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September 2005 Archives

9/11 fund bad, suing good

A reader emails:

You might be interested in this paper (PDF) by an academic who faults the 9/11 Victims Compensation Fund for inducing people to forgo litigation. That's bad because litigation is good. It's not about the money, it's about democracy and accountability. On second thought, maybe you know already everything the paper says without having to actually read it.

Incidentally, the paper is written by Prof. Gillian Hadfield of the University of Southern California Law School, who co-directs the School's Olin-foundation-supported Center in Law, Economics and Organization, and it's forthcoming in a volume entitled The Future of Terrorism Risk Insurance, published by the Defense Research Institute, the organization representing the interests of civil defense lawyers (which is having me in on a panel at its annual meeting in Chicago in a couple of weeks).

For a different critique of the 9/11 fund, see David Henderson's.

P.S. (Oct. 15): Our original correspondent writes back to say: "There's those Olin people, paying off academics to advance the interests of greedy corporate defendants again..."

Credit rating regulation

The unintended consequences of SEC designation of "nationally recognized statistical rating organizations" makes for a fascinating tale of regulatory problems. AEI recently hosted a panel on the issue of pending legislation on the subject: Rep. Michael G. Fitzpatrick spoke on HR 2990; Floyd Abrams and I debated the First Amendment implications of the bill, while Jeanne Dering of Moodys and Professor Lawrence J. White of NYU discussed the regulatory implications. AEI's Alex Pollock moderated. A webcast is on-line.

Something in the water at Harvard?

Why, oh, why, asks Michael Fumento, is the Harvard School of Public Health bestowing its Julius Richmond Award on glamour-puss toxic-tort-chaser Erin Brockovich? (more, more, more, more)

"Prairie Ho Companion"

Ramesh Ponnuru and the National Review have graciously allowed us to reprint his article "Social Injustice," which discusses the inroads trial lawyers are attempting to make on the socially conservative political right. We've also been allowed to reprint an exchange in the letters-to-the-editor section of the magazine (PDF) which ran in response to the column.

Gwinnett County Superior Court Judge Michael C. Clark struck down the offer of judgment provisions added to Rule 68 by the 2005 Georgia tort reform bill in a September 22, 2005 decision in Muenster v. Suh.

The decision, clearly written for further review, is the first case to assess the constitutionality of Georgia's Rule 68.

Judge Clark's decision advances three primary arguments:

Statistical significance and Vioxx

In the second Vioxx trial, Humeston v. Merck, the plaintiffs' attorneys are being allowed to examine a Merck scientist and obtain a concession that Merck did not tell its sales representatives that, in one study, 21 Vioxx patients died, while only 9 people who took a placebo died during the study. In cross-examination, Merck drew out the rest of the story: those deaths included such causes such as electrocution and head injury, and the difference was statistically insignificant. (John Curran, AP/SF Chronicle, Sep. 27).

Perhaps the jury will come to the right conclusion, and reject the unscientific proposition the plaintiffs are asking them to make. But why is the argument even in front of the jury? If it isn't per se legal to limit disclosures to statistically significant data, companies can be punished for failing to bury their sales representatives in mounds of irrelevant information. But were Merck, or any corporation, to do precisely what is implied by the plaintiffs' second-guessing, they could be blamed in court for trying to "hide" the important information.

Indeed, in the Ernst case, we saw both tactics at play. Mark Lanier was allowed to pull a "Miracle on 34th Street"-style grandstanding of piling up hundreds of boxes of the paper version of records Merck submitted to the FDA in electronically searchable form, and falsely imply that Merck chose to submit that much paperwork to hide the (statistically insignificant) cardiological results—never mind that all of the data Merck submitted was required by FDA regulations.

N.J. high court okays foul-ball suit

A classic application of the assumption-of-risk doctrine was the rule that ballpark owners were not liable when a foul ball hit into the stands injured a fan. But assumption of risk has been less than popular in the law schools for a long time, and is under constant pressure from the plaintiff's bar, which would like to curtail or eliminate it. Now, per Law.com, the New Jersey Supreme Court has rolled back the foul-ball rule as regards parts of a stadium devoted to concessions, mezzanines and so forth, though apparently not (yet) seating areas. One likely result: more installation of netting and other screening, even if it impairs fans' viewing experience.

Cathy Young

The Boston Globe columnist and Reason contributor has her own blog now.

Georgia asbestos reform

"Lawyers are gearing up for a constitutional challenge" to it, reports Law.com.

What a neat idea, so naturally it's drawn cease-and-desist letters from the New York and San Francisco transit authorities (Wired, via Dennis Kennedy who got it from B.L. Ochman).

Mississippi fen-phen scandal

What did the lawyers know, and when did they know it?

Lawyers for clients involved in fraudulent diet drug claims are under scrutiny in the ongoing FBI and Internal Revenue Service investigation for what, if anything, the attorneys knew about those false claims.

Of the 1,500 Fayette residents who made diet drug claims, less than 50 were legitimate, said Eva Johnson, one of 16 who have pleaded guilty in connection with the fraud.

Fake claims included prescriptions from dead doctors, medication from closed pharmacies and dates for using the drug before it even came on the market.

Two nonlawyer employees of a Jackson law firm have been indicted on fraud charges, and one has pleaded guilty. In addition, a Vicksburg lawyer has denied as "a complete and utter falsehood" statements by a ringleader in the scheme, Regina Green, that he had told her that prescription labels cited as evidence of having taken the drug would be boxed up in a place where no one would see them; the faking of such labels was a key step in the fraud.

Because federal authorities have no direct evidence at this point tying lawyers to the fraud, authorities are examining whether to pursue the case under the legal theory of deliberate ignorance, regularly given as a jury instruction in federal court in Mississippi as "willful blindness" of an individual, often someone in power.

Similar language was used to help convict former WorldCom CEO Bernie Ebbers, who testified he knew nothing about chief financial officer Scott Sullivan's manipulating the company's books to make it meet profit projections. Sullivan testified Ebbers did know. The judge allowed jurors to consider "conscious avoidance," if they believed Ebbers turned a blind eye to the crime.

AEI panel on Katrina insurance lawsuits

There's perhaps $15 billion at stake in litigation (Sep. 25 and links therein) over the flood exclusion clauses and their application to damage from Katrina. I'll be moderating a panel discussion Monday morning on the economic and legal issues presented by flood exclusion clauses. The speakers will be Robert Klein and Martin Grace of Georgia State University; Adam Scales of Washington and Lee University; and Joanne Doroshow of the Center for Justice & Democracy. See also Adam Scales, "How Will Homeowners Insurance Litigation After Hurricane Katrina Play Out?", Findlaw, Sep. 19; Kathy Bushouse, "Lawsuits over storm-surge damage put insurance industry on the defensive", Florida Sun-Sentinel, Sep. 27.

Spitzer and mutual funds

Prof. Bainbridge is watching. So's AGWatch.

"In Loco Parentis Goes Loco"

Per the WSJ editorial page, federal law sharply restricts colleges' right to disseminate information about their students, and one peculiar result is that they sometimes can't release transcripts to a student's own parents if the student is by law a nondependent. At the same time, college administrators can get sued for failing to prevent suicides by depressed students -- driving them further into a posture of in loco parentis protectiveness (more on higher ed).

The "litigation finance" industry

Businesses which specialize in lending money to plaintiffs, the returns to be paid out of their lawsuit winnings, survived an appellate-level challenge in Florida. "But the state's 2nd District Court of Appeal criticized the business as 'one-sided' and called on the Legislature to consider regulating the industry." Legal Ethics Forum has more and cites the ABA's Model Rule 1.8(e), which "sets out the traditional doctrine that lending money to the plaintiff is an improper form of purchasing influence over the plaintiff." See OL Apr. 5, 2005, Oct. 25, 2003, Aug. 4, 2003, Dec. 3, 2001, and (Australia) Aug. 5, 2005.

After barely seven months on the books, Gwinnett County Superior Court Judge Michael C. Clark has struck down Georgia's offer of judgment reform statute (O.C.G.A. 9-11-68), reasoning that it is unconstitutional under the Georgia State Constitution for restricting the access of individual litigants to the courts. (Fulton County Daily Report, Sept 27, 2005 (sub); Decision).

I plan on posting a longer analysis of the decision tomorrow.

Ferguson Fries Lockyer

Columnist Andrew Ferguson burns California AG Bill Lockyer to a crisp in a criticism of Lockyer's french-fry labeling suit.

(Past coverage: Ted Frank, Aug. 29. This author: Aug. 29, Aug. 30)

Boston invests in pepper ball case

No great surprise: the family of Red Sox fan Victoria Snelgrove, killed in a freak incident outside Fenway Park when a policeman shot her in the eye with a pepper pellet (see Overlawyered, Nov. 4, 2004), is suing the pellet-gun manufacturer. Less predictably, there's a municipal champerty angle:

In May, the city of Boston settled a lawsuit by Snelgrove's family for $5 million. As part of the settlement, the city cooperated in the suit against the gun maker and will receive half of any damage award, up to $2 million.

