KUFM Commentaries - 2004
Return To All Commentaries
(Links to all titles coming soon)
Corporate Class Action Immunity - Deja Vu All Over Again (January 27, 2004)
Med Mal - Rhetoric v. Facts (February 24, 2004)
HMO Profits v. American Lives (March 23, 2004)
Law Day - Civil Justice In America (April 20, 2004)
U.S. Founders - Protect People From Corporations (May 18, 2004)
Now - Protecting Corporations From People (June 15, 2004)
John Edwards - Pride In Trial Lawyers (July 13, 2004)
US Chamber Of Commerce v. Montana Courts (August 10, 2004)
Political Rhetoric v. Facts (September 7, 2004)
Corporate Gifts (October 5, 2004)
Secrecy Agreements (November 2, 2004)
Holiday Safety (November 30, 2004)
Accountability & Responsibility (December 28, 2004)
Corporate Class Action Immunity - Deja Vu All Over Again
In the words of Yogi Berra, it's deja vu all over again. Congress begins it's new year by reconsidering anti-consumer legislation that has been shot down many times, most recently last fall. It's proponents call it the Class Action Fairness Act, but it is anything but fair. Why is it back again?
Because big business wants it. It is part of a concerted effort by lobbyists from giant corporations to prevent consumers from using class action litigation to hold those corporations legally accountable. Want to know how important this bill is to large corporations? Just count their lobbyists - more than 100 major companies and business associations have been paying for at least 475 lobbyists since 2000 to promote their class-action agenda - nearly five lobbyists for every senator.
The so-called "reforms" are a procedural nightmare for injured consumers. "Reform" proposals would allow any defendant or class member to remove a state case to federal court at any time prior to final judgment. The plaintiffs may go through the expense and time commitment of a state court trial only to find that the case is removed to federal court at the eleventh hour. And thereafter, it can become a series of jumps from federal court, back to state court and back to federal court again. And, each jump is more time and expense for citizens and consumers. The end result will be fewer class action cases, fewer protections for citizens and consumers – and less accountability and more corporate wrongdoing.
Class actions are an important tool for remedying and deterring fraudulent practices where the damages to an individual consumer are minimal, but the number of consumers affected is large. The low damages makes the hiring of an attorney by an individual citizen or consumer financially impossible, but when there are enough people for a class action, it becomes financially feasible to hire an attorney. Class actions provide access to justice for thousands of American consumers and small businesses that would otherwise have no realistic means of taking their case to court.
Here are a couple of examples:
Monsanto hid 40 years worth of dumping PCB's, lead, and mustard gas in Anniston, Alabama – harming the land, plants, animals and people in the area. Nothing was done until residents filed a state class action suit.
A state class action stopped deceptive business practices by Beech-Nut Nutrition Corp. and its parent company Nestle. They were selling sugar-water labeled as pure apple juice for infants.
A state class action suit forced Ford Motor Company to replace defective ignition systems in millions of cars that could stall -- often on highways, across railroad tracks and in other dangerous situations.
As a result of state class actions Blue Cross and Blue Shield of Iowa and Louisiana stopped fraudulent billing practices. Blue Cross was charging their insureds inflated co-payments - amounts that in some cases were higher than the actual bill that Blue Cross received from the hospital.
Here in Montana, a state class action seeks protection and reimbursement for Montanans who were charged illegal loan fees on first and second mortgages by an out of state corporation.
What do all these cases have in common? They are a few examples, out of thousands, of the types of class action cases that would be affected, adversely for citizens and consumers, if the latest incarnation of the so-called Class Action Fairness Act is passed by the U.S. Senate.
Class action reform is unnecessary and unfair. Although proponents of new restrictions on class actions like to point to rare and atypical anecdotes to justify "class action reform," the truth is that the overwhelming majority of class actions are meritorious. And while proponents are quick to decry a "tidal wave" of class action filings, there is no statistical evidence to support this claim.
A new empirical study by two objective professors confirms that the system works. This study is the largest of its kind, compiled from comprehensive data of state and federal class action cases from 1993-2002. It covers the biggest sample to date of class action cases, ranging from civil rights violations to securities fraud and will be published in the Journal of Empirical Legal Studies.
