Corp Reform - Not Tort Reform

Show me.... a typo!

I'm often critical of the media because of their poorly-researched and hastily-written "articles" that push for tort reform.  But this one, from a Missouri newspaper, takes the cake.  The headline includes the phrase "workermen's compensation."  There's no such thing as "workermen's compensation." It also talks about capping "non-monetary" awards.  Last I checked, all juries awarded was money. 

The real point of the post isn't to make fun of poor editing, but to point out that the "Show Me" state is pushing for tort reform.

"Tort Reform Is Bunk"

Here's a nice letter to the editor of the Baltimore City Paper:

"...Texans amended their state constitution to place a cap on medical malpractice awards for pain and suffering. GE Medical Protective, the nation’s largest provider of medical malpractice insurance, has admitted in a filing that a $250,000 cap on damage awards for victims of malpractice will not lower physicians’ premiums.

According to the filing, in which the insurer requested a 19 percent hike for doctors’ insurance, “Non-economic damages are a small percentage of total losses paid. Capping non-economic damages will show loss savings of 1 percent,” which contradicts a March 2004 report in which GE Medical Protective stated that capping noneconomic damages is a “critical element (of reform) because in recent years we have seen non-economic damages spiraling out of control.”

Again, an insurance company - the largest malpractice insurer in the nation, purportedly - admits that tort reform won't save doctors any money.

What About The Lobbying Tax?

Those who argue for tort reform sometimes claim that there's a tort tax that costs every American money.  By their logic, we're also forced to pay a Lobbying Tax.

"As President Bush campaigned for reelection pledging to protect doctors and insurance companies from patient lawsuits while easing the tax burden on businesses, industry groups spent record amounts of money lobbying to influence the White House, Congress and their constituents.

Special interests spent $1.1 billion during the first half of 2004 on lobbyists and advertising campaigns, according to public records that interest groups are required to file with the Senate.

Reports tallying lobbyist expenditures for the rest of the year are due in February — and industry insiders expect the yearly total to exceed last year's record of roughly $2 billion.

"A lot of business groups have been waiting for years, if not decades, for all the political stars to be aligned so they could get legislation passed on issues like medical malpractice," said Stephen Moore, who heads the Club for Growth, a leading business advocacy group."

Nice to know that big business is spending billions of dollars to buy legislation that will screw the average American. 

One More Thought About The Monster Cable Lawsuits

Would anything be more ironic than if Monster Cable sued monsterlawsuits.com?  Would the headline read, "Monster Cable files monster lawsuit against MonsterLawsuits.com?"  Or, "Lawsuit-Monster Monster Cable Sues MonsterLawsuits.com over Monster Moniker?"

Monster Cable claims that the point of the lawsuits is to protect the value of their brand.  I wonder if they've figured out how much damage to the brand the lawsuits have done.

The Monster Mob

I'm a big fan of The Sopranos.  So much so, I'm tempted to write a script for the show based upon what Noel Lee and the not-very-nice crew at Monster Cable have been up to.  The plot would go something like this:

Tony Soprano, looking to find a way to earn money that won't draw attention from the Feds, consults with an Intellectual Property lawyer.  Together, they hatch a perfectly legal scheme: Tony will trademark the commonly used word "Monster."  Then, he'll sue any business that's ever used the word Monster to promote its products.  The business owners will have a choice - "license" the use of the word Monster and give Tony a cut of their profits, or be forced out of business due to the cost of lawsuits.

I'm not much of a fiction writer, but I think that the right screenwriter could turn my idea into a  great Sopranos episode.  All the writer would need to do is contact Noel Lee over at Monster Cable and ask him for the details on how the scam works. After all, he and his goons - er, lawyers - run this scam every day on small business owners.

The whole story is here, at Snowmonsters.com.  They're a small business that uses cartoon monsters to teach ski safety to children.  Noel and his attorney are trying to strongarm Snowmonsters into giving Monster Cable the rights to their cartoon characters, and then forcing Snowmonsters to pay to license them back.  If Snowmonsters refuses, Noel will sue, forcing Snowmonsters out of business because of legal costs.

The choice between giving away your business identity and licensing it back or going out of business due to court costs reminds me of the "either your signature or your brains go on this contract," scene in The Godfather.  Right now, Noel has similar actions pending against over 100 entities.  They'll either pay him or pay their lawyers to fight him off - either way, they'll pay through the nose.

