PointofLaw.com
 Subscribe Subscribe   Find us on Twitter Follow POL on Twitter  
   
 
   

 

May 2012 Archives


The Double Jeopardy Clause forbids retrial on a charge that previously resulted in an acquittal. But in Blueford v. Arkansas, the Supreme Court allowed the state to retry a defendant after a jury announced in open court that it had unanmiously rejected murder charges. In 2007, Alex Blueford was accused of killing his girlfriend's young son. The charge of capital murder included three lesser-included offenses: first-degree murder, manslaughter and negligent homicide. Arkansas is an "acquittal-first" jurisdiction, in which a jury may not consider a lesser-included offense unless and until it rejects a more serious offense. In other words, Blueford's jury could not consider the first-degree murder charge unless and until it rejected the capital murder charge, and it could not consider manslaughter unless and until it rejected first-degree murder. When Blueford's jury told the court it could not reach agreement, the forewoman told the judge that it was "unanimous against" capital and first-degree murder, but could not agree on manslaughter or negligent homicide. The judge sent the jury to deliberate further, refusing Blueford's request that the jury be allowed to enter a partial acquittal on the two charges. When the jury announced it was still deadlocked a half-hour later, the court declared a mistrial. When Blueford was re-indicted, for capital and first-degree murder in addition to manslaughter and negligent homicide, he argued that the first two charges were barred by the double jeopardy clause. In a 6-3 decision, the Supreme Court disagreed. Chief Justice Roberts, writing for the majority, held that the jury's announcement that it was "unanimous against" the charges of capital and first-degree murder did not bar a retrail on those charges because "no formal judgment of acquittal was entered," and because the jury could have reconsidered its finding on these charges when it returned to deliberations. He further held that it was not error for the trial court to declare a mistrial without allowing the first jury to enter a partial verdict on capital and first-degree murder. In dissent, Justice Sotomayor wrote that the forewoman's announcement was an "acquittal for double jeopardy purposes," and that requiring entry of a formal judgment exalts form over substance. Moreover, she concluded that the trial court erred in declaring a mistrial without taking a partial verdict. She noted that an acquittal-first instruction increases the likelihood of conviction on a greater offense, and held that requiring a partial verdict in such a case "ensures that the jurisdiction takes the bitter with the sweet."

A win in Dewey v. Volkswagen
| No Comments

We've been discussing the unreasonable Dewey v. Volkswagen class action settlement for some time here: June 2010; July 2010; October 2010; August 2011; February 2012; February 2012; March 2012. Today, the Third Circuit reversed the settlement approval, another victory for the Center for Class Action Fairness. The decision is not an optimal opinion, as it is heavily fact-specific and avoids the opportunity to create useful precedent to make future settlements and fairness hearings more efficient, but a good result for this particular class that had been treated unfairly is still a good result—especially since the settling parties had asked for the recent Sullivan v. DB Investments decision to be extended to preclude any consideration of intra-class conflicts.

Your Nanny Bloomberg update
| No Comments

Mayor Bloomberg wants to ban the sale of sugary sodas larger than 16 ounces. Dairy drinks are not subject to the proposal, so we'll almost certainly see substitution towards milkshakes. (And see Mika Brzezinski defend the ban while drinking a venti Starbucks.) Caleb Brown suggests an entertaining loophole: buy one bottle, get one free.


Under Rule 23.1(a), a derivative action may only be maintained if the plaintiff adequately represents the shareholders. But many shareholder derivative actions hurt shareholders; they're brought solely to vindicate the ability of plaintiff's counsel to collect dramatic fees. Robert F. Booth Trust v. Crowley, in the Northern District of Illinois, was such a case; its only value was the threat of harassment of Sears Holding Company and its directors with expensive discovery. I have long argued that this abuse of the legal system is not a loophole; it reflects the failure of judges to enforce the "adequacy" requirements of Rule 23 and Rule 23.1. As a Sears shareholder, I had the opportunity to move to intervene to dismiss Robert F. Booth Trust when it settled; the district court judge disagreed, and I appealed. Yesterday was oral argument in the Seventh Circuit—in front of a dream panel of Chief Judge Frank Easterbrook and Judges William Bauer and Richard Posner.

As the oral argument indicates, I am cautiously optimistic that we're going to see an important precedent about the duty of courts to rein in abusive strike suits. Michael Greve analyzes with tongue in cheek.


I'm disappointed by Tuesday's decision in Cobell v. Salazar, the first time I ever lost a federal appeal I've argued. (Of course, as always, the Center for Class Action Fairness is not affiliated with the Manhattan Institute.) [Briefing; Coverage: DC Circuit Review; BLT; ICTMN; AP; Reuters; Cronkite; McClatchy; Oklahoman; wildly inaccurate KFBB.]


It has been 10 years since Arthur Andersen LLP, former "Big Five" accounting firm, was indicted for its actions related to the audit of Enron. The firm gave up its CPA licenses and shed nearly 85,000 employees after being found guilty of numerous crimes by a district court and was never able to recover as a firm despite a ruling by the U.S. Supreme Court in Arthur Andersen LLP v. United States which overturned the conviction.

Jim Copland, director of the Center for Legal Policy at the Manhattan Institute, brings to light new tactics employed by the Department of Justice to enforce criminal laws against corporations. In an op-ed published by Bloomberg.com, Copland explains this new approach and why even in the DOJ's efforts to avoid collateral consequences that flow from large-scale prosecutions of corporations such an approach can be problematic:

...in the place of actual prosecutions, the Justice Department has aggressively pursued what are blandly called "deferred prosecution" or "non-prosecution" agreements -- DPAs and NPAs, for short -- through which prosecutors and companies negotiate terms to avoid a criminal trial. This approach may be avoiding the sort of corporate death sentence visited upon Andersen for what proved to be non-crimes, but nonetheless does something just as worrisome: It insinuates Justice Department career bureaucrats into the day-to-day management of major American businesses...


In each of the past three years, fines and penalties levied under federal deferred-prosecution and non-prosecution agreements have exceeded $3 billion. While such fines are not insignificant, of far greater concern are the sometimes sweeping powers that prosecutors have asserted over business practices. In recent DPAs and NPAs, federal prosecutors have variously pressured companies to change long-standing sales and compensation practices; to restrict or modify contracting and merger decisions; to carry out onerous compliance and reporting programs; to appoint corporate monitors with broad discretion over management decisions; and even to oust executives or directors.

Businesses accept the agreements with such aggressive terms because they can ill afford to fight a criminal investigation.

