THIRD QUARTER 1996
A publication of the Civil Justice Association of California - dedicated to
restoring fairness and balance to the civil justice system
HEADLINERS
More Assembly Victories
Several significant reform bills were approved by the Assembly, where they will now face stiff
tests in the State Senate. All four Civil Justice Association of California-sponsored bills introduced in 1996 were passed out of
the Assembly. What is most noteworthy was that all bills passed with varying degrees of
bipartisan (and in some cases tripartisan) support.
The Assembly passed A.B. 2129, A.B. 2385, A.B. 2387, and A.B. 3071. A.B. 2129
(Goldsmith), which passed 41-32, prohibits multiple punitive damage awards for the same act or
course of conduct, raises the burden of proof for punitive damages, and establishes a pleading
hurdle for punitive damages.
A.B. 2385 (Brulte), which abolishes joint and several liability against service providers,
passed on a 49-21 vote.
A.B 2387 (Brulte), which establishes a finite statute of limitations in actions against
service providers, passed 41-32.
A.B. 3071 (Granlund), which seeks to preserve the efficacy and cost-effectiveness of
binding arbitration in medical malpractice actions, passed 44-28.
This represents significant progress because these bills received bipartisan support on highly
substantive tort reforms. You may recall that when S.B. 31 (punitive damage reform) and S.B.
994 (wrongful termination and shareholder derivative reforms) passed on the final night of the
1995 session, they received only GOP support. Those two bills also marked the first time in 20
years that substantive tort reform legislation reached the floor of either house over trial lawyer
opposition. The action on A.B. 3071, 2129, 2385, and 2387 marked the first time in 20 years
that substantive legal reforms garnered bipartisan support on the floor of either house of the
Legislature.
Anti-Proposition 211 Campaign in Gear
A broad-based campaign has shifted into high gear to oppose Proposition 211, the initiative
placed on the November ballot by plaintiffs' securities lawyers scheming to demolish the federal
securities lawsuit abuse reforms enacted by Congress in December.
The campaign, Taxpayers Against Frivolous Lawsuits (TAFL), is supported by a coalition of
investors, senior citizen groups, high-tech and bio-tech firms, accountants, financial and
securities firms, and a diverse group of individuals and other companies across the full spectrum
of the business community. Support for defeating Proposition 211 is coming from across the
nation.
The campaign is co-chaired by Civil Justice Association of California President John H. Sullivan, California Chamber of
Commerce President Kirk West, and software inventor Tom Proulx. Campaign consultant
Goddard*Claussen/First Tuesday, with a proven record of defeating anti-business, anti-consumer
ballot measures, is producing television spots to make sure early on that voters know the
initiative is written and financed by plaintiffs' securities lawyers nationally.
Information on the initiative and campaign is available at http://www.tafl.com.
Securities Expert's Proposition 211 Warning
A former Securities and Exchange Commission member and Stanford law professor has warned
that Proposition 211 would make California law dominate securities litigation nationally and
transform the state into a mecca for lawsuits. Joseph A. Grundfest said in a speech to securities
lawyers in Los Angeles that the proposition's passage would render worthless the legislation
enacted by Congress last year to curb frivolous suits in which there is no real evidence of fraud.
Bad News: Attorneys' Fee Protection Initiative
Civil Justice Association of California has formed a committee "Coalition Against Unfair Attorneys Fees" (CAUAF) to defeat
Proposition 207, the trial lawyer-sponsored initiative to prohibit the Legislature from protecting
consumers and controlling abusive legal fees.
Trial lawyers are trying to disguise their measure as a restraint on frivolous lawsuits. In reality,
the provisions purporting to restrain frivolous litigation generally restate existing laws and rules,
and actually make them more difficult to be enforced.
The ballot argument filed against the measure calls it "a smoke screen." Signing the ballot
argument against Proposition 207 are Assembly Judiciary Committee Chairman Bill Morrow,
Civil Justice Association of California President John Sullivan, and Martyn Hopper, State Director of the National Federation of
Independent Business.
