Mississippi Litigation Review & Commentary : Mississippi Personal Injury Lawyer & Attorney : Phillip W. Thomas Law Firm : MS Litigation Review & Commentary

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Within the last week or so a Gulf Coast arbitrator awarded $2.325 million to a plaintiff whose dump truck collided with an 18–wheeler.

The accident occurred years ago on a four lane road in Jackson County. The 18–wheeler ran a stop sign and crossed two of the four lanes and stopped, with the trailer blocking two lanes. The plaintiff's dump truck collided with the 18–wheeler. All fact neutral fact witnesses agreed that the accident was the 18–wheeler's fault.

The forty-seven year old plaintiff suffered severe injuries and was permanently disabled. The plaintiff had over $180,000 in medical bills. In addition, the plaintiff losing his job caused severe economic hardship for the plaintiff and his family.

The case was originally filed six years ago in the Circuit Court of Jackson County. But the parties agreed to binding arbitration after three trials were continued due to the priority of criminal cases.

At the arbitration hearing, the defense argued that the plaintiff should have stopped his dump truck to avoid the 18–wheeler. The defendant's accident reconstructionist—who had questionable credentials—basically flipped on the witness stand and testified that the plaintiff had only 2.5 seconds to stop, which was impossible due to the size of the dump truck. The arbitrator cited the defense expert in support of his decision.

$1.2 million of the award was for non-economic damages. But it was a pre-cap case, so the caps do not apply. The defendant is not expected to appeal. 

The defendant offered $200,000 to settle before the arbitration. There was a workers comp. lien for the medical bills of over $180,000.

Kasie Braswell and Richard Taylor with the Taylor Martino firm out of Mobile represented the plaintiff. Jim Galloway and Shannon Favre with Butler Snow in Gulfport represented the defendant.

Word on the street on the Coast is that defense counsel is outraged by the result and that Butler Snow has canceled all future mediations with the arbitrator, who is well known and respected in Mississippi.

My Take:

If the defendants only offered $200,000 to settle before trial, then they did not want to settle. Offering $200k to settle with a comp lien of $180k is usually the equivalent of offering zero. If you want to settle, you have to offer a good bit more than the lien. In this case, it probably would have taken an offer of over $500,000 for the plaintiff to even think about it.  

I have heard of the “hey, you hit my 18–wheeler” defense. But most lawyers view it as a weak defense asserted when there is nothing else to argue. Few people actually believe that they will win the case with the defense.

This case could have been a situation where the defendant fell in love with their defense and loss objectivity. You see this happen to lawyers on both sides, who have to buy into their cases in order to do a good job. Published studies show that on average, lawyers do a poor job of predicting the results of their cases. Sometimes lawyers lose all objectivity, which can lead to a really bad—but unexpected—result.

In my opinion, this phenomenon is usually more dangerous for defendants and defense lawyers than plaintiffs and plaintiff lawyers. On the plaintiff side, if you poorly evaluate your case, then there is not a lot that you can do after the case is filed. Defendants will not offer more than nuisance value to settle, which the client will not accept. So you have to try the case and work on doing a better job of evaluating the merits of a case before it is filed. A wise plaintiff lawyer will spend many hours analyzing a case that he ultimately rejects, knowing that the decision can save him countless hours and dollars down the road.   

On the defense side, however, the phenomenon can lead to avoidable huge verdicts that take the defendant (often an insurance company) and defense counsel by surprise. This hasn't always happened when you see a large verdict in a case, but it has a lot of the times. Many times, neutral trial observers were not surprised by the verdict, which often means that the defense fell in love with their case and lost objectivity.

Lawyers have to be careful not to fall into this trap—myself included. Using expected value calculations can help, as discussed in this post. But there is no substitute for experience and having the ability to stay objective in evaluating the range of possible outcomes.

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On Thursday the Mississippi Supreme Court affirmed the Adams County Circuit Court’s Order refusing to enforce an arbitration clause in a nursing home admissions agreement. Here is the Court’s opinion in Adams Community Care Center, LLC v. Reed. The trial judge was Judge Lillie Blackmon Sanders.

There were two admissions agreements in the case that were signed by the resident’s adult sons. Neither son had power of attorney. In addition, the resident’s primary physician had not made a determination that the resident lacked capacity pursuant to the Mississippi Uniform Health-Care Decisions Act. Therefore, neither son had authority to act as a health-care surrogate. The Court also found that an arbitration clause was not a health-care decision under the Act. 

The Court rejected the nursing home’s apparent authority argument because there was no evidence that the resident indicated that her sons were her agents for making health-care decisions. Finally, the Court rejected the nursing home’s third-party beneficiary argument because there was not a valid contract. 

