THIRD QUARTER 1995
A publication of the Civil Justice Association of California - dedicated to restoring fairness and balance to the civil justice system
HEADLINERS
Big Bills Move at Last!
In an historic turn of events, the Assembly Judiciary Committee on July 13 approved a strong, two-bill package of tort reforms and sent it to the full Assembly for a floor vote.
Amendments to restore balance to the law of punitive damages and employment termination anchored the package. Each topped the list of reforms sought by Civil Justice Association of California and the California Chamber of Commerce. Both were in the tort reform package announced by Governor Pete Wilson early this year.
"The committee's action is the first real evidence that the California Legislature is listening to what voters are saying about the legal system," said Civil Justice Association of California President John H. Sullivan.
And Civil Justice Association of California Vice President Mike Carpenter told the Sacramento Bee: "This is the first major piece of tort reform legislation to reach the floor of either house over the objections of the trial lawyers in 20 years!"
The two tort reform bills were approved on a bare majority of eight votes, made possible after Assemblyman Brian Setencich was added to the committee a week earlier. Setencich, a former Fresno city councilman, has been a strong supporter of tort reform in Sacramento since his election last fall.
Leslie, Haynes Become the Authors
The California reform package took shape in two bills amended before the June 12 hearing by their authors Senator Tim Leslie (R-Carnelian Bay) and Senator Ray Haynes (R-Murietta).
Leslie's SB 31 makes changes in three areas:
Punitive Damages
- Makes punitive damages proportional to compensatory damages no more than three times compensatory damages (economic damages plus emotional distress, pain and suffering and other damages);
- Makes judges responsible for setting the amount of punitive damages according to written guidelines;
- Sets at 20% the share of punitive awards and settlements going to plaintiffs;
- Allocates 80% of punitive damages in equal shares to the state for public safety, reduction of the state debt, education, and wildlife preservation;
- Allows lawyers to collect contingency fees only from the plaintiff's 20%.
Emergency Dispatchers:
- Protects 911 emergency dispatchers from unfair liability lawsuits for offering good faith advice during an emergency call.
Felon Plaintiffs:
- Prevents a criminal from suing others for injuries suffered while committing a felony.
- (Similar punitive damage amendments were first introduced in AB 1862 - Morrow and Goldsmith; emergency dispatch amendments are also in AB 1488 - Caldera.)
- Haynes' SB 994 makes changes in two areas:
Employment Law:
- Limits damages for future earnings to a one-year period from the date of termination;
- Requires an employee who claims that working conditions amount to a wrongful firing to give an employer a chance to correct the conditions before the employee files a lawsuit.
Shareholder Litigation:
- Curbs non-meritorious shareholder derivative suits by strengthening the requirement that a shareholder make a demand on the board of directors to take action on an issue before suing on the basis that the corporation refuses to act.
(Wrongful termination amendments were originally introduced in Senate Bill 1312 - Peace; shareholder suit amendments were originally in AB 920 - Cunneen.)
AROUND THE NATION
Senate's Historic Vote
For more than 15 years, the U.S. Senate has failed to get the necessary 60 votes to move forward on product liability reform. But on May 10 it happened. Senators voted 61-37 on a compromise tort reform bill that sends to a Senate-House conference committee its version of reforms to be worked into a final package.
The vote on the Dole-Rockefeller-Gorton legislation came a day after a landmark 60-38 cloture vote to end debate on amendments. Punitive damage restraints were the bill's most visible item of controversy. The compromise resulting embodies a proportional cap (the greater of $250,000 or two times compensatory damages) which can be augmented by a judge in certain circumstances.
However, when the defendant is an individual with a net worth under $500,000 or a business person with fewer than 25 employees, the cap becomes the lesser of $250,000 or twice compensatory damages and a judge may not impose a higher amount.
In other important changes, the bill eliminates retailer and wholesaler liability (unless they are themselves negligent), makes defendants liable for non-economic damages only to the degree they are responsible for injuries, reduces awards for plaintiffs who have misused a product, and prohibits recoveries by plaintiffs whose use of drugs or alcohol made them more than 50% at fault for their own injury.
