May 2009 Archives

Though California has so far escaped from the potentially corruptive influence of contingency-fee agreements between private lawyers and public prosecutors, other states have not been so fortunate.

The Wall Street Journal has published several editorials blasting the unseemly state practice of hiring outside lawyers to sue private companies on a contingency fee basis --and how the trial bar returns the favor with campaign donations to state office holders. The Journal revealed that Oklahoma's attorney general had entered into agreements with private firms to sue tobacco companies and later big-name poultry companies.

Oklahoma Governor Brad Henry just turned down a bill that would have shed light on these deals. According to the Journal, Oklahoma's Private Attorney Retention Sunshine Act would have required state agents to use open, competitive bidding for any legal work of more than $5,000. On contracts worth $500,000 or more the governor would have to sign off. It would also have required contingency lawyers to submit a list of hours and expenses, payment for which could not exceed a mere $1,000 an hour.

The paper also wrote about agreements in Pennsylvania (click here and here) and New Mexico.

California's attorneys general and district attorneys have headed off plaintiff lawyer solicitations and conflicts of interest by following the guidance of long-time Justice Stanley Mosk and a unanimous court in the 1985 decision Clancy v. Superior Court, CJAC President John H. Sullivan noted in a news release.

In an amicus brief, CJAC urged the California Supreme Court to preserve the case rule when it considers County of Santa Clara v. Superior Court. The case involves city attorneys and county counsels in a handful of jurisdictions hiring contingency fee lawyers to bring a public nuisance action against lead-based paint manufacturers.

In the CJAC brief, CJAC General Counsel Fred J. Hiestand quotes Mosk, whose 1985 decision spoke strongly of the need to protect the integrity of the judicial process. In it, Mosk proclaimed: "Not only is a government lawyer's neutrality essential to a fair outcome for the litigants in the case in which he is involved, it is essential to the proper function of the judicial process as a whole."

County of Santa Clara v. Superior Court - CJAC Amicus Brief.pdf

The 5th District Court of Appeal in an unpublished opinion unanimously upheld the constitutionality of the state's landmark Medical Injury Compensation Reform Act of 1975.

The case, James Van Buren v. Sian Evans, M.D. and Yosemite Surgery Associates, involved a $2.5 million noneconomic damages award to a plaintiff against a doctor and the doctor's assistant. A Superior Court judge lowered the award to $250,000 pursuant to MICRA.

The plaintiff argued that MICRA's $250,000 cap on recoverable noneconomic damages deprived him of his constitutional rights to a jury trial and to equal protection of the law.

In its amicus brief, CJAC General Counsel Fred J. Hiestand noted that MICRA's noneconomic damage ceiling fully complies with the U.S. and California constitutions. The brief also argued that MICRA is a piece of well-crafted legislation that has stabilized medical malpractice insurance costs, assured public access to physicians and hospitals, and secured a fair legal procedure for plaintiffs to adjudicate their claims.

In its ruling, the court wrote: "... appellant contends that the Legislature does not have [the authority to limit recoverable damages] -- only a jury does. This argument was made and rejected more than 20 years ago. ... We reject it again."

Van Buren v. Evans - Opinion.pdf

"With California voters' overwhelming May 19 rejection of the major ballot measures intended to help balance the state's budget, lawmakers more than ever should enact straightforward economic recovery solutions that will help fuel our economic engine and produce jobs and tax revenue," John H. Sullivan, president of the Civil Justice Association of California (CJAC), said in a news release distributed today.

Tangible legislation that will make California a more attractive place to do business is bound to result in more jobs sooner, he said. Several simple statutory changes in the civil justice area would help achieve this.

Although three of the proposed bills failed to move in the Legislature, and under normal rules would be dead for the session, these are not normal times, Sullivan said.

"National and even international media have been describing California as a broken state," Sullivan said. "There is no time better than now to show tangibly that California is shedding anti-jobs and business policies."