Justice Lamar wrote the Court’s unanimous opinion. Justice Graves concurred in result only without a separate opinion. Skipper Samson of Gulfport represented the nursing home. Robert Cooper and Trae Sims represented the plaintiff.

Incidentally, I believe that nursing homes get family members of residents to sign admission agreements because they want to be able to go after the family members for the nursing home’s bills. It’s a business decision. I have defended a case that a nursing home filed against a resident’s family member who signed the admission agreement. 

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In November the American Association of Justice published this report identifying five myths about medical negligence (malpractice).

The identified myths are:

1. there are too many frivolous malpractice lawsuits;
2. malpractice claims drive up health care costs;
3. doctors are fleeing;
4. malpractice claims drive up doctors’ insurance premiums; and
5. tort reform lowers insurance rates.

Note: Yesterday's Natchez Democrat contained this article by attorney Sam Gwin that covered some of these issues in Mississippi.

The AAJ report then debunks each myth. Key points include:

• medical negligence causes 98,000 hospital deaths per year;
• there have been steady declines in the last decade in the number of malpractice lawsuits and the amounts of settlements and verdicts;
• the vast majority of filed medical negligence cases have merit;
• the amount spent to defend and compensate victims of medical negligence is .3% of health care costs;
• much of the “defensive medicine” is performed to generate more revenue for health care providers; and
• insurance premium levels are generally the same in states with damages caps as states without damages caps.

I would add another myth to this list: the myth that damages caps affect frivolous lawsuits. This might be the biggest myth of all. Proponents of damages caps argue that they are needed to address frivolous lawsuits, but it's cases with merit and severe damages that caps impact.

The public does not understand this. The public believes that caps affect frivolous cases and are surprised when you explain that caps restrict the recovery of victims of catastrophic injuries to an amount that is less than full compensation.

I am not convinced that damages caps will be permanent. At some point, there could be public backlash similar to what has happened with consumer arbitration. I have no doubt that the public supports legitimate attacks on frivolous suits. I do not believe that an informed public would support damages caps. Both courts and legislatures have a tendency to gravitate to public opinion.

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The WSJ Law Blog has this story about Bank of America deciding to no longer enforce arbitration clauses contained in customer agreements. The article states:

Bank of America, based in Charlotte, N.C., is the first major bank to announce that it is withdrawing from all mandatory arbitrations in consumer-related businesses. Other banks previously have said they are studying their policies.

“We think arbitration is a very fair way to resolve the issue. A lot of our customers did not feel the same way, so we decided to make a change,” said a Bank of America spokeswoman.

In July, JPMorgan Chase, one of the nation’s largest credit-card issuers, announced it would no longer submit disputes to arbitration and was reevaluating the inclusion of arbitration provisions in its consumer contracts.

All the news comes in the wake of congressional testimony on arbitration as well as a Minnesota Attorney General’s agreement in which the National Arbitration Forum decided to stop hearing consumer arbitration cases.

It's like French generals have taken over the defense of arbitration agreements. We surrender!! We surrender!!

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In an opinion issued today over-ruling the Court of Appeals and striking down an arbitration clause in a nursing home admission agreement, the Mississippi Supreme Court effectively ruled that thousands of consumer arbitration agreements in Mississippi are unenforceable. Here is the opinion in Covenant Health and Rehab. v. Moulds. The Court ruled that an arbitration agreement is not enforceable when the designated arbitration forum is not available:

 The rules of the organization referenced in the agreement, the AAA, require that it refuse to administer arbitrations of this type of case, unless the parties agree post-dispute to be bound by arbitration. Thus, not only are our courts being asked to rewrite the agreement in favor of the drafter, but also now to select a forum not anticipated by either party. We decline.

This resulted in the arbitration clause not being enforceable against the nursing home resident.

As previously discussed in this post  and here, the National Arbitration Forum (NAF) recently agreed to stop acting as the forum in all consumer arbitration cases. The NAF was the chosen forum for Mississippi nursing home residents in Golden Living Center Nursing Homes (formerly Beverly Healthcare) and in many consumer credit card agreements. Since the NAF will not accept consumer arbitrations, all agreements that designate the NAF as the arbitration forum are now unenforceable. The Court's opinion, combined with the NAF's recent exit from consumer arbitration, means that thousands of arbitration agreements signed by Mississippi residents with the NAF as the forum are now unenforceable.  

Likewise, many arbitration agreements that designate the American Arbitration Association (AAA) and American Healthcare Lawyers Association (AHLA) as the forum are also no longer enforceable. These organizations do not accept health care cases (medical malpractice and nursing home) involving pre-dispute arbitration agreements. There is also pressure on arbitration forums to follow the NAF and refuse to administer cases involving pre-dispute consumer arbitration provisions. With Congress debating the Arbitration Fairness Act that would declare all consumer arbitration agreements unenforceable and courts continuing to narrow arbitration enforcement, arbitration is in a rapid retreat.

