Score one for the good guys.

THE BACKGROUND

Regular readers of this comment will know that Californians got to vote on three ballot initiatives last year — Props 200, 201 and 202 — that came down hard on lawyers. “The tough 200’s,” we called them. “The terrible 200’s,” the lawyers called them.

The goal, of course, was not to harm the lawyers, any more than the goal of Automatic Teller Machines was to harm human tellers. The goal was to make life better for NON-lawyers. Not surprisingly, the lawyers defeated all three.

  • On Prop 200, which RAND estimated would have cut auto insurance premiums dramatically, the lawyers ran millions of dollars of advertising claiming that rates would go UP 40%. They had to know this was a lie, but with it they succeeded in hanging on to the $2.5 billion a year that they take from the California auto insurance system.
  • On Prop 201, which would have done at the state level what Congress had done federally — discourage extortionate class-action securities suits while leaving the door open for those with substantial grounding — they lied and said it would prevent defrauded shareholders from suing. They ran ads morphing Seagate Technology founder and CEO Alan Shugart back and forth with Charles Keating, convicted felon — never mentioning that anyone who had bought Shugart’s stock around the time of his alleged transgression would, by the time of the ads, have about tripled his money. A few law firms that specialize in these suits thereby succeeded in hanging on to the several tens of millions of dollars a year they make from these suits.
  • On Prop 202, which would have limited a lawyer’s contingency fee to 15% when an acceptable settlement offer was made within 60 days of the initial demand letter, they ran ads claiming that lawyers would cease to work on contingency if Prop 202 passed — they’d all quit, presumably, and become gym teachers.

It was not a great day for democracy, because — as usual — the electorate was not presented the facts objectively and given the opportunity to make an intelligent choice.

The lawyers were working with a particularly maddening formula. First you do something really rotten; then you point to that rotten thing itself as proof you’re right. Not very elegant the way I’ve phrased it, but highly effective the way they did it. To wit:

  • First you sue Al Shugart, co-founder of Seagate Technology, three times for alleged insider trading (the first case was settled for pennies on the dollar to get rid of it, the second was thrown out of court after eating up $3 million in legal fees, the third is still pending); then you blanket the airwaves with commercials implying he’s a stock swindler because “he’s been sued three times for insider trading.” You morph his face back and forth with Charles Keating, the notorious convicted S&L felon, never mentioning that investors in Seagate — unlike investors in Lincoln Savings and Loan — have made, not lost, a pile of money.
  • First you sabotage the early 1970s drive for no-fault auto insurance by giving states “no-fault” in name only. (In states like Massachusetts, there’s all the suing and fraud there is in California. You just need to chalk up $2,000 in medical bills to be eligible to sue — which gives some people an incentive to rack up $2,000 in unnecessary medical bills. The year the threshold jumped from $500 to $2,000, the average number of treatments following a car crash jumped from 13 to 30.) Then, 25 years later when the next generation makes another run at it, you simply point to “no-fault” states like Massachusetts and Connecticut and say, “See? No-fault doesn’t save money. It’s a disaster. An old idea that hasn’t worked.”

First sabotage it, then point to the wreckage to prove it doesn’t work. (In Michigan, the one state that comes fairly close to the true no-fault that Prop 200 would have provided in California, people actually do pay substantially less for auto insurance than in California, while enjoying VASTLY better protection if they’re badly injured.)

THE FOREGROUND

That the lawyers played dirty was plain. Getting them to admit this, even after the fact, is naturally next to impossible — but, as it happens, not entirely so.

Al Shugart sued the trial lawyers for libel. I had all but forgotten about this until last week, when I heard the news: The case had been settled. The California trial lawyers have agreed to place full-page ads of apology and to contribute $350,000 to charities of Shugart’s choice.

Anyone else might have been able to weasel and say, “We just couldn’t afford to fight this suit.” But 5,000 trial lawyers? So, clearly, they were admitting to having used deceptive tactics to defeat Prop 201. In my view, they did the same on Prop 200, defrauding California consumers out of billions of dollars a year, to their own benefit.

 

 

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