More on champerty here and here.

Update: Ellison's charitable settlement

A California judge has withheld approval of a class action settlement, directing Oracle to explain why its shareholders should pay the $22.5 million in legal fees contemplated by a settlement requiring CEO Larry Ellison to pay $100 million to charity over five years. Check back in mid-November. This is one of three class action suits over the identical stock sale; a Delaware court dismissed the charges as groundless, and a federal suit is pending. (David Bank, "Judge Questions Costs in Oracle Suit", W$J, Sep. 27).

It's worth noting that the settlement doesn't present real consequences for Ellison; Ellison has given $100 million to the Ellison Medical Foundation already, and has already indicated that his billions will be bequeathed to charity. So precisely what result have the plaintiffs' attorneys achieved that merits a $22.5 million award, much less one from Oracle shareholders?

Washington Times editorialists

...criticize the federal asbestos trust fund proposal.

"The Lawsuit That Sank New Orleans"

At the WSJ (sub), David Schoenbrod pins some of the blame on shoddy levee-building and pork-barrel reclamation projects, but says environmentalists' levee-busting lawsuits can't escape a share of responsibility as well:

The Corps cannot stop a project, conduct a lengthy study, go back to court, and then be sure it can pick up where it left off. Large federal projects ordinarily cannot proceed unless executives and legislatures at several levels of government agree on the same course of action at the same time. That's why litigation delay can kill necessary projects. However responsibility is apportioned, but for the lawsuit, New Orleans would have had the hurricane barrier.

...Louisiana State University's Hurricane Center found that "the flooding of most of New Orleans" came from breaches of floodwalls on canals adjoining Lake Pontchartrain; Katrina's surges did not pour over the levees but breached them because the Corps' floodwalls were shoddy. The barrier stopped by the lawsuit was designed to keep storm surges out of the lake, so it would have reduced the pressure on these floodwalls.

More: OL Sept. 9, Sept. 14, Sept. 17.

More on Katrina and the legal system

The September 23 issue of "After Katrina Legal News," a newsletter published by the New Orleans-based firm Phelps Dunbar, is online here. Included is this rundown of Katrina Lawsuits:

The first of what is expected to be a multitude of lawsuits relating to Hurricane Katrina have been filed. The Attorney General of Mississippi has sued numerous insurance companies in state court seeking to void exclusions in property casualty insurance policies. Private class action law suits have been filed in Louisiana seeking declaratory judgment that damages caused by waters entering New Orleans because of breaches in the levee system are covered by homeowner insurance policies. A federal class action suit has been filed against oil and gas pipeline companies and oil and gas exploration companies for damages caused to Louisiana's wetlands by the creation of pipeline and access canals, which allegedly contributed to destruction caused by Hurricane Katrina. Class action suits have been filed against oil companies and oil well operators relating to some of the 44 reported oil spills caused by the storm, including five spills classified by the Coast Guard as "major" (over 100,000 gallons), and four spills classified as "medium" (10,000 to 100,000 gallons).

Martin Grace has some thoughts on the suit brought by the Mississippi AG, here and here. The Wall Street Journal editorial page calls it a "Category 5 Lawsuit." The website of the Mississippi AG's Office includes a Katrina-related links page that covers the suit.


In responding to a great crisis such as a major hurricane, we're sometimes better off if those on the front lines dare to throw out the rule book. When Katrina struck, though, many responders seemed more concerned with following proper procedure than with saving those in need of rescue. Why? Don't miss Washington Post science and medicine correspondent David Brown's analysis. And please, fewer lawyers at FEMA, argues the Toledo Blade's Jack Kelly.

Katrina and the runaway AG

I've got a "Rule of Law" guest column in Saturday's Wall Street Journal (subscriber-only link) on the lawsuits by Mississippi attorney general Jim Hood and his ally Dickie Scruggs attempting to overturn the clear and unambiguous exclusion of flood coverage from homeowners' insurance policies in the wake of Hurricane Katrina. As readers of this site know, I'm appalled by the idea:

Sometimes it takes a good lawyer to get an insurance company to pay up on the promises it made. But if you want insurers to pay billions on promises they never made -- risks they were at pains to avoid underwriting, never collected premiums for, and never set aside reserves against -- then a pair of very special lawyers, Jim Hood and Dickie Scruggs, are at your service.

In case you're arriving late, insurance pros worldwide stood transfixed last week at the news that Mr. Hood, the elected attorney general of Mississippi, and his ally Mr. Scruggs, the Pascagoula wheeler-dealer known for his role in the $246 billion tobacco litigation, were suing to invalidate -- as "unconscionable" and contrary to public policy -- the standard flood exclusion in every Magnolia State homeowner's contract. Assuming ordinary readings of policy language, the early estimates have insurers on the hook for a record $40-$60 billion in Katrina payouts. Knock out the flood exclusions and that exposure will increase by many billions more -- scores of billions if the principle gets applied in Louisiana.

I get into the Constitutional issues a little bit, and some of the practical consequences:

So, can't State Farm, Allstate and others cite Article I, Section 10 of the U.S. Constitution, which provides that "No state shall. . . pass any. . . law impairing the obligation of contracts"? Unfortunately, the Supreme Court in Blaisdell, a 1934 New Deal case, gave states free rein to nullify contracts so long as "the legislation is addressed to a legitimate end and the measures taken are reasonable and appropriate to that end." If you think that guts the originally intended protection, maybe you're part of that "Constitution in exile" movement we keep being warned about.

Should the Hood-Scruggs theory be taken seriously, the bankrupting of some insurers and the diversion of money from insureds in other states will only be the start. The wider problem would be that both reinsurers and primary insurers are likely to head for the hills rather than underwrite future conventional policies in Mississippi, or indeed any jurisdiction judged capable of electing a Hood to high office. At a minimum, they're likely to demand a steep premium to compensate for legal risk.

More: Thomas Knapp notes that "It was only a matter of time before the Gulf Coast disaster moved from the finger-pointing stage to the pocket-picking phase." (via Henley). And: Infamy or Praise (Sept. 19), Ribstein, Kirkendall, D.C. Examiner.

Prisoner legal powers

Jonathan Wilson's entry on a prisoner's abuse of the legal system is only the smallest tip of the iceberg. In a much more sinister tactic, Aryan Brotherhood gang members demand self-representation, and then use the resulting subpoena power to hold leadership meetings or attempt to determine "leaks" in the gang's code of silence; the legal system is being requisitioned to help the gang maintain power:

The fact that the 14 or so hardest of the hardcore AB members were housed in Palm Hall, the three-tiered Security Housing Unit (SHU, also described as �a prison within a prison�), was no freak accident of jurisprudence. Most of them had been subpoenaed (or �writted�) to Palm Hall in January 1981 to testify as defense witnesses in the murder trials of other AB members who were representing themselves in court. Inmates did this quite frequently � in fact, they joked about how easy it was to subpoena other inmates, as you did not have to show purpose to the judge.

A brave federal prosecutor, Gregory Jessner, in a relatively rare use of RICO for its intended purpose, is attempting to take down the gang in a trial currently ongoing in Los Angeles. You may recall the case from a comprehensive article in the New Yorker by David Grann in February 2004. The results haven't been pretty so far:

Last year's prosecution in Illinois of David Sahakian, alleged to be one of the AB's federal commissioners, was [a] debacle. Sahakian and two other Marion inmates were charged with murder and conspiracy in the stabbing death of a black inmate, Terry Walker. The trial lasted seven months, cost more than $3 million just for the defense mounted by court-appointed lawyers, and resulted in a hung jury on most of the charges. Sahakian was convicted on a single charge of possession of a homemade knife -- a tough charge to beat, since the shank was found concealed in his rectum.

(Alan Pendergrast, "Bringing Down the Brotherhood", Denver Westword, May 5; Matthew Duersten, "Who�ll Stop the Reign?", LA Weekly, Feb. 4-10; David Grann, "The Brand", The New Yorker, Feb. 16, 2004 (via Taylor)).

Flood exclusion avoidance suits

Doug Simpson traces some of the unintended consequences, virtually all of them bad, of the Hood/Scruggs attempt to wriggle out of policy exclusions in the wake of Hurricane Katrina.

Who says a stint in business is any guarantee of acquaintance with basic economics? Sen. Maria Cantwell (D-Wash.) spent time as a high-tech executive before winning her Senate seat, and yet is still unfamiliar with the process by which users in a crisis-stricken section of the country, their ordinary source of supply disrupted, can explicitly or implicitly bid away a resource from more comfortable users elsewhere:

One bill being written by Sen. Maria Cantwell, D-Wash., would make price gouging a federal offense and heavily fine violators....

[Cantwell said:] "There is absolutely no reason for gas to go up in Washington as the result of a hurricane."

See Sept. 14, etc.

Convicted Rapist Sues Victim

Connecticut Attorney General Richard Blumenthal is seeking an injunction to prevent convicted rapist, Allen Adgers, from using legal process to harass his victim.

