December 2009 Archives

With California mired in a financial crisis, some bloggers and opinion writers have compared California to other states, namely Texas.

And California is not coming out on top.

Trends Magazine pointed out the state was rated the worst to do business in, according to readers of Chief Executive magazine (which has rated California as the very worst state in which to do business for each of the past four years). Texas, which was listed the best place in which to place headquarters, boasts more Fortune 500 headquarters than any other state in the nation and an unemployment rate two percentage points below the national average.

And, as a piece in The Economist notes: "Texas also clearly offers a different model, based on small government. It has no state capital-gains or income tax, and a business-friendly and immigrant-tolerant attitude."

But also, Texas has focused on streamlining the regulatory and litigation burden on its residents, according to an article in NewGeography.com: "Texas has been aggressive in minimizing the enormous burden of frivolous lawsuits."

NewGeography.com writer Tory Gattis of Houston added a personal note to his post on the subject of frivolous lawsuits in California:

"I was just visiting my brother out in CA, and a friend of his with a small store was being hit with a large disability discrimination lawsuit for a minor oversight (handicapped parking was marked on the ground and had the requisite walkways and ramps, but lacked a pole sign). Evidently this has become a cottage industry in California, where lawyers guide the disabled through stores looking for very minor violations of a vague law (things like high shelves or tables), then sue (expecting a quick settlement, of course). Under CA law, discrimination guilt is assumed if there's anything in the store the disabled can't do that a normal customer can do, regardless of the availability of employees to provide assistance. His friend was clearly exasperated with the unwinnable situation. Just plain nuts."

We wrote recently on the CJAC Blog about a law passed last year aimed at increasing access while cutting down on extortionate lawsuits filed under the Americans with Disabilities Act. But Senate Bill 1608, which CJAC supported, has yet to impact the number of ADA lawsuits filed.

'Tis the season for overtime litigation, as new lawsuits pile up and two federal judges gave early holiday gifts to class action plaintiffs, the National Law Journal's Tresa Baldas reported.

Those gifts include one from a federal judge in Minnesota who last week denied a request by Qwest Communications International Inc. to decertify a class of more than 1,500 call center employees who allege that they have not been paid for time spent booting up and shutting down their computers.

The day before, a federal judge in Arkansas granted class certification to a group of former Butterball employees who allege that the poultry company didn't pay them for time spent donning and doffing protective equipment and clothing.

Also last week, security guards at Madison Square Garden filed a proposed class action in New York federal court, claiming that they have routinely and deliberately been shorted on overtime payments.

Read the full story here.

As major federal health legislation makes its way toward possible passage early next year, its sponsors seem little concerned with putting in something that Americans really want -- limits on medical liability awards.

In back-to-back national polls, respondents have stated their clear desire that something be done on the medical litigation front so that health care dollars can be spent where they can do the most good.

First, The Associated Press found strong public support for curbing medical malpractice lawsuits as a way to reduce costs.

The poll, conducted in conjunction with Stanford University and the Robert Wood Johnson Foundation, found that 59% of Americans believe that at least half of tests ordered by doctors are unnecessary and are prompted by fear of lawsuits. A similar number, 54%, favor making it harder to sue doctors and hospitals in disputes over medical care.

The AP poll could be used to support President Obama's ideas for state-level demonstration projects as a way to test alternative liability laws, but a second poll, conducted by Rasmussen Reports, shows that 57% of voters think that putting specific limits on amounts that can be recovered from health care providers is the way to go.

The Rasmussen results more closely follow the approach that California has taken for more than three decades with its Medical Injury Compensation Reform Act, which limits non-economic damages in medical liability awards to $250,000 but places no restrictions on compensation for out-of-pocket losses. The leading federal bills to revamp the nation's health care system do not contain measures to limit jury awards against health care providers.

Such curbs could lead to huge benefits in the amount available to treat Americans. The Congressional Budget Office estimates that limits on malpractice jury awards could reduce the federal deficit by $54 billion over 10 years because physicians would order fewer tests as a safeguard against lawsuits.

That would pay for a lot of health care.

