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November 2006 Archives


So says Carrie Johnson in today's Washington Post. Interesting quote from Larry Thompson himself, suggesting that the memo has been applied beyond its original intended scope.

Watters v. Wachovia Bank

Video from Tuesday's AEI event and the transcript of Wednesday's Supreme Court oral argument are now on-line. The oral argument would seem to indicate that the Court is likely to affirm on narrow grounds of the National Bank Act statutory scheme rather than creating any sweeping new pronouncements on the authority of administrative agencies to preempt state law. Deepak Gupta of Public Citizen has a round-up of links.


Posted to the AEI Liability Project Documents in the News page: Judge Duval's opinion in the federal Louisiana Katrina litigation, holding that language in insurance contracts stating that the policy does not cover "loss caused directly or indirectly by water damage" doesn't necessarily mean as a matter of Louisiana law that the insurers aren't liable for loss caused by water damage because the flood of New Orleans might not necessarily be a "flood" because of the insurance contract's failure to explicitly define that term to include manmade events, and the plaintiffs might be able to prove that the flood was manmade, rather than natural. Are you appalled yet? Earlier Katrina coverage.


The Committee on Capital Markets Regulation has released its interim report. There will be a webcast of the 10:30 AM media briefing. Earlier: Oct. 19; Oct. 30; Nov. 2.

Akron withdraws lead paint lawsuit

The city of Akron, apparently having had second thoughts about signing up for Motley Rice's big money quest, has withdrawn its lawsuit seeking damages from former manufacturers of lead paints, though it says it hasn't ruled out refiling. MedPundit Sydney Smith, who's from the Akron area herself, discusses, as does Boring Made Dull ("Surprisingly, Akron Decides That it's a Bad Idea to Bankrupt a Major Local Employer" -- also see this earlier post.) And Jane Genova has been on the story here, here, here, here, here, and here. An editorial in the Akron Beacon Journal commended the city administration for taking "the responsible course" in reconsidering the suit.


Don't expect the sweetness-and-reason, we're-all-pro-business atmosphere to last long, warns her former chief of staff, now with King & Spalding. That goes "especially when it comes to drug prices, oil company profits and post-Hurricane Katrina insurance rates." The entertainment industry may fare better (or it may not).

Smoot v. Mazda

If Judges Posner or Easterbrook are ever again inclined to wonder why even the simplest of Seventh Circuit briefs might take several thousand dollars of attorney time (Posner: Nov. 24, 2005 and Nov. 29, 2005; Easterbrook: Jul. 8), it is because of decisions like today's Smoot v. Mazda (via Bashman) where a humiliating order to show cause why the attorneys should not be sanctioned was issued for failure to perfectly comply with Federal Rule of Appellate Procedure 28(a)(1), in the process accusing the attorneys of malpractice.

Ironically, while both parties' attorneys were lambasted for failing to comply precisely with technical and arcane (albeit important) requirements, it was entirely shrugged off that the plaintiff had filed a complaint alleging defectively designed airbags without any supporting evidence. The only consequence for that action was the straightforward affirmance of the summary judgment for the defendants. The contrast of what is and isn't considered a sanctionable waste of the court's and attorneys' time is enlightening.



Law.com
has a story that might be a poster child example of the ill effects of this legal monstrosity.

DaimlerChrysler Corp. has been condemned to pay $20 million to a retired police officer who worked for a brake shop for four years, forty years ago, and whose right lung was removed because of cancer caused by asbestos.

A Manhattan jury ruled that Alfred D'Ulisse, 73, of North Massapequa, N.Y., and his wife were owed a total of $25 million.

DaimlerChrysler was found to be 10 percent liable for D'Ulisse's cancer, but will be responsible for a total of 80 percent of the damages because two other companies found to be liable no longer exist.

DaimlerChrysler issued a statement saying the case was built on "junk science" and accused Justice Louis B. York of "improper rulings." The company said it was confident last week's verdict would be reversed on appeal.

Two other auto manufacturers, each found to be 10 percent liable by the jury, settled with D'Ulisse before trial for undisclosed amounts, he said.

The jury also found that DaimlerChrysler was not responsible for the mesothelioma of another worker, Rodolfo Colella. The 50-year-old auto mechanic from Queens worked with brakes made by various automakers between 1972 and 1989.

A DaimlerChrysler spokeswoman, Elaine Lutz, said her company's lawyers presented evidence that Colella's cancer was caused by radiation therapy after he contracted Hodgkin's lymphoma in the 1970s.

The judge had ordered the cases tried together because they had the same lawyers and the same main defendant.

"Inexplicably, the jury accepted the junk science theories presented by the plaintiffs' lawyers in the D'Ulisse case," the statement said.

D'Ulisse worked in a brake shop from 1960 to 1964, then worked there part time during some of his 36 years as a city police officer.

African-Americans at law firms

Adam Liptak in the New York Times (via Lat) reports on the Richard Sander study on African-Americans in law firms. (Stuart Taylor noted the same study in June, but the Times' article is more likely to set the agenda.) The headline asks "Why Blacks Lag at Major Firms": Sanders suggests affirmative action is resulting in sub-par hires, while others trot out the typical theories of racism. I'd like to challenge the premise. African-Americans don't lag because they don't stay at law firms. Rather, white attorneys are the ones who are lagging because they don't get the same opportunity to leave law firms. The resulting lack of African-Americans in law firms reflects the greater career opportunities African-Americans have to similarly situated whites.

I may be leaving someone out, but the last three African-American associates to leave my last law firm went on to bigger and better things: one joined a liberal think-tank in a titled position, and will surely get a spectacular government job in the next Democratic administration; another became an associate professor of law at a top-twenty law school without having to publish first; and I am unaware of any 34-year-old attorney with three and a half years of legal experience, white or black, who would turn down the opportunity to become an FCC Commissioner. None are going to be in the small fraction of people ten years out of law school who make partner at the highly-leveraged firm, which is what Sander measures, but none can be said to be lagging unless one incorrectly views law firm work as the pinnacle of the legal profession. As one partner notes in the Liptak article, law firms are losing women and blacks to in-house jobs, and the law firm partners are now working for them.

There are only so many African-American attorneys to go around, and as academia, government, and private industry compete for the limited pool in the name of diversity, law firms are simply going to lose that race unless they create a separate (and illegal) fast-track for partnership for minorities the way other career paths in the legal profession do: white associates would leave law firms before they could make partner just as fast if they had the same opportunity. (And, indeed, one need only look at the attrition rate for Supreme Court clerks hired by law firms as associates for confirmation of this.) Sanders' paper (and any analysis of it) is simply going to be an incomplete look at the issue unless the entire universe of legal employment is considered.

Thompson Memo Event @ Heritage

The Federalist Society and The Heritage Foundation are sponsoring an event tomorrow morning at eleven on the attorney-client privilege in white-collar criminal prosecutions, and Larry Thompson himself will speak on the issue, along with former attorney general Edwin Meese and George Terwilliger.


That's Stephanie Mencimer explaining (Nov. 28) why trial lawyers should buy multiple copies of her forthcoming book, entitled Blocking the Courthouse Door: How the Republican Party and Its Corporate Allies Are Taking Away Your Right to Sue, expressing views antipodal to our own.

