Levison Group Column for August
October 6, 2008
On occasion, my syndicated column for Under Analysis, a product of the Levison Group, will be found on these pages. Occasionally is like right now!
Make em work for Exxon and Microsoft and Such
You can tell finances are tight here in the Levison Towers. Nothing has been redecorated for the twenty seventh summer in a row. The last new addition to the library is already out of print. And the “refreshments” at the annual Summer Associate mixer were leftovers from political fundraising events. At least, I hope that is where they came from.
Like many sectors of the service industry, things are tight at law firms. Clients are paying later than before- bills that say “due in 30 days” are now ignored for at least 60 days before they are put in the “pay” pile. Those who fear losing clients altogether are not aggressive in collections. The bill merry-go-round is in full whirl.
There was a time when the practices of law and medicine were thought to be THE big wage earning professions. In those days, every daughter was supposed to marry a lawyer or doctor. And when those days passed and all the dinosaurs died off, every daughter was supposed to BE a lawyer or doctor.
The Bard, William Nelson, gave this exact advice to mothers around the globe. He wrote, in his classic poem, “Mamas, don’t let your babies grow up to be cowboys… Make ‘em be doctors and lawyers and such.”
According to the United States Department of Labor, however, lawyers are not the big money makers they once were thought to be. In their recently released study tracking data from May 2006, the median annual earnings of all wage and salaried lawyers was $102,470. The middle half of the occupation earned between $69,910 and $145,600. (This came directly from their study- only a gubmint document would quote a statistic for the middle half.) Doctors have fared a bit better, with a median income of $156,000 to $321,000. Not shabby for either group. On the other hand, mothers ought not discourage budding young cowboys solely on the basis of earning potential.
In a week when Exxon posted record, $12 billion in quarterly earnings, what career should budding Getty’s pursue? (I know that Getty is a bad example here- Exxon made more profit than Getty did when he had an oil monopoly. Sheesh.) I would love to hear your thoughts, Gentle Reader, because I got nothing. I love being a lawyer.
My youngest son asked why I chose to be a lawyer recently. This child, The Inquisitator as we call him, smells fear like a dog smells new socks on a mailman. And fear was in his nostrils when he asked me why I liked being a lawyer.
The truth is that I worked for a state senator in high school, and thought I wanted a career in politics. That dream went out of style for me sometime after the tall socks I wore back then. Politicians spend most of their time fundraising, and I would prefer to eat liver sandwiches than fund raise. The Inquisitator has known me his whole life, but can’t fathom that his father once was young and had aspirations too! The truth would not be good enough for him.
Where to start? Telling him I loved helping people made me sound like a Red Cross volunteer at a disaster site: “Hey, I see your house just got carried away by a flood. Bummer. Care to have me explain the Rule in Shelley’s case?” To a client who is out of work and in pain due to a broken leg from a car crash, it does feel like help when your lawyer calls to say that a rental car is available, and medical bills will get paid. No way the Inquisitator would accept that representing injury victims in court was as good as being a fireman or something.
I could have told him that I like the intellectual challenge of practicing law. But then again, poring over insurance policies at 8 p.m. on a Friday evening doesn’t feel all that intellectual, really. Neither does crafting brilliant interrogatories to learn the name, rank and serial number of a witness to a long past event. It is slanderous to call it drudgery- to those who thrive on drudgery that is.
Instead, I could feel the sweat beading up on my forehead. I blurted out, “Because I couldn’t get a job as a TV weatherman.”
“Oh,” he said. “Kevin’s dad sells computers. That seems like a good job to me. I want to design video games.” That satisfied, the Inquisitator went back to his video games, which he was in fact designing. I felt relief at first. Then ashamed. Not being able to explain why you do what you do is bad, but when your career depends on your ability to explain things to jurors and other strangers, it is much worse.
I would have liked to explain to my son why exactly I practice law. What I enjoy about it, and that I wouldn’t choose a different career path now, even if I could. TV weather notwithstanding.
I can only hope that when he writes the “Lawyer Man” video game, he gives me a small role somewhere. Preferably with a cowboy hat.
The Levison Group has a website- www.levisongroup.com.
