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With Signing of Lawsuit Damage Limits, Haslam Caps Legislative Priority List

Gov. Bill Haslam effectively cleaned his plate of his first legislative package as governor Thursday, signing a tort reform bill that has been touted as a way to create a better climate for jobs in Tennessee.

Haslam signed the bill in a formal setting at the Capitol, making it a clean sweep on his personal legislative agenda. Haslam had previously signed three education reform bills, one at the Capitol on teacher tenure changes, one in Memphis on charter schools Wednesday and one in Murfreesboro last week on his plan to apply Hope scholarships toward classes taken in summer school.

Haslam offered no jobs package of legislation per se, stating from the start that he did not think the state could legislate new jobs — a point with which Democrats took great issue. But the closest measure to a jobs bill was Haslam’s tort reform effort, which met forceful opposition, foremost among trial lawyers who employed lawyer/actor Fred Thompson to do their high-profile lobbying on the issue.

The bill passed 21-12 in the Senate and 72-24 in the House in a Legislature with a heavy Republican majority in each chamber. The Legislature adjourned May 21, but a strong contingent of key Republican lawmakers joined the governor for the signing ceremony on Thursday.

“This was obviously one of our key pieces of legislation,” Haslam told reporters after the ceremony. “I honestly think this will help encourage a better business environment.

“I think we did it in a way that protects victims’ rights but also sets up a predictable landscape for business, and that was our goal all along.”

One interest group, the free-market Tennessee Center for Policy Research, had estimated 30,000 jobs a year could be created with tort reform, translating into 577 jobs a week. Throughout the legislative session, however, it became difficult to get lawmakers or other proponents to put a number on potential job creation. Haslam refused to do so on Thursday. But Haslam said that growth would be genuine.

“I’ve seen supporters of this had a number that they thought it would create. I don’t know how you quantify it. But I do think it’s real,” Haslam said.

The law, formally the “Tennessee Civil Justice Act,” places a cap of $750,000 on non-economic damages in civil cases, although it creates exceptions in cases that involve intentional misconduct, destruction of records or activity under the influence of drugs and alcohol. That cap is extended to $1 million in catastrophic cases, which the law specifies as paraplegia, quadriplegia, amputation, substantial burns or the wrongful death of a parent leaving minor children.

The law places a cap on punitive damages at two times the compensatory damages or $500,000, whichever is greater.

Opponents of the bill had insisted that such decisions should be left in the hands of juries. People who had settled cases that involved severe personal suffering had been brought in to legislative hearings to help make the case against the bill. Thompson in particular had given stirring testimony about the need to leave such decisions in the hands of jurors.

Haslam made special mention Thursday of his legal counsel, Herbert Slatery, and his work on the matter.

“People on both sides of the issue were giving him a strong piece of their mind,” Haslam said of Slatery. “But he kept coming back to ‘What’s the right thing to do?'”

Sen. Brian Kelsey, R-Germantown, said Thursday he had seen seven years as a legislator waiting for the day to come when such a bill would be signed. Sen. Mark Norris, R-Collierville, said it was more like 10.

“Ten years is the length of time we’ve toiled in this vineyard to bring true tort reform to the state of Tennessee,” Norris said. “It wasn’t until Governor Haslam came along with his vision and his focus that we were able to get it across the line.”

The law is particularly welcome in the medical profession.

“For the doctors in the state, this has been a long time coming,” said Don Alexander, CEO of the Tennessee Medical Association. “They need stability in their practices, when the largest expense is their professional liability. Now they know how to at least gauge and know exactly what to set aside to pay. They can limit their coverage a little bit more.

“This is going to make an environment in Tennnessee much more attractive to doctors to come to Tennessee.”

Alexander said that previously doctors who were trained in the state would leave the state because of a liability environment that has been “kind of toxic.”

With tort reform and education legislation completed, Haslam is likely to draw more attention now to his efforts to combat unemployment more directly.

Now that steps have been made ostensibly to create a better climate for business, the issue of job growth will get more scrutiny under the first-year governor. Haslam has made job growth in the state his top priority and has said his legislative agenda was designed for that purpose. Nevertheless, further discussion of education reforms is also expected, including issues of school calendars and the length of school days.

Mike Morrow is a correspondent for TNReport.com, an independent nonprofit news organization supported by readers like you.

Ramsey: Keeping Non-Economic Damages Cap at $750K Preferable

Lt. Gov. Ron Ramsey said this week he believes Republicans in the Senate prefer the original version of Gov. Bill Haslam’s tort reform bill, and that the legislation will likely move through the Senate simultaneously with that in the House.

Ramsey said he anticipates Senate activity on the bill next week. He said his prediction would be that the Senate would adopt part of the governor’s bill, but not the current House version as amended.

“I think the majority of our caucus likes the governor’s original bill without the amendment,” Ramsey told reporters. “I think the bill to begin with was a compromise.”

