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Louisiana Listed Among Potential “Judicial Hellholes” Beset with Excessive Litigation

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“Legacy lawsuits” that lack hard evidence give neighboring states a competitive advantage

Louisiana made the cut this year on an exclusive list, but this is not good news for business owners and consumers who have a stake in energy exploration and production.

The accelerated pace of environmental lawsuits rooted in contamination allegations that often lack hard evidence has eroded the state’s competitive posture, according to a new report from the American Tort Reform Foundation (ATRF). Louisiana has been placed on the “watch list” for “judicial hellholes” as a result of “troubling developments” that lead out of “abusive litigation” practices, the report explains.

Since 2002, ATRF has published annual reports that call attention to areas of the country where judges apply the law in a manner that is considered unfair or unbalanced. The ATRF report also highlights new regulations and legislation that allow for the lawsuit industry to expand liability claims.

The 2011-2012 report names eight areas that stand out as the top judicial hellholes. They are: Philadelphia, California, West Virginia, South Florida, Madison and St. Claire Counties, Illinois, New York City and Albany, New York. But there are additional jurisdictions that are just on edge of falling off into “hellholes” and Louisiana is included on this list.

“This is not the first time Louisiana has been called out on the national stage for its poor legal climate, and whether we like it or not, reputation matters,” Melissa Landry, executive director of Louisiana Lawsuit Abuse Watch (LLAW) laments. “The perception of a state’s legal climate affects how companies do business, and where they decide  to invest and create new, well-paying jobs.”

Louisiana’s burdensome legal climate relates back to civil claims known as “legacy lawsuits.” The suits claim contamination occurred on oil well sites across the state several decades ago causing damage to the land.

“Unfortunately, Louisiana’s pattern of doling out millions of dollars for hugely exaggerated claims of environmental damage as a result of decades-old oil and gas production has spawned a cottage industry of cookie cutter lawsuits that are giving Louisiana a bad name and threatening the survival of a critical aspect of our energy sector,”  Landry said. “This jarring reputation as a potential ‘Judicial Hellhole’ should concern every policymaker and citizen in Louisiana hoping to see more jobs and a stronger economy for our state.”

The aggressive use of “legacy lawsuits” has put Louisiana at a competitive disadvantage with neighboring states like Texas, the report notes. Despite its enormous economic potential, the state has been forced into a position where many of its rigs are either idle or in decline. Over 250 of the “legacy lawsuits” in Louisiana have affected 1,500 companies that have capitulated to claims with settlements instead risking an even more damaging verdict in local court, according to ATRF.

Moreover, it would seem that any funding that should toward any legitimate environmental clean-up needs are instead being diverted over to the plaintiffs’ lawyers, the report suggests.

A 2006 law known as Act 312 was set up to ensure that funds set aside for environmental remediation were actually used for that purpose. But plaintiff attorneys have found a way to make an end-run around the law in court thanks to compliant judges, Landry has explained.

This means the money from settlements is diverted away from legitimate clean-up efforts and in the direction of plaintiff attorneys, she points out.

Landry’s watchdog group favors new legislation that would provide state government officials with greater authority over cleanup exercises and the claims process. Rep. Page Cortez (R-Lafayette) introduced a bill during this year’s legislative session that would reform the existing law, but the House Natural Resources and Environment Committee voted to defer the legislation.

“With the 2012 legislative session on the horizon, our lawmakers and state leaders should be thinking about what they can do to make Louisiana more competitive,” Landry said.  “Addressing the legacy lawsuit issue and passing other meaningful legal reforms to help move Louisiana off the judicial hellholes ‘Watch List’ would be a great place to start.”

LLAW recently released the results of statewide survey that shows 83 percent of Louisiana voters favor lawsuit reform. Among those surveyed, 65 percent  said there are too many lawsuits in the state, while 69 percent agreed that lawsuit abuse contributes to job loss.

Not all of the news is grim in ATRF’s latest report. A section entitled “Points of Light” cites tort reform packages that have taken hold in several states including Wisconsin, Tennessee, Alabama and North Carolina. These reforms include legislation designed to guard against the use of “junk science” in courtrooms and to block courts from expanding liability to include those who trespass on property.

When the Louisiana state legislature convenes early next year, it will have the opportunity to become “a point of light” and to separate itself from the “watch list,” Landry said.

Kevin Mooney is an investigative reporter with the Pelican Institute for Public Policy. He can be reached at  and followed on Twitter.