FOURTH QUARTER 1996

A publication of the Civil Justice Association of California - dedicated to restoring fairness and balance to the civil justice system

HEADLINERS

Unprecedented Opposition to Prop. 211

As the massive campaign against Proposition 211 moved into the final month, President Bill Clinton and challenger Bob Dole headed a growing, diverse list of people and organizations opposed to the securities plaintiff lawyers' ballot scheme to subvert last year's federal securities litigation reform bill.

A mid-September Los Angeles Times poll of likely voters found 42% opposed to 211, 26% in favor, and 32% undecided.

John H. Sullivan, Civil Justice Association of California president and co-chair of the campaign against Proposition 211, said that experience with earlier campaigns suggests that the shift to opposition will continue:

"Voters are becoming extremely suspect of any proposal or candidate backed by trial lawyers. Add this to 211's complexity, and you have the kind of ballot proposition that turns people off."

Television commercials identifying the out-of-state securities lawyers behind 211 began running in July.

Lawyers' Prop. 207 Withers Under Scrutiny

Early editorials and news stories on the trial lawyers' Proposition 207 began the process of stripping away the proponent's fraudulent attempt to pass their fee-protection measure off as a remedy for frivolous lawsuits.

The respected California Journal monthly magazine in its September issue summarized 207 as a measure that would "protect attorneys' ability to charge virtually unlimited contingency fees." The San Jose Mercury News and Oakland Tribune called for voters to defeat the measure.

An analysis by Civil Justice Association of California, which is leading the campaign against 207, reveals that the proposition would not only give lawyers fees and contracts unique insulation from legislative oversight, but would also make it much harder to enact any new laws that truly address the problem of frivolous litigation.

Proposition 207 has been included by the California Chamber of Commerce on its list of "Job Killers" on the November ballot.

Information on 207 can be requested from Civil Justice Association of California at 916-443-4900 or FAX 916-443-4306.

Proposition 214 & 216: Lawsuit Producers

Civil Justice Association of California has called for voters to defeat propositions 214 and 216, the health care measures which include lawyer-friendly provisions to generate meritless lawsuits. The state trial lawyer association is on record as making an indirect $190,000 contribution to the campaign in favor of Proposition 216.

Civil Justice Association of California Lends Support to Proposition 213

"Proposition 213 is a necessary step in the long struggle to bring California a consumer-friendly auto liability system," said Civil Justice Association of California President John H. Sullivan, commenting on the Association's support for the measure on the November 5 ballot. Sponsored by Insurance Commissioner Chuck Quackenbush, 213 would prevent uninsured motorists from recovering non-economic damages in auto accident claims and lawsuits.

Sullivan said that responsible drivers will recognize that 213 is the "battering ram" they need to counter trial lawyers' successful blocking of every reasonable legislative attempt to achieve a fairer and less costly auto insurance system.

Proposition 213 also prevents felons from suing for injuries they receive in committing or fleeing from their crime.

AROUND THE NATION

Major Paper Supports Reform

The Washington Post in August applauded presidential candidate Bob Dole's legal reform package as "serious proposals" developed by "legal scholars and business leaders who have been grappling for years with changes in the tort system that would limit cost and delay, provide incentives for prompt settlements and curb the high awards now paid to lawyers instead of plaintiffs."

The package includes punitive damage caps, proportionate liability, and an auto insurance plan which permits drivers to choose between a traditional tort law policy and one that would provide limited pain and suffering awards and cost an average of 29% less.

Another Call for Punitives Reform

The National Conference of Commissioners on Uniform State Laws has approved a model punitive damage act that would reform some aspects of state laws permitting excessive punitive damages. The act calls for a procedure to prevent multiple punitive damage awards for the same action and require courts to consider a specific list of criteria before upholding an award.

Legal Reform on Bumpy Path in Ohio

A legal reform package barely escaped death in the Ohio Legislature when the lower house granted reconsideration after failing by three votes to enact a Senate-approved conference report in mid-September. The measure addresses punitive damages, joint and several liability, the collateral source rule, and product liability.

