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June 2005 Archives

"Tort-uring the Data"

Eric Helland, Jonathan Klick and Alexander Tabarrok have written an article for the Spring 2005 edition of the American Economics Association's Journal of Economic Perspectives. Its abstract:

This article discusses data available for researchers interested in the U.S. civil justice system and illustrates the uses of the various datasets with some interesting findings. Our focus is on torts, defined as an injury to person or property that is not covered by contract and for which civil liability may be imposed. The most common tort is the result of an auto accident. We discuss data useful for analyzing trends, data that are useful for cross-sectional research and finally data covering only a specific type of civil litigation such as medical malpractice. We conclude by discussing the limitations of all civil litigation data.

Unless you're an AEA member, it's available only on a pay basis.


Martin Grace sets out to ask a philosophical question, "should there be a rational link between compensatory damages and economic harm" but winds up raising a second philosophical question: to what extent should the civil justice system value damages based upon the subjective, ex ante opinion of the plaintiff or upon the objective (replacement cost) value derived from the marketplace?


Per Richard Nadler at NRO, recent events in Kansas raise a question: why are elected officials, including some with reputations as outspoken critics of judicial activism, so passive when judges seize the power of the purse in school funding cases? See Jun. 6, Jun. 7.


I thought that this case, ripped from the pages of the IJ, would be appropriate given the discussion between Jonathan Wilson and Clay Conrad below. Let's push the debate further -- should there be a rational link between compensatory damages and economic harm? I realize that looking at a sample of one to make broad generalizations is not good science, but here goes anyway...

Suppose a teenager attempts suicide by overdosing on 300 aspirins. Suppose further the physicians treating the teenager actually make a medical medical mistake which results in the death of the teenager. What should the damages be? From an economic perspective, the teenager essentially thought his future was worthless. However, we can discount this belief to some extent because of mental illness (i.e. You must be mentally ill as you otherwise wouldn't kill yourself). How about pain and suffering? If one attempts suicide isn't the pain and suffering the attemptee's responsibility? Or loss of enjoyment of life? Is it appropriate to compensate the teenager for pain and suffering since he was, at the very least, also at fault? In addition, the issue of mental illness would likely discount the future earnings depending on how severe the illness was or how expensive it is to treat. All of this presumably should be part of the forensic economic testimony.

Finally, the parents of the teenager have a separate case and they seem to be the ones injured as they are the ones who lost their child.

Find out what the jury said by clicking on continue reading.

Med Mal Costs 2004

Where is the most expensive place to defend oneself against malpractice in 2004? Florida is tops and Wyoming is the least expensive.

Using data from the National Association of Insurance Commissioners who collect most insurance company annual statement data electronically and the Bureau of the Census, I calculated the per capita premiums written, the per capita losses incurred, and the per capita defense costs incurred for medical malpractice.

New York ranks number 1 in terms of losses incurred per capita. Losses incurred are the losses paid plus additions to reserves for future expected losses during the reporting year. New York's losses incurred per capita were $76.25 while the second place state (DC) had a $56.08 per capita loss incurred. Washington, DC also had the highest per capita premiums in the U.S and the fourth highest defense costs incurred.

On the lower end we see that Mississippi, South Carolina, and Wyoming ranked at the bottom for one of the three indicators. Just to provide an idea of the difference in costs between the highest and the lowest state:

Premiums per capita $84.99 (DC and SC)
Loss incurred per capita $47.01 (NY and WY)
Defense costs $14.60 (FL and MS)

To be fair, the defense costs really depend upon the complexity of the cases in a given year, but they do provide a general indication (especially over time) of the legal environment.

See where your state ranks here.


Sir Roy Meadow put several innocent women behind bars by testifying with "misleading and flawed" evidence that several infant deaths must have been murder. The General Medical Council is considering sanctions, including stripping him of professional credentials. ("Paediatrician's 'flawed evidence'", BBC, Jun. 21) (via Skeptico). Compare and contrast New Jersey, which bans "retaliatory action" for such wrongful testimony.

Punch and CounterPunch - Redux

Continuing our recent debate, Texas trial lawyer Clay Conrad continues the argument in a recent post in which he makes (by my count) five primary arguments. In his response he claims that my analysis �ignores� his points but instead knocks down �several obvious straw men�. To the contrary, I think that�s what Conrad has done.

1. A Rational Link Between Punitive Damages and Economic Harm.

Conrad now denies that he previously conceded that punitive damages �have no relationship to the harm or wrongdoing by corporate defendants�.

He now claims, �While punitive damage awards have a relationship to the harm or wrongdoing of corporate defendants, that is not the ONLY thing they have a relationship to. Other factors come into play � and properly so. Juries also determine the likelihood of the harm being repeated, the wealth of the corporation . . . the attitude of the corporation towards their wrongdoing . . . and numerous of factors.�

Setting aside the question of whether Conrad really is conceding the lack of a rational link between punitive damages and economic harm, his response proves my point.

Factors like �the wealth of the corporation� and �the likelihood of the harm being repeated� should not properly be a part of a jury�s consideration of punitive damages.

Conrad likes to compare punitive damages to the sentence imposed in a criminal case. Could a criminal jury in the U.S. properly consider the wealth of the defendant? Could it properly consider whether the defendant was likely to repeat the crime if let free?

It was precisely this kind of rationale that was struck down by the Supreme Court in State Farm v. Campbell, where Justice Kennedy noted that the lowers court�s consideration of evidence of the defendant�s practices in other states and in other cases was not a proper consideration in an award of punitive damages in the case at bar.

If Conrad�s argument is that juries, as a matter of fact, actually do consider a defendant�s wealth and likely repetition of the tort, Conrad is telling us that there is no rational link between the harm caused by the defendant and the size of a punitive damages award. That was precisely my point.

2. What is Justice?

Conrad claims, without support, that �economically efficient deterrence of corporate misconduct is not and has never been the goal of the civil justice system.�

Remove the pejorative word �corporate� and Conrad�s claim becomes false. The economically efficient deterrence of misconduct, together with the efficient reparation of tortious harms done, is precisely the goal of the civil justice system.

Despite denying my formulation of the goals of the civil justice system, Conrad doesn�t tell us should be its goals. Conrad compares civil justice to criminal justice by claiming that �we do not flinch against allowing criminal courts to impose exceptional sentences in order to deter other actors against committing similar crimes.�

But we do flinch. We have elaborate (some would say too elaborate) safeguards to prevent criminal juries from imposing unjust sentences. A criminal case must be proven to a higher standard of proof than in a civil case. A criminal defendant has discovery rights (i.e., the exclusionary rule) against the prosecution that go beyond what a civil defendant would have. Jurors in criminal cases must be chosen through a process that meets standards of procedural fairness. Sentences in criminal cases are restrained by both statutory and Constitutional limits.

Until recently (and only in some states) there were no limits on punitive damage awards against civil defendants. To the extent there are limitations today, they are the result of the civil justice reform movement that Conrad decries.

3. Doing What You Say and Saying What You Do

Conrad claims that there is a difference between �what tort reformers DO, and what they SAY� (emphasis in original). This is a challenge that applies generically to any movement: When there is a broad range of rationales for change and a broad range of prescriptions for change, there will always be some movement rationales that conflict with some movement prescriptions.

To this end, however, Conrad claims that there is no rational relationship between capping awards of non-economic and punitive damages and limiting frivolous lawsuits. But there is.

As I describe in Out of Balance, while there are several factors contributing to the nationwide problem of excessive litigation, one of the contributing factors is that particular kind of case where a plaintiff can raise a claim for punitive damages (or substantial non-economic damages) out of proportion to the real value of the case. Because each party bears its own attorneys� fees (under the current American rule) this allows the plaintiff to extort a settlement from a defendant.

In all of our exchanges so far, Conrad has never denied that this phenomenon exists.

4. The Constitutionality of Cost-Shifting

Conrad attacks my proposal to modify Fed. R. Civ. P. 68 to allow an offer of judgment that shifts attorneys� fees in addition to �costs�. (Under current law, a Rule 68 offer of judgment will shift attorneys� fees only when fees are provided for in the underlying statute; otherwise, only a party�s costs can be shifted).

