By JOHN H. SULLIVAN
Last year cracked the mold. This year could break it that is, the rigid political mold that for years has prevented significant state civil justice reforms.
Last year, the scene changed dramatically when some newly elected moderate Democrats chose not to support trial lawyer-sponsored bills. This meant that despite Democratic control of the Assembly and Senate, trial lawyers could not get the votes to pass anti-business bills to make it easier to advance frivolous lawsuits, end-run the auto insurance reforms the voters enacted in 1996’s Proposition 213, and undercut medical malpractice laws that hold down health care costs.
Over the past decade, campaign contributions have given trial lawyers substantial political muscle. In the last elections they contributed more than $3 million in California legislative races. No single special interest in California approaches this magnitude of political investing. No surprise that trial lawyers testified against Proposition 208 in a court hearing last fall. And they must have been thrilled when a federal judge struck down the limits on Jan. 6.
On the other hand, voter-enacted term limits have been upheld in court and are likely to continue to loosen the legislative leadership’s reins.
What does all this have to do with tort reform? Everything. With legislators less controlled by legislative leadership, senators and assembly members are more free to take a balanced approach to civil justice issues. They need to. In a recent California Business Roundtable-California Chamber poll, 84 percent of business leaders and 65 percent of voters put liability-law reform in the “extremely important” category.
Employment lawsuits continue to be a source of fear and cost for California businesses. In 1998 we will once again see proposals to curb the full-pay-for-life awards which encourage litigation. Trial lawyers are trying to broaden their opportunities for lawsuits by supporting a bill to ban employee-employer agreements to arbitrate job disputes.
A reasonable punitive damages limit would go a long way toward discouraging predatory lawsuits. A 1977 Rand Institute for Civil Justice study found that “punitives” represent more than half of total damages in financial lawsuit jury verdicts. For contingency-fee lawyers, punitive damages are first and foremost a tool to leverage more income.
Increasing jury skepticism of personal injury lawsuits is a trend likely to continue into 1998. A national jury research firm reports that California plaintiffs prevail in 41 percent of all cases 7 percent lower than the national average. This trend and Proposition 213’s reduction of damage money for uninsured drivers are causing plaintiff lawyers to shift to employment litigation and suits involving financial losses.
The business community is seeking, for financial cases, the same kind of liability fairness that the voters approved in 1986 for personal injury cases. That is, make defendants pay for losses in fair proportion to their responsibility for causing them. Such a law will protect many businesses now considered deep-pocket targets for lawsuits, even though their percentage of fault is minuscule. This formula was included in the federal securities litigation reforms passed by Congress late in 1995.
Any preview of legal reform in 1998 must include the courts. The California Supreme Court will be hearing cases and making decisions in at least two liability areas of major importance to businesses of all sizes premises liability and the Unfair Competition Act. The court will be considering when a property owner should be liable for injury caused by criminals acting on or near the premises.
The court will also be deciding how far a private lawyer can go in suing a business for something the lawyer says is unfair, even though no one has produced evidence of injury. A bad outcome in either instance could produce many new cases for trial lawyers.
Cases like these emphasize the special importance of the 1998 governor’s race to the civil justice system. Judges, even more than legislators, are responsible for the fair, balanced operation of the legal system. In California, the governor picks our judges.
The California Bar can affect how business fares under the state’s legal system. With a large budget built from its state-mandated membership fees, the Bar has actively worked to influence the Legislature. Last fall, Governor Wilson acted courageously to counter increased politicization of the Bar by vetoing the attorney dues bill to fund the Bar in 1998. The money crunch this precipitated has brought key players to the table to redesign the Bar. For business, this is good news. It means a state Bar much more likely to be neutral on business issues and far less subject to political capture by special-interest lawyer groups.
John H. Sullivan is president of the Association for California Tort Reform based in Sacramento.