A Crime Bigger than the Murdaugh Murders
The Cato Institute has advocated for tort reform for decades. As the Cato Policy Handbook put it in 2017, tort litigation creates an incredible quarter of a trillion dollar annual bill that is ultimately footed by consumers. While such litigation is an important means for holding companies liable for bad behavior, in excess it is a growth‐minimizing and innovation‐stymying cancer.
The latest example of the costs of excessive litigation comes from a surprising source: the murder trial of Alex Murdaugh in the low country of South Carolina.
Murdaugh himself stole millions in settlement money from his own clients, but what remains underrated is the extent to which Murdaugh’s old law firm, PMPED–the ‘M’ stands for Murdaugh–acted like an economic parasite that impoverished Hampton County and the surrounding area.
The key to PMPED’s rise—and the firm at one point employed half of the lawyers in Hampton County—was a South Carolina Supreme Court ruling in 1991 overturning the state’s contributory negligence standard, which had prevailed for 140 years. I’ll let the legal profession debate the relative (de)merits of contributory vs comparative negligence standards, but what it meant in practical terms is that from 1991 to 2005 it became much easier for people to win massive settlements from companies in South Carolina. Even if a company’s negligence only accounted for 1% of an accident, it could be held liable for 100% of damages.
Other states have comparative negligence standards, but what set South Carolina apart was its incredibly lax definition of “venue,” which is how courts determine where a case will tried. Traditionally, venue is triangulated based on a combination of where the harm occurred, where the company is headquartered, and where it will be easiest for witnesses to appear. But South Carolina’s Supreme Court interpreted corporate residence abnormally broadly as any place where the defendant “own[s] property and transacts[s] business.” In one case, Claussens, a bread maker headquartered in another state, was held to “reside” in a South Carolina county because it had paid another company to display Claussens goods on bakery racks in grocery stores. Renting bakery rack space was tantamount to residence.
By that standard, even the most tenuous corporate connection with a county could be used to establish venue for a lawsuit. And given the intricately interconnected nature of modern commerce, it allowed plaintiffs to “forum shop” around lawsuits to find the ideal district with the most favorable conditions. A country lawyer named John E. Parker—the second ‘P’ in PMPED—in sleepy Hampton County was among the first to spot the potential windfall gains to be made from turning this little corner of the low country into a destination for corporate liability lawsuits.
Bear in mind, the ‘M’ in PMPED began with the firm’s founder in 1920, Randolph Murdaugh Sr., who along with his son and grandson, controlled the criminal prosecution process in Hampton and four surrounding counties for the better part of a century. On the civil side, multiple judges in the fourteenth circuit have close connections with PMPED, including a judge who once worked for Alex Murdaugh’s father and later sold his practice to PMPED when he joined the bench. Forum‐shopping clients of PMPED needed look no further than Hampton County!
Occupying one of the largest offices in the county, PMPED earned the nickname, “The House that CSX Built,” for the big awards it won from the railroad that ran through town, filing 48 lawsuits that pulled in $18.8 million from 1995 to 2002 alone. It was enough to earn Hampton County third place on the American Tort Reform Foundations’ ranking of worst judicial “hellholes” in the nation in 2004, citing the fact that 67% of lawsuits filed in the county came from non‐residents and only 59% involved injuries actually incurred in the county.
The cases often veered into the ludicrous, like the plaintiff who sued Continental Airlines after being injured in a rough landing even though the route neither began nor terminated in Hampton County; no, they claimed venue on the grounds that Continental Airlines did business in Hampton County because it had sold a ticket online and Hampton County had internet access.
But while this forum shopping strategy was incredibly profitable for PMPED—including Alex Murdaugh who joined the firm in 1994—it was like a plague of overdressed locusts descending on Hampton and devouring every business opportunity in sight.
Think about the incentives this system introduced for businesses. The larger a companies’ presence in Hampton County, the more likely it was to attract lawsuits from firms like PMPED based on the state’s nebulous definition of venue. Limiting that exposure was simple arbitrage. Concentrating operations in as few locations in South Carolina as possible was a natural outcome.
Thus, when Walmart considered opening a store in the little Hampton town of Varnville in the early 2000s—which would have brought 200 jobs, $8 million in investment, and many thousands in much‐needed annual tax revenue—its legal counsel warned that doing so would expose every other Walmart in South Carolina to additional lawsuits shopped through Hampton County. Walmart canceled its plans, and today the only grocery store in city limits is Dollar General. The town’s population has fallen by nearly a quarter since 2010.
I grew up in South Carolina. But while my hometown Greenville and Varnville might share the fact that both have a high school named for Wade Hampton—a former Confederate general and Reconstruction era insurrectionist—they barely resemble each other otherwise. Greenville, still a decaying, post‐industrial mill‐town as late as the 1980s, has since transformed into the fourth wealthiest county in the state in terms of per capita income, a boomtown that successfully attracted foreign companies like Michelin and BMW to invest by creating a business‐friendly tax and regulatory environment. By contrast, 40th place Hampton, afflicted with a predatory legal establishment, has faced mass business flight and a higher than average unemployment rate.
It’s hard to quantify the opportunity costs—counted in new businesses unopened, old businesses closed, taxpayer flight, etc—that this system imposed on Hampton county. But we can say with certainty that Alex Murdaugh’s near aristocratic standing and substantial wealth was a product of how South Carolina’s courts had invested a narrow group of well‐connected individuals with immense power but without any compensating accountability.
And while attention is focused on the ways Murdaugh illegally scammed his clients of millions of dollars, don’t forget the ways in which flawed court rulings allowed an entire class of lawyers and bankers to legally skim off tens or even hundreds of millions of dollars over decades from the people of Hampton and surrounding counties.
This entry is crossposted from the Matzko Minute Substack. Follow for content from the intersection of history, politics, and mass media.