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June 2006 Archives

I've got an op-ed today in the New York Post about one of the less obvious issues in the high-profile race for Governor of New York: whoever wins will get to reshape the state's highest court, the Court of Appeals, with implications long into the future for the state's legal well-being. Would a Gov. Spitzer appoint anti-business crusaders to the court? (Walter Olson, "N.Y. Judge Wars: Hidden '06 Issue", New York Post, Jun. 30)(cross-posted from Overlawyered)(& welcome readers of Prof. Bainbridge, who says kind things).

Finishing Up

Thanks again to Walter for the invitation to post here; I've enjoyed it and hope you've found it interesting. I don't have that much more to say. But there are some other possibilities that fit into my goal -- which is much more oriented towards increasing accuracy in allowing good claims while stopping bad ones earlier than towards many other proposals, which often are focused on, for example, reducing insurance premiums.

  • Screening panels. The data are mixed [PDF] as to their effect, but I suspect that may have as much to do with different implementations as anything else. A well-balanced panel (not just doctors, of course) with a real focus on careful selection of members seems feasible and potentially useful.
  • ADR & apologies. I remain interested in the MEDiC Bill , which encourages apologies when appropriate, quick mediation, and improvements in the medical system to avoid future errors. SorryWorks has some useful data on apologies.
  • Daubert & summary judgment. This isn't really much of a reform as a wish that more judges would take seriously their role as a gatekeeper of scientific evidence. The Howard piece linked to earlier this morning has some useful discussion of it.
Thanks again for the hospitality.

(And because I can't resist pointing it out, I just posted last night about what may well be the greatest lawsuit ever.)

New book by Brooke Masters profiling the New York AG sounds interesting, though I haven't seen a copy yet. (Where are those publishers' review copies when one really wants them?) A key ingredient in Spitzer's success, per the author: "his willingness to stretch legal interpretations".

Does the KPMG case help Milberg Weiss?

That's what the law firm appears to claim about the KPMG case in a press release reported by Peter Lattman. But other than the words "Thompson Memo," there are no similarities.

  • The concern in Stein was that the DOJ actually forced KPMG to withhold attorneys' fees for its employees. But KPMG did cave; Milberg Weiss didn't. And its charged "employees" are multi-millionaire partners capable of affording competent counsel, removing any concern of inadequate representation.
  • KPMG was risking indictment for behavior of a small portion of the firm. But the indicted Milberg Weiss partners are name partners with 33% ownership of the firm—and if "Partner A", identified by many to be Mel Weiss, is also indicted, one is talking about a majority of the shares being implicated. This isn't a case of a corporation being forced to choose between throwing its low-level employees overboard and being irresponsible to its shareholders; here, the shareholders are the alleged wrongdoers, and the alleged wrongdoing is alleged to be part of the Milberg Weiss business model.
  • There's more than just Milberg Weiss's refusal to implicate its partners behind its being charged. The investigation started in 1999; subpoenas went out in 2003; Milberg Weiss was allegedly engaging kickbacks through 2005; and didn't hire its well-publicized compliance officer until shortly before the May 2006 indictment.

For more, see my recent Congressional testimony, which reviewed the Milberg Weiss indictment in the course of discussing the pending H.R. 5491 and the need for more measures to prevent kickbacks and improper relationships between lead plaintiffs and plaintiffs' counsel.

"Vioxx and Corporate Apologies"

Professor Elizabeth Nowicki wonders (via Childs) whether a corporate apology (and agreements to settle) are something that is part of a fiduciary duty of a director.

Nowicki's analysis presupposes that Merck has done something wrong other than to be wrong in hindsight, and there doesn't appear to be a case that that is true. (Nor is it the job of the corporate litigator to "'clear' the corporate name" unless that is the primary goal of the corporate client.) But, unfortunately, under the current legal status quo, even if Merck had done something wrong, and was inclined to settle the cases, the scope of corruption in the plaintiffs' bar makes that impossible. In every extra-large scale mass tort settlement to date, the amount of plaintiff fraud has been tremendous, often constituting a majority of the claims. Early indications are that Vioxx is no different. In the Garza, Cona, Rogers, Humeston, and recently voluntarily dismissed federal cases, there were credible allegations that the plaintiff exaggerated (or even faked) Vioxx usage; each of the other plaintiffs in concluded cases to date exaggerated the claims of causation through impermissibly speculative and conclusory expert testimony. If that sort of trend holds up, that means that a majority of the lawsuits filed have severe factual problems even before one gets to the question of whether Merck did anything wrong. Imagine what would happen if Merck replaced the lawsuit process with a settlement process. See also my Apr. 20 post and John Simons, "Merck's got to keep fighting", Fortune, Apr. 25. If there's any corporate fiduciary duty to its shareholders here, it's to fight the lawsuits until the legal system provides a mechanism for policing fraud and punishing, rather than rewarding, the plaintiffs' attorneys who engage in it.

This is bad enough, but the status quo punishes apologies in another way. One could say that Merck's voluntary withdrawal of Vioxx was an apology of sorts, an admission that they were wrong in hindsight. Out of an excess of caution and concern for its patients, it removed the drug from the market. I originally thought that this was a good idea, but now I'm not so sure. At the same time Merck has made its withdrawal from COX-2 sales, Pfizer, facing similar cardiovascular data for Celebrex (celecoxib), a COX-2 inhibitor that works much like Vioxx, has kept its drug on the market, and even resumed marketing it in April, plausibly arguing that the benefits outweigh the costs. (There are second-hand reports of Merck employees continuing to use a secret stash of Vioxx, which suggests the same cost-benefit analysis is true for rofecoxib.) Merck has been sued by over 20,000 groups of plaintiffs, with thousands more likely to sue in the next three months as the statutes of limitations start to expire. Pfizer faces a small fraction of that amount (under 2000 suits to date), and hasn't had its name dragged through the mud the way Merck has. All Merck's overcautious safety has done is prompt the media to single it out and provide free advertising to the plaintiffs' bar. As Merck gets buried by a massive amount of litigation, and gets perversely punished for its commitment to safety, one wonders: will future officers and directors follow the Merck model or Pfizer model of risk aversion? Keep this in mind the next time you hear ATLA argue that lawsuits make consumers safer.

Today's entry is going to be shorter (honest), because mostly I'm going to point to other things, some shamelessly self-promoting.

First, on the theme of better-educated judges, I think it'd be useful to allow (in proper circumstances), discovery into the peer review process, in particular when litigation experts are relying on litigation-driven scholarship. My forthcoming Nebraska Law Review article, The Overlapping Magisteria of Law and Science: When Litigation and Science Collide, addresses the implications of both litigation-driven scholarship and discovery into peer review. In general, the academy's response to the concept of discovery into the peer review process has been hostile at best; I argue that it should be welcomed. Blog 702 has further discussion.

Second, Andrew McClurg (then of Florida International, now going to Memphis) has a fascinating article, Dead Sorrow [PDF]. McClurg provides a wrenching account of the sudden death of his fiance Kody Logan, exploring his grief and the grief of her family in coping with the (tortious) car accident that took her life. He also discusses his challenges in advising her family: "How do you explain to a mother who has just lost her only daughter that the value of her life under the law is literally zero?" (Page 6.)

Ultimately, McClurg concludes that wrongful death suits fail to account for two important aspects of a death: the value of the decedent's life itself and the grief suffered by her survivors. To deal with this failure, he proposes "damages for the lost value of life" that would

be used for the exclusive purpose of establishing a lasting memorial to the decedent. Such a solution would promote both the economic deterrence and corrective justice models of tort law and serve, albeit indirectly, to compensate the decedent by continuing his or her memory and place in this earthly world. Additionally, the memorial established with the lost life damages would, at no additional cost, provide a proven grief-healing instrument for all persons who mourn the decedent's passing. Finally, because it is recommended that memorials created with lost life damages be required to serve a utilitarian function, another unique aspect of the proposal is that it would allocate tort damages in ways that benefit society in addition to tort victims, enhancing the net social benefit of the tort system.

For additional discussion of his proposal, see Andrew's guest post and the multiple posts linked to therein, Ted Frank's comment on that post, and the interesting discussion, again featuring Ted and others, at Evan Schaeffer's Legal Underground.

In the KPMG case, federal judge Lewis Kaplan has blown a great big hole in the Justice Department's policy (as outlined in the now-notorious Thompson memorandum, Sec. VI) of arm-twisting corporations under investigation into withholding legal support from their accused employees:

"Those who commit crimes - regardless of whether they wear white or blue collars - must be brought to justice. The government, however, has let its zeal get in the way of its judgment. It has violated the Constitution it is sworn to defend."

Tom Kirkendall has links to several leading commentators, while Prof. Oesterle (via Bainbridge) challenges the idea that the unfairness involved rises to the level of unconstitutionality. White Collar Crime Prof discusses the D&O insurance implications. More: Larry Ribstein weighs in, predicting that the opinion will stand as "a landmark".

Watch the sleight of hand

The New England Journal of Medicine published an analysis to the APPROVe data that concludes "one could not conclude from the data that a shorter course of rofecoxib is safe."

