There are many
threats to business in our current civil justice system, but
three stand at or near the top: “litigation tourism” to what the
American
Tort Reform Association (ATRA) has called “Judicial
Hellholes,” the state attorney general/contingency fee lawyer
alliance, and abuse of consumer protection laws. This article
discusses these three threats, and what ATRA is doing to address
each of them.
While this article
focuses primarily on tort reform activities, ATRA also
understands to need for the public to know the truth about
lawsuit abuse. Publicity is an important weapon in improving our
civil justice system. Well-honed and well-financed personal
injury lawyers use it all the time by disparaging businesses and
hyping their role as “saviors” of the ordinary citizen. The
societal harms that can arise from over-expanded, over-heated
liability also needs a spotlight. The public must understand and
appreciate that all lawsuits are not good lawsuits, and that an
out-of-control legal system adversely affects their very way of
life.
Litigation
Tourism to Judicial Hellholes
“Litigation
tourism” occurs when a plaintiff brings a claim in a
jurisdiction as a pure “tourist”; he does not live there, he
does not work there, he was not hurt there. The only purpose of
his travel, guided by a skilled personal injury lawyer, is to
reach what ATRA has trademarked as a “Judicial Hellhole.” A
“Judicial Hellhole,” such as Madison County, Illinois, is a
place where judges tend to favor plaintiffs and disfavor
defendants. As reflected in the
Judicial Hellhole report,
the basic concept of “Equal Justice Under Law” is not followed
in these jurisdictions. Even the famous and effective personal
injury lawyer Richard “Dickie” Scruggs has acknowledged the
spirit of these places. Mr. Scruggs does not refer to them as
“judicial hellholes” but as “magic jurisdictions.”
“What I call the
‘magic jurisdiction,’ . . . [is] where the judiciary is elected
with verdict money. The trial lawyers have established
relationships with the judges that are elected; they’re State
Court judges; they’re popul[ists]. They’ve got large populations
of voters who are in on the deal, they’re getting their [piece]
in many cases. And so, it’s a political force in their
jurisdiction, and it’s almost impossible to get a fair trial if
you’re a defendant in some of these places. The plaintiff lawyer
walks in there and writes the number on the blackboard, and the
first juror meets the last one coming out the door with that
amount of money…. These cases are not won in the courtroom.
They’re won on the back roads long before the case goes to
trial. Any lawyer fresh out of law school can walk in there and
win the case, so it doesn’t matter what the evidence or law is.”
It is difficult to
embellish upon such a graphic description of what ATRA calls a
Judicial Hellhole. It is evident why such places are a magnet
for judicial tourism.
ATRA’s Solution
1. When You
Focus the Light, They Will Feel the Heat – The Judicial
Hellholes Report.
As indicated
above, the civil justice reform battle is not solely the
province of legislatures. It is also fought in the media and the
arena of public opinion. Recognizing that fact, ATRA has
produced a series of Judicial Hellholes reports, which
specifically name the worst places in America for defendants to
be sued. The public light shed by this report has produced good
results. The most recent (third) Judicial Hellholes Report also
contains pages of praise for areas of the country that have
substantially improved their legal climate, for example,
Mississippi. The report makes clear that ATRA does not seek a
climate that favors defendants, simply fair and balanced courts.
2. Venue
Reform. Publicity alone cannot stop “litigation
tourism.” The power of law is needed. That power can be
exercised at the state or federal level.
a. State Action. State action can work to stop
litigation tourism through state venue reform. This has occurred
in Texas, Mississippi and, most recently, in South Carolina.
State venue reform can help determine and regulate where cases
can be brought. It is not in a state’s interest to have its
courts swamped with claims from people who do not live within
the jurisdiction; those people pay no taxes to the jurisdiction
and they can clog the courts so that local residents have to
wait months or even years to have their cases heard. It is most
welcome that states hosting Judicial Hellholes are starting to
recognize this fact and are enacting laws that place reasonable
restrictions on where cases can be brought.
b. The Lawsuit Abuse Reduction Act. Unfortunately,
state action alone will not stop litigation tourism. When one
state enacts venue reform, another state may open its doors to
out-of-state claims. This is precisely what occurred when the
State of Texas enacted venue reform. Shortly afterwards, the
President of the Oklahoma Senate at the time indicated that
Oklahoma’s court house doors were open to cases from
out-of-state.
