SECOND QUARTER 1997
A publication of the Civil Justice Association of California -- dedicated to
restoring fairness and balance to the civil justice system
HEADLINERS
Governor Announces Legal Reform Package
Saying "Legal reform...is the loudest message the Legislature can send that Sacramento is
dead-serious about making California more attractive for jobs and investment," Governor Pete
Wilson announced a broad five-point tort reform package.
The proposals include: requiring judges rather than juries to set punitive damage awards and
curbing unfair multiple awards (AB 1371-Morrow); prohibiting wrongful termination suits based
on "implied" contracts but allowing them for violations of an employer's personnel policies and
limiting future pay awards to five years from termination (SB 1278-Leslie); prohibiting
shareholder suits unless a demand for action has been made to directors (AB 1447-Ackerman);
prohibiting private actions under the Unfair Competition Act unless the plaintiff has been
actually harmed and requiring that a person suing on behalf of the general public be an adequate
representative of the public and have an attorney who will adequately represent the public's
interests (SB 1309-Mountjoy); conforming California summary judgment law to the federal
standard requiring sufficient evidence for a reasonable jury to return a verdict (AB
843-Goldsmith).
Civil Justice Association of California told the news media that "The Governor's package is a solid, refined proposal, targeted at
areas of law which the trial lawyer industry has been twisting to its monetary ends. The
Legislature should treat them as balanced amendments that will benefit the vast majority of
Californians who know that unjustified suing hurts their economy."
Shifting Smoke
Capitalizing on a ploy that failed on the initiative front last year, trial lawyers are shifting their
smoke and mirrors to the Legislature in an attempt to undo past tort reforms that have taken a toll
on their income stream. Last fall trial lawyers attempted to turn "winning" themes into
self-serving laws: Proposition 207 played on the public's frustration with frivolous lawsuits in an
attempt to insulate the contingency fee system from legislative oversight. Proposition 211
played on concerns about retirement savings in an attempt to achieve unprecedented ability to
file extortionate securities lawsuits in state courts.
In both cases the public saw through the strategy and defeated both by large margins (211, 74%
no; 207, 66% no). Editorial opposition to both was overwhelming.
This year the trial lawyers are sponsoring bills (See "In Sacramento") that play separately on
concern about drug abuse, sex abuse, managed care, and insurance settlements in order to
promote amendments with a unifying theme: More meritless lawsuits, more defendants, and
more attorney income.
As Civil Justice Association of California has been explaining to editorial writers across the state, the trial lawyer proposals
appear to be based more on focus group findings than on sound public policy.
AROUND THE NATION
Optimism for Product Liability Reform
A bi-partisan group from the U.S. Senate and House are working on a balanced product liability
reform package it hopes will win the President's signature or be sustained by a veto-override.
The legislative vehicle is S.5, introduced by Republican leaders in the Senate as one of their top
10 bills for 1997.
The bill includes a provision to establish proportionate liability for non-economic damages--as
has been California law since voters passed Proposition 51 in 1986.
AROUND THE STATE
Trial Lawyers Attack Initiative
California's personal injury lawyers were in San Francisco Superior Court on March 20 in their
expanding effort to thwart the will of the 77% of California voters who tried to move the state
toward a fairer, less expensive auto liability system by passing Proposition 213 last fall.
"It is ironic that the very lawyers who are now calling themselves 'consumer attorneys' are
kicking legal sand in the faces of the auto insurance consumers," said Mike Carpenter, Civil Justice Association of California
Vice-President. "Researchers at the respected Rand Institute of Civil Justice have found that
Californians are paying two billion to three billion dollars a year because of excessive and
fraudulent medical cost claiming. The trial lawyers who profit from auto cases have been the key
roadblock to reforming these wasteful costs out of the system."
The Court just granted a preliminary injunction, temporarily blocking enforcement of Prop. 213
pending trial and expected appellate review. Proposition 213 prevents uninsured motorists from
recovering pain and suffering damages.
IN SACRAMENTO
Trial Lawyers Target Insurance Consumers
Trial lawyers are sponsoring two bills they hope will turn back the clock and restore their ability
to routinely file "bad faith" lawsuits on behalf of every client who might have a claim against
another party's insurer.
The bills (AB 1109-Escutia, SB 985-Rosenthal) would put personal injury lawyers into every
dispute between an injured person and the insurance company representing the person
responsible for the injury. The bills' proponents have neither established that a problem exists
nor that more tort lawsuits are the best solution to alleged "bad faith claims handling." (People
are properly able to bring a lawsuit against their own insurer for bad faith business conduct.