Merck disagrees. I take no position at this time, because I don't know whether Merck is right that linear time interaction (which shows no significant increased risk for Vioxx before 18 months) makes more scientific sense than the logarithmic time interaction reported by NEJM that provided results that barely missed the .05 significance range. (I am inclined to agree with Jeffrey Drazen's statement that one sticks with the method specified in the paper in advance—though NEJM had no problem raking Merck over the coals earlier for adhering to pre-approved scope of study rather than updating data (Dec. 8; Feb. 22; Feb. 27). It's also entirely possible that NEJM is right to make this "correction" (on grounds of sticking with pre-approved criteria) and Merck is correct that the best scientific view of the APPROVe data is that short-term usage does not have a higher relative risk (on grounds that the pre-approved criteria do not provide the best explanation for the data).)

It's a complex statistical issue, so I'm surprised to see Evan Schaeffer state with confidence that this proves Merck wrong. I look forward to Schaeffer's scientific analysis of why linear time is the inappropriate means of evaluating the data, something he inexplicably omitted from his post defining Merck's scientific argument as a myth. And as Derek Lowe notes, even the logarithmic statistical evidence is ambiguous at best—which, in a court system where the rules for evidence were being followed, would count against the party with the burden of proof.

What I am certain of is that other pro-plaintiff websites are misrepresenting the data. The Settlement Channel claims "A few months of Vioxx can likely cause cardiac harm." But NEJM says no such thing: it certainly does not say that a few months of Vioxx is "likely" to cause cardiac harm (the odds of such harm remain remote); nor does it say that one suffering a cardiac problem is more likely than not to have had that harm caused by Vioxx (the relative risk is well below the 2.0 required to make that "likely" judgment for short-term low-dosage use). All NEJM said was that one cannot conclude with statistical certainty, using one particular statistical test, that short-term Vioxx use is safe. That's a far cry from "likely" on either general or specific causation for any given plaintiff.

It's a sign of how far from science the tort system is that plaintiffs' attorneys with the burden of proof are treating such a statement of ambiguity as affirmative, rather than negative, evidence. (Then again, such bravado may just be another example of the plaintiffs' bar's incentive to spin, which I've earlier discussed.)

Junk Ethics

A nice essay by the editors of National Review Online on the scurrilous charges laid against my law school's Law and Economics Center's renowned judicial education program. A must read!

Today's WSJ [subscription required] has a nice piece on the mini-tort-war currently being raged in the welding industry.

Two issues are involved here:

1) Scientific research has been at odds over whether exposure to manganese in welding rods can lead to neurological disorders such as Parkinson's disease, which diminishes movement and speech. And

2) whether or not manganese can lead to Parkinsons or a similar disease, is welding rods' manufacturers' warning that their rods are potentially hazardous to health sufficient to protect against such claims?

3800 federal "welding cases" have been consolidated before a District judge in Cleveland, and the first decision, involving Ernesto Solis, a 57-year-old former welder who has tremors in his right hand, just came down in the defense's favor. The jury found that the warning on the welding rods was adequate -- this was the best possible outcome for the defense. State suits are also pending, however, and not all warnings were identical, so it is not clear yet that the outcome in the Solis case is a harbinger for the subsequent cases.

As I've pointed out on many occasions, this and many other products issues are really an end run around the prohibition to sue employers in workers' comp. cases. Were it not for workers' compensation, our "crisis" might be about employers instead of manufacturers.

On the TortsProf blog, I�ve mentioned the consistent surprise students express at the lack of a regulatory compliance defense. In fact, in my Products Liability course, I have assigned an essay on what each student thinks is wrong about the law as it stands; both times I�ve assigned it, roughly a fourth of the students have expressed frustration with the fact that compliance with regulation and $3.00 will get you a skinny vanilla chai tea latte but not much more, at least formally, in front of a jury. (They don't usually reference chai tea, though.)

Their concern comes, I think, from two sources. First, it�s a feeling of sympathy for the defendants. The case that typically is cited is one in the Owen et al. casebook I use, Metzgar v. Playskool, 30 F.3d 459 (3d Cir. 1994), in which an infant choked to death on a small play block that was in compliance with all relevant regulations (which were seemingly comprehensive). The block set in question, which had been sold for years, had never caused choking before. Yet summary judgment for the defendant was reversed. In class, students often discuss the tough position in which the manufacturer finds itself, complying with all regs but still potentially on the hook, without their compliance even getting them a thumb on the scale.

The second source of concern is that the lack of a defense fails to give any deference to the agencies that are supposed to have expertise in their respective area, whether the FDA, CPSC, NHTSA, or anything else. Even if they occasionally make mistakes, the thinking goes, they�re going to be right far more often than they�re going to be wrong.

The Washington Times reports that D.C.'s highest court has just disbarred one Reginald J. Rogers, who stole hundreds of thousands from one client, a 91-year old widow, and apparently stole more money from other clients. The lawyer declined to explain his behavior at the disciplinary hearing, then had the chutzpah to say he should not have been disbarred, since he is also being criminally prosecuted for the theft. Sorry, but the court does not need to wait for a criminal conviction to determine whether the lower standard of proof of an ethical violation has been satisfied.

Rogers' defense at the criminal trial will apparently focus on testimony from a forensic psychologist who is "of the opinion that Mr. Rogers never intended to cheat his clients, to harm them financially or to gain financially at their expense." Sounds like the classic "I borrowed her life's savings from my 91 year old client, but in my mind I expected one day to reimburse her" defense.

Lawyers Serving Our Country

I was inspired by David French's description of the first phase of his basic training as a JAG officer for the Army Reserve. I hope you will be, too.

RI lead paint sidelights

Jane Genova, who has blogged so extensively on the Rhode Island lead paint case, continues to provide post-trial coverage. A few tidbits we didn't relay in our earlier posts: defense lawyers wanted to explore the evidence that the lawsuit was conceived by attorneys at Motley Rice and then presented to Rhode Island officials for them to karaoke as a "public health initiative"; but the judge ruled that a line of questioning alerting juries to this was improperly prejudicial. A Columbia public health professor who was providing expert testimony for the plaintiffs declined to explicate his research methods, but educated guesswork about them is not impossible. More on the experts here.

I'm testifying tomorrow morning before the Capital Markets, Insurance, and Government Sponsored Enterprises Subcommittee, the same hearing on H.R. 5491 that Sam mentioned.

Those interested in soundbites can see me on CNBC's "Power Lunch" tomorrow at approximately 1:20 pm Eastern. I'll link to testimony once it's publicly available.

You might expect that particular innovation here, but it's actually being reported in the U.K., where banks are offering something called a "matrimonial dispute loan" advancing funds on the expectation that you will be able to extract the money for repayment from your soon-to-be-ex-spouse. Financial Rounds wonders whether the next step is to securitize the loans.

I�m going to start with relatively small beer: getting judges better-educated about science.

Yesterday I discussed some of my experiences in a variety of jurisdictions in which the judges were seemingly indifferent to getting the science right. With some notable exceptions, I do not think that was because they were uninterested in the jury reaching an accurate conclusion, or because they were in anyone�s pocket -- the decisions reached were too random for that. And it certainly wasn�t because they were incapable of understanding the issues. Instead, I think it was because they simply didn�t know how to evaluate the scientific evidence presented to them, and didn�t think they had the tools to do so.

That�s not a criticism. Last week I led a discussion of torts with a couple dozen Massachusetts state trial court judges. They have no law clerks and a daunting caseload, and frequently the trial is the first time they�ve seen a case, as it is random whether the trial judge handled any pretrial matters. It�s no surprise that they aren�t ready for a full-on analysis of the science in any sort of case.

New poster Will Wilson

Will Wilson of the American Enterprise Institute Federalism Project publishes AGWatch, which keeps a skeptical eye on state attorneys general, just as we often do here with our Regulation through Litigation subpage and other posts. I'm pleased to announce that he'll be posting on this site as well. Visit AGWatch to check out some of Will's past commentary.

The Fix is In

Texas settled a lawsuit with Baxter Healthcare Corporation, "a corporation organized under the laws of Delaware with its principal offices in Deerfield, Illinois." Per the terms of the settlement, Texas will receive $8.5M, but will kick $3,792,000 to the U.S government (because Medicaid involves everyone). Texas will also kick "a percentage" to Ven-A-Care of the Florida Keys, the real plaintiffs in this lawsuit (and, as we'll discuss, many others).

Not surprisingly, the settlement loves itself: "The STATE has concluded that this settlement is in the public interest." Which state? The settlement means Texas, but consumers, shareholders, and employees from four states are directly involved and citizens from all fifty are affected.

More disheartening than even the mess-traterritoriality of the suit, though, are the perverse incentives that have been created by the Medicaid whistleblower rules.

H.R. 5491

On Wednesday, June 28th, Rep. Richard Baker will be leading a hearing entitled "Investor Protection: A Review of Plaintiffs' Attorney Abuses in Securities Litigation and Legislative Remedies." H.R. 5491 is a bill that has been gestating in the House since May 25th, a bill aimed at preventing and discouraging the kind of abuses brought to light by the Milberg indictments. There's been little media coverage of H.R. 5491 (one wonders if this has something to do with the industry it's aimed at.) The results of this hearing ought to be interesting.

