By Keith Ecker, a reporter for Lawyers.com, www.lawyers.com/our-blog
There is a battle being fought at the highest levels of government over your right to file a medical malpractice or defective drug lawsuit. On the one hand are pro-business groups that seek protection from crippling multi-million dollar jury awards. On the other hand are pro-consumer groups that work to restore a person's right to a full and fair trial of his or her case.
The business lobbies have dominated your elected senators and representatives, pushing through laws that:
On the federal level, a well-known example is HR 5, a measure in Congress named the HEALTH bill, which seeks to cap non-economic damages at $250,000 and would shield pharmaceutical and medical device makers from punitive damages.
Similarly on the state level, Senate Bill 13 in Wisconsin would protect drug makers and medical device manufacturers from responsibility for defects in their products as long as the product was approved by the Food and Drug Administration (FDA).
The elected officials who support these measures claim they are creating jobs and improving consumer access to health care services. However the legislation accomplishes its goals by cutting away the rights of consumers to file legal claims against negligent doctors and makers of defective drugs.
The success of tort reform
The battle is over "tort reform," which grew in response to the perception that juries and courts are wildly out of control and are ordering companies to pay excessive amounts. According to the pro-business American Tort Reform Association (ATRA), tort reform has sparked significant changes to states' laws:
The states where consumers have lost the most legal rights are Colorado, Florida, Ohio and Texas.
"Politicians and industries call this kind of legislation 'tort reform,'" says Christine Hines, consumer and civil justice counsel at Public Citizen. It is one of a handful of nonprofit consumer advocacy groups that is attempting to tip the scales of justice back in the favor of the consumer. "I stay away from using that term 'tort reform' to refer to the practice of restricting access to the courts. It's denying people's rights, which is not as smooth of a term."
Tort reform advocates argue that the restrictions reduce the risk of frivolous lawsuits and large jury awards and benefit individuals as well as big corporations. For decades, tort reform initiatives have been pushed by companies in nearly every industry, including tobacco, manufacturing, food, automobiles, chemicals, telecommunications, banking, insurance and health care. But those who oppose it say tort reform takes away consumers' rights to file lawsuits and minimizes industry's payouts for their own harmful actions.
"This has been a long-term process," says Gary M. Paul, president of the American Association of Justice (AAJ), also known as the Association of Trial Lawyers of America. The organization supports consumers and their attorneys in their efforts to seek justice in court. "I have been involved in trying cases for more than 35 years. There has been an ongoing effort for many years to affect public opinion, the courts and legislatures. Ultimately, it will have a dramatic effect on consumers in this country."
In a well-organized tort reform initiative, corporations and trade associations pool their money and funnel it through a variety of channels to influence politicians. This is perfectly legal and is done by hundreds of lobbyists nationwide. As a result, the pro-business groups have successfully persuaded politicians to change the legal rules in their favor.
Vast sums of corporate money are used to sway politicians. Although no exact numbers are available because most lobbying efforts remain undisclosed to the public, a conservative estimate puts the annual amount spent on corporate political financing well into the hundreds of millions, if not the billions.
A Pro-Business Organization
The leading organization supporting tort reform is the U.S. Chamber of Commerce. The national business federation represents many major companies whose brands are household names. To advance tort reform, the Chamber has established a separate arm known as the Institute for Legal Reform (ILR). ILR's priority is to stop "lawsuit abuse." It does this by spending millions each year to spread anti-consumer messages to make the legal system "simpler, fairer and faster for everyone." According to its 2009 financial statement, the ILR has a budget of more than $37 million.
"The funding for tort reform is coming from a small number of wealthy industries, and the U.S. Chamber of Commerce is one of their biggest mouthpieces," says Craig Holman, government affairs lobbyist for Public Citizen and an expert on campaign finance.
The ILR did not respond after repeated requests for comment.
It has become increasingly difficult to understand exactly who is funding these tort reform initiatives and how much money is being spent, since the landmark Supreme Court decision known as Citizens United. This ruling allows corporations, trade associations and rich individuals to direct unlimited funds into special nonprofit organizations, such as the ILR. These nonprofits are dubbed Super PACs (political action committees). There are no disclosure rules around Super PACs. This means that a corporation can donate millions of dollars to an organization whose sole purpose is to pay for ads in favor of tort reform and none of the transaction will be visible to the public. The company can even withhold news of its contributions from its shareholders.
