An increasingly popular tactic of tort reformers is to seek protection from federal preemption. Regulators, backed by tort reform groups, continue to propose and institute measures that seek to preempt state laws and eliminate the rights of those injured. For example, the Food and Drug Administration proposed last year that their regulations should preempt state causes of action; in essence, if the food or drug was approved by them, it would be virtually impossible to sue the manufacturer for any defects in the product. Similar "regulatory preemption" measures have also been advanced with respect to autos, banking, railroads, and medical devices. And just yesterday, the California Supreme Court decided that federal law pre-empted a state court claim against tobacco companies.

However, it’s increasingly obvious that the federal government doesn’t have the resources necessary to completely protect the public. For example, in the wake of this week’s recall and investigation of Mattel’s toys that were made in China with lead paint, the Consumer Product Safety Commission is admitting that it doesn’t have the funds necessary adequately protect the public. But the CPSC isn’t the only problem. In April, the Food and Drug Administration announced stepped up inspections of food imported from China. But those stepped up inspections weren’t enough to stop tainted food from coming to the US, as the US eventually had to outright ban several foods from China. These problems with China have led some to describe it as the Wild West.

So today, federal preemption makes little sense.  At a time when it’s obvious that federal regulators aren’t able to properly do their job, products should be subject to more scrutiny, not less.

For years, Texas residents have been hearing about runaway juries, frivolous lawsuits, and the need for tort reform. But most of the stories in the popular press and thrown around by tort reform groups are anecdotal; there has always been a question of how to best gather data to measure whether jury awards are excessive or suits are frivolous. Several law professors at Baylor think they’ve found the answer. As they say:

[We] believed that asking state court trial judges — "the daily observer of the jury system in action" — would yield the most reliable information on the state of the jury system. The trial judge is the only one in a position to have both seen the same evidence as the jury and yet to be completely non-partisan about the proceedings. Further the trial judge has the benefit of seeing the jury system at work in many cases and is unlikely to form views about the legitimacy of a tort crises based upon anecdotal information about one particular case. Thus, the trial judge would "appear to be the person most capable of forming an informed and objective opinion about the value of civil juries."

So, for the last two years, the professors have conducted a survey of Texas District Court Judges to get their views on the "litigation crises." After receiving responses from an astounding 78% of Texas district court judges, the results of the survey were released in the Baylor Law Review in an article titled Straight From the Horse’s Mouth: Judicial Observations of Jury Behavior and the Need For Tort Reform.

Because the article is not yet publicly available, we don't want to provide too many details.  But we will say that among the results were findings that substantially more judges thought juries had awarded too low of damages than judges that thought juries had awarded too much.  And well over 80% of the judges did not think there needed to be additional "reform" to address frivolous lawsuits. 

This research provides some groundbreaking, quantifiable evidence about the need (or lack thereof) for additional tort reform. It’s a great read (that’s unfortunately not available on-line), but we encourage everyone interested in tort reform or limits on damages in personal injury cases to seek out a copy of the entire article. Our only criticism? With both of us University of Texas grads, we wish some of our faculty in Austin had conducted the study instead of it coming from Waco.

Readers that have spent any time skimming our website know that, for the most part, our lawyers and attorneys represent individuals in personal injury litigation or small to mid-sized business in commercial litigation.  The other day, someone asked about the differences in representing each set of clients.  For the most part, there aren't many differences.  In each, we tend to think that we're representing the Davids against the Goliath big businesses or insurance companies.  Both sets of clients usually have to rely on contingent fees to be able to pursue the litigation.  And for both sets, the result of the case is often very important for their future. In personal injury litigation, that may mean being able to pay off huge medical bills, recovering lost wages, or finding ways to afford needed medical care.  In business litigation, the survival of our clients' businesses may lay in our hand.  Admittedly, there are some differences, but on the whole, an attorney or lawyer's representation of a small business or a personal injury victim are very similar.

The big differences come in the defendants.  Although there are exceptions, most of the defendants in personal injury cases just made a mistake.  A driver may have taken his eyes off the road; a doctor may make a mistake in surgery.  While these actions are negligence and actionable, when it comes down to it, most personal injury cases are mistakes.

