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					The Annual State Litigation Guide

        What If Every State

20   NACD Directorship June/July 2010
Were California?
  By Steven B. Hantler

  Financial cutbacks forced on legal-reform advocates
  stand in stark contrast to ramped-up spending by the
  plaintiffs’ bar. The result? Greater public support for pro-
  plaintiff legislation and the election of more pro-plaintiff
  candidates to state office. Legal reform advocates in state
  after state are conducting defensive campaigns, barely
  holding on to hard-won gains or watching them slip away.
  Boards of directors are in the bulls-eye, and would do
                                                                                    Steven B. Hantler is
  well to heed the warning that in this war of attrition, the
                                                                                    the chairman of the
  plaintiffs’ bar may succeed in worsening the legal climate                        Foundation for Fair
  for business across the country. How has this happened?                           Civil Justice. Contact
                                                                                    him at shantler@
  It’s partly a political shift, partly an anti-business senti-                     foundationforfair-
  ment, and frankly, too many companies sitting on the                     or visit
  sidelines or looking the other way. The plaintiffs’ bar
  knows this and is aggressively pursuing opportunities
  everywhere, as illustrated in the Foundation for Fair Civil
  Justice’s Annual State Litigation Guide, produced in con-
  junction with NACD Directorship. The selected profiles
  that follow were chosen to provide an illustration of those
  states doing well and those like California, that have
  plummeted to the bottom of the list. Directors can get a
  quick glimpse of the future by asking their general coun-
  sel, “How bad would it be if in 10 years our state’s legal
  environment became just like California’s?”

                                                                  June/July 2010     21
The Annual State Litigation Guide

CALIFORNIA                                        medical liability reforms in the 1970s, the       tlement of insurance claims and extend
2010 U.S. Tort Liability Index Output Rank        predatory tactics of today’s trial bar and the    liability protections for “Good Samaritans”
(Pacific Research Institute): 41st                snarled nature of civil liability law make Cal-   in emergency situations. Plaintiffs’ bar
   California is largely viewed as the most       ifornia a hostile environment for business.       allies have expressed interest in challeng-
difficult and expensive legal environment            In 2009, reformers successfully enacted        ing California’s landmark $250,000 cap on
among all the states. Although it enacted         new laws that expedite processing and set-        non-economic recoverable damages and
                                                                                                    pursuing a ban on arbitration agreements.
      Methodology                                                                                      Drastic fiscal issues have resulted in the
                                                                                                    state courts closing one day a month to
  The U.S. Tort Liability Index: 2010 Report measures which states impose the highest               resolve the $410-million gap in court
  and lowest tort liability costs and risks. Lawrence J. McQuillan, PhD, and Hovannes               budgets. Republican governors have
  Abramyan, MA, researchers with the Pacific Research Institute (PRI) co-authored the
  biannual report, now in its third edition. The rankings (see full map and chart, page 24)
  are free of subjective bias of the authors and are based solely on the best outside, inde-
  pendent data primarily from A. M. Best Co., VerdictSearch, American Tort Reform Foun-
  dation, American Bar Association and National Center for State Courts.
     The ranking provides an accurate snapshot of each state’s current tort-liability system,
  a timely and useful tool for business decision makers. It matters greatly whether your
  state is towards the top or bottom of the tort-climate ranking.
     Looking at recent data, job growth was 57 percent greater in the top 10 tort states
  than in the worst 10; state GDP growth was 25 percent greater, tax revenues grew 24 per-
  cent more because of better performing economies; and there was a 232 percent differ-
  ence in migration rates between the top states (net inflow of people) and bottom states           Supreme Court of California
                                                                                                    Main Courthouse
  (net outflow of people).
     The report uses 13 variables— adjusted to account for differences in the size of each          appointed six of the seven judges to the
  state—to rank states from best to worst in terms of relative monetary tort losses and rel-        California Supreme Court, which generally
  ative tort-litigation risks. The authors selected the variables after consulting with dozens      adheres to rule-of-law principles. Supreme
  of legal scholars, economists, university professors, insurance experts and lawyers, and          Court Chief Justice Ronald George has
  after an exhaustive review of the scholarly academic literature.                                  appointed a statewide commission on
     Nine variables track liability losses for private and commercial automobiles, farm own-        impartial courts, and it also initiated a
  ers, commercial general liability, other general liability, homeowners, medical malprac-          working group to deal with asbestos litiga-
  tice, product liability, personal self-insurance and commercial self-insurance. Liability         tion issues.
  losses measure the expected total cost of new claims incurred in a given year. Four vari-             The state Supreme Court’s 2009 majority
  ables track litigation risks: outlier jury awards, the presence of plaintiff-skewed “Judicial     opinion regarding In re Tobacco II mud-
  Hellholes” (as defined by the American Tort Reform Association), number of attorneys              dled the process for bringing class-action
  and tort caseload.                                                                                cases under the Unfair Competition Act.
     The authors collected data for each state across these 13 variables. Once all variables        Reformers warn that the ruling, which
  were ranked from best to worst across all 50 states, an average ranking was calculated            addressed individual causation require-
  for each state by adding together the ranks it earned on the 13 variables and dividing by         ments for each member of a plaintiff
  13. The average rankings were used to compile the final, overall ranking from 1 to 50.            class, could result in protracted class-
  The state with the best average ranking across all 13 variables received an overall rank-         action litigation.
  ing of 1, while the state with the worst average ranking received an overall ranking of 50.           Until a rule-of-law majority is elected to
     Very small differences in average scores matter greatly because they determine the             the legislature, businesses will be mired in
  ordinal, or relative, rank. Economic studies demonstrate that relative differences among          litigation surrounding Americans with Dis-
  states, not absolute differences, primarily determine the inter-state allocation of capital,      abilities Act (ADA) compliance. As a
  labor and entrepreneurship—the ingredients of economic growth.                                    result, the state’s current liability climate
                                                                                                    discourages growth and job creation.

