$560M, more than the budgets of many smaller cities, is a fairly shocking figure, since, at typical 33% to 40% personal-injury contingency rates, it means that it's a wealth transfer of about $30 per capita from every man, woman, and child in the 99% in New York City to the 1% who are trial lawyers. And the $560M figure doesn't include the litigation expenses of a 650-member Law Department (that's more than the number of lawyers in Dewey Leboeuf's New York office at its peak, though not all of those city lawyers are defending personal injury claims) or of non-legal workers whose jobs are interrupted responding to discovery.

But the focus of a NY Times story on the subject is the reporter's inconceivable shock that NYC defends itself in lawsuits instead of blindly writing multimillion $ checks. In particular, the story is critical of the city hiring a private investigator to double-check the claimed injuries of a plaintiff claiming (and eventually receiving) millions of dollars of damages from a tree accident: of course, surveillance of a personal injury plaintiff seeking a large sum for quality-of-life injuries is common, and can uncover fraudulent claims, though courts are inconsistent and relatively lackadaisical about punishing such fraudulent claims. But given how thoroughly wracked the status quo is with fraud, imagine how much a softer touch New York City taxpayers would be if it was known that they did not double-check for fraud? "If you build it, they will come," and that $560 million a year would quickly become $5.6 billion a year. The Times investigated "ten cases"; how were those picked? How many cases involving fraudulent claims that the City successfully beat back did the Times miss?

The Times does not question City taxpayers paying an unprecedented $350,000 to the estate of an elderly woman for what was, at most, a few seconds of pain and suffering (and was probably no pain and suffering at all, but we'll credit the jury's finding for the sympathetic grandmother against the deep pocket); it gives only lip service to the legitimate claim of the City's counsel, Michael Cardozo, that taxpayers are paying excessive amounts for injuries.

The Times story is part of a three-day series suggesting that the City should do more to prevent injuries from falling trees. Of course, creating excessive liability for damage caused by trees is a great way to incentivize a defendant into having fewer trees. Trial lawyers' proposed solutions sometimes involve pure social cost: this blogger argues for warning signs, though, of course, if every tree has a warning sign to avoid liability, citizens will simply ignore the millions of dollars spent on warning signs (and also ignore far more important warning signs). And trial lawyers will still argue that injured plaintiffs were inadequately warned, because, after all, the warnings didn't prevent the injury in hindsight.

On last Thursday and Friday, I was in Charlotte for the spring meeting of the Civil Justice Task Force of the American Legislative Exchange Council, to which I presented my thoughts on how today’s securities litigation affected states. Uptown Charlotte was visited by various protesters affiliated with labor unions, the Occupy movement, and other left-leaning causes who were objecting to ALEC’s meeting and at the earlier-in-the-week annual shareholder meeting for Bank of America.

The protests against ALEC have been led by Van Jones’s Color of Change organization, which has attacked the free-market organization for drafting “stand your ground” model legislation arguably (though not really) at issue in the Trayvon Martin shooting. (Note: Florida’s stand-your-ground law pre-dates ALEC’s model bill, and the group has now disbanded the task force responsible for advancing that model legislation.) Like Ted, I’ve found the left’s attacks on ALEC to be profoundly disingenuous. First, it’s clearly the case that those opposed to ALEC’s reform work—in the case of the Civil Justice Task Force, for instance, the American Association for Justice, formerly known as the Association of Trial Lawyers of America—offer up legislation and legislative amendments to further their own interests. Second, if ALEC didn’t exist, corporations would still offer draft legislation and legislative amendments to further their own interests; it just wouldn’t be vetted by a broad group including legislators across several states and thinkers like myself, my former colleague and Point of Law founding editor Walter Olson (now at the Cato Institute), our editor Ted Frank and others at his Center for Class Action Fairness, and ALEC Civil Justice Task Force co-chair Victor Schwartz, who edits the most-used law school casebook on torts. Exactly how is ALEC supposed to be an unusually nefarious force, apart from the fact that its critics disagree with its agenda?