The study finds that, contrary to rhetoric advanced by corporate and industry lobbyists, neither plaintiffs' recoveries nor attorneys' fees in class action cases have increased over the last decade. The study also confirms that class actions are fiscally efficient, finding that as class recoveries increase attorney fee percentages decrease yielding an increased net return to consumers.
It's not just trial lawyers who think this is a bad bill. The federal and state judiciaries have consistently opposed efforts to "federalize" class actions - knowing that state courts are perfectly capable of handling their own matters without interference from the feds. Additionally, many consumer groups, including AARP, American Cancer Society, American Heart Association, American Lung Association, Campaign For Tobacco-Free Kids and Public Citizen have opposed these class action reforms.
Have our Senators already forgotten Enron, WorldCom, WR Grace, Montana Power and all their ilk? These corporate scandals demonstrate the need for more, not less, accountability. When daily headlines around the country are revealing fraud, deception, and worse, by companies such as Enron, now is not the time to shield the conduct of corporate wrongdoers. At a time when it's important for irresponsible businesses to be held accountable, class action reform sends the wrong message. Congress should protect us citizens – consumers, workers, and retirees, not corporate wrongdoers.
This is Al Smith for the Montana Trial Lawyers.
KUFM Commentary - February 24, 2004
Med Mal - Rhetoric v. Facts
As we get closer to election time, the White House has been taking the lead for advancing political rhetoric instead of fostering a genuine review of facts geared toward finding actual solutions for pressing problems. Health care is just one recent example of White House campaign rhetoric trampling a genuine factual search for solutions.
If you were to look at the problem of rising costs of health care with an eye towards reaching a solution, it would seem that you would want to first look at what costs are rising. When the Kaiser Foundation looked at the numbers, the top factors that they came up with were 67% higher spending on prescription drugs, 59% higher spending for hospitals, 48% higher spending for physicians, 23% higher spending for better technology, and 44% higher insurance company profits.
So what has the White House focused on? Are they looking at reigning in drug costs? No, Bush's Medicare bill in fact prohibits the government from demanding price decreases for drugs. Are they looking at reigning in insurance industry profiteering? No, Bush pushes for more opportunities for private insurance profits. The problem as Bush sees it is medical malpractice lawsuits - calling them "one of the main cost drivers." His solution is to call for the elimination of "wasteful and frivolous medical lawsuits." Sounds good, go after a "main cost driver" to improve health care.
Problem is, it's all political rhetoric without a factual basis. All you have to do is look at the numbers - what are the costs for medical malpractice lawsuits? All malpractice costs - insurance, damages paid, legal fees, insurance company profits, etc - amount to a little more than 1% of our total health care costs. That's right, the health care industry could receive total immunity from all lawsuits and it would lower health care costs by a whopping 1%. But that 1% savings is only realized if all lawsuits were eliminated. Bush just wants to reign in what he calls "wasteful and frivolous medical lawsuits."
Today the U.S. Senate is considering a bill, S. 2061, that Bush supports as a key to stopping "wasteful" medical malpractice lawsuits. Now you'd think a bill that is so important to health care would have had a round of committee hearings so Senators could gather facts in an effort to come up with a meaningful solution. But you'd be wrong - there were no hearings, no search for facts or genuine solutions - just political rhetoric on the Senate floor.
S. 2061 is being sold as a solution for rising health care costs and OB/GYN malpractice premiums . The main problem with the bill is that it does absolutely nothing to lower malpractice premiums - there are not even any promises by the insurance industry, let alone statutory mandates, that insurance premiums will go down.
And, it does absolutely nothing to address the so called "frivolous lawsuits." What the bill does do is restrict and eliminate the rights of women and babies who have suffered harm because of negligent conduct by health care providers.
The main aspect of the bill is limiting non-economic damages to $250,000. That's right the main feature is to limit damages for those who have legitimate injuries - those that a jury finds have been harmed by the negligence of health care providers. How does that stop "frivolous lawsuits" - it doesn't, it just limits the damages of women and babies who have suffered legitimate injuries.