Supreme Court Tightens Punitives
The U.S. Supreme Court's punitive damage decision in BMW v. Gore showed a new and
higher level of appreciation for the "due process" arguments that Civil Justice Association of California and others have been
making to the court over the past decade. In the May decision, the court threw out the $2 million
verdict as unconstitutionally excessive.
The court set out a three-part test for judges reviewing future jury verdicts: (1) The
"reprehensibility" of the defendant's conduct, including considering whether personal injury or
economic damage occurred, (2) the ratio between the punitive damage award and the actual
amount of harm caused, and (3) the relationship between the punitive award and civil and
criminal penalties for the same activity.
Civil Justice Association of California and the American Tort Reform Association jointly filed an amicus brief in the BMW
case.
AROUND THE NATION
Louisiana Enacts Major Reforms
Louisiana Governor Mike Foster has signed three bills to establish proportionate liability, return
Louisiana to a negligence standard in premises liability and related property cases, and eliminate
the only exception to the state's prohibition on punitive damages -- cases involving hazardous
substances. Governor Foster, who called a special session to enact the legislation after his
election last fall, noted that hazardous material mishandling is sufficiently deterred by other civil
sanctions and by criminal penalties.
Clinton Veto Sticks
President Clinton's veto of compromise product liability reform legislation was upheld on a
258-163 vote to override in the House of Representatives, with 33 Democrats voting for override.
Senator Jay Rockefeller (D-West Virginia), a long-time leader for product liability reform, told
reporters, "Unfortunately, special interest and raw political considerations in the White House
have overridden sound policy judgment." The measure would have limited the liability of
retailers who have nothing to do with the manufacture of a product and adopted California's
limited joint and several liability reforms.
Protecting Volunteers
The U.S. Senate has voted to extend federal Tort Claims Act protection to health care
professionals who face medical malpractice claims arising from volunteer services provided in
medically underserved areas anywhere in the nation. The measure does not preempt state laws
that provide greater legal protection for volunteers.
Securities Suits Shift?
Early indications show a drop in the number of class action securities suits filed in federal courts
since federal reforms were enacted in December. But filing in state courts has jumped.
Tower C. Snow Jr., chairman of the securities litigation practice group at Brobeck, Phleger &
Harrison in San Francisco, told the Daily Journal he has seen a 30% to 40% decline.
Snow and Joseph Grundfest, a Stanford Law School professor and former SEC commissioner,
said notice provisions, a judge's ability to pick lead plaintiff shareholders, and stronger deterrents
against frivolous lawsuits are significant factors in the new law's effectiveness to date.
Grundfest says, however, that state court filings in California since January first are about five
times greater than in the same period a year ago.
AROUND THE STATE
Auto-Insurance Cost Cutter Qualifies
A proposal to prohibit uninsured drivers from suing to recover non-economic damages (such as
pain and suffering and emotional distress) has qualified for the November 5 ballot. Sponsored by
"Californians for Personal Responsibility," chaired by California Insurance Commissioner Chuck
Quackenbush, the measure would similarly bar recovery for drunk drivers. Civil Justice Association of California has endorsed
the proposal as a step toward broader reforms in the auto liability system.
"Health" Initiatives Opposed
The Civil Justice Association of California Board of Directors has adopted an opposed position to the two managed health care
initiatives that have qualified for the November 5 ballot. Both measures would result in more
non-productive litigation by, among other things, effectively killing mandatory arbitration
agreements.
Client Fraud Investigation Continues
A U.S. Attorney's office investigation of insurance and client fraud in personal injury cases is
expanding, according to reports by the Daily Journal. Announced last year as the
"Medlaw Project," the investigation involves about 300 lawyers, law office administrators,
doctors, and chiropractors, federal prosecutors say. The client fraud charges are based on a novel
theory that a kickback payment to a lawyer from a medical provider is extra attorney
compensation that a client did not bargain for in a contingency fee agreement.
IN THE COURTS
Civil Justice Association of California Brief Filed in Robbery Suit
Civil Justice Association of California has filed an amicus brief (Kentucky Fried Chicken of California v. Los Angeles
County Superior Court) with the California Supreme Court supporting a fast food company's
attempt to win a summary judgment in a suit brought by a customer alleging emotional distress
suffered during a robbery. The robber told a store clerk he would kill the customer unless the
clerk "quit stalling" and turned over money from the cash register.
