UAB Report: Tort Reform Provides No Savings

I was recently watching CNBC and they were debating health care costs. Former Tennessee Senator Bill Frist was on and was asked about tort reform as part of the health care debate. He remarked that what he considered it an issue, it was not a significant piece of the solution. I was shocked by this remark.

For years, this has been the battle cry of groups like Citizens for Lawsuit Abuse. Hatched in Texas by Karl Rove and others and perfected in Alabama and Mississippi, these groups convinced virtually everyone that "tort hells" and "greedy trial lawyers" were the cause virtually everything evil in society. All lawsuits are frivolous, everyone who sues wants something for nothing, and juries of average people (who can determine whether someone lives or dies in a criminal context) are too stupid to determine whether or not corporations engaged in fraudulent conduct and if so, the level to which they should be punished.

Guess What----It Worked---But for Who??????????????

The success of this endeavor, financed by insurance companies, tobacco and large corporations has been extremely successful. Many states have passed tort reform statutes. Juries view all plaintiffs with distrust, and are much less willing to award damages---"for fear that my insurance rates will go up" as many interviewed jurors will openly tell you. A trial judge recently told me that about 50% of rear end accident cases tried in his court result in a verdict for the defendant. That's right, 50% of the time, when someone admits the were not paying attention and hit someone from behind, the jury refuses to hold them responsible for their conduct. While at a restaurant recently, I spoke with a lawyer who previously worked for a large insurance company trying car wreck cases. He said that he was fired by one insurance company because he recommended that they pay twice the medical bills.

One must then ask the question, who benefits when this occurs. I would submit that it is insurance companies who benefit. See also, "Ironic Twist of Fate--Tort Reform Champion loses his own Medical Malpractice case."

On to the subject of medical malpractice. Frequently, I talk to my friends who are physicians about medical malpractice. Few have been sued. All know of situations where they think physicians should have been sued, and all are scared to death that they will get sued, lose their practice, their homes, and everything they have worked for so long to accumulate.

I ask them where they get their information from and of course, it is their insurance company. They know about the huge verdict here and there, but not the ultimate outcome. They know their rates are going up and assume it is because of huge settlements and verdicts. They never compare the premiums written to the verdicts in Alabama. Their response to that inquiry is that the insurance companies settle out of court. They seem unaware that largest insurance carrier for doctors in Alabama tries virtually all case filed, so that hypothesis is invalid.

I ask them if they have ever driven by the home of the recently retired CEO of the insurance company which writes most doctors in the state. I ask if they ever considered how it is that he could afford a house that published reports indicate the property taxes alone are in excess of $100,000 per year?

I guess I digressed from where I started, which was with the reading of two articles I found ver interesting. One from the Kentucky Lexington Herald-Leader, "Tort Reform does not cut health costs" and the second from from the New Yorker, authored by Ault Gawande titled "The Cost Conundrum, What a Texas town can teach us about health care" .

According to the Lexington Herald-Leader, States that enacted limits on malpractice claims have seen no cost savings. To the contrary, Texas capped malpractice damages in 2003 only to experience a steep rise in health insurance premiums and medical costs.

Boston surgeon Ault Gawande wrote in The New Yorker about his visit to Texas (see full New Yorker article hyperlinked above). While at dinner with several physicians, he asked about lawsuits. He was told that they had dropped "practically to zero." Well, he wondered, what happened to the claim that doctors were practicing defensive medicine---the basis for tort reform. He learned that doctors have an incentive to order lots of tests---they profit from them!!!!!!!!

These results are not unique.

In 2008, researchers at the University of Alabama at Birmingham published reports of their study which surveyed 27 states with non-economic caps. The principle findings state:

"Using a variety of empirical specifications, there was no statistically significant evidence that noneconomic damage caps exerted any meaningful influence on the cost of employer-sponsored health insurance."

The study concluded:

"The findings suggest that tort reforms have not translated into insurance savings."

