Damage cap battle could be most expensive ballot initiative ever in Calif., observer says

SACRAMENTO (Legal Newsline) - From Kimberly Stone's perspective, California's litigation climate changed very little in the past year.

Stone, president of the Civil Justice Association of California, points out that she wasn't proud of the state's No. 1 "judicial hellhole" rank by the American Tort Reform Association in 2013, but she also wasn't surprised by the distinction.

But the good news, she says, is that all of the proposed legislation opposed by CJAC were stopped.

"We don't feel that any new laws that were passed last year are likely to lead to additional unjustified lawsuits, so that's a good thing," Stone said. "There were also a number of little bills that make things slightly better that passed."

While Stone and other legal reform advocates in California applaud steps taken by Gov. Jerry Brown to balance the state's budget and decrease its debt, they say more should be done to stop excessive lawsuits and remove restrictive regulations. They hope for a renewed focus on longstanding issues like Proposition 65, and a stronger fight against new initiatives that could lead to more litigation.

When Stone considers bills that could have further damaged California's litigation climate, she includes AB 242. The bill would have required corporate privacy policies to be no more than 100 words and written at an eighth-grade reading level. She says those limits, which could have exposed many companies to lawsuits, were ultimately removed from the bill.

Stone adds that CJAC also opposed anti-arbitration measures. One of those was AB 802, which would have created cumbersome reporting requirements for private arbitration companies and allowed lawsuits against those companies if they failed to meet the requirements.

CJAC also opposed SB 121, a bill that would have permitted shareholders to sue companies over technical violations of new reporting requirements related to political contributions.

Stone points out that CJAC supported several other bills, including AB 227, a bill that gave businesses 14 days to comply with Proposition 65 after notified of a violation. Stone explains that California created the law to protect residents from chemicals known to cause cancer or reproductive harm and required businesses to post warning signs if they used those chemicals. The law previously allowed consumers to sue businesses for each day they failed to post the signs.

"There are over 850 listed chemicals and if they are present, that sign is required to be posted," Stone said. "If that chemical is present and that sign isn't there, there are about 12 to 15 lawyers who will sue you. Those cases settle for hundreds of thousands of dollars."

Stone adds that CJAC also supported several bills involving Good Samaritans that were signed into law in 2013. AB 58 offers immunity to doctors if they provide experimental but life-saving treatment to a patient, while AB 633 offers immunity to employees if they provide voluntary emergency medical services. Another one, SB 669, offers immunity to those who give an Epipen injection to someone in anaphylactic shock.

Tom Scott, executive director of California Citizens Against Lawsuit Abuse, agrees that while there were minor reforms in 2013, California remains "neck-deep" in Proposition 65, Americans with Disabilities Act, wage and hour, food and class action lawsuits. He contends that with California's complicated legislative process, he doesn't expect major changes in these areas.

As an example, Scott refers to last year's attempts at Proposition 65 reform. He explains that AB 227 started as a larger piece of legislation, but was later amended down. The governor also introduced his own reform package that involved litigation, thresholds, signage and safe harbors, but ran out of time to address all four of those areas.

"The problem was that it was a huge package of issues, and by the time they got through the budget, we were into July, then the legislative recess," Scott said. "Before you know it, we're right on the threshold of the legislative session ending for the year, and they just couldn't work through it."

Scott wants to see the governor revisit Proposition 65 reform in 2014. He argues that one improvement would be increasing the threshold for exempt businesses from less than 10 employees to 25 employees. Another would be sanctioning attorneys who send violation notices to businesses without checking their number of employees.

Stone adds that California should also reform the California Environmental Quality Act. She explains that CEQA was initially passed to prevent developers from harming the environment, but now anyone who opposes a new project or the way it's handled can use the law to initiate a lawsuit.

"It's become a litigation magnet, and it's gone really far from its original intent to save the trees and the birds," Stone said. "There were conversations last year about potentially reforming CEQA in a substantial way, and that did not happen."

Stone expects a few other battles on the November ballot, the most significant involving the Medical Injury Compensation Reform Act (MICRA). The law currently provides unlimited compensation for economic and punitive damages in medical malpractice cases, but limits compensation for non-economic damages to $250,000.

She explains that Consumer Watchdog and state trial lawyers introduced an initiative to raise the non-economic damages cap to $1.1 million. She argues that if voters approve their initiative, healthcare rates would increase, and most doctors would have trouble treating patients.

"If you're a highly-paid doctor in Los Angeles or San Francisco, it would be OK," Stone said. "You could pass those costs on to your patients. But if you're an anesthesiologist or an OBGYN in a rural area or a low-income area, a dramatic increase in your medical malpractice insurance premiums could make a big difference to your ability to practice."

Scott agrees that the MICRA initiative will steal the state's attention in the fall, especially since it represents "a pure and simple power grab by the trial lawyers." He says it could also become the most expensive ballot initiative ever in California.

"The money spent will be massive," Scott said. "This is about trial lawyers and money, it's not about victims, and the potential impact on our healthcare industry is huge."

The Consumer Attorneys of California could not be reached for comment for this article.

In addition to MICRA, Stone adds that a proposal to place health insurance companies and rates under the purview of state Insurance Commissioner Dave Jones will likely appear on the ballot.

Currently, under Proposition 103, Jones has the authority to regulate rates for car, homeowner, property and casualty insurance, but not health insurance. Stone says the law also allows attorneys to intervene, or sue, any company that applies for a rate increase if they find technical problems with the application.

"The company has to pay the intervener, the lawyer, for pointing out those little problems, even though that's what the Department of Insurance is also doing," Stone said. "This scheme would do the same thing. It would increase healthcare costs by allowing lawyers to insert themselves and get paid by the insurance companies."

Stone isn't sure what else to expect since the bill introduction deadline falls at the end of February. She adds that the combination of the election and leadership changes, the FBI investigation against state Sen. Ronald Calderon and the drought in California could prevent legislators from making important decisions in 2014.

"It does feel, at least so far, that there's a lot of other stuff going on in addition to the regular legislative business that might make it a quieter policy year," she said.