***
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.

A San Francisco plaintiffs' lawyer faces a three-year suspension from practicing law after he reportedly "repeatedly badgered, berated, screamed, yelled and/or raised his tone at witnesses and the court, despite court warnings, admonitions and orders not to do this."

The Recorder's Mike McKee writes that a California State Bar Court judge has recommended the three-year suspension as well as five years' probation for Philip Kay, who specialized in litigating sexual harassment suits.

Judge Lucy Armendariz also found that Kay had entered into an illegal fee-splitting agreement with other lawyers in a sexual harassment suit that resulted in a $3.5 million judgment in the early 1990s.

"But somewhere during his overzealous advocacy, he lost it," Armendariz wrote in Tuesday's ruling. "Not the cases, but his integrity, professional decorum, credibility and respect of the court."

During his State Bar Court trial, Kay defiantly engaged in the same kind of behavior that got him into trouble in the first place. He often refused to answer questions, accused the judge of a "railroad job" and demanded to be held in contempt.

A Texas plaintiffs' lawyer whose office advertises "Call the firm that cares" is reported to have kicked off the holiday season by filing a lawsuit against a day center for homeless people in Houston.

The suit from personal injury lawyer Harry C. Arthur seeks a permanent injunction to shut down the operation on the grounds that it's a "private" nuisance, and has created a "health hazard" in the area, according to Texas Lawyer.

Arthur wants a minimum of $250,000 in damages from the shelter, The Beacon, and its operator, Christ Church Cathedral, to compensate him for the loss of rentals in his building and the loss of its market value.

Earlier this month, shelter officials promised to do everything they can to keep The Beacon open for those in need.

"People of Christ Church Cathedral have been on this corner for 170 years -- actually on this corner right across the street -- trying to take care of the poor and the needy and the homeless," Andy Vickery, attorney for The Beacon, told a local television station. "That's the Christian admonition, that's the mission of the cathedral and of The Beacon and we don't intend to be shut down."

An annual assessment of state judicial systems has listed California first on its "watch" list -- giving the state a chance to improve its civil justice system or risk falling "into the Hellholes abyss" in future reports.

The American Tort Reform Association's review focuses on meritless lawsuits and laws that tilt the playing field in favor of plaintiffs' lawyers. (The full report is available at www.atra.org.)

In a news release, John H. Sullivan, president of the Civil Justice Association of California, said: "With the state facing a projected $20 billion shortfall by mid-2011 and forecasters projecting a double-digit unemployment rate into 2012, now is the time for state legislators, who really drive the litigation climate, to enact changes that will allow courts to be more efficient, improve the civil justice system for all litigants, and attract and retain business investment in the state."

He said that state lawmakers will have a chance in the upcoming legislative session to make changes to put the state back on track to economic recovery. They could start by bringing balance to California's class action law. They could also enact a law to bring the state's judicial interest rate on appealed judgments up to date.

In an interview on Sacramento's KFBK -- AM 1530, Sullivan noted that, "You can't say it's the judges' fault, because the judges have to deal with the rules that are set down for them by the legislature and earlier cases."

Listed to the full interview here:

John Sullivan on KFBK - ATRA Judicial Hellholes report.mp3

Some lawmakers weren't satisfied with a report from the nonpartisan Congressional Budget Office in October that estimated savings of $54 billion over the next decade if new limits were imposed on medical malpractice lawsuits.

So they asked CBO officials to explain the figure -- and received a letter from CBO Director Douglas W. Elmendorf reaffirming the $54 billion in savings and an even larger impact from tort reform over the next 10 years.

The CBO previously estimated that tort reform would lower malpractice costs nationwide by about 6%. But now, CBO estimates a reduction in malpractice costs by 10%, if a package of tort reforms was implemented nationwide. Those reforms include a $250,000 cap on damages for pain and suffering, a $500,000 cap on punitive damages, and restricting the statute of limitations on malpractice claims, according to a Legal Newsline article. None of the reforms have been included in the House and Senate health care proposals.

