HOW THE BUSH ADMINISTRATION MAY, OR MAY NOT, INFLUENCE AMERICAN TORT LAW: DID THE PHILIP MORRIS STOCK REBOUND MAKE SENSE?
By ANTHONY J. SEBOK
Monday, Dec. 18, 2000
Last Friday, just before the whole stock market took a post-Bush victory dive, Philip Morris reached its new fifty-two-week high of $42 per share. This was not just a new high for the year. Philip Morris hadnt seen $42 since March 1999. In fact, Philip Morrisdespite its very rich balance sheet and high profitshad been, until recently, selling for less than $20 a share.
The recovery of Philip Morriss share pricealong with those of all other "Big Tobacco" companiesis just one indication that some people (who control a lot of money) think that a Bush victory will make a difference to tort law in this country. Are they right?
Why Bushs Influence Will Be Limited: Tort Law Is Mostly State Law
The influence of a Bush administration on tort law in this country might travel along a number of paths. Bush controls, most directly, his own Executive Branch, including the Justice Department. He will, with the Senate, determine the selection of federal judges, including any new Supreme Court Justices should a vacancy become available. And Bush, as President, will have the power to shape, and ultimately sign or veto, federal legislation. These tools give Bush a limited, but not insignificant set of powers over Americas tort law.
But the most important thing to remember in any discussion of tort law and the federal government is that tort law is overwhelmingly a matter of state law.
Even when a tort case is brought in federal court, it is usually because of the courts "diversity" jurisdiction, meaning that citizens are from different states. In diversity cases as opposed to "federal question" cases the federal court only takes the case because the parties happen to live in different states (partly to eliminate state court bias against out-of-staters). Accordingly, things are supposed to proceed roughly as they would if the parties had been neighbors, and the case had been tried in the state court across the street.
Most significantly, a federal court in a diversity case is obliged to follow law of the state determined to be the appropriate venue. (In contrast, in a "federal question" case, just as you might think, federal law is applied and issues relating to that law are resolved.)
Bushs Power to End Federal Tort Suits Against the Tobacco and Handgun Industries
Taking Bushs powers in the order I listed them above, it is obvious that his power over tort law in America is inversely related to the scope of his control. For example, Bushs new Attorney General will have almost total power to halt (or, in bureaucrat-ese, "review") all ongoing suits by the Justice Department that do not suit the new Presidents views. This means that a lot of aggressive activity on the part of the Civil Rights Division, for example, will come to a grinding halt. The same might be true of the Antitrust Division.
What does this mean for federal tort litigation? Most of the Justice Departments current tort docket is relatively apolitical, with the striking exception of some suits I have written about earlierlitigation against the tobacco and handgun industries. The RICO claim against the tobacco industry that is currently before a federal judge in Washington, D.C. is, I suspect, going to disappear. And Andrew Cuomos threat to lead the Department of Housing in a suit against various handgun manufacturers will also dissolve when Secretary Cuomo moves back to New York in January.
The tobacco and handgun industries have steadfastly claimed that they could beat these suits in court. Still, they are, I am sure, quite happy not to have to fight them. Nevertheless, this does not mean that these industries will not face lawsuits from other quartersfor the litigation threat posed by private parties and state and local governments, whose suits the Bush Justice Department will not generally be able to quash, remains quite real.
The Influence Bush-Appointed Federal Justices and Judges May Have on Tort Law
Since many federal judges are called upon to interpret state law in tort cases between parties from different states, Bushs influence on the ranks of new federal district and circuit judges is not unimportant.
Clearly, the politics of judicial selection turn on many issues, and tort law may not be salient in the minds of those advising Bush, but the influence of a conservative judiciary will be felt in torts as well as other, more obvious areas of constitutional law. For example, the case that, in my opinion, destroyed the hopes of class action lawyers to create a jurisprudence of national class-action lawsuits, Castano v. American Tobacco, was decided by three Fifth Circuit judges, each of whom was appointed by either President Reagan or former President Bush.
The U.S. Supreme Court is a little more difficult to evaluate. The Supreme Court recently supported the Circuits skepticism about allowing national class actions when the Court, ironically, struck down national settlements that imposed mandatory terms even on plaintiffs who would have wanted to opt out and sue on their own, rather than join the class. On the face of it, this move might seem anti-plaintiff and pro-industry. But the politics of the decision are not actually so clear.
The Court, in striking down mandatory settlements, has angered not only the plaintiffs bar, but also the asbestos industry which sees mandatory class actions as the only way for the industry to escape death by piecemeal litigation in hostile state courts. Still, to the extent that Bush will want to help out the asbestos industry, he is unlikely to do so by appointing judges who will loosen the limits on national class actions (a move that would ultimately be seen as anti-business). Instead, he might do so by supporting Congressional limitations on the right to sue.
