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Tort reform takes a turn.

JUST A FEW YEARS AGO IT could hardly seem possible that an alliance of the business community and the defense bar would defeat the Association of Trial Lawyers of America (ATLA) one state after another on a major civil justice reform issue. Yet this is precisely what has happened despite attempts by the plaintiffs' bar to divert public attention from tort reform while embarking on an intense campaign calling for public access to private information.

Tort reform, the business community's decade-old battle supporting a wide array of reforms in the civil justice system, is a maturing force in 1992. For the first time in many years, tort reform appears to have clearly moved up the Bush administration's priority list. During last year's American Bar Association convention Vice President Quayle unveiled a package of administration-backed proposals aimed at controlling litigation costs and ending judicial delays. Most notably, under those proposals, punitive damages would be restricted to amounts equal to compensatory damages awarded and would require clear proof of wrongdoing.

Significant progress has been made in the last eight years to halt the expansion of civil liability and everincreasing damage awards imposed upon corporate defendants. Comprehensive products liability reform enacted in several major industrial states - plus the prospect of more reasonable laws governing products liability and punitive damages - offers the hope of significant savings to businesses and consumers.

A New Frontier

THE AMERICAN Tort Reform Association reports that since 1985, 33 states have abolished or restricted the application of joint and several liability, a doctrine that says that a defendant found to be even remotely at fault can be forced to pay the entire amount of damages awarded. In addition, 27 states have reformed the laws on punitive damages, which are designed to punish wrongful action in addition to those awards that may be assessed for economic and non-economic damages. Finally, 20 states have reformed collateral source laws to reduce compensatory awards. Collateral source gives legal sanction to what is commonly called "double dipping" by allowing a plaintiff to collect damages from his or her employer or an insurer, then sue a defendant for those same damages and collect a second time.

All of the above are hard-won achievements. They are threatened, however, by alarming new initiatives by the plaintiffs' contingency fee bar, particularly ATLA, which seems intent on further fueling the lucrative litigation explosion. The plaintiffs' bar, as represented by ATLA, will most likely thwart efforts aimed at tort reform. Moreover, ATLA continues to vigorously wage perhaps its most intense nationwide campaign in recent memory, a campaign designed to secure disclosure of confidential documents and information of defendant corporations.

Launched three years ago under the guise of ending "court secrecy" and exposing "deadly hazards," ATLA's major offensive was aimed at prohibiting courts from entering protective orders that concealed information regarding "public hazards." Protective orders traditionally have been used by courts to protect confidential settlement agreements and information exchanged in discovery.

Finding a willing ally in journalists seeking the free flow of information, the contingency fee bar has argued that there is a "presumption of public access" to information produced in litigation that might expose "public hazards" affecting the public's health and safety. And most recently, the contingency fee sector of the plaintiffs' bar has used such inflammatory case examples as the silicon breast implant controversy to try to gain additional support for its argument.

The introduction of legislation in over 35 states to restrict protective orders was bolstered by an orchestrated media campaign to reinforce these legislative initiatives. First, Florida and Virginia enacted legislation restricting trial judges from entering protective orders. Then the Texas Supreme Court, under considerable pressure from the plaintiffs' bar, enacted a judicial rule restricting courts from issuing protective orders, action that the Texas Legislature had already rejected. Subsequent ATLA legislative initiatives in over 25 other states have failed,

The dangers of such legislation becoming law are numerous. First, the information that plaintiffs seek to discover from manufacturers in products cases can include trade secrets and other sensitive, confidential or proprietary information, the disclosure of which must be strictly limited. Second, most plaintiff lawyers would define "public hazard" so broadly as to include virtually anything arising from the mere filing of a products liability suit. Aside from these and the privacy interests of litigants that would no longer receive protection, the proposals would impede the free flow of information that results from a liberal discovery process. They would also remove important powers inherent in the trial courts.

In 1991, Lawyers for Civil Justice - a national coalition of defense trial lawyers and corporate counsel spearheaded a continuing effort to establish an "early warning system" to monitor plaintiffs' protective orders legislation and to respond to legislative initiatives. The subject of protective orders is expected to be a major tort reform issue for several years to come.

Punitive Damages

THE ISSUE OF punitive damages promises to be another major area of contention on the tort reform front in the 1990s. Today punitive damages are commonplace - with multi-million-dollar awards occurring monthly. The U.S. Supreme Court determined in March 1991 that the 14th Amendment to the Constitution covering due process places some limits on a state's ability to award punitive damages. This ruling will require state legislatures and courts to review present procedures for awarding punitive damages and, in many instances, change these procedures in order to conform with the Supreme Court ruling.

In Pacific Mutual Life vs. Haslip, an insurance fraud case, the Supreme Court ruled that an unlimited punitive damage award would be invalidated if it was not "reasonable in amount and rational in light of [its] purpose to punish what has occurred and to deter its repetition." This ruling could have a chilling effect on the random punitive damage awards that are weakening U.S. competitiveness, slowing innovation and keeping improved products off the markets. As a consequence of the Pacific Mutual decision, the Supreme Court has granted review, vacated judgments and remanded 12 cases. These cases have gone back to federal and state courts in California, Alabama and Georgia, among others, to be reargued.