That's not the case with business cases.  Most of our business cases involve conduct that is simply fraudulent and deceiving.  You'd think, as lawyers, we would be used to seeing the worst of people.  But business cases never cease to amaze us in the ways that people are able to be creative to lie, cheat and steal from one another.  Partners steal from other partners; businesses lie to their customers or prospective business relationships; attorneys abuse their fiduciary relationships and steal from their clients. 

Now, there are exceptions to each.  There are personal injury defendants that can be viewed as true bad actors: the drunk driver; employers who systematically ignore safety requirements and virtually assure a catastrophic on-the-job injury will occur; the doctor that performs unnecessary surgeries to run up the bills.  And there are innocent defendants in small business litigation.  Sometimes cases involve simple disputes over interpretations of contracts.  But overall, from the attorney and lawyer perspective, the biggest consistent difference between the two types of cases is the egregious and deceitful conduct routinely found in business litigation.

"I don’t believe my role is to replace the verdict of a jury with my own unless there are new facts or evidence of which a jury was unaware, or evidence that the trial was somehow unfair." Those were the words of President Bush in his own autobiography (as quoted in the article, The Texas Clemency Memos) to describe his review of execution of prisoners in Texas.

Apparently, that view has changed. President Bush commuted the prison sentence of Vice President Dick Cheney’s chief of staff Scooter Libby deciding that the judge’s sentence, made in accordance to federal mandatory sentencing guidelines (pushed through by Republicans who thought judges were being too lenient on criminals), was too harsh.  The conduct is ironic, because as recently as last month, Attorney General Gonzales and the administration were pushing Congress to enact legislation that would make it harder for judges sentencing criminals to depart from the sentencing guidelines that Bush is now ignoring.

This is but another example of the continuing usurpation of power of juries and trial court judges. As we’ve previously written (here, here and here), that problem is most evident at the Texas Supreme Court, where big businesses and insurance companies prevailed in 84% of the cases during the 2005-2006 term and where the justices upheld defendants’ claims to reverse jury awards 81% of the time.

The irony in the unwillingness to overturn jury verdicts in criminal death penalty cases versus the willingness to overturn civil jury verdicts in favor of plaintiffs is the quality of representation. Often, criminal defendants are represented by appointed counsel who don’t have the time or resources to present a vigorous defense. On the other hand, civil defendants are usually represented by well-funded, qualified attorneys hired by big corporations or insurance companies. If one of these groups had a claim that the verdicts should be overturned because they were wrong or because they didn’t receive fair representation or a fair trial, it would be the criminal defendants.

The Texas Supreme Court has once again rejected the claims of an individual plaintiff in favor of a corporate defendant. This time, the opinion involved an arbitration agreement.

It has long been held that arbitration agreements are not enforceable if they are unconscionable, if they were signed under duress, or if they were the result of a fraudulent inducement. In the June 2001 opinion of In Re FirstMerit Bank, the Supreme Court held that an arbitration clause could only be avoided if the defense applied to the arbitration clause itself — that is, if the arbitration clause was unconscionable or was signed under duress or the result of fraudulent inducement. Thus, the Court required arbitration in a case where a plaintiff was fraudulently induced to sign a contract, but there was no evidence that there was any fraudulent representations specifically relating to the arbitration clause in the contract.

While that decision may have wounded the defenses, today, the Court killed them. In In Re RLS Legal Solutions, the employee claimed that she was forced to sign an agreement, which contained an arbitration clause among other things, when her employer threatened to withhold her paycheck. The employee (and the court of appeals) thought she had complied with the requirements of Firstmerit because she had specific conversations with her employer where the arbitration clause was discussed. Her employer told her that the arbitration clause was required, that there was no exception to the clause, that there was nothing up for debate, and that she would not be paid unless she signed the arbitration clause. The employee also had disputes with other parts of the agreement.

The Court held that this was not enough.

The Court agreed that the court of appeals correctly concluded that "[t]he economic duress defense and [the employee's] objection specifically related to the arbitration agreement itself," which was the test under FirstMerit. However, the Court held that the duress defense was unavailable because there was no evidence that the arbitration provision was the only provision to which she objected. In essence, the Court created a new test: Now, the duress or fraud must not only go to the arbitration clause itself, but now, the arbitration clause must be the only part of the agreement that the party objects to. To support this conclusion, the Court argues that the employee’s "argument, carried to its logical conclusion, would defeat the rule in FirstMerit in any case where the arbitration provision is only a clause in a larger agreement, since duress to force execution of an agreement containing an arbitration provision also forces consent to arbitration. Unless the arbitration provision alone was singled out from the other provisions, the claim of duress goes to the agreement generally and must be decided in arbitration."

