Senate Bill 68 attacks separation of powers

Tuesday, February 01, 2011

Colorado has been fortunate that attorneys general in our state generally view their role in the traditional sense as the state's chief law enforcement officer — rather than as judge, jury and execution as exemplified by activist attorneys general, a la Eliot Spitzer, the disgraced former Attorney General of New York who sued anything with a pulse or bank account.

Senate Bill 68 (sponsored by Sen. Morgan Carroll) seeks to vastly expand the attorney general's authority into the legislative arena, circumventing the legislature's policy-making authority by empowering the attorney general to unilaterally define unfair or deceptive trade practices.

Worse still, the bill would transform the Colorado Consumer Protect Act from a tool that can punish dishonest businesses that demonstrate a pattern of deceiving the public into a scatter-gun system of jackpot justice that allows any dissatisfied customer to claim that his or her individual claim is evidence of a broader "public impact."

While claims made by plaintiffs and their attorneys would be taken at face value, business who find themselves accused would be required to prove their innocence and to prove a negative — that the allegations in question, no matter how absurd, were unique to the case in question. How would you prove that you didn't do something wrong, neither in the case in question nor any other time. What if the allegations are plainly false? If you think this sounds reminiscent of "have you stopped beating your wife?" you are correct.

By taking plaintiffs' "public impact" claims at face value, courts put businesses that may have made a simple error or employed a reckless employee in the position of paying not just simple damages, but treble damages and attorneys fees. Plaintiffs' lawyers are licking their chops because nothing strikes fear in the heart of a business — providing leverage for a quick out-of-court settlement — than facing outrageous claims which could be automatically tripled.

Senate Bill 68 turns the CCPA into a plaintiffs attorney's arsenal, exponentially exacerbating the threat of litigation against Colorado employers, manufacturers and retailers.

'Lawsuit loans' topic of Breakfast Briefing with AG John Suthers

Tuesday, January 25, 2011

The controversial lawsuit loans industry is the topic of a CCJL Breakfast Briefing featuring Attorney General John Suthers on Tuesday, Feb. 1. Doors open at 7 a.m. and the program begins sharply at 7:30. The event will be held at the Colorado Auto Dealers Association, 290 East Speer Blvd. in Denver. Two "legal financing companies" — Oasis Legal Finance of Northbrook, Ill., and LawCash of Brooklyn, N.Y. — and Attorney General Suthers are currently engaged in litigation to determine whether these companies fall under existing Colorado lending statutes. Lawsuit loan companies typically offer loans either to plaintiffs to cover their expenses while a lawsuit is pending or to plaintiffs attorneys to pay for expert testimony. Opponents of lawsuit abuse have argued that lawsuit loan companies encourage litigation. Some plaintiffs attorneys have also objected to the practice because lenders' interests are not necessarily common to the interests of plaintiffs or their clients. According to Suthers, Oasis and LawCash charge interest rates exceeding 100 percent annually and as high as 215 percent. Recently, the New York Times has focused on the competing interests involved in lawsuit loans, as well as the plight of borrows who found they owed lawsuit lenders the lion's share of their damage awards.

Phantom damages defy law, common sense

Sunday, November 28, 2010

By Mark Hillman From The Sunday Denver Post, Nov. 28, 2010

Whether "haggling" at a garage sale or for the best deal on a vehicle, most of us understand the give-and-take that often determines a fair price.

A seller asks a price that is more than he needs to cover costs and a potential buyer responds by offering less than she is actually willing to pay. If the two parties settle on a price, common sense tells us that price is reasonable – i.e., it meets the seller's need to cover costs and fits the buyer's ability and willingness to pay.

A 4-3 majority of the Colorado Supreme Court doesn't seem to understand that the advertised price and the actual cost are often vastly different. In Volunteers of America vs. Gardenswartz, the court considered whether someone injured by another's negligence is entitled to recover the amount originally billed for his medical expenses or the only the amount actually paid to the hospital and doctor.

Finding that the at-fault party is responsible for the original amount billed, the court majority — led by retiring chief justice Mary Mullarkey — created a huge windfall for plaintiffs — and for plaintiffs lawyers who typically take 33% to 40% of the recovered damages for their services.

Although this case was complicated with other details, consider this simple hypothetical: James drives recklessly and injures Cindy in a collision. Cindy is treated at a hospital and billed $10,000 for medical care. Cindy's insurance company and the hospital agree to settle her account for $6,000.

Common sense dictates that, because James was at fault, he should be responsible for Cindy's medical costs. Instead, the court's majority says even after James pays $6,000 for Cindy's medical care, he must pay an additional $4,000 simply because that the amount was printed on the original bill.

Why? According to the court, Cindy is entitled to this double recovery simply because she had the foresight to purchase an insurance policy.

In essence, the court says Cindy is entitled to "phantom damages" which she never actually owed nor was required to pay.

To arrive at this decision, the court's majority turned inside out a 1986 law, passed by a Republican legislature and signed by Democratic Gov. Richard Lamm, that was intended to prevent such double recoveries. That law requires the court to "reduce the amount of the verdict by the amount" the victim will be indemnified by an insurance company.

The court insinuates that only insurance companies have the leverage to negotiate discounts and that without insurance, the injured victim would owe the full amount billed. That simply isn't true. Anyone who has paid medical expenses out-of-pocket knows that doctors and hospitals will often negotiate a cash or private-pay discount.

Moreover, the majority offered no basis for its conclusion that the negotiated amount was likely less than the true value of services. In fact, that assertion defies economic reality, as hospitals would not stay in business were they not able to cover their own expenses and make a reasonable profit.

As Justice Nancy Rice noted in her dissent, the majority fortified its opinion by selectively misquoting a key co-sponsor of the bill, Sen. Al Mieklejohn, who argued, "I don't think a person ought to collect more than once . . . for hospital costs and things like that."

Mieklejohn argued that the victim's insurer should "be allowed to collect" from the at-fault party "to get their money back." That is, the insurer should be allowed to recover the costs it actually paid. Nowhere did the legislature suggest that the victim had a legitimate claim to a greater amount simply by virtue of buying insurance.

The dissenters, also including justices Allison Eid and Nathan Coats, noted that the majority's opinion is contrary to "the legislature's clear intent, the statute's plain language and sound public policy."

Certainly, the party at fault should be responsible for the medical expenses caused to the injured person, but compelling the payment of "phantom damages" not only ignores the letter of the law, it also drives up insurance costs, encourages more lawsuits and defies common sense — all while serving no worthy purpose.