Mencimer, a frequent contributor to such journals as Mother Jones and the Washington Monthly (see Jan. 19, 2005), has set up a website (previously noted by Ted) to promote her new book. It's not unproductive of chuckles, in its way. For example, in one post earlier this month (Nov. 10), criticizing media coverage of patent hellhole Marshall, Texas, she piously avers that reporters should disclose who fed them tips. A fascinating idea! Does this mean she'll be sure to disclose in her own writings who fed her tips? Or is this new standard only supposed to apply to journalism she disapproves of? (cross-posted from Overlawyered).

Book corner

In the mail, and looks promising: Courting Failure: How School Finance Lawsuits Exploit Judges' Good Intentions And Harm Our Children, edited by Eric A. Hanushek of the Hoover Institution, takes a skeptical look at the results of lawsuits challenging public school finance on grounds of inequality between districts or inadequacy of funding. Among the findings, per the book's summary: court orders "have not had a beneficial effect on student performance" and "cost studies on the price of an adequate education turn out to be more politics than science." Contributors include, besides Hanushek, Williamson M. Evers and Paul Clopton, E. D. Hirsch Jr., Alfred Lindseth, Paul E. Peterson, Marguerite Roza and Paul T. Hill, Sol Stern, and Herbert J. Walberg.

Some other books that the authors have written in to tell us about, but which we haven't seen actual copies of: Christopher Smithies, a British-born surgeon practicing in Bellevue, Wash., has published The Hall Chair: A Satirical Novel on the Medical Malpractice Crisis in America. And Kevin M. McDonald, an assistant general counsel at Volkswagen of America, has published Shifting Out of Park: Moving Auto Safety from Recalls to Reason, which argues that current law on auto safety recalls is something between ineffective and actively dangerous; he looks at the interaction of recalls with litigation, and "compares the current American recall process and its history with the recall processes of several foreign countries with excellent auto safety histories."


In today's W$J:

In one such notable agreement, the U.S. attorney for New Jersey, Christopher J. Christie, put the screws to Bristol-Myers Squibb, which got into hot water because of a potential securities violation for inflating its quarterly earnings by a business practice known as channel stuffing. ...The na�ve reader might think that a DPA should prohibit the firm from engaging in future conduct of the sort that got it into hot water in the first place. But Mr. Christie had larger ambitions. The most striking evidence of the abuse of power is paragraph 20 of the agreement, which requires BMS to "endow a chair at Seton Hall University School of Law," Mr. Christie's alma mater, for teaching business ethics, a course that he himself could stand to take. ...

BMS was ordered to restructure its internal operations and appoint a new chief compliance officer to assist Mr. Lacey [Frederick Lacey, a former federal judge advising Mr. Christie]. .... How can any firm act decisively with a government mole in its midst? What other firm would seek to acquire BMS, knowing that they must thereby give Mr. Christie the keys to its boardroom? ...

A DPA such as this one erodes the most elementary protections of the criminal law, by turning the prosecutor into judge and jury, thus undermining our principles of separation of powers. The Bristol-Myers Squibb DPA allows the prosecutor to lower the boom following the recommendation of Mr. Lacey. The corporation's sole remedy is to plead its case before the prosecutor in an environment wholly devoid of the most rudimentary procedural protections.

These powers were implemented when Mr. Christie threatened to reinstate the indictment if the board did not remove CEO Peter R. Dolan for his role in an aborted agreement with Canadian corporation Apotex. The agreement -- to delay Apotex's introduction of a generic competitor to Plavix, BMS's best-selling blood thinner -- led to a criminal antitrust investigation. Any connection between channel stuffing and price fixing remains unclear.


The WSJ reports a study indicating that the premium for a foreign firm's listing in the US has declined significantly after SOX. This could explain why foreign firms have been leaving the US for other capital markets. I discuss the implications of the study for the debate on SOX.

The Coase Theorem in action

New York has some of the most tenant-friendly courts in the nation. "'It�s very pro-tenant here in terms of the courts,' said Gary L. Malin, the chief operating officer of Citi Habitats. To evict someone who isn�t paying, 'it can take six months to go through the right legal process,' he said. 'That�s six months of no rent.'" Has this made tenants better off? The answer appears to be no: though rents are sky-high, landlords find it unprofitable to add housing stock, there is a severe apartment shortage (vacancy rates are at 1%), and excess demand is such that landlords can be picky about their tenants, rejecting anyone with a housing court history, meaning that even tenants with legitimate grievances pay a huge price for seeking legal resolution. Some landlords just simply refuse to rent to attorneys. (Teri Karush Rogers, "Only the Strongest Survive", New York Times, Nov. 26). Tenants would be much better off ex ante if landlords could trust the court system to resolve disputes fairly and quickly ex post.

January 8, 2008

...is the scheduled start date for the Milberg Weiss trial. Which could keep it on the agenda in time for the elections. There could also be new charges that Milberg Weiss faked costs for expert work, which would almost certainly resonate better with the jury than an arcane theory of kickbacks that the defendants will be able to muddy with for-hire experts who would testify that the kickbacks were realy referral fees that theoretically did not hurt anyone. [W$J, LA Times, NY Times]

"Scalia the civil libertarian?"

It's nice to see someone in the pages of the New York Times, even if in this case an outsider (novelist Scott Turow, writing in the Sunday magazine) getting past the Halloween-scare image of Justice Scalia ordinarily fed to Times readers:

Justice Scalia, especially in the last decade, has frequently taken an expansive view of the Bill of Rights, thus supporting defendants in criminal cases. ...In all of this, Scalia is first and foremost a legal formalist � meaning that to him, the rules are the rules. ... As the Apprendi cases demonstrate, Scalia is more like the court�s liberal members in seeing the Bill of Rights as a constitutional trump when it collides with government power.


In Twombly v. Bell Atlantic, Milberg Weiss filed an antitrust class action against several telecommunications companies, alleging an antitrust conspiracy. In the district court, the defendants got the case dismissed on the grounds that the complaint did not make specific allegations demonstrating conspiracy. The Second Circuit reversed, noting that Fed. R. Civ. Proc. 8 does not require such specific allegations.

For some reason, the Supreme Court has granted certiorari, though they have addressed precisely this issue twice in recent years, albeit not in the antitrust circumstance.

Petitioners are correct that the Second Circuit's decision is horrible public policy: bare-bones antitrust complaints permit hugely expensive fishing expeditions with no consequences to the plaintiffs who bring the case, as numerous amicus briefs point out. But the respondents are correct that this counterproductive result is precisely what Rule 8 commands. The problem here is with the law, not with the court decisions. This is not a place for the Supreme Court to intervene as judges—but the Supreme Court can fix the problem with the rules under their authority granted to it by Congress under 28 U.S.C. �2072, and Congress can also step in.

I briefly touched upon this issue at Point of Law a year ago.

Update: Howard Bashman has a roundup of links, including to the oral argument transcript.


The refusal of certiorari to the Illinois Supreme Court's decision to throw the case out puts an end to the illegitimate class action that resulted in a $10.1 billion judgment in Madison County, though similar cases remain pending in Massachusetts, Missouri, and Minnesota—as well as Judge Weinstein's court in the Eastern District of New York. (Mark H. Anderson, "Supreme Court Won't Consider Reinstating Philip Morris Penalty", WSJ, Nov. 27).


