If you’re thinking about President Bush’s proposal to impose federal tort reform, read this post at Strange Women Lying in Ponds. I want to find a practical way to limit medical malpractice claims (our own Charles Bird wrote on this a short time ago), but Bush’s proposal for a nationwide cap on tort damages has always struck me as suspect.
Nationwide caps undercompensate for some losses. They also risk removing the economic incentive for a plaintiff’s lawyer to bring legitimate cases, for a plaintiff’s lawyer’s fees are usually contingent on a large recovery. (For instance, SWLiP notes that recovey for a male’s loss of his family jewels or a woman’s loss of her ovaries — which result in "noneconomic" injuries — is capped far too low under Bush’s plan.) A nationwide system of caps on state law tort claims is also not a very "conservative" idea.
SWLiP puts the pieces together far better than I could (or do here). He convinced me. Give it a read.
Where are the conservatives that want to limit the power of the federal government? This would set a dire precedent for an even larger central government. Their absence is telling.
I’m right here. I’m not for wholesale tort reform, but I think however that the Class Action issue probably needs to be dealt with at the federal level because it has such serious interstate commerce ramifications.
I agree with Sebastian regarding getting a handle on class action. It’s simply crazy to have national class action judgments purport to come out of southern Illinois or the Rio Grande valley. (Two notorious pro-plaintiff areas.)
Where are the conservatives that want to limit the power of the federal government?
They’ll be very visible again once Democrats regain the White House and Congress. ;p
I agree that class action is fairly ludicrous … I’ve collected nigh over $30 from signing up online for various suits of one sort or another. I never deposited the checks, but surely there’s something wrong with the system.
Its hard not to make a joke about Bush’s desire to “fix” the tort system.
This is simply about transferring money and power to a favored constituency, and nothing about reform. I am sure that there are some reforms that need to be done — noth that the Bush effort is about such reforms. And those reforms are not all about axing plaintiffs — one long overdue reform is raising the med mal damage cap in California from $250,000 (set in 1976) to something like $750,000, which would automatically be the case if the cap was indexed to inflation — it will probably still be $250,000 in another 30 years if Bush apologists have there way.
Oh I forgot, Bush’s “reform” is to utilize the $250,000 cap as if it is a fair reform. Silly me.
von’s implication that the whole notion of “non-economic” damages is suspect is correct. What they are is damages that are not easily measured in economic terms. That doesn’t mean they are not real damages, for which compensation ought to be paid.
Still, some of this class action business needs reform. In securities cases it too often amounts to a lot of people – shareholders – effectively suing themselves. The only ones who gain are the attorneys. I would prefer much stronger corporate governance rules that make it easier to hold actual individuals accountable for misdeeds – including negligence – to the current situation. In non-securities cases this sort of thing is perhaps more justified.
Let see:
– Social Security “reform” will incidentally result in windfall for Wall Street brokers
– Tort “reform” will result in eliminating monetary risk/overhead of insurance companies and businesses
I begin to think that when Bush talk sabout his ownership society ideal, he really means it. Only the people who own the money get to decide the rules.
To Yomtov:
I would prefer much stronger corporate governance rules that make it easier to hold actual individuals accountable for misdeeds – including negligence – to the current situation.
I do not know what needs to be done re class actions, but I would note that we already have strong corporate goverance rules that are enforced by private lawsuits. This happens to be the primary and most effective system currently in place to police corporate bad behavior.
What are the alternatives? A government program which will, in short order, be run by corporate sympathizers (appointed by those reform minded Bushies)?
There is really nothing wrong with private action acting as the governance of corporate behavior — the only real issue is tinkering with the rules to minimize the inefficiencies of the process.
dmbeaster,
I would note that we already have strong corporate goverance rules that are enforced by private lawsuits. This happens to be the primary and most effective system currently in place to police corporate bad behavior.
Except for the “primary” part, I disagree with all of this.
A. I don’t think the rules are strong enough.
B. I don’t think private lawsuits under the current system are an effective enforcement mechanism.
C. And in consequence of B I don’t think the (very lax) rules are enforced by private lawsuits.
I’ve had the unpleasant experience of watching a company in which I held a relatively large number of shares create disaster after disaster. It was not public, so selling was not an option. (How I got my shares is a complex tale). Management was incompetent, the board – controlled by management cronies – was negligent. I was powerless. A lawsuit would have been expensive and most likely futile. Corporate governance rules were useless.
But look at it from a broader perspective. Shareholders have a limited stake. It will rarely be worthwhile for them to pursue legal action. When they do, the defendants have the full resources of the corporation – the shareholders’ assets, but never mind – at their disposal.
