Docket Case: Pennsylvania Tort Reform Advocates V. Critics

Docket Case: Pennsylvania Tort Reform Advocates V. Critics, No. 052009, P.A. (2009).

Questions: Is Pennsylvania tort reform necessary? Will the suggested tort reforms offered by the advocates save money, encourage business, and stimulate the economy?

Plaintiffs’ (Advocates’) Opening Statement, Exhibits

Resting on its laurels. Allowing society to shoulder excessive costs. Preventing economic freedom. Pennsylvania is guilty of it all, according to a report from the Pacific Research Institute for Public Policy (PRI), and has been for some time. The Keystone State’s failure to reform its tort system, the report says, leaves the state in great jeopardy in terms of tort costs and litigation risks.

For the lay, “tort law” is the name given to a body of law that addresses, and provides remedies for, civil wrongs not arising out of contractual obligations. And when it comes to tort costs and reforms, PRI’s “U.S. Tort Liability Index: 2008 Report” finds Pennsylvania scraping the bottom, ranking 45th out of 50 states.

“Pennsylvania needs to enact comprehensive, meaningful tort reform,” said study coauthor Lawrence J. McQuillan, Ph.D., director of business and economic studies at PRI. “Because [Pennsylvania] has done little in terms of meaningful tort reform compared to other states, it is poorly positioned to contain its future tort costs and risks.”

Consequently, the state’s earned “sinner” status in the report.

The U.S. tort system, like any industry, consists of inputs and outputs. In determining a state’s status –as either “saint”, “sinner”, “sucker”, or “salvageable”, a PRI press release states the study merges and uses 41 tort system variables, (13) input variables (e.g. courthouses, judges, juries, clerks, copying machines, law libraries and the rules and procedures on the books that shape tort outputs) and (28) output variables (e.g. cases filed, attorneys practicing to handle the cases, damage awards, and settlement amounts)

“In the competition for jobs and capital investment among the states, those states that suffer from high tort costs and litigiousness (i.e. “sinners”) will continue to lose jobs and businesses to states with superior tort systems,” said McQuillan.

The study, in this, its second installment, uses these various variables to examine which states have rules on the books that, if implemented and enforced, reduce lawsuit abuse and tort costs. These rules are controlled by voters, legislators, and/or judges, either directly or indirectly in each state. The states owning the best overall tort rules on the books, and that will be “heading in the right direction” if said rules are fully implemented, said the report, are “saints” like Colorado, Texas, Ohio, Georgia, and Indiana.

States at the top of the U.S. Tort Liability Index have fairer and more predictable legal systems with less lawsuit abuse and fewer excessive awards, said the report. Valuable in its own right, said the report, this also results in many positive spillover effects for state economics, ranging from more jobs and greater innovation to improved healthcare and stronger economic growth.

The only states ranking worse than Pennsylvania in the report are Montana, Illinois, New York, New Jersey and Florida.

In the northeast in particular, Pennsylvania, New York, New Jersey and Rhode Island “are hostile to economic freedom and the growth that comes with it,” cowrote PRI’s health-care studies directors McQuillan and John R. Graham in their op-ed “Reform Can Help States’ Fiscal Crises,” published in numerous newspapers.

In this op-ed, McQuillan and Graham define economic freedom as “the right of individuals to pursue interests through the voluntary exchange of private property under the rule of law. It translates,” they said, “into low taxes, few regulations, only essential government spending with limited redistribution, and a balanced tort system.

“Unfortunately, tort law has spun out of control.”

“Pennsylvania,” McQuillan told The Business Journal, “has no, or weak, reforms in the areas of appeal-bond caps, non-economic damage caps, class-action rules, early-offers of settlement, attorney-retention sunshine, jury service, asbestos/silica rules, junk food/obesity rules, and expert witness standards.”

Pennsylvania’s failure to enact comprehensive, meaningful tort reform in the face of high and rising tort costs and risks created by lawsuit abuse by personal-injury lawyers will continue to mar the state’s economic freedom and business climate, said McQuillan.

