Corporations and the Litigious Environment that is Destroying America

I’ve been thinking about whether we should quit creating various forms of corporations–like LLCs–for for the past 15 years or so–ever since Bakunin, more or less. But other than the fraud post a few days ago, I think the only other piece I’ve really written on the subject was a short explanation of my opposition to letting corporations have any kind of political rights (eg, donating to campaigns, freedom of speech,) on the grounds that they are non-human organisms (they are meta-human organisms,) and since I am a human and rather speciesist, I don’t want non-humans getting power.

The problem with discussing whether corporations should exist (or in what form, or if they are good or bad,) is that people are prone to status-quo fallacies where they forget that  corporations are just legal fictions and act instead as though they were real, physical objects or forces of nature created by the Will of God, like mountain ranges or entropy.

But a “corporation” is not so much a big building full of people, but a piece of paper in your filing cabinet. Modern corporate structures did not exist throughout most of humanity’s 200,000 year existence, and in fact only came to exist when governments passed laws that created them.

All that takes to change them is a new law. Unlike mountains, they only “exist” because a law (and pieces of paper tucked away in filing cabinets,) says they do. What man has made, man can unmake.

So let’s talk about lawsuits.

America is a litigious society. Extremely litigious. Probably the most litigious in the world. (We also incarcerate a higher % of our people than any other country, though on the bright side, we summarily execute far fewer.)

Sometimes I think Americans are the kinds of people who solve disputes by punching each other, but we’ve gotten it into heads that lawsuits are a kind of punching.

At any rate, fear of litigation and liability are ruining everything. If you don’t believe me, try setting up a roadside stand to sell some extra radishes from your garden or build a bridge over a creek on your own property. You have to pass a background check just to help out on your kid’s school field trip, and children aren’t allowed to ride their bikes in my neighborhood because, “if they got hit by a car, the HOA could get sued.” As farmer Joel Salatin put it, “Everything I Want to do is Illegal.” (All Joel wants to do is grow and sell food, but there are SO MANY REGULATIONS.)

100 years ago, the kind of litigation people are afraid of simply wouldn’t have happened. For example, as Stanford Mag recounts of campus violence around 1910:

Black eyes, bruises, and occasional bouts of unconsciousness didn’t seem to alarm the administration. … Farm life came with a brutish edge. Some freshmen slept in armed groups to ward off hazers, a state of affairs apparently enabled by the administration’s reluctance to meddle. “Persons fit to be in college are fit to look after their own affairs,” Stanford President David Star Jordan said.

Fast forward a century to MIT getting sued by the parents of a student who killed herself:

Elizabeth Shin (February 16, 1980 – April 14, 2000) was a Massachusetts Institute of Technology student who died from burns inflicted by a fire in her dormitory room. Her death led to a lawsuit against MIT and controversy as to whether MIT paid adequate attention to its students’ mental and emotional health, and whether MIT’s suicide rate was abnormally high.

… After the incident, MIT announced an upgrade of its student counseling programs, including more staff members and longer hours. However, the Shins claimed these measures were not enough and filed a $27.65 million lawsuit against MIT, administrators, campus police officers, and its mental health employees. …

On April 3, 2006, MIT announced that the case with the family of Elizabeth Shin had been settled before trial for an undisclosed amount.[7]

Universities, of course, do not want to get sued for millions of dollars and deal with the attendant bad publicity, but these days you can’t say “Boo” on campus without someone thinking it’s the administration’s job to protect the students from emotional distress.

All of this litigation has happened (among other reasons) because corporations are seen (by juries) as cash cows.

Let’s pause a moment to discuss exactly what an LLC is (besides a piece of paper.) What’s the difference between selling your extra radishes as yourself and selling your extra radishes as a corporation? If you are selling as yourself, and one of your radishes makes a customer ill and they sue you, then you can be held personally liable for their sickness and be forced to pay their $10 million medical bill yourself, driving you into bankruptcy and ruin. But if you are selling as a corporation, then your ill customer must sue the corporation. The corporation can be found liable and forced to cover the $10 million bill, but you, the owner, are not liable; your money (the income you’ve made over the years by selling radishes) is safe.

(There are some tax-related differences, as well, but we will skip over those for now.)

There are doubtless many other varieties of corporations, most of which I am not familiar because I am not a specialist in corporate law. The general principle of most, if not all corporations is that they exist independent of the people in them.

This is how Donald Trump’s businesses can have gone bankrupt umpteen times and he can still have billions of dollars.

But precisely because corporations are not people, and the people who own them are protected (supposedly) from harm, people are, I suspect more likely to sue them and juries are to award suits against them.

As a lawyer I spoke with put it, he was glad that his job only involved suing corporations, because “corporations aren’t people, so I’m not hurting anyone.”

Suppose MIT were just a guy named Mit who taught math and physics. If one of his students happened to commit suicide, would anyone sue him on the grounds that he didn’t do enough to stop her?

