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Professor Newt's Contract With Corporations

by Ralph Warner, Publisher
Copyright © 1995 Nolo Press

Newt Gingrich has repeated the words "legal reform" so often in selling his "Contract With America" that many weary listeners have started to believe the Contract must contain something good for ordinary folks. What few people seem to realize is that it speaks almost exclusively to America's corporate elite.

Gingrich's proposals include limiting the amounts that can be recovered in personal injury cases, putting caps on punitive damages and banning suits against drug companies for injuries caused by FDA-approved medications. The Contract also seeks to discourage lawsuits by making losing litigants pay the other side's attorney fees.

Relying on well-publicized horror stories of a few huge jury verdicts for trivial injuries, Gingrich claims that these proposals amount to fundamental legal reform in the broad public interest. To understand why he's wrong, you need to know a little about just where these proposals came from.

For at least 30 years, a battle has raged over how much to compensate people injured by defective products, lousy medical care or in other ways. Lawyers, and the many consumer groups they provide major funding for, have supported the current fault-based personal injury system, with its potential for huge jury verdicts--of which lawyers typically pocket 30%-50%. Insurance companies (sick of paying these huge judgments) and big corporations (similarly tired of paying ever-escalating premiums) have taken the other side, arguing for various ways to limit judgments.

Inside the Beltway, this battle plays out like this: To protect their cash cow, trial lawyers have tended to contribute big chunks of money to Democratic politicians. They gave about $31 million from 1989 to 1994, according to the American Tort Reform Association. Big corporations, on the other hand, have mostly financed Republicans, who favor putting limits on product liability, medical malpractice and other types of personal injury lawsuits. Major corporations donated $23.5 million to this end in 1993 and 1994, according to Citizen Action, a coalition of consumer groups.

Little wonder, then, that the Republicans' Contract With America includes a number of corporation-friendly proposals. All this would amount to little more than special interest politics as usual, with the Republicans rewarding their corporate friends and punishing their trial lawyer enemies, save for one thing: Gingrich's claim that the Contract espouses true legal reform.

Our crippled legal system needs to be returned to its democratic roots, but no one in Washington seems to have a clue about where to begin.

Malarkey. In a worldwide marketplace, it's just plain silly to claim that a few less jury verdicts against big corporations will result in lower prices for you or me, or make loads of innovative products or services available, once their providers are no longer afraid of lawsuits.

Indeed, looking at the Republican proposals from the perspective of Elm Street, rather than Wall Street, it's hard not to yawn. Nowhere in the Contract do Gingrich and his conservative think-tank allies deal with middle-class America's two biggest legal problems: that 150 million citizens can't afford the legal information they need in their day-to-day lives, and that our civil court system simply does not work to resolve the average person's disputes.

Take a look for yourself. Where does the Contract try to provide legal help for a single mother trying to get a restraining order against a violent ex-husband? Where does it make it easier for a family, trying to transfer a deceased parent's property to the kids, to avoid the cost and delay of probate? How does it help a divorced father petition a court to increase the time he can spend visiting his five-year-old daughter?

The fact that Professor Newt's pro big business proposals do almost nothing to help ordinary Americans doesn't mean that some aren't sensible. Nolo supports several similar proposals, including tight restrictions on punitive damages. And making the loser pay the winner's attorney fees makes sense in some situations--for example, if a plaintiff rejects a compromise settlement and a jury subsequently awards the plaintiff less.

These proposals are welcome because the Democratic Party, which has controlled Congress for so long, has regularly beat back all challenges to their tort lawyer friends' right to recover multi-million dollar verdicts. Personal injury lawyers have become as arrogant and inflexible in defending their right to milk the legal system as the National Rifle Association is when it comes to fighting restrictions on assault weapons.

But the fact that, given his opponents, some of Gingrich's business-friendly proposals for change look sensible isn't saying much. Our crippled legal system needs to be returned to its democratic roots, but no one in Washington--including both Newt and, for that matter, Bill--seems to have a clue about where to begin.

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The selected articles originally appeared in the Nolo News and are Copyright © Nolo Press 1996 and reproduced here with permission. If you find them of value, we encourage you to visit Nolo Press at their web site http://www.nolo.com. If you wish to post them on-line or otherwise distribute them, first read Nolo's copyright policy.

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