Results matching “brickman screening”

RICO jury verdict on fraudulent asbestos claims - PointOfLaw Forum

"A West Virginia jury found two members of a Pittsburgh law firm liable of civil racketeering for conspiring with a radiologist to fabricate evidence in asbestos lawsuits against railroad operator CSX." [Fisher @ Forbes; earlier on POL]

The verdict of $429,000, subject to possible trebling and attorneys' fees, is, of course, just a drop in the bucket of asbestos fraud, which has essentially gone unprosecuted criminally as it has sapped billions of dollars belonging to actual asbestos victims and to productive sectors of society. Congratulations to POL reader Marc Williams for his role in the victory. Lester Brickman, of course, has written widely on the problem of mass tort screening fraud.

More could be done to protect the innocent if Congress passed asbestos trust reform requiring more transparency in the notoriously corrupt process.

Sunday's Pittsburgh Post-Gazette covers CSX's lawsuit against Robert Peirce & Associates, a Pittsburgh law firm that allegedly engaged in fraudulent mass screenings as part of its strategy in asbestosis litigation, a subject covered in more detail in Lester Brickman's Lawyer Barons. Peirce recently dismissed with prejudice over 1300 lawsuits against CSX when the company made it clear they would actually put them to proof rather than engage in quick settlement.

We've discussed Lester Brickman's important work on rampant fraud and misdiagnosis in asbestos, silicosis and fen-phen mass screenings, and now the Cardozo lawprof is out with an SSRN paper entitled "The Use of Litigation Screenings in Mass Torts: A Formula for Fraud?" with some sobering estimates of the scope of the problem. Abstract:

Lawyers obtain the "mass" for some mass tort litigations by conducting screenings to sign-up potential litigants en masse. These "litigation screenings" have no intended medical benefit. Screenings are mostly held in motels, shopping center parking lots, local union offices and lawyers' offices. There, an occupational history is taken by persons with no medical training, a doctor may do a cursory physical exam, and medical technicians administer tests, including X-rays, pulmonary function tests, echocardiograms and blood tests. The sole purpose of screenings is to generate "medical" evidence of the existence of an injury to be attributed to exposure to or ingestion of defendants' products. Usually a handful of doctors ("litigation doctors") provide the vast majority of the thousands and tens of thousands of medical reports prepared for that litigation.

By my count, approximately 1,500,000 potential litigants have been screened in the asbestos, silica, fen-phen (diet drugs), silicone breast implant, and welding fume litigations. Litigation doctors found that approximately 1,000,000 of those screened had the requisite condition that could qualify for compensation, such as asbestosis, silicosis, moderate mitral or mild aortic value regurgitation or a neurological disorder. I further estimate that lawyers have spent at least $500 million and as much as $1 billion to conduct these litigation screenings, paying litigation doctors and screening companies well in excess of $250 million, and obtaining contingency fees well in excess of $13 billion.

On the basis of the evidence I review in this article, I conclude that approximately 900,000 of the 1,000,000 claims generated were based on "diagnoses" of the type that U.S. District Court Judge Janis Jack, in the silica MDL, found were "manufactured for money."

NYC readers: Judge Janis Jack to Speak at Cardozo - PointOfLaw Forum

We recently received this communication from Cardozo Law School about an event that sounds well worth attending:

Judge Janis Jack to Speak at Cardozo; To be Introduced by Adam Liptak of the New York Times

U.S. District Court Judge Janis Jack will speak at the Benjamin N. Cardozo School of Law of Yeshiva University on March 27, 2007 at 6:30 p.m. on �The Silica MDL: Manufacturing Diagnoses for Money.� The presentation is under the auspices of the Program on Legal Ethics in the Tort System. Prof. Lester Brickman, director of the Program, will present a brief overview of the use of litigation screenings in mass tort litigation and resultant ethical issues.

Judge Jack will speak about her experiences in presiding over MDL 1553, involving 10,000 claims of silicosis -- a scarring of the lungs caused by inhalation of sand dusts -- and what led her to decide to hold a Daubert hearing and issue an unprecedented 263-page opinion, 398 Fed. Supp. 2d 563 (S.D. Tex. 2005), rejecting the reliability of thousands of the medical diagnoses. In that opinion -- which continues to reverberate around the mass tort world -- she stated that �it is apparent that truth and justice had very little to do with these diagnoses. . . [Indeed] it is clear that the lawyers, doctors and screening companies were all willing participants� in a scheme to �manufacture [diagnoses] for money.�

Judge Jack�s remarks are intended for lawyers and will be off the record. She will be introduced by Adam Liptak, national legal correspondent at The New York Times.

After Judge Jack�s presentation, Professor Brickman and Mr. Liptak will offer comments and questions will then be taken from the audience.

A reception will be held following Judge Jack�s remarks.

If you wish to attend Judge Jack�s presentation, please RSVP by email to: ybekker [at] yu [dot] edu and give both your name, affiliation and email address. Put in the subject line: RSVP�Judge Jack. You may also RSVP by phone: 212-790-0833.

Two hours of CLE credit (one hour of Ethics credit and one hour of Professional Practice) are available. To be eligible, you must indicate in your RSVP your intent to sign up for CLE credit. Course materials will be forwarded to you by email.

Asbestos frauds in the WSJ - PointOfLaw Forum

The Wall Street Journal's Kimberly Strassel has a big article today on the tangle of lawyer deceit exposed when one defendant obtained court permission to delve into the (multiple, inconsistent) earlier claims brought on behalf of a single mesothelioma claimant, Harry Kananian. And over the weekend lawprof Lester Brickman, in the Journal's "Rule of Law" column (sub-only), tackled the problem of fraudulent health screening intended to generate compensable diagnoses, which has been important not only in the asbestos mess but also in fen-phen and other mass tort areas.

