FOURTH QUARTER 1995
A publication of the Civil Justice Association of California - dedicated to restoring fairness and balance to the civil justice system
HEADLINERS
Assembly Says Yes to Reforms!
The California Assembly's approval of two major legal reform bills in the final moments of the 1995 legislative session sent a strong message that California may at last be on its way to restoring balance to its civil justice system.
The bills (SB 31 - Leslie and SB 994 - Haynes) rein in attorneys who misuse punitive damage claims to leverage high settlements, make it harder for lawyers to use shareholders to file frivolous suits against companies, and discourage unjustified employment lawsuits by employees who leave jobs voluntarily.
The bills, part of Governor Pete Wilson's reform package developed in cooperation with the Civil Justice Association of California, each received the minimum 41 votes needed for passage. The bills await amendment concurrence action in the Senate when the Legislature returns in January. A tough fight is certain in the Senate, where Senate pro tem and trial lawyer champion Senator Bill Lockyer (himself employed by a major Bay Area plaintiffs' lawyer firm) controls most of the procedures.
Big Civil Justice Association of California Supreme Court Win
An Civil Justice Association of California friend-of-the-court brief was instrumental in a major product liability/property law victory before the California Supreme Court.
In a unanimous decision, the court overturned a 10-year-old ruling that residential landlords are strictly liable for injuries resulting from alleged defects in products built into the premises being rented. The case, Peterson v. Superior Court, dealt with extending the earlier landlord 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 General Counsel Fred Hiestand in an amicus brief and in oral arguments urged the court to throw out the earlier decision as well as refuse to extend it. The reversal's importance was recognized on the Wall Street Journal editorial pages and applauded by the Sacramento Bee as "Fixing a Cracked Verdict." Syndicated real estate writer Brad Inman said the decision "brought more tort reform to the apartment industry than any landlord in the state could have possibly hoped for." And he observed that because of the ruling and legislation softening rent control, "investment capital is expected to flow into the state's vast apartment market, which has suffered in the last five years."
Five past, present, and incoming presidents of the trial lawyers' association signed an amicus brief supporting the prior ruling.
AROUND THE NATION
Conference Action Predicted
With Congress remaining in session on budget work, appointment is being anticipated of a House-Senate conference committee to work out differences in reform legislation passed by each body earlier this year. Supporters of significant reforms have been mobilizing to gain support for language extending the compromise package well beyond the product liability reforms enacted by the Senate. California Senator Dianne Feinstein is expected to play an important role in determining the final bill's shape.
Civil Justice Association of California has distributed action alerts urging that Senator Feinstein and President Bill Clinton be contacted and told that the Senate version is unacceptably narrow. Copies of the alert can be obtained by calling Civil Justice Association of California at 916-443-4900 or faxing a request to 916-443-4306.
In May the Senate voted 61-37 to approve the Dole-Rockefeller-Gorton product liability legislation. In March the House passed a general civil justice reform measure.
Attorneys General Seek Reforms
Attorneys general in nearly half the states have joined in calling for reforms to quell frivolous lawsuits filed by prisoners. California Attorney General Dan Lungren says that this year his office is spending $10 million defending 1,000 new lawsuits -- most of them without merit.
"Ordinary citizens, even crime victims, have more difficulty gaining access to the legal system than convicted criminals," Lungren noted. The Attorney General released a list of California's top 10 frivolous inmate suits, which included a jury trial over the issue of the Corrections Department not giving a prisoner five free stamped envelopes, and the investigation and defense of a prisoner's claim that prison officials implanted an electronic device in his brain to control his thoughts and broadcast them over the prison public address system.
FDA Finds No Link
The U.S. Food and Drug Administration has told Congress that its research cannot verify alleged links between silicone gel breast implants and connective tissue disease. Lawsuits over the issue have raised the cost and reduced the supply of "biomaterials" used in a variety of medical implants.
No Glamour in Lawsuits
Glamour Magazine has reported its August reader survey found that 79% of respondents "believe America has become too lawsuit-happy" and 68% believe punitive damages should be limited in product liability cases. All respondents said the possibility of high damages encourages frivolous suits, while 76% said that high damages and ongoing litigation drive up product costs. The liability threat discourages new product development, 47% of the respondents said.
