Oklahoma. But over the last decade, a wave of costly litigation driven by the misuse of its products 

by others, a misuse over which the company had no effective control, took its toll. The lawsuits finally drove the company out of 

business. Blitz, USA is gone. But the lesson of the devastating impact lawsuits can have on real lives and real communities lives on. 

I am sure that Rocky will share much more with us today about 

the real-life impact excessive litigation costs had on Blitz and its 

employees. 

There has got to be a better way to solve issues with regard to 

technology and changes in products than to drive a good company 

employing 350 people out of business with lawsuits in which a 

large portion of the amount of money paid was not paid for economic loss and was not paid to the people who suffered, whether 

or not their claim was valid under the law. 

I look forward to our witnesses’ testimony. I believe that it will 

be invaluable as we move forward in this Congress with reforms 

to improve our civil justice system. 

And, Mr. Chairman, I yield back. Thank you. 

Mr. FRANKS. And I thank the gentleman. 

And I would now yield to the Ranking Member of the Committee, 

Mr. Conyers from Michigan. 

Mr. CONYERS. Thank you, Mr. Chairman. I welcome all the witnesses, particularly the one who hasn’t been in this hearing room 

for a number of decades. We remember his father fondly, who was 

himself a Member of the Judiciary Committee. 

Mr. HINTON. Thanks. 

Mr. CONYERS. Members of the Committee, this is a hearing that 

may produce seriously flawed studies, that may make it difficult if 

not impossible to form as a basis for serious policy making. We 

have a number of issues before us. But I think that we need to examine whether we want to change the system and how much we 

want to change it. One frequently criticized component of our trial 

system is punitive damages. And I would like to share with you 

that they are very few, they are rare, and reserved for only the 

most harmful kinds of cases. And they are not awarded to compensate injured plaintiffs, but the purpose is to punish and deter 

future wrongdoing. The whole idea is to inhibit wrongdoing by 

knowing that these kinds of legal results are available. They are 

used in cases where there is either intentional misconduct or grossly negligent activity. And so I want to try to turn off some of the 

wrath that may come down on punitive damages. 

Now, what we have found is that only about 5 percent of the 

plaintiffs were awarded punitive damages. And the median punitive damage award in these cases was $64,000. Punitive damages 

in excess of $1 million were awarded to only 13 percent of these 

cases. And so I want to improve the system in many, many ways. 

And I think that it is carefully occurring. 

Another issue that could be raised is the so-called explosion of 

litigation. And I enjoy all of your comments on that subject. But 
10 

frivolous lawsuits, too, are also brought under this title of explosive 

litigation. But the frequency of tort cases in the courts to most of 

our surprise has steadily decreased in recent years. We found that 

the number of tort cases have declined by 79 percent. And tort filings continue to decline and represent only a small fraction of litigation in the United States. The National Center for State Courts 

shows tort cases account for 4.4 percent of all cases filed in State 

courts. 

And so I invite you to approach these discussions that we will 

hear today in a fair and balanced manner. And remember the great 

savings that occur by the examples set by punitive damages and 

the fact that cases, tort cases are really on the decline and not otherwise. 

I thank the Chairman for his courtesy and return any unused 

time. 

Mr. FRANKS. And I thank the gentleman. 

Without objection, other Members’ opening statements will be 

made part of the record. 

So let me now introduce our witnesses. Welcome to all of you. 

Mr. Paul Hinton is the Vice President of NERA Economic Consulting. Mr. Hinton has over 15 years’ experience in securities and 

finance litigation, commercial and contract disputes, bankruptcy 

and product liability cases. He has testified in litigation, arbitration, and before legislative committees such as this one. Prior to 

joining NERA, Mr. Hinton worked on Project Finance at Morgan 

Grenfell, and at the European Commission. He is a graduate of Oxford University, and has a graduate degree from the Kennedy 

School of Government at Harvard University. Mr. Hinton, welcome, 

sir. 

Mr. Rocky Flick is the former President and CEO of Blitz, USA. 

At its peak, Blitz, USA was the producer of three out of every four 

portable gas cans nationwide and employed 350 people in the small 

town of Miami, Oklahoma. But over the last decade, a wave of costly litigation driven by the misuse of its products by others, a misuse over which the company had no effective control, took its toll. 

Unfortunately, lawsuits drove the company out of business in August of last year. 

Professor Neil Vidmar is the Russell M. Robinson, II professor of 

law and professor of psychology at Duke Law School. Professor 

Vidmar’s scholarly research involves the empirical study of law 

across a broad spectrum of topics in civil and criminal law. A social 

psychologist by training, he is a leading expert on jury behavior 

and outcomes and has extensively studied medical malpractice litigation, punitive damages, dispute resolution, and the social psychology of retribution and revenge. Welcome, sir. 

Professor Henry Butler has been noted already, a rather famous 

name around here, is the George Mason University Foundation 

Professor of Law, and Executive Director of the Law and Economic 

Center as George Mason University School of Law. Professor Butler has devoted much of his career to improving this country’s civil 

justice system through judicial education programs. Professor Butler has held prior appointments at Northwestern University School 

of Law, the Brookings Institution, Chapman University, the Uni-
11 

versity of Kansas, the University of Chicago, and Texas A&M University. 

Each of the witnesses’ written statements will be entered into 

the record in its entirety, so I would ask each witness summarize 

his testimony in 5 minutes or less. 

To help you stay within that time, there is a timing light in front 

of you. The light will switch from green to yellow, indicating that 

you have 1 minute to conclude your testimony. When the light 

turns red, it indicates that the witness’ 5 minutes have expired. 

And before I recognize the witnesses, it is the tradition of the 

Subcommittee that they be sworn. So if you please stand. 

[Witnesses sworn.] 

Mr. FRANKS. Thank you, please be seated. 

And I would now recognize our first witness, Mr. Hinton. Sir, 

please turn on your microphone before speaking. Yes, sir, you got 

it. 

TESTIMONY OF PAUL J. HINTON, 

NERA ECONOMIC CONSULTING 

Mr. HINTON. Thank you very much. I believe the microphone is 

on. 

Thank you, Mr. Chairman and distinguished Committee Members, for inviting me here today to testify on the effects of litigation 

on the U.S. Competitiveness. 

As was already said, my name is Paul Hinton. I am a Vice President at NERA Economic Consulting. NERA is a global firm dedicated to applying the principles of economics and finance and quantitative analysis to complex business, legal, and public policy challenges. I have coauthored a number of empirical studies that estimate the direct costs of litigation to businesses, including a forthcoming study commissioned by the U.S. Chamber Institute for 

Legal Reform that compares litigation costs across countries. It is 

the results of this forthcoming study comparing the costs of litigation in the United States with European countries and Canada 

that provides the basis for my testimony today. 

U.S. Litigation, whether arising in tort claims or otherwise, affects the ability of American companies to compete globally by imposing additional costs. But higher direct costs of doing business 

are just the tip of the iceberg. Litigation also imposes indirect 

costs. Uncertainty created by litigation may affect companies’ borrowing costs and, hence, their ability to invest, grow, and create 

jobs. Many foreign companies are wary of becoming embroiled in 

U.S. litigation, which may deter foreign direct investment, and 

multinational companies may choose to limit the extent of their operations in the United States. 

Dealing with litigation can occupy management time, result in 

unproductive risk avoidance, and otherwise distort business decision making. These indirect costs imposed by the tort system reduce productivity. 

The actuarial firm of Towers Watson estimates that the U.S. tort 

costs exceed $250 billion a year, representing 1.7 percent of GDP. 

Our forthcoming study expands on this body of knowledge with 

separate data and estimates the U.S. litigation costs are about two 

and a half times the average level of the four largest Eurozone 
12 

economies. That is Germany, France, Italy, and Spain. Furthermore, when compared to the least costly European countries, such 

as Belgium, The Netherlands, and Portugal in our study, U.S. litigation costs are estimated to be about four times as high as those 

countries. 

Our study uses prices of general liability insurance bought by 

businesses in the United States, Canada, and Europe provided by 

the insurance broker Marsh, Inc. as a basis for estimating relative 

litigation costs. General liability insurance prices provide a useful 

basis for analysis because they reflect the costs of litigation risk 

even though only a fraction of aggregate litigation costs may be insured. We also examine the differences in costs of automobile thirdparty liability insurance and corporate director and officers liability 

insurance, commonly known as D&O, to provide additional insights 

on different litigation costs. Automobile insurance represents about 

half of all liability insurance in the U.S. and an even greater proportion in Europe. It follows that automobile liabilities costs constitute a significant cost of all insured liability costs. And while differences in auto liability insurance across countries means that 

price comparisons are not very meaningful, comparisons of claim 

costs in different countries reveal that on average U.S. costs in 

2008 were almost four times the level in the largest Eurozone 

economies. 

