Dear Fellow Attorney,

On March 26, 1996, your future as a lawyer will be at stake! There will be two initiatives on the [California] ballot that will end the tort system as you know it. If passed, they will affect all tort cases and eliminate virtually all cases involving motor vehicles. They are the pure NO FAULT AUTO INSURANCE ACT and the LAWYER CONTINGENT FEE UMYTATION ACT.

… No one will be handling automobile cases if this passes! Even if neither you nor your firm handles such cases, the impact on all attorneys and consumers should be obvious.

… [By] drastically reducing the number of filings…[the contingent fee proposal] will effect [sic] everyone in the tort system!

We believe most attorneys in California view those measures as bad for consumers and all others involved in the Civil Justice system.

"All others": Those are the key words in the last sentence of the above excerpts, which come from a mass mailing by the state’s main association of plaintiffs lawyers, the Consumer Attorneys of California (CAOC), formerly the California Trial Lawyers Association.

This mailing has been used to solicit secret PAC contributions from large numbers of business lawyers who represent tort defendants. It is a blatant appeal to the mutual self-interest of lawyers in perpetuating the profits they reap by litigating against one another at their clients’ expense.

The most unusual and salient fact about the tort system in this country is that more than 60 cents of every dollar expended by defendants and insurers goes not to compensate injured plaintiffs, but to pay for transaction costs-led by both sides’ legal fees.

It’s not surprising that lawyers groups want to keep it that way. Nor that they are furiously raising and spending millions of dollars to bury all three of the intriguing tort reform initiatives that will be on the March 26 ballot in trend-setting California.

Still, one marvels at the shamelessness of the CAOC letter. Signed last year by CAOC president-elect (and now president) Mary Alexander and by Bruce Brusavich, her counterpart at the Consumer Attorneys Association of Los Angeles, it includes a helpful suggestion for any business lawyers who might worry about how it would look for them to give money to the plaintiffs lawyers’ PAC: "Any contribution that you make … of $99 or less will not be publicly reported."

This is not to suggest that all opponents of the three tort reform initiatives are motivated by greed, nor that all supporters are motivated by devotion to the public welfare.

But unlike some of the tort reform proposals being pushed by Republicans in Washington, D.C., and around the country, the California initiatives have the support of some veteran consumer activists, as well as the usual business interests. These consumer activists have come to share the spreading suspicion that a substantial portion of the tort litigation in this country primarily benefits lawyers at the expense of everyone else. And they see the California initiatives-as-deftly crafted to save consumers money and lower insurance premiums by cutting out legal waste, while leaving injured claimants no worse off, and in many cases, better off.

To be sure, most consumer activists and groups, including Ralph Nader and Consumers Union, scoff at these claims. Locked in their long-standing embrace with the plaintiffs bar, they passionately attack the California initiatives as sleazy schemes to fatten corporate profits by selling out injured victims. Such attacks gain from the ascetic and astute Nader a credibility that does not lie in the mouths of multimillionaire ambulance-chasers.

But the consumer advocates who have broken ranks with Nader have the better of the argument on the California no-fault and contingent-fee proposals.(The third initiative, which I’ll discuss in a future column, would adopt a loser-pays rule for legal fees in shareholder class actions and derivative suits.) They include Michael Johnson, once a policy analyst Nader-founded Public Citizen in Washington; Bill Zimmerman, a leader of Voter Revolt, which sponsored a 1988 ballot initiative curbing insurance premiums in California; and Andrew Tobias, a consumer advocate, financial writer, and insurance industry critic.

Another supporter is Lester Brickman, a law professor at Benjamin N. Cardozo School of Law in New York and a leading critic of the tort system, who was co-author of a widely acclaimed model proposal on which the California contingent-fee reform initiative is based. Brickman contends that a three initiatives "focus with laser-beam intensity on irrational and financial incentives for litigation." He also enthuses that "if these pass in California, they will be catapulted to the head of the tort reform agenda on both state and federal levels."

A look at the proposed no-fault and contingent-fee initiatives shows why they have attracted such support.

Proposition 200 would adopt the nation’s first pure no-fault system for compensating auto torts. Unlike existing, partial no-fault regimes, it would bar all personal injury litigation among motorists, with very limited exceptions. (A criminally convicted drunk driver could still be sued, for example.) Accident victims would collect compensation for economic losses and lost wages from their own insurance companies. Compensation for accident-based pain and suffering would be available only to those who chose to buy such coverage.

The main premises are that auto tort litigation is especially wasteful and inefficient as a compensation system because a greater share of every premium dollar in California goes to lawyers than to doctors, hospitals, and chiropractors combined, and because seriously injured accident victims get only a tiny fraction of their economic losses compensated through the tort system. (Most accidents in California are caused by uninsured motorists or people with the legal minimum of $15,000 in liability insurance.)

In addition, fault-based litigation has little, if any, deterrent effect on negligent driving. And the incentive to seek large pain-and-suffering awards-typically a multiple of medical expenses–has fomented billions of dollars in fraud and unnecessary medical visits, spurred less by plaintiffs’ medical needs than by the prospect of leveraging each dollar of medical expenses into several tort-award dollars.

According to a detailed analysis by the RAND Institute for Civil Justice, the no-fault initiative would save insurers so much in legal costs and pain-and-suffering awards that it would lower auto insurance premiums for most drivers by 20 percent to 36 percent, including 39 percent to 71 percent of the portion that covers injuries.

Proposition 202 would cap contingent fees in all tort cases at 15 percent of any settlement offer made by the defendant within 60 days of a claimant’s demand for compensation; if the claimant rejected the offer, the lawyer would remain free to charge whatever otherwise lawful percentage the claimant agreed to pay of that portion of any eventual recovery in excess of the original offer.

The premise of this proposal is that (as Brickman has extensively documented) many personal injury lawyers take advantage of their (typically unsophisticated) clients by charging the standard contingent fee of 33-percent to 50 percent, even in the many cases in which the defendant’s liability is clear, the risk of nonrecovery small, and a substantial settlement is likely to be obtained before the lawyer has done much work. Effective hourly rates range above $5,000 in some such cases. The proposal seeks to end such abuses.

The result, Brickman and other sponsors plausibly claim, would be to slash legal costs in ways that (unlike most tort reform proposals) would benefit many injured claimants, by providing defendants with new incentives to make prompt, reasonable settlement offers. At the same time, the proposal would leave ample incentives for contingent-fee lawyers to bring meritorious claims and to invest the time and energy necessary to litigate aggressively those cases in which only inadequate, lowball settlement offers are forthcoming.

Of course, no benefits come without costs and risks. Opponents stress, for example, that the no-fault proposal would bar you from suing a reckless driver even in the most egregious cases. (You could still seek criminal prosecution.) They also warn that the proposed limits on contingent fees would make it impossible for many injured plaintiffs to find lawyers who will press their claims.

I doubt that. But I can’t be confident that the proposed initiatives would do no harm. If the current system were working well, it would be foolish to risk messing it up- especially by so crude a process as the adoption of complex laws via ballot initiative. Ultimately, one’s willingness to experiment with reforms depends on one’s assessment of the status quo. I think it’s pretty bad-bad enough to warrant giving pure no-fault and carefully crafted contingent-fee restrictions a try.