What's the big deal you might ask - aren't we just talking about "pain and suffering?" Well, the bill does cap the pain and suffering of a mother who loses a child to medical negligence. It also caps the damages of a woman who loses her ability to ever bear children. It caps the damages of a baby facing a lifetime of pain and permanent disability. Most importantly, it discriminates against women and babies - the cap most severely impacts those that do not have classic economic damages of lost wages, children and mothers who chose to stay at home. Perhaps the most blatant discrimination is that this bill caps a woman's value as a potential mother at $250,000, but a man's value as a potential father has no cap.
This bill would be bad enough if it was just about OB services - but it is not. The bill limits the rights of women who just receive GYN services too. It also provides protections for not just OB/GYNs, but also drug companies, medical device manufacturers, HMOs and other insurance companies. The bil applies to all drugs and devices related to gynecological care not just those prescribed during the course of a pregnancy. The bill would benefit the manufacturers of birth control pills, intrauterine devices, and hormone replacement therapy.
Will this bill accomplish its two main goals - decrease both malpractice premium rates and health care costs? No, it won't. The insurance costs will not be lowered, and no insurance companies will say that they will be. State after state has enacted draconian tort reforms without a corresponding reduction in insurance premiums. Health care costs will not be lowered either - eliminating all medical malpractice costs amounts to only about 1% of total health care costs. This bill just limits the amounts paid for legitimate malpractice claims, and would not even make a dent in overall health care costs.
S. 2061 is just about political rhetoric. It is no solution for doctors facing rising premiums. It is no solution for consumers facing higher health care costs. The only beneficiaries are drug companies, medical device manufacturers, HMOs and the insurance industry. For the cynics out there, I probably could have just simply told you to look at the Bush campaign reports to see who the beneficiaries of S. 2061 are.
This is Al Smith for the Montana Trial Lawyers
KUFM Commentary - March 23, 2004
HMO Profits v. American Lives
Today the U. S. Supreme Court heard oral arguments in the appeals of two cases involving health maintenance organizations - HMO's - being sued for negligence. The question before the Supreme Court is not whether the HMOs were negligent, but more simply - can a patient even sue an HMO for negligence? Why is that even a question?
Well, patients' rights to hold HMOs legally accountable were taken away in 1974 when Congress enacted ERISA. State liability laws that would ordinarily hold HMOs accountable for injuries or deaths that they cause were preempted by this federal law. Granted immunity, some HMOs have acted with impunity in delaying, denying and terminating health insurance benefits.
But if ERISA preempts state laws, taking away a patients' right to hold an HMO legally responsible for its decisions, why are these cases in front of the US Supreme Court? Well, you may remember that during the 2000 campaign and during one of the presidential debates, candidate Bush was positively gushing over the Patient Bill of Rights he got through in Texas, and he promised the same for all of America. Of course Bush did not mention that he fought against and then vetoed the first Patient Rights Bill sent to him as governor. Nor did he mention that he again fought the same bill the next legislative session, and the bill became law without his signature or support, because the Texas legislature's vote for the bill was overwhelming - and veto proof. Both of the cases argued today came from Texas under their state Patient Bill of Rights. In one of those flip flops Bush is so adept at, his administration argued in the Supreme Court today in support of the insurance industry and in opposition to the Texas law candidate Bush was so proud of when he was courting consumer votes in the 2000 election.
One case involves a lawsuit by Juan Davila, who was covered by an Aetna HMO paid for by his employer. In 2000, he visited his primary care physician, who prescribed the pain-killer "Vioxx" for arthritis. Before filling the prescription, Aetna required Davila to try two other less-expensive medications. After three weeks on the cheaper pain reliever, Davila was rushed to the emergency room, suffering from bleeding ulcers, a side effect of the cheaper medication. Davila sued, claiming Aetna's decision not to cover Vioxx from the beginning was negligent.
The other case involves Ruby Calad, who was discharged from the hospital one day after a hysterectomy. The Cigna HMO nurse decided the standard one-day hospital stay would be sufficient, although Calad's treating doctor recommended a longer stay. After her release, Calad suffered severe bleeding and complications, and had to be re-hospitalized. She sued, claiming Cigna acted negligently in deciding the HMO knew better than her treating doctor and that more time in the hospital was not medically necessary.
