Malicious Intent


How the GOP’s war on the tort system has caused pain
and suffering to victims and Democrats.


By Kevin Drum

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The personal is political. So let’s take a personal tour of the American legal system as it’s currently practiced in the great state of Texas, shall we?

Blocking the Courthouse Door - by Stephanie Mencimer; Free Press $26Victim #1 on our tour is Jordan Fogal, a middle-aged Republican homemaker who bought a home in Houston four years ago. On the day the Fogals moved in, Jordan’s husband pulled the bathtub plug after he had finished taking a bath and, as Jordan later recalled to Randall Patterson of Mother Jones, “all 100 gallons of that water came down through the dining room ceiling, into the light fixtures, down the columns, onto my dining room table and Oriental rugs. And I just started screaming.”

The Fogals’s builder fixed the drain, but more problems cropped up. And then more. An inspector found serious roofing problems, widespread moisture and rot, and encroaching mold. Jordan called and called but got nowhere. Their inspector estimated repairs at $199,000. The builder eventually offered $5,000. Later, Jordan discovered that other houses in the same neighborhood had reported similar problems, and that her house had displayed water and mold problems even before they had bought it.

So did the Fogals take their builder to court? No. Like many states, Texas requires dissatisfied homeowners to settle disputes out of court in binding arbitration. But that’s not all. The Texas legislature has also abolished “workmanlike construction” standards for homes, done away with punitive damages, and created a builder-controlled commission that determines whether you’re even allowed to file for arbitration in the first place. Of the few who get there, even fewer win in arbitration, and there is no appeal. Jordan Fogal was stuck.

Victim #2 is Alvin Berry. Like many Texans, he voted Yes on Proposition 12, a 2003 initiative that limited pain and suffering damages in medical malpractice suits. “I think there are too many frivolous lawsuits,” he told Texas Monthly reporter Mimi Swartz.

But then Berry suffered some malpractice of his own: a doctor who ignored a set of plainly dangerous lab results for months. When the doctor finally ordered a biopsy, he discovered that Berry had prostate cancer that had spread to his bones in 20 places. He gave Berry five years to live.

Subscribe Online & Save 33%Unlike Jordan Fogal, Berry had the right to go to court. In theory, anyway. In practice, as his lawyer explained to him, it’s now usually an exercise in futility. Because of the new damage caps, it’s not worth it for lawyers to take anything but the most slam-dunk cases. What’s more, even if you can find a lawyer to represent you, insurance companies have very little incentive to settle since their losses are limited by law. Thus, between court costs, attorneys’ fees, and other expenses, Berry would be lucky to recover $75,000. Maybe not even that much. Given that reality, was he really willing to sign up for two years of litigation? Most people aren’t.

Victim #3 is Juan Martinez, who was killed in 1999 when a reactor exploded at a Phillips Chemical Plant in Pasadena, Texas. Dozens of workers had been killed at the plant in the previous decades, along with hundreds injured, and when his widow’s case went to trial a year later, the evidence of negligence on the part of Phillips was clear and compelling.

Jurors in the case were appalled and socked Phillips with punitive damages equal to a month’s profit for the company—a pointed warning to clean up its operations. But Phillips never paid anywhere near that amount. Thanks to a tort-reform law championed by George W. Bush in 1995, state law reduced the punitive damages by 97 percent. With no prospect of ever losing a significant amount of money for worker injuries or deaths in Texas, a simple cost-benefit analysis suggests that Phillips has little incentive to change a thing. It’s cheaper to let people die than to upgrade their plant.

“Defunding the trial lawyers”

That last example comes from Stephanie Mencimer, author of “False Alarm,” an award-winning 2004 article for The Washington Monthly about the myth of America’s lawsuit crisis. Mencimer has now expanded that article into a book, Blocking the Courthouse Door, that documents the relentless campaign waged over the past two decades by conservative activists and their corporate allies to limit access to the civil court system. It joins Tom Baker’s excellent The Medical Malpractice Myth, published last year, on the (still) very short shelf of books finally fighting back against the tort-reform industry.

And an industry it is. Insurance companies have been dutifully warning the public since the 1950s that “you pay for liability and damage suit verdicts whether you are insured or not.” But for  its first three decades, their lawyer-bashing campaigns were both sporadic and desultory, a subject of interest only to a few conservative wonks camped out in little-known D.C.-based think tanks. That all changed in the late 1980s and early 1990s when a succession of Republican partisans, including Dan Quayle, Karl Rove, Newt Gingrich, and Grover Norquist, finally realized just how powerful an issue tort reform could be.

Up until then, lawyer bashing had been mostly a pro forma applause line for Republican politicians: a reliable way to loosen the checkbooks of large corporations and generate cheers from local Chamber of Commerce audiences. But in the 1980s and 1990s, conservative activists began pursuing a series of strategies aimed not just at increasing Republican votes and campaign contributions, but also at reducing Democratic votes and campaign contributions—and doing so in a structural way that would permanently erode the Democratic Party’s ability to win elections. The result was an increased interest in gerrymandering, union busting, voter ID laws, and the K Street Project, a party-wide program aimed at persuading lobbying firms to stop hiring Democrats.

And, of course, tort reform. Tort reform was already a natural Republican Party issue thanks to its support in the business community, but it was Norquist, in his usual bald style, who pointed out in 1994 that there was more to it than just that: The big losers in tort reform are trial lawyers, and trial lawyers contribute a huge amount of money to the Democratic Party. “The political implications of defunding the trial lawyers would be staggering,” he wrote.

