Subscribe Subscribe   Find us on Twitter Follow POL on Twitter  


March 2009 Archives

Class actions, as is well known, are often filed as cudgels to persuade corporate defendants to settle (with little for the class but much for the class's attorneys) to avoid the expense and reputational 'hit' of a trial. Those class actions that are not settled are sometimes dropped, as if the defendant called the plaintiff's bluff.

But the class action against American Express, accusing the credit card company of overcharging 7.5 million current and former American Express cardholders who purchased travel insurance, produced a trial that lasted a whopping seven weeks. This trial [Hoffman v. American Express Travel Related Services Co. Inc., No. 01-022881 (Alameda Co., Calif., Sup. Ct.). ] has just resulted in a summary judgment for Amex, which did not have to put on a defense. Judge George Hernandez of the California Superior Court in Fremont, Calif., ruled on March 26, after hearing 11 weeks of testimony from the class of cardholders in a nonjury trial, that the cardholders failed to prove their case.

The suit had alleged that American Express overbilled on travel insurance for cardholders who charged flights on their charge cards and that it allegedly used deceptive marketing of the program that misrepresented or was unclear about how the system worked.

Amex charged a fee for airline travel purchased on its charge card and would sweep in inappropriate insurance charges for flights consumers later canceled, seat upgrades and baggage fees. Consumers were given the opportunity to seek refunds through a form provided by the company or by calling for a refund. The suit alleged that American Express deceptively marketing the program -- of this Judge George Henderson found no evidence. In a previous phase of the trial Judge Henderson found as a matter of law that the Amex agreement was not unclear, so only the fraud charge remained for this trial.

Perhaps this will lead to more class action trials where warranted. This is a result I would applaud.

There's a new bill, H.R. 1214, the Payday Loan Reform Act, introduced in February by Rep. Luis Gutierrez (D-IL). In a statement, Rep. Gutierrez says the bill, "provides significant new federal protections for payday loan consumers by restricting or prohibiting certain predatory payday loan terms and lending practices." The bill caps payday loan fees and interest rates at a total of 15 cents for every dollar borrowed, lower than the cap in 23 states.

The bill also creates a private cause of action, allowing individuals to sue for damages under the law, AND ....

`(h) State Attorneys General Enforcement- The appropriate State attorney general may bring an action to enforce this section and to obtain injunctive relief in any United States district court or any other court of competent jurisdiction, not later than 3 years after the date of the violation.'.

We now officially have a trend, three pieces of legislation (two already law) that fragment the consistent application of federal laws by encouraging civil litigation carried out by state attorneys general -- including ambitious attorneys general, grandstanding attorneys general, and unrestrained attorneys general.

  • The Consumer Product Safety Improvement Act (Public Law 110-314) included provisions giving state attorneys general the authority to enforce provisions of the law. (Subtitle B, Section 218)
  • The stimulus bill, aka the American Recovery and Reinvestment Act (Public Law 111-5), created new law allowing state attorneys general to sue business and private parties for HIPAA violations (SEC. 13410. IMPROVED ENFORCEMENT), recovering attorneys fees if they prevail. The new law also lets the AGs to hire private attorneys on contingency to pursue the civil litigation. (See U.S. Chamber Institute for Legal Reform news release.)

It is almost as if the lobbyists for the trial lawyers have a long-term, comprehensive legislative strategy to expand the venues and opportunity for litigation.

(Thanks to tort reform impresario expert Victor Schwartz of Shook, Hardy and Bacon for pointing out the bill to us.)

EFCA at Point of Law: an index

We've been blogging on "card check", the Employee Free Choice Act and related topics for more than two years at this site. As part of our continuing effort to make our archives more useful, here's an index to past posts, updated as of March 31, 2009:

Auto industry Big Three, UAW and decline of, 12-05-2008, 12-13-2008, 12-18-2008

Buffett, businessman/investor Warren, opposes, 03-16-2009

Canada, consequences of pro-unionization laws in, 04-14-2007, 11-24-2008, 02-11-2009

Card acquisition, union tactics in, 02-26-2007, 12-15-2008, 02-11-2009, 03-30-2009
see also Intimidation

Constitution, U.S., and, 11-24-2008, 12-21-2008, 02-11-2009

Contract, imposition of union, by federally installed arbitrator, 10-23-2008, 10-28-2008, 11-18-2008, 11-26-2008, 01-02-2009, 03-02-2009, 03-13-2009, 03-16-2009

Decertification of unions, asymmetrical handling of, compared with original certification, 02-02-2007, 03-02-2009

Do as we say, 09-13-2005, 04-23-2007, 12-07-2008
See also decertification

Epstein, Prof. Richard, on, 11-03-2008, 12-21-2008, 02-11-2009, 03-25-2009

General, 02-26-2007, 10-27-2008, 11-18-2008, 01-06-2009, 01-26-2009, 02-11-2009, 03-12-2009, 03-16-2009, 03-25-2009

Great Britain, experience under Margaret Thatcher and, 10-22-2008

International law, and, 04-02-2008, 02-03-2009, 01-30-2009, 02-06-2009

Intimidation, 01-22-2009, 03-13-2009, 03-16-2009, 03-30-2009
See also sit-ins, factory

McGovern, former Sen. George, opposes, 08-08-2008

Mexico, American pressure for secret union ballot in, 12-05-2008, 03-13-2009

Misnaming of, 02-26-2007, 06-21-2007

Obama, President Barack, and, 11-18-2008, 01-16-2009, 01-20-2009, 01-30-2009, 03-26-2009

Politics of, 10-02-2008, 11-02-2008, 11-05-2008, 11-10-2008, 11-18-2008, 11-20-2008, 12-15-2008, 01-07-2009, 01-16-2009, 01-26-2009, 02-11-2009, 03-16-2009, 03-26-2009, 03-30-2009
See also McGovern, former Senator George; Obama, President Barack; supporters

Sit-ins, factory, 12-09-2008, 12-10-2008, 12-18-2008, 12-22-2008, 01-26-2009, 03-26-2009

States, federalism, preemption, and, 01-10-2009, 02-27-2009

Supporters of: 02-16-2007 (Lindsay Beyerstein; New York Times), 11-18-2008 (NAACP), 12-18-2008 (Natural Resources Defense Council, Sierra Club), 01-06-2009 (Joseph Slater), 02-03-2009 (Human Rights Watch)

Privacy violations, in union organizing, 06-08-2005

"Voter intimidation", outcry over alleged Republican, compared and contrasted, 02-16-2007, 02-26-2007, 11-18-2008, 03-13-2009

Voting vs. card-checking, 02-10-2009, 02-11-2009, 03-16-2009, 03-30-2009
See also Intimidation; Card acquisition

Wal-Mart, and, 07-27-2005, 09-13-2005, 03-16-2009

Will, columnist George, on, 02-26-2007, 06-21-2007

Mississippi bribery scandal latest

Alan Lange and Tom Freeland are blogging some new developments, including a grand jury's interest in Tobacco Caper mystery figure P.L. Blake and a vigorous early defense by Judge Bobby DeLaughter to the federal charges against him.

The paper's "OMG! She represented a tobacco company!" piece draws further critical responses: Above the Law, John Steele/Legal Ethics Forum. Steele is especially scathing about the "shoddy" quality of the paper's breathless presentation of routine associate tasks as indicative that Gillibrand was masterminding the industry's legal defense ("Can the NYT authors really be that unaware about how law firms work?") and closes as follows:

One of the low points of the article is this snarky, innuendo-heavy sentence: "The industry beat back the federal perjury investigation, a significant legal victory at the time, but not one that Ms. Gillibrand is eager to discuss." Is it possible that the NYT authors are unaware of why any lawyer, not just Ms. Gillibrand, wouldn't be eager to publicly discuss their former client's legal matters? I can think of one excellent reason. I bet you can too. And, what do you know, nine paragraphs later, the authors tip their hand: they know the reason as well. So let's go back and edit that sentence: "The industry beat back the federal perjury investigation, a significant legal victory at the time, but not one that Ms. Gillibrand is eager to discuss, because discussing it would breach her ethical and fiduciary duties as a lawyer."

Earlier here. Of course, as a leading organ of what has been called liberal legalism, the New York Times could recite backwards and forwards the accepted reasons why it's important that lawyers feel free to represent defendants who may be wrong, dangerous, and even evil. Indeed, big-firm lawyers who've represented suspected Guantanamo terrorists have been showered with some of the highest awards the legal profession has to offer. But if you have the temerity to resist a Dickie Scruggs or Stanley Rosenblatt money grab, on the other hand, you can expect this kind of treatment from commentators like Texas lawprof Sandy Levinson. Let future political aspirants be warned -- a line is drawn.

P.S. Yet more: Paul Horwitz, Prawfsblawg.

  • The "business community managed something it has not managed in years: unity," writes WSJ columnist Kim Strassel. They "successfully turned what had been a dry question of labor law into an emotional, grass-roots issue". But "the real test of corporate America is yet to come ... Business's continued unity, or lack of it, will decide what happens next."
  • Remember the film exhibitor's trick of taking a pan review ("a stunning flop ... amazing it got produced at all") and turning it into a positive-sounding blurb? ("stunning... amazing") The Wall Street Journal discovers that the creative blurbists seem to have moved onto the payroll of Rep. George Miller (D-Calif.) and the SEIU. Earlier blogging by Carter at ShopFloor and again.
  • Despite much arm-twisting from the usual suspects, Calif. Sen. Dianne Feinstein, a former EFCA sponsor, may no longer be counted as a firm "yes" for the bill (via Kaus). It's worth noting that even though unions elected more of their friends to Congress last time around, the card check bill was reintroduced this year with fewer, not more sponsors. Hmmmm.
  • Notes Mickey Kaus: "Intimidation isn't required for the results of a public ballot to diverge from a secret ballot (and from the true choice of the voters). All that's required is a desire not to tell your pro-union buddy to his face that you think he's wrong." Of course that doesn't mean that intimidation isn't also a factor. At an Indiana plant where an employer-neutrality agreement freed the union to use the card-check method, one worker tells on video how it "made her a target": workers agreed to sign cards after unionists showed up at their doorsteps at night, but a secret ballot election told a different story. On which, more from David Freddoso.