Copland's piece is only an overview of his deeper analysis of DPAs and NPAs undertaken in a Manhattan Institute Civil Justice Report titled The Shadow Regulatory State: The Rise of Deferred Prosecution Agreements. In this report, Copland zeros in on companies currently operating under these agreements and explores the agreed-to terms. He uncovers that "seven Fortune 100 companies are currently operating under the supervision of federal prosecutors: CVS Caremark (CVS) Corp., Google (GOOG) Inc., Johnson & Johnson, JPMorgan Chase & Co., Merck & Co., MetLife Inc. and Tyson Foods Inc."

Manhattan Institute's Center for Legal Policy also brought Copland together with Senator Rand Paul (R-KY) for a web conference to discuss the broader issue of overcriminalization, the rapid expansion over the last forty years of a host of criminal laws, many of which are vague, many of which overlap and those which decrease or eliminate the intent requirements that traditionally were the foundational principle of criminal law.

It will be important to track the developments of DPAs and NPAs especially as more corporations are subject to these agreements. As Copland explains, "others, such as Wal-Mart Stores Inc., currently facing scrutiny for alleged Mexican bribes prohibited under the Foreign Corrupt Practices Act, are sure to follow."


Bob Dorigo Jones has this year's finalists in the Wacky Warning contest. Of course, wacky warnings aren't just silliness created by the legal system. As I noted in 2010, wacky warnings cost consumers money, and make us less safe.

Related: Bluetooth class counsel claims wacky warning worth nearly a billion dollars.


In addition to punishing one who accesses a computer without authorization (e.g., , a non-employee who "hacks" into a corporate network), the Computer Fraud & Abuse Act ("CFAA") also punishes one who "exceeds authorized access" to a computer by "access[ing] a computer with authorization and [using] such access to obtain or alter information in the computer that the accesser is not entitled so to obtain or alter." 18 U.S.C. 1030(a)(4), 1030(e)(6) (emphasis added). In United States v. Nosal, the Ninth Circuit recently limited the reach of the latter portion of the statute. When David Nosal left an executive search firm, he convinced his former colleagues to help him start a competing business by providing him with proprietary information -- including source lists and contact information -- from his former firm's confidential database. Nosal's colleagues were authorized to access the database, but were not authorized to share it outside the company. Nosal was charged with aiding and abetting violations of the CFAA. In Nosal, a divided en banc Ninth Circuit upheld the District Court's dismissal of the counts. The government argued that the statute's "exceeds authorized access" prong should be interpreted to cover not only users authorized to view certain files, but who access other, unauthorized files, but also users with unrestricted access who make unauthorized use of the information. Writing for the majority, Judge Alex Kozinski held that to interpret the statute in that way would make it a "sweeping Internet-policing mandate." He noted that such an interpretation would criminalize violations of corporate computer use policies (for example, using a work computer to send personal email) or website terms of service (such as lying on dating sites). In dissent, Judge Barry Silverman accused the majority of "knocking down straw men," pointing out that the CFAA's requirement of intent to defraud would prevent the majority's "parade of horribles" from occurring. Judge Kozinski, however, wrote that whether or not Congress could criminalize unauthorized use of computer information, the CFAA must be limited to unauthorized access.


"Hot Coffee" Truth
| No Comments


David Oliver has lots of good questions about the nonsensical Bartlett v. Mutual case that we discussed May 3.



Today's Wall Street Journal featured a piece which discussed the failure of tactics employed by organized labor and activist groups in an effort to "kill business speech" through the proxy proposal process. These particular proposals at issue seek to limit, burden or in some cases disrupt legitimate corporate political activity.

The Journal, citing Manhattan Institute's Proxy Monitor project, reported:

Support for political proxy proposals has fallen significantly at other big companies as well. Overall, according to the Manhattan Institute's Proxy Monitor, in 2012 political spending or lobbying proposals have received an average shareholder vote of 18.3%, compared with 22.6% last year. Could shareholders be getting wise to the political charade?

The disclosure gambit is key to the left's strategy of intimidating businesses from spending on politics to compete with unions and liberal billionaires like Peter Lewis of Progressive insurance. The political bludgeoning will continue, but at least this year the effort to vilify corporations that have exercised their First Amendment rights isn't getting the kind of traction the activists had in mind.

Our own Jim Copland, director of the Proxy Monitor project and Manhattan Institute's Center for Legal Policy, predicted an increase in political spending and lobbying related proposals and is closely tracking the trend in his regular findings.

In his recent finding, Jim discovered that:

Looking at the composition of shareholder proposals with more specificity, a plurality of all proposals introduced to date in 2012 involve corporate disclosure of political spending or lobbying activities, followed by those related to executive compensation and those seeking to separate the positions of board chairman and chief executive officer...


The increase in the share of proposals related to political spending or lobbying is notable and in keeping with a trend witnessed since the Supreme Court's controversial 2010 Citizens United decision, which held that corporate political speech was protected by the First Amendment. In 2012, fully 26 percent of Fortune 200 companies to have filed proxy materials have faced a proposal related to political spending or lobbying, an all-time high.

As the Journal recognized, despite the increase in volume, it doesn't seem that these political spending and lobbying proposals are having the desired effect. At least not yet.

Sh prop type 2012.png


Julian Heicklen, an 80-year old retired chemistry professor from New Jersey, spent the fall of 2009 and spring of 2010 standing outside the federal courthouse in Manhattan with a sign reading "Jury Info." Mr. Heicklen handed passersby -- including, he hoped, jurors -- brochures advocating jury nullification. The doctrine of jury nulification holds that jurors who disagree with a law may vote, on that basis, to acquit a defendant who violated it. For example, in the mid-19th century, sympathetic United States juries refused to convict abolitionists under the Fugitive Slave Act . Mr. Heicklen had his own opportunity to argue for jury nullification when he was indicted for jury tampering. Last month, however, Judge Kimba Wood dismissed the case. Mr. Heicklen -- who in his 60s openly smoked marijuana on the Penn State campus to protest its prohibition -- had argued that the First Amendment protected him, but prosecutors countered that his conduct was "criminal and without constitutional protection." Judge Wood, however, did not reach the constitutional issue. Rather, she held that the jury tampering statute applies only where the defendant attempts to influence a juror in relation to "a specific case pending before that juror."


WXYZ asks "Did a Michigan Supreme Court Justice play a shell game to get out from her underwater home?" Hathaway persuaded a bank to permit her a short sale of a Florida vacation home that saved her hundreds of thousands of dollars from a mortgage made at the peak of the market, but the ABC affiliate finds suspicious transfers of other real estate from the judge to her stepchildren shortly before she got the sweetheart deal from the bank, which is hypothetically available only to those without the assets to pay the mortgage.