Rush to the Courthouse
Attorneys rushed to the courthouse in Texas in the final hours before the state's sweeping tort reforms' September 1 effective date. On August 31 in Travis County, where Austin is located, three times the normal number of lawsuits were filed.
And Oregon courthouses were clogged in mid-September as lawyers rushed to beat the effective date of new legislation to reduce frivolous litigation. The new law increases the use of arbitration and requires most losers of lawsuits to pay $500 -- but the amount can go to $5,000 if a judge finds the filing was made in bad faith.
The American Tort Reform Association reports reforms were enacted in 19 states in 1995. Ted Olson, an attorney who has testified on behalf on Civil Justice Association of California's legislation and works on civil justice issues for Gibson, Dunn & Crutcher in Washington, told the San Francisco Daily Journal, "The effect that a wider and wider circle of the public feels that reforms need to be done [has] had an effect on state legislatures....People don't want to lose their right to sue. But very few think that right is threatened. Huge numbers of Americans fear lawsuits."
New Suing Fad Blocked
President Clinton and Congress teamed up to head off a threatening new wave of bogus class action lawsuits--this time against mortgage lenders. The suit potential was triggered by a U.S. Supreme Court interpretation of the federal Truth in Lending Act which would let lenders be sued and major penalties be imposed for minor errors in information required to be provided to mortgage borrowers.
Lawyers' Share Grows
Plaintiff attorneys' fees in shareholder class action settlements increased from an average $1.96 million in 1993 to $2.03 million in 1994, despite the drop in average settlements from $8.36 to $6.14 million. And, National Economic Research Associates in White Plains, N.Y., reports, the amount of settlement as a percentage of alleged losses rose from 7.5% in 1993 to 9.6% in 1994.
IN SACRAMENTO
Partnership Liability Bill Signed
Governor Pete Wilson has signed an Civil Justice Association of California-supported bill to establish fair liability limits for accountants, lawyers, and others doing business in limited liability partnerships. The bill (SB 513 - Calderon) takes effect January 1, 1996.
Wasteful Design Suits Attacked
Governor Wilson has signed legislation to reduce the number of abusive lawsuits against architects, engineers, and other design professionals. These suits have the effect of driving up the cost of housing and other construction. The bill (SB 934 - Campbell) closes the loophole permitting meaningless consultations to satisfy the legal requirement that an attorney preparing a lawsuit consult a design professional before filing the suit and lifts a sunset on the provision.
NEW BOARD MEMBERS
Terrance B. Flanigan, a partner in the Sacramento law firm Flanigan & Flanigan, was elected in July to Civil Justice Association of California's Board of Directors.
Before establishing the firm in 1991, he was Appointments Secretary to Governor Pete Wilson. From 1988 through 1990 he held the same position under Governor George Deukmejian, with primary responsibility for judicial appointments.
In Sacramento, he has served as legislative advocate for the California Manufacturers Association, the State Bar of California, and the County Supervisors Association of California.
He is a graduate of San Diego State University and received a law degree at the University of California at Davis. He served for two years as deputy city attorney in San Diego. He is on the Board of Trustees of California State University.
James N. Roethe, Senior Vice President and Director of Litigation at the Bank of America, was elected in September to Civil Justice Association of California's Board of Directors.
Prior to joining the bank in 1992, he was a partner for 14 years at Pillsbury Madison & Sutro, a firm he joined in 1971. He received undergraduate and law degrees at the University of Wisconsin, where he was editor-in-chief of the Wisconsin Law Review.
He serves on the City of Orinda planning commission and is a director of the San Francisco Legal Aid Society, the California Shakespeare Festival, the Center for Living Skills in Lafayette, and chairs the Center for Public Resources Banking Committee.
AROUND THE STATE
New Lawsuit Abuse Group
Supporters of civil justice reform in Orange County have announced the formation there of a "Citizens Against Lawsuit Abuse" group. The organization is chaired by Chris Panaro, legal counsel for the Money Mailer. The locally-funded group has goals of educating the public and stimulating debate over the need for civil justice reform.
Headed To the Ballot
Promoters of three tort-related statewide ballot initiatives in September turned in 2.3 million signatures to qualify the measures for the March 1996 ballot. Each of the three statutory initiatives requires 435,000 signatures, making the number submitted almost certainly sufficient to achieve final certification by the Secretary of State.