Over the past eight years Congress has been debating a Patient Bill of Rights. The sticking point has been over whether patients will be able to hold HMOs legally accountable and responsible for the harm they cause. The health insurance industry early on labeled any Patient Rights bill as a trial lawyer bill, and the Bush administration, contrary to his campaign promise, has eagerly continued that characterization.
The industry opposition comes from their knowledge that without meaningful legal accountability HMOs will be able to continue to callously put profits over patients. If they keep their legal immunity HMOs will be able to continue to deny and delay health care with impunity. Unfortunately, some health insurers interfere with the physician-patient relationship and dictate what care a physician can or cannot provide. Americans want their doctors to make medical decisions –– not managed care bureaucrats trying to increase their bonuses.
By removing the legal immunity, the special treatment, enjoyed by HMOs, patients will be given the care they need, deserve and paid for – up front – without a need to resort to the courts. However, for those health insurers who still refuse to play by the rules, injured patients would be able to hold the responsible managed care company legally accountable in state court. HMOs would only be held to the same standard as every other business and every other person in America, because they could be held legally accountable for the injury they cause.
With a repeal of ERISA premption paralyzed in Congress by the big money lobbying efforts of the insurance industry some forty states, including Montana, have passed laws that require and set forth guidelines for internal and independent external reviews of HMO decisions, the Supreme Court has upheld them.
The experience in the ten states, including Texas, which have taken the next step and enacted laws to hold managed care insurers legally accountable is instructive. Fact is patient care has improved, there have been only a handful of lawsuits, and, insurance rates have not skyrocketed in those states. These laws allowing patients to sue HMOs for injuries caused by the wrongful denial or delay of health care have done their jobs – they have made HMOs that might be inclined to wrongfully deny or delay care stop and think about legal consequences, not just profits.
Now, the legality of these laws – passed by ten states, but not Montana – that allow HMOs to be held legally accountable for the harm they cause is before the Supreme Court in these two Texas cases. The question is whether the Court will uphold HMO legal accountability imposed by states or whether it will uphold the immunity the insurance industry purchased in 1974 with ERISA. Legal accountability of HMOs is not about trial lawyers – doctors have filed a friend of the court brief supporting the Texas law and the rights of injured patients. No, whether HMOs will be held legally accountable for their decisions or not, is simply part of the answer to this question - do we as a society value insurance industry profits more than we do the health and lives of American citizens?
This is Al Smith for the Montana Trial Lawyers Association.
KUFM Commentary - April 20, 2004
Law Day - Civil Justice In America
Saturday, May 1, marks the 47th anniversary of Law Day, America's yearly celebration of and reflection upon the unique role our legal system plays in this nation's democracy. Law Day was first proposed by American Bar Association president Charles S. Rhyne in 1957, who envisioned a special day to honor our strong heritage of liberty, justice and equality under law. This dream became a reality in 1958, when President Eisenhower established "Law Day U.S.A." In 1961, Congress designated May 1 as the official date of Law Day.
In many places Law Day has become Law Week, as national associations are joined by state and local bar and trial lawyer associations, businesses and schools in conducting thousands of programs on America's legal system and the many freedoms and protections its confers on us.
When we think of America's legal system, it seems we most often think of our criminal justice system and the protections it offers to hold criminals accountable while also shielding innocent citizens from governmental abuses. In some ways, the more remarkable part of our legal system may be our civil justice system and the contributions it and our jury system have made to consumer health and safety.
For over 200 years, the American justice system has been an important vehicle for positive social change. No matter their wealth or social standing, men and women across this country know that if they or loved ones are injured by another, they can hold the wrongdoer accountable. And, often they play a role in ensuring that no other family suffers the same tragedy, by forcing corporations to take unsafe products off the market.
Our justice system has resulted in improved health and safety for all Americans:
The anti-miscarriage drug DES, the Dalkon Shield IUD and super-absorbent tampons that cause toxic shock are no longer on the market, ensuring that the health of women will never again be jeopardized by these products.
Football helmets have been vastly improved, helping to reduce deaths and serious injuries to our children each season.
Children's pajamas that burst into flames no longer sit on store shelves. Cribs no longer strangle infants.
Firestone tires that blew their treads causing accidents that injured and killed Americans are now off the market.
