FOURTH QUARTER 1997

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

HEADLINERS

An Civil Justice Association of California-sponsored bill to stop frivolous lawsuits over the package size of software, cosmetics, and other products has been signed by the Governor. The bill (AB 1394-Figueroa and Escutia) was crafted largely in response to a flurry of suits against software makers across the state who were being hit with charges that their retail packages were "too large" for the disks and printed documents inside. The suits were filed under the state Unfair Competition Act, without a single legitimate plaintiff or evidence that anyone had been defrauded or misled.

"The new law ensures that consumers are protected against fraudulent packaging but prevents private attorneys from filing absurd lawsuits for their own economic gain," said Civil Justice Association of California Legislative Advocate Barbara Wheeler, who helped draft and lobby AB 1394 as part of Civil Justice Association of California's broader work to improve the Unfair Competition Act.

In 1996 Civil Justice Association of California became involved in appeals of Unfair Competition Act cases and early this year published a comprehensive review of current problems. The Law Revision Commission and other groups join with Civil Justice Association of California in recognizing that while the law has a long history of protecting consumers and businesses, its procedures are now being abused by some lawyers.

Civil Justice Association of California Adds Print Ads to Radio Campaign

In August Civil Justice Association of California's Legal Reform 2000+ coalition ran ads on two successive Sundays in 32 papers in key areas of the state thanking legislators who resisted trial lawyer pressure and refused to vote for harmful liability bills. The ads provided an 800 number and Civil Justice Association of California's web site for readers who wanted more information to help them fight abusive lawsuits.

Second Chance for Terrible Tort Bills

Two bills (SB 19-Lockyer and AB 574-Villaraigosa) attacking mandatory arbitration agreements slipped into inactive status as the first half of the 1997-98 Legislative session came to a close in September. They joined a number of other costly, court-clogging proposals that were earlier shelved when bi-partisan opposition deprived them of votes necessary to survive a floor vote.

However these and other trial lawyer bills that pose a major threat to California jobs and taxpayers will be eligible for vote again in January. Trial lawyers are giving the most exposure to the bill (AB 250-Kuehl) which would undercut California's successful Medical Injury Compensation Reform Act (MICRA) that has helped hold down health care costs. A continuing threat is a bill (AB 1109-Escutia) which would open up the courts to high cost "third party" lawsuits against insurers, and fuel court congestion. Also alive in January is a trial lawyer proposal (AB 1324- Escutia) which would water down California's already too-weak summary judgment law and make it even more difficult for judges to weed out frivolous claims.

Also dangerous but not yet clearly defined are a pair of bills (AB 1486 and AB 1487-Floyd) sponsored by securities lawyer Bill Lerach's law firm and targeted at life insurers.

New Silicone Lawsuits Bill Vetoed

Governor Pete Wilson vetoed a trial lawyer-backed bill (AB 1609-Papan) that would have set a dangerous precedent by reopening the statute of limitations for silicone implant lawsuits. The bill passed the Legislature with significant bi-partisan support, but the Governor in his veto noted that the measure "promises hundreds, perhaps thousands of suits...seeks to impact multiple enterprises with claims totaling billions." He noted also that "multiple opportunities" for breast implant recipients to gain court access have been provided.

Civil Justice Association of California commended the Governor on his principled stand on the bill and his understanding of its potential for precedent-setting harm to the state's entire business community, not just to the manufacturers and raw material suppliers it would have immediately impacted.

Legal Advertising's 20th Birthday

Twenty years ago in October the U.S. Supreme Court in a landmark 5-4 decision opened the door wide to lawyer advertising and solicitation. The decision (Bates v. State Bar of Arizona) raised prospects of increased competition and information that would lead to lower-priced legal services.

"Despite early predictions, lawyer advertising does not seem to have made most legal service available at affordable prices for the majority of citizens," observed Civil Justice Association of California President John H. Sullivan. "In the personal injury and other tort liability areas, lawyer advertising has likely caused a greater percentage of people to use attorneys -- but this hasn't always paid off for consumers. In less-than-serious-injury cases where liability is clear, people may well end up with more money in their pocket if they handle a claim themselves rather than use a lawyer who charges them a third of their damage recovery plus costs. Lawyer advertising is probably contributing to the excessive and fraudulent claims that today are driving up auto insurance costs."