Hathaway, a trial lawyer favorite, won her seat with the help of a Michigan Democratic Party ad that showed a photo of Justice Clifford Taylor blinking and accused him of sleeping on the bench. Severino has more.

Framed
| No Comments

A scary tale of what can go wrong if one makes the wrong enemy of someone willing to persistently abuse the civil and criminal legal system, and how poorly the legal system protects those victims.


$560M, more than the budgets of many smaller cities, is a fairly shocking figure, since, at typical 33% to 40% personal-injury contingency rates, it means that it's a wealth transfer of about $30 per capita from every man, woman, and child in the 99% in New York City to the 1% who are trial lawyers. And the $560M figure doesn't include the litigation expenses of a 650-member Law Department (that's more than the number of lawyers in Dewey Leboeuf's New York office at its peak, though not all of those city lawyers are defending personal injury claims) or of non-legal workers whose jobs are interrupted responding to discovery.

But the focus of a NY Times story on the subject is the reporter's inconceivable shock that NYC defends itself in lawsuits instead of blindly writing multimillion $ checks. In particular, the story is critical of the city hiring a private investigator to double-check the claimed injuries of a plaintiff claiming (and eventually receiving) millions of dollars of damages from a tree accident: of course, surveillance of a personal injury plaintiff seeking a large sum for quality-of-life injuries is common, and can uncover fraudulent claims, though courts are inconsistent and relatively lackadaisical about punishing such fraudulent claims. But given how thoroughly wracked the status quo is with fraud, imagine how much a softer touch New York City taxpayers would be if it was known that they did not double-check for fraud? "If you build it, they will come," and that $560 million a year would quickly become $5.6 billion a year. The Times investigated "ten cases"; how were those picked? How many cases involving fraudulent claims that the City successfully beat back did the Times miss?

The Times does not question City taxpayers paying an unprecedented $350,000 to the estate of an elderly woman for what was, at most, a few seconds of pain and suffering (and was probably no pain and suffering at all, but we'll credit the jury's finding for the sympathetic grandmother against the deep pocket); it gives only lip service to the legitimate claim of the City's counsel, Michael Cardozo, that taxpayers are paying excessive amounts for injuries.

The Times story is part of a three-day series suggesting that the City should do more to prevent injuries from falling trees. Of course, creating excessive liability for damage caused by trees is a great way to incentivize a defendant into having fewer trees. Trial lawyers' proposed solutions sometimes involve pure social cost: this blogger argues for warning signs, though, of course, if every tree has a warning sign to avoid liability, citizens will simply ignore the millions of dollars spent on warning signs (and also ignore far more important warning signs). And trial lawyers will still argue that injured plaintiffs were inadequately warned, because, after all, the warnings didn't prevent the injury in hindsight.


On last Thursday and Friday, I was in Charlotte for the spring meeting of the Civil Justice Task Force of the American Legislative Exchange Council, to which I presented my thoughts on how today’s securities litigation affected states. Uptown Charlotte was visited by various protesters affiliated with labor unions, the Occupy movement, and other left-leaning causes who were objecting to ALEC’s meeting and at the earlier-in-the-week annual shareholder meeting for Bank of America.

The protests against ALEC have been led by Van Jones’s Color of Change organization, which has attacked the free-market organization for drafting “stand your ground” model legislation arguably (though not really) at issue in the Trayvon Martin shooting. (Note: Florida’s stand-your-ground law pre-dates ALEC’s model bill, and the group has now disbanded the task force responsible for advancing that model legislation.) Like Ted, I’ve found the left’s attacks on ALEC to be profoundly disingenuous. First, it’s clearly the case that those opposed to ALEC’s reform work—in the case of the Civil Justice Task Force, for instance, the American Association for Justice, formerly known as the Association of Trial Lawyers of America—offer up legislation and legislative amendments to further their own interests. Second, if ALEC didn’t exist, corporations would still offer draft legislation and legislative amendments to further their own interests; it just wouldn’t be vetted by a broad group including legislators across several states and thinkers like myself, my former colleague and Point of Law founding editor Walter Olson (now at the Cato Institute), our editor Ted Frank and others at his Center for Class Action Fairness, and ALEC Civil Justice Task Force co-chair Victor Schwartz, who edits the most-used law school casebook on torts. Exactly how is ALEC supposed to be an unusually nefarious force, apart from the fact that its critics disagree with its agenda?


In the settlement of the questionable Nutella litigation, the attorneys stand to collect approximately $5 million, while class members will eventually end up with less than $2 million once deductions are made from the settlement funds for the cost of notice and administration—assuming that even 400,000 claims are made. The attorneys justify this by claiming that "injunctive relief" is worth $10 million to the class. But the injunctive relief consists of putting information that already existed on the back of the label on the front of the label, minor changes to the Nutella website, and changing the phrase "An example of a tasty yet balanced breakfast" into "Turn a balanced breakfast into a tasty one." Class counsel also justifies this fee from the work entailed in reviewing 53,000 documents and taking two depositions. [Jackson; Jackson; Lammi]


Have you been a saver over the last few decades, investing in broad-based mutual funds or stocks of banks? Did you responsibly refuse to buy more house than you could afford? Did you structure your mortgage so that you had significant equity in the underlying property? Did, notwithstanding adverse financial circumstances, you keep up with payments on a mortgage? Well, you're a sucker. The DOJ is taking tens of billions of dollars from bondholders and stockholders, and engaging in an arbitrary wealth transfer to homeowners who benefited from buying larger houses than they could afford, regardless of whether they are victims of allegedly deceptive practices in foreclosures (most of which aren't actually deceptive). [Furchtgott-Roth]

As abusive as the mortgage settlement is, it's better than the abusive and counterproductive litigation that led to it in the first place.


In North Carolina, John Edwards is currently standing trial for alleged felonies related to campaign finance violations: it is claimed that the Edwards campaign coordinated over a million dollars of third-party payments to Edwards's mistress, Rielle Hunter, to buy her silence for fear that Hunter talking would adversely affect Edwards's presidential campaign; the third-party contributions should be considered illegal "contributions," according to prosecutors. As Bradley Smith, among others, has noted, this seems abusive to take such a grey area of the law and turn it into a criminal prosecution, especially since Edwards had non-campaign reasons—a desire to hide the affair from his wife—to engage in such shenanigans. (Earlier on POL; and indictment coverage.)

