Californians vote on limiting lawsuits 'Corporate wolves' battle 'legal
sharks'
Richard Price
03/26/1996
USA Today
FINAL
Page 03A
(Copyright 1996)
SAN FRANCISCO -- It's big business vs. high-priced lawyers as Californians
vote today on a trio of proposals that could limit lawsuits in this most litigious
state.
Silicon Valley high-tech executives are driving the measures, which they say will
rein in greedy lawyers who file costly, unwarranted lawsuits. Lawyers paint big
business as devious villains out to cheat consumers of their legitimate right to
sue.
The battle between the two special-interest giants has drawn attention nationwide
as debate rages over civil litigation reform. The proposals:
Proposition 200 calls for no-fault car insurance. Drivers' own insurance
companies would pay the cost of their injuries. All personal injury lawsuits
between parties in an accident would be banned.
Nationally, the Insurance Research Council estimates that of every 100 accidents,
33 produce personal injury claims. In California, it's 66. In Los Angeles, it's 99.
Lawyers appear to be turning back this proposal. The state's independent Field
Poll last week found that 31% of likely voters favored it, 54% oppose it.
Proposition 201 would make it tougher and riskier for shareholders in a company
to sue its officers for offenses ranging from insider trading to misrepresenting a
stock's worth.
Shareholder suits have cost 63% of Silicon Valley firms, including the top 10,
hundreds of millions of dollars in recent years.
The Field Poll shows this proposal losing 51% to 34%. February numbers
showed an even race.
Proposition 202 would limit lawyers' fees in most contingency cases, those in
which lawyers charge a client nothing until a case is won. Fees would be limited
to 15% of the total settlement if the case is resolved within 60 days. Lawyers
typically take 30% to 50% in such cases now.
Analysts predict this proposal will win. The Field Poll's likely voters said they
supported it 45% to 40%.
Each proposal must be approved by 50% plus one voter to pass. Proposition 200
would take effect in July 1997; Propositions 201 and 202 immediately.
Campaigning on all three proposals has been ferocious and bitter. More than $15
million has been spent this year on media ads that portray the executives as
``corporate wolves'' and the lawyers as ``legal sharks.''
Both sides claim to be the consumer's champion.
``People are fed up,'' says Tupper Hull, spokesman for the executives, who
operate politically as the Alliance to Revitalize California. ``We have a screwy,
nonsensical system that fills the pockets of only one group: attorneys.''
Lawyers strenuously object. ``Voters who are potential clients don't realize
they're only harming themselves, not me,'' says John McGuinn, a San Francisco
trial lawyer.
``They'll regret it. What they don't realize is a lawyer doesn't have to accept their
case on a contingency basis. Effectively, it leaves the civil justice system for the
rich and powerful.''
Lining up with the lawyers are Ralph Nader and 70 consumer organizations.
Gov. Pete Wilson and the state Chamber of Commerce are siding with business.
It's not surprising that a fight over civil law reform is being waged in California.
The state leads the nation in lawsuits filed per person. Almost 13 are filed every
minute of every working day, the National Center for State Courts says.
Financial World estimated last year that lawyers in west Los Angeles alone
outnumbered the total in all of Japan.
Nonetheless, both sides in this campaign have been hampered by the complexity
of the ballot proposals.
Fewer than 40% of voters say they understand anything about Proposition 201,
the shareholder litigation reform.
But it's a huge issue for CEOs. Under current law, shareholders whose stock
suddenly drops in value can sue the company if they believe the company misled
shareholders about anything affecting the stock's worth.
A San Diego lawyer, William Lerach, has been so successful suing on those
grounds that executives labeled such class-action suits with his name. ``Getting
Lerached'' is a fearsome prospect in boardrooms across the nation.
Three times, Lerach has hit Al Shugart, who is chairman, president and chief
executive officer of Seagate Technology Inc., the world's leading manufacturer
of hard disk drives.
Lerach first sued Shugart in the late 1980s for $500 million, and Shugart settled
for $9 million rather than put time and money in the case. ``I shouldn't have done
it,'' he says now. ``But it was only 63 cents a share. It didn't mean a damn thing
at the time.''
Three weeks later, Lerach sued again. Furious, Shugart took out a full-page ad in
Upside, a Silicon Valley trade magazine, asking other executives to send him
their business cards so he could organize a fight against Lerach. He didn't get
many cards, but he did get one from Lerach. Written on the back: ``Dear Al,
more is coming.''
True to his word, Lerach sued Shugart again. The second suit was dismissed; the
third is pending.
Proposition 201 is part of Shugart's response. It amounts to a ``losers pay''
approach. Unless the suing shareholders own at least 5% of the company's stock,
they would have to post a bond before trial to cover the defending company's
legal costs. If the shareholders lose and a judge decides the case was not
``substantially justified,'' the shareholders would lose the bond.
If Shugart has his way, the reform is just beginning. He recently faxed Lerach
this message: ``Dear Bill, more is coming.''
Contributing: Jonathan T. Lovitt
PHOTO, B/W, Denis Poroy, AP; PHOTO, B/W, AP; PHOTOS, B/W(2);
Caption: Taking on lawyers: Scott Loughran, of Pacific Beach, Calif., wears a
shark's head to parody trial lawyers while handing out fliers in San Diego last
month. The fliers support limiting lawsuits.Lerach: Lawyer has become a sym
bol of shareholder suitsProposition attacks: A TV ad opposing three California
initiatives aimed at reducing lawsuits depicts its proponents as wolves.Shugart:
Firm sued 3 times by Lerach