Rush To Judgment: Congress May Put Cap On Lawsuits But Legislation Limiting Tort Claims May Fly In The Face Of The Facts

Although few people know her name, she is nationally famous. She’s the woman who sued over spilled coffee at a McDonald’s drive-in.

She has been pilloried as the paramount symbol of a legal system gone berserk - and now her New Mexico case is Exhibit A in a fiercely lobbied, high-stakes drive to persuade Congress to curb personal-injury lawsuits.

Sweeping legislation is scheduled to reach the House floor late next week.

“A jury awarded a woman $2.9 million in a lawsuit against McDonald’s,” exclaims a radio commercial sponsored by those who would change the system. “She spilled coffee on her lap while sitting in her car and claimed it was too hot.

“Every day there’s another outrageous lawsuit. Who pays? You do. … Fight back. Even as we speak, legislation is being considered … to make our legal system more fair, more reasonable. … We can’t afford another million dollar cup of coffee.”

The commercial never mentions, however, that Stella Lieback, 81, was scalded seriously enough by the coffee to require skin grafts and a week in a hospital, that McDonald’s served hotter coffee than other places did, or that the company had received more than 700 complaints of burns by customers and settled claims for more than $500,000. Or that a judge reduced the punitive damage award to $480,000.

The legal reform package extolled in the commercial would drastically limit punitive-damage awards and relieve distributors and retailers of most damages arising from faulty products.

It would also shield manufacturers of products more than 15 years old, and block suits when a person injured by a product was under the influence of alcohol or drugs.

After whizzing through House committees, the Republican-sponsored measures are ready for what House Speaker Newt Gingrich foresees as a “real brawl” on the House floor.

An even tougher fight is expected in the Senate, where Democrats have killed similar bills in the past. So far, the White House has avoided expressing an opinion.

Essentially, the struggle over tort (personal injury) legislation pits trial lawyers and consumer groups who sue against businesses that are sued. Each side contributes heavily to political campaigns. Neither side lacks money, lobbyists or public relations know-how.

For 15 years, manufacturers, insurance companies and other business interests have sought reforms of what they see as a runaway legal system that threatens them with groundless suits, savages them with huge damage awards and forces them into exorbitant settlements.

“Litigation is like a hidden tax on the American economy, impeding our international competitiveness while it increases costs to consumers,” said Richard Willard, a longtime advocate of tort reform who headed the Justice Department’s civil division during the Reagan administration. He now defends clients against personal injury claims.

The chief financial backers of the business coalition include such major corporations as McDonald’s, Aetna, Chrysler, General Electric, Merck and Sears Roebuck.

For their part, the trial lawyers, who usually get 30 percent to 40 percent of tort damages, brought prominent victims of negligence to Capitol Hill to lobby against the reforms. Lieback’s daughter displayed pictures of her mother’s scalded skin.

Basically, plaintiffs’ lawyers and consumer groups like the system the way it is. They say it protects the right of injured people to obtain monetary justice and forces manufacturers to turn out products that are healthy and safe.

“The business community and industry groups are selling the American public a bogus bill of goods about frivolous lawsuits and a litigation explosion,” said Larry S. Stewart, a Miami lawyer and president of the Association of Trial Lawyers of America.

Frivolous lawsuits, he said, are routinely thrown out of court, and the litigation explosion is a myth.

Brian Ostrom, senior research associate for the National Center for State Courts in Williamsburg, Va., agreed. “There is certainly no evidence of a tort litigation explosion at the state level, where 98 percent of all tort litigation takes place,” he said. “Damage awards are relatively stable. We haven’t seen any huge increases in them.”

The most important part of the tort reform legislation would sharply limit punitive-damage awards, which are added to ordinary damages to punish a defendant’s reckless conduct and to deter such conduct in the future.

Awards of punitive damages are rare. Of every 200 tort cases, the plaintiff wins 100 and get punitive damages in only six, Ostrom said.

Laws governing punitive damages vary from state to state. Some states place ceilings on them. All require appellate review of the amounts of punitive damages. The U.S. Supreme Court has ruled that punitive damages, if large enough, can violate a defendant’s constitutional rights. But it has refused to set a standard for state courts to follow.

The punitive-damage legislation awaiting action in the House would help manufacturers and other defendants in personal injury suits in three ways.

First, it would become tougher for injured people to win punitive damages. They would have to prove their injuries were “the result of conduct specifically intended to cause harm, or conduct manifesting a conscious, flagrant indifference to … safety.”

Second, punitive damages would be limited to three times the victim’s financial loss or $250,000, whichever is greater.

They now vary from state to state, sometimes reaching levels that are dozens, even hundreds, of times higher than actual financial damages. (Ironically, the legislation would have made no difference in the coffee-spill case. The legislative maximum would be $480,000 - exactly what the judge ordered).

Third, the limitation would apply broadly to “any civil action in any federal or state court.”

What is most unfair about the current system, Willard said, is that defendants can be “hauled into some of our states and subjected to the prospect of punitive damage awards that are completely unlimited. … Compare that with the criminal law, where people convicted of shoplifting know what their maximum fines will be.”

Stewart of the Trial Lawyers of America says the problem is overstated. “When punitive damages have gotten out of hand,” he said, they’ve been corrected by the trial judge or the appellate process.

“In 80 percent of the punitive damage cases, manufacturers have taken some steps to improve consumer safety,” Stewart said.

As a result of the coffee spill verdict, he said, “McDonald’s lowered the temperature of its coffee 20 degrees and Wendy’s reduced the temperature of its hot chocolate to protect children against being burned.”