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Bait and Switch with "Greedy Lawyers"

Killing Off the Jury with Tort Reform

by CLAY S. CONRAD

Tort reform is high on the Republican and corporate agendas. It is also on the table in many states, unless, of course, it has already passed. Tort reform advocates say that their goal is to restore balance in the civil justice system, to end frivolous lawsuits and the excesses of “trial lawyers”. But beware: all the talk about those evil, greedy trial lawyers is a smokescreen. What the tort reformers really want to eliminate the risk of being held liable and punished by a civil jury.

Consider the tort system from the perspective of a plaintiff’s lawyer. The plaintiff’s lawyer only gets paid if he wins, and then he receives a percentage of the jury award. This is called a contingency fee. The lawyer puts a great deal of time into the case, and usually advances the funds to pay experts. This can quickly run into very large sums of money. If the case is lost, so is that money. Obviously, plaintiff’s law is a high risk business – like drilling oil wells. You sometimes win big – and sometimes lose big.

Reduce the possible gains and you reduce the willingness of plaintiff’s lawyers (for the most part small businessmen) to take big risks. So, the corporate tort reform agenda is to raise the raise the risks and void the gains. When tort reforms put caps on the wins, with no similar caps on the losses, what happens? Difficult or expensive cases will not be litigated, because the downside risk will be more than the potential reward. Now mind you, we’re not talking about frivolous cases here (good lawyers don’t take frivolous cases, because they are by definition losers). We are talking about substantial cases, in which real people have suffered real injuries, often life-altering ones. These are cases, which thanks to tort reform, will never result in jury verdicts adequate to cover the risks of litigation.

Is the Jury System Dying? A Few Statistics

Chief U.S. District Court Judge William G. Young of Boston has said that “the American jury system is dying. It is dying faster in civil cases than in criminal cases. It is dying faster in Federal courts than in State courts. But it is dying, nonetheless”. In 1962, 11.5% of federal civil cases were decided by a jury trial; by 2002, it was 1.8%. In 1962, 15% of federal criminal cases were decided by a jury trial; by 2002, it was 5%. Both civil and criminal trials have shrunk in absolute numbers, while the number of cases filed has continued to increase. In 1962, each federal district court judge heard 39 trials a year; by 2002, the number was down to 13.2.

If the jury system is dying, tort reform is one huge nail in its coffin. By arbitrarily limiting the compensation a jury can give injured people for their injuries, tort reform reduces jury power and authority in those non-frivolous cases that are tried, while keeping many more cases from being litigated at all. The conscience of the community, as the jury is often called, is silenced – and technocratic cost/benefit analysis is expected to take its place.

The Flawed Theory Behind Tort Reform

What the tort reformers, who are by and large conservatives, fail to realize is that tort reform is paternalist, if not downright totalitarian. We limit the individual responsibility of tortfeasors to their victims in the name of “public good”, while forcing their victims to bear the costs of the injuries the tortfeasors caused, because society thinks it is too expensive to give them justice. In essence, we are redistributing wealth from victims to tortfeasors, by not holding the tortfeasors responsible for the damages they have caused.

The ends (say, reducing health care costs) cannot justify these means (eviscerating individual rights and responsibilities in the civil justice system.) Nor, of course, are health care costs lower in states with tort reform than those without. Or insurance costs. In fact, none of the numerous things our allegedly litigious society has raised the costs of have become cheaper as a result of tort reform.

The theoretical premise behind tort reform comes from a group of law professors called “behavioralists”, who argue juries are incapable of rendering rational punitive damage awards. They would prefer to see schedules of fines and penalties, overseen by technocratic administrators, take the place of juries. Some might think it relevant that their major work, a volume called Punitive Damages: How Juries Decide, was funded primarily by Exxon and other large corporations. Not surprisingly, the arguments in Punitive Damages support the corporate desire to take punitive damage awards away from juries.

What the “Behavioralists” claim is that punitive damages awards given by juries have no relationship to the harm or wrongdoing by corporate defendants. The niggardly interpretations of harm and wrongdoing accepted by the “Behavioralists” are unsatisfying (except, of course, to corporate counsel.) Moreover, their view of what juries should do would require completely eliminating the jury role in determining punishment in tort cases.

Could a jury rationally believe a cost/benefit analysis cannot rationally justify placing a known dangerous product in the stream of commerce – and punish the company that did so? Not according to the “Behavioralists”. The “Behavioralists” want the legal system to provide economically efficient deterrence of corporate misconduct. Juries, on the other hand, want fairness and justice.

A number of articles have shown that the “Behavioralist” research is logically flawed. Perhaps Temple Law School’s David A. Hoffman’s article How Relevant is Jury Rationality? does perhaps the best job of surveying the available literature showing that the cost-benefit analysis behavioralists uses as the sole test of jury rationality is only one of many factors juries and society must take into account. Prof. Hoffman’s is far from the only such critique.

If punitive damages are cost-efficient, they may fail to provide the degree of deterrence that juries find necessary. Furthermore, juries may find it justified to flat-out punish tortious conduct that was willful, reckless, or dishonest. It seems outrageous to take such decisions away from juries merely because a few law-and-economics types find it cost-effective to do so. Yet that is what the tort reform movement is attempting to do.

A criminal who kills many people may be given the death penalty in criminal courts. A corporate tortfeasor whose actions kill many people should risk the same penalty: bankruptcy, corporate death.