A 1993 poll published by a California Lawyer magazine found 86% of lawyers responding thought advertising negatively contributes to the public's perception of lawyers.

AROUND THE NATION

Lawyers Circling Year 2000

While computer programmers begin to cope with software's shift from 1999 to 2000, the legal business' interest level is rising. The American Bar Association Journal reports that if predictions of a number of attorneys monitoring the situation are on target, "the millennium bug will keep legions of lawyers busy for years litigating suits brought by and against its victims." The Journal asserts that parties "could be subject to tort liability under various causes of action, including fraud, misrepresentation, professional malpractice, or negligence."

The $3.4 Billion Message

In a case where there were no deaths, no evidence of serious injury, and no other significant losses to 8,000 people evacuated overnight after a fire from a leaking railway tank car, a New Orleans jury nevertheless awarded $3.4 billion in punitive damages. Most of the damages were levied against railroad owner CSX Corporation, which had already been cleared of fault by federal investigators.

Progress on Federal Product Front

As Balance went to press, a compromise product liability bill was taking shape from negotiations between Congress and the White House. Elements include an 18-year "statute of repose" to terminate defect exposure for machine tools and similar workplace equipment, limited product liability for retailers and wholesalers, a defense for manufacturers whose products were intentionally misused, and punitive damage caps for small businesses (fewer than 25 employees). Reform backers continue to press for protection against multiple punitive damages, provisions reducing liability for manufacturers of materials used in human implants, and an extension of the statute of repose to all products.

Securities Suit Cure Taking Shape

Bills are moving in both the Senate and House to solve the problem of securities plaintiffs' lawyers taking their suits to state courts to avoid reforms in the 1995 Private Security Litigation Reform Act. A bi-partisan group of Senators has introduced S.R. 1260, following on the similarly-supported H.R. 1689 in the House. Both bills would enact uniform federal standards requiring that class action lawsuits involving nationally-traded securities be filed in federal courts.

California coalitions of high tech, accounting, and electronics firms and associations have been leaders in developing and advancing the proposals.

Products Restatement

The American Law Institute (ALI) has approved the new Restatement of Product Liability. For many years, the ALI's restatements have been respected by judges and attorneys as a straightforward summary of decisional law in American courts. The product liability restatement is expected to be especially valuable because of the many changes in this area of law in recent years and the variety of holdings in various states.

The new restatement, formally called the "Restatment Third, Torts: Product Liability," has been in process since 1993. Information on the ALI and the new restatement is available at http://www.ali.org/ali/.

The Legend Continues

A 73-year-old Florida woman has filed suit against McDonalds asking for $2 million -- including $1.5 million in punitive damages -- for coffee spilled in her lap. Her attorney, Liability Week reports, is intending to show that McDonalds has not changed its practice of serving dangerously-hot coffee since the infamous Stella Liebeck $2.9 million verdict three years ago.

AROUND THE STATE

Plaintiff Jury Wins Decline

Jury Verdicts Research reports that its survey data shows plaintiffs prevailed in 41% of personal injury cases decided by a California jury in 1996, 5% lower than in prior years in the state and 7% lower than the national average in 1996. Trial lawyer president David Casey Jr. of San Diego told the San Francisco Daily Journal that the figures "confirm a trend we've seen in the field" and blamed the trend on "relentless campaigning by tort reform groups." San Jose trial lawyer Richard Alexander told the paper that he has reacted by expanding his practice to include commercial litigation, corporate fraud, toxic torts, and mass torts, explaining that "it's more challenging and it keeps the caseload up."

A Leash on Class Action Attorney Fees

A Santa Clara Superior Court judge has ordered that plaintiff attorney fees in a class action case be based on the percentage of class action members who take advantage of the coupon offer agreed upon in the settlement. The order is a victory for Lawrence Schonbrun, who has frequently intervened in class action cases to argue that plaintiff attorney fee awards are exorbitant.

In this case, involving reports of speed tests on Intel microprocessors, Schonbrun contended that the plaintiff lawyer's fee should not be based on the cost to Intel that would be encountered if a high percentage of chip purchasers took advantage of the $50 coupon provided in the settlement. The plaintiffs' lawyer will have to wait for three months for coupon results before getting a paycheck.

