Subscribe Subscribe   Find us on Twitter Follow POL on Twitter  


July 2008 Archives

Not sure why this attorney general's public nuisance lawsuit drew such dramatically less attention than Rhode Island's suit against the paint manufacturers, but in any case ...

Trial concluded this week in North Carolina Attorney General Roy Cooper's lawsuit against the Tennessee Valley Administration for creating a public nuisance through its coal-fired power plants in other states. Cooper brought suit in federal court in January 2006 (news release, complaint and FAQ) after failing to win his arguments before the EPA, trying to hold the TVA to the standards of the state's Clean Smokestacks Act of 2002. The TVA maintains that it is reducing emissions, installing scrubbers, etc. U.S. District Judge Lacy Thornburg, who heard the suit, is expected to issue a ruling after September 15.

Both the Tennessean and Asheville Citizen-Times did a good job covering daily trial developments. Here are the most recent reports:

The Washington Post reports that California AG Jerry Brown has vowed that his state will sue the Environmental Protection Agency for "wantonly" ignoring its duty to regulate greenhouse gas emissions from ships, aircraft, and construction and agricultural equipment. This is a poster child for "regulation by litigation."

Brown said the lawsuit, to be filed in Washington after the statutorily mandated 180-day waiting period, was meant to force the EPA to exercise its powers under the Clean Air Act in the way that Brown thinks is required. [Funny, though, Brown is not the one who has policy authority in this field....]

The lawsuit follows two similar ones this year by California in conjunction with other states on car and truck emissions and ozone pollution.

Brown said he petitioned the EPA three times to implement the regulations he wishes to see adopted, and was met with a "pathetically weak" response that failed to conclude that greenhouse gases endangered public health.

"(The lawsuit) is certainly typical of the attorney general of California," EPA spokesman Jonathan Shradar said. "If they don't like how we make a decision on something, they sue and hope the courts will mandate toward their position. It works sometimes and sometimes it doesn't work,"

In April, California was one of 18 states to sue the EPA for failing to limit greenhouse gas emissions from new cars and trucks despite a ruling by the U.S. Supreme Court in 2007 that the agency had the power to do so. [But power is not the same as duty, is it? My state has the power to make the speed limit on highways 25 mph, but I sure hope it doesn't exercise it....] Then In May, California joined 12 other states in suing the EPA, claiming it violated the Clean Air Act by not toughening ozone pollution standards enough.

Long Island College Hospital in Cobble Hill is giving up. Expect more pressure on other Brooklyn institutions such as New York Methodist in Park Slope.

Beck and Herrmann explore variations on that familiar product liability theme, "No good deed goes unpunished".

New EPA lead-abatement regulations will complicate the lives of many brownstone and co-op owners, as well as building managers and landlords in rental housing. Harold Shultz of the Citizens Housing and Planning Council explains at Law and More, with link to report (PDF).

Up on Capitol Hill

Energy policy remains the dominant issue as Congress moves to break for August, but other legislation still scurries about, looking for expanded opportunities to litigate.

  • The House did pass H.R. 4040, the consumer product safety bill, last evening by a vote of 424-1. (Yes, it was Ron Paul voting no.) Expect Senate action tomorrow.

  • Today on the House floor is H.R. 1338, the Paycheck Fairness Act, legislation supporters say will overcome gender disparity in wages. The mechanism? Regulation, studies, and lawsuits. The White House's Statement of Administration Policy, which says the President would veto the bill, highlights the bill's removal of caps on punitive damages. It's quite a SAP. Heritage Foundation's James Sherk also examines the bill: " The Act gives a windfall to trial lawyers, exposing employers to unlimited punitive damages for unintentional mistakes. Any financial benefits reaped by trial lawyers, however, will come at the expense of workers, whose wages will fall in order to cover the increased cost of legal liability insurance."

  • Anti-arbitration legislation is moving. The House Judiciary Committee yesterday reported out H.R. 6126, the Fairness in Nursing Home Arbitration Act, which vitiates pre-dispute arbitration clauses in nursing home contracts. Senate Judiciary marks up the Senate companion bill, S. 2838, this morning. (UPDATE -- 10:40 a.m.: Republicans are asking the bill to be held over.)

  • News accounts report that the Senate's failure yesterday to invoke cloture on S. 2035, the Free Flow of Information Act, means the media shield bill is probably dead for the session. (San Francisco Chronicle, Wall Street Journal.)

What other illegalities has Richard ("Dickie") Scruggs committed besides the one that's sending him to prison? According to the AP's Holbrook Mohr (via), in Scruggs's deposition in the ongoing McIntosh v. State Farm lawsuit, the insurer's attorneys "'alleged activity of a criminal nature against both of the Scruggses,' according to a motion filed Friday by an attorney representing Richard and Zach Scruggs," both of whom "invoked their Fifth Amendment right against self-incrimination and refused to answer the questions, the motion said." Scruggs and son "want to prevent their sworn testimony in [the] Hurricane Katrina lawsuit from becoming public and 'undermining the presumption of innocence' if they face criminal charges in the future" -- that is to say, separate and distinct charges from those in the bribery scheme under which they are already headed to prison. More at Y'allPolitics here and here.

Excerpts from the questions State Farm lawyers unsuccessfully sought to ask Scruggs can be found in the comments at Y'allPolitics, and are truly eye-popping:

Q. And you knew that the Rigsbys -- one of the Rigsbys had stolen this document out of the State Farm file, and based on that information, you informed Attorney General Hood that he could subpoena those records from State Farm and the company would never be able to produce them; isn't that a fact?

Q. You did tell Attorney General Hood to subpoena this document from State Farm knowing that it had been removed from their files and could not be produced; isn't that a fact?

Q. And, in fact, that's exactly what occurred, isn't it? General Hood subpoenaed the document, State Farm couldn't produce it, and you were able to report to the press that they were shredding or deep sixing or destroying evidence that you knew they didn't have; isn't that a fact?

Q. That was part of a program which you euphemistically called the play book from tobacco, wasn't it?

Of course, we don't know what answers Scruggs would have given had he not taken the Fifth -- maybe he would have had innocent explanations for everything. More on the Mississippi AG connection here. For questions about Scruggs's skillful manipulation of ABC News and CBS News coverage, which allegedly included sending the networks copies of documents which were under seal in court proceedings and not to be disclosed, see excerpts here, here, and here. What did ABC and CBS know, and when did they know it?

Meanwhile, on another front, State Farm has filed with a court a couple of depositions given by co-workers of renegade insurance adjusters Cori and Kerri Rigsby. Anita Lee in the Sun-Herald has the story. David Rossmiller has a long, meandering, cruelly funny post on the Rigsbys and their lost illusions. "You'll be heroes," they told co-workers they tried to recruit for the scheme. "We are going to get a book deal. We're going to make a movie. ...We're going to be famous." After all, hadn't most of those things happened for Scruggs's paid informant/spy in the tobacco caper? Kerri Rigsby "wanted Sandra Bullock to portray her in the movie." Another apparently important name in the Rigsby saga, whose name has not much surfaced in news coverage before now, seems to be that of the sisters' mother, Pat Lobrano, who it is suggested helped the initially reluctant Cori overcome her misgivings, recalling inevitably to mind the Mama Rose character in the musical Gypsy.

Rossmiller also provides the following paraphrase of piquant matter to be found in the deposition of co-worker Dana Lee:

[Lee] talks about the supposed meeting Scruggs had with a State Farm "insider" in Bloomington [Illinois, the insurer's headquarters town], which he bragged about in a news story, and which turns out to be so much Scruggsian hot air -- he hired a guy to meet him at the airport and hand him an empty envelope to make it look like he was getting some top secret documents. I guess he had no qualms about staging this phony baloney stunt and then claiming it as real to the media, but then again, that's not so hard to believe about a guy who would bribe a judge.

Also discussed: the purportedly "Dickensian" associations of the law firm name of Provost Umphrey, which must surely owe something to Uriah Heep's protestations of being an "umble person" living in an "umble abode".

P.S. I had skipped reading the deposition of Zach Scruggs on the mistaken assumption it wouldn't contain anything newsworthy, but quite the contrary: one of State Farm's lines of questioning seeks to develop the theme that former Sen. Trent Lott (who of course wasn't present during the questions and, unlike Zach, hasn't invoked the Fifth) acted improperly in the litigation. The AP's Holbrook Mohr has details.

CPSC bill already works its magic

And it's not even passed yet! A news release distributed this afternoon:

WASHINGTON, Jul 30, 2008 (BUSINESS WIRE) -- Responding to a landmark product safety bill that is expected to pass Congress this week and will substantially impact the way that retailers, importers and manufacturers do business, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. announced it has formed a dedicated Consumer Product Safety Commission (CPSC) Practice Group. The group, headed by product safety legal expert Chuck Samuels, is comprised of nearly a dozen practitioners across the firm's Washington D.C., New York, Boston and California offices. The group includes experts in product liability litigation, insurance litigation and federal regulatory issues.

Quick work, eh? (Humor aside, I should note that my colleagues at the National Association of Manufacturers have only good things to say about Chuck, who represented the Association of Home Appliance Manufacturers in working on H.R. 4040, the CPSC bill.)

Speaker Pelosi is now wrapping up House debate.

Media shield laws: another view

I note with interest Carter's links critical of proposed media "shield" legislation, or at least current versions of such legislation. In the spirit of airing a variety of views, here's a recent U.S. News interview with my Manhattan Institute colleague Judith Miller, who spent 85 days in jail rather than reveal a source, and who calls a federal journalistic shield law "long overdue".

I will confess that I haven't fully sorted out my own opinions about the issues raised by such legislation. One of the perennial themes of our legal reform work, however, is that the power of subpoena wielded by lawyers, prosecutors and government officials is a sweeping and often oppressive one that must be watched and delimited carefully given its inherent tendency to serve as an instrument of abuse. So I'm never surprised to see the targets and potential targets of subpoenas rallying public opinion toward the curtailment of that power.

The Senate has just voted 51-43, failing to invoke cloture on a motion to proceed to S. 2035, the Free Flow of Information Act, i.e., the federal media shield bill. The vote was part of the continued maneuvering over whether the Senate Democratic majority will allow amendments to permit drilling on the Outercontinental Shelf and other other pro-energy supply measures.

Sens. Schumer and Specter have new language for the bill, and Sen. Specter includes the text in his statement yesterday. A comment from Sen. Schumer stood out yesterday, too:

[The] definition of a covered person--and this has been one of two areas of some controversy--has been narrowed to ensure that it protects only legitimate journalists, first used in the Second Circuit case of von Bulow v. von Bulow to determine who qualifies as a covered person. Someone who blogs occasionally is not going to get the protection here. Of course, someone on a blog who is a regular journalist but happens to use the blog as a medium will be protected. And that is how it ought to be.

I don't know. Looking at Sec. 10 (2), it appears yours truly would still qualify as a covered journalist. So send all your stolen propriety information here. (Once the law passes, that is.)

On a serious note, yet again no one talks about business concern with the legislation. It's all national security versus reporters.

The conference report for H.R. 4040, Consumer Product Safety Modernization Act, is already scheduled on today's House suspension calendar, so an overwhelming vote for passage is expected. It could go to the Senate for a Friday vote and observers expect the President to sign it into law.

The full, 183-page conference report has been posted as a .pdf at the NAM's blog, Shopfloor.org, here.

The conference report reflects quite a bit of business input to bring balance to the legislation, in particular ameliorating Senate language (S.2045S.2663) or adding provisions to protect from the wildest of litigation. But the self-styled consumer activist groups, symbiotes of the trial bar, are still extremely pleased at the victory over "special interests." (Joint news release here and Consumer Affairs.com article.) Meanwhile, the Hill reports that the U.S. Chamber opposes the bill because it increases litigation and rejects sound science, such as in provisions banning phthalates. (UPDATE: Chamber lettter here.) An ugly precedent, that's for sure, as Congress moves toward a European "precautionary principle."

Key provisions from a litigation standpoint:

Guestblogging opportunities

August is traditionally a prime month for guestblogging opportunities at Point of Law (as likewise at my other blog, Overlawyered) and this year is no exception. One outstanding new volunteer has already stepped forward and will be joining us, but that leaves room for several more. It's a short commitment (just a week or two) and makes a great way to try out blogging if you've never had a go at it, or interest a new set of readers in your blog if you've got one already. As always, past guestbloggers and hopeful newcomers are equally welcome to drop me a line: editor - [at] - thisdomainname.com.