In the settlement of the questionable Nutella litigation, the attorneys stand to collect approximately $5 million, while class members will eventually end up with less than $2 million once deductions are made from the settlement funds for the cost of notice and administration—assuming that even 400,000 claims are made. The attorneys justify this by claiming that "injunctive relief" is worth $10 million to the class. But the injunctive relief consists of putting information that already existed on the back of the label on the front of the label, minor changes to the Nutella website, and changing the phrase "An example of a tasty yet balanced breakfast" into "Turn a balanced breakfast into a tasty one." Class counsel also justifies this fee from the work entailed in reviewing 53,000 documents and taking two depositions. [Jackson; Jackson; Lammi]

Have you been a saver over the last few decades, investing in broad-based mutual funds or stocks of banks? Did you responsibly refuse to buy more house than you could afford? Did you structure your mortgage so that you had significant equity in the underlying property? Did, notwithstanding adverse financial circumstances, you keep up with payments on a mortgage? Well, you're a sucker. The DOJ is taking tens of billions of dollars from bondholders and stockholders, and engaging in an arbitrary wealth transfer to homeowners who benefited from buying larger houses than they could afford, regardless of whether they are victims of allegedly deceptive practices in foreclosures (most of which aren't actually deceptive). [Furchtgott-Roth]

As abusive as the mortgage settlement is, it's better than the abusive and counterproductive litigation that led to it in the first place.

In North Carolina, John Edwards is currently standing trial for alleged felonies related to campaign finance violations: it is claimed that the Edwards campaign coordinated over a million dollars of third-party payments to Edwards's mistress, Rielle Hunter, to buy her silence for fear that Hunter talking would adversely affect Edwards's presidential campaign; the third-party contributions should be considered illegal "contributions," according to prosecutors. As Bradley Smith, among others, has noted, this seems abusive to take such a grey area of the law and turn it into a criminal prosecution, especially since Edwards had non-campaign reasons—a desire to hide the affair from his wife—to engage in such shenanigans. (Earlier on POL; and indictment coverage.)

In apparently entirely unrelated news, the New York Post reports that, in conjunction with Barack Obama's personal request, an Obama campaign supporter attempted to pay the Reverend Jeremiah Wright $150,000 to keep quiet during the 2008 presidential campaign, for fear that if Wright publicly talked too much, it would adversely affect Obama's presidential campaign. There doesn't seem to be anything other than political reasons to keep Wright quiet, since Mrs. Obama was present at the same controversial anti-American sermons that Obama supporters feared Wright would talk about. Nevertheless, not even the New York Post suggests the need for prosecutors, and I seem to be the only blogger asking why this payment isn't more problematic than the one Edwards is being prosecuted for.

Comparative negligence combined with joint and several liability resulted in a variety of absurd cases where the deep pocket with 1% responsibility paid for the negligence or intentional torts of others, so many states, Indiana among them, limited joint and several liability for the minimally responsible.

Abu Rahmatullah's Super 8 Motel, adhering to the non-discriminatory EEOC principle of not performing criminal background checks, hired criminal Joseph Pryor. Unfortunately, Pryor was a recidivist, and robbed and murdered paying guest James F. Santelli. A jury reasonably assigned 97% of the fault to Pryor (currently serving an 85-year sentence), 2% to Rahmutallah for following EEOC guidelines' preference for indifference to criminal history, and 1% to Santelli for reasons that are unclear. This would limit Rahmatullah's liability under the statute, but an Indiana appeals court says it didn't care what the legislature said about the subject, and remanded for a new trial where a jury would not be allowed to assign comparative fault to the intentional wrongdoer. [Santelli v. Rahmatullah (Ind. App. 2012) via Oliver via OL]

A new paper by Suzanna Sherry (h/t M.G.), argues that overreaching and greed by plaintiffs' lawyers resulted in adverse precedent:

Class action plaintiffs lost two major five-to-four cases last Term, with potentially significant consequences for future class litigation: AT&T Mobility v. Concepcion and Wal-Mart v. Dukes. The tragedy is that the impact of each of these cases might have been avoided had the plaintiffs' lawyers, the lower courts, and the dissenting Justices not overreached. In this Article, I argue that those on the losing side insisted on broad and untenable positions and thereby set themselves up for an equally broad defeat; they got greedy and suffered the inevitable consequences. Unfortunately, the consequences will redound to the detriment of many other potential litigants. And these two cases are not isolated tragedies; they provide a window into a larger problem of Rule 23. When plaintiffs' lawyers chart a course for future litigants, they may be tempted to frame issues broadly for the "big win" - with disastrous consequences. I suggest that it is up to the courts, and especially to those judges most sympathetic to the interests of class-action plaintiffs, to avoid the costs of lawyers' overreaching. That is exactly what the dissenting Justices (and the judges below) failed to do in these cases.

I'll repeat my earlier statements that the panic over Concepcion is wholly unwarranted: consumers will be far better off ex ante if vendors adopt consumer-friendly arbitration clauses like AT&T Mobility's, and many vendors will prefer the class action system to such generous arbitration clauses, so the death of the class action is a long ways away.

