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January 2007 Archives

Simonetta v. Viad Corporation

Asbestos litigation has long since gone past asbestos manufacturers as defendants to holding liable secondary and tertiary innocent bystanders as deep pockets. A recent decision, Simonetta v. Viad Corporation (Wash. App. Jan. 29, 2007), over alleged asbestos exposure in the 1950s, extends this trend.

Viad Corporation did not manufacture asbestos. It did not even manufacture a product that contained asbestos. Its alleged predecessor, Griscom Russell, manufactured an evaporator, and the users of the evaporator, in this case a Navy ship where the plaintiff worked from 1958 to 1959, installed insulation manufactured by someone else to wrap the product, and the insulation contained asbestos. This is enough, held the court, to create a duty of Viad to sailors on the U.S. Navy ship that used the evaporator, because they could have anticipated that the Navy would use asbestos for thermal insulation. (The court does not explore how on earth Griscom Russell is supposed to warn machinist mates about evaporator maintenance or why that duty does not rest with the Navy.)

Around the web, January 31

Dumping and suing, cont'd

At Overlawyered yesterday, I took note of a choice new example of the phenomenon of plaintiffs' suing a company after first selling short its stock. This time a hedge fund is pursuing a False Claims Act lawsuit against Allied Capital after having previously taken a short position in Allied's stock. See earlier Point of Law coverage here and here, as well as the Featured Discussion we ran on the subject. Larry Ribstein, one of the participants in that discussion, also notes the case here.

The Charleston Daily Mail reports on the aftermath of West Virginia med-mal legislation:

Charleston Area Medical Center is attributing its rise in new doctors to statewide medical malpractice reforms passed in 2003.

Dr. Glenn Crotty Jr., chief operating officer, said the hospital has recruited around 30 doctors annually over the past few years, for a total of almost 100 new hires.

Before the Legislature passed a comprehensive bill limiting the amount of payouts in medical malpractice lawsuits, the hospital would have been lucky to recruit one new doctor each year, Crotty said.

"We were at almost zero before tort reform," Crotty said about the hospital's recruiting efforts. "And we had several doctors leaving."

Plus: follow-up editorial "Tort reform saved health care" (via Kevin Pho).

Vioxx litigation bill: $500M for 2006

Just about every press account of Merck's 2006 earnings report has listed the litigation expense reserve, but not the actual litigation expenditures. This figure was announced on the conference call (via WSJ):

During 2006, the Company spent $500 million in the aggregate, including $175 million in the fourth quarter, in legal defense costs worldwide related to Vioxx litigation.

Via Rossmiller, Randy Maniloff has a lengthy article on Judge Senter's rejection of the Katrina settlement (Jan. 27; see also Jan. 23 and earlier Katrina coverage). Highlights plus my comments:

  • The settlement leaves open 200 non-Scruggs Mississippi claims pending in court, as well as those of any opt-outs, meaning State Farm's liability wasn't even being capped by the settlement. Maniloff doesn't mention it, but previous mass tort settlements have started a feeding frenzy where lawyers will have an incentive to encourage further opt outs. (Maniloff does not discuss where the statute of limitations fits in to opt-outs: however, if a class is certified, it might imply American Pipe tolling, which could mean that State Farm ends up buying more claims for its trouble than it's settling.)
  • The settlement has put pressure on Louisiana Attorney General to match the price achieved in Mississippi. I note that Jim Donelon hasn't brought the same sort of extortionate illegitimate criminal investigation that Jim Hood did, but State Farm is creating the perverse incentive to do so.
  • Senter denied class certification in Woullard, just as he did in Guice. While settlement class certifications are easier, this is still a hurdle for the parties that probably was not fully contemplated in the drafting of the settlement papers.
  • Maniloff correctly singles out Judge Senter's statement that "I will never approve a procedure that would allow the resolution of claims under standards that are, or may be, different from or contrary to this Court�s prior rulings" as especially problematic. It simply is not the case that parties are required to disregard the possibility of appellate reversal when reaching settlement. One hopes that Senter was simply sloppily referring to the disparate treatment of the Scruggs clients from the unrepresented class members (a not implausible interpretation, given the fact that Senter granted interlocutory appeal in Tuepker), but if Senter is demanding that his decisions be treated as immutable law for any settlement framework, it is difficult to see how the parties can settle until the Fifth Circuit resolves at least some appeals of Senter rulings.
  • Speaking of likely reversals, Maniloff is justifiably critical of the Broussard directed verdict (Jan. 12).

WSJ on Sen. Schumer

If you follow the emerging debate over America's financial competitiveness (see Ted's post of Friday, for example) you will notice that Sen. Chuck Schumer (D-N.Y.) has been making some surprisingly helpful and constructive contributions, joining forces with Mayor Bloomberg to call attention to the need to improve Wall Street's litigation and regulatory climate. The editorialists at the Wall Street Journal yesterday (sub-only) used this development as the occasion to give Schumer some fairly hard and unsympathetic ribbing, writing, "even we didn't expect to see a leading Senate Democrat declare that tort law abuse is making America less economically competitive. Has Chuck Schumer told his colleagues about his epiphany?" with quite a bit more along the same lines.

I wonder whether the Journal is really on the right track here. I think a generally sound maxim would be, "Avoid taking potshots at public figures who are moving in the right direction." Sen. Schumer's rethinking of these issues is assuredly bringing him grief from some old friends. Does the WSJ really want to begrudge him any credit at all for the move? And if so, doesn't that convey the impression that for Schumer to explore common ground with the Journal's own co-thinkers is bound to be a losing game politically? Wouldn't it make more sense to criticize a figure like Hillary Clinton, who pointedly refuses to make any gestures toward the center on this issue of great moment for her home-state constituents?

(Earlier: Dec. 20 and Jan. 8.)

New York Times reporter Alex Berenson was "invited" to testify at the Zyprexa protective order hearing by Judge Weinstein to address testimony "implicating him in a conspiracy" to violate the protective order. As Bill Childs noted on January 25, "I don't remember ever being aware of a reporter connecting sources with lawyers in an effort to get documents that are otherwise under a protective order." As of 10:24 PM, there is no story about this order on the New York Times website or, indeed, anywhere other than Bill Childs's weblog.

Nicole Gelinas of the Manhattan Institute covers the new McKinsey report on New York financial competitiveness in our newest Featured Column, reprinted from MI's City Journal.

AP reports that a West Virginia jury has awarded $405 million to plaintiffs in a class-action lawsuit that accused a subsidiary of Oklahoma City-based Chesapeake Energy of failing to make proper payments on natural gas royalties. Over two-thirds of the amount awarded are punitive damages.

The case focused on post-production expenses deducted from payments due royalty owners. The lawsuit said deductions were excessive.

Chesapeake bought Columbia Natural Resources of Charleston, West Virginia, in November 2005 for $2.2 billion. It might be a bad move for an out-of-state firm to buy a West Virginia firm, as I noted in this short piece about punitives[on p. 118 of the publication].

McNulty memo under scrutiny

The so-called McNulty Memo on white-collar prosecution, issued last month by the U.S. Department of Justice, was initially hailed by many as a welcome retreat from the overreaching principles embodied in the earlier, much-criticized Thompson Memo. However, per a report by Pamela MacLean in the NLJ, the new policy is not actually as big a concession as all that, and leaves many of the critics of the Thompson Memo far from satisfied. "We're thrilled the Department of Justice has taken this step forward after two years of begging. But this proposal is no solution. It not only doesn't go far enough, it still misses the point. They still think DOJ gets to decide whether corporate counsel they are prosecuting have a right to counsel or not," says Susan Hackett of the Association of Corporate Counsel.

Here's the ever-quotable Judge Easterbrook, in an August case entitled Yindee v. CCH Inc., 458 F.3d 599, 18 A.D. Cases 417 (7th Cir. 08/11/2006)(via Michael Fox):

It is not enough to demonstrate that the employer was mistaken, inconsiderate, short-fused, or otherwise benighted; none of those possibilities violates federal law. See Forrester v. Rauland-Borg Corp., No. 05-4650 (7th Cir. June 29, 2006) (collecting authority); Pollard v. Rea Magnet Wire Corp., 824 F.2d 557 (7th Cir. 1987). Poor personnel management receives its comeuppance in the market rather than the courts.

Will Baude finds a passage in Supreme Conflict that, if true, shows a disturbing lack of wisdom in the Bush nominating team.

Supreme Conflict has been getting close to universal praise; it arrived on my doorstep yesterday, and is in my queue.

A possibly more accurate headline on this National Law Journal article from last month would have been, "Class-Action Lawyers Are Reaching Out to Sue Employers on Behalf of Telecommuters". And for many of the putative beneficiaries,the consequences are apt to be unpleasant: some employers will curtail their use of telecommuters, while others will insist on legally defensive paperwork and work rules which add dreariness to the job, such as those suggested by a lawyer with one leading employment-defense firm:

Companies can minimize the risk of legal disputes with work-at-home employees by inking formal agreements about the work and hours, said Mark Batten, a Boston lawyer for New York-based Proskauer Rose.

Batten, a defense attorney, also recommends timesheets, a written policy banning overtime without prior approval and rules requiring employees to monitor and record work-related activities such [as] logging on or off a computer. ...

