Posted on 05/30/2004 2:21:33 PM PDT by Dont Mention the War
ov. Arnold Schwarzenegger's new budget aims to raise almost half a billion dollars by taking 75 percent of the punitive damages that juries in California award to plaintiffs. In the process, he proposes to limit the fees lawyers can charge their clients and to protect defendants from multiple punitive awards for similar conduct.
Critics say the proposal is a Trojan horse. Though the governor presented it as a budget measure meant to raise revenue, it is, they say, a comprehensive revision of the rules governing punitive awards in injury cases - not a tax but tort reform in disguise.
At hearings in Sacramento this week, lawmakers are to hear from scholars, consumer advocates and business groups, many of whom say they find aspects of the proposal dangerously flawed.
Unlike compensatory damages, which are meant to pay plaintiffs for their losses or injuries, punitive damages are intended to punish and deter defendants who engage in egregious wrongdoing. They are thus similar in purpose to criminal fines. They can also be a windfall to plaintiffs and their lawyers.
"The problem with punitive damages," said Cass Sunstein, a law professor at the University of Chicago and a co-author of a book on the subject, "is that they have a lotterylike feature. If there are going to be windfall gains, they shouldn't go to one person but to the public as a whole."
Eight states already have so-called split-recovery laws, which allocate part of punitive awards to state treasuries generally or to specific programs. Several have survived court challenges, though the Colorado Supreme Court struck down a ninth law as an unconstitutional taking of private property. Other states, including Florida, Kansas and New York, have repealed split-recovery laws or allowed them to expire.
Catherine M. Sharkey, a law professor at Columbia, argued in a recent article in the Yale Law Journal that states should sometimes use punitive damage awards to compensate people unconnected to the lawsuit who have been harmed by the defendant's conduct. She called such allocations "compensatory societal damages."
The California proposal adopts that model, said Donna Arduin, the director of the state's Department of Finance.
"Punitive damages are intended to punish," Ms. Arduin said, "and we feel the proceeds are best spent for broader purposes with a nexus to the award."
Most states with split-recovery laws allow lawyers to take their contingency fee, generally 25 to 40 percent, from the total award. California, by contrast, would allow lawyers to take a contingency fee from only the quarter of the award that would go to the plaintiff. And even that fee would be subject to a judge's determination of what is reasonable.
That aspect of the proposal angers the state's plaintiffs' lawyers.
"The attorneys' fees have got to be paid off the top," said James C. Sturdevant, the president of Consumer Attorneys of California, "so there is sufficient incentive for plaintiffs' attorneys to take the risk of attempting to prove the basis for punitive damages."
Robert S. Peck, the president of the Center for Constitutional Litigation, which often represents the Association of Trial Lawyers of America, said the proposal was constitutionally suspect.
"Limiting an attorney to a share of only 25 percent amounts to a taking," Mr. Peck said, referring to the constitutional prohibition on the confiscation of property by the government without compensation. "It forces the attorney to work for free."
But allowing lawyers to take their cut from the total award might create a different problem, said Theodore J. Boutrous Jr., a Los Angeles lawyer who often represents defendants challenging punitive awards.
"It could create a conflict between the lawyer's interest and the client's interest," he said.
Mr. Sturdevant said the gravest problem with the proposal was that it would allow only a single punitive award against a defendant for the same kind of conduct.
"It's really unconscionable," he said. "In a products liability case, that would eliminate the point of punitive damages. It would all but incentivize misconduct by major corporations."
Mr. Boutrous countered that imposing multiple punishments for the same conduct is unfair and may be unconstitutional.
Some supporters of what they call tort reform worry that the proposal might actually lead to larger awards.
"If a juror knows that an award is going to alleviate a tax burden," said Victor Schwartz, the general counsel of the American Tort Reform Association, "she is more likely to render a large award than if she thinks she is giving a windfall to the plaintiff."
Governor Schwarzenegger says the proposal will raise $450 million.
"The estimate," said Darrell Steinberg, a Democrat from Sacramento and the chairman of the Assembly's Budget Committee, "is inflated."
It is based on a study prepared by two scholars at the McGeorge School of Law in Sacramento. They found that juries had awarded punitive damages in about 500 California cases in the decade ending in 2000, for a total of $6.4 billion, or about $640 million a year.
The Schwarzenegger proposal assumes the state will recover around 75 percent of that. But many punitive awards are reduced or eliminated by trial and appellate courts, and litigants who win such awards often settle for smaller amounts.
A review by the state's Legislative Analyst's Office said that $200 million was a more realistic goal.
