Rand economist Stephen Carroll believes the high
court's 1988 Moradi-Shalal decision, in large part, triggered the
drop. The decision took away the ability to sue for bad faith in
third-party liability claims. "I think it's a big part of the
story," said Carroll, who just co-authored a soon-to-be-released
study examining the effects of third-party, bad faith doctrines on
auto insurance costs and compensation.
One of the most striking downward shifts has
occurred in personal injury litigation involving motor vehicles. The
number of such suits seeking damages exceeding $25,000 plunged from
more than 91,000 filings in fiscal year 1988-1989 to just over 42,000
a decade later, according to Judicial Council data. Last year, just
under 46,000 such suits were filed, fewer than in any year throughout
the 1980s and most of the 1990s.
In 1979, the California Supreme Court's Royal
Globe decision opened the door to third-party, bad faith claims. The
availability of a third-party, bad faith cause of action created
pressure on insurance companies to settle legitimate claims that might
otherwise have been denied, Carroll said. But, he added, it also led
insurance companies to settle non-meritorious claims rather than run
the risk of facing costly punitive damages for bad faith.
The Royal Globe decision provided attorneys with
a "big club," Carroll said. And it led to a "substantial
run-up" in personal injury lawsuits, he said, as part of the process
in establishing bad faith. With the Moradi-Shalal decision in 1988,
however, the tide turned, he said.
Morrow, vice president of legislation for the Civil Justice
Association of California (CJAC), also attributes the downturn to some
tort reform, such as the Medical Injury Compensation Reform Act (MICRA).
With MICRA's limitation on fees and caps on non-economic damages,
she said attorneys are less willing to take on such suits.
In addition, Morrow said trial attorneys appear
to be rejecting the smaller cases for what she calls the "home run" cases. She said she's encouraged by the
trend toward fewer lawsuits but adds, "We still have some concern
regarding soaring jury awards and settlements."
Morrow points to a CJAC-supported study that
recently found there was an increase in punitive awards in California
courts over the last decade. The study, conducted by the McGeorge
School of Law Capital Center for Government Law & Policy, also
found that California juries awarded close to $6.4 billion in punitive
damages during the 1990s.
And recent studies conducted by the
Pennsylvania-based Jury Verdict Research firm reflect an upward trend
nationally. While median compensatory damages remained relatively flat
nationwide from 1993 to 1999 - and even declined in California in
1999 - median punitive damage awards nearly tripled and median
settlements quintupled, according to Jury Verdict Research findings.
Bruce Broillet, president of Consumer Attorneys of California,
suggests that such awards occur because corporations have become such
large conglomerates. "When a jury determines that the corporation
has put profits ahead of safety, the jury knows that it has to make a
meaningful award in order to get the corporation's attention,"
said Broillet, of Greene, Broillet, Taylor, Wheeler & Panish in
Broillet attributes the decline in personal
injury lawsuits to litigation-driven improvements in safety. That such
suits have fallen in number is significant, he said, because it
"reflects the fact that not as many people are getting injured, and
that means that lawsuits are leading to safer products and more
Broillet points to safer cars, roadways and
workplace machinery. And while emphasizing that "the job is not yet
done," Broillet suggests that, "generally speaking, lawsuits have
motivated the development of a safer California."
California Highway Patrol (CHP) statistics show
that traffic accidents, as well as injuries, have decreased by 20
percent in the last decade. And while the CHP logged two fatalities
for every 100 million miles driven in 1990, that number dropped to
1.19 in 1999.
Others speculate that the implementation of the
state's Trial Court Delay Reduction Act might be influencing
attorneys' filing decisions. The data, however, shows no difference
between the filing trends in counties that participated in an early
pilot program and those that did not.
According to Judicial Council statistics, nearly
81,000 personal injury suits for damages exceeding $25,000 were filed
in fiscal year 1980-1981. The number of filings crept up to roughly
137,000 in the late 1980s and then fell sharply; last year, the number
dipped back up slightly to 71,000 filings.
