Frivolous’ Lawsuits Plague PA Businesses

Columnist : Lincoln Institute

Civil Justice Reform is a Priority

     Harrisburg, PA — Seventy-one percent of Pennsylvania’s largest employers have been the target of what they consider to be a “frivolous” lawsuit at some point in the past two years according to the Lincoln Institute’s most recent Keystone Business Climate Survey.
The survey of 172 chief executive officers of Pennsylvania-based corporations employing a least 125 people found 74% believe there has been enough abuse of the state current civil justice system to merit reform. Only 11% of those responding to the Lincoln Institute’s Spring 1999 Keystone Business Climate Survey felt the current system works well.
“These results clear show that Pennsylvania’s system of civil justice is out of control and badly in need of reform,” said Lowman S. Henry, Chairman of the Lincoln Institute. “This is an issue that must be addressed if we expect our state’s business climate to continue improving.”
Fifty-nine percent of those surveyed feel civil justice reform is “very important” to the future ability of their company to remain profitable. Another 31% rated reform as “somewhat important”. A total of 10% said reform of the civil justice system was not an important to their future profitability.
Of the 71% of companies who say they were targeted by a frivolous lawsuit during the past two years, 22% said they spent under $10,000 to defend themselves against the suit. Another 21% spent between $20,000 and $25,000, while 18% spent between $25,000 and $50,000 defending themselves. It cost 13% of the companies between $50,000 and $100,000 to settle the litigation, another 18% spent between $100,000 and $250,000, and it cost 8% of the firms over $250,000 to defend against lawsuits.
A majority of the companies, 63%, said they had changed their business practices to make their firm less vulnerable to lawsuits. Among the steps taken by companies to insulate themselves against future lawsuits were enhanced employee training, additions to their human resources staffs, the hiring of more corporate lawyers, more attention is being paid to risk management and changes have been made to insurance coverage.
Despite their legal problems, Pennsylvania’s top corporate leaders continue to feel the state’s overall economy is performing well. Thirty-three percent of those responding to the Keystone Business Climate Survey said business conditions have improved over the past six months, 55% said business conditions had stayed about the same, and 9% thought business conditions had worsened.
Those numbers represent a slight erosion from the September 1998 survey when 44% felt business conditions had improved over the preceding six months. However, only 18% in that survey thought conditions would improve between September 1998 and March of 1999, but the March 1999 survey found conditions had actually improved for 33% of the businesses.
Looking ahead to the coming six months, majority (53%) expect business conditions to remain about the same. Twenty-eight percent forecast improving business conditions while 12% expect the state’s business climate to worsen.
The number of firms saying employment levels are up during the past six months is down slightly from September of 1998. Forty percent said their employment level had increased over the past six months, 39% said the number of persons employed remained constant, and 20% reported a decline in their number of employees.
Last September, 54% of the companies had reported employment increases while 18% same employment losses.
Looking ahead to the coming six months, 40% of the state’s biggest employers say they expect to expand their workforce, 48% forecast no change, and 10% expect to decrease their employee compliments.
Overall optimism about the state’s economy is being fueled by a continued rise in sales. Fifty-two percent of the CEOs said sales increased over the past six months. Twenty-eight percent reported sales had held steady, while 15% experienced a drop in sales.
The corporate chiefs forecast sales increases would continue through the summer and into the fall. Fifty-six percent say they expect sales to go up, 30% expect sales to hold steady, and 6% expect decreasing sales.
The Lincoln Institute’s Keystone Business Climate Survey was conducted between March 1, 1999 and March 22, 1999. A total of 172 Pennsylvania-based companies employing over 125 individuals responded to the survey. Complete numeric results of the survey can be found on the Lincoln Institute’s website at Results of past Keystone Business Climate Surveys can also be found on the institute’s website. The Lincoln Institute is a Harrisburg-based non-profit educational foundation.