March 29, 2011
“Well-educated, diverse talent pool,” reads the ad, placed by New Jersey Governor Chris Christie. Want to start a business? “Innovative financing, incentive and assistance programs. Exceptional quality of life.”
The catch? Here in New Jersey, businesses are vulnerable to lawsuit abuse.
Everything the ad says about New Jersey is true. Christie’s efforts to improve the business climate in New Jersey, combined with our state’s existing assets make New Jersey fertile grounds for entrepreneurship. His outreach to the national business community is both constructive and sorely needed as we seek to reclaim our economic footing here in New Jersey. And business retention as well as recruitment will be critical to our economic growth over the next decade, a point that leaders in both political parties have made.
Yet New Jersey’s unemployment rate remains among the highest in the region. There are many reasons behind this; most notably, the exodus of large employers and the crumbling of small and mid-sized businesses. But the legal beatings that our courts have bestowed on New Jersey’s businesses also haven’t helped.
A decision by the New Jersey Supreme Court found that consumers have no obligation to ask a vendor for a refund before going to court – where the potential for punitive damages and attorneys’ fees are high. The Court also clarified that a glitch in the New Jersey Consumer Fraud Act leaves the door open for lawyers to sue businesses for fraud – even if the consumer wasn’t defrauded in the first place.
Many New Jersey residents are employed directly or indirectly by pharmaceutical companies, which pump $29.25 billion into our state’s economy annually. A report issued by the Healthcare Institute of New Jersey in late 2010, however, revealed that our pharmaceutical industry shed 7.6 percent of its work force since the prior year. A significant portion is attributed to increased legal expenses, with a rise in whistle-blower lawsuits leading the way. The number of suits has risen in tangent with their profitability in our civil courts, and has even attracted out-of-state plaintiffs in a phenomenon called “litigation tourism;” 93 percent of the plaintiffs in class action lawsuits against New Jersey’s pharmaceutical companies now come from out-of-state.
Small businesses are vulnerable as well. From a college student suing a Chinese restaurant for soup she spilled on herself (Somerset County), to a drunken motorcyclist who drives into a parked car and sues a restaurant (Ocean County), lawsuit abuse has an economic impact on businesses in every corner of the state. Every dollar spent fighting nonsense lawsuits is a dollar not spent on innovation or job creation, and it doesn’t need to be this way.
A piece of legislation introduced by Assemblyman John McKeon, D-Essex, seeks much-needed amendments to our Consumer Fraud Act that would limit abuse while protecting the rights of consumers. The bill, A-3333, already has received bipartisan support.
You shouldn’t be able to sue for fraud if you weren’t defrauded. And a person from out-of-state shouldn’t be permitted to sue here because their case isn’t winnable in their home state. In either scenario, we pay for these winnings and attorneys’ fees with jobs, economic development and taxpayer-funded court costs.