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Land of opportunity

At least, if you’re a plaintiff by Lisa A. Rickard and Randy Zook Special to the Democrat-Gazette | September 11, 2015 at 1:56 a.m.

In 1953, the Arkansas General Assembly decided to adopt "The Land of Opportunity" as the state's motto. The slogan stuck around for 42 years before Arkansas took on "The Natural State," but for plaintiffs' lawyers it's still a land of opportunity.

With plaintiff-friendly courts and a Constitution that allows for limitless punitive-damage awards, Arkansas is a great venue for trial lawyers, but not so great for everyone else. The state's plaintiff-leaning courts have contributed to Arkansas' ranking as one of the worst legal climates in the country.

Arkansas ranks 41 out of 50 in the U.S. Chamber Institute for Legal Reform's 2015 Lawsuit Climate Survey. The survey polled more than 1,200 general counsels and senior attorneys from companies with annual revenues of at least $100 million. Respondents ranked each state based on their perception of the lawsuit environment, which includes laws, courts, judges, and juries.

Being ranked in the bottom 10 states is a problem for Arkansas, and it may contribute to an even bigger problem, the overall health of the state's economy. Arkansas' economic growth is well below the national average, with a real gross domestic product growth of 0.8 percent, compared to the national average of 2.2 percent.

So how does Arkansas' legal climate affect economic growth?

Seventy-five percent of respondents in our survey said a state's lawsuit environment is likely to impact important business decisions at their company, including where to locate or expand. That is an 18 percent increase from eight years ago, and an all-time high. In order to attract more companies and thus more jobs, Arkansas needs to improve its legal climate.

That begins with making sure that lawsuits filed in Arkansas actually belong in Arkansas courts.

Survey respondents ranked Arkansas' litigation system lowest for the state's handling of class-action lawsuits and "forum shopping"--a tactic used by some plaintiffs' attorneys to file cases in jurisdictions whose judges welcome out-of-state cases and whose laws allow for mega-dollar verdicts.

With no cap on punitive damages and pro-plaintiff judges, Arkansas courts make excellent lawsuit destinations.

The state courts are known for their pro-plaintiff rulings. In fact, the U.S. Supreme Court ruled that Arkansas plaintiffs must stop trying to game the class-action system by promising to seek less in damages to keep their case in friendly local courts, as opposed to going to the federal level. Keeping the class-action suits in friendly courts increases the odds of a good verdict and a large payday for plaintiffs' lawyers.

The Arkansas courts also upped the lawsuit take-home pay for trial lawyers by doing away with the cap on punitive damages.

In 2011, the state Supreme Court struck down reasonable safeguards that the state Legislature enacted against runaway jury awards in personal-injury cases.

All of this makes job-creating companies think twice about the "Land of Opportunity" state, which means fewer jobs are created for its citizens.

Without positive measures coming from the Arkansas Legislature, the state would most likely have dropped even lower in the rankings.

In the past year, the Arkansas Legislature worked hard to pass some legal reform measures. In April, the Legislature passed a law that puts a stop to the crazy interest rates attached to "lawsuit lending," the practice of lending cash to plaintiffs to cover costs during litigation, but often at massively high interest rates exceeding 200 percent. Plaintiffs are then motivated to hold out for larger settlements just to pay back these high-interest loans.

Thankfully the Legislature made it so that these lawsuit lenders now have to play by the same rules as any other loan providers.

But in order to achieve better economic growth, Arkansas needs more. The state Legislature should take steps to authorize a statewide vote to amend the Constitution to allow for reasonable limits on punitive damages. This will protect the legal system from being misused. The Legislature should also consider imposing safeguards against forum shopping to prevent overcrowding the Arkansas courts with out-of-state plaintiffs.

Arkansas' lawsuit climate doesn't have to stay near the bottom. With these and other legal reforms, Arkansas can truly become a land of opportunity for all.

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Lisa A. Rickard is president of the U.S. Chamber Institute for Legal Reform; Randy Zook is president and CEO of the Arkansas State Chamber of Commerce and the Associated Industries of Arkansas.

Editorial on 09/11/2015

Print Headline: Land of opportunity

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