Should Georgia limit liability for drug companies? PRO

While America continues to sink deeper into recession, Gov. Sonny Perdue has sent a clear signal he’s not waiting for Washington to stimulate Georgia’s economy. The governor has proposed a bold legal reform agenda designed to protect state jobs, attract new investment and make Georgia a better place to do business.

Perdue’s new plan, which builds on landmark tort reform legislation enacted in 2005, has two main planks.

First, the governor has proposed enhancing protections from frivolous lawsuits for pharmaceutical and health care companies whose products have been tested and approved by the nation’s top medical safety regulator — the U.S. Food and Drug Administration.

Similar reforms in other states have proven highly successful in attracting investment and jobs. In Michigan, for example, the state’s economic development office reports that nearly 120 new life sciences companies have been launched in the state since 2000 and more than $2 billion is invested in research and development every year, providing one of the few growth areas for the region’s economy.

Opponents have questioned this proposal, arguing that “FDA approval doesn’t guarantee that a drug will be 100 percent safe.” If this was the standard, no new drug would ever make it to market and every existing drug would have to be pulled from the shelves. All drugs, even aspirin, have risks. Determining the proper balance between potential safety issues and prospective health benefits is a job best left to medical experts and scientists at the FDA, not to trial lawyers arguing before non-expert juries.

Second, the governor has proposed a “loser pays” provision that would discourage frivolous lawsuits by requiring the losing side to pay the legal fees of the winning side in cases that are quickly dismissed in court. Nearly every economic competitor of the U.S. employs loser pays rules to cut down on frivolous cases — which is why tort costs in the U.S. are more than twice as high as in Germany and three times as high as in France and the United Kingdom.

A top lobbyist for the Georgia Trial Lawyers Association says a loser pays proposal is not needed because the 2005 tort reform legislation included an “offer of settlement” provision that requires the losing side to pay the winning side’s legal fees if it rejects a settlement offer, then receives a similarly-sized judgment at trial.

The offer of settlement provision is a good one, but it still requires defendants to go through the costly discovery process on a lawsuit before a judge has an opportunity to rule on its merits. If the case is dismissed as having no merit, companies cannot recover the legal costs they’ve invested. Sometimes companies offer settlements even in frivolous cases to avoid these costs — a form of legalized blackmail. A loser pays rule will make trial lawyers think twice before filing frivolous cases in the hopes of scoring a quick settlement and protect corporate defendants from nuisance claims.

American companies now understand that a fair and predictable state legal climate is as critical to business success as low taxes, a modern infrastructure and an educated work force — and they are making investment decisions accordingly. Smart governors are recognizing it as well, which is why the General Assembly should consider Perdue’s legal reform package an integral part of any successful economic development strategy for Georgia.

• Dan Pero is president of American Justice Partnership, a national organization working for state-level legal reform.