Around the web, March 30

  • David Bernstein (Volokh, George Mason) on the unfinished Daubert revolution in expert evidence [Engage/SSRN]
  • "The State-Of-The-Art Defense In Drug/Device Cases After Levine" [Beck & Herrmann]
  • Prof. Geoffrey Miller discusses class actions in Australia and the U.S. [Melbourne Age] Australia: Busy Times for Class Action Litigation Funder [Securities Docket]
  • Same case, same injuries, two NYC trials produce awards differing by a factor of 25. Why? [John Hochfelder]
  • A bibliography on apology-immunity laws [Robinette, TortsProf]
  • "Med Mal Reform Moves Forward in Hawaii" [Scheuerman, TortsProf]

From the House Judiciary Committee's hearing schedule for the week, notice of a full committee hearing on Wednesday:

Hearing on: Proposals to Fight Fraud and Protect Taxpayers, including:
  • H.R. ____, the "Fight Fraud Act 2009";
  • H.R. 1292, to amend Title I of the Omnibus Crime Control and Safe Streets Act of 1968;
  • H.R. 1667, the "War Profiteering Prevention Act of 2009";
  • H.R. ____, the "False Claims Corrections Act";
  • H.R. ____, the "Financial Crimes Resources Act of 2009";
  • H.R. ____, the "Money Laundering Correction Act of 2009"; and
  • H.R. 78, the "Stop Mortgage Fraud Act."

Wednesday 04/01/2009 - 10:00 A.M.
2141 Rayburn House Office Building
Full Committee
By Direction of the Chairman

Chairman John Conyers (D-MI) issued a related news release, "Judiciary Committee Announces Plan to Fight Fraud and Protect Taxpayers." Rep. Lamar Smith (R-TX) joined in.

We've added links to the bills where available, but there's no text yet for the False Claims Correction Act. Legal author Philip K. Howard of Common Good cited the measure as a potential threat during recent testimony at a Senate Republican Conference hearing on legal reform, saying, "A bill expanding False Claims Act claims would have many pernicious effects, expanding what was originally a system to safeguard against government fraud to a vast range of organizations that receive government funds."

Ted Frank warned against a previous version in this POL post from October 2007, "False Claims Correction Act: another earmark for trial lawyers." Quin Hillyer at the Examiner also laid out the problems with the legislation in a piece last July, "Whistleblowers as mercenaries": "Put forth as an incentive for well-intentioned 'whistleblowers' to report fraud against the federal Treasury, it uses an unusual definition of four little words to open what opponents describe as a host of troubles."

That bill was H.R. 4854, also introduced by Rep. Conyers.

Around the Web: March 29, 2008

  • W.R. Grace, the Criminal Trial: Strange how little media attention this case has gotten. In Missoula, Mont., the federal criminal trial continues of W.R. Grace executives charged with covering up the asbestos-related health consequences of vermiculite mining in Libby. From the Missoulian, via the Seattle Times: "In an argumentative cross-examination, the lead defense counsel for W.R. Grace & Co. suggested Wednesday that a key government witness has a personal ax to grind in claiming corporate malfeasance by Grace." Imagine that, an argumentative cross-examination. The Missoulian has a special web section devoted to the Libby asbestos issue.
  • The Howling, ESA Edition: Also from The Missoulian, "Litigation over wolves far from over": A revised rule will be published this week delisting the gray wolf as an endangered species in Montana and Wyoming. Staff attorney Jenny Harbine of EarthJustice says the group will sue. Again. "We've already shown that such a state-by-state approach to delisting is unlawful. And we will argue the recovery numbers the Fish and Wildlife Service established are inadequate for long-term sustainability."

  • Unused Arbitration: From the Asheville (N.C.) Citizen-Times, "NC malpractice arbitration going unused": "Before it became state law in 2007, a new method of resolving lawsuits against doctors was hailed as a historic detente between physicians and trial lawyers...The two biggest malpractice insurers of North Carolina doctors say none of their clients have gone through the special kind of arbitration, which requires both sides' consent and caps damages at $1 million." David Sousa, general counsel of Medical Mutual Insurance Co., says "There are just no plaintiffs' lawyers who are going to concede at the outset that their case (isn't) worth more than what the cap is."

  • More Doctors to Sue, Now the Military: The American Association for Justice hails a new bill that would allow active service members to use the civil courts to sue for medical malpractice. The news release's headline: "Carmelo Rodriguez Military Medical Accountability Act Will Restore Rights of Servicemembers Injured By Medical Negligence." The bill is H.R. 1478, introduced by Rep. Maurice Hinchey (D-NY) with no cosponsors. The Congressman issued a news release, "Hinchey Testifies Before House Judiciary Panel on His Bill to Reverse Military Medical Malpractice Injustice." We'd count this among the "trial lawyer" earmarks being considered by Congress.

  • Nigeria Reaching into U.S. Courts: Also from the trial lawyers' association is the featured article from this month's "Trial" magazine, "Second Circuit lets Nigerian children's drug case proceed in U.S." At issue is an Alien Tort Claims Act suit against Pfizer for the 1996 trial of its anti-meningitis drug, Trovan. Pfizer issued a statement upon the court's ruling: "The Appeals Court's divided decision is only a procedural ruling that may return the cases to the District Court for further consideration; it is not a determination on their merits. Indeed, the strong dissent by one of the judges may be grounds for further appellate proceedings." In addition, patients given the drug had a higher survival rate than those who underwent other treatment.

Toward the bottom of an AP story about the next phase of the Rhode Island lead-paint litigation -- "RI, paint cos. await decision on lawsuit costs" -- is this little nugget:

The situation is so dire that Gov. Don Carcieri in January proposed delaying payment of a $10 million legal settlement to survivors and victims' relatives of a 2003 nightclub fire, before deciding this month that it should be covered by federal stimulus funds.

Can that be right? Federal taxpayers will wind up paying part of the settlement resulting from the terrible fire that claimed the lives of 100 people attending a Great White show in West Warwick?

Apparently so.

State Budget Officer Rosemary Booth Gallogly said that while the states must use the majority of the federal stimulus money for education, the balance can be used by governors for fiscal relief. Carcieri projected a $357-million budget deficit in this year's budget before Congress approved the stimulus plan on Feb. 17.

Walter has covered the "deep pocket" legal claims and settlement resulting from the fire at Overlawyered.com in these posts. Anheuser-Busch, a beer distributor, Clear Channel, Home Depot all ponied up. But the deepest of the deep pockets is now that of the U.S. taxpayer.

Mark Obbie on today's New York Times attack on Sen. Kirsten Gillibrand.

Topsy-Turvy Florida Tobacco Trials

As readers of PointOfLaw know, in February a Ft. Lauderdale jury awarded Stuart Hess' widow $8 million in damages against Altria, in the first suit following the epic Engle decision. [In Engle, the Florida Supreme Court held that individual plaintiffs don't have to prove that smoking is dangerous, that tobacco companies knew it or that the tobacco industry misled the public about the dangers when they sue for products liability. Essentially, all that's left is proving that tobacco caused the plaintiff's harm.) Then in early March Liggett was hit with another judgment, for $7 million this time.

But this week a St. Petersburg jury took only 90 minutes to deliver a defense verdict for in Gelep v. R.J. Reynolds & Altria. [Here's a report on the case.] The suit was brought by the widow of a smoker who had died of lung cancer. The defense relied heavily on a report that the decedent had told his doctor he didn't want to stop smoking -- but of course none of the victims truly "wanted" to stop smoking, otherwise they would have done so.

Three more tobacco trials will begin in April unless the 11th Circuit accepts the tobacco companies' claims that Engle deprives them of due process by denying them the right to claim defenses in individual cases.

The Gelep defense victory notwithstanding, it's hard to see why Big Tobacco won't be bled dry by an onslaught of Florida cases unless the federal courts intervene. It's also hard to understand how such random trial results can be accepted -- the Rule of Law presumably requires similarly situated parties to be treated similarly. Gelep illustrates that Florida law about tobacco may depend on slight nuances of rhetoric, such as what it means "not to want to stop smoking." [Did the victim "like" to smoke? Don't all addicts "like" the drug to which they're addicted, at some level? Etc.] In any case, so many third parties have interests here (among them some state governments, which depend on the continued financial health of Big Tobacco to pay hefty 9 figure sums each year pursuant to the mammoth AG suit settlement, and institutional investors who have purchased the collateralized debt owed to other state governments) that it's hard to imagine this fight staying within Florida.

EFCA: on to the next round

"Prospects dim for labor bill", reports Politico, as Sen. Arlen Specter's withdrawal of formal support for the Employee Free Choice Act confirmed what was already considered likely given jitters among moderate Democrats. Interestingly, the Obama White House was said to be "happy (but very quietly so)" at the fading of the bill's prospects -- a theme that surfaced enough in the coverage to make it seem likely that the White House was knowingly allowing word to be put out to that effect. The Economist pronounces card check "dead for now".

A lot, however, is packed into that phrase "for now". To begin with, if the AFL-CIO is only one or two votes short of the finish line, it might not take much -- a Senator's surprise resignation or medical crisis, a swing in already volatile public opinion about the economic crisis, perhaps a string of plant occupations following the Republic Windows pattern -- to dislodge a vote or two.

For that matter, Specter himself has positioned himself to be a possible 60th vote. Michael Fox notes the Pennsylvania Republican's comment: "If efforts are unsuccessful to give Labor sufficient bargaining power through amendments to the NLRA, then I would be willing to reconsider Employees' Free Choice legislation when the economy returns to normalcy." (Similarly: Daniel Schwartz). And Fox follows up with an account of Specter's "12 revisions".