Furthermore, D&O insurance is specifically designed to cover the 

costs of litigation. And so it is particularly relevant here. Litigation 

involving directors and officers is only a small component of the 

overall liability costs in each country. However, the large U.S. 

share of the global D&O market is an illustration of how differences in legal systems can affect liability costs. According to Alliance, which is a major global insurance company, U.S. aggregate 

D&O premiums for 2009 amounted to between 5 billion and 6.7 billion, whereas the European aggregate was only 2 billion for an 

economy about the same size. However, it is important to note that 

European D&O costs of multinational companies in large part result from exposure to litigation in the U.S. And not to their domestic exposure. As a result, on average, domestic European D&O litigation exposure would be much less than a third of the U.S. level. 

Now, simple comparisons of insurance costs may not provide a 

reliable basis for comparing litigation costs across countries because there are many factors that affect liability insurance rates 

that are unrelated to the operation of the legal system in each 

country. The contribution of our latest study is to separate out the 

cost differences due to economic factors, demographics, healthcare 

costs, and separate out then the effects of the legal system. 

Just wrapping up—I see my time is up—I would say in conclusion that the U.S. costs are a lot higher. And, unfortunately, this 

means that under the assumption that countries have the same 

benefits to businesses of legal protection, higher litigation costs put 

U.S. businesses at a disadvantage competitively. 

Thank you, Mr. Chairman, and distinguished Committee Members for the opportunity to testify. And I will take any questions. 

Mr. FRANKS. Thank you, Mr. Hinton. 

[The prepared statement of Mr. Hinton follows:] 
13 
14 
15 
16 

Mr. FRANKS. We would now recognize our second witness, Mr. 

Flick. Please turn on your microphone, sir. 

TESTIMONY OF ROCKY FLICK, MIAMI, OK 

Mr. FLICK. Chairman Franks and Members of the Subcommittee, 

my name is Rocky Flick. I am the CEO of Blitz, USA. I appreciate 

the invitation to testify today. 

Today’s hearing explores the costs of the U.S. legal system and 

its effects on global competitiveness. I am here to testify that these 

costs are real. In my experience with my company, these costs are 

borne by employers, consumers, and employees in the form of lost 

jobs, wages, market share, and higher prices for goods and services. 

Blitz, USA was a small company based in Miami, Oklahoma, the 

northeast corner of Oklahoma. When we filed for bankruptcy, we 

had about 120 good manufacturing jobs with better than average 

manufacturing wages and strong benefits. Healthcare was one of 

the benefits that we had at better than market levels for our employees. 

We had been in business about 50 years. And we were able to 

lead in a business, even as a small business, selling to some very 

large companies. Our customers were Wal-Mart and Home Depot 

and Ace Hardware, and the places that you all shop for durable 

goods. We manufactured approximately 15 to 20 million red plastic 

and metal gas cans every year. And our challenges weren’t with 

Chinese competition or foreign competition. We did a very good job 

at competing, both domestically and internationally. But we could 

not survive the onslaught of the trial system. 

We as an industry and the gas container industry today continues targeted by the plaintiffs’ lawyers. They have an organization where they organize around litigation, toward gas can lawsuits. And it is the biggest threat in the industry today. 

The people who lost their jobs when we filed bankruptcy lost 

those benefits. I had several people that had serious issues, like 

cancer, that then we were just unable to provide their insurance, 

and they went through significant issues after Blitz closed its 

doors. 

The way these lawsuits happen is the plaintiffs say that Blitz 

and other gas can companies should put a low-cost, simple device 

into a can to keep it from exploding. The large majority of the cases 

are when someone is pouring gas onto a fire. The second fact pattern is when some children get ahold of a gas can and get near to 

a hot water heater or a flame of some kind. There is no device that 

you can put on a gas can that will make it safe to pour gas on a 

fire. And this basic premise is what these lawsuits are about. 

Over the years Blitz had insurance. The insurance company settled because our litigation is very expensive. And then that attracted more cases and they settled and attracted more cases and 

they settled, and finally insurance got too expensive for us to buy. 

We went out of business. There are other people in the business 

today filling our void. And I believe that they will have the same 

fate as we do, unless the legal system changes. 

The CPSC studied this as far back as 1980 and determined that 

no device would help in this matter, that it shouldn’t be regulated, 

that it was because of the way that people were misusing the can. 
17 

I am not aware of any case of ours or others, other manufacturers, 

where there wasn’t misuse involved in the product. 

And I see it is time for me to wrap up. But we declared bankruptcy. The lawsuits go on today. The trial bar is suing—continues 

to sue Blitz. I am still the CEO, trying to wrap up the bankruptcy 

proceedings. Our assets have all been sold. But the plaintiffs’ bar 

continues to sue the retailers and they sue the individual executives and they sue the owners and past owners of the company. 

This system in my view is not efficient and it is not just. And 

it needs change. 

Mr. FRANKS. Thank you, Mr. Flick. 

Mr. FLICK. I appreciate the opportunity to testify and look forward to your questions. 

[The prepared statement of Mr. Flick follows:] 
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Mr. FRANKS. I would now recognize our third witness, Professor 

Vidmar. 

TESTIMONY OF NEIL VIDMAR, Ph.D., RUSSELL M. ROBINSON II 

PROFESSOR OF LAW, DUKE UNIVERSITY SCHOOL OF LAW, 

AND PROFESSOR OF PSYCHOLOGY, DUKE UNIVERSITY 

Mr. VIDMAR. I want to be very clear, although I am have been 

a faculty member at Duke Law School for the last 26 years, I am 

not a lawyer by training, although I picked up a lot of law in the 

years there. And I did spend a year at Yale Law School when I became interested in the law. My approach to the kinds of questions 

that are before this Committee today and as part of this whole debate about the tort system, is actually to collect empirical data, 

sometimes collected by others, and also to critique the kinds of 

issues that are made before this Committee. One of my areas of 

specialization over the past 26 years has been medical malpractice 

and for a slightly shorter period of time I have been studying punitive damages and related areas. But we are still going back 20 

years or so with regard to the basic kinds of questions. 

Based on this quarter century of empirical work, there are many 

myths about the tort system, the American tort system, that are 

widely believed by members of our society due to simple misunderstandings or are myths created and perpetuated often by business 

groups and individuals that are self-serving and just flat out 

wrong. 

One of the things I still talk about in my class is the McDonald’s 

coffee spill case of the poor woman that ‘‘just spilled a little bit of 

coffee on herself and got a couple million dollars in an award.’’ I 

have the pictures here today. I didn’t put them into my materials, 

but if any Members of this Committee are interested in looking at 

the scars on that woman, they are pretty dreadful because McDonald’s was selling its coffee at 190 degrees Fahrenheit when, in fact, 

the manufacturer had recommended 160 degrees. And the bottom 

line was that McDonald’s continued to sell the coffee even though 

they had had over 700 complaints simply because it the coffee sold 

better, even though more people were burned. And if you see Stella 

Liebeck’s scars, and I would be happy to pass those up, if you have 

a strong stomach. 

The coffee spill case is one of the kind of myths that has been 

perpetuated. And it is overseas as well, I should say, because I 

have given talks in Australia and New Zealand. And I talk about 

the criminal justice system. And the first thing they bring up is, 

‘‘Yeah, but what about the McDonald’s coffee case?’’ It is just wrong 

information. 

And the other thing is that, in fact, I published an article on 

medical malpractice in a leading medical journal. The doctors were 

shocked to learn that when they go to jury trial, that doctors prevail in three out of four cases. That is another one of these things, 

that we are always out to get you. 

Since this Committee’s concern is with the issue of litigation 

against businesses, and especially punitive damages, including exploding gas cans, allow me to offer a few comments that I and my 

other colleagues, Professor Tom Baker, now at the University of 

Pennsylvania Law School and Professor Herbert Kritzer at the 
24 

University of Minnesota Law School made; these are appended to 

my comments. And I urge the Committee Members to look at our 

paper on ‘‘Jackpot Justice’’ and the way that we systematically dissected it. 

There are reasons why our litigation level is a little bit higher 

than European countries, for example. One, these other countries 

have stronger regulatory mechanisms that eliminate the need for 

tort claims. Perhaps exploding gas cans. Second, the social welfare 

systems in these other countries reduces the medical costs to injured parties. I lived in Canada for almost 20 years, although I was 

born in the United States. And one of the things that Canadians 

don’t worry about are medical bills because they are taken care of. 

And tort bills are heavily driven by medical costs that are much 

higher in the U.S. than in other countries. 

In the brief period I have left, allow me to make just several 

points before my time is up. 

