About fifteen years ago, Jodee Berry became part of legal history. Ms. Berry, a waitress at a Hooters restaurant in Panama City Beach, Florida, had just won a sales contest that had been offered by her manager, Jared Blair. Whoever sells the most drinks in the next month – Blair had announced – will receive a “brand new Toyota.” Well, Ms. Berry sold more beer than any of her colleagues, and on the first day of the next month, her boss blindfolded her, escorted her to the parking lot, and said “Congratulations! Take a look at your brand new Toyota!” Ms. Berry took the blindfold off and then saw a small cardboard box in front of her. She picked it up and found that it contained a child’s Star Wars toy – because her boss had given her a “brand new toy Yoda.”
This is America, and so Ms. Berry immediately quit her job and sued Hooters. And I think she had a half-decent case. She legitimately thought that the winner of the contest had been promised a new car, not a kid’s toy. (She ended up with a healthy settlement, presumably because Hooters’s lawyers predicted that a court would not share Jared Blair’s wacky sense of humor.)
The work I do often reminds me of Ms. Berry’s plight. When you monitor politicians for a living, as I do, you’ll find that it’s not unheard of for them to promise a brand-new Toyota — but deliver a different product. Here’s an example.
For the last couple of days, I’ve been writing about SJR 8, a major new tort reform proposal in Arkansas. Recently, an alternative tort reform proposal was filed – SJR 13 – but I was disappointed to see that it is actually a toy Yoda. It is fair to say that SJR 13 accomplishes almost nothing. I’m a little taken aback to see that some people see it as a serious tort reform proposal. I don’t see how they can.
SJR 13 has two features. Both consist of fake tort reform. But the reasons that both are only fake tort reform will require a bit of explanation.
Fake Tort Reform, Part 1: Fake Loser Pays
The first part of SJR 13 provides for an “Entitlement to reimbursement of reasonable attorney’s fees and litigation costs.” That sounds pretty good at first glance: A loser-pays reform – in which losing litigants have to pay some or all of the legal costs that they imposed on the winner of the case – would be a major step forward. But when you read a little farther, you can see that this measure is so restrictive as to be nearly pointless. Under SJR 13, the only time that the reimbursement would ever take place is if a lawyer makes an argument that is (1) not grounded in law or fact, (2) not warranted by existing law, or (3) made for an improper purpose.
I knew I had seen these requirements before somewhere. So I called up the Advance Arkansas Institute’s president, Dan Greenberg, and asked him if he recognized them.
Greenberg: These sound like Rule 11 standards.
Kilmer: What are those?
Greenberg: Rule 11 basically says: when an attorney signs a document, and the document says something really, really wrong, the court can sanction the attorney. So if an attorney signs a court document that, essentially, lies about the law or the facts, or is legally insupportable – or if you sign a motion that looks like it’s intended to harass another party or delay the action – then the court can punish the bad-apple attorney.
Greenberg: Well, the court could fine the bad-apple attorney, or rule that the document that the attorney filed had no legal effect.
Kilmer: Could the court order the bad-apple attorney to pay the fees and costs incurred by the other side?
Greenberg: Sure, that could happen.
Kilmer: How often do Arkansas courts punish attorneys for violating Rule 11?
Greenberg: Almost never. It’s very rare. Rule 11 is never an issue unless an attorney behaves very badly – refers to a fictitious case holding, for instance – and the court figures that out.
Kilmer: Let’s say that we prohibit Rule 11 behavior by writing the Rule 11 standards of conduct for attorneys into the state constitution: what effect would that have on attorney behavior?
Greenberg: Well, I guess I couldn’t say “absolutely none.” But probably none. Certainly, very little. Microscopically little. Because violating Rule 11 is already prohibited under the law, and it already triggers serious punishments for the attorney. What’s the point of prohibiting it for the second time?
Kilmer: Let’s say that the constitutional prohibition of Rule 11 behavior doesn’t just carry the possibility of loser-pays, as it currently does under Rule 11, but the violation of Rule 11 in the constitution carries the mandatory penalty of loser-pays. How would this change attorney behavior?
Greenberg: Not in the slightest, in my opinion. Remember, violating Rule 11 is behavior that is already punished under law, and a Rule 11 sanction is so terrible for a lawyer’s professional reputation that it’s highly unusual for courts to invoke it. So you’re talking about writing a penalty into law for the second time that will almost never be enforced anyway.
This raises an interesting question: how often do courts find Arkansas lawyers in violation of Rule 11? Because if there are lots of Rule 11 violations in Arkansas, you could argue that SJR 13 would lead to lots of losers paying the costs of winners’ legal fees – and that’s something of a policy advancement. If, on the other hand, there aren’t that many Rule 11 violations detected by courts, there won’t be much fee-shifting: if that’s true, this part of SJR 13 is mostly pointless.
How would we find out how often Arkansas courts detect Rule 11 violations? Well, what we could do (and what the crack research team at the Advance Arkansas Institute did) is search for every instance of both “Rule 11” and “sanctions” in reported cases on Westlaw over the last 15 years. Maybe there are more of them than we found – maybe there are lots of unreported, never-appealed Rule 11 cases in Arkansas. But probably not: a Rule 11 punishment is such a serious matter that an attorney is likely to appeal it, which would make it a reported case. So it should be possible to find most or all Rule 11 violations in the state on Westlaw.