According to the AG, Adgers, 41, who is serving a 13-year prison sentence for kidnapping, raping and assaulting his victim, has initiated at approximately two dozen lawsuits in the last four years against judges, prosecutors and even the victim in his case.

As part of the litigation, Adgers has used civil subpoena powers to force his victim to answer questions, using the opportunity to ask her about her past sexual experiences, bra size and other personal details.

Sadly, this is not an isolated story as our legal system contains few constraints to prevent abusive litigation of this sort. (Past coverage on frivolous prisoner suits: (June 13, 2005)

In the mail: "Toxic Diversity"

Received but not yet read: "Toxic Diversity: Race, Gender and Law Talk in America" by Touro Law Center prof Dan Subotnik, who was a gracious host when I spoke at Touro some years back. A analysis of and riposte to critical race theory, feminist legal theory, and other strands of the critical legal studies movement, it boasts blurbs from John McWhorter, Diane Ravitch, Christina Hoff Sommers and others including CLSer Richard Delgado. Prof. Subotnik also takes a leaf from some of the scholars he criticizes by drawing on narratives from his own experience in the legal academy as well as more familiar strains of legal and textual analysis.

A thought experiment on non-economic damages

Ten years ago, on June 25, 1995, American Airlines Flight 58, en route to New York from Los Angeles, suffered severe turbulence in flight when it flew into a thunderstorm. Over the course of a few seconds (the NTSB says five-to-eight seconds, the plaintiffs say 28 seconds), the plane dipped and rose 200 feet suddenly, throwing unbelted passengers from their seats, before resuming level flight. No one was seriously injured, though 16 of the 117 people aboard were treated at hospitals for minor injuries after the flight diverted to Chicago for medical treatment.

Thirteen passengers, including Steven Spielberg's sister, sued for emotional distress. American Airlines acknowledged its liability for failing to avoid the thunderstorm, but refused to offer more than five to twenty thousand dollars per plaintiff, so the question of damages went to a jury trial. A jury assessed $150,000 to $215,000 per plaintiff in emotional damages. (Christa Zevitas, "Fear of Death Nets $2.2 Million For 13 Airline Passengers With Only Minor Physical Injuries", Lawyers Weekly USA, Nov. 19, 1999; Overlawyered, Oct. 8, 1999).

You might see where this is going in the wake of the recent dramatic landing of JetBlue Flight 292 in Los Angeles after an interrupted Burbank to New York flight. The flight had problems with its landing gear, circled for a few hours to burn fuel, and made a safe emergency landing; the event was televised, and passengers could watch the tv coverage up until fifteen minutes before landing. As with Flight 58, passengers feared death. If the $150,000 in emotional damages per passenger that a jury awarded for Flight 58 was appropriate, that would cost JetBlue $20 million. But, recall, Flight 58 was only in jeopardy for a few seconds. JetBlue circled for three hours, and passengers had time to make cell-phone calls to loved ones. Should damages be 360 times more because of 360 times the length of fear? That would imply liability to JetBlue of a bankrupting $7 billion for an accident where noone was hurt.

The problem is that dollars are incommensurate to "emotional distress." While juries hearing evidence on lost wages will tend to cluster around the correct result reflecting economic reality, what any jury of six or twelve people decide for noneconomic damages is essentially going to be a random number. It's just as easy to rationalize a million dollars as it is $100,000 or $10 million. In such a circumstance, is it really so problematic to suggest that a democratically-elected legislature put constraints—caps—on what a jury can award?

Firearms law panel Saturday at GMU

I'll be a panelist this Saturday at George Mason University School of Law in Arlington, Va. where Law Students for the Second Amendment is holding a Firearms Law & Second Amendment Symposium. I'll be on the day's final panel where I expect to be much outshone by my fellow panelists, Nelson Lund, Randy Barnett and Don Kates. Admittance is free to the general public (draft agenda). For more on the subject, check out my discussion with GMU's own Michael Krauss.

Judiciary Committee approves Roberts, 13-5

Since Democrats on the Judiciary Committee tend to be more liberal than Senate Democrats generally, it seems likely that Roberts will rack up an even more lopsided majority when it comes time for the full floor to vote on Monday.

JetBlue emergency landing

Will the popular airline get sued by outwardly uninjured but psychologically traumatized passengers following yesterday's L.A. incident? Precedents are discussed here, here, and (the most famous such incident, also with an L.A. angle) here.

Not Horsing Around

A federal jury returned a verdict for the defense in a personal injury case filed by an off-duty Boston police officer against a mounted Massachusets state trooper.

The plaintiff claimed he was injured when the trooper caused his horse to head-butt him outside a New England Patriots game in 2001, resulting in five months of missed work, headaches and dizziness. The defendant trooper claimed he did not intentionally cause the head-butt and that the plaintiff was drunk and had jay-walked, leading to the horseplay at issue.

Scruggs, Hood and hurricane reinsurance

In a Sept. 12 BestWire interview, Dickie Scruggs demagogically suggested that given the role of international reinsurance his proposal for voiding flood exclusions in the wake of Katrina would merely fob off the cost of Gulf rebuilding on "Swiss gentlemen". But Washington, D.C. policyholder attorney Marc Mayerson of Spriggs & Hollingsworth, on his Insurance Scrawl blog, argues that reinsurers may well escape such costs on the grounds that they are obliged to reimburse only payments triggered by the actual terms of insurance policies, and not to compensate primary insurers for lawless expropriation on the one hand, or (assuming an out-of-court settlement) for "goodwill" payments over and above what contractual language specifies. "The European reinsurers probably have little to fear -- other than the threatened insolvency of their customers (i.e., the insurers)."

The N.Y. Times's softball coverage of Scruggs and his claims is here. Mississippi Attorney General Jim Hood's pleading, in his lawsuit attempting to expropriate the insurers, is here, and his press release here (both PDF).

Write critically about speed cameras...

...and get set up for a sting by vengeful cops: a story from Edmonton, Alberta (via Boing Boing).

Chiropractic kickbacks

Milwaukee personal-injury attorney Charles J. Hausmann pocketed $77,000 in referral payments without disclosing the payments to clients. David Giacalone thinks he got off too easy with two months in a minimum-security facility. Now, if you take the "law is just like any other business" view, you might argue that for a lawyer to get kickbacks from chiropractors is not all that different than, say, a hotel concierge's getting kickbacks from restaurant owners for steering business, which would probably not result in prison time. On the other hand, David cites a possibly aggravating factor:

Hausmann would have the chiropractor write checks to third parties, including a charity whose bank account Hausmann controlled (and which used some of the funds for landscaping at Hausmann's residence). One of the charities named Hausmann its "attorney of the year" in August 2003.

That's aside, of course, from the question of whether lawyers should be held to higher standards than hotel concierges.

Indirect purchaser class actions

Under the Supreme Court's Illinois Brick doctrine, only direct purchasers can recover federal antitrust damages. Many states permit indirect purchaser suits, however, and many plaintiffs file class actions in state courts seeking recovery under state law that wouldn't be possible under federal law. Now, under the Class Action Fairness Act, many of these cases will end up in federal court.

The National Law Journal pejoratively refers to this shift in jurisdiction as a "flood." (Pamela A. MacLean, "Federal Courts May Face Flood of Price-Fixing Actions", Sep. 21). Why twenty cases filed in twenty state courts that can come to inconsistent results is less of a flood than the addition of plaintiff classes to a single consolidated federal case already present in the federal courts remains unspoken. The article quotes an attorney protesting that federal courts don't have a lot of experience construing state antitrust laws—but neither do state courts, many of which expressly defer to federal precedent. I don't have data to confirm this, but I suspect there are very few state-court judges with indirect-purchaser class action experience under their belts, whereas most federal judges on the bench for any length of time have antitrust experience.

Contingency-fee curbs

The Washington Examiner weighs in.

Power Lunch: 1:35 pm

For those interested, I'm scheduled to appear on CNBC's Power Lunch shortly, at around 1:35 pm. I'll be discussing tort reform opposite a representative from the Association of Trial Lawyers of America, with a special focus on the recently passed Good Samaritan Protection for Construction Volunteers Act," H.R. 3717, which offers qualified liability protection to construction workers and firms providing emergency relief.

Davis-Pork in the Gulf

Mickey Kaus wonders whether it's really a good idea for Democrats and liberals to be rallying in defense of the "notorious" Davis-Bacon Act, which is meant to enforce union wage scales on government contractors, and which the President recently suspended in the Katrina reconstruction zone. Time was, after all, when the neoliberal Washington Monthly persuasively pushed for the elimination of the law. (That's nothing; we can remember when the Washington Monthly used to be great on liability reform, too.) And James Taranto amusingly notes that Josh Marshall of Talking Points Memo has been crusading in favor of the union position on Davis-Bacon even as he advertises for internship help at a wage rate of $0.00, which manages to outdo in big-heartedness the wages the UFCW dispenses for picketing Wal-Mart.

