March 8, 2005

New U.S. Chamber of Commerce Poll Ranking States’ Liability Systems Is Part of a Disinformation Campaign to Restrict Consumer Rights

March 8, 2005

New U.S. Chamber of Commerce Poll Ranking States’ Liability Systems Is Part of a Disinformation Campaign to Restrict Consumer Rights

West Virginia and Illinois Are Attacked With Bogus Statistics Aimed at Manipulating Lawmakers Into Passing Reforms That Shield Corporate Wrongdoers

WASHINGTON, D.C. – The U.S. Chamber of Commerce’s 2005 State Liability Systems Ranking Study, the latest salvo in its ongoing attack on consumers’ and patients’ legal rights, meets the same scientific standard as its reports of prior years: politically driven propaganda that grafts corporate bias onto flawed methodology, according to a critique by the national consumer group Public Citizen. This is no surprise given that Chamber CEO Tom Donohue, who unveiled the report today, sits on the board of two of the country’s most notorious corporate wrongdoers – Qwest and Union Pacific – which have been held accountable by the same civil justice system that the Chamber wants to undermine.

What purports to be a “study” is actually a telephone poll of lawyers on the payroll of corporations with revenues of at least $100 million. “The poll’s findings are as predictable – and meaningless – as would be a poll asking drug dealers to rank district attorneys according to whether they would get a fair shake,” said Joan Claybrook, president of Public Citizen. “Of course industry lawyers will consistently more favorably rank states in which legal hurdles prevent consumers from successfully taking corporate violators into court.”  

A Public Citizen analysis of the Chamber’s opinion poll found the following:

Pervasive Pro-Industry Bias. First, only in-house counsel and corporate legal staff, all of whom work for potential defendants in tort cases, were polled. As in previous years, 2005 poll respondents were told in a cover letter that the “research has played an important role in encouraging state legislators and judges to re-evaluate the condition of their state liability system and stimulate discussion on how states might improve their litigation environments.” Second, respondents were deemed qualified to evaluate a given state’s tort system only if they were “very” or “somewhat familiar” with that state’s litigation environment – i.e., they have had some experience representing their company in a lawsuit in the state. That means that grossly subjective factors, such as whether the respondent believes the defendant should have been sued or whether the cases were won or lost, figure heavily in the subjective assessment of the “fairness” of that state’s court system. Third, respondents are required to express an opinion of the state as a whole – even if that opinion is based on experiences in just one county. Given the wide variance among localities within the same state, this can hardly be considered a representative picture of an entire state’s legal climate. 

Flawed Methodology. The survey is marked throughout by the use of overbroad, leading questions designed to elicit pre-determined responses that ostensibly reflect corporate “perceptions” of the nation’s tort system. For example, respondents are asked, “Could it ever happen that the litigation environment in a state could affect an important business decision at your company, such as where to locate or do business?” [Emphasis added] Not surprisingly, an overwhelming 81 percent of respondents say “yes”; any other response to such a double conditional would be ludicrous.

It becomes still clearer just how meaningless the Chamber’s state ranking is when one compares it with other state business rankings. Some states that chronically languish at the bottom of the Chamber poll are cited by other sources as great places to do business. These include Texas, Illinois, Alabama, South Carolina and Florida – all named among the most desirable business climates in Site Selection magazine’s 2004 ranking, which surveys corporate executives. Illinois, which placed 46th in the Chamber’s 2005 ranking of state liability systems, was rated the third best business location in the country in the 2004 Site Selection survey. Alabama, South Carolina and Florida, all in the bottom 25 percent in the Chamber poll, made the 2005 Pollina Corporate Top 10 Pro-Business States list.

Misleading Claims About States. Poll results about specific states should raise red flags to reporters because it is clearly just another weapon in the Chamber’s arsenal of scare tactics designed to induce legislators to enact laws limiting consumer access to the courts. Consider the experience in Mississippi, when in 2002 the Chamber launched an ad campaign charging that businesses were fleeing the state, which often figures at or near the bottom of the Chamber’s state liability system ranking, because it was a lawsuit “mecca.” The ad based its claim on the fact that jury awards in the state over the previous six years totaled more than $1.8 billion. However, this information was deliberately misleading. The ad failed to point out that $500 million of the total was in a single case involving one funeral home suing another. It also failed to state that $474 million of the total was awarded to the State Tax Commission against a computer software company that tried to cheat on a state contract. Many of the original, remaining awards were later reduced on appeal. When the president of Mississippi’s Economic Council, Blake Wilson, challenged a spokesperson for the Chamber’s Institute for Legal Reform to substantiate the claim that Mississippi’s justice system was costing the state thousands of jobs, he was unable to cite a single example of a company driven away by the legal climate.[1]

