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SACRAMENTO — Tucked into the state budget package headed for approval by legislators late Wednesday is legislation that would divert 75 percent of punitive damage awards to the state. But lawyers question whether the plan, as revised in talks earlier this week, will net the $450 million estimated in the budget. Some question whether the plan will produce any revenue at all. A sunset clause inserted into the legislation means the state could only collect on judgments in suits that are filed after the budget is OK’d and are finally adjudicated — meaning appeals are exhausted — before June 2006. Tort reform advocate John Sullivan said the deal is better than nothing. “It’s a little bit like swinging at a pi � ata,” said Sullivan, president of the Civil Justice Association of California, which had pushed the idea in an earlier form. “The pi � ata has got to break open, and if anything hits the ground, you take off your blindfold and see what is there.” One thing that isn’t there is the one-judgment-per-defendant piece of Gov. Arnold Schwarzenegger’s plan. That part of it was especially offensive to plaintiffs attorneys. The revised legislation also allows for attorneys fees to come from the state’s 75 percent of punitive damage awards, rather than coming just from the plaintiff’s 25 percent. The Consumer Attorneys of California issued a carefully worded press release greeting the legislative outcome as at least a partial victory. In the release, CAOC President James Sturdevant and President-elect Sharon Arkin described the plan as evidence that the governor and the Legislature “publicly recognized and embraced the valuable function punitive damages play in punishing and deterring malicious or despicable corporate conduct.” Attorneys out in the field were less restrained. Brian Panish, of Santa Monica’s Greene, Broillet, Panish & Wheeler, said Schwarzenegger is “living in a dream world if he thinks $450 million is going to come into the state” from punitive awards. “This is just an attempt by the tort reform movement, now that they have this governor in office, to start pushing their agenda,” said Panish, who was the lead counsel in a personal injury suit against General Motors Corp. that produced a $4.9 billion verdict. As of Wednesday, the legislation calls for 75 percent of qualifying punitive damage awards to be put in a Public Benefit Trust Fund administered by the Department of Finance and available for annual appropriation. Settled punitive damages claims wouldn’t be affected. Plaintiffs attorneys would be able to take their fees from the state’s portion. Panish and other lawyers question how many punitive damages cases would actually fall into the legislation’s 22-month window. “I would say it would be the unusual case that could be filed today, generate a significant punitive award and make it all the way through the appellate process before the window closes,” said Lisa Perrochet, an appellate partner at Encino’s Horvitz & Levy. The governor’s May budget revision figures put the punitive damages revenue at $450 million. The state’s independent legislative analyst said $60 million was more realistic. Should the actual revenue fall short of the governor’s estimate, it will add to what could be a $10 billion hole in the 2006-07 budget.

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