California Senator Dianne Feinstein voted for the bill; Senator Barbara Boxer against. By mid-July, a two-house conference committee had not yet begun work on the legislation.
Securities Legal Reform Wins Big
The U.S. Senate has passed shareholder suit reform legislation to curb lawyers who specialize in extortionate securities lawsuits, make it safer to issue "forward looking" security information that is not intentionally misleading, hold accountants and attorneys proportionally liable in securities cases unless they knowingly commit fraud, and limit attorney fees in class action litigation. The legislation (S.240) received strong bi-partisan support, passing 70-29 on June 28. Together with the House version (H.R. 1058) passed 325-99 on March 8, securities litigation reform is now in a veto-proof package headed for a conference committee.
Charities Hit by Lawsuit Fear
The nation's litigious climate imposes costs on all charities that can be measured in resigning directors, lost volunteer hours, and sky-high insurance premiums, according to San Francisco United Way president Thomas A. Ruppanner. He says that fear of lawsuits "threatens to bureaucratize organizations known for their hands-on approach. It would replace the personal touch with the impersonal approach of organizations afraid to be different." Writing in the San Francisco Examiner, Ruppanner noted a Gallup survey that found a sharp decline in the number of volunteers willing to assume leadership roles; 16% of those surveyed specifically identified liability fear as their motivation.
New Jersey Enacts Five Bills
New Jersey Governor Christine Todd Whitman signed five reform measures in June: Punitive damages - limited to five times compensatory damages; joint and several liability - defendant must share at least 60% of the fault before being liable for economic or non-economic damages; product liability - sellers excluded from strict liability; medical - limited health care provider liability for harm caused by certain medical devices; certificate of merit - parties cannot assert claim against registered professionals without affidavit by neutral, licensed professional.
Reforms Enacted in Texas
Texas Governor George W. Bush in May signed reform bills to abolish deep pocket liability when the plaintiff is 51% or more at fault, curb venue shopping, discourage frivolous lawsuits, and limit some kinds of government liability.
"Feeding These Vermin"
About 600 Pentium computer processor owners turned against the lawyers representing their class action claim against Intel Corp., the San Francisco Daily Journal reports. A San Jose Pentium owner said in a letter to the court that the estimated $6 million in attorney fees and costs in the proposed settlement "contributes to the unsavory reputation of lawyers and how they abuse the legal system...rewarding and feeding the vermin for their predator ways only encourages them." Another owner defended Intel's "fair treatment" of her and said the suit was a "needless drain on the U.S. economic system."
Reform on August Conference Agenda
Civil justice reform will have a prominent place on the agenda of the 22nd annual meeting of the American Legislative Exchange Council (ALEC) in San Diego August 9-13. A civil justice reform breakfast is set for the morning of the 11th, with Alabama Governor Fob James and Washington Attorney Victor Schwartz scheduled to speak. California Attorney General Dan Lungren is expected to participate in a reform workshop later on the agenda. For information on the conference call Jennifer Whittier at ALEC, 202-466-3800.
AROUND THE STATE
Jury Distrust
Growing distrust of the jury system is the reason Los Angeles Superior Court Presiding Judge Gary Klausner gives for his county's having to send out a million additional jury eligibility questionnaires in 1993-94 to get responses at a level received the prior fiscal year. Klausner told Los Angeles Daily Journal staff writer Lauren Blau that he believes because of high-publicity criminal trials "there has become more of a distrust of the jury system...As people become more unhappy with the jury system they become less inclined to respond [to questionnaires].
Initiative Trio
Three tort-related statewide ballot initiatives have been put into circulation by a new organization called the "Alliance to Revitalize California," a group funded largely by software developer Tom Proulx, who serves as chairman. The separate initiatives would establish a no-fault auto insurance system, establish a loser pay system for shareholder suits, and limit lawyer contingency fees in cases where offers to settle are made. The organization hopes to gain sufficient signatures in time to qualify the measures for the March 1996 primary election ballot. The Civil Justice Association of California remains neutral on the measures while the Legislature makes progress on reform proposals in the 1995-96 Session.
