Civil Liability System Faces Uncivil War : Reform: Trial lawyers will try to ease limits on damage awards and attorney fees. But Wilson and business groups will attempt to impose new restrictions.

SAN FRANCISCO —  Nearing the end of an uneasy five-year truce that was signed on a restaurant napkin, trial lawyers and business groups are preparing to battle again over proposals to reform California’s civil liability system.

The 1987 peace pact brought to a halt a lengthy clash over the reform of lawsuit awards and other liability costs that pitted the state’s legal community against manufacturers, insurance companies and the health industry.

Now, the California Trial Lawyers Assn., encouraged by continued Democratic control in the Legislature, is preparing to seek legislation that would remove or ease limits enacted in 1975 on damage awards and attorney fees in medical malpractice cases.

On the other side, Republican Gov. Pete Wilson and a coalition of business and medical groups are preparing their own package of proposals that are expected to call for new limits on liability, damages and attorney fees in other areas of the law.

“With the end of the agreement, next year is going to be very interesting in the civil liability arena,” said Steven Merksamer, counsel for the Coalition for Fair Liability Laws, which represents manufacturers, insurers and physicians.

“There is a lot of sentiment for reform, but what shape that reform takes and what process is utilized remains to be seen,” he said.

If a political standoff occurs, the reformers say they may take the fight to the conservative-led state Supreme Court for some relief--or offer voters a crack at the issue with an initiative in the 1994 election.

The forthcoming clash in California reflects a national debate over the so-called “litigation explosion.” Advocates of reform say the ever-growing number of lawsuits--a record 668,999 civil cases were filed last year in California’s Superior Courts--is creating excessive costs and delay for plaintiffs and defendants.

“Our legal system is just not working,” said Richard Sybert, director of the governor’s Office of Planning and Research. “It’s not an efficient system in terms of economics and not effective in terms of delivering reasonably speedy justice.”

Trial lawyers say the critics vastly exaggerate the problem and, for the sake of profits, are trying to deny victims of negligence and other civil wrongs the opportunity for fair compensation through lawsuits. They reject as mere lawyer-bashing the attacks such as those made by President Bush, who during the campaign assailed “tassle-loafered” trial lawyers.

“The reason a lot of cases drag on is not the fault of tassle-loafered plaintiffs’ lawyers but instead the fault of wing-tipped corporate defense lawyers,” said Ronald H. Rouda of San Francisco, outgoing president of the California Trial Lawyers Assn. “They delay cases so they can starve out the plaintiffs.”

According to an aide, Wilson will soon offer an array of proposals for reform of the civil liability system, based on the findings last spring of the Council on California Competitiveness, chaired by Peter V. Ueberroth.

The council said excesses in the legal system result in surging liability insurance premiums, huge legal bills, costly settlements and unpredictable jury verdicts. The ultimate results, the council concluded, are more expensive goods and services, fewer jobs and less business investment in California.

The governor’s staff and the Coalition for Fair Liability Laws are studying a wide range of proposals--some of them previously rejected by the Legislature. No decisions have been made, but legal observers say the proposals most likely to be offered will include:

* Extending the limits imposed under the Medical Injury Compensation Reform Act of 1975 (MICRA) to all other civil liability cases. The medical malpractice law limited non-economic damages--those for pain and suffering--to $250,000. Attorney fees were limited to 12%-40% of damages, depending on the size of the award, and insurers were allowed to pay by installments in certain cases.

* Restricting punitive damages to an amount proportionate to a defendant’s net worth or to the victim’s actual damages. The California Supreme Court has agreed to decide whether punitive awards that far exceed actual damages violate the state Constitution. A similar case is pending before the U.S. Supreme Court.

* Protecting manufacturers from liability suits when products that cause injury have met governmental standards or when a particular danger was unknown at the time the products were made.

* Allowing defendants in some cases to collect attorney fees from unsuccessful plaintiffs. The so-called “loser pays” or English Rule is advocated as a way of reducing legal costs and weeding out frivolous suits.

Meanwhile, the politically potent California Trial Lawyers Assn., backed by some consumer groups, is preparing to oppose any proposals to extend limits on damages and fees, saying that they would effectively deny reasonable awards to the victims of negligence.

“The impact would be devastating,” said Will Glennon, the association’s legal analyst. “It would allow manufacturers and others to avoid responsibility for products or other acts that cause injury. Paying damages is part of the cost of doing business--but they don’t want to pay up. They want to dump it on the backs of the people.”

The trial lawyers’ group contends that the time may be right to remove the caps on damages and fees in medical malpractice cases. Republicans had hoped to win gains in the Legislature in November that would have eased the way for their reform legislation. But Democrats--typically allies of the trial lawyers--retained solid control of both houses.

Glennon said there appears to be substantial sentiment in the Legislature for at least easing the limits. Victims are having difficulty suing because lawyers are reluctant to take cases that do not promise adequate damages and attorney fees, he said. “The majority of victims simply cannot get representation . . .,” he said.

On another front, the trial lawyers and their allies are expected to push again for a bill by Sen. Bill Lockyer (D-Hayward) that would have largely barred agreements between opposing litigants to keep secret any evidence of product defects, environmental hazards or financial fraud.

Advocates of the legislation say secret settlements unfairly conceal important evidence that could be used in other cases. But in September, Wilson vetoed the bill, saying it would give trial lawyers another tool to force large settlements by threatening to disclose confidential information.

Some observers envision gridlock over liability reform, with the Legislature rejecting proposals from Wilson and business groups and the governor vetoing legislation backed by the trial lawyers.

If that occurs, Wilson or the business coalition is expected to offer reform through an initiative in 1994. The coalition also would be expected to support cases before the state Supreme Court that could curb the ability to bring lawsuits and win big damages.

However, Daniel Schnur, the governor’s communications director, voiced hope that the Legislature may come up with an economic growth package that would include at least some civil justice system reforms.

“Businesses up and down the state say the single largest impediment to doing business is the lack of tort reform,” Schnur said. “Early indications are that this Legislature will be very interested in working out a pro-business, pro-jobs program.

“An initiative would be our last resort, but it’s a last resort we hope we don’t have to get to,” Schnur said.