A subcommittee of the House Judiciary Committee on Wednesday passed a version of the tort reform measure, which is one of the main legislative efforts on Haslam’s agenda, and it is headed to the full House Judiciary Committee on Tuesday.

The thrust of the legislation, HB2008/SB1522, is to put caps on monetary awards for victims in civil suits. Haslam says the caps will create a more stable business climate for the state. He believes the bill will help create jobs, his top priority as governor.

Ramsey also sees the bill as a way to help create jobs, but he has refused to speculate on a specific number of jobs that could come from the action.

Haslam originally offered a proposal that put caps on non-economic damages in such lawsuits at $750,000. But the legislation immediately became the subject of negotiations behind the scenes among various parties involved.

The administration offered a subsequent version of the legislation that would raise the cap in “catastrophic” cases to $1.25 million. But by the time the subcommittee took up the bill Wednesday, the $1.25 million had been reduced to $1 million.

Herbert Slatery, Haslam’s legal counsel, attributed the changing figures to “the legislative process.”

The $1 million would apply to the most severe cases, such as those that involve amputations or spinal cord injuries that leave victims with paralysis. The $750,000 cap remains in the bill for most cases, and Ramsey’s comments suggest the Senate would like to keep the $750,000 in all cases, as Haslam first proposed.

Advocates for reform say there should be some level of predictability of how big awards could be in cases where victims are harmed. Opponents say such figures should be left to the judicial system, and that legislated caps significantly take away the opportunity for justice in such cases.

The issue has become a matter of emotional appeal, with opponents of the caps offering examples of people who have suffered serious losses. Testimony in committee hearings has included people affected by such cases.

Opponents of the bill have used the star power and persuasiveness of actor and former U.S. Sen. Fred Thompson to head the lobbying effort against the bill. Thompson has appeared before lawmakers but did not address the subcommittee on Wednesday.

Haslam has emphasized that caps will not apply in cases where intentional misconduct comes into play.

The bill includes caps on punitive damages that are two times the amount of compensatory damages in a case, or $500,000, whichever is greater.

It is possible other amendments will be offered on the legislation.

“On any kind of issue, you can argue extremes on both sides,” Ramsey said. “You kind of look at what’s reality in real life, and I think that’s what we’re doing.”

The legislation defines “catastrophic loss or injury” as cases that involve spinal cord injury resulting in paraplegia or quadriplegia; amputation of two hands, two feet or one of each; third-degree burns over 40 percent or more of the body as a whole or third-degree burns up to 40 percent or more of the face; or wrongful death of a parent leaving a surviving minor child or children for whom the deceased parent had lawful rights of custody or visitation.

Still Draining the Nation

Earlier this year Reason magazine offered up a much dimmer view of the Tennessee Valley Authority than that no doubt favored by the federally owned corporation’s 50-member public relations staff.

In “How Big Government Infrastructure Projects Go Wrong,” the libertarian Cato Institute’s Jim Powell cast “America’s biggest monopoly” in a light that by no means revealed it to be the economic savior and cultural redeemer of its much-publicized promise.

It was heralded as a program to build dams that would control floods, facilitate navigation, lift people out of poverty, and help America recover from the Great Depression. Yet the reality is that the TVA probably flooded more land than it protected; much of the navigation it has facilitated involves barges of coal for coal-fired power plants; people receiving TVA-subsidized electricity have increasingly lagged behind neighbors who did not; and the TVA’s impact on the Great Depression was negligible. The TVA morphed into America’s biggest monopoly, dominating an 80,000 square mile region with 8.8 million people—for all practical purposes, it is a bureaucratic kingdom subject to neither public nor private controls.

Powell’s sentiments are reflective of what seems to be a growing consensus among critics of various ideological stripes who agree on little except that the time has come for the Tennessee Valley Authority to be gone.

Today, TVA, although no longer a beneficiary of direct congressional funding, “pays none of the federal, state, and local taxes that private businesses pay,” Powell said in his article.

“As a government-backed entity similar to Fannie Mae and Freddie Mac, the TVA can borrow money cheaper than private businesses,” said Powell. “Currently, the TVA has about $26 billion of debt.”

In a January 2009 op-ed for a local newspaper, Shaka Mitchell, at the time vice president for the Tennessee Center for Policy Research, observed that the hospitable, appreciative manner in which TVA and its leadership seems always to get handled by state and federal authorities (citizen lawsuits are applying the real heat) is typically (and tragically) symptomatic of government ownership or operation of just about anything.

When a private company screws up, someone is held accountable. People stop buying its products. Shareholders fire the CEO. The company goes bankrupt. But when a government-run company has a similar problem, no one takes the blame.

Officials at TVA don’t have to answer to shareholders or voters. Government run companies, like the TVA, are interested in one thing; maintaining their own existence. As long as they keep their jobs, they couldn’t care less about the quality – or dangers – of their product.