Appeals Court OKs Private Enforcement
The First District Court of Appeal has ruled that an Oakland lawyer may use the state's unfair
competition statute to sue Lucky Stores over its alleged violation of the Penal Code prohibiting
selling cigarettes to minors. State law permits district attorneys to file civil suits in these
circumstances but does not authorize suits by private parties.
The case is another in an expanding attempt by trial lawyers to use the unfair competition act to
bring suits in which they may win attorney fees.
Civil Justice Association of California has filed an amicus brief in a similar case before the state Supreme Court (Reese v.
Payless Drug Stores) in which an attorney is attempting to use the unfair competition act to
sue over an alleged violation of a federal law requiring warnings to be posted when selling
products containing artificial sweeteners.
Rare Securities Suit "Win"
Alliance Pharmaceutical Corporation has won a dismissal of a securities class action lawsuit filed
against it under the pre-reform federal securities law. Such wins are rare even when the suits are
based on little or no evidence of a misleading statement. Under the prior federal law, even
totally meritless claims could be used to extort settlements because of high defense costs. The
Alliance suit was filed in 1992, immediately after the company announced it was delaying
clinical trials for some new products. The dismissal was not a total win, however, because the
company was forced to incur more than $2 million in defense costs.
Sanctions in "Potty Suit"
A federal judge has ordered a San Diego man and his attorney to pay the legal expenses of the
city and a food vendor he sued for emotional and punitive damages because he was present when
women used the men's room at the city's baseball stadium during a music event last year. The
sanctions for frivolous litigation are the latest, but not the last, development in a legal action that
is becoming a national model for lawsuit abuse. The plaintiff has since filed both an appeal of
the federal sanction and a new case in state court. He is suing the vendor Service America
because it served him the beer that motivated his repeated use of the facilities.
Drive-By Deep Pocket Theory Shot Down
The company insuring the driver of a car used in a drive-by shooting is not liable to the victim,
the Second District Court of Appeal has unanimously ruled. The court found that when a driver
knows a passenger is armed and that a shooting is likely, the driver's insurer has no duty to
defend against a personal injury lawsuit.
VERBATIM
Women and Litigation
The costs and risk of litigation in the U.S. make cosmetics a safer investment than
contraceptives, or a morning sickness pill, or many other drugs and medical devices. --
Anita Blair, General Counsel, Independent Women's Forum.
No Eyebrow
If punitive damages are to be "capped," they ought to be capped by statute, and not by
eyebrow. -- syndicated columnist James J. Kilpatrick, writing on the U.S. Supreme Court's
BMW v. Gore decision.
No Secret
It's no secret that the California trial lawyers, who are now calling themselves the consumer
advocates of California have had very heavy clout in Sacramento. They have been a very
effective special interest in changing the law to their advantage. -- Gov. Pete Wilson,
California Bar Journal, April 1996.
Fed Up Judges
It sends another clear signal that the judiciary is getting fed up with lawyers who run mass
tort cases for their own benefit, not that of ostensible clients. -- Max Boot, Wall Street
Journal assistant features editor, writing on Federal Judge Arthur Spector's order
dissolving a claimants' committee made up of attorneys whose litigation drove Dow Corning into
bankruptcy, April 3, 1996.
Creators v. Destroyers
Sooner or later, Californians will recognize they need protection from contingency-fee tyrants
like Bill Lerach who destroy companies, not from entrepreneurs like Alan Shugart who create
them. -- Wall Street Journal editorial, March 22, 1996.
Litigation Lotto
Litigation lotto is becoming the way of life in America. I have joked with friends in other
countries that when a child trips on the sidewalk, the father chastises him -- and in the United
States, the father congratulates him for providing a lawsuit to fund his college education. --
Susan Vogel, San Francisco attorney and writer, San Francisco Examiner, May 25, 1996.
Unfair Solutions
The law plays a critical role in promoting everyone's health and safety by penalizing people
and organizations that operate negligently and by helping get compensation to persons injured.
