Asked and Answered . . .

Pitt, past president of MAJ, addresses 30-year tort reform

By Sheila Pursglove
Legal News

Michael Pitt is a founding member and managing partner of Pitt McGehee Palmer & Rivers in Royal Oak.  A past president of the Michigan Association for Justice (MAJ) and a fellow of the College of Labor and Employment Lawyers, he has handled complex employment litigation including nationwide class actions, group actions and multiple party cases on behalf of employees of many of the largest companies in the United States.  A graduate of Michigan State University and Wayne State Law School, he has specialized since 1980 in employment law and civil rights litigation on behalf of employees. He also serves as a court appointed mediator of employment disputes and has been frequently selected as an arbitrator.

What has happened over the last 30 years regarding ordinary citizens’ access to the court system to uphold their rights?

In order to avoid being held accountable for serious injury to the victims of negligence or other wrongful conduct, large corporations and the insurance industry began a nationwide propaganda campaign against the civil justice system. Beginning in the 1980’s, those seeking to restrict access to justice for the average injured person planted news stories characterizing large jury verdicts as the product of “runaway juries” influenced by the unethical practices of greedy trial lawyers. Lawsuits of seriously injured individuals were characterized as “frivolous.”  Pejorative terms like “jackpot justice” and “lawsuit lottery” were invented ... to poison the minds of potential jurors. 

New stories about how these “frivolous” lawsuits were causing an increase in prices of consumer goods and services were rampant. All around the country there were media reports of doctors giving up [practicing[ medicine because they could no longer afford insurance premiums that had allegedly skyrocketed because of huge jury verdicts.

With this propaganda in place, legislatures around country adopted what is known as “Tort Reform.”

Studies from respected sources have established that this aggressive attack on the civil justice system was based on misinformation, exaggeration and lies. For example, only 10% of injured persons actually seek compensation for their injuries and only 2% of those seeking compensation file lawsuits. Punitive damages are awarded in only 2% of the cases where claimants win (only 51% of time) with a median award of only $55,000. Million dollar or more awards come in only one third of 1% of all cases resolved in favor of the claimant.

Studies have also established conclusively that insurance premiums for doctors in states with significant tort reform have actually increased.

Tort reform comes in a variety of forms. In many states, stringent caps or limits on the amount a claimant may recover for non-economic damages like mental anguish were put in place. Some states place a limit on the amount a lawyer may recover on a contingent fee... Caps and restricted contingent fees discriminate against non-wage earning claimants like children, elderly retirees and home workers who do not have economic losses. The forces pushing tort reform know that unreasonable limits on recoveries or the amount attorneys can charge as a fee will deter them from handling cases on a contingent fee basis. 

The simple truth:  without lawyers willing to work on a contingent fee, the average accident victim will not have access to the civil justice system.

What kind of impact has mandatory arbitration had on the rights of consumers?

Mandatory arbitration requirements can serve as barrier for employees and consumers who seek fair and equal access to the civil justice system. Consumers are often required to waive their right to a jury trial and must arbitrate any dispute that might arise in connection with purchase of a service or product. Arbitration means you cannot have your dispute resolved by an impartial jury. In most cases, there is no appeal from an unfavorable arbitration award. You cannot buy a car, secure cell phone service, or a mortgage without agreeing to waive your right to have your dispute settled by an impartial jury.

Your firm handles a lot of employment law cases – how do mandatory arbitration agreements affect employees and businesses?

Corporations and employers prefer arbitrations over jury trials because arbitrations are conducted in secret and the arbitrators most often are connected in some way to the industry or part of the legal establishment which favors the large corporation or employer. Corporations and employers believe an arbitrator is less likely to make an award in favor of the consumer or employee and if the award is in favor of the claimant there is a belief that the amount awarded will be for considerably less than if a jury were to make the award. Statistics prove this belief is realized.

This consumer product and services arbitration system is rigged in favor of corporations. It is the corporation that writes the agreement, usually in fine print, and it is the corporation that makes the rules and often picks and pays for the arbitrator who will hear the dispute.

A recent, excellent documentary prepared by the Alliance for Justice and narrated by former Labor Secretary Robert Reich notes that in consumer arbitrations, the arbitrator rules against the consumer 95 % of the time. 

In the employment context, employers are permitted to force employees and job applicants to waive their right to a jury trial. The jury trial waivers are often found in the job application, and in order for a person to be considered for a job, he or she has to sign an application containing this provision – usually buried in the fine print.  The waiver can be imposed on virtually any type of employment dispute:  race, gender, national origin, disability/religious discrimination or whistle-blower claims.

In addition, time limits on bringing a claim can be shortened by the employer; some are legally shortened from as much as three years to 30 days!

Many employers are reluctant to adopt mandatory arbitration to resolve disputes with employees, because arbitration can actually be utilized by former employees without the aid of a lawyer, at a lower cost and at a lower personal risk.  Some employers believe the availability of arbitration procedures will encourage the filing of claims. 

Prosecuting employment disputes through arbitration can be advantageous in the right case. For example, the employee may have characteristics that a jury might find negative. An arbitrator may be more willing to overlook these negative traits.

There is a big difference between arbitration that is voluntarily entered into after a dispute arises, and mandatory arbitration agreed to before the employment relationship starts.

Can regulatory agencies effectively be the corporate watchdogs they were designed to be?

Regulatory agencies can protect consumers against corporations who overly restrict a consumer’s ability to seek redress for harm. The federal Consumer Financial Protection Bureau (CFPB) is currently studying whether arbitration agreements in consumer contracts are being abused by financial services providers, and has the authority to ban or restrict mandatory arbitration in the financial services industry.

How have various tort reform rulings and initiatives affected class action suits?

To make matters worse for consumers, recent court decisions have allowed these consumer contracts to include a waiver of the right to bring or participate in class action arbitration even if there is no possibility that a single claim can be pursued because the amount in controversy is only a few dollars. These class action waivers are now commonplace. By not allowing consumers to aggregate small claims, corporations can act with impunity in their dealings with customers because they know they will never be held accountable. A federal legislative fix is required in order to level the playing field.

What do the latest?GM ignition and Takata air bag situations say about how consumer protection systems are working?

The GM ignition switch defect revelations illustrate some of the weaknesses of the current civil justice system. Most product liability lawsuits settle before trial. It is customary for the injured party to receive compensation in exchange for confidentiality and secrecy.

In the long run, this customary practice of shielding from public scrutiny the details of a lawsuit settlement is very harmful to the consumer. Secrecy and confidentiality prevents others from learning of the problem or seeking fair redress for injuries sustained because of the defect.

The GM ignition switch scandal is even more disturbing. Consumers and the public had no idea they were being exposed to unsafe product. When dealing with dangerous products, lawsuit secrecy should be secondary to the public’s “right to know.” 

The GM executives who were aware of the ignition switch defect for more than 10 years and failed to correct the problem will not face criminal penalties.  However, Congress is currently considering adding a provision that will impose criminal penalties on executives who ignore reports of serious product defects. If an executive knows he or she may end up in jail for hiding product defects, it is more likely the product defect will be disclosed in a timely fashion and lives will be saved.