So we're very likely going to remain for the indefinite future in a world where union-sought changes to the National Labor Relations Act are not too far from the front burner. Some ideas for compromise that fell flat in recent weeks, such as the "Starbucks skim-milk card-check" idea endorsed by a few businesses with liberal reputations to protect (Starbucks, Whole Foods, Costco) will be brought out for re-examination. Supposedly less controversial elements of labor law reform, such as drastically stiffening penalties for businesses' violations, may be pressed on their own, and will benefit from the postures struck during the card-check debate, in which many EFCA opponents more or less endorsed the penalty provisions so as not to come off as complete rejectionists. Moreover, there may be a tendency to roll over on labor issues not directly related to the NLRA's provisions on unions and their contracts -- on regulation of pay and benefits, OSHA, ERISA, even ergonomics -- on the grounds that the union side has to be given something. Indeed, in the first two months of the Obama administration the union side has already been given more than just a couple of things -- in the form of the Ledbetter act, several executive orders, Davis-Bacon extensions in the stimulus, and so forth. Much more can be expected from the NLRB itself as Obama appointees begin reversing Republican-era precedents.

One problem is that on the rhetorical level, almost everything can be made to sound moderate compared with card check and imposed federal contracts. Peter Kirsanow: "Now that card check may be off the table, EFCA opponents have lost their most effective talking point. ... Senator Specter's announcement merely concludes Round Two."

Carter at ShopFloor, I see, has been thinking along similar lines.

WLF today on state attorneys general

In the Washington Legal Foundation web seminar series, today: "Multi-State Investigations and Suits: How to Address the Expanding Authority and Ambition of State Attorneys General". With Ashley L. Taylor Jr., and William H. Hurd, both of Troutman Sanders.

Around the web, March 27

Where's Cass?

Do a search at WhiteHouse.gov for the term "Cass" and you get posts about Cass County, North Dakota, declared a disaster area this week -- stay dry, Fargo! -- and Lewis Cass, a general and expansionist, in a biography of Zachary Taylor.

But no Cass Sunstein, the Felix Frankfurter Professor of Law at Harvard Law School, whom President Obama was supposed to nominate to head the Office of Information and Regulatory Affairs in the OMB. No reference to him in The Congressional Record either.

We're not the first to notice Sunstein's absence. On March 10th, the Federal Times blog, Fedline, carried a post, "Where's Cass?"

As author of "Laws of Fear -- Beyond the Precautionary Principle," Sunstein can be seen as if not a skeptic, at least a critical thinker about regulations and regulatory overreach. He believes in cost-benefit analysis. Hence, nanny staters like the Center for Progressive Reform have gone after him.

Sunstein's presence at OIRA would seem especially critical given the President's plan to issue a new executive order on federal regulatory review. OMB issued a request for comments on the plan on February 26 (Federal Register notice), and while the plan has escaped most media attention, its development is being watched closely by industry, "consumer" groups and others involved in the regulatory world.

In a March 17 report by Bloomberg regulatory reporter Cindy Skrzycki, OMB spokesman Tom Gavin said Sunstein "is providing insight on key issues" to OMB Director Orszag. (He could start with advising on OIRA's website content. What a mess, full of outdated, Bush Administration materials.)

Top agency officials in waiting often go on the public payroll as "consultants" pending their nominations and Senate confirmation. But that usually happens only after they're nominated. So we ask: Where's Cass?

Bonus clawback madness, cont'd

  • "Did TARP Pay Caps Chase Out Two Famous Merrill Bears?" (John Carney).
  • Megan McArdle finds the story of the AIG bonuses a lot more complicated than Congress made it sound. Per the ABA Journal, "Lawyers at Paul, Hastings Warned of Double Liability" if the firm failed to pay the promised compensation. Connecticut has a relatively liberal, pro-worker statute which pressures employers to fork over compensation for work done even if they believe it falls into a gray area, and there is an obvious irony involved here: a populist-minded statute turns out to have operated to dissuade the company from doing what populists wanted it to do on the bonuses. Perhaps that helps explain why Connecticut AG Richard Blumenthal took such a snappishly belligerent, not to say defensive, posture. As Daniel Schwartz recalls, Connecticut employers have indeed run seriously afoul of this law in the past.
  • Giving back your retention payments, as Richard Belzer explains, unfortunately doesn't mean that you'll necessarily escape taxes on them (via Taranto).

"Gov. Paterson wants to hand the state's powerful trial lawyers a huge cash bonanza by rolling back a two-decades-old reform law that capped legal fees from medical-malpractice awards, The Post has learned." To try to buy off doctors' opposition, the deal might include a one-year freeze on the insurance rates physicians could be charged -- though of course the bill would do nothing to freeze the cost of providing such insurance, quite the reverse. (In the past, docs have gotten an unpleasant surprise after years in which insurance rates had been artificially suppressed, when they learned that rates and assessments would then have to skyrocket to cover past shortfalls).

Readers already know about the tort connections of Assembly leader Sheldon Silver, of-counsel with Weitz & Luxenberg. Not as well known are those of the governor: "Paterson's father, Basil, is partner at the Long Island tort-law/lobbying firm of Meyer, Suozzi, English & Klein. Lifting the malpractice cap would mean a huge payday for Meyer, Suozzi. And a very happy Paterson pere."

We've created some new categories at Point of Law to make it easier to find similar posts and use the archives for research. Among those already populated with old posts are:

  • Labor Law has posts on card check and the Employee Free Choice Act and other controversies relating to the legal status of labor unions and the National Labor Relations Act. Wage-and-hour litigation remains for the moment grouped with Employment Law, but at some point will get its own category.
  • Whistleblower/Qui Tam pulls together posts on both employee whistleblowing protections and bounty-hunting qui tam actions under the federal False Claims Act and similar statutes;

Other categories are on the way as well, including Administered Compensation, Preemption, and several more.

Economist John Torkelsen, a star expert witness for Milberg Weiss in many cases, declared in a sworn deposition that he was working for an hourly fee in a case in which he estimated damages to class clients to be more than $165 million in one of Milberg's cases against casino operator Lakes Entertainment. In reality, Torkelsen had a concealed contingency fee arrangement with Milberg that helped ensure his incentives would be lined up in favor of a high damages estimate. Now Lakes wants its settlement back with treble damages, saying it would never have offered such a high settlement had Torkelsen's true relationship to the law firm been disclosed.

The famed law professor has written an important new paper in the Civil Justice Forum series from the Manhattan Institute. He argues that U.S. labor law (which has been essentially unchanged for decades) cannot be blamed for the steady decline in private-sector unionization levels over the same period; and workers would pay a steep cost for the EFCA regime in losing some of their current control over two questions in which they are legitimately and keenly interested, the selection of a union and the terms of a contract with their employer.

More: Associated Washington Times op-ed and podcast with interviewer Jim Copland.

The New York Times today offers as an op-ed a letter of resignation from Jake DeSantis, an executive vice president of the American International Group's financial products unit, to Edward M. Liddy, the chief executive of A.I.G. Among his many targets, DeSantis takes aim at attorneys general from New York and Connecticut, chastising Liddy for failing to stand up for his employees in face of the AGs' attacks.

But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn't defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.


The only real motivation that anyone at A.I.G.-F.P. now has is fear. Mr. Cuomo has threatened to "name and shame," and his counterpart in Connecticut, Richard Blumenthal, has made similar threats -- even though attorneys general are supposed to stand for due process, to conduct trials in courts and not the press.

(Hat tip: Mark Steyn.)

Just what this issue needs right now

"High-Profile Plaintiffs Attorneys Start to Beat War Drums Over AIG Bonuses".

"Motley Rice lawyers represent themselves and not clients in their bid to block court review of X-ray reports behind tens of thousands of asbestos suits, according to a General Electric attorney." [WV Record]

AEI's Michael Greve is caustically critical of the brand of federalism protected by the Supreme Court majority in Wyeth v. Levine, and warns that banking is next (via Adler @ Volokh, where there are comments).

Because, as Patterico puts it, what could go wrong?

Costs of litigation over layoffs

If an employer isn't careful, they can exceed the amounts saved by the layoffs themselves.

Judge Solomon Olivier Jr. of the The United States District Court in Cleveland has just ruled that some claims against drug manufacturers are still pre-empted by FDA approval, despite the Supreme Court decision in Wyeth v. Levine.

Longs v Wyeth concerns Redux, one-half of the diet-drug cocktail known as fen-phen. Plaintiff sued for design defect, alleging that Redux was so dangerous a drug that it never should have been approved by the Food and Drug Administration. In February 2008 Judge Olivier dismissed the case on the ground that the FDA had approved Redux. The plaintiff moved for reconsideration of this decision in light of Levine.

Judge Olivier has just upheld his ruling. He distinguished Wyeth v Levine as being concerned with post-FDA-approval events. The claim against Redux was about pre-approval facts, all known to the FDA when it made its ruling that the drug was worthwhile.

Around the web, March 24

Scandal's not exactly new in Empire State governance, but the indictment of Hank Morris and David Loglisci, former top aides to ex-Comptroller Alan Hevesi, tells an especially grim tale. According to Manhattan Institute fellow Nicole Gelinas, the "news should end one pension-reform debate: These retirement funds shouldn't be going into so-called 'alternative investments.'"

Bonus-busting on Capitol Hill, IV

Per sources interviewed by the Financial Times, last week's move by Congress to confiscate bonuses at giant TARP banks will send American finance "back to the Stone Age", with key talent likely to jump ship for European-based firms and less-regulated domestic competitors; even amid the wreckage it's worth remembering that finance remains among America's most internationally successful sectors. On news of the pending pay caps, per this table, the biggest U.S. banks -- whose health as business entities is crucial to the likelihood of repayment of their TARP advances -- plunged in value, while the biggest foreign banks slipped only slightly. Jared Bernstein, an economic adviser to Vice President Biden, agrees that the House-passed bonus tax may be "a dangerous way to go".