Tomorrow afternoon, the AEI Liability Project is putting on a panel discussion of Watters v. Wachovia, to be argued in the Supreme Court Wednesday:

Ohio medical malpractice claim report

The Ohio medical malpractice claims report, discussed by Walter a few days ago, is now on-line.

Walter's $281,764,938 figure omits the over $113 million paid in defense expenditures for claims, and even that figure is an underestimate, because about records for allocated legal expenses to claims are incomplete. In either event, if a plaintiffs' attorney collects an average of 35% per claim (perhaps an underestimate), Ohio doctors and patients are paying lawyers over $211 million to administer a system that resulted in $183 million in compensation to patients. Over ten percent of that was for emergency room liability.

The effect of recent malpractice reform in Ohio is as yet unknown, because the cases most likely to be affected by caps tend to be the cases that take several years to litigate.

The Ohio data is superior to data previously made available in Texas and Florida because its inclusion of data for the self-insured.


We covered the billion-dollar case Oct. 27. Howard Bashman has a roundup of links, including the California appellate court's opinion. Plaintiffs promise an appeal to the California Supreme Court, whose original ambiguous opinion in an unrelated case decades ago led to the current legal confusion.


The WSJ has an article on the new market for information consultants. Basically, it's all about inside information which may or may not be material. I show how it's all the result of the SEC's Regulation FD, which was supposed to create a "level playing field," but of course did no such thing.


The Texas-based law firm has done its third annual survey of corporate general counsels on the volume and impact of litigation affecting them: "So what is tops on the corporate lawyer worry-list? Securities-related cases may grab the headlines, but more than half of the in-house counsel cited employment as their top litigation concern."(WSJ sub-only "Rule of Law"; survey and related seminar).

The WSJ on "shareholder democracy"

Today's WSJ takes aim at the "shareholder democracy" movement. I discuss, and show how the WSJ must have been reading a certain blog.

Sued for not suing

Sigh of relief dept.: a three-judge panel of the Second Circuit has unanimously ruled that "two prominent New York plaintiffs firms are not liable to former clients for failing to sue accounting firm Arthur Andersen in a securities fraud suit stemming from the largest Ponzi scheme in U.S. history." Kirby, McInerney & Squire and Bernstein Litowitz Berger & Grossman had sued the Syracuse-based Bennett Funding Group over extensive frauds which victimized investors, but had not sued the now-defunct Andersen firm, which had served as Bennett's auditor in two years. The panel said the two law firms "acted reasonably in not suing Andersen," the availability of both liability and damages being uncertain. "They're usually accused of suing every deep pocket in sight," said the Proskauer Rose attorney who defended the two firms. "Here they're exercising restraint and they get sued for it." Compare the case discussed on Overlawyered Feb. 15-17, 2002, in which a New Jersey appeals court ruled that a law firm could be sued for legal malpractice for omitting a peripheral defendant from a pharmaceutical lawsuit.

SOx reform a Bloomberg priority

In fact it's the number one priority of New York's mayor in the new Congress, the New York Sun reports.

Supposed myth of judicial activism

Presumably Judge Reinhardt is just a figment of the imagination, like the griffin or Sasquatch. Anyway, the supposed "myth" is debated at Penn Law School's PENNumbra. Jonathan Adler also has started a discussion thread.


Henry Manne writes in today's WSJ about corporate social responsibility in honor of Milton Friedman -- who Henry observes was right all along. I give some further thoughts in sympathy with both of them.


Per Law.com/The Legal Intelligencer: "A signed liability release form between a skier and a ski resort does not necessarily supersede an oral agreement between a ski lift operator and a skier to stop a lift before she boarded, according to the Pennsylvania Superior Court."

Vioxx discovery to date

"Merck has produced approximately 22 million pages of documents and a terabyte of data to the [Plaintiffs' Steering Committee], more than 310 depositions have been noticed relating to 168 witnesses, depositions have been taken for more than 145 days and now comprise over 35,000 pages of testimony." — Judge Fallon's November 22, 2006 Order at 3 n. 4.

That order, as expected by even the plaintiffs, refused to certify a nationwide personal-injury class and hinted that even state-wide personal-injury classes could not be certified as a class because of the predominating individualized issues. (Of course, because of the dozens of pre-CAFA class actions that have been filed in various state courts, plaintiffs will get more than one bite at this apple; while Judge Easterbrook's landmark Firestone opinion holds that this would be improper and that such state-court flouting of the federal order could be enjoined, it is unclear whether Judge Fallon will follow that precedent.)

For you complex civil procedure mavens out there, the Plaintiffs' Steering Committee, apparently anticipating defeat in the Fifth Circuit, has taken the interesting and unprecedented tack of asking that the MDL remand the 23(f) appeal back to the transferor courts for resolution by various other circuit courts of appeals, hoping to roll the dice in the Ninth Circuit or a fortuitous three-judge panel elsewhere. Such an extraordinary step would almost certainly violate the law for reasons too arcane to go into without putting the vast majority of readers to sleep, but Judge Fallon has not yet dismissed the idea out of hand.

Public Citizen's Brian Wolfman and Professor Erichson also comment. Class certification issues are still pending for classes seeking medical monitoring relief and "consumer fraud" damages.

A snapshot of asbestos litigation

I was reading the 10-Q of a mid-sized business for some consulting work I was doing, and it provided a fascinating snapshot of how asbestos litigation is affecting the thousands of tertiary innocent-bystander defendants under the plaintiff-bar's entrepreneurial model of cookie-cutter lawsuits suing 100 defendants hoping for nuisance sums from most of them to fund larger speculative ventures against deeper pockets—at the cost of generating tremendous uncertainty in American business investment, not to mention fundamental fairness:

Civil 10b-5 not going anywhere

Alas, it appears the New York Times has misreported the Paulson Committee's intentions to dis-imply the judicially created civil cause of action for 10b-5 securities suits (Oct. 30). Columbia Law Professor John Coffee denies in the Nov. 16 New York Law Journal that he recommended anything more than an incremental limitation on suits; Securities Litigation Watch and Lyle Roberts have details.

Alan Murray on "shareholder democracy"

The WSJ's Alan Murray writes on the coming battle for "shareholder democracy." I provide a reminder that it's really a battle to replace state with federal law, and to mandate a sort of Animal Farm democracy where some (activist, union) shareholders are more equal than others.



As Law.com reports
, a federal jury in Tulsa has just condemned Ford to pay $15 million to the parents of a teenage driver whose Explorer rolled over during a reckless manoeuver.

Tyler Moody, 18, was killed Jan. 7, 2003, when he lost control of the sport utility vehicle while he was passing another vehicle in a no passing zone on a curve. The SUV left the road and rolled at least 1 1/2 times, coming to rest on its roof.

The plaintiffs' own accident reconstruction expert testified that Moody was traveling at about 67 mph through the curve, according to Eagan's Nov. 14 order.

The posted speed limit on the road was 50 mph but as vehicles entered the curve, another sign advised drivers of the curve and stated "30 mph."