"Just allowing employees to work at home without an understanding about how much time is actually needed for work will get the employer in trouble," Batten said.

Wouldn't you know it, Dickie Scruggs and Attorney General Jim Hood were looking for the headline and (in Scruggs's case) the payday, and are told that the settlement doesn't justify dissolving the claims and rights of unnamed class members who have not sued. Senter also criticizes the $10 million minimum payday for Scruggs for the class settlement. (WSJ; David Rossmiller has more details and a link to the opinion). State Farm will have no interest in settling the claims of Scruggs's clients if those who haven't sued yet can also sue. The settlement, on cursory glance, appears to favor named plaintiffs over unnamed plaintiffs: it's doubtful that State Farm would agree to that favorable treatment classwide, and it's also doubtful that Scruggs can justify the disparity to a conscientous court. (Moreover, it's far from clear that there is a certifiable class, given the individualized nature of the claims.) Which means that State Farm might get justice after all if it can withstand the publicity long enough for the Fifth Circuit to correct Senter's earlier mistakes—or it might mean that Hood is able to extort State Farm into giving up billions instead of hundreds of millions.

An official with the Association of British Insurers has his say, in the Financial Times.

A call to end American Pipe's tolling rule

Beck & Herrmann use the recent (and unsurprising) denial of class certification in the Paxil products liability litigation of Blain v. Smithkline Beecham Corp., 2007 WL 178564 (E.D. Pa. Jan. 25, 2007) to note that the American Pipe tolling rule has created some perverse incentives with none of the promised benefits. They also note the procedural-tail-wagging-the-substantive-dog choice-of-law arguments common to plaintiffs in class action litigation.

The vote-buying "scandal"

With the backdating scandal not generating much heat today, the WSJ has a new scandal -- vote-buying by evil hedge funds. New regulation can't be far behind. I discuss the background here, and why regulation may do more harm than good.

The McKinsey report commissioned by the two, "Sustaining New York's and the US' Global Financial Services Leadership," follows up on their earlier Wall Street Journal op-ed, argues that the recent decline in securities litigation is a blip of recent economic good times, that the litigation and regulation environment could cost New York tens of thousands of jobs, and, per Lyle Roberts, calls for the following reforms, inter alia:

  • Limit the liability of foreign companies with U.S. listings to damages that are proportional to their degree of exposure to the U.S. markets;
  • A cap on auditors' liability;
  • Easing Sarbanes-Oxley regulation;
  • Arbitration as an alternative dispute resolution system for securities grievances;
  • Limits on punitive damages (called "critically important"); and
  • Interlocutory appeals in federal securities actions.

That last procedural reform (seen successfully also in the context of the Class Action Fairness Act) cannot be underestimated: billions of dollars of wealth has been extorted by trial lawyers because of outlier district court decisions that cannot be appealed for years and without taking the risk of a bankrupting trial court verdict. Possibly problematic: the creation of a "National Commission on Financial Market Competitiveness" bureaucracy. The Wall Street Journal, NY Sun, NY Post, and Kevin Lacroix note the irony of Governor Spitzer showing up for the unveiling of the report, given that his AG regime is the source of many of the problems identified in the report. (Larry Ribstein, however, notes that Spitzer pulled any specific criticism of his role or of attorneys general from the report.) Press coverage: WSJ; Financial Times; NY Sun; NY Times; and Newsday. Blogosphere: Ribstein; Oesterle; Roberts; Lacroix; Mitchell at Cato; ShopFloor; The Economist; and Dealbreaker.

Health Wonk Review #24

Hosted this week at Health Affairs, the weekly health-policy blog carnival gallantly links to Ted's post taking issue with a Studdert/Mello et al article (on "Sorry Works") in that very journal. Another highlight: two contributors at InsureBlog explain some of the drawbacks of "community rating" of health insurance, the equalization scheme (it prohibits underwriters from considering age and health status) currently in effect under the laws of New York and only three other states (ME, VT, NH).

New York's workers'-comp mess

"California is much better, Florida is doing great, heck, even Texas is really trying to fix its workers comp system. Among the larger states, that leaves NY as the leader in the 'state that needs workers comp reform the most' contest." (Joe Paduda, Managed Care Matters, Jan. 19).

Meanwhile, per the New York Times, a new study by the liberal Fiscal Policy Institute estimates that unlawful premium evasion by employers who understate the size of their workforce or simply ignore the mandatory payments altogether places a substantial burden on employers that follow the rules, amounting to (PDF) "15 percent to 20 percent of all the workers' comp premiums that are supposed to be paid each year statewide". More: Jon Coppelman at Worker's Comp Insider.

Around the web, January 25

It looks as if Emporia, Kansas is going to find itself without orthopedic surgeons, prompting some reflections from a local physician (via KevinMD).

Per the National Law Journal, employment attorneys nationwide say the FMLA is resulting in mounting litigation and uncertainty. "A major point of contention is confusion over whether stress-related illnesses rise to the level of a 'serious health condition' covered by the act," Some employers notice that the stress and migraines which give rise to demands for paid leave ("intermittent unscheduled leave") seem to happen unusually often on Fridays and Mondays.

Kentucky fen-phen scandal

One of the lawyers accused of plundering the $200 million settlement says he thinks he and colleagues burned or otherwise destroyed any paperwork documenting the rationale for the divvying up of the proceeds. Moving forward in court: a demand that famed tortster Stanley Chesley and others disgorge tens of millions in ill-gotten fees. I've got the story at Overlawyered this morning.

Ed Murnane at Illinois Justice Blog has a candidate-by-candidate rundown. Sen. Barack Obama turns out to have voted for a "cheeseburger bill" (which would have curtailed lawsuits blaming food purveyors for obesity) as well as for the Class Action Fairness Act, but Murnane says it would be perilous to jump to the conclusion that the Illinois senator is a supporter of liability reform in any more general sense.

More: reader Ray Lehmann writes in to say, "With all due respect to Mr. Murnane, the 'cheeseburger bill' vote never happened. A related bill was passed by the House in October 2005, but the Senate's version of the Commonsense Consumption Act never had a floor vote, never had a cloture vote, and in fact, never even received a committee markup."

Yet more: Murnane explains that the reference was to Obama's vote during his service in the state legislature, not the U.S. Senate: "Illinois House Bill 3981 (in the 93rd General Assembly) was signed into law by Gov. Blagojevich on July 30, 2004. The bill was voted out of Senate Judiciary Committee 7-0 (Obama was member) on April 28, 2004. It was passed by the full Senate on May 5, 2004 by a 58-0 vote. It is Public Act 93-0848, the Commonsense Consumption Act."

"How my ex-hubby paid to be judge"

New York Daily News has an explosive break in the widening Brooklyn bucks-for-judgeships scandal (earlier coverage).

Akaka bill is back

Fortunately, President Bush has signaled that he'll veto the Hawaiian-tribalization legislation if it passes. Peter Kirsanow has more (via Gail Heriot). Earlier coverage here, here, etc.

See today's New York Times. Mississippi will drop the threat of criminal charges; $80 million to 640 plaintiffs (including 300 whose houses were completely destroyed by storm surge), and the option for 35,000 policyholders to reopen other claims at a cost of $50 to $600 million. (State Farm is a non-profit mutual insurer, so this is money coming out of the pockets of other policyholders.) The long-term costs to all of us are going to be much much higher than this nine-digit settlement, since future attorneys general learn that there are short-term political rewards to be had by demagoguing against settled expectations and insurance companies realize they can't trust courts to enforce those contracts. There are likely other terms to the settlement that are not yet public.

Okla. certificate-of-merit law, cont'd

Regarding my post below, Eric Turkewitz (New York Personal Injury Law Blog) writes in to take issue with how I characterized his reaction to the ruling:

Jubilating is too strong a word. The OK decision was based on the peculiarities of the OK constitution and is not applicable in other states.

NY, where I practice, has a certificate of merit law for med mal cases (signed by attorney, not doctor), which is the majority of my practice. I have no problem with it since consultation with an expert should take place anyway before suit, if possible.

Disclosing the name of the doctor, however, is another matter altogether.

WLF briefing: Legal Reform 2007

I'm stepping in for Steven Hantler at the Washington Legal Foundation's Media Nosh and joining ATRA's Victor Schwartz and Tiger Joyce dicussing legal reform Thursday morning, 9 am at the Washington Legal Foundation headquarters on Massachusetts Avenue. There will be a webcast.

Spitzer as deregulator

Well, not quite. The financial services industry is fleeing NYC and the US to avoid regulation. Meanwhile, the most aggressive cop of all has a new job. So Governor Spitzer is ironically supporting a report that calls for less regulation, as I discuss. But he made sure the report didn't address state attorneys general.

Adam Liptak column

Good news for New York Times subscribers: the paper has given its legal correspondent a new column called "Sidebar" (first installment here, on Craigslist-like charges of housing discrimination against Roommates.com). Bad news for nonsubscribers who see the paper in online form: they're hiding it behind the TimesDelete screen.

"They Work for Us," indeed

Per an Associated Press report, AAJ/ATLA cracks the whip:

Looking to instill discipline among Democrats, a coalition of labor, trial lawyers and liberal groups is launching lobbying and campaign organizations this week to keep Democratic lawmakers from straying on populist issues.

Democrats who don't hew to this agenda could find themselves facing well-funded primary opponents - an aggressive strategy to counter moderate and conservative blocs within the party.

