Marcus Rayner • Enterprise Magazine, New Jersey Chamber of Commerce

If your company has never been sued, consider yourself lucky. Plaintiffs’ attorneys are one group that’s flourishing during this period of 10% unemployment.  New Jersey has become a top destination for lawsuits (i.e., t

Consider this: consumers do not have to be defrauded in order to file a lawsuit under New Jersey’s Consumer Fraud Act.  They don’t have to ask for a refund before suing in court, either.  Warnock Dodge found this out when a customer believed she was overcharged by $40 and immediately marched to court.  New Jersey courts also welcome out-of-state plaintiffs.  In one such case, an Alabama resident who claimed a popular acne medication gave him Inflammatory Bowel Syndrome received a $25,000,000 judgment – money he will take with him to Alabama.  In the mean time, New Jersey-based Roche stopped producing the popular product due to its costly legal battle.  

To make matters worse, when a questionable judgment is levied against a New Jersey business, many companies simply cannot afford the cost of an appeal.  We think that defendants, like plaintiffs, deserve to appeal an unfair decision.  But in New Jersey, businesses must pay in advance.  A defendant cannot pursue an appeal without posting the entire award amount, and oftentimes attorneys’ fees, as a bond.  Awards have skyrocketed in recent years to the point where it is nearly impossible for many small and mid-sized businesses to obtain the financing they need to meet the bond.  As a result, it’s usually not cost-effective to fight.  A company may be forced to file for Chapter 11 bankruptcy in order to stay the judgment.  The money used to finance a bond for the duration of an appeal – which often takes years – is lost and never recovered, no matter what the outcome.  Not to mention the irreparable harm to a business’s reputation. 

In this economy and in this highly-regulated state, the last thing that any conscientious business needs is a frivolous lawsuit. 

There is good news.  A proposal to reform our civil justice system is gaining traction in Trenton.  It’s a cost-neutral approach to revitalize our economy, and the Legislature is starting to notice: Senator Raymond Lesniak (Union) and Assemblyman Gary Schaer (Passaic) introduced S-480/A-2473, which would limit the amount of appeal bond in a civil action to the total amount of the judgment, not exceeding $50 million. 

Tort reform can help New Jersey businesses during this economic downturn. And it can do it without cost to the state.    

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