All Commentary
Saturday, April 1, 1995

Justice or Legal Extortion?

The U.S. Civil Justice System Has Become a Sweepstakes Game

Ms. McCarthy, a Pittsburgh restaurateur, is published in Barron’s, Forbes, and The Quotable Woman.

Shame on the managers of the Las Vegas Hilton for not recognizing that the elite corps of Navy aviators known as the Tailhook Association needed a babysitter. For that failure, the American legal system has sent yet another in its endless series of messages to private industry. “You are the fall guy,” says the message, “and we’re here to shake you down.”

The guys in the gauntlet may have flown away free as Phantoms, but the Las Vegas Hilton has been found guilty of “inadequate security.” In civil court where the standards of responsibility are much looser than in criminal court, Lieutenant Paula Coughlin is expected to be the first of many winners. She has received an undisclosed settlement from the Tailhook Association and was awarded $1.7 million in actual damages and $5 million in punitive damages from the Las Vegas Hilton, money that will ultimately be paid by the stockholders, employees, and customers of the Hilton.

Whether it be the $2.9 million initially awarded to the woman who spilled a cup of McDonald’s coffee on herself as she drove along in her grandson’s sports car balancing the coffee on her legs, or the judge who later reduced McDonald’s fine to a mere $640,000, it’s clear that the U.S. civil justice system has become little more than a spectacular sweepstakes game with an antibusiness bias.

A longtime Pittsburgh bridge-painting company, E. Smalis, recently received the highest penalty ever levied against a single construction company, a $5 million fine for allegedly exposing their workers to lead. Another Pittsburgh bridge-painting company, Manganas Company, has been fined $1.3 million by OSHA. “I tried to work with OSHA,” explained Mr. Manganas. “I try to comply with their laws, but they won’t tell me what to do. They just want to fine me. I’ve been painting bridges around Pittsburgh since 1946, and I’ve never had a death on a job. Now I’m afraid they’re going to put me out of business. I can’t bid on any new jobs while waiting for my court case.”

Mr. Manganas believes that OSHA agents dressed in camouflage were hiding in the woods above his jobs to investigate him. Far-fetched? Maybe, but in a climate where business has been increasingly treated as Public Enemy Number One by government agencies, maybe not. “I tell our companies, ‘watch out for OSHA,”‘ says Peter Eide of the U.S. Chamber of Commerce. “They have the power to make life miserable, and they are.”

In the restaurant business, we get nervous when Health Department inspectors pay us one of their surprise visits during a busy lunch. Their flashlights scope under every nook and cranny and their thermometers poke into our soup. Our hot foods must be always kept at least at 140 degrees. They write us up if any food is sitting out on the counter, if anything is uncovered, or if anything is in the wrong shelf position, such as raw chicken which must always be on the bottom. Every prepared food item must have the date it was prepared on the container. Any cracked tiles or faulty refrigerators will need to be replaced. They make sure our spaghetti sauce is given an ice bath for a faster cool down before being refrigerated.

If a restaurant is functioning at 90 percent, they revisit, monitor, and instruct until a higher level of compliance is reached, holding classes for young chefs and refresher courses to update the knowledge of owners and experienced chefs. There are thousands of rules governing food preparation, and the Health Department’s focus is on education and training. Draconian fines and shutdowns are used only as a last resort for uncooperative restaurants. All of us recognize that businesses must conduct themselves scrupulously, but some regulatory agencies are demanding impossible standards and recklessly trying to break businesses. Department of Labor Secretary Robert Reich personally went and closed down the Dayton Tire Company after an accident there. His actions overruled by a judge, Reich was seen by many of the workers there as threatening their jobs through his grandstanding and overreaction.

Government vs. Business

Stereotypes and biases unacceptable towards any other groups are tolerated and encouraged when directed at businesses. The chairman of the EEOC observed at his inaugural press conference last year that businessmen are frightened when they get a call from the IRS or EPA. “By the end of my term,” he said, “I hope people worry when they get a call from the EEOC.” The same government that endlessly wrings its hands about job creation does its utmost to destroy jobs, especially in the small business sector. “What you have is a government out of control,” states Susan Eckerly of the Heritage Foundation.

Businesses are being hit with large fines not only for mistakes they have actually made, but for things others have done on their premises, or for the misuse of their products by others. Wendy’s International has decided that it’s too risky to serve hot chocolate in America. Will restaurants that serve slushes be liable for frostbite? What if someone pokes his eye out with a plastic straw?