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In a shocking development in the world of arbitration the National Arbitration Forum (NAF) has agreed to exit the consumer arbitration business only days after the Minnesota Attorney General filed a detailed lawsuit alleging shocking bias on the NAF's part in favor of business litigants. Here is a Business Week article reporting the news. The article states:

The settlement with the National Arbitration Forum comes after the Minnesota AG sued the firm on July 14 for consumer fraud, deceptive trade practices, and false advertising. The civil suit, filed in state district court in Minneapolis, alleged conflicting ties between the NAF and debt-collection law firms that represented major credit-card companies. The suit also alleged that New York hedge fund Accretive LLC owned stakes in such collection law firms and the NAF, sending arbitration business between the two.

The NAF is left with virtually nothing:

 The only business NAF can now be involved with is in arbitrating Internet domain disputes, a business it has long been in.

This lawsuit followed on the heels of a lawsuit against the NAF by a former employee who alleged that the NAF was biased in favor of business parties at the expense of consumers (regular people). Here is the WSJ's story on that lawsuit. In that case the former NAF employee alleged the following examples of favoritism by the NAF for business parties:

• instructing arbitrators to change decisions they had issued that were adverse to the [business parties];
• ensuring that arbitrators who had ruled against the [business parties] did not get more cases;
• drafting claim forms for the [business parties].

The NAF presided over arbitrations in Mississippi involving credit card disputes and nursing home abuse and neglect cases, including cases against Golden Living Centers, formerly known as Beverly Healthcare. The NAF effectively conceding that it was crooked is a huge blow to arbitration proponents.

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The Shreveport Times has an article about a local man's lobbying efforts in support of the Arbitration Fairness Act of 2009. Forced to arbitrate a claim against the builder of a bad home, the man was awarded less than the actual cost to repair the home. The arbitrator then destroyed the evidence so that the man could not appeal. Referencing the battle in Congress over arbitration, the article states:

Supporters of the act claim mandatory arbitration clauses force people into unfair situations where the cards are severely stacked against them.

Opponents say getting rid of arbitration would clog the justice system and open the door to countless frivolous lawsuits.

The opponents' argument is a boilerplate argument trotted out every time big business wants to limit public access to the judicial system. The public is wising up, however, as more instances of unfair arbitration proceedings emerge. I am waiting for the Chamber to explain how a consumer can afford to arbitrate a claim over a $10,000 automobile purchase when the consumer has to pay the arbitrator an hourly fee that is typically $200- $400 per hour to hear the case, in addition to his attorney's fees.

Congressional limitations on mandatory consumer arbitration has bipartisan support and appears sure to pass in some form.

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How would you feel if you were sentenced to two years in prison for speeding because murder has gotten out of hand? Chances are you wouldn't like it, since a petty offense like speeding doesn't have anything to do with serious crimes. But the U.S. Chamber of Commerce and tort reform supporters commit a similar bait-and-switch when pushing the tort reform agenda.

An April 28 Bloomberg article discusses the Chamber's renewed push for tort reform and cites shocking statistics about the unfairness of arbitration proceedings for employees and consumers. The Chamber's tort reform advertisements are pure propaganda. The Chamber cites lawsuits that sound frivolous. But the Chamber does not seek remedies that hold filers of frivolous lawsuits accountable. Instead, it seeks to put caps on recoveries in all cases, including for victims in legitimate cases with large damages. It's like arguing that you should be put in jail for speeding because there is a murder problem. The public does not understand this distinction, which is how the Chamber wants it.

Tort reform passed in Mississippi years ago. The public does not understand what legislation passed or what it means. I have yet to meet a client or potential client who understood that tort reform caps damages for meritorious cases. Everyone just assumes that it only affects frivolous lawsuits, since that's what the Chamber and other tort reformers talk about. Unfortunately, there has been no organization with the funding or marketing acumen to educate the public on the Chamber's propaganda. 

The Bloomberg article also cites a study that found what many lawyers have long suspected, that arbitrators favor business interests in the hopes of getting hired in future cases:

Alexander Colvin, a labor professor at Cornell University, published a study in January that examined employment dispute statistics from the American Arbitration Association. Employees won 31.6 percent of the time if the employer had no other case with AAA; 16.9 percent of the time if the employer had more than one case with AAA; and 12 percent of cases where an employer and a particular arbitrator were involved in cases more than once.

Colvin worries that “repeat player bias” is at work, with arbitrators favoring employers in hopes of being selected for future hearings

Of course, the Chamber argues for arbitration with claims that it is quicker, cheaper and just as fair as a court proceeding. In a previous post I criticized the costs of arbitration, but now there is solid evidence that arbitration is unfair in addition to being expensive. There is currently an arbitration fairness act pending in Congress that would ban pre-dispute arbitration agreements in some consumer agreements, such as nursing home admission agreements. Look for the Chamber's propaganda push to fight this legislation. You can bank on the fact that the Chamber's ads will be based on its frivolous lawsuit bait and switch tactics. 