22    NACD Directorship June/July 2010
FLORIDA                                            joint-and-several liability in 2006, and        the multiple legal challenges against the
2010 U.S. Tort Liability Index Output Rank         asbestos/silica litigation reform in 2005.      2005 reforms.
(Pacific Research Institute): 48th                    In addition to ongoing legislative efforts      In 2009, Governor Perdue introduced
   Modest changes in law improve some              to protect previous reform gains, reformers     FDA “preemption” legislation to provide
aspects of Florida’s liability climate for busi-   will need to counter the plaintiffs’ bar con-   liability protection for pharmaceutical and
ness, but overall it remains dismal. The           trol exercised over judicial appointments,      medical-device manufacturers in the state,
plaintiffs’ bar spends millions of dollars to      retention elections and coordinated court       as well as a “loser pays” civil-litigation bill
recruit candidates, fund policy initiatives        challenges against reform laws.                 patterned after Alaska. Neither bill suc-
and exercise significant control over the                                                          ceeded. The Georgia General Assembly
judicial selection and retention process.          GEORGIA                                         has not enacted any new reforms in 2010.
   In April 2010, Governor Charlie Crist           2010 U.S. Tort Liability Index Output Rank         The organized legal attacks against the
signed two liability reform bills that will        (Pacific Research Institute): 28th              2005 reform provisions will succeed in
help level the litigation field somewhat.                                                          direct proportion to the temperament of
The first bill, Fairness in Slip and Fall                                                          the judges who hear the cases, from the
Lawsuits, shifts the burden of proof to the                                                        lower courts to the Georgia Supreme
plaintiff in a slip-and-fall case originating                                                      Court. This motivates the plaintiffs’ bar to
in a business, an important change that                                                            try to elect an anti-reform governor who
streamlines Florida liability law with its                                                         appoints judges and a pro-plaintiff attorney
neighboring states. Florida Attorney Gen-                                                          general. Because the Courts have been
eral Bill McCollum and the business                                                                chipping away at the 2005 reforms, Geor-
community supported the second bill,                                                               gia’s liability climate has slipped in recent
Transparency in Private Attorney Con-                                                              years.
tracting. This prohibits the attorney gen-
eral’s office from hiring outside trial                                                            ILLINOIS
                                                   Georgia Supreme Court
                                                                                                   2010 U.S. Tort Liability Index Output Rank
                                                      Since the 2005 passage of Georgia’s          (Pacific Research Institute): 47th
                                                   omnibus tort reform legislation, legislators
                                                   have remained relatively silent on civil
                                                   justice reform. In response to the well-
                                                   organized reform effort that included a
                                                   strong coalition of medical, business and
                                                   advocacy organizations, by contrast the
                                                   plaintiffs’ bar is now actively engaged on
                                                   multiple fronts to water down, undo leg-
                                                   islatively or defeat in court various reform
Florida Supreme Court                              provisions.
                                                      The state Supreme Court, which only
                                                                                                   Illinois Supreme Court
lawyers on a contingency fee basis. In             recently shifted to a rule-of-law majority
order to hire outside attorneys, the attor-        based on the appointment of former U.S.            The liability climate in Illinois is among
ney general will have to provide written           Attorney David Nahmias by Governor              the worst, despite successful efforts by the
determination stating that the representa-         Sonny Perdue, nevertheless in March             reform community to fend off recent leg-
tion is cost-effective and in the public           unanimously struck down the state’s med-        islative proposals favoring the plaintiffs’
interest.                                          ical-malpractice damages caps as unconsti-      bar. In February, the Illinois Supreme
   In 2009, workers’ compensation reforms          tutional. Two weeks earlier, the high court     Court struck down limits on jury awards in
were enacted that reinstate strict cap fees        upheld offer of judgment and emergency-         medical malpractice cases enacted four
on a claimant’s attorneys. Florida’s reform        room malpractice protections as constitu-       years earlier by the Illinois legislature amid
success list includes the elimination of           tional, thus producing a mixed result in                            (Continued on page 26)

                                                                                                     June/July 2010      23
The Annual State Litigation Guide

                                                MT           ND
                     OR                                                      MN                                         NY
                                                                                     WI                                             RI
                                   ID                         SD                               MI
                                                   WY                                                              PA            NJ
                                                                  NE          IA        IL     IN    OH
                          NV                                                                                  WV
                                        UT                                                                         VA            MD
                   CA                                              KS              MO               KY
                                                                       OK          AR                          SC
                                    AZ             NM
            AK                                                                                           GA
                                                                                          MS   AL
                                                                                                               FL               The liability map: Red
                                                                                                                                indicates a hostile liability
                                                                                                                                climate. Green reflects a
                                                                                                                                climate conducive to
                                                                                                                                investment and job
                                                      HI                                                                        creation. Orange and
                                                                                                                                Yellow are neutral.