Today's Wall Street Journal (sub) editorializes that President Obama needs to face down lawmakers on their "amazing and senseless" move. Jonathan Clements, until recently a personal finance columnist at the paper, says the bonehead bonus bill creates incentives to knock off work in October, or earlier. And at Goldman Sachs, where there are apparently feelings of surprise and betrayal given the firm's prominence as a big-time backer of Congressional liberals, "[a]t least a few people ... have already called recruiters. And recruiters have stepped up efforts to poach Goldman employees offering jobs safe from the TARP bonus tax."

Earlier coverage of the bonus frenzy here, here, and here.

Around the web, March 23

  • "The Duty to Avoid Wrongful Convictions: A Thought Experiment in the Regulation of Prosecutors" [Fred Zacharias/Bruce Green SSRN paper via Perlman, Legal Ethics Forum]
  • Wage-and-hour class action on behalf of CBRE property management maintenance workers seeks overtime for time spent carrying Blackberry at employer's wish to stay in touch during off hours [Business Journal of Milwaukee]
  • "International human rights law" an elastic and ever-expanding thing: now it's said to ban life-without-parole as too harsh a penalty for the worst killers [Volokh]
  • Wyeth v. Levine just one more source of good news for big, prosperous and cohesive Philadelphia trial bar [Inquirer courtesy U.S. Chamber]
  • Dominion Transmission class action: lawyers' fees cut to a mere $2,130/hour [WV Record]
  • Florida Engle/Hess "mini-trials" against tobacco defendants probably unconstitutional, says Cardozo lawprof Anthony Sebok [FindLaw "Writ" via Childs]

Stimulus bill expansion of HIPAA

The HIPAA blog has been doing a series on Congress's expansion (in the stimulus bill) of the already impressively overgrown health-privacy law, HIPAA.
The bill extends direct HIPAA regulation to "business associates" that do not treat patients directly but work with health providers; It creates a new "hide" rule "that lets the public cheat their insurance companies by hiding their real health condition" by requiring doctors to heed the wish of cash-paying patients that the doctor not share information from the visit with their insurer. It adds new rules requiring that patients be notified of various data breaches, and that larger such breaches be reported to "prominent local media" as well. Enforcement is stepped up with higher penalties, criminal liability for employees and not just "covered entities", new liability for "willful neglect" of privacy hazards, and, perhaps most important, state attorney general authority to enforce the law, in tandem or not with private-lawyer pals working for a share of the spoils.

The series can be found here, here, here, here, here, here, and here.

As Walter suggests (ironically)? If so, it might be the very last newspaper with one.

AP, March 13, "Washington Post eliminates standalone Biz section"

Because it's not as if cheap, abundant food might possibly benefit any other parties than those two:

... At the heart of the sustainable-food movement is a belief that America has become efficient at producing cheap, abundant food that profits corporations and agribusiness, but is unhealthy and bad for the environment.

-- From the lead story in today's New York Times business section.

The U.S. Congress must be proud:

One lower-level employee at the company's Wilton offices told her friends she woke up one night this week to people knocking outside her home windows.

The Hartford Courant helpfully ran a picture of one of the employee's fancy homes on the front page of its online edition (it's been rotated off now). However, the union-backed group Working Families, which organized a bus tour to show up in front of the houses of AIG-ers in Fairfield County, got cold feet and decided to protest in a "nicer" way for fear of a backlash that might spur public sympathy for its targets (some of whom had volunteered to give back the bonuses even before the public outcry); reporters substantially outnumbered protesters on the outing. I wonder whether Cory Doctorow's commenters were disappointed. Per Rhys Southan at Business Insider:

The protesters stopped at one point in an organic grocery store and were surprised to learn that many AIG execs were shoppers there, and that according to the store's proprietor, they were actually very nice people.

The flummoxed protesters spent several minutes outside trying to figure out how such "evil" people could be nice to an organic grocer.

Earlier here and here. A further roundup, including ACORN's role: Moe Lane.

An anonymous Russian government source was quoted as suggesting that a settlement of $800 million, or 4 cents on the dollar of the dubious $22 billion claim, would be adequate. Roger Parloff of Fortune is, as before, devastating about the "reasons why Russia's suit, which has extortionate overtones, must not be permitted to succeed":

...Last October the bank, at the U.S. Treasury's bidding, accepted $3 billion in TARP (Troubled Assets Relief Program) money.

Are taxpayers now going to watch more than a quarter of that money go to Russia to pay off a fishy-smelling suit? And even if taxpayers could stomach that, are they prepared to then see 29% of the $800 million -- $232 million -- pass through to American lawyer Steven Marks of Miami's Podhurst Orseck, who represents victims in many airplane crash cases and who has been Russia's contingent-fee trial counsel in the weird case? Court records show that that's what Marks's retainer agreement calls for him to receive. ... According to Columbia Law School professor Katherina Pistor, a 2007 ruling of Russia's highest constitutional court holds that contingent fees in judicial cases are contrary to Russian public policy and, therefore, unenforceable. If Marks' case is about vindicating Russia's laws, he should get zero.

Moreover, the Russian government's purported indignation at the rogue bank officer's actions "is of suspiciously recent origin"; when the case blew up a decade ago, "Russian officials downplayed the gravity of what she'd done, claiming that most of her transfers were lawful and that American officials and media were blowing the matter out of proportion." More: American Lawyer.

Connecticut Attorney General Richard Blumenthal, a staple of these columns, and two Connecticut lawmakers have subpoenaed AIG executives to compel their attendance at a March 26 hearing.

More from Connecticut attorney/blogger Norm Pattis:

This subpoena is an abuse of process. ... Shame on you; each of you....

And it gets worse. The homes of AIG bonus-recipients in Connecticut are now tourist attractions for populist ragemongers. Buses will convey folks to the homes to gawk, scorn and harass the recipients. I say prosecute each and every one of these folks if they so much as step foot on property of one of these people....

All this rage and fury is misdirected. Lawmakers ought to be walking the street in sack cloth and ash begging our forgiveness instead of pointing the finger at others. Where was Congress, Mr. Blumenthal and state lawmakers when the bailout plan was hatched? Why didn't they notice contracts struck before the bubble burst?

At NRO "Corner": Andrew Stuttaford (Congress committed "economic arson"); Mark Steyn ("Maybe they can't see it from the shamrock-hued vistas of their 'cottages' on the west coast of Ireland, but the political class has done nothing this last week but destroy the wealth of this country."). And Noam Scheiber at The New Republic:

...the precedent of taxing income retroactively ... seems to introduce a level of arbitrariness that can't be good for economic growth. ...

...the precedent is pretty ugly. Getting people to hand over money under the threat of legislation that will take it from retroactively is pretty damn coercive. There are third-world juntas that would think twice before doing this.

But our United States House of Representatives didn't think twice.

Around the web, March 21

  • "Will budget deficits tempt states to dip into their client security funds? Apparently so." [Vischer, Legal Ethics Forum]
  • This will not end well: incoming no. 2 official at FDA was Henry Waxman's health adviser [Steir/ACSH, Forbes, Ron Bailey, Reason]
  • "Smithsonian and 27-Year Employee in Battle Over Asbestos" [WaPo]
  • "ADA Amendments Mean Employers Need to Be More Cautious" [Behrendt, Texas Lawyer]
  • New frontiers of criminalization: feds may prosecute doctors for overly close ties to drugmakers [OhMyGov]
  • Alarming unintended effects of minimum wage laws in Honduras [QandO]

Charges dropped against Kent Roberts

The former general counsel of McAfee was a high-profile target in the stock option backdating scandals.

The clouded energy crystal ball

Shareholder class action lawyers have sued Chesapeake Energy for not hedging enough against a downturn in natural gas prices.

Letting AIG fail

Making counterparties on the company's derivative deals take a haircut (as would happen in a failure) would not have to mean leaving policyholders without insurance (the conventional insurance divisions are solvent and under no obligation to the derivative counterparties). Lucien Bebchuk and Larry Ribstein, who disagree on many other matters, seem to be in accord on this one.

The House, incredibly, has passed a bill imposing a punitive 90% tax on the bonuses of employees at large TARP-recipient banks whose household income (including -- or even predominantly consisting of -- their spouses') exceeds $250,000, or $125,000 if filing singly. If enacted, and if not evaded by a reshuffling of compensation categories from bonus into salary categories, the bill would likely lead to a destabilizing mass exodus of specialized talent from the Citicorps and Bank of Americas to competitive institutions not subject to the limits, with taxpayers and the FDIC picking up the ultimate bill as formerly-healthy divisions of these banks and other financial institutions start cratering. [WSJ, Blodget] Even Josh Marshall at Talking Points Memo, anything but a pro-business or conservative commentator, is dubious. [A further roundup: New York mag. And Daniel Schwartz is the go-to person (first, second posts) on the question of whether Connecticut law allows the employees to sue AIG for double damages if deprived of bonuses to which they have a legally accrued right.]

Meanwhile, at much-admired Boing Boing, Cory Doctorow is promoting a union-backed campaign to intimidate AIG executives and their families at their homes. One commenter proposes that similar treatment be meted out to major donors to the Republican Party ("I hope no innocents are hurt. But this is inevitable"), while another pronounces the possibility of an AIG executive actually being killed as "refreshing". It's quite a comment thread.

Updates: follow-up posts here and here.