Brickman on silica and asbestos - PointOfLaw Forum

Cardozo Law School Prof. Lester Brickman, a contributor to this site, has a new paper entitled "On the Applicability of the Silica MDL Proceeding to Asbestos Litigation", forthcoming in the Connecticut Insurance Law Journal and also as Cardozo Legal Studies Research Paper No. 158. Its SSRN abstract reads as follows:

In previous published writings on asbestos litigation, I discussed how the litigation underwent a radical shift in the mid-1980s from the traditional model of an injured person seeking a lawyer to an entrepreneurial model under which plaintiffs' lawyers and their agents actively recruited hundreds of thousands of potential litigants who could claim workplace exposure to asbestos containing products. I concluded that a substantial percentage of the nonmalignant claimants thus recruited had no disease caused by asbestos exposure as recognized by medical science and no loss of lung function.

Recently, in a multi-district litigation involving approximately 10,000 silicosis claims, U.S. District Court Judge Janis Jack has issued findings with regard to silica litigation that largely track those that I had published with respect to asbestos litigation. Because silica litigation involves the same modus operandi as entrepreneurially generated nonmalignant asbestos litigation, the same screening enterprises, doctors, and law firms, it is reasonable to conclude that Judge Jack's findings apply with equal force to asbestos litigation. In this article, I discuss the significance of Judge Jack's findings. I begin by briefly reviewing the elements of the entrepreneurial model of nonmalignant asbestos litigation including screenings, bogus medical evidence created by a comparative handful of X-ray readers and doctors, the use of entrepreneurial witness preparation techniques to implant false memories, the mass filings of claims in a small number of jurisdictions with the intent and effect of overwhelming these courts' dockets, the judicial response of aggregating the claims in order to move them through the judicial system, the perverse effects of these aggregations, and the consequent defense strategies which included inventory settlements totaling billions of dollars though most of the claimants had no actual asbestos-related injury.

Time Warp - PointOfLaw Featured Discussion

Alex,

First of all, thank you for your gracious response to my last posting. This type of give-and-take is exactly what we hope for in our Point of Law featured discussions. And I must say I'm flattered by your reaction to my thoughts -- not only your words of praise but also you actions, i.e., that an economist of your stature would actually run a new regression at 2:30 in the morning to generate an immediate response.

Since we do have two competing theories, the answer is ultimately empirical. And I don't know that we'll be able to come to a clear answer this week; I expect that this discussion could have some useful offshoots going forward. I'm pulling together this response quickly myself at 6:30 in the morning -- before heading to the airport, and I'm not generally a morning person -- so don't hold me to this snapshot reaction as if I'd given the matter extended thought; but here's my immediate take on your new regression results.

I agree with you that your theory does match the assumption that after a contingency fee cap is imposed, expected awards would decrease -- given that you postulate that plaintiffs' lawyers switch to hourly fees and exploit their clients by milking them through more bad cases being filed and more billing, i.e., time spent, per case.

I'm not sure though that in my view of the world, I'd expect average awards over all cases to increase. For any given case picked up, I'd expect that to be true after the drop decision, holding attorney behavior and other legal rules constant. The first clause there -- "for any given case picked up" -- is important: because although the screening mechanisms for lawyers pre-discovery are crude (the very foundation of my theory vis-a-vis the drop results), they're not non-existent. Lawyers, or at least good lawyers, certainly know on average how likely various types of cases are to win or lose, and how big an award they're likely to generate, based on certain characteristics. Although you pick up a lot of these characteristics as independent variables in your Florida regression (i.e., the basic severity of injury, the type of practice, and the type of defendant), there are undoubtedly factors missing. And in any event, there are significant factors to consider for the Florida data that could be affecting those results.

Crucially, as you and Eric notice, there was a "rush to file" in Florida prior to the November 1985 filing deadline, before the contingency fee caps went into place. Florida lawyers certainly seemed to think that the fee caps made a difference. Given the structure of the fee caps in Florida, which only kick in at $1 million (more on that later), it's very likely that these cases rushed to the courthouse were of the really-high-dollar variety. Today, those would be infant birth defect cases and the like; I'm not sure what they be in Florida in 1985, but it wouldn't surprise me at all that attorneys' rush to file such cases before the fee caps kicked in would overwhelm the discovery screening effects.

Perhaps even more important than this rush to the courthouse effect, it's important to consider the other "confounding problem" you and Eric note about the Florida data:

Florida enacted another series of reforms in 1986, the first of which took effect in 1987. These reforms included limiting contingency fees in nonmedical malpractice cases, eliminating joint and several liability, capping non-economic damages, instituting a period payment schedule for large awards, implementing a collateral sources offset rule which reduces the amount of the award by payments from other sources, and capping punitive damages.


19 J.L. Econ. & Org. at 531-32. Given that damage caps certainly could effect award outcomes, these changes might be a significant explanatory factor for the fall in awards, assuming that the damage caps kicking in starting in 1987 would affect a larger subset of the cases filed in the 10 months after the November 1985 deadline than those filed in the 10 months before. Without your full dataset and without a lot of time to consider the issue -- I've only just reread your section with the Florida data specifics -- I'm going to stress again that this reaction is tentative. But I do think that there could be other reasons for a fall in average awards in the Florida dataset other than the contingency fee cap itself.

