Saturday, September 19, 2009
Following up on Tony Sebok's post yesterday, we now have some more details on President Obama's "demonstration projects" on tort reform. Specifically, Secretary of Health and Human Services Kathleen Sebelius announced $25 million in grants for states "to try out new patient safety and medical liability models."
Grants are going to be available for the development, implementation, and evaluation of models that do four things: put patient safety first and work to reduce preventable injuries; foster better communication between doctors and their patients; ensure that patients are compensated in a fair and timely manner for medical injuries, while reducing the incidence of frivolous lawsuits; and finally, reduce liability premiums.
. . . .
Within 30 days, we'll post an official funding opportunity announcement on grants.gov. After that, potential grantees will have 60 days to apply for two different kinds of grants -- one-year planning grants of up to $300,000 that will help states and localities and health systems develop and conceptualize new patient safety and medical liability models; and demonstration grants for up to three years and $3 million that will help implementation of projects that are ready to go.
Friday, September 18, 2009
As promised, I want to explore the debate over tort reform from a systematic perspective. The President’s embrace of tort reform in medical malpractice—tepid as it may be—shows that the issue has moved to the mainstream.
The significance of the President’s endorsement of “demonstration projects in individual states” that had been first proposed during the Bush Administration is not because the proposals are so radical. In fact, if all the President intends to support are, for example, pilot projects establishing some “health courts” in a limited number of states, it is not clear why these reforms could not have been adopted by individual states without any help from the federal government. (Kaiser Permanente has already secured a much more radical reform simply by forcing all of its insured to waive the right to sue and to agree to binding arbitration).
The significance is rhetorical, and in politics, rhetoric counts for a lot. The first Democratic president who was willing to entertain tort reform on a national level was Bill Clinton. His administration championed a Y2K immunity bill that would have limited the liability of computer and software companies sued if it turned out that the feared “Y2K bug” destroyed data, shut down equipment, etc., when the clocks turned to midnight on New Year’s Eve—a tort nightmare that never happened. But Clinton’s support for immunity for the high-tech industry could be explained as a product of pure electoral politics—Silicon Valley formed a significant base of support for the “New Democratic” wing of the party.
Obama’s support for tort reform might be equally cynical—after all, he may simply be willing to throw the American Alliance of Justice under a bus to get a healthcare reform bill passed. But I suspect that the President’s willingness to entertain tort reform is not based on pure cynicism. It is worth remembering that Obama, when he was at the
Sunstein’s credentials as a liberal are unassailable, in my opinion. His classic article, "Lochner's Legacy," reflects a full and robust defense of the administrative state’s power—even obligation—to promote the specific values in a liberal society. The question is which values should be promoted?
Sunstein probably would be tolerant of a wide range of values, but he is not shy about expressing his preferences. When it comes to civil litigation, he believes that private litigation should promote social welfare. In this he joins an honorable tradition of progressive welfare maximizers such as Guido Calabresi and Steve Sugarman. What makes Sunstein different from most progressive welfare maximizers is that he has put some effort—and some scientific rigor—into his critique of the current tort system.
The best example of Sunstein’s approach to tort law, for example, is his treatment of punitive damages. In a Yale article co-authored with Daniel Kahneman and David Schkade, and then later in a book co-authored with a number of scholars, Sunstein made the argument that punitive damages should be radically restricted and reformed.
The basis of the argument made by Sunstein was that there was positive evidence—gathered by him and his co-authors—that lay jurors could not produce punitive damages judgments that would promote rational deterrence among future defendants. The mock-jury studies organized by Sunstein and his co-authors (and paid for, it would later turn out—as noted by the Supreme Court—by Exxon) showed that jurors probably could not figure the right level of penalty to deter rational wrongdoers to save their lives. In some cases, mock jurors irrationally underpunished actors who needed to be deterred, where in other cases the mock jurors placed irrationally high penalties on actors who were simply trying to apply the Hand Test.
From these results, Sunstein and his co-authors concluded that the practice of awarding punitive damages in tort litigation was utterly unconnected to the goals of welfare maximization. They therefore further concluded that there was no reason to defer to the historic practice of allowing juries to award punitive damages (other than quaint artifacts like the Seventh Amendment). The practice of letting juries award punitive damages was an empty ornament affixed to the tort system. Sunstein and his allies were like the Bauhaus school of architecture who looked at
Sunstein’s discovery that lay people are bad at promoting efficient deterrence would surprise and disturb only those who thought that it was the primary goal of tort law to promote social welfare. When I read Sunstein’s results, I did not think they were incorrect as a matter of fact, but I did think they were irrelevant as a matter of tort theory. Juries may be bad at determining the right penalty to deter rational wrongdoers. In fact, I agree with Sunstein that a committee of Ph.Ds. in penology could do a better job. But even if they are bad at law and economics, lay jurors might still be good at figuring out the right response, from the perspective of corrective justice, to a wrongdoer’s action, whether that act is intentional or negligent. And that, traditionally, is all we have ever asked lay jurors to do.