Of course, the tort reform that's supposed to "protect small businesses," won't protect Snowmonsters.  Why?  Because if Noel sues Snowmonsters, his suit will be for financial injury, not personal injury.  And as I've stated before, tort reformers don't want to restrict the ability to sue for financial injury, because they're often the plaintiffs in those suits.  So I ask, if it's a tragedy for a small business to go under because of a personal injury lawsuit, why isn't it also a tragedy for a small business to go under because of a financial injury lawsuit?

What Monster Cable is doing is dispicable - I encourage you to boycott their products, as I have.  But more importantly, the next time you hear someone say we need to protect small businesses from frivolous lawsuits, I want you to ask them if they support restricting financial injury lawsuits.  If their answer is "no," that means that they want to use tort reform to protect the big guys from the little guys.  And perhaps it also means that they value money more than human life.

corpreform has a Google Group

I've set up a Google group here as a test to see how useful and popular it may be to the corpreform readers.  I'm specifically hoping to get some discussion going on above and beyond what we've had in comments.

I'm not big on censorship - the only comments I've deleted here were from some moron hawking Cialis - but do try to keep the posts on topic, reasonably clean, etc. 

I would be incredibly thrilled to read about people's experiences with the legal system, both good and bad, and from both plaintiffs and defendants.  And if anyone really impresses me, I'll give them a Gmail invite.

Have fun with it!

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Fear Brings More Tort Reform to Ohio

It's all but certain Ohio is going to get new tort reform laws.  And like most tort reform laws, this package was enacted due to fear:

"...[T]he provision was important not because there were a lot of cases related to a problem, but because there was a concern that it may become a problem."

This a classic tort reform technique - create fear about a type of lawsuit that could become prevalent, and then rush to pass legislation to fix the "problem." 

A recurring theme in the tort reform movement is that we need to pass laws to "protect" a certain class of defendants from being sued.  However, as I explained here, nothing can ever stop people from filing frivolous lawsuits.  This bill, for example, is supposed to protect farmers from being sued by people injured on their property.  But the reality is that an injured person could still sue the farmer, in which case the farmer has two choices - pay for a lawyer to defend his case, or let the injured person win a default judgment against the farmer. 

Tort reformers exploit the ignorance of the average citizen with respect to the law when they claim that tort reform will "protect" anyone from being sued.  It won't because it can't.

What it means to be a corporate defense lawyer

"It is an honorable calling that you have chosen. Some of you will soon be defending poor, helpless insurance companies who are constantly being sued by greedy, vicious widows and orphans trying to collect on their policies. Others will work tirelessly to protect frightened, beleaguered oil companies from being attacked by depraved consumer groups." - Art Buchwald

Another Interesting Article with an Anti-Republican Slant

Again, I'm not taking sides with Democrats - I'm still irritated at Kerry and Edwards' disingenuous and dishonest stance about tort reform.  That said, here are some quotes from a great article. 

For those of you who don't know, expert witness fees aren't reimbursed if a plaintiff wins a case.  This quote sums up the problem with capping pain and suffering.

"Ivy explained that the only money Smith could extract from Heritage would be for her mother’s “pain and suffering.” To that end, testimony could be introduced about the terror caused by the brutal rape of a confused, elderly woman. But even the most sympathetic jury couldn’t give her more than $250,000, the limit set in the constitutional amendment that passed the previous September. Then Ivy explained why even the maximum award, which Smith was unlikely to get, wouldn’t be enough. Tort reform would force Smith to hire experts in several fields, including psychiatry and nursing-home administration, to prove Heritage had been negligent, costing as much as $20,000 per witness. And with settlements rarer because insurance companies know a jury can’t sting them for more than $250,000, a trial was far more likely than before the initiative passed. All told, Frank Ivy’s five-person law firm had to be prepared to spend $100,000 with no guarantee of recovery or earning its contingent fee of 40 percent of the payout. When all the math was done, the best Smith could hope for would be to win perhaps $50,000 from a nursing home that apparently hired a sexual predator to care for her mother. "

I've previously read that malpractice kills 90-100k people per year, and is the sixth leading cause of death.  This article claims it's 131k and the fourth leading cause of death.  Considering the article's author - Dan Zegart, Google him - I believe it.

"More specifically, malpractice filings declined nationally by about 4 percent between 1995 and 2000. And while a recent analysis of the Medicare population estimated that medical errors kill 131,000 people annually, making it the fourth leading cause of death, medical suits are only 5 percent of personal-injury filings, with product liability cases another 5 percent. Plaintiffs lose 60 percent of product cases and 70 percent of malpractice suits.