In 2005, there was a study by the National Center for State 

Courts. It found that 8 percent of initial claims asked for punitive 

damages. However only 31 cases were actually reported across the 

United States and the major cities in the United States. What happened to those initial claims? Well, what people often do not understand is how the tort system has mechanisms to eliminate frivolous 

claims. One is that the judge just looks at it and says, this is frivolous and I am not going to give it to the jury. That is it. Sometimes 

the judge says, well, we will let it go through. And before the jury 

is sent back to deliberate, the judge says, I won’t give—I don’t want 

you to consider the issue of punitive damages. 

The other issue that I think is important is that we do have 

some large punitive damages cases. But what is striking is they are 

often business versus business. One is TXO v. Alliance Research 

Corporation, where the Supreme Court itself said this case involved 

was egregious behavior. In one of the articles, the second articles 

that I have appended on punitive damages, we have a case which, 

again, the largest punitive one that we uncovered was a case involving a business against another business. 

So some of these things get blown out of proportion and are actually myths. And I keep going back, because I love beating this one 

to death, I love to beat the McDonald’s coffee spill case. This is the 

fourth time I have referred to it. I really urge Members of this 

Committee to look up the McDonald’s case on the Internet because 

this myth has just created incredible impression, the iconic example of our jury system gone awry. I have spent a lot of time studying juries. When I was doing medical malpractice I interviewed jurors, I followed them through. I was also involved in a unique research project in Arizona where we actually—the Arizona Supreme 

Court initiated this project—where we actually recorded in the jury 

room 50 civil juries deliberating as well as the test. The thing—and 

some of these articles are written up. I talk about it in one chapter 

of my book with Valerie Hans—one of things that came through is 

every time these claims are made about runaway juries, they are 

an insult to the American citizens that serve on juries. I feel very 

strongly about that. Because what we found was juries are so conscientious and actually like accountants go through the evidence 

and say, well, you know, the plaintiff claimed X bills. They go 
25 

*See Appendix for the supplemental material submitted with this statement. 

through and they act like accountants: ‘‘Wait a minute, this doesn’t 

add up.’’ 

And so I think those are my final comments. I have actually got 

quite a bit of time left. But I think the point that I would like to 

make is one in addition to what I have also said is I want to go 

back to this, that you underestimate the common good sense of the 

American people when you insult the jury system. 

Thank you. 

Mr. FRANKS. I thank the gentlemen. 

[The prepared statement of Mr. Vidmar follows:]* 
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Mr. FRANKS. And I now recognize our fourth and final witness, 

Professor Butler. Sir, I hope you will also turn your microphone on. 

TESTIMONY OF HENRY N. BUTLER, GMU FOUNDATION PROFESSOR OF LAW, AND EXECUTIVE DIRECTOR, LAW & ECONOMICS CENTER, GEORGE MASON UNIVERSITY SCHOOL OF 

LAW 

Mr. BUTLER. Happy to be here today. Thank you. 
35 

Chairman Franks, Ranking Member Nadler, and Members of the 

Subcommittee, thank you for the opportunity to be here today. 

The impact of our civil justice system on international competitiveness is a vitally important one. The premise of this hearing 

that we, in fact, have excessive litigation is one that I am willing 

to accept, although I cannot quantify the extent to which litigation 

is, in fact, extensive. One area of the law that has seen extraordinary amounts of litigation in recent years, and an area of particular interest to me, and which will severe as the focal point of 

my testimony, is State consumer protection law. I hope to make 

two points in my brief testimony. First, optimal. That is an economic rule. Optimal legal rules recognize the trade-off between the 

cost of accidents and the costs of accident prevention. Second, excessive litigation can tip this balance, leading firms to make socially wasteful expenditures, which ultimately harms both their 

global competitiveness and consumers. 

Tort law is perhaps the most analyzed area of law and economics. This framework of analysis can trace its lineage to one developed by Judge Learned Hand in the seminal U.S. v. Carroll Towing 

opinion over 60 years ago. Judge Hand opined that the determination of tort liability should be based on whether the alleged 

tortfeasor had failed to take additional precautions that would have 

cost less than their expected benefits in terms of reduced likelihood 

and severity injuries. 

A similar approach is found in the work of Judge, then law professor, Guido Calabresi. Calabresi famously wrote in his seminal 

book, ‘‘The Cost of Accidents,’’ that the goal of tort law should be 

to minimize the combination of the costs of avoiding accidents and 

the costs of accidents. That is in evaluating a legal regime we 

should think about the tradeoffs of costs and benefits. We can have 

too much safety, we can have too much consumer protection, we 

can have too much disclosure, and so forth. Because the marginal 

costs of accident reduction increases as the probability of accidents 

decreases, the law tolerates some injuries. That is, the optimal 

number of issues is not zero. And I know that sounds cold and 

harsh, but that is the way we think about it in law and economics, 

and I think the way the courts actually act. The benefits of holding 

American businesses liable for injuries and damages for consumers, 

customers, users of products and services are well known and have 

been summarized some by Ranking Member Nadler’s comments. So 

it serves as a guide for the behavior that we expect of our businesses. 

A civil litigation system characterized by excessive litigation can 

lead to lower levels of production, employment, innovation, and 

business openings. Unfortunately, some areas of American law 

have strayed from the balancing approaches articulated by Judges 

Hand and Calabresi. Their common sense notions have become uncommon in some areas of American law. So State consumer protection acts, which I realize are not in your jurisdiction, are an unsettling example of an area where product litigation has strayed far 

from a common sense balancing approach. In my view, the amount 

of such litigation, which imposes a tremendous toll on all American 

businesses that directly interact with consumers, is clearly excessive. States pass these laws, often referred to as little FTC acts, be-
36 

cause they were modeled after Section 5 of the FTC Act. They 

passed these laws for appeared to be sound economic reasons. In 

our modern mass-produced economy it is often uneconomical for individual consumers to bring lawsuits against manufacturers when 

they are dissatisfied with a product. To solve this problem, little 

FTC acts allow for private actions, awarding of attorneys’ fees to 

a winning consumer, statutory damages oftentimes as high as 

$1,000 per occurrence, and relaxation of traditional common law requirements of reasonable reliance and actual injury. At about the 

same time that the States were adopting little FTC acts, the class 

action lawsuit was coming into favor as another solution to the uneconomical lawsuit problem. So somewhere along the way, the two 

solutions merged into the consumer class actions. And they now 

benefit from the procedural—the class actions now benefit from the 

procedural and substantive advantages that were found in the little 

FTC acts. This combination of solutions has brought about a perfect storm of litigation resulting in a dramatic increase of litigation 

during the first decade of the century, as documented by a study 

that I oversaw when I was at Northwestern University. Consumers 

ultimately pay the costs that excessive litigation imposes on business through higher prices. Of course, because the law of demands 

that higher prices will result in fewer goods being sold, some consumers will decide to go without products altogether, and firms will 

then need fewer workers. To the extent that businesses cannot recover all of these from consumers, moreover, they result in reduced 

profits which translate into lower returns for shareholders and 

other investors. 

I wanted to quickly summarize how this impacts—this type of 

litigation can impact on the global competitiveness of firms. Corporations have responded to these lawsuits; of course, they have to 

respond to these lawsuits. And every lawsuit that is filed against 

a business diverts resources from otherwise productive pursuits. 

The greater the expected cost of litigation, the more a company will 

invest in avoiding litigation. If there are problems with a product, 

the firm will invest resources to improve to avoid litigation. And 

even when there is nothing wrong with the product and no consumers have relied or been injured, however, the mere threat of 

class actions and potential liability under broadly interpreted State 

consumer protection acts can also lead companies to pour more resources into safety. The potential for enormous financial liability as 

well as the potential for unfavorable publicity can force even the 

most stable and rational businesses to settle cases that they believe 

they could win at trial. But because this increased investment is 

tied to the cost of handling unfounded legal claims rather than consumer injury, it is socially wasteful. In this matter, excessive litigation disrupts the balance between the marginal benefits and costs 

to precaution that tort law attempts to—that tort law and other 

areas of law attempt to strike as a balance. 

So the upshot of my brief remarks is that excessive litigation 

under something as benign sounding as State consumer protection 

acts can have serious adverse consequences for America’s competitiveness. 

Thank you for allowing me the opportunity to express my views. 

[The prepared statement of Mr. Butler follows:] 
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Mr. FRANKS. Gentlemen, I thank you for your testimony. And we 

will now proceed under the 5-minute rule with questions. I will 

begin by recognizing myself for 5 minutes. 

I will address my first question to you, Professor Butler. I think 

it is commonly assumed that when U.S. companies are sued and 

excessive litigation costs are imposed that it is a nameless, faceless 
44 

corporation that pays these costs. In your experience, who ultimately bears the costs of excessive litigation? 

