Spring 1999

WALKUPDATES

The firm's annual evening at the races was held at Bay Meadows racetrack. Attended by over 200 clients, guests and friends, the evening was enjoyed by all. Pictured at left is jockey Jose Arriaga (flanked by associates, Doug Saeltzer and Doris Cheng). Arriaga rode home Clancy Revere, winner of the Walkup Law Office stakes. Doug and Doris were particularly happy since they had a wager on the winning mount...

Dan Kelly recently served as a panelist for The Rutter Group's personal injury update program held in San Francisco and Los Angeles. He also spoke to the Northern California Association of Defense Counsel, as part of a program exploring insurance bad faith issues...

Dan Dell'Osso participated as a presenter at Auto Focus '98, a three-day seminar sponsored by the Attorneys Information Exchange Group, an association of counsel specializing in the investigation and prosecution of automobile related product defect claims. Dan spoke on means of effectively utilizing manufacturer-generated product advertising to demonstrate foreseeable product use and defeat defense claims of misuse. Dan has also been elected to the position of First Vice Chair of ATLA's Product Liability Subcommittee...

Jeffrey P. Holl was appointed to the Board of Directors of the Lawyers Club of San Francisco's Inn of Court...

Michael A. Kelly has been elected a fellow in the International Society of Barristers. The Society's members come from all 50 states as well as Europe, Canada, Mexico, New Zealand and Great Britain. Mike has also been invited to participate as an instructor at Emory University's Advanced Trial Techniques Program in the Spring...

Rich H. Schoenberger participated as an instructor at NITA's National Advocacy Skills Program held in Boulder, Colorado. Rich was also invited to speak to the Alameda-Contra Costa Trial Lawyers Association on finding and utilizing experts in premises liability cases...

Michael J. Recupero has been selected by the San Francisco Superior Court to participate as an early settlement panelist in the court's Early Settlement Program.


FIRM WELCOMES TWO NEW ASSOCIATES

Since our last issue of Focus two bright and capable young associates have joined our firm.

Khaldoun Baghdadi comes to us from southern California where he practiced with a real estate litigation boutique. While there he had the opportunity participate as first chair trial counsel in multiple cases.

A 1997 graduate of Hastings College of the Law, Khaldoun was a member of the 1996 Pacific Regional Champion Jessup Moot Court team, ranking third among all oralists in the competition. While at Hastings he also served as managing editor for the International and Comparative Law Review.

Prior to law school Khaldoun was selected as a University of California undergraduate Fellow, traveling and conducting research on the Middle East peace process in the West Bank and Ghaza. In 1995, he served as an intern at the United States Department of State. Fluent in Arabic, and an accomplished cook, Khaldoun is currently working on cases involving employment rights, product liability and premises liability.

Doris Cheng, our other new addition, is a graduate of the University of San Francisco School of Law. Doris, who clerked for our firm in 1997, is a native born San Franciscan. She attended Lowell High School and obtained her undergraduate degree (with honors) at University of California, Davis. Fluent in Chinese, Doris volunteered substantial pro bono time with Equal Rights Advocates, assisting staff attorneys in litigation and in the review of proposed legislation, while at U.S.F.

During her final year of law school, Doris served as an intern to the Honorable Saundra Brown Armstrong in the Northern District Federal Court. Upon graduation from U.S.F., Doris was honored as a Public Interest Law Scholar and also cited as an outstanding participant in the USF Intensive Advocacy Program. Through the advocacy program she was nominated for, and elected to, membership in the USF Inn of Court.

Doris is presently working on cases involving medical negligence, medical product liability and government liability.

Our existing and future clients will be well served by these two new additions to our firm.


FIRM EARNS VALUESTAR CERTIFICATION

We are pleased to announce that we have been awarded the prestigious ValueStar certified symbol of customer satisfaction. This certification is the result of an independent survey conducted by the Public Research Institute at San Francisco State University, in accord with the ValueStar customer service qualification requirements.