Not only are socially significant lawsuits like malpractice and product liability a small fraction of the legal picture but numerous studies show that capping damages doesn’t affect insuance premiums. One survey examined insurance rates between 1985 and 1998, then ranked the states according to the severity of their restrictions on lawsuits. Increased severity did not produce lower rates. In Texas, where malpractice filings dropped 20 percent in the nine years before Proposition 12, the liability picture has been little improved by its passage. About a third of doctors will see a decrease of 12 percent—after cumulative increases of 147 percent. The rest will either get no relief or double-digit increases."

I knew that the tobacco industry funded many "Citizens Against Lawsuit Abuse" groups, and that it provided 50% of the funding for the American Tort Reform Association.  But I didn't know that Karl Rove used to be a Philip Morris consultant:

"The solution was born in south Texas in 1991, when the Rio Grande Valley Chamber of Commerce, infuriated by a $2.5 million verdict to two Mexican-Americans illegally fired from a sugar mill, launched Citizens Against Lawsuit Abuse, which plastered billboards across the valley with slogans like “Lawsuit Abuse: Guess Who Picks Up the Tab? You Do,” according to a joint study by the Center for Justice and Democracy and Public Citizen. The cigarette companies were already deeply involved in the issue, and Philip Morris provided generous start-up funding for Citizens Against Lawsuit Abuse. Thanks in large part to tobacco largesse, there were CALA groups all over the country by the mid-1990s. In 1993 and 1994, while a politically green George W. Bush received instruction from Mike Toomey, soon-to-be lobbyist for Texans for Lawsuit Reform, Karl Rove, a consultant to Philip Morris, was convincing Bush to exploit the lawsuit-abuse issue in his first gubernatorial campaign, according to the book Bush’s Brain, by James Moore and Wayne Slater. Tort reform proved a powerful weapon. Although of little interest to voters, the issue, according to Rove himself, was a magnet for corporate donations—among numerous other benefits. "

If it weren't for those "damned greedy lawyers," asbestos would still be in our schools.  In some cases, Gordon Gecko had it right: Greed is good.

"Carl Bogus, a law professor at Roger Williams University, argues that what plaintiff’s lawyers do best is regulate, a role that has become more and more vital as government’s watchdog function has shrunk under conservative attack. Bogus notes that while asbestos caused 170,000 deaths from lung cancer, the Environmental Protection Agency was never able to ban it. Lawsuits forced it from the market. "

It's always good to know that the 7, 8, and 9 digit salaries of insurance company executives is included in the "tort tax."

"On the tort reform side, the numbers tell a story of squandered dollars. The $809 “tort tax” was invented by taking $233 billion, which is what insurance industry consultant Tillinghast-Towers Perrin says is the cost of the tort system, and dividing it by the population of the United States. But those billions represent not only legal expenses but the total cost of running the insurance industry, including executive salaries, advertising expenditures and much else unrelated to lawsuits. The real figure is probably less than half that amount. "

Read the rest of the article when you get a chance.  It's lengthy but informative.

The Tort System Leads to Lower Insurance Premiums

The Denver Post reports  that a switch from no-fault (and no lawsuit) auto insurance to a traditional at-fault (sue the at-fault driver) system is leading to "double-digit decreases" in insurance premiums. 

As a result of the risk of being sued for bad driving habits, "Colorado drivers are safer and becoming more aware on the road."  This is proof that the tort system works just fine.

The big question I have is why this switch to a tort-based system is referred to in this article as "tort reform." 

Anti-Republican Rant With Interesting Facts About Tort Reform

As readers of this site know, I've never made attacks against either political party.  That's because I don't feel that tort reform is a partisan issue.  Therefore, I'm not going to say whether I agree or disagree with the anti-Republican stance of this interesting article.  But I will point out these excerpts I found quite enlightening:

"Corporations with revenues of $1 billion or more have an average of 86 lawsuits pending at any given time. Most of this litigation is employment/labor disputes, contract disputes and intellectual property cases. They hate it when the public gangs up on them, but they love suing each other and are quite aggressive. Citigroup has reserves of over $7 billion for litigation expense and that is just for defense; one wonders what their "offense" budget is."

"If damage awards beyond direct compensation for injury are limited to $250,000, consider this outcome when a victim "wins": 40% of the award is paid in taxes, leaving $150,000; and then your attorney gets 30% of $250,000, or $75,000, leaving the victim with $75,000 to, perhaps, apportion over the 60 or so remaining years of a severely handicapped child who was victimized by a medical error. Is this the kind of justice we must tolerate in order to preserve the system? "

Lawsuits as Extortion

Tort reformers often claim that some vexatious plaintiffs use the tort system as a form of extortion.  The scam goes like this: A plaintiff with a legitimate - but frivolous -  claim will sue a defendant hoping to force a settlement for more than the case is really worth. 

