Declarations and Exclusions

"Celebrity SLAPP-Down" with Dom DeLuise

At Overlawyered,  Walter Olson reports on the latest celebrity lawsuit out of Los Angeles, featuring hirsute gourmand and funnyman Dom DeLuise (seen above as Father Fyodor in Mel Brooks' still-delightful Russian romp, The Twelve Chairs):

Notwithstanding various impediments which ordinarily restrain civil defendants from filing countersuits -- and particularly from naming their adversaries' lawyers in those countersuits -- a 'Superior Court judge rejected a motion [last] Friday to throw out comedian Dom DeLuise's lawsuit claiming his former daughter-in-law caused him emotional and financial distress when she sued him for $2 million.'

Walter wonders "what implications there might be for the rights of defendants in other cases" to sue opposing counsel.  Here at Decs&Excs we can't resist a LosAngelocentric query such as that, so we did some digging.

Let's take a look at the Complaint in the case of Dom DeLuise vs. Brigitte DeLuise, et al. [PDF].

This is an action for malicious prosecution.  According to the Complaint, Brigitte DeLuise is the former spouse of Dom DeLuise's son David.  David and Brigitte divorced in 2003.  During the divorce proceedings, Brigitte's attorney Steven Zelig filed a separate civil lawsuit on Brigitte's behalf against a number of defendants -- including Dom DeLuise, his wife Carol and their business managers -- seeking damages for alleged fraud, interference with contract, infliction of emotional distress, and so on.  This was, per the new Complaint,

an attempt to circumvent the jurisdiction of a contemporaneous family court action with regards to the division of community assets and [to] extort more favorable terms in any settlement

in the divorce case. 

At one point, Brigitte's attorneys submitted a "statement of damages" claiming their client had a right to recover some $240,000,000.00. 

The outrageousness and objectively excessiveness of the demand [says the malicious prosecution complaint rather ungrammatically] exemplifies the depth of Defendants' bad faith in bringing the prior action.

Eventually, with a potentially dispositive motion for summary judgment pending, Brigitte and her attorneys voluntarily dismissed her case.  In May of this year, Dom DeLuise filed his own malicious prosecution action, naming both Brigitte and her attorney Steven Zelig as defendants.  Dom DeLuise seeks to recover his out of pocket expenses from defending the allegedly unfounded and malicious prior action, and to impose punitive damages on all those responsible for putting him through it.  The basic rule in California (and most other jurisdictions) is that an attorney who files an action on a client's behalf maliciously and without probable cause to do so -- i.e., without an objectively reasonable belief that the action has potential merit -- may be liable alongside the client in a later malicious prosecution action brought by the party that they wrongfully sued.

The motion reported at Overlawyered was brought under California's "Anti-SLAPP" statute.  "SLAPP" is an acronym for Strategic Litigation Against Public Participation, and the statute is intended to prevent the targets of public comment from using pointless litigation as a blunt instrument to silence their critics.  When a defendant is sued based upon claims "arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States or California Constitution in connection with a public issue," the defendant may file a "special motion to strike."  The motion will be granted, and that offending claims stricken from the case, unless the plaintiff can produce evidence to show that there is a reasonable likelihood that there is factual and legal substance to those claims.

Because a malicious prosecution action depends upon the allegedly malicious litigant having exercised the "right of petition" through the filing of an earlier lawsuit, anti-SLAPP motions have become de rigeur as a response to malicious prosecution complaints, especially when the former plaintiff's former attorney, who actually did the petitioning, is named as a party. 

Here, Brigitte DeLuise and her attorney Mr. Zelig argued that Dom DeLuise cannot actually prove his malicious prosecution case.  Dom DeLuise through his attorneys submitted evidence that was, Judge Judith Chirlin concluded, sufficient to suggest that he may in fact be able to prove and win his case.  Accordingly, the courthouse door will not be slammed at this point and the parties can move on to litigating Dom Deluise's claims on their merits.  A good time is not guaranteed for all, or for anyone, in the legal and procedural squabbling that is sure to follow.

