9th Annual Legal Reform Summit, Remarks

Remarks as Prepared for Delivery by
THOMAS J. DONOHUE
President and CEO, U.S. Chamber of Commerce

Washington, D.C.
October 29, 2008

Introduction

Thank you very much, Lisa, and good afternoon everyone. Thank you for coming.

I know that some of you were able to join us for ILR's 10th anniversary celebration in June.

It was a great event. We took a few moments to celebrate some of our victories:

• The passage of the Class Action Fairness Act of 2005
• Successful voter education efforts in races for state Supreme Court justices and attorneys general
• The widespread exposure of fraud and abuse among some of the most prominent members of the U.S. plaintiffs' bar, and
• Convincing many states to enact much-needed fundamental legal reforms, often against great odds.

While we never for one minute thought that the trial bar was down for the count, we were pleased that we had landed some serious blows in the last 10 years.

But we're not here today to pat ourselves on the back for all we've done to improve our nation's litigation environment. We're here to answer the question: Where do we go from here?

Next week, the American people will vote in the most important election in a generation. A few months after that, our newly elected leaders will make policies and pass laws that will set America's future course.

And the job for those of us in this room, as well as those in the business world, is to encourage our leaders to make the right choices … choices that will set America on a course of prosperity.

I'm not saying anything particularly shocking here. We all aspire to grow jobs and improve our economy.

But as our leaders set a new course, they must decide this fundamental question:

Are we going to allow plaintiffs' lawyers to burden our economy with more self-serving, abusive lawsuits? Or are we going to continue the path of reforming our civil justice system?

And this question will not be decided in a vacuum. Indeed, our friends in the trial bar have been working for some time to ensure that Congress and the next administration see things their way.

They have invested heavily in this election, and their lobbying activities in this Congress—pursuing more ways to sue people—have been a dress rehearsal for things to come.

But the path of more lawsuits is a path to a slower economic recovery, fewer jobs, smaller pensions, and a diminished role for America in the global economy.

There is one group that benefits from a more litigious society: Lawyers.

And, by the way, the American people are wise to this fact. Right after the last election, ILR conducted a national poll of voters to ask them who they thought benefitted most from lawsuits. Seventy-five percent of them said, "Lawyers benefit most."

And we'll ask that same question again of the voters next week. I suspect we'll get a similar answer.

Unfortunately, for America, the influence of the plaintiffs' bar is strong and growing. And they have the ear of many of the leaders who will be making key decisions impacting our nation's future.

So for the next few minutes, I want to talk directly to those leaders on what we believe is the right path for our country's economic future.

Message to the Next President and Congress

First, I want to talk to the 44th president and the new Congress. I know that your first priority must be to address the crisis in our financial system and to fundamentally strengthen the U.S. economy.

We see a few hopeful signs that the bipartisan economic relief package passed early this month is working. We have more hard work ahead of us—overhauling our regulatory system.

The Chamber has been deeply engaged in this issue for a long time. And we will be active participants in developing the right solutions.

There will be other voices in this debate, and one of them will be advocates for more lawsuits. They will view this as a prime opportunity to gin up new business. We need to be prepared to combat those efforts.

During the last session of Congress, the plaintiffs' bar knew that it didn't have enough influence to pursue full-frontal assaults on laws designed to limit the number of lawsuits they could file.

So they took a more shrewd approach—they sneaked liability-expanding provisions into must-pass bills, hoping no one would notice.

They tacked at least 46 lawsuit-expanding provisions—what we refer to as "trial lawyer earmarks"—onto legislation dealing with homeland security and the farm bill. They added them to the Consumer Protection Safety Act reauthorization and telecom legislation.

You have to hand it to them—they are ingenious and resilient. And even though America has the most expensive lawsuit system in the world, they have somehow convinced members of Congress to introduce bills that would give them even more opportunities to sue.

They will do the same thing in the next Congress, only more so!

And the truth is: We're going to have our hands full to stop their agenda.

The trial lawyers have more allies than ever before on Capitol Hill. And the number of pro-lawsuit members of Congress is only likely to grow after next week's elections.

But I have a message for the new Congress and the new president—when Americans say that they want their leaders to deliver "change" in Washington, allowing lawyers to sue more isn't the change they are looking for.

Regardless of political party, voters expect their elected officials to curb frivolous lawsuits and abusive practices.

I mentioned our national voter poll. That same survey showed that 85% of people believe frivolous lawsuits are a serious problem, and 86% said Congress should continue to reform the lawsuit system.

And this sentiment is shared by voters from both parties and independents.

So if you think that voters will support an agenda that makes it easier to sue the companies that create America's jobs and fund Americans' retirements and college educations, think again.

If we hope to fully restore our economy, we cannot allow lawsuits to siphon off money that should be used to help our country recover.

Let's not follow the path offered by the plaintiffs' bar. They will try to convince us that the litigation industry is needed to step in to protect consumers and investors.

Yet the very opposite is : Sending in more lawyers would be the least effective, costliest way to police the economy and protect Americans.

Abusive lawsuits filed by plaintiffs' lawyers will not help our financial markets regain their footing …

They will not encourage businesses to invest in innovation …

They will not recoup the losses for millions of investors who have seen their savings and retirement accounts take a hit …

And abusive lawsuits will not add to America's competitiveness.