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The Mississippi Supreme Court issued two unanimous opinions today in nursing home cases, both ruling for the plaintiffs. In Estate of Guillotte v. Delta Health Group the Court rejected the nursing home's argument that summary judgment was appropriate because the plaintiff failed to identify the names of the individual care givers who breached the standard of care. The Court's summary of the testimony against the nursing home filled sixteen pages of the slip opinion. Obviously, there was a lot of evidence of breaches in the standard of care.

The Court was  particularly critical of the defense:

Moreover, it does not make sense that a plaintiff's claim can be defeated on summary judgment just because individual names are not given when there is a significant amount of expert testimony...

The Court affirmed summary judgment on the claims of failure to adequately staff, train and supervise, because of the lack of evidence to support the claim. 

The most surprising thing about this case was that the nursing home was able to get the trial court to buy into the argument. This case looks like another example of defendants pushing arguments too far based on the apparent belief that the Court is biased towards corporate interests and will seize any excuse to throw out a case. It will be interesting to see if more similarly weak defense arguments are disposed of by the Court in the coming months.

The second opinion was Byrd v. Beverly Enterprises. In this case a unanimous Court affirmed the trial court's finding that an arbitration agreement was unenforceable where a representative of the nursing home did not sign the agreement. The Court found that this meant that there was no mutual assent and there was no agreement to arbitrate. 

These decisions continue the trend of the Court taking a moderate position, as I pointed out here. It's still too early to conclude that the Court has swung back to the middle from the far right, as examined by the Mississippi College Law Review, but the signs are encouraging that we may finally have a moderate Court.

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Over at Law.com there is a story about the 5th Circuit's opinion in Citigroup v. Bacon that rules that manifest disregard of the law by arbitrators is not a grounds for vacating an arbitrator's award. Or as they put it:

Abandon all hope, ye who seek to overturn an arbitration award, because the 5th U.S. Circuit Court of Appeals has ruled that manifest disregard of the law by arbitrators is no longer a ground for vacatur under the Federal Arbitration Act.

This is an issue where there is a split among the circuits and we need an opinion from the Supreme Court. I disagree with the following quote near the end of the article:

"I think at some point parties aren't going to enter into a process if there is really no reasonable basis for ensuring that the case is going to be based upon the law," Wade says. "There are broad policy reasons for favoring arbitration....

The person who issued this quote is a former Texas state judge who is now in private practice and plans to obtain work as an arbitrator. Arbitration is good for his business so he's a big fan of it. 

My big problem with arbitration is not that the arbitrators are unfair. The biggest problem is that the case must be big enough to justify the tremendous expense burden that arbitration imposes on the parties.  This makes the so called policy reasons favoring arbitration a disingenuous farce. Arbitration is significantly more expensive than a court case because the parties have to pay the arbitrators and the arbitration forum for "administrating" the case. These are huge expenses. In addition, arbitration proceedings are not any more efficient or faster to resolve than a court case. In particular, federal court, with its mandatory scheduling orders, is usually faster and cheaper than arbitration.

Because of the high arbitration fees and expenses, genuine disputes that involve a small dollar claim cannot be effectively resolved in arbitration. It's about impossible for a lawyer to take a case on a contingency where the amount of the dispute is less than $50,000 and there is a binding arbitration provision. Disputes like these are effectively resolved on a daily basis in Mississippi state courts because it costs around a hundred bucks to file a lawsuit and the parties do not pay the court to rule on the case.

But these are not the only problems with arbitration. Arbitration forums such as the American Arbitration Association (AAA) and National Arbitration Forum (NAF) are bad at administrating cases. It is not unusual for the parties' attorneys to cut the forums out and administrate the cases themselves to save the headache of dealing with an incompetent forum. The NAF once told me that they were closing for the Summer. It ignored repeated requests from me for details on their Summer break. 

My understanding of arbitration is that its origins are from construction litigation and other areas where technical expertise by the decision maker is arguably helpful in resolving cases. I can see that logic. But the practice of jamming arbitration agreements into all sorts of consumer agreements should be banned by Congress. Arbitration agreements in everything from nursing home admission agreements to loan contracts exist for one reason: to discourage lawsuits against against business interests and protect them from the jury system.

I believe that we are in the heyday of arbitration and do not believe that society will tolerate mandatory arbitration in consumer agreements for much longer. More decisions like Citgroup v. Bacon that leave the party that required arbitration complaining about its unfairness can only speed the elimination of mandatory arbitration. Ironically, a decision that supports arbitration could hasten its legislative elimination.