Two Great Distastes That Go Great Together: The Los Angeles Times on the Governor and the Insurance Industry

There are at least two California institutions to which the Los Angeles Times has shown consistent antipathy: Governor Arnold Schwarzenegger and the insurance industry.  Imagine, then, the pleasure in at least some journalistic circles when the Times was able to publish an article in this past Sunday's edition with the headline:

Insurers Liking the Coverage of Schwarzenegger's Policies

The stated premise of the article appears in its opening sentences:

With a onetime State Farm official and a former insurance lobbyist in top staff jobs, Gov. Arnold Schwarzenegger is repeatedly siding with insurers in legislative battles as they maneuver to fend off fees, fines and concessions to policyholders.

A veteran insurance lobbyist, Dan Dunmoyer, is now the governor's deputy chief of staff, helping to craft his entire policy portfolio.  Former State Farm official Kathleen Webb is Schwarzenegger's insurance advisor, vetting insurance-related bills that reach his desk and recommending which he should sign into law.

The unexamined assumptions in those sentences, and throughout the article, are many.  Chief among them is that anything the insurance industry favors must be, by definition, against the public interest, or at least counter to the interest of "consumers."  After all, if there were nothing inherently threatening to the greater good in positions favored by insurers, the fact that those positions are (ostensibly) receiving a sympathetic hearing in Sacramento would not be cause for alarm.

The article as a whole is less a piece of reporting than it is an exercise in innuendo and opinion couched as reporting.  Perhaps the most glaring example appears in this single-sentence paragraph midway through:

Now Schwarzenegger has elevated insurance interests to senior levels of his government, giving them too much influence, in the view of consumer groups.

Certainly, it is not "news" that self-styled consumer groups would hold that view.  What would be news, and what is notably absent from the article as a whole, would be actual evidence that insurance interests are being favored, if at all, for reasons other than the Governor's well-known general inclination to favor a broad range of pro-business positions.  Schwarzenegger was elected as a Republican, after all, albeit not a rigidly conservative one.  It is not to be expected that he would fill his advisory posts with actively anti-business personnel.

What hard evidence does the Times offer for its essential premise that insurance industry influence in the Governor's office crosses the line to become "too much" influence?  Very little:

• When insurance-related bills have come to him, the Governor "has sided with — or at least not opposed — the industry nearly nine times in 10, a review of 56 bills tracked by insurance groups shows."  The details of those 56 bills are not provided; a sidebar identifies only 6, and a seventh is referenced in the body of the article.  The Times itself thus omits "nearly nine in ten" of the bills that it considers evidence of the Governor's pro-insurer bias, but nonetheless concludes (in the introductory sentence to that sidebar) that the Governor "has overwhelmingly sided with the insurance industry on legislation affecting it."  (Emphasis added; hyperbole in original.)

• Incidentally, of the 7 bills actually identified in the article, most came to the Governor's desk before the elevation of the insurance-related officials mentioned in its opening paragraph.

• Consumer advocates complain on the one hand that they have not been included in the consultative process.  They concede, however, that they really haven't tried to be included.  They say they have "'seen no point'" in contacting the Governor's insurance adviser, for example, because "'it's assumed that under this administration'" their influence won't be felt.  Alternatively, they insist that it is not their place to take the lead in seeking to be heard -- to send in their own lobbyists to counter industry lobbyists -- and that they are entitled to be the recipients of "'outreach'" from the administration.

• Insurance industry expenditures on lobbying and on contributions to the Schwarzenegger reelection campaign are mentioned, but no evidence is supplied in support of the unspoken premise that those expenditures are buying undue influence.  Insurance interests are reported to have contributed $4.4 million to the Schwarzenegger campaign -- since he announced his candidacy in the recall election of 2003.  An impressive number, to be sure, but many questions about it are left unanswered, such as: (1) How does it compare to the contributions from any other industry or group?  (2) How much are the consumer groups, and others, contributing to Schwarzenegger opponents?  In other words, is there something about the insurers' contributions that have gained them more influence than comparable contributions?  What is there to show that insurers' special interests are now "more special" than others?

