SECOND QUARTER 1996
A publication of the Civil Justice Association of California - dedicated to restoring fairness and balance to the civil justice system
HEADLINERS
Assault on Congress' Lawsuit Reforms
Fronted by senior citizen groups, securities lawsuit specialist Bill Lerach and his plaintiff lawyer allies were at Balance deadline turning in signatures to qualify a November "Trojan Horse" initiative designed to demolish the federal securities lawsuit legislation enacted by Congress in December. Lerach and his firm Milberg Weiss Bershad Hynes & Lerach and similar firms across the nation had by early March raised well over $4 million for their measure. They have written it to give them a California state court forum to revive and expand the speculative "strike suit" litigation that Congress has curtailed in the federal courts.
Campaign to Defeat Securities Lawyers
A broad-based campaign with experienced consultants has been assembled to defeat the securities lawyers' attack on Congressional reforms passed in December to curb extortionate suits against high-tech and other innovative corporations. John H. Sullivan, president of the Civil Justice Association of California, and California Chamber of Commerce President Kirk West are co-chairing the campaign organized as Californians Against Trial Lawyers' Abuse (CATLA). Goddard*Claussen/First Tuesday, a national firm with a proven track record for defeating anti-business, anti-consumer measures, has been retained as the campaign's consultant.
The fight against this measure is viewed as a must-win for opponents because of the importance to California's economic climate and the opportunity to send a message nationally that trial lawyers can no longer use their financial muscle to control the political process for their own enrichment.
The securities lawyers' initiative would not only have the effect of gutting most of the federal reforms, but it gives plaintiffs' lawyers mandatory punitive damages and fraud-type recoveries even when no fraud is proven.
Information on the campaign to defeat this initiative is available from CATLA at 916-774-0637 (FAX 916-774-0642).
March Measures Fail, But Issues Remain
Ballot propositions aimed at reforms of auto liability law, shareholder litigation, and lawyer contingency fees were defeated in the March primary election. Sponsored by the "Alliance to Revitalize California," a group formed in 1995 to advance the three measures, the election forced trial lawyers (and some defense lawyers) to spend upwards of $15 million for their win.
Proposition 202 (contingency fee limits) was the most attractive measure, barely losing at 49% yes, 51% no. Proposition 200 (pure no fault auto insurance) was least favored at 35% yes, 65% no. Proposition 201 (to create a loser pay system to discourage non-meritorious shareholder suits) finished in the middle with 41% yes, 59% no.
Post-election analysis showed that the trial lawyers' intense and misleading television advertising created the voter confusion that often ends up in a "no" vote. Observers also noted a broad show of editorial support for legal reform, even from newspapers opposing one or more of the propositions.
Big Tort Wins in Assembly
A package of solid legal reform bills was passed by the California Assembly in February, adding to existing pressure on the Senate to deal with the state's litigation problems. The bills, all Civil Justice Association of California-supported, covered topics from punitive damages and product liability to premises liability and immunity for doctors volunteering at homeless shelters. A full list of the bills is available on Civil Justice Association of California's Home Page at: http://www.cjac.org/
AROUND THE NATION
Product Liability Pressure on Clinton
Civil Justice Association of California joined with legal reform associations around the country in an effort to persuade President Clinton to change his position and sign the Product Liability Fairness Act (H.R. 956). The bill is a result of extensive bi-partisan work in both houses of Congress. It would place modest limits on punitive damages, establish a 15-year statute of repose for durable goods, require proportional liability for non-economic damages, and limit the liability of manufacturers when their product has been altered or misused.
Gambler Plays a New Hand
From Lunas, New Mexico, comes the story of Tony Srader, who has brought suit against an Indian gaming casino and the state's Governor to recover the $57,000 he gambled away in the first few months after the casino opened last year. Lunas, basing his suit on a 140-year-old state law, is of course asking for punitive damages ($1 million) and an added amount for emotional suffering. His request for an injunction to close the casino resulted in partial relief: He's been personally eighty-sixed from the place.
