State Allies Blog Series: Q&A with the Business Council of Alabama

March 09, 2016

“Sweet Home Alabama” is home to a litigation system that is especially sweet if you are a member of the plaintiffs’ bar.  High dollar award judgments and a supreme court that allowed a plaintiff to bring suit against a company for another manufacturer’s product have given Alabama a less-than-stellar litigation reputation. 

A court system tipped in favor of plaintiffs’ lawyers can harm the state’s business-friendly reputation. And that’s the concern of the Business Council of Alabama (BCA), which represents the interests of thousands of big and small businesses within the state and is a powerful advocate for reforming the state’s litigation system. 

What does the BCA think about Alabama’s litigation climate, and what’s needed to improve it? The BCA lays out some key reforms in our interview with them. They’re more than just a fresh coat of paint on the state’s lawsuit system, and will help level out the litigation foundation so Alabama can be a sweet home for all.

What does the legal reform landscape look like in Alabama?  What are the legal reform goals on the BCA’s state legislative agenda this year?

The Business Council of Alabama has long been on the front lines of reforming Alabama’s legal system, and though we have won a number of hard-fought victories, we still have a long way to go.  The U.S. Chamber of Commerce’s Institute for Legal Reform ranked Alabama’s liability system 46 out of 50 in its 2015 Ranking the States publication.  Alabama’s current legal system must be reformed to be less expensive and time-consuming for industry and particularly small businesses.  With that in mind, some of the legal reform issues we are working on this year are lawsuit lending, more reliable evidentiary standards, and reinstating a class action restriction that was misinterpreted by a federal appellate court.

The BCA and its allies have been working to pass state legislation on lawsuit lending, and on February 17th the Alabama State Senate Judiciary Committee held a hearing on a proposed lawsuit lending bill.  How would this bill regulate lawsuit lending and curb lawsuits?

Lawsuit lending is the unregulated practice of loaning money at exorbitant interest rates to plaintiffs who could receive large settlements or judgments.  A plaintiff must repay the lender if any settlement or judgment is received - at an interest rate that can exceed 100 percent.  This practice targets a vulnerable population, introduces third-party interests into the attorney-client relationship, and both slows the pace of and increases the cost of litigation for plaintiffs and defendants.

SB 67, sponsored by Senator Cam Ward, will bring the lawsuit lending industry into line with existing Alabama fair lending laws and subject lawsuit lenders to licensure requirements and oversight by the State Banking Department.  The bill was given a favorable report by the Senate Judiciary Committee in February and sent to the full Senate for consideration.  Last year, a BCA-supported lawsuit-lending bill passed the House on a bipartisan 98-1 vote, but the bill was unfortunately bogged down in unrelated Senate politics and never came up for a full vote.  Because of that widespread support, we are optimistic about the passage of this year’s bill.

In litigation, an expert on the subject at hand is often called upon to testify.  This testimony can be abused and “junk science” too often finds its way into the case.  To alleviate this issue, standards have been developed. At the federal level, courts use a more reliable standard for allowing expert testimony in cases, known as the Daubert standard. 

What are the differences in the federal standards for expert evidence testimony and Alabama’s standards? What are the benefits of Alabama adopting the full Daubert standard?

Alabama had long used the Frye standard, which only asked that a judge determine if a scientific expert’s methods were generally accepted, when in 2011 the BCA helped push a partial reform through the Legislature.  Alabama courts have since used the Daubert standard for scientific expert testimony.  Daubert asks that a judge use a multifactor test to determine the admissibility of expert testimony.  The BCA is now working to include all expert testimony, both scientific and non-scientific, under Daubert to hold expert witnesses to a more reliable standard and produce a more fair and efficient judicial system.

SB 158, also sponsored by Senator Ward, has been introduced in the Senate to fully implement the Daubert standard in Alabama courts and bring us line with both federal courts and the majority of other states.  A companion bill, HB 161, sponsored by Representative Matt Fridy, has been introduced in the House.

Class action lawsuits are sometimes misused as a vehicle for plaintiffs’ lawyers to win big jackpots, with businesses paying excessive sums to settle and the class members walking away with little to nothing.  How did a federal court misapply Alabama law and expand frivolous class action liability for Alabama businesses?

A 2015 opinion from the Eleventh Circuit Court of Appeals threatens to subject Alabama businesses to an increased number of questionable class actions under the Alabama Deceptive Trade Practices Act (ADTPA).  These lawsuits will be expensive to defend, even if they lack merit.  In Lisk v. Lumber One Wood Preserving LLC, the Eleventh Circuit ruled that private plaintiffs can bring a class action under the ADTPA in federal court – even though the ADTPA expressly prohibits them from bringing an ADTPA class action in state court.  The Eleventh Circuit clearly ignored the will and intent of the Alabama Legislature.   

The ADTPA prohibits a broad range of deceptive trade practices, including representing that products have characteristics that they do not have, selling products without disclosing known material facts, and any other practice that might mislead consumers.  The ADTPA gives any consumer injured by a prohibited trade practice a private right of action and the opportunity to recover statutory damages and attorneys’ fees.  However, the ADTPA expressly prohibits private plaintiffs from bringing an ADTPA class action.  Instead, it reserves this powerful enforcement tool for the discretion of district attorneys or the Alabama Attorney General’s Office. 

The BCA supports SB 270, sponsored by Senator Phil Williams, which clearly states the legislature’s intent that the class action limitation in the ADTPA is substantive in nature and thus not eligible for broader interpretation by the Eleventh Circuit.

 

 

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