The PRI report said “An efficient tort system is an important part of a thriving free-enterprise economy. It ensures that firms have proper incentives to produce safe products in a safe environment, and that truly injured people are fully compensated. An efficient tort system results in greater trust among market participants, leading to more trading, and eventually a higher standard of living for individuals in the society. An efficient tort system benefits all.

Conversely, continues the report, “A poor tort system, on the other hand, imposes excessive costs on society, not the least of which is fore-gone production of goods and services. There is growing evidence that U.S. tort costs are far greater than other countries’ costs and that much of the difference is due to excessive litigation and lawsuit abuse. All of us shoulder the burden of an excessively expensive and inefficient tort liability system through higher prices, lower wages, decreased returns on investments in capital and land, restricted access to health care, and less innovation. Businesses that spend more money each year on liability insurance have less money available for research and development or for health benefits for their employees. All of us pay the price, whether we realize it or not.”

Pennsylvania also ranked 46th in PRI’s “U.S. Economic Freedom Index: 2008 Report”, down from 45th in the previous installment of the index. The 2008 report, the third in the series, also coauthored by McQuillan, “provides a reliable metric of economic freedom, and encourages a discussion among the public and in state legislatures about economic freedom, along with areas for policy reform.

“Economic freedom,” this index reads, “is the right of individuals to pursue their interests through voluntary exchange of private property under a rule of law. This freedom forms the foundation of market economies. Subject to a minimal level of government to provide safety and a stable legal foundation, legislative or judicial acts that inhibit this right reduce economic freedom. Government acts that advance this right increase economic freedom.”

Legislators can also use the Index to ponder the consequences of inaction, said the report. “Two effects of limiting economic freedom, the report confirms, are that people flee economically oppressive states, and those residents who remain are made poorer. Legislators can change those outcomes by expanding economic freedom in their states, and the Index will help them in that task.”

PRI, a California-based free-market think-tank formed in 1979, is, according to its website, a non-profit, nonpartisan public policy educational organization that has advanced policy solutions that rely on free markets, limited government, and individual initiative and accountability.

For more info:
View entire “U.S. Tort Liability Index: 2008 Report” at: https://special.pacificresearch.org/pub/sab/2008/Tort_Index/.
View entire “U.S. Economic Freedom Index: 2008 Report” at: https://liberty.pacificresearch.org/publications/us-economic-freedom-index-2008-report-2.

Plaintiffs’ (Advocates’) Expert Witnesses

PRI’s “U.S. Tort Liability Index: 2008 Report” has found support in Pennsylvania.

“[The U.S. Tort Liability Index: 2008 Report] points out [Pennsylvania’s] simply not attractive on the basis of our legal climate,” said Gene Barr, vice president of government and public affairs for the Pennsylvania Chamber of Business & Industry. “Any of these [PRI-suggested reforms will] create a better legal environment to make Pennsylvania more attractive for businesses to site [in].”

Like PRI-suggested reforms regarding monetary caps on non-economic damages, punitive damages, and appeal bonds.

“One of the most important things for business is predictability, and the fact that you have runaway verdicts in some cases, undermines any sense of predictability as what costs will run to,” said David N. Taylor, executive director of the Pennsylvania Manufacturers Association.

“If non-economic damages [were] limited to either a set dollar amount, or some multiple of actual economic damages, up to a certain amount, this would provide stability and predictability on costs and stabilize the insurance markets,” Taylor said. “This way, employers would have some sense of what to expect from their rates.”

Taylor explains the purpose of the legal system is to make people whole. Delving into “the intangibles” of non-economic damages and applying an economic answer by trying to determine the worth of the victim’s pain and suffering, et cetera, “while not suggesting those hurts are not always real,” pushes the case into the realm of emotion and is “inherently problematic” because these damages are “unquantifiable.”

Punitive damages, said Taylor, are more than simply making the person whole.