In apparently entirely unrelated news, the New York Post reports that, in conjunction with Barack Obama's personal request, an Obama campaign supporter attempted to pay the Reverend Jeremiah Wright $150,000 to keep quiet during the 2008 presidential campaign, for fear that if Wright publicly talked too much, it would adversely affect Obama's presidential campaign. There doesn't seem to be anything other than political reasons to keep Wright quiet, since Mrs. Obama was present at the same controversial anti-American sermons that Obama supporters feared Wright would talk about. Nevertheless, not even the New York Post suggests the need for prosecutors, and I seem to be the only blogger asking why this payment isn't more problematic than the one Edwards is being prosecuted for.


Comparative negligence combined with joint and several liability resulted in a variety of absurd cases where the deep pocket with 1% responsibility paid for the negligence or intentional torts of others, so many states, Indiana among them, limited joint and several liability for the minimally responsible.

Abu Rahmatullah's Super 8 Motel, adhering to the non-discriminatory EEOC principle of not performing criminal background checks, hired criminal Joseph Pryor. Unfortunately, Pryor was a recidivist, and robbed and murdered paying guest James F. Santelli. A jury reasonably assigned 97% of the fault to Pryor (currently serving an 85-year sentence), 2% to Rahmutallah for following EEOC guidelines' preference for indifference to criminal history, and 1% to Santelli for reasons that are unclear. This would limit Rahmatullah's liability under the statute, but an Indiana appeals court says it didn't care what the legislature said about the subject, and remanded for a new trial where a jury would not be allowed to assign comparative fault to the intentional wrongdoer. [Santelli v. Rahmatullah (Ind. App. 2012) via Oliver via OL]


A new paper by Suzanna Sherry (h/t M.G.), argues that overreaching and greed by plaintiffs' lawyers resulted in adverse precedent:

Class action plaintiffs lost two major five-to-four cases last Term, with potentially significant consequences for future class litigation: AT&T Mobility v. Concepcion and Wal-Mart v. Dukes. The tragedy is that the impact of each of these cases might have been avoided had the plaintiffs' lawyers, the lower courts, and the dissenting Justices not overreached. In this Article, I argue that those on the losing side insisted on broad and untenable positions and thereby set themselves up for an equally broad defeat; they got greedy and suffered the inevitable consequences. Unfortunately, the consequences will redound to the detriment of many other potential litigants. And these two cases are not isolated tragedies; they provide a window into a larger problem of Rule 23. When plaintiffs' lawyers chart a course for future litigants, they may be tempted to frame issues broadly for the "big win" - with disastrous consequences. I suggest that it is up to the courts, and especially to those judges most sympathetic to the interests of class-action plaintiffs, to avoid the costs of lawyers' overreaching. That is exactly what the dissenting Justices (and the judges below) failed to do in these cases.

I'll repeat my earlier statements that the panic over Concepcion is wholly unwarranted: consumers will be far better off ex ante if vendors adopt consumer-friendly arbitration clauses like AT&T Mobility's, and many vendors will prefer the class action system to such generous arbitration clauses, so the death of the class action is a long ways away.

Around the web, May 11
| No Comments

  • Is there nothing lawyers can't do? NSF-funded law review article divorced from reality: "Tort actions may impel industry to take voluntary steps to redesign chemical molecules ... to be less toxic." $366,785 of your tax dollars at work encouraging US courts to cripple American industry. [Oliver]
  • Mac Donald on US v. Arizona argument. [Washington Examiner]
  • Jeffrey Rosen still pushing bogus "Constitution in Exile" conspiracy theory. [Greve]
  • Several amicus briefs in Rubashkin Supreme Court appeal. [ABAJ link roundup]
  • Warren scandal grows; Penn Law also identified her as minority; despite claims from friends, minority status surely counted for something in Harvard Law hiring decision. [Zywicki @ Volokh; Jacobson; Coulter; Bader; Bader; Bedard; Popehat; earlier on POL]

  • False criminal allegation leaves man unemployed, in hock to criminal defense attorneys. [NYDN]
  • New York state health insurance mess. [McMahon @ Newsday]
  • The Obama enemies list in action. [Strassel @WSJ]
  • Has the new North Korean regime made a fatal "New-Coke"-like blunder in its internal marketing? A long read that's worth it. [38 North]

The burdens of e-discovery
| 1 Comment

Marc Herrmann notes that judges have unrealistic expectations regarding e-discovery. Of course, they're encouraged to have such unrealistic expectations by plaintiffs' lawyers in asymmetric discovery cases. Acting as if a mere snap of the fingers can result in the full production of electronic documents means that judges can treat the normal frictions of failure as evidence of bad-faith that could lead to sanctions precluding a defendant from defending itself at trial. And if those consequences are a possibility, then that means that defendants can't risk spending less than top dollar on discovery, meaning that plaintiffs' lawyers have additional leverage to extract rents in nuisance settlements. Add the incentives of insurers indifferent between paying defense lawyers and paying plaintiffs' lawyers, and now any case that can get past the motion to dismiss stage is worth millions, no matter how meritless, and more if the court exercises its discretion to let discovery proceed while to motion to dismiss is pending. So it's of mild concern when a law professor argues (via Steinman) that whether to stay discovery while a motion to dismiss is pending should be adjudicated on a multi-factor-test case-by-case basis, pooh-poohing the costs of discovery, or the incentives of plaintiffs to increase the costs of discovery. Under such a regime, even bringing a case that can't survive a motion to dismiss would be profitable. Among the factors missing from Kevin Lynch's analysis: the incentive of judges to permit discovery to go forward and refuse to rule on a motion to dismiss, hoping that this creates an incentive to settle that gets cases off the docket.

CFPB paternalism
| No Comments

Paging Todd Zywicki. CFPB director Richard Cordray complains that 9% of bank customers pay 84% of overdraft fees, with the implication that paternalistic regulation is needed. Of course, as Shannon Phillips points out (via Funnell), what this statistic really reflects is that the vast majority of account holders use their accounts responsibly: if someone in that 9% were to do a better job of balancing their checkbook, they'd move into the 91%. But CPFB regulation (still in a notice and comment procedure, with comments due by June 29), would likely punish the 91% to protect the 9% from themselves. Except that without the overdraft fees, banks will find it unprofitable to serve these customers in the first place, and will instead charge monthly fees that effectively preclude any access to the banking system for both the responsible and irresponsible lower middle class. But at least regulators can feel better that they stopped overdraft fees.

Similarly, Jeff Sovern complains that many consumers and students are cluelessly engaging in complex financial transactions without understanding basic concepts like variable and fixed interest rates. The proposed solution—required use of mortgage counselors—would make mortgages more expensive for everyone, even those responsible citizens who are capable of representing their own interests and making their own choices without the needless additional overhead. Why not let consumers choose for themselves whether they need to hire a financial advisor?