Conrad claims that my proposal would be unconstitutional, making the remarkable claim that �any procedural rule that would tax the insistence on trial by jury" would violate the Seventh Amendment.

Rule 68 has been on the books for decades and there is no reported federal case where it was held to violate the Constitution. If Rule 68 is constitutional as written, how could it be unconstitutional if it were amended to shift attorneys� fees in addition to costs.

The Constitutional question of cost-shifting is an interesting one at the state level, however, and I am aware of a number of trial lawyers associations that are circulating briefs to challenge Georgia�s recent cost-shifting reform through this line of reasoning. Perhaps, this should be the subject of a separate debate?

5. There is no Litigation Lottery

Conrad�s final argument responds to a straw man argument I never made. He claims, �The statistics simply don�t support this idea that juries are bankrupting corporations left and right. There is no �litigation lottery.��

In none of my prior posts have I ever claimed �juries are bankrupting corporations left and right�. My claim, which is shared by many, is that our civil justice system drains approximately $300 billion out of the U.S. economy every year, an amount that is more than all of the income tax paid by all of the corporations in American is a single year. Ours is the most expensive civil justice system on the planet, consuming nearly 2.4% of GDP.

Conrad never denies these statistics.

As to whether or not there is a �litigation lottery� I�ll leave that to you, the reader, to decide. My experience tells me that there are far too many weak and frivolous suits brought by plaintiffs who are banking on the prospects of a nuisance settlement. If your experience doesn�t lead you to agree, well, you�re on your own.

Joel Bakan, "The Corporation"

The documentary film and related book, whose business-bashing tone has already elicited groans from a number of critics (see Aug. 13, 2004), comes in for more scrutiny, this time from the University of Alberta's Moin Yahya (PDF) and from the Manhattan Institute's Steven Malanga, writing in City Journal.

"Snuff Out This Silly Suit"

PoL contributor Michael Krauss, on the federal tobacco suit.


Cross-posted from the Volokh Conspiracy.

There was once a safe and effective prescription remedy for morning sickness called Bendectin (Debendox in other countries). After a great deal of "phantom risk" hysteria, Bendectin was driven off the American market by thousands of lawsuits, unsupported by valid scientific evidence, claiming it caused birth defects. The litigation continued well after a consensus formed in the scientific community that Bendectin does not cause birth defects, and the evidence has since continued to accumulate that Bendectin is perfectly safe.

With Bendectin off the market, the rate of hospitalizations for morning sickness has doubled, and hundreds of thousands of pregnant women annually face "unwarranted and preventable suffering."* The withdrawal of Bendectin from the market, was, as one article puts it, "an American tragedy"**--Bendectin was never taken off the market in other countries or, as in Canada, quickly returned to the market after a short hiatus; you can easily get it in generic form from Canada or elsewhere (you can also make a home version from nonprescription ingredients, but physicians are understandably reluctant, given the litigation history of the drug, to recommend this). Meanwhile, Bendectin and other litigation fiascoes related to women's reproductive health has severely discouraged pharamceutical companies from researching new morning sickness drugs, contraceptives, etc.

No plaintiffs' attorney is more identified with the Bendectin litigation than former ATLA president Barry Nace [by the way, consider what it says about ATLA's members that they elected him president long after he helped drive Bendectin off the market]. He had many Bendectin cases, and was the one who took Daubert v. Merrell Dow Pharmaceuticals, which revolutionzed the rules for the admissibility of expert testimony, to the Supreme Court (though he hired Georgetown professor Mike Gottesmann to argue the case before the Supremes). At some point, Nace decided that one of his Bendectin cases wasn't worth pursuing, and his client sued him.

In August 1998, his attorney in this case filed a brief in support of a motion for summary judgment, in which he argued, among other things, that Nace wasn't liable to the client because "courts soundly and uniformly reject the notion that Bendectin causes birth defects." Two years later, Nace told the New York Times that he still believes that Bendectin causes birth defects. I guess he forgot to tell his lawyer.

Update: Kaimi Wenger points out that Nace's attorney is likely arguing only that courts have ruled that Bendectin doesn't cause birth defects, not that it actually doesn't. I initially read the brief (as did the source who sent it to me, and the source who sent it to him) as denying that Bendectin causes birth defects, not simply that many courts have rejected causation evidence. The wording of the entire paragraph is awkward and somewhat ambiguous. The argument also isn't very persuasive without the concession that Bendectin doesn't in fact cause birth defects; without the concession, the argument is that because many other courts that the New Jersey trial court, in a summary judgment context, where all facts are construed against the party who wants the case dismissed, should reject the notion that evidence that Nace originally planned to present would have been admitted. This despite the fact that the issue had never come up before in New Jersey, and New Jersey's admissibility test was, at best, consistent with but not identical to the test in other jurisdictions. But, on rereading the brief, I think it is just a bad argument, not (intentionally) an explicit argument that Bendectin doesn't cause birth defects. Nevertheless, one would have thought that Nace would be reluctant to have his attorney argue that his experts' testimony that Bendectin causes birth defects wouldn't be admissible in New Jersey which, in practice, is among the most plaintiff-friendly jurisdictions in the country.

* Paolo Mazzotta, et al., Attitudes, Management and Consequences of Nausea and Vomiting of Pregnancy in the United States and Canada, 70 INT�L J. GYNECOLOGY & OBSTETRICS 359 (2000).

** Melanie Ornstein, et al., Bendectin/Diclectin for Morning Sickness: A Canadian Follow-up of an American Tragedy, 9 REPRODUCTIVE TOXICOLOGY 1 (1995)


Acquitted.

In a prior post I questioned: "But if a case that appears to be as straightforward as his can't get a jury verdict in under a month, one wonders whether prosecutors will ever be able to put together a case under SOX."

Perhaps now is the time for legislators to re-assess whether SOX makes sense at all.


A press release from Common Good provides disturbing new data over the lack of public trust in the civil justice system, claiming that only 16 percent of American adults "trust the legal system to defend them against baseless claims."

According to the release:

-- 83 percent of those surveyed agree that the legal system makes it too easy to make invalid claims.
-- Only 43 percent agree that the overall effects of the system on society are reasonable.
-- Only 33 percent agree that the system provides timely and reliable resolutions of disputes.
-- 56 percent think that there are fundamental changes needed to make the civil justice system work better.
-- 62 percent strongly agree that we need to have more judges who will turn back frivolous lawsuits. (Another 26 percent agree somewhat.)
-- 48 percent strongly agree that lawyers who take on lawsuits that are frivolous should be fined. (Another 29 percent agree somewhat.)
-- 67 percent strongly agree that there is an increasing tendency for people to threaten legal action when something goes wrong. (Another 27
percent agree somewhat.)
-- 55 percent strongly agree that many people use the justice system almost like a lottery -- they start lawsuits to see if they can win millions. (Another 32 percent agree somewhat.)

The Shoe is on the Other Foot

Today's WSJ ($) has an article on Milberg Weiss potential connection to "professional" plaintiffs who are on call to serve as lead plaintiffs in class action cases. The article details an indictment against a California lawyer who has (together with various family members) alleged to have received some $2.5 million in under the table fees for serving as plaintiffs.

The Money Quote

Class-action lawyers said they feared that an indictment of Milberg Weiss could have far-reaching impact and hamper efforts to recover damages for shareholders and consumers. Michael Hausfeld, a prominent Washington plaintiffs' lawyer, said such a case "could taint private civil enforcement of securities law" and deflect attention from "the egregious corporate misconduct at issue in these suits."

Is this a sledgehammer of irony or what?

Supreme Court Speculations

If it's Monday, it must be time to open the floodgates of speculation over a possible resignation of Chief Justice William Rehnquist and the nomination of a successor. (As Howard Kurtz tells it, "Bill Kristol has either got the scoop of the year or he's just blathering about the Supreme Court like everyone else").

