Pennies on the Dollar
As Federal Tort Reform Efforts Grind Away, Local Lawyers Worry About The Future Of Major Verdicts And Needy Clients
By LISA K. BRUNO
Many lawyers may well have tuned out all the talk of impending tort reform in recent years. The debate has risen and subsided over the last decade, the buzz increasing with the introduction of each legislative proposal, only to peter out as bills simmered through the legislative process.
But the placement of tort reform at the center of President George W. Bush’s domestic agenda has reinvigorated reform efforts, and some attorneys predict the coming year may bring changes with a “huge impact.”
The first significant reform got under way two weeks ago, with the passage in the U.S. Senate of the Class Action Fairness Act.While the proposed legislation is federal, the measures preempt state law and have the potential to affect the practice of law for all Massachusetts lawyers representing individuals, these attorneys warn.
“Most lawyers who represent individuals have no idea what’s going on in Washington and are under the impression that the federal government can’t change local tort law,” remarks Anthony Tarricone, a Boston attorney and a national officer of the Association of Trial Lawyers of America. “They are absolutely 100 percent wrong.”
The reform measures are diverse, ranging from class actions to the replacement of auto liability with a no-fault system. Medical-malpractice reform is expected to be on the front burner and includes measures that may include a $250,000 cap on non-economic damages, the elimination of bad faith claims, lower caps on attorneys’ fees, and restrictions and immunities applicable to nursing homes, medical products and pharmaceutical drugs.
Verdicts in Massachusetts over the last 10 to 15 years have already been tremendously affected by media reports of high awards and frivolous lawsuits, according to Massachusetts Bar Association President Kathleen M. O’Donnell.
But the reforms proposed “will completely replace what we have at the state level,” she says.
The changes ultimately will be reflected in the verdicts awarded in Massachusetts courts. A review of last year’s top 10 jury verdicts through the lens of reform legislation provides a concrete illustration: Verdicts in half the cases would have been affected, with the top verdict of $9.41 million startlingly slashed to $8,000.
Clearly, Tarricone says, the proposed reforms will affect the practice of law for those attorneys representing individuals. “But worse than that, it affects the rights of the individuals,” he adds.
This view is repeated by Douglas K. Sheff, a past president of the Massachusetts Academy of Trial Attorneys.
“I can say, yes, that a $6 million verdict would only have been $250,000. That’s obvious to me. And that’s egregious for that particular client,” he says. “But this is a threat to everybody’s safety, whether they have a lawsuit or not, whether they have a verdict or not. This is way more important than how much money did an individual get in an individual case.”
And work on the defense side of the bar will be affected correspondingly, adds Sheff, who describes himself as “one of the largest employers of defense counsel in the commonwealth.”
“If I find out that a case is going to cost me more and have more risk than I can handle, and that the expenses, the medical bills and the liens are going to outweigh whatever my client’s possible recovery could be, I simply don’t file that lawsuit,” he explains. “Nobody’s billing hours on the other side of that one.”
Medical Liability Reform
A cornerstone of the tort reform initiative is in the area of medical liability. Although legislation has yet to be filed with the 109th Congress, proposals are expected, largely resembling the medical-malpractice bills introduced last year.
Based on this assumption, the bill is anticipated to impose a cap on non-economic damages, setting the limit at $250,000.
Massachusetts law already provides for a $500,000 cap on pain and suffering damages under G.L.c. 231, Sect. 60H, O’Donnell observes. But she notes that it has not hampered plaintiffs’ ability to bring claims.
The cap is not applicable if the plaintiff can show that certain circumstances are met, O’Donnell explains, such as the existence of a substantial impairment of a bodily function or substantial disfigurement.
Moreover, acknowledges Barbara H. Buell of Boston, who represents health care professionals and entities, defense lawyers themselves frequently waive the cap, finding the $500,000 figure too suggestive to a jury.
The limitation on non-economic damages will have the greatest effect on the most severely injured plaintiffs, Tarricone predicts — those who have suffered the types of losses not reflected in the economic damages incurred, such as the loss of a limb or the loss of eyesight.
“In other words, the quality of life issues are completely ignored,” he remarks.
Boston lawyer Edmund P. Daley, who won last year’s largest malpractice verdict, remarks that his client’s damages — an increased likelihood of her cancer recurring —had been entirely non-economic.
“Unless you have a case with large special damages, you probably won’t be taking these cases, because they won’t make economic sense for the client,” he suggests, noting the costs associated with prosecuting a medical-malpractice claim.
Daley states the reforms are clearly unfair to low wage earners.
“A wealthy attorney’s life is, all of a sudden, worth a heck of a lot more than the average person with the same injury,” he comments.
Sheff agrees, calling the cap on non-economic damages discriminatory — biased against those groups not present in large numbers in the work force: women, children, the elderly and the disabled.
“They are discriminating against those people who are most vulnerable and need our help as a society the most,” he comments.
