Every year since 1963, the President of the United States has issued a proclamation announcing National Small Business Week, which recognizes the critical contributions of America’s entrepreneurs and small business owners. This Small Business Week, we’d like to draw your attention to the unique challenges small businesses face from litigation, and some of the reforms we have identified that would ease their burden.
Contrary to popular belief, most companies being sued are not “deep pockets.” Lawsuits are frequently filed against small businesses, and thus the small business owners who are heavily invested, both emotionally and financially in those businesses.
- According to the U.S. Chamber of Commerce, “A 2007 Harris poll of small business owners/managers who are concerned about litigation found that 62% make business decisions to avoid lawsuits, and 61% reported that these decisions make their products and services more expensive. More than a third of those surveyed had been sued, and 73% of those sued said the business suffered because the litigation was very time consuming.”
- In a study estimating the liability costs of small businesses, the U.S Chamber found that small businesses paid $105.4 billion in expenses related to lawsuits in 2008. When researchers added malpractice suits to the equation, the amount rose to $133.4 billion.
- When businesses fear lawsuits, they must be overly cautious about launching new ventures and bringing innovative products to market. New Jersey ranks poorly on the Kauffman Index of Entrepreneurial Activity, which measures new business creation across the United States. In the 2014 report, New Jersey is ranked 43.
A state’s litigation climate is one of the top factors business leaders consider when deciding where to locate their business or whether to expand. States with predictable legal systems that discourage abuse allow businesses to more accurately project what future legal expenses will be, allowing them to free up capital for business expansion and job creation. According to the U.S. Chamber’s 2012 State Liability Systems Ranking Study, of our surrounding states, only Pennsylvania is viewed as having a worse legal climate than New Jersey.
Right now there are 5 common sense legal reform bills with bipartisan sponsorship under consideration in the legislature. Several of these bills have been languishing in committee for years without action. Meanwhile, all of us, and small businesses in particular, are shouldering the burden of New Jersey’s excessively expensive and inefficient tort liability system through higher prices, lower wages, decreased returns on investments in capital and land, restricted access to health care, and less innovation.
It is time for the legislature get serious about legal reform so the citizens and businesses of this state can get some relief.