 State Rankings*
                  2010    2008                             2010    2008                              2010      2008                            2010     2008
                  Rank    Rank                             Rank    Rank                              Rank      Rank                            Rank     Rank

 Alabama            25        39        Indiana             29          22    Nebraska                   33        19        Rhode Island         39      44

 Alaska              1         2        Iowa                10           4    Nevada                     40        36        South Carolina       14      14

 Arizona            16        33        Kansas              12          26    New Hampshire              23        16        South Dakota          4      13

 Arkansas           30        30        Kentucky            36          31    New Jersey                 50        49        Tennessee            22      12

 California         41        34        Louisiana           11          29    New Mexico                 38         6        Texas                18      18

 Colorado           32        42        Maine                6          10    New York                   49        48        Utah                 13        7

 Connecticut        42        38        Maryland            24          35    North Carolina             3          3        Vermont              37      23

 Delaware           20        24        Massachusetts       17          41    North Dakota               5          1        Virginia              8        5

 Florida            48        50        Michigan            43          28    Ohio                       15        11        Washington           31      37

 Georgia            28        27        Minnesota           26          21    Oklahoma                   35        20        West Virginia        27      40

 Hawaii              2        15        Mississippi         21           9    Oregon                     34        32        Wisconsin             9      17

 Idaho               7        25        Missouri            45          43    Pennsylvania               46        45        Wyoming              19        8
                                                                              * To read the full 2010 report from the PRI, use an interactive map, or
 Illinois           47        47        Montana             44          46      purchase printed copies, go to

24    NACD Directorship June/July 2010
Top Plaintiffs’ Law Firms
The SCAS 50 lists the top 50 plaintiffs' law firms ranked by the total
dollar amount of final securities class action settlements occurring in 2009 in which
the law firm served as lead or co-lead counsel.

Rank Law Firm                                         Settlement Total       # of                Top Firms
                                                          (dollars)      Settlements
                                                                                            Number of Settlements
  1    Coughlin Stola Geller Rudman & Robbins         1,580,599,000              34     Top 25
                                                                                               Law Firm
  2    Milberg                                        1,440,849,996              10
                                                                                                Coughlin Stola Geller Rudman
  3    Bernstein Liebhard                             1,018,499,996               4        1
                                                                                                & Robbins                34

  4    Barroway Topaz Kessler Meltzer & Check           889,094,996              15             Barroway Topaz Kessler Meltzer
                                                                                                & Check                  15
  5    Barrack Rodos & Bacine                           887,250,000               6
                                                                                                Bernstein Litowitz Berger
  6    Grant & Eisenhofer                               863,500,000               6             & Grossmann               14

  7    Berman Devalerio                                 767,900,000               4        2    Milberg                    10

  8    Bernstein Litowitz Berger & Grossmann            764,375,000              14             Kaplan Fox
                                                                                                & Kilsheimer                7
  9    Johnson & Perkinson                              750,000,000               1

 10    Stull Stull & Brody                              669,774,996               4

 11    Wolf Haldenstein Adler Freeman & Herz            593,249,996               3                  Top Firms
 12    Howard B. Sirota, Esq.                           585,999,996               1             Settlement Average
                                                                                        Top 25
 13    Kaplan Fox & Kilsheimer                          547,544,000               7            Law Firm
 14    Berger & Montague                                508,050,000               3             Bernstein Liebhard
 15    Labaton Sucharow                                 447,750,000               6
                                                                                                Wolf Haldenstein Adler
 16    Nix Patterson & Roach                            285,198,500               3
                                                                                           11   Freeman & Herz
 17    Patton Roberts                                   195,098,500               2             $197,749,999

 18    Abraham Fruchter & Twersky                        80,225,000               3             Berman Devalerio
 19    Kohn Swift & Graf                                 78,000,000               2
                                                                                                Berger & Montague
 20    Gold Bennett Cera & Sidener                       61,275,000               1             $169,350,000

 21    Motley Rice                                       51,000,000               4             Stull Stull & Brody
 22    Lovell Stewart Halebian Jacobson                  50,000,000               1

 22    Sonn & Erez                                       50,000,000               1

 22    Stamell & Schager                                 50,000,000               1

 25    Zwerling Schachter & Zwerling                     46,850,000               2     SOURCE: RISKMETRICS GROUP
                                                                                        SECURITIES CLASS ACTION SERVICES

