Another Look at Lawsuits

In the past I have objected to unusually high judgments or settlements from legal action as behavioral failures in economic understanding and responsibility.

A plaintiff experiences a relatively minor injury, often because he was not paying attention or taking adequate care.  Examples abound:  “A man police call a Good Samaritan may face a lawsuit after injuring the alleged robber he thwarted;” a $200,000 settlement for bites from bedbugs in a hotel; $95 million to an employee for being “groped, teased, talked dirty to, and poked by her manager;” or a California man at a fast food restaurant who won $1.5 million because he heard the manager mumble what he thought was a discriminatory comment when he asked for a second napkin.  Certainly some of these people deserved some compensation, but the outcomes are often far out of proportion to the injury, real or imagined.

In these cases the lawyers move in to convince the injured party that someone else must be forced to pay.  Legal representation is done on a contingency fee – if you don’t win, you don’t pay.  It’s free money.  The injured party, weak in the dimension of responsibility, agrees.

After the trial, the jury, weak in the dimension of economic understanding, doesn’t consider that the outcome of the lawsuit reflects not only on this case but also on future cases and future actions of many parties.  It portends similar actions from similar juries, which causes all insurance companies, not just the one involved, to assume higher risk.  Their customers, all of us, cover this higher risk by paying higher premiums.  Likewise any other companies in the same industry as the one being sued must think about changing practices, which adds cost to their operations, cost that again turn into higher prices for customers.  One obvious cost is printing or stenciling those ridiculous warning labels I’ve written about before.  The outcome has a cumulative effect, plus money is transferred from one party to another (with the lawyers taking their cut) with no overall benefit to society – nothing is produced, improved or made more efficient.

But when I saw the story about the Alabama man who “was awarded $7.5 million in a lawsuit against Walmart after he tripped while buying a watermelon,” I had a different idea.  Back in 2015, the 59-year-old man apparently caught his foot on a pallet where the watermelons were on display and broke his hip.  Now a broken hip is painful and makes life more difficult for a time, but the store reports that the same display continues to be used.  It’s hard to imagine that the store was at fault if other customers have negotiated the watermelon pallets for the last two years without further problems.

But with Wal-Mart’s reputation as promoted by the media, it’s easy to portray them as evil in this case too.  This is a further case of poor economic understanding.  As this source (among others, including Forbes) reminds us:  “Ideologues who rant against Wal-Mart do not understand economics. In a market economy, success goes to those businesses that best and most efficiently serve consumer needs.”

My latest idea is that most juries don’t even get to economic considerations due to the concept of survivor guilt.  The rough definition from Wikipedia is “a mental condition that occurs when a person believes they have done something wrong by surviving a traumatic event when others did not.”  In this case, the traumatic event is life itself.  They see a person with a broken hip or other injury, physical or psychological, and think of how lucky they are for two reasons - first, lucky not to be in his shoes and second, lucky to be in a position to help out (with someone else’s money) to assuage their own guilt.  Economic understanding never enters the conversation.

The more I think about this idea of survivor guilt, the more it explains many of the other seemingly non-critical-thinking behaviors in our society.  Someone else is always worse off and needs defending or bailing out.  And it’s especially easy to support a cause when other people’s money, efforts or rights are sacrificed.