| January 3, 2011

Will Legal Reform Happen in 2011?

Oklahoma’s recent shift from “judicial hellhole” to what might be characterized as "not too bad" leads some to encourage a policy-making respite when it comes to legal reform. Some want a break from the state’s decade-long ascent out of the legal abyss. Indeed, even in the new era of Republican control of the Legislature and the governor’s office, remaining reforms face challenging hurdles.

Considered holistically, reform of our legal system—both the overabundance of lawsuits and a curious workers’ compensation system that is nearly unique in its reliance on litigation to address the needs of injured workers—remains an unachieved objective for business groups, medical doctors, and multi-issue conservatives.

Workers’ Comp Reform

The workers’ compensation system is too expensive and a frequent source of complaint from business. David Thompson, immediate past president of the Oklahoma City Chamber of Commerce, highlighted the issue as he ended his tenure as the business association’s elected leader last month.

In an interview conducted as Oklahoma City University began its Christmas break, law professor Andrew Spiropoulos said, “The key question is whether we should abolish the current court system and establish an administrative agency to process claims.

“The idea behind the administrative system is that if you remove comp from the court system, we would be less likely to see comp claims as litigation and more as an administration of benefits. Both businesses and workers would be less likely to lawyer up, thus reducing both conflict and costs.”

Spiropoulos, who also serves as the Milton Friedman Distinguished Fellow at OCPA, confessed, “I have always been a little skeptical that re-conceiving workers’ comp as an administrative system would really reduce conflict because I still think there will be disputes over compensability and extent of disability. Therefore, both sides will still want lawyers.”

Here’s the rub, however: “There is another reason to go to the administrative system—because the judiciary has made it clear that, as long as they control the system, they will make it difficult, if not impossible, to reform.

“In 2005, the Legislature passed several reforms that would have significantly reduced the costs of the system, including a provision that would have provided for the appointment of an independent treating physician if the parties did not agree on a doctor [i.e., the ‘dueling doctors’ problem], but the courts gutted the provision.”

Spiropoulos concluded, “One could argue that if we went to an administrative system, the courts would be more willing to allow the government to construct a system that would allow an independent authority, such as a chief medical officer, to make binding medical judgments. Until we get a new set of judges (which is what the latest set of reforms have concentrated on), the administrative system approach may be our best bet.”

There is more to the workers’ compensation system than awarded benefits and costs to business, and that is the long-term effects of the current system’s poorly structured incentives on workers themselves.

This year, state Rep. Mark McCullough of Sapulpa plans to introduce recommendations drawn from a state Task Force on Vocational Rehabilitation in Workers’ Compensation, which he chaired. In a statement last month, he made an observation often heard from advocates for workers and businessmen with a heart for those injured employees, saying the system “remains one of the barriers to economic growth in Oklahoma, and it continues to fail injured workers.”

McCullough’s task force backs reform that would return employees to work when possible as a means to both reduce litigation and control costs. In this approach, voc-rehab (vocational rehabilitation) would be made a priority and would begin earlier than at present. The task force also wants doctors in the system to employ evidence-based medical guidelines.

McCullough also supports a shift toward an administrative system for workers compensation, a goal supported by, among others, the State Chamber.

Tort Reform

When it comes to broader lawsuit reform, Oklahoma has moved in the last two years from what the American Tort Reform Association (ATRA) called a “judicial hellhole” toward what two leading analysts characterize as a system that is “salvageable.”

In 2009, Oklahoma passed reforms patterned on those enacted previously in Texas, creating what might be the best “rule book” in America. Still, as Spiropoulos cautioned when looking at workers’ comp, the pivotal question is what will the referees—the judges—do with the rule book? Will they neuter it?

As things now stand, Lawrence J. McQuillan of Pacific Research Institute and Hovannes Abraman of the University of California-Berkeley believe Oklahoma is within reach of broad reform. They defined “salvageables” as “states that have moderate to high relative monetary tort losses and/or moderate to high tort litigation risks, yet have moderate to strong tort rules. … If the rules are implemented as written on the books, the 16 [salvageable states], including Oklahoma, are positioned to do a better job of containing their tort liability costs.”