(c)2008 Under Analysis, LLC. Under Analysis is a nationally syndicated column of the Levison Group. Spencer Farris is the founding partner of The S.E. Farris Law Firm in St Louis, Missouri. If you know of a weatherman opening, please let him know though. Comments or criticisms about this column may be sent directly to the Levison Group via email at comments@levisongroup.com.
Hypocrites of Tort Reform- Long Version!
October 6, 2008
The Hypocrites Of Tort Reform Advocates Who Changed Their Tunes
Emily Gottlieb
Deputy director of the Center for Justice & Democracy.
No one likes a hypocrite. Yet one would be hard pressed to find more hypocrites than in the “tort reform” movement. Take a look at the record of a host of lawmakers, lobbyists and even journalists who complain about lawsuits and argue that the rights of injured consumers to go to court should be scaled back because we are too “litigious.”
When they or family members are hurt and need compensation for their own injuries, often minor ones, these same individuals do not hesitate to use the courts to obtain compensation, to right a wrong, to hold a wrongdoer accountable or to obtain justice. The same is true for corporations that have funded the “tort reform” movement. These companies support efforts to immunize themselves from liability for harming consumers. But when these same companies believe they have been wronged by a business competitor, they are the first to sue.
In this report we take a look at the cases of several proponents of tort restrictions who do not “practice what they preach.” We examine individuals who have sued sometimes for millions of dollars while at the same time championing damage caps and other severe liability restrictions for others. We also look at corporate litigants who have lent financial or other support to groups like the American Tort Reform Association, the Manhattan Institute and state business coalitions like New Yorkers for Civil Justice Reform.
Notably, tort restrictions advocated by these organizations virtually never limit the rights of corporations to sue business competitors for commercial losses. This list is by no means exhaustive but merely representative of businesses and other “tort reformers” who say one thing but do another when it comes to the civil justice system.
George W. Bush
As Texas Governor, George W. Bush was one of the “tort reform” movement’s biggest proponents. One of Bush’s first acts as governor in 1995 was to meet with representatives of nine Texas Citizens Against Lawsuit Abuse (CALA) chapters in a salsa factory outside of Austin, after which he declared a legislative “emergency” on “frivolous lawsuits.” Over his two terms, Bush signed a series of brutal bills that severely reduced injured consumers’ rights to go to court.
However, when it comes to solving problems involving his own family, Bush heads straight to court. In 1999, Bush sued Enterprise Rent-A-Car over a minor fender-bender involving one of his daughters in which no one was hurt. Although his insurance would have covered the repair costs, making a lawsuit unnecessary, Bush sought additional money from Enterprise, which had rented a car to someone with a suspended license. In this case, Bush seemed to understand one of the most important functions of civil lawsuits — to deter further wrongdoing. The case settled for $2,000 to $2,500.
U.S. Senator Rick Santorum, R-Pa.
As a United States Senator, Rick Santorum has repeatedly supported limits on consumers’ rights to seek compensation in the courts. In 1994, Santorum sponsored the Comprehensive Family Health Access and Savings Act that would have capped non-economic damages at $250,000. In a 1995 floor speech supporting damages caps, Santorum said, “We have a much too costly legal system. It is one that makes us uncompetitive and inefficient, and one that is not fair to society as a whole. While we may have people, individuals, who hit the jackpot and win the lottery in some cases, that is not exactly what our legal system should be designed to do.”
But the same rhetoric does not seem to apply to Senator Santorum. In December 1999 Santorum supported his wife’s medical malpractice lawsuit against her chiropractor for $500,000. At trial, the Senator testified that his wife should be compensated for the pain and suffering caused by a botched spine adjustment, claiming that she had to “treat her back gingerly” and could no longer accompany him on the campaign trail. After the verdict, Santorum refused to answer phone calls asking what impact the case had on his views of “tort reform.” According to his spokesman Robert Traynham, “Senator Santorum is of the belief that the verdict decided upon by the jury during last week’s court case of his wife is strictly a private matter. The legislative positions that Senator Santorum has taken on tort reform and health care have been consistent with the case involving Mrs. Santorum.” In January 2000, a judge set aside the $350,000 verdict, deeming it excessive, and offered a reduced award of $175,000 or a new trial on damages only.