The Court is simply wrong on both grounds. In this instance, where there are representations and attempted negotiations about the arbitration agreement itself, then FirstMerit, where there were no particular discussions about the arbitration agreement, can be distinguished. Moreover, the Court’s new rule swallows the defenses. It is extremely unlikely to find any case where the arbitration agreement is not part of another agreement and where there is no objection to any other part of an agreement. Except in the extremely rare case, the Court has abolished the defenses.

The Court was also wrong in its assertion that the arbitration provision was not singled out from the other provisions. There was ample testimony about negotiations and representations that related only to the arbitration agreement.

Unfortunately, this is merely another case where it appears that the Court attempted to obtain a result rather than have an opinion based on good reason and good law.

Having said all that, we are not always opposed to arbitration.  We have successfully arbitrated several consumer disputes (even successfully prevailing at a hearing this week to send a homeowner's dispute against his contractor to arbitration).  We have also agreed to arbitration more frequently for some of our Austin car wreck cases.  But arbitration is not a panacea and comes with many pitfalls.  Whether arbitration is appropriate is a decision that ought to be examined on a case by case basis.

For more of our posts on arbitration, click here, here or here.

The two questions that almost every client ask are "how long will the case last?" and, if the case is not contingent, "what will it cost?"  Those two questions are difficult to answer because the opposing lawyer and the opposing party are such big factors. 

In every case, we try and let the other side know that we intend to work with them to exchange sufficient information so the parties can fairly evaluate the case, that we'll make good faith efforts to settle, and failing that, we'll do our best to give both sides a fair opportunity to present the merits of the claim.   If both sides can agree to this principle, then it's our experience that most cases can be resolved both economically and fairly.  And working in Austin, which still has a fairly small town feel to the civil litigation bar, we know most of the lawyers and can work towards those ends.

However, if the other side doesn't agree, and it plays loose with the rules, hides information, and makes little attempt to work out even the most basic disputes, then costs of litigation increase substantially. 

A recent case in Florida provides one example of how the opposing party's flaunting of the rules can affect the costs.  The case, a $10 billion trade secrets case against Motorola, had waged on for several years.   The case finally went to trial last fall, and the case was tried to a jury for almost two months.  During the trial, the judge entered a standard order that no witnesses should read transcripts of other witnesses' testimony  (you don't want witnesses to mold their story depending on what others have already said).  Unfortunately, two of Motorola's witnesses were caught having read testimony of prior witnesses, and the judge was forced to declare a mistrial.  The parties are currently in the throes of a hearing to determine what sanctions and attorneys' fees should be awarded to the plaintiff for Motorola's violations of the court's orders.  And the stakes are high.  The plaintiff is arguing that the conduct has poisoned the entire case, and it is asking for almost $200 million in sanctions and attorneys' fees (including an unheard of and almost absurd $11,000.00 per hour rate for one attorney).  For more on the story, click here.  (Thanks to our friend Stephanie Mencimer of the The Tortellini blog for the link.  We've also previously written on fraudulent defenses here.)

Fortunately, it is rare to find such a blatant flaunting of the rules.  On the other hand, it's the routine obstinance and refusal to cooperate that drives up the costs and time of litigation, but is not severe enough to be sanctioned by the court.

On Monday, March 26, 2007, the Texas Senate begins hearings on a "court reorganization" bill proposed by Senator Duncan. Instead of a mere reorganization of the Courts, the bill would drastically change the way the Court system in Texas works and removes almost all local authority from the Judicial branch.

Initially, the bill expands Supreme Court jurisdiction. Currently, the Supreme Court is limited as to what types of cases it may hear. Under the new bill, the Supreme Court will have virtually unlimited power to overturn trial court judgments and orders under the guise of "clarifying important issues of law." This is a solution without a problem. The Supreme Court already has the power to consider all cases involving issues about which there is a conflict among the Courts of Appeals. There is no need to disrupt the current appellate process. Moreover, the Supreme Court hasn’t received any additional staff or funding to handle the onslaught of new business.

The bill also reorganizes many of the current trial courts. On its face, there is nothing offensive about these changes. But these courts were established at the request of local citizens and leaders, and any changes should involve their input.