Around the web, March 20

  • Maryland gasoline leak results in award against ExxonMobil of "only" $150 million [Daily Record]
  • Also in Maryland, Peter Angelos calls off a ten-year-old suit against lead paint manufacturers [Genova]
  • Mark Herrmann (Jones Day, Drug & Device Law Blog) op-ed on Wyeth v. Levine [Chicago Tribune] Dechert client alert on the decision [D&DL] And Darshak Sanghavi takes the New England Journal of Medicine to task for imagining "personal injury attorneys can do a better job than the FDA in protecting Americans from complicated and sometimes dangerous medications on the market" [Slate via Pero]
  • Assemblyman Van Tran explains his proposal in Sacramento for class action certification reform [California Civil Justice]
  • New study finds ABA's liberal bent not just a matter of perception [Coyle, NLJ; Vining, Steigerwalt, Smelcer] And now the Association is going to be right back in the thick of the judicial selection process [CBS]
  • Symposium: "The Globalization of Class Actions" [AAPSS, Hensler, ed.]

Bills of attainder, ex post facto laws, and laws impairing the obligation of contracts, are contrary to the first principles of the social compact, and to every principle of sound legislation. ... The sober people of America are weary of the fluctuating policy which has directed the public councils. They have seen with regret and indignation that sudden changes and legislative interferences, in cases affecting personal rights, become jobs in the hands of enterprising and influential speculators, and snares to the more-industrious and less informed part of the community. They have seen, too, that one legislative interference is but the first link of a long chain of repetitions, every subsequent interference being naturally produced by the effects of the preceding. They very rightly infer, therefore, that some thorough reform is wanting, which will banish speculations on public measures, inspire a general prudence and industry, and give a regular course to the business of society.

Federalist Number 44, 1788.

The Intellectual Property Colloquium, in conjunction with UCLA School of Law, makes available a podcast series of which the latest may be of particular interest not only because of the enduring interest of the RIAA file-sharing litigation but also because of the questions it raises over the constitutional status of punitive damages:

Joel Tenenbaum looks a lot like every other defendant who has been accused by the music industry of illegally sharing copyrighted work online, but with one key difference: his defense attorney is Harvard Law School Professor Charlie Nesson, and Nesson is out to turn his case into a public referendum not only on the music industry's efforts to enforce copyright through these direct-infringer suits, but also on the copyright rules that make the industry litigation possible.

In this program, we engage Nesson's key arguments, focusing especially on Nesson's claim that copyright law's statutory damages regime runs afoul of constitutional protections against excessive and/or arbitrary civil damages awards.

Guests include Professor Nesson himself; Steven Marks, General Counsel for the Recording Industry Association of America; and three of the leading academic experts on punitive damages: New York University Professor Catherine Sharkey, Florida State Professor Dan Markel, and George Washington University Professor Thomas Colby. UCLA Law Professor Doug Lichtman moderates.

Lawyers can even get CLE credit in some states for listening.

That's straight from President Obama. Trial lawyers are gearing up for Armageddon. Earlier here.

"Will budget deficits tempt states to dip into their client security funds?," asks Rob Vischer at Legal Ethics Forum. "Apparently so."

Some lawmakers in Lansing are pushing to repeal Michigan's pioneering law providing an FDA-approval defense in product liability suits -- and to backdate the repeal to 1996, this inflicting retroactive liability on tens of millions of past sales. A Detroit News legislation calls the measure out as both unfair and unwise.

Preemption at Fordham

Professors Charles Fried (Harvard) and George Conk (Fordham) will be discussing the issue of preemption after Wyeth and Altria before the Fordham Students' chapter of the Federalist Society on the West Side March 26 (Thursday of next week). And for readers in Boston, on the same day the Lawyer's chapter there will be hosting a panel discussion on the extension of federal authority under the Clean Water Act.

Twombly and antitrust

The new pleading standards have had a big impact and have resulted in the dismissal of more claims, according to a new report from Shearman & Sterling.

Nanotechnology, tomorrow's mass tort?

There's an "ominous cloud of uncertainty" over the manufacture of ultra-small objects, per Chuck Moellenberg and Robin Juni of Jones Day [Jane Genova]

MI's own Marie Gryphon summarizes her superb paper on fee-shifting in this great DC Examiner op-ed. Well done!

Legal author Philip Howard concluded his written statement yesterday to the Senate Republican Conference hearing on legal reform by expressing concern about the "proliferation of legislation already introduced in this Congress which seeks to expand the right to sue." It's a good list.

Underlying many of these bills is the assumption that lawsuits are the best way to resolve disputes. This assumption ignores the fact that there are often alternatives that are cheaper, more efficient, more balanced, and more responsive to our common interests.

For that reason, I am concerned about the bills that seek to ban arbitration, particularly S. 512 and H.R. 1237 (no arbitration in nursing home contracts), H.R. 1020 (no arbitration in employment, consumer and franchise agreements), H. R. 991 (no arbitration in certain consumer contracts. See also H.R. 1214; S. 263. If there are specific concerns about arbitration in specific areas, those concerns should be addressed--but not by eliminating a quicker and more cost effective way of resolving disputes.

Similarly, I am concerned about the bill (S. 537) that would limit the enforceability of protective orders that would seal discovery in many types of civil cases, because it appears to discourage settlement.

Following up on yesterday's post about Sen. John Cornyn's Republican Conference hearing on legal reform in the 111th Congress, we now have links to witnesses' prepared statements.

Philip Howard, author, "Life Without Lawyers: Liberating Americans from too much law"

Christopher R. Drahozal, Chair, Consumer Arbitration Task Force, Searle Civil Justice Institute
and John M. Rounds Professor of Law, University of Kansas School of Law.

Crystal Chodes, the former marketing director for Basketball Town, a special events facility in Rancho Cordova, Calif. Legal costs to fight an unfounded ADA suit drove the family-friendly facility out of business, along with a small pizzeria located in the building. She testified:

Advice on Obama judicial picks

Prominent Democratic lawyer Walter Dellinger, centrist Stuart Taylor, Jr. and right-of-center Jonathan Adler, at a Heritage Foundation panel, agreed on several points about the pool of good nominees: they would be collegial, would be humble about the judicial role, and would include Peter Keisler.

Ezekiel Emanuel, a "key Obama health advisor" who also happens to be an oncologist and the brother of White House chief of staff Rahm Emanuel, raised the prospect of a Democrat-led federal med-mal reform effort during an AMA meeting. See Yahoo coverage here. Health Courts are apparently a possibility being seriously considered.

On the heels of last December's Supreme Court decision in Altria v Good, which preserved a Maine class action based on a purported violation of that state's business practices law for alleged duplicity in marketing "light" cigarettes, the Massachusetts Supreme Judicial court yesterday unanimously approved a similar class action suit in the Bay State. Law.com has the details.

The suit, launched way back in 1998, claimed that Philip Morris engaged in deceptive marketing since Marlboro Lights did not in fact deliver lowered tar and nicotine to smokers (due to their tendency to puff harder and longer on the less potent cigs). The Massachusetts court found it to have been validated by the Good decision. But Philip Morris publicly claimed that the statutory suit could not produce the desired consumer damages. "Potential class members generally have no claim for damages because each of them paid the same price for Marlboro Lights as they would have paid for [higher-tar] Marlboros. In addition, many of these potential class members have continued to smoke Marlboro Lights [even after the company ceased using the phrase "lower tar and nicotine" on packages in 2003] despite their claims," argues Altria associate general counsel Murray Garnick.

Around the web, March 17

  • "Advisen Releases 2008 Securities Litigation Study" [Kevin LaCroix, D&O Diary]
  • Time to reduce California's abnormally high interest rate on judgments [CJAC, more]
  • Litigation activity in China growing at rapid pace [AmLaw Daily]
  • Script we've heard before: Attorney General Jim Hood partnering with private lawyers to sue Entergy [Northeast Mississippi Daily Journal]
  • "Cal Supremes To Decide Impact of Proposition 64 In Class Action UCL Cases" [Cal Biz Lit]
  • "Effects of Payday Lending Regulations": the experience in Oregon [Todd Zywicki @ Volokh on Jonathan Zinman study]

"As a moth is drawn to light, so is a litigant drawn to the United States." Smith Kline & French Labs v. Bloch, 2 All E.R. 72, 74 (1983). Beck and Herrmann analyze a new Alien Tort Statute ruling that has defendants uneasy.

Sen. John Cornyn (R-TX) sponsored a Senate Republican Conference hearing (i.e., a partisan hearing) this afternoon on legal reform in the 111th Congress, "Protecting Main Street Jobs from Lawsuit Abuse." His thesis is that meritless and nuisance lawsuits raise the costs of business and jobs creation, having a disproportionate impact on small business: "Nevertheless, the leadership of this Congress seems oblivious to these facts and determined, to reward political allies and benefactors in the trial bar by passing legislation designed to not decrease but rather increase the number of lawsuits in America." (From the .mp3 file of his opening statement.)

Sen. Cornyn cited several bills already passed that will increase litigation: The Lilly Ledbetter Fair Pay Act, the stimulus bill's permitting state AGs to hire contingency lawyers to sue for HIPAA violations, and the omnibus appropriations bill's encouragement of contingency lawyers in Truth in Lending litigation.

Looking forward, Sen. Cornyn said, "There will also be efforts to undue the important reforms of the Class Action Fairness Act, reviving the class action strike suit, where trial lawyers may make millions while their clients receive nothing other than coupons as a result of their recovery."

That's the first we had heard of this disturbing possibility. For more on the 2005 legislation, we refer you to this 2007 paper by Point of Law contributor Ted Frank of the American Enterprise Institute, "The Class Action Fairness Act Two Years Later."