Time to Settlement: Theoretical Issues

Now I want to look at the second major empirical finding in your contingency fee paper, namely that in states with contingency fee caps, we see an increase in the time it takes to settle a case. You and Eric conclude that this phenomenon is explainable through your hourly-fee theory, i.e., that in states with contingency fee caps, plaintiffs' lawyers switch to the same types of cases on an hourly basis -- and stretch out the time to settle so that they can charge more billable hours to their poor unknowing clients.

Having observed hourly-fee attorneys in action, I'd be the first to concede that each marginal hour of work billed isn't necessarily in the client's self-interest in terms of the value added to the case. I'd also admit, as I did at the outset, that contingency fees help mitigate this incentive misalignment; the incentives for contingency fees on average tend to run in the opposite direction -- the attorney wants to get as much as possible, yes, but for as little work as he can.

But just because I agree with you that hourly-fee lawyers have an incentive to string out cases when they shouldn't, and contingency fee lawyers have an incentive to settle on the cheap and move on to the next case, doesn't mean I buy the theory you and Eric advance. Again, I know of no evidence that lawyers in New York, Illinois, or California are doing significant amounts of medical malpractice litigation on an hourly basis. In your most recent post, you acknowledge that rather than switching to a pure hourly fee, lawyers might shift from a pure contingency fee to other forms of cost-shifting. That's slightly more persuasive to me, but I'd still want to see some real evidence that we see this in practice -- for the med-mal cases you're analyzing -- before I bought into it very much.

Before I get into the specifics of your empirical analysis, let me delve a bit into what we'd expect to see if we accept my alternative view of the world. I don't think that there's a clear theoretical prediction about the effects of contingency fee caps on settlement time. On the one hand, by giving lawyers an incentive to weed out bad cases, contingency fee caps increase the number of dropped claims, as you observe. That trend would directly reduce the time to settlement. Moreover, lawyers working on an unlimited contingency fee, the expected return is higher all else being equal. Thus, it's worth it to invest more time in any given case -- and we'd expect contingency fee caps to lead to quicker settlements.

But other factors would seem to cut the other way. Specifically, the very incentives that cause plaintiffs' lawyers to be more cautious about taking weak cases in states with contingency fee caps, due to the reduced upside, are also likely to encourage lawyers to be more careful about discovery in general -- thus spending more time on the average case. Also, while contingency fee lawyers should be more risk neutral than their clients, they aren't generally going to approach pure risk neutrality except for megafirms with broad portfolios of cases, like the Milberg Weiss securities firm. So if I'm right that contingency fee caps increase the average probability of case success, then we'd expect to see an increase in settlement time; with uncapped contingency fees, risk averse attorneys with more long-shot claims are more likely to cut and run for the cheap settlement.

Those aren't the only arguments out there, but it's obvious that it's not wholly clear to me in which direction we'd expect contingency fee caps to influence settlement time in my view of the world.

Time to Settlement: The Florida Data

You and Eric observe that the time it took to resolve a case increased in Florida after contingency fee caps went into place in November 1985. In your regression analysis, you control for the stock of cases -- thus holding constant court "congestion effects" that may have occurred due to the "rush to file" before the caps took effect. With that control, the increase in time to settlement remains statistically significant.

Rather than reflecting attorneys' switching to hourly fees starting in November 1985, and bilking their clients, I'd guess that this effect has much more to do with the way the Florida reform was actually structured. The main Florida caps only kick in at $1 million. That's around the median jury verdict today, but well above it in 1985. Indeed, Lester Brickman observes that in 1984 the mean med-mal jury verdict nationally was just over $900,000 in 2001 dollars (at p. 710). The median is certainly a good bit lower than that (means are driven upward by large outliers in tort cases), the inflationary effects from 1984 to 2001 are substantial (but not worth my while to calculate since it's not central to my argument), and Florida may well have had lower verdicts on most cases than the rest of the country (since its cases are disproportionately brought by seniors, who have lower economic damages than cases brought by earners in their prime). The point here is that Florida's capping of contingency fees above $1 million is not likely a good explanatory factor for the increase in time to settlement you observe.

What may well be a good explanatory factor is the way Florida structured its fee limitations below $1 million. Fees were capped at one-third for recoveries through the time of filing an answer or a demand for arbitration; but fees were only capped at 40 percent from that point through the trial of the case. Assuming lawyers in Florida took advantage of this statutory cap and structured it into their fee arrangements after November 1985 when the law went into effect, contingency fee lawyers in Florida faced a direct inducement to string out cases beyond the filing of an answer or arbitration demand because they'd take home a bigger piece of the pie. That perverse incentive probably goes a long way toward explaining the results you observe.

Time to Settlement: The Cross-State Data

Like your time-series analysis in Florida, your cross-state analysis also finds that the time to settlement increases in states that have contingency fee caps. Again, though, I'm not convinced that this observation results from attorneys in those states bilking their clients using hourly fees, rather than other factors.

Specifically, I think your observed results are a function of anomalies in your data set. You draw from the 1992 sample of data from 75 large metropolitan counties in a Bureau of Justice Statistics report. When looking at Appendix table 2 (p. 8) of the report, I immediately notice the very long processing time in 2 of the 3 largest counties in your "contingency fee cap" states, namely New York, NY, and Cook, IL (Chicago). Cook County is a notorious "judicial hellhole," and a prominent left-wing litigator has called the Bronx civil jury "the greatest tool of wealth redistribution since the Red Army."

