3 Anti-Lawyer Measures on Ballot Ignite Costly Ad War

Judging from the opening volleys, the statewide television ad campaigns for and against three anti-lawyer initiatives on the March 26 ballot will be about as costly as they are misleading.

Funded primarily by Silicon Valley corporations and entrepreneurs, backers of Propositions 200, 201 and 202 are using what essentially are running lawyer jokes to get across the point that attorneys are out of control--even though statistics show that civil litigation is declining in key areas.

California trial lawyers are responding with a high-cost campaign of attack ads aimed at discrediting the three measures. Their campaign committee, Consumers and Attorneys Against Propositions 200, 201 and 202, is spending $1 million a week on television commercials and soon will increase that to about $1.5 million.

And this is only the start of what promises to be an all-out war over the civil justice system that will continue through the November general election, when the lawyers most likely will have two counter-initiatives on the ballot.

Homing in on Propositions 201 and 202, the lawyers have taken the unusual tack of focusing on a single supporter--Alan Shugart, president and founder of Seagate Technologies, a major Silicon Valley computer firm, and likening him to Charles Keating of Lincoln Savings & Loan infamy.

The ads so stunned Shugart, 65, that he filed a libel suit against the lawyers’ campaign committee Feb. 21, saying the spots essentially accuse him of being a criminal. After it had run for two weeks, CBS affiliates in San Francisco and Los Angeles pulled the ad. KNBC in Los Angeles refused to air it from the start.

The ad opens with a picture of convicted felon Keating as a voice intones, “Keating swindled millions from the life savings of elderly people.”

Keating’s photo then morphs into a grainy picture of Shugart. “Shugart is one of the largest contributors to the campaign to pass Propositions 201 and 202,” the announcer says.

As Keating’s picture reappears, the announcer says the initiatives would have prevented Keatings’ victims from filing lawsuits in “state” court to get their money back.

Again, the Keating photo transforms into Shugart: “Mr. Shugart himself has been taken to court for insider trading by consumers who recovered millions in settlements. . . . Protect yourself from the next Charles Keating.”

Proposition 201 deals with an arcane area of lawsuits filed by shareholders of publicly traded firms when a firm’s stock takes a nose dive. Proposition 201 would, as the ad states, limit those suits in state court. Shareholder suits are a bane of high-tech firms, many of which have volatile swings in stock prices.

Proposition 202 would cap contingency fees charged by plaintiffs’ attorneys in other civil lawsuits.

Shugart and his defenders believe that the lawyers’ attack ad implies that Shugart is another Keating. Unlike Keating, who is serving a 12-year prison sentence for plundering Lincoln Savings & Loan, Shugart has never been accused of criminal wrongdoing.

One of the pioneers of the personal computer industry, Shugart co-founded Seagate in 1979 and built it into a firm that today holds a quarter of the market for disc drives, with sales of more than $5 billion a year. His firm employs 10,000 people in the United States and 55,000 in overseas manufacturing plants, primarily in Asia.

Like many publicly traded firms, Seagate has been sued in federal shareholders’ actions. Each suit came after Shugart and Seagate executives sold company stock, shortly before share prices tumbled.

In a federal lawsuit filed in 1984, Seagate and its insurance company paid a $9-million settlement. A second suit was dismissed. A third federal suit is pending.

When he first saw a tape of the ad attacking him, Shugart said he thought that it was a practical joke. “Then, all of a sudden, it hit me: These guys are crucifying me.

“If I did nothing,” Shugart said, “I’d lose respect from my family, my friends, my employees, shareholders. I have been wronged so totally. The only action I can take is to sue them. They are ruining my reputation, and it gets worse every day.”

Bill Carrick, the trial lawyers’ political consultant, vowed to continue airing the commercials. He noted that Shugart has contributed $250,000 to the campaign for the initiatives and signed the argument in the official California Voter Pamphlet endorsing Proposition 201. “Voters are entitled to know who Alan Shugart is and what his motivations are,” Carrick said.

“We wanted to make this issue real for voters--what it’s about and who’s behind it. The point of the ad is not that Al Shugart is Charles Keating. The point is that he is financing a campaign to solve a very narrow problem for himself that would create a bigger problem for other people.”

Bill Lerach, a San Diego lawyer who brought all three actions against Seagate and was the investors’ lead attorney in the Lincoln litigation, called Shugart’s libel action “the height of hypocrisy.”

“This guy thinks the California courts should be the playground of the rich,” Lerach said.

Lerach’s firm, Milberg, Weiss, Bershad, Hynes & Lerach, has put at least $1.9 million into a proposed initiative for the November ballot that would rescind Proposition 201, should it pass next month.

In a second questionable point, the ad says that if Proposition 201 had been in effect, Keating’s victims could not have sued in state court. In fact, the Lincoln litigation played out in federal court, where a jury awarded 23,000 investors $2.1 billion in 1992. Proposition 201 would not affect federal courts, although a new federal law limits such suits.

Proponents and opponents alike agree that while new federal law limits federal shareholder suits, Proposition 201 would go further by all but closing state courts to most shareholder suits.

The attorneys’ other ad focuses on Proposition 200, which would create a no-fault auto insurance system barring motorists in car accidents from suing in most cases. Under the measure, a motorist’s insurance company would cover some or all of the damages, depending on the size of the policy.

In perhaps the most questionable point, the commercial says the initiative would force insurance rates up 40%. While the initiative does not require that rates fall, a Rand Corp. study estimates that rates under Proposition 200 would drop 11% to 29% and that a person who buys a minimum no-fault policy would save 44% over the minimum policy now required by law.

The state’s legislative analyst says “premiums paid for automobile insurance would decrease because insurers would no longer pay costs associated with lawsuits for death and bodily injury.”

As it is, California’s car insurance rates are the eighth most expensive in the nation, averaging $781 a year. In Michigan, which has a no-fault law similar to the one proposed in Proposition 200, car insurance costs an average of $665, a National Assn. of Insurance Commissioners survey shows. In their commercials, proponents have not yet dealt in any detail with the substance of their three highly complex and far-reaching initiatives. Their spots, aired at a cost of $500,000 a week, have used old-time movie footage and a scene of “lawyers” in business suits slapping one another on courthouse steps to make the point that too many people are getting slapped with too many lawsuits.

Although proponents contend that lawyers are out of control, the number of suits filed involving car crashes and personal injuries has declined over the last five years. The number of suits involving car crashes dropped to 47,493 in the 1994-95 fiscal year, from 82,851 in 1989-90, according to the California Judicial Council. Lawsuits over personal injuries not caused by car accidents fell to 31,997 in 1994-95, from 39,126 in 1989-90.