ANOTHER GOLD RUSH

The gold diggers of Trial Lawyers, Inc. enrich themselves at California’s expense.

The discovery of gold in California in 1848 set off an international in-migration, with prospectors' pursuit of the American Dream helping to drive the state's explosive growth. In contrast, today's get-rich-quick schemers, the rapacious tort speculators of Trial Lawyers, Inc., California is home to some of the nation's most prominent plaintiffs' attorneys, including:

• San Diego's Bill Lerach, perhaps America's most famous and successful securities lawyer;
• Los Angeles's Michael Piuze, who won 2 multibillion-dollar tobacco verdicts for individual lifelong smokers;
• Santa Monica's Brian Panish, the products liability, disaster, and mass-tort lawyer who has brought home more than 70 verdicts and settlements in excess of $1 million;[7] and
• The late Johnnie Cochran of O.J. Simpson–fame, who founded a law firm that touts itself as the largest personal-injury firm in the country.[8]

These and other members of the state "leadership team" of Trial Lawyers, Inc. have dominated California's massive legal system by developing sophisticated business plans both to exploit today's litigation opportunities and to identify key new legal "markets." The litigation industry has also contributed heavily to political and public-relations campaigns to perpetuate its success and to establish new opportunities for lawsuit abuse.

California Courts’ High-Stakes Litigation Lottery

The cost of litigation in California is staggering, believed to be larger than any nation's apart from the United States itself. With over 1,600 judges and close to 8 million legal filings annually, the California court system is enormous.[9] By 2001, tort jury verdicts in the state topped $1.5 million on average[10].

What has driven the growth in legal costs that now threatens California's housing, employment, and very economic base? California's initial litigation explosion came in the late 1970s and early 1980s, when tort filings in the state more than doubled.[11] The increase in filings re.ected weakening liability standards, the onset of asbestos litigation, and relaxation of professional ethics rules against attorney advertising.[12] Another cause of the large increases in filings in California was the state supreme court's 1979 decision in Royal Globe Insurance Co. v. Superior Court, which held that injured parties could sue insurance companies in which they did not hold a policy for "bad faith."[13] This rule inevitably encouraged plaintiffs to file two suits in each case, against both the policyholder and his insurer.[14]

Fortunately, the California Supreme Court reversed its Royal Globe decision in 1988 in Moradi-Shalal v. Fireman's Fund.[15] In addition, California's voters eliminated joint and several liability for noneconomic damages with Proposition 51 in 1986,[16] and the California legislature enacted reforms in 1987 that barred products liability claims for "inherently unsafe" products and tightened legal standards for awarding punitive damages.[17] Over the following decade, legal filings fell by more than half.[18]

Trial Lawyers, Inc. would not go without a fight, however, and began chipping away at legal reforms, taking an increasing share of the state's economic pie. Tobacco lawyer Michael Piuze teamed with the state attorney general to carve out an exception to the products liability law, which paved the way for his record-setting $28 billion verdict in a suit on behalf of an individual smoker.[19] A series of legislative enactments and legal rulings made suits easier to file. Tort suits began to increase again, and the proliferation of class action and other aggregative litigation panned out to bigger awards for the average case. In addition, punitive damages rocketed upward, growing over 300 percent from the early to late 1990s.[20] From 1996 to 2001, the average jury award in California tort cases grew 144 percent.[21] Last year, surveyed business executives ranked California's legal climate 45th out of the 50 states and deemed Los Angeles and San Francisco the worst and third-worst jurisdictions in the nation, respectively.[22]

Buying Justice

Political largesse is central to the lawsuit industry’s business strategy, since its revenue streams depend entirely on those who make and enforce the law. Thus, as it has throughout the nation, Trial Lawyers, Inc. has focused considerable resources on California’s political players.

From 1996 to 2001, the average jury award in California tort cases grew 144 percent.

In the last two statewide election cycles, California’s trial lawyers contributed approximately $10 million in each campaign to statewide and state legislative candidates, including a staggering 25 percent of Attorney General Bill Lockyer’s initial campaign war chest and 10 percent of former governor Gray Davis’s initial campaign funds.[23] (Indeed, Trial Lawyers, Inc. gave Davis $3.3 million for his first race, $1.7 million for his reelection, and another million dollars in 2003 during his unsuccessful fight against his recall.)[24] Moreover, trial lawyers wield substantial influence in the California legislature: in the last two fully recorded campaigns, 2000 and 2002, trial lawyers contributed $4 million and $5 million, respectively, to state legislative candidates.[25]

The lawsuit industry’s generosity has not gone unnoticed in Sacramento. For instance, under the state’s Business and Professions Code Section 17200, plaintiffs’ attorneys mass-mailed letters to businesses threatening lawsuits over picayune paperwork omissions.[26] They sued hundreds of travel agents whose license numbers were not listed on their web pages and homebuilders who used the abbreviation APR rather than ANNUAL PERCENTAGE RATE in their ads.[27] Bill Lerach’s firm even won $3 million in attorneys’ fees from lock manufacturer Kwikset because the Lake Forest company applied “Made in the USA” labels to locks that used six small screws that came from Taiwan.[28] Despite these widespread abuses, California’s legislature never saw fit to reform the infamous “shakedown” statute.

