Opinion: Pass litigation reform to protect companies during COVID-19
It’s no secret that the United States’ litigious culture has been out of control for years now. One recent case involving a Detroit-based company may just take the cake. In June, the 4th Court of Appeals in San Antonio overturned an eye-popping $706 million verdict against Amrock, the United States’ largest title insurance company and a Rock Holding company, over a contract dispute involving Automated Valuation Model technology for property evaluations. The case is now awaiting retrial.
As the U.S. continues to recover from the COVID-19 downturn, it’s important for politicians to take a long, hard look at how trial lawyers can so easily squeeze multi-million dollar verdicts from private businesses that serve as the backbone of the American economy. Litigation reform is needed for the future of American innovation.
The Amrock case stems from a 2015 contract the company (then called Title Source) entered into with San Francisco-based AMV developer HouseCanary. Amrock was to pay HouseCanary $5 million a year to develop a mobile application for their customers to conveniently assess the value of their property. HouseCanary didn’t deliver the app, and Title Source then sued for breach of contract. HouseCanary filed a counterclaim that Title Source had used its trade secrets in attempting to launch an AMV app of its own.
A San Antonio jury awarded HouseCanary the $706 million verdict in 2018, one of the largest trade secret verdicts in American history. Regardless of the case’s merits, the pure size of such a verdict — seven times that of the entire AMV market and nearly 150 times the annual contract in dispute — points to a larger need for legal reform.
The U.S. Chamber of Commerce and National Association of Manufacturers hit the nail on the head in a court briefing explaining the harmful long-term implications of such a large verdict — namely, that it could discourage companies to contract with startups like HouseCanary: “That in turn means fewer opportunities for new ventures, higher costs for established businesses, and slower innovation in a competitive economy for American businesses.”
Fortunately for now, the case remains overturned, but a new trial that has yet to be scheduled may again turn the tables in HouseCanary’s favor. Sadly, this case is one of countless questionable cases with jaw-dropping verdicts every year.
We can all remember a few of the most hilariously egregious examples. In 1994, a jury awarded $2.86 million to a New Mexico woman who spilled McDonald's coffee on her lap. In 2014, Red Bull settled a class action lawsuit for $13 million when customers complained that the product does not actually “give you wings.” The list goes on and on. However, more mundane cases like that of Amrock and HouseCanary usually fly under the radar of the public’s attention.
As I’ve previously written, these frivolous lawsuits could soon be on the rise in the aftermath of the COVID-19 pandemic. Many businesses and health care facilities have had their normal operations disrupted, potentially leading to a flood of angry customers and greedy trial lawyers at their beck and call. As a result, several states have passed liability shields for health care workers and companies that continue operating during these trying times. Federal protections were considered in the late spring as part of a COVID-19 relief package, but ultimately not passed.
Small businesses and startups have been some of the hardest hit in the pandemic, with economic relief lagging and shutdowns continuing in various regions of the country. To get the American economic engine running again, lawmakers should seriously consider litigation reform in the wake of the COVID-19 crisis. Simple solutions like capping the amount of tort damages, having losers pay court fees, and limiting when juries decide civil cases can go a long way in restoring legal sanity to our broken system.
Amrock is a large company and can hopefully withstand its ongoing lawsuits no matter how the cards fall. But how many companies in a less privileged position cannot say the same should they be threatened with a multimillion-dollar settlement? It’s high time for lawmakers to take litigation reform seriously for the future of American innovation.
Casey Given is the executive director of Young Voices, a nonprofit talent agency and public relations firm for students and young professionals in policy.