The groups have organized as two entities - a lobbying wing called They Work For Us and a campaign arm called Working for Us PAC.....

In addition to [Steve] Rosenthal, the two groups are led by some of the most influential organizers in labor and liberal politics, including Anna Burger, the secretary-treasurer of the Service Employees International Union; Eli Pariser, the executive director of MoveOn.org Political Action, and Linda Lipsen, a senior vice president at the American Association for Justice, formerly the American Trial Lawyers Association.

Among trial lawyers' goals in the new Congress, per Sean Higgins of Investors' Business Daily: tougher scrutiny of judicial nominees. "Congressional oversight is going to come back with a vengeance," says Lipsen.

McCool v. Merck dismissed

On February 26, 2007, Angela McCool's trial against Merck was scheduled to start in plaintiff-friendly Philadelphia state court. (McCool had used fraudulent joinder to keep the case in state court by also suing some Merck employees who lived in Pennsylvania.) McCool had blamed the fatal heart attack of her husband (who had hypertension, high cholesterol and obesity) on Vioxx, but apparently thought better of bringing the case, which was voluntarily dismissed with prejudice.

Task for a creative investigative reporter: I really wonder whether the Plaintiffs' Steering Committee (or individual trial lawyers with large inventories of Vioxx cases) are buying off plaintiffs with weak cases so that Merck doesn't have a pile of victories in the early going, something that has effectively shut down other pharmaceutical mass tort litigation that settled for nuisance sums. What possible reason could a plaintiff have to agree to a lawyer's request to settle for zero when there's a better-than-lottery-ticket chance at fame and fortune before a jury? There seem to be a surprising number of voluntary dismissals with prejudice, and there has yet to be a Vioxx plaintiffs' victory of any significance that isn't severely tainted with reversible error on fundamental matters such as expert evidence.

Justice Thomas

In a WSJ commentary, Jan Crawford Greenberg, working from the papers of Justice Blackmun, has a fascinating piece on how influential and persuasive Justice Thomas has been on the Court: rather than being Scalia's lackey, "If either justice changed his mind to side with the other that year, it was Justice Scalia joining Justice Thomas, not the other way around." (Via Adler @ Volokh.) Another scoop or two like that, and her Supreme Conflict book may well turn out to be the most indispensable insiders' book on the Court since The Brethren.

Cleveland asbestos sanctions, cont'd

The WSJ has an editorial today (sub-only). Earlier: Jan. 19, etc.

As we've had occasion to note a number of times in the past (e.g. here, here, and here) one of the weaker (though still useful) procedural reforms in medical malpractice litigation is a requirement that a plaintiff's lawyer obtain a "certificate of merit" from an appropriate medical expert before proceeding with a suit. So modest is this particular reform, and so broadly acceptable in principle to all but diehards of the plaintiff's bar, that even the presidential ticket of John Kerry and John Edwards was willing to endorse it.

Which still doesn't mean organized trial lawyerdom is going to sit by idly while it gets adopted by state after state. In Oklahoma, they've now persuaded the state supreme court, with only one dissenting vote, to strike down the certificate-of-merit law enacted by that state's legislature as inconsistent with the state constitution. George Wallace discussed the ruling while guestblogging over the holiday at Overlawyered, and Eric Turkewitz at New York Personal Injury Law Blog is among many trial lawyers jubilating at the news.

More: Eric Turkewitz writes to say:

Jubilating is too strong a word. The OK decision was based on the peculiarities of the OK constitution and is not applicable in other states.

NY, where I practice, has a certificate of merit law for med mal cases (signed by attorney, not doctor), which is the majority of my practice. I have no problem with it since consultation with an expert should take place anyway before suit, if possible.

Disclosing the name of the doctor, however, is another matter altogether.

Update: disbarred asbestos lawyer

From the South Florida Daily Business Review, more grist for the critics of client compensation programs:

About 4,000 asbestos clients of disbarred attorney Louis Robles will have to find another way to recoup the $13.5 million their former lawyer stole from them after a federal judge threw out their claim against the Florida Bar. ... Robles, a mass torts attorney, was accused of stealing $800,000 from client trust funds and overcharging thousands of asbestos clients. He closed his two law centers and dumped boxes of files in a Miami warehouse. ... None of Robles' clients has received money from the Bar fund.

Michael covered an earlier stage of the story here.

Shareholder access

Business Roundtable's John J. Castellani explores the subject in Saturday's Wall Street Journal.

Vioxx trial update

The California court declared a mistrial after the jury froze at 7-5 in favor of Merck. Retrial will be in April. (Edvard Pettersson, "Merck Gets a Mistrial in Los Angeles Vioxx Cases", Bloomberg, Jan. 18). Merck writes:

As of September 30, 2006, the claims related to more than 3,000 alleged VIOXX users have been dismissed before being scheduled for trial. Of those, more than 1,100 were dismissed with prejudice either by plaintiffs themselves or by judges, meaning they cannot be filed again. Another 2,000 were dismissed without prejudice.

Of the 28 plaintiffs whose claims have been scheduled for trial, including the two plaintiffs in this trial, the claims of six were dismissed, the claims of seven were withdrawn from the trial calendar by plaintiffs, juries have decided in Merck's favor nine times and in plaintiffs� favor four times, and there have been three mistrials (one of which has since been retried to a verdict). A state judge set aside one of the nine Merck verdicts.

As for the four plaintiffs� verdicts, Merck already has filed an appeal or sought judicial review in each of those cases, and in one of those four, a federal judge overturned the damage award shortly after trial.

A ten-person jury, including four casino workers, has been selected for the consolidated New Jersey trial of plaintiffs Humeston and Hermans (Jan. 17).

MMR vaccine and autism, cont'd

At Spiked-Online, Michael Fitzpatrick details the latest developments in the collapsed U.K. litigation campaign aimed at proving a causal link between measles/mumps/rubella vaccine and autism in children. Dr. Andrew Wakefield, a leading proponent of such a link, has now dropped a libel suit arising from criticism of his role. Earlier coverage here, here and here; see also here and here.

Update: See also Paul Offit's piece on vaccine exemptions in Saturday's Wall Street Journal.

Apple charges consumers $1.99 for something it probably would rather have given away free. Apple blames the accountants. Does this make sense? I explain.

State Farm settles another Katrina case

David Rossmiller has a wealth of detail, which more than speaks for itself.

Charitable medical care in decline

According to a survey last year, the "proportion of U.S. physicians providing charity care has steadily declined over the past decade,", from 76 to 68 percent of doctors. Chris Rangel (RangelMD) is prompted to observe:

Part of the reason is that there are few if any protections against liability in treating a population that tends to be less healthy, have more bad habits (obesity, smoking, alcohol, drug abuse), and be less compliant with treatment and follow up. Ergo, they are at higher risk of bad outcomes and bad outcomes tend to lead to lawsuits regardless of any actual malpractice. Remember the old medical school adage; "No good deed goes unpunished."

Good posts at Drug and Device Law Blog: Sean Wajert on the ALI's dangerous proposed medical monitoring rule in its draft Restatement (see also Jan. 17); and Beck and Herrmann on bellwether trials as the least bad alternative for resolving mass torts.

Another tale of expropriation

It's harder to criticize Mississippi when the Democratic Congress seeks to do it, too:

The Democrats also insist that the big five oil companies have received sweetheart deals from the government that have ripped off taxpayers. So let's take a closer look. The most controversial issue involves $6 billion in royalty payments that oil companies are said to owe the government for oil pumped from federal waters. The facts suggest otherwise.

These were leases for drilling rights in the Gulf of Mexico signed between oil companies and the Clinton Administration's Interior Department in 1998-99. At that time the world oil price had fallen to as low as $10 a barrel and the contracts were signed without a requirement of royalty payments if the price of oil rose above $35 a barrel.

Interior's Inspector General investigated and found that this standard royalty clause was omitted not because of any conspiracy by big oil, but rather because of bureaucratic bungling in the Clinton Administration. The same report found that a year after these contracts were signed Chevron and other oil companies alerted Interior to the absence of royalty fees, and that Interior replied that the contracts should go forward nonetheless.

The companies have since invested billions of dollars in the Gulf on the basis of those lease agreements, and only when the price of oil surged to $70 a barrel did anyone start expressing outrage that Big Oil was "cheating" taxpayers out of royalties. Some oil companies have voluntarily offered to renegotiate these contracts. The Democrats are now demanding that all these firms do so -- even though the government signed binding contracts.

The Democratic bill strong-arms oil companies into renegotiating the contracts or pay a $9 per barrel royalty fee from these leases. If the companies refuse, they lose their rights to bid for any future leases on federal property. So at the same time that the U.S. is trying to persuade Venezuela and other nations to honor property rights, Congress does its own Hugo Ch�vez imitation.

(WSJ via Coyote Blog via The American.)

Gov. Spitzer and the New York bar have vowed to push for it. Reformers in Illinois agree. And now the Alabama bar is advancing a plan for that state. Three examples make a trend, right?

"Ohio Judge Finds Calif. Firm Submitted Fraudulent Asbestos Claim Forms" is the headline in Matthew Hirsch's January 19 Recorder story.