Big enough to derail a train. But too vague to keep a lawsuit on track. That's the story of the 400-page (not including exhibits), 1,000-paragraph (who counted them?) securities class action complaint dismissed by U.S. District Judge Marsha J. Pechman in the state of Washington.

In her May 15, mere 33-page opinion (posted on Michael J. Hassen's Class Action Defense Blog), Judge Pechman described the complaint as a "verbose and disordered pleading," and wrote that, "Remarkably, Plaintiffs make no effort to connect a particular statement made by any defendant with allegations as to why that statement was false or misleading." The opus, in her words, "never offers a cohesive presentation of the required elements for securities fraud."

The case is In re Washington Mutual, Inc. Securities, Derivative & ERISA Litig., ___ F.Supp.2d ___ (W.D. Wash. May 15, 2009) [Slip Opn., at 1-3, 5].

As a journalist, Michael Kinsley, former host of CNN's "Crossfire," said he has written about the damage done to the economy and the country by excessive litigation and lawsuits over medical care gone wrong.

As a sufferer of Parkinson's disease, Kinsley said he is a grateful customer of the pharmaceutical and medical device industries.

Kinsley drew on both experiences while testifying before a Congressional committee against a bill that would lead to lawsuits against manufacturers of lifesaving medical devices. The misnamed Medical Device Safety Act of 2009, H.R. 1346, would end pre-emption, the federal liability protection for FDA-approved medical devices, opening the gates wide for product liability suits in state courts.

"Differences in state law or just the randomness of juries produce dozens of different answers," he said, in written testimony. "The direct cost is horrendous: delivering a dollar to a victim costs far more than a dollar in expenses -- mostly lawyers' bills. The indirect cost is immeasurable. Lawsuits focus on the victim of some medical product. By their nature, they undervalue the benefit that same product has brought to other users, or even to the victim herself."

The Washington Times noted in an editorial, "This bill would kill innovation. If manufacturers know they will be subject not just to regulation by the FDA but to uncertain justice under 50 different state standards, the manufacturers are far less likely to bring that device to the market. All those other beneficiaries -- the Michael Kinsleys of the world -- would be harmed by a law undermining the FDA's authority. The Medical Device Safety Act favors litigious trial lawyers over sick patients. Its passage would amount to serious legislative malpractice."

The U.S. Chamber Institute for Legal Reform also has a video with excerpts of Kinsley's testimony.

A lawsuit against the maker of Teflon-coated cookware has been dropped after a U.S. District Court in Des Moines, Iowa, determined it did not deserve class-action status.

The lawsuit against DuPont Co. claimed the company's nonstick Teflon cookware coating could pose health risks to users, according to an Associated Press story in The Wall Street Journal. DuPont said no studies have ever shown Teflon could be toxic.

U.S. District Judge Ronald Longstaff signed a dismissal order on May 1. In December 2008, he denied class action status and ruled the cases were too unwieldy to figure out who should be members of the proposed classes.

The lawsuit -- which has been in the courts for four years -- included 22 cases from 15 states.

Congress is being pushed to pass the deceptively-named Arbitration Fairness Act of 2009, which would amend the Federal Arbitration Act to make pre-dispute, mandatory arbitration clauses in employment, consumer, and franchise agreements unenforceable.

If passed, it would have a profound effect on potentially millions of arbitration agreements that presently exist, attorney Eric B. Meyer wrote on The Legal Intelligencer Blog, the law journal's blog. Meyer, of Dilworth Paxson, litigates and provides counsel to employers on labor and employment issues affecting the workplace.

Lisa A. Rickard, president of the U.S. Chamber Institute for Legal Reform, said the legislation could nullify millions of existing contracts, causing widespread uncertainty of their recourse should a dispute arise. The legislation could also increase litigation and severely damage an alternative dispute resolution system that consumers and businesses have relied on for decades.

