FOURTH QUARTER 1998
FOURTH QUARTER 1998
A publication of the Civil Justice Association of California -- dedicated to restoring fairness and balance to the civil justice system
HEADLINERS
Trial lawyer dollars have been pouring into California campaigns at an unprecedented rate. Preliminary calculations show that through September 30 about $6.5 million has been received by statewide and legislative candidates since the first of the year.
Gray Davis, Democrat candidate for governor, easily leads the list with $2.4 million from plaintiffs' lawyers. This amounts to 13% of his reported contributions from all sources. Davis received approximately $77,000 from trial lawyer committees, with the bulk of his contributions coming from individual trial lawyers and firms. His Republican opponent Dan Lungren reports receiving $154,000, most of it contributed by the political action committee of the newly-formed “Republican Trial Lawyers Caucus,” a subsidiary of the statewide trial lawyers association. This amounts to 1% of his total reported contributions.
Based on research to date, Civil Justice Association of California, predicted in early October that contributions from trial lawyers to legislative candidates would surpass the $3 million identified in the 1995–96 election cycle. Data on contributions reported through September 30 showed $2.8 million in plaintiff trial lawyer contributions to legislative incumbents and candidates. Historically, trial lawyers pour last minute funds into districts they want to capture.
Reports for Attorney General candidate Bill Lockyer show $750,000 received from trial lawyers, and his opponent Dave Stirling's reports show $7,000 in trial lawyer contributions—all from individual trial lawyers and firms. Lockyer's trial lawyer contributions make up 29 percent of his total reported contributions. Stirling's trial lawyer contributions make up 0.5% of his total reported contributions.
Reports for Phil Angelides, candidate for state treasurer, show him receiving $117,000, while his opponent Curt Pringle's reports show $5,000.
An Civil Justice Association of California-sponsored study shows that litigation and the threat of lawsuits are draining off significant resources from California's schools. A survey of districts across the state by Sacramento-based School Services of California, Inc., found that total liability-related expenses borne by California's 998 school districts average more than $80 million per year. Put in perspective, this money is enough to fund local districts' entire share of deferred maintenance costs and is more than districts spend on librarians and nurses combined. In some small school districts liability-related expenses are running as high as $44 per student.
Trial Lawyer Plotting Nixes Health Reforms
In a move denounced by two leading California physician associations and the state's leading health maintenance organization, trial lawyers sabotaged major bi-partisan health care reforms by legislatively linking them to their proposals to target health plans with more lawsuits.
The bills falling victim to the leveraging attempt would have given health care consumers the assurance of independent physician review of a health plan's determination that a recommended treatment is not “medically necessary.”
“We are extremely disappointed that the trial attorneys...have betrayed the trust of their clients and consumers in general by leading efforts to defeat independent external review,” said Robert Reid, M.D., president of the California Medical Association.
Don Fisher, spokesman for the American Medical Group Association which represents more than 200 physician groups across the nation, said: “Independent reviews will give consumers an immediate right to have a denial by a health plan reviewed by physician experts. This is far preferable than litigation which often will not conclude until years after an injury has occurred.”
Commenting editorially on the trial lawyers' power play with legislative leaders, the Sacramento Bee wrote: “They must decide, and soon, whether they want to stand with consumers and citizens, or whether they will stand for bolstering their own prerogatives and filling the pockets of the trial lawyers.”
Legislators who opposed the linking scheme once it was revealed helped kill two trial lawyer bills to expand health plan liability (AB 2436-Figueroa and SB 977-Peace) and another Civil Justice Association of California-opposed measure (AB 1557-Gallegos) which sought to end the use of binding arbitration in disputes between patients and health plans.
Endorsed: Retention of Top Court Justices
The Civil Justice Association of California has adopted a position in support of the retention of the four California Supreme Court justices appearing on the November 3 ballot. The Association stated that it “believes that California voters should review the full record of incumbent judicial candidates and vote to retain them unless a strong showing is made of a continuing pattern of failure to uphold the state's clearly written laws or other abuse of the position.” On the statewide ballot for retention vote are Chief Justice Ronald George and justices Janice Brown, Ming Chin, and Stanley Mosk.
