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March 2007 Archives

People v. Ramirez

On Blog 702, James England writes that the Colorado Supreme Court has confused Daubert jurisprudence in that state with its opinion this week.

"...the free exercise argument is silly. The diocese will continue to function under bankruptcy and, even if it didn't and all the schools were shut down tomorrow and every cathedral bulldozed to put up condos - there would be no impediment to your free exercise of religion..."

Prof. Bainbridge vs. critics on church-abuse lawsuits. See Mar. 10, etc.

Rowe v. Hoffman-La Roche, Inc.

Thursday, the New Jersey Supreme Court decided Rowe v. Hoffman-La Roche, Inc., reversing an appellate court that had misapplied basic conflict-of-laws principles to hold that New Jersey law applied to any suit filed in New Jersey against a New Jersey domiciled drug manufacturer. (The plaintiff wished to get around Michigan's pharmaceutical immunity law to sue over Accutane use.) That decision is fairly straightforward and obvious (though somehow two judges on the court dissented), and would hardly be notable—except that a lower court based its certification of the $27 billion Engineers Vioxx nationwide class on the lower court's Rowe ruling. As Beck and Herrmann conclude in their extensive analysis, "the handwriting�s probably on the wall for that one."

The webcast of the Engineers oral argument starts ninety seconds after the argument does, but it has 53 minutes of the argument.

Thanks so much, Sen. Specter

Day on Torts reports that Sen. Arlen Specter (R-Pa.) has introduced two legislative tax measures "that, if passed and signed into law, would be good for those of us who do contingent fee work and for the clients who hire us." The first would allow attorneys to deduct as a necessary business expense "any expenses and court costs paid or incurred by an attorney the repayment of which is contingent on a recovery by judgment or settlement in the action to which such expenses and costs relate. Such deduction shall be allowed in the taxable year in which such expenses and costs are paid or incurred by the taxpayer." Current IRS practice allows the attorney to deduct such advances only when the litigation is resolved, not at the time the money was advanced. The second measure would allow plaintiffs to deduct, as an "above the line" deduction, contingent fees they pay their lawyers as part of a settlement.

Mr. Senator, the plaintiff's lawyers of America -- especially Shanin! -- wish to express their heartfelt gratitude to you.

Regular Point of Law contributor Michael Krauss has a new paper out from the Washington Legal Foundation (PDF) with the title: "Liggett Group v. Engle: Florida High Court's Imperfect Response to Class Action Abuse". Opening paragraph:

In Liggett Group v. Engle: A Case Study of Class Action Abuse1 this author argued that a Florida trial court judgment against tobacco companies was a poster child for national class action reform. That judgment was struck down in its entirety by a panel of Florida's intermediate appellate court. Now Round 3, the final round, of this torts boxing match has just been completed before Florida's highest court. Who won this bout? Though the decision was a mixed one, with both sides able to claim they scored major points, in the end result the plaintiffs may have won a long-term victory.

I've written extensively about the Engle outrage myself, including WSJ op-eds here, here and here, as well as Overlawyered coverage.

The latest AEI Liability Outlook, which has my take on two years of CAFA, is on-line.

Rhode Island lead levels declining

"Elevated blood levels have been steadily declining in the core cities and in Rhode Island over the past decade" reports the state, which is good news, though news completely contrary to the claims made when litigating against lead paint companies.

Relatedly, Richard Faulk and John Grey have written for WLF on the abuse of nuisance law that occurred in Rhode Island.

Cameras in NY courtrooms?

One apparent factor behind the renewed push: newspaper websites need more video content. The sponsor, State Sen. John DiFrancisco (R-Syracuse), claims lawyers don't alter their presentations because of the camera's presence. Voting against the bill in committee were an unlikely couple, Dale Volker (R-Erie) and Thomas Duane (D-Manhattan). More at Overlawyered here, here, and here.

In a Harvard Law Review article otherwise about a judicial disagreement between Judges Posner and Easterbrook on the scope of fiduciary duty to minority shareholders, J. Mark Ramseyer writes:

By all accounts, Japanese judges are relentlessly honest, and among the smarter members of the bar. Yet they work within a judicial bureaucracy that rigidly rewards conformity � and conform they do. Hired in their late twenties, Japanese judges are regularly evaluated by senior judges in the judicial personnel office. Those senior judges then decide which judges to promote, which to stall, and when necessary (it rarely is), which to fire. Judges who work hard, who clear their dockets quickly, and who do not make waves earn regular promotions. They climb the pay scale quickly and obtain postings in the most desirable cities. The heterodox wallow in undesirable posts at low pay.

The result is an institution that does not work perfectly but that does facilitate dispute resolution more effectively than American courts do. The courts do not attract or encourage creative minds, but that is the point. In the vast majority of real and potential disputes, the law that applies would be easy to predict if judges did not � and in Japan they do not � try too hard to improve the world. And if parties could predict it, they could and would � and in Japan they can and do � settle their disputes out of court in the law�s shadow and pocket the fees they would otherwise pay their lawyers.

A provocative Ramseyer conclusion:

Judges may enjoy creating better rules, but judicial experimentation necessarily makes it harder for disputants to predict what judges will do. An efficient legal system is one that disputants can avoid through settlement. To do so, they need courts that operate rigidly and mechanically � and judges who abandon any intellectual ambitions and resign themselves to working as lower-level bureaucrats. For that to happen reliably, judges need to suffer career penalties for deviating from established rules. We lack ways to impose such penalties in the United States. But appointing judges with the intelligence and creativity of Judges Easterbrook and Posner is � not to mince words � exactly what we should not be doing. As judges, they simply do too much: they muddy the law by trying to fix it, and they worsen the law by encouraging (through example) their less talented peers to do so as well.

Officials at the university said it matters not that an advisory commission has recommended against their plan for a fifth UC law school, to specialize in "social justice" and related issues; they're going full speed ahead on it. Earlier: here, here and here.

Texas's welcome mat for doctors

San Antonio Express-News via Texans for Lawsuit Reform:

The Texas Medical Board, which licenses and regulates the practice of medicine in the state, has a problem. And as problems go, it's a relatively good one for Texas to have.

So many doctors are seeking licenses to practice in Texas that the board is facing a certification backlog. As Express-News business columnist David Hendricks recently detailed, the board processed 2,446 licenses in fiscal year 2001. In fiscal year 2006, the number jumped to 4,026....

The medical malpractice debate is normally an economic and legal abstraction. But the experience in Texas provides hard evidence that reasonable reforms can have real world consequences that improve access to health care....

In Austin, legislators are considering an emergency appropriation of $400,000 for the medical board to clear the licensing logjam. That's a small investment to make to get more doctors working, employing staff, paying taxes and treating patients in Texas.

Medical liability insurance rates have dropped by nearly 30 percent since Texas voters approved Proposition 12, the paper says.

The Mayor's attempt to export New York City's law of gun retailing to places like Virginia and Georgia is not going unresisted, notes Michelle Malkin.

Cornerstone Research finds contrasting trends at work on securities class action settlements (press release, full report, both PDF) and on new filings (press release, full report, again both PDF).

Vioxx litigation update

  • Merck wins the Schwaller case in Madison County. The plaintiffs' expert, testifying that Vioxx caused Patricia Schwaller's fatal heart attack, forgot to mention her diabetes and 280-pound/5'2" frame on his direct examination, which lost him credibility with the jury. [Bloomberg; Madison County Record]
  • Merck asks federal judge to dismiss securities case: case was brought in 2003, and risks of Vioxx were disclosed in March 2000 when Merck learned of them. [Bloomberg]

Scientific-Atlanta entered into a deal with Charter Communications that permitted Charter to inflate their revenues; Charter stockholders sued S-A, and the Eighth Circuit upheld a dismissal, noting that the Supreme Court has strictly circumscribed the scope of civil securities-law enforcement. The Supreme Court has granted certiorari. The case has significance because of the similar Fifth Circuit decision in the Enron litigation, which we discussed Mar. 19. [AP/Law.com]

I've long complained that the Tillinghast/Towers Perrin estimate of the cost of the tort system is a fundamental underestimate because of its lack of measurement of second-order effects.

I haven't had a chance to analyze the PRI report in detail, but their figure of $865 billion/year (6.6% of the GNP), which includes the effect of the tort system on safety, employment, innovation, rent-seeking, and rent-avoidance, is around the right order of magnitude, though it's a little much to expect three-digit accuracy from the estimates the study makes. (Cross-posted at Overlawyered.)

Trent Lott lawsuit against State Farm

ABC News correspondent John Stossel returns in our latest featured column, which explores the cost of vaccine alarmism and leads off with a mention of America's Most Irresponsible Public Figure (r), RFK Jr.

One lawyer's conscience on fees

Norm Pattis in Connecticut continues to raise uncomfortable questions about legal practice (Mar. 18 -- scroll to comments):

There are limits to what is reasonable. I don't see a million dollar fee for a bad injury that settles as reasonable. Many personal injury lawyers cream skim, focusing only on cases of great value and enormous fee. I am offended by that.

