“Our current civil legal system, which once was the envy of the world, is slowly destroying America, both economically and culturally.” Mike Perry
“Frivolous civil lawsuits have become a major U.S. industry, yet they reduce overall economic activity and are destroying our American culture of entrepreneurial risk-taking and personal responsibility (my loss is someone else’s fault). A cabal of lawyers, mediators, expert witnesses, and insurers regularly settle matters that never had any merit in the first place, as ‘a cost of doing business’ and to avoid years of litigation and uncertainty. In less-civilized countries, organized crime or corrupt politicians and/or governments extort funds from honest economic activity. In America, it is not unfair to say that plaintiffs’ lawyers legally ‘extort’ billions every year from honest institutions and individuals in the private sector. Our society today seems to accept the fact that we have become such a litigious nation. Some may even hope that one day they might be the beneficiary of ‘millions’ from suing (e.g. that hot cup of coffee I spilled on my lap was McDonald’s fault, not mine); America’s version of the ‘legal lottery winner’. However, our litigious culture is a fraud. The massive costs of our current U.S. legal system benefit just a few (primarily ‘the legal cabal’ and a handful of rare ‘legal lottery winners’), but adds significant and unnecessary costs to nearly every product and service, and these costs are passed on to all Americans (‘the many’). Also, importantly, our litigious culture saps the risk-taking spirit of entrepreneurs and other Americans of action, which is necessary for a vibrant economy. (Why take the chance, I might get sued?) There are many problems with our legal system that need to be fixed, but a simple first step would be to make it illegal for plaintiffs or their lawyers to make a statement in a lawsuit that is not supported by the facts and allow the prevailing party in any litigation to obtain reimbursement for their litigation costs and damages. Frivolously suing an institution or individual is an act of violence, and a plaintiff who does not prevail should be required to pay damages to the defendant to make them whole for lost time, reputation, opportunities, and finances.” Mike Perry, former Chairman and CEO, IndyMac Bank
“Building new infrastructure would enhance U.S. global competitiveness, improve our environmental footprint and, according to McKinsey studies, generate almost two million jobs. But it is impossible to modernize America’s physical infrastructure until we modernize our legal infrastructure. Regulatory review is supposed to serve a free society, not paralyze it.” Philip K. Howard, Chairman, Common Good
President Obama went on the stump this summer to promote his “Fix It First” initiative, calling for public appropriations to shore up America’s fraying infrastructure. But funding is not the challenge. The main reason crumbling roads, decrepit bridges, antiquated power lines, leaky water mains and muddy harbors don’t get fixed is interminable regulatory review.
Infrastructure approvals can take upward of a decade or longer, according to the Regional Plan Association. The environmental review statement for dredging the Savannah River took 14 years to complete. Even projects with little or no environmental impact can take years.
Raising the roadway of the Bayonne Bridge at the mouth of the Port of Newark, for example, requires no new foundations or right of way, and would not require approvals at all except that it spans navigable water. Raising the roadway would allow a new generation of efficient large ships into the port. But the project is now approaching its fifth year of legal process, bogged down in environmental litigation.
Mr. Obama also pitched infrastructure improvements in 2009 while he was promoting his $830 billion stimulus. The bill passed but nothing much happened because, as the administration learned, there is almost no such thing as a “shovel-ready project.” So the stimulus money was largely diverted to shoring up state budgets.
Building new infrastructure would enhance U.S. global competitiveness, improve our environmental footprint and, according to McKinsey studies, generate almost two million jobs. But it is impossible to modernize America’s physical infrastructure until we modernize our legal infrastructure. Regulatory review is supposed to serve a free society, not paralyze it.
Other developed countries have found a way. Canada requires full environmental review, with state and local input, but it has recently put a maximum of two years on major projects. Germany allocates decision-making authority to a particular state or federal agency: Getting approval for a large electrical platform in the North Sea, built this year, took 20 months; approval for the City Tunnel in Leipzig, scheduled to open next year, took 18 months. Neither country waits for years for a final decision to emerge out of endless red tape.
In America, by contrast, official responsibility is a kind of free-for-all among multiple federal, state and local agencies, with courts called upon to sort it out after everyone else has dropped of exhaustion. The effect is not just delay, but decisions skewed toward the squeaky wheels instead of the common good. This is not how democracy is supposed to work.
America is missing the key element of regulatory finality: No one is in charge of deciding when there has been enough review. Avoiding endless process requires changing the regulatory structure in two ways:
Environmental review today is done by a “lead agency”—such as the Coast Guard in the case of the Bayonne Bridge—that is usually a proponent of a project, and therefore not to be trusted to draw the line. Because it is under legal scrutiny and pressure to prove it took a “hard look,” the lead agency’s approach has mutated into a process of no pebble left unturned, followed by lawsuits that flyspeck documents that are often thousands of pages long.
What’s needed is an independent agency to decide how much environmental review is sufficient. An alteration project like the Bayonne Bridge should probably have an environmental review of a few dozen pages and not, as in that case, more than 5,000 pages. If there were an independent agency with the power to say when enough is enough, then there would be a deliberate decision, not a multiyear ooze of irrelevant facts. Its decision on the scope of review can still be legally challenged as not complying with the basic principles of environmental law. But the challenge should come after, say, one year of review, not 10.
It is also important to change the Balkanized approvals process for other regulations and licenses. These approvals are now spread among federal, state and local agencies like a parody of bureaucracy, with little coordination and frequent duplication of environmental and other requirements. The Cape Wind project off the coast of Massachusetts, now in its 12th year of scrutiny, required review by 17 different agencies. The Gateway West power line, to carry electricity from Wyoming wind farms to the Pacific Northwest, requires the approval of each county in Idaho that the line will traverse. The approval process, begun in 2007, is expected to be complete by 2015. This is paralysis by federalism.
The solution is to create what other countries call “one-stop approvals.” Giving one agency the authority to cut through the knot of multiple agencies (including those at state and local levels) will dramatically accelerate approvals.
This is how “greener” countries in Europe make decisions. In Germany, local projects are decided by a local agency (even if there’s a national element), and national projects by a national agency (even though there are local concerns). One-stop approval is already in place in the U.S. New interstate gas pipelines are under the exclusive jurisdiction of the Federal Energy Regulatory Commission.
Special interests—especially groups that like the power of being able to stop anything—will foster fears of officials abusing the public trust. Giving people responsibility does not require trust, however. I don’t trust anyone. But I can live with a system of democratic responsibility and judicial oversight. What our country can’t live with is spinning our wheels in perpetual review. America needs to get moving again.
Mr. Howard, a lawyer, is chairman of the nonpartisan reform group Common Good. His new book, “The Rule of Nobody,” will be published in April by W.W. Norton.