First WTC bombing trial

Trial is starting in a liability case against New York's Port Authority over the 1993 bomb attack on the World Trade Center.

Thank you, Virginia

...for saying such nice things about the Manhattan Institute (see final sentence).

ALEC Opposes Asbestos Reform Act

The American Legislative Exchange Council, which describes itself as an "association for conservative state lawmakers who share a common belief in limited government, free markets, federalism, and individual liberty" has issued a report claiming that the Fairness in Asbestos Injury Reform Act of 2005 is "fundamentally flawed."

According to the press release, the reform bill fails to set aside enough money in trust to cover anticipated claims, leading to its own insolvency in three years or less.

Vioxx witness "enraged"

Maybe I'm missing something, but I was perplexed by the following account of Friday's testimony in the Humeston v. Merck trial (from the Star-Ledger weblog Ted pointed to last Thursday):

The day's dramatic highpoint came when plaintiff's witness Benedict Lucchesi, a pharmacologist, got choked up while answering a question about an internal Merck e-mail from 1997.

The e-mail, sent among Merck scientists working on Vioxx, was about how to design a clinical trial to test the safety of the painkiller, which wouldn't be approved by the FDA for another two years. The researchers were debating whether to allow people who were on a low-dose aspirin regimen to participate in the trial - a group that could skew the results because of the cardio-benefits of aspirin.

Under questioning from plaintiff's lawyer Chris Seeger, Lucchesi inferred from the e-mail that Merck's scientists recognized the potential cardiac risks of Vioxx well before it went on the market.

"When I see that, I must say I personally become enraged," Lucchesi said, apparently struggling to control his emotions. "They're putting profit before life. I know these people. I trained some of these people.

"They have to live with this."

Perhaps the email does show that Merck realized there could be a cardiac risk from Vioxx--but the fact that there might be a risk for a medication doesn't mean that the medication shouldn't be on the market; the relevant question is whether the drug's benefits outweigh those risks. It also only makes sense to me that Merck wouldn't design a test with a control group that might skew safety results because some in that group were taking another medication with offsetting benefits, which therefore might give a wrong picture of the actual risk-benefit profile of the drug you're actually testing. Unfortunately, I doubt the lay jurors are likely to ask these questions, or to understand them should Merck raise them.

I must admit I get angry when I keep hearing the "putting profit before life" boilerplate. As Ted pointed out after the Ernst verdict came down, Vioxx and other COX-2 inhibitors save lives because they do not cause the stomach problems associated with non-steroidal anti-inflammatory drugs like aspirin and ibuprofen, which take 16,500 lives per year. The question is whether the risks associated with Vioxx are worth more or less than the lives the drug saves. The Food and Drug Administration, based on the evidence then available, initially determined that the cost-benefit analysis for the drug came out in favor of letting Vioxx onto the market. Even with what we know now, that initial decision might have been the right one.

And we wouldn't have had a better picture of Vioxx's health risks if Merck had sponsored a faulty, poorly controlled test.

I'd like to offer our heartfelt thanks to Professors Richard Epstein and Stephen Presser for their contributions to this site in discussing the Supreme Court--from many different angles--following John Roberts's nomination to the Supreme Court. They've each now added a finishing postscript (Professor Epstein, Professor Presser) following the conclusion of last week's hearings. In related confirmation news, it looks like Senate Minority Leader Harry Reid will ignore the professors' advice and vote against the Roberts nomination.

We hope you've enjoyed Professor Epstein and Presser in their discussion as much as we have. Although they ventured across the broad expanse of law--far afield at times from the civil justice issues upon which we focus--it was a real privilege to have such top legal minds exploring the rule of law itself on these pages, which after all are intended to shed insight on how we might make our rule of law more workable.

Oracle settlement

Lyle Roberts has more here and here (see Sept. 17).

The quotable Dickie Scruggs

Prof. Grace had this on his blog and it bears reprinting here:

According to BestWeek ($$$$) our famous litigator from Mississippi, Mr. Richard Scruggs, says

"I'd rather see an insurance company go broke than the tens of thousands of my friends and neighbors in Mississippi, Alabama, and Louisiana go bankrupt."

Last Thursday Mississippi Attorney General Jim Hood, following urgings by Scruggs, filed suit against five insurance companies seeking to have the exclusion of flood damage in homeowners' policies declared void as against public policy, a daring act of attempted expropriation which if successful would likely have far-reaching economic consequences that went well beyond the bankrupting of insurers.

Outbreak of common sense at Washington Post

The Post demonstrates that it's not entirely knee-jerk; indeed, that they may have been reading Point of Law:

Unfortunately for Merck, scientific facts didn't play much of a role in the first Vioxx trial, which ended on Aug. 19. The Texas jury in that case awarded $253.4 million to the widow of a man who died of a heart attack triggered by arrhythmia, which is not a condition Vioxx has been proven to cause. The jury, declaring that it wished to "send a message" to Merck, decided to make an enormous symbolic award anyway. Besides, said one juror afterward, the medical evidence was confusing: "We didn't know what the heck they were talking about." Because Texas law limits the size of jury awards, the final cost to Merck is likely to be closer to $2 million [sic]. But the precedent set by the jury is ominous. Merck is facing about 5,000 similar lawsuits. If every one of those costs the company $2 million, the total price will come to $10 billion -- if, of course, a company called Merck is still around to pay it.

Politicians and regulators should be asking themselves whether a system of massive cash awards to people who may or may not have been adversely affected by Vioxx is a logical, fair or efficient way to run a drug regulatory system. They should also be asking whether juries that scorn medical evidence are the right judges of what information should or should not have been on a prescription label. After all, Vioxx was produced and sold legally. The drug was approved by the Food and Drug Administration, and its label did warn of coronary side effects. [...]

In the long term, using the courts to "send a message" to Merck isn't going to help consumers. If the result is an even more cautious FDA approval system and a more cautious pharmaceutical industry, that will keep innovative drugs off the market for much longer. More people will die waiting for new treatments. The cost of producing new drugs will rise dramatically. Already, there are whole areas of medicine -- women's health during pregnancy, for example -- that are made so risky by liability issues that companies may stop doing research in them.

The first principle of reforming this system should be that a company that follows the FDA's rather extensive guidelines should be protected from punitive, if not compensatory, damages.

Sounds quite familiar. (via Newmark)

Tech difficulties at Overlawyered

For those of you who visit my other site, Overlawyered, you may notice that it hasn't been updated since Monday morning. That's because the site's hosting service, Verio, is again reporting technical difficulties which are preventing new updates at the moment. Having suffered this problem several times now we're exploring rehosting the site, and I'd welcome suggestions from readers on hosting services you've had good luck with: email editor-at-[that other domain name]-dot-com.

Judge throws out AGs' global warming suit

On Thursday U.S. District Court Judge Loretta Preska in Manhattan dismissed the much-publicized suit (more, more) filed by eight state attorneys general, including Lockyer (Calif.), Spitzer (N.Y.), and Blumenthal (Ct.), against five electric utilities seeking to impose more restrictive greenhouse-gas controls than those prescribed by federal clean-air law. "Cases presenting political questions are consigned to the political branches that are accountable to the people, not to the judiciary," wrote the judge. For a foreshadowing of the result, see Aug. 16. For another recent high-profile case in which Judge Preska was obliged to remind plaintiff's counsel of the difference between courts and legislatures, see Apr. 12 (Dickie Scruggs's nonprofit hospital litigation).

Legal wikis

Like blogs, they're likely to emerge as a powerful new way of organizing information about the law, suggests "Excited Utterances" blogger Joy London. See Aug. 24.

9/11 compensation fund

"Set a bad precedent", argues David Henderson.

Those interested in the interplay between disaster, government regulation and housing markets should catch "Robert Musil's" explanation of why the political force behind rent control in the city of Santa Monica dissipated following Southern California's catastrophic 1994 earthquake, resulting in a rightward shift in the city's voting patterns.

Ellison's charitable settlement

Oracle's Larry Ellison has agreed to settle a shareholder derivative class action "for a $100 million donation in Oracle's name to a charity chosen by Mr. Ellison." Oracle will also pay $24 million to a team of plaintiff's lawyers led by Berman DeValerio Pease Tabacco Burt & Pucillo. Floyd Norris of the NYT wonders whether it's a great deal for the plaintiffs, or just for their lawyers. More: Christine Hurt and Larry Ribstein comment.

Katrina and big government

The hurricane proves folks like us were wrong to ask for a smaller and less intrusive government -- that's what we keep hearing, at least. Among those who aren't buying the new line: Anne Applebaum, Colby Cosh and Tom Palmer.

Washington Post on Vioxx Litigation

[Cross-posted at Volokh.com]

An excellent editorial in the Post, which includes this gem:

Unfortunately for Merck, scientific facts didn't play much of a role in the first Vioxx trial, which ended on Aug. 19. The Texas jury in that case awarded $253.4 million to the widow of a man who died of a heart attack triggered by arrhythmia, which is not a condition Vioxx has been proven to cause. The jury, declaring that it wished to "send a message" to Merck, decided to make an enormous symbolic award anyway. Besides, said one juror afterward, the medical evidence was confusing: "We didn't know what the heck they were talking about."

