Alabama's lawsuit climate ranking slips, reforms still needed to improve civil liability issues

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BIRMINGHAM, Ala. — The U.S. Chamber Institute for Legal Reform’s (ILR) 10th state lawsuit climate survey shows Alabama’s legal climate is 46th out of 50, a decline of three places since the last survey three years ago.

The ILR’s survey ranking the lawsuit climate shows Delaware is first and West Virginia is 50th.

Alabama’s lawsuit climate had made a modest gain in 2012, ranking 43rd, the highest ranking since the first survey in 2002. The gain likely was the result of the Legislature enacting the first civil justice reforms in over a decade, the Chamber’s ILR said.

Since the 2012 survey, Alabama had passed important legal reforms including this year when the Legislature at the Business Council of Alabama’s urging overturned the Supreme Court’s two opinions allowing “innovator liability.” The Legislature also enacted transparency in state attorney general hiring of private lawyers in 2014.

The novel legal theory of innovator liability imposes liability on a brand name drug maker for injuries caused by a generic version of the drug. The decision was unfair and marked a steep departure from bedrock legal principles and that is why courts throughout the country have rejected the flawed logic adopted in the Alabama decision, the ILR said.

Without it, Alabama would have been at a great disadvantage in attracting new business investment, which is vital for economic growth and jobs, said BCA President and CEO William J. Canary.

“Innovator liability’s repeal had been important to Alabama manufacturers and economic development since 2013 and 2014 Alabama Supreme Court rulings potentially opened up product tort actions against businesses that do not make a product,” Canary told Yellowhammer. “It was inspiring to see broad bipartisan support for this legislation that at the end of the day is good for business and good for consumers.”

Innovator liability legislation was a major goal of the BCA’s State Legislative Agenda for 2015 and for the BCA’s national partners, the Chamber and the National Association of Manufacturers.

Unfortunately, according to the ILR, Alabama’s recent improvements are not reflected in the rankings because there is often a lag time in overturning perceptions, which is what the survey is based on. “Perceptions do not change overnight,” the ILR said.

In addition to the Supreme Court’s 2013 and 2014 innovator liability rulings, here are some possible explanations for Alabama’s ranking:

Lingering concern about the Court producing such an outlier ruling may have contributed to Alabama’s rank this year. That’s because a year later, in 2014, the Court doubled down and reaffirmed this controversial decision;

High verdicts in federal and state courts also raised fairness concerns;

In 2014, a federal district court jury awarded $117 million, with $100 million in punitive damages, against a group of steel distributors in a business-to-business suit over the supply of allegedly inferior steel. In 2012, a Baldwin County jury awarded $140 million against a hospital in a wrongful death action.

Alabama’s Legislature has made meaningful strides in legal reform, but these have yet to fully materialize in the survey results.

In-house general counsel or senior attorneys at major companies ranked their perceptions of state lawsuit environments, which not only included their laws, but also courts, judges, and juries. Senior executives at larger corporations also were polled.

Seventy-five percent of companies surveyed say a state’s lawsuit environment is likely to impact important business decisions at their company, such as where to locate or expand.

Among other reforms, Alabama previously passed laws reducing forum shopping in wrongful death actions, and has taken steps to minimize junk science in expert witness testimony, the ILR said.

The ILR said Alabama should consider enacting a law to require lawsuit lenders to play by the same rules as others who provide loans in Alabama. This would protect consumers and business from exploitation by this predatory industry.

In the 2015 legislative session, the BCA put its weight behind a bill to reform the lawsuit lending business, advocating legal fairness by properly allocating fault to all parties involved in a lawsuit and should allow juries to consider the responsibility of third parties that may have contributed to a plaintiff’s injury.

The ILR survey was conducted through telephone and online interviews between March 9 and June 24, 2015. Respondents were 1,203 general counsels and senior attorneys or leaders in companies with annual revenues of at least $100 million.

They were asked to rank states for their overall treatment of tort, contract, and class action litigation. Respondents also ranked states for the impartiality and competence of their judges and the fairness of their juries.