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Capitol Comment

    Capitol Comment 232 - Alabama's First Steps Toward Common Sense Legal Reform

    05/20/1999

    The Alabama Senate began the difficult task of enacting fair and reasonable reform of Alabama’s costly system of civil justice. Specifically, the Senate passed legislation that begins to reform where a plaintiff may bring a lawsuit, amends the rules governing class action lawsuits and puts limits on punitive damages. While these bills themselves will not completely fix our legal system, they do represent a step toward reforming Alabama’s out-of-control civil justice system.

    New reforms limit venue shopping. Venue abuse -- or "judge and jury shopping," as it is commonly called -- has been a consistent problem in Alabama in the recent past. In an effort to get their lawsuits into counties where juries are likely to give large awards, plaintiff trial lawyers have gone to great lengths to file cases in a handful of rural Alabama counties. Tactics include plaintiffs moving to a favorable county in order to file a lawsuit there; filing a lawsuit against a defendant in a county where it does business, even though the plaintiff does not live in that county and the injury did not occur in that county; and, filing a lawsuit on behalf of a number of plaintiffs, with only one or two from the favorable county and the vast majority of plaintiffs from other Alabama counties.

    SB 305, part of the recent package of bills passed in the Senate, attempts to end the practice of filing lawsuits in the most generous county by making the reasonable requirement that lawsuits are filed in the county that makes the most sense. Rather than allowing plaintiffs’ attorneys to shop for the most generous venue, the legislation limits venue to three locations:

    The county where the corporation’s primary place of business is located.
    The county where a substantial part of the omissions or events giving rise to the claim took place.
    The county where the plaintiff resided at the time of the occurrence, so long as the corporation does business in that county by an agent.

    For actions involving multiple plaintiffs, SB 305 requires that venue be proper for each plaintiff. Current law requires that venue be proper only for the named plaintiff. All of these reforms provide a common sense approach to determining where a lawsuit can be filed.

    Class action reforms add fairness to Alabama’s legal system. According to the Federal Judicial Conference’s Advisory Committee on Civil Rules, defendants are facing up to a 1,100 percent increase in class action lawsuits nationwide. Alabama is no exception to this alarming trend, and like the venue situation, the problem is most apparent in a handful of pro-plaintiff counties in the state. Moreover, these counties are part of a recent phenomenon grimly known as "drive-by certifications." This term refers to the problem of trial judges allowing a group of plaintiffs to move forward as a class without the defendant being heard on the issue, and often before the defendant has even received notice of the underlying lawsuit.

    SB 72, another bill in the Senate package, attempts to remedy Alabama’s own class action problem. To address "drive-by certifications," the bill codifies recent Alabama Supreme Court rulings that ensure a defendant has adequate time to investigate the allegations and answer the complaint prior to allowing a class to be certified. The bill also provides additional procedural protections, including:

    Mandating a conference between the parties to schedule discovery relevant to class certification of no less than ninety days.
    Permitting either party an appeal of the trial court’s class certification ruling. The class action itself is put on hold until the appeal is resolved.
    Allowing the party to revisit the issue of class certification if new grounds present themselves.

    Making sense out of punitive damages. The recent Alabama jury award of $581 million for a family who claimed they were overcharged by twelve hundred dollars for two satellite dishes is yet another example of why Alabama needs punitive damages reform. In Alabama, punitive damage awards are so out of proportion to our neighboring states they have gained the state a reputation for "jackpot justice." As a first step toward reining in runaway punitive damages, SB 137, does the following:

    Requires that defendants pay for only the punitive damages they have been found to have caused.
    Limits awards in physical injury cases to the greater of three times compensatory damages or $1,500,000. In non-physical injury cases, punitive damages are limited to the greater of three times compensatory damages or $500,000.
    An exception to the caps on non-physical injury cases is created for small business. For small businesses -- defined as having a net worth of less than $2,000,000 -- the cap is the greater of 10% of net worth or $50,000 (all businesses, regardless of size, are subject to the same cap on cases involving physical injury).

    Conclusion. Collectively, these reforms passed by the Senate represent a much-needed first step for Alabama, a state that has become notorious for its legal system. In the interest of consumers and Alabama’s economy, the House must take the next step and pass these bills so that the Governor may sign them into law. Once these reforms are signed into law, much work remains to ensure that Alabama’s courts are fair for everyone. The Alabama legislature needs to continue working on this issue so that fairness and personal responsibility are fully restored to Alabama’s courts.