After reviewing internal e-mails from the Brayton firm and other privileged documents, [Judge Harry] Hanna concluded that [plaintiff's attorney Christopher] Andreas' statements from a hearing last spring "were patently false and could only have been designed to deceive this court and Lorillard."

But Hanna said the improper conduct didn't stop there. The judge concluded Andreas also encouraged an asbestos trust to resist a court subpoena, then withheld materials used to prepare bankruptcy claim forms that Hanna ordered released in discovery.

The judge's only sanction was against the attorney, however. Plaintiff Harry Kananian's case was permitted to go forward, notwithstanding the fraud; Andreas moved to withdraw from the case when the allegations came to light. (If, indeed, the client was an innocent in the matter, that should go to whether the client can recover against the attorney, rather than the victim of the fraud.) Andreas will appeal. We noted press-coverage of the double-dipping allegations May 16 and Dec. 5.

Embarrassment for a peripatetic expert witness in the U.K.: "Gene Morrison, 48, who lived in Hyde, Cheshire, called himself Dr Morrison and trailed the letters PhD and BSc after his name. In advertisements in the Solicitors Journal he boasted that he had been offering a first-class 'objective and professional' service to the legal and insurance professions since 1977."

Exxon punitive damages award

The CL&P Blog has posted Exxon's petition for rehearing en banc in the In re Exxon Valdez punitive damages appeal. It's worth reading: press coverage has utterly ignored how lawless the district court's $5 billion award and Ninth Circuit's $2.5 billion award were.

NY financial competitiveness

Staten Island's Vito Fossella has his say, in the Sun.

Josh Gerstein in the New York Sun has more on the AOL Time Warner securities class action controversy, discussed earlier here.

Arizona malpractice legislation

When Gov. Janet Napolitano vetoed legislation that would have restricted lawsuits against emergency-room personnel, she deflected political fallout by appointing a task force to study the matter. That task force proceeded to recommend (among other things) that ER physicians indeed be protected by such legislation; its vote to adopt that finding was 13-5. So will the Governor sign a reform bill? (Arizona Daily Star, Arizona Republic, East Valley Tribune).

Internships at AEI

If you're interested in interning at the American Enterprise Institute this summer to work on the Liability Project, or any of the dozens of other policy issues studied at the Institute, online applications are available.

Blawg Review #91

This week the links roundup is at Public Defender Stuff, with a Martin Luther King Day theme. It mentions this site, as did last week's carnival, at Minor Wisdom.

State AGs' modern role

The Federalist Society has posted pointers to three papers (all PDF) on the role of modern state attorneys general:

* In "The Modern Role of State Attorneys General: A Renewed Activism", San Diego attorney Robert J. Gaglione critically discusses the shift towards an activist role, with particular attention to California;

* Then-AG Eliot Spitzer delivered these remarks to the National Press Club in defense of his enforcement campaigns;

* U.K. professor Firat Cengiz's paper for the Economic & Social Research Council, �The Role of State Attorneys General in U.S. Antitrust Policy� provides an overview of the office and its diverse powers.

Next New Jersey Vioxx trial

The court has reduced the number of plaintiffs from four (Jan. 12) to two, though that doesn't change the fact that they have different individualized circumstances that mean consolidating their cases is utterly inappropriate. Even more confusing for the jury, the two are from different states, and will have different legal standards for liability and punitive damages.

One is Frederick Humeston of Idaho, who we've seen before (Aug. 17 and links therein), most notably for having a heart attack immediately after being notified by his employer that a private investigator had videotaped him faking a disability, and then blaming it on his intermittent Vioxx use over two months. The NEJM editorial that caused Judge Higbee to throw out his case hasn't appeared to influence any other juries, so this appears to be purely a second bite at the apple with a different jury—though, if Higbee bifurcates the trial as planned, Humeston could be helped. Humeston will also benefit from learning which acting techniques served his experts poorly in the last trial (Nov. 4, 2005). Diane Sullivan, who clashed with Judge Higbee in the previous Humeston trial, will reprise her role as lead counsel.

Merck comments on the second plaintiff, the sister of the late Brian M. Hermans:

In one case, Kathleen Hermans Messerschmidt alleges that her brother, Brian Hermans of Waupaca, Wisconsin, suffered a fatal heart attack at or around September 15, 2002 after allegedly taking VIOXX for approximately 19 months. An autopsy showed that Mr. Hermans, who was 44 years old at the time of his death, had an enlarged heart and multi-vessel coronary artery disease. The evidence also will show that Mr. Hermans had a strong family history of heart disease and early death. In addition, the evidence will show he had untreated high cholesterol and high blood pressure. Further, records show that Mr. Hermans died from an arrhythmia and had methadone and fluoxetine in his system at the time of death.

Opening arguments are scheduled for January 22.

Remember when The American Lawyer said mass torts were dead? If you ever believed it, you have to believe in zombies now.

Even Judge Higbee thought the plaintiffs' attempt to twist New Jersey tort law into creating a cause of action for medical monitoring of a pharmaceutical drug was meritless, and dismissed it, but the New Jersey Court of Appeals reinstated the case by extending New Jersey law for the first time to such cases. The complaint is now merely factually frivolous for alleging without any scientific basis long-term effects from Vioxx requiring medical monitoring; plaintiffs still have to clear the class certification hurdle, which is an implausible task in a judicial system that respects due process. Of course, a 0.1% chance of obtaining hundreds or thousands of dollars of damages for each of tens of millions of putative plaintiffs is still a pretty good lottery ticket. (Sinclair v. Merck (N.J. App. Jan. 16, 2006); W$J).

This suit probably won't go anywhere in the long run unless a new study comes up with surprising results in the next year or so. If there were long-term effects from short-term Vioxx usage, we would have seen them already, which is why the market is shrugging off this decision, whose most likely short-term effect will be to increase Merck's legal expenses.

But there are long-term effects beyond Merck. The possibility of billions of dollars of damages for millions of plaintiffs who have suffered no cognizable injury is precisely the sort of gold-mine the plaintiffs' bar is looking for; the threat of bankrupting liabilities tends to encourage extortionate settlement, and settlement at pennies on the dollar of a gigantic meritless claim can be remarkably profitable, as the Enron litigation showed. This decision, if extended further by New Jersey courts, could lead to New Jersey becoming a magnet for plaintiffs. If the New Jersey legislature (or New Jersey Supreme Court) doesn't step in, it's a strong signal for businesses to leave the state.

The Supreme Court just denied leave to appeal in a case filed by IBM employees who alleged that the company committed age discrimination when it altered its pension plan. The lawsuit asked for $1.4 billion. Former IBM employee Kathi Cooper was lead plaintiff in a class action suit brought on behalf of 250,000 current and former workers. The suit alleged that IBM's "cash balance" plan was discriminatory because it allowed younger workers to accrue benefits faster than older workers.

IBM switched to a cash balance plan in 1999. Cash balance plans provide individual accounts that can be cashed out when a worker leaves the company. This appeals to younger workers, who are more mobile. About 1,500 companies have adopted cash-balance plans.

The 7th Circuit had ruled that IBM's plan was age-neutral.

Last year, Congress passed legislation that clarified that cash-balance plans complied with the age discrimination provisions of ERISA, the Employee Retirement Income Security Act. Cooper's lawyers argued that the legislation applied only to future cash-balance plans.

The case is Cooper v. IBM, 06-760.

[Earlier coverage here, here, here, etc.]

Little noticed in the 2006 election upheavals, San Francisco voters (in a further effort to make their city entirely unliveable) passed Proposition F, which requires paid sick leave to all employees starting February 5, and creates a new cause of action to enforce it. Unlike many complex employment laws, there are no exceptions, which means that not just tiny businesses with a handful of employees are affected, but so is the yuppie couple who hires a babysitter. Like many "labor friendly" laws, this one will hurt laborers by hurting small businesses:

"Between this sick leave law and raising the minimum wage [to $9.14/hour in SF], pretty soon the only ones who can afford to do business in the city will be chains," said Richard Crain, owner of the Village Grill, a restaurant with nine employees down the street from the St. Francis Market. "How can we afford this? You can only charge so much for a hamburger, and then people will stop coming. I'm 52 and was hoping to do this until I retire, but the city is going to force me out of business."

Further problems are created because the law requires sick-leave to be doled out at one hour of leave for thirty hours of work, but has no regulations for describing the plight of employers seeking to comply with the law but who employ exempt white-collar workers who aren't paid by the hour or temporary workers who earn different salaries for different temporary jobs. With penalties at $250/hour of withheld sick-leave (plus the standard one-way attorney-fee-shifting in these laws), there will be certainly be lawyers who seek the most aggressive interpretation of the rule, which is good news for property-owners in the suburbs of San Francisco. (Ilana deBare, "S.F. businesses scramble over sick leave law", San Francisco Chronicle, Jan. 12; Cal Biz Lit blog).

Spitzer's Court of Appeals pick

The new governor has selected Brooklyn Civil Term Administrative Justice Theodore T. Jones Jr. for a vacant seat on New York's highest court. The pick is being hailed in some quarters as showing that Gov. Spitzer is not overly beholden to Democratic constituencies, because during the transit strike Judge Jones (at Spitzer's own urging) held union head Roger Toussaint in contempt of court; he also fined the TWU $2.5 million. Note, however, as well, this detail in the account by John Caher for the New York Law Journal: "Justice Jones is a favorite of lawyers, particularly those representing plaintiffs in civil cases."