This observation explains a good deal about the conservative tort-reform crusade that’s otherwise inexplicable. Take damage caps. Republican politicians, George Bush chief among them, know that railing against frivolous lawsuits is a guaranteed crowd pleaser, and they frequently hold up caps on punitive damages as a way of reining them in. But this makes no sense. Almost by definition, frivolous suits are the ones that are either dismissed by judges or else settled for small amounts by insurance companies that decide they aren’t worth the hassle. These cases aren’t affected by damage caps at all. In fact, the only cases affected by damage caps are the ones that have been fully litigated and in which a jury has already found serious and substantial harm. In other words, they affect the least frivolous cases in the entire civil court system.

So why the focus on damage caps? Take a look through a political lens and the answer becomes clearer. The lawyers who pursue small lawsuits, frivolous or otherwise, run modest street-front businesses and make modest incomes. They aren’t the source of serious political campaign cash. That comes from big-time attorneys, the kind who litigate major cases worth millions of dollars. And in those cases, it’s often punitive damages and pain-and-suffering damages that make up the bulk of the recovery. These aren’t frivolous cases—far from it—but they’re the cases that generate millions of dollars in fees and millions of dollars in contributions to Democratic politicians. Since trial lawyers mostly work on contingency, capping damages caps their fees, and capping their fees is what Norquist meant by “defunding the trial lawyers.”

Blocking the Courthouse Door shines a bright and welcome light on this cynical strategy, in which populist rhetoric masks back-door political machinations that cause the greatest harm to the victims who have suffered the greatest injuries. But Mencimer goes well beyond this, taking on some of the most enduring myths of the tort-reform movement. Have Americans become more litigious in recent years? Not really. Are payouts getting bigger? Not on average—and judges reduce the excessive ones anyway (though newspapers rarely report this). Are doctors being driven out of business by medical malpractice suits? No. Do poor juries in “judicial hellholes” award outsized verdicts as a way of getting back at society? The evidence suggests otherwise, though that doesn’t stop the tort reformers from inventing new hellholes for credulous headline writers every time a jury returns a big verdict against a large corporation—regardless of whether the verdict was deserved or not.

And this, of course, gets to the heart of the tort-reform issue: Are corporations victims of the tort system, or do they richly deserve the big punitive judgments that occasionally come down the pike? Consider one of the cases Mencimer highlights, in which Bank of America illegally raided the accounts of elderly and disabled customers and continued to do so even though they knew perfectly well they were acting illegally. They figured they could get away with it because each individual amount was so small that no lawyer would find it worth their time to litigate it.

In Europe, which relies more heavily on regulation than the United States, it’s likely that a case like this never would have occurred. And if it had, the bank would have paid a fine, not a court judgment. But the United States, historically more suspicious of central regulation than most European countries, has generally chosen a different course, relying heavily on the civil court system to punish corporations for bad behavior. Seen in that light, did Bank of America really deserve the hundred-million dollar punitive judgment it was eventually ordered to pay in a class-action trial? Probably so. After all, if the courts hadn’t punished Bank of America for taking egregious advantage of elderly customers, who would have? And if no one had done it, what would keep them from doing it again?

The same kind of tradeoff between regulation and tort occurs in employment law, a frequent bête noir of small business owners, who sometimes feel like they’re at war with their own employees over charges of racism, sexism, harassment, or running a “hostile workplace.” But as labor lawyer Thomas Geoghegan has pointed out, much of this is due to the decline of unions and union arbitration, which was fundamentally less adversarial than the court cases that are now the only avenue many workers have for working out grievances. Even the Manhattan Institute’s Walter Olson, a scourge of tort abuse, recognized this tradeoff in his 1997 book The Excuse Factory, and suggested that the business community may be paying an unexpected price for its decades-long war against unions.

But even though this tradeoff is inherent in the system, it’s nonetheless in everyone’s interest to make the tort system as fair and efficient as possible. The Republican Party gave away its lack of genuine concern with fairness and efficiency last year when it passed legislation to force most class-action suits into federal court—a move that makes a certain amount of sense since most class actions target large corporations and include plaintiffs from all over the country—but then deliberately declined to increase the resources of the federal civil system to deal with the increase in suits. Plainly, the goal was less an increase in efficiency than it was an effort to keep consumer class-action suits from being heard at all.

Unfortunately, Blocking the Courthouse Door doesn’t really address this efficiency issue either. Most countries, for example, have adopted a “loser pays” system that forces the loser in a civil case to pay the legal fees of the winner. Even many liberals support this as a common sense reform, but Mencimer dismisses it without much explanation and then goes on to dismiss even legitimate concern over frivolous lawsuits as merely “the price Americans pay for having a democratic legal system.” Her book would have been improved by a more serious acknowledgment of the drawbacks of the American tort system and at least a cursory review of reform proposals that genuinely make sense.

But that would have been a different book, and the book Mencimer wrote instead is one that’s been a long time coming. The shibboleths of the tort-reform industry have become so ingrained in American culture—“jackpot justice,” “judicial hellholes,” “greedy trial lawyers”—that most people accept them without much thought, unaware that they’re mostly myths invented by a very deliberate and very well-funded political campaign. Blocking the Courthouse Door is a welcome corrective.

   

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Kevin Drum, contributing writer for The Washington Monthly, edits Political Animal at washingtonmonthly.com.  
 
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