An article in the Chicago Tribune says that the White House has completed its interviews of a possible successor, focusing on Michael Luttig and John Roberts. (My coverage here; also check out the Supreme Court Short List resource page.)

Lyle Deniston describes how a Rehnquist resignation might take place from the bench today.

But Evan Schaeffer's LegalUnderground cautions that Rehnquist might not step down and that all of this speculation may be in vain.

Civil RICO

Lawyers can fall afoul of it too.

Georgia Legalizes Noodling

Was this ever illegal?

Beware Voicemail

"There are dumb mistakes, and then there are really dumb mistakes."

So begins a story on Law.com that relates how the GC of one company may have inadvertently waived the attorney/client privilege by leaving a voicemail for his counterpart at a competitor, describing how his company was appropriating the competitor's trade secrets.

An interesting cautionary tale for those of us in the trenches.

Chris Cox endorsed

As a prospective SEC chair, the California Congressman moves class-actioneer William Lerach to bluster not untinged with redundancy: "He's the worst possible nominee imaginable". Sounds like an endorsement to us.

ADA for employee-only areas?

Pat Cleary at the National Association of Manufacturers says the association has filed comments (PDF) critical of proposals pending at the Department of Justice that would expand the architectural coverage of the Americans with Disabilities Act. In particular, the rules would require employers to adopt broader handicap accessibility standards for their entire facilities, including employee-only areas, even if they do not employ and are unlikely to employ any employee who needs such accommodation. At present, areas open to the public must generally be made fully accessible; however, unless any particular employee requires accommodation, employee-only areas need only be made accessible for disabled persons to enter, exit and approach. The new proposals, in addition to altering requirements in a number of other areas, would require that steps, curbs and other barriers be removed from all commonly used circulation routes within employee-only zones, according to a NAM fact sheet. Moreover, Cleary says, the rules would impose ADA burdens on employers too small to be covered under the ADA's employment provisions. The comment period on the proposals ended May 31.

Punch and CounterPunch

Tort reform nemesis Clay Conrad has an extended piece on CounterPunch that rehashes many of the arguments made in our recent exchange on the subject.

In the last of his blog posts on the subject, Conrad responds to my arguments (but more to the work of Cass Sunstein and a group of law & economics professors he calls the "Behavioralists") writing:

What the "Behavioralists" in Punitive Damages claim is that punitive damages awards given by juries have no relationship to the harm or wrongdoing by corporate defendants. The niggardly interpretations of harm and wrongdoing accepted by the "Behavioralists" are unsatisfying (except, of course, to corporate counsel.)

Could a jury rationally believe a cost/benefit analysis cannot rationally justify placing a dangerous product in the stream of commerce - and punish the company that did so? Harshly? Not according to the �Behavioralists.� The �Behavioralists� want the legal system to provide no more than "economically efficient" deterrence of corporate misconduct. Juries, on the other hand, want fairness and justice.

What Conrad never explains, however, is how to determine "fairness and justice" when the outcome produced by the system (awards of punitive damages, for example) has "no relationship to the harm or wrongdoing by corporate defendants."

If our civil justice system did, in fact, produce "economically efficient deterrence of corporate misconduct" (not to mention the misconduct of individuals), Conrad would say that the outcome was not "justice".

Much of Conrad's argument is adopted from a law review article, How Relevant is Jury Rationality? by Temple University Professor David Hoffman.

Like Conrad, Hoffman also attacks Sunstein's book, at first referring to his school of thought as the "Behavioralists" and later adopting the more prejorative label, "paternalists".

Conrad and Hoffman both concede, fairly quickly, that Sunstein was correct as a matter of fact: juries do make decisions about punitive damages that are "unreliable, erratic and unpredictable." They both also proceed to conclude, without support, that jurors' proclivity to be unreliable, erratic and unpredictable reflects their rejection of "efficiency and deterrence" and their embrace of "what individual citizens want (fairness and justice)." Hoffman at 512.

But one citizen's "fairness" is another's "mob rule".

Here is where Conrad's argument falls apart.

The primary idea behind most in the "reform" camp when it pertains to punitive damages is that the rule of law requires there to be some relationship between the culpability of the defendant and the defendant's liability.

This idea is central to our common law notions. If Hadley v. Baxendale stands for nothing, it stands for the proposition that the defendant ought not be responsible for something he could not have reasonably forseen. The principle extends not only to damages for breach of contract, but also to the responsibility a manufacturer should have for its products more generally.

In the wake of State Farm v. Campbell the principle of proportionality is Constitutional: substantive due process requires that there be some measure of proportionality between an award of punitive damages and the "reprehensibility" of the defendant's conduct.

The reform camp stands for the proposition that the law can be improved in those situations where its outcomes do not reflect a rational relationship between culpability and damages.

Conrad and Hoffman recoil in horror at Sunstein's proposed reforms--limiting the function of civil juries--but they cannot describe how they would measure "fairness and justice". All Conrad will say is that it's something more than the economical deterrence of wrongdoing.

Both Hoffman and Conrad seem to fear Sunstein's solution of limiting the role of juries. They view his proposal as "paternalistic" (Hoffman) and "the narrow logic of technocrats" (Conrad).

I can't speak for Sunstein's proposals, but my own do more to empower individual litigants than they do to entrench any bureacracy. As I describe in Out of Balance, an offer of judgment rule would be extremely effective in forcing parties realistically to determine the value of their cases and in requiring them to bear responsibility for their decisions to litigate or settle.

And, by shifting a prevailing party's attorneys' fees to the party who gambled on a recovery but failed, the reform would discourage the litigation lottery and encourage individual responsibility.

Is that not justice?

Bainbridge on Kelo

Professor Bainbridge has an excellent column on yesterday's Kelo decision at Tech Central Station. See Ted's post yesterday, with links, for more.


Here is an article that does provide some interesting evidence about resident choices. The research, by Michelle M. Mello, JD, PhD and Carly N. Kelly, JD both from the Harvard School of Public Health (note the academic degrees), is in a journal I am not normally prone to read (Obstetrics & Gynecology), but due to the ubiquitous SSRN my horizons are being expanded daily.

I don't have access to the full paper, so a can not make a fair critique, but essentially the authors did a survey of medical residents and their program directors in Pennsylvania in 2003. One-third of the residents said they were likely to leave the state due to availability and affordability of med mal cover. Now, this is somewhat incomplete information as one would really want to know if people actually left due to increased med mal prices rather than what they were thinking about when responding to a survey question. However, the med mal insurance problem was cited three times more than any other issue as a reason to leave.

What lends credibility to the study even given my mild criticism is that the residency program directors reported a decrease in residency retention since the onset of the state's liability crisis. Many wonder where doctors move or if they leave the state at all. Evidence of established physicians moving to another state is somewhat anecdotal (see Jon Klick and Thomas Stratmann's paper for a counter example), but what may be easier to see is that young doctors just starting their practice are the least likely to be tied to a practice or a community. So they are more likely to make choices based upon the medical malpractice environment. So rather than seeing changes in established physicians' practices, we see the locational choices being made by the new generation of physicians. This has a long run (rather than an immediate effect) on the stock of physicians in a state. Thus, the longer a state takes to deal with its crises (assuming it has one), the greater will be the potential reduction in the long run stock of physicians in the state.


An alert reader noted this timely piece that suggests that Merck tried to obtain a patent in 2001 for another drug that was intended to provide "the cardiovascular protective effect of aspirin . . . for patients who are taking COX-2 selective inhibitors."

Trial lawyers cited in the piece claim this is a "smoking gun" that proves Merck "knew" that Vioxx created an increased risk of heart disease. Not surprisingly, Merck representatives disagree.

The reader, noting my recent post on Vioxx litigation in Michigan, suggests that this article "demonstrates Wilson's faith in Merck is not well founded."

The article is interesting and the question of Merck's knowledge at various points in time will undoubtably be explored in the Vioxx litigation. But a few items require mentioning:

1. My prior post was not intended to demonstrate my "faith" in Merck. As I said before, I have no special knowledge about the Vioxx litigation and do not know, one way or the other, whether Vioxx is a safe drug.