Kevin Moody and Veronica Moody alleged in their lawsuit that "because the defective vehicle had an inadequate roof-crush tolerance," Tyler Moody was trapped within the Explorer "and his neck was pushed into his chest by the intruding roof at a precipitous angle."


Plaintiffs claimed that the roof of the Explorer collapsed when the vehicle went through what he termed a relatively slow, easy roll.


Ford's attorney responded that the vehicle exceeded federal standards. She said 98 percent of seat-belted SUV riders who are in rollover accidents are not seriously injured. She said there was no doubt that Moody was by all accounts "a great kid," but on the day of the accident he made "bad decisions that had fatal consequences."

The jury deliberated for only three hours on Nov. 20 before delivering its verdict of actual or compensatory damages of $15 million.

Blawg Review #84

The weekly roundup of stimulating bits from around the legal blogosphere was hosted this week at Jen Burke's Transcending Gender; last week it was at Rick Hasen's election law blog. In both cases this site (and many other good sites) got attention.

$281,764,938

That was the sum paid to Ohio malpractice claimants in 2005, according to the state insurance department, which has begun keeping numbers. Sixty-five claims topped $1 million. "Almost 80 percent (4,005) of medical malpractice claims resulted in no payment to a plaintiff, though almost all claims generated expenses for investigation and defense, an average of $24,443 per claim." (via MedPundit). For purposes of rough comparison, the Cincinnati Enquirer reported two years ago that "The number of doctors maintaining an Ohio address was 24,833 in 2003". The figure for malpractice outlays includes claims against three relatively low-risk specialties -- dentists, optometrists and chiropractors -- suggesting a ballpark estimate of about $10,000 in paid settlements and verdicts per practicing doctor, over and above the sums spent in defense costs, underwriting, etc.

An infuriatingly stupid Kinsley essay

Michael Kinsley notes that publicly-traded stocks are sometimes bought out and taken private, and that private equity managers sometimes make profit on these deals. He concludes that the free market does not work.

The non sequitur is appalling. It is apparently beyond Kinsley's comprehension that private equity managers could add value to a corporation through better management.

Kinsley acknowledges that private equity managers, by taking a company private, could be increasing the value of a corporation by avoiding the regulatory burdens that accompany public trading, but then again concludes that this shows that the free market can not work, rather than the obvious conclusion that the regulatory constraints on the free market are inefficient and create opportunities for profit through avoidance.


The California Supreme Court, reversing an appeals court decision, has just ruled that individuals are essentially immune from liability for transmitting over the Internet content that was originally authored by someone else. The authors themselves may of course be held liable for defamation or other claims.

The California court ruling [http://www.courtinfo.ca.gov/opinions/documents/S122953.PDF] concerned an article that one Ilena Rosenthal had received via email and re-posted on two Web newsgroups, concerning Dr. Stephen Barrett and others. The latter operated Web sites devoted to exposing health frauds. Rosenthal directed the Humantics Foundation for Women and operated an Internet discussion group. Rosenthal posted on the web, among other things, an article received via e-mail from her codefendant Tim Bolen. This article, subtitled �Opinion by Tim Bolen,� accused Dr. Polevoy of stalking a Canadian radio producer.

In the Communications Decency Act of 1996, Congress declared: �No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.� and �No cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section.�

These provisions had been interpreted to confer broad immunity against defamation liability for those who use the Internet to publish information that originated from another source. The immunity has been applied regardless of the traditional distinction between �publishers� and �distributors.� Under the common law, �distributors� like newspaper vendors and book sellers are liable only if they had notice of a defamatory statement in their merchandise. The publisher of the newspaper or book where the statement originally appeared, however, may be held liable even without notice.

California's intermediate appellate court had decided that common law �distributor� liability survived the congressional grant of immunity, so that Internet service providers and users are exposed to liability if they republish a statement with notice of its defamatory character. This has now been quashed, in accordance with a 4th Circuit case, Zeran v. America Online, (4th Cir. 1997) 129 F.3d 327.

So if you wish to defame someone, find something awful already written about them and re-post it on the web!


The figure is somewhat lower than the $4.7 billion the Campaign for Fiscal Equity was seeking, but once you buy into the principle of empowering judicial Robin Hoods to exert control over matters once wisely left to local authority, it's really just a matter of degree (more on school-finance litigation). More: my Manhattan Institute colleague E.J. McMahon takes a more favorable view of the new ruling, and David Bernstein comments at Volokh Conspiracy.

Global warming litigation debate

The online WSJ's "Legal Banter" feature is sponsoring a debate on global warming suits between Russell Johnson of Skadden Arps and David Bookbinder of the Sierra Club (via the WSJ law blog, which has reader comments).


"The government on Friday rescinded a 14-year ban on silicone gel implants for cosmetic breast enhancement, a decision praised by some for providing women with a better product but criticized by others who still question their safety. ... After rigorous review, the [Food and Drug Administration] can offer a 'reasonable assurance' that silicone implants are 'safe and effective,' said Donna-Bea Tillman, director of the FDA Office of Device Evaluation." (Ricardo Alonso-Zaldivar and Daniel Costello, Los Angeles Times, Nov. 18). Silicone breast implants, available to consumers in most other countries, were driven from the market after a campaign of speculation and misinformation by trial lawyers and allied "consumer" groups, particularly Dr. Sidney Wolfe's Public Citizen Health Research Group. The campaign resulted in billions in legal settlements over nonexistent autoimmune effects from the devices, none of which had to be repaid even after more careful scientific studies dispelled the early alarms. Chapter 4 of my book The Rule of Lawyers, which tells the story of the silicone litigation episode in detail, isn't online. The New York Sun has an editorial drawing some of the appropriate conclusions ("Now They Tell Us", Nov. 20)(cross-posted from Overlawyered).

SOX and executive compensation

The WSJ discusses today the problems with SOX 304, which provides for "clawbacks" of executive compensation paid following an accounting misstatement. Sounds like a simple concept, but as I discuss, it's one more thing Congress got wrong in SOX.

Panic! Chemicals frying kids' brains!

Industrial pollution, which is on the decline in this country, is triggering autism and learning disability in kids, diagnoses of which are on the increase. That's the message recently spread about by seeming authorities such as The Lancet and the Harvard School of Public Health, and picked up by innumerable press accounts. To which the appropriate response is: Question Authority. Cliff Hutchinson of Science Evidence explains. At what point do we just stop treating The Lancet as a reputable scientific journal? More: Jane Genova reminds us of Lancet co-author Philip Landrigan's prominent role as an expert witness in lead paint litigation.

Legal academia at work

Referencing the article described in this post at TaxProf, reader J.W.B. comments: "Think there's a basis for treating damages for physical vs. nonphysical injuries differently? You must be a sexist and/or racist."

Update: Great 1998 Tobacco Robbery

Per Jacob Sullum (Nov. 14),

Yesterday a federal judge in Louisiana rejected a motion to dismiss [the Competitive Enterprise Institute's] lawsuit challenging the Master Settlement Agreement that established a government-backed cigarette cartel for the benefit of state treasuries, trial lawyers, and the leading tobacco companies. The judge's order is here [PDF]. CEI's complaint and various other documents related to the case are here.

(see Aug. 4, 2005).