Burlington Northern v. White

Hans Bader of CEI analyzes the Supreme Court's latest pronouncement on retaliation in employment law as he kicks off a week guestblogging at my other site, Overlawyered.

"Why Pay a Fraud Plaintiff to Sue?"

"Securities fraud is a bad thing, but securities fraud litigation is even worse." Maryland professor Richard Booth explains why.

I�m moderately surprised to be blogging here, but pleased that Walter extended the invitation. The invitation surprised me because on most matters, my political views would be classified as substantially to the left of the Manhattan Institute�s. Indeed, my primary plan for the week is to talk about what I call �tort reform for liberals.�

Some background to, perhaps, justify my claim to liberalism: I took a semester off from college to work full-time on Paul Wellstone�s first campaign for the U.S. Senate. I attended college at Macalester College in St. Paul, happily residing in one of the most Democratic precincts in the country, and I now live happily in Northampton, Massachusetts, in another of the most Democratic areas in the country. I spent a number of years raising money for progressive groups and candidates in Minnesota and across the country. Sakes alive, I even supported John Edwards�s primary campaign and then John Kerry�s general election campaign. I am a progressive Democrat.

After clerking in a federal district court, though, I was a litigator at Williams & Connolly LLP in Washington, D.C., with much of my time spent as defense counsel in pharmaceutical mass tort litigation. (In the interest of disclosure (and context), I continue in a consulting role for an average of 10 to 15 hours per month for pharmaceutical companies involved in mass tort litigation. My comments here and elsewhere may or may not reflect my clients� views; they have no input into them.) Two years ago, I joined the faculty of Western New England College School of Law.

A report from Syracuse, this time. Earlier: here.

Larry Schonbrun on class actions

Outspoken as usual, in the L.A. Times.

My Manhattan Institute colleague has a magisterial treatment of the subject in the new issue of Commentary, making numerous observations about product liability along the way.

Howard J. Vogel's "Statement of Facts" that he admitted to as part of his guilty plea is available on the Web.

The DC Circuit struck down the SEC�s hedge fund registration rule. This is the second time that court has sent the SEC back to the drawing board, the last time being the Commission�s mutual fund independent director rule, which the DC Circuit twice rejected because the Commission didn�t do its homework. I analyze the opinion and possible implications for Sarbanes-Oxley, and securities regulation generally.

I have some thoughts up on Tech Central Station on Mark Cuban�s proposed journalism/trading venture, and here on the �fairness� so-called argument for insider trading regulation.

Firefighters, police officers, and cleanup workers who worked on rescue and clearing operations at Ground Zero are suing New York City and its subcontractors for health problems allegedly caused by working at the site. 200,000 respirators were distributed at the time, but many workers did not use them. Injured workers are already eligible for workers' compensation and free medical care, but attorneys are hoping for a bigger pot of money from taxpayers. "The city has argued that it will be handicapped in responding to any future disasters if the possibility of negligence lawsuits is left hanging over its head." (Anthony DePalma, NY Times, Jun. 23).

The Specter-Leahy asbestos bill has been amended to also cover 9/11 and Katrina responders.

Remember Spitzer�s billion and half buck settlement and all the rules about conflicts between investment banking and securities analysis? I discuss recent data indicating that investors were not hurt after all. Chalk it up to the costliest gubernatorial campaign in history.

Cali Lead Paint

According to Mike McKee, in the Recorder, eight makers of lead paint may find themselves stuck with a cleanup bill in the billions:

The California Supreme Court on Wednesday refused to review a ruling that OK'd a suit seeking to force manufacturers, such as Atlantic Richfield Co. and Sherwin-Williams Co., to cover the costs of abating lead paint inside and outside all types of structures.

This litigation has been hard-fought for years: 12 Bay Area counties and eight paint manufacturers have wrestled over it. It looks like one more victory for the trial bar at this point. Anyone interested in this subject should read PoL's own Jim Copland's excellent article on the subject in the Spring 2006 City Journal.

NAM legal database

The National Association of Manufacturers (whose Pat Cleary recently guestblogged in this space) has made available to the public a database of 400 noteworthy legal cases dating back to 1995 and relevant to manufacturing. The database, called "Beagle", is explained here.

Among the many high-handed, undemocratic premises of the 1998 multistate settlement between state AGs and the tobacco industry is the notion that the deal is somehow just a private matter between the two sides whose evolving details need not be submitted to the general public even for scrutiny, let alone debate. Thus, when there were big news stories earlier this year about how an arbiter had issued a report that could lead to reduced payments to states by the tobacco companies, the AGs took the position that the report was "privileged and confidential" and need not be made available to the public. Now, however, the Evergreen Freedom Foundation and Competitive Enterprise Institute have succeeded in using the open-records law of the state of Washington to successfully demand copies of the arbiter's report and other key documents. Details are here.

Antivaccination warriors, jabbed

Respectful Insolence's Orac reviews the MMR debacle and points to some serious new digging by Kathleen Seidel into the methods of some prominent anti-thimerosal activists.

Peter Lattman is asking why two plaintiffs' law firms suddenly withdrew a motion asking a federal court to consider whether the Milberg indictment has any impact on choosing a Milberg spin-off, Lerach Coughlin, as lead counsel in a securities class action.

One wonders what antitrust violations an aggressive plaintiffs' law firm would infer from the information that two corporations withdrew from a bidding war within hours of being publicly criticized by a third competitor.

Perhaps even bigger news comes from the Chicago Tribune, which reports that pension fund legal advisor William Cavanagh received $750,000 in legal fees from Milberg Weiss that wasn't disclosed to the courts handling class actions. The Tribune quotes two judges who say that information would have been material to their lead counsel decisions. (via Lattman)

Milberg ReLieff

According to Justin Scheck, reporting in the Recorder, prominent San Francisco plaintiffs' firm Lieff Cabraser is in negotiations with Milberg to take on wholesale a group of fleeing Milberg partners. Another SF attorney, Melvin Goldman, thinks this is a good idea:

"I don't think anyone who works there is particularly tainted by working there," he said. Rather, it's the firm itself that's got the taint. And by vacating the firm, Milberg partners would have an easier time keeping clients made skittish by the federal charges.

He may be right. And, as Scheck notes, this grab would really power Lieff Cabraser up in securities law. But it seems just as likely that it could cut the other way, and that the Milberg taint won't vanish. Wait and see.

"A couple is suing Home Depot and the manufacturers of a grout sealing product for $111 million -- including a $1 million claim that the product destroyed their sex life. Jay Flynn of Lilburn, Ga., and his wife Laura, said that he became ill and was hospitalized for four days after using an allegedly defective batch of Tile Perfect Stand'N Seal Grout Sealer in July 2005." The suit asks a 10-to-1 ratio of punitive damages to compensatories. (AP/Gwinnett Daily Post, Jun. 15). Its damages demand aside, the suit may not count as particularly remarkable: "About 300,000 cans were recalled in August 2005 after 88 people complained of respiratory injuries, according to the U.S. Consumer Product Safety Commission. Of those, 28 had to be rushed to hospitals. There are dozens of other lawsuits against the product manufacturer and Home Depot, including at least one wrongful death suit, said Frank Ilardi, the Flynns' attorney." (Lateef Mungin, "A love life worth a million dollars", Atlanta Journal-Constitution, Jun. 14).

Dr. Michael Hebert discovers the hard way why his tail coverage expense is so high. Can any Louisiana lawyers confirm the loophole he describes?

Suit against Vatican can proceed

A federal judge in Oregon has ruled that the Holy See can be sued in U.S. court for allegedly shuffling around a priest it knew had a history of sexual abuse. Prof. Bainbridge calls the ruling "clearly wrong".

"...a necessary evil"

"His [attitude] was, 'Lawyers are a necessary evil, and I don't know if I have enough evil for you to be necessary.' He doesn't like lawyers to slow him down."

Whether or not you would ordinarily read a profile of the general counsel of restaurant chain Chick-fil-A, you have to admit that's a pretty good line.

Stuart Taylor has a nice piece in the current National Journal on the tragedy of the blatant racism that goes on in corporate law firms today. Profiling the great work by UCLA's Richard Sander, Taylor points out that the substantial preferences for blacks (and milder preferences for Hispanics) disserves clients, the black lawyers themselves, and of course those who are denied a job because of the color of their skin.

The case against "benign" racism, in brief, is that it is never benign -- it is evil. When states do it, it is highly publicized. Sander's recent work shows a seamy side of corporate practice, insufficiently publicized.

Peter Nordberg suggests that I haven't "completely grappled with the issue of economic incentives." It seems to me that it's the other way around. Nordberg writes:

One foundational premise of a capitalist economy is that the invisible hand of the marketplace will incentivize the enterprise as a whole to pursue a rationally profit-maximizing course. Malpractice exposure apart, are there really comparable market pressures for health care institutions to make health-maximizing decisions?

Note the bait and switch. True, doctors' interests aren't perfectly aligned with their patients' interests. But officers' and directors' incentives aren't perfectly aligned with their corporations' interests, either. And the question isn't whether those interests are perfectly aligned; nor is it the case that any system that flunks that question merits intervention. The question is whether judicial intervention creates better incentives.

