Civil Justice Reform - Law Firms The Prospects For Civil Justice Reform - An Overview

Tuesday, February 1, 2005 - 00:00

Editor: When I think of torts, you and Prosser immediately come to mind. You are one of the most published authorities on civil justice reform. It is always a pleasure to get your insights. First, tell us about your practice.

Schwartz: I joined Shook Hardy & Bacon a few years ago. I could not be more pleased. Because Shook Hardy is a firm of litigators, their knowledge of what is actually taking place in the trenches and our experience with government relations and the media as well as with litigation makes for a nice fit. Our Public Policy Group now has eight people, four women and four men, four Democrats and four Republicans, but not divided among genders. I remain general counsel to the American Tort Reform Association (ATRA) and continue to work closely with the American Legislative Exchange Council (ALEC) as Co-chair of its Civil Justice Task Force.

Editor: One of the purposes of this interview is to get your insights into some of the priorities of the Civil Justice Reform Group (CJRG) that are mentioned in our cover article. As you know, leading general counsels support the CJRG. First, how effective is the CJRG process for setting priorities?

Schwartz: The CJRG has brought together from within its membership people with great talent who have been involved in many battles in the campaign for civil justice reform. They have seen both the wins and the losses. By enabling them to sit down and share experiences, CJRG has been able to set meaningful priorities. It is important to set priorities because there are dozens of civil justice reforms and resources are limited. You cannot enact everything. It has been a very significant source for funding for some of the initiatives that have gone forward. They do things in a quiet and effective way without fanfare.

Editor: First, what are your thoughts on the asbestos legislation?

Schwartz: Asbestos reform is really a three-tier problem and not everyone focuses on all three levels. The first does not involve legislation; it focuses on the judges themselves and making sure that they are aware of the pitfalls that come from focusing solely on expediting cases. We did an article that was well received by judges called Letter To The Judges Of America: How Efficiency Is Hurting You And Victims Of Asbestos. This is available on our firm's website (www.shb.com). The article says that if judges focus on expediency, as contrasted with rules of law, they are going to get more and more cases that should not be in court.

Judges have the power to say that if a person is not currently suffering an injury, a claim should not be allowed. Judges in a number of jurisdictions have so ruled. In New York there is a deferred docket for 90 percent of the cases of people who are unimpaired. Their claim is deferred unless they actually get sick as determined using objective criteria. Therefore, the first level of defense is judicial education.

The second level is state legislation. In Ohio an asbestos/silica bill passed which as a practical matter did what some judges have done. It created a separate docket for people who are not sick from either asbestos or silica. The genius of that bill is that it recognizes that if you close the door on asbestos claims only, it can open in other areas, such as silica. Similar legislation is pending in Texas and may soon be legislated in Georgia and other states where there are a lot of claims from unimpaired people.

The final level is legislation at the federal level. There is general agreement that the best way to address the problem is to remove the cases from the court system by setting up a fund to pay the claims. A lot of people have worked diligently on creating a piece of legislation that will unite parties with differing interests behind a single bill. It is extremely difficult to do because both companies that have been sued because of exposure must agree among themselves and then the insurance industry must agree on how much money to put into the fund. Then, there has to be some agreement with labor to get Democrat support. Finally, you have to overcome the political force of the trial lawyers who are doing everything they can to block this type of legislation.

Editor: What about class actions?

Schwartz: The class action bill is in a better position for early enactment because there is a consensus bill. The Class Action Fairness Bill has passed the House three different times and there are a growing number of senators who support it. It has been through the vetting process many times. While there was an indication on the part of Senator Frist that he might wish to take the bill that came out of the Judiciary Committee last year directly to the Floor, he has now decided to refer it to the Judiciary Committee for prompt action. While poison pill amendments could slow its progress, it is a good bill that has a real possibility of becoming law. Senators that support cloture also must support a reasonable agreement limiting the time for debate. There also must be an understanding that non-germane amendments will not be added to the bill.

Editor: If passed, how would The Class Action Fairness Bill improve the situation in problem jurisdictions?

