Copyright 1995 Newsweek  
Newsweek
March 20, 1995, UNITED STATES EDITION
SECTION: NATIONAL AFFAIRS; Pg. 32

LENGTH: 2369 words

HEADLINE: Are Lawyers Burning America?

BYLINE: ARIC PRESS with GINNY CARROLL in New Mexico and STEVEN WALDMAN in Washington

HIGHLIGHT:
Justice: Have you heard the one about the little old lady who sued for spilling coffee on herself? The case isn't what you think, nor is the move toward 'law reform.'

BODY:
STELLA LIEBECK DIDN'T HAVE TIME for breakfast at her daughter's house. Her son, Jim, was catching an early flight out of Albuquerque, N.M., and, with the 60-mile drive from Santa Fe, they had to leave at dawn. After dropping off Jim, Stella and her grandson Chris Tiano pulled into a McDonald's drive-through for breakfast. At 79, Liebeck was quite spry; she had just retired after a long career as a department store salesclerk. Stella ordered a Mcbreakfast, and Chris parked the car so she could add some cream and sugar to her coffee.

What happened next on the morning of Feb. 27, 1992, was an accident. "I took the cup and tried to get the top off," she later testified. She looked for a place to set it down, but the dashboard was slanted and there was no cup-holder in the Ford Probe. "Both hands were busy. I couldn't hold it so I put it between my knees and tried to get the top off that way." Liebeck tugged, and scalding coffee gushed into her lap. She screamed. Chris leaped from the car to help her. Desperately, she pulled at her sweat suit, squirming in a bucket seat as the 170-degree coffee seared her skin. By the time they reached an emergency room, second-and third-degree burns had spread across her buttocks, her thighs and her labia. All that she remembers is the pain.

The spill that badly wounded Stella Liebeck is now scarring the landscape of American law. A jury awarded her $ 2.9 million after a trial; a judge knocked that down to $ 640,000. Then she became the poster lady for the bitter "tort reform" effort no in Congress. (A tort is a personal injury usually caused by negligence.) Last fall the Republican "Contract With America" pledged major changes in the civil-justice system aimed at curbing the number of lawsuits and the size of damage awards. Last week the House of Representatives did just that, passing three pieces of legislation that would cap some jury verdicts, deter some court actions and force some losing litigants to pay the legal fees of their opponents. Most important, Congress set national limits on awards for punitive and medical-malpractice damages, until now the province of state courts (box). "This represents the first significant regulation of lawsuits and lawyers from the perspective of nonlawyers," says Rep. Christopher Cox of California. "If there's a Robin Hood aspect, it is to take from the lawyers and give to the average working American."

It was the most hard-fought battle of the new Congress. The limousines of lobbyists idled outside the Capitol, while their passengers worked the congressional hallways and hideaways, giving the House the feel of a souk with cellular phones. The foes operated from different premises, born of wildly divergent self-images. Business, trade and medical associations lined up on one side, pressing their advantage with the GOP majority. They pleaded their case as hamstrung Gullivers, tied down by greedy lawyers and their foolish clients. Against them were consumer groups and the Association of Trial Lawyers, one of the shrewdest and best-funded political operations in Washington. They argued as noble paladins, battling scandalous corporate misconduct on behalf of average Americans.

Both sides were deluding themselves. Last week's bills, which will likely be changed in the U.S. Senate, were really about changing the balance of power in courthouses. Since World War II, a revolution in American legal doctrine and practice has made it easier for consumers and workers to sue and collect for injuries (page 36). These changes have yielded what has come to be known as "the litigation explosion," the purported epidemic of lawsuits that is much brooded over by chambers of commerce. But there is little agreement over what the dimensions of the crisis might be or over how the various reform proposals might cure the ills. The absence of facts did not slow the legislative wheels. Instead, Congress -- where 229 of 535 admit to being lawyers -- and the interest groups on both sides relied on half-truths, distortions and argument by anecdote. Consider:

Horror stories: Reform proponents, up to Speaker Newt Gingrich, seized on the fact that it takes profits from 87,000 boxes of cookies sold by Washington-area Girl Scouts to cover the organization's liability insurance. True, say the Scouts, but they've never been sued, have no position on tort reform and don't want to politicize their annual drive. A tort-reform group had hoped to use a model dressed as a Scout in an ad. When the scoutmasters refused to go along, the Associated Press reported, the girl became a Little League player instead, and the ad became a staple of the Washington campaign.