Recent studies have shown that consumers fare better in arbitration rulings than they did when their case was decided in a courtroom. The Civil Justice Association of California supports arbitration as a fair, speedy, and efficient method of resolving disputes.

A Stanford Law Review empirical study of arbitration in employment law concluded that from the employee's point of view, arbitration yields roughly the same result as litigation, but is much faster.

In another study of consumer arbitration cases, the upfront cost was found to be quite low, and the average time from filing to award was just under seven months.

On a side note: The federal legislation would not disturb the Supreme Court's recent decision in 14 Penn Plaza LLC v. Pyett; a collective bargaining agreement may continue to provide for the mandatory arbitration of certain federal claims.

Legislators passed up a chance to eliminate -- at no cost to taxpayers -- an unfair and costly irritant that has signaled an anti-business attitude for years.

Senate Bill 393, authored by Senator Tom Harman (R-Huntington Beach) and sponsored by CJAC, would bring California's judicial interest rules up to date and ensure that defendants during legal appeals are paying interest at a rate comparable to market rate. The bill failed passage in the Senate Judiciary Committee.

In a news release, CJAC commended Senators Tom Harman and Mimi Walters for supporting the bill.

Click here to watch CJAC's Kim Stone testify on the bill.

"It is inherently impossible for an outside, private retained counsel, compensated on the basis of a contingency fee contract, to uphold the principles of impartiality and neutrality that represent the office of the public prosecutor," Fred J. Hiestand, CJAC's general counsel, summarized in the amicus brief the association filed asking the California Supreme Court to preserve a case rule that for more than two decades has prevented the potentially corruptive influence of contingency-fee agreements between public prosecutors and private lawyers.

The case, County of Santa Clara v. Superior Court, involves city attorneys and county counsels in a handful of jurisdictions hiring contingency fee lawyers to bring a public nuisance action against lead-based paint manufacturers.

In the CJAC brief, Hiestand quotes long-time Justice Stanley Mosk, whose 1985 decision Clancy v. Superior Court spoke strongly of the need to protect the integrity of the judicial process. In it, Mosk proclaimed: "Not only is a government lawyer's neutrality essential to a fair outcome for the litigants in the case in which he is involved, it is essential to the proper function of the judicial process as a whole."

Fortunately for California, its attorneys general and district attorneys have headed off plaintiff lawyer solicitations and conflicts of interest by following the guidance of Justice Mosk and a unanimous court, CJAC President John H. Sullivan noted in a news release.

"We hope that California law continues to protect our state's prosecutors to set their priorities based on the public's interest and not have to contend with lawyers proposing litigation based on their own pursuit of contingency fees," Sullivan said.

What kind of label on a camouflaged, portable toilet seat could win the 12th annual "Wacky Warning Label" contest?

You can find out at contest founder Bob Dorigo Jones' site, where this year's winners were recently unveiled.

Jones and the Foundation for Fair Civil Justice have been using the competition to dramatize how runaway product litigation has driven companies to spend millions of dollars on common-sense warnings. And make us look like dummies to the rest of the world.

The CJAC entry missed this year's contest deadline. But we're getting into the 13th annual contest right away. Nobody's going to hold a candle to our entry!

Calling its tactics a "waste of the court's time," Los Angeles Superior Court Judge Aurelio Munoz criticized a plaintiff's law firm for playing the same "grisly game of asbestos litigation" in at least nine cases.

In the trial court opinion, Judge Munoz reluctantly denied defendant Crane Co.'s motion for summary judgment, but then blasted plaintiffs' firm Waters & Kraus for its tactics, Amanda Bronstad wrote in the National Law Journal. In Judge Munoz's own words:

• "This court does not have the authority to summarily prohibit the use of otherwise admissible testimony even if the court does not approve of the games, and they are games, that are being played."

