FIRST QUARTER 1996
A publication of the Civil Justice Association of California - dedicated to restoring fairness and balance to the civil justice system
HEADLINERS
Override Shocker
Civil justice reform everywhere got a huge end-of-the-year boost with Congress' override of President
Clinton's federal securities lawsuit reform veto. In a landmark vote December 22, the U.S. Senate voted
68-30 to override the President's veto and enact long-sought curbs of abusive securities lawsuits. Two
days earlier the House voted 319-100 to override the veto.
"Congress should be congratulated for putting the interests of workers and investors ahead of plaintiff's
lawyers," commented John H. Sullivan, Civil Justice Association of California president. "Enactment of this important legislation carries two messages -- that legal reform is a
jobs-for-America issue supported by both Republicans and
Democrats, and, second, that California is under even more pressure to shed its reputation as the 'sue-me'
state."
Sullivan noted that Civil Justice Association of California members joined with reform advocates across the country in sending faxes and
making phone calls in the hours before the President's action and the Congressional votes. Sullivan urged
Congress and the President to immediately turn attention to the broader litigation reforms now before a
House-Senate conference committee.
The new federal Private Securities Litigation Reform Act of 1995 is designed to discourage speculative
lawsuits filed by attorneys when a company's stock value drops. The bill is also intended to increase the
flow of information to investors. It requires auditors to report illegal acts to the Securities and Exchange
Commission, and gives more control of securities class action lawsuits to plaintiffs, reducing the power of
their lawyers to determine settlement amounts and attorney fees.
Turkey Sprung on Its Day
Trial lawyers picked Thanksgiving Day to kick off signature gathering for an initiative to end-run the new
federal securities litigation reforms and block all future controls on excessive attorney contingency fees.
The measure, headed for the November 1996 ballot, is already opposed by a campaign co-chaired by
Civil Justice Association of California President John H. Sullivan and California Chamber President Kirk West.
"It is fitting that they chose Thanksgiving time to take their latest turkey out of the oven," Sullivan
noted.
Trial lawyers and "strike suit" king Bill Lerach, a plaintiffs' securities lawyer operating out of San Diego,
attempted to have their scheme identified as a "retirement protection" initiative. But the Attorney General
chose a more accurate title which begins with the phrase "Attorney-Client Fee Arrangements." With
federal reforms in place, enactment of the trial lawyer-Lerach initiative will make state courts a mecca for
lawyers specializing in abusive securities lawsuits and turn California into a hot-spot for anti-business
litigation.
Persons and organizations interested in the campaign against the initiative should call Californians
Against Trial Lawyers' Abuse at 916-774-0637 (Fax 916-774-0642).
Civil Justice Association of California Endorses 200, 201, 202
Civil Justice Association of California has endorsed the no-fault auto insurance, shareholder litigation, and lawyer contingency fee
control propositions on the March statewide ballot. The three legal reform initiatives qualified after
signatures were turned in by the "Alliance to Revitalize California," a group formed early this year to
advance the three measures. It is chaired by software developer Tom Proulx.
The initiatives would establish a no-fault auto insurance system, create a loser pay system to discourage
non-meritorious shareholder suits, and limit windfall lawyer contingency fees in uncontested cases where
early offers to settle are made. Commenting on the endorsement, Civil Justice Association of California president John H. Sullivan said:
"We continue to prefer achieving legal reforms through the legislative process. But with these three
propositions now officially on the March ballot, we want voters to know that their passage will help
reduce legal abuse in California."
IN SACRAMENTO
Legislature Tries Again
The California Legislature gets another chance to enact serious legal reforms as the second half of the
1995-96 Session gets under way. Punitive damage and employment law reforms top the list of reforms
sought by proponents. In landmark votes last year, the Assembly approved a punitive damage bill (SB 31
- Leslie) and wrongful termination measure (SB 994 - Haynes) and sent them to the Senate, where they
face an uncertain fate under the control of Senate Pro Tem Bill Lockyer, a supporter of the trial lawyer
agenda.
"For the first time in several decades, the state Senate will have an opportunity to enact meaningful legal
reforms, thereby supporting the public interest over the narrow special interest of trial lawyers," said Mike
Carpenter, Civil Justice Association of California vice president for legislation.