The state’s place in lists of positive tort outputs could improve, they argue, “as the benefits of reform” feed the system. The academic pair examined Oklahoma and other states in illuminating detail last summer, in an essay which appeared in these pages.

Weeks ago, The Wall Street Journal commented on the need for further reforms, even in Texas, a “Mecca” for recent reform. Due to its terrible past, even Texas is still mired (like Oklahoma) in the bottom one-third of states in terms of actual litigation costs and results.

Endorsing Gov. Rick Perry’s stated intention to move the state toward a “loser pays” rule, Journal editorialists lamented that “Americans now spend more on tort litigation than they do on new cars. … A procedural reform like loser pays to deter junk lawsuits would make the legal system less of a drag on the economy and less of a political tool for redistributing wealth.”

“Loser pays” requires losing parties to pay for the winner’s attorneys’ fees.

Perry wants to go beyond historic reforms enacted in 2003 and 2005 that have made Texas, in the Journal’s words, that “Mecca for doctors, especially the emergency physicians, obstetricians, and surgical specialists who elsewhere can face blue-sky malpractice premiums. Liability rates have fallen by 27.5 percent on average since 2003. The number of doctors applying to practice in Texas has increased 60 percent, even as the overall population grew by 14 percent.

“All of this is helping to end an acute Lone Star physicians shortage, especially in rural areas. Twenty-three counties now have their first E.R. doctor, 10 their first OB-GYN. Hospitals are reinvesting the malpractice savings in scarce services like neurosurgery and neonatal units and expanding access to care.”

So surely Oklahoma will go for it, right? We’ll see.

Dr. Spiropoulos cautions: “The interesting question here is whether either the legislative leadership or the governor really intends to push reform. Many people (wrongly, in my view) believe that we have already sufficiently reformed the system.

“The key problem here is the cap or limit on non-economic damages. The 2009 reform places a $400,000 cap on such damages, but allows the cap to be lifted if there is serious bodily harm or gross negligence. The problem is that the former are precisely the cases in which the cap will be at issue and the latter is so amorphous that trial lawyers will too often be able to make a plausible-sounding case that it is present.

“I think the law could be much improved by simply changing the law to say that both serious bodily harm and gross negligence must be present to lift the cap. Simply change the ‘or’ to ‘and.’ This change will at least ensure the higher standard will apply in the cases it is most necessary.”

His views were echoed by Dr. Eli Reshef, who emerged in the past decade as a leading advocate for medical tort liability reforms. He led in establishing the Oklahoma Alliance of Physicians for Tort Reform.

In an interview last month, Reshef said: “We certainly would like to see a hard cap on non-economic damages. We want collateral damages reformed. We are still troubled with the joint and several liability provisions. My colleagues and I will be pushing these and other reforms this session. We will encourage the appropriate legislators, not only Republicans, to push for more measures this session. Without a doubt, a lot was achieved in 2009, but this journey is not over.”

The alliance Reshef has helped guide emerged in a particular and important historic context. In 2004, the state medical association and legislative leaders passed modest tort tinkering, then declared a “moratorium” on further changes. As Dr. Reshef tells the story, “what was achieved was actually quite modest and yet a ‘moratorium’ on reform was announced. What was achieved then was not sufficient. No moratorium was appropriate then, and one is not appropriate now.”

Reshef, politically liberal yet a crucial reform voice in the lawsuit realm, is an engaging interview. He explained his motivations: “I respect my profession. It would be disrespectful of the medical profession I cherish if a group like our [alliance] did not push harder for a new round of reforms and improvements.”

The fact that ATRA no longer lists Oklahoma as a problem child leads some to conclude the work of lawsuit reform is over. But Spiropoulos, Reshef, and a few others disagree. They say it’s time to grow up. They want Oklahoma to become a model for lawsuit reform—better than Texas or anywhere else.

Patrick McGuigan (M.A. in history, Oklahoma State University) is editor of

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