My only point on the safety of Vioxx is that the public does not know today whether or not it is safe. Merck's own studies suggested there may have been a correlation between an increased risk of heart disease and use of Vioxx. Not all studies demonstrated this same correlation. As a result there is no final answer today.

2. Correlation is not causation. Merck voluntarily recalled the drug--even though the FDA subsequently cleared Vioxx for use on the market--because it found a correllation. Scientists do not yet know whether the heart disease noted in the studies were caused by Vioxx or were merely a correlation with some other factor.

3. While the 2001 patent application may turn out to be a "smoking gun", it doesn't necessarily prove anything. Further discovery will be required to connect the dots between this patent application and Merck's knowledge.

There is nothing necessarily inconsistent with believing (a) Vioxx poses no increased risk of heart disease and (b) for patients taking Vioxx who wish to have "the cardiovascular protective effect of aspirin" there is this additional drug, etc.

Consumers who buy cars with airbags do not necessarily do so because they expect to have head-on collisions. Boaters who wear life-preservers do not do so because they expect their boats to capsive. You get the idea.

4. The real issue is whether a drug manufacturer ought to have any liability for selling a drug that has been tested and approved by the FDA (setting aside situations of intentional falsehood or misrepresentation on the part of the manufacturer).

Michigan's legislature answered this question in the negative more than a decade ago and trial lawyer activists are trying to reverse that decision through the legislative process in order to open up the state to Vioxx lawsuits. Through the wonders of the U.S. federal system we can observe how that decision works (or doesn't) and the other 49 states are free to learn whatever lessons they wish.

SOx compliance costs

Foley & Lardner is out with a new survey (PDF) finding it costs 30 percent more to keep your books legal if you're an ordinary-sized publicly held company (via Christine Hurt). More: Larry Ribstein has reflections on Sarbanes-Oxley after three years, with an SSRN paper.

Anesthesiologists and Malpractice

The plaintiffs' bar is excited about a Wall Street Journal article (reprinted in the Jun. 21 Pittsburgh Post-Gazette (via Schaeffer)) showing that anesthesiologists' malpractice insurance rates have decreased when adjusted for inflation. The tag-line: "Rather than pushing for laws that would protect them against patient lawsuits, these anesthesiologists focused on improving patient safety."

But the article fails to point out the revealing truth: while technological improvements and medical advances have reduced patient deaths from anesthesiology by more than an astounding 97% in the last twenty years, anesthesiologist malpractice insurance costs have dipped only 37% in real dollars. Could there be a more damning indictment of the total divorce between malpractice lawsuits and patient safety? Though anesthesiologists have improved an embarrassingly shoddy record thanks to much-needed and previously unperformed scientific research, they're still seeing about half as many lawsuits as when they were killing forty to sixty times as many patients through such elementary errors as accidentally intubating through the esophagus instead of the trachea.

Hospitals can do more to improve safety. But the random lottery of malpractice suits doesn't accomplish this goal, it only makes medicine more expensive and transfers wealth from patients and doctors to lawyers.

Kelo v. New London

By a 5-4 vote, the Supreme Court upheld New London's condemnation of private homes for a private development project. The Institute for Justice has a press release and there's a discussion going on SCOTUSblog, and you can expect interesting commentary at The Volokh Conspiracy.

One factor I haven't seen anyone comment upon: the decision is not just a refusal to limit governmental power, but, beyond that, is an affirmative expansion of judicial power. Justice Kennedy's concurrence creates a brand-new test: "There may be private transfers in which the risk of undetected impermissible favoritism of private parties is so acute that a presumption (rebuttable or otherwise) of invalidity is warranted under the Public Use Clause." This test is so amorphous to be effectively standardless, requiring case-by-case adjudication, thus effectively transforming the judicial branch into a super-legislature with the power to veto condemnations engaged in by the executive branch—after extensive litigation over whether the favoritism is "permissible" or "impermissible," of course. Like many other cases in the last decade, the Supreme Court's decision vests additional political power in itself.


Tom Kirkendall comments on the extended deliberations of the jury in the trial of Richard Scrushy.

The judge had to appoint an alternate juror after one of the regular jurors became ill. The addition of the alternate (who had not been present during deliberations) means that the jurors must re-start deliberations from the beginning. The judge even went so far as to collect all of the juror's notes and charts to ensure that they could not re-use anything they had developed before the alternate joined them.

The jury had previously told the judge they were deadlocked on June 3, only to be told to try harder. No one can know for sure, but the longer the deliberations continue, the more likely a hung jury or acquittal.

Scrush was at one point considered the poster child for criminal enforcement of the Sarbanes-Oxley Act. But if a case that appears to be as straightforward as his can't get a jury verdict in under a month, one wonders whether prosecutors will ever be able to put together a case under SOX.



An editorial in the Detroit Metro Times (billed as "Detroit's weekly alternative") advertises a proposed change in Michigan's law prohibiting suits against drug manufacturers over drugs that have been approved by the FDA.

Michigan has one of the strictest laws in the country, prohibiting most product liability suits against a drug manufacturers if the drug at issue was approved by the FDA. See MCL 600.2946(5).

The spate of recent Vioxx suits, however, left the Michigan trial lawyers panting for a piece of the action.

Michigan House Bill 4773 would rescind Michigan's blanket immunity for drug manufacturers, replacing that immunity with a "rebuttable presumption" that a drug approved by the FDA was safe.

The editorial, however, injects an unintentional bit of irony when it describes the bill as a necessary step to allow Michigan residents to sue over drugs like Vioxx, "which was found to have caused heart damage."

It is hyperbole like this that prompted Michigan to adopt its blanket immunity law in the first place.

I have no idea whether Vioxx is a safe drug or not. I do know, however, that it was Merck's own testing that uncovered the potential problem with the drug and that Merck voluntarily withdrew the drug from the market, even whent he FDA had cleared it to continue sales.

The scientific question of whether Vioxx "causes" any adverse effects seems to continue to be in dispute.

As recently as May 5, 2005, Merck's Vice President of Global Strategic Regulatory Development, Dennis Erb, testified before the House Committee on Government Reform that, "while Vioxx was on the market, the combined analysis of our controlled clinical trials demonstrated no increased risk of cardiovascular thrombotic events for pateitnts taking Vioxx compared to patients taking pacebo or NSAIDs other than naproxen."

Federal courts interactive map

Tell Us What You Really Think

Professor Roberta Romano does tells us what she thinks of SOX in this Yale Law Review article snappily titled "The Sarbanes-Oxley Act and the Making of Quack Corporate Governance."

The paper nicely summarizes the law and finance literature applied to corporate governance.

And the Choir Sang, "Amen"

Our recent post on serial litigant Holli Lundahl drew this response from David Nieporent:

"But, once you get past the amusing anecdotes about this woman, this story has a more serious purpose: it goes to show just how misleading the opponents of tort reform are when they claim that frivolous litigation isn't a problem because courts can deal with it. Courts have a very difficult time doing so, or at least are very reluctant to do so. (Such a claim is disingenuous in another way, in that it conceals the fact that "frivolous" means something very different to the layperson and the courts.)

It may not cost every defendant $1 million to deal with a vexatious litigant, but even if it only costs a few thousand, those defense costs add up when someone files a hundred different suits."


Some legal blogs claim that the notice-and-takedown provisions of the Digital Millennium Copyright Act impinge on free speech by providing an extra-judicial process for removing allegedly infringing content from a website.

I take issue with this view, arguing that the DMCA's "safe harbor" provisions for ISPs reduce unnecessary litigation by giving ISPs a bright line test to avoid any risk of liability.