I am very ambivalent about living off the misfortune of others. No question about it. I simply try not to gouge folks. I also do not practice in the area of personal injury or medical malpractice, where fee-gouging appears to be the highly lucrative norm.

I am still uneasy, though. So I try not to gouge folks. A simple enough distinction for most folks to grasp...

Reversing a trial judge, the Second Circuit ruled in a case called Tomassi v. Insignia Financial Group that a supervisor's stray remarks could cumulatively amount to proof of age discrimination. Day Pitney Employer's Law Blog has a summary.

This Friday, March 30, I'll be a panelist at an all-day conference on "Litigation and Tort Reform" presented by the Searle Center at Northwestern Law in Chicago. The conference was organized by Henry Butler, who is professor of economics and of law at Chapman University and directs the Judicial Education Program at the AEI-Brookings Joint Center for Regulatory Studies. I'll be commenting on a paper by Victor Schwartz about state judicial invalidation of liability reform statutes. Bill Childs also gives the program a mention.

Bogus experts

David Bernstein @ Volokh is collecting examples.

Late last year, as readers may recall, the Oklahoma Supreme Court struck down its legislature's enactment of a statute requiring that medical malpractice complaints be accompanied by a "certificate of merit" from a reviewing physician. We noted that although the certificate-of-merit idea is relatively weak stuff as liability reforms go -- even John Kerry and John Edwards saw fit to endorse it -- organized trial lawyerdom still seems intent on blocking it wherever it raises its head. Now the Arkansas Supreme Court, citing its Oklahoma colleagues with evident approval, has struck down the portion of its legislature's certificate-of-merit statute that calls for the dismissal of an action filed without such a certificate. In this case, the court's grounds for invalidating the rule was that it was procedural in nature, and the Arkansas constitution (supposedly) rigidly excludes the state legislature from interfering with matters of civil procedure. John Day comments here, and the opinion in Summerville v. Thrower is here (PDF).

Around the web, March 26

  • Per survey of public, it's not uncommon for physicians to overtreat or overprescribe [WSJ/Harris via The Antidote and KevinMD]

  • Hit parade of successful plaintiff's securities-suit firms [Lattman]

  • Recycled charges about feds "throwing" tobacco suit: what WaPo left out [Adler @ Volokh, NY Sun]

  • Conrad Black trial coverage continues [Steyn, Margolis, Worthington]

  • Mississippi insurance commissioner, a Democrat, denied renomination; did he annoy certain high-ups there? [Rossmiller]

  • France to allow class actions? Maybe not so fast [AP/Law.com]

  • Whenever possible go outside the experience of the enemy: Hillary and Obama shared youthful attraction to Alinsky organizing [Lizza @ TNR, Geraghty @ NRO, WaPo]

  • Step right up, folks, and sue Kaiser Permanente [law firm website via MedPundit]

After a two-month trial, a California judge has ruled that tuna cans do not need to carry warnings about minute traces of methylmercury in the fish, nearly all of which is naturally occurring. The state of California is appealing the ruling, putting a smidgen more strain on the "Jerry Brown is going to be different from Bill Lockyer, just you wait" thesis. Cliff Hutchinson has details.

Volunteer physicians in Alabama

"Long hours and a perception that nonpaying patients are more likely to file malpractice lawsuits are cutting into the number of doctors willing to donate time at the state's 15 free health clinics," according to physician Tim Denton, who volunteers at the clinic in Birmingham's Avondale community. That's despite a 2000 law which was intended to provide liability protection for medical Good Samaritans but which, backers think, may not have gone far enough to set minds at rest. The Birmingham News has details.

We reviewed the judgment against Bank of America Oct. 27 and noted its reversal Nov. 27; now, the California Supreme Court will cast an eye on Miller v. Bank of America. [Examiner]

The Associated Press reports that a federal District judge has ordered a new trial because of abusive closing arguments by plaintiffs' counsel, after a $15 million judgement in a Ford Explorer rollover case.

Tulsa Jeweler Kevin Moody lost control of his 1995 Ford Explorer while he was passing another vehicle while speeding, in a no-passing zone on a curve, according to court records. The sport utility vehicle left the road and rolled at least 1 1/2 times, coming to rest on its roof. Moody's young son died in the crash.

Moody's lawyer told the jury that the Explorer's roof collapsed when the vehicle went through what he termed a relatively slow, easy roll. In his closing argument, the lawyer said the part that gave way was made of "spindly little pieces of metal engineered down to an unacceptable level to save money."

Ford contends that the vehicle actually exceeded federal standards. Ford's lawyer told the jury that Mr. Moody made "bad decisions that had fatal consequences."

On Jan. 5, U.S. Chief District Judge Claire Eagan added more than $3.3 million in prejudgment interest on the $15 million verdict.

But this week Judge Eagan wrote in her order for a new trial that personal attacks on Ford witnesses and attorneys, "along with plaintiffs' counsel's improper conduct, leaves this court with a firm conviction that Ford did not receive a fair trial."

During his closing arguments plaintiff's lawyer "blatantly suggested that Ford Explorers were responsible for 10,000 deaths per year, and he had the temerity to compare this improper suggestion to the number of deaths in the Iraq War," wrote the judge. This statement alone likely prejudiced Ford's case and that because it was made in the final portion of Brewster's closing argument, "Ford had no opportunity to respond or cure any resulting prejudice."

New Jersey Law Journal has a handy guide to when employees are, and aren't, inviting future wage-and-hour-law disasters for their bosses by checking their BlackBerries at 10:45 p.m.

The Lopez Torres lawsuit, which seeks to overturn New York's current system of nominating trial court judges by political party convention, has met with success so far in federal courts (see Sept. 7, 2006). There don't seem to be many New Yorkers eager to defend on principle today's practice of clubhouse selection of judges, with its sometimes-scandalous results. Supporters of the lawsuit have been circulating a ten-page summary of their case which advances an additional argument likely to be of particular interest to readers of this site:

2. The system results in clubhouse justice.

The unaccountable political party leaders in New York City have created a tort liability system that studies have found inhospitable to business. According to the U.S. Chamber of Commerce, the Greater New York Metropolitan Area is one of the five jurisdictions in the nation with the �least fair and reasonable litigation environments,� just behind the infamous Madison County, Illinois. The Pacific Research Institute ranked the state 48th in its 2006 U.S. Tort Liability Index. And the American Tort Reform Association placed New York City on its list of areas that �have characteristics consistent with Judicial Hellholes.� For judicial selection in New York, loyalty to the political party leadership counts for more than quality.

The Brennan Center -- flagship of the liberal Left in New York legal politics, and a key backer of the lawsuit -- posts nearly the entire text of the summary on its site (PDF), but for some reason omits the paragraph that discusses the liability climate and quotes the views of the U.S. Chamber, ATRA, etc. C'mon, Brennanites, don't throw away some of your best arguments!

On Feb. 12, Chief Deputy AG Fran Hughes told the [West Virginia] Senate Finance Committee that the office will stop giving away money from settlements of the state's lawsuits. [Attorney General Darrell] McGraw's office has drawn criticism over that practice, mostly because the critics say the Legislature is the only state government entity authorized to distribute public funds.

"This is not going to repeat itself in the future," Hughes assured Senate Finance Committee chairman Walt Helmick during the Feb. 12 meeting. "We are not interested in being the center of controversy."

One week later, McGraw's office distributed part of an installment payment in a settlement with Purdue Pharma to local counties over bipartisan opposition. (Chris Dickerson, Legal Newsline, Mar. 1; West Virginia Record, Mar. 8). Earlier discussion: Feb. 25, 2006.

Tony Sebok has the story of the German Constitutional Court decision, which asks the legislature to create exceptions to the country's ban on contingent fees.

However, as Sebok also notes, Germany already permitted third-party litigation financing that created financial arrangements that were economically identical to plaintiffs as contingency fees, so questions whether a change in the law will really have any effect.

According to the Wall Street Journal, the SEC is studying regulating so-called "empty voting" -- that is, corporate voting without owning shares. This would move the federal government into another area formerly controlled by state corporate law. This is part of the attack on hedge funds, fueled by the fairy tale of "shareholder democracy." Here's an analysis of what's really at stake.

Rudy remembers NYC hospital lawsuits

From Mayor Giuliani's remarks during Q-&-A at a Hoover Institution speech last month: "I ran a hospital system, the second- or third-largest in the country. . . . We were paying out $500 million in claims, and settling claims that we just had to settle for amounts of money I would never thought you should give, and I'm a lawyer. That's what I really know about, even more than foreign policy."

Per the Sacramento Bee:

The California Postsecondary Education Commission voted 8-3 Tuesday against construction of a $70 million law school at the University of California, Irvine.

The vote apparently deals a severe blow to plans for the proposed 92,000-square-foot facility to accommodate 600 law students.

