Lawsuits: America's COVID-19 Recovery Tax

Lawsuits: America's COVID-19 Recovery Tax
(AP Photo/Andrew Harnik)

A battle is emerging over how much Washington should seek to curb lawsuits that endanger America’s economic recovery. The Families First Coronavirus Response Act, signed into law by President Trump on March 18, insulated manufacturers and distributors of certain protected face masks from legal liability. But in the face of a ferocious pushback from the trial-lawyer lobby, Democratic leaders Chuck Schumer and Nancy Pelosi have signaled an unwillingness to go further. Meantime, Senate Majority Leader Mitch McConnell has insisted that any additional Covid-relief package must include liability protections, and the president’s chief economic adviser, Larry Kudlow, has stressed the issue’s importance for business viability in a pandemic.

As a general matter, Kudlow is right. America’s unusually permissive liability system singularly jeopardizes U.S. economic recovery, so long as the virus that causes Covid-19 has the potential of affecting anyone under U.S. legal jurisdiction. Among other idiosyncrasies that distinguish the American legal system from those of Western nations, the U.S. gives civil juries broad powers to decide complex liability trials; grants plaintiff attorneys sweeping rights to “discover” documents and depose witnesses before trial; and refuses to allow the winner of a lawsuit to recoup costs from the other side—imposing costs on civil defendants, win or lose. These and other differences matter, and they help explain why tort litigation in the United States, as a percentage of the economy, costs about three times as much as in the average European country.

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