• "The main theme seems to be settle or we'll run up the attorneys' fees so high that it is cheaper to settle. Rarely do the cases go to verdict. Instead what is accomplished is a waste of the court's time, the burning of numerous jurors because of the one day one trial rules and what seems to be a type of judicially sanctioned extortion."

• "In short this is the grisly game of asbestos litigation that occurs in the courts. The court is of the opinion that it cannot grant the relief requested, but perhaps an appellate court can."

Read the full opinion here.

Assembly Bill 470, authored by Roger Niello (R-Fair Oaks), passed the Assembly Insurance Committee on the consent calendar and will now go to the Assembly Floor.

The bill, which CJAC is sponsoring, eliminates delays in the timely processing and settlement of claims caused by existing law, which prevents an insurance company from disclosing a police report to anyone, even to a lawyer for an insured.

This simple bill would allow a work-around to expedite processing and settlement of claims.

Given the chronic underfunding of California's courts, our judges can certainly be excused for their vigorous attempts to get parties to settle prior to trial. A recent Court of Appeal case, however, explains the limits to such persuasion.

The setting: A Los Angeles County courtroom where two occupants of a vehicle that was struck from behind claimed injuries and medical expenses, including a medical exam of the pregnant passenger. The defendant driver of the second vehicle argued that the plaintiff's vehicle had stopped so suddenly that it was impossible to keep her from striking the car they occupied. Through her attorney, the defendant driver argued that the accident was so minor that it could not have caused any injury.

At a mandatory settlement conference attended by attorneys and a representative of the defendant's insurance company, the two plaintiffs demanded $15,000 each. The defendant offered $1,000 -- prompting a stern rebuke from a frustrated judge: "Counsel and the adjuster came to court today unprepared to discuss damages, unprepared to discuss costs of defense, unprepared to have an intelligent conversation about how they derive a thousand dollars in total to be paid to the plaintiffs. There is an auto claim as well for repair of the vehicle ... of which little or no discussion could be elicited from counsel. ... I have every intention of imposing monetary sanctions. I find there was bad faith conduct by counsel."

Contrary to his first instinct, the judge imposed $1,857.50 in sanctions not on the defendant's attorney, but on the insurance company. Though sympathetic to the judge, the Second District Court of Appeal in Vidrio v. Hernandez (Mercury Insurance Company) found he went too far.

"Even were we to agree with the trial court's assessment of the conduct of counsel and the adjuster, the failure to increase a settlement offer or to otherwise participate meaningfully in settlement negotiations violates no rule of court and is not a proper basis for an award of sanctions," the three-judge panel wrote. In concluding, the Court of Appeal noted that the defendant filed the appropriate paperwork, attended the conference, and participated in it. "While the trial court's frustration at the parties' lack of movement is understandable, no more was required."

Defendants appearing at mandatory settlement conferences no doubt often feel that the "mandatory" part of the hearing applies to the settlement, not just the attendance. The Vidrio case is a reminder that the constant pressure on judges notwithstanding, all parties are entitled to their day in court.

Gordon Ownby is general counsel of the Cooperative of American Physicians, Inc., www.cap-mpt.com, and can be reached at gownby@cap-mpt.com.

The buzz continues to expand over the remarkable revelations in Los Angeles of one of the most massive and methodically-corrupt client recruitment schemes ever uncovered.

The plaintiff lawyer-engineered scam was based on phony allegations that thousands of Nicaraguan banana workers were rendered sterile by pesticides used on Central American banana plantations.

Nicaraguan lawmakers got the ball rolling with a legislated assumption that anyone who worked on a banana farm got poisoned. Nicaraguan judges, lawyers, and heavy-handed client "recruiters" rolled the ball into perhaps 10,000 class action plaintiffs. Some California lawyers took over and pitched it into an L.A. courtroom.

Los Angeles Superior Court Judge Victoria Chaney upheld the integrity of the courts in unraveling this ball and exposing it. In her words: "... if you took all the bad cases I've read and put them together, they don't even come close to what's happened here."