A hidden problem resulting from the various medical liability crises in the last thirty years is that there are relatively few large insurers selling med mal coverage. Insurers have dropped out of the market over the last three decades allegedly due to the uncertainty, risk, and low profitability of medical malpractice insurance. It is possible that this exodus has had an impact on quality of medical care. As the amount of underwriting expertise declines leaving relatively young physician owned firms being a major provider of insurance in the market, the markets ability to generate quality improvements is reduced.The states have been relatively successful in passing tort reforms and at the same time the med mal market is returning to profitability, so now is the time for physicians and insurers to work on systems to reduce medical errors. David Hyman and Charles Silver, in the most recent issue of Regulation, point to an important agency cost problem in the medical profession - - self policing (or the reluctance to self police). However, they note specifically the successes the professional association of anesthesiologists has had in improving quality of care and reducing medical errors.

If we had more, larger insurers the industry could exert a positive effect on medical care quality. Given physicians' alleged reluctance to police themselves, insurers may have a greater ability to underwrite and to set standards for improved medical care quality. Essentially, this is what insurers did for manufacturing and product safety in the last two centuries.However, because of the relatively small economies of scale of physician owned firms and the lack of large interstate med mal insurers, this pressure is not as strong as its potential.

Update: Today's WSJ ($) describes in more detail how the American Society of Anesthesiologists has been able to work with physiscians to reduce medical errors and malpractice premia.

Introduction

Walter Olson has graciously allowed me to be a guest here at Point of Law. I normally reside at RiskProf where I comment on law and liability economics. I am an economist who went to law school. I did both degress simultaneously and both programs thought I was crazy. One of my economics professors was quite indignant and wanted to know whether I understood that lawyers were the source of dead weight losses. I said I did understand, but one could make more money transferring wealth than teaching supply and demand. I don�t know what happened after that � the next thing I knew I was teaching in a business school and I am now a professor of risk management and insurance. My areas of interest (and where I do most of my research) is in regulation and taxation of the insurance industry. I�ll be posting here and at my own web log over the next two weeks and I can be reached at riskprof [at] gmail.com. Thanks Walter!

Only $500K damages? Take a hike

That's what some lawyers are telling prospective clients following the enactment of limits on Ohio med-mal recoveries, according to Crain's Cleveland Business. David Giacalone doesn't think it's the smartest move in the world, p.r.-wise, for the lawyers to go around talking that way.

Confusion in Wisconsin

A writer for a business magazine in Wisconsin tells us that "studies indicate there is no tort crisis".

Perhaps more significantly, the writer notes that while President Bush has said he favors legislation that would reform class action litigation, "details of the proposed law are unknown at this time."

Apparently news of the Class Action Fairness Act have not yet reached Wisconsin.

Fighting dis-information in the MSM is a full-time job.



The California Supreme Court issued two decisions last week interpreting the U.S. Supreme Court's guidance on punitive damages in State Farm v. Campbell.

In Johnson v. Ford Motor Co., (June 16, 2005), the California Supreme Court reversed in part the ruling of the California Court of Appeals which reduced an award of punitive damages.

At trial, the plaintiff had recovered approximately $17,000 in compensatory damages and $10 million in punitive damages. Applying the State Farm v. Campbell, the California Court of Appeals reduced the punitive award to $53,000, an amount approximately three times the compensatory damages.

The California Supreme Court held this was error and that, while an award of $10 million in punitives would be impermissible where compensatory damages are only $17,000, an award of punitive damages more than ten times greater than the compensatory damages would have been permissible in this case.

In the second case, Lionel Simon v. San Paolo U.S. Holding Company, Inc. , plaintiff obtained a jury verdict for fraud and recovered compensatory damages of $5,000 and punitive damages of $1.7 million.

The California Court of Appeals affirmed the punitive damages award. The U.S. Supreme Court then granted a petition for review, twice, each time remanding the case to the Court of Appeals for reconsideration in light of Cooper Industries v. Leatherman (the first time) and State Farm v. Campbell (the second time).

In each remand, the Court of Appeals affirmed the punitive damages award, even though it was more than ten times the compensatory damages.

After the second remand and affirmation, the California Supreme Court granted a petition for review.

The California Supreme Court reversed the Court of Appeals, holding that, under the facts, an award of punitive damages could not exceed ten times the compensatory damages, or $50,000.

It remains to be seen how the California courts will reconcile these two, seemingly irreconcilable opinions.

The confusion that will almost inevitably follow buttresses one of my two recommendations in Out of Balance: a statutory cap on punitive damages based upon a ratio to compensatory damages. Settling this matter through the legislature will save litigants and the courts inestimable work and expense.

ADA Reform Bill

Congressman Bill Thomas (R-CA) has introduced a bill (H.B. 2804) that would impose a 90-day notice period before a plaintiff could sue under the Americans with Disabilities Act. The bill would give the potential defendant (store, restaurant, etc.) 90 days in which to remedy the alleged shortcoming before a plaintiff could sue.

Thomas' local newspaper suggests that the bill is a reaction to a spate of ADA suits filed in Thomas' hometown of Bakersfield by a single plaintiff. The paper claims that a number of local businesses had been forced to close their doors as a result of the litigation.


Forbes recounts recent securities class action settlements and the attorneys' fees generated by those settlements. It estimates that Bill Lerach stands to generate almost $300 million in fees for a settlement that is pending in Enron litigation.

The article also cites research suggesting that the Private Securities Litigation Reform Act, sponsored by SEC-chair-nominee Christopher Cox, may not have been effective in tempering the number of suits brought against large companies. Securities class action settlements in 2004 amounted to $5.5 billion, breaking the previous record set in 2000.

Settlements so far in 2005 suggest that this year might break the record again.

Bruce Carton from ISS has helpful blog coverage on recent settlement activity.

Litigation hokey-pokey

You have to file those claims.

You've got to sue those stiffs.

You have to shift the blame,

With no ands or buts or ifs.

And if you're bright and plucky

You will turn your case around.

That's what the law's about.

-- From a parody by lawyer/humorist Madeleine Begun Kane (whole thing)(via Have Opinion, Will Travel).

Viagra blindness allegations

Most plaintiffs' attorneys with a pharmaceutical practice have been slow to jump on the new allegations, reports Justin Scheck of Law.com. One reason: some of them cried wolf about Viagra and heart attacks and that didn't pan out. Another: everyone's too busy with Vioxx.

Guest bloggers coming Monday

Not just one but two guest bloggers -- both of them authors of superb blogs which we hope you read regularly -- have agreed to stop in at Point of Law next week. Be sure to stop back then when the mystery will be unveiled.

Arbitration Pros and Cons

Randy Barnett, writing on Volokh, describes an interesting debate on the merits (and enforceability) of arbitration clauses.

There was a time when pro-business reformers thought that arbitration would play a significant role in reducing legal expenses for businesses. That view has reduced over time and the arbitration debate is vastly reduced in relevance these days.

In federal court, if a party sues instead of seeking arbitration, the defendant must prove the enforceability of the arbitration clause in order to get the case dismissed. This mini trial can sometimes cost almost as much as a trial on the merits. The defendant's reward for winning the mini trial and enforcing its arbitration clause: an arbitration proceeding with the plaintiff.

Once arbitration begins, business lawyers sometimes find that their legal fees are not much less than they would be at trial. Lawyers' still charge by the hour when they take depositions for an arbitration as opposed to a trial.

Even worse for the defendant, an arbitrator who makes an error of law (say, refusing to enforce a waiver of damages clause in the contract) is immune from appeal.

Tort Reform Criticism

A Texas lawyer and blogger has developed a critique of "tort reform" based on the argument that "tort reformers", acting in concert, have the hidden agenda of wishing to eliminate the institution of civil juries.

I take a stab at these arguments on my personal site.


A must-read op-ed in the Times (via Bainbridge).

EPCOT center ride death

...gets KipEsquire thinking about the balance of costs and benefits in accident law.

"A Farce or a Tragedy?"


A court in Helena, Montana has refused to apply the state's loser-pays rule to shift attorneys' fees in a case that challenged the eligibility of ballots cast in an election for the statute legislature.

The Helena Independent Record opined that loser-pays rules shouldn't apply in litigation involving elections because there is a public interest at stake in the outcome in addition to the personal stakes of the candidates. It wrote, "[W]e realize that "loser-pays" laws are designed to deter frivolous lawsuits. But we have to agree with Judge Christopher, who said that "candidates and their attorneys should not have to subsidize the rest of the state by bearing the entire burden" of the cost."