The bill also eliminates current small claims courts and gives the Supreme Court the authority to make rules to oversee these cases. Again, this is a solution without a problem. The bill assumes that the local authorities are mismanaging small claims courts, but there is no evidence that this is the case.

The most drastic part of the bill is the establishment of a new system to control "complex" cases. The bill authorizes the Supreme Court to impanel a new body that will be charged with removing "complex" cases from local courts and assigning them specially appointed judges. Unfortunately, the definition of "complex" is so broad that it could be read to cover almost all litigation that is tried in the district courts. The result is that most cases could be tried by specially appointed judges instead of locally elected judges. These judges could be appointed without any regard to whether they were elected of simply political appointments. Apparently the legislature doesn’t believe that our local judges have the capacity to handle routine cases.

The provision will also greatly delay litigation. For all cases involving this determination, there is an automatic mandamus (that appears to be an interlocutory appeal) to the Supreme Court to appeal the decision of whether the case is complex. Reportedly, if you look at the Supreme Court’s last 10 mandamuses, the average time from filing of petition to the Court’s issuance of an opinion is 594 days and lasted as long as 771 days. If it’s treated as an interlocutory appeal, the delay is even worse. Reportedly, if you look at the Court’s last 10 interlocutory appeals, the average time from filing to issuance of an opinion is 916 days and lasted as long as 1621 days. These types of delays could occur as a matter of course in most litigation.

The legislature’s bill analyses is here. The bill is also discussed here.

Not surprising, this bill is supported by Texans for Lawsuits Reform.

The bill is also being discussed on at least one other blog.

We urge anyone interested in civil justice issues to urge your Senator and Representatives to vote against this bill.

Earlier we had a post reporting that Nathan Hecht, a Texas Supreme Court justice, was seeking legislation that would reimburse him for attorneys' fees he incurred in defending himself from an ethics complaint. That story took another twist today when the Fort Worth Star Telegram published a story that Hecht had already been reimbursed for those attorneys' fees by political supporters after Hecht allegedly wrote supporters and solicited donations. It appears that Hecht failed to tell the Senator he convinced to sponsor the bill about the collection. Senator Jeff Wentworth said he would not have introduced the bill if he knew that Hecht had already collected the money. With this revelation, Wentworth is pulling his support for the bill.

Hecht's conduct brings up the always thorny issue of judges raising money from attorneys. As was commented in the article:

Andrew Wheat, a spokesman for Texans for Public Justice, a nonprofit judicial watchdog group, said it is troubling that Hecht is trying to raise money from lawyers who most likely have cases before his court while also asking taxpayers to pay his legal bill.

"It sounds like double-dipping to me," Wheat said. "He wants everybody to pay him for his pain. The lawyers in his courtroom, the taxpayers, too."

One lawyer who did not want to be identified as criticizing the senior member of the state's highest court said lawyers can't afford to turn Hecht down, saying it would be a "death wish" if a client had case before the court.

The Star Telegram had previously written an editorial about Hecht's conduct.

Just a few months after ruling that successful claimants in uninsured/underinsured motorist litigation can’t recover attorneys’ fees from insurance companies when the claimants prevail in a suit, Texas Supreme Court Justice Nathan Hecht is now lobbying for legislation that would award him attorneys’ fees for his own successful lawsuit, according to an article in the Austin American Statesman.

According to the article, Justice Hecht received an ethics rebuke from the State Commission of Judicial Conduct for his public comments surrounding Harriet Miers’ nomination for the US Supreme Court. Hecht challenged the rebuke and claims to have incurred attorneys’ fees in excess of $350,000.00 in the process (which seems excessive to us, but that’s another issue).

Two bills introduced in the Texas House and Senate would require the State of Texas to reimburse judges for any attorneys’ fees they incur in any successful challenges to similar rebukes from the State Commission of Judicial Conduct. Again, according to the article, the bills each contain a provision making the bills retroactive so that the only past claims they apply to are those of Justice Hecht.

Also pending in the legislature is House Bill 2013, which would undo the Supreme Court’s opinion and allow consumers to recover attorneys’ fees when they have to hire lawyers to sue their insurance companies for uninsured/underinsured motorist claims. Given Justice Hecht’s newfound interest in making sure that litigants are reimbursed attorneys’ fees when they are successful in their claims, we’re sure that Justice Hecht is also fervently lobbying the legislature to get this bill passed too.