In addition, Daley points out, under an adjunct to Massachusetts’ collateral source rule, awards against health care providers are reduced to the extent that medical expenses have been paid by insurance.
“Realistically, the people who would be able to finance an actual suit where there’s more than just pain and suffering are people who have had very, very large lost income claims or people rich enough to have paid their own bills,” he reasons.
But Buell estimates there are only a couple of cases each year in which the cap would ever come into play. In her experience, the sums handed down by juries are largely attributable to past and future medical expenses, and lost earnings and lost earning capacity.
“Those are demonstrable and the areas in which damages get very, very large,” she comments.
The legislation will also seek to restrict punitive damages, Tarricone reports, by requiring clear and convincing evidence that the defendant acted with malicious intent to injure the plaintiff. If awarded, the amount of punitive damages recoverable will be limited to two times the economic damages, or a maximum of $250,000, he adds.
In Massachusetts, Tarricone notes, this limitation will only affect malpractice cases resulting in fatalities, as under state law punitive damages are only awarded in death cases.
Notably, the legislation is expected to provide immunity from punitive damages entirely in products liability cases if the pharmaceutical or medical device has received approval from the Food and Drug Administration, both Tarricone and O’Donnell report. The immunity even extends to non-approved drugs and devices that are generally recognized as safe and effective, according to Tarricone.
“At the same time, the FDA is approving things faster and not requiring the same scrutiny that they did a few years ago,” notes O’Donnell, pointing to the tide of claims arising from the recent recalls of blockbuster drugs Vioxx and Celebrex.
“I would hope there would be an exception to that immunity if the companies intentionally withheld some information,” she says.
Limitations are also expected on attorneys’ fees recoverable in medical-malpractice suits. While Massachusetts already imposes restrictions under G.L.c. 231, Sect. 60I, which provides a sliding scale for fees, they would be further curtailed by the fee structure outlined under federal proposals.
Other measures also change state medical-malpractice law, Tarricone reports. Proposals would reduce the statute of limitations to one year and would eliminate joint and several liability. They would also require that future damages awarded by a jury be paid periodically, rather than by a lump sum.In fact, past federal bills have explicitly provided for the complete preemption of state law, Tarricone observes. Further, it is a one-way preemption, he says, meaning that state laws protective of patients and consumers are overridden, while the more restrictive statutes remain in effect.
Thus, Tarricone offers by way of example, damages would still be subject to Massachusetts’ $20,000 charitable immunity cap.
The need for medical liability reform is questioned by O’Donnell, who points to a study by the National Center for State Courts that ranked the verdicts handed down in two Massachusetts counties as some of the lowest in the country.
Because of the time and expense they call for, there aren’t small malpractice claims in Massachusetts, O’Donnell notes. “And we certainly don’t have medical-malpractice cases that don’t have some merit,” she adds.
Buell acknowledges there is merit in such an argument, reporting estimates that the cost of bringing a med-mal claim through trial or appeal can easily climb into the six figures.
“But the question is, what’s the problem we’re addressing and what’s the best method of addressing it,” she says, suggesting that one of the problems is doctor flight — flight from certain jurisdictions, from certain specialties, from the practice of medicine altogether and even from insurance coverage.
A better solution, Buell speculates, would be to address the cost of liability premiums as a society, as has been done in the case of federal flood insurance, so that the burden does not fall on the shoulders of individual doctors.
“[Medical liability reform] is supposedly the cure for something — and it is a real something,” Buell remarks. “But I’m not sure that an analysis has been done to match the problem to the cure.”
Auto Choice Reform Act
Also pending in Congress is the Auto Choice Reform Act, which would institute a federal no-fault automobile insurance system that lawyers warn could “wipe out” current auto liability practice in Massachusetts.
While Massachusetts already has a limited no-fault system providing coverage for medical expenses and lost wages, the proposed legislation would expand no-fault coverage to encompass all claims arising from an automobile accident.
Under the proposal, all of a policyholder’s claims would be redeemed in exchange for payment of no-fault benefits, set at $8,000 in the bill’s latest version, lawyers report. In return, the policyholder receives a discount on his premium.
The effect on the outcome of auto cases would be dramatic, O’Donnell predicts.
“You take those verdicts from last year and those people who were injured, who had those devastating injuries, who have no ability to earn money for the rest of their lives and you give them $8,000,” she states.
The bill does offer consumers the choice of purchasing the no-fault option or remaining in the state’s present tort system. But O’Donnell describes the proposal skewed towards the no-fault alternative.
“When people buy auto insurance, they don’t look at the policy, they don’t look at the coverage — they look at the bottom line,” she explains. “And they won’t realize what a bad deal they got until a family member is injured.”
O’Donnell says she frequently sits across from clients who have minimal insurance coverage and severe injuries. “They’re probably not getting fully compensated, but they’re getting more than $8,000,” she remarks.
Nothing in the proposed legislation excludes commercial operators from opting for the no-fault alternative, both Tarricone and O’Donnell note.
