“We must reform a legal system that has made the lawyer’s briefcase a weapon of terror that threatens to undermine California’s economy.” Gov. Pete Wilson.
Gov. Wilson’s strong words in his State of the State message took aim at the abusive lawsuits continuing to plague California businesses, consumers, and taxpayers.
The smoke of 1996 ballot initiative wars obscured temporarily the fact that California is slipping farther behind other major states in reforming a legal system that is both unfair and needlessly costly.
But the smoke is fast clearing. In December the California Business Roundtable released its seventh annual Business Climate Survey. And for the fourth year in a row, California’s business leaders and voters identified the state’s liability laws as “the issue most likely to hurt the states business climate.”
Over the past two years, we’ve seen 30 states enact solid civil justice reforms. Ohio and Pennsylvania joined the list as 1996 drew to a close. The California Legislature is becoming increasingly distinguished by its inaction.
Businesses are continuing to pay for the gridlock in higher insurance rates, unnecessary legal fees, and the lost time that goes into warding off frivolous lawsuits.
In November voters rejected by a huge margin trial lawyer initiatives to encourage speculative securities lawsuits against businesses and permanently lock in the high, often unconscionable, contingency fees that drive frivolous lawsuits.
At the same time, the voters approved by well over a two-to-one margin Proposition 213, which is designed to bring more personal responsibility into the auto liability arena. It was heavily opposed by trial lawyers.
These lawyers laid out their agenda for all to see. It was convincingly rejected, and a strong anti-frivolous lawsuit message was delivered to the Legislature.
Punitive damages, employment law, construction litigation, and “unfair competition” lawsuits by private attorneys all require Sacramento’s immediate attention.
Research funded by our Association last year revealed that nearly a third of all contract and tort cases involve demands for punitive damages. This data confirms that punitive damages are almost routinely used as a tool to leverage higher out-of-court settlements.
In Los Angeles County, punitive damages were demanded in an amazing 50 percent of all tort and contract suits against businesses.
Employment laws continue to plague businesses especially small business and reduce job and income levels. Jury Verdict Research reported that median jury awards in wrongful termination cases surged to an all-time high of $204,310 in 1995. The U.S. Department of Justice reported last year that the average punitive damage award in employment litigation is a staggering $2,875,000.
In California the situation is demonstrably worse. A study by the California Employment Law Council revealed California laws to be tilted far more against employers than in 14 other major states. Even the system for federal employees is more balanced.
A Charlton Research Company survey last year found that one in every five California businesses has restricted hiring because of employment lawsuits. Eleven percent reported that the state’s employment laws have actually caused a reduction in their number of employees.
Home builders continue to be victimized by speculative “construct defect” lawsuits. Studies are showing how these suits not only hold down the supply of affordable housing, but they reduce home values for people mired in excessive litigation.
Bi-partisan attempts to address these problems have been killed by the powerful trial lawyer lobby.
The state Unfair Competition Act will receive overdue scrutiny in the new legislative session. Indications are clear that a growing number of trial lawyers see this as a significant new area for speculative litigation, especially targeting retailers, consumer product manufacturers, insurers, and financial institutions.
The act was intended to protect both consumers and firms from unfair business practices. But it is being misused. Private lawyers advance lawsuits when no law has been broken and no one has been injured. In one case, Mattel is being sued by a lawyer claiming false advertising because a children’s baking oven took longer to produce cookies than advertising suggested!
These private lawsuits can be brought repeatedly, even when government has investigated, prosecuted, and resolved the problem.
Ironically, trial lawyers are aggressively attacking the one major new law enacted directly by a public fed up with the high costs of an unfair legal system Proposition 213. This proposition prohibits uninsured drivers from collecting non-economic damages (such as “emotional distress” and “pain and suffering”) after an auto accident.
Proposition 213 addresses the problem identified by the Rand Institute for Civil Justice when it calculated that phony and exaggerated medical claims in auto accidents are costing every insured driver in the state $200 to $250 a year in excessive premiums.
Efforts in the Legislature to solve this problem have been repeatedly blocked by trial lawyers. Now, we are confronted with the spectacle of trial lawyers, who now sometimes call themselves “consumer attorneys,” working directly against consumers who voted 77 percent in favor of tackling the problem via an initiative.
The harmful effects of what has become a litigation industry are being felt so broadly that a poll of attorney’s published by the California Lawyer magazine found half responding that frivolous and unfounded lawsuits are ruining the economy!
The pressure for change will not abate until some common sense improvements are finally enacted.
John H. Sullivan is president of the Association for California Tort Reform, a coalition of citizens, ta~cpayers, businesses, local governments, professionals, insurers, and medical organizations.