Tort Reform Perception Versus Reality

INTRODUCTION

On February 27, 2002, the Wall Street Journal reported that the U.S. Chamber of Commerce plans to spend up to $15 million for television ads that highlight the “hidden costs” of allegedly plaintiff-driven product-liability litigation.²  Thus, U.S. business returns full throttle to an old campaign: tort reform.

The message is not new.  For the past fifteen years, pro-business interests in America have sought to “reform” the judicial and regulatory systems that govern consumer products and services in America by limiting the remedies of injured citizens.  Until now, initiatives targeting legislative change have encountered limited success.  Although many legislatures have adopted some tort-reform measures, most states have rejected the more Draconian reforms.  In fact, courts in some states have struck down tort reform attempts as unconstitutional.

The tort reform campaign has gained much wider acceptance, however, in the jury box.  Many jurors now treat as axiomatic the notion that the nation is plagued with “frivolous” lawsuits and outrageous jury verdicts.  The rich and greedy plaintiff's lawyer has become a part of American folklore.  Of course, these stereotypes have not emerged by chance.  They have grown out of a calculated attempt by corporate America to portray itself as the helpless victim of an unfair legal system - to cultivate a legal system that favors business interests.

Thus, while the tort reform campaign may not have convinced legislatures and judges, it has resonated with the public at large.  Contrary to widespread propaganda, studies have shown that jurors tend to be “generally favorable toward business, skeptical more about the profit motives of individual plaintiffs than of business defendants, and committed to holding down awards.”³ As a result, plaintiffs prevail in fewer than half of the cases (48%) that juries hear⁴.  Moreover, the overall value of the average jury award is generally less than the actual losses suffered by victims⁵.  In fact, juries make the largest awards not in tort cases, but in business litigation cases.⁶

The battle here is not about reality, but perception, and business interests have clearly influenced this battle.  And there is every indication - from the Chamber of Commerce's announcement to election promises - that pressure for alleged “reform” of the legal system will only increase.  To face these challenges, proponents of equal access to the justice system for all must understand (1) how the “need” for reform was created, (2) the tactics used and (3) the true facts about the role of personal injury cases in the nation's courts.

THE BEGINNING OF THE “TORT REFORM” CAMPAIGN

Initial industry efforts to shape the tort-reform debate began in the 1980's and concentrated on the editorial boards of large newspapers and small-town publications.  Editorial writers themselves described direct links between industry-sponsored tort reform campaigns and the content of the editorial articles they wrote.  In the mid-1980s, for instance, three tobacco firms (Lorillard, Brown & Williamson and Philip Morris) hired the law firm of Arnold and Porter to gather news clippings on “out-of-control” personal injury claims and send them to influential reporters, columnists, editors and TV producers⁷.  These clippings inevitably contained biased accounts of lawsuits in which plaintiffs won large verdicts for seemingly small or nonexistent civil wrongs.  Public relations campaigns like these, targeted at the press, produced positive results for their industry sponsors. Commentators soon noted that “ . . . the media began to reflect the anguish of business leaders who complained that a “tort explosion” was undermining Corporate America.”⁸

Individual editorial writers acknowledged the influential effect of the industry media blitz.  Naomi Freundlich, science editor at Business Week, described how her perceptions of the breast implant litigation shifted after receiving several targeted mailings from the Dow Corning Corporation⁹.  Embroiled in lawsuits with thousands of women over the implants it manufactured, Dow Corning sent Freundlich and other editorial writers materials that disputed the notion that breast implants cause disease.  Describing her reaction to these mailings, Freundlich commented that: “At first, I shrugged the material off as company propaganda.  But it wasn't much later that scientific articles and a wave of news reports led me to begin to question the accusations being made against implants.”¹⁰ Targeted persistence coupled with effective use of one sided materials produced hefty pay-offs for companies like Dow.