• Is there nothing lawyers can't do? NSF-funded law review article divorced from reality: "Tort actions may impel industry to take voluntary steps to redesign chemical molecules ... to be less toxic." $366,785 of your tax dollars at work encouraging US courts to cripple American industry. [Oliver]
• Mac Donald on US v. Arizona argument. [Washington Examiner]
• Jeffrey Rosen still pushing bogus "Constitution in Exile" conspiracy theory. [Greve]
• Several amicus briefs in Rubashkin Supreme Court appeal. [ABAJ link roundup]
• Warren scandal grows; Penn Law also identified her as minority; despite claims from friends, minority status surely counted for something in Harvard Law hiring decision. [Zywicki @ Volokh; Jacobson; Coulter; Bader; Bader; Bedard; Popehat; earlier on POL]

• False criminal allegation leaves man unemployed, in hock to criminal defense attorneys. [NYDN]
• New York state health insurance mess. [McMahon @ Newsday]
• The Obama enemies list in action. [Strassel @WSJ]
• Has the new North Korean regime made a fatal "New-Coke"-like blunder in its internal marketing? A long read that's worth it. [38 North]

Marc Herrmann notes that judges have unrealistic expectations regarding e-discovery. Of course, they're encouraged to have such unrealistic expectations by plaintiffs' lawyers in asymmetric discovery cases. Acting as if a mere snap of the fingers can result in the full production of electronic documents means that judges can treat the normal frictions of failure as evidence of bad-faith that could lead to sanctions precluding a defendant from defending itself at trial. And if those consequences are a possibility, then that means that defendants can't risk spending less than top dollar on discovery, meaning that plaintiffs' lawyers have additional leverage to extract rents in nuisance settlements. Add the incentives of insurers indifferent between paying defense lawyers and paying plaintiffs' lawyers, and now any case that can get past the motion to dismiss stage is worth millions, no matter how meritless, and more if the court exercises its discretion to let discovery proceed while to motion to dismiss is pending. So it's of mild concern when a law professor argues (via Steinman) that whether to stay discovery while a motion to dismiss is pending should be adjudicated on a multi-factor-test case-by-case basis, pooh-poohing the costs of discovery, or the incentives of plaintiffs to increase the costs of discovery. Under such a regime, even bringing a case that can't survive a motion to dismiss would be profitable. Among the factors missing from Kevin Lynch's analysis: the incentive of judges to permit discovery to go forward and refuse to rule on a motion to dismiss, hoping that this creates an incentive to settle that gets cases off the docket.

Paging Todd Zywicki. CFPB director Richard Cordray complains that 9% of bank customers pay 84% of overdraft fees, with the implication that paternalistic regulation is needed. Of course, as Shannon Phillips points out (via Funnell), what this statistic really reflects is that the vast majority of account holders use their accounts responsibly: if someone in that 9% were to do a better job of balancing their checkbook, they'd move into the 91%. But CPFB regulation (still in a notice and comment procedure, with comments due by June 29), would likely punish the 91% to protect the 9% from themselves. Except that without the overdraft fees, banks will find it unprofitable to serve these customers in the first place, and will instead charge monthly fees that effectively preclude any access to the banking system for both the responsible and irresponsible lower middle class. But at least regulators can feel better that they stopped overdraft fees.

Similarly, Jeff Sovern complains that many consumers and students are cluelessly engaging in complex financial transactions without understanding basic concepts like variable and fixed interest rates. The proposed solution—required use of mortgage counselors—would make mortgages more expensive for everyone, even those responsible citizens who are capable of representing their own interests and making their own choices without the needless additional overhead. Why not let consumers choose for themselves whether they need to hire a financial advisor?

Part of the problem in the mortgage context, I would strongly suspect, is the degree to which meaningful disclosures are buried in meaningless defensive disclosures banks engage in upon risk of class action liability. To take a related example, the pending Supreme Court case of First American Financial Corp. v. Edwards involves a RESPA class action alleging a technical violation of the law without any financial injury; while this is not a disclosure case, it shows the degree to which banks face litigation exposure by entrepreneurial rent-seeking trial lawyers without regard to whether the alleged transaction problem actually harms consumers. The disclosure regime has grown to the extent that it has become counterproductive: even brilliant experienced federal judges find it unprofitable to read the disclosures. Where CFPB could be useful is to create a clear-cut disclosure regime—a page of disclosures—together with preemption precluding lawsuits over the lack of the other 100 pages of disclosures. Earlier.