Auto fuel systems no longer explode upon impact. Garage doors now have automatic reverse mechanisms, trucks have back- up beepers, farm tractors have roll bars -- the list goes on.
These changes have come about thanks to courageous and determined citizens and attorneys who represent consumers. Together, they have forced the negligent and reckless to account for their acts. Our legal system provides for justice -- through juries composed of ordinary citizens acting as the conscience of the community.
These days we often hear from corporations that product liability lawsuits are too costly. But, how much does improved safety really cost us? Product liability insurance costs large businesses about six-tenths of 1 percent of annual gross receipts and costs small businesses about 1 percent. That costs American consumers 26 cents out of a purchase of $100 for a product – – one quarter of one percent. Consumers get a pretty good deal. What corporations are really concerned with is being held fully accountable and responsible for the harm they cause.
The importance and success of our civil justice system cannot be overlooked, especially now that this very system is under continual assault by corporate America. At a time when Americans increasingly sense an erosion of personal responsibility in society, our civil justice system remains the one institution that holds individuals and organizations responsible for their behavior and forces them to change their conduct for the better.
Corporations however, are continually seeking ways to avoid legal accountability. The continuing efforts of asbestos corporations to be relieved of full responsibility for the disease and death they have caused is but one example. Recently, Elaine Chao, Bush's Secretary of Labor, complained that overtime rules were costing corporate America $200 billion a year because of what she called "needles litigation." Litigation over wages and hours has increased, because more and more companies are cheating more and more workers out of the money they have a right to. Was Chao's solution to have the Department of Labor step up education and enforcement efforts so that companies complied with overtime rules? No, her solution was to get rid of the litigation by gutting the overtime rules, thereby preventing workers from ever getting to court. It is only through the vigilance and actions of individual citizens standing up and saying NO - No you will not take away my rights to hold wrongdoers accountable for the harm they cause - that we are able to keep our civil justice system.
The enviable record amassed by America for consumer health and safety has made our justice system the envy of the world. No wonder Great Britain, whose "loser pays" attorneys fees rule keeps large numbers of poor and average-income people from seeking justice, is considering adopting American-type "contingency fee" arrangements as well as broadening the availability of punitive damages. And, Japan recently adopted tougher, American-style liability laws in order to keep dangerously defective products off its market.
We should be proud of our system, and be ever-vigilant that citizens never lose their essential rights. In America, justice belongs to people, not politicians; to juries, not insurance companies; to individuals, not government; to injured workers and their families, not asbestos corporations.
This is Al Smith for the Montana Trial Lawyers Association.
KUFM Commentary - May 18, 2004
U.S. Founders - Protect People From Corporations
Our world today is dominated by corporations. We see it in most of the news we get, filtered through the ever smaller number of corporations that own our newspapers, TV and radio news sources. We see it in corporations performing governmental, military and intelligence functions in Iraq. We see it in an administration filled with corporate foxes appointed to guard the chicken houses that protect our public resources. And, we see it in the laws churned out, at the behest of and to the benefit of corporations, in Congress and in our state legislatures.
Corporations and their messages have become so pervasive that we hardly even question their place in our country anymore. It wasn't always so. Most of us remember our grievances that led to the American Revolution as being against good old King George. What most of us don't remember, or never learned, was that many of our grievances were with King George carrying out the bidding of the few corporations that dominated colonial America, like the East India Company. In 1776 we declared our independence not only from British rule, but also from the corporations of England that dominated and controlled us, and extracted wealth from us.
In the early days of our country, we the people, through our state legislatures, allowed corporations to be chartered to serve solely as a tool to gather investment and disperse financial liability for the public good, such as construction of roads, bridges or canals. Our country's founders retained a healthy fear of the threats posed by corporate power and sparingly granted corporations a limited business role.
These state laws, many of which remain on the books today, imposed strict conditions. A corporate charter was granted for a limited time and for a specific public purpose - build your road, dissolve the corporation and pay the stockholders. Corporations could engage only in activities necessary to fulfill their chartered purpose - no cigarette companies pushing macaroni & cheese and beer too. Corporations could be terminated if they exceeded their authority or if they caused public harm. Owners and managers were responsible for criminal acts committed by the corporation. Corporations could not make any political contributions, nor spend money to influence legislation. A corporation could not purchase or own stock in other corporations, nor own any property other than that necessary to fulfill its chartered purpose.