"Acquired Conviction Syndrome"

Charles Fried, in an W$J op-ed on the Guantanamo representation flap:

It is too bad that lawyers in this country feel bound not only to submit the best possible arguments for their clients -- virtuous or deplorable -- but also to stump for them in the press, before legislative bodies and in professional organizations. Debate in the American Bar Association and American Law Institute, for instance, has been degraded in recent years by their members carrying their representation of their clients' interest into fora in which their best independent expert judgment is asked for. How unfortunate that in this country we have plaintiffs' lawyers and defendants' lawyers, lawyers who represent only unions and others who represent only management. One looks with nostalgia at the British bar, where barristers will prosecute one day and defend the next.

Insider trading and consultants

Looks like another scandal in the making. Here's the WSJ report on NY and SEC investigations, and my discussions here and here about what's going on. It's not clear this is insider trading, and in any event the practice may well be a product of the foolhardy attempt in Regulation FD to create a "level playing field."

Does Sorry Work?

Consider me a skeptic of the "Sorry Works" idea, which suggests that if doctors immediately disclose all potential errors and apologize, total malpractice costs will go down. To the extent a disclosure regime has merit, reduction of litigation expense always seemed to me to be an implausible reason.

Lawless Mississippi kills its economy

The attack on Mississippi's insurers over Katrina is already having consequences. Unable to be confident that the state will be willing to fairly enforce contracts as written (Oct. 11, 2005; Oct. 16, 2006), insurers are simply not issuing new ones. The town of Long Beach is finding that businesses are unable to reopen because of the lack of insurance. Insurance isn't the only reason the town's largest employer, Oreck Corporation, has picked up stakes and moved to Tennessee, taking with it 500 jobs and $300,000/year in property taxes, but it's been a contributing, and perhaps the deciding, factor. The legislature's response has been to make things worse: criticize the businesses who have left, and seek to further regulate the price of insurance, despite thousands of years of evidence that limiting the price will reduce the amount supplied and lead to shortages. (Leslie Eaton, "Vacuum Maker Hailed as Savior Quits Gulf Town", New York Times, Jan. 15) (via Rossmiller).

"[Trauma-mill kingpin Norman] Chesler began cooperating with [Brooklyn DA Joe] Hynes's office after he was indicted in two no-fault car insurance scams by then state attorney general Eliot Spitzer's office." Eventually the trail led to a brown envelope filled with cash which Hynes is expected to charge passed as a quid pro quo in exchange for elevation to the Kings County bench. Wayne Barrett in the Voice has a big investigation (via Henry Stern); Gothamist has a brief summary.

One possible lesson to draw, if the charges pan out: injury-fraud rings and related trauma-medicine mills make good targets for investigation. This isn't the first time they've turned out to be linked to wider networks of corruption.

Picking judges in Illinois

The Illinois Civil Justice League thinks the state would do better with an appointive process, rather than partisan elections as at present. More: Dan Hull, of What About Clients?, approves of this sentiment, and has written on the subject previously.

Edward Whelan deems it "thoroughly scandalous":

In sum, [ABA committee chair Roberta] Liebenberg�s sworn testimony that �This is not a process where Mr. Tober [Stephen Tober, a longtime Wallace adversary] had any role whatsoever in the evaluation or the vote,� and her other categorical statements to the same effect, are truthful only if �whatsoever� is not given anything close to its ordinary meaning but is instead a secret code that means, at a minimum, �except that he assigned the first investigator, reviewed her draft report with her, assigned the second investigator, reviewed his draft report with him, determined that he was satisfied with the quality and thoroughness of both investigations, directed his committee colleagues to read the investigators� reports in tandem, received and tallied the votes, and reported the ABA�s rating to the Senate Judiciary Committee.�

Gretchen Morgenson gives a one-sided account of the debate over when to implement a new accounting rule on reporting tax positions. I give the other side.

Texas probate, hijacked to California

If there's a chance to learn more (W$J) about a really stimulating topic, such as the tactic of forum-shopping by crafty lawyers in American courts, it's worth plowing through a certain amount of background material about a fundamentally dull subject, like that of pneumatic gold-digger Anna Nicole Smith. Right?

P.S. Here's more, from Prof. Ribstein, about enforceable choice-of-law clauses in contracts and other legal documents.

We discussed the issue January 10. Deepak Gupta predicts a reversal, and it's indeed hard to imagine circumstances where the Court would grant certiorari to affirm. It's unlikely that the Democratic Congress will step in to fix the problem that the Eighth Circuit is trying to solve.

Public Citizen on medical malpractice

Public Citizen released a study on medical malpractice, calling claims of a problem a "hoax," and you can guess the conclusions. The report repeats all the standard mistakes that we've criticized in the past:

  • It uses medians to measure the issue of judgment growth. Unfortunately for doctors, insurance rates reflect expected means, which are several times higher. Two years ago, we noted how even liberal anti-reformer Kevin Drum, speaking of a different anti-reform study, wrote the use of medians rather than averages "is so obviously the wrong statistic to use in this case that there must be some kind of axe to grind here."
  • To measure "real" verdict sizes, the study uses an artificially high deflator instead of the standard one, dampening the effect, but consistently characterizes that deflator as "adjusted for inflation", rather than "adjusted for increases in medical costs." Of course, part of the increase in medical costs are medical malpractice costs. Adjusted for inflation in gasoline expenses, gasoline prices have been constant between 2002 to 2007. More importantly, doctors pay for malpractice insurance with real dollars, not medically deflated dollars.
  • The study starts its cut-off date at 1991, but fails to note that reformers thought malpractice costs were too high in 1991. From 1975 (the earliest data available) to 1991, medical malpractice costs increased 2.2 times as fast as GDP, while medical inflation grew as fast as GDP.
  • The study makes a big deal of some declines that began after 2003, but fails to note the large increases from 1991 to 2003 that prompted the renewed complaints.
  • The page designer very effectively used a lot of nifty tricks to dampen the visual effect of increases over time: big thick lines and points that obscure where the points actually are; in some graphs, there is an artificially-elongated Y-axis with lots of white space to dampen the trend line.

  • Even with all of these dampening adjustments, the actual data in the Public Citizen report shows a huge increase in median judgment from 1991 to 2005 (and an even larger one from 1995 to 2001) consistent with what reformers are claiming. Solution? Just caption the graph "Judgments Constant When Adjusted For Inflation [sic]" even when the graph shows nothing of the sort, and announce that reformers are committing a "hoax."

  • The study talks of "million-dollar judgments", but adjusts it for inflation, while eliding whether it's talking about "million-1991-dollar judgments" or "million-2005-dollar judgments." If it's the former misleading figure, as one guesses given the consistency in statistical choices in the rest of the paper, the "million-dollar judgments" are really two-million-dollar judgments because of the artificially high deflator used.

  • By focusing on payments to patients, Public Citizen ignores the largest part of the malpractice cost, which is payments to attorneys, which has been rising even faster than payments to patients.

  • The study conflates "medical errors" with "medical malpractice", even though the two are different. Of course, the study trots out the discredited Institute of Medicine statistic, which has become wildly popular through repetition if not accuracy. (It's ironic that many of the anti-reformers who parrot the IOM statistic criticize Towers Perrin for its annual measurements of tort costs, even though Towers Perrin is forthright about their study's narrow scope and limitations.)
  • And, of course, the report does nothing to address the major complaint of doctors regarding the randomness and inaccuracy of the malpractice litigation system.
  • The study repeats the standard trope of "small percentage of doctors responsible for large percentage of malpractice" without making any adjustments or cross-checks to see if these numbers are within the range of risk-adjusted random statistical chance. Again, I noted this issue two years ago (Jan. 6, 2005.)

That said, some of the report's proposals are unobjectionable: a national mandatory adverse event reporting system; computer physician order entry systems; JCAHO guidelines to prevent wrong site surgery; improving state medical board web sites and funding and staffing. Other proposals, such as stricter restrictions on workweeks, may be counterproductive in the short and/or long run (Dec. 19).

Doctors want safety for their patients, and most doctors make considerable personal sacrifices to achieve those results; if Public Citizen really cares about patient safety, rather than the amount of money attorneys extract from society, one wonders why they preface patient-safety reforms with offensive insults of doctors for having legitimate concerns about a broken malpractice system. The sensible fixes of patient safety and the sensible fixes of malpractice litigation are neither exclusive nor at cross-purposes.

Cash balance pension plans

Per Prof. Secunda, the Supreme Court is considering whether to review Judge Easterbrook's Seventh Circuit decision upholding the IBM plan. More here, here, etc. Update: no, the Court won't grant review.

More on Broussard v. State Farm

Following up on Michael's post:

"It sets a horrendous precedent in terms of these cases when you're talking about a policy sold in Mississippi providing wind coverage, but that has to pay several hundred thousand in water damages and several million in punitive damages," said Robert Hartwig, chief economist for the Insurance Information Institute.

Hartwig noted that the policy wording is approved by regulators, and warned that such rulings could hurt the homeowners' insurance market, and ultimately policyholders, not only in Mississippi but also in other coastal communities.