Because the legal system is not well suited to judge complex issues (be they business decisions or medical decisions), it's poorly situated to deter "incorrect" decision-making; rather, liability leads to perverse incentives that further drive a wedge between the interests of the agents and their principals. It's one thing when liability is used to deter the keeping of wild animals in urban areas or drunk driving; it's another when it's used to deter the practice of medicine. When the underlying activity is socially productive, we should be very hesitant about using the liability system to "improve" it. That lesson is equally applicable to the business judgment rule and to medical malpractice litigation.

We can trust the system to resolve questions of self-dealing or of practicing surgery while intoxicated or of poisoning customers with glycol; there's little risk that civil liability will overdeter socially beneficial practices in such and similar instances, because the conduct leading to liability is so unambiguously bad. But can we trust the judicial system to provide the correct incentives for corporate broadband investment or not exposing patients to radiation from unnecessary CAT-scans or producing vaccines or designing automobiles?

Before one answers that question too quickly, let's turn Nordberg's question around: what market pressures exist for legal institutions to make health- (or other social-welfare-) maximizing decisions? Or, setting the bar almost absurdly low, what market pressures exist for legal institutions to make truth-maximizing decisions?

Trial Lawyers, Inc. Update

Make sure to check out the new installment in the Center for Legal Policy's ongoing coverage of America's lawsuit industry. We have just released a new TLI update: The Move to Reverse Michigan's Model Reforms.

Michigan has the good fortune to be the only state in the union with an FDA defense law: once a drug has recieved FDA approval, its maker cannot be sued for damages, except in case of fraud on the part of drugmaker or government. Now, the plaintiffs' bar has launched an assault on this unique protection, putting the state in economic danger and threatening to lower the quality of its citizens health. Read and download the whole report here.

More Milberg

According to the invaluable Amanda Bronstad of the NLJ:

Federal prosecutors who indicted Milberg Weiss Bershad & Schulman last month are in talks with a Denver lawyer whose testimony could sharpen the investigation's focus toward Melvyn Weiss, founding partner of the New York-based law firm, according to sources familiar with the government's probe.

Read the whole thing here.Things just keep getting worse for the firm. An indictment against the founding partner would make the already severe damage they have suffered even more grave. Stay tuned for further developments.

The Ft. Worth Star-Telegram reports that the social networking Web site MySpace.com has been sued for $30 million by a 14-year-old girl who says she was sexually assaulted by another MySpace user.

The lawsuit accuses MySpace, which has more than 72 million registered users, of having "absolutely no meaningful protections or security measures to protect underage users."

The suit was brought by an Austin girl who says that Pete Solis, 19, of Buda lied in his MySpace profile about being a senior on the football team to gain her trust and phone number.

USA Today has a nice piece about a broad federal regulation that allows researchers to test emergency treatments on patients with specific, life-threatening medical conditions without their explicit consent, so long as they remain under close watch of independent reviewers.

The newspaper report is based on an article that just appeared in the Journal of the American Medical Association (abstract here).

A simultaneous "open letter" to national review boards, in the American Journal of Bioethics, points out that the experiemental procedures are sometimes more dangerous than the approved alternatives, which are withheld from the nonconsenting patients. This is ethically intolerable to the authors of the open letter, and also to yours truly.

Rep. John Shadegg (R-Ariz.) has introduced a bill that would allow health insurers licensed to sell policies in one state to offer them to residents of any other state.

A new NCPA Brief Analysis shows how this would create a more competitive, nationwide health insurance market. For those interested, I have a similar solution proposed to our products liability crisis, published in the Brigham Young Law Journal. The idea, in both cases, is to allow citizens to choose the legal package they most desire, balancing off price and quality concerns. This would vanquish market failures caused by the legal system. PDF's on request.

Peter Nordberg's response to my proposal suggests that an analogue to the business judgment rule wouldn't apply to medical malpractice because a rationale for the former is that corporate officers and directors' fates are so tightly wound with their corporation. This isn't quite the case: after all, the business judgment rule precludes second-guessing decisions of directors and officers that have left the company as surely as it does those who remain; there's no sliding scale that applies the business judgment rule with a tighter or looser hand depending on the surrounding circumstances of an officer's diversified financial portfolio. Billionaires who sit on boards of companies as favors rather than for the pittance of options received for doing so get the benefit of the business judgment rule.

But it's worth looking other rationales for the business judgment rule. Justice Steele of the Delaware Supreme Court writes for the ABA that the business judgment rule permits directors to perform valuable work without fear of liability without second-guessing. "Fear of liability" and the business judgment rule is a common theme in many writings.

Too, several have noted that courts do not "possess the experience, expertise, or information necessary to make complicated business decisions." Daniel R. Fischel, The Corporate Governance Movement, 35 Vand. L. Rev. 1259, 1288 (1982).

On a side note, now that I've started tackling a literature review, I see that I am, to a great extent, reinventing the wheel. See Hal R. Arkes & Cindy A. Schipani, Medical Malpractice v. the Business Judgment Rule: Differences in Hindsight Bias, 73 Ore. L. Rev. 587 (1994), from whom I've taken that last quote and cite, saving me the trouble of looking it up in my Easterbrook & Fischel.

In yesterday's post, I hinted at as-yet unfinished work I'm doing questioning the very premises of medical malpractice liability when I asked why courts don't abstain from questioning medical judgment the same way they question business judgment or legal judgment. Peter Nordberg wasted no time in composing a long, thoughtful post on the potential problems from such a rule, though he graciously acknowledges that my post was "meant to spark thought, not to provide a finished solution." (A commenter is considerably less polite.) So let's discuss further, if not completely. We'll start with an aspect of my post that Nordberg did not respond to: the difference between legal malpractice and medical malpractice.

More on med-mal-study letters

Legislator/physician Sidney Bondurant of Mississippi writes:

You posted a letter to the editor from a Midwestern doctor that was picked up by Donna Rovito. Evidently the ATLA folks sent out a sample letter commenting on the New England Journal of Medicine article that state trial lawyer association presidents signed and sent on to their local papers.

The Jackson Clarion-Ledger published one of these by the Miss. TL Assoc. president and the phrases used in it were almost the same as the one mentioned in the letter you reprinted. It appears that the local trial lawyers rely a good bit on the national office for their ideas for letters to the editor. I wrote a reply to them which was published in the Jackson Clarion Ledger Jun. 11.

The text of Dr. Bondurant's letter follows.

Precious T. Martin, president of the Mississippi Trial Lawyers Association, asserted that an Associated Press report you printed was wrong ("Most malpractice claims have merit," May 22 letter).

The AP report said that according to a paper in the New England Journal of Medicine, 40 percent of medical malpractice suits are non-meritorious. Mr. Martin stated, "In fact, the Harvard study found that most malpractice cases are meritorious, with 97 percent involving injury."

The AP reporter got it right the first time. The report found that 3 percent of the claims had absolutely no adverse outcome for the patient at all. Thirty-seven percent had an adverse outcome but there was no negligence or malpractice involved.

The paper says, on page 2029, "We found that only a small fraction of claims lacked documented injuries. However, approximately one third of claims were without merit in the sense that the alleged adverse outcomes were not attributable to error."

In Mr. Martin's world, adverse outcome, no matter if there was no malpractice, equals a meritorious claim. I do not think most people see things that way. Despite all the things that doctors and physicians do for people, there are still illnesses and injuries that get worse and cause suffering and death.

A better system than the one we have now would be to have an impartial screening panel to look at the case before going to court and make recommendations to the court as to the presence of actual malpractice. If the attorney and his client decided to proceed to court after the panel said there was no malpractice, then the plaintiff and the attorney should be responsible for the defendant's costs if the defendant won in court.

Such a system would keep most of the non-meritorious claims from ever going to court, cut down on the 54 percent overhead costs now built into the system, and speed compensation to those who were injured by true malpractice.

S.W. Bondurant, MD


Thanks to guestblogger Pat Cleary

...and drop by his home base at the National Association of Manufacturers' ShopFloor.org.

Only in certain states in America would this lawsuit be a winner. See the Wall St. Journal's interesting description here (subscription required)

The Supreme Court's decisions earlier this month on the Racketeer Influenced and Corrupt Organizations Act are generally good news for business defendants that have been seeking to narrow the statute's application, reports Marcia Coyle at the NLJ. The Court stuck to its previous position that plaintiffs must prove that a defendant's RICO violation was the proximate cause of their injury, and it sent the Mohawk case (see here, here and here), alleging that a manufacturer's use of illegal immigrant workers amounted to racketeering, back to the 11th Circuit with instructions to apply that test, vacating the existing judgment against the company (cross-posted at Overlawyered).

Legal Reform: Progress...?

Could it be that we're actually making progress on tort reform?

Maybe so, according to this editorial in the Champaign-Urbana (Ill.) News-Gazette. It notes that there has not been a single class action filed in neighboring "Judicial Hellhole" Madison County thus far this year. (In 2003, 106 were filed there). It credits both the Class Action Fairness Act and the election of Lloyd Karmeier to the Illinois Supreme Court. Says the News-Gazette:

"Thanks to the electorate � and no thanks to the judiciary � southern Illinois' judicial reputation has been greatly improved. That's a tremendous endorsement of the power of the ballot box."