AROUND THE STATE
Lawsuit Fear Choking Lower-Priced Housing
Despite the long-awaited increase in housing construction around the state, the threat of lawsuits is still holding down condominium building. Southern California continues to be the hardest hit area, with Ben Bartolotto of the Construction Industry Research Board reporting that condominiums represent only a few of the approximately 4,000 multifamily building permits issued annually in Los Angeles and Orange counties.
Recent research by the California Building Industry Association found that a typical insurance policy covering litigation costs has a $300,000 premium with a $600,000 deductible, meaning a sued builder faces $900,000 in out-of-pocket expenses before receiving any insurance backup.
One overall result is that the shortage of lower cost housing is making California one of the highest cost housing markets in the country, for both renters and homeowners.
Chief Justice's Panel Looks at ADR
The Task Force on the Quality of Justice appointed by State Supreme Court Chief Justice Ronald George has charged a Subcommittee on Alternative Dispute Resolution and the Judicial System with examining fairness and ethics in the areas of mediation, arbitration, and the appointment of discovery referees. The subcommittee met in San Francisco and Los Angeles in early October to take public testimony. A final report from the Task Force is due to the Judicial Council by March 1, 1999.
AROUND THE NATION
Congress Moves on Year 2000
Congress approved and the President signed an information disclosure bill (S. 2392-Hatch) to encourage businesses to share information about fixing Year 2000 computer problems. The bill, heavily opposed by trial lawyers, prevents the use in court of information provided by a company as an admission of liability. It also protects companies from being held liable for false, misleading, or inaccurate statements unless “clear and convincing evidence” shows a company made the statements knowing they were false. The bill includes a limited anti-trust exemption for agreements aimed at heading off Year 2000 problems.
First Comes Year 1999
With concern unabated over the potential of Year 2000 disputes turning into lawyer-driven class action and tort circuses, a number of coalitions are continuing to look at both state and national solutions that can be advanced in 1999.
A bill (H.R. 4240) modeled on Civil Justice Association of California-sponsored AB 1710 was introduced by California House members David Dreier and Christopher Cox, but has been sidelined in favor of immediate action on an information sharing and disclosure bill.
Civil Justice Association of California's Barbara Wheeler has been chairing a committee analyzing federal proposals and John Sullivan, Civil Justice Association of California president, joined the committee for an August 31 meeting with John Koskinen, the chair of the President's Council on the Year 2000 Conversion, to discuss disclosure and liability legislation. The consensus: an information-sharing bill might emerge from Congress in the next two weeks (it did); broader liability legislation will be on Congress' Y2K agenda when the next session starts.
A coalition of manufacturers has been developing a “Year 2000 ADR Commitment” to encourage mediation of Year 2000 disputes and discourage lawsuits.
(Information on Y2K liability issues is available at Civil Justice Association of California's special website http://www.cjac.org/y2k/)
Punitive Damage Bill Stalled
The Fairness in Punitive Damages Act (S. 1554), which would make punitive damages in financial loss cases proportionate to the degree of responsibility for causing loss, was stalled in the Senate Judiciary Committee as Congress moved toward adjournment. But Civil Justice Association of California and other supporters are keeping the pressure on to ensure the proposal is a high priority with Congress when it convenes in January.
Securities Reforms Move Toward Enactment
The Senate and House have passed legislation which will increase company disclosures by eliminating the ability of plaintiffs' lawyers to file securities fraud suits in state courts and avoid the requirements of the 1995 securities litigation reform bill. The measure, the Securities Litigation Uniform Standards Act, was embodied in (S. 1260) and (H.R. 1689). Support of the bills by the Securities and Exchange Commission means the President's signature is likely.