AROUND THE STATE
Excessive Punitive Award
For the first time, a federal appeals court has ruled that a punitive damage award was so large it violates the U.S. Constitution's guarantee to due process. In Pulla vs. Amoco, U.S. Circuit Court of Appeals, Eighth Circuit, No. 94-4001, an employee of Amoco Corp accused the company of age discrimination and invasion of privacy. Amoco searched Pulla's company credit card records and discovered that he had abused sick leave, using his credit card at bars and restaurants on days he called in sick. The company then asked Pulla to provide a doctor's note before submitting claims for sick leave. The court awarded $2 in actual damages, but $500,000 in punitive damages due to the credit-card search. Justice Byron White stated that the award was "unreasonable and violates Amoco's substantive due process right....We hold that the 250,000-1 ratio between punitive and actual damages is excessive."
IN SACRAMENTO
Civil Justice Association of California's 1996 Legislative Agenda
Civil Justice Association of California's 1996 legislative agenda is focused on new legislation to prohibit the award of multiple punitive damages for the same act (AB 2129-Goldsmith); provide a government standards defense to punitive damages claims (AB 2880-Baugh); eliminate joint liability for economic damages in professional liability disputes (AB 2385-Brulte); and protect the integrity of contractual arbitration (AB 3071-Granlund). And the Association will continue to advocate passage of the punitive damage and employment law reforms contained in SB 31 (Leslie) and SB 994 (Haynes), which are awaiting a hearing in the Senate.
Civil Justice Association of California is strongly opposing bills which will promote electronic database discovery abuse (SB 1034-Calderon), gut health care arbitration (SB 1660-Rosenthal), and undermine the integrity of binding arbitration (SB 692 - Lockyer). A full list of the bills is on Civil Justice Association of California's Home Page: http://www.cjac.org/
Governor's Tort Package
Governor Pete Wilson is sponsoring a five-bill tort reform package to cut civil justice system costs. The proposals would expand discovery limitation rules from cases valued at $25,000 or under to those where up to $50,000 is in dispute (AB 3381-Baugh), reduce the number of peremptory jury challenges in civil cases (SB 2159-Leslie), make summary judgments less difficult to obtain (AB 3113-Goldsmith), apply proportionate liability for economic damages in cases where a defendant is less than 50% at fault (AB 3259-Ackerman), and encourage mediation by requiring an early status conference followed by one-day mediation in all cases where more than $50,000 is in dispute (SB 1429-Russell).
Lawyers' "Trojan Pony" in the Gate
The trial lawyers' initiative, designed to prohibit the Legislature from ever controlling one-sided contingency fees, has officially qualified for the November ballot. The trial lawyers tried to disguise it as a restraint on frivolous lawsuits, but the news media -- focusing on the measure's source -- is already telling voters about the Trojan horse provision that protects attorney fees. With the Bill Lerach, securities lawsuit measure almost certain to be on the November ballot as well, the time has come to reclassify the trial lawyers' scheme the "Trojan Pony."
Other Initiatives May Appear
Two legal reform-related initiatives were still in circulation in April with potential for the November ballot. One, sponsored by the Alliance to Revitalize California and Voter Revolt, would impose a sliding scale of contingency fee limits for personal injury-property damage cases and class action litigation. It also imitates the frivolous lawsuit provisions of the already-qualified trial lawyers' "Trojan pony" initiative.
An initiative advanced by California Insurance Commissioner Chuck Quackenbush would prohibit uninsured drivers from recovering non-economic damages. Proponents are reported to be gathering signatures at a rate sufficient to qualify for the November ballot.
Three other initiatives circulating in early April have significant civil justice implications. One sponsored by a civil servant engineers' union trying to block highway design "contracting out" would make private firms contracting with California governments strictly liable for government employee negligence. Two HMO-related proposals being circulated by nurses and public employees include a provision to kill arbitration.
Civil Justice Association of California Opposes "Stacked Deck"
Civil Justice Association of California's Board of Directors voted in March to oppose an initiative proposed by the Professional Engineers in State Government as a tool to limit state and local government contracting with private firms. The initiative provision provoking Civil Justice Association of California's opposition was a "strict liability" section requiring private contractors to hold government agencies and their employees harmless from any legal action involving the contract, even if public employees are at fault.
Big Assembly Committee Change
With the appointment of Oceanside Republican Bill Morrow as Chairman of the Assembly Judiciary Committee, assignment changes were made that restructured the 15-member committee from a narrow 8 to 7 tort reform majority to a 9 to 6 pro-reform majority.