"We now have a lobbying campaign that has largely gone underground," Holman says. "The small number of very wealthy industries that are funding tort reform campaigns are funneling their money through a series of nondescript foundations and organizations. Additionally, when the money goes through a nonprofit, it becomes difficult to trace how the money is being used."
These Super PACs often use consumer-friendly names. For example, Americans for Job Security sounds like an organization that works to improve the job market. But one of the organization's biggest initiatives is to limit consumers' access to the courts and to restrict compensation for injuries. After Citizens United ruing, Americans for Job Security saw a dramatic jump in its funding, up from $3.5 million in 2009 up to nearly $12.5 million in 2010.
And when money talks, your elected representatives listen.
How the health care and insurance industries shape politics
Washington, D.C., may seem far away, but a tort reform bill under consideration by Congress will affect you if you are the victim of medical malpractice or a harmful side effect of a prescription drug. In January 2011, Republican Representative Phil Gingrey introduced H.R. 5 before the US House of Representatives, using the name "Help Efficient, Accessible, Low-cost, Timely Healthcare" (HEALTH). The stated purpose of the bill is to improve patient access to health care services, however, consumers are the last ones to benefit from the legislation.
"The Institute of Medicine estimates that as many as 98,000 patients die each year as a result of medical malpractice," Paul says. "There's no question that there is a significant number of medical malpractice errors in this country, and H.R. 5 is essentially trying to limit the ability of people who have been injured or have lost a loved one to seek equitable compensation in court."
Rep. Gingrey and other supporters of the bill claim that by limiting medical malpractice lawsuits and medical malpractice awards, the cost of health care and health insurance premiums will go down
"Enacting meaningful medical liability reform is vital to our nation's healthcare system," Rep. Gingery said in an issued statement. "Medical liability reform will ensure patients are compensated for current and future economic damages. It will also ensure that the parties responsible for a patient's injuries pay their fair share and that patients -- and only patients -- receive the majority of damage awards. Finally, medical liability reform seeks to end the incentives that encourage frivolous lawsuits and would significantly reduce the cost of health care in this country by as much as $200 billion annually."
But studies contradict these claims. Even the conservative Cato Institute released a report on Oct. 20 that concludes, "If caps on damages reduce insurance industry incentives to minimize the risk of patient injury, then consumers could lose important protections." Furthermore, the report states that, "The oversight provided by medical malpractice is more comprehensive than that provided by direct government regulation." The report concludes that capping court awards will make many patients worse off.
In addition, Public Citizen released a report on Oct. 12 that analyzed the economic impact of Texas' medical malpractice tort reform initiative. Enacted in 2003, the Texas legislation places a $250,000 cap on non-economic damages. The report concludes that the law has shifted the burden of paying victims of medical malpractice from the wrongdoers to the taxpayers:
"Instead of having the costs be borne by the people who caused the injury, they end up being borne by society," Paul says. "The person injured or family who suffers a loss is unable to reach just compensation from a jury, but they have to get compensation somewhere. So they will turn to Medicaid, Medicare or public assistance."
The Texas tort reform bill is working as planned. Payments by Texas doctors for medical malpractice fell by 64.8 percent in 2010, when compared to 2003. Also, the state's largest medical liability insurer, which provides doctors with insurance coverage in the event of a medical malpractice claim, advertises that doctor's premiums were 50.5 percent lower in 2010 than 2003. Meanwhile malpractice payments to injured patients have fallen at an even faster rate. This means that both doctors and insurance companies have benefited financially from the legislative changes.
Members of Congress who support tort reform have accepted campaign contributions from industry groups, even though the resulting laws cut back on the rights of the people who elect them. An example is Representative Phil Gingrey, who introduced H.R. 5 before the U.S. House of Representatives
According to the Center for Responsive Politics, an organization that tracks political fundraising, Rep. Gingrey's campaign committee and leadership PAC have received the majority of their 2011-2012 funding from health professionals ($141,300), pharmaceuticals and health products manufacturers ($54,000), and insurance companies ($43,750). In fact, Rep. Gingrey is ranked fourth among members of the House and 14th among all Congressional members who receive money from the various interest groups that support H.R. 5.
The money Rep. Gingrey receives from these industries represents just a fraction of what they spend overall to influence politics and policy. In 2010, lobbying dollars for the health industry surpassed $522 million. That's more than $1.43 million spent on lobbying efforts per day. And this only represents money that is disclosed; it does not represent the unknown amounts contributed to Super PACs. 2011 is shaping up to be a significant spending year for the health sector as well, with $373 million spent so far. Some of the biggest spenders for this year include:
The insurance industry is also a major player in medical malpractice tort reform and has much to gain from H.R. 5 as well.