(read abstract to study here)

Unfortunately, I think too many to may physicians have been misled by the insurance industry that the evil lurking is a lawyer who trying to take everything they have work tirelessly to attain. Perhaps if they formed their own mutual company and insured their own risk, they could see what the real cost of malpractice coverage.

Court Documents Show Wyeth Paid Writers of Hormone Therapy Articles

In a front-page story last week on August 5th, the New York Times reported that "Newly unveiled court documents show that ghostwriters paid by [Wyeth] played a major role in producing 26 scientific papers backing the use of hormone replacement therapy in women, suggesting that the level of hidden industry influence on medical literature is broader than previously known."

The articles were uncovered by lawyers suing Wyeth over the hormone therapy written about.

The articles were drafted by a medical communications firm paid by Wyeth, and were "published in 18 medical journals including The American Journal of Obstetrics and Gynecology and The International Journal of Cardiology. between 1998 and 2005." The articles did not disclose Wyeth’s role in initiating and paying for the work.

The articles "emphasized the benefits and de-emphasized the risks of taking hormones to protect against maladies like aging skin, heart disease and dementia."

The "supposed medical consensus" created by the papers is said to have helped sales of Wyeth's hormone drugs Premarin (conjugated estrogens) and Prempro (conjugated estrogens/medroxyprogesterone acetate) rise "to nearly $2 billion in 2001."

That "consensus fell apart in 2002 when a huge federal study on hormone therapy was stopped after researchers found that menopausal women who took certain hormones had an increased risk of invasive breast cancer, heart disease, and stroke."

Corporate Bonuses: The bubble that it seems will never burst

According to a report issued by New York Attorney General Andrew Cuomo Citigroup, Inc., Merrill Lynch, and seven other banks who received more than $175 Billion (yes, that is billion with a "B") in taxpayer, aka OUR MONEY, paid out more than $32 Billion in bonuses to executives. According to Bloomberg, more than 5,000 of those bonuses were more than $1,000,000.

Cuomo's study, called “No Rhyme or Reason: The ‘Heads I Win, Tails You Lose’ Bank Bonus Culture,” comes as Congress and the Securities and Exchange Commission examine whether to limit the compensation paid to top corporate executives.

Citigroup and Merrill Lynch suffered losses of more than $27 billion at each firm, the report said. Yet Citigroup paid out $5.33 billion and Merrill $3.6 billion in bonuses.

Industry talking heads say that pay is tied to performance and that government should not get involved. The problem is that this type of structure led to the taking of huge amounts of leveraged risk, and when that blew up in their faces, they fired employees, eliminated 401(k) contributions, ruined the economy and left us (the taxpayers) to pick up the tab.

Take as an example the case of Andrew Hall, who runs Philbo, Citi's oil-trading subsidiary. He is on track to collect $100 million, which is his cut from profits from a year of extremely aggressive bets on the oil market. Citi says his trading resulted in $2 billion for Citi over the past five years and they are contractually obligated to pay him. The problem is that this type speculation was not used to lock in supply or steer capital where it was needed, but rather by outsmarting other investors. That bodes the question---what happens when he bets wrong and loses 2 billion, and 10 of his collegues do the same? Well, we know how that story ends.

On main street, if you bet the farm and lose, you lose the farm. On Wall Street, if you bet the farm and lose, the rest of us have to buy you a new farm.

The problem remains that these executives continue to suffer the what I call the "Marie Antoinette Syndrome." They don't get it. They continue to fly around in corporate jets, promote their children, pay themselves (and their buddies whose boards they sit on) huge bonuses while the rest of the country suffers under immense economic stress.

Despite their political power across both parties, I would submit that this simply cannot continue. The industry has had the chance to police itself. That time is past. Just as small businesses cannot put lazy family members on the payroll and pay them to hang out at the country club, neither can banks.