Mr. BUTLER. Well, to the extent we have excessive litigation, I 

think it is fair to characterize it as a tax. And as Milton Friedman 

famously would say, only people pay taxes. If somebody has to bear 

that cost and that cost is either borne by consumers in the form 

of higher prices, employees in terms of lost jobs, shareholders in 

terms of lower rates of return. So there is no—there is no free 

lunch in this system; the costs are borne by someone. 

Mr. FRANKS. Yes, sir. 

Mr. Flick, I might follow up with you sort of in the same vein. 

Who paid the ultimate price for the lawsuits against Blitz, USA? 

I won’t try to lead you in the question. Who paid the ultimate costs 

there? 

Mr. FLICK. I think all three of those, the consumer—the prices of gas cans went up over the years from about $5 for a 5-gallon gas 

can to more recently $20. People are paying more for the product, 

and the costs of litigation are in that. The costs of some environmental regulation are in that too. 

But the consumer certainly paid more, our people who lost their 

jobs paid with their jobs and their loss of benefits, and the shareholders ultimately had a company that was worth nothing. 

Mr. FRANKS. Thank you, sir. 

Mr. Hinton, let me ask you a question here. 

I was fascinated with the Professor Vidmar’s comment that they 

recorded, I think, some of the juries deliberating in cases. I didn’t 

know whether the juries knew that they were being recorded or 

not. If they did, I suppose that would change the dynamics of the 

deliberation pretty profoundly; if they didn’t, it opens up a whole 

new set of questions. 

But Professor Vidmar’s testimony, he states that the claims 

about negative effects of the American tort system have not stood 

up to scrutiny. I would like to just give you the opportunity to reiterate what your studies have shown about the effects of the American tort system and to respond to any points regarding Professor 

Vidmar’s testimony. 

Mr. HINTON. Yes. Thank you. I think one of the points I would 

like to respond to Professor Vidmar that he raised was that if you 

look at Europe, they have much more extensive healthcare benefits 

and welfare benefits and so on. And so how can you be sure that 

higher tort costs in the United States are not just a result of that. 

And in the study that we have done, we actually relied on some 

research by Kermar and Schmidt, who tried to control the amount 

of government program spending in their comparative analysis and 

found that if you were to change the benefit system in Europe to 

the same level of benefits that they have—we have in the U.S., it 

would only change the tort costs there by about 26 percent, which 

is a tiny fraction of the difference that we measure. 

So I think that in terms of the effects of the tort system, those 

cost differences, they are so large it is difficult to ignore them. The 

question of whether or not they affect competitiveness does depend 

a little bit on this issue of transfer rate; how much benefit is there 

coming from the tort system. The reason in our study that we 

think we address that is because we think that those types of bene-
45 

fits provided by the legal systems in these countries are of similar 

magnitude. And they are certainly not sufficiently different to explain why the U.S. tort system costs over two and a half times the 

European one. 

Mr. FRANKS. Well, thank you, sir. 

Mr. Flick, I might return to you, sir. I don’t know if Blitz, USA 

would have qualified as a small business. I think you said at one 

point you had 120 employees, and that is certainly not a large corporation. But would it have been easier for Blitz to survive the lawsuits against it if it were a large corporation or a division of a large 

corporation? 

Mr. FLICK. Yes, I believe so. I guess it would depend on how 

large and how much the large corporation wanted to put into 

fight—— 

Mr. FRANKS. So you think there may be a disproportionate impact on small businesses? 

Mr. FLICK. Well, a small business just can’t get the cases to trial with the high costs. If it costs 2 or $3 million to win a case and 

your insurer—the insurance company is going to settle that case. 

And a large business can take a longer view due to their resources 

and fight the cases and shine more light on the truth. 

Mr. FRANKS. Well, thank you very much. And I am going to turn 

to Mr. Nadler and yield him for 5 minutes for questions. 

Mr. NADLER. I thank the Chairman. 

Professor Vidmar, I would like you to elaborate. I mean, we had 

a little debate here about the U.S. having higher litigation costs 

than Europe. Can you expand in your testimony about why these 

differences might exist and why Mr. Hinton is wrong in what he 

was saying? 

Mr. VIDMAR. My view is that when some of these estimates—I 

have not seen those statistics. What I do know is that the issue 

that was brought up with the Jackpot Justice article, which were 

very similar to these, I mean, he has different data than we have 

now, but when my colleagues, Tom Baker and Herbert Kritzer and 

I went through the report, we just found so many flaws in the assumptions, that we decided it was not worth the paper it was written on. 

Mr. NADLER. So they were like all these studies that we were 

told here that when we amended the Bankruptcy Code, every credit 

card holder will get $400 savings in lower interest rates. They have 

that amount of validity. 

Mr. VIDMAR. Yeah. It is—— 

Mr. NADLER. Um—— 

Mr. VIDMAR. Oh, I am sorry. 

Mr. NADLER. Go ahead. 

Mr. VIDMAR. No. I was just going to say, it is difficult sometimes 

in making these exact comparisons across the different countries. 

Mr. NADLER. Okay. Could you comment briefly on the assertion 

that some jurisdictions are legal hellholes driving out doctors, that 

OB/GYN’s are leaving jurisdictions—— 

Mr. VIDMAR. Well, you know—— 

Mr. NADLER [continuing]. Because of the tort system. 

Mr. VIDMAR. Yes. That is something that I addressed a number 

of years ago about legal tort claims places. I have actually written 
46 

about them—one of the places we know about is the Bronx jury. 

Everybody moves their cases to the Bronx because the Bronx juries 

are favorable to plaintiffs. In fact, I wrote an article with a colleague where we actually went in and looked at the data and compared the Bronx to Manhattan and to the other boroughs. We 

found no difference. That is the kind of work that I do. 

Mr. NADLER. So Manhattan and the Bronx are both legal 

hellholes? 

Mr. VIDMAR. I am sorry? 

Mr. NADLER. So Manhattan and the Bronx are both legal 

hellholes? 

Mr. VIDMAR. Yes. Well, I mean, it is one of those things. But that 

has been the pleasure for me in doing these things just as an intellectually interesting task is everybody believes about the Bronx 

jury. 

Mr. NADLER. So in other words, you found no evidence that the 

fact—— 

Mr. VIDMAR. We found no evidence whatsoever to support that 

position, with one tiny exception. 

Mr. NADLER. To support the position that doctors are leaving. 

Mr. VIDMAR. With one tiny exception, which is not doing it justice. Yeah. 

Mr. NADLER. Okay. Mr. Hinton, in your testimony you cited a 

2011 report by Towers Watson, you referred to it, that U.S. Tort 

costs exceed $250 billion per year. In the report, they state, ‘‘we examined only one side of the U.S. Tort system, the costs. No attempt 

has been made to measure or quantify the benefits of the tort system or conclude that the cost of the U.S. tort system outweighed 

the benefits or vice versa.’’ 

Have you calculated the benefits of the tort system? And if so, 

what is the net cost of the system after subtracting the benefits? 

Since we don’t know the net costs, then everything else that you 

are talking about is irrelevant. 

Mr. HINTON. That is one of the reasons we developed this forthcoming study looking at across countries. So basically the idea of 

that study design is to say, let us choose some other countries 

where we think the regulatory environment and the compensatory 

benefits that are—— 

Mr. NADLER. And that will show you the net benefits of the tort 

system? 

Mr. HINTON [continuing]. Are about the same, right, so we hold 

those constant, and that enables us then to infer from differences 

in the costs—if those differences in costs and the benefits are about 

the same, then we must be—— 

Mr. NADLER. So that is a forthcoming study? 

Mr. HINTON. That is the forthcoming study. 

Mr. NADLER. So as of now, this touted $250 billion cost is a number that means nothing, because it is just one side of the equation. 

We don’t know the other side of the equation. Until you come out 

with a forthcoming study, it is an irrelevant statistic. Correct? 

Mr. HINTON. I mean, I think it is an exactly what it says it was. 

It is an estimate by Towers Watson, not by me—— 

Mr. NADLER. Okay. 
47 

Mr. HINTON [continuing]. Of how big they think the tort system 

is in terms of its costs. 

Mr. NADLER. In terms of its costs, but it says nothing about its 

net benefits or net costs. 

Mr. HINTON. They didn’t address that, I don’t think. 

Mr. NADLER. Okay. Exactly. Thank you. 

Professor Vidmar, could you comment on Mr. Hinton’s statement 

about the forthcoming study that by comparing—can you in fact 

compare these systems across different countries? 