In addition to co-sponsoring the punitive damage and wrongful termination bills, Civil Justice Association of California will be
sponsoring measures to eliminate joint and several liability for economic damages in non-personal injury
cases, and to prohibit repeated punitive damage awards for the same act or omission.
Carpenter noted that Civil Justice Association of California will also be fighting efforts to promote electronic database discovery abuse,
curb the right of consumers to enter into private contractual arbitration agreements, and undermine the
integrity of contractual arbitration.
Attack on Arbitration
Civil Justice Association of California has criticized a Senate Judiciary interim hearing on arbitration as a thinly-disguised attempt by
trial lawyers to attack alternatives to litigation because they solve disputes "without contingency fee
lawyers getting their accustomed, outrageously-large cut of the action."
Civil Justice Association of California vice-president Mike Carpenter noted that the RAND Institute for Civil Justice reported in early
1995 that the number of civil lawsuits filed annually in state courts has been rising across the nation at
about three percent a year, faster than the rate of population. "It is RAND's assessment that without a
similar increase in the numbers of judges and courtrooms -- especially in the face of increasing pressure
from criminal caseloads--state courts could well find themselves in a crisis situation in the near future," he
said. "At a time when we ought to be expanding arbitration, trial lawyers are trying to undermine both
the availability and integrity of the process."
AROUND THE STATE
New Citizens Group Forms
Citizens in the Silicon Valley have formed a new organization to fight legal abuse on the local front.
Charter members held an early January news conference to announce formation of "Silicon Valley
Citizens Against Lawsuit Abuse" and encourage local involvement. The group is headquartered in San
Jose. Persons who would like to join or obtain more information may call 408-975-0820.
Defective Construction Defect Law
Builders throughout California are uniting to reform construction defect litigation which has turned into a
trial lawyer gold mine, diminished homeowners' equity, and reduced the state's supply of affordable
attached housing. Michael D. Pattinson, President of Barratt American Inc. in Carlsbad and chair of the
California Building Industry Association litigation committee, says builders are considering legislation
including a shorter statute of limitations, a shift from strict liability to a negligence standard, and
limitations on attorney contingency fees. Builders achieved what they hope to be a partial solution in last
year's SB 1029 aimed at settlement of defect disputes without litigation.
Mickey Mouse
In a suit against Disneyland for failing to prevent a parking lot robbery, lawyers are claiming additional
emotional distress damages by contending that while the victims were being questioned by security
personnel following the incident, three children in their family saw Disney cartoon characters removing
their costumes and discovered that they were make-believe.
AROUND THE NATION
Reform Windfall Fees
Professor Lester Brickman of New York's Benjamin N. Cardozo School of Law has urged Congress to
work on three reforms to reduce windfall attorney contingency fees: 1) prohibit lawyers from charging
risk-based contingency fees on amounts proposed in early settlement offers [a concept embodied in
Proposition 202 on the March ballot in California], 2) eliminate the attorney stranglehold on auto
insurance by allowing consumers to choose whether to buy pain and suffering coverage [addressed by
Proposition 200 on the March ballot], and 3) make lawyers' fees in tort cases a matter of public
record.
In testimony prepared for a November 7 Senate Judiciary Committee hearing in Washington, Brickman
said: "The contingency fee has been called the key to the courthouse for the injured plaintiff--and indeed
that is undeniable. But it is also the key to enormous and untold riches. It yields plaintiffs' lawyers well
in excess of $15 billion annually -- wealth which is redistributed throughout the political and judicial
process to purchase protection from public scrutiny."
Voters Limit Damages
Louisiana voters by a 58% margin have approved a constitutional amendment to allow their legislature to
limit the liability of state and local governments. The measure enacts a $750,000 limit on non-economic
damages.
Marketing Reforms
Knowing a good economic development issue, the State of Illinois prominently included its 1995 liability
reforms in a December 11 Business Week special advertising section. Governor Jim Edgar's letter
heading the section lists as one of five legislative accomplishments "tort reform measures that would
restore fairness to the system and eliminate the costly and archaic system of the past." And Illinois House
speaker Lee Daniels comments that "This is a model for the nation." Since the reforms' passage, the
number of liability cases being brought in the state dropped from 25 a week to four, according to the
advertisement.