...In rejecting the Irvine project, the commission concluded that existing schools supply more than enough lawyers to meet market demand, [commission director Murray Haberman] said.

California currently has 51,151 more attorneys than needed to accommodate market demand, and the excess will rise to 57,422 by 2014, the commission report said.

Earlier: here and here. And veteran Sacramento Bee political columnist Dan Walters dismisses the scheme (via Lifson) as "institutional aggrandizement" born of "arrogance" and an "obvious roll of the pork barrel".

Individual voir dire

Peter Lattman reports:

[Joe Nacchio's attorney Herb] Stern had asked the judge for permission to question individual jurors, a process called �individual voir dire.� The government asked the court to reject Stern�s request. Stern is the author of an eight-volume treatise, �Trying Cases to Win.� Wrote the government:
There are excellent reasons for not allowing counsel to conduct individual voir dire, as it is a well established technique for coloring jurors� views about the case. See, e.g., Herbert Stern, Trying Cases to Win: Voir Dire and Opening Argument, at 473 (1991 ed.) (explaining that one of the purposes of the voir dire is �to color jurors� views about the case, to inoculate them against your difficulties, to enlist them with your strengths,� and observing that this practice �is universally condemned in law books as illegitimate even as it is universally practiced in the law courts�); id. at 504 (suggesting that in voir dire, the lawyer should �advocate your cause and begin to influence the panel�). Accordingly, the government submits that no forthwith hearing is necessary.

(A "forthwith hearing" is a strange Colorado-specific turn-of-phrase for a hearing not in the ordinary course. I'll leave the etymology to others.)

"Second Thoughts on Breasts"

At American.com, Amity Shlaes writes on the breast implant fiasco:

But to others, exoneration by simple proclamation was insufficient. And they, unlike the anti-implant attorneys, will not have their day in court. Hearing the FDA�s news, John Walter says, �Most of us who were involved in the past said, �Where is the apology?�� Larry Wilson, the reporter, compares Dow Corning to Ray Donovan, the secretary of Labor under Ronald Reagan. Donovan was exonerated by a Bronx jury and three separate independent-counsel investigations of possible links between his company and the Mafia. After it was over, Donovan famously said, �Which office do I go to to get my reputation back?�

Scientific innovations can be controversial, and Americans will always raise legitimate concerns about their safety. But we need also calculate the price tag that arbitrary regulation, driven by fear and greed, imposes. Investors will want to offer their own version of the Donovan question: Where do I go to get my equity back?

�It's out of a John Grisham novel�

American.com's David Robinson interviews me for a podcast on the Vioxx litigation. The irony of this happening less than 48 hours after the great Virginia Postrel extensively quotes me ragging on video-blogging does not escape me. (cross-posted at Overlawyered)

Global warming litigation, four ways

According to this New Jersey Law Journal contribution by Stuart M. Feinblatt and Monique Cofer, both of Sills Cummis Epstein & Gross, promoters of greenhouse-gas litigation have pressed into service four main bodies of law: the Clean Air Act, National Environmental Policy Act, state environmental law, and perhaps most ambitiously, nuisance law. "Given the wide range of people potentially affected by environmental conditions, efforts to certify class actions are inevitable." Three key defenses? Political question/judicial competence concerns, standing, and causation. (earlier)

Featured discussion wraps up

Our thanks to law professors Michael Krauss (George Mason) and David Wagner (Regent) for their scintillating discussion of the Supreme Court's ventures in finding what limits, if any, the Constitution places on punitive damages. Michael is well known to readers of this site for his posts on a variety of liability issues, while David's blog is the celebrated Ninomania.

"Capital Complaints"

AEI's Peter Wallison in the Wall Street Journal on Sarbanes-Oxley and securities class actions:

Foreign companies are still coming to the U.S. to raise funds, but much less so in the public securities markets where class-action liability lurks. In 2006, for example, for the first time, more equity financing was raised in private transactions under the SEC's Rule 144A ($162 billion) than was raised in IPOs on the NYSE, Nasdaq and the Amex combined ($154 billion).

So what are the benefits of the class-action litigation system? Precious little. Companies are often compelled to settle meritless class actions in order to avoid even more costly legal fees and drains on management time. Class actions do not always punish the actual wrongdoers, who are often indemnified by their companies or covered by insurance. And with recoveries averaging 2% to 3%, class actions don't even compensate the people who actually suffered losses--the defendant company's settlement is in effect a transfer to the complainants and their lawyers from the innocent long-term shareholders of the company. Perhaps most significant of all, a single successful class action judgment could result in the destruction of one of the Big Four auditing firms--a catastrophic loss for the global financial community.

With so little to recommend them, why have securities class actions survived for so long? One reason may be a misperception that they are part of the pattern of the securities laws. Some people even think of them as constitutional rights. But this is wrong. A private right of action under Rule10b-5 was created by a court in 1946, and since then Congress and the Supreme Court have been trying unsuccessfully to place some limit on them. (Congress has authorized private rights of action under some sections of the securities laws, but not for the section on which Rule 10b-5 was based.)

Yet the odd mystique of this costly compensation system lives on. Despite all the reports indicting securities class actions, only Mayor Bloomberg and Senator Schumer called for more than a mere study: "The SEC," they said "should make use of its broad rulemaking and exemptive powers to deter the most problematic securities-related suits."

It's doubtful that the SEC will pick up this baton, but even if it did history shows that courts cannot discipline themselves to distinguish effectively between the well-founded suits and the "problematic" ones. The only solution is restoring what Congress originally intended--enforcement of Rule 10b-5 only by the SEC. The fact that a Democratic senator has stepped forward to press this issue should encourage those who know what the problem is but have thus far been reluctant to address it.

Wallison has more detail in the March Financial Services Outlook.

A note on Katrina coverage suits

I notice that at the trial-lawyer-defense website TortDeform.com, Cyrus Dugger takes issue with the statement in my recent Times (U.K.) op-ed that in Mississippi, "insurers besieged by the state's politico-legal tag teams are offering billions to settle Katrina flood-damage claims, notwithstanding clear flood exclusions in their policies." Let me clarify, then. Since their initial attempt to knock out flood exclusions fared badly in court, Hood and Scruggs are no longer characterizing the claims as being for flood damage which insurers must pay for notwithstanding the exclusion. Instead they are presenting them as "my house is gone and you can't prove it wasn't wind" claims. Besieged by the aforementioned tag-teams, insurers are offering billions to settle claims which both sides know perfectly well were caused by the storm surge rather than wind, even if for purposes of litigation Scruggs and Hood pretend otherwise. In other words, I think NYT business columnist Joseph Nocera is exactly right in writing recently that this is not a case of "reasonable people contesting water versus wind", as goes on elsewhere in insurance coverage litigation, but rather that "in Mississippi, the insurance contract has been largely tossed aside by the power of litigation" and that claimants there are "trying to abrogate the terms of the contract they�ve signed with their insurers. It is hard to see how an economy can function if contracts are not upheld."

Dugger also falsely attributes to me the position "that even if the home is damaged by wind, if the already damaged/destroyed home is later further damaged by flooding, even hours or perhaps days later, the insurance company no longer has to pay ... anything". He does not document where I supposedly said this, not surprisingly since it is not in fact a position I have ever taken. So far as I can recall, I have referred in print only twice to this particular argument for denying coverage, here (a brief and neutral description, before I read Judge Senter's opinion) and here (two days later, where I described such a grounds for denying coverage as one that was "strained" and would be "harsh if not fraudulent" in the context of the Nationwide policy, and pointed out that Nationwide itself was not asserting a right to deny coverage on such grounds to Katrina victims).

More: David Rossmiller contributes a calm and informative discussion of "anti-concurrent" clauses and their interpretation.

Welcome Chicago Tribune readers

Today's Trib reprints my Times (U.K.) piece urging caution about journalists' claims that business has "trounced the trial lawyers". (Walter Olson, "Trial lawyers not trounced yet", Mar. 20)(cross-posted from Overlawyered).

Around the web, March 20

Updating some ongoing Point of Law stories:

Steyn on Conrad Black trial

Following up on Ted's post of yesterday, I notice that Maclean's magazine is having Mark Steyn blog the trial from Chicago, which promises to make for lively reading. And before leaving the subject of Steyn's earlier piece, I was struck by this passage:

Richard C. Breeden, the court-appointed "corporate monitor" at the collapsed WorldCom and an "adviser" to the special committee of Hollinger International, is on course to become the first corporate governance billionaire. ...Who knew there was so much money in complaining about the excessive salaries of American executives? As Olga and Adrian Stein note dryly in Books In Canada, it is "a remarkable achievement to have turned the knotty subject of ethics ... into a financial fortune."

Mr. Breeden was formerly and famously the chairman of the U.S. Securities and Exchange Commission. Today he presides over the half-billion-dollar corporate governance hedge fund at Breeden Capital Management of Greenwich, Conn., which is registered as an investment adviser to Breeden Partners Ltd. of the Cayman Islands. Breeden Partners has approximately $1 billion in assets. The Cayman Islands is in the British West Indies and thus beyond the jurisdiction of Mr. Breeden's successor at the SEC.