Fortunately, California’s voters amended section 17200 last November by passing Proposition 64, a major victory for tort reformers.[29] So, too, did voters use the referendum to stop the legislature and Gray Davis from their trial-lawyer-backed attempt in 1999 to overturn Fireman’s Fund,[30] which would have led once again to a massive increase in tort filings.

But Trial Lawyers, Inc. has used the referendum process to further its own goals as well. One successful effort still on the books is the pernicious Proposition 65, California’s toxic tort “bounty hunter” statute, which was initially adopted by referendum in 1986 and enables plaintiffs’ lawyers to act as “private attorneys general” and file a wide array of suits “in the public interest.”[31] Ostensibly created to keep toxic substances out of drinking water, Prop 65 has become “a clever and irritating mechanism used by litigious NGOs and others to publicly spank politically incorrect opponents ranging from the American gun industry to seafood retailers.”[32]

Finally, California’s civil justice system can never be sound until its courts start taking their responsibilities seriously. Too frequently, however, the state’s judges have been strong supporters of Trial Lawyers, Inc. San Francisco’s judges do not limit the number of cases for which a trial date can be assigned, and so they are giving only summary treatment to the thousands of asbestos cases choking their dockets.[33] Judges in Los Angeles’s Central Civil West Division are widely known for their outlandish rulings and are even known to encourage astronomical jury awards. Even the California Supreme Court, just last December, enshrined into law the “catalyst theory” of fee collection—i.e., the notion that attorneys can collect fees when they lose if they “catalyze change” in the business they sue—despite the fact that the U.S. Supreme Court had rejected the same theory for federal courts three years earlier.[34]

<<previous section | next section>>

7. See Panish's firm's website, http://www.gbtwp.com/attorneys/layout/panish.htm (last visited Mar. 3, 2005) ("Brian has successfully obtained more than 70 verdicts and settlements in excess of one million dollars, including eight verdicts in excess of 10 million dollars.").

8. See The Cochran Firm's website, http://www.cochran.rm.com/cochran-aboutthe.rm.html (last visited Mar. 3, 2005) ("Johnnie L. Cochran, Jr.'s national law firm . . . has emerged to become 'The Cochran Firm', America's largest personal injury plaintiffs tort law firm.").

9. See 2004 COURT STATISTICS REPORT, supra note 4, at vi, 20 tab. 1, 60 tab. 12.

10. See discussion supra note 5.

11. See Tort Filings in 16 States, supra note 4.

12. See generally Bates v. State Bar of Arizona, 433 U.S. 350; James M. Wootton, How We Lost Our Way: The Road to Civil Justice Reform, Critical Legal Issues Working Paper Series No. 120 (Washington Legal Foundation 2004); Lester Brickman, On the Theory Class's Theories of Asbestos Litigation: The Disconnect Between Scholarship and Reality, 31 PEPPERDINE L. REV. 33 (2004); George L. Priest, The Invention of Enterprise Liability: A Critical History of the Intellectual Foundations of Modern Tort Law, 14 J. LEGAL STUD. 461 (1985).

13. See generally Royal Globe Ins. Co. v. Superior Court of Butte County, 23 Cal. 3d 880 (1979).

14. See ALEXANDER B. AIKMAN & KAREN A. VISCIA, JUDICIAL COUNCIL OF CALIFORNIA, EXPLORING THE WORK OF THE CALIFORNIA TRIAL COURTS: A 20-YEAR RETROSPECTIVE 45 (2003).

15. 46 Cal. 3d 287.

16. Proposition 51, The Fair Responsibility Act, was enacted in 1986 and codi.ed at CAL. CIV. CODE § 1431.2 (West 2005).

17. Act of Sept. 30, 1987, §§ 3, 5, 1987 Cal. Legis. Serv. 1498 (West) (codi.ed at CAL. CIV. CODE §§ 1714.45, 3294 (West 2005)).

