COMMENTARY: The shocking economic costs of mass tort litigation

Mass tort litigations often involve a procedural process known as multi-district litigation. This process was conceived to move large numbers of related civil lawsuits more efficiently through the federal court system by consolidating them into one case. However, they have become a cash cow for attorneys and their financial backers instead of making the process easier. These lawsuits clog courtrooms with frequently baseless claims of personal injury. As of 2023, these cases make up 65 percent of the federal civil caseload, a far more significant share than the 38 percent a decade ago.

The dollar figures associated with the various aspects of MDLs and mass tort litigation are staggering. In fact, billions of dollars have been allocated toward legal advertising over the past few years. Much of it is aimed at identifying potential clients for mass tort suits and is largely financed by outside financial backers who have no legal connection to the case.

Hedge funds and other investment companies finance mass media legal advertising campaigns. They also frequently cover the other costs of pursuing tort cases in exchange for a healthy share of court awards or settlements.

The mass tort suits promoted by profit-motivated legal firms and financed by outside investors extract money from the general economy. They drain capital that could be put to more productive use in the private sector. Every dollar spent on such a suit could not be used to support economic growth, business expansion and job creation.

Third-party litigation funding has grown into a multibillion-dollar industry. This has notably shaped mass torts and MDLs. The fact that so many third-party funders find it lucrative to involve their capital in these suits is a symptom of real rot within the American legal system. Regardless of whether a prospective defendant has a legitimate case, the current system incentivizes lawsuits. Those incentives have ballooned into the economically draining cottage industry it has become.

The concerns behind these criticisms — namely, the dangers of incentivizing third parties to manipulate litigation for profit — are just as relevant today, particularly in mass torts and MDLs.

When cases are consolidated into MDLs, they draw in the interest of funders seeking high returns on investment. However, this financial involvement can distort the litigation process. Funders, driven by profit rather than justice, may often push for prolonged litigation or settlements that benefit their profits rather than working toward resolutions that serve the claimant’s best interest.

Mass torts also diminish tax revenues, shifting more of the burden of paying for government expenditures to taxpayers. A study calculated those losses to be $77.4 billion in annual federal revenues, $24.3 billion in annual state revenues, and $20.5 billion in annual local government revenues.

The unnecessary financial and societal costs of excessive mass tort litigations could be significantly reduced by state and federal regulations that impose reasonable rules on litigators. In response to an epidemic of homeowner insurance lawsuits, Florida passed a tort reform measure in 2023 that rapidly cut in half the number of monthly filings to initiate litigation. Other states and Congress should consider similar legislative initiatives to rein in the out-of-control costs of mass tort litigations.

In addition to these reforms, courts should consider revisiting the standards for consolidating cases under MDLs and mass torts to reduce profit-driven funders clogging the courts. This would help restore ethical boundaries within our legal system while protecting people from the economic drain caused by frivolous litigation.

David Williams is the president of the Taxpayers Protection Alliance. He wrote this for InsideSources.com.