Shark Zone

0 Comments | Insight on the News, Nov 8, 1999 | by Gayle M.B. Hanson

Leading trial lawyers are raking in the money in class-action lawsuits against corporations. But critics say that the trend is not helping individual consumers and may be ruining the judicial system.

Big fish eat little fish, and in the shark tank that is the American civil-justice system a handful of lawyers who brokered the multibillion-dollar tobacco settlement now are in a feeding frenzy as they prepare to take on health-maintenance organizations, or HMOs.

"The first thing to recognize is that these lawyers can bring resources to the table that are unavailable to other attorneys simply because of their wealth," says Sherman Joyce, president of the Americans for Tort Reform Association. "Look at Richard Scruggs. He was the guy at the center of the tobacco litigation. He's now getting ready to move on to the HMOs."

That story, first reported in the Wall Street Journal, comes at a time when the nation's civil-justice system is undergoing massive tremors from having been called upon both to adjudicate and legislate.

The House has just passed a bill that would make it even easier to sue health-care providers, and a flood of class-action lawsuits against HMOs is expected to hit the courts within a few months. These lawsuits -- filed by the same guys who brought you the multibillion-dollar tobacco settlement, say their detractors -- could have an extremely negative effect on the ability of insurers to provide low-cost coverage as they move to shore up their resources against the high cost of litigation and fear of huge punitive cash awards.

Passage of the Bipartisan Consensus Managed Care Improvement Act will cripple the nations employer-based health-insurance systems, say insurance-industry representatives. "Passage of the `Dingwood' bill shows that the entrepreneurial plaintiffs' bar and their political soul mates in the House of Representatives are interested in advancing their own financial and political interests over the needs of consumers," says Chip Kahn, president of the Health Insurance Association of America. "If this bill becomes law, it will reduce consumers' choice of health plans and expose employers to the prospect of crippling lawsuits."

And, according to a Rand report, the threat of litigation may not accomplish any significant benefit to consumers. "The threat of litigation may cause health plans to make better decisions, i.e., to approve more medically necessary care," says the report, titled The Effectiveness of the Legal System in Deterring Wrongful Practices. However, the report goes on to say, "Decisions that cause injury may be deterred, but not all the time or in all cases; at the same time, health plans may react defensively by approving unnecessary care" and raising premiums dramatically.

Class-action lawsuits, conceived as a way to empower groups of people who have suffered a common injury to receive redress, have had an enormous and chilling impact on our economic climate, say critics. They have done little for most individual plaintiffs and may not be effective in deterring wrongful behavior. If in some instances they address real grievances, the question remains as to how they should travel through the legal system.

And if Scruggs, who could not be reached for comment, is successful in leading the charge of millions of consumers against a select group of targeted HMOs, the class of people likely to benefit most from such a lawsuit may consist of Scruggs and his lawyer cohorts. As for the HMO members, judging by other cases, they likely will get little more than a boost in premiums and a further failure of the system and eventually be turned over to the greater problems of government medicine. In addition, civil libertarians argue, unless serious tort reform is enacted there likely will be other increasingly bizarre applications of the law.

"We are getting further and further from the traditional notions of tort law in which you had to be injured in order to receive damages," says Joyce. "Now we have a situation in the case of American Home Products where the courts have decided that the company must provide a financial settlement to people who have not yet even been injured."

The case, which pitted hundreds of thousands of litigants against the maker of the popular diet drug fenphen, reached a $1 billion settlement that will provide a cash award to hundreds of thousands people who have yet to (and may never) get sick. The idea behind the award is that the plaintiffs will use the lump sum during the course of their lifetimes to pay for screening of possible medical conditions that might arise from their onetime use of the drug. "I know that if someone handed me $20,000 to use to monitor my health care I'd probably use it to pay my child's college tuition or give it to my broker," says Joyce.

Even as individual Americans continue to use the courts to advance ever more imaginative ways to wrench a few bucks out of the system, Americans have watched the emergence of trial lawyers as pop-culture commentators on cable TV. While flashy trial lawyers do like to beam in the warm glow of the klieg lights and a salivating Geraldo Rivera, there's nothing like that cold, hard cash on the bottom line. Johnnie Cochran, who was Soul Brother No. 1 for Court TV with his sign-off advice to viewers to "keep the faith," has decided to switch his ministering to the field of personal-injury law where the real money is.