The
Lawsuit
Abuse Reduction Act (“LARA”), H.R. 420, appreciates
that litigation tourism is a problem of interstate commerce.
LARA places reasonable limits on where a person can bring a
claim. They could bring claims where they live, where they were
injured or the defendant’s principal place of business.
When LARA was
first introduced to the House of Representatives near the close
of the 108th Congress, it quickly passed by a vote of 229-174.
Experienced and senior House Judiciary Committee Member Lamar
Smith has now reintroduced LARA in the 109th Congress. It has
already received the strong support of the National Federation
of Independent Business, the National Restaurant Association,
the National Association of Wholesaler-Distributors, the
National Association of Manufacturers, the U.S. Chamber of
Commerce’s Institute of Legal Reform, and ATRA.
The Class Action
Fairness Act (“CAFA”) passed both Houses of Congress and was
signed into law by the President on February 18, 2005.
Seventy-two Senators said “no” to litigation tourism in class
actions. The same public policy applies to individuals. It also
should apply to all class action cases. In that regard, there
was an exception in CAFA for mass action cases below 100
litigants. Already, alert personal injury lawyers are
“packaging” their cases accordingly. These new litigation
tourist packages would be stopped by LARA.
Business Week has said that the LARA is one of the best ways to
fix the tort system. Business Week has also indicated that LARA
has great promise to become law.
Not only does LARA
stop litigation tourism, but it also puts an economic spike on
lawyers who bring baseless claims. It will make them pay the
costs that such claims that unfairly rain upon defendants,
especially small businesses. LARA’s weaponry against frivolous
and baseless claims is a principal reason why small business
regards this reform as a priority in the entire arena of civil
justice reform.
The State
Attorney General/Contingency Fee Trial Lawyer Alliance
State Attorneys
General are respected officials with important responsibilities.
They are on the forefront of assuring that wrongful practices,
such as racketeering and fraud, are stopped or prevented. On the
other hand, state attorneys general are not in business to
expand our liability system. That is not a state official
function. Expansion or contraction of the tort system is left to
private litigants – personal injury lawyers, defense lawyers and
judges who must resolve cases.
In the early
1990s, a dramatic change occurred when state attorneys general
entered the liability tort system and signed contingency fee
contracts with plaintiffs lawyers in tobacco cases. While the
end result produced a settlement in the hundreds of billions of
dollars, fundamental rules of law were changed that could, in
the long run, have adverse effects on public policy.
State attorneys
general take their oath and obligation to the state and the
public. They swear allegiance to both the federal and state
constitutions. On the other hand, wealthy personal injury
lawyers are in business, and their purpose is to expand tort law
as much as possible and generate for their clients as much
income as possible, because they profit as their clients profit
through the contingency fee system. The state attorneys general
and private contingency lawyers serve different masters. One,
the state, the other Mammon.
The attorney
general/contingency fee lawyer alliance is riddled with examples
where the public was not served – fraud and abuse occurred in
Texas; inappropriate conduct and abuse prevailed in other
states. Even without clear abuses, the alliance creates an
inappropriate engine to overwhelm defendants, force settlements,
and engage in regulation through litigation. Regulation through
litigation uses the tort system to change behavior, as
contrasted with its legitimate function of compensating
individuals who have been injured by a defendant’s wrongful
conduct. Regulation through litigation changes, including
whether a manufacturer of guns should place safety locks on
their equipment, are often precisely those that have been
rejected by elected officials.
ATRA’s Solution
1.
Publicity. ATRA is considering developing an objective
state attorney general scorecard – that focuses on their role in
our society. The project is in its earliest stages. ATRA wants
to be absolutely fair and objective regarding conduct of public
officials. All public officials – from the President to a county
clerk do need to have some objective oversight of their
activities.
2. The
American Legislative
Exchange Council’s (ALEC) model Private Attorney
Retention Sunshine Act. Many of the abuses that occurred when
state attorneys general hired contingency fee lawyers in cases
against the tobacco industry could have been cured if the hiring
process had been done in the open, with competitive bidding.
Unfortunately, with a closed-door system, state attorneys
general often hired personal friends and political fundraisers.
In one instance, the personal injury lawyer allowed the state
attorney general to run her political campaign out of the
lawyer’s offices.
Not long after
these scandals arose, ALEC developed the model Private Attorney
Retention Sunshine Act. It is now law in Texas, North Dakota,
Colorado, Kansas and Virginia. This act would require state
attorneys general and other state officials to hire contingency
fee lawyers in the open with competitive bidding. The Act also
provides for legislative oversight of the hiring process.