“As far as I know, the no-fault option is available to commercial vehicles, and any company would economically have to take this option,” comments O’Donnell.
While not specifically addressed by the bill, the attorneys anticipate that a no-fault payment would also redeem loss-of-consortium claims stemming from the plaintiff’s injuries.
O’Donnell conjectures that policyholders who can afford to remain in the current system could purchase the equivalent of underinsurance coverage to protect family members, but notes that the value of any claim would then be decided by arbitration rather than by jury.
Margaret M. Pinkham of Boston, one of the attorneys who won last year’s top verdict on behalf of a paraplegic victim of a collision with a commercial 18-wheeler, notes that her client’s medical bills alone ran in excess of $400,000. “She got $8,000 for her car,” she remarks.
Liability was not at issue in her client’s case, Pinkham notes. She concedes that in cases where it is questioned — and where the injuries are less severe — the no-fault option could provide advantages.
But anyone suffering catastrophic injuries in a motor vehicle accident would be left bankrupt under the absolute no-fault system, Pinkham states.
While there is always the possibility of exploring recovery directly from the defendant where insurance coverage is insufficient, she acknowledges, such a course is not an option for most plaintiffs. In her client’s case, the driver who rear-ended her worked for a large company, Pinkham recounts, and there was ample insurance in place.
“But if it was a 16-year-old kid who had the minimum coverage, she and her family would be destitute by now,” she says.
An alternative favored by some consumer groups is the “no-fault system with unlimited benefits,” which allows no award for pain and suffering, but pays for medical expenses and lost wages for the duration of the plaintiff’s life, O’Donnell explains. While more equitable, she concedes, such a system remains expensive.
“You’re never going to have a no-fault system that is fair to people, because it’s unaffordable,” O’Donnell remarks.
The no-fault measure affects small and average practitioners to a far greater degree than the other tort reform initiatives, observes Sheff.
“People have gone around thinking to themselves, ‘they’re not after me, they’re after the big guns, like the class action people and the medical-malpractice practitioners,’” he says. “Not anymore.”
Both Sheff and O’Donnell note that the no-fault bill is sponsored by two Republican senators with clout — Mitch McConnell of Kentucky and John McCain of Arizona — and stress that its passage could become a reality.
But some defense attorneys remain skeptical about the likelihood of the measure passing, noting that reform measures have been kicked around for years.
“I know this most recent wave seems to have gotten the plaintiffs’ bar attention,” says James B. Peloquin of Boston. “But I still have substantial doubts that anything meaningful is going to be passed.”
In particular, he dismisses the possibility of an act instituting a nationwide no-fault obtaining passage through Congress.
Efforts to contact other defense counsel for comment were not successful.If it is signed into law, Sheff’s prediction is grim. “If you handle a bunch of auto cases, you’re going to be out of business,” he bluntly states.
Class Action Fairness Act
Already approved by the Senate is the Class Action Fairness Act, whose key provisions would redirect many class actions from state court to federal court, in an effort to curtail “forum shopping.”
Under the bill, federal courts will have original jurisdiction of class actions when the aggregate claims exceed $5 million and when less than one-third of the plaintiffs are from the same state as the primary defendant. The legislation applies to future lawsuits and will not affect pending actions.
The bill would also change how lawyers are paid in suits involving “coupon settlements,” providing that attorneys’ fees will be based on coupons redeemed, not the value of coupons awarded.
As written, the bill also encompasses mass torts, Tarricone observes, such as pharmaceutical products liability cases and tobacco litigation.
Critics charge the bill prevents state courts from hearing state claims and that it deprives consumers of the chance to band together to sue companies for overcharges, defective products or other wrongdoing.
“Let’s say Wal-Mart is overpricing every item by a dollar,” posits O’Donnell, referring to the item-price suit brought against the retail giant in Massachusetts. “You’re never going to get an individual to pursue a case for a dollar, because it doesn’t make any sense.”
Moreover, says Tarricone, once in federal court, actions involving plaintiffs from multiple states are not likely to be certified as a class, because of the difficulty of applying a variety of state laws to a single case.
“So it’s a Catch-22,” he concludes. “And in its present form, the Catch-22 means every class action dies.”
Amendments have been proposed to exclude mass torts from the bill’s scope and to allow federal judges to apply a single state’s law to the case, Tarricone reports, but have yet to be successful.
The measures in the foregoing three areas are components of a larger reform effort. Attorneys anticipate a flurry of tort reform initiatives, including the establishment of an asbestos trust fund, the so-called “cheeseburger” bill — targeting obesity lawsuits — and the Lawsuit Abuse Reduction Act, which sanctions attorneys for frivolous litigation and limits the venues in which tort plaintiffs may file suit.
And they are bracing themselves for further grants of immunity and caps on recovery.
“It’s going to appear in legislation that we won’t even anticipate it appearing in,” warns O’Donnell. “Every bill has to be scrutinized.”