“In other countries, most especially Britain,” said Taylor, “they’re recognizing that punitive damages are a punishment for a greater damage done to society; punitive damages are not awarded to the plaintiff, but instead to the state.” Having a reform of punitive damages would also “curb the entrepreneurial nature of the plaintiff’s bar.”

“In Pennsylvania,” added Barr, “our constitution has been interpreted to say the legislature cannot move forward on any kind of caps. What we would have to do –and we, the business community, and doctors and hospitals have already attempted to do– is change our constitution solely to allow the legislature to have that debate –which we can’t do right now.

“While we’ve not advocated a particular number,” Barr said, “we think it’s certainly necessary and appropriate our legislature have the debate. Particularly,” said Barr, “in light of greatly increasing healthcare costs, and so forth.”

Barr said taking such measures could stimulate the economy, save money, make Pennsylvania more receptive to job creators, and help in the practice of defensive medicine.

“I’m not going to say legal reform is the only criterion businesses evaluate when determining where to site, just like I won’t say taxes are the only thing,” said Barr, “but in the concept of taxes and the concept of our legal environment, Pennsylvania falls way down the list.”

Standards for Negligence, Joint & Several Liability

Taylor said having standards for contributory, comparative, and modified-comparative negligence would certainly limit lawsuit abuse.

“What is so misguided about our judicial system is not only that it, in some ways, functions more like a national lottery than an impartial system of dispute resolution,” said Taylor, “but also it’s the underlying notion that all of us have a right to a nerfed existence and that nothing bad can ever happen to anybody.

“So much of the lawsuit industry is premised on those two falsehoods, that somebody owes you something, and that if anything ever goes wrong for you in your life, that somebody’s gotta pay.”

And sometimes, said Taylor, some are forced to pay a lot when faced with what he calls, essentially, “the deep pockets rule.” Barr said Pennsylvania needs to immediately adopt reform of this rule, known as Joint and Several Liability.

Pennsylvania, said Barr, is of only six states who has not done so.

“In our view, [adopting reform of this rule] would be the quickest, easiest, most logical thing for us to do. Forty-four states,” said Barr, “have figured out a way to reform this concept, which is a huge disincentive to business, and one of the major issues for hospitals and doctors.

“[With our current rule on joint and several liability], you could be one or two percent liable [for an accident and/or injury],” Barr said, “and be responsible for 100 percent of the damages. In our view, that’s not right. And it leads to is personal injury lawyers trying to cast a net as wide as possible to catch anyone who could conceivably be involved.”

“The repeal of joint and several would allow for some degree of proportional reliability,” said Taylor.

From other anecdotes, Barr cited one case where a company, who had “clearly no culpability whatsoever,” agreed to settle out of court because “all it took was some on the jury saying, ‘Well, they could have done this a little differently, maybe they could have done that,’ so they paid $1 million to get out of the case.

“That’s how joint and several works,” said Barr, “and in plainness, personal injury lawyers know it. They know if they can grab a couple companies with deep pockets –whether cash, big insurance coverage, or both– they can probably get them to pony up something.”

Barr said the most unfortunate thing about joint and several liability is that it’s been passed twice in Pennsylvania. Once struck down in courts because “they didn’t like the way that it was purely procedural, not substantive,” and a second time –about three years ago– when Governor Rendell vetoed it. “Even though he supported it as a candidate and campaigned on it. Hugely frustrating,” said Barr.

Taylor believes someone also needs to be held accountable for attorney contingency fees.

Attorney Contingency Fees, Class Action Rules, FDA/FTC Defense

“[Limiting attorney contingency fees] speaks to the same principle about having class action rules amended –there should be limits on what attorneys can take from what’s intended for the redressed plaintiffs. We need balance,” said Taylor, “it’s not that the people should go without representation, or that the people who represent them should go uncompensated, but the fact is many times you have a lawyer taking the lion’s share of monies that are awarded in a given case.”