ValueStar a publicly traded, consumer-owned company has a patented system for surveying customers of applicant companies. Only companies rated very good to outstanding are certified.

ValueStar began in the San Francisco Bay Area in 1992. To assure credibility of its surveys, it utilizes San Francisco State University's Public Research Institute to audit each and every satisfaction study. At present, some 1,000 California companies have achieved certification in businesses and professions ranging from accountancy and automotive services to health care and real estate lending.

Over half of the companies which apply for ValueStar certification fail to achieve the required degree of customer satisfaction.

ValueStar rating information is available on the worldwide web at www.valuestar.com. ValueStar's services have been lauded by consumer advocates including Chris Bjorklund of KGO Radio and Laurel Pallock of the San Francisco District Attorney's Office, host of All Consuming on Bay.TV.

Our entire staff takes pride in our acknowledgment by ValueStar. We continue to be committed to delivering superior representation to our clients now and in the future.


SUPREME COURT APPROVES RICO USE IN HMO CASE

A statute intended to prevent unfair claims practices (the McCarran-Ferguson Act) does not prohibit plaintiffs from suing for insurance fraud under the Federal Racketeer Influence and Corrupt Organizations Act according to the United States Supreme Court.

In Humana, Inc. v. Mary Forsythe, et al., the Supreme Court held that because RICO advances the state's interest in combating insurance fraud, and does not frustrate any articulated state policy, the McCarran-Ferguson Act does not preempt a RICO action.

The Ninth Circuit had previously reached the same result, overturning a District Court grant of summary judgment in favor of Humana. In the underlying case, the plaintiffs claimed that they had been overcharged on their co-payments for hospital stays. In its master contract, Humana had agreed to pay 80% of the beneficiary's costs over their deductible, leaving the beneficiary responsible for the remaining 20%. However, because Humana had negotiated discounts with the hospital on its portion of the charges, it ultimately paid less than the 80% it contracted to pay.

The plaintiffs alleged a pattern of fraud violating of RICO, seeking actual, punitive and treble damages.

Humana sought to have the action dismissed on the basis that the Mc-Carran-Ferguson Act was a preempted state law which "invalidates, impairs or supercedes" laws regulating the business of insurance.

The unanimous Supreme Court opinion was authored by Justice Ruth Bader Ginsberg. She found that the statute did not preempt the application of RICO when such application would not "frustrate any declared state policy or interfere with a state's administrative regime."

The McCarran-Ferguson Act is patterned substantially on the National Association of Insurance Commissioners model Unfair Trade Practice Act, a fact which was significant to the Court. The Unfair Trade Practice Act authorizes a private right of action in a number of circumstances, including where an insurer misrepresents to insureds or claimants pertinent facts or policy provisions relating to coverage. The Model Act does not exclude application of other state law, statutory or decisional. Enactment provided for common law remedies against insurers. Overall, therefore, the Court found no frustration of state policy in permitting a RICO action to go forward. RICO's private right of action and treble damage provisions were found to complement (and in may respects mirror) statutory scheme. The Court was also impressed with the fact that the state filed no brief at any time urging that the application of RICO would frustrate its policy or interfere with the state's administrative regime.

HMO immunity from compensatory and punitive damages is also being attacked in California.

California Insurance Commissioner Chuck Quackenbush recently announced his support for Senate Bill 21, which would permit jurors to hold HMOs liable for their conduct in making treatment decisions; a circumstance which is now prevented both by state law insulating HMOs from liability, and, federal decisions preempting state liability laws where ERISA plans are involved.

As a rule, the provisions of ERISA limit recovery by wronged health plan members to the value of the denied benefit, mandate the application of federal substantive law, and require the plaintiff to show an arbitrary or capricious abuse of discretion in the denial of benefits. ERISA eliminates potential exposure for compensatory or punitive damages.

