FAYETTE — At the same time Mississippi is garnering attention for having one of the best economic development organizations in the nation, there are fears that the Magnolia State is becoming widely known for an anti-business environment.
To the rest of the nation, Mississippi seems to be replacing Alabama with a reputation as ground zero for tort suits with hefty settlements.
In the mid-1990s, Barbour County in Alabama, which has two county seats, was often referred to as “tort hell,” where jury pools doled out millions in compensatory and punitive damages. In one instance, within 24 hours, 45 cases were settled out of court for $4.1 million before a jury selection was made. Before tort reform was passed in 1999, the median punitive damage award in Alabama was $250,000, three times the national average.
Now, it appears to be Jefferson County’s turn. Tucked in the southwest corner of the state, its population is largely poor. Only half of the county’s jury pool of 6,571 has a high school diploma.
National attention turned to this tiny town after the Mississippi Supreme Court ruled 5-4 in the case of American Bankers v. Alexander on Feb. 1, which opened the floodgates for multiple plaintiffs to join together in a single lawsuit.
The American Bankers’ appeal involved five different lawsuits filed by the same plaintiffs’ attorneys in the circuit courts of four different counties — Claiborne, Jasper, Jefferson and Jones — for a combined total of 1,371 plaintiffs.
Michael C. Hotra, public education director for the American Tort Reform Association, called Jefferson County “a magnet for highly speculative litigation that wouldn’t get traction in other courtrooms in the U.S.”
On April 27, the Mississippi Supreme Court denied the request of the Mississippi Manufacturers Association, Mississippi Bankers Association, American Financial Services Association and the American Council of Life Insurers that had asked the Supreme Court to reconsider its Feb. 1 decision in the American Bankers case.
Even though the Supreme Court slightly altered the language of its earlier opinion concerning the doctrine of fiduciary duty, members voted 5-4 to reject all arguments regarding joinder and the filed rate doctrine. (The earlier opinion had stated without qualification that American Bankers owed the plaintiffs a fiduciary duty. The revised opinion retracted this language and emphasized that juries will determine whether a fiduciary duty exists.)
The decision allowed cases to be combined in what amounts to a class action lawsuit, even though Mississippi has no provisions for such a move.
“The American Bankers decision will lead to even more outrageous abuses of Mississippi’s court system,” said Jerry McBride, president of the 1,800-member Mississippi Manufacturers Association.
In Marshall County, the MMA has also filed a friend-of-the-court brief on interlocutory appeal. The Mississippi Supreme Court must determine if a Kentucky man can be included as a plaintiff in a Mississippi trial court asbestos lawsuit filed against Illinois Central Railroad.
“If the court allows the inclusion of out-of-state plaintiffs, Mississippi will indeed become the lawsuit mecca for the nation,” McBride said.
Lance Stevens, president of the Mississippi Trail Lawyers Association, insisted that the American Bankers decision in February didn’t change anything.
“It said exactly what Rule 20 of the rules of civil procedures has always said,” he said. “It was just more of a high profile case that caught a lot of folks’ attention.”
Stevens said a class action lawsuit, admissible in federal courts, is very different from a lawsuit that involves multiple parties.
“Yes, class action lawsuits involve multiple parties, but there are different procedures for opting in and out,” he said. “We have class action in federal courts, but Mississippi doesn’t have a set up for class action. What we’re talking about, as a result of the American Bankers case, are mass torts and contract claims.”
Even though no one would go on record with a public comment, many folks in the Mississippi business community said that the Supreme Court decision was the result in the change of power between Supreme Court Chief Justice Lenore Prather, who had served on the high court since 1982, and Supreme Court Justice Chuck Easley of Caledonia, a former assistant district attorney and city judge who narrowly defeated Prather last November. (With Prather’s loss, Justice Edwin Pittman, who began his first eight-year term in January 1989, became chief justice.)
In the 5-4 decision, Easley cast the swing vote, siding with presiding Supreme Court Justice Chuck McRae.
“In the mid-1980s, the first set of tort reform was passed in Alabama,” said Graham Champion, manager of governmental affairs for Birmingham-based AmSouth Bank.
“The Alabama Civil Justice Reform Committee consisted of a group of trade associations and interested corporations with a lobbying presence in Montgomery that came together for tort reform/court reform, as we called it,” he said. “We realized that you could pass all the tort reform legislation you wanted to, but if you didn’t have fair-minded judges sitting on the bench — those who want to interpret the law rather than write it — it didn’t matter what legislation was passed because the court would unwind it.”
In Alabama, Supreme Court justices are elected on a staggered, statewide, partisan basis, Champion said.
“The election of a fair-minded appellate court process basically insures that we have a predictable court, and by predictable, I’m not talking about a court that sides with business 100% of the time, but one that you know is going to rule on law, not politics,” he said.
“In the last six years, we’ve gone from a court that was predominately favorable to the trial bar to a court that is responsible and open-minded. I think we made a good dent in slowing down the problem in Alabama. We’ve seen a significant reduction in lawsuits that have been filed.”
Richard T. Bennett of Clinton, president of The Mississippi Bar, said that Mississippi “will continue to have significant litigation initiated in the form of suits here until the courts render a contrary view.”
“We have constituencies from all sides, so The Mississippi Bar is not taking a position on tort reform,” he said. “But we have diametrically opposed views as to whether these suits brought by personal injury trial lawyers are proper.”
Champion said several insurance and finance companies moved out of Alabama because “they just didn’t have the stomach for the plaintiff trial bar.”
Several years ago, an Alabama jury awarded a $550-million judgment against Whirlpool on a satellite issue with compensatory damages of $1 million on a $1,000 contract and $549 million in punitive damages, Champion said.
“When we passed the first major legislation in the second round of tort reform two years ago, which capped punitive damages, it was right after the Whirlpool verdict,” Champion said. “At the same time, we were negotiating with Honda for a plant outside of Birmingham. They had expressed some serious concerns to the governor about lawsuit abuse, and I think the combination of that outrageous verdict and Honda telling the governor it needed to be addressed brought it to a head.”
Stevens called the impact of the American Bankers case on economic development “a red herring.”
“This does not constitute a change in the law. It’s been the law forever. It was considered by Nissan when they made the decision to build a plant here, and furthermore, I would disagree with the fundamental presumption that there
a larger number of lawsuits,” he said.
“With the current interpretation of Rule 20, you can gather lawsuits into one forum so that our court system can economically deal with them. For example, if you’ve got a law