• To place that $4.4 million figure in perspective, consider that just one man and his immediate family -- Sacramento real estate developer Angelo Tsakopoulos -- contributed nearly twice that much -- $8.7 million -- in the recent Democratic gubernatorial primary in support of the eventual nominee, current state Treasurer Phil Angelides.  Many believe that Tsakopoulos' expenditures made the difference in Angelides' battle with Democratic rival Steve Westly.

• The one vetoed bill that is discussed at length in the article seems to have been selected so as to portray insurers, and the Governor, as cold and heartless sorts who single out good-deed-doers for particular abuse:

Terry Tillery earns $10 an hour working for a state program aimed at helping sick and elderly people remain in their homes.  The Sacramento resident cares for three patients, driving her 2000 Ford minivan to supermarkets and drugstores for food and medication.

One day in 2004, she got a letter from her auto insurance company: Her rates would be going up.  Her job put her in the same commercial category as a pizza delivery driver, her insurer said, making her a higher-risk driver.

Tillery said she told her insurance company, 'I don't speed.  My driving record is good, and I haven't had any tickets in the last 14 years.'

Assemblyman Gene Mullin (D-San Mateo) offered a bill last year that would have barred insurers from raising rates in circumstances like Tillery's. Among the measure's opponents was the Assn. of California Insurance Cos., which represents 300 property-casualty firms.

Lawmakers passed the bill, but the governor vetoed it. If rates dropped for these workers, his veto message said, echoing arguments made by insurers, then other motorists would be forced to pay more.

The bill in question -- AB 778 [PDF] -- amended Insurance Code section 11580.1, the statute specifying the provisions that are either mandatory or prohibited in every automobile policy in the state, to prohibit treating vehicles used in the single state program employing Ms. Tillery as "a common carrier, livery or for-hire vehicle".  That is, it singled out some drivers traveling about and making pick-ups and deliveries in their vehicles in a business and declared that they could not be treated in the same way as every other driver engaging in those same activities and exposing themselves to the same inherent risks in their businesses.  While the Governor's veto can be characterized, as it is by the Times, as showing favoritism to a position favored by insurers, the bill itself can be characterized as compelling the insurers to show favoritism to a small subset of their policyholders.  The interests on both sides are arguably "special."  Governors always favor one interest over another in signing and vetoing legislation; that the Times would obviously favor a different interest than the Governor did is not particularly compelling evidence of the sort of sinister dealings the article tries so hard to suggest.