Granted limited powers, corporations continually sought more from state legislatures. Mindful of the corporate tyranny they had cast aside in the Revolution, most opposed any further expansion of corporate power. Thomas Jefferson said, "I hope we shall crush in its birth the aristocracy of our moneyed corporations which dare already to challenge our government in a trial of strength, and bid defiance to the laws of our country."
For 100 years after the Revolution, citizens and legislators tightly controlled the corporate chartering process. Having thrown off English corporate rule, we made certain that charters were issued one at a time, for a specific purpose and for a limited number of years, and, the laws restricting corporate actions were enforced by the states. Early legislators granted very few corporate charters, and only after debate. Citizens governed corporations by detailing operating conditions not just in charters but also in state constitutions and state laws. In Europe, charters protected directors and stockholders from liability for debts and harms caused by their corporations. American legislators rejected this corporate shield. The penalty for abuse or misuse of the charter was not a plea bargain and a fine, but dissolution of the corporation.
An important vestige from that era is Article XIII, Section 1 of our Montana Constitution. It provides for our power to charter corporations and a mandate to the Montana legislature to "provide protection and education for the people against harmful and unfair practices by" corporations.
The men running corporations were not content. They continued to battle over charter controls, and then to control labor, resources, community rights, and political sovereignty. Ever more frequently, corporations abused their charters to become conglomerates and trusts. They converted the nation's resources into private fortunes, creating factory systems and company towns. Political power began flowing to absentee owners, rather than community-based businesses.
The most severe blow to citizen control of corporations was the 1886 Supreme Court case of Santa Clara County v. Southern Pacific Railroad. A case about local taxation powers became the precedent by which corporations became "persons" under the U.S. Constitution, entitled to all the rights of any other person, even though the Constitution never mentions corporations. The 14th Amendment, enacted to protect rights of freed slaves, has since been used to strike down hundreds of local, state and federal laws enacted to protect people from corporate harm.
Having gained Constitutional equality with we the people, corporations have moved on to demand special treatment. Not content with getting protection for directors and stockholders from liability for debts and harms caused by their corporations, a special immunity rejected when we the people still remembered our English corporate abusers, corporations now seek protections for the corporations themselves for the harms they cause. Whether it's asbestos manufacturers, HMO's, drug companies or makers of dangerous products, they all ply the halls of Congress, by the thousands, seeking, no, demanding, and getting, protection from "activist judges," trial lawyers and we the people.
We have gone from protecting people from harmful corporations to protecting corporations from accountability to the people they harm. If only we too could protect ourselves and property, our freedom, and our country, simply by dethroning a guy named George who does the bidding of domineering and abusive corporations.
This is Al Smith for the Montana Trial Lawyers
KUFM Commentary - June 15, 2004
Now - Protecting Corporations From People
Last month I talked a little about the history of corporations in our country. Based on the feedback I received, I struck a chord with people.
A brief recap - our country was founded with a healthy concern for the power of corporations. Our revolution was not just against King George, but also against the handful of corporations that abused colonists with George's help. The revelers at the Boston Tea Party didn't go after the King's ships, rather they went after the ships of the East India Company. As a result, in the early days of our country, we the people, through state legislatures, allowed corporations to be chartered to serve solely as a tool to gather investment and disperse financial liability for the public good. Our country's founders retained a healthy fear of the threats posed by corporate power and sparingly granted corporations a limited business role.
The men running corporations were not content. They continued to battle over corporate charter controls. In the latter half of the 19th century, ever more frequently, corporations abused their charters to become conglomerates and trusts, converting the nation's resources into private fortunes, and consolidated political power by ignoring or gutting prohibitions on lobbying.
The most severe blow to citizen control of corporations was the 1886 Supreme Court case of Santa Clara County v. Southern Pacific Railroad. Had our founding fathers wished to make corporations persons under the Constitution, they could have, but they did not because they understood the potential abuses of corporations. In Santa Clara, the 14th Amendment, enacted to protect rights of freed slaves, was used to make the legal creations of corporations into "persons" with all the rights afforded real flesh and blood citizens. Using that new found foothold, corporations have sought more and more control of our laws, while accepting less and less accountability and responsibility for the harms they cause.