While the Pacific Mutual case was not the definitive decision on whether punitive damage awards are unconstitutional, per se, it did send the message to the states that in order to meet the due process test, their procedures must be at least equal to the level of scrutiny the Alabama court demonstrated in Pacific Mutual. Moreover, other courts, most notably the 5th Circuit Court of Appeals and the Tennessee Supreme Court, have all modified the standard for awarding punitive damages in light of Pacific Mutual. Also, the jury understood that punitive damages were meant to punish the defendant, not compensate the plaintiff.

The Pacific Mutual case represent- ed the fourth time in five years that the U.S. Supreme Court had considered federal constitutional challenges to excessive punitive damage awards, but the first time the Court actually applied the due process clause to such an award. Unfortunately, the Court's decision still leaves many issues unresolved.

A reasonable argument can also be made that the imposition of punitive damages is unwarranted in situations in which the defendant's product or practice complied fully with federal or state legislative or administrative safety standards. But only a few states allow such a defense, with the others relying on jury members and judges who may not have the technical expertise to make a sound determination as to the safety of a product or service.

To date, the problems with punitive damages have largely gone unheeded by state legislatures. However, the U.S. Supreme Court's decision in Pacific Mutual will force the states to take a closer look at whether their procedures meet due process. This is a golden opportunity for the states to go beyond the due process question and repair a system that encourages outrageous and unfair punitive damages awards.

Political Crosswinds

STATE AND FEDERAL legislatures are not the only arenas in which civil justice reform will be fought in the 1990s. Rules of civil practice and procedure are more often than not the result of judicial rule making rather than legislative enactment. But these, too, are subject to political crosswinds and undercurrents.

Beginning in 1990, the U.S. Judicial Conference, which is responsible for recommending federal procedural rule changes to the U.S. Supreme Court, began an extensive review of Federal Rules of Civil Procedure. The most alarming and controversial of the proposed amendments is the revision of FRCP 26 to require certain mandatory, simultaneous prediscovery disclosures by all parties shortly after a civil action starts. The revisions, which were circulated in August 1990 for public comment and have yet to be adopted, also call for a broad array of sanctions to punish those who fail to make such disclosures.

Simply stated, the proposed disclosure requirement is fraught with problems, Chief among them are the likelihood of overdisclosure, increased discovery, new disputes regarding disclosure and more delays. But, most importantly, the proposed revision of FRCP 26 truly represents a radical departure from the current system and, if passed, will ultimately provide plaintiffs with a major strategic advantage in litigation. Lawyers for Civil Justice is coordinating a program to encourage defense trial lawyers and corporate counsel to contact the U.S. Judicial Conference to express themselves regarding these changes.

Will the Standoff Continue?

IN ADDITION TO defending the status quo on such issues as protective orders, the business community and the defense bar are in a good position to initiate positive reforms in the legislative arena. At least three states, New York, Pennsylvania and Mississippi, will likely be center stage for comprehensive products liability reform initiatives. And Texas - where the business community suffered its most significant defeat in 1991 when the Legislature narrowly rejected a strong products liability reform measure - may revisit the issue. A handful of other states passed less significant reforms in 1991, and at least that many will address various tort reform measures in the next few years. These issues include limiting statues of limitations and providing government standards defenses to products manufacturers.

Even Congress may inch another step closer to enacting a federal products liability law. In late July 1991 legislation, which now has 50 co-sponsors, was introduced in the U.S. House of Representatives to establish a uniform federal products liability system. Senator Robert Kasten, RWis., introduced a similar bill in the Senate in March 1991 that has 39 cosponsors.

Unlike previous efforts, the current federal products liability initiative represents a more moderate approach that includes: restrictions limiting punitive damages to those instances where wrongdoing is proved by "clear and convincing evidence," provisions for a defense against punitive damages where pharmaceutical manufacturers meet FDA requirements, and requirements that defendants pay only that portion of pain and suffering awards for which they are actually responsible.

Preserving the Gains

IT HAS YET TO BE determined whether, overall, the hard-fought victories won in the statehouses in recent years will be lost in the courthouses. Similarly, it is too soon to tell to what extent, if at all, new tort reform proposals - most notably those introduced in August 1991 by the Bush administration - will be adopted. Other key reforms called for by the Bush administration focus on: discouraging overuse of discovery, establishing fee shifting mechanisms to force the losing parties in certain cases to pay the winners' legal bills, providing greater incentives to use alternate dispute resolution, and ensuring that testimony by expert witnesses is "an objective aid to the courts' search for truth." But the Bush administration's initiatives have given new impetus to tort reform and civil justice reform around the country.

Overall the battle for tort reform in the 1990s is focusing on preserving the gains that have already been made in legislatures and the courts and introducing new legislative initiatives and court reforms to streamline the civil justice system, maintain its integrity and reduce the cost of litigation. And, in this much-changed atmosphere conducive to tort reform, the 1990s may very well be recorded as a period of significant progress for reformers.

Edward W. Muffins Jr. is president of Lawyers for Civil Justice and senior partner in the law firm of Nelson, Mullins, Riley and Scarborough in Columbia, S.C.
COPYRIGHT 1992 Risk Management Society Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
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Author:Mullins, Edward W., Jr.
Publication:Risk Management
Date:Jul 1, 1992
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