AROUND THE STATE

Civil Justice Association of California's Major Role in Proposition Fights

The Civil Justice Association of California is playing a major role in opposing propositions 207 and 211.

Civil Justice Association of California formed the Proposition 207 opposition committee "Coalition Against Unfair Attorneys Fees" and is working with the consulting firm Goddard*Claussen/First Tuesday and Edelman Public Relations on news releases, "slate" mailings, and commercials. By October 1, Civil Justice Association of California President John H. Sullivan had met with editorial boards of seven major newspapers across the state. Civil Justice Association of California's staff is handling dozens of inquiries a day, and the volume is expected to increase when voters receive their official election pamphlet which identifies Civil Justice Association of California as the contact for information on the 207 opposition campaign.

As co-chair of Taxpayers Against Frivolous Lawsuits, the campaign committee opposing Proposition 211, Civil Justice Association of California's president has participated in debates, interviews, and has given fund-raising and other talks on the initiative around the state.

High Volume of Punitive Damage Claims

Further evidence of runaway punitive damage claims is presented in a four-county study by Civil Justice Association of California. The study found that nearly a third of all contract and tort cases involved demands for punitive damages.

The numbers confirm the almost-routine filings for punitive damages, a major factor in leveraging higher out-of-court settlements. The Civil Justice Association of California study analyzed 2,528 superior court cases filed during 1995 and 1996 in Los Angeles, San Diego, San Joaquin, and Sacramento counties.

Runaway Punitive Damage ClaimsPunitive damages were sought far more frequently in the Southern California counties. In San Diego, punitive damages were demanded in 60% of the tort and contract suits against government entities, 41% of the suits against businesses, and 26% of the suits filed against individuals. In Los Angeles County, the numbers were 36% in suits filed against governments, 50% in suits against businesses, and 20% in suits against individuals.

Civil Justice Association of California noted that trial lawyers who boost their incomes settling punitive damage claims have been trying to head off solutions by claiming that punitive damages are no problem because they are seldom awarded by juries. On a percentage basis, few cases of any kind get to the jury verdict stage. Most are settled. But punitive damage jury verdicts have been skyrocketing nevertheless, encouraging the lawyers who routinely file punitive damage claims to extract bigger settlements.

Reforms Boost California Aviation

A survey of general aviation-related businesses around the state confirms the effectiveness of tort reform in the 1994 General Aviation Revitalization Act. Aircraft sales, manufacturing, and supply spokesmen contacted by Civil Justice Association of California agreed that the act was resulting in new, upgraded aircraft and producing a spurt in new jobs.

"It's a step in the right direction," said Ken Yunker, owner of Stockton-based Valley Aero Sales. "The demise of general aviation in the last 10 or 15 years has been due largely to horrendous lawsuits brought by trial lawyers." Insurers Address Company-Killing Lawsuits "Company-killing" lawsuits based on employment practices are leading California insurers to develop employment practices liability insurance, according to the San Francisco Business Times. The Times report says California's litigious climate makes insurers leery about offering coverage here and that few companies purchasing policies are willing to discuss the matter, "for fear of being seen as a deep-pocket target for a lawsuit." The U.S. Equal Opportunity Commission reports that sexual harassment claims have increased from 6,000 in 1990 to 16,000 in 1995.

IN SACRAMENTO

Lawyer-Controlled Senate Buries Reforms

Governor Pete Wilson summarized legal reform's fate in the 1995-96 Legislative Session in a speech at the annual Sacramento Host Breakfast in September: "Look at what they killed this year--the trial lawyers....They killed sorely needed reform of California's abusive legal system, allowing the California trial lawyers to keep a thumb on the scales of justice--at the expense of California employers, workers, and consumers.

