Tort Laws are Driving Businesses Away
States, cities and towns work hard to lure both large and small businesses to their area. There are numerous tools they employ including tax breaks, public/private partnerships, education policies that attract young people, available financing, fewer restrictive regulations, and friendly transportation policies. Unfortunately, they may not pay enough attention to the competing factors that drive businesses away.
Besides crime and higher taxes, there is one factor that both turns away businesses but also hurts the most vulnerable residents – lawsuits. A report by The Perryman Group, found that in 2019, 89 percent of corporate respondents said that the litigation environment in a state can affect whether or not they choose to locate or stay there. This is particularly true of manufacturing industries (e.g., chemicals, pharmaceuticals, electrical equipment) and health care delivery.
Judicial Hellholes is a report on the places where poorly conceived lawsuits find a home in courtrooms. Here are three states that rank high on that list and that CEO’s say are the worst states to do business.
Some of the lawsuits are weird or really stupid but at least most of them get dismissed. Here are some examples:
2021 - In Michigan federal court, Janet Avigne and Lauren filed suit against Kroger that claims that the smoked gouda cheese wasn’t really smoked, although the packaging notes that it has a “distinctive, smoky flavor.” U.S. District Judge Jorge Alonso gave the greenlight to a class action lawsuit in Illinois. There’s also a class action suit in California. Perhaps they should be aware that smoking foods has been linked to intestinal cancer but then many smoke flavorings are also being studied in Europe for toxicity. FDA and USDAhave weighed in on the labeling debate with the opinions of their highly educated scientists demanding that a statement such as “Artificial Smoke Flavoring Added” shall appear in prominent letters and contiguous to the name of the product.”
2022 - Saying that consumers shouldn’t have to “scour” the ingredients list, another class action lawsuit in New York against Sanofi Consumer Healthcare and Chattem say that their Ducolax laxative products aren’t natural. They note that they contain, for example, citric acid, i.e., Vitamin C and glycerin, a sugar alcohol that occurs naturally in fermented products or can be commercially produced. The consumers charge that they can’t tell if the product truly “works naturally” at the point of sale. The lawsuit goes on to say,“Consumers would certainly not recognize real nature of the active ingredients just by reviewing the active ingredients tag.”
2023 – Jonathan Nootens, who tweets about sweepstakes, is leading a class action suit in Chicago, Illinois claiming that Molson Coors’ “Ranch Water” is mislabeled in that it doesn’t contain tequila. The suit’s evidence is that the water is labeled as 100% Agave which is the source crop for tequila.
2016 – A woman in Harlem, New York sued Target, because that’s the store she was walking into when a shopping cart dropped on her head. It was dropped by some boys four floors up at the mall where the Target happened to be located.
These were stupid but the harm they do appears to be minor relative to the big, mass torts where hundreds or thousands of consumer plaintiffs sue companies. The problem with these isn’t that they are frivolous, it is that they are often based on poor science – and the harm they do may be massive.
RoundUp (glyphosate) – This is the popular weed killer that will be gone this year. Although every public health authority said that glyphosate does not cause cancer, the one that finds just about everything to cause cancer, the WHO’s International Agency on Research on Cancer (IARC) did. One reason is because they don’t consider the level of exposure and it’s not too hard to feed rats tons of stuff or, if you are studying people, to find an association between chemicals and cancer if that’s what you want to do.
Ethelene Oxide – This is used to sterilize medical equipment (by over 100 companies) and has been subjected to trials where the plaintiff consumers allege that their cancer arose from being exposed to the chemical at their workplace. A recent review of the general likelihood of causation found that there was no convincing evidence that there was an increased cancer risk.
The costs of these cases fall on consumers in multiple ways. The initial cost of these cases is paid by insurers who, in turn, raise the cost of insurance (premiums) on everyone. Just like crime and taxes, these lawsuits also discourage businesses from locating in those areas which means fewer jobs. They also increase health care costs and discourage innovation. They also translate to less revenues for cities and states that will make it more difficult to provide welfare services.
While some politicians don’t get it, many understand the value of attracting businesses to their towns and states. It’s not enough to keep crime under control and taxes reasonable, they must also pay attention to the litigation environment.