By the mid-1990s, corporate America had succeeded in achieving one of its primary goals: winning a place on the editorial boards of influential periodicals like the Wall Street Journal and controlling the framework through which issues like tort reform were discussed.  Through writers like Max Boot and John Stossel, industry leaders were able to sway the course of public opinion and capture the attention of the regulators who were most likely to implement its tort reform agenda.  The strategy? Demonizing trial lawyers, playing into the public fear of corruption and manipulation, and, ultimately, convincing the public that the victims of these misdeeds would be economic progress and public health.  This strategy, however, relied on skewed facts about trial lawyers and the civil justice system in general.

Media outlets accused trial lawyers of everything from attempting to “bypass and subvert democracy”¹¹ to stirring up “false illnesses.”¹²  In most lawsuits, one writer explained, “the evidence of [corporate] wrong-doing was at best ambiguous and at worst completely fraudulent.”¹³ Lack of evidence did not stop the “swashbuckling” tort lawyers, however, for “they simply bludgeoned the companies into settling by threatening an endless series of harassment suits.”¹⁴  Moreover, most of the time the big settlements “went not to the alleged victims but to their lawyers”¹⁵  Editorial writers like John Stossel issued urgent pleas for system-wide reform that would “protect [Americans] from legal vultures.”¹⁶  Relying on a keen sense of hyperbole, Stossel mocked the notion of “Exploding Cars! Breast Implants! Flammable Pajamas!,” setting out to inform the public that “[t]hese are the type of media-enhanced scare stories that trial lawyers thrive on, and it is from the bullying promoters of these ‘dangerous products' that lawyers claim to protect us.”¹⁷  Then, Stossel cleverly asks, “What if it's the lawyers who are the bullies? Who polices them?”¹⁸

Editorial boards have also attempted to create a public fear that a rash of lawsuits, fueled by irresponsible and greedy lawyers, would bankrupt America.  Calling for a return to the days of “personal responsibility” (read “caveat emptor”), writers cautioned Americans to refrain from resorting to lawsuits when trifling problems arose.¹⁹  “Unfortunately,” one commentator warned, “the Blame Game, while very lucrative for the lawyers, costs you and me plenty.”²⁰  The United States civil justice system, he informed his readers, is the most expensive in the world.  “It not only costs us $152 billion annually,” he explained, “but it also decreases economic productivity and employment.”²¹  Then a word of warning: “If we Americans refuse to accept responsibility for our own actions, we may all have an even more serious price to pay.”²²  Other writers like John Stossel criticized lawyers for making all products inaccessible to the less fortunate: “They brag that football helmets are safer because of their lawsuits, and they probably are, but the liability premium adds $100 to the cost of the helmet.  That means that financially strapped schools don't have a football program.  The kids play in the street.”²³

Moreover, the Wall Street Journal editorial board promoted the idea that frivolous lawsuits filed by greedy attorneys would ultimately deprive Americans of valuable, life-saving medical treatments.  One writer warned that “the threat of lawsuits has stopped the development of birth-control devices and made delivering babies a high-risk profession.”²⁴  He cited an example of a particularly frivolous case that typified the problems that plagued the system:

A family is now suing in Maryland because of injuries its daughter sustained playing high school football.  Her enterprising attorney claims the board of education failed to warn her of football's risks, a sport whose violence is on TV every autumn weekend. . .. Now the costs of her playing will be borne by the school district's taxpayers - not to mention that some judge may well force them to drop football.²⁵

Suits like the one in Maryland, it is argued, while sometimes successful in lining the pockets of lawyers and individual plaintiffs, would work to inflate the cost of public services, and might render many services unavailable altogether.

Playing on public fears of ever-elevating medical costs, media outlets have turned recently to the issue of medical malpractice insurance.   Editorial boards are promoting the idea that enormous jury verdicts that have forced insurance companies to hike malpractice premiums to an all time high.  For instance, a New York Times editorial concluded that “medical malpractice insurance premiums are soaring at the highest rate since the mid-1980s, adding to rising health care costs.”²⁶  The article blamed this rise, in part, on the fact that “juries keep awarding more for other damages, like medical expenses and lost wages,” despite the fact that several laws place caps on pain and suffering awards.²⁷  Caught up in the momentum of this media-fueled drive, the President of the Florida AMA recently told a group of doctors that “the medical liability system is out of control . . . We're at war.”²⁸  Informing the doctors that “politics got us into this mess and it's politics that will get us out,” the President encouraged the doctors to ask their patients to sign petitions for a state constitutional amendment that would cap medical malpractice damages.²⁹  It is the lawyers, flooding the system with lawsuits and out-of-control jury verdicts, and not corporate wrongdoing or insurance company malfeasance, that ultimately harmed the public they professed to protect.

