The Campaign Finance Lawyer Loophole

By James Wootton
February 2002

A great irony could emerge from the 107th Congress: The purportedly populist campaign finance reform bills being considered by Congress would stifle debate on legal reform—a vital consumer and shareholder issue—while creating a loophole for the most powerful special interest in Washington: plaintiffs' class action lawyers.

As it relates to independent expenditures and issue advertisements, these bills don't cover trial lawyers because lawyers commonly take their compensation as individuals and, therefore, are not treated as "corporations" subject to the restrictions in the legislation. Whether or not they intend it, the bill's authors would grant license to these trial lawyers who ante up tens of millions of dollars in campaign contributions a year and, in doing so, would further empower a new class of wealthy individuals with an aggressive political agenda.

The Shays-Meehan/McCain-Feingold bills unwittingly step into a major public-policy battle between plaintiffs' trial lawyers and the U.S. business community in a way that's certain to produce a clear loser: the American public. Legal reform is a concept abhorred by these lawyers because it would rein in the filing of frivolous lawsuits and put a lid on the lottery-like legal fees that have made some trial lawyers fabulously rich. They remember well the bullet they dodged when President Clinton vetoed the 1996 Federal Products Liability bill. Since that bill's demise, the trial bar has been rewarded handsomely: The total of the top 10 jury verdicts increased twelve-fold from 1997 to 1999.

Because legal reform could help curb the "lawyer tax" that increases the cost of consumer goods and services by $4,800 annually for a family of four and degrades the value of investments, the public has a lot at stake in this battle.

Today, personal injury lawyers already are on top of the world. Freshly infused with the expectation of billions in fees from tobacco litigation, they are investing heavily in Senate elections to build a barrier against any future legal reforms. If lawyers were ranked among industries, they would be number one on the list of donors to political campaigns. According to the Center for Responsive Politics, lawyers contributed more than $110 million in the 2000 election cycle, $77 million of which went to Democrats. Members of the Association of Trial Lawyers of America alone gave $3.6 million to federal campaigns over the same period.

The battle over legal reform takes place on many fronts, from electing or selecting reform-minded officials, to educating the public about the need for reform, to engaging in grassroots and legislative lobbying and, ultimately, to enacting reform legislation. To be sure, personal injury lawyers and American businesses both engage in these activities. Unfortunately for the public, Shays-Meehan/McCain-Feingold would hobble American businesses involved in this debate while leaving trial lawyers armed to the teeth.

For instance, the legislation would impose a gag rule, prohibiting corporations from running broadcast issue ads that even mention the name of a candidate for a 60-day blackout period before a general election and 30 days before a primary. Personal injury lawyers would face no such obstacle.

Shays-Meehan/McCain-Feingold contains other booby traps that could confound business efforts to inspire needed reforms to our legal system. A gag rule, for example, would bar corporations from running ads that simply ask viewers to "Call Senator Jones and urge him to support legal reform bill X." During the blackout period, corporations would even be prohibited from running ads that name the principal sponsors of this bill.

Undoubtedly these are unintended consequences of Shays-Meehan/McCain-Feingold. The fact is that the courts are more solicitous of the free speech rights of individuals than corporations. Although some campaign reform advocates have expressed disdain for the greedy plaintiffs' bar and supported legal reform, the campaign finance bills would give more power to personal injury lawyers while crippling the business community's efforts to restore sanity to our civil justice system. Any congressional supporter of common sense legal reform should be wary of a bill that could significantly empower the plaintiffs' trial bar to block these needed reforms.

James Wootton is President of the U.S. Chamber Institute for Legal Reform.