June 28, 2017

Multi-million dollar damage awards against businesses are not unusual in jury cases around the country. But there are states where courts are more business-friendly, including Delaware, Vermont and Nebraska, according to a survey done by the U.S. Chamber of Commerce.

The Chamber’s Institute for Legal Reform (ILR) surveyed 1,203 general in-house counsel and other senior litigators and executives at major companies nationwide with at least $100 million in annual revenues. The organization conducts the survey annually or bi-annually and issues a report on its findings.

Respondents were first screened for their familiarity with the litigation environment in a given state. In addition to questions detailing various categories (described below), they were also asked to give the state an overall grade for creating a fair and reasonable litigation environment. All elements were combined to create an overall ranking of state liability systems.

The Best

For the tenth consecutive time, the ILR survey found Delaware’s lawsuit climate to be the best in the country.

Respondents praised the state’s court system for its fairness, efficiency and predictability.

The state’s Wilmington-based Chancery Court judges hear cases without juries and parties are barred from seeking punitive damages. Delaware’s court system is one of the main reasons that so many Fortune 500 companies are incorporated in the small state.

Delaware also offers a fast track incorporation process and tax breaks for corporations that are domiciled in the state, but don’t do business there.

The Worst

The survey found that West Virginia’s lawsuit climate was the worst in the country. Never ranking higher than 49th since the study’s inception in 2002, West Virginia has been at the bottom of the list for the last six surveys.

Survey respondents were also asked which city or county courts they thought were the worst. Responses included East Texas (26%), Chicago or Cook County, Ill. (20%), Los Angeles, California (16%), Madison County, Illinois (16%), and New Orleans or Orleans Parish, Louisiana (15%).

The ILR cautioned that “courts and localities within a state may vary a great deal in fairness and reasonableness” and respondents were asked to evaluate the state as a whole. “To explore the nuances within each state would have required extensive questioning about each state and was beyond the scope and purpose of this study,” the organization added. It’s possible that some states received low grades due to the negative reputation of one or more of their counties or jurisdictions.

When asked how state policymakers should focus their attention in order to improve the litigation environment in their states, the most important issue cited by 32% of respondents was “eliminating unnecessary lawsuits.” Also important were: placing reasonable limits on discovery; limiting punitive or other types of damages; and increasing the effectiveness of judicial case management.

What the Survey Covered

The top issues mentioned in the survey as creating the “least fair and reasonable litigation environment,” were: biased/partial judgment, corrupt/unfair system and poor quality of jury/judges.

The 2015 ranking survey (the latest available) reviewed many categories within a state’s court system, including:

  • Overall treatment of tort and contract litigation
  • Having and enforcing meaningful venue requirements
  • Treatment of class action suits and mass consolidation suits
  • Damages
  • Timeliness of summary judgment or dismissal
  • Discovery
  • Scientific and technical evidence
  • Judges’ impartiality
  • Judges’ competence
  • Juries’ fairness

Although Delaware scored the highest in most of the above categories, there were some other states that scored higher in some areas. For example, Vermont was voted the best state in the categories of Discovery, Scientific and technical evidence and Judges’ impartiality. Nebraska scored best in the category of Juries’ fairness.

Respondents were first screened for their familiarity with the litigation environment in a given state. In addition to questions detailing the above categories, they were also asked to give the state an overall grade for creating a fair and reasonable litigation environment. All elements were combined to create an overall ranking of state liability systems.

Why It Matters

The ILR found 75% of attorney respondents in the United States said the lawsuit environment in a state is likely to affect important business decisions at their companies.”

More business leaders than ever have identified a state’s lawsuit climate as a significant factor in determining their growth and expansion plans,” said Lisa A. Rickard, president of ILR. “States ought to take notice that a good lawsuit climate is vital to their continued job growth.”

© 2019