Op/Ed: Damage Caps Benefit Big Business, Not the Little Guy

California’s The Daily Journal
Friday, October 1, 2004

As Congress reconvened this month to deal with pressing matters like Iraq and terrorism, a few determined House members devoted an entire day of their rapidly ending legislative session to attacking injured victims and the lawyers who represent them.
Passing three bills that take away victims' rights to sue, lawmakers said: "Frivolous lawsuits bankrupt individuals, ruin reputations, drive up insurance premiums, increase health care costs, and put a drag on the economy." Perhaps they cause global warming, too?
These bills have no chance of passing the Senate this year. But that apparently did not matter to the members of Congress who brought them up. It's an intensely political season, after all, and these congressmen seemed perfectly content to just talk about the issue.
Indeed, hardly a day goes by anymore without some conservative political figure making reference to "junk lawsuits" and the need for so-called "tort reform" in speeches, at political fundraisers, and on the floor of the U.S. House of Representatives.
The current wave of tort reform coincides perfectly with the recent rash of corporate scandals, at least from the perspective of big business. Tort reform makes it difficult for defrauded investors and pensioners to recover from companies like Enron that squander their life savings (or from insurance, tobacco and chemical companies that show a repeated disregard for the citizens they sometimes injure). The proximity to the election is no coincidence, either. One can easily see the correlation between big corporate contributions and legislative paybacks that benefit special business interests.
Most states have succumbed to special-interest pressure and passed some kind of tort reform legislation. Some states have capped damages, taking money out of the hands of families that need it, right back into the pockets of insurance companies.
Some have passed immunity for certain types of corporate misconduct, so that citizens lose any opportunity to hold a company responsible for causing harm. 
California has capped noneconomic jury awards in medical malpractice cases at $250,000, a law that has had devastating consequences for many severely injured people, according to a recent Rand study. Insurance rates have been controlled, but that's only because the state has some of the stiffest insurance regulation in the nation, Proposition 103, a fact the business community seems loath to acknowledge.  
To the contrary, the business community is now pushing Proposition 64 which, among other things, would limit the ability of anyone except the state attorney general and local prosecutors from bringing suit under the state's unfair-competition law. These laws protect Californians from pollution, invasions of privacy, and consumer fraud. As a result of cases brought under these laws, supermarkets had to stop altering the expiration date on old meat and reselling it; HMOs had to stop misrepresenting their services to patients; and bottled water companies had to stop selling water that hadn't been tested for dangerous levels of harmful chemicals and bacteria.
Proponents say Proposition 64 protects small businesses. But a look at who contributes to the Proposition 64 campaign tells the real story. Blue Cross of California, which has been accused in unfair-competition suits of discriminating against noncompany emergency room doctors and underpaying hospitals, has donated $250,000.
Bank of America, found by a jury to have misrepresented to customers that it had the right to take Social Security and disability funds from their accounts to pay overdraft charges and other fees, donated $100,000. State Farm, accused by a group of victims of the 1994 Northridge earthquake of reducing their quake coverage without adequate notice and was reportedly forced to pay $100 million to policyholders, donated $100,000. Chemical companies, oil companies, and credit card companies have also supported the bill.
But the effort by big business to protect itself from legal accountability doesn't stop at the state level. The so-called Class Action Fairness Act (S2062) came close to becoming federal law last year, failing by a Senate vote of 44-43. This legislation would have forced most class actions into federal court even if they were based solely on a violation of state law and even if every class member was from the state, as long as any "primary defendant" was not incorporated or didn't have its principal place of business there. No matter how much business - or damage - an interstate corporate defendant did in a state, it could be protected from the reach of state law.   
Adding insult to injury, the transferred cases would likely have been denied class certification in federal court because multiple state laws would apply - the very reason they were transferred to begin with - leaving injured consumers with no recourse.
The bills taken up by the U.S. House of Representatives are equally anti-consumer. One was the Lawsuit Abuse Reduction Act of 2004 (HR4571), sponsored by a Republican congressman from Texas, Lamar Smith, and dubbed by some as back-door tort reform.
This bill would directly amend Civil Rule 11 by removing a court's discretion to impose sanctions on a frivolous filing and making sanctions mandatory. It also eliminates the "safe-harbor" provision allowing lawyers 21 days to withdraw a suit after a sanctions motion is filed.
The bill revives the mandatory sanctions in effect from 1983 until 1993, during which time resourceful attorneys abused the rule, causing widespread wasteful satellite litigation. Rule 11 motions were met with counter motions seeking sanctions for making the original motion. The 1993 amendments to Rule 11 alleviated those problems by making sanctions discretionary and establishing a safe harbor. Since 1993, the number of frivolous filings has not noticeably increased.
But HR4571 goes even further and extends the mandatory sanctions to all state court actions deemed, on motion, to affect interstate commerce. If this intrusion on state courts' freedom to adopt their own rules of practice seems inconsistent with the agenda of its sponsors to protect states' rights, it is. The bill also makes state judges determine if the case involves interstate commerce, requiring potentially lengthy and costly hearings.
The other three bills the House recently considered also take away citizens' rights under the guise of protecting them. The Good Samaritan Volunteer Firefighter Assistance Act, which also passed the House, immunizes donators of unsafe fire equipment to volunteer fire departments, stripping firefighters of the right to redress when they are injured by faulty equipment.
The Volunteer Pilot Organization Protection Act, also passed, immunizes pilots (and their companies/employees) who fly people for medical treatment. The effect: victims of an air disaster caused by negligence - and surviving families - would be without means of redress.
The Nonprofit Athletic Organization Protection Act, which fortunately did not pass the House, would have immunized nonprofit athletic organizations while, in effect, preventing parents from suing when their children are hurt by an organization's negligence.
Tort reformers thrive on mythology. They claim there is an "epidemic" of frivolous lawsuits, which, according to rigorous studies, is simply not true. They ignore the repeated lessons of history that lawsuits against reckless companies result in significant safety improvements, such as flame retardant children's pajamas and the removal of harmful medical devices from the market.
Aside from the obvious public health interest, this saves countless dollars in terms of injuries that are prevented, health care costs not expended, wages not lost, litigation costs avoided.
Today, insurance industry profits are booming, lawsuit filings are declining, only two percent of injured people sue for compensation, punitive damages are rarely awarded, liability insurance costs for business are minuscule, medical malpractice insurance and claims are both less than 1 percent of all health care costs in America, and the premium-gouging underwriting practices of the insurance industry have been widely exposed.
The system is not broken, but tort reformers' attempts to fix it will most assuredly break it. Their motivation is, at worst, greed, and, at best, misinformation. Either way, tort reform seeks to take the "civil" out of "justice," and must be seen for what it is - another attempt to shield big pockets from accountability.
Laurie Beacham is the communications director for the Center for Justice and Democracy in New York. 

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