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University of Chicago law professor Richard A. Epstein

One of the main topics in the aftermath of the oil catastrophe in the Gulf of Mexico has been the extent of BP’s liability to compensate those who have been harmed.  The tone of that discussion changed Wednesday, when the company agreed to create a $20 billion fund to pay damage claims for Gulf Coast residents.  Until then, BP’s liability could have been limited, because under federal law covering the oil industry, the Oil Pollution Act of 1990, the “total of liability . . . with respect to each incident shall not exceed for an offshore facility except a deepwater port, the total of all removal costs plus $75,000,000.”

University of Chicago law professor Richard A. Epstein said BP likely would have had to pay more than $75 million anyway:

Fortunately, the law removes that cap if the incident was caused by “the gross negligence or willful misconduct” of any party, or its failure to comply with any “applicable Federal safety, construction, or operating regulation.”

But Epstein goes on to argue, in an opinion piece in the Wall Street Journal, that there shouldn’t be any legal cap on liability in the first place.  It should be noted that Epstein would not be considered a knee-jerk liberal; a noted Libertarian, he is or has been affiliated with the Hoover Institution at Stanford University, the Manhattan Institute and the Cato Institute, all of which could be characterized as conservative.  All emphasize limited government, free markets, individual liberty and individual responsibility.

And that’s where the civil justice system comes in, by making corporations (and others) accountable for their actions that cause harm.  Here’s Epstein’s explanation:

Tort remedies are essential to protect people (and their property) who do not have contractual relations with defendants from harms such as air and water pollution.  The legal system should never allow self-interested parties to keep for themselves all the gains from dangerous activities that unilaterally impose losses on others—which is why the most devout defender of laissez-faire must insist, not just concede, that tough medicine is needed in these cases….

The first element in the mix is a no-nonsense liability system that fastens full responsibility on the parties who run dangerous operations, no excuses allowed.  Accordingly, we have to be especially wary of statutory caps on tort damages…we’d all be much better off if there were no statutory liability cap and if operators both big and small were required to purchase insurance—amounting to the tens of billions if necessary—when they operate in dangerous waters or terrains.

A tough liability system does more than provide compensation for serious harms after the fact.  It also sorts out the wheat from the chaff—so that in this case companies with weak safety profiles don’t get within a mile of an oil derrick.

Epstein believes there is a role for government regulation as well, but he clearly feels the potential for literally paying the price for their misdeeds goes a long way toward keeping companies’ actions and behaviors in line.

Another commentator, Daniel Indiviglio, not only thinks liability caps are misguided, he goes so far as to say the idea that BP’s liability could be capped at $75 million helped to cause the current catastrophe.  A former investment banker, Indiviglio writes on The Atlantic’s website:

If a liability cap had never been put in place, BP and other oil companies would have behaved differently….Without a net to catch the oil companies if they fell, BP probably would have been more careful.  Cheap insurance creates a moral hazard, where you are lulled into believing that your risks are fully covered at a low price.  Spending money on additional safety measures becomes a bad business proposition…

Indeed, not only does this moral hazard result in behaving less prudently, but it also provides little incentive to put plans in place to respond to disasters.  Why bother?  No matter how bad the spill gets, you’ll only be responsible up to the government cap…

The reasoning involved goes beyond the current catastrophe and is not limited to oil companies.  Epstein writes we should be “especially wary of statutory caps on tort damages.”  That logic can also be applied to California’s MICRA law that limits non-economic damages for victims of medical negligence to $250,000, an amount that has remained unchanged since the law was passed in 1975.  When they are exposed to paying full compensation for harm caused to patients, hospitals and health care providers have significant additional incentive to raise patient safety to the highest level.

–J.G. Preston

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In the end, front groups for the oil, insurance, health care and pharmaceutical industries that want to see consumers and attorneys take it below the belt instead got walloped in the polls. And they spent a whole heap of money along the way.

Among the biggest losers? The Civil Justice Assn. of California and its board of corporate giants that includes BP, AIG, the California Building Industry Assn., Dow Chemical, Pfizer, State Farm Insurance and lots more.

Here’s a look at the numbers.

$60 million

(That’s how much Mercury Insurance and PG&E spent while failing to pass Propositions 16 and 17).

$2.5 million

(What anti-tort groups CJAC and Californians Allied for Patient Protection poured into showdown races).

684

(The vote lead progressive Democrat Mary Salas holds over corporation-backed candidate Juan Vargas, an insurance executive, in the 40^th Senate District primary).

10

(The number of races targeted by the Consumer Attorneys of California).

10

(The number of targeted races in which candidates supported by the Consumer Attorneys of California either won or hold the lead).

0

(The number of targeted races won by candidates supported by CJAC and CAPP).

The outcome of this election makes it clear that voters are getting canny about corporate-backed candidates and causes. In an era of BP oil spills and runaway Toyotas, the public has grown wise to the reality that corporate candidates are bent on undercutting the civil justice system to help boost the profits reaped by corporations and their billionaire leaders. The common man and woman can make a difference simply by stepping into the voting booth and making wise choices.

–Eric Bailey

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Who are the victims denied justice by MICRA’s damage cap?  Stern mentions some of them:

James Van Buren’s doctors diagnosed him with a perianal abscess and recommended surgery, during which Van Buren’s doctor negligently severed one of Van Buren’s muscles, causing Van Buren to suffer permanent fecal incontinence. At trial, the jury determined his damages for a lifetime of incontinence to be $2.5 million.  Following MICRA, the judge reduced the amount to the cap, $250,000…

Other examples include the plaintiff…who had to live with painful physical disfigurement and scars, and several women I know who lost a fetus late in pregnancy due to medical negligence.  These are primarily emotional, not economic, injuries, but they are injuries nonetheless.