DISPELLING THE MYTH

Editorial writers echoing pro-business interests have engaged in a war of words, attempting to convince the public that “the notion that it's really consumers who benefit from the lawsuit explosion is laughable.”³⁰  So-called “junk science” explains large verdicts against otherwise innocent companies.  Greed explains the lawyer's success in manipulating the legal system.  “Victim” defines the role of all citizens in the face of such corruption.  The first casualty of this war of words, however, has been truth.  Endeavoring to create a system that places business interests above those of consumers, these writers have ultimately failed to report accurate empirical data about the workings of the American justice system.

First, regardless of what editorial writers at the Journal suggest, jurors tend to be conservative and not anti-business.  The notion that plaintiffs' lawyers are winning “out of control” jury verdicts has also been refuted in several reputable studies.  In 1995, one study focused on jury awards in the nation's 75 largest counties.³¹  Researchers concluded that punitive damages are awarded in only 3.3% of all cases.³²  Moreover, judges were more likely than juries to award them.  While judges awarded punitive damages 7.9% of the time, juries awarded them in only 2.5% of the cases they heard; while the median damage awarded by judges was $75,000, the median jury award was only $27,000.³³

Hard evidence and statistical studies also discredit the claims of tort reformers that the number of lawsuits filed in this country is exploding.  In reality, only 10% of Americans ever seek compensation for injuries (including informal demands and insurance claims), and only two percent of Americans ever file lawsuits.³⁴  Moreover, instead of skyrocketing, the volume of tort litigation in this nation has actually declined steadily since 1990.³⁵  Between 1984 and 1994, civil cases rose 24%, while criminal cases rose 35%, juvenile cases rose 59% and domestic relations cases rose 65%. Between 1989 and 1997, tort filings in America dropped 9% while contract suits went up 9% in the two years between 1995 and 1997.³⁶  The numbers in Minnesota have paralleled this national trend. In 1992, the plaintiffs filed 328 medical malpractice cases in Minnesota .³⁷  By 2001, that number had decreased by over fifty percent, with the total number of filings reaching only 132.  In contrast, the number of non-personal injury civil filings has increased from 31,281 in 1992 to 35,980 in 2001.³⁸  Regardless, no one has suggested that business or intellectual property litigation needs to be reformed.

Moreover, while industry claims that the cost of allegedly “frivolous” lawsuits results in increased insurance, manufacturing and product costs, they fail to mention corporate defendants who employ tactics designed to increase the cost of litigation.  To quote a now famous document written by a tobacco lawyer representing R.J.  Reynolds: “‘[T]he aggressive posture we have taken regarding depositions and discovery in general continues to make these cases extremely burdensome and expensive for plaintiff's lawyers, . . ..To paraphrase General Patton, the way we won these cases was not by spending all of [defendant's] money, but by making the other son of a bitch spend all of his.'”³⁹

In the Dalkon shield litigation, for instance, where 200,000 were injured and more than 17 died, company stalling tactics succeeded in delaying suits for over 10 years before A.H. Robins agreed to pay any awards to victims.⁴⁰  In addition, a recent Ernst and Young study revealed that liability costs for U.S. corporations decreased 37% in the five years prior to 1997.⁴¹  On average, the cost of products liability insurance amounts to only 16 cents per $100 dollars of retail costs (2/10 of 1 percent).⁴²  In fact, when adjusted for inflation, insurance costs have fallen over 75% since 1988.⁴³