“Lawsuit Abuse” Group Founder and Trustee, Sterling Cornelius
Sterling Cornelius, owner of Cornelius Nurseries and Turkey Creek Farms in Houston and a trustee of the corporate front-group, Citizens Against Lawsuit Abuse (CALA), is one of the most vocal businessmen complaining about lawsuits and advocating tort restrictions in Texas. With the help and support of the Texas CALA group, Texas enacted a series of “tort reforms” in 1995, including caps on punitive damages and severe restrictions on lawsuits filed under Texas’ Deceptive Trade Practices Act.
But in 1993, Sterling filed a $100 million lawsuit against DuPont, claiming that its fungicide, Benlate, damaged his companies’ crop and nursery. Among the damages Cornelius sought were $75.3 million in punitive damages under the Deceptive Trade Practices Act as well as additional punitive damages. Because his lawsuit was filed before enactment of the 1995 legislation, his lawsuit was not affected by the “tort reforms” that passed.
Florida State Representative Mark Flanagan
As a member of the House Civil Justice and Claims Committee, Mark Flanagan was a major force behind severe tort restrictions that were enacted in Florida in 1999, sponsoring and co-sponsoring bills that protect manufacturers of defective products, while calling Florida “the most litigious society in the world.”
But it was a different story when his own daughter fell from a daycare center’s jungle gym and broke her leg in 1995. Flanagan sued both the day care center and the manufacturer of the jungle gym, alleging that the manufacturer “negligently and carelessly designed” the apparatus and that the preschool failed to properly supervise his daughter. Like many injured victims whose rights Flanagan’s legislation decimates, the lawsuit alleged that his daughter suffered from “severe pain” and “lost the capacity to enjoy life.” After 18 months of litigation — and two months before his bid for re-election — Flanagan settled for an undisclosed amount.
Texans for Lawsuit Reform Board Members
In April 1995, Texans for Lawsuit Reform (TLR) helped lobby for legislation that capped punitive damages, limited governmental and professional liability, undermined joint and several liability and decimated Texas’ Deceptive Claims Practices Act.
Yet at the time this legislation passed, TLR Board members Leo Linbeck, Richard Trabulsi and Richard Weekley had themselves filed over 60 lawsuits either personally or as business owners. Between 1978 and 1995, Leo Linbeck’s construction company was the plaintiff in at least 37 lawsuits. In one suit, which was settled confidentially, his company sued its own insurance company for triple damages stemming from the deaths of three workers in a construction accident. In another case, settled in November 1988, Linbeck sued for punitive damages.
By 1995, Board member Richard Trabulsi had also filed suit numerous times. In 1986, as the owner of Richard’s Liquor and Fine Wines, Trabulsi sued Walgreen’s to force it to stop selling alcohol in Texas. He also filed a personal-injury suit against his company in which the company prevailed. He told the Houston Post, “I have had access to the courts a number of times I had forgotten.” As of 1995, TLR President and co-founder Richard Weekley, head of Weekley Properties and Weekley Development and a partner of David Weekley Homes, had sued six times; his companies had sued 14 times.
West Virginia Supreme Court Justice Richard Neely
In January 1994, West Virginia Supreme Court Justice Richard Neely testified before the New Jersey Senate Commerce Committee as it considered bills designed to abolish the state’s tort system. Appearing as a paid spokesman for the corporate front-group, New Jersey Citizens Against Lawsuit Abuse, Neely attacked every player in the civil justice system, from lawyers to judges to injured victims who sue.
Those pronouncements were surprising given Neely’s personal history with the civil justice system. In 1986, he reportedly sued TWA because his bags arrived 70 minutes late. He demanded $38,000, $3,000 of which was a “speaker’s fee” for telling other passengers about the delay. Three years later, the case settled for $12,500. In 1993, Neely sued Goodyear Tire after a wheel fell off his father’s Cadillac. He sought $49,000 that included $2,000 for himself for five-hours worth of telephone calls to his parents. As Neely testified before the New Jersey Senate, the case was dismissed.
