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Monday, August 27, 2018

OPINION:

Amazon is closing in on its search for the site of its second corporate headquarters, after visiting all 20 finalist cities in the spring.

The e-commerce giant has said it will make a final decision by the end of the year on which city will become “HQ2,” a move that comes with a $5 billion investment and as many as 50,000 high-paying jobs.


Regardless of which city ultimately gets HQ2, Amazon’s highly publicized search has highlighted what companies want from the cities or states where they do business. In Amazon’s case, it says it is looking for a large pool of tech talent, reliable public transportation and a major airport with connections to its headquarters in Seattle.

For many companies looking to expand across the United States, one other factor is becoming more and more important: A state’s lawsuit climate.

The U.S. Chamber Institute for Legal Reform’s 2017 Lawsuit Climate Survey ranks all 50 states by asking corporate legal experts to rate the states across 10 categories, including their laws, courts, judges and juries. Last year’s survey is the 11th time the survey has been conducted.

So where do some of Amazon’s top contestants stack up when measured against the lawsuit climate survey?

Northern Virginia is among the finalists, and it scores highest on the Lawsuit Climate Survey at No. 10. Maryland holds the next highest score, at No. 19. There are a few finalists from states in the middle, but a number of the finalist cities come in toward the bottom half.

Chicago is on the finalist list, but for lawsuit abuse, its lawsuit climate was ranked as the single worst local jurisdiction, with 23 percent of those surveyed saying it had the least fair courts in the country. It’s not surprising that the state of Illinois has also been ranked among the five worst states for the last 10 years. Gov. Bruce Rauner has cited Illinois’ abusive lawsuit environment as one of the main reasons why companies tell him they won’t do business in the state.

Florida is also one of the lowest-ranking states in the lawsuit climate survey, coming in at 46 out of 50. And Miami/Dade County is a standout of its own: 12 percent of the survey’s respondents say the county’s courts are among the least fair for both defendants and plaintiffs.

New Jersey (41st), Georgia (40th) and Pennsylvania (38th) are all states with Amazon finalist cities. While they certainly have many desirable attributes, their litigation climate is not among them.

Amazon, like any business making a major expansion, is looking at a host of factors in making its decision. Geography, infrastructure, connectivity, access to talent, cost of living, taxes, and even culture and the arts are all among the key decision factors.

But now that the list is narrowed, the case for a state’s lawsuit climate being a key consideration is strong. Why? Because businesses tell us so.

The Lawsuit Climate Survey found that 85 percent of businesses say a state’s litigation environment is likely to impact their decisions on where to locate or expand their businesses. That is the highest percentage since the survey was first conducted in 2002.

A state’s lawsuit climate matters to businesses because the harder and more expensive it is to defend against frivolous lawsuits, the costlier it is to do business — and the less likely they are to put down roots in that state.

Lawmakers in states that are looking to attract top companies like Amazon should take note of their lawsuit environment. If states truly want to be “open for business,” they should evaluate their lawsuit climate and consider the reforms needed to make themselves attractive to new companies.

Businesses look at a host of factors in deciding where to locate, but a state’s lawsuit climate just might be the make-or-break factor that differentiates the winning candidate.

• Lisa A. Rickard is the president of the U.S. Chamber Institute for Legal Reform.


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