I hasten to add I have nothing against Richard Breeden. And I certainly have no desire to attract his attention in any way whatsoever. But it is striking that all the phrases that set off alarm bells in relation to Conrad Black -- "excessive compensation," "Cayman Islands," "lavish personal tastes" -- apply to Mr. Breeden equally and then some. And Mr. Breeden doesn't create any goods, doesn't publish any daily newspapers, doesn't produce anything except internal memos. It's four years since Hollinger put him on the payroll at 800 bucks an hour. That seems an awful lot to pay for a few sharp lines about Barbara Amiel expensing her tips to the doorman at Bergdorf Goodman. The tip was $20. Mr. Breeden earned that in the first minute-and-a-half of his labours for Hollinger.

More: Returning to the Black trial itself, there seems to be some very funny business going on involving someone's having allegedly posed as a juror for purposes of confessing bias: Steyn blog, Worthington.

New York Assembly Speaker Sheldon Silver's law firm, Weitz & Luxenberg, says it's just a coincidence that Erie, Schenectady and Oswego counties, which must go hat in hand to the Speaker for appropriations, hired the law firm of which he's of counsel to pursue Medicaid drug reimbursement suits against pharmaceutical companies for a 20 percent share of the proceeds. More on pharmaceutical pricing actions here, here, here, etc.

Peter Lattman is reporting that the Fifth Circuit has struck down the class certification seeking to hold bystander banks liable in the Enron collapse (Feb. 9 and links therein). "As we have recognized, class certification may be the backbreaking decision that places 'insurmountable pressure' on a defendant to settle, even when the defendant has a good chance of succeeding on the merits."

But perhaps Lerach can now bring a lawsuit on behalf of the shareholders of the banks that paid billions of dollars of protection money in response to the extortionate lawsuit. He'll appeal to the Supreme Court, but the money he has already collected from other deep-pocket bystander codefendants is unaffected by the ruling.

Update: Press coverage: AP/Law.com; NYT; WSJ; Houston Chronicle; WaPo. The Fifth Circuit decision conflicts with the legal standards of the Ninth Circuit, so there's a decent chance the Supreme Court takes the appeal. (As the joke goes, "This is a petition for certiorari from a decision of the Ninth Circuit Court of Appeals—and there are other reasons for granting the writ as well.") In the blogosphere, Roger Parloff surprisingly comes out on the side of the plaintiffs, perhaps not recognizing that the trial court's exception would swallow the rule. Others: Ribstein; Beck/Herrmann; Hurt.

Update, Mar. 21: More in the blogsophere: Roberts has a good summary; Denniston thinks Supreme Court review unlikely because of developments in the trial court in the cert petition in the Ninth Circuit case of Avis Budget Group, et al., v. California State Teachers Retirement System.

Conrad Black trial

One of the best white-collar-crime bloggers around, Tom Kirkendall, has a roundup of links on the Black trial, including to this Mark Steyn column. I'm staying out of this one: I have colleagues who know Black personally, my old law firm represents clients adverse to Black in civil litigation, and my law-school roommate is the lead prosecutor on the case. I will note, however, that if I were Conrad Black, I'd be awfully concerned about the number of potential jurors who assume someone is guilty just because they made a lot of money, especially given the prosecution's inclination to introduce prejudicial evidence of expenditures. [New York Times; Globe and Mail]

Separately, this Economist commentary piece not only mentions the Black trial, but Larry Ribstein's "Apple rule." (cross-posted at Overlawyered)

[Originally posted Sat. 3/17 11:30 a.m., bumped for Monday readers]

Because the moistly admiring profile that it ran a year and a half ago ($) just wasn't enough, the New York Times was back yesterday with another moistly admiring profile of trial lawyer zillionaire Richard ("Dickie") Scruggs, once again letting Scruggs's contentions pass without challenge on a series of controversial Katrina-coverage questions and for good measure quoting a common-man description of the Pascagoula potentate, by a casino security guard, as "good people. ... If he tells you something, it�s gospel."

Although Scruggs has been making a lot of news in recent days, the Times piece is curiously selective about what it chooses to mention. For example, the profile does not consider it newsworthy that Scruggs is due in court next week to answer contempt charges relating to his handling of much-trumpeted adjustment documents which are said to show that State Farm over-scrutinized claims of wind damage. Those who read a WSJ editorial on Thursday were aware that this coming Wednesday, March 21, federal judge William M. Acker Jr., in Alabama has scheduled a hearing on whether Scruggs should be held in contempt for having arranged with his pal, Mississippi AG Jim Hood, to shuffle some of the papers into Hood's possession in order to evade an injunction requiring their return. The W$J editorial fills in some of the legal and ethical background about the story, which

revolves around E.A. Renfroe, a company with offices in Alabama that was hired by State Farm to send insurance adjusters to evaluate Katrina claims. Two sisters, Cori Rigsby Moran and Kerri Rigsby, had worked as adjusters for Renfroe since the late 1990s. Both had signed employment agreements and codes of conduct promising to protect the confidential information of companies for which Renfroe worked.

Yet around February of 2006, the Rigsby sisters seemed to be thinking of something beyond contracts. According to court documents, they met with Mr. Scruggs (a friend of their mother's) and gave him State Farm documents they'd stolen from work. Mr. Scruggs at this point was working on his civil litigation against insurers, and the Rigsbys started clandestinely working with him. In June of 2006, the two copied 15,000 more pages of claims information and, on Mr. Scruggs's advice, gave a copy first to Mr. Hood and then to Mr. Scruggs. They also went on national television to crow about their theft, and to accuse State Farm of misconduct....

...neither woman went to Renfroe management with their concerns before they stole the papers. Instead, they both took jobs with the Scruggs Katrina Group -- a coalition of trial lawyers suing over the hurricane -- and are now each earning $150,000 a year as "consultants" for advising on insurance litigation.

Nor does the Times mention Scruggs's appearance last week as a witness in the high-profile retrial of his former close associate, leading Mississippi attorney Paul Minor, on charges of judicial bribery. The U.S. Department of Justice offered Scruggs immunity for his testimony; Scruggs chose not to take the proffer of immunity and testified anyway, but the whole episode, with its details of how Scruggs arranged for loans and repayments for friendly judges, might have introduced a jarring note into all the talk about "good people" and taking his word as gospel and so forth.

Times insurance-beat reporter Joseph Treaster does quote a few Scruggs critics, who it seems "sniff" their objections over matters of "decorum". Little or no mention is made of the ethical questions and allegations of orchestrating meritless legal claims that have dogged the Scruggs law practice over its tobacco, asbestos, HMO, and hospital claims (and on and on).

Even assuming Katrina litigation were to be the article's only focus, Friday's beat-sweetener has curious omissions. For example, in a passing mention of "complaints from rival lawyers about potential fees of more than $46 million for Mr. Scruggs and the pick-up team of two dozen lawyers in his Scruggs Katrina Group", you'd think a Times reporter might pursue the question of how well that $46 million figure squares with Scruggs's talk a year and a half ago about how "he did not see the insurance battle as a personal gold mine. He said he was prepared to take as little as 1 percent of any settlement or jury award -- far less than the typical contingency fee of one-third or more". It's hardly as if reporter Treaster could have missed the earlier profile where those lines appeared, since it carried his co-byline. Or is the danger that readers will suspect that they -- and the newspaper's own editors -- are being played for credulous fools by Mr. Scruggs's public relations machine?

P.S. I see Peter Lattman at the WSJ law blog preceded me in taking note of the contrast between the NYT's and WSJ's Scruggses.

Canadian Supreme Court on torts

Our friend Moin Yahya of the University of Alberta calls to our attention the case of Resurfice Corp. v. Hanke, decided Feb. 8, which reversed an appeals court and upheld an Alberta trial judge's dismissal of a case in which the operator of an ice-resurfacing machine sued the machine's manufacturer over an accident that followed the overfilling of its gas tank with hot water, causing an explosion. Excerpt (citations omitted):

While the Court of Appeal would have preferred a different approach to foreseeability, no error of law or palpable and overriding error of fact or mixed fact and law has been established in the trial judge�s approach or conclusion on this issue. There was evidence supporting his finding that H was not confused by the two tanks, notably H�s own admission, and the seriousness of H�s injury and the relative financial positions of the parties were not matters relevant to foreseeability.

With respect to causation, the trial judge did not need to engage in a contributory negligence analysis because he found, not only that H�s carelessness was responsible for his injuries, but also that the alleged design defects were not responsible for these injuries. Further, the Court of Appeal erred in holding that the trial judge should have applied the �material contribution� test to determine causation. The basic test remains the �but for� test. This test ensures that a defendant will not be held liable for the plaintiff�s injuries where they may very well be due to factors unconnected to the defendant and not the fault of anyone. The �material contribution� test only applies in exceptional cases where factors outside of the plaintiff�s control make it impossible for the plaintiff to prove that the defendant�s negligence caused the plaintiff�s injury using the �but for� test, and the plaintiff�s injury falls within the ambit of the risk created by the defendant�s breach of his duty of care owed to the plaintiff.

