Tuesday, February 4, 2014

Blocking the Door to the Halls of Justice: ALEC Weighs In Again

Introduction.

Several years ago, while chatting with some of my students, one young woman revealed that she had no worries about paying for college. She laughed and said PopTart will pay for four full years at any college I choose with enough left over for my younger brother. I asked her to elaborate, and she explained that she was a latch-key kid, arriving home before her parents or her brother. Every day, she chose a PopTart for her after-school snack. On the day that changed her collegiate life, she put the tart in the toaster, unloaded her backpack and listened for the tart to pop. When it did, she depressed the lever to warm the tart thoroughly--just as she did every day, Monday through Friday, for a full school year, and she returned to organize her homework on the dining room table.

This day, however, the tart caught fire inside the toaster. The flames leaped up the cabinets, and soon the fire was out of control. The kitchen and living room had to be gutted after the fire department and insurance were through investigating. Her parents sued, and thus, according to my student, was born a disclaimer on the PopTart package reading “Due to possible risk of fire, never leave toasting appliance or microwave unattended.” 

Some would call the family’s actions a frivolous lawsuit; others would understand that the girl’s parents believed a warning was absolutely necessary for the safety of us all. They believed they were sending a message to the world to watch over your tarts as they heat and thus, save lives.

I wasn’t able to verify my student’s version of events, and in truth, I had no reason to do so. I know that she and her brother graduated from the same expensive private college and did not need student loans to do so. I have however verified that Kellogg’s has been sued and has paid several claims for decades--even after the disclaimer appeared on their packages, and I don’t have a problem with that.

The marketplace is large, consisting of many parts. Manufacturers, retailers, government, attorneys, and experts all co-mingle and analyze in order to deliver products that are profitable and desirable. The courts are merely one measure or safety valve to prevent abuses, including, but not limited to, some of the following abuses when Goliaths preyed upon our natural resources and human well-being in the pursuit of profits that subsequently returned to their victims.

Many American stories are about Davids slaying Goliaths: 
  • John Travolta, starring in A Civil Action, reluctantly undertakes the case of people poisoned by a company’s callous disregard for natural resources and human life. His pursuit of justice is expensive, endangering his professional life and personal wealth, but he continues to tilt at windmills because the cause is righteous, and he wins without cashing in.
  • Julia Roberts portraying Eric Brockavich also wins.
  • Greg Kinnear represents the plaintiff in Flash of Genius he loses everything, even his family, in pursuing justice against Ford Motors over intermittent windshield wipers.
  • Matt Damon portrays John Grisham’s fictional attorney who, with little experience or funding and no firm to support him triumphs over a negligent, opportunistic health insurance company in The Rainmaker.
  • Paul Newman portraying another fictional attorney revives his lost dignity in The Verdict and scores sizeable punitive damages in behalf of a woman who resides lost inside a coma at great expense to her family.

In each of these, filmmakers examine the unbalanced scales of justice. Defendants and corporations have armies of attorneys and deep pockets from which to fund a prolonged legal battle while plaintiffs and their attorneys have few tricks up their sleeves and pockets with holes in them. Filmmakers persuade us to cheer for the underdogs, those put-upon plaintiffs and the attorneys who risk it all to deliver justice, and we cheer loudly when the compensatory and punitive damage numbers flash upon the screen. We cheer because the Big Companies and Their Big Legal Teams dissemble and deploy dirty tricks to win. 

Conventional Wisdom.

As I labored to explain last week, we have heard a narrative so often repeated and declared as fact that many of us no longer question it, and that narrative persuades us to believe that:
  • Our judicial system is constipated by frivolous lawsuits;
  • Attorneys are opportunists wheedling little guys to pick up that slingshot and aim at big business;
  • Attorneys charge excessive contingency fees, taking from the rich but withholding from the poor;
  • Our nation will crumble if we don’t right these wrongs promptly because the Captains of Business and Industry can only thrive in a less litigious state; and
  • The marketplace will correct itself without legislative or judicial interventions.
The Manhattan Institute for Policy Research, heavily funded by the Koch Brothers, billionaires with political aspirations and an agenda, suggest that we must eliminate contingency fees and stop the practice of the lawsuit loser paying for the lawsuit winner’s legal fees. Both suggested changes would have a chilling effect upon consumer protections because few petitioners have the means to pursue their claims in court; they rely upon not only an attorney’s expertise, but also his firm’s financial resources.

An organization of which the Kochs are fond, ALEC, seeks to reduce the costs of consumer protections by revising and/or restricting regulations as well as legal remedies. In another piece of model legislation, ALEC proposes to reduce the cost of doing business by holding in check damage awards for consumers, requiring that compensation be restricted to actual “out of pocket” loss, that a prospective defendant be given ten days’ notice before any suit is filed so the defendant may attempt to compensate the complainant for actual “out of pocket” loss, that no additional awards be made unless the court or arbiter determines that the loss was the result of a willful act to defraud, and that additional awards be limited to three times the actual loss or $500--whichever is greater.

In addition, any suit must be filed within one year of the loss and a class action eliminates the possibility of any additional award. Thus, consumers must be aware of the damage or loss in a calendar year and may not join together to sue without limiting the amount awarded for loss. Furthermore, no retailer can be sued if the retailer was simply representing the claims of a manufacturer, and advertisers are held blameless if they collect money for claims that subsequently turn out to be fraudulent or deceptive.

Warnings.

With this piece of legislation, the children of parents with property poisoned by long-term, upstream pollution could never sue or expect remedy if the effects of those toxins were not known until a generation of data had been collected. With this piece of legislation, my former student would not be able to settle for damages and go on to college. With this piece of legislation, a group of people whose insurance claims were denied after a catastrophic event could not join to sue the insurer even though the weight of their combined experience stands as undeniable proof of harm. These consumers would need to stand not as as Davids against Goliath, but as David alone against behemoths.

Photo by Al Griffin
This legislation would have a chilling effect upon consumer complaints without delivering an adequate deterring effect. If the company merely has to refund a negligible amount, it has no incentive to stop the practice because many people will never catch the error or even pursue a complaint. After all, the death of one person appears to be a terrible result not necessarily attributed to the drug recently prescribed. But 30 months later, after several deaths linked to a drug and studies undertaken, the first family’s loss would have no remedy because the loss did not fall within the calendar limits to sue. Moreover, proving that a company willfully misled the public about the effects of the drug is not easy, especially if doing so must be accomplished by individuals within a single calendar year. Similarly, proving that a bank has charged consumers “junk fees” for years is very difficult to prove when each complaint results in a settlement before a suit is made public.

That small fines and refunds have no deterrent effect is evident in today’s financial world. Chase and Bank of America have been assessed record-setting fines for failing to provide adequate safeguards against Ponzi schemes and mortgage fraud, but the fines are so slight when compared to the banks' profits that few expect unfair banking practices to stop.

Conclusion. 

The ALEC proposed legislation is not in the service of citizens and consumers. It would make it tough for underdogs to have their day. It would give Goliath more advantage than he has now, and it would cease to inspire the nation to believe that one day, justice might well be served. We have in the marketplace laws, regulations, competition, incentives, and courts that are flexible enough to accommodate different circumstances and wide variations in incomes. Let the system stand and work. It is regulated capitalism. Unfettered capitalism has not been good for people.