Lawyers on Trial
BY PAMELA SHERRID
Bankrolled by the billions of dollars won in the fight against Big Tobacco, aggressive attorneys are targeting new industries, everything from house paint to hog farming. They are even, it turns out, complicating the war on terror. Drug makers, for instance, are afraid to supply the government with new vaccines to protect Americans against biological attacks unless the government protects them against lawsuits. And on Capitol Hill, the fight to rein in lawyers could derail efforts to get the government to help cover future terror-related insurance losses, a step some experts say is critical to the economy's health. Are lawyers out of control? Or, more important: Has litigation become more of a burden to society than a safeguard?
Lawyers are certainly more powerful than ever: Their coffers are flush, thanks to the $246 billion settlement with the tobacco industry in 1998. Plaintiffs' lawyers have cemented new alliances with state and local governments and with consumer groups to take aim at corporations. They have powerful friends: The Association of Trial Lawyers of America was top donor to Democratic candidates in the last election cycle. And, as any good lawyer might tell a jury, they have motive: The existing system of contingency fees, in the words of Supreme Court Justice Sandra Day O'Connor, can turn ordinary lawyers into "overnight millionaires."
Of course, in nature even sharks serve a purpose. "The plaintiffs' bar does an important service in vindicating the claims of injured persons and in keeping manufacturers from putting out defective products in the first place," notes Stephen Gillers, a professor of law at New York University. In the 1970s, it took hard work and their own money for plaintiffs' attorneys to prove that manufacturers were covering up the health damage caused by asbestos. The maker of the Dalkon Shield–which covered up the dangers of its birth control device to protect profits–might have gone unpunished had it not been for suits brought in the 1980s.
But the price of righting wrongs is steep. Add up the fees collected by plaintiffs' lawyers in a year, and the total tops $30 billion. Add in payments to injured people, as well as the costs of defense counsel and administrative expenses, and the overall annual tab for the American tort system is at least $179 billion, according to consulting firm Tillinghast-Towers Perrin. In an economy in recession, rising litigation costs take a bigger chunk of the nation's output. "That's generally not viewed as the best way to allocate society's resources," says Tillinghast consultant Russ Sutter.
Smokin'. The burden on the economy has grown since the 1998 tobacco settlement, which will deliver about $3 billion in fees annually to a cadre of top tort lawyers for the next 25 years. "The sheer volume of that money makes those fees the most destabilizing event in U.S. legal history," says James Wootton, president of the U.S. Chamber of Commerce's Institute for Legal Reform. "It gives lawyers more money for R&D, more money to pour into the political system, and more leverage to force settlements."
Follow the money and you'll find Richard Scruggs, the Pascagoula, Miss., lawyer who pioneered the tobacco litigation and who stands to collect $300 million in fees. Scruggs, together with David Boies, who handled the federal government's case against Microsoft, is leading an assault on the HMO industry, charging several top managed-care companies with racketeering. The industry has already spent tens of millions of dollars defending itself, money that most likely will be recovered in premium hikes.
No fool. Then there is Ronald Motley. His South Carolina firm will collect an estimated $2 billion in tobacco fees over the next 25 years. Motley is masterminding a new legal campaign against paint manufacturers such as Sherwin-Williams and Glidden Paint. Motley believes that paint companies should be liable for the abatement of peeling lead paint and the medical costs of lead poisoning, even though the manufacturers stopped using lead in their products in 1978 and lead paint that hasn't peeled isn't considered dangerous by most experts. Lawsuits, though, are surely a hazard: When the Rhode Island Superior Court rejected the defendants' motion to dismiss Motley's case in April, Sherwin-Williams's stock price dropped 21 percent.