Prof. Yahya writes: "This case is significant because it is part of a continuing set of cases that have scaled back liability (after an earlier decade of expansion). Earlier, as Walter had noted on Overlawyered, they rejected social host liability for alcohol served at a party that resulted in an accident."

Jeff Sovern at the Public Citizen blog notes a New York Times story that Democratic leaders will be pushing a bill "would give borrowers and others the ability to sue the Wall Street firms that package those mortgages and then sell them as mortgage-backed securities, as well as the purchasers of those securities in the secondary market."

This sort of deep-pocket/innocent-bystander legislation is dumbfounding. These mortgage-backed securities consist of hundreds or thousands of mortgages, and the banks receive only a transaction fee for their services. If the process of repackaging means that one is liable for alleged wrongdoing in each and every of the mortgages, it just means that repackaging won't happen any more as due diligence requirements and the risk of litigation for the entire value of the mortgage (plus punitive damages?) make transactions costs skyrocket, which means the mortgage market will become less liquid, which means a tremendous shock to the economy.

Most upsetting is to see that one of the senators behind this is Chuck Schumer. It seems to have taken him less than two months to pull back from his observation that the litigation risks Wall Street faces are unduly damaging the economy, and that what is really needed is to expose them to more parasitic wealth transfers. (And welcome Dealbreaker readers.)

Juror selection

In practice it's a process of deselection, notes this reasonably comprehensive Psychology Today article (via Arts & Letters Daily). My take of a decade ago is here.

From a recent W$J piece on such firms:

National lawyers' associations don't track the number of family law firms that specialize by gender, but at least one father-focused firm can now be found in most of the biggest U.S. cities....

Some legal observers say firms focusing on either men or women can foster confrontation between parents, rather than negotiation of an amicable settlement. "They fuel the gender wars, which is not in the best interest of the children," says Andrew Schepard, a family law professor at Hofstra University School of Law in Hempstead, N.Y.

For a related point deploring the polarization of the bar in other areas of the law, see Charles Fried's point quoted here.

Oxycontin and nuisance

West Virginia's settlement two years ago with Purdue Pharma, maker of the drug Oxycontin, was alarming on numerous grounds; Prof. Childs, pointing to this student note (PDF) by Joseph B. Prater of Northwestern on the affair, observes that the case was "another step in efforts to make products liability cases into public nuisance cases". Guns and lead paint having already been assailed under nuisance theories, he wonders whether other pharmaceuticals will follow.

Around the web, March 16

  • Buffett's Berkshire Hathaway spent $14 million extra on accountants last year because of Sarbanes-Oxley [Carney/DealBreaker]

  • "Human greed has no bounds" says Microsoft, objecting to counsel fees in Wisconsin class action [Koppel/WSJ law blog]

  • Regarding that cy pres-funded antitrust documentary: c'mon, David, winning an award doesn't mean it's not propaganda [Giacalone; earlier post here]

  • Class-actioneer Michael Hausfeld hits London in a whirl of publicity [Times Online, Kranenburg]

  • Sure, cardiac catheterization can cause chronic mental illness. What do you mean you're skeptical? [KevinMD, WV Record]

  • Layoffs at prominent asbestos/toxic tort firm Baron & Budd [Texas Lawyer]

OT: Bernard Lewis at the AEI Dinner

Jacob Weisberg makes much of a single sentence in Bernard Lewis's one-hour-plus address at the AEI Annual Dinner, which I attended last week.

In a disquisition lasting about an hour where he discussed the history of Islam's relationship with the Western world, Lewis spent a paragraph where he called the Crusades "a late, limited and unsuccessful imitation of the jihad," and noted that it was a ludicrous example of "political correctness" for John Paul II to apologize for them given that they were a response to Islamic aggression. Weisberg says this line drew "applause," which is technically true—there was scattered applause in a ballroom of over a thousand people, though none at my table, where I quizzically looked at my date and laughed "Are they applauding the Crusades?!"

Anyone who knows the dynamic of lengthy alcohol-fueled late-night pre-dinner lectures knows that a single audience member can generate polite applause from dozens or hundreds of people whose attention had been distracted because of the mechanism of the tipping point. (In my younger, more mischievous, days, I would do that myself at speeches I attended in college.) Weisberg draws a heck of a lot of inferences out of that scattered applause and tries to tar an entire political spectrum with the Crusades. Neil King's account on a WSJ blog is even more slanted, but at least he appended a correction, after Claudia Rosett took him to task. Let's see if Weisberg does the same.

Dunn charges dropped

"The state of California's case against Hewlett-Packard executives, brought last year as a headline-grabbing prosecution of corporate malfeasance, ended with a whimper Wednesday when a judge agreed to dismiss charges against the former board chairwoman and refused to impose jail time on three others." (The Recorder). San Jose Mercury-News:

Let's just say it straight out: The prosecution of ex-Chairwoman Patricia Dunn and three other defendants in the Hewlett-Packard corporate-espionage case covered the California Attorney General's Office in the kind of mud that's hard ever to wash off.

The chief culprit in this fiasco is ex-AG Bill Lockyer, who got personally invested in the HP case when he was running for treasurer as a termed-out lawman in the fall last year.

On some of the weaknesses in Lockyer's case, see this commentary in the Legal Intelligencer by white-collar defense attorney Christopher R. Hall.

Update: Roger Parloff comments.

In other Vioxx news

  • A Texas judge failed to rule on Merck's motion for a new trial after revelations that a Garza juror who had "interest-free loans" from the plaintiff contacted her several times during the trial. It will be up to the Texas appellate courts to correct the miscarriage of justice. [AP/Law.com]
  • In Madison County, plaintiff's lawyer Andy Birchfield uses the "Dodgeball Vioxx" canard in arguing that Vioxx caused 5'2", 300-pound diabetic Patricia Schwaller's heart attack. [Madison County Record]
  • Meanwhile, the AHA warns about the use of all NSAID pain-relievers. [WaPo]

Bumped for update: Note to readers, March 15: On March 14, I wrote a post about problems with the Humeston trial. A plaintiffs' attorney has written in to challenge the factual accuracy of the first and second bullet points. In an abundance of caution, and as part of my commitment to accuracy, I retract these points until I can definitively verify them (or refute them) with trial transcripts or post-trial briefing. I'll rewrite the post in a couple of months; if it differs substantively from my March 14 post, I'll let people know.

Whether or not the particular allegations made for a few hours in the March 14 post were accurate, I still find the Humeston result problematic for multiple reasons that I've discussed in earlier posts, inter alia:

  • NEJM's publicity stunt "Expression of Concern" that was the justification for Judge Higbee throwing out the original defense verdict was not material to the causation question that caused the jury to reject Humeston's claims in 2005. Indeed, it wasn't material, period.

  • The procedural consolidation of multiple cases and improper bifurcation was designed to unfairly prejudice defendants.

  • The plaintiffs' evidence of specific causation was conclusory and not scientifically valid—even if one accepts the questionable claim that Humeston was taking Vioxx that contradicts the documentary evidence that he was not.

  • The $47.5 million damages award for a non-fatal and minor heart attack demonstrates a jury that was swayed by passion and prejudice, rather than reason.

  • The fact of FDA approval without an FDA finding of fraud on the agency should completely preclude the litigation.

The plaintiffs' attorney complains that I did not disclose that I represented Merck in 2005. I have disclosed that on this blog and elsewhere (including the biography on the AEI web site) on multiple occasions; I don't believe that I need to include that disclosure every time I post, but I do so again here. As with all of my posts, I speak for myself, and not for any party or its attorneys.

One-way fee-shifting

The Colorado Civil Justice League correctly identifies its unfairness:

The CCJL would like to thank Chris Ottele from the law firm of Holme, Roberts and Owen for his tireless work helping us negotiate a satisfactory settlement over a particularly troubling employment litigation bill, HB1247. As we notified you last week, this bill originally created treble damages for wage-claim violations and eliminated the right of employers to seek attorneys' fees and court costs when they prevailed in a case.

The CCJL has always insisted on a "level playing field" in fee-shifting arrangements - both sides should be able to recover fees and costs or neither side should - and we will clearly need to keep reminding legislators why that is important. Permitting only employees to recover costs and fees paints a litigation target on the backs of Colorado's employers. It is all upside and no downside for employees who want to sue their bosses. One-way fee shifting eliminates the only meaningful disincentive to filing meritless claims.

More here and here and, at Overlawyered, here, here and here.

More stirrings on health courts

Philip Howard's organization Common Good is reporting (and is itself at the center of) a flurry of activity on the concept, including a grant from the Robert Wood Johnson Foundation, and legislative stirrings in Maryland, Virginia and elsewhere. More details at the Common Good site, including FAQ and brochure.