During the same period, the number of other
"general civil unlimited" complaints - which include business
torts, contracts and employment litigation, as well as judicial review
and enforcement of judgment cases - has followed a wave-like
pattern. Last year, such filings showed an increase.
The number of civil matters involving $25,000 or
less, however, has dropped steadily from some 636,000 cases in fiscal
year 1990-1991 to 471,000 last year. And the number of small claims
cases has declined from 515,000 cases to roughly 321,000.
Some speculate that the economy may be a factor.
Some point to litigation costs. And some believe that changing social
attitudes also are at work.
Jamie Court, advocacy director of the Santa
Monica-based Foundation for Taxpayer & Consumer Rights, suggests
that Americans have bought into a corporation-driven "myth" that
there is a "litigation explosion that is going to destroy
society." Says Court: "People are far more hesitant to exercise
their own legal rights to hold a corporation accountable because of
the stigma, the societal stigma, associated with it."
Many suggest that ADR, too, has influenced the
decline. Waddington, a JAMS "neutral" for nearly a decade, said he
sees ADR as a "significant factor."
If the expanding caseload of the American
Arbitration Association (AAA) is any indication, ADR is indeed
booming. From 1980 to 1990, the ADR provider's national caseload
jumped from some 40,500 cases to roughly 60,000. In the last decade,
however, its workload has tripled to more than 198,000 cases handled
San Mateo Superior Court Judge Quentin Kopp,
however, raises concerns about the decline in civil action filings and
trials and what he sees as the judicial establishment's
participation in shifting civil litigation to arbitration.
not encouraging more trials as such," the former state senator said.
"I'm suggesting that the judicial establishment disengage itself
from fostering binding arbitration in circumstances (in) which often
one party has economic advantage over another party."
Rob Waring, legislative counsel for the
California Judges Association, also believes that ADR is decreasing
civil filings as well as post-filing litigation. "One of the
purposes of it was to impact the system," he said. "In an era of
limited resources, it just makes sense."
Initially, he says, the judiciary was somewhat
reluctant to endorse ADR. Judges wanted to make sure, he said, that
there wasn't going to be "wholesale abdication" of peoples'
rights. "The concern was that if you privatize this, where are the
controls?" he said.
But over time, Waring said the system has shown
that it does have an impact on limited court resources and can be done
in a way that preserves people rights. "We're continuing to make
efforts to perfect the system," he said.
Waring concedes that judges may sometimes
"poke" litigants a little toward arbitration. But judges - at
the direction of policymakers - have had to find ways of unclogging
a congested court system that is competing with the public's demand
for speedy criminal trials, he said.
When it comes to the decline in personal injury
filings, UCLA School of Law professor Stephen Yeazell has his own
hypothesis, and it has little to do with ADR, tort reform or changing
social attitudes. Yeazell speculates that the decline is simply part
of a long-term trend in which the plaintiffs' personal injury bar
has become more selective.
Such attorneys are "better capitalized
financially and intellectually" than they were some 30 years ago,
Yeazell says. He depicts them as more likely to concentrate on those
cases that are strong on the merits and that have high damages
associated with them.
Greater diversification also plays into
Yeazell's theory. He has some data suggesting that small firms are
getting larger and, therefore, more able to handle a diverse caseload.
"It's like a stock portfolio," he said.
"You have some ho-hum cases that will pretty reliably produce a
return." And then "you can take the home run case."
Rising punitive damage awards also fit into his
theory. So does the decline in smaller cases. "The $25,000 claim is
not a claim that is worth the time of a well-capitalized expert
lawyer," he said.
What is in store for the future? The selectivity
might continue, Yeazell says. Or, another possibility would be
"greater capitalization and diversification," which would enable
firms to start taking cases that don't seem worthwhile now but, with
a little more investment, would pay off.
"I think that you could tell a lot of different
stories," Yeazell said. "I don't know how it's going to go."