Mr. VIDMAR. Well, there are so many differences between different countries that you always get into the difficulty of confounded variables, I am using a technical term that we use in this 

field, but, I mean, it is just not the same. And, in fact, I think, if 

I understood the comment, is that some of these issues are just not 

controlled for in the study. 

Mr. NADLER. Okay. Thank you. Let me get back to Mr. Hinton before my time runs out. In your study with the $250 billion, the 

Towers Watson study, does the $250 billion include transfers from 

one party to another? 

Mr. HINTON. It includes all the costs that would—— 

Mr. NADLER. So in other words—— 

Mr. HINTON. It would include some transfers. 

Mr. NADLER. So you did not subtract the transfers from the 

costs? 

Mr. HINTON. Not in that study. That is my understanding, 

that—— 

Mr. NADLER. So do you think transfers are net costs? 

Mr. HINTON. No. I think that the transfers are part of the benefit 

of the system. Right? They provide for the compensation, I think. 

Mr. NADLER. Okay. So in other words, even the cost figure is not 

a real cost figure, because it includes—— 

Mr. HINTON. Well—— 

Mr. NADLER [continuing]. Includes transfers. Transfers are not a 

cost. 

Mr. HINTON. Well, a cost—— 

Mr. NADLER. As Judge Posner pointed out. 

Mr. HINTON. If I am paying you compensation, then the compensation is still a cost to me. 

Mr. NADLER. To you, but not to the system. 

Mr. HINTON. Well—— 

Mr. NADLER. Because I have the money. Maybe I deserve to have 

the money and you shouldn’t, because you punched me in the arm 

or whatever. 

Mr. HINTON. I think you are right that you have to be careful 

how you refer to the system when you are referring to costs. 

Mr. NADLER. Okay. My last—I think my time has expired. Thank 

you. I yield back. 

Mr. FRANKS. I thank the gentleman. And I would now recognize 

the gentleman from Pennsylvania, Mr. Rothfus, for 5 minutes. 

Mr. ROTHFUS. Thank you, Mr. Chairman. Mr. Hinton, in your 

testimony, you talk about features of a country’s legal environment 

and how it might impact on a country’s overall litigation costs. Do 

you have an opinion on characteristics of our legal environment 

that you think have the biggest negative impact? 
48 

Mr. HINTON. Well, in our study, we specifically looked at two features of the legal environment: whether or not you had a civil or 

common law tradition, and the number of lawyers per capita in 

that country. There are obviously other features that are important 

characteristics of the legal system. We didn’t study those directly, 

but that may be a topic for further work. 

But one of the differences that is notable between the U.S. and 

Europe is the existence of class actions as a remedy and mass litigation procedures. And in the analysis we did of D&O insurance, 

it is certainly true that securities class actions represent a significant part of the costs of D&O insurance in the U.S. And so may 

make a contribution or explain in part why the U.S. makes up such 

a large fraction of the total global D&O costs. 

Mr. ROTHFUS. What about other countries and their treatment of 

punitive damages? For example, are European countries, do they 

have a punitive damages option available to litigants? 

Mr. HINTON. I am sorry. I didn’t—— 

Mr. ROTHFUS. Punitive damages. May litigants seek punitive 

damages in European courts? 

Mr. HINTON. I am sorry. I can’t answer that question. I am not 

really an expert on that issue. 

Mr. ROTHFUS. What about, I mean, have you studied, you know, 

mechanisms that other countries may use to assess the viability of 

a claim before they would go to a court? Are there any stages to 

litigation in European countries before you get to a court that 

might weed out claims that don’t have merit? 

Mr. HINTON. Again, I would have to do further study on those 

legal characteristics. 

Mr. ROTHFUS. Professor Vidmar, just a couple of questions. You 

made a statement in your written testimony about, this is on page 

5, the important lesson—this is with respect to physicians. The important lesson is that the per capita number of physicians has 

steadily increased over 4 decades. 

Is that still a current assessment or is this study somewhat old, 

because I looked at some of the charts that accompanied your testimony, both on page 3, the patient care physicians per capita, and 

again on page 4, we had some specialties per capita, neurosurgeons 

and OB/GYN’s? In looking at these charts, it looks as though, 

frankly, the number has flatlined over the last decade. 

Mr. VIDMAR. They are going up. You can only take—is that on? 

Yeah. You can only take them up so far. But we actually have some 

data that have gone up through 2010. You reach a certain point 

that you just don’t—you don’t need more physicians or whatever it 

is, I mean, if you insisted that it go up. 

What has been very important in our research is to show they 

have—contrary to the claims. Illinois was one example. Doctors are 

leaving Illinois. Okay. That was the claim. We looked, and they 

weren’t leaving Illinois. A related claims was that doctors in the 

rural areas were leaving. We looked and broke the data down by 

rural counties. They weren’t leaving. I have done the same thing 

for Missouri, I have done the same thing for Florida, and consistently we find that these claims are just not legitimate. Or they are 

not supported by data is probably a better way to state it. 
49 

Mr. ROTHFUS. A little bit about punitive damages. Again, my understanding of punitive damages is that they are meant to punish 

a wrongdoer. When you punish a wrongdoer, when society punishes 

a wrongdoer in the criminal context, we have a beyond-a-reasonable-doubt standard of proof. It seems to me that if you are going 

to punish a wrongdoer, would you not consider that kind of standard of proof in a civil context? 

Mr. VIDMAR. Well, in a civil context it is—in the ordinary case, 

it is more reasonable than not, but when you get to punitive damages, the standard is higher. 

Mr. ROTHFUS. A clear and convincing—— 

Mr. VIDMAR. A preponderance of evidence becomes much more 

accepted. It is not proof beyond a reasonable doubt, because people 

are not put in jail or not sentenced to die as a result of the verdict, 

but in fact in the punitive damages there is a higher threshold of 

doubt that the jury has to overcome. 

Mr. ROTHFUS. But you are punishing people, are you not? 

Mr. VIDMAR. Yes, yes, for misbehavior. And the work that I have 

done, when you read these cases on a case-by-case basis, what you 

find is some of the defendants in these cases—I can’t give examples 

right offhand, I can actually send some in, but reading the case 

studies, their behavior is absolutely egregious. 

Mr. ROTHFUS. When you punish wrongdoers, shouldn’t the benefit go to society? When you extract a punishment from a wrongdoer, shouldn’t it be applied more generally to the society? 

Mr. VIDMAR. I didn’t understand the question. 

Mr. ROTHFUS. Well, when you allow for punitive damages in a 

civil litigation context—— 

Mr. VIDMAR. Yes. 

Mr. ROTHFUS [continuing]. You are a private litigant litigating 

that—— 

Mr. VIDMAR. Yeah. 

Mr. ROTHFUS [continuing]. And when you are punishing a wrongdoer, it is not for the harm, it is for the bad act. 

Mr. VIDMAR. It is for the bad act, yes. 

Mr. ROTHFUS. And doesn’t society have an interest in taking the 

award for that bad act and making—— 

Mr. VIDMAR. Well—— 

Mr. ROTHFUS [continuing]. Sure that victims are adequately compensated? 

Mr. VIDMAR. In some instances, I would actually think that that 

might be the case, but that is the way our law has developed. And 

there is no more I can say about that, except that when you see 

these cases, it is a punishment. The behavior, you know, sometimes 

it has been sexual abuse, sometimes it is been just somebody who 

has been so totally reckless in what they have done, that any Member of this Committee, if I showed you some of those cases, you 

would say, yeah, that is a bad person. And this is one way, it is 

not a criminal sanction, but it is one way of punishing. It is a fine. 

But one of the things I want to reemphasize, I went over it very 

quickly, the jury just doesn’t get these right away. Most of these 

claims that are made, some lawyers, and again, I am not going to 

defend the lawyers, almost automatically when they file a lawsuit 
50 

they ask for punitive damages, but they know it is not going anywhere. And, in fact, the judge looks at it and says—— 

Mr. ROTHFUS. Well, if they know it is not going anywhere, should 

there be Rule 11 sanctions? 

Mr. VIDMAR. Well, they do it sometimes. It is just a matter of 

part of the negotiation tactics. The other side knows that they are 

not going to get—— 

Mr. ROTHFUS. But if there is no merit for it—— 

Mr. VIDMAR. I am sorry? 

Mr. ROTHFUS. If there is no merit for it and—— 

Mr. VIDMAR. Well, but—— 

Mr. ROTHFUS [continuing]. Somebody is putting it in a pleading, 

you know, shouldn’t there be some kind of—— 

Mr. VIDMAR. Well—— 

Mr. ROTHFUS [continuing]. Sanction for that? 

Mr. VIDMAR.—I would almost agree with you, some of the time 

when they do this, it is just the lawyers getting out of control. I 

am not always going to defend lawyers. Remember, I am not a lawyer, so I don’t have to defend them all the time. 

