SADOW: Tort Reform’s Mixed Outcome In This Legislative Session

Two (or two-plus) bills essentially addressing the same subject of tort reform, but with two different outcomes in the Louisiana Legislature; why?

SB 418 by Republican state Sen. Kirk Talbot passed both chambers three votes higher than a supermajority. The bill would extensively reform tort law dealing with vehicular accidents in a way that, if the history of similar laws in other states provides any guide, will reduce both insurance rates and the size of court-ordered judgments. That bill, obviously, garnered opposition from the trial lawyer lobby.

Those opponents include Democrat Gov. John Bel Edwards, on whose behalf a political action committee devoted to opposing tort reform in all of its forms spent $13.5 million that resulted in his narrow reelection. Edwards is using every last bit of his leverage to dilute the tort reform bill in any way possible, by promising not to veto the measure even as he doesn’t stand much of a chance in having such a veto stick, in order to save face. An overridden veto will reduce his governorship going forward to a cipher and even the smallest change that he could cajole from a conference committee picked by legislative Republican leaders would allow him with a straight face to refuse conceding defeat and to sign the bill.

But he won’t have to face a similar approaching humiliation on another tort reform matter, dealing with the ability of local governments to sue for environmental damages. Current state law, amended in 2014 to exclude some local governments from such suits, neither empowers nor precludes parishes from doing this.

Allowing parishes to do this within the state’s coastal management zone creates chaos. Louisiana by law creates long-range plans to deal with coastal erosion and restoration, and if parishes freelance by trying to use state courts to sue businesses – in this case, energy companies – into coughing up money without proving any kind of negligence, this uncoordinated approach towards coastal management can conflict with or even work at cross-purposes with state plans. (As well, having the state handle these suits means 100 percent recovery, while parishes may see less if any contingency fees apply.)

However, the statutory ambiguity has allowed ambitious lawyers to ally themselves with money-hungry parishes to launch independent forays designed to scare companies into settling. They have managed one conditional success, cajoling Freeport McMoRan into promising to disgorge $100 million to 12 parishes.

This never may happen. The Legislature turned back an effort this session to set up a legal procedure to deal with any settlement and two parishes refuse the deal. Nothing can happen on this until next year, although Edwards likely will call a special session before the end of the year that could include an item to legislate on the matter. It therefore seems unlikely any other deals would manifest until sorting out these issues.

Still, optimally the Legislature would make statute absolutely clear on the matter, denying the parishes the ability to act contrary to the state’s wishes. Two instruments this session would have done that – SB 359 by Republican state Sen. Bob Hensgens and an amended SB 440 by GOP state Sen. Big Mike Fesi. Both items picked up significant majority support, ratified when both chambers overwhelmingly (although largely on party lines) passed SCR 7 by Republican state Sen. Sharon Hewitt as a statement in support of the bills’ objective.

Yet the bills never made it to final chamber votes, and contrasting that with how SB 418 did proves instructive. Consider that bill classically demonstrated asymmetry in coverage scope: while the costs of the current tort regime born by ratepayers spanned a large number, meaning a relatively small individual cost to each, the benefits accrued to just a small number of trial lawyers, meaning huge payoffs to each. Thus – and this is why the system remained intact for so long – the small number of big beneficiaries had far greater incentive to mobilize and keep the environmental tort laws unchanged than did the mass public, who generally didn’t realize or were indifferent to the costs, had in reform.

That was overcome because of policy entrepreneurship. Political leaders, aided by contributions from entities most negatively affected by the system (ratepayers facing exorbitant costs because of the system and lack of competition it spawned), deliberately campaigned on the issue and raised public consciousness to the point they won.

Compare this environment to that concerning the lawsuits. In that case, both costs and benefits are concentrated: either a small group of companies pay out the nose to deliver jackpots to a small number of governing officials on behalf of parishes and handful of lawyers, or they don’t, with the public largely uninvolved. The mass public won’t see any direct benefits from this (dampened by the inability for full recovery and potentially frittered away), and they don’t perceive any direct costs (although their energy costs will rise slightly if companies decide to pay the tribute).

Even so, elected officials made a run at this but failed, in this instance, precisely because of the possibility of promised concentrated benefits. The rules of both legislative chambers specify that bills that would cost at least $100,000 need a dual referral to a respective money committee. Originally, SB 359 had a fiscal note disclaiming additional costs, but, in an almost unheard-of maneuver, the Legislative Fiscal Office redid the note and alleged costs could go into the millions, on the assumption the state would pursue the suits.

That was a wholly presumed action on behalf of state government which, bizarrely, the note validated because the bill’s opponents, led by the primary instigator of the suits Talbot, Carmouche & Marcello APLC, were pursuing these to the tune of $9 million already spent (which, if the bill became law, it would have to eat plus forgo thousands of billable hours at $500 per). Money out the door shouldn’t matter in the note’s determination; it’s intent that does and substituting the intent of the firm that stands to gain from defeating the bill for that of the state as defining the impact of the bill makes zero logical sense – a point noted by Hensgens and others.

Given the compressed time frame imposed when Edwards froze much statewide activity for a month-and-a-half, including legislative activity, the extra hurdle the diversion caused simply proved too much to move the bills through the process. Because of concentration of both costs and benefits, opponents didn’t have to fight off an activated majoritarian component and, isolated from that pressure, could use insider tactics to stall the bills.

So, Edwards won’t have to face the same kind of Hobson’s choice – and a less fungible one at that, since he might be able to slightly weaken SB 418 but could have done nothing about the all-or-nothing nature of SB 359 and SB 440 especially if passed by two-thirds majorities – on this issue as he does with SB 418: veto but likely see an override display his impotence for all the policy-making world to see that would reduce his influence going forward close to zero, or don’t veto and signal that other policy-makers must make supplications to the legislative leadership while safely ignoring him. This is why he desperately will try to jawbone any dilution to SB 418, to reduce the degradation of his power.

He’s salvaging that, at least, for now. The Legislature’s actions on this issue clearly demonstrate that energy firms need not knuckle under to the parish raiding attempt as help will come, and to the parishes and their voracious lawyers of the increased likelihood that their expenditures will come to naught, thereby discouraging them from further pursuit. For the issue will resurface next year, and with a trial run under their belts bill proponents have every opportunity to offer up an instrument with veto-proof majorities.

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