Ted also testified at today's hearing, addressing a wide range of civil litigation issues, including medical malpractice, asbestos and mass tort fraud. His prepared testimony is available here. From the abstract:

Our nation's tort system is substantially more expensive than that of other nations. Features unique to the United States--unbounded non-economic damages; a broader use of punitive damages; contingent fees of a percentage of recovery; the lack of loser-pays; extraordinarily broad discovery; class-action litigation; the use of speculative and non-scientific expert testimony in some state courts--raise costs tremendously. Yet, despite these increased costs, there is no evidence that the United States tort system provides marginal benefits relative to other nations. For example, New Zealand does not even offer the availability of private medical malpractice litigation, yet there is no evidence that medical care in New Zealand is of substandard quality due to the lack of fear of malpractice litigation. If anything, it is quite likely that the arbitrary nature of the American tort system has distorting effects that make it perform worse than that of other nations...

In the extended entry, more comments from Sen. Cornyn...

Employee Free Choice Act roundup

More links on the hottest labor law issue since, oh, maybe the Eisenhower years:

Around the web, March 15

  • Well past time for print versions of law reviews to die a peaceful death, and this may help things along [David Post @ Volokh]
  • Radiologists said to overrate their risk of being sued for failure to diagnose breast cancer [Science Daily]
  • Lead-as-toxic-substance docket really jumping, reports James Cordrey in last month's Mealey's [Genova]
  • Attorneys Seek $110 Million in Fees in UnitedHealth Group Options Backdating Settlement [Securities Docket]
  • Texas enacted strong tort reform. Supply of emergency docs in rural counties improved. Naah, must be coincidence [White Coat]
  • Suit alleging soaking of chicken in water to add weight had demanded "chicken by chicken account" of Kroger sales [Madison County Record courtesy Chamber/ILR]

Jerry Brown encounters a setback in a Prop 65 case, but the real point of interest is what the judges had to say about scientific evidence. [CalBizLit]

"Secret ballots are free choice"

Eugene Scalia in the WSJ on EFCA, the misnamed card-check bill:

Never before has it been thought that eliminating the secret ballot reduces voter intimidation. In McIntyre v. Ohio Elections Commission (1995), a case about political pamphleteering, the Supreme Court called the secret ballot the "hard-won right to vote one's conscience without fear of retaliation." Indeed, EFCA'S lead sponsor in the House, Rep. George Miller (D., Calif.), previously joined 15 other colleagues in urging Mexico to recognize that "the secret ballot is absolutely necessary . . . to ensure that workers are not intimidated into voting for a union they might not otherwise choose."

As Thom Lambert (via Larry Ribstein) makes clear, the Massachusetts Democrat either doesn't understand the nature of the bank program, or does understand it and has chosen to demagogue the issue anyway.

Federally imposed labor arbitrators

That might be the most dangerous part of the card check/EFCA bill, contends an Examiner editorial.

On the EEOC's docket. And: "EEOC Reports Record Number of Discrimination Claims for 2008; Up 15 Percent from 2007" [Daniel Schwartz]

Loser-pays proposals in Georgia

The Georgia Senate stripped those provisions from Gov. Sonny Perdue's reform bill and passed only a considerably reduced version (via Robinette/TortsProf).

The Searle Civil Justice Institute at Northwestern University School of Law is out with a new study on consumer arbitration that should serve as a valuable corrective to the organized plaintiff's bar's running campaign for legislation aimed at returning consumers to the arena of litigation as their clients. From the "Summary of Key Findings":

"Class Actions Sans Frontieres"

The winter newsletter of the ABA's Class Action and Derivative Suits subcommittee, Section of Litigation, highlights the continued upsurge of interest in international class actions (via Karlsgodt).

Trial lawyers are once again attempting to overturn California's landmark law limiting medical malpractice payouts, and once again they're obscuring the history of the law's success in curbing insurance rates. [California Civil Justice Blog]

Diana Furchtgott-Roth (Manhattan Institute) on the misnamed Employee Free Choice Act.

Around the web, March 12

  • Maryland trial lawyers once again pushing Annapolis bill to open up suits against former lead paint manufacturers [Marta Mossberg, D.C. Examiner]
  • U. of Chicago emergency room under fire for sending dog-bit kid home. What's the ultimate lesson? [White Coat]
  • Expert on economics of piracy has book out next month titled The Invisible Hook [Dubner, Freakonomics]
  • "Everything from an alarming advertisement to a cockroach baked in a pie": what can't be called "public nuisance"? [Maureen Martin via Genova]
  • Prejudgment interest bill in Springfield could be a sort of stimulus bill for Illinois trial lawyers [Travis Akin, I-LAW via Pero]
  • James Zirin reviews Philip Howard's Life Without Lawyers [NY Law Journal]

Jonathan Adler deconstructs a particularly intemperate New York Times editorial.

Two Federalist Society events next week in Washington, D.C. of interest: on Tuesday, Mar. 17, there will be a lunchtime panel discussion on "Regulation by Litigation: Boon or Bane?" with Andrew Morriss, Bruce Yandle, Andrew Dorchak, David Vladeck, Roger Martella, Jr., and Jonathan Adler. Details here. And two days later, on Thursday, Mar. 19, will be a morning-through-mid-afternoon event on "The Financial Services Bailout: Cause, Effect and the Limits of Government Action" with James Carr, Timothy Canova, John Eastman, Bert Ely, Ronald Cass, Jeb Hensarling, Alex Pollock, John Weicher, David Berenbaum, Wayne Abernathy and, Louis Michael Seidman. Details on that one here.

My Manhattan Institute colleagues James Copland and Paul Howard are the authors of a just-released paper which proposes comprehensive federal preemption of state product liability drug litigation, combined with a new administrative compensation program for persons injured by unforeseen drug side effects, modeled on the existing vaccine injury compensation program. Their paper is here, and the section on administered compensation begins here. A summary, and early reaction: Medical News Today, Legal NewsLine, their Washington Times op-ed, AmLaw Daily ("makes for interesting reading"), Drug and Device Law.

More Wyeth v. Levine reactions

Our own Jim Copland and Paul Howard of the Manhattan Institute, in the Washington Times; Gordon Crovitz, in the Wall Street Journal. More: Russell Jackson (via Beck & Herrmann), Carter @ ShopFloor, Daniel Fisher @ Forbes, Ted Frank @ Overlawyered, Rick Hills @ Prawfsblawg on Justice Thomas's federalism, and one we missed before from Beck & Herrmann.

No reason is offered in the AmLaw coverage why the fraud litigation should be taken away from the American courts. One hopes the reason is not merely, "if it's big enough, we need an international court for it". "[The group of lawyers] intends to submit a proposal for the creation of an IFC at a G-20 meeting scheduled for next month in London."

We've already sounded the alarm about them a few times, and now Daniel Schwartz does a more thorough explaining.

Class actions and punitive damages

Prone to abuse when taken separately, and in the view of a gathering consensus of courts, Beck and Herrmann argue, "unconstitutional together".

Banning the Barbie doll?

In the brouhaha over a West Virginia lawmaker's foolish proposal, says Scott Greenfield, there's a serious point to be made about the overcriminalization of life today:

[At one time] legislators understood that the creation of crimes was reserved for only serious matters, and they did not try to burden the penal codes with daily annoyances, odd-ball situations or, as here, social engineering. To do so would not only be considered inappropriate, but would reduce the legislator's credibility to zero in the eyes of more serious colleagues. This has all changed, to the point where someone would be goofy enough to propose outlawing Barbie without fear of never being invited to lunch again....

A new RICO suit in the name of National Service Industries targets Ray Harron and various others involved in mass x-ray screening for (the suit alleges) "fabricating bogus 'medical evidence' for asbestos litigation claims." [(U.S. Chamber-backed) Legal NewsLine, West Virginia Record, and Madison County Record] Separately, as Beck & Herrmann relate, an MDL court has declined lawyers' request to quash defendants' subpoenae "for documents from doctors who had purported to diagnose asbestos-related conditions in probably thousands of plaintiffs."

Discovery in cases like these could reveal a lot about what goes on in the industry of mass-diagnosing asbestos illness in seemingly unimpaired plaintiffs.

Around the web, March 9

  • How far should law go in expanding "crime victims' rights" at trial? Scott Greenfield vs. Paul Cassell on the pending W.R. Grace trial [Simple Justice, Volokh]
  • Remember usury laws, much deplored by economists? Sen. Durbin has a bill that would fix maximum consumer interest rate at 36% [CL&P]
  • Thwacking RFK Jr. and the Huffington Post soundly over more anti-vaccine wrongheadedness [Orac]
  • "Wilmer Lambasted for Fee Request in Whistle-Blower Case" [AmLaw Daily]
  • "Calif. Justices Air Standing for UCL Class Actions Against Tobacco Industry" [The Recorder]
  • Constitutionally protected lawyer advertising enters its fourth decade: one less-than-enthusiastic view [California Civil Justice]

Securities Docket has more on proposals that could serve as a great boon to the economy of Westchester County, N.Y. (or, if New York makes itself inhospitable, maybe Bergen County, N.J. or New Castle County, Del.).

"How To Shake Down the Banks"

Bill Lerach is chiming in from behind bars on the subject of how the government should go after those wicked bankers, and naturally (given his old modus operandi) he proposes class-action derivative suits against directors and officers, aimed at extracting money from their insurers. If memory serves, the biggest insurer in the D&O line is taxpayer-propped AIG, which would make a lot of the money transfers wonderfully circular, except for the very large contingency fees that Lerach's colleagues would cream off, and the fees taken by various other lawyers and professionals.

Evidently proud of his Lerach interview "get", Matt Miller of The Daily Beast displays no curiosity whatsoever about the systematic dishonesty that sent this felon to the big house, so I'll link to one reminder.

Meanwhile, "Bill Lerach's victims deserve to learn the truth" about the recent charges that he's misbehaved seriously as an inmate, writes James Freeman in the WSJ. Does FOIA reach prison-discipline matters?

"Mafia cops"

In New York, they may keep their pensions even as they serve long sentences. I've got numerous tales of public employee tenacity at my other site, Overlawyered.

