Friday, March 25, 2011
State lawmakers are taking a broad swing at the Tennessee Consumer Protection Act, a far-reaching law that ups the stakes on legal liability for businesses while guarding consumers.
But changing the scope of the law, which could triple court damages, is about more than balancing business liabilities against consumer protection. Businesses not only deal with the risk of costly consumer lawsuits under the protection act, they use the law themselves to sue one another — as seen in high-profile cases involving May 2010 flood damage at Opry Mills Mall and Gibson Guitar Corp.
A large portion of the push comes within Gov. Bill Haslam’s tort reform proposal, a bill that’s drawn enthusiastic support from business interests and company leaders across many industries. Similar proposals in the Tennessee General Assembly are expected to fall under the Republican governor’s initiative, but others stand on their own and could create dilemmas for businesses.
The legal risks that come with the Consumer Protection Act are real to Jim Amos. As CEO of Tasti D-Lite — which moved to Franklin from New York for the friendly business climate — he considers steep legal liability a threat to the company’s network of small franchisees, no matter how good they are at customer service.
“That’s an extraordinarily difficult issue,” said Amos, who considers legal reform a gap in Tennessee’s business-friendly reputation. “In many cases the kind of litigation that results puts these folks right out of business.”
He and other businesses — including a new coalition across several industries called Tennesseans for Economic Growth — believe Haslam’s proposal will spur job growth by reducing risk.
Though an amendment was pending this week, Haslam’s tort proposal would make it more difficult for plaintiffs to invoke the Consumer Protection Act in a range of cases. It also would eliminate it from use in class-action lawsuits that challenge companies on behalf of a broad swath of consumers.
Critics warn that tort reform’s consumer provisions degrade the court system that’s supposed to protect everyone equally, while also opening up direct risks to businesses. Mark Chalos, a Nashville attorney with Lieff Cabraser Heimann & Bernstein, argued that the Consumer Protection Act is a guard for responsible companies looking to do business in Tennessee.
“Weakening the civil justice system only protects wrongdoers and encourages bad conduct,” he said.
Another bill that progressed in the legislature this week would prevent the consumer act from being used in insurance cases, which Republicans say would end improper use of treble, or triple, damages.
They say customers still have legal standing and other recourse, but companies have become accustomed to invoking the law.
Simon Property Group, owner of the still-closed Opry Mills Mall, and Gibson, the Nashville guitar manufacturer that also sustained flood damage last year, both cited the Tennessee Consumer Protection Act in suits seeking tens of millions of dollars from insurers. The companies declined comment, but the triple damages under the law would provide the sort of compensation that trial lawyers argue is fitting as insurance disputes drag on.
That bill in particular creates a careful dance for business interests, who are enthusiastic about the governor’s proposal but are mulling how to sort out matters like insurance law.
Bills address range of consumer protection
The bills that compose Republicans’ broad push on consumer protections address a number of business concerns, but also contain unexpected dilemmas.
• House Bill 2008/Senate Bill 1522 — The bills, being carried by Republican leadership in the House and Senate, compose Gov. Bill Haslam’s tort reform proposal. One portion of the proposal deals with the Tennessee Consumer Protection Act on a number of fronts.
Opponents warn that eroding protections damages the court system and poses business risks — like lessening legal remedies against Ponzi schemers. But Bradley Jackson, vice president of governmental affairs for the Tennessee Chamber of Commerce & Industry, said the bill’s consumer measures provide more stability for businesses without eroding consumer protections.
“(Current law) creates an unpredictable and unstable environment,” he said.
• House Bill 1189/Senate Bill 1912 — These bills would prevent plaintiffs from leveraging the Consumer Protection Act in insurance lawsuits and the triple damages it can lead to in judgments.
This reduces risk for insurance companies, and Rep. Pat Marsh, the Shelbyville Republican pushing the bill in the House, said consumer protections have been used as “blackmail” by attorneys to force big settlements. Consumers and companies alike use the act in litigation, and Democrats raised some questions about consumer protections before consenting to the bill’s easy passage in a subcommittee this week.
Marsh said consumers — and companies who use the act — still have options for insurance disputes, including suing under the insurance code.
“You’ve got all the protection you’ve ever had,” he said.
• Other bills — A range of other bills address consumer protections. Most of those that seek to scale them back will likely fall behind Haslam’s proposal, insiders say, but there also are a range of bills that add consumer protections that are getting less traction.
Just to illustrate the way propaganda works, consider this statement from the link: “In many cases the kind of litigation that results puts these folks right out of business.” I don't know. I carry business liability insurance to protect me against those kind of risks. If the businesses complaining about consumer protection don't carry proper insurance for their protection,then I see no reason for them to complain.
Thursday, March 24, 2011
UPDATE: Here's another report on the hearing. And another. Here's a good Thompson quote from that last link: "Folks, we are about to kill a mouse with a bazooka."
Let's also understand the big lie the Republican Administration is trying to foist on the public. There is no reliable data -- none -- that supports the claim that restricting individual civil litigation rights would "scare off potential businesses" from locating in Tennessee. In fact, the lack of a state income tax makes Tennessee very attractive for many businesses.
What I wonder is why businesses are so worried -- if they actually are? If a citizen -- individual or corporate -- acts reasonably, that citizen has nothing to worry about. This Administration is openly and arrogantly admitting that it places the interests of corporations and Big Insurance before the rights and welfare of Tennessee citizens and residents.
If you think there's something wrong with that picture, you're right.
Wednesday, March 23, 2011
UPDATE: Former Senator Fred Thompson, who sponsored tort reform legislation in Congress back in 2003, is now a vocal opponent of the Haslam rights limitation bill. In fact, the Tennessee Association of Justice has employed him to lobby against such legislation. Here's an interview with Thompson. His message: "The fact of the matter is we have a good system here in Tennessee that has served us well for a long period of time."
This type of rights limitation legislation keeps popping up, despite the lack of any real evidence that it benefits the public, as opposed to Big Insurance. I blogged about similar federal legislation back in 2003. Thompson was, I believe, a Senate co-sponsor of this bill, which was -- properly -- defeated.