Also, Stanford economist Jeremy Bulow has published another in his series of always-excellent papers on the great tobacco robbery. As the Milken Institute's Oct. 20 press release puts it, Bulow argues that

the public was conned: the tobacco companies passed on more than 100 percent of the cost to smokers, many states were locked into terrible financial settlements and billions in fees were set aside for trial lawyers.

"Few people trust tobacco companies, trial lawyers or politicians," he writes. "But somehow when the three groups got together and spoke with one voice they were able to convince most people - particularly nonsmokers who benefit from higher cigarette tax revenue - that the settlement had achieved a noble public health goal. In reality, the settlement preserved tobacco companies' profits, while it gave the trial lawyers an incredibly large ongoing source of income gouged from the hides of smokers, and handed state politicians bragging rights as Davids to Big Tobacco's Goliath."

("The tobacco settlement: when trial lawyers meet tobacco execs", Milken Institute Review, December)(reg). For more from Bulow, see PoL, Nov. 18, 2005, and Jan. 20 and May 18, 2006.

The 1998 multistate tobacco settlements were a central theme of my 2003 book The Rule of Lawyers and have been covered in depth on this site, including Aug. 4, 2005 and links from there, Sept. 11, 2005, and Jan. 3, 2006, as well as at Point of Law: May 17, Jul. 20 and Jul. 26, 2004, Oct. 6 and Oct. 14, 2005 and Mar. 20, Mar. 29 and Apr. 12, 2006 (cross-posted from Overlawyered).

Setback for overtime suits

Not all news from the Ninth Circuit is dismaying for business defendants: a panel of the court has just rejected an employee-classification suit that claimed adjusters for Farmers Insurance should have been paid overtime. Plaintiffs are talking about asking for en banc review from the full court. (The Recorder/Law.com).

Bottom of the Ninth

George Will on Ayers v. Belmontes:

There should be two U.S. Supreme Courts, one to reverse the Ninth U.S. Circuit Court of Appeals, the other to hear all other cases. Last term, more of the Supreme Court's caseload -- 18 of 82 cases (22 percent) -- came from the liberal Ninth Circuit, based in San Francisco, than from any other circuit, and the Ninth was reversed in 15 of the 18. The Ninth's winning percentage (.167) was worse than that of the 1962 Mets (.250). ...

How did capital punishment jurisprudence reach its current baroque condition, in which cases live longer than did the murder victims? At the hands of judges such as Stephen Reinhardt..."

("Tidying up after the Ninth Circuit", syndicated/San Francisco Chronicle, Nov. 16). Notes Kent Scheidegger (Nov. 16): "There are two vacancies on the Ninth and two stalled nominees for them."

"We will be on the offense"

That's ATLA lobbyist Linda Lipsen, talking about the next Congress:

The change in Congress means that "instead of being on the defense, we will be on the offense," said [Lipsen].... Some ATLA issues were very close to passage when the Democrats last controlled Congress, she said, noting the proposed Patients' Bill of Rights, elimination of the antitrust exemption for the insurance industry and enhanced monitoring of federal agencies' enforcement of safety regulations.

Meanwhile, the John Conyers-led House Judiciary Committee is likely to push "civil rights legislation to reverse recent U.S. Supreme Court restrictions on gender, disability and age discrimination lawsuits"; Conyers also favors legislation that would authorize the filing of stateside antitrust lawsuits against OPEC oil producers notwithstanding the governmental nature of that international cartel. Wouldn't it be fun if trial lawyers' urge to insert themselves into disputes between sovereign nations got us into an actual war one of these days? For much more, see Marcia Coyle's NLJ roundup.

Pelosi: we're open to SOx reform

Prof. Bainbridge has details.

Sid Schwab (SurgeonsBlog) on getting sued

His first: "news of the lawsuit was in the newspaper before anyone had had the decency to contact me. What kind of people act like that?" Not that everyone sympathizes: "Ho hum," says Greedy Trial Lawyer, who read the first two posts in Schwab's series. "Get out the violins." Don't miss this one, or the outpouring of reader comments (parts one, two, three)


In Chicago, presiding over the settlement of a class action against Boeing, Cook County Circuit Judge Nancy Arnold has ordered a number of plaintiffs, all holders of small numbers of Boeing shares, to disclose how it was that they came to be clients of Milberg Weiss. The Chicago Tribune (reg) has details (via Peter Lattman, whose colleague Nathan Koppel also covers a "slugfest" in Newark between Milberg Weiss and rival Bernstein Litowitz over representation of shareholders in a suit against Merck; colorful comments on that one).

Merck Wins Another Vioxx Suit

As the W$J reports, Merck has won another one.

A federal jury on Wednesday cleared Merck of liability for a 2003 nonfatal heart attack suffered by a Utah bank manager who had taken Vioxx for more than 10 months.

Charles Mason, a 64-year-old from Salt Lake County, Utah, switched to Vioxx after years of taking anti-inflammatory drugs because of back pain. He was seeking about $690,000 in lost wages and other damages.


Merck attorneys, in closing arguments Wednesday, said Vioxx had nothing to do with Mr. Mason's heart attack because he took the once-popular painkiller for less than a year and stopped taking it four days before his heart attack.

Mr. Mason's attorney, Ed Blizzard, countered that the drug's effects didn't go away between the Monday that Mason began taking a different painkiller for chest pains and the Friday of his heart attack.

New Zealand: No-fault medical error

Colleen Flood and Lorian Hardcastle of the University of Toronto take a look at New Zealand's non-lawsuit compensation system:

In New Zealand, you can't sue for personal injury including injury as a result of negligence on the part of a doctor, hospital, nurse, etc.

A person injured by medical error receives some income compensation and rehabilitative services including treatments in private hospitals and clinics, home care, prescription drugs, physiotherapy, all things not covered by New Zealand's equivalent of medicare.

The good news for both injured patients and their doctors is that patients don't have to prove negligence on the part of their doctors.

The Kiwi no-fault system has many appeals. Many more patients will receive some assistance after injury including income supports and coverage for rehabilitation services right when they need them most.

Claims are processed within an average of 15 days as opposed to five years or more in the tort system.

In addition, the claims process is user-friendly � you can easily make your claim without a lawyer � as opposed to the cost and complexity of litigation. New Zealand's scheme seems manageable in terms of total cost; it covers 4 million people for less than $30 million per year or just over $7 per person, per year. ...

There is no evidence at all from New Zealand that there are higher rates of error because patients can't sue. ...

Although New Zealand has a no-fault system, there is still anecdotal evidence that doctors are reluctant to admit mistakes. This may result from fear of professional discipline or concern with reputation.

On the other hand, the New Zealand system has come under criticism because the size of awards is not generous (and has been eroded over time) and because some see it as arbitrary that ailments caused by medical misadventure are compensable yet similar ailments caused by illness itself are not.

UK shareholder suits, cont'd

Werner Kranenburg writes to say:

An update to your Sept. 19 post ("UK plans to liberalize scope for derivative suits"):

The Companies Act 2006 (formerly the Company Law Reform Bill) received royal assent last week.

For debates on the Bill in the House of Commons, including on derivative claims and derivative proceedings, see this link.