FASB Standard 5, cont'd

We've added several new links to our Monday post on this proposal (which would require much broader accounting disclosures than now as to how companies are being sued and might be sued in the future, and what the cases might be worth). Included are commentaries from Ted Frank, Larry Ribstein, and Kevin LaCroix, as well as links to some advocacy from proponents of the new standard.

The FASB public comment period ends August 8, not much more than a week from now.

The rate of filings has picked up again following a couple of slow years, according to the mid-year report from the Stanford Securities Class Action Clearinghouse and Cornerstone Research. Not surprisingly, the market drop and subprime implosion appear to be crucial factors. More details here.

More: Paul Kedrosky. And Kevin LaCroix at D&O Diary cites a new mid-year securities litigation report from NERA (press release, report in PDF), with numbers that diverge somewhat, suggesting some of the problems with "counting" even as relatively well defined a class of lawsuits as this. (More: Lyle Roberts). In a second post, LaCroix takes under consideration the U.S. Chamber's report issued last week on that subject; see also Lyle Roberts.

It's been a long, long time since so many items of legislation were afoot on Capitol Hill aimed at expanding rights to sue, eviscerating defenses, boosting obtainable damages, and giving plaintiffs new tactical advantages in litigation. The U.S. Chamber Institute for Legal Reform has just launched a very handy web compendium of these measures entitled Trial Lawyer Earmarks: no matter how many you were already aware of, you will probably learn of new ones. Ted has more at OL, as does Quin Hillyer at the Examiner*, along with a useful sidebar* on the troublesome "False Claims Correction Act".

*Both links auto-play annoying audio ads -- someone should really tell the Examiner to cut this out.

Around the web, July 29

  • Jury returns defense verdict in asbestos case against duPont, but Jefferson County, Texas Judge Donald Floyd orders new trial after Reaud, Morgan & Quinn's Glen Morgan complains (inter alia) that coverage by U.S. Chamber-backed Southeast Texas Record tainted the trial [SETR, editorial, Caryl Richardson/Willis Whisnant, Jr. case]
  • Brouhaha over sweet pension deals for town lawyers in New York spreads from school districts to fire districts [Newsday]
  • Harvard lawprof Charles Ogletree, of reparations-lawsuit and plagiarism-flap fame, described (let's hope inaccurately) as "mentor" to Obama [NLJ]
  • As you may have suspected already, Richard Hofstadter's Social Darwinism in American Thought was really more of a political tract than a reliable rendering of intellectual history [Bernstein @ Volokh channeling Princeton's Tim Leonard]
  • Hanging 'em still on agenda? More on that Massachusetts School of Law conference on war crimes prosecutions of Bush officials [Legal Blog Watch, earlier here and here]
  • Medical school.... for judges [AMA's American Medical News]
  • Where are Chicago's law professors in the dispute over the proposed Milton Friedman Institute? Mostly on the sidelines, which of course is preferable to what some of their colleagues are doing [Wright, Truth on the Market]

Lawprof opinions for rent, cont'd

The important article by Columbia's William Simon on the dispensing of legal-ethics opinions by prominent legal academics (more here and here) has now led to a (rather testy) exchange of further views with Fordham professor Bruce Green, one of Simon's targets. It is available through links at Legal Ethics Forum here and here.

Catching up on the "Most Dangerous Litigation in America: Kivalina," we see that the many energy companies being sued for defending their right to produce energy have moved for dismissal in Native Village of Kivalina and City of Kivalina v. ExxonMobil Corporation et al. (No. 08cv1138-SBA). The companies filed the motion June 30th in U.S. District Court, Northern District of California, Oakland Division. (Available here as .pdf file.) From the introduction:

This case asserts tort claims without precedent in the annals of American law. Plaintiffs seek to hold a handful of U.S. businesses - including the Oil Company Defendants submitting this motion - liable in damages, on nuisance and conspiracy theories, for what plaintiffs themselves explicitly allege to be harms resulting from centuries of all human activities across the entire planet Earth. Even assuming the property losses plaintiffs assert could be traced to human-induced changes in the global climate - itself a staggeringly difficult problem of factual proof - no cognizable U.S. tort law, either federal or state, offers plaintiffs any basis for holding a small collection of defendants liable for the supposed atmospheric effects of all historical human industrial, commercial, agricultural, and residential activity worldwide.

Judge Saundra Armstrong has scheduled a hearing for December 9.

The "Democracy Now!" radio program, the premiere hard-left radio news program, had an informative interview earlier in July with Steve Susman of Susman Godfrey explaining the rationale for the litigation. Susman:

The case is a nuisance case. The theory is basically, you can't do something on your property that prevents the enjoyment of mine. I mean, if you were barbecuing and ashes from your barbecue pit fell on my house and burned it up, that's a perfect nuisance case, and you would be liable under the common laws, as long as we've had common law. Now, this is a little more direct, because what they're putting in the atmosphere hurts everyone in the world, for sure, and there are a lot of people putting the stuff up there. So it's very difficult--impossible to get all of the wrongdoers in the same courtroom. And that's where we're testing the theory.

In a second segment, interviewer Amy Goodman talks to John Holdren, professor of environmental policy at the Kennedy School of Government at Harvard University.

The Senate Judiciary Committee marks up S. 2838, the Fairness in Nursing Home Arbitration Act at 10 a.m., Thursday. (Meeting details.) This is the bill that would ban predispute arbitration clauses in nursing home contracts, the wedge legislation in a broad campaign against arbitration.

The American Association for Justice recently filed its lobbying disclosure report for the second quarter 2008, available here. The trial lawyers group reported $1,740,000 in lobbying expenses for the quarter. (!) Arbitration-related bills cited:

  • H.R. 3010/S. 1782, Arbitration Fairness Act, to prohibit mandatory binding arbitration agreements in consumer contracts.
  • H.R. 1519, American Homebuyers Protection Act, relating to the including of mandatory binding arbitration in homebuilding contracts.
  • H.R. 3512, Automobile Arbitration Fairness Act, relating to the use of arbitration agreements to resolve disputes involving nursing home care and nursing home contracts.
  • H.R. 6126/S. 2838, Nursing Home Arbitration Act, relating to the use of arbitration agreements to resolve disputes involving nursing home care and nursing home contracts.
  • H.R. 6124, the farm bill, specific interest in language in enrolled bill (PL 110-246) relating to the use of arbitration to resolve controversies arising under livestock or poultry contracts; also similar language in H.R. 2419.

The Associated Press (via Law.com) has a thorough report on a high-punitives case decided last Thursday in which divided state supreme court has upheld the trial court award of $13 million in punitive damages in a wrongful death lawsuit against DaimlerChrysler Corp. (the parent company of Chrysler at the time 8-month-old Joshua Flax was killed in 2001).

Joshua was riding in the backseat of a 1998 Dodge Caravan in Nashville when the vehicle was rear-ended by one Louis Stockell., The front passenger seat of the minivan collapsed from the force of the collision and the passenger struck Joshua, fracturing his skull.

In a 3-2 decision filed Thursday, the court said the automaker acted recklessly in maintaining the design of the van's seats, and that the award of punitives (in addition to $5 million in compensatory damages to the parents) was not excessive. The court did reverse the trial court's award to Joshua's mother of over $6 million more in punitives emotional distress, as duplicative and therefore unconstitutional under Supreme Court guidelines. [The jury had awarded Joshua's parents $98 million in punitives, but the trial judge had reduced this amount to $19 million, $13 million of which were upheld here.]

In the original trial, the family tried to prove the automaker knew the minivan seats were defective and unreasonably dangerous, because they yielded in rear-end collisions, but failed to fix the problem or warn consumers and continued to market the vehicles as safe. Chrysler argued the seats yielded to protect the passenger -- firmer attachments would result in more passenger deaths. They also argued that their seats were similar to ones used by other car manufacturers, and exceeded federal regulations. We shall now see if pre-emption (interesting) and punitives (must manufacturers warn of design tradeoffs?) issues are brought before the US Supreme Court on this one.

Needless to say, the negligent driver Stockwell was also held liable (though not for punitives -- and of course he will not pay beyond his insurance limits). He was only driving at twice the posted speed when he rammed the Flax's van, after all.

Ted Frank has posted eloquently about earlier iterations of this sad case. See here, here, here, here and here.

Major news afoot from the accounting world as written up in Law.com's The Recorder:

... changes proposed by the Financial Accounting Standards Board that would force public companies to disclose more about the risks of litigation have caused a howl of protest among general counsel and corporate and defense lawyers.

Under the revised rules for FASB Statement No. 5 (pdf), the threshold for reporting the potential loss from a lawsuit would be lowered from "probable" to anything but "remote." Public companies would also have to estimate just how much legal threats might cost and the likely outcome. They'd also have to disclose more details about the underlying litigation and the reasoning behind their predictions.

Businesses and their lawyers are worried about the possible abrogation of attorney-client privileges involved. Such a change could handicap business defendants and benefit the plaintiff's bar in at least four other distinct ways (there may be other ways I haven't noticed yet):

  • The shareholders' bar would be furnished with new grounds for suing companies over insufficiently disclosed litigation risks.

  • The plaintiff's bar generally would acquire an immensely valuable new road map to where companies are being sued and how seriously they take possible exposures. At present, companies often try to minimize public attention to emerging or speculative areas of litigation for fear of encouraging copycat or bandwagon suits. The new disclosures would soon become a tip sheet for exactly such filings.

  • In the poker-style negotiations over how much a lawsuit should settle for, plaintiffs may obtain through the accounting disclosures a look at their adversary's hole card, their evaluation of what the claim is "really" worth. Supposedly there'll be "an exemption from disclosing information that could hurt a party's position. But defense lawyers aren't sure that would protect them."

  • Defendants' assessments of litigation risk, especially if they are conservative (i.e., on the high side) to fend off shareholder lawyers, will tend to depress their stock and increase their cost of raising capital. In turn, companies will have a new reason to fold and pay a high settlement in order to get an even higher contingent liability off the books.

The story quotes veteran Northern California plaintiff's lawyer Joseph Cotchett as thinking the accounting change is a great idea, which is like having your picnic location endorsed by the ants.

John Beisner, whose writings on class action law are often cited in this space, and his O'Melveny & Myers colleagues Allison Orr Larsen and Karl Thompson, have a new article in the Federalist Society's Engage (summary leads to article, PDF) warning EU policymakers away from a supposed "Canadian path":

Activists urging European Union nations to adopt the class action device have recently begun citing Canada as a model. Like the United States, Canada has adopted formal class action rules that permit plaintiffs to bring class proceedings. And there is a perception that, to date, Canada has been spared the sort of rampant, U.S.-style class action litigation that has been widely criticized for imposing "huge, avoidable, and unnecessary cost[s]" on the economy. Some European class action advocates have therefore suggested that Canada provides a guide to creating a class action regime without opening a "Pandora's box" leading to the American experience.

Unfortunately, they say, Canada's relatively new class action format is abnormally liberal on the key issue of class certification standards, which is likely to open especially wide dangers for abuse. At this early stage, the scope for such abuse is still seriously narrowed by Canada's loser-pays rule and severe restrictions on contingency fees, but abuses did not develop overnight in the United States, either. A certification standard even more liberal than that employed in U.S. courts is unlikely to provide a sound model for cautious Europeans to follow.

More: Canada's Bizop says it's worse than I think up there, and cites a class action against Toronto-Dominion Bank.

If you're not reading Ted's and my other site, you're missing out on stories you really should know about:

Supreme Court picks

Stuart Taylor, Jr.'s cover story in the new National Journal looks at the high court appointments one might expect from a President Obama or McCain. Obama: Elena Kagan, Cass Sunstein, Merrick Garland, Hillary Rodham Clinton, Sonia Sotomayor, Eric Holder Jr., Diane Wood. McCain: Larry Thompson, Maureen Mahoney, Michael McConnell, Lindsey Graham, James Comey, Paul Clement.