News stories don't do this travesty justice. It had -- still has -- elements of physical danger to plaintiffs, defense lawyers, and investigators. It has a cast of Central American political and legal pirates. Most amazingly, it got a toe hold in our state in our courts!

But fortunately, Judge Chaney was there: "... although there has been a strong attempt to bring the seeds of the Nicaraguan corruption here to this country, it has not succeeded, and if I have anything to say about it, it will not succeed."

As Judge Chaney told a courtroom audience when she dismissed the case last week: "The actions of the attorneys in Nicaragua and of some of the attorneys in the United States, specifically the Law Offices of Juan Dominguez, have perverted this court's ability to deliver justice to those parties that come before it."

And she concluded by assuring that: "I will be making referrals that I believe are appropriate to either the state bar of this state, perhaps state bars of other states, and to prosecutorial agencies."

There is no substitute for reading this ruling. Here it is, 28 pages, large type, following this warm-up from the American Lawyer web site.

"Breathing Fire from the Bench, Judge Finds Plaintiffs' Lawyers Committed Fraud, Dismisses Tort Case Against Dole as Sanction
It's not that we're jaded, exactly, but it takes more than run-of-the-mill allegations of attorney misconduct to impress us. So when we say that a hearing that took place last Thursday in Los Angeles superior court addressed the most egregious plaintiffs lawyer extortion and fraud allegations we've seen this side of criminal indictment, we're not being hyperbolic. And if that description isn't enough to make you click on our link to the hearing transcript, consider this: Judge Victoria Chaney may also have set a record for the most extended metaphor that we've ever heard in a courtroom. We're talking fire-breathing chimeras, people."

Read, too, what aforementioned plaintiff attorney Juan J. Dominguez says -- admits -- on his web site about his role in the case: "Significantly, I am currently the lead attorney representing over 10,000 workers, in combination with several other law firms ... I oversee the legal work by all lawyers both here in the United States and in Central America. I also have monthly radio broadcasts providing status to the affected communities, public, and clients."

You will be amazed to read, in Judge Chaney's ruling, the message of some radio broadcasts.

Read more about Mr. Dominguez, whose web site bio tells us he is "one of the most widely known, recognized and respected personal injury attorneys in Southern California ... regularly interviewed by the news media for legal rights that he seeks to champion for thousands of seriously injured workers in Central America."

The Los Angeles Times on May 27, 2007, ran a long story on the plight of the banana workers and the heroics of Mr. Dominguez and his thunder speeches in Nicaragua. The article was titled: "Plantation workers look for justice in the North."

They found it, in a most sad manner. Those who led them on may now find justice, too.

Arbitration is a fair, cost effective, and efficient method of resolving disputes, Kim Stone, CJAC's Vice President - Legislation, told the Assembly Natural Resources Committee.

Ms. Stone testified in support of Assembly Bill 696, authored by Assembly Member Curt Hagman, which would have allowed an applicant and a lead agency to agree to resolve disputes arising from an environmental impact report through arbitration rather than through a lawsuit. Assembly Bill 696 failed to pass out of the committee.

Several studies have also showed the utility of arbitration. A Stanford Law Review empirical study of arbitration in employment law concluded that from the employee's point of view, arbitration yields roughly the same result as litigation, but is much faster.

Another study reviewed 301 cases of consumer arbitration cases, all performed by the American Arbitration Association (AAA), and found the upfront cost to be quite low -- $96 for claims seeking under $10,000 and $219 for claims seeking between $10,000 and $75,000. The study shows that "access to justice is provided in a relatively inexpensive and expeditious manner, and outcomes are not biased in favor of businesses that arbitrate on a repeat basis," said Geoff Lysaught, director of the Searle Civil Justice Institute.

The California Supreme Court has also supported the use of pre-dispute arbitration agreements to resolve complaints.

Click here to watch Ms. Stone's testimony.