                                                                                          June/July 2010   25
The Annual State Litigation Guide


(Continued from page 23)                          forces ample time to work the system.            MISSISSIPPI
“spiking liability costs” for medical                Newly invigorated with 2008 election          2010 U.S. Tort Liability Index Output Rank
providers. The state Supreme Court ruling         gains in the state House of Representa-          (Pacific Research Institute): 21st
is likely to trigger significant insurance cost   tives, plaintiffs’ bar allies are maneuvering
increases, and establishes a dangerous            to: repeal the Food and Drug Administra-
precedent for other states where caps are         tion preemption defense; expand the Con-
being challenged in court.                        sumer Protection Act to allow for more
    The influence of the plaintiffs’ bar in       causes of action; dilute or eliminate previ-
Illinois permeates not only the state bar         ously enacted medical-liability reform,
but also the state legislature. With anti-        including expert witness standards, affi-
reform majorities in both chambers of the         davit of merit and statute of limitations;
Illinois General Assembly, the state’s pro-       and erode automobile no-fault.
reform advocates have been forced to                 Following the U.S. Supreme Court
fight back a multitude of anti-business ini-      decision in Wyeth v. Levine, which left the
tiatives. Legal reform advocates, such as         authority to each state to determine which       Mississippi Supreme Court
the Illinois Civil Justice League (ICJL),         lawsuits challenging FDA decisions would
successfully fought 2009 legislation that         be allowed, the Michigan General Assem-             Mississippi’s legal climate is improving,
would have allowed prejudgment interest           bly debated several bills sponsored by           mostly because of the Tort Reform Act of
to accrue from the time the defendant             activist legislators, all of which threaten      2004 that included reforms relating to prod-
was served.                                       earlier reform gains.                            uct liability, joint-and-several liability, jury
    The plaintiffs’ bar appears to be most                                                         service, medical liability and non-economic
interested in the three Illinois Supreme                                                           damages. Not surprisingly, the plaintiffs’ bar
Court retention elections this year. Activist                                                      is pushing to undo these reforms.
Justice Thomas Kilbride looks to be the                                                               The plaintiffs’ bar unsuccessfully sought
most vulnerable of the three and is the                                                            legislation to change the definition of the
recipient of a lion’s share of the plaintiffs’                                                     term “trade secret” so only the “most distinc-
bar support.                                                                                       tive” part or parts would qualify. This would
    The American Tort Reform Association                                                           have made it more difficult and expensive
continues to designate Cook County                                                                 for companies to protect trade secrets.
(Chicago) as a “Judicial Hellhole.” Madi-                                                             A “loser pays” reform measure was
son was moved to ATRA’s “Watch List”                                                               defeated; it would have enabled defen-
and St. Clair County was cited as a juris-        Michigan Supreme Court                           dants to recover litigation costs from the
diction to watch, despite a spike in                                                               plaintiff if the defendant won. This would
asbestos and pharmaceutical filings. In               Attorney General Mike Cox, a strong          have limited value, as most cases are set-
lieu of substantive legal reforms, Illinois’      rule-of-law advocate, is running for the         tled. Another defeated reform was the Law-
liability climate will continue to discour-       governor’s spot in 2010. Since the 2008          suits Reduction Act, which provided that a
age growth and job creation.                      elections, the rule-of-law majority on the       legislative or regulatory act does not create
                                                  state Supreme Court was lost. Another            a private right of action unless specifically
MICHIGAN                                          seat on the bench is up for election in          stated in the legislation.
2010 U.S. Tort Liability Index Output Rank        2010.                                                 Reformers support private attorney
(Pacific Research Institute): 43rd                    Although Michigan’s liability climate        retention sunshine legislation that would
   Michigan’s liability climate has dra-          has been conducive to growth and job cre-        make public the process by which state
matically slipped due to aggressive trial         ation, it is now a state to be watched           contracts with private attorneys is open to
bar legislative efforts and state election        because of both the very aggressive plain-       public scrutiny. However, political losses
results favoring anti-reform legislators.         tiffs’ bar legislative efforts and new control   by reform advocates have led to a continu-
Unlike most other states, Michigan’s leg-         of the state Supreme Court by an activist        ing impasse.
islature meets all year, giving plaintiff         majority.                                                              (Continued on page 32)

26    NACD Directorship June/July 2010
The Seven Myths of Business, According to
Highly Effective Plaintiffs’ Lawyers
By Steven B. Hantler