I think that sometimes some plaintiff lawyers do it a matter of 

pleadings, and they just figure, well, this will scare the other side, 

but what I can tell you is the other side says, this—they get into 

pretrial discussions and the other side says, this ain’t going to go 

anywhere. If the plaintiff lawyer gets really recalcitrant, it gets to 

the judge, and the judge says, we are going to throw this out. And 

our data show that of the claims that are made, most of the time 

the legal system filters these cases out before they ever get to a 

jury. And I should add—— 

Mr. ROTHFUS. Thank you, Mr. Chairman. 

Mr. VIDMAR [continuing]. Another thing, that I do a little bit of 

consulting. Most of the time when I have done, because my law 

school position allows me do that, I am usually a defense expert 

rather than a plaintiff expert on these kinds of matters. So I see 

both sides of the cases. 

Mr. ROTHFUS. Thank you, Mr. Chairman. Yield back. 

Mr. FRANKS. I thank the gentleman. And I would now recognize 

the Ranking Member of the full Committee, Mr. Conyers, for 5 

minutes. 

Mr. CONYERS. Thank you, Chairman Franks. This has been pretty interesting, but Mr. Flick, your situation is prominently known. 

Were you sanctioned by the court, finding that Blitz hid information in the form of a handwritten memo by you that would have 

hurt, if not potentially eliminated Blitz’s defense that the flame arresters weren’t useful in preventing these explosions? 

Mr. FLICK. Yes. Thank you for letting me talk about that. 

Mr. FRANKS. Sir, can you pull your microphone? Pull it toward 

you. 

Mr. FLICK. Yes. Thank you. Blitz—I don’t know how much detail 

I can get into that, because—— 

Mr. CONYERS. Is the answer yes? 

Mr. FLICK [continuing]. Because the case is under appeal, but I 

don’t think we were sanctioned for hiding anything. We produced 

some documents late, and we were sanctioned for that. It is under 

appeal, and—— 
51 

Mr. CONYERS. What about destruction of documents and not 

turning certain other documents over? 

Mr. FLICK. I don’t think it has ever been shown that we destroyed any documents. 

Mr. CONYERS. So is your answer yes or no? 

Mr. FLICK. Would you—— 

Mr. CONYERS. To my question. 

Mr. FLICK. The question—repeat the question, please. 

Mr. CONYERS. Well, I was just trying find out if it is true that 

you had a handwritten memo, which I have a copy of, and that 

your defense would have been eliminated in preventing devastating 

explosions if that information had come forward. 

Mr. FLICK. I don’t think the defense would have been eliminated. 

There was a document that was found that was produced late, and 

we were sanctioned for that, and that is under appeal. 

Mr. CONYERS. Okay. Well, what about the part where the court 

finds that the settlement would have been not less than $250,000 

higher if the plaintiff would have had the documents discussed in 

this memorandum opinion, and particularly those which were not 

disclosed to the plaintiff would have drastically increased the settlement value? The court seemed to have had some problems, 

and—but since you are still in court with it, I won’t pursue this 

any further. I didn’t know that this was still under appeal. 

Professor Vidmar, you have been the subject of much comment 

even though you are one of the witnesses. You have heard references to the so-called tort tax. Have you ever examined that for 

any accuracy or do you have a view about it? 

Mr. VIDMAR. I try to stick to my areas of expertise. That is not 

one. In economics—I mean, I understand economics as a general 

rule, but I tend to avoid areas that go beyond my expertise, and 

that, I feel, is one that I shouldn’t jump into. 

Mr. CONYERS. We have heard a lot about class action lawsuits, 

but it has been my experience that class action lawsuits are very 

complex, they are not easy to come by and very few of them get 

through. As a matter of fact, former President Clinton gave it a try 

at one time and wasn’t very successful at it. 

Mr. VIDMAR. Our legal system has its flaws, but it also has its 

good points. And many of the times you have an adversary system 

where plaintiffs go after—you know, the lawyers go after people, 

but our system does a pretty darn good job of weeding out most of 

these frivolous kinds of lawsuits, but of course that is not what we 

hear about. We hear about the ones that go through. But judges 

and others, they start applying the law and say these are just not 

appropriate lawsuits, so they don’t get there. 

Mr. CONYERS. Thank you, Mr. Chairman. 

Mr. FRANKS. And I thank the gentleman. 

And I would now recognize the gentleman from Florida, Mr. 

DeSantis, for 5 minutes. 

Mr. DESANTIS. Thank you, Mr. Chairman. Thanks to the witnesses for your time and testimony. Mr. Hinton, you mentioned 

that you compared lawyers per capita. I didn’t actually hear what 

the result was. I am assuming America has way more lawyers per 

capita than European countries. 
52 

Mr. HINTON. Yes. That is right, but it is not just that the U.S. 

has more, is that we were able to measure how many, the number 

of lawyers in each country, and so see how much variation in the 

liability insurance prices followed the same pattern that existed 

across all the countries. 

Mr. DESANTIS. No. I understand that. And in terms of the—did 

you look at Great Britain, because you said there was civil versus 

common law countries? We are obviously common law. Great Britain is common law. Did you look at them or are they just continental European countries? 

Mr. HINTON. No. The U.K. was included in our study. 

Mr. DESANTIS. Okay. In the U.K., is it true, I don’t know if you 

looked at this, that they have basically a British rule where if you 

sue somebody and you lose, then you got to pay the winning party’s 

attorney’s fees? 

Mr. HINTON. Yes. That is my understanding, is that that is how 

the loser pays system operates. 

Mr. DESANTIS. Is that something that the continental European 

countries also utilize? 

Mr. HINTON. It works differently in different countries. 

Mr. DESANTIS. Okay. Mr. Flint, I guess in your experience—I 

mean, you guys eventually got brought under because of excessive 

litigation, but had you been dealing with litigation before you went 

under? I mean, was this just a common occurrence that you would 

have to deal with lawsuits? 

Mr. FLICK. Well, the lawsuits under this theory started about 10 

years ago for our company, and they started slow and got excessively more in the last few years. 

Mr. DESANTIS. So were you winning those early lawsuits? Or 

how was that—— 

Mr. FLICK. I was only able to get two cases to trial. We won one 

and lost one, the rest of them settled or are pending, or they are 

stayed in bankruptcy court currently. 

Mr. DESANTIS. And so from your experience, were these cases 

driven by victims or by lawyers? 

Mr. FLICK. In my experience, they were driven by the money that 

plaintiff’s lawyers make. There are victims, and they are horrific 

injuries in each of these cases, but I think the driver was the 

money that the plaintiff’s lawyers were making. 

Mr. DESANTIS. And you guys—from your testimony, it sounded 

like they couldn’t even tell sometimes whether it was actually your 

cans, but is it that they are going after you because they knew that 

you could pay a judgment? 

Mr. FLICK. That would be speculation, but, you know, in lots of 

cases it was only testimony that said it was our can, because there 

wasn’t any physical evidence. And we did buy adequate amounts 

of insurance, and I think that is a driving force for the plaintiff’s 

attorneys as well. They are a business, and they go where they can 

get money. 

Mr. DESANTIS. And did you settle any cases? 

Mr. FLICK. Our insurance companies did, usually under protest 

of the company. We wanted to be able to tell our story more than 

we did. 
53 

Mr. DESANTIS. So knowing that you—so you may have a situation where you know it is going to cost more to pay the attorneys 

to actually litigate the case, but you wanted to do that rather than 

just kind of paying somebody a smaller fee just to kind of go away 

and drop the case? 

Mr. FLICK. Yes, sir, that is correct. 

Mr. DESANTIS. Okay. Thank you, Mr. Chairman. I yield back the 

balance of my time. 

Mr. FRANKS. And I thank the gentleman. 

And I will now recognize the gentlemen from Virginia, Mr. Scott. 

Mr. SCOTT. Thank you, Mr. Chairman. 

Professor Vidmar, are there cases where companies changed 

their policies only because punitive damages changed the calculation that it would be cheaper to just go ahead and pay a lot of 

claims rather than fix a problem? 

Mr. VIDMAR. I can’t speak to that directly. I think there is some 

evidence for this. I do know the insurance companies, I think consistent with what you have said, often say, ‘‘Look, settle this thing. 

We’ll take care of it,’’ rather than go forward, even though sometimes the defendant in these cases is protesting. So it is kind of 

a—— 

Mr. SCOTT. Well, I mean, when the calculation in the boardroom 

is, rather than fix the problem, why don’t we just incur the recurring lawsuits, because paying the lawsuits would be cheaper than 

fixing the problem, wasn’t that what happened in one of the automobile cases where people were getting burned to death? 

