Philly’s Complex Litigation Center is profit center, says reformer

By Michael P. Tremoglie | Nov 10, 2011

In New York, they call it the Bronx Jury Effect.

Here, it’s called the South Philadelphia Jury Effect, which looks something like a wealth redistribution scheme, according to a legal observer.

“Philadelphia’s courts have been bad for years,” said James Copland, Director of the Manhattan Institute’s Center for Legal Reform (CLR).

Copland said the effect is a net result of juries that will award exorbitant amounts to plaintiffs who are suing anyone – such as doctors or large corporations – they perceive as being able to pay and that they believe should pay out large amounts.

Empirical data exists that indicates that juries in venues where there is high unemployment and poverty rates are more likely to award settlements that are costlier to defendants, Copland said.

“According to the data, during the 1990s, I think it was, there was a disproportionate share of high dollar litigation occurring in Philadelphia,” he said. “One effect was seen in medical malpractice practice cases. Maternity wards in South Philadelphia were closing because of the lawsuits.”

But Philadelphia, in addition to having the jury pool “effect” also is an anathema to defendants for other reasons, Copland said. One reason is that it uses procedural innovations such as ‘reverse bifurcation,’ a process whereby trials are divided into phases.

In essence, damages are determined in the first phase of trial. After the damages phase, the trial is suspended while the litigants try to reach a settlement. If no settlement is reached, trial resumes on liability questions. Reverse bifurcation trials are most commonly applied in asbestos cases.

Study Shows Reverse Bifurcation Favors Plaintiffs

Professor Michelle J. White of the University of California, San Diego conducted a study of asbestos litigation which was published in the Journal of Legal Studies in 2006.

She said reverse bifurcation was developed specifically for asbestos trials and that this procedural innovation favors plaintiffs.

“I did a national study that indicates reverse bifurcation tends to favor the plaintiff because it does greatly increase the probability the plaintiffs winning the case and it increases the award,” said White. “Some of the information is eliminated in asbestos trials where there is reverse bifurcation. Liability information favors the defendants. The damage information favors the plaintiffs.”

If defendants are going to win at all they must be able to present liability evidence, White suggested. But in reverse bifurcation this possibility is eliminated to a certain degree.

“My research found that plaintiffs were 27 percent more likely to win a reverse bifurcated trial,” said White. “The damage awards (were) almost one million dollars more.”

White also is a visiting professor at Cheung Kong Graduate School of Business, Beijing, and a research associate with the National Bureau of Economic Research.

She said that bifurcation influences the results of trials by eliminating some of the evidence that juries would otherwise consider in making their damage decisions.

Evidence presented and examined regarding damages often supports plaintiffs, she said. Yet, evidence concerning liability often favors defendants because plaintiffs are unable to prove that they were exposed to the particular type of asbestos that was contained in defendants’ asbestos products.

According to White, “If the jury had both types of evidence, then it might decide that a plaintiff’s damage is, say, $500,000, but award only $250,000 because of doubt over whether the defendant should be liable.”

White states in her study that, “Although juries might compensate for higher damage awards by finding defendants not liable more frequently in phase two, this will not be observed if the parties settle following phase one. This suggests that bifurcated trials will have higher damage awards than non-bifurcated trials.”

Philadelphia a Favorite Venue

A study by Joshua D. Wright, a law and economics professor at George Mason University School of Law in Virginia, states that “systemic biases” in Philadelphia’s civil courts attract plaintiffs with little or no connection to the city. The result, according to the study, is “disproportionate litigation and verdicts relative to other courts.”

Wright’s study was released by the International Center for Law & Economics.

CLR’s Copland agrees. If Philadelphia’s court can get cases moving more quickly, plaintiffs’ lawyers win because they don’t have to spend much time on a case that will result in high dollar settlements, he said. So, they choose to file in Philadelphia. Adding a particular defendant in Philadelphia to defeat complete diversity is common, Copland said.

He also said the plaintiffs’ bar knows which jurisdictions handles cases faster. And since Philadelphia is moving cases through faster, it has been experiencing more out-of-state cases.

But, Copland also sees another benefit to this for Philadelphia’s court system. Pennsylvania law permits local courts to keep their fees, a somewhat unique practice. Nonetheless, it gives Pennsylvania’s courts a profit motive.

"The more cases they can attract the more fees the Philly court collects,” Copland said. “This then becomes a profit center. So, for a court that is facing budget cuts this is very attractive.”

Venue Shopping Increases Plaintiffs’ Awards

Along the timeline of filing a lawsuit, White postulates that choices are made at two points in time. First, plaintiffs’ lawyers choose where to file claims. Later, judges choose whether to use procedural innovations.

Indeed, White’s research also indicates that moving trials through quickly, and procedural innovations like reverse bifurcation, attract potential litigants.