One day the government free cheese program will be over. Banks will have to compete in a new environment. I submit that when that day comes, many good bankers will have gone to community banks and they will become a real force in the industry. In the meantime, we will continue to read about such bonuses at the same pace we read about major league baseball players and steroids.

Alabama Supreme Court Rejects Sealed Container Defense as to Reatilers in Breach of Warranty Claims

A recent Alabama Supreme Court decision answered a certified question from the United States District Court for the Northern District of Alabama in the case of Sparks v. Total Body Essential Nutrition Inc., Wright Enrichment, Inc. & TexAmerican Food Blending, Inc.

After the District Court concluded that it was not clear under Alabama law whether claims alleging the breach of the implied warranties of merchantability and fitness for a particular purpose are subject to the defense of the sealed-container doctrine, the Supreme Court held that they were not. See the opinion here.


The majority said:

"We answer the certified question in the affirmative and hold that the sealed-container defense is not available to the retail seller of food products in claims asserting a breach of implied warranty under the UCC."

This case aligns Alabama law with the majority of states which have interpreted this issue, including Georgia and Florida, and is also significant in that it will prevent the continued removal of such cases (which involve in-state retailers) from being removed from state to federal court under a fraudulent joinder theory.

The sealed container defense previously allowed retailers who purchased their products from manufacturers in a pre-packaged, sealed container, to avoid liability for defects in products which the retailer did not contribute to or could not have reasonably discovered.


Chris Hellums is co-lead counsel of the Executive Committee to the Personal Injury Plaintiff's Steering Committee for the Total Body Multi-District Litigation.

See here: http://chrishellums.blogspot.com/2009/05/lawyer-chris-hellums-appointed-as-co.html

Pittman Dutton Kirby & Hellums is currently representing clients in various claims against Total Body.



Chris can be reached at Chrish@PDKHlaw.com or Pittman Dutton Kirby & Hellums at http://www.pdkhlaw.com/.


Total Body FDA Warnings & Articles:

Food & Drug Administration Warnings : http://www.fda.gov/ForConsumers/ConsumerUpdates/ucm050806.htm

200 Injured by Total Body : http://www.foxnews.com/story/0,2933,405361,00.html

Ironic Twist of Fate--Tort Reform Champion loses his own Medical Malpractice case

Elliott M. Kaplan is a prominent Kansas City attorney. For years, he railed against judges, juries, and trial attorneys, as he and his former firm, Daniels & Kaplan, got big bucks to represent big companies. He was well known as one of the founders of the modern tort reform movement in America. He was named "Legal Reform Champion" by the American Tort Reform Association.

In a cruel twist of fate, it appears he may have reaped what he sowed.

According to its website, The American Tort Reform Association was founded in 1986 by the American Council of Engineering Companies and shortly thereafter, the American Medical Association followed them. They have worked to enact tort reform legislation in 45 states. They have led grassroots efforts which have resulted (they claim) in 85% of Americans believing that frivolous lawsuits clog our courts.

Their efforts have paid off, perhaps to the detriment of one of their own. According to the National Practitioner Data Bank, the number of U.S. malpractice payments in 2008 was the lowest since creation of the federal National Practitioner Data Bank, which has tracked payments since 1990.

WHAT HAPPENED TO LAWYER KAPLAN

Lawyer Kaplan was diagnosed in 2003 with pancreatic cancer by his doctor in Kansas City. Kaplan sought the best care money could buy. He went to the Mayo Clinic in Rochester, MN. There he was again diagnosed with pancreatic cancer.

To save his life, he underwent a Whipple resection, a highly invasive surgery that can cause more harm than good. It was only after the surgery that the diagnosis was determined to be wrong, that he only suffered from pancreatitis, and that the Whipple resection made the condition worse, leaving him debilitated and a broken man.

Believing that the doctor had committed malpractice, Kaplan sued the pathologist alleging negligence in the diagnosis.