Federal Class Action Bill
At Balance deadline, a bill (H.R. 3789) to curb frivolous class action lawsuits was on the House floor awaiting consideration. Authored by Congressman Henry Hyde of Illinois, the measure would move to federal court those cases that are interstate in nature. Federal judges have more experience and resources to hear class action suits, and have adopted clear, uniform procedures for determining whether a case should be certified as a class action. In California, Civil Justice Association of California has been urging members of Congress to support the bill.
Biomaterial Makers Get Lawsuit Protection
Congress has passed legislation giving increased immunity to suppliers of components of implanted medical devices. In findings prefacing the “Biomaterials Access Assurance Act of 1998” (H.R. 872), it is noted that raw material and parts suppliers have been subject to design and warning lawsuits even though they have not been involved in designing or testing a final medical product. These suits have caused suppliers—both foreign and domestic—to cease supplying raw materials, jeopardizing the health of millions of Americans who depend upon the availability of implanted life-saving devices.
It was reported that the Association of Trial Lawyers of America did not work against the legislation.
IN SACRAMENTO
First Step on Y2K Liability
Governor Wilson has signed a bill (SB 1173-Vasconcellos) that attempts to provide liability protection for the disclosure of Year 2000 “readiness” information. While only a limited response to the predicted Y2K litigation onslaught (Civil Justice Association of California was neutral on the bill), most accept it as a first-step in the process of addressing Year 2000 liability concerns.
In May trial lawyer opposition stopped an Civil Justice Association of California-sponsored bill (AB 1710-Firestone & Cunneen) to steer most Year 2000 date conversion legal disputes away from tort litigation. However, this bill's language became the basis for one of a number of Year 2000 proposals in Congress (see Around the Nation).
Governor Vetoes Pro-Lawsuit Health Bills
Three bills which would have expanded health plan liability and unnecessarily raised costs met with a Governor's veto. One (AB 332-Figueroa) defined medical necessity decisions as the practice of a healing arts profession, thus exposing medical directors, other plan employees, and plans themselves to malpractice liability. The Governor called the bill “a bald attempt to increase the number of lawsuits in the health care system.”
The other two vetoed bills (SB 324-Rosenthal and SB 557-Leslie) would have applied new criminal and civil penalties to health plan employees who make medical necessity or appropriateness decisions without a medical certificate. The Governor said the bills would “allow trial lawyers to prey upon innocent consumers and decent health care professionals.”
Trial Bar Squelches Fair Liability Bill
After being allowed to proceed to the Assembly in skeleton form, a bill (SB 1536-Brulte) to extend Proposition 51's proportionate liability concept to economic loss cases failed in the Assembly Judiciary Committee on a 5-8 vote. A spirited attempt by Assemblyman Bill Morrow to withdraw the bill from committee in the waning hours of the session was defeated by a vote of the full Assembly.
Attacks on Arbitration Fail in the End
Senator Bill Lockyer's four year battle to undermine binding arbitration ended with arbitration intact when the author amended his bill (SB 19) to remove language to subject awards to broad appeal rights. Civil Justice Association of California's early work against the measure, backed-up by a clear signal from the Governor's Office that the appeal language would be vetoed, convinced the author to reduce the bill to a simple extension of an existing mediation program.
Assembly Speaker Antonio Villaraigosa failed to heed a similar message when he muscled his bill (AB 574) prohibiting arbitration clauses in employment agreements to the Governor's desk, only to see it vetoed with a message calling it “bad precedent, bad law, and bad policy.”
Age Discrimination Bills Die
Governor Wilson vetoed two measures (SB 1098-Kopp and AB 1643-Escutia) seeking to prohibit cost-cutting layoffs if they affect employees 40 or older. A third bill (SB 2192-Vasconcellos) escaped veto only because its author held it in the Legislature in the session's waning hours.
The three were introduced in reaction to an appellate court decision (Marks v. Loral) which held that layoffs forced by economic considerations were not by themselves age discrimination. The Governor said in his veto message that in a “competitive market-based economy like California's, employment decisions which consider salary appear not only reasonable, but essential.”