Major bills dealing with everything from punitive damages to product liability failed in the Senate, most breathed their last at a day-long hearing of the Senate Judiciary Committee on August 7. The trial lawyers and their lobbyists were out in force, easily leading the stacked committee to defeat even modest bills to ease frivolous lawsuit problems surrounding skate boarding and horseback riding.

Despite the final outcome, the session remains a landmark one for Civil Justice Association of California and one to build on for the future. For the first time, significant tort reform bills were debated on the floor. Some received bi-partisan votes as they moved from the Assembly to the Senate. Civil Justice Association of California lead the successful opposition to bills designed to destroy binding arbitration and to establish unnecessary and intrusive opportunities for electronic discovery.

Civil Justice Association of California carried an unprecedented legislative workload for the past two years--supporting, opposing, and watching a total of 84 bills. For detailed information on legislation in the past session, please visit Civil Justice Association of California's Web site at http://www.cjac.org/ or phone 916-443-4900 and request a list of 1995-96 legislation.

IN THE COURTS

Bigger Target for Prescription Drug Suits

The California Supreme Court has made it easier to sue pharmaceutical makers over drug warnings. In a complex 4-3 decision (Carlin v. Superior Court of Sutter County), the court said that liability could be established without a showing of negligence in a failure to warn about known or reasonably knowable drug side effects. Civil Justice Association of California filed an amicus brief in the case, arguing that the "strict liability" test does not make sense in warning cases.

Some observers predicted that the decision could open the door to junk science testimony about side effects, while others predicted increased litigation which would ultimately restrict product development. Manufacturers may cope with the new liability by publishing even more detailed and lengthy warnings in the hopes of cataloging every possible side effect that might give rise to a suit.

Court Backs Away from Competition Cases

The California Supreme Court has refused to hear two cases dealing with the growing abuse by some lawyers of the state's Unfair Competition Act.

In August the Court changed its mind on hearing a case (Reese v. Payless Drug Stores ) in which an attorney used the act to sue over an alleged violation of a federal regulation requiring warnings to be posted when stores sell products with artificial sweeteners. Civil Justice Association of California's amicus brief in the case argued that state law was not intended to allow a private right of action (with attorney fee awards) in the case of federal violations which specifically reject the use of private enforcement. The Court may have taken its action because the federal rule was repealed while the case was on appeal.

In September the Court announced it would not hear the appeal of a case (State Farm Fire & Casualty Co. v. Superior Court of Los Angeles County) in which lawyers used the Unfair Competition Act to bring a pricing, coverage, and claims suit on behalf of persons who were not customers of the insurance company.

Peddling Paranoia Doesn't Pay

Trial lawyers looking for a lucrative career suing electric utilities suffered a major power outage when the state Supreme Court ruled 7-0 they could not sue for harm allegedly caused by high voltage power lines. The case, Covalt v. San Diego Gas and Electric Company, involved claims for property value declines caused by concern over electromagnetic fields (EMF). Courts earlier threw out cases claiming personal injury due to EMF and EMF fear.

Civil Justice Association of California filed an amicus brief in the case, drawing on successful experience in earlier cases blocking lawyers' attempts to base lawsuits on mere fear of injury.

The court's 74-page opinion began with a 12-page essay on electricity and magnetism, symbolically if not intentionally signaling that good science was welcome in its chambers.

The decision's importance was summarized by San Diego Gas and Electric Company assistant general counsel E. Gregory Barnes: "Science has proven no causal link between EMF and health effects. With this decision, the state's highest court has sent a clear signal to plaintiff lawyers that peddling paranoia for profit doesn't pay."

VERBATIM

Exploiting Health Concerns

The only people who had an actual financial interest in the panic created during the breast implant scare were the trial lawyers who hoped to corral frightened women into a multimillion-dollar global settlement. Reforms to place some reasonable limits on liability awards would reduce the incentive such lawyers have to exploit health concerns. -- Sandy Firestone, accountant and founder of the Women's Implant Information Network in Irvine, San Francisco Examiner, August 28, 1996.