The Democratic composition of the Senate might act as a brake on a President McCain's range of choice in selecting nominees, while a President Obama would likely have a freer hand:

Obama, who voted against both [John Roberts and Samuel Alito] during their Senate confirmation hearings, has said that they and the Court too often side with "the powerful against the powerless" and lack "empathy" for ordinary people. The presumptive Democratic nominee exudes determination to move the Court sharply to the left if he gets the chance.

About that FDA "black box"

Per Dr. Matthew Mintz: "There is no such thing as a 'Black Box', it is a boxed warning. The 'black' is something scary the media added". More here.

Yesterday, at a New York City forum sponsored by the Manhattan Institute (as is this website), the U.S. Chamber of Commerce's Institute for Legal Reform released its new Securities Class Action Litigation Report (PDF). Per its press release, ILR president Lisa Rickard noted

that the current system of lawsuits essentially entails one group of innocent investors suing another group of innocent investors. She pointed out that aggrieved investors often receive only pennies on the dollar, while huge sums of money are chewed up in legal costs.

The study estimates that defendants have paid approximately $51.8 billion in settlements over the past decade, and notes that filings jumped sharply, by 58 percent, from 2006 to 2007. Brian Baxter of American Lawyer's AmLaw Daily covered yesterday's event; see also the (Chamber-backed) Legal NewsLine. More: see July 30.

Around the web, July 25

  • California Supreme Court agrees to hear appeal of the very important dispute on public contingency fees between Santa Clara County and lead paint defendants [Legal NewsLine; more]
  • More sighs of relief in employee benefits community as Second Circuit joins trend to uphold cash balance retirement plans [NYLJ; background here, here, here, and here]
  • On Scruggs and his "mistakes": "Leaving an 's' out of 'Mississippi' is a mistake; bribing a judge is a crime." [John Agnew, Fort Myers News-Press]
  • Chevron has a website explaining its side in the litigation over Ecuador environmental damage ["Texaco in Ecuador"; earlier here, here, and here]
  • Provoking outrage among plaintiff's bar, employers have found another way to contract around the litigation system, this time via employee agreements to shorten statute of limitations [NLJ]
  • San Diego's city attorney is suing mortgage lenders and says he aims to make his city a "foreclosure sanctuary" [Sorkin, NYT "Dealbook", press release; earlier here, here, etc.]

The Washington Legal Foundation is putting on a live webcast next Tuesday on the interesting topic, "The SEC and Securities Class Action Suits: Defining the Relationship Between the Commission and the Plaintiff's Bar". The panelists are Moin Yahya of the University of Alberta, known for his work on short-selling by plaintiffs and their lawyers, and Lyle Roberts of 10b-5 Daily blog fame. Details (PDF) are here.

Heard at the House Education and Labor mark-up of H.R. 1338, the Paycheck Fairness Act.

"This should be re-named the Trial Lawyer Paycheck Expansion Act" -- Rep. Buck McKeon (R-CA)

Oh, sure, we've heard wisecracks like that before, but it still applies to this half-disguised bit of comparable worth legislation. As we argue in a post at Shopfloor.org, the bill would radically expand government involvement in employment decisions, create disadvantages for a new group of employees (blue collar), and invite a flood of litigation.

Section 3 is especially problematic, creating a section "enhanced penalties" that broadens the grounds for suing and removes any limits on compensatory and punitive damages. In other words, sue them until they cry uncle and then sue them again for not crying aunt.

The bill is expected on the House floor next week.

UPDATE (4:35 p.m.): Labor Secretary Elaine Chao on Wednesday sent a letter to the committee detailing the agency's strong objections. She is recommending a veto.

New York's new video game law

Not as bad a bill as the one ex-Gov. Spitzer was pushing, but by no means uncontroversial.

Last November the Newark Star-Ledger reported on an eyebrow-raising instance of the Justice Department practice of leaning on companies under investigation to appoint "corporate monitors". In particular, New Jersey U.S. Attorney Christopher Christie had "helped the Ashcroft Group -- the consulting firm of ex-Attorney General John Ashcroft -- obtain a contract worth between $28 million and $52 million to monitor Zimmer Holdings, a medical supply company accused of Medicare fraud." That story quite rightly set off a round of discussion and concern, both because of the dangers of political coziness in the choice of monitor and because the fee numbers seemed high. Last week, Democrats on the Hill introduced legislation to impose what it is hoped will amount to an "open, competitive process" -- going beyond the Justice Department, which had already adopted its own tightened guidelines for the picking of monitors in implicit acknowledgment that the concerns were genuine.

It's funny how these things work, though. For a full decade now -- starting with the great state tobacco-Medicaid litigation, and never really abating since then -- debate has raged at the state and local level about the often cozy and uncompetitive process by which governments select outside counsel for the correction of business defendants. In this latter case -- exemplified by the gun, lead paint, drug-reimbursement, and many other public-nuisance and mass-tort actions, as well as a wide range of securities class action matters -- the lawyers are hired to sue the businesses, as distinct from monitoring them afterward, and they are compensated through contingency fees, which sometimes sets them up for lower fees than Ashcroft & Co., but often for fees that are very much higher.

You may have noticed that many of the folks who have led the charge on the Christie-Zimmer matter display virtually no interest in this longstanding debate about state and local retention of outside counsel. The Times, for example, has gleefully seized on the Christie/Zimmer affair as a stick to beat the Bush Justice Department, invoking "the kindness of cronies", the use of monitoring positions "to throw patronage to friends and political allies", the danger that prosecutorial judgment will be colored by the chance to generate "a rich payday for a friend", and so forth. Yet the Times never shows the slightest editorial interest in the contingency-fee contracts that governors, mayors, treasurers, comptrollers, and attorneys general keep arranging for close chums and leading campaign contributors, whether it be lead-paint contracts in Rhode Island, Oxycontin contracts in West Virginia, securities and drug-reimbursement suits in many states, insurance cases on the Gulf Coast, or tobacco and gun litigation contracts nationwide including its own back yard of New York, Connecticut and New Jersey. Congress never did show much interest in investigating those contracting abuses either, and it shows essentially none now. So although groups like the U.S. Chamber of Commerce have pressed for transparency in the awarding of such contracts, they face a mostly uphill and unpublicized fight.

Of course, one obvious difference between the two types of potential corruption is that there is not much partisan mileage to be had by going after the contingency-fee kind, because although plenty of Republican officials around the country are in on the game, even more Democrats are. But that can't be relevant. Can it?

Michigan court-stripping debacle

It's gotten embarrassing enough that even the local trial lawyers' best friends, like Brian Dickerson of the Free Press, are telling them they'd be better off dissociating themselves from it.

The Senate Judiciary Committee has begun its hearing, "Courting Big Business: The Supreme Court's Recent Decisions on Corporate Misconduct and Laws Regulating Corporations." So far, only Chairman Leahy's statement is online, and it embraces the expected criticisms on cases such as Ledbetter, Stoneridge and especially Exxon Valdez. He also lays into the court for "blind devotion to corporation arbitration schemes." Leahy's statement also includes a political narrative:

The Supreme Court has demonstrated its increasing willingness to overturn juries who received the factual evidence and weighed the arguments. Nothing is more fundamental to the American justice system than our trust in the wisdom and judgment of ordinary Americans who serve on juries.

UPDATE: The prepared testimony is now available. Osa M. Schultz provides the perspective of a very angry Alaskan harmed by the Exxon Valdez spills, and she wants high punitive damages. Patricia Ann Millett, a former attorney in the Office of Solicitor General, gives a dispassionate assessment of the Court's opinions and judicial alliances on preemption, arbitration, employment cases and punitive damages.

The target to come under the heaviest fire today was mandatory pre-dispute arbitration, as Harvard Law Professor Elizabeth Bartholet condemned its transformation into a mechanism biased toward corporate interests. In her lengthy prepared testimony, Bartholet cites her experience as an arbitrator dealing with consumer credit card cases for the National Arbitration Forum.

Judging by the witnesses, testimony and his opening remarks, Chairman Leahy regarded today's hearing as especially useful in building the Congressional case against arbitration. The legislation with the most prospects is S. 2838, attacking arbitration in nursing home contracts; the House version, H.R. 6126, is moving quicker, though, having been reported out of the subcommittee last week.

MORE: RTTNews carries a straightforward account of the hearing here. Mayer Brown had a legislative update last week on the anti-arbitration bills moving through Congress, focusing on the effects on international arbitration.

The New York Law Journal (via Law.com) reports on a very interesting New York appellate court decision, Fabiano v. Philip Morris Inc., in which the Appellate Division, 1st Department, holds that the $248 billion settlement with tobacco companies in which New York state was a party bars the estate and husband of a New York woman who died of lung cancer from collecting punitive damages from them. The court unanimously held that the massive 1998 settlement and the Fabiano wrongful death suit were predicated on "materially indistinguishable" transactions.

"[A] claim by a private attorney general to vindicate what is an essentially public interest in imposing a punitive sanction cannot lie where, as here, that interest has been previously and appropriately represented by the State Attorney General in an action addressed, on behalf of all of the people of the State, including plaintiffs and the decedent, to the identical misconduct," presiding Justice Jonathan Lippman wrote for the court. This is a most interesting take on the nature of punitive damages, which as we know have been limited by the Supreme Court.

The Fabiano demand for punitive damages centered around the companies' alleged "targeting of young people in their advertising and marketing of cigarettes," (Ms. Fabiano started smoking at age 14). The court found this to be "materially indistinguishable," from the suit that culminated in the settlement/cartel agreement now well known. The court rejected the Fabianos' claim that they were not bound by the 1998 settlement because the attorney general failed to represent smokers' interests in the earlier litigation.

In an interview with Jane Genova at Law and More, attorney Joseph K. Hetrick of Dechert, a product liability specialist, looks at some of the contrasts between European legal systems and our own. Excerpt:

...Essentially, there are three key differences.

One, is that the U.S. believes that the people are entitled to a risk-free life. There should be zero exposure to risk. That's now embedded in our national ethos.

But that wasn't always how it was. It became a fixed idea when strict liability decisions were being made.

And, this is certainly not the way most other nations think. Maybe other nations such as Europe had been through too many brutal wars and revolutions on their own land to ever embrace the idea that risk can be prevented from a life. In Japan, if you state that zero risk is your goal, they would laugh out loud. ...

Most nations are conservative about what law should be used for. It should not be a tool to transfer wealth. ... You have to remember: Most suits in Europe begin as a criminal matter. ... our system [in the U.S.] is money-oriented.

An earlier interview between the same participants was linked here.

AP reports that a disbarred Manhattan lawyer, who has been convicted of statutory rape, has sued the American Express Co. for giving police credit card information that he says led to his capture in Canada, where he had fled to avoid prosecution.

44-year old James Colliton objects that American Express violated its agreement to withhold customer information from third parties. We haven't seen his contract with Amex, but doubt that it obliges the company to resist requests from law enforcement.

This comes close to the definition of chutzpah, right?

In the asbestos case Bugosh v. I.U. North America, the Pennsylvania Supreme Court is being urged to back away from the principle of strict product liability and instead adopt a standard imposing liability only when defendants have acted unreasonably. For decades the state has followed section 402A of the Restatement (Second) of Torts, which provides for more or less automatic liability once a jury finds a product defective and injurious -- the "putting the product on trial" approach. In the Bugosh dispute, the trial judge consequently excluded defense testimony intended to show that the product distributor had acted in accord with the state of the art of its day on safety. Business groups have filed amicus briefs urging the court to move toward the standard of section 2 of the Restatement (Third) of Torts: Products Liability, which gives wider scope for such defenses. More: K&L Gates, Legal Intelligencer blog, LexisNexis Mealey's, NAM, WLF (the latter two with amicus brief links).

[Replacement post]. This event, on discovery and employment law, has been canceled.