Part of the problem in the mortgage context, I would strongly suspect, is the degree to which meaningful disclosures are buried in meaningless defensive disclosures banks engage in upon risk of class action liability. To take a related example, the pending Supreme Court case of First American Financial Corp. v. Edwards involves a RESPA class action alleging a technical violation of the law without any financial injury; while this is not a disclosure case, it shows the degree to which banks face litigation exposure by entrepreneurial rent-seeking trial lawyers without regard to whether the alleged transaction problem actually harms consumers. The disclosure regime has grown to the extent that it has become counterproductive: even brilliant experienced federal judges find it unprofitable to read the disclosures. Where CFPB could be useful is to create a clear-cut disclosure regime—a page of disclosures—together with preemption precluding lawsuits over the lack of the other 100 pages of disclosures. Earlier.

Around the web, May 10
| No Comments

  • Congratulations to my law school buddy, Ward Farnsworth, named dean of University of Texas Law School. [Statesman; Alcalde; UT; earlier at POL]
  • Prosecution wraps their case against John Edwards; it seems to be built largely on embarrassing him. And why is it more illegal for Bunny Mellon to fund a mistress than a "BS-y antipoverty institute"? [Kaus; Hasen @ Slate; Politico]
  • Ousted Senator Lugar pushing bad "Law of the Sea" treaty. [Rabkin @ CEI; Daily Caller; see also Tabin]
  • Judge Richard Posner, who a decade ago argued that the First Amendment protects nude dancing, would not extend it to the right of citizens to record police officers. Fortunately, the other two judges on the panel disagreed. [Volokh; ACLU v. Alvarez]

  • RIP Vidal Sassoon, an early challenger to bogus occupational licensing requirements. [Virginia Postrel in 1998]
  • California rejects reform against disability filing mills, though ATRA coverage incorrectly calls it a question under the federal ADA.
  • Who says we're not wealthier than 40 years ago? Even on a per capita scale, this is a remarkable increase about 50%. [Census Bureau via @thestalwart]
  • Lincoln didn't invent Facebook. [Atlantic]


As we discussed in 2007, the U.S. Supreme Court in Leegin recognized that it was economically irrational to treat "resale price maintenance" as a per se violation of the antitrust laws, especially given existing jurisprudence recognizing economically equivalent vertical restraints as a benefit to consumers. (See also my AEI discussion; Overlawyered.)

But that hasn't stopped the plaintiffs' bar from forum-shopping for courts that might ignore economic reality in favor of soaking out-of-state defendants. Last week, they hit paydirt with another lawsuit against Leegin Creative Leather Products, as the Kansas Supreme Court held resale price maintenance per se illegal. But the decision goes beyond that, arguing that Kansas law holds other so-called restraints on trade illegal, even when adjudged "reasonable" (i.e., beneficial to consumers) by federal antitrust standards.

Such a rule would effectively hold illegal common business practices recognized as proper for decades, and would be a pure wealth transfer from society to lawyers, and from out-of-state businesses and consumers to Kansas. It would force interstate businesses who could not readily operate differently in Kansas than in the rest of the country to change their practices, to the detriment of consumers in all fifty states. It's not just bad policy, but an impingement on interstate commerce and should be held a violation of the Commerce Clause for its attempt to expropriate the benefits of interstate commerce. One hopes defendant Leegin gets the U.S. Supreme Court involved; one also hopes that the Kansas legislature fixes this mess as quickly as possible before the state becomes a judicial hellhole.

Obama and gay marriage
| No Comments

I'm very surprised that people are treating Obama's public statement as a watershed moment. Obama has publicly supported gay marriage since 1996, and only in recent years has cravenly pretended that he hasn't. Even now, Obama couches his support in terms of "states' rights," a concept the administration has repeatedly rejected, most recently in suits against states attempting to protect against voter fraud. As a policy matter, Obama's "evolution" has no effect: the Department of Justice was already breaking with its obligation to enforce federal law and litigating against DOMA on grounds that would guarantee a constitutional place for gay marriage.

I suppose one could celebrate that gays are now sufficiently accepted within society that the Obama administration felt it was politically more dangerous to continue its disingenuous hypocrisy on the issue than to publicly come out with half-hearted support for gay marriage. (As a political calculation, the Democratic voting bloc most likely to oppose gay marriage—African-Americans—is unlikely to leave Obama, despite the disastrous consequences his policies are having for that community.) And the administration has now successfully distracted the news cycle from the poor economy for a full four days. But they will be hard pressed to complain about the fact that Mitt Romney flip-flopped on social issues to appease his base.


Paul Larkin, senior legal research fellow at The Heritage Foundation's Center for Legal and Judicial Studies, in his most recent memorandum, offers a strong response to a paper entitled "Logging and the Law" published by the Union of Concerned Scientists (UCS) criticizing the proposed Freedom from Over-Criminalization and Unjust Seizures Act of 2012 (FOCUS Act). This is the second consecutive rebuttal offered by Larkin who also responded to an article by Jon Adler at the Police: The Law Enforcement Magazine Website, written on behalf of the Federal Law Enforcement Officers Association (FLEOA) which argued that the FOCUS Act "would put federal officers and agents at risk by taking away their right to carry firearms in the course of their criminal law enforcement duties."

In short the FOCUS Act as introduced by Senator Rand Paul (R-KY) and Representative Paul C. Broun (R-GA) respectively would substitute civil for criminal penalties in the federal Lacey Act and eliminate that law's reliance on foreign law. Groups like UCS urge that criminal enforcement of the Lacey Act is necessary and will benefit the global environment and the domestic economy. Larkin disagrees and articulates a two-part argument:

(1) criminal enforcement of the Lacey Act leads to miscarriages of justice, and

(2) criminal enforcement of the Lacey Act is unnecessary.

Larkin explains these points at length in his paper and makes a strong case for the proposed legislative reforms needed to curb overcriminalization.


Point of Law will now open its forum and featured discussions to enable user commentary. With great daily content from our regular bloggers and participants in our monthly featured discussion debates, the editors have decided to promote user engagement and contribution. The objective is to spur the exchange of ideas and to connect daily readers of the blog with the bloggers.

To submit a comment you can click on the post title or comments link in the byline of the post. Your name and email address are required for commenting. Email addresses are not published on the blog, nor shared.

Once submitted, the comment will first be reviewed by our editors and is not guaranteed to be published. Point of Law editors reserve the right to edit, delete, move, or mark as spam any and all comments. They also have the right to block access to any one or group from commenting or from the entire blog. A comment which does not add to the conversation, runs off on an inappropriate tangent, or kills the conversation may be edited, moved, or deleted.