Barratry in Pennsylvania

Carlisle, Pennsylvania resident Cory Cormany has been charged with barratry for allegedly filing 24 lawsuits against various Cumberland County officials since 1994.

Senior District Attorney Matthew Smith, describing Mr. Cormany's lawsuits as "ungodly" says "He's just bothering people with civil suits that just constantly get dismissed." He adds, "It's people like him that bog down the civil legal system."

Peremptories and prejudice

Beldar does not share our enthusiasm for radically curtailing or eliminating lawyers' use of peremptory challenges, but the Supreme Court's latest venture into Batson-parsing provides him with a good occasion for telling a few of his war stories about jury selection; anyone with an interest in that line ought to pull up a chair.

Judicial ethics charges

As reported here last month, the left-wing Community Rights Counsel filed ethics charges against federal judges who'd been consorting with known libertarians at conferences on environmental law. Now chief judge James Loken of the Eighth Circuit has ruled that CRC's complaint against Judge Danny Boggs lacks merit. More: Jonathan Adler in NRO.


I agree with Walter's conclusion on the debate between Employment at Will vs. Self-Defense.

If the employer isn't free to enforce its rules on how employees should respond to dangerous situations (like an armed assailant on the premises) then the employer is on the horns of a dilemma that the law should not impose.

Under the rule that the West Virginia Supreme Court established, the employer is liable for wrongful termination it it terminates its employees for using violence in response to an attack on the employer's premises.

The employer is also liable, under prevailing theories of respondeat superior and premises liability, if its employees' actions result in injury to other employees or patrons.

The holding in the Feliciano case seems to damn employers both if they (a) try to restrict the actions of their employees and (b) allow their employees to defend themselves.

New Hampshire Med-Mal Reform

Both Houses of the New Hampshire legislature have passed a reform bill (S.B. 214) that requires pre-filing review of medical malpractice actions by a review committee.

Local newspaper reports indicate that the measure is modeled after a similar pre-screening procedure already in effect in Maine.

"One Man, One Lawsuit"

David Thomasson, who writes occasional editorials on litigation subjects for the recently launched Washington Examiner, had a piece in the paper May 17 describing an unusual case in which the parents of a 17-year-old boy sued over his injuries, the boy himself upon turning 18 filed a separate suit, and the Virginia Supreme Court ruled that the settlement of the youth's own suit did nothing to settle his parents' claim for medical expenses on his behalf. The ruling might seem to suggest (perhaps correctly as a matter of law, and perhaps unnervingly as a matter of human relations) that the youth is under no obligation to use his lawsuit winnings to recompense his parents for the medical costs they so recently had laid out in his behalf.

Shooting holes in employment at will

The ordinarily sensible David Kopel applauds a West Virginia ruling curtailing the scope of employment at will in a case where the Southland Corp., of 7-11 store fame, terminated a worker for resisting a robbery. Prof. Bainbridge argues (correctly, in my opinion) that jubilation is by no means in order: freedom should mean freedom for everyone, including employers.

Law professor blogs

Daniel Solove at PrawfsBlog posts a large, though incomplete, census of them. P.S. Much more complete now, thanks!

Inmate Suit Scam

An article by Phil Luciano in the Peoria Journal Star highlights a disturbing new scam: convicted felons filing frivolous suits while still in prison.

The article describes an example, whereby a state prisoner (serving a multi-year sentence for aggravated sexual assault with a weapon) found a young woman's name out of the newspaper marriage announcements. Because marriage announcements often provide the new couple's address, the inmate was able to provide an address for service of process.

The inmate then completed and mailed the form of complaint required in small claims court and the unlucky defendant received service upon returning for her honeymoon.

Although the plaintiff/inmate claims to be suing for $3,000 he allegedly loaned the defendant, Luciano seems to assume the claim is baseless. After all, the defendant would only have been 14 years old when the alleged loan was made.

The scam seems intended to intimidate the female defendant into settling. After she was served with the complaint, the inmate plaintiff sent her a letter, inviting her to visit him in prison to discuss settlement.

Apart from the monetary value and hassle of having to defend herself against what she claims is a frivolous suit, the female defendant fears for her safety and worries that a dangerous criminal may be trying to insinuate himself into her life.

In addition to the costs imposed on the defendant, the state will bear the cost and complexities of transporting the prisoner plaintiff to small claims court for trial. Even if he loses, the prisoner gets a free road trip paid for by the taxpayers.

When asked why they would allow state prisoners to file suits against citizens, a spokesman for the department of corrections said, "We can't stop someone from filing a lawsuit. It's a constitutional right."

"Invaluable"

Troy at Water Is Wet begins thinking about the difficulty of finding a playground slide high enough to please his five-year-old son, and before you know it he's paying tribute to this site.

Asbestos defense blog

Consisting of the "ruminations of an asbestos defense lawyer" in Palo Alto, Calif., it's entitled Friable Thoughts. "Friable" means something akin to "crumbly"; the friability of a given asbestos product is typically an important factor in assessing its degree of hazardousness (via Schaeffer).

Gun Fight at the Enid Corral

An unhappy reader was upset by my comments on the Enid News letter to the editor and wrote a response to the Enid News, calling my arguments "an absurdity".

In particular, the unhappy reader claimed "a majority of the American people" actually believe the hoax e-mail that was debunked in the original letter, even though the hoax has been de-bunked on Snopes.com since 2001.

You can judge for yourself which is the "absurdity".

I've posted the reader's complaint and a detailed, point-by-point response here.

Utahn Holli Lundahl

Serial litigant Utahn Holli Lundahl has been barred from filing further appeals before the 10th Circuit, according to an article in the Salt Lake Tribune. According to the article, Lundahl has filed more than 100 lawsuits in various courts and has been barred or restricted from filing further lawsuits on her own behalf by a variety of courts. The U.S. Supreme Court, in particular, has prohibited her from filing further non-criminal papers there.

In the 10th Circuit case, Eli Lilly and another defendant claim to have spent more than $1 million in defending themselves against Lundahl's claims, which the 10th Circuit called, "fanciful, implausible and bizarre."

Lawyers doing their jobs

Kris at Random Mentality has some thoughts on small towns, big cities, and the professional obligations of the plaintiff's and defense bar.


We've previously been critical of the Whittington v. U.S. Steel case (Overlawyered, Jan. 5, 2004; Sep. 20). Now the U.S. Steel lawyer makes a sensational allegation: it appears one of U.S. Steel's co-defendants was a Madison County company represented by Madison County attorneys, John Crane Inc. John Crane Inc. was kept in the case, where it proceeded to argue against change-of-venue, and moved to strike jurors favorable to the defense; meanwhile, the plaintiff introduced no evidence against this apparently sham defendant. �The court�s allocation of six challenges per side became, in effect, 10-to-two in favor of the plaintiff.� Ed O�Connell of O�Connell & Associates denies an improper relationship with asbestos plaintiffs. (Steve Korris, "Defendant John Crane was plaintiff foil, says attorney", Madison/St. Clair Record, Jun. 10; Steve Gonzalez, "Multi-international John Crane fights to stay in Madison County", Madison/St. Clair Record, Jun. 2; Steve Gonzalez, "Sparks fly in Madison County asbestos trial", Madison/St. Clair Record, Jun. 1).

The St. Louis Post-Dispatch has an entertaining retelling of a cross-examination of a plaintiff's witness who claims to remember the name of the asbestos-laden joint compound her father used 35 years ago—though she can't remember the brand of paint or any other product her father used then, or even the color of the label of the joint compound. (Paul Hampel, "Defense attorneys grill witness in asbestos trial", May 10). She did testify that the product came in a pail, which was the wrong guess, since it came in a can. The plaintiff himself said he never used Georgia-Pacific products. The jury nevertheless went on to award $500,000 against Georgia-Pacific, which avoids the unjust result because the plaintiff, Willard King, has already settled for well over that amount with Georgia-Pacific's co-defendants. Evan Schaeffer complains about the size of the verdict without noting that there was essentially no evidence that Georgia-Pacific did anything to cause the plaintiff's mesothelioma, or that the plaintiff has already been well compensated in the millions of dollars by other defendants (many of whom, no doubt, were equally innocent). (Paul Hampel, "Defense attorneys revel in $500,000 asbestos award", St. Louis Post-Dispatch, May 20; Steve Horrell, "Jury award falls far short of request", Edwardsville Intelligencer, May 20).