IN THE COURTS
The Risks of Riding
In a brief (Parsons v. Crown Disposal Company) filed in January, Civil Justice Association of California asked the California Supreme Court to strengthen the defense of implied assumption of risk. The case poses the question whether primary assumption of risk applies when the defendant is not a co-participant or controlling party in a sporting activity that carries with it certain inherent risks. The case arose when a horseback rider was thrown after his mount was frightened by noise from trash collection occurring during normal hours at a restaurant that was near the riding trail.
Wrong Place for Product Liability
The attempt to bring a tort cause of action into a contract dispute is opposed in an Civil Justice Association of California brief (Transwestern Pipeline Co. v. Monsanto Co.) filed in the Second District Court of Appeal. In the case, the plaintiff Transwestern Pipeline Co. obtained a verdict against the defendant for indemnification based upon strict product liability although the plaintiff, defendant, and the third party harmed by the use of the product, were all large commercial enterprises who either did or could have negotiated the allocation of loss for the use of the product. Civil Justice Association of California argued that when parties to a dispute are commercial entities of equal bargaining strength, the public policies of risk spreading and safety are not served and strict liability should not apply.
Protecting Arbitration
Civil Justice Association of California has filed a brief (Engalla v. The Permanente Medical Group, Inc.) with the California Supreme Court supporting arbitration. The Court unanimously voted to grant review in the case in which the Court of Appeal held that delay in selecting a neutral arbitrator does not constitute grounds for judicial rescission of the arbitration agreement, and that the California Arbitration Act provides a remedy for delay in appointing a neutral arbitrator. Civil Justice Association of California asks the Court to uphold the appellate opinion because it furthers the integrity of the California Arbitration Act and makes clear that judicial remedies around or outside of voluntary arbitration are not favored.
No Liability Outside Apartment Premises
An appeals court has upheld a Los Angeles superior court judge's reversal of a jury verdict holding an apartment owner liable for injuries to a tenant robbed on a public street in front of the building. The court said (Rosenbaum v. Security Bank Corp.) it found no prior case anywhere extending a landlord's liability to injuries caused by criminal acts of third persons off the premises. And it observed that "The goal of imposing a duty on landlords to protect their tenants should be to promote tenant safety without touching off skyrocketing inflation in the rental housing market which, ironically, would have the greatest impact on low-income tenants in high-crime neighborhoods who are most in need of protection."
VERBATIM
Keep Pressure on Sacramento
"In each case, the proponents have identified real problems...The legal system needs to be restructured to discourage frivolous lawsuits and expedite compensation to people who have been injured, whether physically or financially...The better way to bring tort reform to California is through the Legislature, which could anticipate flaws in the package before it was passed and correct any unintended consequences later. We know many of you are skeptical that the Legislature will be willing to take on the powerful trial lawyers. We will need to keep the pressure on Sacramento." -- Editorial, San Francisco Chronicle, March 15, 1996.
Ruinous Cost
"The risk-takers who create California's jobs are fully prepared to face the uncertainties of the marketplace and even the hazards of fire, flood or earthquake. But they can't survive the ruinous cost of lawsuit abuse." -- Governor Pete Wilson, State of the State address, January 8, 1996.
Securities Lawsuit Reform
"In my view, there is no reason to assume that just because something is good for business, it must be bad for the little guy. Every measure needs to be considered on its own merits, and, in this instance, the case in favor of securities litigation reform was overwhelming." -- Congresswoman Anna Eshoo (Democrat - Palo Alto).
Charming Superstition
"There is another psychological foible that a plaintiff's lawyer can exploit. In assigning causes, people are much more likely to attribute an event that has momentous or emotional implications to an agent rather than to chance.
"In one experiment, for example, a group of subjects is told that a man parked his car on an incline, after which it rolled down into a fire hydrant. Another group is told that the car rolled into a pedestrian. The members of the first group generally view the event as an accident; the second group holds the driver responsible. It's a charming superstition that significant consequences must be the result of significant negligence." -- John Allen Paulos, "A Mathematician Reads the Newspaper," Doubleday, 1995.