For comments from law firms, especially whereas derivative claims are concerned, see
- Norton Rose (the most comprehensive one of these three)
- Freshfields (PDF)
- Ashurst (Word document)

I�d argue it won�t, as reported, but the proof of the pudding is in the eating whether or not the Act will lead to increased litigation or not indeed.


In our newest featured column, we invited NYC attorney and former federal tax official Alvin Lurie to tell the story of Cooper v. IBM, the lawsuit that very nearly torpedoed the enormous sector of the pension business organized along "cash balance" lines. Ted also discussed the case Aug. 8.

Congratulations to Oregon voters

By a decisive 35-65 margin they rejected Ballot Measure 42, "which would have prevented insurance companies from using credit scores in setting premiums". If credit scores are in fact of no use in predicting claims experience, we can be confident that insurers will not go on doing it, especially as it requires shelling out good money to credit bureaus. If, on the other hand, it is helpful in predicting claims experience, then the system will more fairly be placing the cost of insurance on the riskier customers (via the Public Citizen consumer law blog, which predictably takes a different view). The Portland Oregonian, which seems to have quite a knack for wrongness in its editorials, unsuccessfully urged a yes vote.

Costco sex-bias class action

Second verse, same as the first: a sub-only WSJ editorial notes that lawyer Brad Seligman is reusing the same formula that has so far proved successful for him against Wal-Mart, seizing on statistical disparities between male and female employees' pay to argue for class certification. Shades of the old Sears case...


There is a nice piece in today's WSJ [subscription required] on Omegaven, a new drug approved for use in Europe but (gee, this has never happened before, has it?) not in the USA.

It turns out the drug shows promise in helping children with "short bowel syndrome." These children can't absorb enough nutrients from food, and some need intravenous feedings to survive. For reasons not fully understood, children put on intravenous nutrition may suffer liver damage. Some require liver and small bowel transplants, risky procedures that don't always work. Others die waiting for a transplant.

In July 2006, in a paper in Pediatrics, researchers at Children's Hospital in Boston reported on a potentially promising treatment. They found that by switching from the standard intravenous formula to Omegaven, babies weren't progressing to liver failure. Trouble is, the German company that developed Omegaven, Fresenius Kabi AG, says it isn't interested in bringing the drug to the U.S. market. It has an even better drug in the pipeline, and cannot afford the cost of getting two drugs approved by the FDA.

The drug can be procured in Europe, of course, but not with Fresenius Kabi's help -- for that would be inviting punitive damages if an unapproved drug were to be promoted stateside.

Meanwhile, little children are dying.

Post-reform doctor supply in Texas III

(Earlier entry.) Professor Charles Silver responds a bit more angrily this time, complete with a smear of this website. My response:

France approves class actions

The French government has passed a bill creating class action procedure in that country; interestingly, they seem to have avoided many (though not all) of the pitfalls in American class action practice. Class actions may be used only for consumer goods linked to a standard contract; damages are capped at 2000 Euros; only government-approved consumer organizations may file suit; contingent attorneys' fees would not be allowed; and compensation would be negotiated individually after a finding of fault. (Rick Mitchell, "French ministers rubber stamp class-action bill", Business Insurance, Nov. 10; AP/LA Times, Nov. 8).

Relatedly, my former O'Melveny colleagues John Beisner and Charles Borden recently wrote a paper for the Institute for Legal Reform titled "On the Road to Litigation Abuse: The Continuing Exportation of U.S. Class Action and Antitrust Law."

Rumsfeld to be indicted in Germany?

The extraterritorial jurisdiction chickens of United States courts may be coming home to roost; a German prosecutor is threatening to indict former Secretary of Defense Donald Rumsfeld for "war crimes" under a theory of "universal jurisdiction" in German courts. We have long said that a risk of the United States asserting its jurisdiction over extra-territorial acts is that other countries would come to feel that it could assert their courts over us. Even if one dislikes Donald Rumsfeld, one has to fear the long-term consequences if other nations are allowed to judge our foreign policy in legal proceedings. (Adam Zagorin, "Charges Sought Against Rumsfeld Over Prison Abuse", Time.com, Nov. 10).


David Hyman and Charles Silver have a lengthy attack on malpractice reform rhetoric and caps in the Vanderbilt Law Review. The paper, aside from equivocation on the term "frivolous", is largely effective in criticizing some of the oversimplifications of politicians advocating for reform (a problem that Hyman and Silver themselves have been guilty of in the other direction), but ignores four critical and interrelated aspects of the more subtle case for reform.


Maggie Fox has the story for Reuters. You may recall that plaintiffs' lawyers have been dragging Merck over the coals for daring to suggest that a likely hypothesis for the statistically significant difference between Vioxx and naproxen in its VIGOR study was because of the cardioprotective effect of naproxen.

NYSE's John Thain

For a Wall Street guy, he sounds pretty outspoken:

Thain also cited competition between state and federal regulators as another reason why some companies list their shares abroad and sounded relieved that New York Attorney General Eliot Spitzer was moving into the governor's mansion.

"We really don't need all of our different regulators trying to figure out who is the toughest cop," he said.

Despite his confidence that Sarbanes-Oxley relief is on the way, Thain was less optimistic that the new Democratic-controlled Congress would put a stop to what he sees as a flood of frivolous shareholder lawsuits against U.S. companies.

"Class-action lawsuits are a tax on all companies and ultimately consumers who do business in the United States," Thain said.

Turning lead into gold

The Institute for Legal Reform has put on its website the definitive summary of lead paint litigation and the problems of public-nuisance law expansion, written by Texas attorneys Richard Faulk and John Gray.


A not-unusual tactic in the junk science area is to get a for-hire expert to take legitimate data on one kind of cancer (say, lung cancer), and claim that it is evidence that a substance caused a different kind of cancer (say, colon cancer). Because both have the name "cancer", judges mistakenly let what is actually a non sequitur slide. In Cliff Hutchison's new "Science Evidence" blog, he points out the fallacy of cancer as a single monolithic disease, noting a recent NIH report that states "Cancer is a term that encompasses at least 200 different diseases characterized by genetic changes that alter the normal, controlled growth and division of cells."

See also Jerry M. Rice & Charles H. Frith, The Nature of Organ Specificity in Chemical Carcinogenesis, in Organ and Species Specificity in Chemical Carcinogenesis 1 (Robert Langenbach, et al. eds. 1983).

The blog is highly recommended; it's a sort of Blog702 from the defense perspective. A n interesting November 2 post looks at the Delaware case of Quinn v. Woerner, which excluded the testimony of an expert who used purely speculative post hoc ergo propter hoc reasoning. The blog's proprietor wrote an excellent piece of work on mold litigation for the Chamber of Commerce in 2003.

Florida insurance markets

The Sunshine State's market for homeowners' coverage is intensely and irrationally regulated at the moment, argues Prof. Grace, and the citizens of the state will inevitably wind up paying the price.

Is the SEC about to shrink SOX?

It's possible -- at least the part of it dealing with internal controls reporting -- as I discuss here. Here's hoping we'll get a real amendment of the applicable standards rather than just another "guidance"

Stop the presses

Activist state attorney general fails to win higher office. It might even have happened twice.