Unfortunately, no matter how many quotes like this one reads, nor no matter how obvious it is that complicated scientific evidence presented orally in an adversarial system will inevitably be beyond the comprehension of many lay jurors, it won't convince many academics that perhaps jury trials are not a good way to resolve medical causation issues (the breast implant litigation being a fine example). For a well-written, but ultimately unpersuasive apologia for juries in this context, see this article by Vidmar and Diamond. For that matter, despite the protests from skeptics such as myself, many academic lawyers seem intent on actually expanding the power of juries to wreak havoc with the pharmaceutical industry.

Collateral-source rule

It's under discussion in Kansas, where the legislature is considering allowing juries to hear about insurance sources that may already have covered a plaintiff's injury. "States are split on the issue -- 24 have laws allowing courts to consider outside payments in judgments and 26 don't, according to the National Association of Mutual Insurance Companies."

Mississippi tort reform

Among other signs of success following last year's landmark legislation, the state's predominant medical liability insurer, Medical Assurance Company of Mississippi, "recently announced an end to its moratorium on new business; it also just declared it will cut its rates for 2006". See, among other entries, here and here and here.

Shorter Russ Feingold

Bill Dyer condenses protracted Senatorial grandstanding at the Roberts hearings into one mini-grandstand.

Humeston v. Merck weblog

The biggest casino running in Atlantic City these days is the second Vioxx trial, Humeston v. Merck. The Star-Ledger is running a weblog with regular updates. Coverage of this trial (W$J; NYT; AP; Reuters; MarketWatch; Financial Times ($)) is lower key than in the Ernst case. Unfortunately for Merck, one of its expert witnesses won't be able to testify because he's from New Orleans. New Jersey state law permits the decision to be made by a 5-1 vote of a six-person jury; the reference to "ten people" in the press includes the four alternates.

Davis-Bacon lifted in disaster zone

President Bush last week announced that the federal "prevailing wage" law, which generally requires government contractors to pay the equivalent of union-scale wages whether or not they employ union labor, would be suspended in areas affected by Hurricane Katrina. The suspension, which follows earlier precedent in times of natural disaster, has drawn much outrage on lefty blogs as well as in such predictable quarters as the N.Y. Times editorial page. A better question is why this dinosaur of a wage-fixing law, kept on the books through the political clout of labor unions in defiance of the principles of a free labor market, should not be repealed altogether and permanently. Tim Worstall has some fun with the Times; Steve Antler at EconoPundit and Michael Fox at Employer's Lawyer also comment.

Dumb-ass question of the day

(Explanation of the title.) Thanks to Heather Mac Donald for pointing out this gem of a self-parody from Sen. Kohl:

Judge, in the aftermath of Hurricane Katrina, we all saw that those who suffered the most were those who had not been able to take advantage of the great opportunities that our great country has to offer. As we found out, those without employment opportunities and educational opportunities simply did not have the means to escape the storm and the flooding.

As you seek to become the head of the judicial branch, as you seek the position of chief justice of the United States of America, what role would you play in making right the wrongs revealed by Katrina? And what role do you and the judicial branch play in making sure that we as a nation keep on moving forward toward providing equal opportunity to all Americans?

Judge Roberts answers with a paean to equal justice under the law and the importance of upholding the rule of law. Not good enough for Kohl, who follows up:

In spite of all of our laws and all of our rules, we still saw what happened down in New Orleans. And the people who were left behind were people who had not had educational or employment opportunities.

And the question I asked was whether you, as a person who aspires to be the chief justice of the United States, sees a particular role other than continuing the role that you observe we are following now, particular role for improving our ability to respond to the needs of those people who live under those circumstances?

What does Kohl think the Supreme Court is supposed to do—charter a helicopter for rescues? Create a constitutional right out of whole cloth to one-SUV-per-family? Roberts responded more diplomatically:

Well, the courts are, of course, passive institutions. We hear cases that are brought before us. We don't go out and bring cases. We don't have the constitutional authority to execute the law. We don't have the constitutional authority to make the law.

Our obligation is to decide the cases that are presented. Now I'm confident, just in the nature of things, that there will be cases presented arising out of that horrible disaster, of all sorts. And many of those will be federal cases, I'm sure. Others will be in the state courts.

And again, the obligation of the federal judiciary and the state judiciary is to make sure they provide a place where people can have their claims, their litigation decided fairly and efficiently, according to the rule of law.

That's the appropriate role for the judicial branch.

Lee Otis

...is slicing and dicing opponents Seth Rosenthal and Nan Aron of the Alliance for Justice on a special blog Knight-Ridder has set up to debate the John Roberts nomination. Topics include, but are not limited to, the hapless toad case and the notion that judges' willingness to strike down Congressional enactments amounts to a measure of their "activism".

AGs' demagoguery on gas prices

Holman Jenkins in today's W$J:

Gasoline is the most visible price in the economy, easily discernible from the roadway without even slowing down. Yet the head of the Westchester [County, N.Y.] consumer protection office went on local TV and all but pronounced one station owner guilty because he raised his posted price more than the next station down the street....

One Florida station owner told investigators exactly why he raised prices -- because he had too many customers. For his sensible honesty, he was named in the first lawsuit brought as part of the state's "gouging" dragnet.

More: this site Sept. 8; OL Sept. 1 and Sept. 2; Will Wilson, AEI Federalism Project AGWatch, Sept. 5.

News flash: we agree with Judge Reinhardt

We don't get the chance every day to side with the Ninth Circuit's Stephen Reinhardt, but here we go: federal racketeering law (RICO) has been "stretched both in scope and meaning far beyond that which Congress originally intended," the judge said. "In my view, it is well past the time for our lawmakers to take another look at RICO and consider amending the statute so as to limit it to its original purpose." Hear, hear! The U.S. Supreme Court is considering an unusual flurry of RICO cases this year and the liberal lawprofs who spoke to the NLJ (Blakey and Chemerinsky) are eager for the justices to expand its scope, which presumably sets them at odds with Judge Reinhardt.

Big-hearted UFCW vs. Wal-Mart

The United Food and Commercial Workers wants to call public attention to the crying scandal of a Wal-Mart grocery in Henderson, Nevada's starting workers at $6.75 an hour. So what does it do? It hires temp workers at $6/hour with no benefits to walk a picket line in 104-degree heat in front of the air-conditioned store. Picketer Sal Rivera, as it happens, used to work at Wal-Mart, where he made $8.63 an hour, a good deal above what the union paid him to picket; he'd consider re-applying. (Las Vegas Weekly)(& welcome Volokh Conspiracy readers).

Should liberals oppose Roberts?

Mark Tushnet and Jeff Rosen square off at Legal Affairs' Debate Club this week.

Mandatory conservation, AG style

Regarding the lawsuit filed last week by attorneys general of 15 states demanding quicker bans on electrical appliances that allegedly use too much energy, reader Terry Maher writes in to say:

Reminds me of the 1995 energy law which mandated installation of low-flush toilets as a water conservation measure, notwithstanding the fact that multiple flushes are needed to clear the bowls; residue remains in the bowl even after multiple flushes; the units clog easily; and they require more maintenance than 3.5-gallon models and cause more damage when they overflow. But hey, they save water!

More: reader Walter E. Wallis writes:

I am an engineer who designs plumbing systems among other things. I installed a 1.6 gallon per flush toilet in my house more than 20 years ago. It was an American Standard elongated cadet with the Sloan stored pressure flush. In the succeeding 20 years, I have never had a flush failure. Not even once.

When congress passed their bill, they failed to make a performance requirement, so a lot of companies just stuck a smaller tank on their existing toilet and let the plumbers take the blame. Congressmen make poor plumbers.

Roberts hearings underway

Tom Goldstein is live-blogging at SCOTUSblog.

Employment law overview

An overview of the many modern issues in employment law, written by our editor, has now been posted on that category page. Walter's brief summary is adapted from his full-length book, The Excuse Factory, which all should read if they want a fuller exploration of the topic.

A record amount of money is pouring into Washington state over two medical malpractice reform measures on the ballot. (Angela Galloway, "Dueling over medical malpractice", Seattle Post-Intelligencer, Sep. 8). Initiative 330 caps attorneys' fees in malpractice cases, non-economic damages caps as high as $1.05 million, allows voluntary arbitration of claims, provides for the admissibility of evidence of collateral source payments, and places limitations on joint and several liability. In response, the trial lawyers have put up a Potemkin measure on the ballot, Initiative 336, calling for an investigation of insurance fees, the creation of a state-run excess insurance program that will presumably replace those insurers who leave the state under the new law, a fig leaf requiring certificates of merit and barring "frivolous" suits ("frivolous" being defined narrowly enough that anyone filing a certificate of merit will never meet the standard), and, worst of all, the three-strikes rule for doctors sued for malpractice. If this sounds familiar, it's because Florida had the same debate last year (Nov. 29, Nov. 4, Nov. 2, etc.). Then, after both sides' Florida measures passed, AP noted about the three-strikes law:

Legal experts say the measure could let loose a flood of malpractice suits. Doctors say it will scare some physicians away from Florida while forcing others to reach quick malpractice settlements to avoid a "strike" against them.