Private lawyers in the lead litigation are also borrowing an important tactic from the tobacco campaign: They're acting as hired guns for governments and other public entities. "It's an unholy alliance," says the Chamber of Commerce's Wootton. Trial lawyers like the efficiency of the new partnerships: They expect to win larger profits by representing a large number of people at once. Officials of cash-strapped governments can't resist the temptation to hire an attorney for a no-risk contingency fee without spending taxpayers' money on expensive lawsuits. "They get a free pot of money if they win, but take no financial risk," says Walter Olson, a researcher at the Manhattan Institute, a think tank. "This [joining of governments and tort lawyers] is something you'll see more of," says Dennis Connolly, a litigation expert at insurance broker Marsh.
Already, plenty of local governments are signing on. Motley's first lead-paint client was the state of Rhode Island, which filed in 1999. Since then, cities including San Francisco, Milwaukee, and St. Louis, as well as two Houston-area school districts, have hired Motley or others in similar lead suits. New York City had been going it alone in its 12-year-old suit against paint makers until this fall when it hired Motley's firm. "They wanted our firepower in court," says one of its partners.
One age-old tactic–some might call it ambulance chasing–didn't have to be lifted from the tobacco case. A Beaumont, Texas, law firm sent letters to school districts last year touting the lead litigation as a "win-win situation." The selling points: Districts had "nothing to lose" by suing, and any money recovered, the letter promised, could be used any way the district wanted, not just to remove old paint. The hunt for victims has been taken to remarkable lengths in ongoing asbestos litigation, as well (box).
Now the victims are even chasing the lawyers. Robert F. Kennedy Jr.'s Waterkeeper Alliance, a not-for-profit advocacy group, decided to turn to lawyers, not legislators, when it took on the hog-farming industry. Kennedy wants to put an end to the industry's practice of storing liquefied pig manure in open lagoons that can contribute to spillover into rivers. He persuaded several plaintiffs' law firms to take on his pollution case against Smithfield Foods, the nation's largest hog farmer. Earlier this year, they filed state and federal cases in North Carolina and a separate racketeering case in Florida. "They are bringing as many suits as they can in the hope one will stick," says Richard Poulson, executive vice president at Smithfield. He would actually prefer more federal regulation rather than letting judges and juries decide complex scientific issues.
Even a top tort lawyer like Scruggs–perhaps because he has already pocketed so many millions–admits the system needs changing. "They may burn me at the stake at the next ATLA convention," he says. But tort reform is stalled. Most voters care more about holding corporations accountable for misdeeds than about the cost to the economy of unnecessary litigation and high lawyer fees. The Republicans' loss of the Senate earlier this year squashed most hopes in the business community that President Bush would fulfill his campaign promises for tort reform.
Inoculated. The events of September 11, however, have nudged both sides to act. Already the Bush administration has had to intervene to make sure the threat of lawsuits didn't prevent Americans from getting essential vaccines. The backdrop: In the late 1970s, suits alleging serious adverse side effects against makers of childhood vaccines helped drive many manufacturers out of that business. In 1986, a law was passed that compensates children while protecting companies from litigation. That framework wouldn't safeguard companies in today's crisis, though. So President Bush issued an executive order in October that lets the government treat drug makers as it treats defense contractors. The key provision lets the government agree to be liable if a drug maker has to pay damages in a bioterror-vaccine suit.
The trial lawyers have also been reining themselves in. The day after the World Trade Center attacks, ATLA President Leo Boyle called for a moratorium on lawsuits stemming from the terrorist attacks. The group has organized a volunteer effort to give free legal help to parties injured in the attacks who want to apply to a new federal victims' compensation fund and avoid litigation.
Have the trial lawyers overreached? Tobacco lawyer Scruggs is certainly acting as if they have. He recently signed on with the defense for the first time in years to plot strategy for Sulzer Medica, a medical device manufacturer that is being sued for defective hip implants. "Right now," he says, "there's no way for a company that makes an honest mistake–or any other kind of mistake– to extricate themselves from litigation other than bankruptcy."
Source: US News & World Report, Dec. 17, 2001 Issue
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