Pennsylvania's Fair Share Act

Despite the Pennsylvania legislature's attempt to enact limits on the application of joint and several liability in medical negligence suits, opponents have managed to stymie the idea, getting the state high court to strike it down on technical grounds and then blocking re-enactment. But the case for the reform is as strong as ever, notes the Reading Eagle.

More name changes

According to the Jacksonville legal paper, the Florida Trial Lawyers Association, following the lead of the national organization, is changing its name to the Florida Justice Association.

Quaker Litigation - II

Walter's post this morning on Quaker litigation rang a bell for me. I grew up in Quakertown, Pennsylvania (seriously), home to a Quaker meeting house that has been holding meetings since 1710.

While law and economics provides a very plausible explanation for the Quakers' use of their own, intra-community, courts, there is a non-economic explanation as well: a literal reading of the New Testament suggests that Christians avoid secular courts in disputes with fellow Christians! As the linked article confirms, the Quakers took a number of theological positions based upon a literal reading of the Bible.

Chapter Six of Paul's First Letter to the Corinthians chides his readers for having utilized secular courts in disputes with each other and claims that it would have been better for them to allow themselves to be wronged than to have availed themselves of the litigation process:

(1)If any of you has a dispute with another, dare he take it before the ungodly for judgment instead of before the saints? (2)Do you not know that the saints will judge the world? And if you are to judge the world, are you not competent to judge trivial cases? (3)Do you not know that we will judge angels? How much more the things of this life! (4) Therefore, if you have disputes about such matters, appoint as judges even men of little account in the church! (5)I say this to shame you. Is it possible that there is nobody among you wise enough to judge a dispute between believers? (6) But instead, one brother goes to law against another�and this in front of unbelievers!

(7) The very fact that you have lawsuits among you means you have been completely defeated already. Why not rather be wronged? Why not rather be cheated?

Vioxx litigation update

You might not know that there have been twenty Vioxx cases scheduled for trial by now—nearly every press account scorecard lists only the ten that have gone to verdict or those ten minus the Humeston defense verdict that was mysteriously overturned by Judge Higbee. The real total is 16-4: five cases were dismissed with prejudice by Judge Fallon, and five more were withdrawn by plaintiffs' attorneys before they could result in losses, six resulted in defense jury verdicts, and four in plaintiff jury verdicts, though all of those have strong appellate grounds for, among other things, violations of state and federal expert testimony standards. The West Virginia Record has an excellent interview with Merck defense attorney Ted Mayer. ("Vioxx cases not all big payoffs," Nov. 8).


My new column, on Tuesday's vote, is up at the online Times (UK). "The result didn't hang on a chad this time, but lawyers still played a starring role". I make various comments about Eliot Spitzer and his brethren, the importance of winning by a vote "beyond the margin of litigation", and the return of John Dingell and Henry Waxman (Nov. 9)(cross-posted from Overlawyered).

The dressmaker's dummy

Ted, at Overlawyered, has already briefly linked to this excellent piece by Paul Horwitz on an instance of conveniently recollected testimony in Williams v. Philip Morris, the punitive-damages cigarette case. Horwitz's concluding passage, however, seemed too good not to quote in full:

...litigants, forcing the past through the gauntlet that any set of facts must traverse in order to state a successful legal claim, create a narrative that bears about the same resemblance to lived reality that a dressmaker's dummy does to a human being. One might feel much the same way about people's descriptions, in lawsuits, of their injuries. Not that one necessarily disbelieves that they have suffered injuries, but their descriptions of those injuries often sounds suspiciously as the injury fits juridical categories rather than lived experience. (Nor is this all about plaintiffs, of course; the narrative shaped on behalf of defendant employers in defense of their alleged conduct in job discrimination cases is also often stunningly other-worldly.)

If I were an alien from another planet, sent to report back on the nature of human existence, I think the last place I would look would be the law reports. The novels of Richard Russo, maybe. But law reports, never.


Admit it: you always wanted to learn about this.

Wall Street's competitiveness

If New York City's representatives in Congress are serious about bolstering the city's competitiveness with places like London as a financial center, it'll be a refreshing contrast with their record up to now, observes Steve Malanga at City Journal.

Election results

At the election roundtable, I've got a periodically updated post giving results on some races of legal interest. P.S. And keep scrolling there for comments from Ted on results in California, Michigan, Connecticut...

Watters v. Wachovia

Economists and scholars have filed a Supreme Court amicus brief calling for federal preemption of state "anti-predatory lending laws" for federally chartered banks in the important Watters v. Wachovia case. At the Volokh Conspiracy, Todd Zywicki comments in detail.

Fortune and Sebok on Milberg Weiss

Peter Elkind, known for his writing on Enron, turns his journalism on "The fall of America's meanest law firm," Milberg Weiss, in the Nov. 3 issue of Fortune magazine.

Anthony Sebok's Findlaw column discusses the Milberg Weiss indictment and the Fortune article, though perhaps cuts the firm too much slack; for example, it's certainly not the case that "critics had no real concrete gripe to voice against the firm - until the indictment." The Oxford Health litigation that Sebok singles out reflects parasitic free-riding off of SEC efforts unnecessary to vindicate real shareholder interests; and when such free-riding wasn't occurring, it was because Milberg Weiss was often suing over legitimate drops in stock price and using the threat of litigation to extort settlements, again to the detriment of shareholders. For this, the firm received over a billion dollars of shareholder money in the course of its securities litigating.

Post-reform doctor supply in Texas II

General counsels as DoJ satraps?

Sue Reisinger at Corporate Counsel/Law.com: "The price for settling criminal allegations by the government keeps going up. In August, Prudential Financial signed a deal with the DOJ that allows it to avoid prosecution for wrongdoing at a brokerage subsidiary. The settlement requires Prudential's GC, Susan Blount, to personally design, install and oversee a compliance program, and report on it to federal prosecutors for the next five years. Should the program fail, Blount could be held liable by the government, as well as by shareholders."


Next Monday evening in midtown Manhattan, the Federalist Society NYC Lawyers Chapter will be holding a panel discussion of whether the Thompson memo interferes with the right to counsel. (See, among many other links, this one.) Panelists will include Matthew Biben, Andrew Hruska, and Gary Naftalis, and the moderator will be Columbia lawprof John Coffee. Details here.

Blawg Review #82

It's at VoteLaw, and follows #81 which was hosted by Denise Howell at Bag & Baggage. Posts from this site are featured in both roundups.

Loser pays, Babylonian-style

Not that I'm advocating any of this, but still interesting. From a web translation of the Code of Hammurabi:

Post-reform doctor supply in Texas

Professor Charles Silver argues, using a single time series, that the successful constitutional referendum for medical malpractice liability reforms in Texas did not increase the supply of doctors, even though license applications are up substantially. I note a non sequitur as well as a misleading conclusion:

U.S. Navy found 55 percent responsible

...but under principles of sovereign immunity will pay 0 percent of the $10.5 million award a San Francisco jury gave plaintiff George Barnes, who worked at the Long Beach Naval Shipyard. The Thorpe Insulation Co., "the lone named defendant at trial", probably won't have the money to pay its assigned 15 percent of the responsibility. Several other defendants settled before trial. Naval shipyard workers are at the center of the epidemic as regards serious asbestos-related disease; if you Google "Long Beach Naval Shipyard", a sponsored link will lead you to asbestos lawyers who will proceed to sue everyone but the Navy on your behalf.