Over the recent past we have been subjected to several stories of corporate abuses – Enron, Worldcom, Firestone, Montana Power and W.R. Grace to name a few. The spin we have heard again and again is that all corporate wrongdoing is rooted primarily in unethical behavior among a few "bad apple" executives. The "bad apples" explanation ignores the real source of corporate wrongdoing: the very structure and nature of corporations and the laws that govern them.
Jerry Mander, in his 1991 book, In the Absence of the Sacred, explores what he calls the "Eleven Inherent Rules of
Corporate Behavior." They illustrate the severe limitations of what we quaintly call "corporate responsibility." These Rules expose the fallacy of the "bad apples" theory and illustrate the impotency of mere regulation or pleas for corporate self-responsibility. Let me give you a few, brief real world examples of how a couple of these rules of corporate behavior manifest themselves in our country today.
Primary among the rules is the Profit Imperative – because maximizing return to shareholders is legally required of corporate officers, profit must be the ultimate measure of all corporate decisions. Profit is more important than consumer safety, worker safety, public health, environmental preservation, or community well-being.
The primacy of profit may have economically destructive impacts, such as Enron's manipulation of electricity markets to maximize profits on the backs of consumers. The most notorious case involving the cost-benefit-profit analysis is the Ford Pinto. In the early 1970s, Ford Motor Company analyzed the costs and benefits of relocating the Pinto gas tank to greatly reduce the likelihood of fires and explosions in rear-end collisions. The predicted cost: $11 per vehicle. The benefits: 180 lives saved and 180 serious burn injuries prevented each year. Ford decided that the benefits of saving 180 lives a year did not justify the costs. Ford calculated that it would have to pay $200,000 per death and $67,000 per injury - a lot to you and me, but cheaper, and more profitable, to Ford than just fixing the problem.
The public eventually learned that the Pinto had a tendency to explode in rear-end collisions, and victims and their families sued the company. A jury, indignant over Ford's callousness, awarded $125 million in punitive damages - 600 times Ford's predicted cost to pay for their victim's firey deaths. It wasn't until after juries awarded punitive damages - an unpredictable cost that didn't fit into their cost benefit analysis - that Ford fixed the problem. The corporate solution, governed by the profit imperative, is not to eliminate unsafe products. No, the profit imperative compels corporations to seek elimination of, or statutory limits on, punitive damages in our legislatures and our courts - thus making the calculation of costs of human lives and thus corporate profits more predictable. And that is the course they have chosen.
Another inherent rule of corporations is that of structural amorality. Corporations are artificial creations, shielded from obligations of personal morality and responsibility by their very design. The result are decisions that may be antithetical to community interests, workers' welfare, consumer safety, or public health, decisions made without risk of personal liability to the shareholders of the corporation. Especially when coupled with the profit imperative, structural amorality allows a W.R. Grace to devastate its workers and their families, and a whole community, like Libby, and then avoid responsibility. Unshackled by the protections our founding fathers insisted upon, corporations like Grace have perversely used our government to protect themselves from accountability to the real people of this country that they harm.
It's easy to forget lessons not learned through personal experience. Our founding fathers understood that the true threat from corporations came not from a few "bad apples" but from the nature of corporations themselves. Have we learned that yet?
This is Al Smith for the Montana Trial Lawyers
KUFM Commentary - July 13, 2004
John Edwards - Pride In Trial Lawyers
Last week's announcement of John Edwards as John Kerry's running mate brought immediate attacks from the GOP. Edwards' chief failings according to the GOP - he's a liberal and a trial lawyer. Two labels that have become, consciously, smear words in the GOP lexicon. The trial lawyer bashing was no surprise, given the decades long campaign by corporations and their GOP lap dogs to paint trial lawyers as evil doers on par with communists.
Recently, Commonweal Institute, a nonpartisan think tank incorporated in Washington, DC, announced its release of a report revealing the workings of the so-called "tort reform" movement. The report, "The Attack on Trial Lawyers & Tort Law" reveals the political and economic motivations of the "tort reform" movement. For more than three decades, business interests have invested billions of dollars to sell the public a distorted view of a legal system. Influencing public opinion has been a key strategic aim of the business-driven campaign for so-called "tort reform," which is designed to limit corporate liability, prevent civil lawsuits against corporations, and restrict citizens' ability to pursue recourse in the courts. In addition to these corporate backers of tort reform, however, there are also right-wing think tanks and other organizations that have played a major role in promoting "tort reform."
