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Capitol Comment

    Capitol Comment 245 - Congress Needs to Pass Comprehensive Civil Justice Reform

    07/12/1999

    When the editorial pages of the conservative Wall Street Journal and the liberal Washington Post agree on an issue, both politicians and voters should take notice. Recently the Post described America’s legal system as a "kind of lottery in which clever trial lawyers and a few victims get very rich at the cost of society's confidence in the justice system." The Journal opined that recent verdicts have "corrod[ed] the public’s, and the world’s, belief that courtrooms are serious places."

    The legal system is becoming a place where people expect unpredictable and sometimes unfair jury awards, rather than justice.

    Both editorials bemoaned the recent $4.9 billion jury award against General Motors. In that case, a drunk driver, traveling at 70 miles per hour, smashed into a 1979 Chevy Malibu that was carrying six passengers. The car exploded and some of the passengers became trapped. At trial, the six passengers’ attorney claimed that GM knew the gas tank could explode and therefore should pay punitive damages. A Los Angeles jury awarded $107 million in actual damages and $4.9 billion in punitive damages. In the unlikely event that this $4.9 billion award survives an appeal, the trial lawyer representing the victims will probably receive anywhere from $1.6 to $2 billion.

    To put this $2 billion into perspective, consider the fact that this year the United States Drug Enforcement Agency has a budget of $1.2 billion, and the Federal Bureau of Prisons has a budget of $3.2 billion. The earnings of General Motors will probably be under $4 billion. Without taking into account interest or inflation, $2 billion will pay that lawyer a modest salary, say $650,000 per year, for the next 3,076 years.

    If GM is responsible for the terrible injuries suffered by the passengers, then surely they should pay. But verdicts and trial-lawyer windfalls of this size erode the credibility of our civil justice system, which already costs each consumer an extra $616 per year in higher taxes and insurance, according to the Public Policy Institute. Last year, lawsuits cost businesses and consumers $160 billion.

    Citizens of some states have told their legislators that the legal system is not working. Grassroots citizens in Florida and Alabama successfully pressured their state legislators into passing laws that would implement common sense solutions to the lawsuit problem. Some of the major reforms Florida signed into law this year include:

    Punitive Damages The law creates a two-tiered cap system. The first tier doubles the earlier $250,000 cap on punitive damages to $500,000. The second tier quadruples the cap to $2 million or four times compensatory damages, whichever is greater. The new law also provides no cap if the defendant intended the harm.
    Joint and Several Liability: Any defendant that shares more than 10 percent, but less than 25 percent, of the fault shall have joint and several liability for up to $200,000 in economic damages. Any defendant that is found to be at least 25 percent, but no more than 50 percent at fault, shall have joint and several liability for economic damages up to $500,000.
    State-of-the-Art Defense and Subsequent Remedial Measures: A jury now may consider whether the product manufacturer used state-of-the-art processes and materials when it designed the product.
    Immunity Against a Criminal Plaintiff: A person owning an interest in real property shall not be held liable for negligence that results in the death of, or injury or damage to, a person who is attempting to commit a felony on the property.
    Alabama (labeled "tort hell" by Time magazine) also passed a series of reforms:
    Punitive Damages: The law creates two types of punitive damages caps: for physical injury cases, the greater of 3 times compensatory damages or $1.5 million, and for non-physical injury cases, the greater of 3 times compensatory damages or $500,000.
    Class Actions: The law eliminates ex parte, or "drive by," certifications and enacts procedural reforms making class action certification more structured, ensuring that a defendant receives adequate time to answer the complaint, and investigate the allegations. The law permits an appeal of the trial court’s order on certification.
    Venue Reform: Prior Alabama law permitted plaintiffs’ lawyers to "forum shop" for sympathetic juries. The venue provision signed into law limits venue to: (1) the county in which a substantial part of the omissions or events giving rise to the claim took place; (2) the county where the corporation’s primary place of business in the state is located; (3) the county in which the plaintiff resided at the time of the occurrence so long as the corporation does business in that county by agent.
    It's time the United States Congress followed the leadership of Florida and Alabama and passed commonsense reforms to our civil justice system. However, the recent state tobacco settlements have left a group of trial lawyers with billions of dollars, and trial lawyer political giving may make reform unlikely. Fred Levin, one of the tobacco trial lawyers in Florida, has stated, "[w]hat can you do when someone drops so many millions in your lap? What this allows me to do, is give it away."

    Trial lawyers have given, and will continue to give, millions to politicians at the state and federal levels. According to Contributions Watch, a nonprofit organization, trial lawyers are funding politicians at an astonishing rate. For instance, in 1995 trial lawyer PAC and soft-money donations at the federal level exceeded $8 million. The tobacco companies gave $3.2 million, oil and gas companies gave $2.8 million, and the Big Three automakers gave $842,000.

    The Washington Post and The Wall Street Journal are both correct. The legal system is becoming a place where people expect unpredictable and sometimes unfair jury awards, rather than justice. The United States Congress and the Clinton-Gore administration need to heed the call of the American people and fix our civil justice system.