Former President of MAJ Addresses Tort Reform
By Sheila Pursglove
spursglove@legalnews.com
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 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 from the lowest to highest levels 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.
Pursglove: What has happened over the last 30 years regarding ordinary citizens’ access to the court system to uphold their rights?
Pitt: 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 for seriously injuries individuals were characterized as “frivolous.” Pejorative terms like “jackpot justice” and “lawsuit lottery” were invented by these forces 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 the practice of 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 a 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 for his or her work. Caps and restricted contingent fees discriminate against non-wage earning claimants like children, elderly retirees and home workers who do not have economic losses flowing from the injury. The forces pushing tort reform know that unreasonable limits on recoveries or the amount any attorney can charge as a fee will deter lawyers from handling the case on a contingent fee basis.
The simple truth: without lawyers who are willing to work on a contingent fee, the average accident victim will not have access to the civil justice system.
Pursglove: What kind of impact has mandatory arbitration had on the rights of consumers?
Pitt: 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 proceed to arbitrate any dispute that might arise in connection with the 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.
Pursglove: Your firm handles a lot of employment law cases — how do mandatory arbitration agreements affect employees and businesses?
Pitt: 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 when consumers and employees are pushed into mandatory arbitration.
This consumer product and services arbitration system is rigged in favor of the corporation. 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 percent of the time. http://www.afj.org/multimedia/first-monday-films/films/lost-in-the-fine-print.
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 or religious discrimination or whistle-blower claims.
In addition, time limits from bringing a claim can be unilaterally shortened by the employer; some are legally shortened by employers from as much as three years to 30 days!
Many employers are reluctant to adopt a mandatory arbitration procedure to resolve disputes with employees. This is 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, in some cases the employee may have characteristics that a jury might find to be highly negative. An arbitrator may be more willing to overlook these negative characteristics.
There is a big difference between arbitration that is voluntarily entered into after a dispute arises and mandatory arbitration that must be agreed to before the employment relationship is commenced.
Pursglove: Can regulatory agencies effectively be the corporate watchdogs they were designed to be?
Pitt: Regulatory agencies can protect consumers against corporations who overly restrict a consumer’s ability to seek redress for harm caused by the organization. The federal Consumer Financial Protection Bureau (CFPB) is currently studying whether arbitration agreements in consumer contracts are being abused by financial services providers. The CFPB has the authority to ban or substantially restrict mandatory arbitration in the financial services industry.
Pursglove: How have various tort reform rulings and initiatives affected class action suits?
Pitt: 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 are permitted by the courts to act with impunity in their dealings with customers because they know they will never be held accountable for their misdeeds. A federal legislative fix is required in order to level the playing field for consumers who have disputes with large product or service providers.
Pursglove: What do the latest General Motors ignition and Takata air bag situations tell you about how systems to protect consumers are working?
Pitt: 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 settlement of claims against GM for faulty ignition switches.
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 other consumers who may be injured by the same product defect 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 members of the public had no idea they were being exposed to unsafe product. When dealing with dangerous products, lawsuit secrecy and confidentiality 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 under the laws governing automobile safety. However, Congress is currently considering adding to the law 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.
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