Limboland
The lights went out on the 1997–98 legislative session with the State Bar in the same confused status it found itself in nearly a year earlier when Governor Pete Wilson vetoed its dues bill. The Governor and Legislature came close to concluding a Bar reorganization and dues agreement, but division among the Bar's board of governors played a significant role in the Legislature's lack of enthusiasm for nailing down a definitive structure for a “new” state bar. Final-hour proposals included language Civil Justice Association of California wanted in order to strictly limit the Bar's political lobbying.
Obituaries were forthcoming, including a lengthy historical chronology in the California Lawyer magazine that recalled how in 1997: “Against its lobbyist's advice, the board endorses legislation to revise the Medical Injury Compensation Reform (MICRA). The bill would increase pain and suffering damages in medical malpractice cases but has a long list of opponents and little hope of passage. Sacramento conservatives, who had warned the bar away from MICRA reform, are infuriated at being ignored.” The article quotes a former Bar president: “The lobbyist contract [a $900,000, two-year deal which included an illegal contingency provision] and the MICRA position were significant mistakes.... the board waded into tort reform, which historically the bar had stayed out of because its members were so sharply split. These were two serious self-inflicted wounds.”
The Bar in early October formally petitioned the state Supreme Court to order attorneys to pay $171 a year to run the attorney discipline system, and at the same time the Governor wrote the Court to ask that it not order the dues increase but take over the discipline system itself. Chief Justice Ron George had earlier offered to mediate the dispute.
IN THE COURTS
Legislature Should Fix UCL Abuses
In a 6-1 decision allowing the Unfair Competition Law (Business & Professions Code Sec. 17200) to be used against title insurers for refusing to insure property bought at a tax sale, the California Supreme Court in an opinion by Justice Marvin Baxter said the “court is not unmindful of the abuses to which the UCL is subject. Many of those concerns are matters that should be addressed to the Legislature, not the judiciary, however.”
The ruling reversed a lower court in a case (Quelimaine Company v. Stewart Title Guarantee Co.) where the defendants contended that only the Insurance Code governed the situation.
Justice Janice Brown, writing in dissent, said “It is a truism that UCL litigation over industry-wide economic practices hampers rather than advances effective regulation” and that the Department of Insurance was “likely to prove better at the job” of resolving “a myriad of complicated fact and policy issues tied to the economics, risks, costs and availability of title insurance” than a single Superior Court judge hearing a single UCL case.
“Orderly legal development is not advanced by placing this court's imprimatur on yet another unfair competition claim of dubious pedigree,” she wrote.
Major Construction Case to Supreme Court
The California Supreme Court will hear an appeal in an important case (Aas v. Superior Court) which could help reduce the litigation that is dampening multi-family residence construction in the state. When the case earlier reached the Fourth District Court of Appeal, appellate justices invited Civil Justice Association of California to file an amicus brief as a result of the Association's prior work in a related case (Zamora v. Shell Oil Co). In Aas, Civil Justice Association of California argued—and the appellate court agreed—that plaintiffs in construction defect actions could not recover where there was no damage or injury. The plaintiffs claimed a loss in value due to construction defects, but the court also ruled against these “stigma damages.”
Texas Jury Finds `Lawsuit Abuse'
In the first Norplant contraceptive case to reach a jury, the plaintiff was sent away by Texas jurors who told reporters afterward that the case was an example of “lawsuit abuse.” The plaintiff said she had suffered side effects from the implant for two years, yet never sought medical help during that period.
Norplant maker Wyeth-Ayerst Laboratories reported that it is defending 3,700 suits over the capsules and that it has won 14 cases in summary judgments.
VERBATIM
Bart Takes a Stand
“I will not file frivolous lawsuits.”—Bart Simpson, writing on the classroom blackboard at the beginning of “The Simpsons” September 20 season premiere television show.