A Sangamon County judge threw out the former judge's libel suit against his political opponents (Dec. 21, Dec. 23, Dec. 23 Overlawyered, Dec. 24, Dec. 24, Dec. 28). Judge Maag and his attorney, Rex Carr, did not comment. (Paul Hampel, "Defamation suit by losing court candidate is dismissed", St. Louis Post-Dispatch, Jun. 10; Steve Gonzalez, "Maag's $110 defamation suit dismissed", Madison/St. Clair Record, Jun. 10, Maag v. Coalition for Jobs, Growth and Prosperity decision) (via Schaeffer).

Spitzer rebuffed

The WSJ, Kirkendall and Ribstein weigh in on the Sihpol acquittal. P.S. And here's the New York Post, TalkLeft, and even (of all places!) the New York Times, in the person of "Dealbook" columnist Andrew Ross Sorkin.

Astroturf

I learned a new word the other day: astroturf.

I mean, of course, not the stuff that's used in place of grass for indoor sports arenas, but rather a technique used by some advocacy groups to create the appearance of an up swell in popular opinion. Because the technique is actually employed by sophisticated PR agents to create the false appearance of popular opinion, the "grassroots" are fake. Hence, astroturf.

I wrote recently on my personal site about once such example of astroturf that appeared in the Enid News.

Introductions

My thanks to Jim Copland for his generous introduction. I hope my future work on this site merits such kind words.

But before I start, a brief disclaimer: My opinions are only my own and do not necessarily reflect the positions of any of my clients or employers, past present or future. (By saying this only once, and in my first post on this site, readers will understand this disclaimer to apply to anything I might write hereafter).

How securities lawyers get clients

Or how some of them do, anyway: Lyle Roberts notices a Newark Star-Ledger piece reporting that Vermont teacher Chaim Lodish emerged as the lead plaintiff in a class action against Able Pharmaceuticals though he "was unaware of the exact problems at the company until he was cold-called by a plaintiffs' firm [Schiffrin & Barroway of suburban Philadelphia] and asked to participate in the suit."

Alcohol class actions

...already generating insurance coverage litigation, per Law.com.

Welcome Blawg.org readers

The "source for law and legal-related weblogs" profiles us today, praising our format as innovative.

Welcome Jonathan Wilson

I'd like to welcome a new contributor to our Forum, Jonathan B. Wilson. Vice president and general counsel of Interland, Inc., an internet services company, Jonathan is a seasoned technology attorney with experience in corporate, securities, technology, and intellectual property law. Jonathan founded and chairs the American Bar Association's Internet Industry Committee.

In addition to his technology expertise, Jonathan brings our site a broad-based interest in litigation and civil justice reform. He has just released a book, Out of Balance: Prescriptions for Reforming the American Litigation System, outlining his ideas -- I encourage all our readers to check out this thought-provoking read.

Alabama asbestos-ad antics

A group calling itself the Senate Accountability Project is running TV ads in Alabama blasting Republican Sen. Jeff Sessions for supporting federal asbestos legislation, a stance which they charge creates "a liberal entitlement program" and thus violates the conservative principles on which he campaigned for office. According to the Birmingham News, the SAP turns out to be headed by Texas asbestos lawyer Mark Iola. The ads, Iola tells the paper, are aimed in part at "the conservatives who form [Sessions's] base". So does that mean Iola's group itself is conservative in outlook, as its pejorative talk of liberal entitlement programs would lead you to assume? Well, no, doesn't sound like it: "Iola said the group is interested [in] progressive politics on several issues". For more examples of how some trial lawyers opportunistically adapt conservative rhetoric to their ends, see The Rule of Lawyers, pp. 276-77 and 279-80.

New blog on juries

Clay Conrad, author of a book on jury nullification, has launched JuryGeek, a blog focused specifically on jury issues.


As we mentioned on May 22, tomorrow AEI is holding a panel featuring U.S. Senator Lamar Alexander (R-Tenn.) and U.S. Representative Roy Blunt (R-Mo.) discussing their proposed legislation, S. 489, the Federal Consent Decree Fairness Act. The Act is an elegant attempt at a solution to the political problem whereby an activist group and an executive branch agency, unable to achieve a certain political result through normal constitutional means, contrive litigation of one sort or another that demands that result as a remedy and then collusively "settle" the case by agreeing to have the court administer the relief under pain of contempt. Current procedural rules then make it difficult to remove the court's power from administration, meaning that the citizenry has no recourse to changing the policy, even through elections. Indeed, under current constitutional standing doctrine, aggrieved citizens often cannot even participate in the underlying judicial proceedings. Under the Act, a government may move to re-evaluate consent decrees after the expiration of the term of the individual who authorized the settlement.

Steve Hitov of the National Health Law Program argues against the bill on the ACSBlog. Here's Senator Alexander's press release in support of the bill. For more on this and similar issues, see POL's Regulation Through Litigation section.

The politics of loser-pays

From Columbia lawprof William H. Simon's "The Prudent Jurist" column in Legal Affairs:

The "loser pays" rule would accomplish what current reforms are striving for: It would encourage plaintiffs' lawyers to bring fewer claims that have low probabilities of success. Unlike some current reforms, however, fee-shifting would work without inhibiting claims that have a high likelihood of winning.

Unfortunately, "loser pays" does not appeal to any of the groups most active in the tort reform debate. Plaintiffs' lawyers dislike it because it would force them to bear defense costs they can now impose on their opponents when they lose. Industry groups dislike it because, while it reduces "frivolous" claims, it invites a new category of lawsuit�small claims with a high probability of success that are discouraged under the current system because of the expense of bringing them. If losing defendants had to reimburse successful plaintiffs for litigation expenses, these claims would become viable. From the point of view of fairness, this seems a gain, but its prospective cost dampens business enthusiasm for the measure.

Texas asbestos and silica reform

Texans for Texas, a group that strongly supported the reform, has a short wrap-up and description of what the new law does (see May 16, Apr. 29).


Hey, this wasn't supposed to affect our guys dept.:

In a decision that could change the way some union organizers do business, a federal judge has certified a class action suit under the federal Driver's Privacy Protection Act of 1994 brought by a group of factory workers who claim that a union illegally obtained their home addresses by copying their license plates in the company parking lot.

(via Law.com).

Post those EEOC posters

...or else your employees may have forever to sue.

Posting glitch at Overlawyered

Readers who follow my other site, Overlawyered, haven't seen any new posting since yesterday morning; that's because of a technical glitch that I'm working to resolve. Hope to be back soon with new content.

Georgia experts, cont'd

Jonathan B. Wilson cautions against jumping to conclusions regarding the expert testimony provisions of recent legislation in Georgia which we and others have criticized (see Jun. 2). In particular, he writes, "while the House amendment limited the impact of the Daubert rule to only civil cases, that amendment did not have the effect of widening the scope of permitted testimony in criminal cases. It merely kept the pre-amendment law in place for criminal cases. If Georgia law now admits too much junk science in criminal cases, that shortcoming was already present in the law prior to the 2005 amendment." A bill passed by the Georgia Senate earlier would have applied Daubert to civil and criminal cases alike, but the House saw things differently. The entire post is here.

More on Kansas decision

We are not alone in looking askance (see yesterday's post) on the Kansas Supreme Court's education-finance decision; John Hinderaker of PowerLine ran a similarly critical item on the case (hat tip: reader John Steele Gordon).