"It has branded the state as probably the most unfriendly state for physicians," said Robert Yelverton, a Tampa doctor. ...

Lester Brickman, a professor of legal ethics at the Cardozo School of Law of Yeshiva University in New York, said the lawyers "trumped the doctors" with the three-strikes amendment, because lawyers will rush to sue in hopes doctors will settle to avoid a "strike" on their record.

"You'll see hundreds of these claims," Brickman said. "In the next 10 years virtually every doctor in the state of Florida will have been sued."

Roberts hearings and ole' Arlen

Well, today the Senate Judiciary Committee is set to begin its hearings on the nomination of John Roberts for Chief Justice of the United States. For more insights, see the many musings of Professors Richard Epstein and Stephen Presser here, as well as the thoughts of the rest of us here. For umpteen newspaper articles and columns, see Howard Bashman's citations here and here.

Sunday morning, Arlen Specter, father of trial lawyer Shanin Specter and chairman of the Senate Judiciary Committee, had the following interesting commentary on Meet the Press:

Back-to-school reading

In our continuing effort to upgrade some of this site's offerings, we'll be expanding the lists of recommended books and articles you may want to read to get a feel for the many different dimensions of civil justice reform.

We've recently added six books to the archive, and expect more before too long. Our new entries include classic looks at products liability from Richard Epstein and from Kip Viscusi, two short AEI policy books by Paul Rubin and by Charles Fried and David Rosenberg, RAND's comprehensive study of the class action problem, and the popularly oriented book that made Phil Howard famous. Anyone seriously interested in tort reform should check out these books (as well as the others on our list). Our archive is sortable by author, date, title, and topical area, and each book has a write-up and is linked to Amazon.

Our friend Stephen Bainbridge has a new paper entitled "Shareholder Activism and Institutional Investors" (available for download on SSRN). The abstract:

"Have You Been A Victim of Lawsuit Abuse?"

The American Justice Partnership, which works with business, research and advocacy groups to advance litigation reform, is collecting true-life stories through its newly launched Lawsuit Abuse Experience Victim Project. It solicits stories in the categories of individuals victimized in litigation, small businesses or corporations, medical patients, physicians, consumers or clients of plaintiff's firms, individual investors, and community organizations or municipalities.

Oz judge scolds a malleable expert

It's long been a complaint about our system of lawyer-procured scientific evidence that experts often trim and shape their testimony to fit the needs of the lawyer who hires them. Now an Australian court has chided the prominent law firm of Clayton Utz for taking too aggressive a hand in managing its expert, computer science professor Keith Ross of Polytechnic University in New York, in a case on behalf of a client named Sharman Networks, a maker of controversial music-swapping software. Clayton's lawyers started by sending Ross a draft "skeleton" of the testimony they needed, and went on to demand technical changes; evidence later submitted indicated that Ross was led to endorse some propositions that he acknowledged weren't based on his own knowledge or observations, according to The Australian. He even wrote the law firm: "Feel free to make any changes, delete entire paragraphs etc." In sharply critical language, Judge Murray Wilcox "ruled that he could not accept Professor Ross's explanation for these exchanges, and discounted his evidence on controversial issues."

Law profs' letter opposing Roberts

Falls very much short, in Tung Yin's view.

Punitive damages

...with no compensatories at all? That's the issue following a jury's recommendation in July "that a French company involved in an illegal scheme to buy failed insurer Executive Life pay $700 million in punitive damages to the state of California."

A Lockyer-Bee cut-and-paste

This Wednesday press release from California attorney general Bill Lockyer, announcing the consumer-unfriendly lawsuit on energy standards discussed in earlier posts, contains a minor verbal glitch no doubt arising from faulty proofreading: it repeats the word "motors" in the list of appliances whose redesign the suit demands ("...heat pumps, motors, ranges, ovens, motors and lamps" -- emphasis added). And now check out this Thursday Sacramento Bee article reporting on the lawsuit: it includes the same list complete with the same glitch ("...heat pumps, motors, ranges, ovens, motors and lamps").

Did the Bee, reporting on Lockyer's activities, go so far as to cut-and-paste language from Lockyer's own press release? Sure looks that way.

We've posted a lot on the rash of successful lawsuits seeking to compel the taxpayers of various states to pony up more for the support of big-city schools: see Aug. 26, Aug. 17, Jul. 22, and many others. Now we're pleased to announce the publication of our latest featured article, entitled "Classroom Bullies: New York's Abusive School-Finance Litigation", which takes a close look at the Campaign for Fiscal Equity's lawsuit against New York state. The article's first paragraph gives a flavor:

Around the country in recent years, activist litigators have persuaded state judiciaries to step in and seize control of school finance, ordering state lawmakers to institute new spending for the purpose of equalizing spending among local districts, rectifying alleged funding inadequacies, or both. The resulting court decisions have been vastly controversial, stirring (well-justified) charges that the courts are stifling voters' control of the schools, usurping the historic appropriations role of the legislature, and sinking the states with mandated-but-ineffective spending. If the experience of New York is any indication, the decisions are subject to another, distinct critique: namely, they are obtained by way of abusive litigation. In particular, their proponents are allowed to evade classic prerequisites of standing and adversarialness, aimed at ensuring that courts are presented with a genuine "case or controversy", with the result that litigation becomes a puppet play aimed at justifying a preordained conclusion.

The author is Thomas C. O'Brien, an attorney and author in Corning, N.Y. whose past work includes a highly recommended analysis of the multistate tobacco settlement, published in 2000 by the Cato Institute.

Spitzer: consumers have too many choices II

Spitzer's suit, and the underlying Congressional law it seeks to enforce, is notable for its unspoken—and apparently unreported—assumption. It's one thing for there to be mandatory restriction of consumer choice when there are externalities or collective-action problems that are not reflected in the price. The classic example is regulation of auto exhaust emissions; if I am to purchase a car, I would bear all the costs of installing environmental controls, but I receive an infinitesmal percentage of the benefit from making my car less smog-producing. Other than the occasional insufferable Toyota Prius owner (a group that counts me and my brother as members), very few people voluntarily pay extra to reduce their emissions; consumers do not bear the social cost of the smog that their auto produces. By requiring all new cars to meet certain environmental standards, government regulation can solve the collective action problem. One can quibble with the implementation of the idea—an emissions tax might be more efficient if technology existed to make the administrative costs of measurement of emissions low enough; California's "grandfathering" of old cars means that 5% of the vehicles in California produce half the state's smog—but the theory is reasonably sound.

But when it comes to "energy efficient" appliances, the cost is "consumers use more energy." Every major appliance in America is sold with a prominent yellow sticker indicating its electricity usage. Consumers can decide for themselves whether they wish to pay for the extra kilowatts; some utility regulators have even required utilities to subsidize consumers' purchase of energy-efficient appliances, on the theory that doing so would be cheaper than building a new power plant.

If consumers are purchasing energy-hog washers and dryers and refrigerators, it's because they're willing to bear the extra costs of the energy. So there's no social problem—unless Eliot Spitzer and Congress think that electricity prices, like prices for smog-producing cars, do not reflect the true social cost of electricity. If so, there's an easy way to get consumers to use a socially efficient amount of electricity while internalizing any externalities from electricity usage: add a tax reflecting these social costs to bill for electricity, which, unlike auto emissions, is readily measurable through the existing infrastructure. Raising the tax (which can be made revenue-neutral through a cut of taxes on socially beneficial activity, such as working, which New York taxes between 4 and 7.7%) would then allow the market to decide the cheapest way to reduce electricity usage, which would be a much more efficient result for consumers than a top-down bright-line appliance-by-appliance diktat, and one that would require many fewer bureaucrats and pages in the Federal Register. So the New York Times is guilty of omitting the lede: the story is not "AG Spitzer sues to make appliances more energy efficient," it's "Aspiring Governor Spitzer thinks electricity prices aren't high enough."

Spitzer: consumers have too many choices

Along with the AGs of 14 other states and New York City Corporation Counsel Michael Cardozo, New York's hyperactive attorney general is suing the federal Department of Energy for allegedly failing to force household appliances off the market that use too much energy, in accord with the National Appliance Energy Conservation Act of 1987. Spitzer describes denying consumers in New York and elsewhere the option to buy such appliance designs as "good energy policy, good environmental policy". And if consumers don't like being herded toward expensive and complicated front-loaded clothes washers, for example, well, that's their problem.

Business and the Roberts nomination

The major Washington business groups are quietly supporting the John Roberts nomination, but aren't currently planning to take a high-profile role.