Let's keep this in mind as election day 2006 draws nearer. It's a reminder both that elections have consequences and that we can make a difference.

[Cross-posted at ShopFloor.org]

A recent Philadelphia medical malpractice case highlights problems with many studies on medical malpractice, as well as potential shortcomings of proposed liability reforms.

Daniel Keenan, born in November 2000, suffers from severe cognitive and developmental disabilities. Doctors blame this on the seizures he regularly had as an infant with West syndrome, which "require[d] frequent hospitalizations, and, ultimately, a feeding tube and daytime nursing care." The vast majority of West syndrome babies suffer severe developmental disabilities, even with successful treatment, which, with technological improvements, has reduced the mortality rate to about 5%.

Plaintiffs argue that Keenan would have been one of the minority of babies who survived West syndrome and severe seizures unscathed and blame his problems on a stroke he had in March 2002, and blamed the stroke on Children's Hospital of Pennsylvania and at least eight of Keenan's doctors. Plaintiffs wanted round-the-clock medical care for a full lifetime; doctors argued that Keenan was unlikely to live past ten and needed only 16 hours a day of nursing care.

The jury eventually found against the hospital and two of the doctors (all of the neurosurgeons and neurologists sued were exonerated), and awarded $30 million in damages. The parties, however, reached a secret high-low settlement, ending the case, but we don't know for how much. (Asher Hawkins, "Jury Awards $30M in Med-Mal Suit, but High-Low Hides Outcome", The Legal Intelligencer, Jun. 13).

  • How can this sort of causation question get to a jury?
  • There was also a battle of the experts on whether the doctors appropriately treated a blood clot. I don't know whether this aspect of the verdict is wrong or right, though I certainly have my suspicions. But one immediately recognizes problems when juries are asked to decide between two experts about the appropriate treatment course. If reasonable doctors disagree, both treatment courses should be considered non-negligent. Otherwise, one jury could find treatment A negligent, while another jury can find the alternative treatment negligent, and doctors are effectively blamed for any bad result. Yes, I know no court adopts a "business judgment" rule for medical malpractice, though this sort of discretion is given attorneys in legal malpractice cases. But why not?
  • Opponents of med-mal reforms will point to the settlement as a reason to disregard the $30 million verdict. But insurance companies have to establish reserves based on possible future losses—and they can't disregard the fact that juries are willing to award $30 million on flimsy evidence. (The Legal Intelligencer kindly notes that, though there were no $10 million verdicts in Philadelphia in 2005, there were three in 2004.)
  • Note also, whenever you see a study mentioning the "median" verdict, that this $30 million verdict has next to no effect on the median, and that the result is therefore highly skewed to dampen the actual impact of large jury verdicts.
  • Only $15 million of the damages were for "pain and suffering." Non-economic damages caps would not have a major effect on the damage to the medical system caused by this case. Real reform needs to be aimed at improving the quality of the evidence jurors hear and of taking reasonable judgment calls out of malpractice.
"Boss Silver whacks taxpayers"

New York Daily News editorial comes down hard on Assembly Speaker Sheldon Silver for his maneuverings (mentioned a few days back) to derail a bill that would curb "double-dipping" in injury claims by public employees. "Because of a quirk in state law, injured public workers can sue for wages and medical costs even when, thanks to full health insurance coverage and generous disability benefits, they haven't lost a dime of either," the News says. Henry Stern's readers at NYCivic "StarBlog" also comment.

We hear a lot about direct compliance costs under SOX, but too little about what might be an even bigger problem -- litigation costs. These will only get bigger, not smaller. Moreover, these costs are especially a problem for big firms, not the smaller firms we hear so much about. As it turns out, this includes not only the costs of litigating SOX, but the costs of litigating everything, as I discuss here.

Echoes across the pond of concerns voiced here, from a report in The Scotsman:

At a conference yesterday, the society's [Royal Society for the Prevention of Accidents] play safety manager David Yearley said playgrounds should be "as safe as necessary, not as safe as possible" if they are to prevent children playing on railway lines, by roads and on river banks.

He warned that parents have to accept children may get hurt while playing.

So reports Peter Lattman's Law Blog, which kindly notes our November commentary on the curious delay.

Mexico: Hitting Us Where it Hurts

Largely unnoticed in all the sturm und drang that has marked the immigration debate was this item from the Washington Times. Frustrated by its seeming inability to sway the debate, Mexico has resorted to desperate tactics.

Last month, Mexico Foreign Secretary Luis Ernesto Derbez told a Mexico City radio station that if US National Guard troops along the border became directly involved in detaining immigrants, that they would "immediately start filing lawsuits through our consulates."


Sad but true -- the Mexicans have found the Achilles' heel in the US economic system, the Spock-like pressure point that'll bring us to our knees. Isn't there a WTO complaint we can file for unfair trade practices or something? Hey -- how 'bout we send a bunch of lawyers to Mexico, to do the work that Mexicans won't do -- like litigating?

Elaine Doherty v. Merck

This Atlantic City case has gotten somewhat less trial coverage than previous Vioxx trials. According to Merck, "Mrs. Doherty had multiple risk factors for heart disease, including age, high cholesterol, diabetes, high blood pressure, obesity, a sedentary lifestyle and a family history of heart attack. Testing further demonstrated that she had severe triple-vessel and left-main coronary artery disease." The VIGOR study was on the warning label for most of the time Doherty took Vioxx, though, to date, jurors and judges haven't seemed to care about that fact.

Heather Won Tesoriero provides some background on the opening statements in a WSJ Law Blog post.

A commenter asks: I have always wondered why Merck doesn�t hammer home the point that virtually every senior member of the management team and their families used Vioxx themselves. Hardly what would have been the case if it was a vast profit making plot. Has this point of evidence been blocked ?

The answer: Yes. Plaintiffs' lawyers have successfully moved to keep this evidence from the jury.

60 percent equals "almost every"

A letter to the editor that ran in the Columbus Dispatch Jun. 4:

I read with interest Philip J. Fulton�s May 25 letter. I also read the article he refers to in the May 11 edition of The New England Journal of Medicine. Fulton, president of the Ohio Academy of Trial Lawyers, claims this article "establishes that almost every medical-malpractice suit filed in the United States has a meritorious basis."

The first sentence in the conclusion of the abstract is "Claims that lack evidence of error are not uncommon, but most are denied compensation." The study shows 40 percent of filed claims lacked evidence of error or injury.

I did not go to law school, but I do not see how Fulton can draw the conclusion that 60 percent equals "almost every."

Where I went to school, 60 percent equaled a D-minus.


New Concord

(via Donna Rovito)

In these days of withering global competition, we hear lots of proposals aimed at leveling the international playing field. These include various tariffs, duties, taxes, etc, all intended to put us on par with our trading partners. Typically, they seek some kind of parity of costs or expenses, to make sure everyone is operating under the same rules, and that no one has an unfair advantage.

In that spirit, we thought we'd toss an idea into the mix in the hopes of maybe getting a conversation started.

There are a few token conservatives and libertarians present on panels at this weekend's ACS National Convention in Washington. Inter alia:

  • Douglas Kmiec is speaking Friday at 9:45 on the separation of powers.
  • AEI's Michael Greve is speaking Friday at 2:45 on federal preemption of state law.
  • ATRA's Victor Schwartz is speaking Saturday at 11 on a panel titled "Is Federal Legislation Closing The Courthouse Door?" that one presumes is about liability reform.
  • Roger Clegg is speaking Saturday at 2:30 on federal civil rights enforcement.
  • And, for some reason, I've been invited to speak Saturday at 4:15 on habeas law on a panel alongside Judge Boyce Martin, Deborah Pearlstein, Judge Virginia Phillips, and Bryan Stevenson. I'm sufficiently fifth-string that I've been left off the front page.

I previously debated habeas reform in Legal Affairs last August.

Kircher v. Putnam Funds Trust

While the blogosphere was excited about the Court's shift on the exclusionary rule today, I was more interested in a case involving an esoteric interpretation of federal appellate jurisdiction. The unanimous Supreme Court opinion in Kircher v. Putnam Funds Trust is a good example of how federal liability reform often has a loophole that permits unfriendly judges to disregard it. I discussed SLUSA (and the now-reversed Seventh Circuit opinion in Kircher) when the Supreme Court decided Dabit earlier this year. SLUSA was passed to pre-empt plaintiffs' lawyers' use of state courts to evade the reforms of the PSLRA in securities litigation. If a plaintiff evaded federal jurisdiction by bringing a case in state court, the defendant could remove the case. (Larry Ribstein, Steve Bainbridge, and I also discussed the federalism implications of Dabit.)

The problem comes when a plaintiff-friendly district court simply ignores the federal law. In Kircher, the Southern District of Illinois improperly remanded a case back to state court. The Seventh Circuit reversed. Today, the Supreme Court interpreted 28 U.S.C. � 1447 to preclude appellate review of the erroneous remand order—even as it acknowledged the remand as erroneous and the state case as precluded by federal law. But, that's okay, the Supreme Court said: state courts are expected to follow Supreme Court precedent.

