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BusinessWeek: March 29, 1993 |
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A LASSO AROUND LIABILITY Damage awards get hog-tied in Texas--and business whoops Texas has long been a corporate lawyer's nightmare. Witness last July's mammoth $163 million fraud judgment against financier First Reserve Corp. and another jury's $137.4 million thrashing of Kemper Securities Group Inc. In the first seven months of 1992, more than a third of the nation's million-dollar verdicts against businesses took place in Lone Star State courts. So it came as a Texas-size surprise on Mar. 4 when Governor Ann Richards signed a product liability law that in most cases prohibits consumers from suing the makers of "inherently unsafe" products, including tobacco and alcohol. Plaintiffs also must prove that manufacturers had safer alternatives available at the time they made a product, and retailers are shielded against suits involving goods they merely sell. The law doesn't cap punitive damages. Still, it's a victory for a business community that united to whip powerful Texas trial lawyers, who have long poured money into state judicial and legislative races. Now, corporate lobbyists hope the strategy can be repeated in Illinois, Pennsylvania, and other key states. "After years of frustration, we finally got our act together," says Martin F. Connor, president of the American Tort Reform Assn. (ATRA). UNANIMOUS. The seeds of the Texas victory were sown in last year's election, when the Civil Justice League worked to defeat a group of state senators who were plaintiffs' lawyers. The league succeeded in four key races, the most important a Democratic primary victory by goat farmer Bill Sims over Temple Dickson, a former committee chairman who had blocked Senate consideration of the liability bill. Lieutenant Governor Bob Bullock, a reform proponent, pressed hard for action this year, and the measure passed the Senate unanimously. Pro-business Senate challengers got help from a grass-roots campaign from doctors, who charged that attorneys were scaring local business away. It played well, especially when the challengers were business owners. "We pounded on the fact that this was a day-and-night race, a businessperson against a trial lawyer," says Republican State Senator Jane Nelson, part-owner of a small subcontractor for aircraft parts. The victory in Austin has ironic echoes in Washington, where lawyer-bashing has yielded to a Clinton Cabinet packed with lawyers. Perhaps now, that doesn't matter so much. "For the past 12 years, the business community was so fixated on Washington that we ignored the states," says ATRA's Connor. "What we should have realized is that the states is where we would get reform." | |
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