Sadly, this really does happen.  In fact, I know of one vexatious plaintiff who has done this to over 7,000 defendants.  This plaintiff finds someone who has caused them a trivial amount of financial injury - $10 or so - sues them, and forces the defendant to settle for an average amount of $5,000.  Yet tort reform would do nothing to stop these lawsuits.  Why?  Because they're filed by big business.

This article sums it up. 

Tort Reform and Federalism

Fox News published this editorial  arguing that the federal government has no business telling states how to run their courts.  For example:

"The national government is not empowered to dictate substantive rules of state tort law. And Republicans who are supposedly devoted to fighting federal bloat, should be on the front line in stopping the central government from worming its way into an area that has been left to the states for two-and-a-quarter centuries."

The guy goes off into lala-land when he suggests that consumers may eventually decide whether to buy their products based upon the tort laws in the states where product manufacturers are based.  But Federalism is just another reason not to pass tort reform.

Businesses File More Suits Than Citizens

This news release  at Public Citizen reveals:

• The people who most take advantage of the legal system are the business interests lobbying to curtail citizen’s legal rights: U.S. businesses file lawsuits four times more often than individuals, according to an analysis of states and counties that keep such data. Moreover, businesses are 69 percent more likely to be sanctioned by federal judges for filing frivolous lawsuits than are tort plaintiffs and their attorneys, according to an analysis of the 100 most recent cases where such sanctions were imposed.
• Tort lawsuit filings have decreased 9 percent overall from 1992 through 2001, according to a joint tracking project of the Conference of State Court Administrators, the Bureau of Justice Statistics and NationalCenter for State Courts. The filing data from 30 states represent a total of 74 percent of the U.S. population. When adjusted for population growth, tort filings declined by 15 percent, from 269 to 228 per 100,000 over that period.

As I've mentioned before, tort reform proposals never include caps on damages for financial injury cases, such as when one company steals the intellectual property of another.  Financial injury verdicts are larger and more commonplace than personal injury verdicts, but since corporations are often the recipients of financial injury verdicts, they don't want them capped.  Hypocritical?

Another insurer admits that tort reform doesn't lower rates

The good guys at Consumerwatchdog revealed that the largest medical malpractice insurer in the country admits that noneconomic damages are about 1% of their losses:

"According to the Medical Protective filing: "Non-economic damages are a small percentage of total losses paid. Capping non-economic damages will show loss savings of 1.0%."

If the malpractice insurers are telling regulatory agencies that tort reform doesn't work, why should we believe them when they tell the press that it does? 

Q: When is a frivolous lawsuit not frivolous? A: When it's filed by a corporation.

One complaint about plaintiff's lawyers is that they file frivolous lawsuits against big corporations to try and make a few bucks by settling.  Many people believe that this purported behavior is so bad that we need to reform the legal system.

So why is it OK when corporations behave the same way?  Monster Cable has been filing shakedown suits against anyone who uses the word Monster in their business, such as:

• Monster.com
• Monster Garage
• Disney, because of Monsters, Inc.

• Monster Cable is even trying to squash small businesses that dare to use the word "Monster." 

The suits are supposedly brought because Monster Cable is afraid that consumers will think that Monster Cable is associated with anyone else who uses the word Monster in its business.  I'm pretty sure that no one said, "Hey, Monster Cable just hired Pixar to make an awesome movie about Monsters.  Let's go see it NOW!" 

Maybe Monster Cable will sue me for telling the truth about their product: It's not worth the price premium over regular brands of cable. Here's an excerpt from a great article at Forbes about Monster Cable:

TO ENCOURAGE audio salesmen to push its costly stereo cables, 12 times a year Monster Cable flies a dozen or so top producers from stores around the country to all-expenses-paid weekends at places like the Napa Valley, Hawaii and Germany.

Founder, chairman and sole owner Noel Lee even lets the star salespeople zoom around in his 13 sports cars, including a $200,000 Ferrari.

Lee needs good salespeople because his product requires lots and lots of selling. Buy a $400 stereo from the Good Guys in California and chances are you'll also walk out with $50 worth of Monster cables. Buy a $1,000 Marantz amplifier from Ken Crane's Home Entertainment in California and you'll get sold on a $100 connecting cable.

This reveals one of the great hypocrisies about tort reform: Business wants limits, caps, and restrictions on personal injury cases, where they're usually the defendants, but they want no limits, caps, or restrictions on financial injury cases, where they're often the plaintiffs.

My latest thought on the Monster Cable Lawsuits is here.  Or go here and find out why what Monster Cable is doing would make a great episode of The Sopranos.