On a hunch, I looked at the summary data for civil jury results in the 1992 survey, presented in this BJS report. I looked at the 4 counties in your "cap states" with 200 or more civil jury trials in the sample -- the two aforementioned MSAs plus Los Angeles and Orange counties in California. I then examined the 7 counties in the "non-cap states" with 200 or more civil jury trials: Hennepin, MN; St. Louis, MO; Cuyahoga, OH; Philadelphia, PA; Bexar, TX; Dallas, TX; and Houston, TX. What I found confirmed my suspicions. The large counties in the "cap" sample had juries more likely to award for the plaintiff (54 percent to 50 percent), thus reducing risk to the attorneys (and reducing the incentive for attorneys to "cut and run" through early settlement). The "cap" counties had higher average verdicts ($834,000 to $697,000), thus increasing the expected return to attorneys (and increasing the amount of time a reasonable attorney would spend working on a case). And, significantly, the "cap" counties had a higher percentage of plaintiff winners getting a verdict of $1 million or more (14 percent to 8 percent) -- again, increasing the percentage of cases for which contingency fee attorneys would be willing to work more hours on a case, caps notwithstanding.

Of course, these data differences also show up in your summary data showing that the "cap" counties have higher average awards than "non cap" counties -- and indeed, that the differential is greater in med-mal cases than in auto cases (unsurprisingly, since the high-end med-mal verdicts bumping up the mean will be relatively larger than the biggest auto cases). But all that tells us is that contingency fee caps -- or more precisely, the caps imposed in these states -- are not sufficient to ameliorate the tort system's problems entirely. I don't think any reasonable person would claim otherwise.

But what your analysis tells us is that even these caps can have a significant effect in screening undesirable cases, to the tune of inducing a higher drop rate of around 15 percent. That's nothing to sneeze at.

Private Contracts and Market Failures - PointOfLaw Featured Discussion

Alex,

Your comments are typically thoughtful and lucid. I have so much to say, so I'm going to start with a very basic reaction to your post. I'll then post later today with more detailed thoughts about the empirical evidence you and Eric put together on this issue.

First, again, I'd like to emphasize where we do agree: that fee regulation is not inappropriate for class actions. That concession is actually a major step in the right direction. Class actions are a particular problem in that low probability claims very regularly have fairly high expected returns for the plaintiffs' attorneys working on a contingency fee merely due to the size of the class. As you note, in no way can we say that class members are actually able to negotiate at arms' length for fee contracts, since they're automatically in the class unless they choose to opt out. The lawyers drive the process. Securities class action lawyer Bill Lerach has noted that his legal practice is "the best" since it has "no clients."

I wonder if you'd also extend that position to mass tort claims? There, plaintiffs aren't automatically in the class, so you could say there's (in theory) some fee negotiation. But plaintiffs' attorneys advertise aggressively to pull together thousands of claims. Often, such claims wind up being manufactured. Courts are flooded. Again, the contingent fee is the primary driver in these cases because the aggregate nature of the claims makes speculative cases much more valuable. Television, internet, and radio advertisements trolling for clients wouldn't be nearly so effective if the clients weren't told "you pay nothing unless you win."

Taking television advertising as an entry point, let's look at why I don't buy your argument that contingency fees "have been around for well over a hundred years -- thus they cannot be responsible for problems in the tort system that have developed over the past several decades." Yes, contingent fees -- like the "American rule," like civil juries, like elected judges, like so many other features of American law -- are deeply rooted. But it simply does not follow that such entrenched features of our legal system are not related to the litigation explosion merely because they've been around a long time; it only follows that such features are not solely responsible. 100 years ago, there were no aggregate claims like today's class actions and mass torts; tort claims were much more restricted by substance and procedure (indeed, there wasn't any products liability law to speak of -- see Richard Epstein's discussion of the evolution of products liability law here); federal courts weren't bound to apply state law under Erie v. Tompkins; transportation costs were much higher (making forum shopping much more difficult); there was no television, radio, and internet; and attorneys were not permitted to advertise.

The real question is whether any of these changes, interacting with deeply rooted features of American law (like the contingency fee, no fee-shifting, elected judges, civil juries, federalism, etc.), have contributed to the increase in litigation costs. My claim is yes. And it's not because the changes are necessarily all bad; rather, we may need to look at the long-standing rules as well. For instance, a free speech purist like myself agrees with the Supreme Court that attorneys have the right to advertise commercially. But there's no question that such a right changes attorney behavior. When attorneys can aggregate mass tort claims on a contingent fee, the payoffs are huge. Folks who may or may not be sick are happy to sign up when there are "no fees unless we win."

Private Contracts and Contingent Fees

I, like you, am generally a big fan of private contracting. But "spider-sense" isn't infallible, at least in those of us who can't climb walls. So, here too, I want to take issue with a couple of points.

I think it's important to remember that contingency plaintiffs, in general, are not only liquidity constrained but relatively unsophisticated. Yes, that's one reason contingency fees can be useful: when lawyers are only paid if they win, it pays them to be careful about the cases they take and to be cautious about rejecting settlement and proceeding to trial. But the "screening function" in which the lawyer evaluates the merits of the case cuts both ways. Because an unsophisticated plaintiff is unable to evaluate the merits of his case, he has no idea if, for instance, it's a "slam dunk" that the insurance company is certain to settle for the policy limit. The lawyer does typically know that and is happy to take the case, on a standard contingency fee of 33 percent, to score a windfall at the plaintiff's expense. This potential for abuse is at the root of the contingency fee reforms that are focused on plaintiff protection -- admittedly different from the "blunt instrument" caps we're discussing. (Yes, I agree with you that percentile fee caps are a crude reform measure, as I said before. So are damage caps. But that doesn't mean they can't be effective.)