From 1996 through 2005, plaintiffs’ lawyers            Yet, the belief is that corporations rou-   face of every civil attorney’s experience.
filed an average of 52,000 lawsuits each day       tinely harm customers for profit, and only         In 2002, a report from the Council of
in state courts. Of these, 7,800 were tort cas-    punitive damages can set things straight.       Economic Advisers revealed that the United
es. According to the Pacific Research Insti-           The compelling evidence, though, is         States has the most expensive tort liability
tute’s “Jackpot Justice” economic analysis,        that punitive damage awards do not make         in the world. The cost is more than dou-
the tort system “imposes an annual ‘excess         the marketplace any safer. This is con-         ble the average of other industrialized
tort tax’ of about $2,000 for each American.”      firmed by the research of W. Kip Viscusi,       nations that have been studied. The CEA
A conservative estimate by PRI’s economists        a law and economics professor at Vander-        report also noted that the cost of lawsuits
is that excessive tort costs in 2006 were $589     bilt University Law School. While at Har-       in America “is far more than enough
billion, about equal to a 7 percent tax on         vard in 1998, Viscusi wrote: “States with       money to solve Social Security’s long-term
consumption or a 10 percent tax on wages.          punitive damages exhibit no safer risk per-     financing crisis.” For an American family
    To understand the roots of America’s           formance than states without punitive           of average income, excessive tort costs
legal crisis, we have to look at the deeper        damages.” Moreover, there were no over-         would provide $8,000 toward their annual
currents of American culture. Television           all differences with regard to safety and       mortgage bill.
dramas about the law and courts continue           environmental performance, and “there is           Nowhere does lawsuit abuse inflict
to be a national addiction, the way Westerns       no deterrence benefit that justifies the        more harm than in the arena of medicine.
once were. Just like those Westerns, today’s       chaos and economic disruption inflicted         According to Jury Verdict Research, Inc.,
legal drama needs a good guy and a bad             by punitive damages.”                           the medical malpractice median jury
guy, and these legal thrillers are invariably          Since punitive damages don’t work, there    award in 2007 was $1 million, 43 percent
told from the side of the plaintiffs’ bar. Satu-   is, Viscusi found, no need to augment the       higher than the $700,000 median in 1999.
rated in this drama, our culture is in danger      safety incentives that are already provided     For the years 2006 and 2007, 17 percent of
of forsaking the rule of law. To understand        by the market, government regulation and        all awards exceeded $1 million and the
what is really going on, we need to move           compensatory damages. Any penalties that        average medical malpractice jury award in
behind the sound stage and address the sev-        go beyond those needed to create an effi-       2007 was $4,043,416. Hospitals pay hun-
en fictions that some on the plaintiffs’ bar       cient level of safety will produce redundant    dreds of thousands in defense costs even
use to frame their cases and exploit the law.      levels of safety, which add costs. The higher   when they win at trial.
                                                   costs, of course, lead to higher prices and        These costs and awards increase the pre-
  MYTH NO. 1: Corporations put profits             other adverse economic effects.                 miums that doctors pay for malpractice
ahead of safety and honesty, and large                 We also learn from Viscusi’s work that      insurance, which in some states range up
damage awards are the only way to get              punitive damages are applied so capri-          to $200,000 and more annually. One
corporations to act responsibly.                   ciously that they are regarded by compa-        Pennsylvania medical college pays 15 per-
   The executives that run corporations are        nies as random visitations of disaster, like    cent of its annual budget just for liability
like the rest of the individuals in our world.     tornadoes.                                      premiums. Those inflated costs are passed
Some are bad actors, some are not. There                                                           on to patients. In some cases, the higher
are exceptions—Enron and WorldCom                     MYTH NO. 2: The so-called “liability         premiums cause doctors to give up their
readily come to mind—but most corporate            crisis” is an invention of corporations to      practices, limit their services to patients
managers care about the safety of their cus-       limit their liability for wrongdoing.           without health conditions that raise litiga-
tomers. They are not, as Ralph Nader                  The American Association for Justice,        tion risks, or move to a state where the tort
would say, “moving on all fronts to                formerly the Association of Trial Lawyers       system isn’t as punitive and the malprac-
advance narrow profit motives at the               of America, has argued that “tort claims do     tice insurance is more affordable.
expense of civic values.”                          not clog our courts.” But that flies in the        Tort costs restrict Americans’ access to