Only so-called "third party" suits are at issue in AB 1109 and SB 985.)
In Civil Justice Association of California's analysis, letting lawyers return to the practice of routinely filing separate "bad faith"
lawsuits in the course of handling an injury claim means more litigation and higher insurance
costs--lawyers on both sides win, while consumers pay in higher premiums and settlement
delays. The Department of Insurance brings enforcement actions against insurers for unfair
claims settlement practices. If more enforcement is needed, the Legislature can provide more
money and more oversight. Bills have been introduced to do this.
Attack on Medical Malpractice Reforms
Trial lawyers are sponsoring two bills (AB 250-Kuehl, AB 1220-Migden) to riddle the $250,000
non-economic damage limit that has been central to holding down health care costs since it was
enacted 22 years ago.
Assembly Bill 250 poses as a response to doctor-committed drug and sex abuse. But its backers
fail to identify problems that are not being well-addressed by the at least nine existing criminal
and administrative remedies already in place to deter and punish.
The Medical Injury Compensation Reform Act (MICRA) under attack by AB 250 and AB 1220
has worked for 22 years to fairly compensate injured patients, hold down health care costs, and
assure access to risky but beneficial medical procedures. Californians who are unfortunately
injured because of medical negligence can get full recovery for lost wages, future projected
wages, medical expenses, and custodial care for life. In the rare instances where intentionally
harmful acts are involved, a patient can also recover unlimited punitive damages.
Assembly Bill 1220, like AB 250, plays on a topic of concern--this time managed care--to launch
the same attack on MICRA. As Civil Justice Association of California is explaining to editorial writers and reporters, no
productive resolution can come from encouraging the contingency fee liability system to drive a
wedge between doctors and health care provider organizations, and--worst of all--to use medical
malpractice laws to propel that wedge.
Bill Would Create Unfair Liability
New legislation aimed at blocking government contract structural design and consulting work
includes a provision that would unfairly hold private contractors liable for negligent performance
of state employees. The bill, AB 376 by Assemblyman Joe Baca, mirrors provisions of an
initiative which the public employee engineers' union has already qualified for the next statewide
election.
Civil Justice Association of California, which last year took an oppose position on the yet-to-be-numbered ballot proposition,
believes the liability provision improperly separates financial responsibility from performance.
"This looks like a poison pill provision, designed to make the threat of a private firm's liability so
great that public works contracts would become unattractive and public engineers would thereby
achieve the monopoly they are seeking," said John H. Sullivan, Civil Justice Association of California President.
Reforms Introduced
Civil Justice Association of California is working to enact new legislation to curtail speculative awards in wrongful termination
litigation and to eliminate unfair joint and several liability in actions involving providers of
professional services. Addressing the same problem as a bill in the Governor's tort reform
package, AB 1171 (Kaloogian) limits "front pay" awards in wrongful termination litigation to
one year's salary from the date of termination and requires a writing to establish the existence of
an employment agreement. With bi-partisan authorship, Senate Bill 232 (Brulte-Bowen)
eliminates joint liability for economic damages in actions against professional service providers.
It would not apply in personal injury, property damage and wrongful death actions.
Tri-Partisan Support for UCA Reforms
Nuisance and multiple-hit lawsuits brought under the state Unfair Competition Act (UCA) are
the target of three bills with Democrat, Republican, and Independent authors. The legislation
grew out of a study by the California Law Revision Commission and statewide concern over the
growing number of high tech companies, retailers, manufacturers, insurers, and banks being hit
by variations of extortionate lawsuits filed by private attorneys under the UCA.
The bills (SB 143-Kopp, AB 1296-Caldera, SB 1309-Mountjoy) do not hamper public
prosecutors who use the UCA to protect consumers and businesses. However the current law
permits private attorneys to file lawsuits even after a district attorney or the Attorney General has
successfully prosecuted a violation. And private attorneys can bring fee-generating lawsuits
without a client or any evidence of actual loss.
In one recent example of abuse, several software manufacturers are being sued under the UCA
because their retail packages are "too large."
Civil Justice Association of California President John Sullivan commended Assemblyman Louis Caldera for supporting
reasonable UCA reforms: "Assemblyman Caldera earned the gratitude of many in the state when
he stepped forward early in the campaign against Proposition 211 last year to point out its
harmful potential for the general California economy and for high tech companies in particular.