Rarely do juries decide corporate misconduct was so bad as to justify this death penalty. However, having it available does more to deter corporate misconduct than the criminal death penalty can to deter murder. Unlike most murderers, corporations are rational actors with the self-control to act in their own interest.

What About the Problems Tort Reformers Complain Of?

Tort reformers claim that excesses by those dreaded “trial lawyers”, (which somehow only includes plaintiff’s counsel, but not the lawyers defending corporations) make tort reform necessary. But is the solution to excesses by lawyers to reduce jury awards when they are justified? Such excesses exist (e.g., television commercials with cash-register sounds in the background), and they are, at best, tacky. But why should tort victims be the ones to pay for them?

Sometimes, it is argued. mass-tort litigation takes too much of a toll on our courts, as thousands of asbestos and fen-phen cases wind their way to a verdict. Our legislatures have not drafted procedures to properly handle such litigation. But is the solution to reduce jury power to punish tortfeasors in favor of those who are injured, killed or maimed?

There are problems with our procedural codes. And I would suggest that corporate defendants in these cases do not want to face expedited procedures, in which one loss may open the doorway to hundreds, thousands, or millions of claimants. As the public cost of a district court, on average, is about $1000 an hour, corporate lobbyists should be forced to take a backseat to public economy.

And in any event, is the way to handle the failure of the legislature to draft and enact appropriate procedures to handle mass-tort litigation to gut the power of juries to award damages to real victims?

Most tort reform bills that have either passed or been proposed do little or nothing to rein in actual lawsuit abuse. They deal with reducing damages to actual, bona fide victims. I would suggest this is because the corporate sponsors of tort reform are more concerned with the awards they have to pay REAL victims than they are with the costs of frivolous litigation.

If the latter was the concern, their goal would be a system to require plaintiffs or their counsel to reimburse defendants if a case is dismissed as frivolous. We are not hearing many cries for those sorts of reforms. Yes, there are some, but they are certainly not the focus. Those behind tort reform are not trying to streamline litigation (they benefit as the rising costs of litigation make it onerous to file suit.) They are not trying to punish lawyers who file frivolous lawsuits, but to avoid seeing corporations punished for their misconduct.

Arbitration: The Tort Reform Movement’s First Success

If anyone doubts that the goal of the tort reform movement is to eliminate juries, one has only to look at the success of their first effort, the movement towards arbitration in the place of litigation.

The Federal Arbitration Act encourages corporations to include arbitration clauses in form contracts. Often hidden in the small print at paragraph 37, arbitration clauses exist in credit card agreements, pest control service agreements, internet service agreements, etc. If you’ve signed a contract with a large or medium size corporation (and even some small ones), you have probably signed an arbitration agreement.

When you sign such an agreement, you give up your right to sue the entity you contract with. If the company defrauds you, burns your house down, gives your family cancer, or recklessly employs rapists who assault your children, your recourse is to take them to binding arbitration. No judge, no jury: just a lawyer, often retired, who decides who he thinks should win and how much.

Forget about hiring yourself a lawyer at no up-front expense. Arbitration requires that the party initiating proceedings pay a huge lump sum, often well over $10,000, to begin proceedings. And, no matter how willful, wrongful, and knowing the tortious action is, arbitrators cannot give punitive damages, and their awards can rarely be appealed.

The dirty little secret is that arbitration is no cheaper than litigation. It is loaded with up-front costs that prevent many disputes from ever being filed. There has been no more dishonest anti-consumer legislation ever passed than the Federal Arbitration Act and its many state siblings. These laws disempower consumers, especially poor ones.

Of course, because an arbitration award, if any, will be much smaller, good lawyers probably won’t want to handle an arbitration claim on a contingency fee. You want a lawyer? You have to pay a retainer and an hourly fee. Consumers are on their own.

Arbitration is supposed to put corporations and their consumers on an equal footing. How? Both are required to come up with the up-front costs to initiate a case; both are required to pay their lawyers out of their own pockets. Is this equal? Certainly – if the consumer has pockets as deep as those of corporate America. For the rest of us, we just got priced out of the market. Goodbye, so long, see you later.

Arbitration agreements are contractual, and do not cover all tort victims – only the customers of the corporations that put arbitration clauses into their contracts. Now that their customers are precluded from suing them, these corporations are out to ensure that they cannot be held fully liable to third-parties who are injured by their faulty products, services or employees. And for this, they depend on “tort reform”.

Greedy Trial Lawyers: A Perfect Smokescreen

For the most part, the general public has failed to see the dire threat tort reform poses. By demonizing “trial lawyers”, the tort reformers have found an easy and unpopular target. But tort reform isn’t aimed at lawyers; it is aimed at reducing jury power and limiting victim recovery. It is only by hiding what tort reform actually does that its proponents hope to succeed. Few of us yearn to abandon our Seventh Amendment rights to a civil jury trial; few of us want to see companies who injure or kill our loved ones escape with no meaningful punishment. But hey, who doesn’t want to knock those arrogant trial lawyers down a notch?

The tort reform battles have not yet exhaustecd themselves. It is important, however, to recognize them for what they are: a smokescreen for an attack on the civil jury system. And a dishonest attack, at that.

CLAY S. CONRAD is an attorney with the law firm of Lamson & Looney, P.C. (www.lamsonlooney.com) and operates the Jurygeek blawg (www.jurygeek.blogspot.com)