Blawg Review #99

The latest edition of the weekly carnival of law-related blog posts is at Matt Barr's Begging to Differ. Last week's was hosted by Susan McDonald at Legal Research & Writing, and linked to our summary of the Behrens/Crouse article on the direction of civil justice reform. And the week before, Blawg Review #97 appeared at Health Care Law Blog, published by Charleston, W.V. lawyer Bob Coffield. All are well worth checking out.

Microsoft settles Iowa class action

Last fall we noted the extravagant plaintiff demands in this tag-along case, which the software giant has now settled nearly three months into a trial. "Details of the settlement won't be announced until a preliminary hearing on April 20." (Des Moines Register; Lattman).

Has the U.S. Supreme Court wrongly ventured into the realm of substantive due process in its attempt to oversee excessive punitive damage awards? Will the Court's latest closely divided decision, in Philip Morris v. Williams, add any clarity to the confusing law of punitive damages? Law professors David Wagner (Regent) and Michael Krauss (George Mason) will be batting around those topics, and others, in our newest Featured Discussion, now underway.

With its own bipartisan commission, the U.S. Chamber of Commerce has weighed into the debate on capital markets competitiveness, following the Paulson report, Bloomberg/Schumer, and others. The report and executive summary are here; blog reactions and comments from Prof. Bainbridge, Werner Kranenburg, Securities Law Prof Blog, and SOX Center.

Subprime collateralized debt

Larry Ribstein lets fly another broadside at the NYT's Gretchen Morgenson, this time channeling Calculated Risk.

More: Felix Salmon doesn't like Morgenson's analysis either (via Carney). And Bear Stearns, one of whose research analysts got slammed in the piece, complains of "complete misrepresentation".

Humeston wins Vioxx retrial

(Bumping March 12 3:41 PM post to reflect punitive damages verdict and additional press coverage.)

[New Jersey Law Journal; Bloomberg; AP/Forbes; Reuters; Reuters; WSJ Law Blog]

Both the liability determination and the $20 million "compensatory" damages verdict are divorced from reality—and the jury has yet to assess punitive damages after a finding that Merck's actions were "willful and reckless." (Later in the evening, the jury also awarded $27.5 million in punitives.) Humeston took Vioxx for two months (along with large doses of ibuprofen), was overweight, had high blood pressure and cholesterol, but blamed on Vioxx the heart attack he had moments after receiving a letter from the Postal Service suggesting that his disability claim was fraudulent. There was little evidence that the heart attack adversely affected his life relative to other health conditions he had. But this jury, unlike the first Humeston jury, consisted mostly of uneducated casino workers. Earlier Humeston v. Merck coverage, and we discussed the first trial verdict on November 3 and November 4, 2005. An honest appellate court will reinstate the first verdict, as Judge Higbee had no legitimate basis for overturning that jury determination. This is the fifth plaintiffs' jury verdict out of twenty-nine Vioxx cases that had been ready for trial (not including two pending mistrials), but with millions of dollars awarded each time, plaintiffs' attorneys can keep batting below the Mendoza line and make a sizable profit—especially when a couple of defense product liability verdicts in New Jersey from out-of-state plaintiffs also resulted in "consumer fraud" plaintiffs' wins under a strange view of New Jersey choice-of-law and consumer fraud law that entitled plaintiffs to seven digits of attorneys' fees for winning $45 or so at trial.

The miscarriage of justice is so routine that most papers are covering the story with only a paragraph or two.

Merck announced it would appeal.

But what is this going to do to the business plan of the silicosis-litigation bar?

The Pennsylvania Department of Environmental Protection has fined a New Jersey medical screening company $80,500 for X-raying potential silicosis plaintiffs at three Pennsylvania motel parking lots without prior written authorization or the presence of a licensed medical practitioner.

The crackdown follows allegations that Beaumont, Texas-based Provost & Umphrey, of asbestos and tobacco fame, has been using mass screenings to build an inventory of silica cases. Peter Geier at the National Law Journal has the story here. More on the silicosis-screening scandal here, here, here, here, here, here, and many others.

Our newest entry in the Featured Column series explains the astounding growth in entrepreneurial litigation under the Alien Tort Statute, which sometimes seems to operate as a charter for lawyers to bring all the far-flung grievances of a troubled world into American courts for cash settlement. "Consider one class-action lawsuit, in which a plaintiffs firm sued Deutsche Bank on behalf of an African tribe which suffered atrocities committed by imperial Germany in the 19th century. ...Cases involving wholly foreign events routinely consist of tens or hundreds of thousands of 'John Doe' plaintiffs who reside in remote locations as distant as Sudan and Pakistan. The size of the class of defendants has also grown to 500 or more deep-pocketed individuals or companies."

Authors Joseph Finnerty III and John Merrigan, both of DLA Piper, put their finger on the essential arrogance of the statute's expansion: "Imagine our justifiable indignation if courts in Japan, France or Russia determined they had jurisdiction over alleged wrongdoing by Americans, in America, against other Americans. It takes a thoroughly arrogant view of the world -� call it legal imperialism �- to presume that our courts should be the arbiter of problems everywhere, whether or not the problem had anything whatsoever to do with the U.S."

Whole thing here.

An Indianapolis law firm reports that the Indiana Supreme Court is currently considering a case that could greatly impact directors who sit on corporate boards.

In September 2006, an Indiana appeals court affirmed a trial court judgment assessing personal liability upon a Toronto resident, Ralph Lean, who served as an outside director of a Canadian company. Mr. Lean, at his very first board meeting, was asked to approve management�s proposal that the company acquire a private Indiana company by a stock-for-stock exchange; the acquisition closed three days after the board meeting. When their investment in the Canadian company soured, the Indiana shareholders alleged that the securities were �sold� by the Canadian company in violation of registration requirements of Indiana securities laws, and that the Canadian company had not disclosed certain information that was material in violation of disclosure requirements of the Indiana securities law. Mr. Lean contended that outside directors typically assume that management, legal counsel, and the due diligence process have taken care of any issues regarding securities compliance.

The intermediate appellate court would have none of this. It held that the Indiana statute (which is similar to many other states' statutes) permits an outside director to avoid personal liability for company violations of the registration and disclosure requirements of the Indiana securities law only if he or she can show that reasonable care was taken. By Mr. Lean�s own admission, a single question to other directors would have provided Lean with salient knowledge about the transaction -- so the appeals court saw negligence as a matter of law.

Chrysler hit with $50M punitives

Law.com reports that Daimler-Chrysler has been held liable for $50 million in puntives, on top of the $5.2 million in compensatory damages already decided, in a wrongful death suit filed by the estate of Richard Mraz. Mraz was killed when his twelve-year-old Dodge Ram truck rolled over him. Plaintiffs alleged that a design defect caused the truck's automatic transmission to go into Reverse from Park. Chrysler retorted that "The accident occurred because Mr. Mraz ignored proper safety procedures by exiting a vehicle that was still running, then ... attempting to jump into a vehicle while it was moving." Apparently the jury did not appreciate this claim... and plaintiffs deliberately asked the trial judge to craft jury instructions that took February's Philip Morris ruling into account.

[Further coverage: Ted at Overlawyered -- ed.]

What is tort law for?

Via Bill Childs, here's the SSRN abstract of an article published last year in the Vanderbilt Law Review by John C. P. Goldberg of Vanderbilt, and entitled, "What Are We Reforming?: Tort Theory�s Place in Debates over Malpractice Reform":

This Essay explains why lawyers, policy-makers and scholars interested in medical malpractice reform and tort reform more generally must attend to tort theory. Theory does not provide answers to policy questions. Rather, it frames and guides analysis. The Essay uses two examples to make its point.

The first concerns the phenomenon of �underlitigation,� which is typically treated by commentators as a symptom of tort law's deficiencies as a scheme for deterring undesirable behavior and/or compensating injury victims. This evaluation presupposes, of course, that tort law is properly theorized as a scheme for deterring and/or compensating. An alternative and more satisfactory conception of tort treats it as a law that empowers victims of wrongs to respond to those wrongs by seeking redress from their wrongdoers. Given this alternative conception, we will want to know much more about why malpractice victims tend not to sue. For if they are knowingly and voluntary choosing not to pursue claims that the law has made available to them, then, on a wrongs-and-redress theory, there is nothing at all wrong with the tort system.

The second example concerns the constitutionality of reform measures that cut back on malpractice liability in the name of making medical services more readily available or cheaper. If tort law is conceived as public regulation of bad medical practices - i.e., enforcement actions brought by plaintiffs playing the role of private attorneys general - then courts probably should assess the constitutionality of malpractice reform measures under toothless rational basis analysis. If, by contrast, tort is understood as a law for the redress of wrongs, courts will be entitled to deploy a more robust form of judicial review.