IN THE COURTS
Strict Liability Improper
In a brief filed with the California Supreme Court (Carlin v. Superior Court of Sutter County), Civil Justice Association of California is
asking for a ruling that pharmaceutical manufacturers must be found negligent before liability can be
established in "failure-to-warn" cases. A court of appeal had found that negligence was not necessary and
that strict liability applies.
Future Failure Not a Tort Issue
Civil Justice Association of California has filed a brief (Zamora v. Shell Oil Company) asking the Fourth District Court of Appeal to hold
that a manufacturer cannot be found liable in tort law for the fact that its product may fail in the future.
The plaintiffs sued Shell as the maker of a resin used in producing polybutlene pipe that allegedly would
deteriorate earlier than expected, even though no pipe failure evidence was introduced.
Private Enforcement Excesses
In a brief filed with the California Supreme Court (Reese v. Payless Inc.), Civil Justice Association of California is urging that plaintiffs
not be allowed to use the state's unfair competition act to bring a private lawsuit for violation of a federal
food labeling law that prohibits private enforcement lawsuits. The case arose when a private party sued
Payless Drugs for not posting conspicuous saccharin warnings near food containers containing saccharin.
The containers themselves carried the prescribed federal warning. The state's Law Revision Commission
has been reviewing the problem of excessive litigation caused by private attorneys using unfair trade and
competition statutes to bring lawsuits even though government agencies and prosecutors have already
obtained penalties and restitution.
Another Air Bag Suit OK
Indiana's Supreme Court has permitted a lawsuit arguing that a 1986 Chevrolet was defective because it
was not equipped with an air bag. The decision is similar to a September New Hampshire Supreme Court
ruling. In both cases the cars involved were built before air bags were federally required under minimum
safety standards. But attorneys for the plaintiffs argued that auto makers should nevertheless be liable
because air bag technology was available when the cars were manufactured.
TRIAL LAWYER WATCH
The $99 Solution
Plaintiffs' lawyers suffered an embarrassing exposure of their fund raising tactics in December when both
the Los Angeles Times and Daily Recorder statewide legal newspaper carried lengthy stories on a trial
lawyer association solicitation letter explaining how contributions of $99 or less are not publicly reported.
And the letter implored "you, your spouses, other family members, and friends to each contribute $99
now."
The mass-mailed letter was evidently targeted at non-association members in an attempt to raise added
funds in opposition to the three legal reform measures on the March ballot. The Times quoted California
Common Cause executive director Ruth Holton as saying: "Unbelievable...these are attorneys appealing to
attorneys to violate the spirit of the law." The Fair Political Practices Commission is investigating an
allegation that the solicitation violated campaign law by describing how contributions made directly to the
association can indirectly fund the ballot campaign.
Trojan Horse Rides Ahead
The trial lawyers have turned in more than 700,000 signatures to qualify their original contingency fee
protection initiative for the 1996 General Election in November. Disguised as an attack on frivolous
lawsuits, the measure would prohibit the Legislature from any future control of attorney contingency fees.
It would also nullify Proposition 202, the contingency fee measure on the March ballot. Both the
Legislative Analyst's office and the Department of Finance have said the frivolous lawsuit provisions in
the initiative do little more than "maintain existing law and practice."
Capping Cappers
State Bar investigators made it to the scene of an Oakland fire not long after the emissaries of ambulance
chasers and began handing out material themselves -- leaflets warning people about the state law
prohibiting soliciting clients at an accident site or hospital.
VERBATIM
Tax Cuts v. Tort Reform
"If the choice is a tax cut or less litigation, most businessmen will tell you they'll take less litigation. That
suggests they've calculated the economic cost of our current lawyer-dominated system and confirms that,
unless it's changed, it will be a major impediment to job creation in the 21st century." -- Newt Gingrich, Fortune, September 18, 1995.
Sixth Grade Lawsuits
"I believe we are over-lawyered and that there is too much fairness. By that I mean that there are many
disputes that find their way into courts that should be resolved in other ways. For example, I recall that I
was cut from the sixth grade basketball team. That disappointed me immensely, but I can't say that it has
scarred me for life. Today, unless the coach had previously posted the criteria for making the team and
had given me an opportunity for a hearing after I was cut, I could have a lawsuit of some kind in many
jurisdictions. That is a silly example but sadly true." -- Roger L. Taylor, attorney, Kirkland & Ellis,
commenting on the Rand Institute of Civil Justice's survey on the future of the legal profession in
California.
