Serious Fight Over `Frivolous' Lawsuits
IN the debate over legal reform on Capitol Hill this week, the two sides are as sharply split as prosecution and defense in an important and complex trial.Skip to next paragraph
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Proponents warn that an explosion of litigation and predatory lawyers threatens economic competitiveness.
Opponents counter that one of the central tenets of American freedom - the right to seek justice before a jury of peers - is under siege. They say the number of civil suits brought annually hasn't risen in a decade and that, per capita, there are fewer such disputes now than during the Civil War.
Both sides join the debate armed with horror stories about abdicated personal or corporate responsibility, about million-dollar cups of spilled coffee or indentured girl scouts paying off costly insurance premiums with boxes of cookies.
But beneath the hyperbole about excessive punitive-damage awards or lenient settlements, both sides admit a dearth of hard evidence about what spawns the annual filing of roughly 1 million injury lawsuits in state courts and how reforms would affect them.
``The actual number of punitive damages awards in products-liability litigation is unknown ... because no comprehensive reporting system exists,'' state a recent study known as the Rustad Report.
The House has already passed two of three sweeping reform bills that tilt toward pretrial settlements. One would require the loser in a case to pay the legal fees of the winner if the loser had rejected a pretrial settlement. Another would limit class actions against securities brokers.
Today the House takes up the third and most contentious bill, which would cap punitive damages in products-liability cases.
The debate poses risks to both Republicans and Democrats. Perhaps on no other issue is the GOP so vulnerable to the charge that they are the puppets of big business. And Democrats are on the side of trial laywers, a highly unpopular group among voters.
The ``Common Sense Product Liability and Legal Reform Act of 1995'' for the first time establishes a cap on punitive damages in products-liability cases at $250,000 or three times the awarded compensation, whichever is higher.
Proponents advance several arguments for a national standard. Thirty-five states don't have caps; and companies that engage in interstate commerce are forced to hire teams of lawyers in each state they sell their products in. Further, they say, a cap would ensure swifter resolution of cases.
``Some 70 percent of products are consumed outside the state they were manufactured in,'' says Tiger Joyce of the American Tort Reform Alliance in Washington. ``This bill establishes reasonable national standards on product liability.''
But opponents say the cap would cut off access to the courts for those with limited means. The ``loser pays'' provision and the cap on damages may deter lawyers from taking cases on a contingency-fee basis.
``All these things are scarry stuff for the little guy,'' says Ned Reilly, a products-liability lawyer in Santa Anna, Calif. ``Ninety-five percent of people can't afford a lawyer on anything but a contingency fee. Punitive damages are one of the only incentives'' lawyers have in accepting such cases.
Furthermore, he says, $250,000 is ``a parking ticket'' for a major company, and the cap undermines the point of punitive damages, which is to punish a company for knowingly producing a detective and dangerous product.
But Paul Huard, president of the National Association of Manufacturers, disagrees.
Lawyers instinctively go after punitive damages in every case, he says. He estimates companies spend at least $100 billion annually on defense and settlement of product liability cases. But the vast majority of businesses are small, not Fortune 500 firms.
``A uniform rule levels the playing field,'' he says. ``It prevents lawyers from chasing these claims'' and enhancing opportunity for settlement.
Mr. Reilly counters that the vast majority of products-liability cases are already decided by settlement, and the burden of proof in a punitive damage claim is sufficient protection for corporations.
The products-liability bill is expected to pass in the House tomorrow. The Senate is expected to take up the package of legal reforms quickly, with some modifications. Sen. Spencer Abraham (R) of Michigan, for example, may attempt to limit the ``losers pay'' rule to people with annual incomes higher than $75,000.
The Clinton adminstration opposes the reforms, but a veto threat remains uncertain.