The initiatives are sponsored by the "Alliance to Revitalize California," a new organization funded largely by software developer Tom Proulx and managed by Voter Revolt staff members who advanced the successful Proposition 103 attack on insurers in 1988.
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 early offers to settle are made and accepted.
Although traditionally in support of no-fault auto insurance and favoring action curbing frivolous lawsuits, Civil Justice Association of California is not taking a position on the initiative proposals while the Legislature continues to show progress addressing civil justice problems.
Job Siting Factor
It was down to the wire between Sacramento and Las Vegas over which city would be picked by Japanese compact disk maker JVC Ltd. for its western U.S. $35 million plant. Sacramento officials, learning that the firm's management was concerned with excessive litigation in the U.S., found numbers showing that on a per-capita basis, considerably more personal injury and employment lawsuits are filed in Clark County Nevada than Sacramento County. JVC picked Sacramento.
IN THE COURTS
It's Short Circuit Time
Civil Justice Association of California is asking the California Supreme Court to block the newest gimmick lawyers are using to convert unjustified fears of power lines into attorney fees. The case, Covalt v. San Diego Gas and Electric Company, involves claims against the utility for property value declines allegedly caused by concern over electromagnetic fields (EMF). Courts earlier threw out cases claiming personal injury due to EMF and EMF fear.
"California homeowners and the housing market in this state do not need to be set upon by trial lawyers trying to use junk science to turn residential equity into attorney fees. This is not only junk science, it's junk law and the court should short circuit it," said Civil Justice Association of California President John H. Sullivan.
Additional briefs against this misuse of science have been filed by the American Medical Association and 14 eminent scientists, including six Nobel laureates.
BMW Paint Job Before Top Court
The U.S. Supreme Court heard oral arguments in October on a major punitive damage case in which Civil Justice Association of California has joined as a friend of the court urging that punitive awards be required to be proportional to actual damages.
The case, BMW of North America v. Ira Gore, involves the well-publicized case of the Alabama doctor who sued because his new BMW had been repainted before he took delivery. A jury awarded him $4,000 in compensation then added $4 million in punitive damages after his lawyer argued that BMW should also be required to pay $4,000 for every other auto it had similarly repainted. A judge cut the punitive award in half.
The Civil Justice Association of California brief, filed jointly with the American Tort Reform Association, contends that punitive damages "have become perhaps the most arbitrary form of punishment administered in the annals of this country." The brief argues that "punishment which is not proportionate -- which does not 'fit the crime' -- is the prototype of arbitrary punishment and strikes at core notions of due process considered central to a rational and fair system of justice." A decision is expected in the case in mid-1996.
Imagination Unscoped
Manufacturers cannot be held liable for failing to make their products safe for unforeseeable use, the Second District Court of Appeal in Los Angeles has ruled. Justice Reuben Ortega, writing a unanimous opinion, said, "Any product is potentially dangerous if accidentally misused or abused, and predicating the different ways in which accidents can occur is a task limited only by the scope of one's imagination." The case was brought by the family of an electrician who fell while working on a roof and plunged through a plastic skylight.
VERBATIM
More Cases, Higher Stakes
"The news continues to remind us that discrimination and wrongful termination issues are far from a thing of the past. Not only do the numbers of these cases increase, but the awards stakes become ever higher." -- CEB Programs, Continuing Education of the Bar, University of California, November-December 1995.
Hucksters of Law
"And in the end, this entire sorry business has turned out to be a grand hoax in which medical science has been overwhelmed by the hucksters of law." -- Los Angeles Times contributing editor Robert Scheer, in "The Great American Breast Implant Hoax," Cosmopolitan Magazine, September 1995.
Praise-Free Environment
"Employers, in order to defend themselves in court, must adopt stiff bureaucratic hiring and employee-reviewing procedures. Since almost anything can be interpreted by a sympathetic jury as an implied contract,' employers are counseled by leading experts to avoid giving praise for jobs well done." --Michael Lynch, public policy fellow, Pacific Research Institute.
Local Government's Stake
"There is one party on the reform side of the debate that stands to benefit greatly from the anti-litigation efforts: local government...proponents of tort reform are predicting another big year in 1996, and municipal liability concerns may move to the forefront." --Andre Henderson, "Damming the Lawsuit Flood," Governing Magazine, September 1995.