"CBO's estimates of the likely effects of tort reform are based on research that links changes in malpractice costs to changes in health care spending, including not only the spending changes caused by providers' responses to changes in the medical liability environment but also the spending changes resulting from associated changes in health status," Elmendorf concluded in the letter to U.S. Sen. John D. Rockefeller IV.

"With all of those factors taken into account, the weight of evidence indicates that tort reform would reduce the utilization of health care services and, thereby, spending."

Consumers in debt collection cases prevailed more often in cases resolved in arbitration rather than in court, a recently released study has found.

A report by the Searle Civil Justice Institute (SCJI) at Northwestern University School of Law examined the outcomes of American Arbitration Association debt collection arbitrations and the outcomes of debt collection cases in court. The data came from cases in Oklahoma and Virginia state courts, and student loan cases in federal court.

It found:

• Creditors prevailed less often (that is, consumers prevailed more often) in the arbitrations studied than in court;

• Creditor recovery rates in the arbitrations studied were lower than, or comparable to, creditor recovery rates in court.

• The rate at which debt collection cases were disposed of other than by award or judgment (e.g., by dismissal, withdrawal, or settlement) did not appear to differ systematically between arbitration and litigation.

This is the second report on arbitration released by the Searle Civil Justice Institute this year. The Institute also released an empirical study of consumer arbitration which found 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," according to Geoff Lysaught, director of the Institute.

The Civil Justice Association of California supports arbitration as a fair, speedy, and efficient method of resolving disputes. Click here to listen to Kim Stone, CJAC's Vice President-Legislation, talk about arbitration. More background is available on our blog at www.cjac.org/blog/arbitration.

A law designed to reduce the number of abusive lawsuits under the federal Americans with Disabilities Act while also improving compliance with important access laws has yet to impact the number of ADA lawsuits filed, according to The Recorder legal newspaper's Cheryl Miller.

As Miller noted, attorneys on both sides of the issue say the number of lawsuits brought under state and federal disability access laws has not dropped.

However, one ADA defense specialist who helped draft the law, Senate Bill 1608, said it has cut the amount of damages plaintiffs are seeking, if not the number of claims they file.

"I have fewer clients coming to me saying, 'I'm going to go out of business, I'm going bankrupt, I'm going to have to dip into my home equity,'" said San Diego attorney David Warren Peters, the CEO and general counsel of Lawyers Against Lawsuit Abuse. Plaintiffs "can no longer make these very large demands. All things considered, that's a great improvement."

The law, which CJAC supported, created access specialists who can inspect businesses for access violations. Business owners can then display signs indicating their properties have been inspected, which allows them to ask a court for a 90-day stay of litigation if targeted for an access violation.

Also, statutory damages are now tied to the number of times a plaintiff was denied access, not to the number of violations found on the site.

One problem with SB 1608, Miller wrote, is that many ADA lawsuits are brought in federal court, where the reach of the law is unclear.

"It's a heyday [for plaintiffs] in this economy," said Catherine Corfee, a Carmichael attorney who defends businesses sued for access violations. "They know nobody can afford to challenge them."

Several business owners sued under the ADA have talked to CJAC about the lawsuit and its effect on their business. View their stories at www.cjac.org/problem.

The wave of litigation in California is not likely to ebb anytime soon, as demonstrated by the results of an annual survey of litigation trends.

Ninety-one percent of California companies surveyed reported having lawsuits commenced against them over the past year, according to a Daily Journal op-ed by Robert W. Fischer Jr., a partner at the Los Angeles office of Fulbright & Jaworski (subscription only).

Also, the percentage of companies in California with more than 20 lawsuits commenced against them in the past year doubled -- from 16% in 2008 to 32% this year (which is also above the national average).

Other results from the survey include:

• The state again topped the national average in companies with a class action brought against them during the 12 months prior to the June 2009 survey: National average: 30%, California: 39%;

• In the labor/employment area, 22% of California companies reported an increase in multi-plaintiff wage-and-hour disputes in the last 12 months, well above the national average of 17%; and

• One of every six Californians surveyed believe the economic crisis produced more lawsuits, and more than one in five say their companies practice tighter cost controls over litigation as a result of the economic downturn.