Strong rules? The SEC can’t even get a rule passed to let shareholders nominate candidates for the board. Shareholders are not allowed to vote on executive compensation.
Further, it seems difficult to enforce any sort of obligation on the directors. The audit committee didn’t know the books were cooked? So what? In some states, IIRC, they do not even have a fiduciary responsibility to the shareholders specifically. (Perhaps one of the lawyers around here can provide more information on this point).
No. I don’t think we have strong rules effectively enforced by private lawsuits.
Italics. Off!
I agree on federal jurisdiction for class action.
With regard to med/mal I was talking about this with a friend who just finished med school. She told me about Montana’s system: link
Medical malpractice cases are unique. Montana law requires that you first present your claim to the Montana Medical Legal Panel before you can file suit. This is a somewhat informal hearing that is usually held in Helena. At the hearing, both sides present their case to a panel consisting of three medical providers and three attorneys. The ruling of the panel is not binding on either side. After the panel rules, the plaintiff may then file suit.
An adverse judgment by the panel would probably discourage a lot of plaintiffs. It’s an interesting idea, but I don’t know how long they’ve had it in place.
oops.
trying again
This usually works (four ‘close italics’ in a row.)
Bernard Yomtov:
Sorry to hear about your investment nightmare.
I am a lawyer and a primary aspect of my legal work involves investment disputes (which includes various kinds of partnerships in addition to corporations). My opinion is based on what I know can be done is such actions to address bad behavior.
You are right about the SEC, which is why I doubt effective governance can flow from a government entity.
Your investment situation involves the most difficult aspect of corporate governance, which is basically negligence or hard to prove self-dealing in corporate management in a non-public company. Current law leaves a lot of discretion in the hands of management which cannot be second guessed simply because the decision making was un-wise.
dmbeaster,
Thanks for your comments. You write that
Your investment situation involves the most difficult aspect of corporate governance, which is basically negligence or hard to prove self-dealing in corporate management in a non-public company.
Does a public company really differ that much? Suppose I were an Enron shareholder who felt, reasonably enough, that the board – paid around $300K/yr for their services – was negligent in its duty to supervise management. In a practical sense, that is, allowing for legal fees and the like, would I really have any recourse?
It seems to me that the answer is no, and that in turn suggests that our governance rules are not nearly strict enough.
dmbeaster: I am a lawyer…
Good grief, another one? Has anyone here taken a roll-call?
interesting article, thanks von.
I have one major question about the president’s plan for tort reform: Does it only involves medical malpractice cases, since the goal of this idea is to limit the costs associated with being a doctor, or is it a total change to tort law? My point is that if it’s not just a limit on medical malpractice awards, it’s really a big payoff to companies who create harmful products and services. Think the huge legal liabilities Haliburton is carrying over asbestos suits it acquired, as well as the horrifying “girl sucked down the bottom of the pool” case we all heard about during the election that John Edwards was a trial lawyer for. If this tort reform is not aimed specifcally at medical sutis, it becomes just another huge corporate payout. Did I also hear something about limiting class action suits? Same thing.
been a while since ive posted here – new computer and all 😉
I agree that there needs to be reform, but I think a 250K cap is wrong.
Hear me out – im going to write one sentence, in the form of a question:
What if the ACTUAL COST to undo the damage caused is more than 250k?
Let me expand and explain –
Someone gets both legs cut off due to someones negligence. 250K wont even cover the cost of the surgery, much less the cost of the prosthetics and rehab.
You see – capping penalties at 250K doesnt begin to undo the harm done, and will allow wholesale disregard for the welfare of customers, patients, etc.
What WOULD be appropriate though, is a 250K cap on pain and suffering, ABOVE AND BEYOND the ACTUAL incurred cost to the victim for “normalization” of live, etc.
This kind of setup, though, is meaningless. The lawyers would argue over what the cost of normalization (or whatever you want to call it) would be in the same way they argue over awards today.
I would love to have a 250K cap on my liability when someone falls on the ice in front of my building at 5 AM (1 hour before it gets scraped and salted) but I dont want a 250K cap if my doctor leaves rotting sponge tissue in my colon after surgery… I want it taken out, my medical bills paid for, and damages inflicted (250K in damages is more than enough)
But there is more… and I apologize for talking about circumstances, rather than guidelines… my cousin got run off the road by a banker in an SUV who was on the phone on Long Island – she was one of the cases that sealed the no-drive-while-on-the-phone law out here. I want her continued therapy for the permanent brain damage to be covered in her settlement. I dont think she needs more than 250K in un-accounted for cash to live the rest of her life like a Rap star though.
Now – that said – how the HECK am I supposed to think up a set of reasonable guidelines for this?