He assembled what appears to be an army of attorneys to represent him; his former law partner, James F.B. Daniels of McDowell Rice Smith & Buchanan, Thomas Ward of Ward & Ward, Mark Johnson of Greene Espel & Robert A. Stein (former Dean of Minnesota School of Law).

Unfortunately, the jury found against Kaplan and awarded him no damages. He has moved for a new trial. The motion is currently pending.

Read the Kansas City Business Journal article describing Kaplan's lawsuit against the Mayo Clinic here.

I certainly feel for Lawyer Kaplan. Unfortunately, he and the organization which he was a "Champion", foster the belief that all lawsuits are frivolous and that they compromise access to affordable health care, punish consumers by raising the cost of goods and services, chill innovation, and undermine the notion of personal responsibility.

I don't know if his lawsuit was meritorious or not. If it is, then I pray that justice will prevail. I do know that his organization, the American Tort Reform Association, has perpetuated the belief among many Americans that all lawsuits are frivolous. The beneficiaries of this belief are not injured or defrauded people, but the insurance companies and large corporations who fund these organizations.

One only need read jury verdict reporters to see that juries daily turn away victims just like attorney Kaplan.


Correction: Yesterdays initial post had information referring to Elliott S. Kaplan, one of the founders of the law firm of Robbins Kaplan Miller & Ciresi. The source of this information was the Alabama Jury Verdict Reporter and was assumed to be correct. We have notified the Jury Verdict Reporter of this potential error.


Elliot M. Kaplan Biography:

• by Forbes.com - http://people.forbes.com/profile/elliott-m-kaplan/26454
• Legal Reform Champion
• ZoomInfo - http://www.zoominfo.com/Search/PersonDetail.aspx?PersonID=58139401
  

Chris Hellums can be reached at Chrish@pdkhlaw.com

Tsunami Continues in Arbitration War--Congressman Rails against Arbitration Abuses

Bloomberg News (7/22, Van Voris, Rosenkrantz) reported, "A congressional staff investigation into the biggest U.S. consumer debt-collection arbitrator found 'deeply disturbing' abuses, U.S. Representative Dennis Kucinich said" yesterday at a hearing before a House subcommittee he chairs. "A report on the investigation, released yesterday, claims that the National Arbitration Forum, a Minnesota company that handled most consumer debt-collection arbitrations in the U.S., misled consumers and hid ties to debt-collection firms." Said Kucinich, "The debt collection industry and the alternative legal system that has been created around it can no longer be ignored by the federal government."
The Minneapolis Star Tribune (7/22) reported, "Minnesota Attorney General Lori Swanson backed federal legislation Wednesday that would protect consumers from 'fine print' arbitration contracts that forfeit their legal rights against creditors. 'Millions of Americans are giving away that right without even knowing it,' Swanson told a panel of the House Oversight and Government Reform Committee." Also appearing before the committee was Mike Kelly, CEO of Forthright, "which provides administrative services for the" NAF. Kelly "defended the company's work as a simple and cost-effective alternative to the courts, saying that without access to arbitration, consumers would be the losers."
The AP (7/22, Choi) reported that Kenneth Clayton of the American Bankers Association testified that "arbitration is a valuable way for consumers and businesses to resolve disputes in a very low cost and fair manner. Take it away and consumers will suffer." But "a study by Public Citizen found that credit card companies track arbitrators' rulings and do not enlist the arbitrators who rule against them."
Jones: "arbitration revolution" possible. In a blog at the Wall Street Journal (7/22), Ashby Jones wrote, "It's too soon to say, in all likelihood, but we could be in the early stages of an arbitration revolution."

ARBITRATION: DEJA VU ALL OVER AGAIN

It was not too long ago that many of us could remember the Stop Binding Arbitration bumper stickers and billboards up and down the highways. Lawyers who represented consumers were dismayed by the proliferation of arbitration contracts in almost every consumer contract. Car dealers, credit card companies, even nursing homes added the provisions to their contracts.