Here come the insurance lawsuits

Most insurance policies sold cover wind damage but not flood damage, and it was the latter that devastated Louisiana. Even so, of Hurricane Katrina's estimated $100 billion+ in economic losses, "insurers are already expected to pay $20 billion to $35 billion, more than [they have] paid for any other natural disaster in the country's history. But property owners are likely to push for a more expansive definition of insurers' liability." (NYTimes).

The Law of Price Gouging

Shortages of gasoline in the wake of Hurricane Katrina have prompted both state and federal regulators to take steps to curtail price gouging. Legally, approaches wary widely, from those of New York Attorney General Eliot Spitzer (who has tried to apply mini-FTC Act language -- "unfair and deceptive trade practices" -- to prohibit sudden price increases) to Georgia Governor Sonny Purdue (who has the advantage of a specific Georgia statute that applies only during declared emergencies to prohibit retail price increases that are not connected to demonstrable changes in the cost of supply) to the Federal Trade Commission (which has been lobbied by some members of Congress to "investigate" claims of gouging).

What makes this multiplicity of legal approaches interesting is that some commentators question whether "gouging" really exists and, if so, whether it might actually be beneficial. (More coverage).

Class Action Fairness Act

The Civil Justice Reform Group and the Institute for Legal Reform have jointly launched a resource center with educational materials on the new federal class action law. The target audience is defense lawyers, but many of the materials are likely to be of interest to others as well.

The Litigation Lobby is howling with outrage over a provision in proposed new federal rules prescribing roof strength in passenger vehicles. The provision would cut off future liability lawsuits based on allegations that car roof designs that comply with the standard are defectively weak. Put differently, the rule would prevent lawyers and juries from endlessly second-guessing the standard once set and compelling automakers to pay large judgments even when they fully complied with the rule. Public comment is open for 90 days and the usual suspects can be expected to push a substantial campaign to derail the provision. (Detroit News first/second article).

The following dialogue occurred Aug. 22 in the Texas courtroom of federal judge Janis Graham Jack, as prominent plaintiff's attorney Richard Laminack attempted to explain why so many persons filing silicosis claims turned out to have filed asbestos claims earlier. It appeared last week in the W$J, alongside a scathing editorial, but is worth a reprint for the light it sheds on the unfolding silicosis scandal.

Yet another Sarbanes-Oxley problem

According to Larry Ribstein, the law's provision requiring audit committees to set up snitchlines -- excuse me, information channels to facilitate anonymous whistleblowing -- conflicts with various laws of the home countries of foreign firms that do business in the U.S., leaving them in a compliance bind.

Parade of new blogs

The highly regarded (by us and others) AEI-Brookings Joint Center on Regulation has launched a blog which has already ranged over topics as various as bear-resistant canisters, tobacco ads in China and regulation of private schools in Pakistan (which certainly sounds different from "bringing radical madrassas under control in Bin Laden's back yard"). The Capital Research Center, known for keeping a critical eye on labor unions, environmentalists and liberal foundations, has launched a blog featuring the work of Robert Huberty, David Hogberg, and Joseph de Feo, among others. The Voluntary Trade Council, scourge of antitrust laws, has begun its own you-know-what as well. And Burton Randall Hanson, whose no-longer-published Law and Everything Else was among the first law blogs, is back with a new one he calls The Daily Judge.

William Kristol fears that Senator Cornyn is floating a trial balloon for a Justice Gonzales. (Weekly Standard, Sep. 6).

Littler Mendelson has some advice (via Michael at EmploymentBlawg).

A Federal court in New York rebuked the SEC on September 1st when it dismissed the SEC's lawsuit alleging that Siebel Systems, Inc. violated Regulation FD, a rule providing for "fair disclosure" to investors (SEC v Siebel Systems, Inc., S.D.N.Y., No. 04CV5130 (GBD), September 1, 2005).

Regulation FD requires public companies to disclose information to the public in ways that avoid "selective disclosure", prohibiting public companies from saying one thing in a press release, for example, only to give out different information to analysts or investors. While the rule has an admirable intent, it can be very difficult for corporate officers to apply. Corporate officers routinely have conversations with analysts and key investors and cannot simply repeat the text of press releases in those conversations. The practical implications of the rule have proven difficult to implement and represent an ongoing concern for corporate law practitioners.

Siebel was the first company charged by the SEC under Regulation FD in 2003. It settled those charges, but when the SEC brought a second action in June 2004 it decided to fight back.

The SEC's complaint alleged that Siebel had disclosed material non-public information during private dinners with institutional investors. The SEC alleged that by disclosing that Siebel's business activity levels were "good" and "better" and that its sales were "growing" and "building", the CFO implied that the company's business was improving. The SEC claimed that this information was significantly different from public statements made by the company's CEO in shareholder conference calls, where he had allegedly emphasized negative aspects of the business.

According to the SEC, institutional investors who attended the the private dinners interpreted the statements as a signal of improving fortunes and communicated this to clients, leading to a jump in Siebel's stock price. The SEC argued that this market reaction proved the materiality of the information.

What made the SEC's charges especially problematic for corporate counsel was the vagueness of the language at issue in the Siebel case. If corporate insiders cannot have conversations with outsiders in which they say that business is "good" or "better" and "growing" or "building", how can they say anything at all? Corporate spokespersons would be required to record all of their conversations and then post transcriptions on the company's website to avoid the potential for inconsistent disclosure. Such an outcomes would have been unreasonable, of course, but would have seemed inevitable if the SEC had its way.

In its opinion, granting Siebel's motion to dismiss, the Court held that the SEC's approach put an unreasonable burden on companies, requiring a level of linguistic sensitvity that is inappropriate. The judge wrote "Regulation FD was never intended to be utilized in the manner attempted by the SEC under these circumstances." The Court stated that "excessively scrutinizing vague general comments has a potential chilling effect which can discourage, rather than encourage, public disclosure of material information."

Shorter Jonathan Kozol

Alex Tabarrok sums him up:

Letting people escape over the Berlin Wall starves the East German system of the presence of well-educated, politically effective people to fight for the equity of all East Germans.

Thursday NYC debate on Spitzer

On Thursday evening, Sept. 8, at the Cornell Club in NYC (6 E. 44th), Prof. Richard Epstein will be debating former Maine attorney general James Tierney on the subject: "Is Eliot Spitzer Good for America?" The sponsor is the Federalist Society New York Lawyers' Chapter, and the moderator is Mark Smith, author of "The Official Handbook of the Vast Right-Wing Conspiracy". Reception at 6, debate at 7; contact Mark Schuman at (212) 578-9043.

Those of you who have been following our ongoing featured discussion between Professors Richard Epstein and Stephen Presser on the vacanc(ies) at the U.S. Supreme Court--catch up with their new postings, prompted by the death of Chief Justice Rehnquist and President Bush's decision to nominate Associate Justice nominee John Roberts to fill the Chief Justice position. Most recently, Professor Presser calls Bush's decision to nominate Roberts for Chief a "brilliant political move."

For very comprehensive coverage of the Supreme Court situation, check out SCOTUSBlog (including the statements made by the president and Roberts; statements by the remaining Supreme Court justices on Rehnquist's passing; significant discussion over the tactics of nominating Robert to the Chief Justice position, and the implications for Justice O'Connor's retirement; and a blog round-up). Among numerous other blog entries that may be of interest to our readers: Orin Kerr's analysis on the prospects for a Justice Janice Rogers Brown (he says low, with which I sadly must concur); Jack Balkin on Chief Justice Rehnquist's likely legacy (he doesn't come out and say it, but says justices tend to be graded historically based on their politics, not judicial craft, and by implication he finds Rehnquist lacking (based not only on his words but my knowledge of Balkin's politics)); and this posting from Rick Hasen (arguing that Democrats will accept Roberts for Chief and shift the fight to the battle looming over O'Connor's successor).

The question now becomes how long Sandra Day O'Connor will remain on the Court, as there is no chance a successor for her seat will be confirmed before the term starts. Though her resignation claims not to take place until her successor is confirmed, interviews with her after Rehnquist's death showed no eagerness to remain on the Court.

Another question is whether Bush will risk naming a second conservative to the bench while Roberts' nomination is pending.

A third is how this website achieved the improbable feat of reporting this news before Howard Bashman did.

Roberts for chief?

Orin Kerr, in addition to offering some thoughts about Chief Justice Rehnquist's legacy ("Especially as Chief, Rehnquist didn't view legal opinions as opportunities to make grand jurisprudential statements. ...The idea that the Justices on the Supreme Court are engaged in a grand struggle between opposing theoretical commitments makes for good entertainment, and provides lots of fodder for law review articles. As Chief Justice, at least, I don't think Rehnquist saw the work of the Court that way"), suggests that President Bush may decide to make John Roberts his nominee for the now vacant chief justice position, rather than for O'Connor's seat. From the time of his selection, Roberts has been seen as a plausible contender at some point for advancement to the Chief's spot, given his combination of 1) a conservative-but-confirmable expected place on the ideological spectrum; 2) a high degree of familiarity with the institutional workings of the Court; 3) a close identification with Rehnquist himself; 4) perhaps most important, a consensus-building personality and record of achieving collegiality with judges of many different views. Although reslotting Roberts into the Rehnquist vacancy would presumably delay his eventual confirmation somewhat, it might result in a quicker confirmation of a new Chief than most other options. In addition, since Justice O'Connor's resignation is contingent on the confirmation of a successor, her seat might not have to fall vacant when the Court reconvenes next month.

