Tort Reform: A Little Here, a Little There...

Business lobbyists are pursuing smaller changes--that add up

Jefferson County, Miss., is home to fewer than 10,000 people. But because of the enormous judgments local juries routinely levy against big companies, it's familiar territory to plaintiff's lawyers. From 1995 to 2000, more than 21,000 people filed suit in the small county courthouse.

In December, the American Tort Reform Assn., a lobbying group supported by businesses and defense attorneys, declared Jefferson County to be one of 10 "judicial hellholes." In highlighting allegedly horrific abuses of the county legal system, the public relations ploy employed a political tactic long used by trial lawyers: Win the hearts of the public, and you'll win the hearts of juries.

The campaign garnered so much global publicity--and positive press for corporate "victims" of legal abuse--that business lobbyists say they'll do it again in the coming weeks. Chalk up a small but sweet victory for Corporate America's war against plaintiff's lawyers. Frustrated in their efforts to secure broad legal protection from Congress, companies are seeking new arenas. Rather than aim for major reconstruction of the civil justice system, such as abolishing punitive damages, they're focusing on smaller-scale, more winnable confrontations (table). "For too many years, the [corporations] working legal reform defined it as getting legislation passed," says Steven Hantler, a lawyer at DaimlerChrysler Corp. "We realized that we had to compete at all levels with the trial bar."

In statehouses, for instance, business lobbyists are pushing for laws mandating compulsory jury service, thereby making it tougher for middle- and upper-income professionals, who might be more sympathetic to companies, to dodge civic duty. Borrowing a page from plaintiff's lawyers, companies are also spending money on local judicial races. In Washington, meanwhile, defense attorneys are lobbying a little-known agency that writes the rules of civil procedure to make it more difficult for plaintiffs to obtain embarrassing internal e-mails.

Why the new strategy? If there was ever a time for companies to win major legislation they have long sought, such as limits on class actions, caps on damages, and rules requiring the losing party to pay the victor's legal expenses, this would be it. President George W. Bush dislikes trial lawyers, and he now commands a GOP majority in Congress.

But given the recent wave of accounting scandals, politicians can't be seen siding with business over injured consumers. And the trial bar's grip on the Democratic Party makes it nearly impossible to win the 60 votes needed to pass a law in the Senate, where the GOP has a one-seat majority. Some Republicans--such as Senate Banking Committee Chairman Richard C. Shelby of Alabama--oppose federal tort-reform legislation on grounds that it infringes on states' rights.

So, with their fingers to the wind, business strategists are beginning to pursue lower-visibility measures. Recently, they slipped a provision shielding Eli Lilly & Co. (LLY ) from liability for a vaccine ingredient into the homeland security legislation. Outraged lawmakers have vowed to strip Lilly of its protection, but other companies are likely to copy the tactic of tacking stealth measures on to must-pass legislation. This year, business hopes to win congressional support for reforms such as a cap on jury awards in medical malpractice suits and a rule that would allow class actions to be tried in federal courts, which tend to be more business-friendly.

The strategy shift, which has been building slowly in recent years, is starting to show results. In the November elections, business racked up judicial wins in Mississippi, where Jesse Dickinson handily defeated Supreme Court Justice Chuck McRae, a favorite among trial lawyers. Dickinson was one of three judges business swept into office in the Magnolia State. Victory didn't come cheap: The three pro-business candidates tallied $1.66 million in campaign donations, outraising four candidates favored by trial lawyers, who pulled in a combined $958,000.

Those figures don't include money spent by national trade groups such as the U.S. Chamber of Commerce, which spent an estimated $10 million to elect judges in Alabama, Illinois, Ohio, and elsewhere. The wins are key: In the mid-1990s, business persuaded lawmakers in several states to limit punitive damage awards, only to have the courts nullify the laws as unconstitutional. Sympathetic jurists would be less likely to reverse legal reforms the states passed.

State legislatures are the next big focus. Business this year will blitz statehouses with a record number of legal-reform bills, including measures that would limit damages in class action cases and make it tougher to dodge jury duty. Business is emboldened after a big win in Mississippi, where Democratic Governor Ronnie Musgrove signed damage caps into law in December after a special session of the legislature.

Back in Washington, DuPont (DD ), BASF (BASFY ), and other companies are trying to make it tougher for trial lawyers to get their hands on sensitive e-mail and other digital information. They're asking the Administrative Office of the U.S. Courts to write new bench rules that would require lawyers to provide cost-benefit analyses for obtaining electronic documents. They also want judges to shift the cost of digital discovery onto plaintiffs. Barry Bauman, executive director of Lawyers for Civil Justice, a business-funded advocacy group, says trial lawyers shouldn't be allowed to embark on costly fishing expeditions. Indeed, teasing out old e-mail and memos from discarded drives or tapes can be expensive--in a recent case involving Murphy Oil USA Inc., the cost of reviewing 93 computer backup tapes was estimated at $6.2 million.

Rewriting rules on digital evidence will take years, but corporate lawyers believe the debate is raising the visibility of the issue among judges. And that, in turn, is causing them to give less leeway to plaintiffs' attorneys. It's a marginal victory, to be sure--but that's the only type that seems to be available these days.

By Lorraine Woellert in Washington

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE