Analyze where tort litigation is heading, from reform efforts to class actions, and the different kinds of costs litigation creates.

A jury awards $800,000. The plaintiff nets less than half after lawyers, offsets, and statutory caps. Understanding where each dollar goes, and how reform reshapes it, is the heart of this scope.

The tort system is expensive to run. Think of every dollar spent as split into buckets.

$$C_{\text{total}} = C_{\text{net}} + C_{\text{plaintiff legal}} + C_{\text{defense}} + C_{\text{admin}}$$

KEY: Net compensation itself has two parts. Economic damages cover provable dollars (medical, lost wages, property). Non-economic damages cover pain and suffering. Punitive damages are separate; they punish and deter.

HIGH-FREQUENCY: Studies of the tort system show roughly half of each dollar reaches claimants. The other half is friction: plaintiff attorney fees, defense costs, and overhead.

Reform aims to cut cost and volatility. The main levers:

TRAP: A statute of limitation runs from injury or discovery; a statute of repose runs from the defendant's act and can bar a claim before the injury is even known.

A class action lets one representative sue for many similarly harmed plaintiffs. It makes small individual claims economically viable.

Common mistakes

• Treating all damages as compensation. Punitive damages punish and deter; they are not compensation and are separately capped.
• Assuming the plaintiff keeps the full award. After plaintiff attorney fees near one-third, plus offsets, net recovery falls far below the verdict.
• Confusing limitation with repose. Statutes of repose can bar a claim before injury is discovered; limitation periods start at injury or discovery.

Bottom line

• Tort costs split three ways: claimant net compensation, claimants' legal (plaintiff attorney) costs, and defense plus administrative costs.
• Compensation divides into economic damages (medical bills, lost wages, provable) and non-economic damages (pain and suffering); punitive damages punish and deter, not compensate.
• Only about half of every tort dollar reaches claimants as net compensation; the rest is transaction cost.
• Reform tools: caps on non-economic and punitive damages, modifying joint-and-several liability, collateral source rule reform, statutes of limitation and repose, contingency fee caps.

Exam shortcut

Split any tort-cost question into net compensation versus transaction cost first; roughly half the dollar is friction, and compensation further splits into economic and non-economic. When reforms stack, apply caps and offsets before any fault-share reduction; cap non-economic damages, offset economic damages, then multiply by the defendant's fault percentage. For class actions, run the four-part gate in order: numerosity, commonality, typicality, adequacy. Any single failure blocks certification.

The full lesson (about 1,082 words, 7 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.

Learning objectives

• A6

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