That said, it is also important to note that the views and opinions of those providing comments are those of the author of the comment alone, and even if allowed onto the site do not reflect the opinions of Point of Law bloggers or the Manhattan Institute for Policy Research or any employee thereof. Comments submitted to Point of Law are the sole responsibility of their authors, and the author will take full responsibility for the comment, including any asserted liability for defamation or any other cause of action, and neither the Manhattan Institute nor its insurance carriers will assume responsibility for the comment merely because the Institute has provided the forum for its posting.

We look forward to reading your comments!

Around the web, May 7
| No Comments


On Tuesday May 8, 2012, the Subcommittee on Fisheries, Wildlife, Oceans, and Insular Affairs of the House Committee on Natural Resources will hold a hearing on proposed legislation to de-criminalize the Lacey Act, a 1900 statute prohibiting the interstate transportation of wildlife or plants obtained in violation of federal, state or foreign laws. The statute received attention recently when Gibson Guitars was raided by federal agents for allegedly importing ebony and rosewood in violation of the laws of India and Madagascar. Senator Rand Paul and Representative Paul C. Broun have introduced companion bills in the Senate and House, which would replace the Lacey Act's criminal penalties with a civil penalty system, and strike from the Act all references to "foreign law." The new legislation would also make the Lacey Act enforceable only through civil process.

The unfair attack on ALEC
| No Comments

Secondary boycotts on ALEC supporters demonstrate a breakdown of civil society. Liberals have NCSL and NAAG and any number of Soros-funded organizations where legislators can exchange ideas and think about model legislation; heaven forfend free-market legislators have the same. The racial mau-mauing is especially disgusting and unfair, especially given the fact that so many of these former ALEC supporters were already supporting the Congressional Black Caucus, which refuses membership to African-Americans who don't toe their anti-market and racial-grievance line. [Adler @ Volokh; Smith @ WSJ and @CCP; WSJ; Bader; Forbes; Cherokee Tribune; Franklin Center; ALEC]


Black/Hyman/Silver have a new draft paper, "Does Tort Reform Affect Physician Supply? Evidence from Texas," (via Robinette) that substantially undermines the empirical case for the conventional wisdom that Texas's 2003 reforms against medical malpractice lawsuits attracted more doctors to Texas. The result is highly counterintuitive: after all, even the authors acknowledge that the reforms dramatically decreased malpractice expenses for doctors. Are we to conclude that doctors do not respond to economic incentives?

Alas, the authors do not suggest any explanation for the phenomenon they describe. Possibilities:

  • The supply of doctors is inelastic relative to after-expense income. This is a testable hypothesis, and would have dramatic implications for "bending the cost curve" of health-care expenditures if true.
  • Employers of doctors offset the decrease in medical-malpractice expenditures by decreasing wages paid to doctors. This seems somewhat implausible, as many doctors are independent, and the ones that aren't probably aren't paying for their own malpractice insurance. But it is also a testable hypothesis. Too, if the health-care market in Texas responded to such a wage decrease by reducing costs to patients (or, at least, reducing costs to patients relative to the nationwide trend of rising costs to patients), that is also worth studying, and would be a benefit that may refute the overstated conclusion of the authors that "tort reform is a small idea, when it comes to the larger and linked questions of health care access and affordability."
  • The quantity of doctors did not increase, but the doctors responded to the incentives by changing the mix and quality of services provided in any given year: more OB/GYNs willing to deliver babies rather than restricting themselves to less risky work; more doctors willing to work in emergency rooms; doctors spending more time seeing patients and less time in medical-malpractice-related activities like defending themselves in lawsuits, cover-your-ass documentation, and (for better or worse) defensive medicine. If the average practicing doctor is spending more hours with patients post-tort-reform than pre-tort-reform, doctor supply is increasing, even if the raw numbers aren't. I am not aware of any evidence for this, but economic theory would predict this result. It's not clear whether the data exists to test this hypothesis, but as in the parable of the drunk looking for his lost keys under the streetlamp, one should avoid drawing conclusions that contradict economic theory just because it is too difficult to test an alternative hypothesis consistent with economic theory. Too, if defensive medicine practices changed, as one predicts they would, have health outcomes changed for better or worse? (Professor Silver has argued elsewhere his concern that Texas doctors would take less care post-reform.) Again, this is difficult to test, especially since the adverse consequences of many defensive-medicine decisions, such as excessive CAT scans, won't be known until the additional cancers show up decades later. But it is both a potential benefit and a potential cost of tort reform, as we don't know to what extent doctors are properly weighing benefits and costs (including opportunity costs of more intensive treatment of a particular patient) at the margin. Kessler's study, backed to a lesser extent by the CBO, certainly suggests defensive medicine is wasted money at the margin in the state of the world without damages caps, but defensive medicine is surely different today than in the 1980s.
  • For many doctors with low-risk practices, malpractice liability is not a large factor in their practice decision. But the malpractice liability crisis most heavily hit high-risk practices, like neurosurgery or OB/GYN or emergency-room care. Did Texas tort reform materially affect the supply of doctors in high-risk specialties, while the effect on low-risk specialties was overwhelmed by noise? This should be a testable hypothesis, but the data is poor because of a change in the way statistics were collected. The authors try to get around this by comparing 1997-2000 growth to 2008-2010 growth, but there's not necessarily a reason that one would predict a post-tort reform world to have a different post-equilibrium effect than a pre-tort reform world. One cannot rule out the hypothesis that doctors overreacted to the new incentive when tort reform was first imposed and that depressed new demand in later years. Of course, one cannot rule out the null hypothesis that a dramatic decrease in malpractice-insurance rates caused by tort reform did not increase the supply of high-risk doctors, though, again, one wishes for an alternative explanation for why doctors are not responding to economic incentives. (Note, too, that the authors' decision of excluding 2001-07 from the data has dramatic effects on the data. It's unclear to me why a reporting change in 2001 that would artificially increase the 2001-02 numbers relative to the 1999-2000 numbers should have an effect on the 2003-07 numbers, especially given the 2000-2003 declines that are being excluded.)

Can anyone think of other alternative hypotheses in the comments?

I remain skeptical that a wealth transfer from lawyers to doctors and patients didn't have positive externalities, but I, for one, am going to stop claiming that Texas tort reform increased doctor supply without better data demonstrating that. More study is needed to explain Black/Hyman/Silver's counterintuitive result, and partisans on both sides need to be more conservative with their policy claims. Earlier.