In addition to SB 21 in California, similar legislation has been offered in Texas and at the federal level. A number of proposals pending in Congress would peel back ERISA protection and allow medical malpractice suits to be brought directly against health plans.


AIRBAG CARNAGE CONTINUES- NHTSA PROPOSES NEW STANDARDS

Passenger side airbags, now in the majority of the cars on the road, are estimated to have saved somewhere between 200 and 300 lives between 1993 and 1997. During that same period, it is estimated that such airbags have also killed 60 or more children.

The fundamental problem with many airbags now in use (a problem denied by auto manufacturers) is that most passenger side bags are the product of inferior technology. That is, at the time domestic auto makers started installing the passenger side airbags, the technology existed to make airbags safe for everyone, without risking injury or death to small occupants. Unfortunately, the technology was expensive and the Big Three opted for economy.

Since the 1970's, American car makers had the ability to manufacture so-called "dual deployment bags" which deploy more gently in low speed collisions, and more aggressively in high speed collisions. Electronic safety interlocks which sense whether or not an adult passenger is seated in the passenger position have also been available.

Even inexpensive safety steps have been resisted by manufacturers. The recent step of placing warning decals in cars concerning the dangers of putting small children in the front seat had to be forced on the manufacturers by the Federal government after lobbying by parents for safer airbags.

Recognizing that some airbag designs are dangerous, especially for children and small occupants, the National Highway Transportation Safety Administration has announced a proposed rule making to require auto manufacturers to install safer airbags.

This proposed rule making, which includes a mandate for more realistic crash tests, will require that airbags protect belted and unbelted occupants of various sizes, and further, require that airbags be configured so as to minimize risk to infants, children and small adults.

Over the last 25 years, the Federal government has only required that airbags be tested with a dummy the size of an average sized adult male. This has allowed manufacturers to install bags which are dangerous to small occupants. Compliance testing under the proposed rules will measure airbag performance using test dummies representing 12-year-old, 6-year-old and 3-year-old children, as well as small females. NHTSA is also suggesting crash tests which include off-set frontal barrier tests at speeds up to 25 miles per hour so as to better replicate real world collisions.

In addition to new dummies, upgraded injury criteria will be added if this standard is adopted. The new criteria is aimed at evaluating the potential for chest and thoracic injury, as well as neck injury secondary to flexion, extension and sheer loading.

At present, no one knows whether (or when) the proposed rule will become effective. In the meantime, millions of Americans continue to be at risk from overly aggressively, poorly designed airbags which have the potential to cause serious and sometimes fatal injuries.


SUPREME COURT AUTHORIZES CONSOLIDATION OF U.M. ARBITRATIONS WITH SUPERIOR COURT TRIALS

In Mercury Casualty v. Superior Court, a unanimous California Supreme Court, in a unanimous decision, has held that a trial court has the power to consolidate an uninsured motorist contractual arbitration with a pending Superior Court action, where both actions arise out of the same accident and involve common questions of law and fact.

In Mercury, the injured plaintiff was hurt in an accident caused by the concurrent fault of a hit and run vehicle and an insured auto.

By law, the hit and run vehicle was "uninsured" within the meaning of Insurance Code §11580.2. Pursuant to California's statutory scheme, and the terms of the insurance contract, plaintiff was required to pursue an arbitration against the carrier.

The insured co-defendant (struck by the hit and run car and propelled into plaintiff's vehicle) was subject to suit in Superior Court. Midway through the pendency of both cases, plaintiff made a motion to consolidate the uninsured motorist case with the pending Superior Court tort suit on the grounds that absent a consolidation, there was a great risk that plaintiff, who was faultless, could either end up with nothing, or less than that to which she was entitled. Her reasoning was that in the uninsured motorist case, the carrier was claiming that the hit-and-run driver was faultless and all blame rested with the defendant in the Superior Court suit. Meanwhile, in the Superior Court action the insured defendant was claiming that all fault rested with the "mystery car." Unless both proceedings were consolidated there was the very real potential that the faultless plaintiff could end up with no recovery.

