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Pricing Pain and Suffering : Business and Consumer Groups Square Off Over Tort Reform

March 10, 1995|DONNA K. H. WALTERS | TIMES STAFF WRITER

Karin Smith died Wednesday, and her friends in Washington could think of no better reason to continue their fight against tort reform.

Smith died of cervical cancer--a disease that has a remarkably high survival rate when detected in time. Smith's diagnosis was missed because three separate, faulty tests at a Wisconsin laboratory failed to reveal the problem. She sued the lab and won a $6.3-million settlement. Until shortly before her death at age 29, Smith continued to fight for consumer protection laws so that other women might be spared.

At Citizen Action, a consumer group that opposes the overhaul House Republicans have charted for laws pertaining to civil suits, Smith's death was hard to take. To them, she was a hero in the battle to preserve laws and punitive damage awards they say hold businesses' feet to the fire.

The reforms being considered by the House this week would would put aspects of torts--civil lawsuits in which someone's actions are blamed for another's injury--under federal, not state law. They would put a cap of $250,000, or three times the amount of certain damages, on punitive damage awards.

In cases with multiple defendants, such as some of the fraud and product liability cases of the past, the reforms would lessen the plaintiffs' chances of recovering non-economic damages (such as loss of fertility, disfigurement, lifelong pain or loss of eyesight). Already, the House has passed a "loser pays" provision that opponents say would force plaintiffs to accept low-ball settlement offers rather than risk having to pay the defendants' legal bills.

Manufacturers and businesses say they need the reforms, especially limits on what can be sky-high punitive damage awards, to reduce the costs of doing business and stay competitive. They cite the famous McDonald's case, in which a judge last year reduced to $480,000 a New Mexico jury's initial $2.7-million punitive damage award to a woman who was severely burned by spilled coffee.

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Small companies also suffer, said Paul Huard, lobbyist for the National Assn. of Manufacturers, one of the main business groups backing the reform measures.

"I have members with 50 employees, and when they spend $50,000 in legal fees to defend against a frivolous lawsuit, that's a lot of money that doesn't get given out in Christmas bonuses, raises or used to buy new machinery," he said.

Huard said businesses particularly like provisions of the legislation that would limit damage awards in injury cases if the injured person altered or misused the product in question or was intoxicated or abusing drugs at the time. "And if you're going to impose punitive damages, they have to bear some relationship to the underlying injury," he said. "We call that common sense."

Consumer groups cite Karin Smith's experience, and warn that the proposed changes would limit ordinary folks' access to the civil justice system and allow businesses to continue dangerous, shoddy or negligent practices.

"This is a one-way street that has a never-changing red light for consumers seeking to use their legal rights, and a never-changing green light for corporations to behave any way they want," said Cathy Hurwit, legislative director for Citizen Action.

Taking away a jury's power to determine when a defendant's actions have been egregious--and to assess a fine intended not to compensate the plaintiff, but to punish the wrongdoer--would be a severe blow to consumers' rights, trial lawyers and consumer groups say.

"One of most important things about punitive damages is that they have not been set in stone," said Mary Griffin of Consumers Union, the activist group that publishes Consumer Reports. "The threat of damages is a very powerful incentive for companies to make sure they produce the highest quality and safest products, and act responsibly."

Punitive damages at the $250,000 cap may be a powerful enough incentive to small companies, consumer groups say, but such an amount would be no more bother than a gnat to a large corporation. In the past, several high-profile product liability cases have spurred changes in product design or resulted in warnings on packaging. Some have led to products being withdrawn from the market.

"We've always been strong proponents of safe products. Regulatory agencies are being scaled back, their enforcement power cut, at the same time Congress is making cuts in regulation," said Griffin. "And now (with the reforms), they are pulling the safety net out from under workers, women, children and seniors."

The opponents take issue with those who say such lawsuits are responsible for court backlogs. The real caseload growth, they say, is in lawsuits between businesses. Torts amount to 2% of all court cases and 9% of all civil cases, according to a 1992 report by the National Center for State Courts. Punitive damages are awarded in less than 1% of all cases. Some states already prohibit or limit punitive damage awards; the House legislation would not require them to allow such awards.

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