True, but the state court in this instance is in Madison County, Illinois, where courts have been quite able and willing to ignore federal law when it suits plaintiffs' interest. It will be fascinating to see whether the state court will have the chutzpah to refuse to dismiss this illegitimate case upon remand now that there is Supreme Court precedent directly on point. If the lower court refuses, it is a sound argument for Congress to take another look at the removal statutes, and fix the problem of unreviewable improper remands nullifying Congressional intent. And in any event, it's a reason why Congress needs to make the right of federal removal explicitly reviewable when it passes future reforms, as it did in the Class Action Fairness Act. Otherwise, a single federal district judge can act to assist plaintiffs' attorneys in evading federal reforms.

"Lawsuit Heaven -- NYC's Hell"

I've got an op-ed in today's New York Post about the rising tide of liability lawsuits against New York City and its taxpayers (cross-posted at Overlawyered). For more on how Assembly Speaker Sheldon Silver's office disposes of reform legislation in Albany, see Henry Stern's NYCivic, Jun. 14. Further: Jun. 18.

Fowl Play?

Just wanted to pile on to Michael Krauss' piece below about about one Arthur Hoyte, some doctor-as-shill-for-wacky-group and his lawsuit against KFC. What, did the good doctor have a gumption bypass? Doesn't he have a steering wheel on his car, or a gas pedal that he can use to drive past KFC? A spinectomy, maybe (like Lisa Loopner's dear departed father) that leaves him powerless?

In any event, it all set us to thinkin', so we moseyed on over to Google, just to check out this fine upstanding doctor-plaintiff.

Thanks to U. of Alberta's Moin Yahya for alerting me to a welcome development: a Supreme Court of Ohio decision reversing lower courts and throwing out a class action award against Philip Morris. Lower courts had allowed PMI to be held liable for fraud for selling "light" cigarettes -- a claim similar to that in the Oregon case currently before the Supremes.

Writing for the majority, Justice Stratton wrote that no precedent in Ohio law, nor any Ohio regulation, gave any notice to Philip Morris that its production of "light" cigarettes might be deemed deceptive under Ohio's consumer protection legislation.
In addition, the majority said that the Federal Trade Commission (FTC) extensively regulates the tobacco industry and had approved the tar and nicotine testing methods and advertising of such methods that PMI used. PMI was required to follow the federal mandates and standards for its light cigarettes.

Finally some welcome news from a state attorney general's office: Texas AG Greg Abbott has opened a grand jury probe in the ever-widening silicosis-suit scandal. (AP/Business Week via StonePosts).

Latest Suit Against Big [Trans]Fat

As the LA Times reports, Yum Foods (owner of Kentucky Fried Chicken) has just been sued by a retired physician, represented by The Center for Science in the Public Interest. The plaintiff claims that when he purchased KFC's extra-crispy chicken he did not know it was cooked in partially hydrogenated oil. He is seeking class action status, as presumably other folks were similarly ignorant.

The plaintiff has not claimed injury. He has not claimed he is sick because of eating the chicken, or that the food was unfit to be consumed, or illegal in any way. He is claiming that trans-fats should be removed from restaurant menus across the land.

But isn't this a matter for public ordering (legislation, regulation), not tort law? Sanctions, anyone?

Britain's General Medical Council will reportedly level charges against Andrew Wakefield, author of work alleging a link between the MMR (measles, mumps, rubella) vaccine and such disorders as autism and Crohn's disease. In the wake of the public panic set off by Wakefield's work, vaccination rates slumped and measles incidence has increased in the United Kingdom. Reports the BBC:

His initial Lancet paper has since been disowned by the journal.

The editor admitted he would not have published the 1998 paper if he had known about what he called a "fatal conflict of interest".

Mr Wakefield was being paid to see if there was any evidence to support possible legal action by a group of parents who claimed their children were damaged by the vaccine.

Wakefield says he stands by his work and is expected to dispute the charges. "If found guilty, Mr Wakefield could be struck off the medical register.... He has since moved to the US." (more)(via KevinMD).

With the market dipping these days, no doubt many of you are wondering where you should be putting your money. Well, maybe we should all take a page out of the trial lawyers investment book, as they have apparently found an investment with a phenomenal 10,000% rate of return.

According to a study by Health Care America, during the 2003-2004 election cycle, lawyers contributed $182 million to Congress. During this same time, trial lawyers received more than $18 billion in medical malpractice lawsuits -- at least 40% of which a Harvard study found "groundless." As you know, the trial lawyers' minions in Congress have continued to effectively block any medical malpractice reform, so the trial bar can continue to reap the kinds of returns they've seen thus far. Apparently this is one case where past performance is an excellent indication, if not an outright guarantee, of future results.

Click here to see a chart comparing the trial lawyer's investment in Congress to the more pedestrian returns of the Dow Jones, NASDAQ and S&P 500.

Ohio med-mal proposals

The Ohio Senate has passed and the House is now being asked to consider S.B. 88, which "would establish a Northeast Ohio pilot program in which all medical malpractice claims would go through a mandatory arbitration process before going to trial." The arbitration panels would consist of dispute resolution professionals and persons conversant in the relevant medical specialty. Interesting tidbit:

Ohio had a voluntary arbitration process in place two decades ago. However, that system did not contain a so-called "loser pays" provision included in the current legislation. Backers of the new measure say the provision means the losing party in arbitration, if it also loses at a subsequent trial, must pay its opponent's legal costs � a strong deterrent to the filing of frivolous lawsuits.

Under the failed arbitration system from the 1970s and '80s, plaintiff attorneys would take a "dive" and lose arbitration on purpose just to get to trial, said Mike Wise, a McDonald Hopkins Co. LPA attorney and lobbyist for the Academy of Medicine.

(Crain's Cleveland Business; via Kevin Pho).

Why do we have all those laws against insider trading? Hint: it isn�t because they make economic sense. I discuss some explanations here and here.

The corporate governance industry

My skeptical reflections on the corporate governance industry -- those people who think they know how corporations should be run -- are discussed here. And here I discuss the latest pronouncement by one of the industry's main avatars.

Henry Manne, a godfather of corporate law and economics, has an op-ed in today's WSJ on the role of behavioral finance in securities regulation. I have a response. We both come out at the same place, via somewhat different routes.

'A Salute to Frivolous Lawsuits'

Inspired by a fan who sued a local team because he didn't get a red nylon tote bag handed out at the game as a promotion for Mothers' Day, the Double-A Altoona (PA) Curve is hosting "A Salute to Frivolous Lawsuits" night on July 2 at its home field, the Blair County Ballpark. This event is being sandwiched between, "Corporal Klinger Night" (June 26) and "Beaver Cleaver Night" (July 15).

From their press release, here are some of the plans for the evening:

Squashing testimonial peer review?

Peter Nordberg reports at Blog 702:

United States District Judge Ralph Tyson, sitting in Baton Rouge, has issued a temporary restraining order barring the American Association of Neurological Surgeons from sanctioning a Louisiana neurosurgeon for testifying as a plaintiff's expert witness in a Florida malpractice case. The AANS wants to suspend the neurosurgeon for two years because he "demonstrated a lack of adequate subject matter knowledge and acted as an advocate for the plaintiff and the plaintiff attorney rather than as an unbiased witness."

The underlying news story, from the Advocate of Baton Rouge, is here.

Asbestos Strikes Back

Following last year's damaging revelations about the dubious quality of much of the medical evidence used to support the class action against former and current makers/distributors of asbestos, a coalition of such companies has decided to fight back. Shannon P. Duffy in the Legal Intelligencer reports:

In a bold and unprecedented move that could drastically alter the nature of asbestos litigation, a coalition of 47 companies last week asked a federal judge to dismiss tens of thousands of pending cases, alleging that the vast majority of them are premised on flawed or fraudulent medical diagnoses. In the motion, defense lawyers say they are targeting claims that stem from "mass medical screening enterprises" which, they say, have clogged the courts with thousands of bogus asbestos claims.

Read the whole thing here.

Pat Cleary, Guestblogger

We are very pleased to have with us this week NAM�s Patrick Cleary. Patrick is senior vice president of communications at the National Association of Manufacturers. He launched, and writes, The Manufacturer�s Blog (www.blog.nam.org), the highest-traffic page on the NAM site. TMB has been cited in the Washington Post, US News, The Hill, San Francisco Chronicle, Chicago Tribune, Influence, and PR Week, as well as a host of on-line publications. Patrick appears frequently on (and is frequently quoted by) major media outlets, from CNN to The New York Times to NPR to the Wall Street Journal, on the topic of business. Stay tuned for more of his excellent blogging.

Milberg recusals galore

Too many of the judges have presided over Milberg Weiss cases, or had dealings with the law firm when previously in private practice.

Also, the WSJ today runs a letter from Leon Silverman of Washington, D.C., former assistant deputy attorney general and former president of the American College of Trial Lawyers, responding to my May 23 op-ed "Inside Milberg's Credenza" and to a Journal editorial.

Good morning, everybody -- greetings from ShopFloor.org, your guest blogger this week. As it turns out, we happen to be starting out the week in Sin City -- Las Vegas -- subject of Ted Frank's post below, where the trial bar apparently took a break from practicing before Judge Gene T. Porter -- Chief Judge of Nevada's Eighth Judicial District -- to hold a piggish, Vegas-style party cum fundraiser for him. Here's what Judge Porter had to say in his introduction to the Eighth Judicial District's 2002 Annual Report:

Dataset on tort reforms

Northwestern lawprof Ronen Avraham has compiled one, of which the SSRN description is as follows (via Childs):

This manuscript contains the most detailed, complete and comprehensive legal dataset of tort reforms in the U.S.