This is the sixth year that Fulbright & Jaworski L.L.P. has commissioned a poll of corporate law departments in the U.S. and U.K. on the state of global litigation. The poll, conducted by an independent research firm, is the largest that tracks dispute-related issues and opinions of senior corporate counsel throughout the United States and the United Kingdom.

A total of 408 respondents participated in this year's survey from May to July; California respondents comprised 8% of the U.S. sample in the survey, which divides the country into seven regions.

The full survey can be downloaded here.

California's landmark Medical Injury Compensation Reform Act has for more than 30 years lowered malpractice insurance rates and encouraged more than 30 others states to enact similar reform measures, The Sacramento Bee's Dan Walters wrote in a recent column.

But since MICRA was enacted in the mid-1970s, plaintiffs' lawyers have fought -- unsuccessfully -- to weaken the law and overturn its $250,000 limit on recoverable non-economic damages.

As Walters wrote, the plaintiffs' lawyers have failed in their efforts to modify or repeal the cap even when their bills were carried by speakers of the state Assembly.

Advocates of the cap have urged President Barack Obama and Congress to make it part of national health care. As Walters notes, the Congressional Budget Office has said that such a cap would save $54 billion in health care costs over a decade, and other estimates are higher.

He writes:

"Obama has been noncommittal, but (House Speaker Nancy) Pelosi and other Democratic leaders of Congress, as a gesture toward the national trial lawyer lobby, included a provision in their bill that would give 'incentive payments' to states that establish a 'fair resolution' process for malpractice claims but only if a state 'does not limit attorneys' fees or impose caps on damages.'"

"It's likely to be a major issue when House and Senate leaders try to iron out a compromise bill, and if it survives, (Attorney General Jerry) Brown, who aspires to return to the governorship in 2010, may have to decide whether the cap he supported in 1975 will be repealed."

Walters' column prompted nearly two dozen comments after it was posted on Monday. Some of the comments cut right to the heart of the matter:

"The Lawyers should be capped at no more than 10% of the judgment overall; this would include all costs and time billed," wrote one individual. "The only ones who benefit from no CAP (are) the trial lawyers."

Wrote another: "The threat of excessive litigation is still so strong that today doctors are forced to practice what has become known as defensive medicine: Doctors order lots of extra, costly tests just to protect themselves from litigation."

And a third added: "Repealing the cap would be a huge mistake for California. What we really need to do is extend it to product liability as well as other non-medical service providers. That might be a good first step in showing the rest of the country that California is business-friendly."

The 8th U.S. Circuit Court of Appeals has ruled that a name brand prescription drug manufacturer could not be held liable for injuries caused by a generic competitor's version of the drug.

In a statement, CJAC President John H. Sullivan commended the Court's ruling and said, "the court got it right, showing a refreshing abundance of common sense in telling us that 'Traditional products liability requires a plaintiff to show that she actually consumed the defendant's product.'"

"It makes no sense to tie a company's product liability to a drug that it invented but has lost patent protection -- and which the plaintiff was not taking when the injury occurred," he added.

The plaintiff in the case, Mensing v. Wyeth, brought a failure to warn and misrepresentation case against a number of manufactures of a drug, Reglan, and its generic form. She also sued the name brand defendants for fraud and negligent misrepresentation on the theory that her doctor relied on Reglan's label when assessing the risks and proper uses of the generic.

The Court also considered and rejected an appellate court's holding in a November 2009 California court of appeal decision in Conte v. Wyeth that found Wyeth Pharmaceuticals liable for the plaintiff's negative reaction to a medication used to treat stomach conditions -- which Wyeth pioneered but no longer produced. The plaintiff in that case took a generic drug, manufactured and sold by a generic drug manufacturer, but sued Wyeth for failure to warn of risks associated with the drug. The California Supreme Court declined to review that case.

Read the opinion in Mensing v. Wyeth by clicking here. (Click the link and search for case number 08-3850.)

Previous blog posts on Conte v. Wyeth can be found by clicking here, here, and here.