So many times, class action suits are simply a vehicle for the plaintiff’s bar to loot a particular company or industry to enrich itself, rather than addressing any harms done to individuals in the class, said Taylor. If reforms were put on these suits, particularly ensuring compensation benefits the members of the class, it would reduce the economic incentive for lawyers to seek out these kinds of cases when they are not justified, said Taylor.

While The Business Journal approached countless local defense lawyers without success, a defense lawyer from Wilkes-Barre did say our fruitless efforts most likely resulted because, “People see [defense lawyers] as ‘the bad guys’ in cases like personal injury and the like,” he said. “They believe we’re denying the injured just compensation when, in actuality, we’re simply doing our jobs, representing our clients and their rights. They often forget the defendant has his or her rights.”

When it comes to changing rules to allow defendants in product liability cases the right to invoke the FDA or FTC defense, Taylor feels it’s simply common sensical.

Taylor refers to the medical realm, explaining, for example, the many years of rigorous research, development, trials and approval it takes to get a medicine or medical device to market. He notes FDA approval cannot be fast-tracked for a medication (et cetera) even if it has been approved by a recognized government body, is in use, in treatment, and benefitting people in another country.

“There’s a moral hazard here,” said Taylor. “What happens to the people in the U.S. who have benefited from it, but don’t have access to it for a year, two years, or more? What happens if they die from their illness, condition, what have you, which this medicine could have prevented?

“This is like a nod to the expertise and research that already exists about a particular product that’s being referenced in this particular defense,” Taylor said, “saying ‘look, we’ve been vetted by the relevant government authority. Doesn’t that, in and of itself, prove the product, if used correctly, is safe?”

Early Settlement, Jury Duty, Collateral Source Rule

Taylor also favors the adoption of Federal Rule 68 regarding early offers of settlement.

“It’s a way of encouraging settlement from cases, and anything that would provide a degree of accelerated mediation,” said Taylor, “brings these things to close, gets these cases off the docket, allows the courts to focus on other business, and would be good for everybody.”

As PRI also suggests, reform jury rules so people don’t avoid jury duty like the dentist’s office, said Taylor.

“Unfortunately, there’s the old joke: You’re sitting there in the defendant’s chair and you’ve got every reason to be terrified because you’re going to be judged by 12 people who weren’t bright enough to get out of jury duty.”

Taylor said there needs to be more value placed in the service rendered by our jurors, as a part of our civic literacy, and education, and just basic patriotism, and agrees some sort of reform is needed.

Finally, the collateral source rule also needs reformation, said Taylor.

“This rule really means telling the jury about other ways that the plaintiff may have already been compensated,” said Taylor. “As it stands now, if someone suffers an injury or some kind of wrong, he or she can receive a big insurance settlement, or payment through one of the taxpayer-funded systems like worker’s compensation or unemployment compensation, what have you, and that the defense cannot inform the jury of that fact. It’s a matter of truth-telling.

“The systems of social insurance, funded by the taxpayer, the system of commercial insurance, paid by the rate-payers, those systems all serve the same end. And it would help to reduce lawsuit abuse if double dippers, and triple-dippers were revealed as such in court.”

Closing Statements

As the PRI study showed, the problem with our current system is one of over-litigation, said Taylor

“The cost of the legal system in the United States is over two percent of our gross domestic product. There isn’t another country on Earth where the cost of their legal system is as much as one percent of the GDP. So the fact that our system is twice as costly as anyone other is a major competitive problem because it acts as a hidden tax.

“Any of these different reforms would provide a fairer, stabler, more predictable system that inflicts fewer unnecessary costs, it lowers that hidden tax and it, again, allows the monies that would otherwise be spent on lawsuits to instead to be put to productive use.”

“Again, our legal system should be zero, absolutely not, it is critical for the success of our free enterprise system to have a healthy and functioning judicial system, that can enforce contracts and uphold property rights and settle disputes and all of those sorts of things, however,” said Taylor, “as this PRI report shows, Pennsylvania is ranked 45th out of 50 states in lawsuit abuse both with inputs and outputs, and this is directly related to PA’s very poor economic performance.

