The head of a restaurant company, Andrew F. Puzder of CKE Restaurants (the parent company of Carl's Jr. and Hardee's), recently announced he's considering moving the company's headquarters from California to Texas.
Why? Excessive litigation—the same reason that has often landed the Sunshine State on top of many bad lists over the last decade.
Most notably, California was recently ranked second on the American Tort Reform Association's annual list of Judicial Hellholes around the country. The report noted, "California has a history of wacky consumer class actions that further encourages plaintiffs' lawyers to seize on minor missteps as a means to lots of cash."
CKE CEO Puzder also noted that California laws encourage "private attorney general" lawsuits against private businesses over overtime and regulatory rules, which encourage other attorneys to file questionable legal actions against restaurants. These "private attorney general" suits involve a personal injury lawyer taking action on his or her own volition with the backing of the state – often to engender a quick settlement to make the case go away. Is it any wonder that CKE and hoards of other businesses are looking for a quick exit from California?
And is it a coincidence that many of them are moving to Texas? I think not. In the early 1990's, after years of rampant lawsuit abuse, Texas passed some of the strongest legal reforms laws in the country. Since then, they've experienced a boom in employment. According to the U.S. Bureau of Labor Statistics, Texas had more job growth than any other state from 2000-2010. And they still lead the county today—far out-pacing every other state in job creation over the past year. Certainly, there were other factors that also contributed to Texas' job growth, but when you look at the big picture, it's pretty clear—reform works.
This story should serve as an important lesson for Louisiana. Litigation is a growing industry here, but it does not represent the kind of business we need to grow. The lack of legal reform has made Louisiana a breeding ground for personal injury lawsuits. This is bad news for Louisiana workers, families and small businesses. We need only look west to see where this path can lead.
Our state is at a critical crossroads, and we have an important choice to make – will we enact more laws to encourage abusive lawsuits like California and watch our businesses flee, or will we follow Texas' model and support reforms to attract new jobs and growth?