What we have when it comes to contingency fees is a market failure. Unsophisticated plaintiffs can't value their cases and therefore can't bargain with their attorneys over price. They can't shop on price -- they're too unsophisticated to know a good attorney from a bad one, and might indeed be suspicious that a "cheaper" attorney isn't as good, whether that's the case or not. Thus, as Lester Brickman has shown, there isn't really any price competition over contingency fees. Now I disagree with Lester's claim that the lack of price competition is likely due to collusion; as those of us with training in economics are well aware, collusive arrangements are very difficult to maintain and would be virtually impossible to maintain for a group as broad and varied as contingency fee lawyers. It's the very fact that plaintiffs in contingency fee cases have too little information and understanding to shop and negotiate on price that leads contingency fees to be set at a standard level.

So, there are ethical reasons to question the contingency fee, from the plaintiff's perspective. Unlike Professor Brickman, I tend to approach most of these questions from a law and economics rather than an ethical perspective, but the above-normal windfall from noncompetitively priced contingency fees almost certainly helps drive excess litigation.

Why is that? Well, let's start with Lester's seminal study concluding that contingency fee lawyers, on average, make above normal profits relative to their hourly brethren, even after adjusting for risk. I view that paper similarly to yours and Eric's on contingency fees: very useful work, but the wrong analysis. (I know I haven't yet laid out in detail why I think that is for your paper, but I will in my next post, as I said at the outset. I just want to get the main theoretical debate on the table first.) I find it hard to believe that contingency fee plaintiffs' lawyers, on average, make a risk-adjusted return higher than hourly attorneys, because if that were the case, hourly attorneys would switch to contingency work.

And that, I think, is just what has happened. Lester's study, importantly, looks at the top quartile of contingency fee lawyers. Some of those lawyers are indeed getting paid handsomely for risk, luck, or performance. Others are exploiting the information imbalance between plaintiffs and lawyers to get extra cash based on the absence of price competition over fees. But among the lawyers not in the top quartile, a lot are doing worse than hourly lawyers. They're often less skilled, in courtroom work, in preparation, in case screening, or even in advertising strategy. Still, they stick around chasing the big payoffs, at least as long as they can. The absence of price competition over contingency fees leads directly to more contingency fee lawyers -- and more lawsuits and cost to society.

Of course, the mere fact that there's a market failure need not imply a regulatory response. Far too often, those with too little respect for limited government ignore the cautions of public choice theory and the law of unintended consequences and rush to "correct" market imperfections with cures that are worse than the disease.

But so too is it the case that merely because we generally respect the law of contracts -- and indeed think that the substitution of the law of tort for that of contracts over time is a major underpinning of overlitigation -- we need accept every contractual arrangement. You admit as much in saying "we don't enforce contracts against the public interest." My argument is that contingent fee contracts, at least in some cases, can be just that, as I'll explain further in my next post.

What Did Those Asbestos X-Rays Really Show? - PointOfLaw Columns

By Lester Brickman

This is an updated version of an article that ran as a "Rule of Law" column in The Wall Street Journal on November 5, 2005. The Senate is set to begin debate on asbestos legislation shortly.

In the mid 1980s, court decisions dramatically enlarged insurance companies' liability for asbestos-related injury. At the same time, defendants and their insurers began to pay asbestos claims without demanding much in the way of proof of injury or liability. Plaintiffs' lawyers responded opportunistically.

As a consequence, asbestosis litigation, which had previously focused on malignancies and other debilitating injuries, shifted radically from the traditional model of an injured person seeking a lawyer to an entrepreneurial model. Lawyers spent millions to sponsor mass screenings of upwards of 750,000 industrial and construction workers. Of the 850,000 asbestos claimants that have so far brought suit against over 8,400 different defendants, about 600,000 have been recruited by these mass screenings.

Most of these 600,000 plaintiffs claim a mild form of asbestosis (a scarring of lung tissue), or other nonmalignant condition, but suffer no symptoms or lung impairment. They have no asbestos-related injury recognized by medical science and no significant probability of manifesting an asbestos-related malignancy in the future. Nevertheless, lawyers charging 40% contingency fees have extracted tens of billions of dollars in settlements, after hiring a comparative handful of doctors who consistently read X-rays and "diagnose" disease in 60% to 80% of those screened.

According to medical science, however, asbestosis is a "disappearing disease" and only 2% to 4% of claimants now generated by screenings have an actual nonmalignant condition resulting from asbestos exposure. This led me previously to conclude that the X-ray readings and "diagnoses" of these litigation doctors were a function of the millions of dollars paid to them by the lawyers. Overwhelming evidence in support of these conclusions about asbestos litigation has recently come to light in the not-unrelated litigation based on exposure to silica or sand.

Silicosis, like asbestosis, is a scarring of the lungs but is caused by the inhalation of large quantities of fine sand dust. Once a scourge, it is a disappearing disease because of strict government regulations and employer practices. Deaths attributable to silicosis have dropped over 80% in the past 30 years. But beginning in 2002, claim filings in state courts, mostly in Mississippi, reached "epidemic" proportions.

The reasons for the "epidemic" are that key states began to adopt comprehensive asbestos litigation reform and Congress took up consideration of a fund (paid for by defendants and insurance companies) to pay claims, as a way of taking asbestos litigation out of the tort system. Worried about the future of their enterprise, lawyers, doctors and screening companies abruptly shifted gears from ginning up claims based on asbestosis to claims based on silicosis. As one lawyer acknowledged, "why reinvent the wheel?"