Greve on consumer class actions

AEI has released a new monograph by Michael Greve on consumer class actions, specifically the kind alleging broad economic harm which

proceed under broadly worded state laws against fraud, misrepresentation, unfair business dealing, and the like. The plaintiffs are not required to show that they actually relied, to their detriment, on the defendant's alleged misrepresentation. Consumers who were injured are explicitly excluded from the class and may obtain separate redress for their harms.

Greve argues that

When added to existing legal protections and recovery for injured consumers, additional actions on behalf of unharmed consumers will generate double recoveries and excessive deterrence. ... To protect against [such dangers], the private enforcement of consumer protection laws should be closely tied to traditional common law requirements of detrimental reliance and loss causation.

The full text of the monograph is available in PDF format here.

Imperial judiciary watch

And now it's the Kansas high court that has seized the power of the purse away from legislators:

In a landmark ruling, a unanimous Kansas Supreme Court on Friday ordered state lawmakers to increase school funding by $285 million by July 1, a decision that will force a special legislative session and a possible tax increase.

Right Side of the Rainbow wonders:

My Lords, rather than instruct the Kansas Legislature to act on your behalf, why not just order it dissolved sine die and cut out the middlemen altogether? You could then write the budget and set the tax tables on your own. After all, isn't it tiresome pretending that there are any restraints on your power, or that you owe deference to mere commoners?

More: Jun. 7.

Scruggs and Hantler debate

On video, courtesy American Justice Partnership. The event was moderated by Fox News's Judge Andrew Napolitano and sponsored by the Manhattan Institute and the Georgia Chamber of Commerce.

End run around Proposition 64?

Only months after California voters approved Proposition 64, reining in the state's bizarrely liberal s. 17200 law, some legislators in Sacramento are pushing what is characterized as an environmental-protection bill that critics fear will open up wide opportunities for s. 17200-style shakedown lawsuits. According to the Civil Justice Association of California's position paper, Assembly Bill 528

allows "any person with a beneficial interest" to sue a business to "enforce" a long list of code sections and related regulations, permits, and orders. This sets the stage for lawyers to file the same kind of "shakedown lawsuits" for minor violations alleging wrongdoing under more than 1,000 code sections addressing health and safety, water issues, air, agriculture, fish and game, etc. As was the case under Business and Professions Code Sec. 17200, no harm needs to be alleged. Worse than the old "17200," AB 528 would let a private lawyer extract civil fines, "restoration of the environment," and -- of course -- attorney's fees.

More: bill details, L.A. Times, Orange County Register editorial, Sierra Club arguments in favor of bill, CJAC press release on local government views. Update: Jonathan B. Wilson says the bill is dead for this session.

Prosecution-side expert testimony

Another thought relevant to yesterday's question of whether the Georgia legislature did the right thing by encouraging super-permissive standards for admitting scientific evidence prosecutors wish to introduce in criminal proceedings:

The rules of evidence are primarily statutory or common law. Nonetheless, constitutional rights are involved, such as the rights to a public trial, to know the evidence against you, and to confront your accusers. There is also a right, which probably rises to constitutional stature, to be convicted only on the basis of competent evidence. For example, if a state decided to start sending people to jail on the basis of testimony from the Psychic Friends Network, one would hope such efforts would fail on constitutional grounds.

-- James V. DeLong, "The New 'Criminal' Classes: Legal Sanctions and Business Managers", originally published in 1997 and reprinted as part of Go Directly To Jail: The Criminalization of Almost Everything, edited by Gene Healy and published earlier this year by the Cato Institute.

Rand Corp. on asbestos

Last month's major Rand Corporation report on asbestos litigation estimated that of the $70 billion spent on asbestos compensation by defendants and insurers claimants have received 42 cents on the dollar, defense costs have absorbed 31 cents and plaintiff's attorneys and related costs have taken 27 cents (per Mark Hofmann's account in Business Insurance). A link to the study is here. The Birmingham, Ala. News reports on the fate of Rock Wool Manufacturing, a local mineral-wool insulation company which for 12 years incorporated 1/2 of one percent asbestos as an ingredient in an insulating cement, and thanks to the magic of "product identification" found itself a defendant in "more than 140,000 lawsuits by the mid-1990s": "We had almost one lawsuit for every bag we sold," said George Cusick, son of the company's former owner. Be sure to follow the jump and read the article's second page, which makes it more understandable why an editorial in the recently launched newspaper, the Washington Examiner, calls the asbestos litigation "a hideous abuse of civil law" which "must be stopped".

Flaws in Georgia liability reform

According to the Savannah Business Report, there are some clarity and drafting problems with the version of liability reform that the Georgia legislature enacted earlier this year, which could in particular pose a snag to the proper operation of the law's "offer-of-judgment" provisions, a mild version of the loser-pays principle. And that's aside from the inconsistency (appropriately flayed by David Bernstein and Peter Nordberg) of the legislature's disparate treatment of expert witnesses in civil and criminal cases, in which civil litigants are accorded strong protection against unreliable scientific evidence, but criminal defendants are accorded nothing of the sort. More: Jun. 3, Jun. 7.

Illinois med-mal

Despite the longtime blocking abilities of House Speaker and trial-lawyer ally Michael Madigan, it now looks as if reform is on the way in the Land of Lincoln, propelled by a surge of physician activism. And according to the Sun-Times, channeled by KevinMD, "Attorneys are furiously filing medical malpractice lawsuits in Cook County in a race to beat Gov. Blagojevich's signature on a bill that caps awards in such cases."

Andersen reactions

Mens rea means mens rea -- no consciousness of guilt, no criminal liability. Tom Kirkendall comments:

The ruling is a stunning setback for the Department of Justice generally and the Enron Task Force specifically, which pursued a dubious prosecution of Andersen that effectively terminated a going concern that employed 30,000 persons in the U.S. (in comparison, Enron's implosion cost approximately 5,000 employees their jobs). That economic carnage was a stark reminder of the increasingly common governmental regulatory practice of criminalizing merely questionable business transactions, a practice that has been played out over and over again in other aspects of the Enron case and, more recently, in regard to the governmental investigations into American International Group Inc.

Peter Henning observes:

1. It is a 9-0 decision. Reaction - The government had it wrong and the Court thought it clear enough to speak with a single voice....

4. Document retention policies deserve some respect- the Court specifically says that they are "common in business." To say that one "impedes" the government merely because they have and use such a policy is wrong. More should be required.

Other comments: Tony Mauro; Wired GC; WSJ; Stephen Bainbridge; Gordon Smith; Larry Ribstein here, here and here ("If the government couldn�t prove that the conduct was knowingly wrong, it was wrong to proceed to put the firm out of business, even if it thought that lots of people at Andersen were bad actors, and even if could come up with what it thought was a linguistically plausible reading of a criminal statute.").

Commitment to "social justice"

...may soon be a prerequisite for becoming a teacher, and candidates who lack the approved set of attitudes may draw negative evaluations and never get their license, according to critics who say Brooklyn College's School of Education, a unit of city-run CUNY, is "screening students for their political views". Jacob Gershman's New York Sun article has the disturbing details.

Go away, Wegman's

You may be most Americans' dream of what a grocery store should be like, but in Montgomery County, Md. local officialdom finds you a threat.

Expert admissibility motions

Should they be the means by which the contested Washington governor's race is decided? Or by which a federal court resolves a challenge to the Dover, Pa. school district's policy of teaching creationism/"Intelligent Design" alongside Darwinian evolution? While we're at it, if professional societies can appropriately call members to account for giving badly flawed testimony, should that happen to Sir Roy Meadow, whose testimony to the effect that multiple crib deaths generally reflect homicide may have played a role in the conviction of innocents in Great Britain? Peter Nordberg is in question-posing mode this week; as for the answers I'd give if pressed, 1) I don't know enough about the Washington situation to say; 2) if juries are being invited to reach findings of fact based on the notion of "Intelligent Design", darn right a Daubert challenge would be in order, you'd think; 3) hard to see why Meadow should be immune to scrutiny by his peers, who must naturally be concerned to clean house after an episode that has done much to bring expert medical evidence into disrepute.

 

 


Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.