“The trial bar is one of the most powerful interests in Harrisburg,” said Taylor, “they have their fangs deep into all of the caucuses, not just the Democrats, but the Republicans too, and that it’s part of our culture. And we’re paying the price for this hidden tax and this failure to enact the kind of common sense reforms that exist in a lot of neighbor states and competitor states.”

Defendants’ (Critics’) Rebuttal, Expert Witnesses

However, not all in Pennsylvania, and elsewhere in the nation, agree with PRI’s 2008 Tort Liability Index report. Some question PRI’s motives, legitimacy, and math.

“Mark Twain once said, ‘There are three kinds of lies: lies, damn lies, and statistics.’ I think the [2008] PRI [U.S. Tort Liability Index] report qualifies as all of the above,” said Paul Lyon, coordinator and spokesman for The Committee for Justice for All, a Kingston-based non-profit advocacy group “fighting to preserve the integrity of the civil justice system and the Constitutional right of all Americans to trial by jury,” its mission statement reads.

“The report is nothing more than anti-consumer propaganda,” Lyon said. “It’s funded and fabricated by the same corporate special interests that have actually the most to gain, by shutting the courthouse doors to injured people.”

According to Leonard Sloane, former president of The Pennsylvania Association for Justice and practitioner of law in Media, PRI is funded by companies like Altria (the largest tobacco company in the world, formerly Philip Morris), Exxon Mobile, Pfizer and PhRMA (“Tort reform not the answer to state’s fiscal crisis,” Jan. 11, 2009, The Delaware County Times)

These organizations are all interconnected, said Lyon. “There’s a huge propaganda infrastructure of which PRI is a part. It’s funded by corporate America, whose sole mission is to eviscerate the civil justice system, reduce liability costs for corporations, and eliminate any form of accountability.

“I find [the report’s] methodology is totally flawed,” said Lyon, “and it’s conclusions are completely erroneous. The Tort Tax and terms like ‘sinners’ and ‘saints’ make for compelling copy and catchy headlines, but they’re utterly meaningless. [The report is] junk research at its worst.”

Lyon said, in addition to quoting themselves or related organizations such as the American Tort Reform Association (a front group for big tobacco, big oil and big PhrMA) 52 times (see the report’s endnotes), some of the claims they make are “just unreal.

“For instance, page 9 [of the report, PRI] talks about the cost per person of the tort system. This is a completely specious number to begin with. They extensively cite Tillinghast-Towers Perrin [TTP], a wholly-owned subsidiary of the insurance industry.” Lyon reads further.

“[TTP] says direct U.S. tort costs were $261 billion in 2005, which translates to $880 per person, in contrast, costs were only $96 per person in 1950,” Lyon reads. “First of all, the tort system, as it currently exists, didn’t really even exist in 1950. I highly doubt anybody was keeping track of those statistics in 1950. Furthermore, the costs of goods and services and the things people are compensated for in lawsuits, such as medical bills and medical services, have gone up exponentially since 1950. It’s an apples-and-oranges comparison; it makes no sense to compare today’s tort costs versus those in 1950.”

Look at the components of tort costs, said Lyon.

“First components are insurance costs, benefits paid to third parties or their attorneys and so on. The third thing they look at is insurance company administrative costs –what does that mean? Insurance industry CEO compensation.”

Lyon notes Forbes Magazine revealed Daniel Amos of Aflac was the highest-paid CEO, raking in just under $28 million in compensation. And over the last five years, he’s been paid almost $87 million in compensation.

“Is that [and similar executive salaries] included in the insurance company administration costs? I think they are,” said Lyon.

Lyon cites another passage from the report. “In the past 50 years, direct U.S. tort costs have risen more than 100-fold. In contrast, population has not even doubled, and economic output has risen by only 37-fold. As a result, tort costs have become a larger share of our economy. America has become a more litigious society.”