3. Briefs
and learned articles. ATRA believes that there is a need
for both amicus briefs and learned articles that challenge state
attorneys generals’ power to delegate public responsibility to a
biased private interest. In some instances, state attorneys
general have not merely delegated responsibilities to
contingency fee lawyers, they have abdicated their role as state
attorneys general. There are serious questions under state
constitutions whether this is lawful. If a state official hires
a contingency fee lawyer, the contingency fee lawyer’s role
needs to be supervised and monitored in a way that will be in
the public’s interest, not the private interest of an outside
counsel.
Abuse of State
Consumer Protection Laws
There is no doubt
that America needs the Federal Trade Commission (FTC). The FTC
exists to protect the public against potential abuse and fraud
through advertising and other means. Several decades ago, FTC
officials indicated that they could not handle or address all
the fraud in America, and asked for help from the states. For
that reason, so-called “baby” or state FTC regulatory bodies
were established. This was all in the public good. Then, a quirk
occurred in some states. Laws that were used to establish and
set charters for state regulatory trade commissions included or
added a private cause of action. Unfortunately, in some
instances, state legislators were not attentive to the
differences between the law meant to protect the public at large
and a law meant to provide a private remedy to an individual.
A law intended to
protect the public at large should not require actual damages.
If a company sells yogurt on television stating that it is
non-fat, and it actually contains substantial fat content, that
action is against the public interest. There is no need to show
that any harm occurred. It is in the public interest to stop
that activity before harm occurs. On the other hand, if a person
is to be awarded monetary damages because of an advertisement of
this type, that the person should show that he or she suffered
an actual harm.
The problem with
some state consumer protection laws, either as construed by
courts or according to their Black Letter, is that the
fundamental requirements of private causes of action are absent.
In one Massachusetts case, the court held in a 4-3 decision that
a person could have a right to sue and obtain monetary damages
even if he or she suffered no damage, never relied on any false
advertising, and could show no clear causal relationship between
the alleged wrongful act and the individual’s harm. The court
would allow a claim even if the person still used the product.
ATRA’s Solution
1. Learned
Articles. Learned articles are needed to help judges
distinguish between laws meant to protect the public and laws
intended for private causes of action. In that regard, state
consumer protection laws often have ambiguities. The Aspinall
case was a 4-3 decision. Four of the judges did not appreciate
the difference between public and private laws, but three judges
did so and construed the state’s consumer protection act in a
way that it is both rational and reasonable. The “cure” for
abuse of state consumer protection acts can often come through
judges themselves.
2. Public
Referendum. Sometimes, the consumer protection laws are
absolutely clear that fundamentals of a private cause of action
are not required. That was true in the case of California Unfair
Competition Law. Business groups that suffered under this law,
often with crushing, unfair lawsuits, sought a constitutional
amendment that would require the restoration of the basics of a
private cause of action. There had to be an actual injured
plaintiff. There had to be a causal relationship between the
defendant’s conduct and an individual’s harm. Placed in intense
media light, and a very vigorous public relations campaign, more
than 59% of the voters of California supported the removal of
abuses from the state consumer protection laws. The State’s
Governor, Arnold Schwarzenegger, strongly supported this reform
and helped ensure its passage. The California situation shows
that when the public understands abuse of state consumer laws,
they will support reform and not believe that anything labeled
“consumer protection” is necessarily good for the public.
3. State
Legislative Reform. ALEC is focusing on developing model
legislation to cure abuses of state consumer protection laws.
The model act is still under consideration, but it will focus on
restoring fundamentals of a private cause of action in a
Consumer Protection Act case. One should have an injured
plaintiff; he or she should prove justifiable reliance; prove
causation; and actual damages.
Personal injury
lawyers will fight these changes and probably solicit help from
their friends in consumer groups. Nevertheless, return of
consumer protection laws are in the public interest. Consumer
protection laws should not be used to stop legitimate and fair
business in America.
Conclusion
The battles over
civil justice reform are likely to increase in the next five
years. New leadership at the Association of Trial Lawyers of
America is intelligent, focused and very aware of how public
relations battles can be won or lost. Those who support civil
justice reform should join with ATRA, ALEC and the newly formed
American Justice Partnership, in stopping abuses and assuring
that our justice system is fair and balanced for all.
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