"The broad definition of 'health care lawsuit' in H.R. 5 would potentially cover health insurance claims, including wrongful denial of health insurance benefits and bad faith insurance actions," Hines says.
In 2010, the insurance industry spent more than $158 million in lobbying efforts, not including money donated to Super PACs. This figure includes lobbying efforts of other types of insurers outside the health care industry. The industry has so far spent more than $116 million on lobbying efforts in 2011. The top two spenders for 2011 are Blue Cross Blue Shield ($9.35 million) and America's Health Insurance Plans ($6.86 million), both insurers that operate in the health care industry.
Keeping claims out of court
Pro-business groups have also been very effective in influencing the courts directly. The Seventh Amendment of the Constitution provides for the right to a jury trial in civil cases. But because of tort reform efforts, consumers lose this right in what are called forced arbitration agreements. These agreements stipulate that the consumer waives his or her right to file a claim in court against the company that created the contract. Instead, the individual must resolve the claim through arbitration. Arbitration is when two or more parties resolve a dispute outside of the court system before an arbitrator, who acts as judge and jury. Forced arbitration agreements are widely used in cell phone service agreements, credit card agreements, securities agreements, employment contracts and in a host of other situations.
Arbitration poses a number of disadvantages to the consumer. Although in theory the arbitrator presiding over the consumer's dispute is unbiased, this is rarely the case.
"Companies give arbitrators repeat business," Hines says. "Arbitration is also a secret system; whereas the courts are open to the public, and there is precedent being set. There also have been studies that show that arbitrators disproportionately side with the industry."
In addition, companies can specify within their forced arbitration agreements that the consumer has to split the cost of arbitration, which usually is expensive considering arbitrators are paid by the hour. The company can also specify that it can select the venue for arbitration, which means it can force consumers to travel to another state at their own expense.
Stopping class action lawsuits
However, even with forced arbitration clauses in place, consumers had a method of recourse in some states that allowed them to seek compensation in the court system. This method was to pool their resources together with other consumers who had similar claims and form what is known as a "class." A class could then afford a team of trial lawyers who had the resources to go toe to toe against big business.
But the Supreme Court of the United States terminated this pathway around forced arbitration agreements in April 2011. In AT&T Mobility v. Concepcion, telecommunications company AT&T argued that its forced arbitration agreement prevents consumers from banding together and filing a class action. Although lower federal courts and the 9th Circuit Court of Appeals rejected AT&T's argument, the Supreme Court decided in favor of the company.
"The AT&T case has essentially shut down significant claims against companies, including huge employment discrimination claims," Hines says. "This also means that if a company is earning a lot of money by overcharging its customers by a small amount, individuals cannot get together in collective action to stop it."
AT&T spokesman Marty Richter provided a statement from the company, in which it cited the Supreme Court's opinion that the plaintiffs "... were better off under their arbitration agreement with AT&T than they would have been as participants in a class action, which 'could take months, if not years, and which may merely yield an opportunity to submit a claim for recovery of a small percentage of a few dollars.'" Richter added, "We value our customers, and AT&T's arbitration program is free, fair, fast, easy to use, and consumer friendly."
Unlike congressional members, there is no way to track whether any direct monetary influence affected the Supreme Court's decision. Most court systems are subject to ethical standards that require judges to remove themselves from a case if a conflict of interest exists. However, the Supreme Court justices are not required to do so.
"While other judges come under scrutiny for accepting money or prizes from someone who has litigation pending before the court, that is not the case for the Supreme Court of the United States," Holman says. "The Supreme Court is above and beyond the conflict of interest rules, so they frequently accept gifts, travel and honorary awards from companies that have litigation pending." For example, the American Enterprise Institute (AEI) gave Justice Clarence Thomas a $15,000 gift. Afterwards he voted in favor of the legal result AEI favored in three cases.
What is known are the names of the entities that filed briefs, known as "amicus" briefs, in court in support of AT&T. These briefs are intended to influence the court's opinion and pro-consumer groups also send them to the court. Business organizations that filed amicus briefs in the AT&T case include:
Tort Reform: Fighting back for consumers
When Ronald Sanders' wife died of brain damage in a hospital in 2005, he sued neurologist Iftekhar Ahmed. The doctor had ordered Depakote, an anti-seizure medicine, for her but failed to order any blood tests. Sanders went into a coma because the drug's side effects caused her brain cells to die.
