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Small Businesses: Unwitting Victims of Tort Reform

We routinely represent small businesses, not only from Austin, but from all over Texas, in disputes and litigation. And it seems more common that small business owners are victims of improper conduct by larger corporations, and they are ending up in our office, seeking our advice on how to enforce their contracts or how to get relief from the other party’s fraud. We have consistently been warning our (often-Republican) clients that they are being used as pawns and that their ability to do business is being threatened by their continued support of tort-reform. Sometimes they listen, but sometimes our warnings fall on deaf ears.

But in the last ten days, two major business publications have included articles that may help in our warnings. On July 1, Jeffrey Pfeffer, a professor at the Stanford Graduate School of Business, wrote IN DEFENSE OF LAWYERS (No Joke), in Business2.0 Magazine. In the article, Professor Pfeffer argues that  attorneys and the tort system are necessary to help keep the economy humming. In the article, he writes:

The next time you want to complain about “frivolous” lawsuits, picture doing business in a world where promises can’t be relied on and you can only deal with people and organizations you already know well. There are undoubtedly abuses and problems in our current system, but the cost of punishing malfeasance is a necessary and small price to pay for running a modern economy.

On July 9, Business Week ran AFTER THE $54M DRY CLEANER LAWSUIT, which interviewed owners of small businesses and members of national small business organizations and asked about their concern of being sued. The article found that, for the most part, small business owners weren’t concerned about being sued. And, in fact, for many, the opposite was true. In discussing “tort reformers” use of small businesses to push tort reform, the article echoed our warnings to clients:

That may not reassure small-business owners who are being asked to get behind tort reform, particularly because they can find themselves at the plaintiff’s table. “Very often it’s small companies being harmed by larger corporations and needing to seek redress through the civil justice system,” says Jeff Milchen, cofounder of the American Independent Business Alliance.

While the US Chamber of Commerce continuously argues that one lawsuit could put many small businesses out of business, the opposite is also true. Many small businesses couldn’t survive being the victim of one large improper act (whether it’s the breach of a big contract or misrepresentations about a deal) without the aid of the tort system.  Unfortunately, many small business owners listen to the propoaganda and let themselves be used to try and change the system in ways that often come back to harm themselves.

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