Dealing Lawsuit Abuse

It's a bad hand no matter what your dealt with the new deck of cards introduced by the Los Angeles "Citizens Against Lawsuit Abuse" organization. Each of the 52-cards succinctly describes a different recent example of silly, abusive litigation. For information on how to get your own deck and impress your trial lawyer friends next time you have them over for hearts, call 310-326-3694.

Ten Staged Wrecks a Day

As many as 10 staged auto accidents a day are occurring on the streets of Los Angeles, according to a state Department of Insurance investigator. The department estimates that the statewide cost to insurers of these accidents is running $300 million a year. California's current auto liability system makes it profitable for sophisticated rings who recruit people to participate in staging accidents. The Los Angeles Times reports that the rings work with a number of attorneys and doctors who prepare fraudulent reports for insurance companies. In the past two years investigators have apprehended 55 people involved in staged auto accidents in Southern California.

IN SACRAMENTO

Fair Share Liability Group Launched

A new statewide coalition has been formed to establish fair, proportionate liability standards for service providers such as realtors, accountants, engineers, and surveyors. In announcing the group in September, Civil Justice Association of California president John H. Sullivan said "California's law on joint and several liability severely burdens taxpayers, consumers, and the economy, and must be changed." Civil Justice Association of California is one of a number of organizations in the new Coalition for Fair Liability Laws, which includes the California Chamber of Commerce, National Federation of Independent Business/California, and the California Legislative Council of Professional Engineers.

Recent polling indicates that Californians overwhelmingly support the reforms -- 90% agreed that if a court finds someone partly at fault that person should pay only his or her proportionate share of damages.

Governor Vetoes State Bar Dues Bill

In a lengthy veto message itemizing many of the recent complaints over the political activity of the State Bar of California, Governor Pete Wilson rejected the bill authorizing mandatory dues from attorneys in 1998 and 1999. The Governor said he would favor a bill that required Bar members "to pay only for functions which were, in fact, a mandatory part of a responsible, cost efficient regulatory process."

Civil Justice Association of California focused public and legislative attention on the Bar earlier this year when it opposed the dues bill after the former Bar president arbitrarily brought before the Board of Governors a piece of trial lawyer-sponsored legislation attacking California's medical malpractice reform act. By a divided vote, the bar board voted to support the measure, despite a presentation by Civil Justice Association of California's general counsel explaining that it was bad public policy and a matter outside the Bar's area of responsibility.

Trial Courts: State $ to the Rescue

A $450 million court funding overhaul was one of the major agreements between the Governor and the Legislature in the final hours before this fall's adjournment. County funding is capped at the 1994-95 level. The state General Fund will pick up the future operations cost growth, and the Legislature will govern court budgets in the future. The plan could result in 40 new trial court judgeships in 1998.

Civil Justice Association of California president John H. Sullivan called attention to the resulting benefit for tort reform: Any legislation that might result in more litigation and added court workload will from now on come under the withering scrutiny of the State Department of Finance. Proposals that improve court efficiency will likely have new, powerful support.

Civil Justice Association of California Lobbying Strength Increases

Mark Krausse has joined the Civil Justice Association of California as Vice President-Legislation. Formerly Director of Governmental Relations for The Doctors' Company, he is a member of the California State Bar and has eight years experience in staff positions in the California Legislature.

At Civil Justice Association of California, he joins in lobbying activity with Barbara M. Wheeler, who came to the Association in 1996 after civil litigation experience with Yamaha Motor Corporation and with an insurance defense law firm in Southern California. She holds a law degree from Whittier College School of Law and received a bachelor's degree in personnel management from Georgia State University. She is a member of the California and District of Columbia bars.

Krausse is a graduate of the University of Pacific, McGeorge School of Law, and holds a bachelor's degree in government from California State University, Sacramento.

IN THE COURTS

Good Faith Termination

Civil Justice Association of California has filed a friend of the court brief (Cotran v. Rollins Hudig Hall International, Inc.) with the state Supreme Court supporting an employer's ability to terminate an employee after an investigation turned up evidence establishing a good faith basis for believing he had sexually harassed other employees. The fired employee sued for wrongful termination, revealing information he had evidently withheld from his employer. A trial court denied the employer's request for a summary judgment on the basis that the employer had not proven that harassment had actually occurred. The Second District Court of Appeal reversed in favor of the employer.