The Trouble with Lawyers
"Something's gone wrong. America's brightest young people are choosing a profession many won't like...where they're not building something, not making the economic pie bigger, just fighting over who gets which slice. And the rest of us are upset because we're paying for it." -- Reporter John Stoessel on an ABC special report "The Trouble with Lawyers."
TRIAL LAWYER WATCH
Bundling for More $!
The Association of Trial Lawyers of America is reported to be planning a new program to step up its already-massive campaign contribution program. To supplement the millions of dollars given to Congressional candidates by its political action committee, the association would obtain advance commitments from its members to contribute specified amounts to specified candidates. This process, commonly known as "bundling," would be prohibited by bi-partisan campaign reform bills pending in Congress.
The Defense Rests
Trial lawyers argue against contingency-fee limits as being one-sided: "They're unfair because they don't limit what defense lawyers make." Query: Why, then, did trial lawyer president Mary E. Alexander write defense lawyers all over the state urging that they contribute money to defeat Proposition 202, the 15% limit on fees in early settlement offers? In her words, the measure would have had the effect of "drastically reducing the number of filings. This will effect everyone in the tort system!" (Italics and emphasis not added.)
STUDIES OF NOTE
New Punitive Extortion Evidence
A study showing that more than a third of the tort and contract lawsuits filed against local governments and businesses allege claims for punitive damages provides new evidence for legal reformers' arguments: that lawyers are using demands for punitive damages to extort higher settlements rather than reserving them for cases of serious wrongdoing.
Conducted by the Pacific Research Institute, a San Francisco-based public policy group, the study analyzed 1,024 cases filed in San Francisco Superior Court for a one-month period. The study revealed that punitive damages are demanded in 39% of the tort and contract suits filed against businesses and 35% of those suits filed against government agencies.
"These are shockingly high percentages, given the law's attempt to reserve punitive damages for cases that involve intentional fraud and real malice," commented Civil Justice Association of California President John H. Sullivan. "We believe that what is going on here is lawyers trying to climb on a big settlement bandwagon instead of dealing fairly with the facts of a case."
The study found that 98% of the cases reviewed were settled prior to a jury verdict, a number similar to most other studies. Copies may be obtained at 415-989-0833 or E-Mail: PRIPP@aol.com.
NEW Civil Justice Association of California BOARD MEMBERS
Richard S. Costigan Jr., Duane Dauner, and Eugene R. Erbstoesser were elected to Civil Justice Association of California's Board of Directors in January.
Costigan is Senior Manager-State Government Relations for Pfizer Inc. He has spent 25 years in the pharmaceutical industry, working first with Johnson & Johnson's McNeil Laboratories before joining Pfizer in California in 1984. He is chairman of the Granite Bay Municipal Advisory Council and serves on the board of the Northern California Chapter of the Arthritis Foundation.
Dauner is President and Chief Executive Officer of the California Healthcare Association, a position he has held since 1985. He began his work with hospitals in 1966 and served as Vice President of the Kansas Hospital Association and later President of the Missouri Hospital Association. He is on the American Hospital Association Board of Trustees and has authored a book on health care reform entitled The Health Care Solution.
Erbstoesser is Associate General Counsel with Ernst & Young in Los Angeles. He received an undergraduate degree from the University of Southern California and a law degree in 1974 from Hastings College of Law. He practiced law with the firm of Macdonald, Halsted & Laybourne in Los Angeles until joining Ernst & Young in 1978. He is a member of the New York and California bar and serves on the Board of Directors of the Los Angeles chapter of the American Corporate Counsel Association.
Eberhard G.H. Schmoller and Steven C. Szalay were elected to Civil Justice Association of California's Board of Directors in March.
Schmoller is Senior Vice President and General Counsel of Consolidated Freightways, Inc., based in Palo Alto. He was an attorney with McDonnell Douglas Corp. before joining Consolidated Freightways in 1974. He holds a bachelor's degree in engineering from Stanford and earned a law degree from the University of California at Los Angeles.
Szalay was appointed Executive Director of the California State Association of Counties (CSAC) in 1995 after serving in top management positions for a number of California cities and counties. He was the County Administrator in Tuolumne County for eight years and more recently was Alameda County's County Administrator. He has served on the State Trial Court Budget Committee and is the counties' advisor to the State Constitutional Revision Commission.
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©1996 California Association for Tort Reform
