The Strain of Excessive Litigation on Municipal Budgets

In this month’s issue, Governing magazine highlighted the costs of civil litigation on American cities. The magazine found that New York City spends $720 million on lawsuits every year, more than the next nineteen other cities combined. The city that never sleeps is often sued, handling 9,500 cases in the last fiscal year. The fact that New York City far out paces all other American cities in litigation volume and costs may not be a surprise, but what is alarming to many New Yorkers is that this cost is more than the combined budgets of the Parks and Recreation Department and the Department of Buildings.

For progressives who care about government services – including Mayor Bill de Blasio – the strained budgets these lawsuits cause has become a serious governing problem.  Picture how much good even just a fraction of that $720 million would do if properly allocated towards schools, affordable housing, and the homeless. While some of this litigation may have merit, not all of it does.  As quoted in the Governing magazine article, the progressive Mayor de Blasio expressed the importance of working in a bi-partisan fashion to “end the madness of these frivolous lawsuits.”

Addressing frivolous lawsuits is only half the problem, though.  Mayor de Blasio and others should also look at laws that New York has that allow people to sue and receive excessive payments – payments that people do not deserve because the city did not wrongfully injure them or payments far in excess of what would it takes to make people whole for their losses.

New York State’s civil justice laws are among the most antiquated in the nation, leading to more lawsuits and higher costs.  And, these costs extend far beyond the City.  According to a study by the Rockefeller Institute for Government, Upstate New York’s municipalities spend more than a billion dollars a year on lawsuits and litigation.

A primary reason for New York’s lax civil justice laws is the influence of the New York State Trial Lawyers Association (who declined to comment for the Governing magazine article). Personal injury lawyers have a vested interest in making lawsuits against municipalities easy and lucrative. Governor Cuomo once called the trial lawyers “the single most powerful political force in Albany,” and for good reason. They spend millions of dollars on lobbying and millions of dollars on political contributions.

Make no mistake: if anyone has been injured by the negligence of the city, that person is entitled to compensation. However, this study illustrates how a state’s civil justice climate can be a drain on the budget of one of the world’s major cities and take away from important services and infrastructure needs of its people.

The trial lawyers who block legal reform in New York often claim that reforms, even when focused only on excessive liability, would bar the courthouse doors. This report shows that is not the case – civil justice reform is needed to open the doors to more schools, parks, and libraries.

Tom Stebbins is a member of the PPI Center for Civil Justice Advisory Board and the Executive Director of the Lawsuit Reform Alliance of New York.