WASHINGTON – Lawyers from large businesses said Maryland has a “fair” liability climate, a disadvantage when it competes for jobs with Delaware and Virginia, which were ranked first and eighth in a new survey.
The U.S. Chamber of Commerce survey of more than 900 corporate attorneys from companies with over $100 million in annual revenues ranked Maryland 23rd for its state liability system, down from 22nd last year.
Perceptions about a state’s liability climate can determine whether business owners relocate to a state, said chamber President Tom Donohue, who released the report Wednesday.
“When abusive lawsuits rush in, new jobs stay out,” Donohue said. “States must know that if they maintain legal systems that are unfair for companies, those companies can and will go elsewhere.”
The lawyers surveyed pointed to several key factors in their rankings, including the number of class-action suits, the amount of punitive damages allowed and the overall treatment of litigation in a state.
While the Maryland Chamber of Commerce acknowledged that the state does have some laws that businesses might view as unfriendly, it stressed the fact that this is a good place for business to locate.
“Maryland’s legal environment has some very good aspects for businesses,” said Miles Cole, the state chamber’s senior vice president for government affairs.
Cole noted that Maryland is one of the few states that has a contributory negligence standard, which makes it harder for the plaintiff to collect damages if he is responsible for any part of his injury. The state also requires that actual malice, or intent to harm, be shown for punitive damages to be assessed, he said.
Albert Winchester, a lobbyist for the Maryland Bar Association, said the rankings are based on rumors and perceptions, not on easily quantified statistics, and that they are simply an attempt by the U.S. Chamber of Commerce to further its cause.
“In the legislature you hear these kinds of arguments and it’s really so selective,” Winchester said. “I’m very dubious of rankings of state’s liability systems. It’s based on perceptions not numbers.”
But perceptions and reputations can have a big affect on whether businesses come to an area, said Steve Haner, of the Virginia Chamber of Commerce.
“Once you’ve got a bad reputation it’s hard to lose it,” he said.
Virginia has a contributory negligence standard, like Maryland, but it imposes a $350,000 cap on punitive damages. Virginia also does not allow class- action suits in state court, something that is noticed by businesses like Phillip Morris Companies Inc., now known as Altria Group Inc., which recently relocated to Richmond.
“It (Virginia) is not a plaintiff-friendly state,” Haner said.
He said more than two dozen Fortune 1,000 companies have home offices in Virginia. Delaware, hailed by many business people as having the model liability system, hosts the legal home office of 58 percent of all Fortune 500 companies, according to Gov. Ruth Ann Minner, who was at Wednesday’s news conference.
But Maryland Secretary of Business and Economic Development Aris Melissaratos said that businesses weigh many factors other than liability climate before relocating to a state.
Melissaratos said the labor climate, tax laws and regulatory climate often play a much bigger role than the much-maligned liability system. He believes Maryland does a good job of attracting and keeping businesses with its current system.
“The Chamber of Commerce would always like to improve the system,” he said. “There’s always room for improvement, but we can live with it the way it is.”