Around the web, July 22

  • Worth keeping an eye on: "The Service Employees International Union and the Teamsters have sued six law firms (including Beasley Allen, Girardi and Keese, and Levin Fishbein) for their handling of the Vioxx settlement." [Beck & Herrmann]
  • Paul Selzer, last remaining defendant in Milberg Weiss/Lerach scandal, pleads guilty; Milberg says government knew of its plan to turn over 15 percent of fees from pending cases to Weiss [NYLJ]
  • Environmental Working Group and Fenton Communications lead campaign against plastic-softening bisphenol A and phthalates, and "trial lawyers sense a big payday" [Fortune]
  • Early Chemerinsky hires for UC Irvine law school confirm that it won't "look like Orange County" at all, ideologically [Bainbridge]
  • Dismissing more than 1,000 railroad asbestos suits for refiling elsewhere, West Virginia high court rejects argument that all Americans enjoy Constitutional right to take their disputes to WV courts [WV Record]
  • Hong Kong, which has hitherto done without antitrust laws, now is considering one [proposal in PDF, press release]

The National Law Journal, via law.com, reports that Microsoft's has informed its 17 "Premier Preferred Provider law firms", which collectively receive about $150 million in fees each year, that they will receive financial bonuses based on "improvements" they make in their diversity numbers.

The preferred law firms must opt by Aug. 15 for one of two ways they want Microsoft to track their diversity "progress." Under one formula, they must demonstrate a two-percentage point increase in the percentage of Microsoft hours billed by "diverse" attorneys, compared to last year. Under the second formula, law firms must show a 0.5 percentage point increase in total "diverse" attorneys as a percentage of the firms' total attorneys, regardless of whether they work on Microsoft matters.

Included in Microsoft's definition of diverse attorneys are women and those attorneys who are African-American, Latino/Hispanic, Asian, Native Hawaiian/Pacific Islander, American Indian, Alaska Native or "mixed race." Obviously, then, reducing the number of white men on staff is "progress" to Microsoft.

Imagine if reduction in any other group was considered "progress".

Finishing up his three-part series for FindLaw, in which he calls the Rhode Island court's dismissal of the lead paint case "the right answer for the right reasons", the Cardozo lawprof singles out perhaps the most important point that distinguishes legitimate old from spurious new applications of public nuisance law: "the Court held that the law of public nuisance requires not only that the defendant be a substantial cause of the interference, but that the defendant still be in control of the instrumentality that caused the interference at the time when the suit is brought." (via Scheuerman, TortsProf).

Jonathan Klick of Florida State and Robert Sitkoff of Harvard have a new paper on SSRN entitled "Agency Costs, Charitable Trusts, and Corporate Control: Evidence from Hershey's Kiss-Off". Abstract (h/t contributor Mike DeBow):

In July 2002, the trustees of the Milton Hershey School Trust announced a plan to diversify the Trust's investment portfolio by selling the Trust's controlling interest in the Hershey Company. The Company's stock jumped from $62.50 to $78.30 on news of the proposed sale. But the Pennsylvania attorney general, who was then running for governor, brought suit to stop the sale on the grounds that it would harm the central Pennsylvania community. In September 2002, after the attorney general obtained a preliminary injunction, the trustees abandoned the sale and the Company's stock dropped to $65.00. Using standard event study econometric analysis, we find that the sale announcement was associated with a positive abnormal return of over 25 percent and that canceling the sale was followed by a negative abnormal return of nearly 12 percent. Our findings imply that instead of improving the welfare of the needy children who are the Trust's main beneficiaries, the attorney general's intervention preserved charitable trust agency costs on the order of roughly $850 million and prevented the Trust from achieving salutary portfolio diversification. Overall, blocking the sale destroyed roughly $2.7 billion in shareholder wealth, reducing aggregate social welfare by preserving a suboptimal ownership structure of the Company. Our findings contribute to the literature of trust law by supplying the first empirical analysis of agency costs in the charitable trust form and by highlighting shortcomings in supervision of charitable entities by the state attorneys general. Our findings also contribute to the literature of corporate governance by measuring the change in the Hershey Company's market value when the Trust exposed the Company to the market for corporate control.


The Senate Committee on the Judiciary has scheduled a hearing on "Courting Big Business: The Supreme Court's Recent Decisions on Corporate Misconduct and Laws Regulating Corporations" for Wednesday, July 23, 2008 at 10:00 a.m. in Room 226 of the Senate Dirksen Office Building.

No witness list yet.

Given last week's Capitol Hill rally by liberal women's groups, the Ledbetter decision could certainly be one of the rulings to be criticized.

UPDATE: Guessed wrong, looks like. The witnesses are now listed:

Certainly one of the month's better headlines, and the blog post in question, at Class Action Blawg, is well worth reading too. It notes that the 2007 Finnish enactment

differs from U.S. procedure in a couple of major ways. First, only the "Consumer Ombudsman" has standing to bring a class action. Second, only those class members who return a "letter of accession to the class"--in other words, only those who opt in--will become class members (not to mention that they get an additional chance to opt out later).

As for why the law is considered a success although never once used, a report on a Finland-based website quotes a consumer agency official as saying that it has provided leverage for the conclusion of settlements without litigation in some cases.

In an update for the Cato Institute of a 2005 article (overview leads to PDF-format article), Washington attorney N. Richard Janis looks at the arsenal of methods, many relatively recent, by which federal prosecutors can arm-twist business defendants into submission. A portion of the executive summary:

...The combination of draconian sentences, lack of meaningful judicial control over the imposition of sanctions, and the impossible burdens on company officers have jeopardized the very nature of our adversary system of justice.

To avoid the potential catastrophe of a federal indictment, business firms are taking extraordinary steps to placate federal prosecutors. And those prosecutors now regularly insist on the following:

* That business firms surrender or "waive" their attorney-client privilege,
* That firms must pressure their employees to waive their constitutional right against self-incrimination,
* That firms facing indictment refuse to advance legal fees to employees under investigation -- even if a firm concludes that an employee was just following directions or is otherwise innocent of any wrongdoing, and
* That embattled firms must discharge certain employees at the direction of the government -- even if a firm concludes that an employee was just following directions or is otherwise innocent of any wrongdoing.

Any organization that balks at the government's demands risks months of negative publicity as prosecutors characterize a legal defense as "impeding" or "obstructing" the investigation. ...

Hoping to boost book sales, perhaps?

Naomi Klein, eh? Just happened to see her name the other day. She's one of the plaintiffs in the ACLU's suit challenging the just-signed FISA Amendments Act (Public Law No: 110-261).

From the lawsuit, page 29: "Nation contributor Naomi Klein has written extensively about the extension of radical free-market capitalism and the resurgence of imperial militarism following the September 11 attacks." Therefore, she will be monitored.

More on the Michigan scheme

Having spent a lot of time around state legislators over the years, just can't get enough of the news out of Michigan today. (See James Copland's post here.) Reform Michigan Government Now's proposed constitutional amendment is revealed to be a blatant scheme by organized labor and some Democratic politicians to take control of the three branches of government in time for the 2012 redistricting.

This suspicion was confirmed when some (former-by-now) employee of the UAW posted the PowerPoint presentation online. Labor often overreaches, but boy, oh, boy. And what do you call rigging a court's political makeup by reducing, not increasing the number of justices -- court unpacking?

More ...

Worst book of the year

Clearly Naomi Klein's godawful The Shock Doctrine, with its conspiracy theories blaming free-market economists for every bad thing to happen in the world, is headed for that honor. Earlier here and here. More: Chris Bodenner @ Andrew Sullivan's.

In yesterday's WSJ, Mark Herrmann of Drug & Device Law Blog fame reviews what he depicts as a lamentably one-sided treatment of the controversy over alleged side effects of Prozac and other antidepressants:

"Side Effects" [by Alison Bass] belongs to a genre of investigative journalism that involves talking to plaintiffs, their lawyers and their expert witnesses, taking their stories as gospel and denigrating the opposing view because corporate money (apparently less pure than money from the plaintiffs' side) supposedly has a corrupting effect. Ms. Bass admires David Healy, for example, a British psychiatrist and expert witness whom the drug companies have been "unable to discredit." Surely a more even-handed account -- since corporate fees are routinely cited -- would mention the fees that Dr. Healy has collected for testifying for a dozen or more plaintiffs. She does not mention either that a court in 2002 rejected his testimony because of "glaring, overwhelming and unexplained" errors in his analysis.

Jim and Walter have done an excellent job of covering the waterfront (Jim even quoted my criticism of the "Missouri Plan"!), so let me restrict myself to some additional thoughts they haven't addressed:

Last week, Carter Wood noted the massive (19,000 word) ballot proposition slated to be before Michigan voters that would radically restructure the Michigan constitution -- including stripping away the two senior-most (conservative) supreme court justices, in an FDR-like reverse-court-packing maneuver. (The Wall Street Journal's John Fund wrote on the measure here; I've had an op-ed pending for a couple of weeks at the Detroit News, addressing the ballot measure as well as the broader litigation themes laid out in the recently released Trial Lawyers, Inc. Update on Michigan.)

This afternoon, Dan Pero at the American Justice Partnership reveals the shocking story behind the ballot proposition:

It turns out that all the suspicions about Reform Michigan Government Now's stealth plan to "reverse pack" the courts to benefit the state Democrat Party have now been shown to be right on target.

The smoking gun is a PowerPoint injudiciously posted on one of the UAW's regional member websites and discovered by the Mackinac Center for Public Policy, which has now posted the revelatory document on its website. The UAW PowerPoint makes no bones about the purpose of the measure, boldly titling it: "Government Reform Proposal: Changing the rules of politics in Michigan to help Democrats." The emphasis is their own. . . .

The UAW's PowerPoint lays out "the problem," which is that "Democrats in Michigan have not controlled the entire State Legislature in 25 years," and the Democrats "Must control Governor, Senate, House and Supreme Court" next time redistricting is to occur.

"The Problem," as slides 7 and 8 spell out, is that there is no way that Democrats can achieve this result fairly through the democratic electoral process. As the slides say, it is "a very long shot proposition." Nor, as the UAW concedes, will redistricting reform by itself be approved by the voters.

The only hope then is to "change the rules," and do it by stealth . . . .

The Detroit Free Press reports here.

I'd like to expand a bit more on the thoughts I briefly shared with Walter over email, and explicate my position more fully. In short: I agree that elections aren't good ways to pick judges, but let's be very wary of the push to replace them with "merit selection."

To begin with, I agree strongly with Walter and Michael Krauss that in a vacuum -- if we were adopting a judicial system from scratch -- we'd never want to have the election of judges. The courts' function is interpreting the rule of law and safeguarding against oppression by the other branches of government, which control the sword and the purse. Those other branches are accountable to the people -- itself a critical safeguard of liberty -- but the passions of the moment might well undo the Rule of Law upon which liberty depends; and the majority of course might oppress the minority. The argument is laid out clearly by Alexander Hamilton in Federalist 78:

Judicial elections: some reactions

My post this morning arguing that prominent business advocates are wrong to crusade for direct election of state judges has stirred up considerable discussion.

Judging by the flurry of committee action, looks like there will be a congressional vote this year on at least one anti-arbitration bill. The Senate Judiciary Committee today is marking up S.2838, Fairness in Nursing Home Arbitration Act, which would vitiate arbitration provisions in nursing home contracts.

On Tuesday, the House Judiciary Subcommittee on Commercial and Administrative Law reported out three anti-arbitration bills, including the House version of the nursing home legislation, H.R. 6126. The Naderific group, Public Citizen, issued a news release praising the action as an "important step toward protecting American consumers from companies that would take away their access to the courts."

The U.S. Chamber of Commerce has been active in support of arbitration in contracts, arguing the provisions provide more affordable and reliable handling of claims for consumers and businesses both.

Update: Readers and bloggers have had many reactions, which I've summarized in a follow-up here.

* * *

As readers of this space may have noticed, some of our friends in the business community have lately been taking up as one of their big causes the direct voter election of state court judges. They argue in a populist vein that the common people ought to exert control over the judiciary and that methods such as gubernatorial appointment or "Missouri Plan" merit-screening panels are too open to influence behind the scenes from bar insiders, politicians, and trial lawyers. They also appear to believe that litigation outcomes will be fairer and more predictable from a business person's point of view when judges hold their offices by election than when they are appointed. The Wall Street Journal has published a series of editorials and other articles assailing the Missouri plan and talking up direct election.

I must say that I find it really odd that business groups have gone off on this kick. Unlike them, I am not at all convinced that electioneering and noisy public campaigns make a good way of selecting judges. In fact, I think there's plenty of evidence that those practices contribute to some of the most serious problems of the state courts, and specifically to some of the worst problems facing business in those courts. In light of all that, crusading against appointive and for elective methods of judge-picking would appear -- at best -- a badly misplaced outlet for reform energy.