We are pleased to see him involved this year on behalf of legislation that insures consumer
protection, but targets those lawyers who are turning the Unfair Competition Act into a fee
generating weapon aimed at not only high tech companies but at businesses of all kinds and sizes
around the state."
IN THE COURTS
Civil Justice Association of California Argues in Sport Risk Case
Civil Justice Association of California General Counsel Fred Hiestand appeared before the California Supreme Court in
February to argue for clarifying and strengthening the defense of implied assumption of risk.
The case, Parsons v. Crown Disposal Company, centers on a rider who sued a disposal
company after he was thrown from a horse frightened by a truck and crew making a routine
collection near a riding trail.
Arbitration Before the Supreme Court
Civil Justice Association of California is scheduled to participate in oral arguments before the California Supreme Court in April
in Engalla v. The Permanente Medical Group, Inc., a case in which the Court of Appeal
held that delay in the selection of a neutral arbitrator does not constitute grounds for judicial
rescission of the arbitration agreement. In its amicus brief filed a year ago, Civil Justice Association of California argued that
the California Arbitration Act provides a remedy for delay in appointing a neutral arbitrator and
there is no evidence that the medical group waived its right to arbitration of the malpractice claim
against it. The case is important in maintaining the cost and time saving benefits of binding
arbitration agreements.
Court Urged to Review Lifetime Pay
Civil Justice Association of California has joined the numerous requests that the state Supreme Court take up Lane v.
Hughes, which involved the all-time largest wrongful termination award in California--$17.3
million awarded to two employees. A key issue in the case is whether it is proper for courts to
make lifetime front pay awards which requires juries to speculate as to the possible amount of
money the employee would have made throughout the course of life had he or she not been
wrongfully terminated.
Employment Opinion Published
After Civil Justice Association of California filed a letter with the Third District Court of Appeal requesting that an unpublished
opinion be published, the court changed its position and published Feminist Woman's Health
Center v. Superior Court. The ruling is important in affirming that an employee may not
bring an action for wrongful termination against a former employer for violation of a right to
privacy where the employee expressly waived the particular privacy right as a condition of her
employment.
VERBATIM
Everyone Would Win - Almost
Trial lawyers contribute heavily to state and federal politicians, largely because they want to
block reforms that would eliminate excessive litigation that follows automobile accidents and
other mishaps. For the most part they have succeeded, but their gain is the average driver's loss.
Americans pay punishingly high premiums, much of which land in lawyers' bank accounts.
-- New York Times, in January 21, 1997, editorial supporting bipartisan Congressional
proposals for "choice" auto insurance.
Rationale for Skepticism
When business criticizes the tort system, plaintiffs' lawyers tell us not to believe business'
statements, because business is just trying to increase profits. The same rationale for skepticism
should apply to statements by lawyers. When they resist reasonable changes that seek to make
liable the party most at fault, plaintiffs' lawyers are just acting to preserve their fees obtained
from deep-pocket defendants. -- Charlotte A. Lowell, Los Angeles attorney writing in the
Daily Journal, January 15, 1997.
There Comes a Point
At some point, manufacturers must be relieved of the paternalistic responsibility of warning
users of every possible risk that could arise from foreseeable use of their product. That point
comes when ordinary users readily recognize the risk on their own. -- Appellate Justice
Stephen S. Trott, ruling that a trial court was correct in dismissing a case in which an attorney for
two men injured in an auto accident sued General Motors for negligence, fraud, and product
liability for failing to warn that riding in the back of a pickup truck is dangerous.
You Can Look It Up
It is only a matter of time before a coalition of cupidinous lawyers, nervous public officials,
and safety-first zealots take all the excitement out of kids' lives. -- San Francisco
Chronicle, in a January 23, 1997, editorial decrying the movement to purge Bay Area
communities of playground equipment that has "delighted generations of California children."
TRIAL LAWYER WATCH
On the Road to Co-Option
The California Bar Board of Governors has voted to support AB 250, the trial-lawyer sponsored
bill attacking the California Medical Injury Compensation Reform Act. Civil Justice Association of California General Counsel
Fred Hiestand appeared before the board and argued that not only was AB 250 bad policy but
that the State Bar should not take any position on political legislation not reasonably related to
the Bar's purpose and goals.
The San Francisco Daily Journal reported that the support motion passed when civil
defense attorneys on the board joined with trial lawyer members promoting the legislation. No
information has been received on whether the Board of Governors will be acting on other trial
lawyer bills or on civil justice measures sponsored by the Governor or non-lawyer organizations.