I wouldn't necessarily go along with Prof. Goldberg's second point -- one can envisage the function of a body of law as being the redress of private grievance rather than public regulation and still believe that the legislature and not the judiciary should reign supreme in defining its remedies -- but it's food for thought regardless.

The rewards of break time

Plaintiff's attorneys in a break-time class action against Wal-Mart are asking for more than $46 million in court-ordered attorneys' fees. "Last October, a Philadelphia jury awarded nearly $78.5 million to the class in Hummel v. Wal-Mart Stores Inc., which is comprised of some 186,000 current and former employees of Pennsylvania Wal-Marts who claimed they weren't properly paid for missed rest breaks and off-the-clock work." Further proceedings may result in the payment of additional sums to members of the class, however. Philadelphia's Legal Intelligencer has more.

Parade of new blogs

Legal Times, a big player in the print legal media, has launched The BLT: The Blog of Legal Times. Bruce Carton, who's known for blogging on class actions at Securities Litigation Watch, has moved shop and now blogs under the banner of Best in Class, published by the Garden City Group (via Lyle Roberts). The ever-expanding Law Professor Blogs Network now has an entry entitled Civil Procedure Law Prof Blog, put out by lawprofs W. Jeremy Counseller and Rory Ryan of Baylor. And Robert Ambrogi at Law Technology News recently surveyed a variety of web developments, including a search service with the self-explanatory name of BlawgSearch.

"The Equation"

New York Magazine (via Lawbeat) has a lengthy story on a medical-malpractice trial that settled for $1.5 million before the verdict came in:

Melnick had a different kind of problem, a gambler�s problem. He was highly confident that he would win the case. Still, if Melnick didn�t win, a verdict could run $10 million or more. So the hospital�s insurance managers (Beth Israel is part of a self-insured pool of nonprofit hospitals) had to make a decision not only about whether they were likely to win, but what the odds were. Nassau, from her own experience on the defense side, gets it down to a simple process: �If there might be a $10 million penalty and they think they have a 50 percent chance of winning, offer $5 million.�

The evening before the jury was to be given its charge, the insurance company called Nassau to offer a settlement of $1.5 million. It was, for this kind of case, a pretty good outcome for the hospital. Under the circumstances, it was also a good figure for the plaintiff. Nassau and Torres accepted the offer.

The settlement naturally will confirm many people�s feelings about malpractice law. John Fitzgerald says that he asks for medical records in only one in 50 to 100 inquiries that come into the firm�s referral line. But in the cases in which the firm does go to the step of getting medical records, it files suit in fully half. The math here is clear: Simply delivering a child who is seriously premature and seeing its patient go to a law firm like Fitzgerald�s means that a hospital is already facing a 50-50 chance of finding itself in a position in which a $1.5 million settlement is a pretty good outcome for the defense.

For those keeping score, it's the fifth and largest diocese to go bankrupt so far under pressure from abuse claims, following Tucson, Portland, Ore., Spokane and Davenport, Iowa. (AP, San Diego Union-Tribune). Earlier coverage here, here, here, here, here, here, here, and here.

Todd Zywicki (George Mason and Volokh Conspiracy) has an SSRN paper on the work of the great law-and-economics and public choice theorist. Partial abstract:

[Gordon] Tullock critiques two specific aspects of the common law system: the adversary system of dispute resolution and the common law process of rulemaking, contrasting them with the inquisitorial system and the civil law systems respectively. Tullock's general critique is straightforward: litigation under the common law system is plagued by the same rent-seeking and rent-dissipation dynamics that Tullock famously ascribed to the process of legislative rent-seeking. This article reviews Tullock's theoretical critique and empirical studies on both issues. The article concludes that Tullock's critique of the adversary system appears to be stronger on both theoretical and empirical grounds than his critique of the common law system of rulemaking.

Because of their authority to regulate foundations, charities and nonprofits domiciled within their borders, they have considerable discretion in sniffing around and pressuring some of their states' most influential institutions, like the big family foundations that control the Chicago Tribune and many other papers. Honestly, we'd never say a word against AGs, we think the whole bunch of them are just swell.

Even some holders of large portfolios of software patents seem to be signaling that the answer may be yes, suggests Roger Parloff.

AOL securities opt-outs

They'll do quite nicely, reports Josh Gerstein in the NY Sun: "Time Warner has agreed to pay $400 million to five large institutions that opted out of a class action settlement of securities fraud charges stemming in part from unusual accounting practices at America Online." The WSJ law blog says Bill Lerach's firm, which represented the biggest of the opt-outs, the University of California, is expected to pocket about $37 million of the university's $246 million take. Earlier coverage here and here.

With 140 possible backdating cases in the works and after months of alarming headlines the SEC now faces a daunting task: figuring out whether there was a problem. I discuss the agency's dilemma.

Don't throttle subprime lending

So-called subprime lending has opened doors for many once-marginal borrowers, who would be locked out of credit opportunities if the law refuses to countenance higher-risk, higher-interest lending. "If we want poorer households to manage their money and assets better, we have to be prepared for them to make some mistakes, and not hurry to overprotect them," writes housing expert and Manhattan Institute VP Howard Husock (New York Sun).

Alvin Lurie, the former assistant IRS commissioner and expert on ERISA law, contributed a column here in November on the tangled litigation over cash balance employee retirement plans (more on the topic). Now, after a flurry of further developments on the issue, he writes in with the following commentary (� A.D. Lurie 2007):

The Georgetown Business Ethics Institute, the National Association of Criminal Defense Lawyers, the Heritage Foundation, the US Chamber of Commerce�s Institute for Legal Reform, and the American Criminal Law Review are hosting an impressive series of panels at a full-day symposium at Georgetown Law March 15. Speakers include former AGs Ed Meese and Dick Thornburgh. The second panel, "Regulation Through Criminalization: When is the Criminal Sanction Appropriate?", features professors Moin Yahya and Christine Hurt among others.

Backdating and 9/11 muckraking

A story in today's WSJ says stock options were backdated to dates when shares were depressed by 9/11. Apparently the emotional appeal of linking 9/11 to backdating isn't lost on the trial lawyers. I discuss the journalistic strategy lurking in this story.

RI lead paint ruling: more reactions

Jane Genova continues to solicit and publish (anonymous) reactions and opinions from professionals who've followed the long-running Rhode Island suit (recent coverage here and here). A few excerpts:

"Long-term lead-paint watcher" with law degree:

From what I have observed the likely course of events is that the private law firm of Motley Rice explored where to file a lawsuit against the former lead paint industry. Not all states or cities are equally suited for this kind of litigation. The legal scout probably, as with the tobacco litigation, sought out a venue where those in the leadership might have weighty political ambitions. A plus would be if those ambitions required campaign contributions in order to be realized.

...Another challenge was to get around the reality that although there were laws on the books requiring property owners to maintain lead-safe dwellings those laws were not being enforced. As those who followed the RI lead paint trial might recall, Brown University identified about 1200 properties and landlords where 95 percent of the lead-paint hazards existed in Providence, for example.

The jury during the trial did not have, I contend, a true understanding that this was a landlord problem and the solution was already in-place, but neglected, for dealing with it. Enforcement could have been zealously done.

"Brand name Beltway attorney":

In RI, the state could not sue paint manufacturers, per se. That's because there is in the state an eight year Statute of Repose on the sale of products which "improve real property," including paint. Thus, the "they" putting together the complaint had to sue a small group of large companies which purportedly produced and sold "lead products for paint." As you will recall, the trial is officially about lead pigments, not lead paint per se. The problem for the judge was that there was absolutely no proof that any of these companies did so in the state of RI. That was hammered home again and again by the defense teams during RI lead paint trial II. No evidence, or as NL Industries lead attorney Don Scott put it: NADA.

"Legal expert" characterizing the Rhode Island Supreme Court, where the action is likely headed next:

...not a court which would be considered an "activist" one. ...[but] the Court is likely to give deference to the RI legal community at large and considers standing and respect within that community to be very important. ...as most of us lead paint watchers know, RI is an old boys network in many ways.

Another attorney, non-practicing:

In order to actually receive any money for abatement, the state will have to conduct more specific discovery on the actual number of lead-unsafe properties and the degree to which they present a health hazard. That will be something which the state fought earlier against because the defendants wanted to have that evidence for trial.

All of a sudden, the state will need to argue in favor of that sort of discovery, or try some sort of magic act to get a Special Master to present an abatement plan which includes dollar figures without specifying the extent of the hazard.

Another of Genova's sources, a Washington D.C. attorney, says it's vital to recall that the Rhode Island Supreme Court "is holding in abeyance [i.e., has not yet ruled on] the constitutional challenge of the contingency fee arrangement between the state attorney general and private law firm Motley Rice." And a financial source following the industry is actually "pleased" with the ruling, which allegedly helped "smoke out" issues for appeal.

New York mag on AG Cuomo

Referring to his news-bulletin-a-day pace, the magazine calls the new attorney general "a press-release-dispensing machine".