The American Justice Partnership, the state-oriented tort-reform group, has released a new national survey that indicates strong public support for elective state Supreme Court justices: 75 percent for electing the justices, 21 percent for appointing them. AJP President Dan Pero says: "While the American Justice Partnership Foundation takes no official position on this question, we believe the decision to abolish the peoples' right to select state Supreme Court justices - a right enshrined in many state constitutions - should not be taken lightly."

The full survey, conducted by Ayres, McHenry & Associates, Inc., is available here.

New areas for litigation

As the American Association for Justice concludes its annual convention in Philadelphia, we bid farewell by taking a look at the list of the 66 litigation groups , highlighting the proposed groups that met.

  • Bisphenol - A/Phthalates Proposed Litigation Group
  • Motorcycles Proposed Litigation Group
  • Digitek Proposed Litigation Group Meeting
  • Chiropractic Malpractice Proposed Litigation Group
  • Walmart-Proposed Litigation Group
  • Nuva Ring Proposed Litigation Group
  • Chantix Proposed Litigation Group

So I rode my motorcycle over to Walmart to buy some nice, soft plastic toys and refill my stop-smoking prescription. Man, threw out my back....Is there a lawyer for me?

On Tuesday, the House Judiciary Subcommittee on Commercial and Administrative Law passed out three anti-mandatory arbitration bills, which will now go to the full committee for action.

  • H.R. 6126, the "Fairness in Nursing Home Arbitration Act of 2008"
  • H.R. 5312, the "Automobile Arbitration Fairness Act of 2008" and
  • H.R. 3010, the "Arbitration Fairness Act of 2007"

As noted in previous posts (here, here and here), the plaintiffs' bar has made pre-dispute arbitration clauses their No. 1 lobbying target in the current Congress, using emotional arguments about nursing homes to leverage other anti-arbitration bills.

Monday's Wall Street Journal carried an effective op-ed arguing for the benefits of arbitration by a former Clinton-appointee to the FTC, Christine Varney (now at Hogan & Hartson): "Arbitration Works Better than Lawsuits." She notes the Arbitration Fairness Act, "is so sweeping that it wouldn't apply just to contracts consumers may sign in the future. It will cancel arbitration agreements agreed to in the past."

The U.S. Chamber of Commerce's Institute for Legal Reform, which has been working diligently on arbitration, yesterday released a new analysis of California debt collection arbitration cases, demonstrating that arbitration is a better course of action for the consumer than going to court.

The Legal Intelligencer (via Law. com) reports that Pennsylvania's high court has agreed to hear an extraordinary case whereby Kia was condemned to pay almost $10 milliion (including over $4 million in attorney's fees) because a customer's brakes wore "too quickly."

Shamell Samuel-Bassett's total cost for brake repairs during the warranty period on his Kia Sephia was $596.16. Brakes are not warranted (they are a "wear and tear" item), but Samuel-Bassett argued that his brakes wore too quickly. His attorney transformed his small-claims case into a class action by arguing that this amount should be awarded to each of the 9,402 people who had purchased 1995 to 2001 Sephias, for a total of about $5.7 million. Kia, not unreasonably, suggested that each case was different, and that not all drivers have similar braking habits.

Nonetheless, trial judge Mark I. Bernstein entered judgment for the class without requiring individual proof of the breach of the class members' express limited warranty contracts; he then added $4.13 million for attorneys' fees, including a $1 million "risk premium." Kia protests that the class certification denies its due process rights, and that the "risk premium" violates relevant Supreme Court precedent about fee-shifting statutes.


No one bid on that domain name at its eBay auction (minimum bid, $999; ending date July 7), despite the seller's description of it as "great, keyword heavy for a law firm dealing in lead paint poisoning law suits" and the added attraction of free shipping (in case you were wondering how much it cost to ship a domain name). A reflection of a post-Rhode Island lull in the business, perhaps?

More Scruggs trouble (Rigsby branch)

Judge William M. Acker Jr. has ruled that key Scruggs Katrina co-operators Cori and Kerry Rigsby must pay $65,000 in contempt fines, and Dickie Scruggs is continuing to fight those payments on the renegade insurance adjusters' behalf, with not much time left before Acker's deadline (Anita Lee, Biloxi Sun-Herald). Meanwhile, Scruggs says he is under no obligation to pay the high bills that law firm Zuckerman Spaeder ran up representing the Rigsbys (it eventually withdrew after going unpaid for too long). That prompted a post from the inimitable David Rossmiller, which begins as follows:

Two questions.

Number 1.

Q: How close is this whole Rigsby mess to unraveling, like a crow swooping down, grabbing a loose thread on your suit and flying off?

A: Apparently, pretty close.

Number 2.

Q: When is an agreement to indemnify someone's expense not an agreement to indemnify someone's expenses?

A: Apparently, when Dickie Scruggs is involved....

Gov. John Lynch has signed Senate Bill 378, creating a specialized business docket in the New Hampshire Superior Court. From the governor's news release:

"This legislation marks a significant reform to our court system. It is very important that our judicial system is equipped to handle efficiently the complexity of business statutes and conflicts, and this legislation will help them do just that," Gov. Lynch said.

The new business court will be similar to other specialized courts in New Hampshire, such as the family court, where a superior court judge will handle the docket of all business and commercial disputes, allowing business disputes to be resolved quicker and adding efficiency to the judicial system.

"Businesses move at a different speed and they need this docket to make justice more accessible to them and accommodate the speed at which they move today. And this new business docket fits in with our goal of making the judicial process more affordable and understandable," New Hampshire Supreme Court Chief Justice John T. Broderick Jr. said. "This has been a collective effort and the beneficiaries are the businesses and the people of New Hampshire."

The Union-Leader covers the story.

Forum-shoppers' delight?

Prof. Chemerinsky is out with a new book that (per John McGinnis's review in today's WSJ) proposes letting plaintiffs pick either a federal or a state forum, whichever they think will prove most favorable, to enforce their rights under federal law. He's not crazy about knocking out state law through pre-emption, either. More: Althouse.

Louisiana expert witness reform

It's not as if the Bayou State regularly produces good news on lawsuit reform, but a new measure applauded by Fred Shumate, executive director of Louisiana Lawsuit Abuse Watch, sounds like an exception: S.B. 308 "would establish a uniform system for eliminating 'junk science' and nonexpert witnesses from the courtroom. ... This legislation is similar to laws passed recently in Georgia, Mississippi and Michigan, and is already being called a model for possible legislation in West Virginia."

Around the web, July 15

  • Injury lawyer Eric Turkewitz blogs one of his trials, a car accident case, in seven parts [last post links to the earlier ones]
  • Joe Nocera, very often the best reason to read the NYT business section, has started blogging ["Executive Suite"]
  • Arkansas governor Mike Beebe, when attorney general of his state, "suggested to [public employee] retirement systems they had a fiduciary duty to" hire private lawyers to file big securities suits, so now they do [Democrat-Gazette courtesy U.S. Chamber ILR]
  • "Banana boomerang": Another weirdly tangled story of Nicaraguan pesticide injury being sued over in U.S. courts, this one involving Beaumont's Provost Umphrey, apparently different from the West Coast one that has gotten Girardi and Lack in such hot water [SE Texas Record]
  • ADA sometimes obliges employer to accommodate disability even when employee does not ask for that to be done, rules Second Circuit panel in Wal-Mart case [NYLJ]
  • "The SEC's Inglorious Role in Limiting Small Business's Access to Capital" [Campbell, Jr., Fed Soc's Engage]

"Pay gap" mythology

Steve Chapman thinks Obama knows better.

Big goings on in Philadelphia

Quite a weekend in Philadelphia just past. The National Governors Association celebrated its 100th anniversary, with Pennsylvania Governor Ed Rendall taking over as chairman for the 2008-2009 year. As governor, Rendell has frustrated tort-reform advocates over the years, vetoing one reform bill (SB 435) in 2006. (Point of Law post.) But Rendell is making infrastructure his national NGA focus.

Also in Philadelphia, the annual convention of the American Association for Justice continues today, with Minnesota Senate candidate Al Franken speaking at a townhall meeting. And, like every day, it's a big day for litigation groups, those bands of attorneys who join to share good ideas about suing people. From today's agenda, we see the activity:

Birth Trauma Litigation Group Meeting
Construction Defects - Property Damages Litigation Group and Toxic Mold Litigation Group Education Program
Resort Torts Litigation Group Education Program
Schools: Violence, Misconduct, and Safety Litigation Group Education Program
Aviation Law Section Education Program
Bad Faith Insurance Litigation Group Education Program
Human Bone & Tissue Recovered from Cadavers Litigation Group
Elective Gastric Bypass Litigation Group
Securities Litigation Group Meeting
Nursing Homes Litigation Group Bring Your Files Forum and Roundtable
Burn Injury, Crane & Aerial Lift Injury Litigation Groups Bring Your Files Forum
Child Sex Abuse Litigation Group Roundtable
Chiropractic Malpractice Proposed Litigation Group
Gas Fire & Explosions Litigation Group
Schools: Violence, Misconduct, and Safety Litigation Group
Traumatic Brain Injuries Litigation Executive Committee
Walmart-Proposed Litigation Group
Orthopedic Implant Litigation Group Roundtable
AMO Complete Moisture Plus Eye Care Solution Litigation Meeting
Bad Faith Insurance Litigation Group Roundtable
Nursing Homes Litigation Group Education Program
Medical Negligence Information Exchange Litigation Group
Fair Housing Litigation Group
Lawn Mower Litigation Bring Your Files Forum and Roundtable
Traumatic Brain Injuries Litigation Group
Railroad/Highway Crossing & Derailment Litigation Group and Railroad Law Section Joint Meeting and Roundtable Electric Blankets and Heating Pads Litigation Group Roundtable

Apparently with support from the European Union, personal injury lawyers cooperating across national lines maintain the ten-year-old organization PEOPIL, which last month (notes John Sullivan of the Civil Justice Association of California) held a conference in Valencia, Spain, at which it hosted the president and president-elect of the American Association for Justice (formerly ATLA). PEOPIL's website lists committees working in just five areas -- aviation, medical negligence, road traffic accidents and whiplash, occupational health, and tourism -- a far cry from the hundred-plus litigation groups under the AAJ/ATLA umbrella. More background is at the website of U.K. solicitors Russell Jones & Walker, and the report from the group's 2007 tenth anniversary conference in Prague is here (PDF).

Around the web, July 14

  • "We would say 'only in America' but for the fact that it's in Russia": travails of Bank of New York in Moscow courtroom show need to rethink RICO law [NY Sun editorial, earlier]
  • New Hampshire is latest target for ABA-backed "Civil Gideon" push for blanket right to taxpayer-paid lawyers in noncriminal cases [Jonathan Baird, Concord Monitor via ABA Journal; earlier] Last December the Washington Supreme Court ruled against such a constitutional claim [Perkins Coie]
  • Expect some hot contests in Mississippi high court races [Clarion-Ledger] "What do Dickie Scruggs' crimes have to do with you? Plenty." [Ziemba, Meridian Star via YallPolitics]
  • Most dangerous kind of discrimination claim? Jury sets $10 million punitive damages in age-bias suit against telecom firm Avaya [NJLJ]
  • Score one against litigation slush funds: after controversy over payout to Seton Hall Law in Bristol-Myers Squibb nonprosecution deal, DoJ adopts policy to curb deals "requiring a defendant to pay a third party unrelated to the defendant's criminal conduct" [Corporate Counsel, earlier]
  • Texas Watch, a group whose views often seem to reflect those of the Lone Star State's litigation lobby, keeps firing blanks at the Supreme Court of Texas [SMS blog]

Two items from this weekend's reporting:

  • The Statesman-Journal reports: Failing to make the fall ballot for lack of petition signatures are two proposed initiative measures, one to limit lawyers contingency fees and the other to make it easier to punish attorneys for filing "frivolous" actions. The measures were sponsored by the head of FreedomWorks in Oregon and Republican Party Vice Chairman Russ Walker. The Politicker blog declares the Oregon Trial Lawyers Association a political winner for the week, commenting: "Sending a team of trial lawyers down to Salem to police the signature counting, it looks like they are off the hook for a ballot measure aimed at cutting their salaries."
  • John Fund of the Wall Street Journal highlights the proposed Michigan constitutional amendment (see below) as an example of left/liberal/progressive activism in a column, "Obama's Liberal Shock Troops." Fund writes: "There is also a direct attack on the judiciary. The initiative reduces the state's Supreme Court to five members, down from seven, and the state's Court of Appeals to 20 judges, down from 28. Saving money appears not to be the motive: Democratic Gov. Jennifer Granholm could appoint 10 newly created circuit court judges. The net result would be that conservatives would lose control of the state Supreme Court, because the two justices who would be removed would be the last two appointed by GOP Gov. John Engler. Of the eight appeals court judgeships that would be eliminated, six are now held by people with GOP backgrounds."

