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Clark County, Nevada

In April 2013 the Las Vegas Review-Journal declared Sin City to be “the undisputed jackpot justice capital of the world” after another Clark County jury delivered a $500 million verdict against a health insurer. The massive award is the latest in the continuing fallout from the hepatitis C outbreak stemming from unsanitary practices at Dr. Dipak Desai’s endoscopy clinic.

A doctor’s pockets are only so deep, especially when he’s fighting criminal charges, so plaintiffs’ lawyers targeted every major business associated with the clinic. First, in 2010, they got a $500 million verdict against a drug manufacturer and distributor on the theory that they produced the anesthetic, Propofol, in vials large enough to be reused by clinic staff in treating colonoscopy patients. The following year, plaintiffs’ scored another $162 million windfall against those businesses. And only days later, another Clark County lawsuit yielded $90 million more in compensatory and punitive damages for a single patient. After those outcomes, the drug maker, Teva, settled most of the remaining cases for $285 million.

But the plaintiffs’ lawyers were not through. They turned their attention to local insurer Health Plan of Nevada (HPN), claiming that the insurer also had a role in the outbreak because it failed to remove Dr. Desai from its network of doctors despite quality-of-care concerns. This April, that trial resulted in $24 million in compensatory damages to three patients plus a mind-boggling half-billion dollars in punitive damages.

HPN noted that if the verdict is allowed to stand, it will affect the affordability of health insurance in Nevada. “The only numbers that matter here are the higher insurance premiums that Nevadans may pay if health plans are held liable for the criminal conduct of independent doctors,” the statement said. As the Las Vegas Review-Journal more colorfully observed, “The breathtaking stupidity of this verdict would be comical if it didn’t have such costly ramifications for every resident of this valley.”

Clark County jurors were kept in the dark about Dr. Desai’s misconduct, allowing plaintiffs’ lawyers to focus on demonizing whatever deep-pocket business they had dragged into court. As Peabody Award-winning investigative reporter George Knapp observed in the first trial, “jurors were never allowed to hear a host of arguments, evidence and experts who would have offered alternative explanations.” Knapp also noted that “the presiding judge, Jesse Walsh, was viewed as overtly friendly to the plaintiff’s attorneys. The fact that those attorneys contributed such a large percentage of Walsh’s campaign war chest is only part of the explanation.”

Similarly, in the HPN case, another Clark County District Judge Timothy C. Williams barred the jury from hearing such evidence, including evidence about how insurers rely on numerous private and government regulators’ site visits and credentialing and licensing processes, none of which uncovered improper practices at Dr. Desai’s clinic over several years, the Review-Journal reported. Jurors also were not told that other juries had already found the drug companies at fault.

In October, Dr. Desai was sentenced to 18 years to life in prison for his criminal convictions in the deadly hepatitis C outbreak.

The Review-Journal has cautioned that the Clark County plaintiffs’ bar and judiciary’s response to the Desai case is “a warning to businesses everywhere: You won’t get a fair shake in the Nevada justice system — not even close. Rest assured, our casinos offer fair play. But the courts are rigged.”

ALL EYES ON THE NEVADA SUPREME COURT

Nevada Attorney General Catherine Cortez Masto’s repeated use of private law firms to enforce Nevada law, and her office’s compensation of these outside lawyers based on the amount of fines they impose on those who do business in the state, are of continuing concern. A challenge to this practice, discussed in last year’s Judicial Hellholes report, remains pending before the Nevada Supreme Court, which heard oral arguments in June 2013.

That appeal stems from a Clark County case in which AG Masto hired Washington, D.C.-based plaintiffs’ class-action law firm, Cohen Milstein, to challenge the business practices of homebuilders and mortgage lenders. Given that Nevada has among the highest foreclosure rates in the country, such lawsuits are politically popular. But by pursing such actions through contingency-fee arrangements, these lawsuits seem more influenced by the profit-motives of self-interested out-of-state lawyers than by justice in the public interest. ATRA filed an amicus brief in the case.

AG Masto has failed to explain adequately why her own substantial, taxpayer-funded staff cannot handle this litigation. Nor has she explained why she is letting an out-of-state private law firm drive such massive litigation in Nevada, though Cohen Milstein lawyers have generously supported her campaign fundraising and the Democratic Attorneys General Association in recent years.

In fact, Masto’s use of private lawyers could jeopardize a $127 million settlement between a mortgage-processing company and 49 other states and the District of Columbia. The holdout is Nevada, where the Masto-Milstein deal gives the private firm “virtual veto power” over any settlement offer. As the Wall Street Journal explained, “under [the mortgage processor’s] settlement with other states, the states can renegotiate if any state gets a different deal. So if Nevada’s trial lawyers insist on a bigger payday for themselves, [the processor] has to return to the negotiating table.” If she allows this to happen, AG Masto will have an awful lot of explaining to do.

Observers are not optimistic that the Nevada Supreme Court will intervene in the arrangement between Masto and her contingency-fee lawyers. And last year, the high court became the only appellate court in the nation to embrace a highly controversial rewrite of the law governing premises liability. In that case, the state’s high court reversed a trial court’s dismissal of a “trip-and-fall” case against Costco, finding that the store had a duty to guard against hazards that are open and obvious to all, such as a wooden pallet left in a warehouse aisle. This aspect of the decision is similar to the unsound West Virginia ruling detailed on page 19 of this report. But the Nevada Supreme Court went further. It imposed upon businesses and homeowners a new duty to guard against risks to any person who comes onto their property, even if that person is trespassing, adopting Section 51 of the American Law Institute’s model Restatement of the Law (Third) of Torts: Liability for Physical and Emotional Harm (2012). In contrast to Nevada and as noted among Points of Light in last year’s report, the clear trend nationally is to reject the new Restatement’s radical approach.

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