I doubt it. For starters, Mit wouldn’t even have millions of dollars to sue for.

When people get hurt, juries want to do something to help them. Sick people have bills that must get paid one way or another, after all. Corporations have plenty of money (or so people generally think,) but individuals don’t. A jury would hesitate to drive Mit into poverty, as that would harm him severely, but wouldn’t blink an eye at making MIT pay millions, as this hurts “no one” since MIT is not a person.

You might say that it is kind of like a war between human organisms and corporate organisms–humans try to profit off corporations, and corporations try to profit off humans. (Of course, I tend to favor humanity in this grand struggle.)

The big problem with this system is that even though corporations aren’t people, they are still composed of people. A corporation that does well can employ lots of people and make their lives better, but a corporation that gets sued into the gutter won’t be able to employ anyone at all. The more corporations have to fear getting sued, the more careful they have to be–which results in increased paperwork, record keeping, policies-on-everything, lack of individual discretion, etc., which in turn make corporations intolerable both for the people in them and the people in them.

So what can we do?

The obvious solution of letting corporations get away with anything probably isn’t a good idea, because corporations will eat people if eating people leads to higher profits. (And as a person, I am opposed to the eating of people.)

Under our current system, protection from liability lets owners get away with cheating already–take mining corporations, which are known for extracting the resources from an area, paying their owners handsomely, and then conveniently declaring bankruptcy just before costly environmental cleanup begins. Local communities are left to foot the bill (and deal with the health effects like lead poisoning and cancer.)

The solution, IMO, is individual responsibility wherever possible. Mining companies could not fob off their cleanup costs if the owners were held liable for the costs. A few owners losing everything and ending up penniless would quickly prompt the owners of other mining companies to be very careful about how they construct their waste water ponds.

People need to interact with and be responsible to other people.

 

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19 thoughts on “Corporations and the Litigious Environment that is Destroying America

  1. I’d like to try treating entities MORE like people rather than less. E.g., a mining company kills someone–the mining company gets the death penalty and its accomplices are jailed and/or executed depending on their level of complicity. That would solve both your “more eager to punish non-humans” jury dilemma and your “corporations being too meta” problem, because the lack of a corporate veil addresses the latter, while the prospect of gas-chambering executives if a financial judgment is levied on a corporation addresses the former.

    Liked by 1 person

  2. The real problem are the lawyers. Whether it’s companies, marriages, or anything else the state has anything to say on, they will modify them to suit their own needs. This is why I was sure gay marriage would happen, but that poly stuff will not. Gay divorce will be very profitable for the divorce industry, but poly would not be- too many people with claims means not as much going to the lawyers. They are more likely to make it legal to marry an animal than more than one person.

    It’s a similar gig with companies. They’ve made just being an owner of a business extremely dangerous by basically declaring they can take everything from you in a lawsuit. So people have to do an llc just to get some protection. Now, while some can manage to do it on their own, it is probably prudent (and the intention) to have you go get a lawyer to help you.

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  3. I agree with August, but with a slight modification. The problem is that *we have chosen to hand lots of power to lawyers*. It’s our collective fault. Tocqueville wrote that the nearest thing we had to a nobility was our lawyer class. They still dominate American politics to this day.

    There’s also the problem that lawyers have a particular way of viewing the world, and their training and experience exacerbates the skew (as the older martial nobility had their own, different, skew). I’ve had numerous friends who became difficult to talk to while in, or recently out of, law school because they were constantly having their thoughts pushed towards what sounds and feels right (ie their ideas went through selection on persuasiveness) rather than what’s true. This also, I believe, explains why having the Supreme Court as our sovereign has led to so much nonsense.

    On the flip-side, an engineering-heavy elite, like we see in some Asian countries, tends to end up over-engineering their country. A business-heavy elite will just cartelize everything. I think upper-houses need to have a healthy mixture of Martial/STEM/Biz/Moral elites and lower-houses need sortition to represent median interests.

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  4. August, your impressions are misguided. Like you, I am disgusted with lawyers, and I’m also disgusted with accountants, realtors, physicians, professors, teachers, and customer support specialists. However, in all of those cases, the vast majority of people with those titles are ordinary, powerless people, and their possession of such a title bears no more relationship to the acts of the associated elite than does yours by virtue of being “an Earthling” or “a human.”

    My favorite old academic blog on the issue, “Scholastic Snake Oil,” was abandoned by its sultry lecturette hostess, but if you want to enjoy lawyer problems specifically, read some of the entries here:

    http://thirdtierreality.blogspot.com/

    There are similar blogs for many professions now, in which people share their grievances over having not attained any degree of wealth or social standing despite pursuing the education or career path they were sold. It’s even starting to affect medicine now.

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    • My impressions are not misguided. Most people in D.C. are lawyers. You mistake my impression, because you think I’m thinking some plot is going on.

