NEW YORK — Tuesday, the conservative Manhattan Institute think-tank released its highly anticipated and in-depth report on the court system — suggesting that America should start making the loser in a lawsuit pay the winner.

The lengthy 12,000-word report — complete with mathematical equations, pie graphs and flow charts — is entitled “Greater Justice, Lower Cost: How a ‘Loser Pays’ Rule Would Improve the American Legal System.� Written by Marie Gryphon, a senior fellow at the Manhattan Institute’s Center for Legal Policy, the report examines how the legal system in the United States would be impacted by a loser-pays rule, under which the loser in a civil suit must pay the winner reasonable legal expenses and attorneys fees.

Former New York City Mayor Rudy Giuliani wrote the foreword. “The integrity of our legal system is under assault. Establishing loser-pays rules and other tort reforms can help restore citizens' faith in the bedrock of society — justice, fairness and the rule of law, Giuliani wrote.

The Manhattan Institute is a think tank that’s “mission is to develop and disseminate new ideas that foster greater economic choice and individual responsibility,� according to the Institute.

Gryphon writes in the report that the country is struggling with a “uniquely costly civil justice system that often is inefficient and unfair.� Small businesses suffer from frivolous lawsuits that cost them millions of dollars each year, she says.

“A loser pays system could be an important part of a larger effort to reduce litigation cost, discourage meritless lawsuits, and better align tort law with its goal of deterring socially harmful conduct. The rest of the world uses the loser pays or ‘English rule’ system,� argues the report. “It’s time the United States adopts one as well.�

According to the report, the loser-pays system is necessary because:

— Direct costs of tort litigation reached $247 billion in 2006, or $825 per person in the United States

— Tort costs in the United States are double the cost in Germany and more than three times the cost in France or the United Kingdom

— Percentage of United States’ GDP that is consumed by tort litigation, 1.87 percent every year, is greater than what Americans spend every year on new automobiles

— The fees and expenses incurred by lawyers on both sides of a lawsuit are almost as costly as transfer payments to plaintiffs claiming injury

Almost every economist who has studied the loser-pays system predicts that it would, if adopted, reduce the number of frivolous lawsuits, according to the report. The states of Alaska and Florida can be examined for their loser-pays systems.

Alaska has always had a loser-pays rule, and as a result, tort claims constitute only 5 percent of Alaska’s litigation, compared to the national average of 10 percent.

In Florida, which, according to the report, adopted a loser-pays rule in the 1980s, which only applied to medical-malpractice suits, 54 percent of the plaintiffs voluntarily dropped their lawsuits, compared to 44 percent previously. The number of mad-mal cases that went to trial in Florida during that time period was cut in half.

According to the report, the goals of the loser-pays proposal are (1) to reduce the number of abusive lawsuits, by requiring plaintiffs to demonstrate that they have the means to pay the defendant’s attorneys’ fees if they do not prevail, (2) promote early settlement by encouraging the parties to make settlement offers at an early stage of litigation, (3) reduce litigation costs by capping recoverable fees at 30 percent of the difference between the amount of the judgment at trial and the non-prevailing parties’ relevant settlement offer, and (4) preserve access to justice for plaintiffs with strong cases by removing barriers to the development of a robust litigation insurance industry.

“Thoughtful reforms in state and federal law can bring our civil justice system into sync with the rest of the world by replacing the American rule for attorneys’ fees with a loser-pays system,� writes the Institute.

The full report can be accessed online at manhattan-institute.org

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