How big is the problem? Reform advocates say the economy is drained of at least $ 130 billion by the civil-justice system. But that figure is way too broad. It includes every insurance claim paid in the United States and the administrative costs of processing them, as well as the minority of cases that involve lawyers and court actions. Nothing Congress does, short of outlawing the insurance business, will make a dent in that $ 130 billion figure. There's no debate that the United States has experienced a huge growth in lawyers, but none of the reforms would roll that back, either.

Personal-Injury cases: All of last week's action focused on tort cases. These are billed as the cutting edge of the litigation explosion. But a major new study indicates that cases filed against roughly 2,000 of the largest U.S. corporations have grown only gradually over the last 20 years. The exceptions: disputes between the firms themselves; suits alleging discrimination and other statutory violations, and claims from special injuries such as those caused by asbestos manufacturers. "It's kind of curious that we have all the furor focused on the one area not exploding at all," says University of Wisconsin law professor Marc Galanter.

Deceptive numbers: According to figures from the National Center for State Courts, suits grew in 13 states and fell in 13 others between 1990 and 1992. In the period from 1985 to 1992, suits were up in 14 states and down in six others. These figures prove conclusively that better record-keeping is necessary.

Punitive damages: The trial lawyers cited studies indicating that juries seldom make such awards, which are designed to punish defendants for gross behavior. And judges usually reduce these verdicts anyway. But the specter of these few cases strongly influences settlement negotiations, where three quarters of all cases get resolved.

Whatever the course of the debate last week, inevitably someone would refer to Stella Liebeck and her hot-coffee spill. "Nightline" featured her story. She and her family of self-described conservative Republicans delivered a statement at a Public Citizen press conference. In rebuttal, proreformers marched on the Capitol grounds with a banner reading SHE SPILLED IT ON HERSELF. Of course she did, but the story doesn't end there.

After the spill. Liebeck spent seven days in an Albuquerque hospital and about three weeks recuperating at home with her daughter Nancy Tiano, then was hospitalized again for skin grafts. She had lost 20 pounds -- down to 83 pounds -- and was practically immobilized. The grafts were almost as painful as the burn, her daughter Judy Allen recalls: "She was in tremendous pain; I didn't know if she'd survive this." In August Liebeck wrote to McDonald's, asking the company to turn down the coffee temperature. She wasn't looking to sue, but the family thought she was entitled to her out-of-pocket expenses -- about $ 2,000 -- plus the lost wages of her daughter who stayed home with her. According to the family, McDonald's offered $ 800.

With umbrage in hand, Liebeck's daughter Nancy went scouting for an attorney. Friends sent her to Reed Morgan, of Houston, who had tilted with McDonald's before. In 1988 he won a settlement of less than $ 30,000 for a woman whose spilled coffee had caused third-degree burns on her thigh. Morgan filed his complaint, charging McDonald's with "gross negligence" for selling coffee that was "unreasonably dangerous" and "defectively manufactured." He asked for no less than $ 100,000 in compensatory damages -- including payment for her pain and suffering -- and triple punitive damages. McDonald's moved for summary dismissal, defending the heat of its coffee and blaming Liebeck for spilling it. She was, McDonald's alleged, the "proximate cause" of the injury.

The case proceeded in the stylized manner of the civil courts: expert witnesses were gathered, settlement offers were made. Just before trial Morgan suggested $ 300,000, but McDonald's wasn't interested. In August 1994 they went to trial before a jury filled with citizens annoyed at having to listen to a case about spilled coffee. "I was just insulted," recalls Roxanne Bell, 38, a preschool teacher. "The whole thing sounded ridiculous to me." According to several jurors interviewed by NEWSWEEK, three witnesses turned the case around. First there were the photos of Liebeck's charred skin and the testimony of Dr. Charles Baxter, a renowned burn expert from Southwestern Medical School in Dallas. He testified that coffee at 170 degrees would cause second-degree burns within 3.5 seconds of hitting the skin.