Of course, Sunstein’s point of view would lead a policy-maker to treat the tort system as nothing more than a mechanism for incentivizing rational actors to act safely or in ways that promote welfare. If one suspected that the medical malpractice system was like the punitive damages system—that is, utterly and radically disconnected from the task of rationally incentivizing action—then it would be easy to trade it away for other political goals, no matter how speculative. It would be like a modern architect tearing down an ornate molding to improve the wiring for some lights.
And that, in my opinion, explains why President Obama is so willing to entertain tort reform in the context of his healthcare bill. Given how little I suspect the President and his inner circle value tort law as a system of corrective justice, I would not be surprised if they would be willing to trade the right to sue in tort law for other policy goals in the future.
Professor of Law
Benjamin N. Cardozo School of Law
Thursday, September 17, 2009
Monday's Guest Blogger is Mike Rustad. Rustad is currently the Hugh C. Culverhouse Visiting Chair at Stetson Law School. He is also the the Thomas F. Lambert Jr. Professor of Law and co-director of the Intellectual Property Law Concentration at Suffolk University Law School. He teaches Torts, Commercial Transactions, Secured Transactions and Internet Law.
Professor Rustad, originally trained as a sociologist, is a leading academic and business lawyer whose numerous law review articles and book chapters have been cited by the U.S. Supreme Court and many state supreme courts and federal courts. He clerked for the late Judge William E. Doyle of the 10th Circuit U.S. Court of Appeals in Denver, Colorado. Prior to becoming a law professor, he was an associate with the Boston law firm of Foley, Hoag. Professor Rustad has testified before both Houses of Congress and has been interviewed by NBC Dateline, The Economist, The Wall Street Journal, The New York Times, ABA Magazineand many other national publications. He has authored or co-authored three amicus briefs before the U.S. Supreme Court on the constitutionality of punitive damages.
Professor Rustad’s most recent books include: Internet Law in a Nutshell (Westlaw 2009); Understanding Sales, Leases, and Licenses in a Global Perspective (Carolina Academic Press 2008); Tort Law: Cases, Problems, Perspectives (Lexis/Nexis, 2008) (with Thomas Galligan et. al.); Everyday Law for Consumers (Paradigm Publishers, 2008) and E-Business Legal Handbook (Aspen Law & Business, 2003).
He is an elected member of the American Law Institute and belongs to the Member Consultative Groups of the Restatement of the Law (Third) Torts and Principles of Software Contracts. He was elected to the Executive Committee of the American Association of Law Schools Section on Torts and Compensation Systems. In 2009-10, he was elected secretary of the AALS torts section. He has also served as a task force leader for the ABA Business Law Section on Information Licensing.
Wednesday, September 16, 2009
Theodore Eisenberg (Cornell) has posted to SSRN U.S. Chamber of Commerce Liability Survey: Inaccurate, Unfair, and Bad for Business. Here is the abstract:
The U.S. Chamber of Commerce uses its Survey of State Liability to criticize judiciaries and seek legal change but no detailed evaluation of the survey’s quality exists. This article presents evidence that the survey is substantively inaccurate and methodologically flawed. It incorrectly characterizes state law; respondents provide less than 10% correct answers for objectively verifiable responses. It is internally inconsistent; a state threatened with judicial hellhole status ranked first in the survey while venues not on the list ranked lower. The absence of correlation between survey rankings and observable activity suggests that other factors drive the rankings. Two factors may help explain them. First, persistent low ranking of Gulf Coast states indicates that corporate counsel cannot shed hostility to states that were prominent in asbestos and tobacco litigation, notwithstanding changes in state laws. Second, low rankings of populous states suggest respondents fail to distinguish between rates of events and the absolute number of events. Adverse events in large states may occur more often but not necessarily at higher rates than in small states. The Chamber’s uses of the survey fail to account for the sample design, fail to account for the same respondent rating multiple states, fail to account for industry effects, and fail to distinguish among respondents based on their knowledge of a state. The survey may discourage investment in the U.S. and corporate risk managers’ views suggest that the survey promotes corporate behavior that needlessly endangers the public.
Yesterday the Georgia Supreme Court heard arguments in a case challenging the 2005 law imposing a $350,000 cap on non-economic damages in medical malpractice cases. The trial judge ruled the caps unconstitutional. Coverage is here: Atlanta Journal Constitution, Atlanta Business Chronicle.