      No, I think something similar to what happened to Rome is happening to us. The court system becomes a profit center. D.C. is filled with lawyers. Many of them are called things like Senator, representative, lobbyist, bureaucrat, etc… they all have an incentive to justify their existence, and keep themselves paid well. Individually they may all know they shouldn’t kill the goose, but in aggregate, the emergent phenomenon is the destruction of the American court system.

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    • Did you read Third Tier Reality or any of the links there? Almost all non-medicine graduate schools have been scams for over ten years. The majority of lawyers are either working in non-legal jobs, or are doing $20/hour no-benefits document review work in a basement somewhere. Many of the others are doing the same kind of empty, low-salary, bureaucratic corporate or government work that is done by millions of other “HR” employees worldwide. The tiny slice of lawyers who are working in D.C. are from incredibly wealthy parasite families that would’ve been performing the same/similar functions with or without law degrees or bar memberships.

      Your assessment of the scum in D.C. is accurate, but equating the problems to whatever certification they’re claiming is inaccurate. I got bit by a dog owned by a lazy asshole who let the dog ramble freely around nearby roads, and I know a lot of other dog owners who are like that, but I know other dog owners who aren’t like that, and it only diminishes my ability to accurately critique bad dog owners if I make myself look foolish by saying “dog ownership makes people jerks.”

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  5. Personally–
    The legal/justice system is its own thing that can be critiqued separately, and has many of its own flaws, but as far as corporate law/lawsuits involving corporations, we have to pay attention to where the money for these lawsuits comes from: corporations.
    My impression from talking to lawyers (even some from places like DC) is that they are all employed by corporations to sue other corporations. A few lawyers are just “patent trolls” and the like who buy up patents and then harass people for settlements, but I think the vast majority of them are paid by big corps, and the corps see spending millions upon millions every year on legal fees in order to harass their competition as “just part of the cost of doing business.” It’s a defect/defect situation, and part of how corporations use the legal system to prevent little corporations from getting a toehold in the market.
    If the corporations weren’t paying them, most of these lawsuits would disappear and their lawyers would be forced to get different jobs. (The work certainly does not appear to be inherently rewarding.)

    Of course, a fair critique is that banning LLCs would not stop rich people from using lawyers to sue other people (including poorer people trying to start their own businesses.)

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      • Perhaps what you might consider crusading against is the idea of doing business as a silent partner, e.g., a person who owns stock in Monsanto but has nothing to do with Monsanto’s day-to-day operations. That’s completely different from two farmers who form a farm corporation so that they can share a bank account for depositing their checks from the local Sunday market.

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  6. You don’t know what you’re talking about. This entire post falls under the “it’s not even wrong” principal. Each case you describe has a specific set of facts and falls under a specific set of legal principals, not one syllable of which you mention here. As to your basic point about LLC’s, no, they are not ‘cash cows.’ They are one form of corporation among many and are mostly used by very small businesses, not multinationals. Bankruptcy is an important tool in business development even though assholes like Trump use it to skate away from their obligations. Please, don’t talk about what you don’t know.

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  7. higharka,

    I am not equating the problem to the certification.

    There is an idea out there called bootleggers and baptists. I think it was an economist called Yandle. The idea is that politics makes strange bedfellows. The baptists are the pious ones making a moral case for something, and the bootleggers- well, the bootleggers are the ones with the financial interest. The original bootleggers liked that booze was illegal. Higher profits and less competition.

    I think the lawyers are the bootleggers here.

    Liked by 1 person

    • Well, let’s be conservative and say that 80% of lawyers (it’s probably more like 85%) are doing small-scale compliance and HR work and wishing they had better jobs. Those are welfare-style jobs in the sense that they only exist because of regulatory bullshit, but then, so are almost all other “Department of ________” government jobs.

      Punishing the lawyers seems like punishing “Black Lives Matter” activists or “Women’s Studies” students. Sure, they’re annoying, but they’re just following a money trail out of the same desperation that drives the rest of us. If you eliminate Soros and the other Marxists, the money trail goes away and all those people can become productive members of society.

      Conversely, eliminating the street-level operatives will only cause new street-level operatives to appear. You need to arrest legislators and lobbyists, not Joe making $35K/year at the Public Defender’s office.

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  8. The LL in LLC applies to the investors, not the officers. The problem here is not corporations, per se (some nearly optimally competitive arrangement of human collective action will inevitably emerge), but in the deficiencies inherent to “democratic” government. Whenever re-election is on the line, the biggest money will talk the loudest, and the better collectively organized will have more money with which to “talk” than the poorly organized.

    Suffrage, free speech for corporations? Preposterous. So too is suffrage and free speech for anyone.

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  9. I like the idea that one of the Houses NOT have any lawyers. Rep. or Senate. Rep. probably better.

    A way to stop corporate campaign financing is to pass a law saying all corporations who want to be recognized as people can fund campaigns but lose limited liability just like a person. They can of course op out from being people.

    Liked by 1 person

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