"It creates a situation whereby hundreds of millions in losses could be paid by insurers who have collected not a cent for this type of loss," Hartwig said. "If insurers have never collected any money to cover floods, but they're on the hook, then these sorts of situations will have to be imbedded into rates, and that'll have negative consequences for the cost of insurance."

(Becky Yerak, "Katrina loss for State Farm", Chicago Tribune, Jan. 12). I've been waiting to see the opinion before I comment on this case, but, as David Rossmiller notes, Judge Senter has not publicly released it yet. Rossmiller has done some impressive detective work on the Broussard docket, however, and his comprehensive post, with links to the briefs, is highly recommended: "One measure of how surprised State Farm was by yesterday's directed verdict by Judge Senter and, later, by the jury's $2.5 million punitive damages award is this: the official docket for the case shows that on December 12, 2006 State Farm made an offer of judgment for $20,000."

Update: Still no written opinion, but now Rossmiller links to the oral opinion. I find the logic less than compelling, but perhaps Judge Senter will fill in the gaps later. The problem arises from Senter's earlier ruling striking down the concurrent cause clause, which was designed precisely to avoid this sort of battle-of-the-experts litigation. I earlier noted that Dickie Scruggs had good reason to be happy with that Judge Senter opinion in the Leonard case, which had been portrayed in the press as an insurance victory.

We don't (alas) have a general "loser pays" rule in American tort law. But if you're a corporation, especially an insurer, and you are a defendant, and you lose a tort suit, sometimes we have a "loser REALLY pays" rule. In this Mississippi case (here's the Baltimore Sun summary), State Farm used its "flood exclusion" clause to refuse to pay for a home lost in Hurricane Katrina. The federal judge (taking this issue from the jury, interestingly) found State Farm liable (the issue in these cases is often whether a house was lost due to wind or to water -- a fine issue often involving conflicting expert testimony). State Farm had its experts, and though I have not read the trial transcript (and so am a bit tentative here) it's pretty hard to see how $2.5 million in punitives (right at the multiplier limit established by the Supreme Court in another case involving State Farm) are merited when a bona fide defense can be made.

In the Broussard case, plaintiffs said a tornado (covered by the policy) had destroyed their home before the floods of Katrina (not covered) hit. State Farm disagreed. [Note that the policy excludes combinations of water and wind, though Judge Senter has found that clause ambiguous (Sep. 7 and links therein).]

The plaintiff's attorney, in his closing argument Thursday, said State Farm had breached their contract "in a bad way" by denying the Broussards' claim. State Farm "acted like a chiseler," he said, adding, "The pocketbook is what they listen to."

Is a corporation supposed to minimize income? Is an insurer supposed to maximize future premium increases?

Earlier POL Katrina coverage.

If one looks past some snide anti-reform remarks by Peter Nordberg, one finds a comprehensive and persuasive dismantling of the policy proposals in the Neurology article we linked to earlier. As Nordberg suggests, the problem here—and any solution—is related to discovery abuse, rather than blanket exemptions of scientists from discovery.

To float a possible solution, why not compensation of non-litigants subject to subpoenas by the party requesting discovery? Any unfairness can be balanced through an expansion of FRCP 36 and analogous rules: one party issues a request for admission to an adversary; if the point is contested and requires third-party discovery to resolve, then the losing party compensates the party who needed to request discovery. This not only reduces the burdens on innocent third parties, it should narrow the need for discovery in the first place as well as reduce the incentive for the proverbial fishing expedition.

The Apple investigation continues

The WSJ has an interesting report on the ongoing Apple investigation. As I discuss, this has created a major mess for the backdating and executive compensation moralists: do we trash Steve Jobs' career and send Apple into a tailspin, let a young lawyer take the fall, or create an ad hoc Apple exception? Stay tuned.

"Mass Torts and Multiple Misjoinders"

The Drug and Device Law blog has a tremendously well documented post on the law of the mass-plaintiff-dump, the complaint filed with several unrelated plaintiffs. (We covered the issue ourselves in a less extensive fashion Oct. 15, 2005, focusing on the narrower question of fraudulent misjoinder to evade federal jurisdiction.) Of course, not every court follows the sound law documented by Beck and Herrman. The list of courts notorious for ignoring that law—e.g., West Virginia, Madison County, pre-reform Mississippi—corresponds remarkably well to ATRA's list of judicial hellholes, which goes to show that that list isn't anywhere near as arbitrary as reform opponents make it out to be.


A great deal of case law in federal and state courts holds that product liability cases are generally inappropriate for multi-plaintiff joinder because such cases involve highly individualized facts and �[l]iability, causation, and damages will. . .be different with each individual plaintiff.�

That long list of precedent is being ignored in the forthcoming mess of a New Jersey Vioxx trial, where four completely unrelated plaintiffs will have their lawsuits glommed together, despite different timing (resulting in different knowledge by Merck—even if one thinks Merck should have known better in 2004, it doesn't mean that Merck should have known better in 2002), different warnings, different causation issues, and different alleged damages. Maybe one thinks Merck should have had a different warning to doctors depending on the patient's predilection for heart disease? According to Judge Higbee's court's summary of the trial, however, the one jury will resolve the failure-to-warn question in one go across all four plaintiffs divorced from the related issue of causation, an appalling violation of due process seemingly intended to coerce a defendant into acceding to the sort of mass-tort settlement that has resulted in billions of dollars of fraud in asbestos and fen-phen litigation. (Update, Jan. 17: court reduces plaintiffs from four to two and updates its summary of the trial.)

The January issue has a major report, authored by John M. Wylie II: "The $40 Billion Scam: How slick lawyers have turned a genuine health crisis into a ripoff you won't believe."

Parade of new blogs

Werner Kranenburg, who has been mentioned in this space as a commentator on as well as practitioner of securities class action law, now has his own site, KranenburgEsq. ImSuingLawSchool.com is certainly one of the better names for a law student blog, although it turns out the student-author isn't seriously planning to carry out that threat (via Schaeffer). Traditional Notions (also via Schaeffer) is worth a look if only for the post explaining its choice of name in reference to the latter-day history of personal jurisdiction doctrine. And a new blog by Robert Shattuck, Attacking Plaintiff's Lawyers in Alabama, lives up to its single-minded name.

Sure, go ahead, sue the Vatican

...says a Kentucky judge in a sex-abuse case. Earlier: here (similar ruling, federal judge in Oregon), here and here.

More on Nardelli

Kevin Lacroix has a comprehensive post, including a link to his employment contract. See especially Section 7. And Lerach Coughlin is suing after the fact on a severance payment agreed to and disclosed six years ago. Bill Lerach, of all people, has some chutzpah complaining about overcompensation by innocent shareholders. Earlier: Jan. 4.

Canada permits silicone breast implants

Following our own FDA's similar decision. Related: per ABC News, some U.S. doctors report that patient demand is not shifting toward now-legal silicone-filled implants as rapidly as some had expected. A notable quote, from Dr. Darrick Antell, an official spokesperson for the American Society of Plastic Surgeons and a surgeon in private practice in NYC: "I think it will take time for people to embrace what science has told us. It just shows how people can be influenced by the media and hysterical lawyers."

Terrorism finance lawsuits

Ted's recent op-ed in the Wall Street Journal is our newest Featured Column.

Global warming legal practice

With Pillsbury Winthrop Shaw Pittman launching a new "climate change and sustainability" practice group, American Lawyer wonders, "Will the legal fees be as big as the polar ice caps, or will they melt away into nothing?"

Watson v. Philip Morris

Tobacco companies are facing a blizzard of illegitimate class actions and class certifications over light cigarettes in state court. One sympathizes with the tobacco companies being sued for labeling cigarettes' tar and nicotine content under the "Cambridge Method" given that the FTC threatened companies with suit were they to vary from that formulation, as well as with the defendants' desire to get out of state courts that misapply procedural rules for class certification. (Preventing such forum shopping was the rationale behind the Class Action Fairness Act, but the law was not retroactive.) But the tobacco companies have resorted to a, shall we say, aggressively creative interpretation of federal jurisdiction, and removed several suits to federal court under 28 U.S.C. � 1442(a)(1), a provision creating federal jurisdiction when federal officers were sued.

It's not a wildly crazy extension. For example, in Camacho v. Autoridad de Telefonos de Puerto Rico, 868 F.2d 482 (1st Cir. 1989), a court held there was � 1442(a)(1) federal jurisdiction over a lawsuit brought against a private telephone company that, at the behest of federal officers, assisted an allegedly illegal wiretapping. The Eighth Circuit bought into this use of the law in Watson v. Philip Morris, and plaintiffs sought a writ of certiorari, arguing that the FTC's regulation of cigarette advertising was not so extensive as to be acting at the behest of federal officers and thus did not merit � 1442(a)(1) jurisdiction.

Deepak Gupta reports that the Solicitor General, filing a brief at the request of the Court, has agreed with the petitioners that the Eighth Circuit is factually incorrect, but recommends against a grant of certiorari. Gupta finds this inconsistent, but a reading of the SG's brief shows that the distinction arises from the Supreme Court's decision to limit its workload by taking itself out of the business of mere "error correction" in cases where the lower court has not misstated the law but merely applied it incorrectly to the facts. One can find fault with the Supreme Court's policy in this regard, but not with the SG's application of it.