“Well that doesn’t follow. At all. From those so-called ‘facts’ they just cited. For instance,” said Lyon, “after World War II, people bought cars and moved to the suburbs. With the rise of the American automobile and everyone owning one, more accidents occurred. With this rise in accidents, more litigation and insurance claims ensued, so that’s one of many (many) things that changed the American landscape and which could account for what they allege is a 100-fold increase in U.S. tort costs. However I don’t believe that statistic to begin with.”

The PRI report also considers the total number of state trial courts involving civil cases per 100,000 residents.

“That’s absolutely meaningless!,” said Lyon. “Civil cases include all kinds all kinds of different stuff –not just tort cases. And according to the Center for State Courts, businesses versus business lawsuits outnumber tort lawsuits 10 to 1, and those are all civil cases. Patent infringement, copyright infringement, contract disputes, real estate disputes, et cetera, all fall under the civil justice system. So to look at how many civil cases are filed in a state is totally meaningless.”

Lyon also notes the PRI report puts much stock in the number of residents and active attorneys in a state.

“Again, completely meaningless.” Lyon said the percentage of the PA Bar that practices tort law is in or just above the single digits.

“So how meaningful is it to look at the number of practicing attorneys in a state as an indication of litigiousness? Or of the tort system? In PA, 85 percent of the lawyers could be corporate lawyers. What does that mean? I don’t think it means anything!

“The markets within particular geographic, and within states,” said Lyon, “state the number of lawyers practicing within any area of law is dictated by market factors. If you’re in the Scranton/Wilkes-Barre area, where you have around a dozen hospitals within a 40-mile radius, you probably have more lawyers practicing medical malpractice, and handling such claims. Go out to the middle of Montana, you don’t –because there aren’t any hospitals.”

The report also cites “judicial hellholes” and “defense medicine,” said Lyon.

“The Judicial hellholes [concept] is a fabrication of the American Tort Reform Association, that’s based on surveys of defense attorneys within particular jurisdictions and has been completely discredited as having any credibility whatsoever, yet PRI looks at that as though it means something,” said Lyon.

“PRI cites ‘defensive medicine’ as though it were an established fact. It’s not. It’s very much in dispute. A myth,” said Lyon “Look in the Scranton area, virtually all of our diagnostic testing is being done at outpatient, diagnostic centers, and they’re owned by doctors. So by ordering more tests, they’re increasing their profit.

“So it’s disingenuous at best, and outright deceitful at worst, to say that doctors are practicing defensive medicine.”

How do you find out which companies are not developing new products b/c they’re afraid of litigation?” said Lyon. “What are they doing sending them surveys or something? I mean how do you measure that? Without getting inside the minds of those companies’ CEOs? How do you measure that? You can’t measure it. It’s nonsense.”

But what about PRI’s suggested monetary caps on damages?

Monetary Caps on Non-Economic Damages, Punitive Damages, Appeal Bonds

“Take this scenario, for instance: a housewife is killed by medical malpractice,” said Lyon. “They have a very low economic recovery because there isn’t really any wage loss, per say, no future medical costs –because she’s deceased, so that person then, according to the proposal by PRI and others, their recovery would be limited to non-economic damages only, which would be capped at $250,000.”

Medical malpractice cases, explained Lyon, are often complex and take years to litigate, and the costs, the outlay by the attorneys and law firms to proceed with the case can run well into the six figures.

“So what happens if the family of this housewife shows up at a law firm or calls the intake paralegal and they are told they seem to have a case –that there is certainly some negligence and malpractice, but there is no recovery at the end of the day. The recovery, if you look at the 33 percent contingency fee ($80,000), plus you have to recoup your costs, (let’s say they’re $100,000), what’s left for your client? And that assumes the jury would award you the full $250,000.