So here’s what we found out: for the last 15 years in Arkansas (2002 onward), there were a total of 30 Rule 11 sanctions reported. In other words: the entire group of Arkansas lawyers received an average of two Rule 11 sanctions every year for the last 15 years. (I’m not saying that every lawyer in Arkansas received two Rule 11 sanctions; I’m saying that there were two lawyers in Arkansas that were sanctioned every year.) So what that means is: if current trends hold, you’d see about two more Rule 11 violations – and therefore about two more cases of fee-shifting every year – under SJR 13. Of course, I appreciate that past performance is not a guarantee of future results, but it’s a good starting point. And what the past shows is that (unless you think that two cases per year is a lot) the loser-pays provision of SJR 13 is just about pointless. No serious person would say that a marginal change to professional sanctions in two cases per year would have any real impact on lawyers’ behavior: SJR 13’s loser-pays provision will have no real effect on Arkansas’s civil justice system.
Fake Tort Reform, Part 2: Fake Punitive Damage Limits
SJR 13 also allows the legislature to limit punitive damages. Section 2, although it’s a little clumsily drafted, appears to allow the legislature to put a ceiling on the punitive damages multiplier. (Typically, punitive damages are assigned to punish wrongdoers; they are typically a multiple of the actual damages that are suffered by the victim.) But there’s a catch. SJR 13 says that the legislature could put a ceiling on punitive damages, but it also requires a floor: the ceiling can be no smaller than five times actual damages. How would this work? Once again, I called up Dan Greenberg to get his legal opinion on SJR 13’s proposed damage cap.
Kilmer: So what do you think about this? The other half of SJR 13 is a punitive damage cap that would give the legislature discretion to determine the maximum amount of punitive damages – as long as the legislature doesn’t set the cap any lower than five times actual damage. What’s the verdict on that?
Greenberg: That is genuinely pointless. It’s basically P.T. Barnum, there’s-a-sucker-born-every-minute territory. That five-times punitive-damage floor makes the phony fee-shifting measure we were talking about before look like a major change to the civil justice system in comparison.
Kilmer: Really? Why is that? What’s the problem with SJR 13’s punitive damage limit?
Greenberg: Well, it all goes back to a case that that United States Supreme Court decided about 14 years ago, State Farm vs. Campbell. In that case, the Supreme Court found that punitive damage awards that are four times the size of the actual damages are “close to the line of constitutional impropriety.”
Kilmer: Okay, but what does that mean?
Greenberg: That means that if you get much bigger than four times punitive damages, you’ve gone over the line into unconstitutionality. The Court basically thinks that once you start multiplying damages too much – when you go somewhere a little north of (but pretty close to) a four-times multiplier, then you’re not treating the defendant fairly. Once you produce punitive damages that are the result of factors that are a little bigger than four times, the Supreme Court will strike them down.
Kilmer: Okay, so does that mean that setting a floor of five times punitive damages in a constitutional amendment isn’t allowed?
Greenberg: Well, no, I wouldn’t put it that way. But it is reasonable to say that SJR 13’s floor is almost completely pointless. Look at it this way: suppose I gave you a gift of a bicycle and said: enjoy it, take it anywhere you want, but only as long as you can maintain a speed of 50 miles per hour on level ground.
Kilmer: That would be pointless, right? It wouldn’t make any sense for me to ride the bike. Because even Lance Armstrong couldn’t ride a bike at 50 miles per hour.
Greenberg: Right. That’s kind of what this limit is like. And you know what would be even more pointless? If some state government official said “I am concerned about bicycle safety. Let’s require every county to impose a bicycle speed limit. Each county can set the bicycle speed limit anywhere it wants, but under no circumstances can the bicycle speed limit be lower than 50 miles per hour.”
Kilmer: That would, indeed, be even more pointless.
Greenberg: Well, that’s the analogue of what SJR 13 does on punitive damages. It sets a limit that is significantly above a typical punitive damage multiplier, somewhere that is very close to crossing the line into illegality. By and large, although there are occasional exceptions, courts won’t even arrive as something as big as a five times punitive multiplier. Now, in fairness, this isn’t a perfect analogy. Because nobody knows exactly what punitive damage multiplier is unconstitutional. The Supreme Court is pretty vague about this stuff. We don’t know where the line is. But what we do know is that a four times multiplier is, as the Court says, “close to the line of constitutional impropriety.”
Kilmer: So are there legitimate punitive damage awards that are greater than five times punitive damages?
Greenberg: Sure there are. Just like there are four-leaf clovers. There just aren’t many of them. Look, I’m not saying that this punitive damage cap would never have any effect. But the fact is that punitive damages awards with more than a quintuple multiplier occur so rarely in the post-State Farm era that it’s pointless to regulate them in the fashion that SJR 13 does.
I know that all sounds kind of general and theoretical. Here’s what all of that means: the punitive damage limits in SJR 13 will have no real effect on Arkansas’s judicial system.
Conclusion: SJR 13’s Two Fake Tort Reforms
Here’s the bottom line: SJR 13 contains two fake tort reforms (and nothing else). First, it would write loser-pays into law for approximately two lawsuits every year. No reasonable person could argue that shifting fees for two lawsuits every year has any real impact on Arkansas’s legal system. Second, it would give the legislature the power to limit punitive damages, but it would only allow the legislature to set multiplier limits that are bigger than the ones that are “close to the line of impropriety,” according to the U.S. Supreme Court. In other words, SJR 13 wouldn’t allow any damage limits at all unless those limits are so high that they wouldn’t have any impact.
Compare this to SJR 8, a tort reform proposal sponsored by about 70 legislators which contains real contingency fee reforms, real punitive damage limits, real non-economic damage limits, and (perhaps most importantly) a return to the balance of powers that the Arkansas state government possessed a few years ago, when the legislature was able to write real legal reforms. If the people of Arkansas return that power to the legislature, the Arkansas General Assembly will be able to improve the state’s legal system by producing things like real class-action reforms and real loser-pays reforms. In short: SJR 8 is the real deal, but SJR 13 is just a toy Yoda.