Although medical malpractice insurance costs have been on the rise in the past few years, these increases have little to do with “out of control” jury verdicts.  Rather, the primary culprit is the insurance industry itself.  Insurance rates reflect conditions in the financial marketplace.  With a turbulent economy post 9/11, insurance-company investments have floundered, forcing the industry to increase rates to maintain profit levels.  A recent article in the Wall Street Journal reports that the mismanaged pricing and accounting practices of insurance companies have been major contributors to malpractice premium increases and the withdrawal from the market of certain major insurance carriers.⁴⁴  During the booming economy of the 1990s, insurance companies in fierce competition for new territories sold coverage for less than the cost of claims.⁴⁵  When the economy went bust, and investment earnings dwindled profit reserves, the insurance industry found itself in crisis.  The only way out was to raise premiums.

Of course, the insurance and medical industry conveniently ignore these facts in their drive to attribute premium increases to large malpractice verdicts.  The statistics used by the industry to support their claims, however, have finally come under critical scrutiny.  Even the Wall Street Journal has questioned the credibility of industry-promoted statistics, noting that “the litigation statistics most insurers trumpet are incomplete.”⁴⁶ In fact, the U.S.  House of Representatives has called for a GAO investigation of the insurance industry's responsibility for creating a nationwide malpractice crisis.⁴⁷

Finally, studies show that even if jury verdicts do explain premium increases, the remedy called for by the industry – tort reform – will not solve the problem.  A study based on data from the insurance industry itself concluded that tort reform laws that limit damage awards and lawsuits have done nothing to halt or lower insurance costs.  In some cases, premiums have risen more in states that have implemented tort reform laws than in states that have not.⁴⁸  The study concluded that “legal system restrictions are based on a false predicate.  Tort reforms do not produce lower insurance costs or rates.”⁴⁹

CONCLUSION

The most notable consequence of the tort-reform media campaign is the changed attitudes of judges and jurors.⁵⁰  The industry's campaign to portray the legal system as out-of-control and plaintiffs' lawyers as unscrupulous has impacted deliberations in the jury room.  One study conducted by professors Valerie Hans and William Lofquist concluded that 83% of jurors think that there are “far too many frivolous lawsuits,” 57% believe that “lawsuits interfere with the development of new and useful products,” and 51 % believe that “big business . . . is adequately concerned” with safety.⁵¹ Juries also demonstrated a reluctance to find fault in industry practices.  “Most of the jurors polled in the Hans and Lofquist study made fewer comments derogating business . . . compared to the more frequent negative evaluations of plaintiffs and their mercenary motives.”⁵²

The pro-tort reform media agenda has also had an impact on judges, and has caused judges to implement reform policies in their courtrooms.  Studies have noted an increasingly pro-defendant mind-set among judges in the United States.  This mind set is reflected in the propensity of judges to reject liability-expanding claims,⁵³ to defer to legislatures and regulatory agencies,⁴ and to use “tort reform” reasoning in their opinions and decisions.⁵⁵  Scholars have attributed these changes to pro-tort reform propaganda that has occupied such a prominent role in media writings and commentary.  One scholar noted that “[a] . . . promising explanation of the pro-defendant trend rests in the efforts of tort reformers not only to secure passage of reform legislation, but also to change public and policymaker opinion about the torts and products liability system.”⁵⁶  Other researchers have concluded that “[judicial] opinions that reject new liability expanding claims often sound the themes of the tort system's critics, e.g. that the system is out of control, imposes burdensome costs on business and consumers, deters manufacturers from marketing worthwhile products, . . . and makes U.S. products less competitive in world markets.”⁵⁷

Trial lawyers are trained to win within the parameters of the courtroom.  If the above is any indication, putting together a strong case may not be enough.  Trial lawyers face the increasing challenge of protecting their clients not only in the courtroom, but also outside the courtroom.  Equal access to the court, a basic pillar of this democratic society, is once again under attack.  If we wish to protect the legal system under which we serve and represent those injured by unsafe products and negligent acts, we must rise to battle. Fortunately, we have two persuasive weapons - truth and justice.  Let us hope it is enough to prevail.