The Downside of Compensation without Litigation

Over the years, tort reformers have regularly suggested that the country would be better off replacing lawsuits over medical malpractice or asbestos poisoning or other mass tragedies with administrative compensation funds a la workers comp or the 9/11 fund. But the latest controversy over a fund for the families of the victims of the Virginia Tech shooting, I think, illustrates one huge problem with that approach: It makes victims look greedy.

Again, I'm late with this, but I was struck by the story in the Washington Post last week about some of the VA Tech families griping that they weren't getting enough money from a university gift fund set up after the shootings. (The fund isn't a substitute for litigation, but may be a model for one that is.) Americans tend to get pretty queasy at the spectacle of people profiting from personal tragedy (which is one reason they are skeptical jurors). Compensation funds may be cheaper and more efficient than litigation, but they seem to be especially well designed to generate ugly squabbling among the beneficiaries over who deserves the biggest piece of the pie.

Greed obviously plays a role in some litigation, but I do believe that a desire for justice and information also genuinely motivates people to sue when they've been wronged. Public fact-finding and scrutiny of responsible parties through litigation can also help heal some wounds and mitigate the distasteful process of trying to affix a dollar figure to a life. And unlike fund claimants, lawsuit plaintiffs can legitimately claim a moral high ground--that they are seeking justice, not just money.

Claim-filing may satisfy a victim's real need for money (and a potential defendant's desire to stay out of court), but it certainly doesn't lead to the sorts of public disclosures, remedies or even exonerations that can be achieved through a lawsuit. Because the money doled out on a schedule has no relationship to a wrongdoer's conduct, the payments also look a lot more like windfalls than jury verdicts do. As Virginia considers its options in the coming months, I think it might do the VA Tech families a big favor if they just let them sue...

Comments

[Joe S.]

I'm not sure that--as a general matter--compensation schedules make victims seem greedy. I agree with you for ex post compensation schemes, such as the WTC and VaTech murders. But the recent Holocaust litigation does not look much better. I think you get this problem whenever you have a politically organized victim class that has to argue with itself on how to divide the proceeds.

Workers comp--a stable scheduled system--does not suffer from this problem at all. (The problem with worker's comp is that the schedule is too cheap.)

I think that the big distinction is between politics, law, and regulation. Politics is uglifying. Law isn't bad, and there is something to be said about your point on public fact-finding. I still think that a decent regulatory scheme is probably best, with the most rationality and the fewest transaction costs. (But how to get a decent regulatory compensation scheme in America?)

[Jason]

I agree with your post. However, one small quibble is that as a lawyer that has handled more than a few plaintiff's case in personal injury and other matters, I *know* that a desire for justice and information are strong motivators for clients.

I would also add self-respect. Putative corporate defendants tend to treat claimant-plaintiffs like whiners when they ask for anything in compensation--even though the corporation really screwed up and caused loads of damage.

Great blog!