Gresham's Class Action Law
"Many in the bar would like to view abusive settlements as exceptional and rare. They are not. A
Gresham's Law is developing under which 'bad' class actions -- and bad plaintiff's attorneys -- are driving
out the good." -- John C. Coffee Jr., Columbia University law professor, and Susan P. Koniak, Boston
University law professor, writing in the Wall Street Journal, December 27, 1995.
Making More, Achieving Less
"Lawyers are making more and achieving less, and we have lost a lot of what we used to be." -- Sol M.
Linowitz, former partner at New York's Coudert Brothers law firm and author of "The Betrayed
Profession: Lawyering in the 20th Century," speaking at the California Bar Association annual
meeting.
STUDIES OF NOTE
Torts Top Roundtable Survey
The California Business Roundtable's Sixth Annual Business Climate Survey has revealed that 91% of the
state's business leaders and 62% of the state's voters agree that reforming liability laws and civil litigation
is important for California's future economic growth.
Among business leaders, reducing state bureaucracy (88%) and reforming state government fiscal policies
(80%) followed tort reform in priority. Copies of the survey findings may be obtained by calling 800-222-0213.
Older Voters Not Fooled
Sixty-five percent of California voters 50 and older favor new laws limiting lawyers' ability to file
questionable lawsuits against high growth companies in the state. In a November survey by Public
Opinion Strategies, 73% said they were concerned that passage of a proposed trial lawyers' initiative
making it easier to sue high tech firms would prompt such California companies to relocate to other states.
Sixty-five percent added that knowledge that trial lawyers are behind the initiative makes them less likely
to vote for it. Persons wanting more information on the survey should call Public Opinion Strategies at
703-836-7655.
Tort Costs Still High
The latest Tillinghast-Towers Perrin tort cost trend study finds that the cost of the U.S. tort system
continues to run at 2.2% of Gross Domestic Product -- two and a half times the average of other major
industrialized countries. Between 1973 and 1993, U.S. tort costs as a percentage of GDP grew by 76% --
exceeded only by Spain and the United Kingdom. The U.S. is well ahead of second place Belgium where
tort costs are 1.4% of GDP.
Harvard Medical Critique
A comprehensive critique of the much cited-Harvard study of medical malpractice is now available from
The Doctors' Company. Dr. Richard E. Anderson, M.D., chairman of the Company's Board of
Governors, authored the critique after he "became exasperated over continued citation of the study as an
authoritative voice on the frequency of medical negligence." The study is being often cited to attack
medical malpractice reforms at the federal level. A copy of the 23 page critique can be obtained by calling
Jim Cathcart at 1-800-352-0357.
Small Business, Big Target
Half the nation's businesses with 50 to 250 employees have faced lawsuits over the past five years,
according to a Gallup/National Federation of Independent Business nationwide survey. Thirty percent of
the firms with 20-49 employees were sued over the period, while for companies with 10-19 employees the
percent sued dropped to 20%. In every employee size range, no more than 5% of the companies had filed
a lawsuit.
Among those surveyed, two thirds believed the civil justice system is out of balance, and of these, 89%
believe the system is skewed to favor plaintiffs.
Suits Curbing Research
Lawsuits are playing a major role in stymieing research on a new generation of contraceptive devices,
according to a study by the New York non-profit Alan Guttmacher Institute. The study said many
pharmaceutical companies have left the field due to fear of crippling liability suits and the length of time
required to get government approval. The study noted that Norplant, one product which did receive a nod
from the Food and Drug Administration, was quickly engulfed in product liability litigation.
MICRA Success Affirmed
An American Academy of Actuaries study of medical liability reforms in California, Ohio, and New York
concluded that "California is the success story" because of its combination of a cap on non-economic
damages and a law allowing juries to consider payments from collateral sources. The two provisions are
key elements of the Medical Injury Compensation Reform Act of 1975 (MICRA). The study, published in
the September-October issue of the Academy's Contingencies magazine, tracked paid medical claims in each state as a percentage of the U.S. total.
Return to the BALANCE Index
©1996 California Association for Tort Reform
