Prop. 202 Packs a Powerful Potential

Even in a campaign year riddled with lawyer bashing, Proposition 202 stands out on Tuesday’s ballot, the one measure in the package of three civil justice initiatives that hits the most lawyers most directly.

According to the Los Angeles Times Poll, the measure also has the best chance of winning on Tuesday.

Proposition 202 is brief, a fifth the length of the companion measure to institute no-fault auto insurance, and not nearly as arcane as the initiative to limit class-action securities lawsuits. But of the three, legal experts on both sides say Proposition 202 could have the most dramatic impact on California’s civil justice system.

If Proposition 202 passes, people who file lawsuits will be forced to describe the extent of their damages or injuries and make a settlement demand within 60 days. Defendants will then make a counteroffer. If the case is settled quickly, the plaintiff’s lawyer’s fee will be capped at 15% of the settlement, rather than the prevailing “contingency” fee of 25% to 33%.

If the plaintiff rejects the offer and the case goes to trial, the lawyer could collect 15% of the initial defense offer, plus a third of any award beyond the original offer.

Plaintiffs’ lawyers who fail to follow provisions of the measure will face sanctions, including a fee cap of 15% of the total award. Proposition 202 does not apply to businesses that file suits and would not directly affect defense lawyers’ fees. They generally charge hourly rates.

“This would have a dramatic effect and the plaintiffs’ bar perceives that,” said University of Virginia law professor Jeffrey O’Connell, one of three Eastern academics who came up with the idea embodied in Proposition 202.

Consumer advocate Ralph Nader, long an advocate of the right to sue, calls Proposition 202 “demonically clever.” He says it would pressure people to settle early, before their lawyers could discover “skeletons from the closets of the Dalkon Shield manufacturers or the Pinto manufacturers.” (The manufacturers of both those products were accused of withholding information concerning their danger.)

While attorneys say major lawsuits will be filed even if Proposition 202 wins, lawyers who handle cases on a contingency fee basis say the measure will force them to turn away truly injured individuals.

“There’s no way you can run a contingency practice” if fees are capped at 15%, said San Francisco lawyer Paul Wartelle, who specializes in suits on behalf of low-income tenants. “Tenant law is totally bankrolled by contingency work.”

Backers of Proposition 202 characterize it as a consumer protection measure that will rein in lawyers and lawsuits, both of which they claim are out of control.

“This one has such a strong consumer appeal--protecting consumers from getting ripped off by lawyers,” said Tom Proulx, a founder of computer software giant Intuit and chairman of the Alliance to Revitalize California, the campaign organization backing the three civil justice measures.

Proulx’s political consultant, Michael Johnson, one of the main strategists behind the anti-litigation campaign, drafted 202 after reading work by three conservative legal academics.

One, Michael Horowitz, worked on tort reform during the Ronald Reagan administration, when he was a high-ranking official in the Office of Management and Budget. In the early 1990s, he developed the fee cap concept while a fellow at the Manhattan Institute, a New York-based think tank funded largely by conservative foundations and such corporations as State Farm Insurance, Citibank, Chevron and tobacco giant Philip Morris.

Joining Horowitz were Lester Brickman, who teaches legal ethics at Benjamin Cardozo Law School in New York, and O’Connell. O’Connell and Brickman also are among the drafters of Proposition 200, the no-fault auto insurance measure on Tuesday’s ballot.

“These proposals home in on incentive,” Brickman said. “Right now, there is too great an incentive to litigate and not settle.”

However, a new study by the Rand Corp. and California court statistics show that litigation in key areas is declining, that most cases settle short of trial, and that when cases do go to trial, plaintiffs prevail only slightly more than half the time.

Juries sometimes order defendants to pay hugely expensive punitive damage awards. But jurors grant punitive damages in only a fifth of cases, says Rand, which surveyed thousands of civil trials over the past decade.

“Our studies don’t add credence to the claim that lawsuits are out of control,” said Rand’s Erik Moller, the study’s author.

Additionally, the California Judicial Council, the administrative arm of the courts, reports that personal injury suits dropped by 2,000 last year, as did the number of suits involving car accidents. In the past five years, suits over car crashes are down by half and personal injury suits are down by 20%.

Experts cite several possible explanations for the changes: products are safer; corporations now take steps to avoid litigation; arbitration has increased; juries are more conservative, and the California Supreme Court has limited the right to sue since voters ousted Chief Justice Rose Elizabeth Bird and two other liberal justices in 1986.

“People haven’t caught on. The tort system is correcting itself,” said UCLA law professor Mark F. Grady. “After 1985, the courts became more sensible and less intrusive.”

Whether such assessments will have an impact on Tuesday’s vote remains to be seen. In the campaign’s critical closing days, Proposition 202’s proponents have received large infusions of cash from corporations and are matching the television ad blitz by trial lawyers who are funding the opposition campaign.

No matter the outcome, the fight won’t end on Tuesday. Trial lawyers intend to place one and perhaps two counter-initiatives on the November ballot. Both would repeal the fee caps in Proposition 202.