Fee Dreaming

Four hundred years ago William Shakespeare observed that lawyers "dream on fees." During the ensuing centuries, few lawyers, even in their wildest dreams, have envisioned fees such as those that have resulted from mass tort litigation. -- Judge Robert F. Chapman, Senior Circuit Judge: Fourth Circuit United States Court of Appeal, Appellants v. Dalkon Shield Claimants Trust, June 20, 1996.

Lawyer Production

It is well recognized that the "business" of lawyering has changed dramatically in the last 20 years. In California in 1975, for example, there were 46,596 active lawyers, or approximately 2.2 lawyers for every 1,000 people in the state. Today, 20 years later, there are approximately 118,000 active lawyers, or approximately 3.7 lawyers for every 1,000 people in California. Competition within the profession has substantially increased. The increase is understandable, since lawyers' earnings have risen substantially during that same period, leading to an increase in the supply of lawyers. -- San Diego attorney Robert S. Berber, California Litigation, Fall 1995.

Threat to a National Market

Perhaps the greatest single threat to preserving the benefits of a national market is the development of what can only be called the "litigation business." There are a growing number of lawyers who have become expert in using litigation or the threat of litigation as a tool for gaining immense personal wealth. In doing so, they have cast aside any meaningful role as "officers of the court" or as representatives of their clients. These legal entrepreneurs can cause great national corporations with very minor activities in the state where the legal attack is mounted to totter on the brink of ruin and businesses throughout the state to pay soaring insurance premiums, which in turn must be passed on in the form of higher prices to the consumer. --Editorial, Metropolitan Corporate Counsel magazine, September, 1996.

TRIAL LAWYER WATCH

Bulging Envelopes

Trial lawyers poured $11.4 million into federal elections between January 1, 1995, and April 1, 1996,--with $3.5 million of that total coming in the first quarter of 1996. Totals are the result of research by Contributions Watch, which reviewed contributions by individual lawyers and firms in addition to their political action groups.

Investing in the Chief

Lawyers and their firms were the single biggest group of donors to the Clinton-Gore reelection campaign through mid-1996, with contributions totaling $3.9 million. According to research by the Center for Responsive Politics which collected the data, this was double the amount the legal industry gave to challenger Bob Dole. Clinton-Gore contributions from the entire finance, insurance, and real estate sector (the second largest contributing group) was a distant second at $2.2 million.

Even They Pan Crash-Chasing

Faced with broad criticism for swarming over the families of victims of last May's jet crash in Florida, trial lawyers say they want restrictions on their own solicitation of business from relatives of people killed in airplane disasters. The chairman of the Association of Trial Lawyers of America said "We as trial lawyers have caused some of the criticism that we're getting." Fewer criticisms have been heard in connection with the July explosion of TWA Flight 800, possibly because relatives near the scene found protection from lawyers in a heavily guarded hotel.

The Association of Trial Lawyers of America later added its support to a Congressional proposal to prohibit unsolicited communication concerning "a potential action for personal injury or wrongful death" within 30 days of an aircraft accident. The prohibition applies to air carriers and insurers as well as personal injury lawyers.

Lawyer Rake Off

"The Victims Get the Short End" headlined the Los Angeles Times editorial decrying a case where "Lawyer rakes off most of housing discrimination settlement." The Orange County suit settled for $775,000 and the plaintiffs' lawyer took $645,000, causing the Times to comment that "There is something wrong with this picture."

STUDIES OF NOTE

Laws Chill California Employment

An Civil Justice Association of California-sponsored survey of California businesses has found that one in every five firms has restricted hiring because of employment lawsuits. And 48% of the firms questioned say the state's employment termination laws have made liability insurance more expensive, while 11% say these laws have actually caused a reduction in the number of employees on their payroll.

Sixty percent of the firms say employment laws are making it more difficult to get information or references on prospective employees, and 53% say they will not provide reference on former employees.