Supporting Arbitration

As part of an ongoing effort to protect the use of arbitration, Civil Justice Association of California has filed a friend of the court brief (Broughton v. CIGNA Healthplans of California) in the Second District Court of Appeal. The brief challenges an attempt to evade an arbitration agreement by arguing that arbitration cannot be used where a plaintiff is seeking an injunction under the Consumer Legal Remedies Act.

Construction Arbitration OK

A test case challenging the Department of Real Estate's refusal to permit binding arbitration agreements to settle subdivision development disputes has produced a win for consumers and builders. After a San Francisco Superior Court ruled that the arbitration was permitted under state law, the Department chose not to appeal but to rewrite its regulations permitting the faster, lower cost dispute settling process.

Deep Purses

Two hundred or so women attending a 1995 country club event in Orange County later received a present they hadn't bargained for -- a lawsuit. A woman driving to the event ran a red light and tragically killed a couple in another car. The family of the deceased understandably filed a suit against the driver -- but also against each of the women already at the country club. The plaintiffs' attorney reasoned that since all the women were attending the same event, they should all share the liability.

VERBATIM

Crazy Courts

We have very good, acute medicine in Germany. We've been looking at prices on the Internet and we know we can do a hip replacement for one-third less than the Americans, with their crazy court system of strict liability and punitive damages. -- Max Theo Gassner, Director, Department of Social Insurance, Bavarian Health Ministry, Los Angeles Times, August 16, 1997.

Deep Pocket Dreaming

The constitutional right of Californians to pursue and obtain safety could be an untapped source of riches that plaintiffs' attorneys should consider on behalf of their clients and the public. -- Raphael Metzger, Long Beach attorney, writing in the San Francisco Daily Journal on basing a new tort claim on the California Constitution's "inalienable rights" provision.

Blatantly Misleading

The trial lawyers, through Kuehl's bill (AB 250), want to unravel a tort reform measure that has helped stabilize (medical) malpractice-insurance rates for 22 years. Moreover, the attorneys have been airing blatantly misleading advertisements to rally public support. One 60-second spot claims a child injured by a doctor's malpractice could get no more than $250,000. That is wrong -- and the lawyers who know the law know better. -- San Francisco Chronicle editorial.

"Epidemic Neurosis"

Replacement of the ordinary ethical standards with which students enter law school by the amoral habits of current legal practices, has produced an epidemic neurosis among American lawyers, many of whom are suffering from depression, chronic anxiety, and discontent. If current trends continue, almost all lawyers are likely to become hired gun technocrats, operating outside commonly held ethical values. -- San Francisco lawyer Harrison Sheppard, writing in the San Francisco Chronicle.

TRIAL LAWYER WATCH

Court Cruise

The Los Angeles Times reports that prominent Los Angeles trial lawyers last August used a foundation they set up to charter a Cunard cruise liner Sea Goddess II to take a 90-member group -- including active judges and retired judge arbitrators/mediators on a seven day Mediterranean voyage. Of the 10 jurists aboard, the Times reported, two traveled free because they lectured on board and that seven of the remaining eight said they paid their own way. The eighth, not identified, told the paper initially he understood the trip was free but later said he would pay.

According to the Times, several lawyers and judges prominent in the Los Angeles legal community, speaking only if not named, criticized the trip and said it symbolized one of the attorney's, Thomas Girardi, "acquisition of too much influence over the legal system." Girardi told the Times that the cruise had "an extensive professional program." The funding group, Foundation for the Enrichment of the Law, earlier contributed $1.2 million to improve jury facilities at Los Angeles' downtown court complex.

STUDIES OF NOTE

Science, Validity, and the Courts

The role of judges in determining when expert scientific testimony is proper evidence for a jury is explored in a new book co-authored by Peter Huber of the Manhattan Institute. Huber, author of Galileo's Revenge: Junk Science in the Courtroom, joined with Kenneth Foster, a bioengineering professor at the University of Pennsylvania, to produce Judging Science: Scientific Knowledge and the Federal Courts, which is available from MIT Press.

Items in Balance may be reprinted without permission but credit should be given to the Civil Justice Association of California

©1997 California Association for Tort Reform