The Perils of Prop 79
California has another confusing slate of initiatives on the ballot for the next election, including several related to various interventions in pharmaceutical pricing (helping to demonstrate that grass roots democracy can be just as tyrannical to individual rights as any other form of government). Bill Leonard, of the California BOE, notes in his weekly email:
Proposition 79 seeks to capitalize on public outrage over high drug prices by creating a new big government program that would supposedly mandate drug discounts for low-income Californians.
It turns out that the initiative contains a little-noticed provision that will allow private trial lawyers to sue drug companies for the new tort of "profiteering in prescription drugs." Under this sneaky provision, which will be effective immediately even if the drug discount program is never implemented (Federal approval is required), drug makers would be prohibited from demanding "an unconscionable price" or demanding "prices or terms that lead to any unjust and unreasonable profit." These terms are not defined anywhere in the initiative or elsewhere in state or federal law, so your guess as to what these terms mean is probably as good as mine. A violation of this new offense would carry a minimum fine of $100,000 or triple the amount of damages (whichever is greater) plus court costs and legal fees. You can see why the trial lawyers love this initiative! It is bad enough to have government bureaucrats setting drug prices, but imagine having drug prices set by randomly-selected jurors!
Can you imagine offering a product in a market and not knowing if your pricing was legal until after a jury trial? Actually, until after multiple jury trials, since in cases like this there is effectively no restriction on being tried one, two, or ten thousand times for the same thing. Not only will prices be set by a jury, but they will be set by the single most aggressive jury in what is sure to be an onslaught of trials.
In case you have any confusion or failure of imagination as to how poorly this will work out, California tort lawyers have slipped this same provision into other laws, notably the sue your boss over picayune labor code violations law and the Unruh Act, which allows lawyers to serially sue businesses for picayune technical violations of the ADA. Here is an example of Unruh at work:
Molski, who lives in Woodland
Hills, has sued dozens of Central Coast businesses, from the Santa Ynez
Valley to Paso Robles, for alleged violations of the ADA. Among them
are Firestone, Fess Parker and Kalyra wineries in the Santa Ynez
Valley, Cambria Winery in northern San Luis Obispo County, and Fosters
Freeze restaurants in San Luis Obispo and Morro Bay.A provision of California state law known as the Unruh Act allows Molski to demand $4,000 in damages per violation, per day.
Molski
has said in the past that an average settlement is $20,000. He
testified in the Los Angeles trial that he personally nets an average
of $4,000 per settlement, after paying attorney's fees, Beardsley said....As of Friday, 528 cases were listed under Molski's name in federal civil courts....
Also
fighting Molski in court is Harmony Cellars in northern San Luis Obispo
County. Winery owner Chuck Mulligan sees the L.A. decision as a good
sign, but isn't counting on winning."You
just never know. A jury trial is always a crap shoot," Mulligan said.
"I think the public sees through this whole quagmire that's going on.
They claim they are trying to do something for society but it's really
just pulling money away from society that could be used for jobs," and
other purposes, he said.
Molski's
suit against the Hitching Post in Casmalia alleged a wheelchair ramp
was too steep, and the bathroom wasn't accessible because the toilet
was a half inch too close to the wall; and the sink was three inches
too high, and the soap dispenser was too high.
Stricklin contends the bathroom is fully accessible.
"Our
restaurant's accessible and has been for a long time. Our mother is in
a wheelchair. Of course it would be accessible," Stricklin said. "Every
customer we have that's disabled has gotten into our restaurant, and
we've never had a complaint."
"I've
talked to about five people in Solvang and Cambria who have been sued
twice in the last year," Stricklin said. "They're stuck. Unless you
close your doors, somebody else can come along and sue you, and that's
why we're fighting. If they can see that we're not going to roll over
and settle, they'll think twice about going to trial."
At least in the case of Unruh, there is a defined legal standard, even if suing for $4000 per day for violations of 1/2-inch are ridiculous. Prop 79 would allow suits with no standards, except whatever a jury happens to come up with on a particular day. And we all know how smart and thoughtful juries can be (from recent Vioxx case):
Jurors who voted against Merck said much of the science sailed right over their
heads. "Whenever Merck was up there, it was like wah, wah, wah," said juror John
Ostrom, imitating the sounds Charlie Brown's teacher makes in the television
cartoon. "We didn't know what the heck they were talking about."...... [juror] Ostrom, 49, who has a business remodeling homes, was also disturbed
that former Merck Chief Executive Raymond Gilmartin and another top Merck
official gave videotaped testimony but weren't in the courtroom. "The big guys
didn't show up," said Mr. Ostrom. "That didn't sit well with me. Most definitely
an admission of guilt."...One juror, Ms. Blas, had written in her questionnaire that she
loves the Oprah Winfrey show and tapes it. "This jury believes they're going to
get on Oprah," Ms. Blue told Mr. Lanier. "They only get on Oprah if they vote
for the plaintiff."
Previously, I made my own tongue-in-cheek suggestions for follow-ups to Unruh, but prop 79 may be worse than any of these:
So, I would like to propose my
own Unruh II law. I propose that in California, every citizen now has
the right to sue any other person they observe violating any sort of
traffic law. If you observe someone speeding, doing a rolling stop at
a stop sign, failing to signal a lane change or turn, with a burned out
tail light, not wearing a seat belt, jaywalking, etc, you may now sue
them for $4000 per occurrence.Coming in future posts, I will
propose Unruh III to empower citizens to sue over health code
violations, Unruh IV to empower citizens to sue over fire code
violations, and Unruh V to sue anyone for any reason if they have a net
worth higher than you do.
It strikes me that my suggestion for Unruh V is where we are really going.