The survey by Charlton Research of San Francisco also found that: 53% percent of firms have experienced an increased cost of screening and hiring applicants, 51% have reduced the termination of employees for good cause, 28% have reduced employee earnings and benefits, and 27% have resisted expanding in California.

In releasing the data, Civil Justice Association of California noted that it adds to existing evidence that "the wheels of justice are badly out of alignment when it comes to California employment law."

Proposition 207 is Devious and Dangerous

Trial lawyers put Proposition 207 on the ballot to prevent the Legislature from ever controlling unreasonable attorney contingency fees or unfair, one-sided fee agreements. The prospect of windfall attorneys fees is the major driving force behind frivolous lawsuits against businesses, individuals, and government entities. Proposition 207 would also lock in weak standards for curbing frivolous litigation and would likely even reduce a judge's incentive to apply sanctions.

Governor Wilson said "I can think of few challenges more deserving of our attention than calling a halt to the effort of special interests to preserve their right to charge excessive legal fees, diverting money which should go to compensate victims. A 'no' vote on Proposition 207 sends a clear message that no special interest, regardless of its size or clout, can thwart the will of the people."

"It is a devious, dangerous little ploy that would carve out an exemption from legislative oversight for legal fees," says John H. Sullivan, president of the Association for California Tort Reform and chairman of the 207 opposition campaign, Coalition Against Unfair Attorneys Fees.

Among those who oppose proposition 207 are Governor Pete Wilson, the Bay Area Council, the Consulting Engineers and Land Surveyors of California, the California Business Properties Association, the California Chamber of Commerce, the California Manufacturers Association, the Chemical Industry Council of California, the Los Angeles Area Chamber of Commerce and the National Federation of Independent Business.

Consider the following:

Proposition 207 must be stopped. Get involved with the campaign to defeat Proposition 207 by calling (916) 443-4900.

Coalition Against Frivolous Lawsuits
1201 K Street, Suite 1960
Sacramento, CA 95814
(916) 443-4900 Fax (916) 443-4306

Paid for by Coalition Against Unfair Attorneys' Fees, No on Proposition 207, CA I.D. #960770.

Proposition 211 Will Clog Our Courts With Frivolous Lawsuits

Wealthy securities lawyers are bankrolling Proposition 211 to make California state courts a haven for frivolous class-action securities lawsuits. They file these suits against companies whose stock price drops or earnings don't meet projections. With Proposition 211, a company can be innocent of securities fraud with no apparent victim--and still be subjected to a class-action securities suit. Securities lawyers monitor the stock market and use their ready-and-waiting professional plaintiffs to file these meritless cases.

A broad-based coalition called Taxpayers Against Frivolous Lawsuits is conducting a grassroots effort to defeat the initiative. The group is led by National Chairman John Young, retired president and CEO of Hewlett Packard; and Co-chairs John H. Sullivan, president of the Civil Justice Association of California; Kirk West, president of the California Chamber of Commerce; Tom Proulx, Intuit co-founder; and John Doerr, partner in the venture capital firm of Kleiner Perkins Caufield & Byers.

Joseph Grundfest, former commissioner of the Securities and Exchange Commission, opposes Proposition 211. If this passes, he said, California "will dominate securities litigation nationwide" and Congress' recent curbs on federal lawsuits will prove worthless.

Consider the following:

Stop this handful of lawyers from misleading the public and filling our courts with frivolous lawsuits. Get involved with the campaign to defeat Proposition 211 by calling (916) 774-0637 or contacting the web site at http://www.stop211.org

Taxpayers Against Frivolous Lawsuits
915 L Street, Suite C307
Sacramento, CA 95814
(916) 774-0637 Fax (916) 774-0429

Paid for by Taxpayers Against Frivolous Lawsuits, NO on Proposition 211, a coalition of seniors, small business, taxpayers, high-technology and financial services companies and associations. CA ID #951764.

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