And since we're on the WSJ's op-ed page, here's another Fund column on Justice Scalia's recent interview with Britain's Daily Telegraph, "Let's Be Rid of Half the Lawyers."

Fannie Mae and Freddie Mac debacle

Prof. Bainbridge, among others, saw it coming a long way back.

Yes, and thought's common enough (Daily Business Review). Seriously, there's some kind of a point to be made here about the artificiality of a fact-finding method in which looking up a word's meaning in a dictionary needs to be suppressed with rigor as "misconduct". But that's a point for another day.

Filed just before the Class Action Fairness Act went into effect -- and therefore escaping its provisions -- a gigantic set of class actions against 581 insurers charges that their use of claims-management software is unfair to policyholders and beneficiaries. It's been grinding on for years since then in remote (but plaintiff-friendly) Texarkana, Arkansas. Our own Jim Copland is quoted extensively in the coverage by the Chamber-backed Legal NewsLine, and notes that the infliction of massive discovery costs as well as negative publicity has provided the plaintiffs' side with crucial leverage.

The Delaware advantage

In an interview with Metropolitan Corporate Counsel, Delaware chief justice Myron T. Steele explains the reasons for the state's pre-eminent appeal to business litigants, including its Court of Chancery, run by experienced business judges without punitive damages or juries; adoption of federal Daubert standards on expert evidence, and use of summary judgment to narrow issues; merit selection of judges under an unusual constitutional provision requiring political balance; extensive use of arbitration and mediation; and relatively well-educated juries in cases arising from common law (as distinct from equity). At the same time, Steele notes, the state's courts are attractive for some plaintiffs in mass tort cases, at least in part due to factors such as speed and efficiency that also please business litigants.

President Bush signed H.R. 6304, the FISA Amendments Act, into law Thursday. His statement from the signing ceremony is here. The ACLU and aggrieved allies immediately filed suit in the U.S. District Court for the Southern District of New York, seeking a court order that declares the law unconstitutional and ordering its immediate halt. From the ACLU's news release:

"Spying on Americans without warrants or judicial approval is an abuse of government power - and that's exactly what this law allows. The ACLU will not sit by and let this evisceration of the Fourth Amendment go unchallenged," said ACLU Executive Director Anthony D. Romero. "Electronic surveillance must be conducted in a constitutional manner that affords the greatest possible protection for individual privacy and free speech rights. The new wiretapping law fails to provide fundamental safeguards that the Constitution unambiguously requires."

The complaint in Amnesty v. McDonnell is available here.

As this New York Sun story notes, the ACLU suit does not take on the civil immunity for telecom companies included in H.R. 6304. The Electronic Frontier Foundation is not a party to the ACLU suit; perhaps the group takes the lead in the private-sector litigation. (The private sector issues are the ones that interested us.) For now, EFF is excoriating the new law as a means to raise money.

More background following passage of H.R. 6304:

UPDATE (2:05 p.m.): Orrin Kerr comments at The Volokh Conspiracy, "The New FISA Law -- and the Misleading Media Coverage Of It."

The second part of Texas Public Policy Foundation's audio interview with former state Rep. Joe Nixon, a key architect of the state's reforms, is now up in MP3 format. Part I is here.

"Barbarians on the bench?"

The New York Times, E.J. Dionne, and others pretend that a right-wing cabal of "highly conservative" and "cold-hearted" justices now exerts near-control over the Supreme Court. In reality, notes Stuart Taylor, Jr. in his new column, the key decisions that were deemed triumphs for the right this term were joined by such justices as Stevens, Breyer and Souter and applauded by such public figures as Barack Obama. Even the exceptions typically came in cases where dissenting conservative justices stood closer to American public opinion than did the majority of the court. "it's misleading to brand as 'far-right' and 'radical' positions that in fact are more liberal than, or near the center of, mainstream public opinion. ... The explanation may be that media portrayals have convinced the public that the Court is more conservative than it really is."

Around the web, July 11

  • Our own Ted Frank on punitive damages after the Exxon Shipping decision [yesterday's WSJ]. Also check out Gordon Crovitz's take [WSJ earlier]
  • After acquittal of Mills, Kentucky fen-phen trial results in hung jury for Gallion and Cunningham; prosecutorial fumbles blamed [Ted at OL]
  • Adventures in class action choice of law: New Mexico high court sees no problem applying its law to transactions in other states [Albuquerque Journal courtesy US Chamber]
  • Alabama drug-pricing trial: Jere Beasley gets jury to award $114 million against Glaxo and Novartis, demand letters sent to 69 other drugmakers charged with the same supposed fraud [CNBC, FiercePharma]
  • Abbe Lowell files Fifth Circuit appeal of client Paul Minor's conviction [White Collar Crime Prof Blog, appeal in PDF]
  • WSJ on hurricane insurance models is stronger on hand-wringing than on analytical rigor [Salmon, Portfolio]
  • Defense bar lagging plaintiffs' in new media involvement? [Genova]

The verdict in a French court, if upheld, won't just compel the online auction site to police its listings for counterfeits of luggage, perfume and other status goods, but also will knock out "gray market" goods (product originating in authorized channels, but sold in a different market than intended). "It would even bar individuals from reselling LVMH perfumes that they had received, for instance, as unwanted Christmas presents, both lawyers say." (Parloff, Fortune).

A Michigan leap of faith

Reform Michigan Government Now, a political group of uncertain provenance, has submitted its petition signatures (more than 487,000, they claim) to qualify a proposed constitutional amendment for the November election. The measure sweeps through all the branches of government in its 19,000 words, cutting the pay of elected official, shrinking the Legislature and eliminating seats on the state Supreme Court and Court of Appeals, in the process kicking off Republican appointees.

Here's the text.

The petition gathering went on in relative obscurity, and organizers have kept silent about their funding, saying their backers don't have to be revealed until August. The spokeswoman for the group is Dianne Byrum, a former Democratic House leader, and other leading Democrats have praised the measures; scuttlebutt is that organized labor is the primary mover.

Republicans have certainly geared up against the measure, with state GOP Chairman Saul Anuzis laying out the arguments against in this op-ed in the Detroit Free Press. As for the courts, he says, "This monstrosity proposes a wholesale special interest takeover of our state's courts. It purges two Supreme Court justices, with those justices chosen by one set of criteria. It wipes out seven Court of Appeals judges by a different set of criteria. It jiggers the pensions of more than 250 judges, potentially creating a real emergency in our courts if most or all of them decide to quit. "

Which raises another sticky issue. Backers of the measure claim no sitting judge can review the legality of the ballot language because of inherent conflict of interest; they'd be ruling on their own pay. (Kalamazoo Gazette story.)

Gov. Granholm, a Democrat, says she likes some parts, not so sure about others, and maybe a state Constitutional Convention is the way to go. (Detroit Free Press.)

So, much confusion, no doubt litigation, and let the accusations fly. The measure promises months of theorizing, commentary and fun for political watchers, but it's hard to see any good government coming out of it.

On Wednesday the House Committee on Oversight and Government Reform chaired by Rep. Henry Waxman held a hearing, "On Manufacturers of FEMA's Toxic Trailers," with testimony from four representatives of the travel trailer industry. The issue was formaldehyde levels in trailers that FEMA supplied to people displaced by Hurricane Katrina. It was your typical House Oversight hearing, full of attacks against industry and the Administration as bad actors.

Thankfully, some balance come from the ranking member of the committee, Rep. Tom Davis (R-VA), who gave an opening statement that reflected the real world difficulties that FEMA and the industry encountered after the disaster. Davis recounted the different reports on formaldehyde levels from tests conducted by the CDC and commented (our emphasis):

That leaves trailer occupants, already victimized by one storm, caught in a lingering tempest of post-Katrina political scapegoating, bureaucratic finger-pointing, and litigation. Once again the Committee risks being used as a discovery proxy for plaintiffs suing companies called to testify before us. Instead, we should be asking FEMA why contract requirements for habitable mobile units weren't more specific, why inspection procedures weren't consistent, and why heath concerns didn't trigger standardized testing and, where necessary, prompt remediation. We should be asking federal science and health agencies how to establish, and measure, workable standards for formaldehyde exposure in realistic settings.

Along those lines, here's...

  • An informative article on the lawsuits against one of the trailer manufacturers. It's from "Trial," the magazine of the American Association for Justice.

  • ToxicFEMAtrailer.com, a website from a lawfirm soliciting clients in a class-action lawsuit.

  • An MSNBC story on the hearing, "Congress names names in FEMA trailer probe -- House Democrats say manufacturers knew of high formaldehyde levels."

The MSNBC story is a real piece of work, "Congressional Democrats for the first time named names Wednesday in their investigation of formaldehyde-contaminated travel trailers provided by FEMA to victims of Hurricanes Katrina and Rita, charging that manufacturers knew but did not disclose that the units were emitting high levels of the toxic gas that could sicken inhabitants." Named names...The media cannot resist making McCarthy-era allusions, no matter how ridiculous and strained.

Anyway, it's the classic combination: "Investigating" politicians, industry-attacking class-action lawyers, and hyping, accusatory media. At least Rep. Davis identified the game being played.

SEIU vs. private equity

Diana Furchtgott-Roth traces the union's relationship with Kohlberg Kravis Roberts and Henry Kravis (whom it's now demonizing in a high-visibility campaign) and also examines the union's stewardship of its own pension plans.

Public employee union sclerosis

New York may display a more advanced stage of the malady, but Connecticut has come down with it too.

Trophy federal courthouses

Why, wonders Ron Coleman, must their design be so soulless and uncomfortable?

A news release from the Electronic Frontier Foundation, which is representing the plaintiffs in Hepting v. AT&T, a class action lawsuit, and is coordinating co-counsel in the 47 lawsuits outstanding against the telecoms: "Senate Joins House in Caving to White House Immunity Demands -- Telecoms Let Off the Hook for Illegal Spying - For Now"

"We thank those senators who courageously opposed telecom immunity and vow to them, and to the American people, that the fight for accountability over the president's illegal surveillance is not over," said EFF Senior Staff Attorney Kurt Opsahl. "Even though Congress has failed to protect the privacy of Americans and uphold the rule of law, we will not abandon our defense of liberty. We will fight this unconstitutional grant of immunity in the courtroom and in the Congress, requesting repeal of the immunity in the next session, while seeking justice from the Judiciary. Nor can the lawless officials who approved this massive violation of Americans' rights rest easy, for we will file a new suit against the government and challenge warrantless wiretapping, past, present and future."

Interesting. The comments echo remarks made by Sen. Sheldon Whitehouse (D-RI) on the Senate floor yesterday (Page S6409):

Today's effort is a naked intrusion into ongoing litigation. Where will that stop? Will Congress be able to rove at will through litigation anywhere in the judicial branch, picking winners and losers as we like? We don't just trespass on the separation of powers; we trespass onto dangerous ground.

If I were a litigant, I would challenge the constitutionality of the immunity provisions of this statute, and I would expect a good chance of winning.

So the telecoms were creating this public nuisance...

The Senate has just passed H.R. 6304, the FISA Amendments Act, to update the authority for intercepting foreign, electronic communications for intelligence purposes. Earlier today, the Senate handily defeated three amendments that would have undercut (and in the case of the Feinstein-Dodd amendment, eliminated) the legal immunity the legislation provided to telecom companies that assisted in the Administration's post-9/11 program of surveillance. The vote was 69-28.