This all became clear when 10,000 of the 35,000 pending silica claims were centralized into a federal multi-district litigation (MDL), presided over by U.S. District Court Judge Janis Jack, a Clinton appointee. During the course of the MDL, one of the doctors recanted all 3,617 of his diagnoses of silicosis, provoking Judge Jack to observe that "it's clear this . . . [diagnosing] business is fraudulent." She issued an unprecedented order allowing defendants to cross-examine, in her presence, every doctor who had provided a silicosis diagnosis, as well as the owners of the screening companies.

It turns out that 6,000 of the plaintiffs had previously filed asbestosis claims. Nevertheless, pulmonary experts testified at a U.S. Senate hearing that, while it was theoretically possible to have both asbestosis and silicosis, they had never seen a single dual disease case during their extensive practices. Moreover, many of the X-ray readings on which the silicosis diagnoses were based were made by the same doctors who had previously read the X-rays as "consistent with asbestosis"—but who had never mentioned silicosis.

Judge Jack concluded that "the lawyers, doctors and screening companies" were "all willing participants" in a "scheme [that] manufactured [diagnoses] for money"—the equivalent of a finding of pervasive fraud. If the same level of discovery were permitted in asbestos suits, I have no doubt of the outcome. The same screening companies, X-ray readers and diagnosing doctors excoriated by Judge Jack have been involved in asbestos litigation for almost 20 years. As Judge Jack observed, the "evidence of the unreliability of the [X-ray] reads performed for this MDL is matched by evidence of the unreliability of [X-ray] reads in asbestos litigation." The asbestos lawsuits have resulted in billions of dollars in settlements.

Sitting in Judge Jack's courtroom during the cross examinations was an assistant U.S. Attorney from the Southern District of New York. He was there because a federal grand jury had been convened in mid 2004 to consider possible criminal charges arising from claims of exposure to silica and asbestos, and the use of witness-coaching techniques to implant false memories about product exposure.

Asbestos litigation, meanwhile, prevented the creation of 500,000 jobs because of the diversion of capital in over 70 asbestos-related bankruptcies. Plaintiff lawyers have exercised undue influence over the bankruptcy process, essentially obtaining ratification of the claim-generation process that Judge Jack condemned. Here too, the worm appears to be turning. In a series of decisions, the Third Circuit Court of Appeals, echoing the exact words I used to describe the ongoing Congoleum bankruptcy proceeding, stated that to approve a reorganization plan tainted by lawyers' engaging in conflicts of interest and securing preferential treatment for their clients to generate additional fees, "would be a perversion of the bankruptcy process."

The next shoe to drop may be in federal court in New York. If indictments are forthcoming—and lawyers who sponsored the mass screenings and collected billions of dollars in fees are among those indicted—the ensuing process could shine a floodlight on a fraudulent scheme so massive as to qualify non-malignant asbestos litigation for entry into the pantheon of such great American frauds as Enron, WorldCom, OPM, Cr�dit Mobilier and Teapot Dome.

Lester Brickman is a professor at Cardozo Law School, Yeshiva University, and a contributor to Point of Law.

Why Flatter The Trial Lawyers? - PointOfLaw Featured Discussion

Jim:

I trust you enjoyed your Thanksgiving break, as did I. I think we have made considerable progress in this exchange. My first goal in this final post is to wind down our discussion of medical malpractice reform, where I think we have many sentiments in common. My second goal is to respond to your impressions of the trial bar generally, and to your specific concerns about pharmaceutical litigation. With respect to these issues, I think you surface several interesting and important issues, but to me they remain unsettled. I hope you will not interpret my uncertainty, and occasionally my skepticism, regarding the latter issues as vitiating our points of agreement on the former.

Let�s start with medical malpractice. I think we have very substantial agreement on many points. If major differences remain, I attribute them (as you have in prior posts) to our different perspectives. I think of litigation as a very tiny piece of the health care system, and I�m interested not only in improving medical litigation but also (more) in influencing in positive ways the great majority of health care transactions that never give rise to litigation. So I�ll always be trying to connect goals of tort liability � injury prevention, compensation, justice � to procedures that don/t depend on actual litigation, and that in fact are much closer to the process of delivering health care than to the process of resolving disputes in court. For example, I�m generally in favor of ADR, but I�m more enthusiastic about early disclosure of error and mediated discussions that are essentially an extension of giving good medical care (see the report by Carol Liebman and Chris Hyman on the Pew project website, www.medliability.org) than I am about pre-trial mediation or formal arbitration. Similarly, I think it embarrassing to physicians, as well as counterproductive to speedy, low-cost dispute resolution that the way many patients find out the details of possible medical errors is by consulting a lawyer, who in the course of declining the representation does a little investigation and explains to the patient what happened and why. Lawyers shouldn�t be doing physicians� jobs. I also care a lot about defensive medicine, and other consequences for health care of how physicians perceive the liability system. And I very much want to find a way to compensate � using the term broadly to encompass information, restoration of trust, and future prevention as well as monetary payment � a much larger percentage of patients who experience undesired outcomes of medical care than litigation offers.

I�m delighted, for example, that you are also concerned about the ill effects of delay after medical injuries occur. And I would love to join forces with you on getting the employer community involved in testing better alternatives to malpractice litigation. Regarding my personal interest in having Medicare sponsor a pilot program, I agree that political concerns are important. However, it is easy to document that seniors currently are very, very poorly served by the tort system, which might well bring AARP on board. Moreover, I would welcome serious engagement by AARP and other powerful health care constituencies; as I noted in my first contribution to our discussion, I think that the principal political barrier to constructive malpractice reform has been that litigation politics, not health care politics, has controlled the debate. How costly a better system for Medicare patients would be is a legitimate concern; one reason to do demonstration projects is to find out.