David Rossmiller believes the much-ballyhooed (by Dickie Scruggs, the New York Times, and others) False Claims Act over insurer wind-vs.-water practices may be getting ready to expire with a whimper. Not that Rossmiller is entirely lacking in admiration for the now-imprisoned trial lawyer legend: "Let's face it, give the man his due, Dickie Scruggs is the guy who took down Dickie Scruggs! That's hard to do."

Ledbetter and the press, cont'd

Hans Bader is still going after the shortcomings in media coverage of the employment-law cause celebre, and Prof. Obbie takes note. Earlier here, here, here, and here.

New Republic: "Pre-emption games"

Yale lawprof Peter Schuck declines to join in the isn't-it-wonderful media chorus about Wyeth v. Levine:

...Juries have great virtues in many kinds of cases, but making these medical cost-benefit tradeoffs is not one of them. They sit in only one case, and the plaintiff's lawyer makes sure that the severely injured, extremely sympathetic plaintiff whom they see is not representative of the much larger group of those who reap the drug's benefits when it is properly administered. The trial lawyers intentionally seek jurors who know nothing about the subject at hand. The jury's verdict is completely opaque and unexplained. It is accountable to no one. And juries in different states make different decisions on the same drug--hardly a recipe for the uniformity and predictability to which manufacturers should be entitled.

A jury's flaws are inherent in its design. In contrast, the FDA's flaws--and they are many--can at least be remedied by Congress, to which it is highly accountable.

Empowering institutionally limited lay juries to make life-and-death decisions about drugs is a foolish way to make public policy, especially when the real culprit is not the manufacturer but the malpracticing clinician. ...

Read the whole thing here.

Per Naomi Schaefer Riley in the WSJ (also at), the left-leaning (but influential) National Center on Responsive Philanthropy is not only lending its weight to the demands that philanthropies set aside a substantial share of giving to minority and diversity causes -- no matter what sort of clash this makes with donor intent, mission, or program effectiveness -- but is also pushing foundations to allocate at least 25% of grant dollars for purposes of "advocacy, organizing and civic engagement to promote equity, opportunity and justice in our society." (And yes, those do function as code words for a particular set of ideological values by no means shared by all donors or foundations.) For our earlier coverage, follow links from here.

We and others (above all Prof. Lester Brickman) have been consistently critical of the gamesmanship and power plays involved in the "prepackaged" bankruptcies of various companies sued in asbestos litigation, in which asbestos plaintiff's lawyers have sometimes effectively seized control of the bankruptcy process (in cooperation with current management) to frustrate the legitimate interests of non-asbestos creditors and insurers. Now New Jersey bankruptcy judge Kathryn Ferguson has dismissed the attempted prepack of the Congoleum Corporation, a flooring manufacturer, in what American Lawyer's David Bario calls a "feisty" ruling (PDF) that could discourage such attempts in future. Check out Bario's article for reminders of the far from attractive conduct of (among others) Joe Rice of Motley Rice and Perry Weitz of the Sheldon Silver law firm, Weitz & Luxenberg.

Around the web, March 5

What follows is my two cents' worth on the Wyeth v Levine case, already discussed on this blog.

First, it is important always to understand that appellate courts are bound by the procedural posture of a case. This case rose out of a plaintiff's jury verdict in a "failure to warn" suit. Now, I fully agree that there was indeed ample warning in this case. But the Vermont jury decided to the contrary, and appeals are not "do-overs" of trials. To prevail on appeal the defendant must claim that the case should never have gotten to the jury (because, the defendant Wyeth claimed, the warning's content had been pre-empted by the FDA-approved label and therefore the plaintiff's theory should not have been submitted to the jury). If there is no pre-emption, the adequacy of Wyeth's warning is for state courts, not the federal court, to decide. Therefore, and with respect, I take serious issue with that part of Justice Alito's dissent that emphasizes that the warning was adequate. That can only be obiter dictum. The Supreme Court's sole task was to determine whether there had been federal pre-emption. Discussing the content of Wyeth's warning is relevant to the absurdity of Vermont products liability law, not to the pre-emption question.

As regards pre-emption, I expected a 5-4 decision (I wasn't sure in which direction), with Justice Breyer favoring pre-emption based on his prior pragmatic approach to interstate commerce and federal regulation, and of course I was wrong on that count. I also expected Thomas to concede that the Geier v Honda case was good law, and this he did not do, enabling him to dissent on grounds of federalism. Last but not least, I found the majority's distinguishing of Geier to be almost pathetically weak and most unpersuasive.

I think the Wyeth case severely weakens the effect of Geier, possibly generally (if the court is to be principled, which I doubt, given its pre-emption history) and certainly as regards pharmaceutical litigation. Ultimately, the effect of the decision may be confined to FDA matters, because of the lack of a pre-emption clause in the statute. That clause should not make a difference, conceptually, given the logic of the Geier case, as both the dissent and Justice Thomas's concurrence maintain, but these four Justices did not prevail on this point.

Express pre-emption, all concede, occurs in "a case in which state law penalizes what federal law requires." But the Geier case (disallowing a state lawsuit based on design defect for failure to equip a Honda with an air bag, when federal regulations had required a certain percentage of Hondas to be so equipped, and Honda had complied with that regulation) saw pre-emption in "a case in which state law penalizes what federal law explicitly allows." That was precisely the case in Wyeth -- the warning deemed defective was explicitly allowed (if not mandated) by the FDA. But Geier is no more -- at least as regards the FDA.

Meanwhile, Justice Thomas's insistence on federal principles is, I think, welcome. He clearly (alone among Justices) would explicitly overrule Geier, thereby possibly forcing the hand of the federal government to expressly pre-empt state product liabiilty law if it wishes to trump state sovereignty. Thomas's concurrence is coherent, unlike Justice Stevens,' in my opinion. As for Justice Breyer's opaque concurrence, the most that can be said for it in my opinion is that it follows his increasingly explicit pragmatism -- it is unprincipled, but pragmatism disdains principles.

Supreme Court pre-emption jurisprudence has been even less satisfying, intellectually, than Supreme Court punitive damages jurisprudence. Wyeth is the latest in a back-and-forth that now brings us back to the pre-Geier days when, essentially, pre-emption was minimized. It remains to be seen whether the Court will in the future restrict Wyeth to the drug field, as I suspect, in which case an express pre-emption cause in the Food, Drug and Cosmetic Act would at last be welcome.

Federal prosecutors say that they have more than enough legal authority to target any wrongdoing associated with the financial crisis, but apparently that's not good enough for some in Congress. The Fraud Enforcement and Recovery Act (S. 386), sponsored by Senators Patrick Leahy (D-Vt.) and Charles Grassley (R-Iowa), would add an array of new offenses and harsh penalties to federal law.

In an op-ed today, Brian Walsh and Tiffany M. Joslyn challenge FERA's basic premise: "that criminal activity caused the financial mess we're in and that prosecution can fix it." That's simply the wrong diagnosis for our current difficulties.

If that's the case, then rather than rush to criminalize, Congress should instead "make the best use of scarce federal resources, and forgo overwrought indignation and simple-minded 'tough on crime' politics."

Find more on FERA here.

The longtime high-level aide to Sen. (now VP) Joe Biden is well connected in liberal and Democratic legal circles, but once crossed the trial lawyers on a big one. Now, for anyone who may ever consider doing likewise, the Litigation Lobby (led as usual by Public Citizen) has made an example of him.

The decision is just out, and Lyle Dennison's early commentary is here.

No doubt, there will be much more commentary throughout the day. I'll add links to this post.

For what it's worth, I share Alito's view: "This case illustrates," his dissenting opinion begins, "that tragic facts make bad law." Getting to five in this case--that is, winning in the Court--was going to require Kennedy and Breyer, given Thomas's well-known skepticism of implied preemption on textual grounds (on display today, in fact). Breyer and Kennedy are not resolutely opposed to preemption (as Justice Stevens seems to be), and the 4-4 split in Warner-Lambert v. Kent provided some indication that the two might be open to it in the drug context. (Justice Roberts sat that one out.)

So what was different this time around? The facts, or at least what the media made of them. Story after story (see, e.g., here and here) focused on Diana Levine, a musician who lost her arm to gangrene after being administered Phenergan, Wyeth's drug, via IV-Push injection. But in that simple summary, so many facts are lost:

  • The drug's label did warn about the risk of gangrene due to "intra-arterial injection"--exactly what happened to Levine.

  • The physician's assistant who injected the case used a disfavored, though not contraindicated (i.e., banned) method of injecting the drug.

  • Twice the maximum labeled dose was injected.

  • The physician's assistant continued to inject the drug despite Levine's complaints of pain.

  • IV-push, the method of administration at issue in the case, is a particularly quick-acting and effective way to administer the drug, though it does carry with it some (labeled) risks, such as gangrene.

In short, then, this really wasn't about "failure to warn"--because the warnings were there--but failure to outright ban a method of administration that already carries heavy warnings but that the FDA, balancing all the interests at stake, determined should still remain available.

(And if that method is misused, as seems to have been the case here? That's a malpractice claim.)

But there's no way to square today's decision with the FDA's role in making these kinds of determinations. The majority, unfortunately, sweeps that fact under the rug, arguing (unconvincingly) that expert determinations and jury decisions on drug safety can somehow coexist.

Hard facts, goes the old saw, make bad law, and now we have Alito's new formulation of that lament. If only the facts of the case, rather than the facts of the plaintiffs' bar's media blitz, had carried the day, the Court might not have found this case so hard or made such bad law.

Update: Thoughtful commentary (as always) by drug and device law gurus Beck and Herrmann:

Levine isn't good news for our side by any means, but it's no Lohr. The Court did not hold that there's no preemption at all, or no preemption without an express regulation, either of which it could have done. It didn't impair either Riegel (which, being an express preemption case, is completely different) or Buckman. In short, Levine doesn't make preemption impossible, just a lot more difficult. After Levine it's pretty clear though that implied preemption is going to depend quite a bit on what the FDA has to say about specific drug risks, and not very much on what the FDA has to say about preemption.