                                                                                                     June/July 2010    27
The Annual State Litigation Guide | 7 Myths of Business

health care. Doctors weary of paying high         inspires other plaintiffs to seek similarly    tion. The character of U.S. class-action law
malpractice premiums have left their prac-        large amounts. Each eye-popping verdict        underwent a radical transformation in
tices. Several states face a growing crisis,      has an unseen but powerful effect on the       1966 when jurists reversed the “opt-in”
with medical centers closing and doctors          greater mass of settlements.                   rule. In other words, people could suddenly
leaving their states by the thousands.               The system also coerces defendants to       be dragooned as plaintiffs in a lawsuit
   Clearly, there is a runaway tort problem       settle through laws that require the posting   unless they affirmatively notified the plain-
in this country and no amount of denial           of an appeal bond that for many is unaf-       tiffs’ attorneys they wanted out.
can change that.                                  fordable. These bonds are a holdover of            The result has been the practice of
                                                  archaic state laws, enacted at a time when     clientless law. In Florida’s Pinellas County,
   MYTH NO. 3: Punitive damages are               verdicts were much smaller. “In the new        Circuit Judge W. Douglas Baird described
rarely awarded; those that are awarded            world of billion-dollar verdicts,” writes      one class-action case as the legal “equiva-
are almost always substantially reduced in        legal reform analysts Victor E. Schwartz       lent of the ‘squeegee boys’ who used to fre-
post-trial proceedings.                           and Leah Lorber, “the bond requirements        quent major urban intersections and who
   There is some truth to this. But it is         have brought about a new and unantici-         would run up to a stopped car, splash
grossly misleading. Most cases do not             pated result: They may deprive a defen-        soapy water on its perfectly clean wind-
result in punitive damages for the simple         dant of his or her right to an appeal. The     shield and expect payment for the uninvited
                                                                                                 service of wiping it off.”
                                                                                                     Not only do class actions often address
A Florida judge described one class-action case as the                                           specious “injuries,” they often cheat the very
                                                                                                 clients they purport to serve. The exemplar
legal equivalent of the “squeegee boys” who expect                                               of class-action abuse remains the infamous
payment for the uninvited service of window cleaning.                                            BancBoston case. In this suit, one of the
                                                                                                 bank’s customers, who didn’t know he was a
                                                                                                 plaintiff in the case, was awarded a $2.19
reason that most defendants are terrified of      defendant, no matter how large, simply         refund on his account, allegedly to compen-
going to trial with the possibility that they     cannot afford to post a bond, so he settles    sate him for the bank having overcharged
might get hit with unmerited and unpre-           for a lesser amount and gives up his right     escrow account customers. He was also hit
dictable heavy punitive damages. The sys-         to an appeal.”                                 with a $91.33 charge from the bank to cover
tem coerces defendants to settle, so rather                                                      the legal fees it incurred in the suit. The
than fight, they opt to pay the blackmail.           MYTH NO. 4: Class-action lawsuits           plaintiffs’ attorneys were awarded more than
   According to Bureau of Justice data, only      always serve the public good by marrying       $8.5 million. The largest award to any Banc-
about 2 percent of tort, contract and real        efficiency with justice.                       Boston plaintiff was $8.76, which isn’t
property cases make it to jury trials in state       Class actions allow for the convenient      much, but is worth more than a lot of class-
courts. Cases are often settled before they       and efficient grouping of plaintiffs sharing   action plaintiffs get: nearly worthless
reach that stage and they are settled on the      a common complaint to link up in a single      coupons.
terms demanded by plaintiffs. According to        lawsuit. When used correctly, class actions
Yale Law School Professor George Priest,          allow courts to resolve in one action many       MYTH NO. 5: Litigation protects con-
the mere specter of “unlimited punitive           smaller, similar claims that might other-      sumers when regulators fail to act.
damages affect 95 to 98 percent of cases that     wise remain unheard because the cost of           In the federal regulatory process, safety
settle out of court before trial. It is obvious   any particular suit would exceed the pos-      policy is developed by an expert-led inves-
and indisputable that a punitive damage           sible benefit to the claimant.                 tigation of risks. In the tort process, where
claim increases the magnitude of the ulti-           Class actions also allow defendants to      the stakes are the titanic profits of the
mate settlement and, indeed, affects the          focus their energies on resolving all claims   blame industry, the investigative process is
entire settlement process, increasing the         in one lawsuit, and prevent courts from        anything but scientific.
likelihood of litigation.”                        being flooded with duplicative claims.            It is also a process in which pertinent
   While some large punitive damages are             But the perverse incentive of contin-       facts are concealed through the arcane
indeed reduced on appeal, their size              gency fees has warped class-action litiga-     and discriminatory rules of evidence of the

28    NACD Directorship June/July 2010
The Annual State Litigation Guide | 7 Myths of Business

legal system. In 26 states and the District       taking power away from the proper deliber-         entities to be feared. The irony here is that
of Columbia, for example, juries are not          ative, legislative and regulatory authorities.     it is the legal system itself that can be a
allowed to hear that a plaintiff injured in a     One-time Alabama Attorney General Bill             heartless, monolithic monster.
car failed to wear a seatbelt. Incredibly, the    Pryor, now a federal judge on the 11th Cir-
fact that the driver at fault was drunk or        cuit of the U.S. Court of Appeals, has               MYTH NO. 7: Like David against
drove through a red light is not admissible       warned that regulation through litigation          Goliath, the trial lawyer is outgunned and
in many courts.                                   has the power to “shift the awesome pow-           outclassed by powerful and resourceful
   Even when scientific research and policy       ers of legislative bodies—the powers to            corporations.
decisions from the regulatory arena are           control commercial regulation, taxation,              This is the most cherished trial lawyer
included in a trial, they are often presented     and appropriation—to the judicial branch           myth: that there are a few Robin Hoods
in a haphazard and skewed manner. On the          of government.”                                    out there struggling against the armed
basis of courtroom polemics, juries with no          Rather than protect consumers where             might of the powerful sheriff (see related
expertise are asked to render verdicts that, in   regulation fails, litigation undermines the        charts, page 25). But Robin Hood gave to
effect, set new safety benchmarks.                very safety that it supposedly promotes.           the poor. Six trial lawyers and their firms
   For example, regulators can determine                                                             took more than $5 billion as fees for their
that a given component is either safe or             MYTH NO. 6: Corporations settle law-            firms from tobacco litigation—money that
defective. Twelve juries can find that com-       suits to cover up their wrongdoing.                many believe belong in state treasuries for
ponent to be safe. But if the 13th jury finds       This is a popular theme spread by                health care and education.
it defective, and reinforces that decision        movies, books and the press, and has caused           The plaintiffs’ bar is no outgunned
with a staggering verdict, then it sweeps         corporate defendants to labor under the per-       underdog. The American Association of
away the methodical deliberations of the          ception of guilt. This is especially true when     Justice offers courses in how to sue partic-
                                                                                                     ular companies. The lawyers themselves
                                                                                                     have become quite wealthy. Joe Jamail of
Rather than protect consumers where regulation fails,                                                Texas has a Fortune 500-sized net worth of
                                                                                                     $1.2 billion. Another trial lawyer, Freder-
litigation undermines the very safety net that it                                                    ick Furth of San Francisco, owns his own
supposedly promotes.                                                                                 1,200-acre vineyard in Sonoma County.
                                                                                                     Another, Wayne Reaud of Beaumont,
                                                                                                     Texas, owns a newspaper. And, of course,
other juries and federal regulators alike.        defendants are forced to settle rather than        Peter Angelos owns the Baltimore Orioles.
   While regulators look ahead so that            face a ruinous class-action judgment. Few             The plaintiffs’ bar is a power lobby like
they might save lives, tort law looks back,       people, other than lawyers, know that vir-         none other. Over the last 10 congressional
seeking to use hindsight bias to assign           tually every certified class action ends in set-   election cycles, the legal profession has
blame for accidents that have already hap-        tlement: to face a class action is to risk the     led all other groups in campaign contri-
pened. That, of course, is exactly what it        corporate death penalty.                           butions with the exception of 2008, when
was designed to do. The problem arises               In a world where punitive damages of            it was second. In that cycle alone, it gave
when plaintiffs’ attorneys adopt the guise        $100 million or more are no surprise, corpo-       more than $233 million in political con-
of regulators and pretend that they are           rations tend to settle class actions before they   tributions. More than three-fourths—76
seeking to make products safer. In fact,          get to juries. To go to a jury trial can make a    percent—went to the Democratic Party.
they often threaten the safety of prod-           game of Russian roulette seem like a reason-       The legal profession is also the top politi-
ucts—by dictating design changes based            able gamble.                                       cal contributor in the current campaign
on a single accident—while ignoring (as              The plaintiffs’ lawyers and their propo-        cycle, having given more than $31 mil-
regulators cannot) the whole universe of          nents have convinced much of the national          lion, 82 percent of it to Democrats. It’s
data.                                             jury pool that corporations are not a collec-      dishonest for plaintiffs’ lawyers to liken
   While a tort system can never be an            tion of hard-working people with kids to           themselves to a little guy going up against
effective regulator, it is quite effective in     put through college, but rather monolithic         a giant.