Let me turn now to your comments that don�t relate to medical malpractice. Your distinction between business and profession no doubt reflects real concerns about trial lawyering, but I think it raises more questions than it answers. A first question is the compatibility between the attributes of professions that you and I both value and the social benefits of competition for professional services that you and I value as well. Ron Gilson wrote years ago that market power is probably a precondition to professionalism, and your ambivalence about advertising, joint venturing, and other competitive behaviors when engaged in by lawyers supports his insight. Competitively insulated lawyers occupying �elite� roles probably will exhibit fewer unseemly behaviors. Noblesse oblige. At the end of the day, then, I suspect that the best society can do with respect to law or medicine is to police serious abuses of market power and create incentives for professionals to further the expressed interests of their patients or clients, but otherwise encourage the exercise of professional authority and judgment. I do, however, think that professionals should have public obligations in exchange for these privileges. In other words, I do not view professionalism as compatible with a pure individual advocacy model. As I�ll come back to later, I think these public obligations � which I usually call �regulatory duties� � need to be enforced directly rather than piggybacking them on the �relational duties� owed by individual to individual (a distinction I apply beyond the professional context).

In malpractice litigation, for example, a lot of problems both real and perceived reflect the number of �amateurs� representing plaintiffs. Malpractice cases are complex, protracted, and consequently difficult and expensive to litigate. In a contingent fee system, experienced plaintiffs� lawyers seldom accept even winnable malpractice cases with potential damages under $100,000 ($200,000 in some states). Experienced lawyers routinely reject cases that are meritless, or even speculative. However, there are so many lawyers in the U.S. who represent individuals in personal injury cases that, even if most take on a malpractice claim only very occasionally, inexperienced lawyers account for a substantial percentage of malpractice litigation in the aggregate. (And, of course, many negligent injuries that have serious financial implications for patients and their families go both lawyerless and uncompensated.) Certificates of merit, screening panels, and other requirements designed to reduce frivolous litigation assume the inexperienced lawyer; experienced lawyers police their own cases quite effectively, even without a loser-pays system. Applied across the board, however, screening panels in particular can be cumbersome and cost-ineffective. As you know, I�d like most medical errors to be prevented, and the ones that occur to be compensated outside of the courts. But in general I would also support reforms that got the amateurs out of the medical malpractice business � they tend to take bad cases and handle them badly. By contrast, the �name� plaintiff lawyers who handle malpractice cases exclusively, or nearly so, usually impress me with their case selection as well as their ability to generate ample settlements for their clients. Perhaps careful attention to competitive conditions in litigation markets would cause specialization to emerge as an efficient outcome, and I�d be happy to consider reforms that might tend in that direction. But it is also possible that, in order to preserve professionalism, a regulated oligopoly of malpractice plaintiff�s lawyers is preferable to a free market.

On the other hand, I�m afraid I don�t understand your assertion about lawyers uniquely having the power to take property from parties without their consent. I don�t think this is an economically or politically coherent �monopoly.� One could equally say that lawyers are empowered to reclaim property on behalf of those who have had it taken from them without their consent. Such is the adversarial system, and only the neutral arbiter can decide which party is entitled to take or reclaim. What you call �redistribution through force,� others might regard as �justice through law.� Depending on the context, there could be some truth to each perspective. Plus there are many lawyers who help create wealth, even if some wealth creation eventually devolves into redistribution through litigation. And though I agree that litigation is an extremely inefficient form of redistribution, I doubt that even the most successful class action lawyer would regard litigation as a principal form of redistribution in society. So we�re left, as we should be, assessing each practice area separately for its costs and benefits, rather than condemning the litigation enterprise en masse.

It is also difficult to buy into your generalization about the victimization of defendants. Although struggling family physicians and rural hospitals are often the public face of tort reform, most defendants in the cases you complain about are large corporations. I agree that courts� tendency to add zeros indiscriminately to damage awards involving corporate defendants is problematic. Like you, I was dismayed by the Vioxx award. And I take account of the issue in my own proposals for enterprise liability in malpractice cases; decoupling medical negligence from a sympathetic individual physician defendant and assigning it to a faceless commercial entity creates real risks of excessive compensatory and undeserved punitive damages. For that reason, the malpractice working group of the Clinton health reform task force proposed capping damages if universal health coverage were accomplished through competition among accountable managed care plans bearing enterprise liability.

But the rhetoric of forcible taking simply doesn�t suit this category of defendant. It is rare as hen�s teeth for contingent fee or class action lawyers to victimize the poor defendant; there�s no financial reward for doing so. The most attractive defendants are the richest ones, who are far from powerless against the supposed monopoly of force that you ascribe to plaintiff�s lawyers, and who engage to an even greater degree in over-the-top marketing. I actually think Merck behaved quite well with respect to Vioxx considering the financial importance of the drug to the company. But it can hardly be called a passive victim. For every ad currently warning of the dangers of Vioxx and marketing legal services, there were dozens of ads by Merck touting the drug�s supposed benefits before it was withdrawn from the market. Sure, Bayer wasn�t sued, but Bayer didn�t lead consumers to believe that aspirin was better than existing drugs when it really wasn�t, and Bayer didn�t price aspirin for the lucrative, patent-protected, health-insurance paid, prescription-dependent market. This doesn�t absolve the trial bar of its own excesses. Nor does it excuse courts who get the science wrong: much as I think that the Supreme Court�s decision in Aetna v. Davila was a missed opportunity to clarify ERISA preemption, there�s a delicious irony to dismissing a large-dollar claim brought by a patient who alleged he was wrongfully denied Vioxx at the same time that millions of other patients have lawyers alleging they were wrongfully given Vioxx. However, it does make it seem absurd to single out the plaintiff�s bar for its political and financial muscle.