The legislation now goes to the President, and once it becomes law, the telecom companies can submit documentation to the U.S. District Court to demonstrate that they were, indeed, asked to cooperate by the Administration in the surveillance. (The usual phrase is "given a legal order" or words to that effect.) If the documentation satisfies the court, as most everyone expects it to, the court will dismiss the 40-plus civil lawsuits filed against the companies.

This bill and immunity for the telecoms have been a cause celebre among civil libertarian groups like the ACLU and EFF, opponents of the Administration's foreign-policy, and the left-wing blogosphere. With litigation pending, and being in an unenviable PR position, the telecommunication companies mostly stayed quiet.

Still, a very good explanation of the national security and legal reasons for the bill came from Sen. Orrin Hatch (R-UT) today on the Senate floor. (Prepared remarks here.)

It's very simple - Congress should not condone oversight through litigation. The lawsuits seize on the President's brief comments about the existence of a limited program to go on a fishing expedition of NSA activities. But this is really worse than a fishing expedition; this is draining the Loch Ness to find a monster. Sometimes what you are looking for just doesn't exist. Yet we consistently hear as justification for the apparent paranoia that some wiretaps were warrantless. But lest we forget, the 4th Amendment does not proscribe warrantless searches, it proscribes unreasonable searches.

The fact is the President created an early warning system to prevent future attacks; essentially a terrorist smoke detector. But rather than appreciate the protection it offered, critics rushed to pull out the batteries so that it couldn't work. My feelings of admiration and respect for the companies who did their part to defend America are well known. As I've said in the past, any company who assisted us following the attacks of 9/11 deserves a round of applause and a helping hand, not a slap in the face and a kick to the gut.

The Senator also does a nice job of debunking the legal claims of those who sued the phone companies: "In the over 40 outstanding civil lawsuits, is there any proof that any litigant was specifically targeted by the government? Can any of the plaintiffs show that they are "aggrieved persons" under the definition of FISA? The answer to both questions is no. Rather, many of the lawsuits utilize the following logic: I have long distance service, so I am going to sue because I think you listened to my calls."

I've been following this week's FISA debate over at Shopfloor.org. Start here.

The paint manufacturers hit by the lead-paint lawsuits have just issued a news release about the city of Columbus dropping its suit. Excerpt:

COLUMBUS, OHIO - The City of Columbus has voluntarily dismissed with prejudice its public nuisance lawsuit filed in December 2006 against former manufacturers of lead pigment. With Tuesday's filing in Franklin County Court of Common Pleas, all ten public nuisances suits filed by Ohio cities since 2006 have been either voluntarily dismissed or rejected by courts.

"The City of Columbus followed settled law by asking the court to dismiss its lawsuit," said Charles H. Moellenberg, Jr., an attorney for The Sherwin-Williams Company, speaking on behalf of defendants Sherwin-Williams and Millennium Holdings, LLC. "The lawsuit was legally and factually wrong in suing companies that lawfully made products that the city, painters and consumers demanded historically as the best on the market."

The City's action follows a series of significant decisions over the last two years, all of which have rejected public nuisance lawsuits against former manufacturers. On July 1, the Rhode Island Supreme Court unanimously rejected a public nuisance lawsuit filed nine years earlier, saying that the claim "should have been dismissed at the outset." Earlier, state Supreme Courts in Missouri and New Jersey, along with a jury in Wisconsin, also rejected plaintiffs' claims in public nuisance cases. As a result, public nuisance lawsuits against former manufacturers have been rejected by all courts in which the cases are resolved.

We'll be watching for news from the Ohio Attorney General's office, which last week expressed its intention to continue the state's lawsuit. Seems an untenable position.

Earlier post on Columbus' litigation here.

Around the web, July 9

  • Paris's Le Figaro warns Europe against going down the U.S. path on class actions [The Moderate Voice]
  • Tennessee docs hoping new law requiring 60 days notice and expert attestation of merit will curb dubious cases [Minch/Tennessean]
  • Not much chance lawmakers will investigate charges that business-bashing political group ACORN was promoting liar loans [Malkin; Adler @ Volokh]
  • Reforming judicial selection a necessity if Alabama is to turn around its courts' poor reputation [Mobile Press-Register]
  • Ignominious end to Eliot Spitzer's crusade against NYSE chief Grasso [WaPo, Ribstein]
  • Since 1958 it has been unlawful to trade futures in onions, and a lesson lies therein about whether speculators are to blame for price volatility [Tabarrok]
  • Illinois businesses manage to stop proposed "Structural Work Act" allowing suits against other contractors on work site to bypass workers' comp; New York said to have only such law [Akin/Madison Record]

Panelists at the D.C. event will include Point of Law's own Prof. Martin Grace and his Georgia State colleagues Robert Klein and Harold Skipper, along with Bob Litan of Brookings, Peter Wallison of AEI, Hal Scott of Harvard, and a host of others. Details here. Update: now with full-length video and audio links.

Even from beyond the grave, the eminent economist has no trouble refuting the mysteriously popular left-wing polemicist in this Reason.tv remix.

Apropos preemption, we note this session on Sunday, July 13, at the American Association for Justice's annual convention in Philadelphia:

Preemption Law Litigation Group

  • Theme: Federal Preemption: Fighting in Court and in Congress

  • Preemption Update: Activity on the Hill

  • Overview of Federal Preemption: Its Origins to Today's Most Popular Defense Against Liability

  • Federalism: Agencies and Legislation Encroaching on States' Rights

  • In the Trenches: Litigating Preemption in Pharmaceutical Cases

  • FDA Discovery

  • Arguing Against Preemption: Auto Defect and Other Cases

  • The Role of Amicus Briefs in Fighting Preeemption

Elsewhere, reinforcing the line of attack, a "Perspective" piece appears in the July 3 online issue of the New England Journal of Medicine, written by the journal's doctor/editors, "Why Doctors Should Worry about Preemption." The three anticipate the Supreme Court's ruling in Wyeth v. Levine and argue, "Why should doctors be concerned about preemption? In stripping patients of their right to seek redress through due process of law, preemption of common-law tort actions is not only unjust but will also result in the reduced safety of drugs and medical devices for the American people. Preemption will undermine the confidence that doctors and patients have in the safety of drugs and devices. If injured patients are unable to seek legal redress from manufacturers of defective products, they may instead turn elsewhere."

"Unable to seek legal redress..." Well, the doctors certainly know their anatomy of a straw man.

The attacks against federal preemption, a recurring topic of discussion around here, are stepping up in Congress.

On June 26 Rep. Frank Pallone (D-NJ) and Rep. Henry Waxman (D-CA) introduced H.R.6381, the Medical Device Safety Act. Being sold as overturning the Supreme Court's decision in Riegel v. Medtronic, it simply amends the Federal Food, Drug and Cosmetic Act with a clause: "Nothing in this section shall be construed to modify or otherwise affect any action for damages or the liability of any person under the law of any State."

Pallone's office issued a news release, "Health Leaders in Congress Introduce Legislative Reversing Supreme Court's Medical Device Decision."

The introduction of the legislation coincided with a letter from Waxman's Oversight Committee to FDA Administrator Andrew von Eschenbach, a typical document hunt to demonstrate that the FDA colludes with the drug and medical equipment industries to prevent state tort actions. By July 11, Waxman demands, the FDA must submit (and this is just a small sample)...

All documents since January 20, 2001, relating to communications between FDA officials and private persons, including representatives of drug or medical device companies, about preemption, including documents related to: (a) A intervention in specific product liability cases; (b) the development of Section D "Comments on the Product Liaiblity Implications of the Proposed Rule" in the preamble ot the 2006 drug labeling rule; and (c) policy documents and guidance relating to preemption.

The food and drug trade press has noticed (here and here, for example).

The letter follows an Oversight committee hearing in May on preemption, the one where Dennis Quaid and his wife testified.

Fifth in the ongoing multi-sided discussion series "New Talk" from Philip Howard's Common Good, this one runs from today through Thursday and includes such names as Judge Edith Jones, Profs. Walter Dellinger, David Schoenbrod and Peter Schuck, Alan Morrison, Ken Feinberg, and our own Ted Frank, to name only a few.

A road map for the Kivalina suit

The Kivalina suit, backed by liberal foundation money and formidable plaintiff's lawyers, seeks to extract vast sums from energy companies on a theory that climate change can be construed as public nuisance. A Washington Legal Foundation paper (PDF) by Peter Gray and J. Benjamin Winburn of McKenna Long & Aldridge examines the hurdles and defenses the suit will likely have to overcome, including the political question doctrine, pre-emption, and standing, and most significantly causation, since the contributions of defendant oil, coal and utility companies to global warming cannot readily be disentangled from the contributions of entities not sued. Although the state tobacco recoupment precedent suggests that "civil conspiracy" and "concert of action" could be powerful theories for the plaintiffs, Gray and Winburn conclude that the atmospherics (so to speak) of sympathy are likely to be more favorable for the defendants in this case, in that their activities, unlike the sale of cigarettes, are essential to the functioning of modern society.

From Stuart Taylor, National Journal, Feb. 19, 2003, "Perverting the Legal System: The Lead-Paint Rip-Off."

[Attorney General Sheldon] Whitehouse signed an unusual "retainer agreement" with Ness Motley and another firm. It not only guaranteed the lawyers a contingent fee of 16.67 percent of any money recovered, plus all litigation expenses; it also gave them considerable control over whom to sue, what to claim, whether to settle, and on what terms. In other words, Whitehouse delegated a share of the state's sovereign power to a law firm whose best-known partner, Ronald L. Motley, had vowed that he would bring the paint industry to its knees within three years or give up his 156-foot yacht. Never mind the conflict between the interests of the lawyers in huge fees and the interests of Rhode Island's people, who might, for example, be misled and alarmed by the lawyers for their state, who claim that old lead paint in school buildings is a big threat to the students.

With all the commentary over the R.I. Supreme Court's rejection of the state's public-nuisance lawsuit against the paint industry, there was comparatively little analysis of the ruling's section on the propriety/legality of contingency fee arrangements. LegalNewsline had a good examination of the issue, following up a story from May about Motley Rice's fee. Otherwise...eh. Probably because the court upheld the contingency fee, albeit with strong words of admonition.

The section of the opinion on the continency fee arrangement, Track V, starts on page 60. The gist is on page 71.

The Propriety of Contingent Fee Arrangements
Although we are keenly aware of the gravity of the issue and of the fact that thoughtful and potent policy-based arguments have been made on both sides of the issue, in the end we have concluded that, in principle, there is nothing unconstitutional or illegal or inappropriate in a contractual relationship whereby the Attorney General hires outside attorneys on a contingent fee basis to assist in the litigation of certain non-criminal matters. Indeed, it is our view that the ability of the Attorney General to enter into such contractual relationships may well, in some circumstances, lead to results that will be beneficial to society--results which otherwise might not have been attainable. However, due to the special duty of attorneys general to "seek justice" and their wide discretion with respect to same, such contractual relationships must be accompanied by exacting limitations. In short, it is our view that the Attorney General is not precluded from engaging private counsel pursuant to a contingent fee agreement in order to assist in certain civil litigation, so long as the Office of Attorney General retains absolute and total control over all critical decision-making in any case in which such agreements have been entered into.

Bolded and underlined! And restated, more or less, several times in the opinon.

A good sentiment, but hard to enforce in the real world, we think.

As for Mr. Motley's yacht, the Themis was still on Power & Motoryacht's list of America's 100 Largest Yachts in 2007. But only #99. He's not keeping up.

Land of the Ballot Builders

Electoral populism continues its decade-long battle against the elite polity in Oregon, with at least 10 citizen initiatives on the ballot this November, including two that go after trial lawyers.

The Oregonian covers the activism, much coming from familiar advocates of smaller government, lower taxes, and less organized labor, Bill Sizemore and Russ Walker. The Statesman-Journal also has a story, suggesting as many as 14 initiatives making it to the ballot. Two of the qualified measures (as detailed at the excellent Secretary of State's online database):

The first, Initiative 51, limits a lawyer's contingency fees to 25 percent for the first $25,000 and 10 percent above $25,000. The second, Initiative 53, requires the court to sanction attorneys who file frivolous pleadings in civil actions.

