Posner 's criticisms of Jackpot Justice are right on the mark, as the authors of the study considerably exaggerate the cost of the tort system. Still, I agree with them that the tort system is not efficient and can be improved. I offer a few suggestions for how to do this that maintain the essentials of the American approach to using the legal system to correct harms inflicted by some actors on others, which is what a system of torts tries to do.
The old rule of caveat emptor, or buyer beware, is too rigid in a world where buyers of products, or of medical and other services, may be much less informed about possible risks than are the producers or doctors who provide them. Nevertheless, in the world of excessive and sometimes inefficient litigation that Jackpot Justice tries to measure, a bias in the tort system toward buyer responsibility is warranted. Such a bias would reduce the amount of litigation, and hence the social cost of the tort system, by discouraging lawsuits in cases where reasonably informed and careful consumers could have avoided being damaged. So a person who buys a cup of coffee that is excessively hot should nevertheless not be allowed to sue for burns caused by the coffee's spilling when driving with the cup on his lap. For common sense would indicate not to drive with hot coffee situated in a way that it may spill and cause harm. On the other hand, a tort should be possible if very hot coffee spilled and caused burns because sellers of coffee used defective plastic cups that would not be obvious to customers but could have been know to sellers.
Put differently, the presumption should be against buyers except in cases when an unreasonable degree of information or care would be required by buyers to avoid accidents that would cause them harm. The presumption should be against lawsuits in all other cases, including those where it is not clear whether reasonable buyers could have avoided harm. A presumption of caveat emptor would eliminate a sizable fraction of all tort cases that have been brought in recent years. More importantly, the cases eliminated would tend to have the highest social cost because these cases are likely to be litigated until the courts reach decisions that would tend to be more arbitrary and difficult to predict in advance by both plaintiffs and defendants.
To reduce the magnitude of the defensive and rent seeking spending rightly emphasized, although not accurately estimated, in Jackpot Justice, punitive damages should be restricted to no more than four times compensatory damages, except in rare circumstances, and when the damages are small so that a high ratio is necessary to stimulate any litigation by those harmed. To a first approximation, the multiple in punitive damages should be determined by the inverse of the probability that a real tort is discovered and litigated. For example, if the probability of bringing such a lawsuit is 1/3, punitive damages should be 2 times actual damages in order to bring the expected cost to producers of the torts, through the sum of compensatory and punitive damages, in line with expected damages.
Anti trust law uses the criterion of treble actual damages for antitrust violations to reflect that many violations are not discovered and prosecuted. Perhaps in product liability, medical malpractice, or other tort cases, the multiple should sometimes be larger than trebling, but only rarely or for small losses should it be higher than four times.
Jurisdiction shopping (often called "forum shopping‚Äù"by lawyers) is the practices whereby plaintiffs bring their cases to the jurisdictions that are most likely to be sympathetic to their claims among all the jurisdictions that are possible for any particular case. Such shopping has been criticized because some jurisdictions tend to be biased against defendants when they are large corporations with deep pockets, or for other reasons. A practice that leads to a bias against certain types of defendants is obviously not "fair", and it will tend to stimulate strategies by producers regarding the pricing of their products and the way they are produced that would often not be efficient.
On the other hand, to the extent that known biases also means greater certainty about outcomes, jurisdiction shopping would reduce the amount of extensive litigation. For defendants are more likely to settle early when they can predict an adverse outcome if their case were to be litigated through to a court decision. More generally, both sides may benefit from jurisdictional shopping if it leads to cases being brought in jurisdictions where outcomes are more easily predicted by both sides. One of the most costly aspects of litigation stems from outcomes that are not easily predictable, so that both defendants and plaintiffs would litigate extensively since they both may be confident that they will win. Shopping among jurisdictions tends to bring greater certainty about outcomes, even if it also leads to a bias toward plaintiffs.