White wrote in her 2006 report, “An important aspect of asbestos litigation is plaintiffs’ lawyers’ right to choose where to litigate their claims. Most asbestos claims are filed in state courts and plaintiffs’ lawyers concentrate claims in states that have favorable legal rules and in jurisdictions within those states that have favorable judges and juries. Mississippi is a favored location because its liberal joinder rules allow asbestos claims from all over the country to be litigated there….

“Plaintiffs’ lawyers file a single case that involves a Mississippi resident suing an out-of-state defendant and then join thousands of out-of-state claims to the original case.

“Mississippi and several other states are also favored because they have no limits on the size of punitive damage awards. Not surprisingly, Mississippi is reported to have 20 percent of all asbestos claims. Other favored locations for asbestos litigation are West Virginia, Madison Co., Illinois, and Houston, Texas.”

Philadelphia has not been shy about its willingness to attract business from the plaintiff bar. According to the American Tort Reform Association (ATRA), “In a March 2009 interview with the Legal Intelligencer, (Common Pleas President Judge Pamela Pryor) Dembe reportedly said that the court’s budgetary woes could be eased by making the CLC even more attractive to attorneys, so we’re taking away business from other courts.”

Last year, ATRA dubbed the Philadelphia courts a “Judicial Hellhole.”

According to White, judges also have enormous influence over asbestos litigation. Judges decide when to schedule a particular trial, whether to use the procedural innovations, whether to admit particular types of evidence at trial, and (in some states) whether to instruct the jury to consider awarding punitive as well as compensatory damages. Some judges also encourage the parties to negotiate mass settlements and may become personally involved in the negotiations.

“Going to trial in three particularly favorable jurisdictions increases plaintiffs’ expected return by $1.7 to $2.6 million, compared to states with few asbestos trials, and that use of the three procedural innovations increase their expected return by $900,000 to $2.3 million,” White said.

Settlements Favored Over Trials

Another factor that makes Philadelphia’s Complex Litigation Center attractive to plaintiffs’ attorneys is that speed sells in the world of asbestos litigation. As Copland pointed out, the faster a trial, the less time is spent and the more trials are pushed through. This works to the benefit of the trial lawyers and to judges. Plus, Philadelphia has the added benefit of retaining court fees.

As White’s study points out, “the asbestos plaintiffs’ bar is a concentrated industry, with a small number of firms each representing thousands of plaintiffs. Law firms recruit plaintiffs by advertising widely.”

White’s research indicates that since plaintiffs’ lawyers are paid on a contingency fee basis (she said on an average of 33 percent to 40 percent of any settlement or damage award) they greatly favor settlements over trials. Trials are lengthy and contingency fees do not compensate adequately for them.

Therefore, a routine tactic in asbestos cases is “to file several thousand asbestos claims in the same court, combining a few plaintiffs who have mesothelioma or other cancers and a large mass of plaintiffs who are unimpaired. Each plaintiff sues 20 to 50 defendant firms,” according to White.

Case Consolidation

Cases are consolidated when multiple asbestos suits are brought at the same time before one jury. The jury would then reach separate verdicts for each plaintiff against each defendant.

Rules of legal procedure require that consolidated cases have some common issues of law or fact. The issues may be such things as whether plaintiffs were exposed to specific products, what the manufacturers knew about the products, or if the victims were warned about the dangers from asbestos exposure.

According to White, consolidation affects trial outcomes in that one jury decides all issues that are presented once.

Because a single jury decides these types of cases, she writes, trial outcomes are more positively correlated rather than different juries deciding each case.

She says that the risk of going to trial is higher when cases are consolidated, and settlements become likelier. Therefore, judges have an incentive to consolidate their asbestos trials.

A presentation by plaintiffs can skew the perception of all of the defendants - making them cruel and greedy because of the lack of warning labels by one defendant - this makes the jury more sympathetic to all of the victims, White said.

“Also, plaintiffs in consolidated trials have a mixture of low and high-severity diseases and juries often (mistakenly) infer that less severe diseases will inevitably become more severe over time,” she said.

However, despite these built-in biases, the results of consolidated trials were a mixed bag for plaintiffs.

“Consolidation was a more mixed result,” White said. “Small consolidations favored plaintiffs. Damage awards were 15 percent higher. But in the larger consolidated cases the damages were actually lower and there was no effect on the probability that the plaintiffs would win the suit.”

Bouquet Trials

Bouquet trials are a variation of consolidated trials, a practice that also is applied in Philadelphia. A small group of plaintiffs are selected from a larger group. After the bouquet trial, the judge directs the parties to settle all the cases in the larger group modeling the results of the smaller trial.

“Bouquet trials have higher damage awards,” said White.

“However, there were no differences in the probability of a verdict in favor of the plaintiffs from other trials.”

The Philadelphia courts have many of the same problems for defendants as other jurisdictions and for the same reasons. But Philadelphia’s courts are unique in that there is a direct correlation between the amount of cases they try and their revenue streams, said the Center for Legal Reform’s Copland.

While judges may not directly benefit from this it certainly makes it attractive for their court’s budgets to make Philadelphia user-friendly for the trial lawyers’ bar.

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