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The Institute for Legal Reform has a diverse panel, moderated by Victor Schwartz, evaluate the claims of the trial-lawyer movie "Hot Coffee." Earlier.

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.

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.

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]

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.

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.

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The twentieth anniversary of the Los Angeles riots that killed 54 and devastated innocent Korean-Americans left unprotected by police is of more than trivial concern, given how history is repeating itself the inflammatory race-baiting by the media and the Sharptons of the world in the feeble case against George Zimmerman over the Trayvon Martin shooting. [Mac Donald; Hicks; Dunphy]

Paul Taylor, Chief Counsel to the Subcommittee on the Constitution for the House Judiciary Committee, lays out a comprehensive argument for federal tort reform in The Federalist Papers, the Commerce Clause, and Federal Tort Reform published in the Suffolk University Law Review.

In the modern era, Congress has enacted many federal "tort reform" statutes that supersede contrary state laws. However, some question the appropriate constitutional role of Congress in enacting federal tort reform. The Federalist Papers, the authoritative exposition on the Constitution written by James Madison and Alexander Hamilton, describe the need for a new federal Constitution that gave Congress the power to regulate "Commerce ... among the Several States." This Article explores in detail the extent to which the arguments presented in the Federalist Papers, many of them too often overlooked, support Congressional efforts to enact federal tort reform. Indeed, the authors of the Federalist Papers advocated for a Commerce Clause that Congress could use to remove state barriers to trade that weakened the national economy. The examples Madison and Hamilton gave illustrating the need for the Commerce Clause encompass by their logic many federal tort reforms regarding both state products and personal liability law, insofar as such reforms are required to counteract significant negative impacts on America's free enterprise system and thereby facilitate the free flow of voluntary commerce between willing buyers and willing sellers nationwide.

Seventy percent of African-American children are born to single mothers. Moreover, children growing up in the African-American community face the peer pressure of gangsta culture: success in school results in ostracism for "acting white."

With such dysfunction in the African-American community one would expect African-American children to have more disciplinary problems than average. And indeed they do: "black students were three and a half times as likely to be suspended or expelled than their white peers".

These problems are certainly difficult: how do you change the culture? Unfortunately, the Obama administration is proposing counterproductive policies that would reduce personal responsibility.

According to the Obama administration, the disparity in discipline is a "civil rights" issue of "equity." The Department of Education is threatening "disparate impact" inquiries on school districts that discipline blacks more than whites or Asians. School districts could only comply by failing to discipline poorly-behaving African-American students; disciplining well-behaving whites to get the numbers up will just result in lawsuits. The consequences would be disastrous. Poorly-behaving African-Americans are most likely to be attending majority-minority schools. The ultimate effect is a wealth transfer from well-behaved African-American students trying to learn to thugs interfering with that process, only adding to the dysfunction of public schools and the African-American community.
[Via Sailer; related at Overlawyered, 2003.]

The Obama administration obsession with disparate impact has led to other counterproductive policy choices because of its unreasonable presumption that disparate impact can only result from illegal discrimination, as we've discussed elsewhere: Jan 2012; Nov 2011; Aug 2011; Jul 2011; Mar 2011.