Corporate Hypocrates
The following corporations have funded or are members of either national or state organizations that advocate “tort reform.” Tort reforms are always aimed at curbing litigation by sick and injured consumers against corporations, hospitals and other wrongdoers. Such “reforms” rarely affect “business-to-business” litigation, leaving corporations with unfettered use of the courts to obtain compensation for their commercial losses from trademark infringements, breach of contract, patent infringements, unfair completion or a host of other commercial claims. Sometimes the targets of their lawsuits are much smaller businesses or even consumers. The following are a few examples:
Enterprise Rent-A-Car
In 1998, Enterprise Rent-A-Car began litigation against Rent-A-Wreck — a company 25 times smaller than Enterprise — over Enterprise’s trademarked phrase, “We’ll Pick You Up.” Rent-A-Wreck had used radio ads that contained the phrase “And of course, they’ll pick you up.” Later, after a purported settlement between the companies, Enterprise tried to stop Rent-A-Wreck from obtaining a trademark for the phrase, “We’ll Give You A Lift.” In 2000, Enterprise sued Rent-A-Wreck for civil contempt for using “We’ll Give You a Lift.” The contempt motion was dismissed.
Exxon Corporation
Major corporations like Exxon support laws to limit the ability of average consumers to sue their insurance companies when those companies unfairly deny claims. But when Lloyds of London refused to pay Exxon $250 million for losses it suffered as a cargo owner resulting from the Valdez oil spill in Alaska, Exxon did what all consumers should have the right to do. Exxon sued its insurance company. In this case, Exxon won.
Exxon has used the courts for other purposes well. For example, in August 1998, Exxon sued Mobil Oil Corp. for patent infringement involving a catalyst that makes better plastics. A jury awarded Exxon $171 million and a judge issued an order prohibiting Mobil from infringing on Exxon’s patent.
Johnson & Johnson
Johnson & Johnson, makers of Mylanta in partnership with Merck, sued Smithkline Beecham Corporation for false advertising regarding the nutritional benefit of Tums over Mylanta. The court dismissed Johnson & Johnson’s complaint. The lower court’s decision was upheld on appeal.
In 1995, Johnson & Johnson/Merck filed another false advertising suit against SmithKline over claims that Tums and Tagamet HB were superior to Pepcid AC. The court issued a preliminary injunction, ordering SmithKline to suspend the ads. In 1999, Johnson & Johnson sued Bausch & Lomb for making claims about the superiority of its extended wear contact lenses.
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Conclusion
In 1975, Indiana lobbyist Frank Cornelius, whose clients included the Insurance Institute of Indiana, helped secure passage of a $500,000 cap on medical malpractice awards and elimination of all damages for pain and suffering in Indiana. As he wrote in the New York Times on October 7, 1994, he now “rue[s] that accomplishment.” Beginning in 1989, Frank Cornelius experienced a series of medical catastrophes that resulted in his wheelchair confinement, respirator-assisted breathing and constant physical pain.
When he turned to the Indiana courts to provide a remedy, to compensate him for his massive injuries and hold the negligent health care providers accountable, the law was no longer there for him. The Indiana legislature had taken his rights away. Though his medical expenses and lost wages amounted to over $5 million, his claims against both the hospital and physical therapist at fault settled for a mere $500,000 — the limit on damages for a single incident of malpractice.
In some ways, the hypocrites of “tort reform” are an amusing list. But tragedy for them lurks just around the corner, just like it did for Frank Cornelius.
Claims Don’t Drive Insurance Rates!
October 6, 2008
Blaming the Victims
Miami Herald
December 30, 2002
by Edward Wasserman
Why are liability insurance rates soaring again?
It’s the courts, stupid. Runaway juries award lottery-sized winnings for groundless claims filed by money-mad lawyers. Facing grievous losses, battered insurers have no choice but to raise premiums.
This, we all know.
At least, that’s what we’re told — by the insurers that pocket the soaring rates and by the companies and professionals who pay them and repeat what the insurance companies tell them.
The problem is that it’s not really true. Here’s why:
- The amounts paid out in claims haven’t really been rising, even though a few outlandish cases make it seem otherwise.