If the Supreme Court does decide to accept certiorari, it's fairly likely that this is a signal that it will reverse the Eighth Circuit. If so, class actions will be remanded to state courts in Arkansas, Missouri, and Minnesota, and the last two states have already joined Massachusetts as the only states to certify classes (though those rulings may not withstand appeals down the line—a second court in Minnesota refused to certify a class). A similar case in Madison County, Price v. Philip Morris, resulted in $10.1 billion in implausible damages and attorneys' fees being awarded before the Illinois Supreme Court intervened. Judge Weinstein's certification of a federal class is currently on appeal in the Second Circuit (Oct. 1 and links therein).

Peter Lattman had a good get: Enron prosecutor John Hueston, now at Irell & Manella, commenting on the Gladwell take on the Enron affair. Tom Kirkendall has a lengthy response. Earlier: Jan. 6.

A recent Neurology article ($) appears with this title; I haven't seen it, but Beck and Herrmann discuss the issue and some of the problematic incentives Daubert has created for junk science to infect more than just litigation. (Update: Bill Childs reports that he has an SSRN paper on the issue forthcoming in the Nebraska Law Review.)

Apple and backdating

If backdating is the scandal of the century, why is it that Steve Jobs, who has been heavily implicated in backdating at Apple, emerged unscathed from an internal probe co-conducted by none other than Al Gore, after which Apple's stock rose? Could it be that backdating is not, after all, the scandal of the century? Holman Jenkins, the lone journalist voice of sanity, has a must-read column, and two lawyers representing a backdating criminal defendant pick apart the prosecution, in today's WSJ. I discuss the implications of Apple for the overblown backdating story.

At Law.com, Roger K. Smith and P. Daffodil Tyminski of Morgan Lewis recount some of the high points of the silicosis-screening scandal.

From the Nov. 1 issue of The Voice, published by the Defense Research Institute, comes this news item by Lisa A. Coppola:

Disability insurers in New York State may wish to think carefully about the use of surveillance when rendering benefits determinations. The United States District Court for the Northern District of New York recently held that an insurer�s reliance on surveillance was not enough to deny benefits....

Glockson was drawing benefits from a disability policy premised on her inability to hold down even part-time work. Although a medical examiner had backed up her claim, the insurer "conducted surveillance, finding the plaintiff running errands, having lunch with friends, walking around town, and carrying small packages for up to five hours at a time." Presented with the new footage, the physician changed his mind about her ability to work. The court, however, "found that the video did not constitute substantial evidence" in support of the denial. "In light of this decision, insurers doing business in New York should be careful to not rely solely on surveillance as objective evidence supporting a denial of disability benefits." The case is Glockson v. First Unum Life Ins. Co., 7:04-CV-838, 2006 U.S. Dist. LEXIS 47613 (N.D.N.Y. July 6, 2006).

Ohio veto brouhaha

Incoming Democratic Gov. Strickland has (attempted to) veto a liability and lead-paint reform bill passed by the state's GOP legislature and left unsigned by predecessor Gov. Taft. Whether or not Strickland's veto was timely and thus effectual may depend on the question of whether Sunday qualifies as a "day", which is likely headed for court. More reaction via Jane Genova, here and here.

Job applicants' credit records

For an employer to consider them is discriminatory toward minorities, according to a suit in progress against Harvard (via Taranto).

"If I had my way, I'd be a barrister"

Norm Pattis reveals that I am not alone in thinking that there are some distinct advantages to the professional separation of barristers from solicitors as seen in Britain. He concentrates on the effects of specialization on competence and job satisfaction, but there are also reasons to think that barristers, by standing in a position of greater independence from the client, might be better able to respect professional norms, and in particular, might be better able to resist improper pressures to "win at any cost".

Nice little insurance company you've got here, be a shame if anything happened to it because you did something stupid like trying to hold to the terms of your contract.

Zyprexa protective order enforcement II

(Earlier: Dec. 20.)

Bill Childs has a good update and roundup of links with the latest developments in the Egilman/Gottstein document leak scandal.

As this anti-Lilly activist site shows, however, Gottstein may have disseminated the documents so widely that Lilly has little effective recourse. (Update: Bill Childs says it took him 19 minutes to find the documents on-line using Tor.)

A lengthy non-story

With all that is wrong in the world, today's LA Times devotes front-page space and dozens of column inches to complain that the Gates Foundation charity has money invested (in this case $2 million out of $66 billion, or less than 0.1%) in "companies that were accused in lawsuits or by government officials of making it easier for thousands of people to lose their homes." (In this case, a family sues a lender for letting them borrow money without reading any of the paperwork, and then claims that they should be allowed to recover because they obtained the loan only through fraud; this is, of course, the fault of the shareholders of the loan company.)

I'm curious what the newspaper's point is. Is it that a plaintiff's lawyer's complaint should require an institution to divest itself from the defendant? What about bonds from municipalities accused of police brutality? Are charities supposed to keep their money under mattresses? (And how would a plaintiffs'-bar-conducted audit of the LA Times' pension portfolio fare?)

The money manager for the Gates Foundation needs to invest tens of billions of dollars. If as the Times argues, a lawsuit can taint that investment, the Times is essentially arguing against large charities existing at all.

Update: Mickey Kaus notes other silliness in the series.

Mark Moller of Cato reports that his near-final paper of this title is up at SSRN. The abstract reads, in part:

This Article considers how courts should interpret federal statutes when the interpretive question affects the scope or availability of class certification. When faced with such a question, many courts are tempted to interpret the statute in a way that enables class certification, enhancing the chance that the parties will settle.

I argue that the debate over this practice can be conceptualized as a debate about delegation. Those who argue that courts act illegitimately when they �adapt� statutes to �fit� the class device assume Congress has delegated courts a narrow range of discretion to promote certification and settlement under federal statutes. By contrast, those who argue courts have great leeway to certify statutory claims, even at the price of �distorting� the statute, assume courts have been delegated a great degree of such discretion.

The Chevron doctrine of administrative law provides an unexpected solution to this debate, if we treat Chevron as a �starting-point� measure of Congress's intent to delegate authority to �adapt� federal statutes to new circumstances. This proposal is roughly similar to Nicholas Quinn Rosenkranz's suggestion that Chevron might be treated as a �constitutional starting-point rule� for defining permissible delegations of �dynamic interpretive power.�...

Going bare

The Madison County Record notes another instance in which "consumer protection lawyers" display a certain lack of attention to the protection of their own clients:

Two of the most active class-action plaintiff's attorneys in the Madison and St. Clair County courts do not carry malpractice coverage, even though one was once suspended by the Illinois Bar for harassing several women.

While such lack of coverage does not violate Illinois law, it raises questions as to the adequacy of representation that class-action members in the firm's cases are receiving.

Eric D. Freed and Paul M. Weiss, of the Chicago firm Freed & Weiss LLC, continue to represent class-action plaintiffs and have won a series of major class action verdicts in Illinois.

NY Times hoisted by its own petard?

Question: now that the New York Times is seeing first-hand the use of its own e-mails against it in a manner it perceives as unfair (Neil Lewis, "Editor�s E-Mail May Be Used in Suit Against The Times", Jan. 6), do you think that their editors might become a little more skeptical when plaintiffs' attorneys feed their reporters out-of-context e-mails (e.g., Dec. 19, Nov. 10, 2005) to further litigation purposes?

Nocera takes on Gladwell re Skilling

Compare and contrast Joe Nocera's rationalization of the conviction (temporary NYT-Select passthrough via Bashman) with Tom Kirkendall's take a month ago. There's also a lengthy comment thread on Gladwell's blog.

George Will on the minimum wage

New York lawyer advertising rules

New York's court system has adopted final rules on attorney advertising, effective Feb. 1, which were narrowed significantly from earlier proposals in part to answer criticisms that they would tend to throttle legal blogging and other participation in public debate by lawyers (see here, here, here, etc.). Hanno Kaiser and David Giacalone analyze the outcome. More: New York Law Journal is now out with its coverage.

Securities class actions down in 2006

Lyle Roberts summarizes the competing numbers from Cornerstone and NERA:

Why the decline in filings this past year? Possible reasons put forward by the reports include better corporate governance (Cornerstone and NERA), a strengthened federal enforcement environment (Cornerstone), a strong stock market combined with lower stock price volatility (Cornerstone), and distraction on the part of the plaintiffs' bar (NERA).

The Chamber of Commerce votes for the last explanation, noting that the decline in Milberg Weiss cases alone is greater than the decline in total cases. If I can add two more explanations: (1) there's just simply a backlog of bigger cases filed earlier in the decade. 21st-century cases have many more e-mails and tertiary defendants than cases in the 1990s; (2) the number of securities cases has always naturally fluctuated somewhat—add an upward market, firms withdrawing from or refusing to enter American securities markets, and Milberg Weiss distraction, and of course the total number is going to go down.

What's worth noting is that "number of securities suits" is hardly the best number to judge this by: Lerach Coughlin doesn't get paid by the complaint. Settlements and contingent fees are up, and so are legal defense expenses. It's hardly an improvement in the legal climate if the plaintiffs' bar has replaced the $10 million nuisance settlement with the $1-billion extortion payoff by a bank to avoid a 5% risk of being bankrupted by a meritless legal ruling holding it entirely responsible under joint and several liability for the Worldcom or Enron collapse.