Tuesday, September 15, 2009
However, I have not found any stories confirming that the trial did, in fact, begin yesterday, and GSK has settled other Paxil-related cases. This trial is the first of several Paxil birth defect suits scheduled in the Philadelphia Court of Common Pleas for this fall.
UPDATE: From the Bloomberg link in the comments, it appears that jury selection did take place yesterday in Philadelphia, and opening arguments will be held today.
The New York Times reports that, on Friday, a federal judge in New York declared a mistrial in the first Fosamax trial to reach a jury. A copy of the plaintiff's motion for mistrial(pdf) is also available from the NYT.
Monday, September 14, 2009
This is a good week to be guest-blogging at TortsProf. President Obama’s speech last week in defense of healthcare reform won the longest and most sustained applause from the Republican side of the aisle when he mentioned tort reform. Some commentators, such as Timothy Noah at Slate, have suggested that a cap of $250,000 on pain and suffering damages would be a small price to pay for meaningful reform.
Noah is an example of a certain kind of liberal—one who views tort litigation as an instrument for the achievement of certain social ends, but not as a unique instrument, or one that is worth defending for its own sake. In this way, Noah’s cavalier attitude is not very different from Obama’s own prescription to liberals about how to treat the idea of “single payer” insurance schemes: “only a means to [an] end”—namely universal coverage. I will call this the “instrumentalist position,” a term I have borrowed from my co-authors John Goldberg and Ben Zipursky.
I will be writing this week about the pros and cons of this position. We can analyze the instrumentalist position from two different perspectives. First, we might ask whether we will ever have enough information to draw the conclusion that medical malpractice law currently instantiated by the tort system—which is some mixture of strict liability and negligence—is a net drag on the other social goals we have (such as cost and safety). Some defenders of the medical malpractice system take the position that litigation over adverse events happens so rarely that the effect of the medical malpractice system on the healthcare system is negligible. That is not much of a defense, much less an endorsement, of one of the most criticized parts of the tort system.
Second, we might want to ask whether, if we were convinced that we would never be able to gather concrete and reliable aggregate data on the effect of the medical malpractice, we would be able to make decisions about its optimal shape nevertheless. That is, do we have to wait until we have “enough” data to decide whether to accept or reject reforms? The tort reformer might complain that their critics’ constant refrain that we lack data misses the point—that the demand that we wait for data is just another way of saying, as in Waiting For Godot, that we should do nothing forever. The defender of the tort system might argue, with equal vigor, that the demand that medical malpractice law prove that it does not create costs in terms of health care delivery misses the point, since there are other values at stake which justify the continued use of tort litigation, which is admittedly expensive and error-prone, other than its capacity to contribute to welfare maximization.
These are some of the questions which I will raise over the next week. Before I start with these questions, however, I would like to invite the readers of this blog to answer the following question: what, if anything, will Obama’s healthcare reform do with the problem of ERISA preemption?
As any teacher of insurance law knows, ERISA—the Employee Retirement Income Security Act of 1974 (29 U.S.C. § 1001 et seq.)—has been interpreted by the Supreme Court to provide complete preemption of all state contract and tort remedies relating to the interpretation of employer-provided health insurance plans. These plans, of course, sit exactly at the center of the current debate over healthcare reform. In his speech last week, President Obama promised “[a]s soon as I sign this bill, it will be against the law for insurance companies to drop your coverage when you get sick or water it down when you need it the most.”
This is a wonderful claim, except that the federal government, through ERISA, preempted the state law remedies that would have allowed disappointed policyholders who got their coverage through their employers to sue when companies “drop[ped their] coverage” when they got sick or “water[ed] it down” when they needed it the most. To get a sense of how much damage the federal government has already done, one only has to read the angry pleas to Congress to remove this preemption from judges like Federal District Court Judge William Young in Andrews-Clarke v. Travelers Ins. Co., 984 F. Supp. 49, 50 (D. Mass. 1997) who wrote, “ERISA has evolved into a shield of immunity that protects health insurers, utilization review providers, and other managed care entities from potential liability for the consequences of their wrongful denial of health benefits.”
One simple reform to the healthcare system which would be simple, budget-neutral and actually conservative would be to repeal the part of ERISA that immunizes health insurance providers from state common law actions in tort and contract. I honestly do not know whether the plans being considered by the Congress would provide this repeal, or whether they simply maintain the federal preemption but provide for federal remedies with more teeth than the current system. The current federal remedies—reimbursement of out-of-pocket expenses by a victorious beneficiary or injunctive relief—are useless for most people, and certainly lack the deterrent effect of state tort and even contract remedies.
If anyone knows whether Obamacare will finally get rid of ERISA preemption, please let me know.
Professor of Law
Benjamin N. Cardozo School of Law