Mr. VIDMAR. I believe that is correct, that in the past, that this 

was a cost of doing business, we’ll lose a few, but we’ll win more 

often, because they have to make a calculation, a balance. To some 

degree—— 

Mr. SCOTT. And only because punitive damages changed that calculation did they bother to stop killing people. 

Mr. VIDMAR. As opposed to compensatory damages, that is one 

of the functions of punitive damages, is to simply override this, 

‘‘Well, it is cheap to pay somebody off.’’ The punitive damages said, 

you are going to pay a penalty for doing this. 

Mr. SCOTT. Are you familiar with the numbers that said there 

are about a hundred thousand deaths due to preventable medical 

errors? 

Mr. VIDMAR. Yes. 

Mr. SCOTT. And 15,000 medical malpractice cases? 

Mr. VIDMAR. I think that is probably right. 

Mr. SCOTT. And so if there was a fair system, there would be not 

15,000 cases, but a hundred thousand cases. Is that right? 

Mr. VIDMAR. It is not clear in those instances from what I have 

seen about this. I am hesitant to make a direct kind of projection 

from that. 

Mr. SCOTT. But, I mean, when people say there are too many 

lawsuits, those numbers themselves suggest that that cannot be 

true. 

Mr. VIDMAR. Well, that is probably true. 

Mr. SCOTT. Now, Mr. Hinton, you said that the average costs per 

incidence is high. I think Professor Vidmar pointed out that a lot 

of—just about every country outside of the United States, 
54 

healthcare is not a cost. Is that one of the reasons our damages are 

higher? 

Mr. HINTON. Yes. That is an important thing to control for when 

you are comparing countries, both how much is paid for as a government benefit, as a social—part of social programs, but also there 

is differences in the private sector health insurance market. And 

we controlled for those things in our study. 

Mr. SCOTT. Well, do you also control for the fact that in the 

United States a lot of these lawsuits are so expensive to bring, that 

the smaller lawsuits aren’t brought? And that would increase the 

average, wouldn’t it? 

Mr. HINTON. I am not sure how that would affect our study. 

Mr. SCOTT. What is the—we are talking about competitiveness. 

What part of the product price is litigation costs? 

Mr. HINTON. What fraction of the product’s price? That is an interesting question. It obviously depends very much on the product. 

And I know we heard today from Mr. Flick about their experience 

in the prices—— 

Mr. SCOTT. Well, if you have a company that is getting sued a 

lot, it may be because they are not very careful in the way they 

do business, but, I mean, the product price, you have got one for 

litigation, and if it is not that big, and then the percentage of that 

that is negligence cases, because a lot of this is businesses suing 

businesses, isn’t it? 

Mr. HINTON. Well, I do know of another example where some 

economists studied differences in drug prices between Canada and 

the United States—actually, I think it was vaccine prices—and it 

was around the time of—I think it was in the ’80’s. 

Mr. SCOTT. Where we provided immunity to offset that—— 

Mr. HINTON. That is right. There was—that was the legislative 

solution. But at the time it was studied, they found that it was a 

big cost—a price differential, and that was attributed to cost of—— 

Mr. SCOTT. I am running out of time. I would like Professor 

Vidmar to just tell us, typically what does a lawyer make for bringing a frivolous lawsuit? 

Mr. VIDMAR. For a frivolous lawsuit, nothing. 

Mr. SCOTT. Thank you. 

Mr. VIDMAR. The other thing that I discovered in the research is 

sometimes people are hurt very badly, whether it is medical malpractice or whether it is some other injury, but the evidence is so 

weak or it is so difficult, you are going to have to require so many 

experts to do this that they—and I do know of cases where the lawyers just say, I can’t take the case, and so the person never gets 

compensation even though by some other standard, we would say 

they deserve it. 

Mr. SCOTT. So you are saying in a good case, they can’t bring it 

because it is too expensive; in a frivolous case, if they bring it they 

don’t get paid? 

Mr. VIDMAR. That is roughly it, yes. 

Mr. SCOTT. Thank you, Mr. Chairman. 

Mr. FRANKS. I thank the gentleman. 

And I will now recognize the gentleman from Florida, Mr. 

Deutch, for 5 minutes. 
55 

Mr. DEUTCH. Thank you, Mr. Chairman. Mr. Flick, in response 

to a question earlier about who paid the ultimate cost, you talked 

about the number of your employees who lost their jobs and the 

cost of the gas can going from $5 to $20 per gas can. And then in 

your written testimony you said that Blitz shuttered its door because the trial bar got greedy. 

And I appreciate the majority’s decision to hold a hearing about 

the excessive litigation’s impact on America’s global competitiveness. I don’t know. I am still not sure what constitutes excessive 

litigation. 

And in the case of Blitz, I wonder if the trial bar, if it is greedy 

trial lawyers who brought the case of the 4-year-old who was 

burned to death in his garage after he knocked over a Blitz can 

and it exploded, or the 10-year-old from California who was burned 

85 percent of his body when the gas can exploded, or the man who 

was walking down the street carrying a Blitz gas can when the 

static electricity from his body ignited the gas can and he was 

burned over 80 percent of his body. 

And I wonder if it was greedy trial lawyers who are responsible 

for bringing the case of the man whose lawnmower ran out of gas, 

and when he went to refuel, and while pouring, his can exploded 

and threw him through the barn door and then he burst into a ball 

of flame. 

I wonder if it was greedy trial lawyers who were responsible for 

bringing the case of the 4-year-old in upstate New York who was 

burned over 80 percent of his body, or the 11-year-old who was 

roasting marshmallows around the campfire when the fire died and 

he went to pour some gas on, and the can burst into flames. 

And then finally, I wonder if it is greedy trial lawyers who are 

responsible for bringing the case of a young boy from Florida, 

where I am from, Jacob Joyner, who was 10 when he suffered second and third degree burns over half of his body, and after 6 weeks 

in intensive burn treatment facilities, he passed away. 

I understand there is this ongoing effort to demonize lawyers. In 

every one of these instances, the only way that these tragic circumstances were going to be addressed—the nature of our tort system is such that the only way that any of these individuals or their 

families could pursue justice is through the courts. 

And so it is my understanding, and this is just what I would like 

to chat a bit about, that as early as 1973, Consumer Reports had 

said that if fumes outside a gas ignite, a flashback is possible that 

could ignite the contents of the can itself. And they said then that 

such accidents can be prevented by a flame arrester, which they 

had suggested should be legally required in all gas cans. 

And so given—it is also my understanding, by the way, and I 

would just like your thoughts on this, frankly, that the cost of those 

flame arresters is about $0.04, significantly less than the jump 

from $5 to $20 per gas can. 

And, again, I just want to know whether it is the—you said the 

trial bar got greedy, and I want to know if it is the trial bar’s fault 

that the decision was made by the company to manufacture something where there was plenty of evidence of what could be done to 

prevent these things from happening, and if 20 years ago when the 

company was first sued, or before that, when Blitz was first told 
56 

that there was a way to prevent the explosions, if a flame arrester 

had been included in these devices, that the horribly mutilated and 

in some cases dead folks that I referred to wouldn’t have been hurt. 

And, frankly, if that decision had been made, and ultimately 

there is a legitimate chance, isn’t there, that the employees who we 

were told earlier are the ones who really paid the ultimate cost 

here rather than these victims, whether they might not still have 

their jobs? 

Mr. FLICK. Well, that is a long question, and I would like to 

break it down as you presented it. Oh. Is this on? Okay. I think, 

to your first point, you know, do we just blame—do I just blame 

the plaintiffs’ bar? No, I don’t. I think they are a player in a system 

that is broken, and I believe if you—— 

Mr. DEUTCH. But I am not asking about the system. I am asking 

about each of these individuals and their lawyers. 

Mr. FLICK. Well, I think you have got a fair amount of misinformation in the statements that you have made. You have listed 

purposefully, I think, a few cases where it is assumed that there 

wasn’t misuse, and I don’t—and that doesn’t—— 

Mr. DEUTCH. I am only—I only want—I am going to run out of 

time. The only question I have is was there ever a moment where 

you considered putting flame arresters into the cans? 

Mr. FLICK. Yes, yes, continually for years. And we studied it and 

we studied it deeply, and we felt that it would cause more harm 

than good, and we didn’t feel that it would make the cans safer. 

And I think it is a false assumption to say that this $0.04 device, 

which isn’t a $0.04 device, would—— 

Mr. DEUTCH. How much does it cost? 

Mr. FLICK. Well, I don’t—it depends on how you do it, but then 

you get other unintended consequences. And it is easy for a plaintiff’s lawyer to say, you could have done this and saved this person, 

but it takes more—— 

Mr. DEUTCH. What is the unintended consequence by putting 

something in that could have prevented the explosions that wound 

up causing—— 

Mr. FLICK. You could encourage people to accelerate fires with 

the product, thinking it is safer than it is. 