30    NACD Directorship June/July 2010
           State Litigation Guide
The Annual Litigation Guide

(Continued from page 26)                         posals have not been announced.                state’s consumer fraud law. As a result of the
   The state’s business community is closely        The plaintiffs’ bar and its allies in the   weak state consumer-fraud law, businesses
watching Double Quick, Inc. vs. Ronnie Lee       state legislature unsuccessfully supported     are in jeopardy of becoming lawsuit targets
Lymas, now before the Supreme Court of                                                          for something as minor as an invoicing
Mississippi on the question of the constitu-                                                    error. Of note, more than 93 percent of tort
tionality of caps on non-economic damages.                                                      lawsuits in New Jersey originate out of state.
   Mississippi’s overall climate trend is con-                                                     Reformers are supporting legislation
ducive to growth and job creation, but this                                                     that would establish qualification stan-
trend is fragile and depends on the future                                                      dards for expert witnesses, a measure that
election successes by pro-reform advocates.                                                     would have significant impact in the med-
                                                                                                ical malpractice arena. Additionally, the
NEW JERSEY                                                                                      New Jersey Lawsuit Reform Alliance is
2010 U.S. Tort Liability Index Output Rank                                                      working with lawmakers to establish a rea-
(Pacific Research Institute): 50th                                                              sonable appeal bond cap. Currently, New
    New Jersey’s liability climate is consis-    New Jersey Supreme Court - Hughes              Jersey requires defendants to post the
tently among the worst of the 50 states.         Complex                                        entire amount of a court award as bond for
There have been some recent reform suc-                                                         the appeal.
cesses, however. Governor Chris Christie         legislation expanding wrongful death              It is unlikely New Jersey’s liability cli-
is signaling that he understands that liabil-    actions that would have allowed unlimited      mate will be favorable to economic growth
ity laws are hurting the state economically.     damages, as well as legislation that would     and job creation in the foreseeable future.
However, significant liability reform pro-       have expanded strict liability under the
      How to Rein in the Plaintiff Plutocrats                                                   2010 U.S. Tort Liability Index Output Rank
                                                                                                (Pacific Research Institute): 15th
     1. Eliminate the doctrine of joint-and-        5. Congress needs to act on asbestos           Ohio continues to serve as a business and
  several liability, at least for non-economic   law reform. Our courts are clogged with        legal harbinger for the Midwest and a cen-
  damages.                                       lawsuits filed by people who, while they       tral battleground for legal reform in its legis-
     2. Congress and the courts need to          may have been exposed to asbestos,             lature and courts. The state has a highly
  impose and follow rational guidelines for      have absolutely no illnesses. These claims     active and motivated plaintiffs’ bar and an
  punitive damage awards, so the greater         prevent those with real illnesses from hav-    equally motivated business community
  interests of workers and shareholders can      ing their day in court.                        focused on specific tort-reform measures to
  be taken into account. The United States          6. Government lawsuits should be            strengthen the state’s economy and medical
  Supreme Court has strengthened and             restricted so that regulation through liti-    community. The 200-member Ohio
  clarified constitutional guidelines on the     gation becomes a thing of the past.            Alliance for Civil Justice has advocated for
  award of punitive damages. Lower courts           7. A Legal Consumer’s Bill of Rights        comprehensive tort-reform initiatives
  should heed those rulings.                     should be enacted that would give clients      including medical criteria for asbestos, silica
     3. Congress or the courts should            the vital element of any functional market-    and mixed-dust cases.
  reverse the “opt-out” provision, so that       place—disclosure and honest information.          A 2010 Ohio Insurance Department
  people must affirmatively choose to join          These seven measures would go a long        report shows that the state has realized sig-
  a class-action lawsuit.                        way toward reforming the stranglehold          nificant benefits since state-level medical
     4. There should be a return to the orig-    the plaintiffs’ bar has on our society. But    malpractice reforms in 2003 put a
  inal understanding of the rule of law. Con-    one more area still needs to be                $350,000 cap on non-economic damages.
  gress or the courts should rely on the         addressed: Before we can free our politi-      The report details a 21 percent drop in
  implied power to roll back the ability of a    cal system from the grip of a special inter-   medical liability-related lawsuits between
  single jury to tax and regulate the entire     est, we must free our culture from the dis-    2005 and 2006. An additional result is the
  United States.                                 torted myths told by the plaintiffs’ bar.      influx of new physicians practicing in the
                                                                                                state, a similar development experienced