The GOP has also been dutifully and actively spouting the corporate "tort reform" disinformation campaign as part of its campaign against the American consumer. GOP consultants such as pollster Frank Luntz, have been pushing tort reform since the early 1990s. "It's almost impossible to go too far when it comes to demonizing lawyers," Luntz wrote that year in a memorandum to Republicans running for re-election. "Make the lawyer your villain by contrasting him with the little guy,' the innocent hard-working American who he takes to the cleaners."
That the Bush campaign would attack Edwards as a trial lawyer was to be expected. During his campaigns and over his two terms as Governor, Bush attacked trial lawyers. As Governor, Bush signed a series of brutal bills that severely restricted injured Texans' rights to sue, greatly reducing liability risks for Texas corporations. Bush signed a series of laws that insulate Texas corporations like Enron from lawsuits for their reckless behavior and strip the rights of injured Texans who would be entitled to compensation.
Texans for Lawsuit Reform (TLR), one of two principal "tort reform" corporate lobbying groups in Texas that succeeded under Bush, received 80 percent of its money from the families of just 24 tycoons. Ken Lay, a.k.a. "Kenny Boy" former Enron chair, was one. Political action committees, businesses and individuals affiliated with Texans for Lawsuit Reform and the Texas Civil Justice League, the state's other major "tort reform" lobby group, contributed $4.1 million to Bush's two gubernatorial campaigns, outspending every other special-interest donor except for those in the Enron "energy and natural resource" category.
"Tort reform" interests contributed heavily towards Bush's presidential bid, as well. At least 75 percent of the members of the Texas Civil Justice League contributed to Bush's presidential campaign.
But the GOP and Frank Luntz have it backwards when it comes to John Edwards - he didn't clean out the little guys. He targeted corporations like Sta-Rite Industries.
In his most notable case, John Edwards represented a five-year-old girl named Valerie Lakey. Valerie had been playing in a Wake County, N.C., wading pool when she became caught in an uncovered drain that pulled so forcefully that the suction pulled out most of her intestines. She survived, but for the rest of her life will need to be hooked up to feeding tubes for 12-14 hours each night. Edwards filed suit on the Lakeys' behalf against Sta-Rite, the Wisconsin corporation that manufactured the drain.
Before the trial began in December 1996, John Edwards discovered that several other children had suffered similar injuries from Sta-Rite drains, that the company knew it, yet Sta-Rite never took steps to prevent such injuries. The company made more and larger settlement offers right up to the trial. The Lakey family and Edwards declined the offers. In January 1997, the jury found Sta-Rite responsible for Valerie's injuries and liable for $25 million in economic damages. In North Carolina, punitive damages could have tripled that amount. The company immediately settled for $25 million rather than risk a large punitive award. The Lakeys went on to get a law passed in North Carolina that regulates drains in pools, so that others would not be injured like Valerie.
Perhaps the easiest way to contrast Edwards, the trial lawyer, with Bush, the corporate poster boy, is to look at the Patient Bill of Rights. Edwards has supported a patient's right to hold an HMO legally accountable for the harm they cause when they wrongfully deny or withhold necessary and covered medical care - a position supported by the American Medical Association, among other healthcare providers. Simply, Edwards supports the proposition that patients and their physicians should make treatment decisions, not insurance industry bean counters more interested in profits than proper care.
Bush has consistently, as governor and as president, supported the insurance industry. Bush characterizes the patients' right to hold HMOs legally accountable as just a benefit to trial lawyers, which is simply untrue. Trial lawyers can collect attorney fees for cases where HMOs wrongfully deny or delay care under current law. Legal accountability of HMOs is not about attorney fees, it is about justice for the patients and their families who have been harmed.
It is simple - Edwards, a trial lawyer who advocates for people injured by corporations - Bush, a corporate good old boy who advocates to protect corporations from injured people.
This is Al Smith, a proud Trial Lawyer.