The Supreme Court held that Code of Civil Procedure §1281.2, which governs contractual arbitration, authorizes consolidation where there is a potential of conflicting rulings on common issues of law or fact. The Court reached this holding even though the language of California Insurance Code §11580.2 suggests that uninsured motorist claims must be arbitrated.

This ruling is a welcome one, as in the post Proposition 51 era this scenario frequently arises.

In light of the Court's ruling it is difficult to conceive of an uninsured motorist case where counsel would not want to consolidate the uninsured motorist arbitration with any Superior Court action(s) pending against other motorists who have exposure for plaintiff's injuries and damages pursuant to Civil Code §1431.2.

Members of our firm have significant experience in the resolution and arbitration of uninsured motorist claims. Associate counsel desiring to refer such matters outright, or to work on them jointly with members of our firm, should contact Kevin L. Domecus.


HEALTH CARE LOBBYISTS FIGHT PATIENTS' RIGHTS

As the newly elected legislature ponders measures to raise the general damage cap of $250,000 in medical negligence cases (Civil Code §3333.2), health care lobbying groups have lined up to oppose any alteration of the 22 year old cap. The same groups, during the 1997-98 legislative term, blocked passage of a bill which would have raised the 250,000 limit where the victim was under 14, the claim involved death or paralysis, or, where the physician was under the influence of drugs or alcohol.

The vice president of the California Medical Association, Steve Thompson, was recently quoted as stating that "basically, the data shows there is not a significant enough problem for us to sit down and negotiate" an increase in the cap. Fred Hiestand, general counsel for the newly created "Californians Allied for Patient Protection," an ironically named physicians' lobbying group, is trying to create opposition by claiming the cap promotes access for poor, low and moderate income people. Desperate to prevent any change in the system, Hiestand's group has aligned itself with the California Medical Association in trying to convince non-profit clinics, Planned Parenthood and other providers that a change in the MICRA cap will exacerbate the difficulty the poor find in accessing health care. None of the proposals presently on the table would raise the MICRA cap to a number which approaches increases in the consumer price index since 1976. Such an adjustment would bring the cap to somewhere between $750,000 and $1,000,000.

Even though California's medical malpractice insurers have been persistently turning record profits, and have branched out into states where no cap exists, they threaten that any effort to raise the California limit will invite a "holy war." Hopefully, with a Democratic governor and a Democratic legislature, changes can be made which permit medical consumers to be properly protected while maintaining affordable access for all California citizens.


ATLA ANNUAL CONVENTION VISITS SAN FRANCISCO

The Association of Trial Lawyers of America is holding its annual convention July 17th through the 21st here in San Francisco. As a result, we expect that a number of our fiends and associate counsel will be heading here come summer. As this issue of Focus goes to press, we are in the process of putting together an insiders guide listing the best places to visit, dine and stay.

This year's ATLA convention will include National College of Advocacy demonstrations, lectures, panel discussions and technical exhibits showcasing the latest in advocacy aides. Our own Dan Dell'Osso, vice president of the ATLA product liability section will be speaking on emerging issues in the field of product liability.

The keynote speaker for this year's convention is Morris Dees, co-founder of the Southern Poverty Law Center, and a tireless civil rights advocate.

Our friends and associate counsel visiting the Bay Area for the first time should drop us a note requesting our recommendations for the best restaurants, kids' activities, clubs, hiking trails and jogging loops. Our 25 favorite restaurants, including the best place to find authentic Italian food in North Beach, the hottest Szechuan in Chinatown, and the three most romantic restaurants in San Francisco, will be something all of our friends will want.