32    NACD Directorship June/July 2010
           State Litigation Guide
The Annual Litigation Guide

by Texas after enacting its recent reforms.     on procedural grounds, not substance,            mesothelioma lawsuits from scientifically
  The outlook for the state Supreme             which had been remedied by the newer             sound standards of causation and weak-
Court is unclear. In a controversial move,      legislation. Pennsylvania remains one of a       ened workers’ compensation law.
Governor Ted Strickland appointed               small handful of states not to enact this          Other plaintiffs’ bar bills called for
Franklin County Probate Court Judge Eric        important reform.                                sweeping qui tam expansion for targeting
                                                   Recently introduced legislation would         Texas businesses; requirements for
                                                have driven up jury awards by allowing
                                                plaintiffs’ lawyers to quantify damages by
                                                suggesting lump sum figures to a jury, there-
                                                by tainting the discretion of a jury.
                                                   Many studies and medical associations
                                                have in recent years declared the Com-
                                                monwealth’s healthcare system in extreme
                                                crisis based on the number of physicians
                                                leaving medical practice or moving from
                                                the state, as well as the closing of critical
Ohio Supreme Court                              specialty facilities, particularly maternity
                                                units. Employee health insurance is              Texas Supreme Court
Brown to fill the remaining months of           among the most expensive in the country.
Chief Justice Thomas J. Moyer, who died                                                          employers to reimburse for “phantom”
unexpectedly in April. Brown will face cur-                                                      medical expenses allegedly incurred in
rent Justice Maureen O’Connor, a Republi-                                                        personal-injury matters; lowered standards
can, on the ballot in November for a full                                                        of liability protection for emergency-room
term as chief justice. Governor Strickland                                                       treatment; eliminated the right to contract
could have appointed a caretaker or elevated                                                     for arbitration as an alternative dispute res-
a lower court judge on a temporary basis:                                                        olution in many kinds of cases; expanded
Some worry Brown’s appointment is an                                                             class-action lawsuit provisions to allow the
unnecessary politicization of the Supreme                                                        state Attorney General to bring suit on
Court. This will be one of the nation’s most                                                     behalf of individuals; and eliminated cer-
closely watched court elections.                                                                 tain liability protections for physicians who
                                                Pennsylvania Supreme Court in the
                                                                                                 practice in rural hospitals.
                                                State Capitol
PENNSYLVANIA                                                                                         The Texas Trial Lawyers Association is
2010 U.S. Tort Liability Index Output Rank         The 2010 elections will highlight many        investing heavily in the state’s election
(Pacific Research Institute): 46th              issues related to the civil-justice imbalances   cycles. According to The Wall Street Journal,
    Pennsylvania’s liability climate remains    that have created quality-of-life and cost       plaintiff lawyers spent $9 million in 2008’s
one of the worst in the country. Lame duck      hardships for the people of Pennsylvania.        state legislative elections to gain support and
Governor Ed Rendell’s support of several                                                         it is likely this funding will increase in 2010.
critical pieces of legislation that would       TEXAS                                                Thanks to continued pressure from the
expand liabilities, along with the pro-plain-   2010 U.S. Tort Liability Index Output Rank       Texas business community and legal reform
tiffs’ bar imbalance in the state House and     (Pacific Research Institute): 18th               advocates, the state’s economy has fared bet-
Senate, point to the 2010 elections as nearly      Texas maintains a favorable liability cli-    ter and will rebound sooner because of a
the only hope for meaningful change.            mate, even while the plaintiffs’ bar spends      legal and regulatory environment encourag-
    Rendell’s most famous flip-flop was sup-    millions to put forward hundreds of bills        ing investment and job creation. D
port for, then later veto of, the Fair Share    intended to roll back tort reforms enacted
Act reforming joint-and-several liability.      in recent years. Two recent bills, both of       For further information, contact the Foun-
The original 2002 Fair Share Act was            which passed at least one legislative cham-      dation for Fair Civil Justice at (770) 317.2423
passed and later struck down by the courts      ber, would have exempted asbestos-related        or email

34    NACD Directorship June/July 2010

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