On a related topic, the Washington Post reports that Roberts is in good shape with many Democratic Senators representing conservative or moderate states. And the San Francisco Chronicle, in an article speculating on whether Roberts like several earlier GOP appointees will turn left in office, includes a surprisingly favorable quote about him from Alan Morrison, the veteran Public Citizen litigator now at Stanford whose views stand pretty much 100% in opposition to many of those expressed on this site. "John Roberts is a very careful and good lawyer, and I think the facts (of each case) will matter to him," Morrison said. Hmmm...

P.S. 8:40 a.m.: No, I didn't have any inside information about the selection. But the logic was there.

British and Australian news sources are reporting that white foreign tourists have been evacuated from the Superdome to other staging sites and shelters because they were being threatened on account of their race: BBC account (via Kaus); Australian Herald Sun account; Australian Age/Reuters account.

According to Bearing Blog, officials seem to be planning to racially segregate the emergency shelters to avoid racial tension; the blogger comments on the linguistic somersaults needed in an NPR interview to avoid the word "segregation."

Ann Althouse reminds us that February's 5-3 decision, Johnson v. California, authored by Sandra Day O'Connor, held that the safety concern of warring racially-based gangs in prisons did not create an exception to strict scrutiny of racial segregation. (The majority for this position, as Althouse notes, is actually 6-2; Justice Stevens' dissent protested that the Court should have gone ahead and found the practice unconstitutional rather than remanding to the courts below.)

Because there is typically more deference given to administrative decisions in the prison setting than in other government settings, Washington v. Harper, 494 U. S. 210 (1990), there could be lawsuits over the government's safety plans, and current law seems favorably disposed to find the practice unconstitutional. And do not be surprised if lawyers later seek to claim civil rights violations over evacuation triage decisions.

BREAKING NEWS: Chief Justice Rehnquist dead

A Supreme Court spokeswoman has announced the death of Chief Justice Rehnquist at his home at the age of 80.

A group of California small businesses have banded together with pro bono representation to fight a series of UCL 17200 suits brought by a plaintiffs' attorney who was permanently enjoined from filing the claims.

Spokane diocese asset ruling

"It's a huge decision," says well-known lawprof and church/state specialist Douglas Laycock. See Aug. 31, Sept. 1, etc.

Juries and DNA evidence

A new study (subscriber-only link) has just appeared in the Journal of Legal Studies, by Dale A. Nance and Scott B. Morris, assessing jurors' evaluation of DNA evidence. According to Prof. Bainbridge, the study tends to support the conclusion that poor presentation by lawyers, as opposed to intrinsic degree of technical difficulty, is often the key obstacle to juror comprehension of the technical issues at stake, a theme popular with the let-it-all-in side of the Daubert wars. Larry Ribstein weighs in as well.

How not to support John Roberts

Some of his most vocal backers show how to do his nomination more harm than good: portray him as robotically committed to a checklist of results desired by conservatives. The Committee for Justice seems to imagine that if confirmed "Roberts won't allow bureaucrats to seize ordinary people's private property", although the use of eminent domain powers on behalf of genuinely public uses is plainly contemplated by the Constitution and is not the subject of any controversy among the current Justices. And it claims he "won't favor criminals' rights over victims' rights", although like most judges Roberts has shown himself perfectly willing to rule in favor of criminal defendants who show their rights to have been violated, and although the Constitution, as it happens, has much more to say about the rights of criminal defendants than about those of crime victims.

The predominant tone of Judge Roberts's own opinions and in-house Justice memos -- calm, wry, and civilized -- could hardly stand in more contrast to the tone of some of the support material being generated on his behalf.

More: Sean Rushton at the Committee for Justice writes in to respond:

I think we can justify a checklist on grounds that as a judicial conservative who will strictly apply the Constitution, John Roberts is likely NOT to engage in the sort of activism associated with the court's liberal wing. Applying the Constitution faithfully is not the sort of results-driven reasoning associated with the Left, but I think conservatives do our cause a disservice by defending nominees solely on process and philosophy. Given the Left's policy-specific charges on civil rights, women's rights, environmental protection, etc, I think the public needs a clearer sense of what good things to expect from a conservative, if only in terms of what he won't do.

As to eminent domain, I am aware our formulation was simplistic, but I think the general public will understand it as a reference to Kelo, not to legitimate eminent domain for true public use.

On criminal rights, again, we plead guilty to simplifying a complex issue. But with the death penalty under assault, the war on terror under scrutiny, and other, past decisions that have weakened government's ability to bring criminals to justice, we think the point is rhetorical but basically accurate.

The purpose of this language is to encourage less lawyerly, sharper debate against the Left's results-driven, populist rhetoric. It is not aimed at lawyers and scholars so much as the easily confused media and regular folks who often find the Right's position incomprehensible next to the Left's.

Ernie the Attorney, cont'd

After trying to stick it out in the city (see Aug. 30), the lawyer/blogger eventually got out of New Orleans and has been posting on his experience.

What next for Merck?

Richmond attorney/lawprof Cullen Seltzer surveys the options for the drug firm and its opponents after the Vioxx verdict (via Prawfsblawg). More: plaintiff's lawyer Dwight Meredith argues that the "Texas case had a number of disadvantages for Merck that may not be present in subsequent cases" and concludes, "I think that it is quite possible that the Vioxx litigation is now at its high water mark for plaintiffs. I suspect that things will look better for Merck once the Daubert standard is applied, a few defense verdicts are reached, and the Texas verdict gets reduced (as it will) or reversed."

Looting in New Orleans

Glenn Reynolds suggests shooting looters. Eric Muller proudly looks down his nose at the idea. How uncivilized! But the irony is that it's Muller whose position is uncivilized.

There are lots of snarky remarks about looting coverage (Prawfsblawg, unlike Wonkette, at least noted that one can't expect consistency across different news organizations), but in reality, as a look at blogs from people actually in New Orleans show, the looting is far worse than the media is reporting until recently. This isn't an issue of salvaging spoiling food and water (though, even here, allowing looting means the strong get food and the weak starve); they're attacking rescuers and doctors and hospitals. "At flood-swamped Charity Hospital, looters with handguns forced doctors to give up stores of narcotics." Other looters are stealing generators from unarmed citizens. This is the anarchy that Muller is defending; he can bring to bear a lot of sarcasm on the matter, but that's hardly a useful policy suggestion. If someone wishes to argue that shooting violent looters is inefficacious, that's one thing, but simply to argue that doing so will lead to loss of life seems to me to ignore the opportunity costs of permitting looting.

I fully acknowledge that shooting looters is an inappropriately disproportionate response if one views looting as mere larceny. But one doesn't shoot looters to protect property, one does so to protect order. Somebody is going to suffer unjustly when society breaks down. I don't understand why Muller thinks it preferable for the law-abiding citizens to be the cost-bearers. History has shown repeatedly that the way to stop an anarchic riot is an early display of substantial force.

Of course, with the New Orleans police having close to third-world levels of corruption in good weather, there isn't exactly law enforcement that I would trust on the ground in the city until the National Guard gets sent in, so the whole question may be moot.

The original comment thread on Volokh is here. The bash Glenn Reynolds and Ted Frank thread is here.

Update: Glenn Reynolds has more:

When I was on Grand Cayman last month, several people told me that looting became a problem after Hurricane Ivan, but quickly stopped when the police shot several looters. That's because looters usually value life over property too.

And Jeff Goldstein:

That many progressives I�ve been reading are so willing to advocate for an anarchic condition wherein stronger, better armed, and more ruthless civilians are able to lord it over the weaker victims of Katrina�all for the sake of maintaining their critique of materialism�is, frankly, astounding.

Church lawsuits and Katrina relief

One more consequence of the church abuse litigation and associated diocesan bankruptcies: Prof. Bainbridge is going to be careful about which Catholic institutions he selects as recipients of his Katrina donations, lest the money wind up in hands like those of, say, Larry Drivon (Aug. 31). More on the Canadian situation in this report (via Sullivan):

More than 130 churches and other property belonging to a Roman Catholic diocese in Newfoundland could soon be up for sale after a court approved a financial settlement Tuesday for the victims of abusive priests.

The negotiated settlement between St. George's Diocese and the 40 victims is expected to raise $13 million for compensation. St. George's is believed to be the first Catholic diocese in Canada to seek bankruptcy protection as a result of sexual abuse claims.

The men involved will receive awards of between $75,000 to $1 million once the sale of properties is completed over the next 30 months....

The church won't have to sell items used to perform mass, such as vestments, candelabras or Bibles.

While on the subject of Katrina donations, Glenn Reynolds has an updated listing of charities helping with survivor relief.



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.