Common Good and the Harvard School of Public Health are having a half-day conference on the subject this coming Wednesday, Nov. 8 in Washington, D.C. Details here, including a link to a live webcast.

Extending our Featured Discussion

Our roundtable discussion of the upcoming election and its implications for law is currently in its fourth day. Among the topics that have come up so far: the implications of likely Democratic gains for judicial nominations and liability reform, this year's crop of ballot measures, the politically charmed life of state attorneys general, and: is Iowa going to send Congress its next John Edwards?

With much more in the pipeline -- several liability reform activists around the country have volunteered reports from the front line -- we're going to extend the roundtable past the usual five-day limit and let it run on into next week. It looks like there won't be any shortage of material, so stay tuned.


Big news in asbestos litigation, and maybe for mass torts generally:

The 3rd U.S. Circuit Court of Appeals has revived a proposed class action suit against a group of lawyers from southern states brought by more than 2,600 former clients from northern states who say they were cheated out of their fair share of $400 million in asbestos personal injury settlements in the Mississippi state courts when the lawyers gave larger payouts to southern plaintiffs.

Reversing a lower court's decision that dismissed the suit, Senior U.S. Circuit Judge Jane R. Roth issued a stern lecture to lawyers about the duty of loyalty.

"We are embarrassed to have to explain a matter so elementary to the legal profession that it speaks for itself: All attorneys in a co-counsel relationship individually owe each and every client the duty of loyalty. For it to be otherwise is inconceivable," Roth wrote in Huber v. Taylor.

The case provides a rare glimpse into the high-stakes world of asbestos litigation in which plaintiffs are termed "inventory" and settlements often involve hundreds or even thousands of cases. ...

Geographic origin was an appropriate factor in determining settlement value, the defense lawyers said, because jury verdicts in northern states are traditionally lower than in southern states and because, in southern courts, jury verdicts for northerners are typically lower than for southerners in their home state.

But Roth found there was evidence that the settlements were, in fact, aggregate, and that the plaintiffs may have a valid claim under Texas law for breach of fiduciary duty that could entitle them to a disgorgement of the southern lawyers' fees.

At the heart of the claim, Roth found, is the duty of loyalty every lawyer has to every client.

That duty exists, Roth said, "even when clients are viewed as mere 'inventory.'"

"This is the cost of doing business as an attorney at law, and we will not countenance shortcuts," Roth wrote.

P.S. Daniel Fisher at Forbes covers the story here.

L.A. Times on punitive damages

In an editorial today:

Punting the case would be a terrible idea. As this lawsuit demonstrates, many lower courts are uncomfortable with the Supreme Court's efforts to curb outlandish punitive-damage awards. An inconclusive ruling would embolden those courts in their resistance. It also would encourage speculation that recent changes in the high court's membership have undermined its punitive-damage precedents. ...

Huge awards in individual lawsuits � as opposed to sensible legislation � are not the best way to curb smoking, obesity, gun violence and other threats to public health. The Supreme Court should see through the smoke screen of this "hard" case and say that.

Auditors seek protection

"The cost of our audits was never built for insuring the capital markets," said William G. Parrett, chief executive of Deloitte Touche Tohmatsu, the international arm of Deloitte & Touche. "I don't think we're saying we shouldn't have any liability, but it has to be in proportion to our participation in any problem."

The firms also say they can't get sufficient insurance because their liability is almost unlimited, encompassing in a worst-case scenario the total stock-market value of the companies they audit. So they are forced to settle lawsuits rather than risk a trial.

A study for the European Commission, released in September, said the total costs of judgments, settlements, legal fees and related expenses for the U.S. audit practices of the Big Four firms had risen to $1.3 billion in 2004, or 14.2% of revenue, up from 7.7% in 1999. In addition, according to a study by insurer Aon, there were 20 claims outstanding against U.S. auditors as of September 2005 where damages sought or estimated losses topped $1 billion. Accounting firms say they couldn't survive an award of that size.

Advocates of liability caps frame the issue around the broader debate over U.S. market competitiveness.

"I think the whole issue of liability is one of the major reasons why foreign companies aren't coming here" to list their stocks on U.S. exchanges, said Hal S. Scott, a Harvard Law School professor and a founding member of the Committee on Capital Markets Regulation, the group formed with [Treasury Secretary Henry] Paulson's blessing to study market competitiveness.

("Booming Audit Firms Seek Shield From Suits", Wall Street Journal, Nov. 1). See also Larry Ribstein, who comments on the idea of permitting auditors to resolve the matter contractually.


"In an apparent first among state AGs, New York's Eliot Spitzer is pressing companies to stop paying the legal fees of employees facing criminal charges. Most of Spitzer's targets are financial institutions swept up in his probe of mutual funds. Corporate Counsel's review of 17 agreements that Spitzer's office struck with companies accused of market timing shows that nine included 'no indemnification' clauses, which ban payment of indicted employees' legal fees unless required under company bylaws." (David Hechler, Corporate Counsel/Law.com, Nov. 2).


The belle province had won a reputation as the class action capital of Canada in part because of an unusual local doctrine that allowed litigants to name an entire class of companies in an industry as defendants, whether or not they had in fact had dealings with all the companies. Now Quebec's Court of Appeal has retreated from that rule, effectively banning the practice, in a lawsuit in which Andr� Bouchard sued Agropur Cooperative and 11 other dairies, demanding C$89 million in damages, over alleged variability in the fat content of their milk, though he had purchased milk from only one of the dairies. The Toronto Globe & Mail has details ($) (via CL&P).


Yeah, like that's supposed to come as a huge surprise or something. This time it's in Madison County, Ill.


I discuss their op-ed in today's WSJ, which sends a somewhat different message than did their other hometown paper over the weekend.

Grundfast on backdating

Roger Parloff's must-read blog reports an interesting conversation with Stanford law professor Joseph Grundfast on options backdating issues.

Ben Stein: no shame, or no memory?

On Oct. 19 we quoted Bruce Carton as predicting a "barrage of deafeningly loud disapproval from the plaintiffs' bar and consumer groups" over the Paulson Committee's proposals for curtailing securities suits. Right on schedule, we heard in Sunday's Times from the most comic expert witness in Milberg Weiss's stable, wearing his "Times columnist" hat. If you're still clutching your sides in helpless laughter over this from Seth Mnookin, Larry Ribstein can restore some perspective (here, too).

The pity is that in the hermetic world of the Times Sunday Business section, they probably imagine that running Ben Stein somehow gives them a claim to balance, since he channels the views of the plaintiff's securities class-action bar from a "conservative" point of view, while other writers there do so from a more conventional liberal point of view. (See also Ted, below.)

Punitives' history

John Steele Gordon comments at American Heritage:

Tort lawyers argue that punitive damages give them an incentive to police the marketplace and go after wrongdoers. In other words, it enables them to act like the privateers of old, when governments at war granted citizens licenses (called letters of marque) to attack enemy shipping and keep the ships and goods successfully attacked. The trouble with privateers, of course, was that they had a very bad habit of turning into pirates. The same can be said of all too many tort lawyers, thanks to punitive damages.

 

 


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

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

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.