- What drives insurance rates has little to do with claims — and has everything to do with the profitability of the real business that insurers are in: investing in stocks, bonds and real estate.
Those are the conclusions of studies directed by J. Robert Hunter of the Consumer Federation of America. Hunter is an actuary who was insurance commissioner for the state of Texas and federal insurance administrator under President Gerald Ford.
The story of insurance rates that emerges from the studies is a stunning departure from the tale that we’ve long been told.
Investment Pools
Here’s how it really goes: Insurance companies are essentially huge investment pools. The whole reason insurers sell coverage is to raise money to invest.
Now, when interest rates are high and the bond and stock markets are returning nice profits, insurance companies are hungry for as much money as they can get their hands on. So they cut their premiums to sell more insurance, offer marginal lines of coverage and relax underwriting standards, even if that means taking on risks that turn out to be imprudent.
Naturally, insurers don’t like to pay out on claims; they’d rather keep that money invested. But the risk of claims losses is acceptable when the investment markets are hot and they can make profits from the premiums.
Then the markets cool off, and things are different. When interest rates fall — as they have now — and the profitability of investments plunge, insurers pull back from insuring. They jack up their rates to unaffordable levels, abandon lines of insurance with unappealing claims histories and narrow down the risks they accept. Clients start howling.
To cover their own tracks — and save themselves money later on — insurers clamor for restrictions on lawsuits that, they declare, are the real reasons they’ve had to raise their rates.
Lawmakers obligingly push through so-called tort reforms. They limit how much injured people can sue for, how much lawyers can make by taking on long-shot litigation, how much courts can make wrongdoers pay for grossly irresponsible actions, and how long manufacturers remain responsible for dangerous products they make.
These limits save insurers money. So, does the industry cut premiums?
In the 1999 study ”Premium Deceit,” Hunter and his associates looked at the impact of 15 years of tort reforms. They divided the 50 states into three categories depending on how aggressively legislatures had slashed the rights of plaintiffs.
Their conclusion: ‘States with little or no tort law restrictions have experienced the same level of insurance rates as those states that enacted severe restrictions on victims’ rights.”
For instance, Massachusetts — which had passed no tort reforms — had annual rate increases of 1.8 percent, the 10th lowest in the country. New Jersey, which had enacted tough lawsuit limits, had increases of 4.7 percent per year, or 2.6 times those of Massachusetts.
Stable Pools
In another study released in October, Hunter and his colleagues looked at medical malpractice insurance over the past 30 years. While doctors were periodically hammered by huge premium increases, the study found that the purported explosion of malpractice payouts that might account for the rate hikes had never occurred. Payments “have been extremely stable and virtually flat since the mid-1980s.”
Actual payouts on malpractice claims averaged under $30,000 — when the many claims on which nothing was paid are considered — and had risen not in any explosive way, but at the same rate as the overall inflation of medical costs.
Malpractice premiums “rise and fall in concert with the state of the economy,” the study concluded. Rates reflect the gains or losses of the insurance industry’s investments, and the industry’s calculation of how much can be made on the investment ”float” — the time that elapses between the inflow of premiums and the outflow, if any, on claims.
Affordable premiums during the 1990s encouraged more people to pay in money to insurers so the industry could profit from red-hot investment markets.
With the market cool, there’s little money to be made, so rates are heading into the stratosphere. The industry’s legislative allies are preparing for a new round of assaults on the courts in an effort to explain the sudden unaffordability of insurance. The specific lawsuit limits take various forms, but their objective is to deter plaintiffs by making suits harder to bring, harder to win and less likely to yield enough money to make them worthwhile.
Having a profitable insurance industry is in the public interest. Insurers historically have put vital pressure on businesses to stop practices that harm employees and customers. But they act only when they feel the hot breath of the courts on their necks. And it’s no less in the public interest to have a court system that lets ordinary people be compensated in a way that juries think fitting.
We don’t see the social cost of a family that can’t get its day in court because reforms have capped its potential gains to where they won’t cover the expense of litigating. But justice denied has a cost. It’s just not a cost the insurance industry wants you to care about.
Edward Wasserman is a writer and consultant in Miami.