Free Cookies
San Francisco Chronicle staff writer Steve Rubenstein followed up on a newspaper ad
for an "Accident and Injury Seminar" at a Bay Area hotel and concluded it was "another name
for two lawyers and two chiropractors looking for business." One of the lawyers, Rubenstein
wrote in a February 19 story, told a woman in the audience she had made a mistake by not going
to a doctor after an accident even though she said she felt okay. "In a perfect world, I would
have liked to see you go to the emergency room," the lawyer said.
Rubenstein noted that there were many empty chairs at the seminar but that persons who did
attend the two-hour session were given coffee and cookies. "The chiropractors did not charge for
a cookie and the lawyers did not take one third of the cookie before handing it out," he noted.
STUDIES OF NOTE
Unfair Competition Act Reviewed
"California's Unfair Competition Act' A New Lesson in Unfairness" is an
Civil Justice Association of California-published explanation of the way the state's Unfair Competition Act (UCA) has been
expanded through successive legislative amendment and judicial interpretation to become a
weapon of attorneys primarily seeking court-awarded fees. Written by Fred Hiestand, Civil Justice Association of California
General Counsel, and Carol Livingston Managing Principal Attorney with Livingston &
Mattesich of Sacramento, the 40-page paper covers legislative history, key cases, and argues for
bringing balance to the act's provisions. Copies of the study are free to Civil Justice Association of California members.
Civil Justice Association of California Punitive Damage Data Published
The Washington Legal Foundation has nationally published a Legal Backgrounder on Civil Justice Association of California's
research showing a shockingly high percentage of punitive damage claims in lawsuits in four
larger California counties. Entitled "New State Data Confirms Runaway Abuse of Punitive
Damages," the four-page paper is available from Civil Justice Association of California (free to Civil Justice Association of California members), the
Washington Legal Foundation at 202-588-0302, or on the Civil Justice Association of California website.
New Defensive Medicine Study
Malpractice liability reforms have a documented positive effect on reducing defensive medicine
without substantial detrimental health effects, according to a new study by Stanford University
and the National Bureau of Economic Research. The study by Daniel Kessler and Mark
McClellan found that reforms directly limiting liability reduced hospital expenditures by five to
nine percent within three to five years of adoption and that these savings were significantly more
important than the reduction in litigation and insurance expenses themselves.
The study, published in the May 1996 Quarterly Journal of Economics, focused on
Medicare beneficiaries treated for serious heart disease in 1984, 1987, and 1990.
NEW Civil Justice Association of California BOARD MEMBERS
Daniel E. Kinney, Audrey A. Stricker, and Arne D. Wagner were elected to Civil Justice Association of California's Board of
Directors in March.
Kinney is Counsel in the California office of State Farm Insurance's Corporate Law Department.
He joined the company as an attorney in 1986 and transferred from the Illinois headquarters to
Sacramento in 1991. He manages the Sacramento corporate law office, which is responsible for
legislative and regulatory matters in eight western states. He is currently chairman of the
Insurance Advisory Committee of the Institute for Civil Justice.
Kinney graduated from Northern Illinois University and received a law degree from the
University of Illinois.
Stricker is Executive Vice President of the Cooperative of American Physicians, Inc./Mutual
Protection Trust (CAP-MPT) and since 1995 has been responsible for overseeing political and
governmental activities.
A registered nurse, she has supervised operating and recovery rooms in Pennsylvania and Florida
and was assistant director of nursing-operating room services at Cedars Sinai Medical Center in
Los Angeles.
She serves on the executive committees of Californians Allied for Patient Protection and the
Health Care Liability Alliance.
She holds a bachelor's degree in business management from Pepperdine University.
Wagner was named the Bank of America's Director of Litigation earlier this year after joining the
bank's legal department in 1985. Since 1988 he has been manager of the Northern California
litigation group.
He has served as a judge pro tem in the Alameda Municipal Court and has performed volunteer
pro bono and early settlement work with the Bar Association of San Francisco. In 1994 he
authored "ADR in Consumer Contracts" for the Association of Business Trial Lawyers.
Before joining the bank, he was a partner with Beckford, Spanner & Kelly and an associate with
Thelen, Marrin, Johnson & Bridges.
He is a graduate of the University of Manitoba, received a Ph.D. in statistics from the University
of California at Berkeley, and a law degree from Boalt Hall.
Items in Balance may be reprinted without permission but credit should be given to the
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©1997 California Association for Tort Reform
