Excessive civil litigation costs Louisiana almost 40,000 jobs annually, imposes a hidden “tort tax” of more than $1,000 per person and saps $2.9 million in personal income, according to a new economic study.
Louisiana Lawsuit Abuse Watch (LLAW) this week released the new numbers, which were gleaned from a study on the economic benefits of tort reform conducted by the Texas-based Perryman Group, based on 2023 data. The study also provides a look at the impact of excessive litigation on the metro areas of New Orleans and Baton Rouge.
“Our legal system is completely unpredictable and out of balance, resulting in abuses that force all of us to pay the resulting costs,” LLAW Executive Director Lana Venable said in an email to the Louisiana Record. “We don’t need legal reform just to lower the cost of insurance – it’s good public policy that neighboring states like Texas, Florida and now Georgia have fully adopted.”
Abuses of the tort system also led to more than $9 million in expenditure losses for Louisiana businesses in 2023 and more than $240 million in revenue losses to the state government, according to the report. In addition, the toll on Louisiana’s gross domestic product was more than $4.6 million, while losses flowing to local governments due to excessive lawsuits was more than $200 million.
The story was even worse in the Greater New Orleans area, where the annual “tort tax” was estimated at more than $2,000 per year, the report says. Baton Rouge residents are also feeling the pinch, to the tune of more than $570 million in personal income losses due to excessive litigation, according to the study.
“We simply can’t afford to stand by and continue to allow lawsuit abuse to negatively impact our residents, job creators and overall economy,” Venable said. “Texas enacted sweeping reforms decades ago and has been repeatedly named a top state for business. More recently, Florida and Georgia enacted comprehensive reforms to bring more balance and equity to their legal environments.”
Exorbitant plaintiff awards and questionable litigation will cause Louisianans to lag behind other states unless legal reforms are put in place, she said.
“This domino effect will impede opportunity for our residents and businesses, while they continue to absorb the rising costs of goods and services,” Venable said.
The study emphasizes that tort reforms – such as those recently passed in the Louisiana House of Representatives, including measures to restrict damages calculations in personal-injury cases to amounts that were actually paid out and limiting plaintiffs’ ability to recover damages if they are 51% or more at fault for an injury – can be effective in improving state economies.
“Tort reform can lead to substantial economic benefits, and states that have implemented reforms have seen improved judicial efficiency and measurable advancement in economic performance,” the study says.
Such reforms can enhance innovation and boost productivity, according to the report.
Late last month, the House Committee on Commerce passed HB 677, sponsored by Rep. Kim Carver (R-St. Tammany) by a vote of 10-6. The measure would attempt to curb excessive litigation by targeting legal advertising that is false or misleading under the state’s Uniform Trade Practices and Consumer Protection Law. Under the measure’s provisions, offenders would be liable for costs of investigations carried out by the Louisiana Attorney General’s Office.
Tort reform supporters have argued that such a law is needed to stop law firms from exaggerating potential legal outcomes to attract new clients.
"Prolific trial lawyer advertising has played a significant role in creating a 'jackpot justice' mentality in Louisiana," Venable said. "More than $20 million was spent by trial lawyers across television, print, digital platforms and outdoor media across the state in the first quarter of 2024, alone. Comprehensive legal reform is long overdue and measures like Rep. Carver’s are an important piece of the puzzle."