18. See Tort Filings in 16 States, supra note 4.

19. See Sylvia Hsieh, Tobacco Giant Smoked for $28 Billion, LAW. WEEKLY USA, available at http://www.lawyersweeklyusa.com/lotypiuze2002.cfm (last visited Mar. 3, 2005) (describing how Piuze had lobbied for a "decade" to repeal section 1714.45, and succeeded "when the state Attorney General's Of.ce wanted to join the national 'gravy train' of suing the tobacco industry for the health costs of smoking"); see also Act of Sept. 29, 1997, §§ 1, 2, 1997 Cal. Legis. Serv. 570 (West) (codi.ed at CAL. CIV. CODE § 1714.45 (West 2005)) (deleting "tobacco" from section 1714.45(a)(2) of the civil code, and restoring "common law rules with respect to the manufacture or sale of tobacco products by tobacco manufacturers and their successors in interest").

20. See J. CLARK KELSO & KARI C. KELSO, AN ANALYSIS OF PUNITIVE DAMAGES IN CALIFORNIA COURTS, 1991-2000 16, tab. 9 (Capital Center for Government Law & Policy 2001) (showing 223 verdicts with punitive damages in 1991-95, with a mean punitive award of $5,671,942, and 266 verdicts with punitives in 1996-2000, with a mean punitive award of $19,273,391).

21. See discussion supra note 5.

22. See U.S. Chamber of Commerce, supra note 5, at 14 tab. 3, 17 tab 5.

23. Campaign contributions from trial lawyers are as tabulated by the Civil Justice Association of California, see http://www.cjac.org/research/contributionsarchive.html (last visited Mar. 4, 2005); Press Release, Personal Injury Lawyers' Political Spending Political Money a Shade under $10 Million in 2001-02 Cycle (Mar. 19, 2003) [hereinafter Political Spending 2002]; California Statewide Races: Total Trial Lawyers Contributions 97-98, at http://www.cjac.org/research/contributions98/sw123198.pdf (last visited Mar. 4, 2005) [hereinafter California Statewide Races 97-98].

24. See id.; Political Spending 2002, supra note 23; Trial Lawyer Campaign Spending Update, available at http://www.cjac.org/research/contributions030204.pdf (last visited Mar. 4, 2005) (showing Davis and Lieutenant Governor Cruz Bustamante receiving over $1.6 million for the reporting period January 1, 2003, through March 2, 2004).

25. See Political Spending 2002, supra note 23; Campaign Contributions 2000, at http://www.cjac.org/research/contributions110700.pdf (last visited Mar. 4, 2005).

26. See Walter Olson, The Shakedown State, WALL ST. J., July 22, 2003.

27. See Walter Olson, Stop the Shakedown, WALL ST. J., Oct. 29, 2004.

28. See id.

29. See Carolyn Said, Citizens’ Right to Sue Limited, S.F. CHRON., Nov. 4, 2004, at C1.

30. See Insurance Claims Practices. Civil Remedy Amendments. Referendum, at http://primary2000.ss.ca.gov/VoterGuide/Propositions/31analysis.htm (last visited Mar. 5, 2005); Catherine Bridge, Voters Spank Trial Lawyers, Judiciary, RECORDER, Mar. 9, 2000, at 1.

31. Proposition 65, The Safe Drinking Water and Toxic Enforcement Act, was enacted in 1986 and codi.ed at CAL. HEALTH & SAFETY CODE § 25249 (West 2005); see § 25249.7(d); Proposition 65's Effect on Small Businesses, 1999: Hearing Before the House Comm. On Small Business, 1999 WL 983519 (F.D.C.H.) (Oct. 29, 1999) (statement of Jeffrey B. Margulies, Haight, Brown & Bonesteel, LLP), available at http://www.calprop65.com/docs/margulies.doc (last visited Mar. 5, 2005) [hereinafter "Margulies testimony"].

32. PEW PCB Study Reveals NGO Strategies for 2004 & Beyond, at http://www.fisheries.ifcnr.com/ (last visited Mar. 5, 2005); see also Margulies testimony, supra note 31.

33. See Dominica C. Anderson & Kathryn L. Martin, The Asbestos Litigation System in the San Francisco Bay Area: A Paradigm of the National Asbestos Litigation Crisis, 45 SANTA CLARA L. REV. 1, 1-2 (2004).

34. Compare Graham v. DaimlerChrysler, 101 P.3d 140, 149 (Cal. 2005) ("We continue to conclude that the catalyst theory, in concept, is sound."), with Buckhannon Board & Care Home, Inc. v. West Virginia Dept. of Health and Human Resources 532 U.S. 598, 600 (2001), and Graham, 101 P.3d at 161 (Chin, J., dissenting) ("This court has never awarded attorney fees to a party with no judicial ruling in its favor. We should not start now. . . . [The majority] adopts the so-called catalyst theory, a theory that was once prevalent in federal courts, but that the United States Supreme Court has now repudiated. We should not resurrect it.").