For the athletically inclined, Dan Kelly is compiling a list of his ten favorite public golf courses within a one hour drive of San Francisco, Dan Dell'Osso (who recently qualified for the Boston marathon) will give you his five favorite running routes through the streets of San Francisco, and our unidentified in-house wine snob has put together a list of the best undiscovered wineries in the Napa Valley. In addition, we are coordinating a party at Fisherman's Wharf for our friends and referring attorneys from around the country.

Don't forget to bring a sweater and a sweatshirt. July in San Francisco can be quite chilly. As the Central Valley heats up and the fog rolls in, July nights often seem like the middle of February, so be forewarned.


FEDERAL RULE ADDRESSING CHILD SEAT COMPATIBILITY IN THE WORKS

The National Highway Transportation Safety Administration is shortly expected to propose requirements for a universal child-seat restraint system to minimize compatibility problems that arise between various styles of child restraints and automobile seats. Child-seat makers, and vehicle manufacturers, have been at odds on this issue for some time, leaving parents with the task of determining whether a given child restraint is compatible with their vehicle. With so many makes and models of child-seats on the market there is no way to insure that all designs will be compatible with the ever-widening range of vehicle seat, seat belt and airbag combinations. Indeed, NHTSA recently admitted that more than 80% of children are improperly restrained because of compatibility problems between the child restraint and the vehicle.

In an effort to eliminate compatibility problems, the new rule will require that vehicles and child-restraints be equipped with a means, independent of vehicle safety belts, for securing child-restraints to vehicle seats.

In its advanced notice of proposed rule making, the agency indicated support for General Motors' uniform child restraint anchorage system (UCRA) because it was relatively inexpensive and utilized familiar hardware. The GM design utilizes two lower anchorages near the seat bottom and an upper tether to anchor the top of the infant seat.

Now that almost all states require children below a specified age or weight to be secured in child seats, it is more important than ever to make certain that consumers can be certain that the child seat they buy will safely fit into their car.


AMENDMENT OF CCP §998 MAKES LITIGATION COSTS RECOVERABLE IN KAISER ARBITRATIONS

Ever since Dickinson v. Kaiser Foundation Hospitals (1980) 112 Cal.App.3d 656, and Woodard v. Southern California Permanente Medical Group (1985) 171 Cal.App.3d 666, Kaiser members have been unable to collect traditional costs of litigation which Superior Court litigants are to recoup through the utilization of Code of Civil Procedure §998.

CCP §998 as recently amended permits plaintiff to serve on a defendant (or vice versa) a written offer to allow judgment to be taken on specified terms and conditions. The statutory offer can be made anytime until ten days prior to the commencement of trial. A party to a contractual arbitration proceeding (including arbitration of a professional negligence claim against a health care provider, CCP §1295) may now serve another party with a written offer to allow "an award to be entered." The offer can be made until ten days prior to arbitration and is deemed withdrawn if not accepted within 30 days, or prior to arbitration, whichever occurs first. (CCP §998(b)).

CCP §998 creates a strong incentive to settlement because of the monetary penalties which result where a defendant rejects a §998 offer and the plaintiff then obtains a more favorable award. Plaintiff is entitled to 10% interest on the award, calculated from the date of the 998 offer. Such interest continues to accrue until the judgment is satisfied. Civil Code §3291; Steinfeld v Foote-Goldman (1996) 50 Cal.App.4th 1542.

Where the conditions of Civil Code §3291 are met, pre-judgment interest is mandatory.

Whether the pre-judgment interest provisions of Civil Code §3291 also apply to arbitration is not settled. Under Civil Code §3291, where plaintiff makes an offer which the defendant does not accept, the judgment bears interest at the legal rate of 10% per annum. CCP §3291 expressly provides that interest accrues on judgments. When CCP §998 was amended, no corresponding change was made to Civil Code §3291, which continues to refer only to §998 offers in the context of a "trial" and plaintiff's failure to obtain a "more favorable judgment." While it is assumed that the legislative extension of CCP §998 to contractual arbitration was intended to permit §3291 interest to be added to an arbitration award, no reported case has so-held.