That takes us to Bushs final and weakest tool. Many observers hope that a Republican in the White House means that "tort reform" legislation will finally have a chance in Congress.
Over the past twenty years, tort reform has come to mean legislative limitations on plaintiffs common law rights in tort. Tort reform has been a rallying cry in state legislatures, and activists representing the insurance and manufacturing industries have had some success in statehouses passing statutes that cap damages, modify contribution rules, and immunize certain defendants from litigation.
Needless to say, the views of the Republican and Democratic parties have hardened over this issue, almost in direct proportion to the source of their funding. (It should surprise no one that the trial lawyers were the second largest donors to the Democratic party, after teachers). Nonetheless, the politics of tort reform at the national level is a little more complex than one might think.
Given that tort law is primarily state law, it has always been difficult for certain (principled) Republicans to enthusiastically support what, in effect is a massive expansion of federal power into the states sovereign affairs. And, given the extraordinary waste created by our current tort system, it has been difficult for certain (principled) Democrats to ignore the need for a federal solution to especially outrageous abuses.
Thus, we saw the interesting phenomenon that in 1998, Senator Joseph Lieberman was one of the driving forces behind an unsuccessful effort to legislate a national coordinated settlement facility for all outstanding asbestos claims. (Currently, three-quarters of all asbestos court costs are consumed by lawyers and administrators). The bill he proposed was opposed by trial lawyers and his own party.
Bushs Texas Tort Reform: A Possible Precedent
Bush comes into office with a history as a tort reformer. Campaigning for his first term against Ann Richards, he promised to get tough with the trial lawyers. And as soon as he took office, he proposed a tough, eleven-part assault on Texas tort system.
Bush succeeded in getting most of his bill passed although even some Republicans in the legislature thought the original bill was too extreme. (For example, Bush proposed limiting punitive damages only to cases where the plaintiff could prove that the defendant had criminal-type intent, a limitation no state tort reform, to my knowledge, has ever adopted).
The resulting 1995 bill capped punitive damages to either two times economic losses plus an amount equal to non-economic losses (up to $750,000), or $200,000 (whichever was higher); limited joint and several liability to defendants at least 50% at fault; and made it more difficult to file "frivolous" medical malpractice claims.
It is hard to predict how much Bush will want to do in the area of tort reform, given how little political capital he has. The Democrats are stronger in Congress than they have ever been in years. On the other hand, one cannot assume too much just by counting party affiliation. Liebermans influence has been magnified by the past campaign, and he is likely to return to questions of tort reform, an issue about which he feels strongly. There may also be other Democrats who will feel emboldened to follow Lieberman if they believe that, unlike with earlier asbestos and products liability reform bills, the White House will support their efforts.
I do not think, however, that the political will exists in either party to support a more broadbased assault on state tort law regardless of how much that law is despised by the major donors to the Republican party such as the tobacco, insurance, and various manufacturing industries.
In theory, the Commerce Clause of the U.S. Constitution might give the power to the Congress to do in every state what Bush did in Texascap punitive damages, dictate the rule of defendants respective contributions towards paying judgments, etc. But such a move would so violate deeply-held principles of federalism that I cannot imagine enough Republicans stomaching the hypocrisy. (Although, after last weeks cavalier treatment of state sovereignty by the Supreme Court, I can now imagine the Rehnquist Court upholding a Bush Tort Reform Act, despite its recent, constricted Commerce Clause jurisprudence.)
An Election Irony: Nader Voters May Have Damaged Consumer Safety
A final note. The cruelest irony of all in the election of 2000, in my opinion, is that, in addition to the pressures that a Bush White House may bring to bear to curtail the interests of plaintiffs, there is every reason to believe that consumer safety will suffer the most.
That is not only because there will be Bush appointees in the various agencies responsible for monitoring manufacturers, or because of Bush federal judges, or because of the almost certain prospect of a products liability reform bill. It is also because Ralph Nader is now effectively out of the picture.
Before he became the Green Party candidate, Nader was one of the Democrats most effective allies in the constant struggle over the definition and application of consumer safety rules. But for obvious reasons, Nader is now no longer welcome in the offices of Dick Gephardt. Even if the Democrats get the chairmanship of a few Senate committees, such as the Commerce Committee, I dont think Nader will be asked to testify any time soon.
Naders role as a lobbyist on behalf of consumers, and as a powerful counterweight to industry, is finished. And that is probably also true for the various organizations with which he was connected, such as Public Citizen, and its director, Joan Claybrook. I imagine that it will take a long time before a prominent Democrat chooses to accept a phone call from any part of the Nader camp.
Thanks, Ralph. Somewhere, lobbyists for General Motors and Philip Morris are smiling and toasting you.