Cutting legal costs: The paper chase | The Economist

Cutting legal costs: The paper chase | The Economist

Cutting legal costs
The paper chase
Lawyers abusing procedures on evidence slow justice to a costly crawl

Jun 23rd 2011 | NEW YORK | from the print edition

AMERICA thinks of itself as having not only liberty, but “justice for all”, as the Pledge of Allegiance has it. The World Justice Project disagrees, releasing a report on June 13th on the status of the rule of law in 66 countries around the world. America ranked in the top echelon in many categories. For example, it got high marks for open government, limits on government powers and “order and security”. But on access to civil justice, America did badly: it came 21st, just behind the Czech Republic and just ahead of Jordan. The cost of the system was the most important thing dragging America’s score down.

America is rightly considered litigation-happy. Opening a case is easy. But once begun, many factors conspire to make the process expensive and frustrating. Ambulance-chasing lawyers and runaway juries are only part of the problem, and probably not the most crucial one. Less than 2% of federal cases result in a trial. The worst problem comes in the pre-trial phase known as discovery.

Once a suit is filed and the defendant answers, the parties to a suit have an extensive right to demand information from each other. This includes written questions to the other side, depositions of witnesses, and demands for documents the other might have. The rules presume a right to nearly anything in the other party’s possession that might conceivably be relevant. The right to discovery has been used by aggressive lawyers not just to find pieces of information, but to exhaust and impoverish adversaries through endless motions for more.

The problem has worsened since the proliferation of digital information has made discovery more complicated and expensive. E-mails, financial records and other databases are all subject to discovery. Some records are automatically archived; some are routinely deleted. Clients may not always know exactly what they have. But if a court finds out that parties have failed to produce discoverable information, the sanctions can be severe. These can include an automatic negative inference about the missing information, dismissal of the case, or heavy fines.

This leads lawyers to practice the legal equivalent of “defensive medicine”, producing far more than they need to to stay on the safe side. Clients foot the ever-growing bills (e-discovery services are now a business estimated to be worth between $1.2 billion and $2.8 billion) as the lawyers ratchet up their demands of each other. Even the stronger party in a case has a strong incentive to settle, to avoid the time and cost.

So ever fewer cases are going to trial: the ratio of federal trials to initial filings in 2009 was a twelfth of what it was in 1962. States courts have held far fewer trials, too. This has led the Institute for the Advancement of the American Legal System, an advocacy group, to lead a call for reform. The IAALS wants stronger enforcement of the principle of proportionality. This rule (already on the books, but not much used) dictates that discovery requests should be in line with the sums of money at issue. Second, they want to raise the bar at the pleading stage: litigants should put all the information they have forward at the outset. This should smoke out more of the bad cases, so that those that survive are more likely to reach trial, and lawyers will focus on the merits, not discovery ambushes.

The Seventh Circuit courts (in Illinois, Indiana and Wisconsin) are testing some of these ideas in a pilot project. In it, an “e-discovery liaison” is appointed from each party at the start of a case. Lawyers must meet and try to co-operate with each other before they see a judge. Following positive reports the pilot is being expanded into a two-year second phase with three dozen judges participating, and a report due out May 2012 which will see if the new rules lowered costs.

Better procedures alone are not sufficient to reform American justice. But stopping lawyers from throwing sand in the gears is a necessary step. Even the American College of Trial Lawyers has joined the IAALS in supporting the changes. Trial lawyers make money in discovery, too. But they get into the business to argue cases in courtrooms, not to file endless papers.