Just asking
| No Comments

If, in applying for law-school faculty jobs, Elizabeth Warren had fudged her transcript to improve her chances of getting hired, she'd almost certainly be suspended by the bar for ethics violations.

So where is the ethics investigation on Warren's fudging of affirmative-action credentials? Earlier.


Last week, the Supreme Court heard oral arguments in Arizona v. United States on the issue of "whether federal immigration laws preclude Arizona's efforts at cooperative law enforcement and impliedly preempt four provisions of S.B. 1070 on their face." Ilya Shapiro, senior fellow in constitutional studies at the Cato Institute and editor-in-chief of the Cato Supreme Court Review, recently discussed the case in our regular podcast series.

Today, we feature, fellow and senior legal analyst with the American Civil Rights Union and legal contributor to Breitbart News, Ken Klukowski's hypothesis on how the Court will rule:

I think two of the provisions of the statute, the alerting of federal authorities or inquiring with federal authorities regarding immigration status and also the warrantless arrest authority: those provisions fall I think pretty well within what we refer to as police power which is an inherent authority that all states possess to make laws for public health, public safety, social welfare, personal responsibility and morality. Those are the two, I believe, that the one judge in the Ninth Circuit voted to say was okay. I think there's a good chance, a real solid chance, you might be able to get five votes to uphold those. And I think that would be correct.


The other two provisions, making it a state crime not to have the federally required registration documents on you and also the provision making it a crime for an illegal alien to solicit work. Those I think face an uphill battle and I think that those are a much closer call regarding current federal law. Again, not saying that that federal law to the contrary, [if it is to the contrary] not saying it's a good idea, just saying that's a judgment that Congress has made. And so the way to change that would be Congress amending the law. Courts do not have the discretion to decide whether or not Congress's law is a good one. They, just so long as it's constitutional, need to uphold it against any contrary state law.

Klukowski also comprehensively discusses the central legal issues and analyzes the arguments as articulated before the Court in the full podcast.


Sulindac, like all NSAIDs, is capable of causing the rare (and horrific) reaction toxic epidermal necrolysis, and does so in about five or six patients a year. Nevertheless, the FDA, in evaluating the drug, recognized that the benefits outweighed the rare side effects, and approved the drug as "safe and effective." Karen Bartlett was in the very unfortunate one in a million, and suffered the rare side effect when she took generic sulindac. Her failure-to-warn theory was both a non-starter (her doctor never read the warnings) and, in any event, preempted by Pliva v. Mensing. But she was permitted to take a "design defect" theory to the jury. It's unclear how defendant Mutual Pharmaceutical was supposed to "design" sulindac differently; after all, it's a single molecule, and no one claimed that the inactive ingredients in the medication were at fault. But plaintiffs' theory was that the FDA was wrong, and that manufacturers should simply withdraw the drug from the market. A judge let this get to a jury, and let the jury consider the warning label in determining whether the drug was unreasonably dangerous, and, after the inevitable loss aversion bias kicked in, Mutual is now on the hook for $26 million. All this made possible by the Supreme Court's erroneous anti-business decision in Wyeth v. Levine. [Bartlett v. Mutual Pharmaceutical Co. (1st Cir. May 2, 2012) (via Bashman)].

Beck calls for Supreme Court review. I agree.

(Looking for good links on NSAIDs and SJS, I found that the search-engine-optimized websites for Stevens-Johnson Syndrome are all trial-lawyer sites, natch, with misleading names like "Skin Association.")


In The American Conservative, Ron Unz compares the Vioxx litigation to the Chinese melamine scandal, and finds the American justice system lacking. (Also: Sailer; Roberts; and a plaintiffs' lawyer who makes the lay mistake of confusing a mass tort with a "class action".) But Unz's entire argument is based on an incorrect premise. Unz assumes that David Graham is correct in implying that Vioxx had "probably been responsible for at least 55,000 American deaths during the five years it had been on the market." But Graham is not. While Graham's text in the Lancet made wild allegations, the headlines were not supported by his underlying data, which found a relative risk of low-dose Vioxx of 1.24, which was not statistically significant. A later Lancet study confirmed that Vioxx and other COX-2s were no worse than other NSAID pain relievers when it came to cardiovascular risk.

And, of course, Vioxx was not merely a product of corporate profit-seeking; it had benefits over other pain relievers. Since Vioxx has been withdrawn from the market, serious ulcerations have increased 21%.

Merck's total legal bill for Vioxx is in the range of $8 billion and counting, though it correctly won the vast majority of cases taken to final judgment; the only ones it lost, it lost due to junk science. Merck's experience with Vioxx is certainly a damning indictment of the American justice system, but for reasons opposite than the ones Unz thinks.


The Class Action Fairness Act requires additional scrutiny of coupon settlements, as well as limitations on attorneys' fees in settlements with coupon relief. With the able help of Dan Greenberg, I recently objected to a coupon settlement in a class action settlement Wal-Mart made in antitrust litigation accusing them of conspiring with Netflix to divide the online DVD market. (Netflix fought the case and won.) Plaintiffs argued that CAFA did not apply because the parties agreed to call the coupons awarded to the class "gift cards," and the district court literally rubber-stamped the settlement. I have appealed. Fierce Online Video and UPI cover the story. Earlier and see also.

The case is In re Online DVD Rental Antitrust Litigation, No. 4:09-md-2029-PJH (N.D. Cal.), appeal pending, No. 12-15705 (9th Cir.).


Details are sketchy, but New York state appears to be about to initiate a program requiring its 10,000 annual applicants to the bar to demonstrate 50 hours of supervised pro bono work as a prerequisite. [NY Times; Justice Lippman speech]

My view is that this proposal imposing a tax on attorneys is preferable to proposals taxing a broader tax base for the same thing under the guise of "civil Gideon." (More preferable still would be to make the requirement a substitute for, rather than in addition to, barriers to entry like the bar exam and CLE requirements.) On the other hand, fifty hours of an inexperienced attorney is perhaps comparable to twenty hours of an experienced attorney's work, so one questions how much of a gap this requirement will close. My greater concern is that the breadth of pro bono will be inconsistently applied to permit attorneys to engage in societally counterproductive activity characterized as "pro bono," but that a double standard will preclude work for the Institute for Justice or Center for Individual Rights.

(If, however, "work for a non-profit" can be out of state, I am happy to take requests to provide the Center for Class Action Fairness LLC.fifty hours of pro bono work. CCAF is not affiliated with the Manhattan Institute.)