Bear in mind that if the same doctor had caused the same injuries in, say, a car crash, the victim could receive full compensation as determined by a jury.  But if the injuries are caused by medical care, MICRA overrules what a jury thinks is fair compensation.

Stern goes on to write, “medical providers should not be shielded from the consequences of causing injuries more than any other group.  People deserve to experience the consequences of their mistakes…”

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Over the last two months five well-heeled organizations have dropped nearly $400,000 in a campaign against Betsy Butler, former development director for Consumer Attorneys of California and one of nine candidates seeking the Democratic nomination in the June 8 primary for Assembly District 53.  (Some members of Consumer Attorneys of California sit on the board of the Civil Justice Research and Education Project, which funds this site.)

Betsy Butler

Interestingly, they don’t seem to have spent a dime for any candidates in that race.

At the risk of appearing to back a connection — it’s not, I’ve never met Butler, and this should not be construed as an endorsement — it’s striking that these groups are so afraid of Butler getting into the Assembly they’re willing to spend massive amounts of money to have any other Democrat get that seat. It’s now held by Ted Lieu, who is running for the Democratic attorney general nomination.

So who are the groups so set against the possibility of an Assemblymember Butler?

They include Californians for Balance and Fairness in the Civil Justice System; Put California Back to Work (sponsored by the Civil Justice Association of California), the Californians for Civil Justice Reform PAC, Californians Allied for Patient Protection Independent Expenditure Account (CAPP is a group dedicated to maintaining a limit on the amount of damages that can be awarded to Californians injured by medical negligence), and the Cooperative of American Physicians Independent Expenditure Committee.

See a theme here?

And where do those groups get their money? From insurance companies, medical firms and other groups with a vested interest in trying to limit consumers’ access to the courts as a means of redressing negligence and other wrongs. In short, the kinds of things Butler has been fighting for.

If spending is an indication of concern, then it looks like these groups are very worried.

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Quaid has produced a documentary film springing from his own experiences with medicine gone wrong: The nearly fatal overdose of medication administered to his newborn twins in 2007.

In a recent interview with the Associated Press following a speech to the National Press Club in Washington, Quaid said, “There were 41 hours where their lives were in the balance.” He said it was the most frightening day of his life and left him and his wife, Kimberly, in “shock, anger and confusion.”

In the documentary, “Chasing Zero: Winning the War on Healthcare Harm,” slated to run April 24 on Discovery Channel, Quaid details the toil of medical mistakes on society. He appeared this past week at the National Press Club in Washington to talk about the nation’s medical malpractice epidemic, and in a TV interview talked about how the 98,000 preventable deaths due to medical error each year in America make such mistakes the third leading killer in the nation.

Quaid, 56, is no stranger to taking a stand. CBC 60 Minutes has done a piece on the twins’ medical travails. In 2008, just months after his twins — Thomas and Zoe — recovered from an overdose of the blood thinner heparin, Quaid spoke to Congress about his concerns with mounting medical malpractice and with the limits on legal challenges established in California and other states. In written testimony Quaid said:

I have also learned a lot about the legal system – and it was surprising, I have to tell you. Like many Americans, I believed that a big problem in our country was frivolous lawsuits. But now I know that the courts are often the only path to justice for families that are harmed by the pharmaceutical industry and medical errors. Yet the law is stacked against ordinary people.  For instance, in my home state of California, a 1975 law caps compensation to malpractice victims. The cap has never been raised for inflation. The practical effect is that people without the wealth to pay legal fees up front are unable to get their cases before a judge or jury.

Now we face something with potential to be even more sweeping and even more unjust: federal preemption. The Supreme Court is about to decide whether to bar most lawsuits over drugs and their labeling, as long as the drug was approved for marketing by the FDA. After many years of rejecting arguments that FDA actions should preempt lawsuits involving injuries from products regulated by the FDA, White House appointees at the FDA reversed that position in 2002, and now argue that FDA approval immunizes the manufacturers of dangerous products from liability for the deaths and injuries they cause.

We sued Baxter Healthcare Corporation in November 2007. Baxter has filed a motion to dismiss the case, relying on the same preemption argument that the drug industry and the FDA has made before the Supreme Court – that when the FDA allowed its Heparin drug onto the market, it gave Baxter the government’s seal of approval – a “get out of jail free” card that denies us the right to hold the company accountable. (Of course, Baxter never mentions the FDA regulations that encourage and sometimes require manufacturers to fix their drug labels immediately, without getting the FDA’s permission first.) So, says Baxter, our suit may not be heard by a judge or jury.

It is hard for me to imagine that this is what Congress intended. You tell me, Mr. Chairman: When it passed the Food, Drug, and Cosmetic Act in 1938, did Congress intend to give appointed bureaucrats at the FDA the right to protect a drug company from liability, even when the company cuts corners and jeopardizes our safety? A federal ban on lawsuits against drug companies would not just deny victims compensation for the harm they experience. It would also relieve drug companies of their responsibility to make products as safe as possible, and especially to correct drug problems when they are most often discovered – years after their drugs are on the market.

Permitting bureaucrats who are under pressure from their bosses and the drug companies themselves to yank our access to the courts is incomprehensible. We have all heard about understaffing and backlogs at the FDA, and about drug-safety scrutiny that is patchy at best. If the Supreme Court rules in favor of the drug companies, it will eliminate one of the most effective deterrents to letting the bottom line win out over public health and safety.

We can hope that the Supreme Court will not put more barriers in front of patients who are harmed by drug companies. But if the Court goes along with the FDA and rules for the drug companies, I respectfully ask this Congress to pass corrective legislation on an emergency basis, just as it should do immediately to correct the recent Supreme Court decision immunizing the makers of defective and mislabled medical devices. We Americans need some balance on the scales of justice in our country.

–Eric Bailey

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