It’s time to recognize that our legal system is simply not performing the duties with which it is charged. It is neither protecting Americans from violent crime, nor resolving civil disputes in a fair and unbiased manner. A rapist or murderer is presumed innocent in court, while a small-business owner is not. Courts bend over backwards to assure that correct arrest procedures are used to protect the civil rights of murder suspects, but a businessman is met with a legal system biased in favor of redistributive economics.

If something unsavory like sexual harassment happens at a business, the owner will not be excused from outrageous fines even if she was totally unaware of the event. She will be judged by the “should have known” standard. If anything happens in a business, then the owners “should have known” about it according to the law, even if they have branch offices in different cities. A society that designates spilled coffee and workplace flirtations as financial catastrophes is a society whose citizens live in fear. America’s businesses exist in a climate not unlike that experienced by citizens of totalitarian regimes who wait for the knock at the door.

On the criminal side, too, the glitches have become truly bizarre. In a recent Harper’s, editor Lewis Lapham states, “Maybe we live in a society where a sufficient force of publicity and $5 million in legal fees buy the privilege of cutting off a woman’s head.”

The American people are beginning to suspect that these horrors are not glitches at all, but just business-as-usual in the legal system.

Pennsylvania’s recent gubernatorial race hinged on the furor surrounding the early release of a murderer by the lieutenant governor when he served on the Pennsylvania Parole Board. The parolee has been since arrested in New York where he’s charged with murdering one woman and raping another. The lieutenant governor was shocked and indignant that anyone might want to hold him accountable for the crimes resulting from his unfortunate decision, but one can be certain that if such mishaps had occurred in the private sector, the punitive damages incurred would have been stratospheric.

Unequal Standards of Justice

If there were an equal standard of justice for the private and public sectors, parole board officials who release murderers would be held financially responsible for inadequate public security. Crime victims’ families would be able to take their houses. Their pensions and lifetime earnings would be confiscated to send a message to any other official who might be negligent or soft on crime. Lawyers, too, would be able to be sued for the damages resulting from the escalation of hostilities and hostile environment that often ensues after they interject themselves like bulls in china shops into workplace or marital disputes. Harsh penalties, indeed, but such is the quality of justice meted out every day to America’s businesses, large and small. If lawmakers and lawyers were subject to the same standards and onerous penalties that they inflict on businesses, perhaps they would be less likely to impose such fines.

A legal system that is soft on crime and tough on business will produce fewer jobs and more crime. The Wall Street Journal targets a Philadelphia judge as one of the worst. Reports the Journal, “some 67 percent of all defendants released because of her prison cap simply fail to appear in court. And in the past 18 months alone, 9,732 arrestees out on the streets on pre-trial release because of her prison cap were arrested on second charges, including 79 murders, 90 rapes, 701 burglaries, 959 robberies, 1,113 assaults, 2,215 drug offenses, and 2,748 thefts.”

Such mayhem is more dangerous to society than McDonald’s coffee, but it’s McDonald’s who gets hit with jackpot damages because they “should have known” that their coffee was dangerous. The prosecuting attorney said McDonald’s had “known about these injuries for 15 years.” The streets of America have been a hostile environment for at least that long, but who in the criminal justice system can citizens sue for inadequate security?

If judges and parole board officials were held to the same unfair and unreasonable “should have known” standard that is used to judge companies, they would be expected to have known that 60 percent of violent offenders on early release are re-arrested within three years for a felony or serious misdemeanor. Does anyone believe that any restaurant operates with a 60 percent coffee scald ratio?

In most areas of public policy, our lawmakers have exempted themselves from the rules and penalties that they apply to the rest of us. Until the 1995 Congress changed the law, Congress exempted itself from the minimum wage law, overtime pay rules, age discrimination laws, The Occupational Safety and Health Act (OSHA), disability laws, The Family and Medical Leave Act, and all civil rights legislation, including the sexual harassment laws. Members of Congress have exempted themselves, too, from the punitive damage fines that are levied with such gusto on the private sector. Even under the new legislation that makes Senators and Representatives on Capitol Hill subject to the same laws that they apply to the rest of us, there’s still no real equality between how the private and public sectors are treated. All the new costs for employee overtime or family leave will be shifted to the taxpayers. No Senator will pay a penny from his personal funds, unlike employers in the private sector. Further, under the new legislation that allegedly makes politicians as accountable as the private sector, if any Senator or Representative is found guilty of sexual harassment or discrimination, all fines are shifted to the taxpayers.

Would lawmakers think it fair that they be personally liable for the dangerous and hostile environment they have permitted to exist on the streets of America’s cities? Mr. Manganas is proud that no deaths have occurred on his watch. If only our judges and parole board members could say the same.