So, to the future president and next Congress: We cannot sue our way to prosperity. We cannot sue our way to job growth. We cannot sue our way out of an economic crisis. And we cannot sue our way to better regulation.

That's not to say that all lawsuits are without merit. Some are. People with legitimate grievances deserve their day in court.

But, on the whole, if you open the litigation floodgates, the predatory lawsuits filed by opportunistic plaintiffs' lawyers will only benefit one group—plaintiffs' lawyers—at the expense of everyone else.

Message to Main Street

Now I have a message to Main Street businesses.

During the current crisis, many have tried to pit Wall Street against Main Street.

But you are tightly connected. One is dependent on the other. And both must be successful for America to be successful.

The funds that flow through Wall Street help drive the activity on Main Street that creates jobs and generates income. They supply businesses with the funds to operate, expand, and innovate.

In addition, small business owners and their workers are connected to Wall Street through their savings, retirement accounts, and investments.

Wall Street and Main Street have another thing in common: They get sued.

A few years ago, ILR studied the cost of litigation on Main Street. We found that small businesses pay $98 billion every year in tort costs—that's a staggering amount.

We also discovered that small businesses realize that they are just one lawsuit away from bankruptcy.

So to Main Street: We know that abusive lawsuits have a negative effect on your ability to grow your business, create jobs, increase benefits, and invest in innovation.

We will fight hard to change the lawsuit culture in America so that you can do what you do best—create jobs and grow our economy.

Message to Global Companies and Foreign Investors

For years, our capital markets have been undermined by frivolous and expensive lawsuits.

How? By plaintiffs' lawyers taking advantage of a broken lawsuit system, extorting billions of dollars from our companies that are forced to settle rather than put the entire company at risk.

Just this morning, Commerce Secretary Gutierrez released a report that said America's lawsuit system was negatively impacting direct foreign investment.

The Department of Commerce report revealed that while the United States has one of the best legal systems in the world, our litigation environment is viewed by many foreign investors as expensive and risky—two qualities sure to drive investors away.

As we overhaul the regulations governing our financial system, the question we need to ask ourselves is: How can America continue to be competitive in this new global economy?

There isn't a silver bullet solution. However, one thing we do know is that adding costs and uncertainty to doing business in the United States will never be the right answer.

Our legal system should not pose a barrier to foreign companies thinking about investing in the United States, but it does-and that needs to change.

Unfortunately, most businesses don't expect the litigation environment to change anytime soon.

In fact, earlier this month, a survey of in-house counsel found that the business community is preparing for a new tidal wave of class action lawsuits.

As a result of the economic downturn, the survey indicated that nearly half of the larger companies expect an increase in litigation in 2009.

We cannot strengthen our financial system, invigorate our capital markets, and spur the economy while we increase our litigation burdens on businesses.

This is the fundamental choice for us: As the world economy hits the re-set button, and global businesses take a hard look at where they locate, manufacture, seek capital, and sell their products, will America still be the world's choice?

Or will other nations become the global business centers of the 21st Century?

So I have a message to foreign investors and companies: The U.S. Chamber will work very hard to make sure that the United States is still the best place in the world to do business. As part of that, we will fight to reduce predatory lawsuits.

Conclusion

And I have a message to everyone here today.

We are heading into a tougher environment. But you know what? That makes the work of ILR that much more important.

We're going to use every tool at our disposal—the entire apparatus we spent a decade building—to stop the earmarks, stop those looking for political payback, and stop the unraveling of important reforms

At the same time, we're going to be very positive and aggressive in continuing to educate citizens across the country about the punishing tax that lawsuit abuse imposes on all of us.

This is a time for resolve, not crying in our soup. It won't be easy. We'll win some and yes, we'll probably lose some. But we will not back down.

To our trial lawyer friends, we say: More lawsuits are not the answer to America's problems. More lawsuits will not bring about economic recovery. More lawsuits will not accomplish needed reforms in our financial system.

No matter what happens in the elections, we are confident that the American people will side with us on this—if we continue to get our message out … if we continue to show the real and damaging impact that lawsuit abuse has on our small businesses, on new discoveries, on our way of life, and on our economy that is struggling to get back on its feet.

Don't forget we're the ones who are for change here. Those on the other side of this argument are the ones who want "more of the same" …

We're the ones putting forward a positive reform agenda. The others are the ones who are seeking to use political power to defend a crumbling empire …

We're the ones who are standing with the good guys—the mom-and-pop stores that create most of the jobs, and the innovators, scientists, and researchers who develop lifesaving and life-enhancing inventions. It's those other ones who are seeing their highest ranks heading off to jail.

As we get these elections behind us— and begin a new year with a new government in place—don't be shy, don't be reticent, don't be ashamed, don't be apologetic for being for legal reform. You can be sure we won't!

We'll adjust our tactics, our strategies, and to a degree our expectations—but we'll never back down on our principles.

Nothing is more important to the long- term health and competitiveness of the American economy than changing our legal climate and lawsuit culture. We've made history over 10 years, and we'll make plenty more in the years to come.

Thank you very much and enjoy the rest of our summit.

# # #