No matter who is in power at any given moment Sacramento is just like any other state capitol, a bubbling brew of competing policies each with its own advocates.  Every group believes that only its view is the "right" one and there is always a tendency to assume foul play when another group gets its way.  Sometimes, foul play really is at the root of things and a particular group's influence on its favored issues becomes "too much" influence.  Newspapers such as the Times can and should seek out those instances and expose them.  Even under the loose evidentiary standards of investigative journalism, this article simply does not make its case.

~~~

UPDATE: Mike the Actuary comments and raises the interesting question of whether Governor Schwarzenegger's alleged fondness for insurers acts as a counterweight to the well-known hostility of outgoing Insurance Commissioner John Garamendi toward the industry.  I have an update on the race for Insurance Commissioner in the works, and I will try to address some of Mike's points in that context.

"That's 1 for You and 3 for Me" -- But Nothing From Nothing Leaves Nothing

Two years ago, in the thick of his efforts to improve the state's budgetary posture, California Governor Arnold Schwarzenegger signed into law a statute under which 75% of all punitive damage awards became payable to the state rather than to the prevailing plaintiff.  At the time, I noted the short lifespan set for the statute, and I was skeptical whether the plan would actually produce any benefit to the state's embattled coffers:

The statute remains in effect, unless it is later extended, only until July 1, 2006, and it only applies to cases filed on or after August 16 of this year [2004] that result in final judgments -- really final, with all appeals and post-trial motions concluded -- prior to the statutory expiration date.  It is easy to predict right now that there will be a rash of motions to continue trial dates as that expiration date approaches, so that the judgments will be free of the State's claim.  In fact, given that it takes most of a year to get a typical case to trial, and that any post-trial motions and appeals will likely consume most of another year -- and let us not forget that the U.S. Supreme Court has found that there is a constitutional right to independent appellate review of any punitive damage award -- it is not particularly clear whether any punitive damage awards will find their way into the State's coffers before the statute disappears by its own terms.

Now that the statute has expired, a new bill (Senate Bill 832 [PDF]) sits atop the Governor's desk awaiting signature, veto or veto by inaction by September 30.  If signed, the bill will reinstate the "punitives tax" for an additional five years, until July 1, 2011.

So, if the Legislature is fired up to extend the state's claim on punitive damage awards, the idea must have been a good one, right?  Apparently not so.  Writing in Capitol Weekly, John Howard confirms this weblog's remarkable predictive powers:

Two years later, [the promised] $450 million still hasn't materialized.  Amazingly, not even a penny has flowed into the state Public Benefit Trust Fund, which was expressly set up to handle the punitive-damage money.  This gap between the administration's promise and pocketbook reality is remarkable, even in the smoke-and-mirrors world of state budgeting that, in the end, is based on sophisticated expectations of revenue and expenses.

As Howard notes, SB832 began life as an environmental protection bill before being hijacked in committee in the waning days of the legislative session, rewritten to eliminate every word of its original text and re-tooled as an extension of the punitives-to-the-state (or, as the legislators termed it, "split recovery") statute.  Why go to so much trouble to extend a statute that seems to have produced no discernible benefit to anyone?

'I think the feeling is, why not?  Let it go another five more years to see if money comes in,' said one Capitol staffer familiar with the issue.

There is no indication yet whether the Governor will sign the extension in to law.  The usual public voices on subjects such as this are mixed:  The California Trial Lawyers Association is Consumer Attorneys of California are officially neutral.  Insurers are vocally opposed, even though they are prohibited outright under California law from covering punitive damage awards against their insureds.  The concern, perhaps, is that jurors' knowledge that the lion's share of punitive damages will go to the state will cause the size of those awards to increase in, for example, "bad faith" suits against insurers.

Strangely enough, the insurers are joined in their opposition by The Foundation For Taxpayer & Consumer Rights (FTCR), brainchild of Proposition 103 author Harvey Rosenfield, and no friend whatever of the insurance industry or the Governor.  (FTCR is at least consistent: it was against the idea in 2004 as well.)

When the original bill passed in 2004, Walter Olson expressed at least tentative support for the idea, citing what has long struck me as a reasonable argument for passing all punitive damages on to the public, if one is going to permit punitive damage awards at all: 

Lawyers who sue for a living talk a great deal about how the general public has a stake in the success of their endeavors.  Here's their chance to show they mean it.

Governor Schwarzenegger has ten more days to decide whether to continue this interesting, if thus far ineffectual, experiment.  This post will be updated when news comes in on his decision.

    ~~~

UPDATE [100306]:  Governor Schwarzenegger chose to veto the proposed extension of the "punitives tax."   In his veto message (PDF), he indicates he is not opposed to an extension of the tax in principle, but was concerned because the bill "was amended late in the legislative session and did not provide an opportunity for sufficient hearings to determine whether this policy has been effective or not."   He encourages reintroduction of the bill in the next legislative session for purposes of havein a "full debate" on its merits.

I'll Be CPC-ing U in All the Ol' Familiar Places

I am off to Music City USA, Nashville, Tennessee, through next Tuesday to attend the 2006 Annual Meeting & Seminars of the CPCU Society and to participate in the Mock Trial presentation sponsored by the Society's Consulting, Litigation and Expert Witness [CLEW] Section. 

If any Decs&Excs readers happen also to be in attendance, by all means track me down.  Posting may or may not occur here in my absence.

Of course, in Nashville "CPCU" is pronounced "See-Pea-See-Y'all."