TRIAL LAWYER WATCH
Trojan Horse Ranch
The state's trial lawyers have sent to the Attorney General their second initiative of 1995. The latest one, deceptively entitled the "retirement savings and consumer protection act," includes the now familiar Trojan horse language to block limits on contingency fees. But this proposal would move into state statutes the flawed federal securities law provisions which have produced bi-partisan support for securities reforms in Washington.
"If this initiative were enacted, it would undo in California the reforms that are on their way toward becoming law in Washington," commented John H. Sullivan, Civil Justice Association of California president. "What we have is a small band of lawyers willing to crater California's business climate by making the state a national mecca for suing high tech and innovative companies and everyone involved with them. The voters will have a hard time finding a better demonstration of special interest greed than is displayed in this proposal."
The initiative is expected to be certified for signature gathering around December 1 and could qualify for the November 1996 ballot.
In the meantime, the trial lawyers said their earlier initiative (whose deceptive title "frivolous lawsuit limitation act" was not adopted by the Attorney General) has garnered insufficient signatures for the March ballot but will be ready for November. Observers have suggested that the plaintiffs' lawyers may, however, have in fact decided to change Trojan horses in midstream.
Still More Trial Lawyer $
California plaintiffs' lawyers' political contributions to state office candidates hit $6.9 million during the four-year period ending December 1994, a study by the American Tort Reform Association has revealed. The report released in September showed that $3.5 million of the total was given to candidates from July through December in 1994.
Number one plaintiff's lawyer contributor in California for the overall period was William Lerach of San Diego, who along with his firm contributed $395,724 to state and local candidates.
Lawyers Group in Top 5
The trial lawyers' organization placed fifth in contributions to legislative races in 1993-94 in a study by California Common Cause. The $951,000 in contributions greatly understates total trial lawyer political giving, however, because it does not include amounts contributed directly to candidates by trial lawyers, their firms, and family members. When individual contributions are computed, the trial lawyers' lobby becomes by far the largest contributing special interest group in the Capitol.
Who's Next?
The State Bar has decided not to sanction Bay Area lawyer Don Driscoll, who made the papers early this year for accusing 2,300 retailers of selling cigarettes to minors and telling them he would hold off suing them if they sent $100 to an association run by his mother. According to California Lawyer magazine, the Bar said there was "insufficient evidence to proceed" with its probe of the attorney who, it said, had also sued toy maker Kenner because its Easy Bake Oven took 29 minutes to bake cookies instead of 10 as the company claimed.
STUDIES OF NOTE
Lost Jobs and Income
California's employment laws making it easier for employees to sue their employers have reduced job opportunities and income, especially among low income persons. This finding was the result of a study by labor economists Richard Vedeer and Lowell Galloway of Ohio University, published in September by the Pacific Research Institute for Public Policy (PRI). The legal environment caused by wrongful termination lawsuits diminished potential employment by as much as 171,000 between 1970 and 1990 and cut potential income by as much as $6 billion during that period. The researchers found that the effect of the job and income loss is felt disproportionately by lower income people. The study may be ordered from Sheri Annis at PRI at 415-989-0833, FAX 415-989-2411, e-mail: Sheria4pr@aol.com.
Cost Climb Continues
Settlements for directors and officers liability lawsuits have climbed to an all-time average high of $4.6 million, the Wyatt Company reports after its latest survey of directors and officers liability insurance in 1,000 companies nationally. Defense costs averaging $967,000 are an added cost.
Tort Reform = Economic Growth
A study published by the National Bureau of Economic Research in Cambridge, Mass., has statistically linked liability laws and levels of productivity and employment. Looking at economic data from 1969 through 1990, the study found that reforms were enacted, employment and worker output grew. And employment fell where tort laws were expanded.
The study, which was first released in preliminary form at an Civil Justice Association of California meeting in 1994, was co-authored by California Senator and Stanford law professor Tom Campbell and Emory University economist and law school professor George Shepard.
Outside Directors Targeted
Forty-two percent of outside directors of Fortune 1000 companies have been sued in connection with their board service, according to a Louis Harris & Associates poll. The poll also sampled smaller public companies and found that 80% of the directors of these firms believe spurious lawsuits against board members are a problem. Copies of the study are available by calling 800-432-8168.
Return to the BALANCE Index
©1996 California Association for Tort Reform