But legal solutions are inefficient and unfair when they are used to shift income, to provide
someone with punitive or emotional damages just because someone else has the ability to
pay. San Diego City Attorney John Witt, writing in the San Diego Union-Tribune,
May 13, 1996.
It Has To Change
Every single Californian is paying the price for the current legal system, at the cash register,
in lost jobs, in quality of life. It simply has to change. -- Frank Luntz, president of Luntz
Research, Washington Times, May 6, 1996.
TRIAL LAWYER WATCH
Public Seeing Through "Victimology"
Trial lawyers seem to be concluding that the public has caught on to their favorite tactic of
playing up their clients as "victims" and fuzzing up the question of whether a defendant is truly
at fault. Former American Trial Lawyer Association president Larry Stewart reportedly told
ATLA convention-goers that research is showing that "victims" evoke negative attitudes from
"substantial segments of society" and no longer receive sympathy.
How the Washington Post Sees It
The Washington Post, editorializing on President Clinton's product liability reform veto,
said "...reformers have been successfully blocked by a group of wealthy and powerful
professionals who are the primary beneficiaries of the current arbitrary system..."
"Lawyers usually collect one-third or more of the damages in a product liability case, whether the
lawsuit is settled or goes to trial. Of course they want the present high-stakes rules to be
preserved. Defeating this reform has been at the top of their priority list for a long time, and they
have contributed substantially to candidates, including the president, who see things their way."
STUDIES OF NOTE
Scientists: Lawsuits Hurting Research
A committee of the National Academy of Sciences has said the threat of product liability
lawsuits is blocking research on contraception and is urging Congress to enact litigation limits in
this area. The finding is part of a report issued in May by a 17-member committee of the
Academy of Sciences' Institute of Medicine.
Women and Legal Reform
When it comes to health and business, women have been especially hurt by the runaway legal
system. Civil Justice Association of California has published a fact list on this issue which can be obtained by calling
916-442-2331.
Suits Attacking Builders
The effects of speculative lawsuits against builders of attached housing are outlined in an
Associated Builders and Contractors Magazine article by Johnny Zamrzla, president and chief
executive officer of Western Roofing Corporation. The article shows how property values and
housing supply are both hurt by lawsuits such as the San Diego suit demanding construction
defect damages far exceeding the cost of building the condominium project. Copies can be
obtained by calling 916-442-2331.
Wrongful Termination Awards
Jury Verdict Research reports that median jury awards in wrongful termination suits surged to
the $204,310 level in 1995. The previous record since the research firm began tracking these
awards was 1991, when the median was $152,014. These and other related statistics are included
in a publication "Tips to Tackle Wrongful Termination," published by the firm's parent company
LRP Publications (800-341-7874, extension 274).
NEW Civil Justice Association of California BOARD MEMBERS
Jim Cathcart and David A. Mulford were elected to Civil Justice Association of California's Board of Directors in May.
Cathcart is Vice President of Governmental & Corporate Relations for The Doctors' Company in
Napa. His responsibilities include overseeing tort reform issues in the many states in which the
company has a major presence. He has been instrumental in establishing California's Medical
Injury Compensation Reform Act as a model statute federally and in several states.
He joined The Doctors' Company in 1990 after a 23-year career as a policy and regulatory
analyst in the California Legislature. He was chief consultant for two Senate committees, the
Insurance and the Business and Professions Committee.
Cathcart was nominated to the Board to succeed Susan A. Wilkinson, who was promoted to
Assistant Vice President of Communications.
Mulford is Senior Counsel for Bechtel Corporation in San Francisco. He joined the company as
litigation counsel in 1976 and worked on assignments in Kuwait, London, and Indonesia.
He returned to the U.S. as Division Counsel and in 1988 was appointed Senior Counsel for
Litigation.
His responsibilities include managing Bechtel's alternative dispute resolution program. Mulford
serves as chairman of the Bay Area Mediation Group, an organization of 20 local companies
formed to promote the use of alternative dispute resolution in the corporate community. He is an
author and frequent panelist on the subject of litigation management and corporate dispute
resolution.
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©1996 California Association for Tort Reform