“So a cap on non-economic damages will effectively shut entire classes of plaintiffs –low-income plaintiffs, people with low economic value– out of the courthouse, and [PRI and similar groups] know that,” said Lyon. “That’s why they’re doing that. That’s why $250,000 is the magic number, not $500,000 or $1,000,000.

“People who have high economic worth –surgeons, corporate executives, for instance– will be able to find lawyers to take their cases because their value, their income earning capacity, is much higher.”

“[Tort reform advocates] always want to be able to quantify damages, they talk about uncertainty,” said David I. Fallk, Scranton attorney and president of The Committee for Justice For All. “The problem with certainty is the problem you have with the infamous Ford Pinto Case.

“Ford knew it had this problem, actually calculated this defect would probably result in 60 deaths, 60 severe burns, and they figured, well, if we could hit $250,000, the magic number… Ford did a cost-benefit analysis as to which would be more costly, paying the $11 or $15 per Pinto to fix the defect versus suffering the lawsuits and replacing the burned up vehicles. The analysis said don’t fix the cars. Burn people.” And Ford kept quiet and let the accidents happen, and let people die.

“So that’s what you get when you have that kind of thinking. It’s scary at times,” said Fallk. “And [PRI and other tort reform advocates] talk about ‘the legal lottery’ or ‘the jackpot justice’ –terms coined from focus-grouping, but tell me, who’s in the lottery more than the people driving the Ford Pinto? Or if you’re driving a Ford Explorer with Firestone tires? Or you’re taking Vioxx?”

Standards for Negligence, Joint & Several Liability

PRI suggests reforming the state’s standards on negligence. Fallk says nay.

“Pennsylvania currently operates under a modified-comparative standard for negligence, where you have to show the defendant was at least 50 percent negligent before you can collect. That’s just an honest policy to me,” said Fallk, “once you get into the variations of comparative negligence, and contributory negligence (which was just a free ticket to evade responsibility), to reinstate these is really to take the law back half of a century.”

And joint and several liability?

“You may not think it’s fair if you’re the defendant, maybe a hospital,” Lyon said, “but it’s really not fair to make plaintiffs and their families go through years of litigation to collect on a judgment that’s been rendered in a court of law.”

Fallk adds, “And why should the plaintiff have to go after two or more different defendants? Shouldn’t those defendants be responsible to work it out?”

Attorney Contingency Fees, FDA/FTC Defense

What about PRI’s suggestion of capping attorney contingency fees?

“First of all, no one is capping the fees that large corporations or the insurance industry can pay their lawyers. And no one is capping the harm they can do to people,” said Lyon. “But when people go to hire an attorney who is willing to take risks, invest his or her own money, and pursue [the case] for years, all of a sudden they think that should be capped. Free market, all of a sudden, doesn’t exist. But the entrepreneurial spirit doesn’t apply. And that’s the height of hypocrisy.”

Attorney Howard M. Levinson, partner at Rosenn Jenkins & Greenwald, agrees there should be no change in attorney contingency fees.

“Over the years,” said Levinson, “plaintiffs’ cases are becoming more and more expensive, and the reality is some cases last years, and people who have been seriously injured would not be able to get the quality of representation they’re entitled to once you start reducing attorney contingency fees.”

And the FDA/FTC defense, also known as “regulatory pre-emption”?

“If someone designs and manufactures a product that consists with those standards, they should be able to invoke that as a defense,” said Levinson, “but I don’t think that that should be an absolute defense and excuse them from liability. To say those standards provide absolute immunity, I feel, is categorically wrong. We’re an evolving people and society, and as things change, people have to adapt to the changes that are being made to improve safety.”

Citing various cases, including the infamous Vioxx cases, Lyon said, “The FDA has been asleep at the switch in this case and others.

“[People who believe this defense should allow complete immunity] want to say, essentially, for instance, if this pace maker is FDA-approved, and then blows up, catches on fire and kills your elderly father, we will not be held responsible because the FDA said it’s okay. It’s nonsense.”

Early Settlement, Collateral Source Rule

“The PRI suggestions are unacceptable,” said Lyon, “except for early settlement.”

