Deep-Pockets Legal Snarls Keeping New Law in Limbo

Before its passage into law last June, opponents of the “deep-pockets” initiative warned that the measure, which limits each defendant’s payment for pain and suffering to its proportion of liability, would end settlements of civil suits, clog courts and prevent victims from recovering their just awards.

Proponents, primarily defense lawyers in civil suits, countered that the courthouse ceiling would not fall. They promised that the initiative would make long-scarce liability insurance available and affordable to government entities, which traditionally have paid large judgments because they are the defendants with the most money--that is, the ones with “deep pockets.”

Neither side’s predictions have come to pass four months after voters adopted the measure, listed as Proposition 51 on the ballot.

At least, not yet.

Volume Remains About the Same

Frank Zolin, executive officer and clerk of the state’s largest court, Los Angeles County Superior Court, said that the volume of settlement conferences and trials remains about the same and that the number of settlements is unchanged.

The proposition had been expected to affect particularly asbestos and toxic-waste cases in which “deep-pockets” defendants could be assessed varying amounts of responsibility for injuries and where much of the awards consisted of non-economic damages.

But Los Angeles Superior Court Judge Leon Savitch, who has handled his court’s 4,000 asbestos cases for the last two years, said he has been surprised to observe that Proposition 51 has neither stymied asbestos settlements nor lowered the amounts victims receive.

As for whether cities and counties can find cheap insurance, even the strongest campaign proponents of the measure concede that it is not yet available.

“Right after passage more than half a dozen (insurance) companies said they were going back into underwriting municipal liability,” said Fred J. Hiestand, general counsel to the Assn. for California Tort Reform in Sacramento, which spawned the initiative. “But . . . they have decided to wait.”

The reason that little negative or positive result can be seen from passage of Proposition 51, agree attorneys on both sides of the argument and the judges in the middle, is that major legal confusion must be resolved by the state Supreme Court.

And that, they agree, could take three to 10 years.

“Appellate lawyers went out and made down payments on new cars, figuring they would be in courts on 51 forever. They have cut down whole forests to make paper for this,” joked Gerald E. Agnew Jr., president of the Los Angeles Trial Lawyers Assn., whose members represent victim-plaintiffs and who strongly opposed the measure.

The most immediate question, already on the Supreme Court’s threshold in cases appealed from trial courts throughout the state, is the law’s effective date.

Proposition 51 became law June 4, the day after the election. But judges differ over whether the law affects cases that were pending in court by that date, cases filed over injuries that happened before that date or only future cases based on injuries occurring after June 4.

Lawyers for defendants, who could benefit by sharing the liability with co-defendants under the act, have argued that Proposition 51 applies to any case pending on June 4 as well as to future cases. Lawyers for plaintiffs, who might lose some money if liability is apportioned to an unmonied or unnamed defendant under the law, argue that it should be applied only to future suits based on injuries after the election.

‘Purely Procedural’ Change

Deputy Atty. Gen. Joel A. Davis, who has defended the State of California, a major “deep-pockets” defendant, in liability suits and assisted various defense attorneys throughout the state with briefs on the retroactivity question, said that because the measure makes only a “purely procedural” change in the law, it should apply retroactively or to anything pending in court when it was passed.

The courts have long held that if a new law makes “substantive” changes, then it can be applied only in future cases.

Also, Davis said, countering arguments by plaintiffs’ lawyers, plaintiffs have no vested right in an award--either settlement or jury verdict--not yet decided when the law changed. Therefore, Davis said, plaintiffs are not being deprived of any rights by having Proposition 51’s apportionment of damages among defendants applied to their cases.

“My educated guess is that it will not be held retroactive, but it is a close question,” said Los Angeles Superior Court Judge Jack Tenner, who was appointed by Presiding Judge Thomas T. Johnson to advise the court on the impact of Proposition 51 and has become an unofficial adviser to trial judges throughout the state.

Tenner has told trial judges--just in case--to have juries assess percentages of liability for all defendants and to record the numbers on special jury forms. If the Supreme Court decides that the apportionment is necessary under a retroactive Proposition 51, the cases will not have to be retried. If the measure is held not retroactive, any defendant can be held solely responsible for the total verdict under the pre-Proposition 51 “joint and several” liability system.

Tenner personally stayed verdicts in his court until a state appellate court--any one would do, and it happened to be San Francisco’s 1st District--ruled on the question. That court said the proposition was not retroactive, but the Supreme Court could reach another conclusion.

Another major issue that the Supreme Court must ultimately resolve is whether the measure is constitutional.

One plaintiff’s attorney contesting the constitutionality is Herbert Hafif, who is trying to overturn a Los Angeles Superior Court judge’s decision upholding the law and applying it retroactively to toxic waste cases against BKK Corp. and its West Covina dump.

Constitutionality Questioned

Hafif argues in briefs filed with the Supreme Court that the measure violates the 14th Amendment right to due process of law because it makes filing or prosecuting such cases prohibitively expensive.

“You might have to sue every household which ever polluted--10 million polluters. Say you sue 400,” said Hafif, a former president of the California Trial Lawyers’ Assn., which opposed the proposition. “It could cost you $20,000 just to serve them (with documents). This will mean million-dollar filing fees. Here you have litigation that could make the practice of law impossible.”

Charles S. Vogel, a former Los Angeles Superior Court judge who represents BKK, said Hafif exaggerated the horrors and that even toxic litigation would continue to have a handful of named, logical defendants. A judge, Vogel said, would demand an offer of proof about any exorbitant number of peripheral defendants and limit them.

Their argument poses another major question for the Supreme Court--who are the “defendants” to share the liability?

Vogel and many of his defense colleagues insist that only defendants named in the original suit, or added later under a “Doe” listing, would be considered by a jury.

Plaintiffs’ lawyers fear having to sue everyone or everything that might have contributed to an accident, including, Agnew says with a grimace, the squirrel that ran across the road or the manufacturer of the flip-flop shoes that the victim wore when he fell down the soapy stairs.

Dilemma Cited

“You are damned if you do and damned if you don’t,” Agnew said. “If you leave out a defendant, your opponent will point to the empty chair in court and tell the jury the empty chair was 90% responsible. If you sue a defendant the jury decides isn’t liable, you open yourself to a malicious prosecution suit.”

While the law awaits appellate court interpretation, plaintiffs’ lawyers such as Agnew and Steven Kazan, California Trial Lawyers’ Assn.’s Proposition 51 expert, continue to insist that voters were misled.

“What the voters thought they were getting was cheap, available insurance for public entities and an end to abusive litigation,” Kazan said. “They are not getting that. The people got suckered.”

Hiestand and defense attorneys disagree.

“The voters did accomplish something. They gave a message that they want the civil justice system cleaned up,” Hiestand said. “Whether the public policy makers--the Legislature and the governor and the judiciary--perceive that as a one-shot message or an underlying malaise that people want addressed remains to be seen.”