Gov. Spitzer's economic proposals

The Business Council of New York State has a few preliminary reactions on the incoming gov's numerous proposals for change. And organized workers' comp lawyers are mobilizing to make sure the governor's call for reform of that program doesn't impinge on their interests.

Michael Fox at Jottings of an Employer's Lawyer checks Google News and finds that 10 news headlines make it sound as if the EEOC won its recent trial of a wrongful termination case against domain registrar GoDaddy, while 6 headlines make it sound as if the agency lost. What actually happened was a not unusual occurrence -- the jury rejected the employee's underlying discrimination claim, but accepted his retaliation claim. Now, that wasn't so hard to report, was it?

My latest Liability Outlook for AEI is about the Ford Explorer rollover litigation and what it says about products liability litigation in the US in general:

It went generally unnoticed last November when the California Supreme Court refused to review an intermediate court�s decision in Buell-Wilson v. Ford Motor Co. But then again, it went generally unnoticed when a jury awarded an arbitrary $368 million in damages in that case, when the trial judge reduced that verdict to an arbitrary $150 million judgment, and when an intermediate appellate court reduced that figure to an arbitrary $82.6 million (which, with interest, works out to over $100 million). Products liability verdicts have become so run-of-the-mill that even nine-digit verdicts and their aftermath receive only local or specialty press coverage, with cursory national coverage. But Buell-Wilson demonstrates much that is wrong with the current liability regime, including the fact that the media is so jaded by litigation abuse that a $368 million verdict is barely newsworthy.

I have a related letter to the editor in the Jan. 1 Legal Times. See also POL Dec. 13, OL Dec. 12, OL Jun. 3, 2004.

Nardelli's severance

Who exactly is hurt by Bob Nardelli's paycheck that it's creating such outrage?

In 2000, GE picked Jeff Immelt to replace Jack Welch as CEO. That made the two "losers" in that battle, Jim McNerney and Bob Nardelli, also groomed for the top GE job, high-in-demand free agents. A bidding war arose for their services; Boeing picked up McNerney, and Home Depot agreed to pay the price of a New York Yankees infield to get Nardelli—a price that included a negotiated gigantic severance at the back end. These promised payments were necessary to induce Nardelli to leave behind the millions of dollars of stock options he was surrendering by leaving GE. Unlike, say, liability costs, which are variable costs that rise with every worker hired, every store opened, and every good sold, such severance payments are fixed costs, and are swallowed entirely by shareholders.

Economic theory teaches us that when a rare commodity with uncertain future value like an MVP shortstop or GE executive is subject to an auction, the winner of the auction will probably be the party that most overvalues the commodity: the concept of bidders' remorse. And perhaps Home Depot overpaid for the privilege of hiring Nardelli. (Press coverage is sneering that the Home Depot stock price dropped during Nardelli's reign, but, aside from omitting dividend payments, that drop reflects much more how bubbly Home Depot stock was in 2000, when it had a 46 P/E ratio. Nardelli doubled Home Depot profits; improved shareholder returns by repurchasing 10% of outstanding stock; quintupled dividends; increased the net profit margin; and the stock has been very profitable for those who bought it in late 2002.)

But, with a very few exceptions not relevant to this discussion, no one was forced to be a Home Depot shareholder. Someone could anticipate that large sums of shareholder money would eventually be paid to Nardelli on the back end when he was first hired. If one disapproved of the pay package Nardelli was destined to receive, there was a very easy solution: divest the stock, and invest in another company that did not bid on former GE executives to become their CEOs. (Of course, then one would have missed the huge profits in the run-up on Boeing stock.) Investors who think that GE experience created magical CEO abilities worth a premium in the marketplace were free to invest in Home Depot. Home Depot stock went up over 20% in December 2000, the month that Nardelli was hired: it would have been easy to sell the stock if one disapproved of the generous employment contract while the market basked in the glow of the hiring. No one paid Nardelli a dime who didn't agree in advance to pay him that dime.

Do I think Nardelli was worth hundreds of millions of dollars? Probably not: it's hard to believe that there weren't Moneyball candidates for the CEO position who were capable of equal- or higher-quality results for much cheaper. I also don't think Carlos Lee is worth $100 million, but the fact that the Houston Astros blew that sum on a mediocre outfielder doesn't demand federal regulation, as opposed to, at worst, mocking those who made those decisions.

John Steele at Legal Ethics Forum has made some picks.

As reported in the Sunday Times (UK):

Andrew Wakefield the former surgeon whose campaign linking the MMR vaccine with autism caused a collapse in immunisation rates, was paid more than �400,000 by lawyers trying to prove that the vaccine was unsafe.

The payments, unearthed by The Sunday Times, were part of �3.4m distributed from the legal aid fund to doctors and scientists who had been recruited to support a now failed lawsuit against vaccine manufacturers.

Critics this weekend voiced amazement at the sums, which they said created a clear conflict of interest and were the �financial engine� behind a worldwide alarm over the triple measles, mumps and rubella shot.

�These figures are astonishing,� said Dr Evan Harris, Liberal Democrat MP for Oxford West and Abingdon.

�This lawsuit was an industry, and an industry peddling what turned out to be a myth.�

A monument to honor Sarbanes and Oxley?

It wouldn't, however, be erected in their own country.

CEI's John Berlau notes that the Democrats actually ran to the right of the Republicans on the issue of Sarbanes-Oxley reform. It remains to be seen whether this is a case of Nixon going to China or mere lip service to prevent a revolt of New York investment banks heavily involved in financing the Democratic Party. That Schumer followed his Wall Street Journal op-ed with a post-election crowing claim that "Reaganomics is dead" is not encouraging.

Jackson's Clarion-Ledger reports that the Mississippi Supreme Court will hear oral arguments on Jan. 10, in an appeal by Ford Motor Corp. to re-instate a jury verdict in its favor in an important wrongful death suit.

L.C. Tennin, of Jackson, was driving on State Highway 7 when a Jeep Cherokee crossed into his lane and collided head-on with the his 1997 Ford Explorer. Tennin and his passenger were killed. The wrongful death lawsuit had alleged that the blaze that erupted after the wreck was caused by a faulty fuel system on the Explorer. Ford maintained the two young men's deaths were the result of the initial crash, not the fire. The jury agreed, but the trial judge overturned the verdict and found for the plaintiff as a sanction for alleged discovery abuse by Ford during the trial.

Malcolm Gladwell on Enron and Skilling

Must-read New Yorker piece on Skilling and Enron, demonstrating the fundamental flaws in the Skilling prosecution, even if Gladwell's framing device—the supposed difference between "mysteries" and "puzzles"—isn't, as Larry Ribstein points out, especially coherent. Blogosphere discussion: Carney; Kirkendall; Fleischer; Kling; Stastny.

Lithwick's civil-liberties blinkers

Dahlia Lithwick compiles a list of the ten worst civil liberties outrages of the past year, which turns out to consist entirely, with not a single exception, of Bush Administration policies relating to the War on Terror. #10 on the list, for example, is federal prosecutors' decision to seek the death penalty for enthusiastic Al Qaeda plot participant Zacharias Moussaoui. That counts as a more serious menace to civil liberties, in Lithwick's view, than any prosecutions of the innocent on terrorism-unrelated grounds in the past year, or any existent or proposed curbs on mainstream political speech, or any steps afoot to regulate the Internet. How comforting to know that state governments or courts deciding liability cases or drug warriors or for that matter non-state actors never appear in the top rank of threats to our civil liberties.

Radley Balko has drawn up a list of 2006 outrages that does a better job of conveying the range and diversity of government threats to liberty. RightRainbow is not particularly charitable toward Lithwick, describing her as "appallingly obtuse" (& welcome readers of Doug Berman's Sentencing Law blog).

The Lakin class action club

It seems to be quite a tangled web of interlocking and prosperous attorneys in Madison and St. Clair Counties, Ill.

A Franchisor is Not an Employer

The New York Law Journal reports that 7-Eleven has escaped liability for the negligence of one of its franchisees, who spilled hot coffee on a customer.

Eugene Nickola was present on May 22, 2002, when Mizra Mahmud, an employee at a local franchise, began struggling with another customer for possession of a coffee pot. Nickola was standing shoulder to shoulder with the customer but was not involved in the dispute. Nickola testified that Mahmud wrenched the pot away and threw the coffee at the customer, but the liquid missed its target and instead hit Nickola on his head, neck and shoulder. The local franchise was presumably insolvent, and 7-Eleven produced evidence of its safety training for franchisees. The New York Supreme Court reaffirmed classic respondeat superior rules, asserting that the franchisor did not possess the kind of micro-control over the franchisee that would have led to liability.

Isn't it amazing that the confirmation of such rules is news, worthy of report here and in the New York Law Journal. Sign of the times, I'm sure....

Twelve-step meeting

�My name is Lawrence Solum and I am a legal formalist.�

�My name is Brian Tamanaha and I am a legal formalist.�

Business Week cover story

"How Business Trounced the Trial Lawyers in Texas" would have been a more accurate title, as far the assembled evidence goes to prove anything, but presumably lacked wide enough appeal as cover material.

"Illinois doctors' med mal rates drop"

Illinois Justice Blog has more.

Best of '06 at Overlawyered

Don't miss Ted's series of posts nominating the best stories of the year at Overlawyered: January, February, and so forth through posts here and later (scroll as needed).



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.