Levinson agrees. “I think [this suggestion] is fair and appropriate, and something that should be done in Pennsylvania. However I do think it could use some more teeth, and that it could better define what constitutes ‘costs’, because I don’t think that term currently includes experts’ fees.

“The law currently talks about any time more than 10 days before the trial begins,” said Levinson. “I’d like to see the rule moved back maybe to 60 days before the trial begins, and if the party who refuses the offer doesn’t get it, a verdict equal or greater than the offer, then the offeree should be responsible for all the costs.”

And collateral source rule?

“There’re a couple of problems with this,” said Fallk. “One, you’ve paid for this with a separate insurance; why should you be penalized for it? And two, they don’t stand up and say, ‘But by the way, we want to reimburse the plaintiff for his insurance costs, we’re just gonna take full credit on this stuff. That’s not fair either if I’ve spent years paying, say, Blue Cross and now all of a sudden I have to use it –why shouldn’t I get reimbursed for what I’ve paid in to have this covered?

Fallk also points out sometimes the other payer has segregation rights.

“Blue Cross does. Say Blue Cross gets a claim,” said Fallk, “and they admit my injury was caused by someone else’s negligence. They then can and will send me a letter saying we have segregation rights, if you sue them and you collect, you have to pay us back what we paid on your behalf. They don’t always give credit for that segregation on this, and so they try to take advantage of other people’s financially responsible acts.”

Closing Statements

Asked what he thinks of groups like PRI, Fallk sounds off.

“They’re well-paid for what they do. And what they do just adds to a chorus of misdirected aims,” said Fallk. “Never confuse tort reform with real reform. Don’t forget, none of these [PRI-suggested reforms in this report] do anything to improve public safety, which is a major aim of tort law.

“[PRI’s aim is] blame the justice system for the economic climate. Nobody would think that the closing of the mines in Northeastern Pennsylvania had anything to do with the lack of tort reform. The loss of the needle trades. You’re not going to get jobs back here as long as you’re competing with 50 cent/hour workers in Asia.

“To think that tort reform is the catalyst for economic improvement is diluting,” said Fallk.

“I don’t believe reforming out tort system, taking away from people who have been seriously injured and are in need of fair and just compensation is any way to jumpstart our economy,” said Levinson. “There’s a disconnect [there]. There are other issues and reasons why our economy is in the condition it is in. Certainly, by and large, people that are plaintiffs in personal injury actions aren’t responsible for the mess that Wall Street has created, and those people shouldn’t be financially harmed.”

Lyon adds insurance companies spend “an inordinate amount” of money adjusting claims, and trying to deny people compensation for their injuries. “Is that the fault of the tort system?” he asks.

“Right now we have the same corporate mentality that’s screwed up Wall Street focusing on our justice system,” said Fallk. “In many instances, this just tells people to cut corners, telling them what they want to hear, rather than telling them what they need to hear –we have to have safety first, we have to have transparency and accountability, and we have to hold those people responsible and not work out schemes to get around that.”

“[The PRI report] says an efficient tort system ensures that firms have the proper incentives to produce safe products in a safe environment so that truly injured people are compensated. Yet what they’re trying to do is just the opposite,” said Lyon.

“They’re trying to lift any regulatory and oversight framework, that are trying to allow corporations to act with impunity to evade responsibility and accountability, and to deny legitimately injured people the compensation they deserve,” said Lyon. “[The work of PRI and similar groups all] reinforce the same idea: serve corporate masters at the expense of the consumer, consumer rights, and consumer safety.

At the end of the day, the people who lose in this equation are the people who rely on the courts as their last refuge. The regulatory framework in this country is obviously either incapable or unwilling to enforce responsible corporate conduct, as we’ve recently seen on Wall Street. And in many cases, the tort system is the only regulator to deter reckless corporate conduct. And these guys want that to all go away.”

Both sides have spoken. We now ask for your deliberation.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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