Legal Reform & Economic DevelopmentEach day seems to bring additional news confirming what we already know: New Jersey needs economic growth to create jobs and much needed tax revenue. The state took a tremendous hit during the recession, and has yet to fully recover. The state’s unemployment rate remains high, and the budget gap continues to widen as revenue collections miss their targets.


New Jersey has little room to maneuver with already high rates of taxation and slow revenue growth. In order to attract business investment government must look at innovative policies that spur investment without depleting needed revenue. If New Jersey wants to completely and quickly escape the recession, legal reform must become part of the state’s economic development plan.


75% of attorneys at U.S. companies say a state’s lawsuit environment is likely to impact important business decisions at their company, including where to locate or expand.


States with predictable legal systems that discourage lawsuit 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.


Right now, the same attorneys that said a state’s lawsuit environment is likely to impact important business decisions ranked New Jersey’s legal climate as 38th in the nation. That is a drop of six spots from 2012, when the survey was last conducted.


New Jersey's Rank


We must work on improving our state’s legal climate and repairing our reputation.


When businesses fear lawsuits, they are overly cautious about launching new ventures and bringing innovative products to market.


New Jersey ranks 36th on the Kauffman Foundation’s Startup Activity Index, which is designed to measure new business creation activity and people engaging in business startup activity. Improving the state’s litigation climate would show entrepreneurs, inventors, and investors that New Jersey is open for business.


Small businesses are disproportionately impacted by litigation.


Contrary to popular belief, most companies being sued are not “deep pockets.” Lawsuits are frequently filed against small businesses. In fact, 43% of small business owners report having either been threatened with or involved in a civil lawsuit.



According to the U.S. government’s Small Business Administration, “The impact of litigation on businesses goes well beyond the purely financial impact of legal fees and damages. Most small business owners are invested personally in their businesses; litigation causes not just financial loss, but also substantial emotional hardship, and often changes the tone of the business.”


Legal reform is a win-win when it comes to the state budget.


In the short run, legal reform can provide an economic stimulus without loss of tax receipts or an increase in spending. In the long run, states with improved litigation climates see more economic activity, leading to increased revenue collections.


Click here to read NJCJI’s list of 11 legal issues New Jersey should tackle if it wants to improve its reputation and economic outlook.