Clash of Titans in California Over Limiting Lawsuits
LAWYERS VS. HIGH-TECH CEOS
MENLO PARK, CALIF. — SNARLING wolves race in a pack across the snow, while an ominous voice warns against ''corporate wolves'' on the prowl.
A flashily dressed man steps out of a luxury car with a license plate reading ''SOAK U,'' while an announcer tells viewers to tell lawyers that their ''good times ... are over.''
These are part of a multimillion-dollar political advertising war being waged by opponents and backers of a controversial package of initiatives on California's March 26 primary ballot.
An alliance of Silicon Valley business executives and activists is asking voters to approve three laws that would radically limit the ability of lawyers to file suits in the case of auto accidents, personal injuries, or corporate misdeeds. Opposing the alliance is a wide coalition led by trial lawyers and consumer organizations, which argue the changes would tilt the balance of justice in favor of business.
Once the arcane province of law-school journals, so-called tort reform has become a hot political issue in Congress and state capitals across the country. But the proposed changes in California go further in curbing litigation than anything currently on the books - including a law recently passed by Congress (over presidential veto) that limits shareholder suits.
Thus, the California vote is being watched closely as a test of sentiment on an issue affecting millions of consumers and businesses.
Tort reform does have a decidedly partisan side to it. It is a featured plank of the Republican Party's Contract With America. Trial lawyers - the main target of these measures - are among the largest financial backers of the Democratic Party, on both the national and state levels.
The proponents here, organized in the Alliance to Revitalize California, are led by Tom Proulx, a Silicon Valley computer programmer who made his fortune as the inventor of Quicken, the leading personal-finance software.
The unwolf-like strategist
Wearing a denim shirt, khaki slacks, and sneakers, a brown bomber jacket draped over his chair, the boyish Mr. Proulx conveys a decidedly unwolf-like appearance. He was embarking on a sabbatical break from the computer business when author Andrew Tobias persuaded him to take on the cause of auto-insurance reform.
After two years, the 34-year-old whiz kid still claims to be unnerved by the fierce political battle he has gotten into, expressing amazement at ads that paint his fellow Silicon Valley executives as ''corporate swindlers'' akin to the perpetrators of the savings-and-loans scandals of a few years ago.
But for all their protestations of innocence, Proulx and his allies have carved a sophisticated strategy for selling the no-fault auto-insurance law. In the past, such measures have run up against public distrust of insurance companies, as happened here with a no-fault initiative backed by the insurance industry in 1988.
The reform backers' tactic is to package the complex no-fault law with the two other measures in a simple pitch that plays on an even more visceral dislike of lawyers.
''Since nobody is going to understand [the no-fault law], the proponents have tried to reduce this into a feel-good, lawyer-bashing exercise,'' says Harvey Rosenfield, a lawyer and consumer activist. He contends the proposed law is an attempt to roll back a successful 1988 proposition he sponsored that controls insurance-company profits to bring down rates.
''They don't go together at all,'' admits Proulx, ''other than one common, unifying theme - too many lawyers, too many lawsuits.''
The Alliance deliberately put the initiatives on the March primary ballot, calculating that the GOP presidential contest will mainly bring out Republicans, who are more sympathetic to their cause. (Lawyers are sponsoring counter-initiatives for the November ballot in case they fail in March.)
Who's who of Silicon Valley
The key to the package is the anti-shareholder initiative that has brought the alliance almost all its funding - more than $6 million has flowed in already from a list of donors that reads like a who's who of Silicon Valley. David Packard, co-founder of Hewlett-Packard, has alone contributed $600,000, Proulx revealed.
Many of these Silicon Valley firms are high-tech companies whose executives are concerned that the firms could be targets of suits filed on behalf of shareholders. Stock prices for these companies have been known to fluctuate dramatically, and some shareholder groups have sued, claiming the companies deliberately conceal information that leads to huge drops in the value of shareholder investments. In many cases, firms settle such suits quickly rather than pay the huge cost of fighting in court. Though the new federal law restricts such shareholder suits, the firms are worried that they will now be sued in state court, as happened in February in a suit filed against software producer Adobe Systems.
The tort-reform backers trot out horror stories of frivolous law suits to support their broader initiative to limit the contingency fees lawyers get if they win their clients' suits.
But opponents of these measures counter with their own equally powerful tales of the victims of stock swindles, medical malpractice, or dangerous products who would be denied legal help by these restrictions. They have the backing of prominent consumer advocates such as Ralph Nader and the Consumers Union, publisher of Consumer Reports.