IN SACRAMENTO
Civil Justice Association of California Fights for Arbitration
Civil Justice Association of California is working to preserve cost-cutting alternative dispute resolution in the face of new efforts to undermine the right to enter into binding arbitration agreements. Trial lawyers appear to have launched a media attack against arbitration and are backing legislation intended to undermine the process.
"Arbitration has become a welcome alternative to the delay, costs, and uncertainty posed by California's civil court system," commented Mike Carpenter, Civil Justice Association of California Vice President.
Partnership Bill Moves
A bill to establish fair liability limits for lawyers, accountants, and others in limited liability partnerships continues to move in the Legislature. Senate Bill 513 (Calderon), supported by Civil Justice Association of California, passed the Assembly Judiciary on a 14-1 vote in July.
IN THE COURTS
Civil Justice Association of California Argues Before Top Court
Civil Justice Association of California General Counsel Fred Hiestand appeared before the California Supreme Court in Los Angeles June 7 to argue that the court should overturn a 10-year-old holding that residential landlords are strictly liable for injuries resulting from latent defects on premises. The Association has filed a friend-of-the-court brief in Peterson v. Superior Court, where the question is whether to extend the earlier holding to hotel proprietors in a situation where a guest slipped on a bathtub that did not have a non-skid surface. Civil Justice Association of California contends that the 10-year-old rule should be discarded. A decision is expected in mid-September.
Junk Mail
A state bar can legally prohibit personal injury lawyers from sending targeted direct mail solicitations to potential litigants and their relatives for 30 days following an accident or disaster, the U.S. Supreme Court has ruled. Florida enacted the state bar rule in 1990 after a two year study found that the public views mail solicitations in the wake of accidents an intrusion on privacy that reflects poorly on the legal profession. The court quoted a citizen who wrote, " I consider the unsolicited contact from you after my child's accident to be of the rankest form of ambulance chasing and in incredibly poor taste.... I cannot begin to express with my limited vocabulary the utter contempt in which I hold you and your kind." The Florida Bar rule was challenged by a lawyer referral service entitled "Went For It, Inc."
Not My Party
Should a real estate broker be liable for injuries to people hurt when a balcony broke at a party in a house the broker closed a sale on two days earlier? The Second District Court of Appeal says no. The guests were not sellers, buyers, or even prospective buyers and had no contractual relationship with the broker.
VERBATIM
Simple Rules
"Judges and juries second-guess the design and warnings of products, thus creating a level of uncertainty so great that one jury could award a plaintiff nothing while another requires the payment of punitive damages. The result is that manufacturers receive little guidance in what sound product design should be, and instead take absurd, high-cost precautions." -- John H. Fund, Wall Street Journal editorial writer, reviewing "Simpler Rules for a Complex World," a book by Richard Epstein.
Taking Classes from Students
"We need some common sense tort reform. The real shame of all this is that the money comes right out of our classes. You're taking classes away from students with all these legal costs." -- State Center Community College Chancellor Bill Stewart, commenting in Community College League of California publication The News, on the growth of legal actions involving community colleges.
Dubious Science, Dubious Experts
"Given the financial incentives, one cannot expect restraint from the tort bar. It is incumbent, therefore, on judges to take a more active role as gatekeepers to keep dubious science and dubious experts out of the courts." -- Los Angeles Times editorial, June 28, 1995.
My Friend Ralph
"My friend Ralph Nader has suggested that those of us supporting tort reform are stooges of corporate America and corporate greed. Mr. Nader and some of his trial lawyer supporters have been trying to educate me on these matters, the trouble is that their superior knowledge and expertise does not always square with my stubborn common sense...common sense tells me that some of the damaging things that happen to us are not always someone else's fault. Some of the lawsuits now being filed for every imaginable incident have gone too far. There are far too many lawsuits without merit. They are in various ways hurting both the economy and the decency of our society. In many cases, the lawyers are the chief gainers in such suits. I have this on the word of some of the senior lawyers I most respect and trust." -- George McGovern, former U.S. Senator and 1992 Democratic presidential candidate, Washington Times, May 4, 1995.