At the end of the medical malpractice trial, the jury awarded Sanders and his daughters money to pay back medical bills plus $9.2 million in non-economic damages.
There was just one problem: a state law that caps the non-economic damages in medical malpractice lawsuits. That statute cut down Sanders' $9.2 non-economic awards to $1.2 million. Sanders appealed and the case was heard by the Missouri Supreme Court on Nov. 2.
Sanders argues that the legislature's cap on non-economic damages in medical malpractice lawsuits violates the Missouri Constitution, which guarantees the right of trial by jury. The legislature first imposed limits on non-economic damage awards in an effort to hold down the rise in medical malpractice insurance rates.
Unless the state supreme court restores the will of the jury, it will be another example of how tort reform has throttled the authority of juries and taken away a legal award won by a consumer in court.
Chipping away at consumer rights
Consumer advocacy groups and a handful of other organizations are struggling to reverse the tide in favor of tort reform, which has chipped away at consumer rights to file a medical malpractice or defective drug lawsuit. Consumer groups face highly-organized associations of corporations that have achieved major results in limiting your access to get into court, restricting the types of claims you can assert and capping the recoveries you can obtain.
At the federal level, an example of pro-consumer legislation is the Arbitration Fairness Act. The proposed law would turn back the clock on forced arbitration agreements making such arrangements illegal. This would protect the Seventh Amendment rights of consumers and non-union employees, allowing these parties to access the courts should a legal dispute arise with a company.
Democratic Senator Al Franken sponsored the bill. He has received a significant amount of funding from organizations that traditionally support consumer rights. For example, from 2007 to the present, he has received more than $1.3 million from lawyers and law firms. In that same timeframe, he has received nearly $1 million from associations which represent retired Americans and is another group that aggressively advocates against such tort reforms as limits on medical malpractice awards.
In addition, groups like Public Citizen and the American Association of Justice have urged Congress to look at proposing additional legislation to restore the rights of consumers.
"We've tried to get legislation introduced that would roll back nursing home arbitration agreements, but nothing is moving through the Congress," Paul says. "With the leadership that exists in the House right now, it's an anti-consumer situation. It's a deadlock."
Although consumers' rights may be dwindling, they can still have their opinions heard. Paul recommends consumers reach out to their members of Congress and voice their concerns.
"If citizens want their rights protected, such as a trial by jury, they have got to rise up and let their elected officials know," he says. "It's amazing how often elected officials have no idea what their constituents want."
An uphill battle for consumer rights
However, consumers face an uphill battle, not just on the federal front but within the states as well. For example, Wisconsin Governor Scott Walker ordered the state legislature into a special session recently to consider legislation that will promote job creation. However, consumer-rights advocates revealed the legislation has little to do with improving employment and everything to do with shielding pharmaceutical and medical device manufacturers from lawsuits -- by taking away consumers' access to the courts.
Introduced by Republican state Senator Rich Zipperer, Senate Bill 13 protects drug makers and medical device manufacturers from liability caused by defects in their products as long as the product was approved by the Food and Drug Administration (FDA). In essence, the tort reform measure removes any responsibility of the manufacturer to ensure the safety of its products and misplaces it on a government agency. Further, if the FDA fails to identify a harmful side effect or a design flaw, citizens who are injured will not be able to successfully sue the manufacturer in state court.
As exemplified by S.B. 13, one of the hottest areas for tort reform is medical malpractice. In this case, one well-funded representative is trying to pass a piece of legislation that has the potential to leave consumers virtually powerless against the leading businesses in the health care industry, from doctors and hospitals to drug companies and nursing homes.
According to the 2010 campaign finance summary of Wisconsin state Sen. Zipperer, some of his largest contributors were the health industry with $13,321 and the insurance industry with $6,822, totaling more than $20,000. This amount represented about 23.5 percent of total donor dollars he received for that cycle.
Sen. Zipperer did not respond after repeated requests for comment. What you can do about tort reform
Your elected officials have whittled away at your legal right to bring a medical malpractice or defective drug lawsuit. If you are injured you'll face laws that:
Senators and representative accept generous contributions from well-organized pro-business groups to insulate them from responsibility for the damage they cause. The best hope for consumers is to go online and learn where your elected officials stand on tort reform. If your elected official voted to cut back your rights, the best place to respond is the ballot box.
For more information about LexisNexis products and solutions connect with us through our corporate site.