Now the Chamber is at it again, targeting West Virginia (ranked 49th) and Illinois (ranked 46th) as states whose litigation environment threatens to shut the door on business. As usual, however, the Chamber’s “facts” do not stand up to scrutiny. Its West Virginia Legal Reform Fact Sheet released with the 2005 survey notes the bad marks the state gets from respondents, but neglects to point out that only 107 out of the 1,437 corporate attorneys polled even answered questions about West Virginia – and virtually every one of them worked for an out-of-state company, making it highly likely that their knowledge of the state court system was as a corporate defendant charged with harming West Virginia residents. In fact, West Virginia sees fewer tort filings per capita than most states, ranking 35th in the nation, according to a 2003 National Center for State Courts study.  Business Facilities magazine ranked West Virginia the cheapest state in the region to do business in 2003.

The Chamber “fact” sheet on Illinois is similarly misleading – if not outright dishonest. It decries the exodus of doctors from the state, although the number of doctors practicing medicine in Illinois has risen steadily since 1996.[2] According to the American Medical Association, Illinois ranks above the median nationwide, with 2.6 doctors per 1,000 residents.

According to Public Citizen, the Chamber’s survey as well as its CEO, Tom Donohue, lacks credibility and any semblance of even-handed objectivity. A new Public Citizen report, Tom Donohue: U.S. Chamber of Commerce President Oversees Renegade Corporations While Pushing for Limits to Corporate Accountability, chronicles Donohue’s checkered record with Union Pacific Corp. and Qwest Communications International Inc. The report, which formed the basis of a major New York Times story published on Feb. 20, 2005, is available at https://www.citizen.org/hot_issues/issue.cfm?ID=1001.

Donohue has a vested interest in the Chamber’s campaign to limit corporate accountability. Although he has proclaimed the importance of board members serving as watchdogs for the corporations they manage, Donohue sits on the boards of Qwest and Union Pacific – both publicly traded companies whose reputations have been marred by serious misdeeds that have prompted the type of civil lawsuits Donohue wants to limit.

Among Public Citizen’s findings about Qwest since Donohue joined its board:

• The company has paid $250 million to settle fraud charges brought by the Securities and Exchange Commission for overstating earnings, has paid $25 million to settle five lawsuits concerning alleged insider trading and still faces billions of dollars in potential civil litigation liabilities.
• The company has been assessed more than $114 million in fines by 10 states and the Federal Communications Commission for defrauding consumers and for failing to disclose secret business dealings.
• Instead of punishing Qwest’s corporate executives, Donohue, who sits on the board’s compensation committee, and fellow board members rewarded them with higher pay packages. Qwest’s board has received dismal ratings from two independent research organizations for furnishing executives with exorbitant pay packages despite poor corporate performance.

Since Donohue joined the Union Pacific board in 1998, the company has repeatedly been found liable in accidents resulting from poor training or unsatisfactory upkeep of tracks, has pressured workers not to report accidents, and has been deemed responsible by courts for manipulating or destroying evidence: 

• The Arkansas Supreme Court said in a 2004 decision involving a fatal accident that “the record in this case reflects the development of a corporate policy at Union Pacific that put company profits before public safety.”
• A federal judge in Arkansas fined Union Pacific $168,000 in 2001 for destroying evidence in a case stemming from another railway crossing crash that left a motorist dead.
• In Washington state, a federal judge sanctioned Union Pacific in February 2002 after it was revealed that a manager secretly fixed a faulty railway crossing after a motorist was killed there. The judge labeled the actions “egregious” and said “severe sanctions are appropriate” since the manager’s “actions were not that of a rogue underling.” Union Pacific had sought compensation from the driver’s estate in this case, claiming the crash had left one of its locomotives damaged.    

Again, Donohue and fellow board members appear to have rewarded Union Pacific executives with ever higher pay. An independent research organization last year recommended against retaining Donohue as a board member because of his role as chairman of the compensation committee, which assented to an accounting trick that triggered a multimillion-dollar bonus for company executives.

“If the Association of Trial Lawyers of America conducted such a biased poll among its leading attorneys about state liability systems, the Chamber would be up in arms,” said Frank Clemente, director of Public Citizen’s Congress Watch. “The Chamber’s politically motivated poll is not a true representation of the nation’s judicial landscape. It is a cynical attempt to manipulate public opinion in order to win huge legislative favors that allow industries to escape accountability for their misdeeds.”

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