There was no populist swell against arbitration. In retrospect, there a probably a number of reasons. First, many view attorneys with scepticism and a jaundice eye. Additionally, business groups portrayed arbitration as an efficient and cost effective way to resolve disputes. Besides, who could expect a jury of regular people to be able to understand and resolve such disputes---
I never really understood this argument since the jury system is the bedrock of our legal system and no one has ever argued or submitted that juries should not be allowed to determine whether someone is incarcerated or is sent to die in the electric chair.

Be that as it may, Big Business won and arbitration agreement proliferated contracts. Almost immediately, many consumer attorneys refused to take arbitration cases. The fees were high, the ability to prove cases through documents became limited, and most importantly, many argued that the arbitrators were biased in favor of business. Many argued that consumer attorneys were summarily rejected by arbitration companies.

In the end, consumers were placed on unequal footing and basically got screwed. I even hear story of a general counsel of a large company threatening an arbitration company if an unfavorable opinion came from one of that companies arbitrators.

Finally, the abuses went too far and the dam was broken.


Minnesota Attorney General Lori Swanson filed suit this week against the National Arbitration Forum of Minnesota, the nation's largest arbitration company for consumer credit disputes, accusing it of consumer fraud, false advertising and deceptive trade practices by "misrepresenting its independence" and hiding its "extensive ties" to the collection industry.The Attorney Generals lawsuit claims the National Arbitration Forum has ties to debt-collection law firms and works against consumers by virtue of having a mandatory arbitration clause set forth in a credit card, bank, or retail contracts.

Hundreds of thousands of consumer disputes are resolved each year not by a judge or jury, but by a private arbitration system. The Attorney General’s suit alleges that the National Arbitration Forum represented to consumers and the public that it is independent and neutral, operates like an impartial court system, and is not affiliated with and does not take sides between the parties. National Arbitration Forum, while holding itself out as impartial, works behind the scenes—alongside creditors and against the interests of ordinary consumers—to convince credit card companies and other creditors to insert arbitration provisions in their customer agreements and then appointing the Forum to decide the disputes. Forum pays commissions to executives whose job it is to convince creditors to put mandatory arbitration clauses in their customer agreements. Forum does this to generate arbitration filings in the Forum—and hence, revenue—for itself. The lawsuit alleges that, despite telling consumers and the public that it is not affiliated or aligned with the collection industry, the Forum in fact has financial ties to the collection industry.

Beginning in 2006 and through 2007, Accretive—a family of New York private equity funds—engineered two transactions. In the first transaction, Accretive formed several equity funds under the name “Agora” (meaning “Forum” in Greek), which invested $42 million in the Forum.In the second transaction, three of the country’s largest debt collection law firms—Mann Bracken of Georgia, Wolpoff & Abramson of Maryland, and Eskanos & Adler of California—merged into one large national law firm called Mann Bracken. Accretive then acquired the majority interest in a debt collection agency called Axiant, which acquired the collections operations of Mann Bracken. Through these transactions, Accretive took control of one of the country’s largest debt collection enterprises and became affiliated with the Forum, the country’s largest consumer collection arbitration company. Accretive principals remain actively involved with the Forum. In 2006, the Forum processed just over 214,000 consumer collection arbitration claims, of which 125,000, or nearly 60 percent, were filed by the above law firms. Swanson said that the Forum was aware of the affiliation problem in 2006 when it negotiated its relationship with Accretive.

An email from an officer of the Forum to the hedge fund stating: “…we should certainly plan for unwinding any deal in the event shared ownership becomes an acute issue.”

We'll follow this interesting story.View the complaint here:http://capwiz.com/nacanet/attachments/MN_Complaint_Against_NAF.pdfSources:MN Attorney General Press Releasehttp://www.politicsinminnesota.com/2009/jul14/3464/swanson-files-suit-against-national-arbitration-companyBusiness Week
Labels: deceptive trade practices, fraud, Minnesota Attorney General, misrepresentation, National Arbitration Forum