Louisiana’s legal system ranks 50th — the worst in the nation — according to a new survey from the U.S. Chamber Institute for Legal Reform.
The survey asked senior business executives about their experiences with lawsuits in the state. Eighty-five percent of the companies that participated in the survey said a state's lawsuit environment affects their decisions about expansion.
Lauren Chauvin, director of civil justice reform for the Louisiana Association for Business and Industry (LABI), agrees with the survey.
“Louisiana has one of the worst legal climates in the world," Chauvin told the Louisiana Record. "Louisiana got an 'F' when it comes to judicial accountability. If you’re a business looking to grow or expand in Louisiana, those are scary statistics. And that is before the state itself became one of the biggest plaintiffs.”
Six out of 10 LABI business members report frivolous lawsuits raise the cost of doing business, she said. To allow business to expand, the legal climate needs to improve, according to Chauvin.
“These perceptions matter because they can be influential in business decisions about where to conduct/expand/constrict business operations or sales,” she said.
Chauvin sees government-sponsored lawsuits as a big factor in Louisiana’s poor ranking in the survey. These include lawsuits filed under the State and Local Coastal Resources Management Act as an enforcement action. Five coastal parishes have collectively filed more than 40 such suits, she said.
The general claim in the lawsuits is that oil and gas companies failed to meet their coastal use permit (CUP) obligations, according to Chauvin.
"After the suits were filed, the attorneys seem to pivot to 'unpermitted activities,' hoping to find a friendly judge in one of the five parishes and use this new hunting expedition to create new law in the hopes of a large settlement," she said.
Chauvin said such cases have little transparency, so the public has difficulty telling what's going on.
"The legal work and compensation of those private attorneys is often shielded from public scrutiny by claims of attorney-client privilege,” she said.
Another critical factor, Chauvin said, is the high rate for auto insurance in Louisiana.
“"Louisiana’s jury trial threshold is a major factor in the state’s rank as second in the country for auto insurance rates, which consequently causes small businesses, especially trucking companies, to pay exorbitant rates because these lawsuits have taken away options for lower rates," she said. "These high premiums are preventing them from reinvesting and growing their businesses and helping our state’s economy grow.”
Legislative remedies to help the situation are available, however, Chauvin said.
“First, remove the ($50,000) jury trial threshold," she said. "For a small-business owner, even one frivolous lawsuit can cause them to shut their doors. While a $50,000 lawsuit may not mean much to a larger business, for a small firm it can be devastating.”
Another legislative remedy, according to Chauvin, would be to repeal direct action -- that is, the ability to sue the insurance company rather than the insured person.
"Third, reinforce regulatory agencies and demand APA (Administrative Procedure Act) compliance," she said. "Companies need to be able to trust that the state will follow the stated APA compliance statutes and rules. They need to know that the first time they are going to hear about an alleged infraction isn’t when they are served with a lawsuit."
Finally, state and local government agencies must stop hiring private outside counsel to harass businesses that are operating legally, Chauvin said.