Update: Jonathan Adler, writing on the Volokh Conspiracy, makes the point that Wyeth, as well as the Court's decision from earlier this term rejecting preemption in Altria v. Good, is "evidence that early proclamations that the Roberts Court is a 'pro-business' court were premature."

In an additional posting, Lyle Dennison prognosticates on the effect of the decision: "The Court no doubt will have other federal-vs.-state regulation cases to sort out as time goes on, because consumer advocates are sure to try to make the most of the Wyeth ruling to support their lawsuits in state courts over what they claim are defective products. "

Update: A victory for federalism and "states' rights"? Several commentators, including a number of plaintiffs' attorneys, think so. (Do we get referral fees for these links?)

Update: The Journal's Jess Bravin on the takeaway from Wyeth and the other recent preemption cases: "All three of these cases wound up being primarily about statutory interpretation. The Court in each looked at the specific statute and determined whether or not it could exist side-by-side with state tort law. But in each it was an individualized examination."

CEI's Greg Conko faults the Court for its broad rule substituting jury decisions for FDA experts' "balanc[ing] the benefits and risks of new medicines." He concludes, "[N]ot only is the majority's decision bad policy, it's also bad law."

At Freakonomics, Daniel Hamermesh writes of discovering one reason why lawyers in a related set of large antitrust lawsuits use a multiplicity of experts rather than allowing one to reprise his work: "They said very simply: if the other side finds a mistake or problem in your work on one case, they can use it on all the other cases; so we like to diversify."

Plead the dean of Columbia's medical faculty dean and the CEO of New York-Presbyterian.


Chasing the client-chasers: a new blog (via Childs) is apparently going to devote itself to exposing bad practices among the many law firm marketing sites that present themselves as dispensing objective information about mesothelioma, the asbestos-linked cancer. Often it's only in the fine print (if indeed there) that the sites disclose that they are not actually sponsored by a medical charity, patient advocacy group, or research foundation, as their manner of presentation might otherwise suggest. The blog's author is listed as Theodore Stevens, not further identified.

This morning the Supreme Court hears oral argument in Caperton v. A.T. Massey Coal Co., a Due Process challenge to a West Virginia Supreme Court justice's refusal to step aside in a case where the defendant's CEO had supported his election to the court. With Justice Brent Benjamin's deciding vote, the court voted 3-2 to reverse a $50 million verdict against the defendant, Massey Coal.

Read the facts of this case, and you'll see it's anything but a straightforward tale of corruption. Massey chief Don Blankenship did spend a pile of money in the campaign, but it was independent spending, uncoordinated with Benjamin's campaign. Blankenship says his aim was to unseat Benjamin's opponent and predecessor on the court, Warren McGraw.

Moreover, court records show that Benjamin has voted against Massey's financial interests nearly every time the company has come before his court. Not counting the present case, Benjamin voted against Massey 15 times, and for it only twice. Several of those cases were worth far more than Caperton.

Finally, it's worth pointing out there's no direct evidence of any quid pro quo, just insinuations of impropriety. The best that Caperton's merits brief can muster is the lame assertion that, after Benjamin's election, "some in West Virgina wondered aloud whether Massey had 'bought itself a judge.'"

Thus, the odd question presented to the Supreme Court: Whether a judge's mere appearance of impropriety, something usually left to state ethics rules and political processes, somehow violates the Due Process Clause of the Fourteenth Amendment.

The way the Court answers that question could go a long way toward ending judicial elections in the states--a long-time goal of "reformers" who favor undemocratic selection committees dominated by ABA and trial-bar apparatchiks. Could there be any other end when any sizable campaign donation--perhaps just a few thousand--guarantees recusal? (A cheap investment for some litigants, quips a colleague.)

Be wary of the constitutionalization of judicial ethics under the guise of Due Process and "good government." Caperton, usually portrayed as simple case of corruption, is not exactly what it seems.

Update: In a post entitled "In search of a limiting principle," Lyle Dennison reports Justice Kennedy's fretting at oral argument over the line-drawing exercise inherent in constitutionalizing an "appearance of impropriety" standard for judicial recusal.

Beyond the insurance they're required to carry under federal law (typically $750,000 or $1,000,000) it is not uncommon for small trucking operators to be essentially judgment-proof when sued after an accident. So it's on with the search for deep pockets:

For example, there have been an increasing number of claims against freight brokers for injuries sustained in an accident with the motor carrier to whom the broker tendered freight. More recently, at least one published opinion has recognized the possibility of such a claim against a shipper who directly obtains a motor carrier.

The claims have required stretching and reworking common law rules that ordinarily would bar such claims, including the rule "that one cannot be held vicariously liable for the acts of his or her independent contractors". The article is Robert T. Franklin, "But I Didn't Do It!" Expanding Theories of Vicarious Liability, 58 Fed'n Def. & Corp. Couns. Q.347 (2008)(PDF) (via Day on Torts)

Not easy advice to follow when a manager is added individually as a defendant in an employment dispute, as happens regularly.

Pending federal legislation provides for not only long prison sentences for disturbing fossils on federal land, but for forfeiting offenders' cars for inadvertent violations. [CEI "Open Market", Overlawyered, more]

Walter Olson, Point of Law's editor and host, requests that I introduce myself.

With some trepidation, here goes:

According to my official bio, as The Heritage Foundation's Senior Legal Policy Analyst, I study "overcriminalization"--the practice of turning minor civil offenses into serious criminal acts--as well as "constitutional law; national security, civil liberties and privacy issues; domestic intelligence operations; the legal aspects of economic regulation; and tort law."

Yes, that's a rather broad purview. Perhaps it makes more sense if you agree, as I do, with the contention that "A lawyer can provide adequate representation in a wholly novel field through necessary study." Study is, after all, how I spend my days. That, and writing.

My posting here will primarily focus on criminal law and overcriminalization, with some posts on civil justice issues as time allows. I also comment, from time to time, on other topics on Heritage's Foundry blog, the Technology Liberation Front, and my own (somewhat spartan) personal site.

Thanks again to Walter Olson, for the invitation to contribute to a website that I have long admired and relied upon.

The Other Half of EFCA

Would the Employee Free Choice Act--the mis-named bill best known for a provision would put an end to secret-ballot voting in union organizing--also empower government bureaucrats to impose the initial contract between a newly recognized union and an employer? No one, explains Slate's Mickey Kaus, seems to know:

The arbitration parts of the card check bill are so vaguely drawn that nobody knows who the arbitrators will be. The job appears to be delegated entirely to the Federal Mediation Service. The FMS might decide to use its own employees. It might decide to use arbitrators from the private sector selected along more traditional lines. The two breakfast debaters (Prof. Richard Epstein and attorney Anthony Segall) did seem to agree that, since thousands of arbitrators might quickly be needed for the expected explosion of mandatory arbitration, it's unlikely they would all be newly hired GS-12s. But they don't know.

But, as Kaus explains, whoever is in charge, mandatory arbitration will inevitably "freez[e] in place hierarchies and job categories both across industries and within individual firms."

Labor-induced stagnation: that's a sure recipe for success.

Commentary's Jennifer Rubin calls the provision "far more extreme" than Roosevelt's National Industrial Recovery Act, which allowed industries to set their own (incumbent-protecting) codes. Unions, she concludes, "would have little reason to agree voluntarily to a deal with management so long as a government arbitrator would be available to ring still more concessions out of the employer."

No surprise, then, that mandatory arbitration is a top labor priority, perhaps even more so than card-check. Opposition to ending secret-ballot elections--or, at least, the fear of the political fallout from doing so--has kept EFCA from moving forward this year, leading some to predict that, with watered-down card-check language, the bill could cruise through Congress this summer, arbitration language intact.

Sen. Arlen Specter (R-PA) has introduced S. 437, amending the Internal Revenue Code to allow attorneys a tax deduction in the current taxable year for reimbursable expenses and court costs which they pay or incur in connection with contingency fee cases.

This another run at legislation that Ways& Means Chairman Charlie Rangel tried to include in the energy and tax extenders bill last year (Section 311 in H.R. 6049), and it's a straight-forward giveaway to trial lawyers. In an editorial last May, The Wall Street Journal called the provision, "The Bill Lerach Tax Cut." Excerpt:

The provision would allow plaintiffs lawyers to deduct the up-front expenses of pursuing contingency-fee lawsuits, even in cases where the lawyer is expecting to be reimbursed for these expenses. The IRS currently considers these costs a loan from the lawyer to his client, and like other taxpayers, the lawyer can only deduct the loan if it isn't paid back.

Mr. Rangel's spokesman says, "This is purely a matter of fairness and tax equity. The individuals who would benefit from this provision are already eligible to deduct expenses related to contingency-fee lawsuits, the only question is when." Not exactly. Attorneys who snare a percentage of the recovery plus expenses today receive no deduction. Allowing these big deductions now would mean that future reimbursements are taxed, but with some monster class-actions, the lawyers could avoid the tax bill for a decade or more.

Naturally, this would be an incentive to file more class-action suits, because the lawyers could write off their up-front expenditures to pursue them.

Kathleen Flynn Peterson of the American Association for Justice wrote a letter in response and Sherman "Tiger" Joyce of the American Tort Reform Association also commented.

Specter's introductory statement and the bill text are on page S2325 of the Congressional Record. His cosponsors are: Mike Crapo (R-ID), Lindsey Graham (R-SC), Mary Landrieu (D-LA), Patrick Leahy (D-VT) and Mel Martinez (R-FL).

New law school for Dallas?

Especially given the steepening recession in lawyers' employment, it's not one of the brighter ideas Brian Cuban has heard of from the Texas legislature.

Over-specific product warnings

They figure in a comic strip (Sunday edition).



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.