You Can Live Without Them
"Contingency fees are universally used in America in personal injury cases, even though in most other countries they're banned. So it's not as if a system can't exist without contingency fees. If you sue the federal government under the Federal Tort Claims Act, they limit your fee, and that works well." -- Stephen Sugarman, Professor of Law, Boalt Hall, University of California at Berkeley, Sacramento Recorder, May 5, 1995.
Feinstein Cites Tort Woes
"The tort liability system has been a particular source of concern to many, and that includes everyone: consumers, professional service providers, manufacturers, and public agencies, all of whom, in recent years, have faced increasing liability insurance costs. Over the last 40 years, general liability insurance costs have increased at over four times the rate of growth of the national economy. American manufacturers and product sellers generally pay product liability insurance rates that are 20 to 50 times higher than those of their foreign competitors. In a global marketplace, that becomes a real barrier to competition." -- Senator Dianne Feinstein, Congressional Record, May 4, 1995.
Scorched-Earth Policy
"Punitive damages are alleged in almost every complaint. In California, a simple allegation that the defendant consciously disregarded the safety of others is enough to support a punitive damages claim. The mere potential of an award of millions of dollars inspires plaintiff's attorneys to pursue a scorched-earth, no-stone-left-unturned policy." -- Kevin J. Dunne, president of the International Association of Defense Counsel and a partner in Sedgwick, Detert, Moran & Arnold in San Francisco, writing in the California Bar Journal, May 1955.
TRIAL LAWYER WATCH
Deception Redux
The state's trial lawyers are gathering signatures for an initiative to prevent future laws limiting their contingency fees. The measure, deceptively titled the "Frivolous Lawsuit Limitation Act," brought the following comment from Civil Justice Association of California President John H. Sullivan: "Taking this initiative out for signatures is another milestone in the trial lawyers' Year of Deception. First, they changed their name. Now this."
"Buried in some 44 paragraphs of initiative blather is their golden nugget -- the clause that would let a personal injury trial lawyer continue to take huge percentages of injured victims' money, no matter how little work he or she does on a case. California voters will never be deceived by this poorly-disguised attempt to lock-in these lawyers' big litigation industry."
Who Would Know Better?
"Frivolous lawsuits and frivolous defenses clog our courts, cost taxpayers money, and delay the legal system...Lawyers who file frivolous lawsuits or frivolous defenses violate their ethical obligations as officers of the court and should be punished." -- excerpt from "findings and declarations" of an initiative to block contingency fee controls filed by Wayne McClean, president of the California trial lawyers' organization.
Hot Copies
In the latest reported evidence of the copy cat phenomenon in the world of personal injury lawyers, comes a suit against Burger King Corporation for hot tea burns to the leg and foot of a 37-year-old New York woman. According to Liability Week, her husband seeks $250,000 for loss of her services.
STUDIES OF NOTE
Inequities
Punitive and non-economic damages rank first in public policy concerns among more than 2,000 U.S. corporate executives polled by Alexander & Alexander, the international insurance and risk management consulting firm. "The inequities and unpredictability of the civil justice system continue to add costs to doing business in the United States. While corporate America has found constructive and creative ways to begin to contain health care and workers compensation costs, no amount of resourcefulness can protect against the uncertainty of non-economic and/or punitive damages." For information on the study call Alexander & Alexander at 202-371-2800, or fax 202-371-2805.
The Auto Tort Price-Tag
"How Big is the Price Tag For Excess Auto Injury Claims?" is a four-page research brief on Rand's recent study showing that Californian's are paying $2.5 to $3.5 billion a year extra in auto insurance because of tort law's incentive to fraudulently or excessively claim injuries. The brief (#RB 9023) can be ordered from Rand at 310-451-7002, 310-451-6915 (FAX), or on the Internet ORDER@RAND.org.
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©1996 California Association for Tort Reform