Whatever the proposal might yield, Mr. Schwartz said, it is essentially a revenue measure.
"This is not tort reform," he said. "This is a budget proposal from a very popular governor. This is a freight train. Not too many people are going to stand in front of it."
how long before the teachers unions and prison guards start run TV ads asking jurors to vote punitve damage awards "for the children" or "for your safety" - so the take can go into higher salaries for public employees.
This idea is beyond stupid.
The need for tort reform is at crisis level.
The need for government to use is as a tax simply makes the current situation worse.
Im starting to really dislike this Nazi.
Welcome to the real world. For the middle class, the combined burden of federal, state, and local taxes is around 50%. We work for free half the year.
Very bad Idea. Now the blood suckers will go after even bigger awards since they get so little of it. Then after the goverment is addicted to the revenue like a crack addict, there will be even less chance of real tort reform.
Oh Boy! I wonder how long before states begin supplying high priced attorneys to assure the state share is maximized?
This is not tort reform. It's another government money grab.
What a horrible idea. This is the opposite of tort reform. Passing this law would place yet another dependent, the government, on the backs of defendants and their insurers.
I see Georgia on the list of states getting revenue from punitive awards. No wonder so few in Georgia government, Republican and Democrat alike, are interested in tort reform.
Just more Big Bully Brotherism.
The only way to limit gov't is to cut the funding.
I e-mailed this story to some radio hosts after I read it in the OC Register. I don't know if any of them talked about it. Many so-called 'conservative' radio hosts don;'t have a Christian or Constitutionalist world view, so they don't even comprehend the evils of collectivism. Many of the ''conservatives' (aka republican party mesmerized loyalists) probably wouldn't even see this idea as flawed.
They would probably cheer it as a way to get back at 'greedy sue-happy Americans'. The State above all else. The state as the master, the populace as the servants.
But the dumbed-down people of CA voted for this clown, voted for his bond measures to paper over past debt and squander more money, and will surely vote this socialist/marxist moviestar in again. yee haw!
This idea actually make some sense. What motivates frivilous lawsuits other than the possibility of massive punitive damages? If the attorneys don't stand to reap a big windfall maybe they will not take up some of the more marginal cases. The argument against this seems to be that juries will award even bigger damages because it is going to the government till. I have more confidence in the common sense of juries than that. Big punitive damages are awarded when the jury wants to punish the defendant, not enrich the attorneys or plaintiff. They won't award larger punitive damages than necessary just to make the attorneys share bigger.
What motivates a crooked leftist judge than a way to raise taxes out of the hide of a company with a fat jury award?
Tort reform is a good idea. Banning punitive damages entirely is a good idea. This is not.
If I could find the stats for this I would..I can't right now...so the following is totally hearsay..
I heard malpractice claims were down..especially in missouri...so the doctors who are whining about their insurance payments need to complain about the insurance companies and not torts.
Imagine a company makes a truely defective product and because of the cost & negative publicity decides against a recall.
There are lawsuits. Some people are horribly injured, and some are only moderately injured. The company uses every legal ploy available to delay the trials of the horribly injured parties, but speeds up the trial of the ones with only minor injuries.
Based on a relatively minor injury, punitive damages are awarded, but they are small. Now the company is "immunized" against further punitive damages.
It sounds to me like this would be a deterrent for class-action lawsuits. Am I missing something?
The real key is to remove the lawyers from the puntive damages phase or just eliminate punitive damages altogher. If trial lawyers couldn't get 40% of the puni's, they are going to be a whole lot less likely to go after cases. Trust me, they are all looking for the one 8 figure case that will make them rich. The know that the damages in the trial case won't typically do it but one single punitive award can set them up for life.
Virtually every trial lawyer of any substance got his firm started after one huge punitive damages award which netted him a million or more and allowed him to get a huge line or credit and start his own firm.
Punitive damages are the holy grail of trial lawyers. If you can separate the lawyers from the puni's, you will cripple the majority of trial lawyers. You could wipe 25% of them out in a single year.
Giving the money to the state would just make the state as corrupt as the trail lawyers are right now. You would just be replacing one evil with another.
I thought the juries decided what the punitive damages should be, not the judges. This isn't tort reform, but it seems like a resonable first step, cutting the incentive to file frivilous lawsuits.
Yes. There are lots of other ways to construct a deterrant to class actions that do justice to injured parties and assure that lawyers are adequately compensated for their work and risk. Rewarding the State for a broken regulatory system with a fat compensation check isn't it.
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