That new Irvine law school

Thomas Lifson at American Thinker takes a closer, and critical, look at the planned taxpayer-funded institution which per California officialdom is

intended to challenge students to think more deeply and critically about a number of complex social issues regarding: (a) equal opportunity; (b) racial and national identity; (c) minority rights; (d) civil and individual rights; and (e) social justice

but which wouldn't embody any particular political slant, nope -- perish the thought. Earlier coverage here, and Prof. Bainbridge has more, as does a letter-writer at American Thinker.

The class-action firm refused to go graciously, as Ted reported Dec. 15, but a judge ruled that the Archdiocese of Milwaukee Supporting Fund, the lead plaintiff in the securities action against Halliburton, did after all have the right to choose its own counsel (Parloff, Koppel @ WSJBlog).

Poultry companies challenge Okla. AG

Lawyers for Tyson Foods and seven other poultry companies are challenging Oklahoma Attorney General Drew Edmondson's hiring of three law firms (Miller & Keffer; Riggs, Abney, Neal, Turpen, Orbison & Lewis; and Motley Rice) to represent the state in its environmental action over river pollution, per the Northwest Arkansas Morning News. "The contracted law firms could win up to 50 percent of any settlement or damages awarded, according to the contract." Each of the three law firms is also a campaign donor to Edmondson. "Government lawyers are expected to do justice and they can't have a personal financial stake in the outcome of the litigation. That principal applies just as well to private law firms hired by the state as to attorneys working in Attorney General Edmondson's office," argued Tyson attorney Robert George of Kutak, Rock. Edmondson's lawsuit has stirred up ill feeling between Oklahoma and neighboring Arkansas. We've been covering the controversy for quite a while (here, here, here, here, and here).

In case you imagine that tobacco companies' litigation problems are going away -- notwithstanding the damaging California ruling discussed by Michael two weeks ago, the equivocal outcome in Philip Morris v. Williams, and the "unlawful cigarette giveaway" challenge recently green-lighted by a Massachusetts judge and discussed by Michael here -- here's yet another data point. A Louisiana appeals court has cut by more than half a $1 billion award on behalf of smokers in that state, reducing the size of the class entitled to recovery and denying pretrial interest. But it left intact enough of the rationale for the award that plaintiffs declared victory, and defendants sounded none too pleased. Still, Wall Street likes tobacco stocks these days, and Wall Street doesn't err about these things. Right?

The Federalist Society has launched a series of audio broadcasts providing expert commentary on Supreme Court issues. The maiden podcast features none other than Chicago lawprof and Point of Law favorite Richard Epstein discussing Philip Morris v. Williams and four other high court cases, Weyerhaeuser Co. v. Ross-Simmons, Lawrence v. Florida, Marrama v. Citizens Bank of Massachusetts, and Wallace v. Kato (via Kerr @ Volokh).

Ohio consumer damages fiasco

Last November the Ohio Supreme Court interpreted the state's Consumer Sales Practices Act, which already allowed treble damages, to permit awards for noneconomic damages as well for aggrieved consumers. The state legislature moved to correct this interpretation, but its effort to do so got caught in the legislative and constitutional train wreck occasioned by incoming Gov. Ted Strickland's attempt to veto liability legislation that outgoing Gov. Taft assumed had become law without his signature. Jones Day has a paper on the extreme uncertainties that afflict the liability climate for some lines of business in Ohio until the whole mess gets resolved (via Jonathan B. Wilson).

"Back to basics, Dr. Frieden"

While the NYC Health Commissioner was squandering the city's credibility on trans fats ("totally replaceable", you betcha) and hatching Big Brother schemes for diabetic-watching, the traditional and basic functions of his office, like keeping rats out of restaurants, were going untended, notes an editorial in the Post. "The Taco Bell in question had received a, you should pardon the expression, clean bill of health from one of Frieden's restaurant inspectors 24 hours before the rats were taped doing their "Happy Feet" impressions last Thursday morning. ...Of course, if the Taco Bell rats had been smoking, Frieden would have been there to nail the door shut himself." Andrew Stuttaford at NRO thinks it's long past time for Frieden to go.

Hey, look, a good article in the New York Times:

...faculty and graduate students across the country increasingly complain that these panels have spun out of control, curtailing academic freedom and interfering with research in history, English and other subjects that poses virtually no danger to anyone.

The panels, known as Institutional Review Boards, are required at all institutions that receive research money from any one of 17 federal agencies and are charged with signing off in advance on almost all studies that involve a living person, whether a former president of the United States or your own grandmother. This results, critics say, in unnecessary and sometimes absurd demands.

Among the incidents cited in recent report by the American Association of University Professors are a review board asking a linguist studying a preliterate tribe to �have the subjects read and sign a consent form,� and a board forbidding a white student studying ethnicity to interview African-American Ph.D. students �because it might be traumatic for them.�

�It drives historians crazy,� said Joshua Freeman, the director of the City University�s graduate history program. �It�s a medical model, it�s inappropriate and ignorant.� One student currently waiting for a board to approve his study of a strike in the 1970s, Mr. Freeman said, had to submit a list of questions he was going to ask workers and union officials, file signed consent forms, describe the locked location where he would keep all his notes, take a test to certify he understood the standards.

Zachary Schrag of the George Mason history department maintains a blog on institutional review boards (via Adler). Our earlier coverage is here and here, and also see this at Overlawyered.

Professor Bainbridge: "When I go on the road to present my overview of SOX, I routinely hear from lawyers that employees are in fact gaming the SOX whistle blowing provisions." More here and (regarding foreign application) here, here, and here.

I discuss how the McAfee case seems to be creating new layers of ad hoc-ness in the criminal prosecution of backdating.

Mark Behrens and Andrew W. Crouse of Shook, Hardy & Bacon have an article (PDF) in the University of Dayton Law Review based on a symposium contribution last year; its title is "The Evolving Civil Justice Reform Movement: Procedural Reforms Have Gained Steam, But Critics Still Focus On Arguments Of The Past". Behrens (who has in the past been a frequent co-author with liability guru Victor Schwartz) and his co-author note that the emphasis of the litigation reform movement has shifted quite markedly in recent years. What might be called the "traditional" movement concentrated on legislating restraints on damages -- non-economic and punitive damages, as well as joint and several liability. It also focused on tort law (hence its popular label, "tort reform"), especially product liability and medical malpractice. Although these older reform ideas have in no way disappeared (and indeed have met with much success in many states), the momentum of reform efforts has shifted steadily toward reform of procedure, including such areas as rules of class action filing and certification, the admissibility of expert and medical testimony, and the problems of forum selection. There is considerable interest as well in attempts to improve the fairness of jury selection and juror instructions, in regulating the emergent "public/private" litigation models by which state attorney generals are enlisted in private litigation causes, and so on. Most of these procedural and organizational topics spill well beyond the boundaries of tort law as such, which makes it ever more misleading, even as shorthand, to describe the effort as one of "tort reform".

A notable passage:

Ironically, as the civil justice reform effort has changed focus, critics of reform efforts seem intent on continuing arguments of the past. Critics seem to be debating the merits of the cold war (e.g., whether caps on damages are sound) while the legal reform efforts of business groups are focused on other issues. One must question why this disconnect exists. It is unlikely that critics of civil justice reform proposals are unaware of the proposals being adopted today. One explanation, therefore, might be that opponents of reform have chosen not to engage in a debate over the current issues of the day because they believe it may be advantageous to play on the perceived inequities of more traditional tort reforms.

Put differently, some defenders of the current system would rather keep the conversation focused on damage caps because it's easier to rally opposition to such caps among legislators, editorial pages, activists, and lawyers themselves than it is to get into discussions of areas like forum-shopping, fee-driven class actions and unprincipled experts-for-hire. When it comes to those areas, a high percentage of lawyers themselves, to say nothing of the general public, recognize that the problems are real and need addressing.

On a personal note, I must report feeling gratified by the general trend Behrens and Crouse are recognizing (without necessarily endorsing the particular procedural reforms they suggest). Back in The Litigation Explosion, and ever since, I've been arguing that procedure is of paramount importance in understanding how we got into the modern litigation mess and how we might get out. It used to feel like a lonely position, but doesn't anymore.

...but it got sued over the fall anyway, because the stairs were used (although not exclusively) for access to its subway. In Bingham v NYCTA, decided Feb. 15, the Court of Appeals ruled that the Transit Authority could be held liable anyway under a duty to maintain safe means of access and egress to its facilities. Justice Graffeo, in dissent:

Beyond its incompatibility with modern trends, the majority rule is troubling because it results in a party being held liable for a condition that it did not create and lacks the power to ameliorate. Where the Transit Authority does not own, occupy or control property, it is not well-positioned to ensure that the property is free of hazardous conditions. A common carrier has no greater right than any other neighbor to enter and repair a defective condition on property owned, occupied or controlled by another, or to erect the barriers or warning signs suggested by the majority.

(via Nicole Black)



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.