Schwartz: Although the American Tort Reform Association's Judicial HellholesTM project has been successful in improving some problem jurisdictions, Madison County and other state courts that are pro plaintiffs' counsel are still on the Hellholes list. If the Class Action Fairness Bill were law, it would prevent cases from being tried in Madison County or other pro-plaintiff state courts where most of the plaintiffs are not from the state in which the action is brought. It would stop fraudulent joinder where a local retailer is named as a co-defendant in order to confer jurisdiction on a state court that is friendly to plaintiffs' counsel. It would not permit removal of a case that has all plaintiffs or most plaintiffs from the home state, but it would permit the removal of cases to federal courts that encompass plaintiffs from other states. It would not stop a case like the Engel tobacco case in Florida, a massive class action brought by Florida residents against an out-of-state corporation in a very plaintiff-friendly court. Furthermore, the class action bill would not stop individual plaintiffs from going to problem jurisdictions. Individual forum-shopping cases are a big problem for the pharmaceutical, auto and other industries. Therefore, it is necessary to continue the effort to achieve reforms in problem states. This year, ATRA took Mississippi off its Judicial HellholesTM list of problem states. Mississippi not only adopted a model tort reform package, but fair and balanced judges have been elected to its Supreme Court. As reconstituted, the Supreme Court of Mississippi has handed down some solid, well reasoned decisions.

Editor: I understand that the U.S. Supreme Court's decision in the Campbell Case caps punitive damage awards?

Schwartz: It helps if you can get to the Supreme Court. The Campbell case focuses on punitive damages and lays down firmer rules for when due process says an award is excessive. It says that except in unusual cases, you cannot have an award of punitive damages larger than nine times compensatory damages. It prevents irrelevant, out-of-state evidence from being used to bolster a punitive damages award. The problem with Campbell is that the Supreme Court does not have police power to enforce its ruling in every jurisdiction in America. The only way it can enforce its rules is to keep taking cases and giving writs of cert. and reversing courts who do not follow Campbell . There were two cases, one that involved Union Pacific in Georgia, and the other is Campbell itself on remand, where it was clear that the lower court had not followed Campbell . The Supreme Court did not grant cert. That could send a signal to lower courts that the decision is a paper tiger.

ALEC has tried to do something about this problem. They have created a model statute, Constitutional Guidelines for Punitive Damages Act that places Campbell in a statutory form that is easy to follow and understand. The presence of that type of law in each state will make it more likely that courts will follow the decision. Now, plaintiffs' lawyers are realizing that the doors are closing on excessive punitive damages awards. For that reason, they are trying to convert pain and suffering awards into punitive damages awards. See Victor Schwartz & Leah Lorber, Twisting The Purpose Of Pain And Suffering Awards: Turning Compensation Into "Punishment, 54 S. C. L. Rev. 47 (2002). ALEC also has developed a model state bill called the Full and Fair Non-Economic Damages Act that in the current climate is very enactable. It was enacted in Ohio about three weeks ago. Instead of capping awards, it goes to why they are unreasonable in the first place and gives a judge objective standards to review an award if it is too high. Contact www.atra.org to get copies of these bills.

Editor: What organizations should corporate counsel contact to find out how they can help?

Schwartz: Let me discuss five bills at the federal level that are important, and which organizations have played a major lead. One is the asbestos reform. The pivotal organization for that is the National Association of Manufacturers. For the class action bill, it is U.S. Chamber of Commerce Institute for Legal Reform. Medical liability has been driven by a lot of organizations. One group is the Doctors' Group. Another, of course, is the American Medical Association. Two other bills are the Commonsense Consumption Act that stops obesity lawsuits against people who sell food. The National Restaurant Association has taken the lead in that effort. The final one is the Lawsuit Abuse Reduction Act or LARA. The National Association of Independent Business has taken the lead on LARA. The American Tort Reform Association, the National Association of Manufacturers, the National Restaurant Association, and the National Association of Wholesaler-Distributors, among others, also support the legislation. LARA restores the sanctions against plaintiff's lawyers that used to be in Rule 11. The second part of LARA is to stop litigation tourism by providing that you can only sue a defendant where you live, where you work, where you were hurt or at the defendant's principal place of business. We believe that it has a good probability of becoming law.

For information about the model acts I mentioned, corporate counsel can contact Kristin Armshaw who is the legislative director of the ALEC Civil Justice Task Force. Her email is karmshaw@alec.org. On the ATRA website, www.atra.org virtually every model bill I have discussed can be found, and a pivotal person for information is Matt Fullenbaum, mfullenbaum@atra.org. For example if someone is interested in reform in South Carolina, Matt can direct you to the appropriate organization in South Carolina.