Trial lawyers lobby sinks $6.2M in debt

The trial lawyers lobby has been awash in debt and bleeding members - just as it embarks on a national campaign to block any clampdown on medical malpractice lawsuits as part of President Obama’s health care overhaul.

The American Association for Justice, the most prominent group representing plaintiffs’ attorneys, has seen a shake-up in its executive suite and has struggled to deal with what appears to be a mounting budget shortfall. To help it fight congressional efforts to make it harder for patients to sue doctors and lawyers, it recently sent out an extra solicitation to its members, asking them to fork over money for a lobbying campaign.

The most striking evidence of its financial woes is a swift decline in income, which resulted in a more than $6.2 million deficit in its operating budget for the fiscal year ending July 31, 2008, the most recent year for which data are available.

The biggest hit to its books was in membership dues, which dropped from $28.6 million in 2005 to $19.2 million in 2008, according to the annual AAJ financial report for that fiscal year filed with the Internal Revenue Service.

“That is our number-one priority: to strengthen our membership,” said Joey Diaz, a member of the AAJ executive committee, speaking by phone from his law office in Madison, Miss. “We have a number of people working on membership and we have reversed that [downward] trend and are starting to move forward again.”

Mr. Diaz said he did not know the status of the association’s finances because he does not serve on the budget committee.

Officials at AAJ’s Washington headquarters declined to answer any questions about finances or the status of the organization. The association’s fiscal year ended July 31, and tax filings for that year are not available to the public.

Budget issues didn’t stop the group from rolling out a nationwide advertising campaign this week, a response to Mr. Obama’s decision to conduct state-run pilot programs that will test alternatives to lawsuits for settling medical malpractice claims.

Dubbed “Put Patients First,” the ad blitz warns lawmakers against stripping patients of their rights to sue amid an “epidemic of preventable medical errors.” The group is running commercials in Washington newspapers and has created a Web site, 98000reasons.org, which cites an Institute of Medicine study that estimates that 98,000 Americans die each year because of medical errors.

AAJ asked members for extra money to pay for the lobbying campaign in a solicitation last week.

“The stakes are high and the opposition is well organized, but we will succeed because we are on the right side of this issue,” an AAJ executive told members in a fundraising e-mail. “A contribution to the Protecting Patients Rights Campaign is an investment in your practice and in your clients’ future.”

AAJ’s Web site also asks members to donate money to an endowment, a political action committee and a fund to pay for AAJ’s new Washington headquarters.

The association’s financial filings for the past four years reveal that AAJ’s operating revenue fell by more than $8 million - from $36.7 million in 2005 to $28.6 million in 2008 - while total yearly expenses remained about the same, at roughly $34 million.

The predicament appears to have forced the trial lawyers lobby to burn through its cash in 2008 and take on more than $14 million in additional debt.

When the association’s chief executive officer, Jon Haber, stepped down early from the post in April, he explained that AAJ was in the strongest political position in a generation and that this gave him the opportunity to move on to new challenges.

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