Pennsylvania Can't Afford Philadelphia's Tort Tax

Pennsylvanians are struggling with an affordability crisis. Groceries, insurance, housing, health care, and basic services all cost more than they used to. Yet many may not know that there is one hidden cost that never appears on a receipt, even though families and small businesses pay it every day.

The numbers are sobering. In 2024 alone, Pennsylvania juries reportedly handed down 12 nuclear verdicts – awards of $10 million or more  – totaling $3.4 billion, with Philadelphia accounting for 10 of them. These decisions affect insurance markets, business planning, consumer prices, and whether employers view Pennsylvania as a predictable place to operate.

According to one estimate, excess tort costs alone impose $2,437 annually in additional costs per household. Small businesses, meanwhile, have found themselves bearing nearly half of commercial tort costs even though they only account for about 20 percent of commercial revenues.

Consider the city’s recent plastics litigation alleging that consumers were deceived by recyclability claims on products such as bread bags and Ziploc bags. (City of Philadelphia) Reasonable people can care about recycling and clean neighborhoods while still recognizing the danger of lawsuits like this. If similar cases across the country succeed, some analyses suggest plastics-related litigation exposure could reach exceed $100 billion, costs that would ultimately be passed on to consumers or threaten the viability of companies that provide widely used products. This is precisely the kind of frivolous lawsuit that sends the wrong message to businesses considering whether to invest in Pennsylvania.

Antitrust litigation that Philadelphia has entered into against the three major manufacturers of fire trucks underscores this point. The case asks courts to treat rising prices and delivery delays as evidence of collusion and award triple damages for any established overcharge, even though fire trucks are highly specialized vehicles built in a market that has been strained by inflation and backlogs. Taxpayers should be wary: fire trucks are already scarce and expensive, and adding litigation costs and settlement pressure is unlikely to make them cheaper or easier to obtain. Before rushing into court, public officials should ask whether this is truly a case of unlawful coordination or another attempt to turn a difficult procurement problem into a costly mass litigation campaign.

That is the deeper problem with this litigation strategy. When one locality repeatedly uses litigation to pursue revenue, headlines, or policy goals, the costs do not remain local. They ripple across the Commonwealth and the country. Fortunately, there is an opportunity to begin restoring balance.

The Pennsylvania Supreme Court’s Civil Procedural Rules Committee has proposed a rule that would allow discovery of third-party litigation funding agreements when an outside funder provides money in exchange for a right to influence litigation or settlement decisions. These arrangements can turn lawsuits into investment vehicles and without disclosure, judges, defendants, and sometimes even plaintiffs may not know who is really funding a case or whether that funder has influence over settlement decisions. The committee explained that disclosure would help courts and parties understand potential ethical issues created by outside funders with a stake in the outcome. That is a step in the right direction.

Lawmakers should also take a closer look at contingency-fee arrangements involving public entities. These contracts can allow private law firms to pursue public lawsuits with limited upfront cost to local governments, but that does not mean the lawsuits are free. If they encourage speculative claims, inflate settlement demands, or increase costs for essential goods and services, taxpayers and consumers ultimately pay the bill.

Pennsylvania cannot afford to let Philadelphia’s litigation culture become the Commonwealth’s economic reputation. At a time when families need relief and businesses need predictability, state leaders should make clear that public lawsuits must serve the public interest.

Michael Puskaric is a former member of the Pennsylvania House of Representatives and previously served on the committees on Labor and Industry and Insurance.