Special Report

The Best States to Sue a Company

According to the in-house lawyers of America’s biggest companies, the court system is making things easier for them. The U.S. Chamber of Commerce’s Institute for Legal Reform (ILR), a lobbying group that represents the legal interests of businesses, asked attorneys working for major corporations to describe how fair the corporate legal systems are in each of the 50 states. Nearly 50% responded that court systems were favorable and reasonable, up from 44% in 2010.

Read: The Best States to Sue a Company

The survey asked the general counsels of companies with revenues of $100 million or more to grade each state on 10 key areas of legal fairness in the court system. This included how the state treated class-action suits, damages that were awarded to plaintiffs and judges’ fairness or competence. Respondents were only allowed to grade states with which they were at least somewhat familiar. The overall scores nationwide have improved substantially in the past 10 years, but businesses still perceive many states as being extremely unfair and unreasonable toward corporations. These are the 10 states that companies rated as the least fair.

While the survey attempts to rank the overall fairness of the legal climate in each state, some believe the survey only identifies the states’ with legal systems that benefit corporations the most. “This is purely from the perspective of big business,” says J. G. Preston, press secretary for the Consumer Attorneys for California, whose members represent plaintiffs in civil cases against companies. “We don’t think it’s any way to evaluate the civil justice system. I say it’s like asking the players what they think of the referees.”

A review of the rankings shows that states with legal climates that are perceived as unreasonable for businesses tend to do poorly in everything they are evaluated in. The three worst states scored among the worst 10 in each of the categories the group measured.

Respondents were asked to rate the five districts nationwide they viewed as the worst for overall fairness. The places most commonly referenced were located in states that also scored poorly overall. Chicago/Cook County, Ill. was mentioned a survey-high 17% of the time, followed by Los Angeles, Calif. at 16%.

Michael Lepage, spokesman for the Institute for Legal Reform — the group that conducted the study — said while all of the areas evaluated for fairness are important, some are bigger issues for American corporations than others. In particular, the practice of “venue shopping,” or “forum shopping” by plaintiffs looking for the best jurisdiction to file suits was a problem in these 10 states.

In many cases, the group states, people will choose locations where they believe they are most likely to win trials and be awarded the most damages. In Philadelphia, Pa., for example, 47% of all the asbestos cases tried in the area were from out-of-state, and more than 80% of all pharmaceutical cases were from out of state. Other states with similarly high proportions of out-of-state suits include Texas and Illinois.

In addition to making class-action lawsuits easier to bring, Lepage indicated that jurisdictions in some states, like California and Florida, award much larger jury awards than others. In West Virginia, the state rated by respondents as the least fair for awarding damages to plaintiffs, the debate was reignited last year after a judge awarded more than $90 million to a resident whose mother died of dehydration in a nursing home.

Not surprisingly, the states that are often viewed as exceptionally favorable to business were rated very well in some of these key areas. Delaware, for example, which has ranked number one every year the study was conducted, received the best scores of any state for venue requirements, strict requirements on the admissibility of scientific evidence and impartial judges.