Mr. DEUTCH. All right. I yield back, Mr. Chairman. 

Mr. FRANKS. And I would now yield to Mr. Cohen for 5 minutes. 

Mr. COHEN. Thank you, Mr. Chair. This is a hearing that reminds me of the hearings I have been having in the Subcommittee 

on Regulations and Commercial Law. And it has been dealing with 

regulations, and everything has centered on what are the costs of 

regulations, and this is what are the costs of our litigation system. 

And in neither one of these Committees has the majority put forth 

the side of what are the costs to human beings who are affected 

by bad air and bad water, by torts. And that seems to be totally 

disregarded. And we see these numbers. The tort system costs us 

$265 billion or whatever. Well, that means there has been $265 billion of harm somewhere. Very little of it is punitive damages. Most 

of it is harm. And when somebody is injured by a drunk driver, 

that is part of that figure. 

Aren’t the victims—Mr. Hinton, aren’t the victims of drunk drivers who might lose a limb or a life entitled to damages? 
57 

Mr. HINTON. They are in some cases, right. And I think the issue 

on competitiveness—— 

Mr. COHEN. In some cases—let us say the cases were liable—in 

every case that goes to—there is a judgment, there is liability 

found—— 

Mr. HINTON. Right. 

Mr. COHEN [continuing]. There has been a breach of duty. 

Mr. HINTON. I agree with that. I think to answer your question 

about why don’t we talk about the cost to the—you know, the cost 

to society, you know, the harm to individuals, in the case of our 

study, at least, we were trying to address the question of international competitiveness or comparisons across countries, and so 

we deliberately compared countries where we felt that the rates of 

accidents were similar and the levels of protection and compensation paid were similar, and so that we could essentially avoid having to compute that number directly, but take account of the benefits of the legal system. 

No one is saying that having a legal system, legal protections is 

a bad thing per se. You know, it delivers justice and compensation. 

What we are trying to do is work out whether it can be done, you 

know, more cheaply, or less—you know, more efficiently, so we 

compared these countries where we feel that there are similar levels. 

Mr. COHEN. What countries were they that you looked at? 

Mr. HINTON. They were the core European, Eurozone countries, 

the U.K., Canada and the United States. 

Mr. COHEN. Okay. Well, if you take countries like India that are 

competitive countries, and I was in India recently and I heard from 

heads of companies that said, oh, our tax system is unfair. We need 

to have a tax system that lets us compete with Simmons and these 

other companies that we have to compete against. And what I 

heard from Mr. Goodlatte is we need have a tort system and a civil 

justice system that is like these other countries. 

Well, America is not like the other countries. America is in fact 

the best country in the world. That is one thing you realize from 

traveling. We are the best place in the world to live and we got the 

best stuff here, and our civil justice systems is the envy of the 

world. And in India and Pakistan, it takes 20, 30 years to get a 

case to judgment. That is one of the deficiencies of their government. That is why we have in our Seventh Amendment the right 

to trial shall remain inviolate. That has been 200 and something 

years of jurisprudence, and people look at us with envy. And for us 

to take the lowest common denominator of taxes and/or civil justice 

so that we can compete is not what America is about, and it never 

should be, because we take that, we scrap the civil justice system. 

We say, all right, we will just have the same system as India or 

we will have the same system as somebody else. And, you know, 

I just don’t see that in any system. I think our country is doing 

pretty good and I just don’t see the damages. 

And I am sure that the professor talked about some of this, but 

I picked up today’s New York Times. A liability challenge. Generic 

drug makers defense faces a Supreme Court test. Karen Bartlett 

was left seriously injured and legally blind having taking a generic 

drug. I mean, are not the victims like Miss Bartlett, the victims 
58 

who took Celebrex, the victims who got hip replacements from 

Johnson & Johnson after the company had known that 40 percent 

of the devices were expected to fail, aren’t they entitled to getting 

justice? And how would that justice be different if it was handled 

in a different jurisdiction? How would it have happened in India? 

Mr. HINTON. That is a really good question and it is the sort of 

frame of reference to sort of think about the study that we did, 

right. We are not saying that there aren’t Celebrex victims in other 

countries in Europe. Essentially the premise of the sort of law experiment is that, yes, there are people who took the drug are going 

to be equally at risk in the U.S. As they were in these European 

countries, and they are going to have their disabilities compensated 

and have their healthcare costs compensated in different ways in 

different countries, but to a similar extent. And it is because we 

are able to make that assumption that it is then fair to compare 

the cost side of the equation and say, at the end of the day, the 

U.S. is a much more expensive place to do that and to deliver that 

justice. 

Mr. COHEN. My time has expired, but I thank the Chairman for 

the opportunity to ask questions and to speak in terms that the 

Founding Fathers would have appreciated. 

Mr. FRANKS. Thank you, Mr. Cohen. 

And this concludes today’s hearing. Thanks to all of our witnesses for attending. 

Without objection, all Members will have 5 legislative days to 

submit additional written questions for the witnesses or additional 

materials for the record. And, again, I thank the witnesses. I thank 

the Members and, of course, I even thank the audience. This hearing is adjourned. 

[Whereupon, at 4:35 p.m., the Subcommittee was adjourned.] 
(59) 

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Honorable Bob Goodlatte, a Representative in 

Congress from the State of Virginia, and Chairman, Committee on the Judiciary 

With America’s facing high unemployment and stagnant economic growth, it is 

the role of every congressional committee to do its part to get America moving 

again. For the Judiciary Committee this means, in part, doing what we can to remove the crushing burden that excessive litigation costs impose on our global competitiveness, economic growth, and our ability to create and retain jobs. 

Judge Learned Hand observed that ‘‘litigation is to be dreaded beyond almost anything short of sickness or death.’’ Unfortunately, the United States has become the 

world’s most litigious country. 

This litigiousness has created what amounts to a ‘‘tort tax,’’ which imposes an 

added cost on every product Americans purchase and every service we consume. 

We need a civil justice system that deters wrongdoers and fully compensates victims. But a prosperous free enterprise economy also depends on a tort system that 

is efficient and free of meritless litigation and excessive damage awards. As economists have pointed out, ‘‘an efficient tort system produces greater trust among market participants through the fair and systematic resolution of disputes, thereby encouraging more production and exchange, creating a higher standard of living for 

individuals within a society.’’ 

In other words, we can ensure that all injured parties have their day in court 

while at the same time enhancing our global economic competitiveness and creating 

and maintaining jobs for American workers. 

Regrettably, our civil justice system is not functioning toward this end. It’s not 

fairly compensating victims, who have to wait too long to get a case to trial and 

receive an average of only 46 cents of every dollar spent in litigation even when they 

win. And it’s hurting the economy. 

America’s runaway litigation system harms the economy in at least four ways. 

First, the specter of undeserved, ruinous litigation makes it more difficult for small 

businesses to grow and become competitive on a global scale. 

Second, even those American businesses that are large enough to compete globally 

are saddled with litigation liabilities that their foreign rivals do not face. 

Third, America’s lawsuit climate discourages foreign direct investment in the U.S. 

economy. 

And finally, American companies’ domestic liability for their actions abroad places 

them at a competitive disadvantage relative to foreign competitors seeking to do 

business in the same foreign markets. 

The real losers in all of this are ordinary Americans. American consumers are 

hurt in the form of higher prices, U.S. workers in the form of lower wages, and 

American retirees in the form of lower returns on retirement accounts and pension 

funds. 
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Those hurt by excessive litigation costs include people like the former employees 

of Blitz USA, the company Rocky Flick, the second witness on our panel today, used 

to run. At its peak, Blitz USA, produced three out of every four portable gas cans 

nationwide and employed 350 people in the small town of Miami, Oklahoma. 

But over the last decade, a wave of costly litigation driven by the misuse of its 

products by others—a misuse over which the company had no effective control— 

took its toll. And lawsuits finally drove the company out of business. 

Blitz USA is gone, but the lesson of the devastating impact lawsuits can have on 

real lives and real communities lives on. 

I’m sure that Rocky will share much more with us today about the real life impact 

excessive litigation costs had on Blitz and its employees. 

I look forward to our witnesses’ testimony; I believe that it will be invaluable as 

we move forward this Congress with reforms to improve our civil justice system. 

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Material submitted by the Honorable Trent Franks, a Representative in 

Congress from the State of Arizona, and Chairman, Subcommittee on the 

Constitution and Civil Justice 
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Supplemental Material submitted by Neil Vidmar, Ph.D., Russell M. Robinson II Professor of Law, Duke University School of Law, and Professor 

of Psychology, Duke University 
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