We are learning an important lesson about the differences between what happens when a private company and a public one impact the community negatively. Exxon had to pay over half a billion dollars to fix the mess it caused, and rightfully so. Troublingly, taxpayers will be forced to pay to clean up the TVA’s debacle.

A 2001 paper (highlighted in Powell’s Reason article) from the Northeast-Midwest Institute, a “non-partisan research organization dedicated to economic vitality, environmental quality, and regional equity,” assessed TVA in terms just as damning.

“Sixty-five years after it was created, this giant federal agency can no longer justify its existence,” wrote Richard Munson, now the senior vice president of Recycled Energy Development, in “Restructure TVA: Why the Tennessee Valley Authority Must Be Reformed.”

“Why should 242 million Americans be forced to subsidize the electricity rates of the 3 percent of Americans who happen to live in the Tennessee Valley,” asked Munson, who also testified before Congress on the subject of TVA in 1999. “There’s little doubt that TVA has become a burden to the nation’s taxpayers. What’s becoming increasingly apparent is that the status quo also harms the very Tennessee Valley residents that TVA is supposed to serve.”

Last winter a prominent longtime critic of the Tennessee Valley Authority called on President Obama to embark upon perhaps the most counterintuitive political undertaking an FDR-idolizing stimulator-in-chief could conceive of.

Writing for the Christian Science Monitor back in February, environmental activist William U. Chandler, a graduate of Harvard and the University of Tennessee, offered that if President Obama really wanted to throw his GOP detractors for a real mindbender, he’d take an aggressive run at radically reforming – and perhaps even dispensing with – the granddaddy of all New Deal boondoggles.

Obama will have to grapple with the history and the politics of this question as he ponders how to make TVA a force for more-efficient energy use, better jobs, and a low-carbon future. At the least, Obama could put TVA management on notice of his expectations. He could direct his Department of Energy and Environmental Protection Agency to define steps TVA should take to reform the 75 year-old agency. He could require – and reward – investment in energy efficiency and disincentivize the wasteful use of power. He could require TVA to create the most advanced carbon mitigation measures of any US utility – and then of any utility anywhere in the world. He could inform managers that if by 2011 this plan is not well advanced, they will be replaced, and the agency put up for sale.

Such blasphemies are the sort that once laid low the higher political ambitions of Barry Goldwater, who got himself in Dutch with the Tennessee masses for offhandedly quipping that he’d sell TVA “for a dollar” given half a chance. And speaking of “Dutch,” the plug got summarily pulled on Ronald Reagan’s job as host for General Electric Theater at around the same time, after he expressed similarly contemptuous views of the “big government” powerhouse, which he soon discovered was as “sacred as motherhood” in some quarters.

Of course, all that was long before Dec. 22, 2008, when overnight TVA’s popularity sank to levels rivaling that of a lump of coal in the public’s collective stocking.

For a little perspective on the gargantuan nature of the 5.4 million cubic yards of ash that roared forth from the Kingston Fossil Plant, which as of last summer TVA was estimating would cost up to $1.2 billion to clean up, here’s what Tennessee Department of Environment and Conservation deputy commissioner Paul Sloan told state lawmakers during a hearing last session: “If you took the Great Smoky Mountains and you subdivided it in one-acre tracts – over half a million acres – the amount that spilled (at Kingston) would be sufficient to put about 11 tons of ash on every one of those acres. So that’s the scale that we’re dealing with. So, yes, this is a very long-term cleanup.”

But like the others who have for years criticized the massive agency, it’s not just TVA’s darkest-day disaster that ought to cause America to rethink TVA organization, oversight and even ownership, Chandler argued.

The Tennessee Valley Authority — an “icon of the New Deal” that also happens to have “the worst environmental record of any utility in the nation” — in fact never did “live up to its supposed goals,” he said.  In particular, its promises of bestowing collective prosperity on the region’s inhabitants fell demonstrably short: “Both during and after the Great Depression, manufacturing jobs were created faster just outside the TVA area than within it,” he wrote.

Non-TVA counties in northern Georgia and Alabama and western North Carolina in 1933 were as poor as or poorer than TVA counties, but by 1953 they were generally better off. Even rural electrification and the use of household appliances grew faster in the non-TVA south.

To be sure, TVA created jobs for some 13,000 workers, but for at least four decades, Depression-era investments in TVA dams, waterways, and recreation areas have failed to pay for themselves by any economic measure.

In his 1984 book, “The Myth of TVA,” Chandler observed that “(a)mong the nine states of the southeastern United States, there has been essentially an inverse relationship between income per capita and the extent to which the state was served by TVA.” Furthermore, he wrote, “In a critical measure of economic performance, growth and income, no evidence exists to suggest any special contribution by TVA to the development of the Tennessee Valley.”

Chandler concluded his book with words that no doubt reflect sentiments held today by far more ratepayers and taxpayers than when first published 25 years ago: “The fundamental result of the TVA experiment teaches that buying flexibility by giving away democratic control is a false bargain.”