Six years ago, a single Tesla shareholder—with just nine shares to his name—sued the electric vehicle company, arguing that CEO Elon Musk’s $56 billion compensation package was unfair. The shareholder’s lawyers, in turn, saw a jackpot for themselves in the making.
Last week, a Delaware judge sided with this lone shareholder, despite 72 percent of Tesla shareholders’ previously voting to approve Musk’s compensation package—not once, but twice. In the end, the shareholder’s lawyers could walk away from this fight with up to $345 million in legal fees, earning themselves a jaw-dropping $18,000 per hour for their work. That is preposterous, even in the legal profession.
President Donald Trump has spent years excoriating the myriad abuses of America’s legal system. The 45th and soon-to-be 47th president has also faced nonstop litigation throughout his career—and, most recently, prosecutorial abuses unprecedented in the history of the republic.
Legal abuses like these have an economic as well as a political cost. Left-wing trial lawyers exploit our legal system to line their own pockets, while hamstringing the innovators on whom our modern economy depends. Many conservatives, investors, and shareholders blasted the Tesla ruling, keen to the chilling effect it could have on businesses. Left-wing trial lawyers feast; consumers are left paying higher prices.
In September, Trump posted on X, “Your Automobile Insurance is up 73% . . . I’ll cut that number in half!” He’s right. Auto insurance premiums and ride-sharing costs are up, driven by the relentless lawsuit lobby. The Institute for Legal Reform (ILR) estimates that the costs associated with automobile commercial liability—which covers ride-sharing—have recently grown on average 10.1 percent annually, up from $33 billion in 2016 to $58 billion in 2022. Health-care costs have also soared, partly due to increased medical liability insurance, which grew at an annual rate of 4.3 percent between 2016 and 2022. Too many small businesses have to raise prices on products just to cover ever-increasing insurance premiums, even as they live in fear that one frivolous lawsuit could shut them down for good. We don’t see this “tort tax” as a line item on our pay stubs; it’s just embedded in everyday costs.
Trump won a second term in large part on his pledge to lower the cost of living and bring down inflation. The Trump administration and the incoming Republican-led Congress have an opportunity to take on this “tort tax” issue and cut costs for families. Time and again, American families and small businesses are left paying these exorbitant fees. The ILR estimates that lawsuits, legal fees, and settlements cost the average American household $4,207 annually. In Georgia, New York, New Jersey, and California, per-household costs surpassed $5,000 in 2022.
Trump’s second election has caused hope to surge throughout America’s industries and institutions. Yet, following the Musk ruling in Delaware, the lawsuit lobby also feels emboldened. State governments and the federal government have a duty to rein in the rapacious left-wing plaintiff bar.
As with many successful policies, we can look to the states for a path forward. In my home state of Florida, Governor Ron DeSantis and the Republican-led state legislature recently passed comprehensive reforms to curb excess litigation by prohibiting lawyers from artificially inflating their costs, as well as shielding small businesses from paying outrageous settlements when they are not the party “primarily at fault.” These efforts are already bearing fruit. According to the ILR, “insurance rates are stabilizing or decreasing” in the Sunshine State following DeSantis’s reforms. In West Virginia, the state government has also taken steps to control excess litigation, including legislation that curbs excessive jury awards and limits misleading trial lawyer advertising. As a result of these efforts, “West Virginia’s tort costs declined 20% from 2016 to 2022,” bringing the state’s “per-household tort costs [to] the lowest in the nation.”
Musk’s firms are some of the most innovative and indispensable out there—from space travel to artificial intelligence to free speech to electric vehicles. Yet companies like his are seen as lucrative targets by left-wing trial lawyers.
But legal-reform efforts aren’t just about one lawsuit, one CEO, or one billionaire. The point is to remedy a broken system that is raising costs on every American and threatening entrepreneurship. The voters handed Trump a mandate in the 2024 election. Next year, he and Republicans in Congress must rein in the left-wing trial-lawyer lobby, protect consumers and businesses, and lower costs. If they succeed, they will help to drain one of the murkiest parts of the Washington, D.C., swamp.
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