A slippery slope?
| No Comments

Must all playground slides be straight and dull on pain of liability for "design defect," as Max Kennerly implies or can a manufacturer give parents the option to supervise children to play on a slide with some curves? Nick Farr defends. NB the rhetorical imprecision of Kennerly turning sixteen injuries into "odds are pretty good a kid is going to fall off and break their arm or knee when they land." Sixteen injuries may be too high to permit the product to be sold as is; I don't know what a reasonable baseline comparison is, or the size of the denominator. Certainly any playground equipment of height that isn't a barred cage permits a child to fall off and break an arm or a knee, and it certainly can't be the case that any risk of injury is too much risk, or that any product less safe than the most safe product is defective. If the ratio of injuries to slides used is much higher than average, I could certainly concede that a product is unreasonably unsafe. Kennerly's proposed solution, as well as that of the complaint in one lawsuit, however, is ridiculous: bigger warning labels. A warning label on a slide is just going to teach children to ignore warning labels; and any parents who don't understand the law of gravity aren't going to be educated by the label on a slide. The only conceivable label that could make a difference is "Don't Use." Either the Evos Slalom Glider is too unsafe to be sold at all (a possibility I don't rule out), or it isn't; let's not abuse the failure-to-warn doctrine.


Just last month I joked about whites who "claim the Cherokee great-grandfather" to get an affirmative action bump. Little did I know that former Harvard Law professor and Massachusetts Democratic U.S. Senate candidate Elizabeth Warren would bring the issue to the forefront: with 1/32 Indian heritage, Warren—and her law-school employers—had been claiming diversity credit as a Native American. We've previously noted Warren's penchant for academic dishonesty when it suits her political purposes (as well as her lobbying for the litigation lobby special interest at the expense of consumers).

Can we at least say that, when someone 31/32 white and 1/32 Indian finds it advantageous to her career to claim to be Indian, we can stop talking about "white privilege"? John Rosenberg and Hans Bader comment at Minding the Campus.


The Sixth Circuit has affirmed the convictions of Shirley Cunningham, Jr. and William Gallion, whose rip-off of clients in a mass tort settlement has been the subject of coverage in this blog for years. The opinion's summary of the facts facially demonstrate the ethical violations of everyone involved, and don't even include some of the more appalling conduct, such as the diversion of supposed cy pres to a Florida A&M Chair that paid one of the attorneys. The Sixth Circuit upheld a refusal to admit expert testimony that would have endorsed the propriety of the cy pres.

Around the web, May 1

  • The cy pres problem is far from entirely fixed: a California-state consumer-fraud lawsuit against Acura resulted in a $94,500 award to the Make-a-Wish foundation that the plaintiffs' lawyers treat as their own personal donation. [press release; more on cy pres]
  • A reminder: the gender-pay gap reflects career choices by men and women, rather than employer discrimination. In urban areas, single women in their 20s make $1.05 for every $1 single men in their 20s make, a number that goes up to $1.20 for "certain cities with a heavily knowledge-driven employment base." Law isn't going to "fix" this without top-down commands requiring women to prefer work to staying at home, a cure one would think is worse than the supposed disease. [Hymowitz @ WSJ; Lowry; Hymowitz @ WSJ]
  • California appellate court awards punitive damages based on defendant's denial of wrongdoing. [Cutting]
  • Disparate impact banking defendants fight back. [Bank Lawyer's Blog; earlier]
  • N.D. California federal court rejects forum-shopping national class action. [Trask]
  • Adam White on David Dorsen on the great Judge Henry Friendly. [WSJ (h/t D.R.)]
  • "The GSA scandal obscures a broader problem: the shell game of federal largesse." [Mac Donald @ City Journal]
  • Illinois, pension basket case. [Barro @ Bloomberg]
  • Speaking of riots, Theodore Dalrymple bemoans the state of the UK. [City Journal; WSJ]
  • Don't forget: you can follow us on Twitter: @pointoflaw; @tedfrank.


Unfortunately, this Fox Business story offering consumers answers to the question "Should you participate in a class-action lawsuit if you're eligible?" gets it entirely wrong: you don't have a choice whether to participate, the only question is the degree to which you participate. Opting out of the typical consumer class action is likely to only cost consumers time and money without getting them anything in return (unless a consumer has a documented claim sizable enough to be worth taking to small claims court). And the option of "objecting" to try to improve the settlement isn't mentioned at all.

Gallucci v. Boiron

If ever there is a justification for consumer fraud laws, it is surely "homepathic medicine," so you won't find any argument from me against the fact that plaintiffs brought a class action over Boiron, Inc.'s homeopathic products, which are so much snake oil. But, as snake oil goes, I'm suspicious of a settlement that (1) does not disclose how much of the $5 million fund the attorneys are going to ask for and (2) creates an extraordinary reporting burden in violation of Rule 23(e)(5) on any objectors who dare to raise questions about the division and the lack of disclosure. Press coverage unquestionably repeats the "$5 million" figure, though I strongly suspect the class will end up with less than a tenth of that amount: people who buy homepathic products are sufficiently defrauded that they don't think they're being defrauded (and the settlement and notice permits Boiron to stand by its deceptive advertising), so it's unlikely that many people will make a claim. [Top Class Actions; Lawyers and Settlements; related at The Telegram (Canada)]

Moreover, the notice and administrative costs come out of the $5 million settlement fund, which suggests the attorneys will be asking for a commission on these payments to third parties who aren't their clients.

The majority of the class members who contact the Center for Class Action Fairness LLC (which is not affiliated with the Manhattan Institute) to inquire about their settlements are highly-educated computer-literate civics-aware citizens of above-average income who find us through Google or who remember reading about me in high-end publications. It's been fascinating to see which unfair settlements generate inquiries and which don't. I can guess that, just as very few people will make claims in the Boiron settlement, few, if any will object to a settlement where there's no disclosure about how much the attorneys will be seeking. In short, settlements relating to classes with lower-end demographics are less likely to generate objections than those with higher-end demographics, and it's thus much more likely that attorneys will take advantage of poorer clients in negotiating class-action settlements and requesting attorneys' fees.

The district court here rubber-stamped a preliminary approval order that violated Rule 23(e) by failing to disclose the attorneys' fee request in the notice and placing impermissible burdens on objectors. I hope Judge John Houston of the Southern District of California will put a little more scrutiny into the Rule 23(h) fee request when it happens.

In this particular case, the negotiations and docket show a competing class action where the attorney is getting frozen out. But I haven't been impressed by the quality of objections from competing class actions to date.

The case is Gallucci v. Boiron, Inc., Case No. 11-cv-02039 (S.D. Cal.).

 

 


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

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

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.