In March the Florida Times-Union, one of the South's larger papers, published a downright humiliating critique by its reader advocate, Wayne Ezell, of an article the paper had run assailing alleged medical malpractice at the Jacksonville Naval Hospital. Ezell said the article, which was written in sensational tones, mostly rehashed earlier coverage but had "several unwarranted assertions" added in. For example: the story suggested sweepingly (and in apparent contradiction to its own reporting) that the hospital failed to take action against its doctors when they committed mistakes, and its photo captions assumed the truth of unproven malpractice allegations by two families.

"Rx for American health care"

Business historian John Steele Gordon of American Heritage has some ideas for reform, including rollbacks in medical and pharmaceutical liability.

Guest Blogger Monday

Make sure to check Point of Law Monday, June 12th, for a new, mystery guest blogger! Enjoy.

Prof. Bainbridge is providing full coverage, here and in adjacent posts. Lots more at our own Larry Ribstein's, and at Conglomerate.

The American Tort Reform Association is alerting citizens via a billboard that attorneys who attempted to defraud Chrysler Corp. of $2 Billion, and who have been condemned to pay $1 million in sanctions, still practice in the Lone Star State.

It's been more than five years since the Texas Court of Appeals upheld a trial judge's order for three San Antonio attorneys to pay nearly $1 million in sanctions for their role in bringing an utterly fraudulent product liability lawsuit that sought to extort $2 billion from DaimlerChrysler in 1998. One of the attorneys has made no payments toward his share of the sanctions, and continues to practice law. Another, Robert Kugle, was disbarred and has apparently fled the country with a fraudulently obtained fortune, according to ATRA.

When one loses a pet through another's negligence, should one be able to claim loss of consortium (companionship)? An Oregon attorney is fighting to establish this right in a case summarized on law.com [free registration required]. In that case, a judge threw out a $1.6 million claim for loss of consortium after a pet dog was intentionally killed by a neighbor. [Intentional infliction of emotional distress and punitive damages were allowed, but not "loss of consortium", reserved in most states to spouses and in some states extended to cases for loss of a child.] The case is on appeal.

In a quote the implications of which for both the English language and the Rule of law are telling, Chicago attorney Amy Beyer, "who mostly handles animal law cases", is rooting for the Oregon case to chart a new path. Beyer observed, "Historically, courts have undervalued, if not completely unvalued, the lives of anybody who isn't human." She then added, plaintively, "I hope [the Oregon attorney] makes some headway because most days I feel I'm just banging my head up against the wall trying to make some progress. Courts are very reluctant to do anything that a previous court hasn't done."

Nevada state courts

The Los Angeles Times has a lengthy must-read article on Nevada state court judges' "pay to play" system, and a lengthy individual case study of a particular judge who made it from the state courts to the federal bench. All that's missing is a public-choice quote from Alex Tabarrok on why such a system necessarily penalizes out-of-state litigants. Of course, Hamilton first noted this problem in Federalist No. 80...

Akaka bill dead for now

The Senate failed to invoke cloture; the Bush Administration belatedly also came out against the measure. Coverage: Honolulu Star-Bulletin, Advertiser. See here and here for more.

An article by Tom Elliott in the New York Post is highly critical of the AG's "price gouging" enforcement efforts. Apparently it's no defense for a station under the state's law that it may have set its gas price to match the competition's, or that it based the price on the anticipated cost of replacing the gas in a period of rapid price hikes. More: Sept. 14 and Sept. 23, 2005. Incidentally, David Weigel at Reason "Hit and Run" refers to Spitzer as "the Lawsuit That Walks Like a Man".

New, Horrible Class Action

It looks like we're taking one more step towards throttling down internet trade with taxes-- and opening one more class action Pandora's Box. Liz Flynn, reporting for Savannah's WTOC, informs us that

...cities like Savannah are losing hundreds of thousands of dollars because of travel websites. Now many Georgia counties and cities are filing a lawsuit, trying to get some of that lost tax revenue back.

The idea being that, because internet travel retailers buy up hotel rooms wholesale and don't pay the same level of taxes on them that the end users of those rooms do, the travel companies owe the state. Big time. Read the whole story here.

Vicksburg Post executive editor Charlie Mitchell has some things to say about the Mississippi diet-drug-suit scandal.

Merck's Preemptive Strike

Merck, in the run-up to its first California trial, is seeking to have one of the pending California cases thrown on on statute of limitation grounds, according to NLJ's Amanda Bronstad. Merck has filed a motion for summary judgment in the case of Rudolph Arrigale, a 73-year old man who suffered a heart attack after taking Vioxx. Read the whole story here.

More on benzene-in-sodas suits

Michael posted last week on the lawsuits filed against numerous soft drink makers over alleged trace quantities of the chemical in their wares. For those following the issue, here are a few more links. The FDA sent this March 21 letter answering (and rebuking) the trial-lawyer-linked Environmental Working Group, which has been agitating the issue in the media. And Beverage Daily, Bill Childs, and American Council on Science and Health all offer further background.

Democrats in Congress are in full bay over excessive pay for CEOs and top executives, but Republicans are planning a turn of the tables -- or would that be a poison pill?

The partisan rhetoric flew, as befits an election year. Countering [Rep. Barney] Frank's legislative proposal, Republicans disclosed that they have a bill of their own in the works: one that would rein in trial lawyers, a group that is a perennial ally of Democrats and generous contributor to their campaigns.

Don't blame the corporate executives, said Rep. Patrick McHenry, R-N.C. By targeting companies in lawsuits, "Trial lawyers are the ones who are sopping up investor wealth in this country."

The four candidates for the Alabama Supreme Court who asserted that they did not have to abide by United States Supreme Court rulings all lost their primaries challenging Republican incumbents yesterday by 22 points or more. Also losing was former Chief Justice Roy Moore, who had sought the governor's mansion, and Democrat Larry Darby, a white supremacist running for attorney general.

There's a nice, balanced piece in today's W.S. Journal [subscription required] on the lawsuits recently filed in California against Schering-Plough Corp., Neutrogena Corp., Johnson & Johnson and others.

Note that this is NOT a products liability suit, but a consumer protection class action. The defendants' sunscreen products, according to the complaint, are not waterproof, don't work all day, don't block the most harmful of the sun's rays, and don't prevent wrinkling -- as products claim they do. The plaintiffs are alleging violations of California's fraud, false advertising and misrepresentation statutes. They are not suing for any injury, but for a refund of the purchase price -- and this is not insignificant in an industry where sales exceed $500 million annually.

The defendants argue that their compliance with federal standards is sufficient. The trial judge found that federal regulations concerning the labeling of sunscreens merely state that labels cannot be "false and misleading," thus failing to pre-empt state statutes at all. Methinks that experts on both sides will be debating the meaning of "waterproof" and other such terms.

Gilbert Heintz Disgorgement

Alexia Garamfalvi reports, for Legal Times, that Washington, DC firm Gilbert Heintz & Randolph has been put in severe financial peril by a $9.7 million disgorgement order upheld by a US district court, and execuetd by former Gilbert Heintz client Congoleum. Read the whole thing here.

Surge in overtime suits

A WSJ news account (sub-only) covers the trend:

Last year, 3,599 lawsuits alleging some violation of the Fair Labor Standards Act, which mandates federal pay rules for employees, were resolved, according to the federal judiciary. That is more than double the 1,596 cases resolved in 2000.

"There has been an explosion of Fair Labor Standards Act litigation since 2002," says Edward Harold, a partner at Fisher & Phillips LLP in New Orleans, which represents management in labor-law disputes. His firm estimates that lawsuits by groups of workers, as opposed to individual workers, alleging violations of federal wage rules rose to 1,300 in 2005, up from 350 in 2000. Other attorneys and workers' groups say they have seen similar increases.

Could the increase be due to intensive recruitment and development of cases by the plaintiff's bar? Yes, say defense lawyers, while their opposite numbers say no, it's just this big spontaneous upwelling of worker anger at FLSA infractions. Much more on our employment law page.

Sen. Frist's family anecdote

According to Pennsylvania's WNEP, the majority leader/surgeon says he's seen Topic A come up in discussions in his own family:

The topic of discussion Thursday was medical liability reform.

Frist said the lack of it is why his own son chose not to enter the field.

"He said, 'Dad I'm not going into medicine. I've loved pre-med and I want to help people, but why would I want to subject my life to inevitable lawsuits, one after another, when I've done nothing wrong?'" Frist related.

Akaka bill

The Federalist Society will be sponsoring a panel discussion on the proposed Native Hawaiian Government Reorganization Act next Monday afternoon on Capitol Hill (more). (Update: POSTPONED following failure of bill to achieve cloture.) And: Peter Kirsanow comments here and here.

Hollywood and business

TCS and the Media Research Center are co-hosting a program tonight on Hollywood�s portrayal of business. James Pinkerton thinks it�s not so bad. I think it is.