Two defense witnesses inadvertently helped Liebeck, too. Christopher Appleton, a quality-assurance supervisor at McDonald's headquarters, testified that the company had not lowered the heat under the coffee despite receiving 700 burn complaints over 10 years. Safety consultant Robert Knaff asserted that 700 complaints -- which amounted to about one in 24 million cups -- was "basically trivially different from zero." Later he misspoke: "It's just that a burn is a very trivial thing -- a burn is a very terrible thing." The damage was done. "Each statistic is somebody badly burned," says juror Betty Farnham. "That really made me angry." She also wasn't impressed by the tiny CAUTION: CONTENTS HOT label on the McDonald's cup. To read it, Farnham said she needed her glasses. She had started the case thinking the suit was frivolous. By the end, Farnham pushed for a total award of $ 9.6 million.

Stern warning: McDonald's had one more shot: the closing argument of defense lawyer Tracy E. McGee. She acknowledged that the coffee was hot; that's how customers want it. She insisted that Liebeck had only herself to blame. She was "unwise" to put the cup between her knees. She failed to leap out of the bucket seat after the spill. '"The real question," McGee concluded, ". . . is how far you want our society to go to restrict what most of us enjoy and accept."

After deliberating for about four hours, the jury found for Liebeck. Her compensatory damages -- out of pocket plus pain and suffering -- were set at $ 200,000. To be fair, the jurors knocked off 20 percent because she had contributed to the accident. Then they hit Mcdonald's with a stern warning: $ 2.7 million in punitive damages. "It was our way of saying, 'Hey, open your eyes. People are getting burned'," recalls juror Bell. A month later, trial Judge Robert H. Scott reduced the award to $ 640,000, calculating punitive damages at three times compensatory. He, too, wanted to deliver a message to McDonald's that it "was appropriate to punish and deter" its corporate coffee policy. Scott, another self-described conservative Republican, insists the case was "not a runaway. I was there." After further post-trial skirmishing, the two sides settled out of court. Part of their deal includes keeping secret the final amount.

As everyone knows, there was an immediate uproar. Jay Leno told jokes; editorialists harrumphed; tort reformers rubbed their hands. They had an example they could cite repeatedly of the courts gone crazy, especially when they only had to give the headline and none of the details. The American Tort Reform Association bought radio ads in the Washington area using the Liebeck case as its key example of an "outrageous" lawsuit. The case was chosen because "it points out a lot of the problems with the system," says Sherman Joyce. ATRA's president. "It demonstrates that the system needs reform."

How would the bills passed by the House last week change the outcome of the McDonald's case? Not at all. Even the controversial punitive -- damage award would go undisturbed because Judge Scott applied exactly the formula three times out-of-pocket damages -- that was in the "reform" bill.

None of this is to say that the legal system does not have serious problems. One idea that may address an important issue has already been introduced in the U.S. Senate. This proposal would change the contingency-fee arrangements used in civil lawsuits. Typically, plaintiffs' lawyers receive one third of any verdict or settlement plus expenses. That's a high percentage, but one designed to reward lawyers willing to gamble on clients who otherwise would be locked out of court. The problem is that many cases are not very risky but the lawyers are still collecting big fees. Under the reform idea, fees would be capped at 10 percent of the first $ 100,000 and 5 percent of anything more, if a case settles quickly. If the settlement offer is rejected, the lawyer can collect his normal one-third fee only on the amount of the ultimate award that is greater than the first offer. This plan would encourage early, generous offers and would put most of the money in the hands of injured people. "All we're trying to do is see that contingency fees are paid in cases that are truly contingent," says Jeffrey O'Connell, a law professor at the University of Virginia and co-inventor of nofault insurance.

No plan -- short of shuttering the courts -- will stop the regular advance of stupid and wasteful lawsuits. It's little comfort, but that may be the price the system and the nation pay for encouraging people to settle disputes in a peaceful, if tedious, manner. It's too easy to blame only the lawyers. If there are too many suits, there is another reason: there are too many clients, too.

LOAD-DATE: March 21, 1995