Sizemore was the Republican Party's candidate for governor in 1998. Last week, the Oregon Supreme Court upheld a $2.5 million civil verdict against Sizemore, the result of a racketeering lawsuit brought by the state's teachers unions against Sizemore-organized groups that collected petitions for initiated measures in 2000. Statesman-Journal story here, and the Supreme Court's opinion in S054403 American Fed. Teachers v. Oregon Taxpayers United is available here.

Rhode Island's dominant paper, the Providence Journal, summarizes the lead-paint litigation with a Sunday feature on the Liz Colon, the mother of a child who suffered from lead poisoning. Colon became the face of the litigation against the paint manufacturers, joining the activist group, The Childhood Lead Action Project, for which she now works.

From "Court reversal on lead poisoning stuns a longtime advocate for lead poisoning victims":

Colon says she can understand the Supreme Court's rationale for reversing the state's case.

She still has trouble accepting why she had to pay so much financially and emotionally after her son got lead poisoning. Governments at every level are paying. Taxpayers are paying.

And the companies walk away "scot free."

The newspaper invested great time and effort in coverage of the lead paint issue as a public health crisis, in 2001 publishing a special, multipart report, "Poisoned." Among the installments: "Babies as lead detectors," and "Unsafe at home." And the wrap-up, "Enact new laws, enforce the old," with the teaser, "To shake Rhode Island out of its complacency and to stop the lead poisoning of our children, Atty. Gen. Sheldon Whitehouse is going after unresponsive landlords. He has also filed a precedent-setting lawsuit against the companies that manufactured paint containing lead. Some advocates are pushing for additional measures to curb lead poisoning."

That's the kind of coverage that helps activist attorneys general get up in the morning.

Speaking of AAGs, we missed the fact that Rhode Island Attorney General Patrick Lynch was elected last month to be president of the National Association of Attorneys General. Why? For the children:

"I am enlisting the assistance of my colleagues and good corporate citizens, and marshalling the resources of NAAG and other organizations, to increase protections, decrease risks, and encourage a more just and secure world for our children," Attorney General Lynch said.

The annual trial lawyers convention is just around the corner, as members of the American Association for Justice gather in Philadelphia July 12-16th.

The convention brochure, as always, makes for interesting reading. You get a good sense of new strategies and priorities from the various seminars and discussions. For example, from the Section on Toxic, Environmental, and Pharmaceutical Torts (STEP), page 8 in the brochure.

    Afternoon Theme: MDL--State Coordination
  • Internal Struggle: How to Resolve the Conflict of Contingent Fees and Common Benefit Fees in Mass Tort Litigation (ethics)
  • Ethics of Mass Tort Settlements (ethics)
  • The Preamble/Supreme Court Preemption: An Update
  • What's Hot: New Litigation--Bisphenol-A, Pain Pumps, Toxins

Bisphenol-A, that's a hot topic right now in Congress, too, with Senator Boxer working on a federal ban. Pain pumps, though...new to us.

On the political side, we've got a post over at Shopfloor.org that notes Gov. Rendell and Sen. Specter are speaking, logically enough given the Pennsylvania location and their legal interests. But the speaker who really catches our eye is Al Franken, the DFL candidate for U.S. Senate in Minnesota. He's not just the townhall speaker, he's the special guest for a "meet and greet" limited to the Platinum-level contributors to the AAJ's PAC.

No political distancing there, and perhaps even a reconciliation? Prominent Minnesota trial lawyer Mike Ciresi originally sought the party's nomination before dropping out given Franken's advantages.

Franken's fundraising strategy is also now apparent. He's relying on trial lawyers, labor bosses and the well-heeled liberal elite.

Which makes for an obvious campaign slogan: Send lawyers, goons and money.

In other West Virginia legal news

West Virginia Governor Joe Manchin has taken the unusual step of filing an amicus brief with the state Supreme Court of Appeals, asking the court to clarify the ability of DuPont to challenge a jury's award of punitive damages against it. DuPont last week filed an appeal (news release) to the state's top court of last October's awarding of $196.2 million in Harrison County Circuit Court, the result of a class-action lawsuit by residents who charged a nearby zinc smelter was contaminated with heavy metals. (Previous news coverage.)

AP now reports:

Manchin urged the justices to clarify what sort of appellate review is to be afforded DuPont under its constitutional right to due process. His lawyers cited a 2003 U.S. Supreme Court decision to argue that the 14th Amendment guarantees appeals of punitive damages.

The brief essentially questions whether consideration of a written appeal alone is adequate.

"Ensuring that West Virginia courts provide the appropriate level of appellate review to (DuPont), as well as all other parties seeking review of punitive damages awards, is an issue of vital public importance,'' the brief argued.

The plaintiff's lawyers express outrage; Florida lawyer Michael Papantonio declared, "This just further delineates how badly the deck is stacked in West Virginia against people trying to recover when they're taking on DuPont. It's stacked against people who have been wronged by corporate America.''

A recent survey Directorship Magazine and the American Justice Partnership ranked West Virginia as having the 49th best legal climate for business. Manchin, a Democrat, has been making good-faith efforts to reduce the state's legal capriciousness, and the new amicus brief can be seen as more evidence of the attempts.

UPDATE (Sunday): The governor's amicus brief in DuPont v. Perrine is here.

In West Virginia, a state where government hiring of private lawyers to pursue public lawsuits has been particularly controversial, four law firms including Hagens Berman are set to split $3.9 million for prosecuting an antitrust suit against Visa and MasterCard that resulted in a settlement, per the Charleston Daily Mail. And Attorney General Darrell McGraw has appointed four lawyers to pursue a new suit against a variable annuity life insurance provider. Steve Roberts, who heads the state chamber of commerce, said it's particularly frustrating that the AG's office makes no disclosure about how the lawyers -- many of whom contribute to his campaign -- are selected for the task.

Related to which: our newest featured column is by John Sullivan of the Civil Justice Association of California, and discusses the worrisome recent appellate court ruling that backed off from the state's significant Clancy doctrine, which had long prohibited lawyers pursuing public nuisance actions on behalf of local government from capturing fees contingent on the results of those actions. More on Santa Clara v. Superior Court here, here, and here.

Zach Scruggs Gets 14 Months

The government had suggested probation, but as the WSJ law blog (free!) reports, he has been sentenced to 14 months for misprision of a felony.

The WSJ law blog says that this federal crime is committed by failure to report a crime of which one has knowledge, but that is not accurate. The federal crime of misprision of a felony requires concealment of the crime, not merely non-reporting of it.

The young Scruggs' attorney was none other than former Mississippi AG (and mastermind of the great tobacco cartel) Mike Moore. Moore argued that Zach had "great love for the law", but somehow U.S. District Court Judge Neal Biggers failed to find that convincing....

Around the web, July 2

  • Kentucky jury acquits Melbourne Mills, the "too drunk to pay attention" fen-phen defendant, can't reach agreement on others [Ted @ OL]
  • Related: Florida A&M says no one's proved $1 million law school donation from Ky. scandal's Shirley Cunningham came from tainted funds, so why give it back? [ABA Journal]
  • Law of the land: Chicago's Daley isn't so hostile toward the Second Amendment that he'd defy the Supreme Court, or is he? [Chapman]
  • "I don't hate lawyers. I hate the unfair legal SYSTEM." [docblog Fertility File]
  • Southern Illinois forum-shopping: "None of the claimants reside in St. Clair County" but all seven have gone there to file contact-lens suits against Bausch & Lomb [St. Clair Record]
  • Next up in cellphone early termination class actions: trial against Verizon in Alameda County, Calif. [The Recorder; earlier]

Site outage fixed now

Point of Law's front page (though not its individual posts or inner pages) were down for about twelve hours. Anna D. and Tatiana K. of the Manhattan Institute have now caught and corrected the blog-software problem involved. Thanks for your patience.

From the Columbus Dispatch:

"Most everybody pinned their hopes on how Rhode Island moved," said Columbus City Attorney Richard C. Pfeiffer Jr. "I think it's fair to say, with Rhode Island's decision, we'll have to seriously re-evaluate this case and see if it should continue."

The city estimates that cleaning up 150,000 lead- contaminated homes could cost $1.7 billion.

"Obviously, this ruling in Rhode Island does not bode well for our legal strategy," said Dan Williamson, spokesman for Mayor Michael B. Coleman.

Columbus sued paint manufacturers in December 2006, (mis)using public nuisance law in the process. (Search for the docket for case 06 CV 016480 here.) In March, 2008, U.S. District Judge Edmund A. Sargus Jr. dismissed a suit filed by Sherwin-Williams that sought to block the city's litigation. (Columbus Dispatch story), so the city's suit is still alive. But in any case, the water-based writing is on the wall.

The Attorney General's office is not reacting as post-factually as the city attorney's office. The Dispatch quotes Jim Gravelle, an AG spokesman, saying, "This in no way restricts Ohio's right to hold lead paint companies liable for the extreme harm they have caused Ohio citizens under public nuisance or other causes of action."

We note the state's lawsuit was filed in 2007 by the disgraced, since-resigned AG, Marc Dann. His judgment obviously proved lacking in many things; the current, appointive AG could certainly renounce the lawsuit with no political harm, especially since she's not seeking the office in the fall election. And ultimately, it was politics that drove the suit.

P.S. The Cleveland Plain-Dealer editorially called on the state and cities to face reality and give up the suits: "Paint companies should continue helping struggling cities abate this expensive problem, but those are deals to be struck at a negotiating table, not in a courtroom."

It's happening live momentarily at this link.

Word is coming in that the Rhode Island Supreme Court, reversing a lower court, has ruled against the creative public nuisance theory suit seeking to hold companies that made lead paint and pigments decades ago liable for billions of dollars in housing cleanup costs. Ted is also covering the story at Overlawyered. (And see Mike Krauss's post just below.)

More 10:30 a.m.: The court was unanimous and ruled "that the lawsuit should have been dismissed at the outset". Defendants now have a statement up:

"Today's ruling is a landmark victory for common sense and for responsible companies that did the right thing," said Charles H. Moellenberg, Jr., an attorney for The Sherwin-Williams Company, speaking on behalf of defendants Sherwin-Williams and Millennium Holdings, Inc. "This case never should have been filed - it was factually wrong and legally flawed. A company should not be held liable when there is no proof that it did anything wrong. It has taken nine years and two juries, but the Supreme Court's decision today puts public nuisance law in Rhode Island squarely in line with the overwhelming majority of jurisdictions of the United States."

For the aromatic politics behind the suit, including the role of South Carolina law firm Motley Rice (formerly Ness Motley), see OL, Jun. 7, 2001. For some background on the disputed epidemiology behind the controversy, see OL, Jun. 8-10, 2001. Eight and a half years ago, flush with billions in tobacco and asbestos fees, Ron Motley vowed, "If I don't bring the entire lead paint industry to its knees within three years, I will give them my [120-foot] boat".

Associated Press reports that the Rhode Island Supreme Court has unanimously overturned a 2006 jury verdict (the only one ever obtained against them) against Sherwin-Williams, NL Industries Inc. and Millennium Holdings, former manufacturers of lead paint.

A jury found all three liable in 2006 for "creating a public nuisance" by manufacturing their then-legal product. The companies would have been required to clean up hundreds of thousands of homes built before 1978 (when lead paint was banned), at a cost of billions.

The high court found that the trial judge should have dismissed the suit since the state had failed to prove that the presence of lead paint was a public nuisance. The requirement of wrongdoing seems finally to have been upheld in the Ocean State.

The manufacturers had also noted that Rhode Island never presented any evidence that their products were used in any Rhode Island home or had even been sold in the state.

Many of us have written about this abuse of tort law. Neither wrongdoing nor causation was ever established here. Lead poisoning is the result of ingestion following poor maintenance, and typically also results from poor childhood supervision. Holding companies liable because they happen to still exist, even though they have not wrongfully and proximately harmed anyone, is a perversion of tort law. I look forward to reading the Rhode Island decision.

Nine years old today

My (and Ted's) other blog, Overlawyered, is celebrating its ninth anniversary today. Check out its recent posts on a lawn mower warning case against John Deere, Ted's experience as an objector at the Grand Theft Auto videogame class action settlement, another dubious class action settlement in a Time Warner Cable case, Jim Copland on asbestos screening (and more), and a tangential link between Chicago's Rezko scandal and the politics of Illinois's lawsuit-famed Madison County.




Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.