Here�s some thoughts, inspired by Milberg and Lerach. It's about fixing the law and the judges, and not just the lawyers.

I have some uneasy reflections here about the Enron prosecutors' zeal to get Ken Lay, and here about all those other Enron trials we probably won't be seeing.

Suing venture capitalists

From Law.com's description of an article by Xenia P. Kobylarz in The Recorder: "After years of reluctance by entrepreneurs and investors to sue the venture capital community that helped fuel the Internet boom of the '90s, lawsuits targeting VCs have become nearly as common as the failed dot-coms that littered Silicon Valley after the bust. And law firms are getting in on the action. With new funds and larger players to hit up for seed money, there are 'a lot more people willing to blame others when things go wrong,' says Michael Rhodes, Cooley Godward's head of VC litigation."

The many hats of Dan Fee

Yet another good column from the Allentown Morning Call's Paul Carpenter discusses Dan Fee, "one of the most politically connected wheeler-dealers in Pennsylvania" whose many hats include campaign manager for the re-election campaign of Gov. Ed Rendell and spokesman for Rendell's campaign. Those seem to be side gigs, however, compared with Fee's post as executive director of "Pennsylvania Citizens for Fairness", a front group owned and operated by the Pennsylvania Trial Lawyers Association (more). More on Carpenter's work here and here.

The Rhode Island Supreme Court has declined to settle, for now, a dispute over attorney fees in the state's case against former lead paint manufacturers, saying unresolved issues needed to be decided first.

The state hired private lawyers when it sued the lead paint industry in 1999 for creating a public nuisance by selling an unsafe product. The contingency fee contract entitled the lawyers to just over 16 percent of whatever the state received if it won the lawsuit.

A jury in February found three companies -- Sherwin-Williams Co., Millennium Holdings LLC and NL Industries, Inc. -- liable for creating a public nuisance and ordered them to clean up lead paint contamination in Rhode Island. JNOV motions, among others, are still pending. An appeal is expected if there is a judgment on the verdict

The court said it wanted to wait until those issues are resolved before deciding whether the state can honor its contract for attorney fees. The court appeared to acknowledge that important questions of due process and separation of powers are raised by the attorney general's delegation of power to private attorneys via the contingency fee.

The state has said the defendants might be on the hook for billions of dollars.

Jarndyce and Jarndyce and Boies

Saturday's NYT had an unusual item on the firm of Boies, Schiller and Flexner, which has become entangled in a sordid legal dispute over the acquisition by its CFO Amy Habie of a gardening company in Florida. It's estimated that the firm invested more than $4.5 million worth of pro bono legal work in the case; 70 lawyers from 14 firms have been involved overall, to the tune of 13,000 billable hours. Read the whole story here. (h/t How Appealing)

O'Reilly radio today

I'm scheduled to be a guest on Bill O'Reilly's radio program today, shortly after noon Eastern time, to talk about the role of judges.

The Senate will take up the Akaka bill this week. How do you say "Balkanize" in Hawaiian? Our reprinted column on the subject by Prof. Gail Heriot (U. San Diego School of Law) is here; more coverage here, here, etc.

Law students are so cute when they're clueless.

One bit of cheer for Merck

Another data point or two on how state attorneys general come to hire private law firms to sue private businesses, courtesy of Mississippi's not-always-discreet AG, Jim Hood:

Hood said he normally awards the contracts to the attorneys who propose the lawsuit...

Copeland, Cook, Taylor & Bush brought the idea for the lawsuit against the pharmaceutical companies [demanding huge sums for alleged overcharges] to Hood. While the firm by its very nature is more affiliated with Republican Party politics, it has one prominent Democrat in its midst -- former Gov. Ronnie Musgrove is a member of the firm.

See May 24 and, more generally, our Regulation Through Litigation page.

Garamendi's blog nemesis

In California this year, Insurance Commissioner John Garamendi is trying to parlay a demagogic approach to insurance issues into a successful run for Lieutenant Governor. George Wallace at Declarations and Exclusions has been energetically tailing the erratic commissioner and correcting some of his lamer assertions.

Sox and Private Equity

SOX is encouraging lots of firms, big and small, to leave the US public equity markets. The huge Kinder Morgan deal has drawn attention to this phenomenon. Private equity can be a good thing. But as I explain here, the artificial, regulation-induced, demand for it is not.

Eminent domain in NYC

At the Manhattan Institute's Center for Rethinking Development, Institute Senior Fellow Julia Vitullo-Martin has some thoughts on the subject.

John Luik has a nice piece on the excellent Tech Central Station site about the new "benzene scare."

As he reports, Coca-Cola and Cadbury-Schweppes have been added to a Florida suit already involving Pepsi, Kraft Foods, Ocean Spray Cranberries, Polar Beverages and In zone Brands. The suit alleges that the benzene in their drink products exceeds the one part per billion standard established in Florida -- a standard that is one fifth the federal standard set for drinking water. Luik points out that the FDA is "investigating" the issue, but find that there is no "health risk." He also points out that benzene also forms from natural processes such as forest fires, and is routinely found in the air. For example, ambient air levels of benzene have been found at 182 ppb (parts per billion) in Los Angeles and at 179 ppb in London. Benzene is also found in many foods such as meats, eggs and bananas, which however are immune to product liability lawsuits....

When asked if drinking a soda containing 79 ppb of benzene poses a risk to consumers, Dr. Laura Tarantino, director of the FDA�s Office of Food Additive Safety, replied, �No� this is likely an occasional exposure, not a chronic exposure. Obviously, no benzene is something that anyone wants to have, but the amount of benzene that they�re getting in the soda is very, very small compared to the benzene you�re exposed to every day from environmental sources of benzene.� See the full interview with Dr. Tarantino here.

As Ted Frank has pointed out here, an Oregon case against Philip Morris, where $800K in damages was accompanied by almost $80 million in punitives, is now before the U.S. Supreme Court. At issue is the survival of the recent (State Farm) single-digit multiplier, which the Oregon Supreme Court casually (in my opinion) dissed.

Here is the core of the rationale invoked by the Oregon supremes to allow a punitives-to-compensatories ratio eight times the normal maximum indicated in State Farm:

In summary, Philip Morris, with others, engaged in a massive, continuous, near-half-century scheme to defraud the plaintiff and many others, even when Philip Morris always had reason to suspect -- and for two or more decades absolutely knew -- that the scheme was damaging the health of a very large group of Oregonians -- the smoking public -- and was killing a number of that group. Under such extreme and outrageous circumstances, we conclude that the jury's $79.5 million punitive damage award against Philip Morris comported with due process, as we understand that standard to relate to punitive damage awards.

When the smoke is cleared (sorry), the "scheme" at hand boils down to selling cigarettes to willing buyers. The "fraud" is difficult to discern to these eyes, which have read of centuries-old warnings about tobacco, including of course the warning on every pack of cigarettes for almost all those fifty years.

This "scheme" is comparable to McDonald's "scheme" in selling fatty hamburgers, candy bar makers' "scheme" of "addicting" us to sugar, and of course beer-makers massive "scheme" to fatten and addict us against our will.

"From physician to legislator"

His awareness of the legal impediments to practicing sound medicine was among the reasons Dr. Sid Bondurant got interested in politics. When he decided to run for the Mississippi state legislature, it required scaling back his ob/gyn practice. But he defeated an incumbent and soon threw himself into medical liability debates in the Magnolia State. Now Dr. Bondurant, a longtime friend of this site, has written up his experience in the new issue of the magazine Contemporary Ob/Gyn, and generously cites the work of this website in doing so.

The bite of punitive damages

Patti Waldmeir of the Financial Times takes issue with Judge Posner on some questions of punitives and proportionality. Most noteworthy line: "Bedbugs notwithstanding, it is normally a very bad idea to punish defendants for hypothetical wrongdoing that has not been tried in court." (via Lattman).

Apologies for site outages

We've had several prolonged outages in recent weeks at Point of Law, mostly occurring on weekends but occasionally during the week, as with the latest disruption in service, which had us down for most of this morning. Our tech people are working to fix things. Thanks for your patience in the mean time.

Under the policy outlined in the Justice Department's intensely controversial Thompson Memorandum, it's considered a mark of appropriate contrition in a business enterprise to refuse to advance legal fees to indicted employees, and the advancement of such funds may in fact be construed as a sign that the enterprise is unrepentant, uncooperative with prosecutors, and deserving of more severe punishment. So how does the federal government react when its own employees are indicted for alleged misconduct in carrying out official duties? Well, if they're FBI agents indicted over the Ruby Ridge incident, the answer is...it pays their legal fees. Washington attorney John T. Boese of Fried Frank explains that companies struggling with Thompson-memo issues may be able to throw the government's own prior position back at it (PDF).

Parade of new blogs

Attorney Nicole Black has launched Sui Generis, a weblog covering New York law. The Times of London (which plans a U.S. expansion soon) now has its own legal weblog. SoxFirst "focuses on Sarbanes-Oxley, business ethics, corporate governance, accounting, management and compliance, executive remuneration and similar issues". Disassociate.net is a humor site aimed at law firm associates. Parens Patriae offers "A critical look at government involvement in the family". And our friends at the Cato Institute have set up Cato at Liberty.



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.