Cooperstown of Torts
“For some reason, a lot of people are making fun of Ralph's [Nader] idea [for a museum of American Tort Law]. But why? The litigation explosion has been a boon to us all, particularly those who happen to be trial lawyers. It's useful to recall that the baseball hall of fame was not built until baseball clearly emerged as the dominant national pastime. Now that litigation has achieved similar status in our time, a similar museum should follow.” — John Leo in U.S. News & World Report, August 17-24, 1998.
Frustrating Innovation
“An approach to product liability that holds that when something bad happens to you, the product is assumed to have caused that adverse affect whether or not scientific data support such an assumption, is one that necessarily frustrates innovative product development.” —family physician Katherine Dowling writing in a Los Angeles Times opinion article.
Mass Tort Fountainhead
“A mass tort occurs when the plaintiffs bar decides to invest in it.” —anonymous attorney at fen-phen seminar, quoted in California Lawyer magazine article on diet drug litigation.
Litigation Growth Industry
“Sadly, litigation is a growth industry in this country. And, it is a negative one. Instead of contributing to the expansion of the economy, it retards it. Instead of producing revenue, litigation only redistributes it. And it rewards without demanding anything, whether it be labor or capital, in return. It contributes to everything from additional costs of manufacturing that put American industry at a disadvantage in the international marketplace to increased medical expenses.” —Richard E. Mulroy Jr., Senior Vice President & General Counsel, Mutual Life Insurance, in an American Corporate Counsel Association opinion article.
Arbitration is Good Business
“A reputable vendor or service provider does not regard itself as being in the litigation business, yet any high-volume enterprise will generate some consumer dissatisfaction, and it will be good business to provide for quick, economical and fair resolution of disputes, as by arbitration.” —Winslow Christian, retired California Court of Appeal justice, in California Law Business.
TRIAL LAWYER WATCH
33% x $1 Trillion = $333 Billion Attorney Fees
The L.A. Times long September 8 article “Year 2000 Bug Likely to Infest Courtrooms” ended with a revealing statement by California trial lawyer association president Rick Simons: “ . . . the problem should be allowed to sort itself out through traditional means—even if costs reach the grisly level of $1 trillion.
“`The more damage they cause the more the need for them to bear some responsibility. It's their fire. It's their responsibility to put it out.'”
Civil War Revival
Appropriately timed with the re-release of Gone with the Wind, trial lawyers around the country are reviving the Civil War's False Claims Act as another new fee-generating device. The act was passed to fight fraud by contractors supplying the Union Army and was amended in 1986 to apply to modern defense contractors. But attorneys are now attempting to extend the law to other kinds of firms doing “business” with the federal government—such as health care providers.
The Act lets private attorneys bring fraud suits and collect a share of damages.
Civil Justice Association of California BOARD MEMBERS
Roland G. Rapp has been elected to the Civil Justice Association of California Board of Directors. He is a partner in the Pleasanton law firm Rapp, Kiepen and Harman, where he specializes in health care law and business, tax, and labor matters.
Rapp is newly-elected president of the California Association of Health Facilities and since the mid-1980s has held a number of board and committee leadership positions with the association. He has been operations director for a group of nursing homes in Northern California and guided the opening and licensing of a residential care facility.
He has published articles and conducted seminars on civil litigation and nursing homes.
Rapp is a graduate of California Polytechnic State University at San Luis Obispo and holds a juris doctorate and masters of law degree in taxation from Golden Gate University in San Francisco.
Mark Webb has been elected to the Civil Justice Association of California Board of Directors, succeeding Wayne Wilson who has taken a position with Farmers Insurance and remains on the Civil Justice Association of California board.
Webb is Vice President for State Affairs for the American Insurance Association (AIA) and is based in Sacramento. He served as Counsel and Senior Counsel with AIA from 1988 through 1994, when he departed to spend three years with the firm of Richard Robinson and Associations. There he worked on a wide range of insurance issues and supported the firm's tort reform activities.
He has been Vice President at AIA since June of this year.
Webb practiced law in Tucson, Arizona, and served as Deputy Director of the Arizona Department of Insurance.
He received a B.A. in political science and law degree from the University of Arizona.
