Welcome to my “daily comment.” The ground rules Ceres and I have agreed to are simple. I can write whatever I want, ranging from a sentence to an epic. I can even say things like, “Don’t trade stocks yourself — no matter how cheap the commissions. For most people, it’s smarter to invest through no-load mutual funds.” Which it is (though it may be less fun).
Yesterday I described Prop 200, an almost “pure” no-fault initiative (you could only sue a driver if he’d been convicted of driving drunk when he hurt you) that will be on the March 26 California ballot. Prop 200 would save California drivers a fortune, at the same time as it greatly increased protection to those who are worst hurt, and automatically covered every child under 18, no matter what.
We turned in the requisite 2.2 million signatures to put Prop 200 and two other initiatives on the ballot. Here they are in three nutshells:
- PROP 200 – A pure no-fault auto insurance system that RAND estimates would save the average California driver 48% on the bodily injury coverages (all, that is, but theft and collision) . . . and yet would greatly increase the pay-out to those worst hurt. (Better protection at lower cost is possible because the current system spends more on lawyers than on medical care, and is driven by an incentive to pad and invent claims. No-fault eliminates that incentive.)
- PROP 201 – A “loser pays” provision in securities class-action “strike suits” of the type that have been plaguing Silicon Valley in particular. This gives a wrong-doer more incentive to settle (rather than rack up two sets of legal fees) and discourages extortionate nuisance suits. But there are safeguards. First, the judge can waive “loser pays” when he believes the plaintiff had legitimate grounds to bring suit even though he lost. Second, no one need join in the suit, and thus bear any risk, in order to collect his full share of any winnings. In other words, a couple of big institutions could be the “class” and bear the risk (that to a Fidelity, or a pension fund, would be minimal) . . . but if they won, all the little guys who’d been wronged would get their share of the proceeds.
- (This measure is aimed at the same problem that was just successfully addressed at the Federal level. Even Ted Kennedy voted to override the President’s last-minute veto — a veto that could have been avoided if just a little of the language had been changed. Our approach has no such language, and I like to think the President would approve, although of course he’d be nuts to get involved in California battle like this one.)
- PROP 202 – A cap of 15% on what a lawyer could take in situations where his initial demand letter resulted in a settlement offer within 60 days. A sort of usury law to protect the little guy against lawyers just as we have usury laws with lenders. If the client chose not to accept the early offer, then the lawyer could take 33% or more — whatever they agreed to — of whatever extra he was able to win. This actually gives the lawyer MORE incentive to pursue a claim aggressively, rather than just sit back and collect 33% of an inadequate settlement offer, as he might now . . . but allows the client to pocket at least 85% of any early settlement if they do decide to accept it. This initiative measure grew out of a proposal last year backed by Derek Bok and the late Erwin Griswold, both former Harvard Law School deans, Morris Abram, former president of Brandeis, and Norman Dorsen, former president of the ACLU, among others.
The group backing these three initiatives is called THE ALLIANCE TO REVITALIZE CALIFORNIA. I co-founded it and sit on the five-person board.
I’m a Democrat who made his money with a software program called Managing Your Money. The guy I recruited to be our chairman, Tom Proulx, is a Republican who made his money with my former competitor, Quicken, and who is now devoting his full time to winning these three initiatives.
Our supporters are widely bipartisan and include everyone from former Secretary of State George Shultz, Peter Ueberroth, and Governor Wilson to Roberta Achtenberg, Amfar Co-Chair Tom Stoddard, and Medical Education for South African Blacks co-founders Joy and Herb Kaiser. And on and on — Intel chairman Gordon Moore, software entrepreneur and liberal philanthropist Peter Norton, former Democratic congressman Chet Atkins (whom we’re hoping people will confuse for the singer) — about 80 in all so far.
We haven’t reached him yet, but because legal reform is often thought of as a Republican issue, we are fond of quoting George McGovern (September 8, 1995):
“America is in the midst of a new civil war, a war that threatens to undercut the civil basis of our society. The weapons of choice are not bullets and bayonets, but abusive lawsuits brought by an army of trial lawyers subverting our system of civil justice while enriching themselves.”
(If you have friends in California, could you cut and paste these comments into your e-mailer and broadcast them far and wide? The bottom line: Vote YES on Props 200, 201 and 202 on March 26!)
Tomorrow: The REIT/FedEx Hedge
Quote of the Day
[It would be splendid if someday] economists could manage to get themselves thought of as humble, competent people, on a level with dentists.~John Maynard Keynes
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