That said, I think a market analysis of personal injury litigation is well worth doing. Your twist on the �who is the consumer� question so central to health insurance is clever: considering defendants the �buyers� because they end up paying the bills through contingent fees. I agree that solves the problem of looking for an authentic consumer of class-action litigation, but overall I�m skeptical that it is the first direction in which one should take the competition policy of litigation. In many ways, contingent fee litigation (and certainly hourly fee litigation) is an easier market to analyze than medicine because there are clear financial gains to trade in most circumstances, so that willingness to pay for legal services equals ability to pay. In medicine, a lot of services are needed or desired by people without the means to pay, even through insurance mechanisms, so the issues of social subsidy are more important (and the idea of paying for successful performance not self-enforcing). There are certainly many areas of litigation that don�t come with a financial payoff and therefore that require public support, but not personal injury lawyering � though I�ll readily admit that we overly depend on financial payoffs in malpractice litigation to attract lawyers even when clients would prefer information, apology, and other non-monetary redress for their grievances.

I prefer more grounded inquiries regarding markets for legal services. For example, I take very seriously the point Lester Brickman makes about lack of competition for contingent fees, so that fees do not increase with risk of failure. I�m also very interested in referral patterns. One of the big issues in Pennsylvania during the current malpractice crisis was venue reform, with health care providers desiring to keep cases in their local communities rather than having them transferred to plaintiff-friendly Philadelphia. There are unanswered normative and factual questions here. Are Philadelphia juries too friendly to patients, or are other parts of Pennsylvania too friendly to physicians? Is it unfair to send a case to Philadelphia just because the suburban hospital where the doctor practiced was affiliated with an urban academic medical center, or was the prestige of that affiliation one reason why the patient sought care from the suburban physician and hospital in the first place? But these issues aside, the success of any particular venue reform in public policy terms depends in part on the law and norms governing lawyer referrals, including the point I raise above regarding the general desirability of having malpractice cases handled by specialists. And I�m fascinated by your insight that lawyers collectively profit from wins, making the competition to gather clients the only meaningful competitive issue. I suspect there are many industries where competitors want each other to succeed in opening up new markets, but you certainly raise questions worth examining in specific practice areas regarding imperfections in the market to attract clients, in the price of legal services, in entry barriers, etc.

Your discussion of federalism and repeated bites of the litigation apple raises a related second question: who should supervise lawyers? One difference between law and medicine is that the judicial branch of government claims a near-exclusive right to regulate the former, while the latter � when not allowed to regulate itself � is subject to a broader set of legislative, administrative, and judicial constraints. Both systems are susceptible to capture, but you are probably right that lawyers� groups find it easier to capture elected judges in some states than doctors find it to capture their overseers. There are also other limitations and confusions that likely arise from the more insular regulatory framework applied to lawyers. Take your concerns about deceptive marketing, for example. Attempts to rein in lawyers typically come from the judiciary and therefore constitute state action subject to the First Amendment (but immune from antitrust enforcement). Attempts to rein in doctors typically come from private professional associations, which by contrast are subject to antitrust review but not to the First Amendment. I think the latter approach is more effective at policing the abuses that worry you (not to mention the risk that courts will confuse the two standards, as Tim Muris believes has occurred to the detriment of consumer protection). On the whole, then, I am relieved rather than concerned if both doctors and lawyers come to think of themselves as participating in regulated industries as well as ethical professions (e.g., when Congress or the SEC imposes public obligations on securities lawyers).

A third question is the relationship between litigation and legislation/regulation. I think there needs to be a relationship rather than an either-or choice, and I�m encouraged when you allow for the possibility of private redress � however circumscribed both substantively and procedurally � as part of public regulatory systems. As I�ll get to shortly, for example, I think drug product liability should be integrated with (but not merely preempted by) federal regulation. The broader issue for me, however, is as follows. I believe that many of the excesses of personal injury litigation � and, yes, I do believe there are excesses � arise because general �regulatory� obligations to society as a whole become entwined in the courtroom with specific �relational� obligations of defendant to plaintiff, with the unhappy result of applying causal standards and awarding damage amounts that try to encapsulate aggregate, impersonal interests using the emotional, personal context of an individual grievance. Strongly relational duties such as those between health care providers and patients are particularly susceptible to this conflation. For example, �conflicts of interest� are used incoherently in the regulation of medical research because societal interests in innovation, public confidence in medicine, and avoidance of unnecessary harm map poorly onto a the popular image of a �researcher-subject relationship� that is drawn from longstanding beliefs about doctors and patients. But the conflation of relational and regulatory duties also happens whenever an aggregate economic harm can be portrayed in relational terms, often as fraud or misappropriation (e.g., fraud-on-the-market, insider trading, fraudulent conveyancing, fraudulent concealment, unfair business practices). The punitive damages debate is a core example of how the legal system can be blind to these effects because it communicates so poorly with other regulatory systems. Cathy Sharkey�s article describing punitive damages as �societal compensatory damages� is such an important contribution because it states the obvious in a way that allows many people to see it for the first time.

One can think about class-action lawyering and individual client lawyering in these terms, though to do so one has to acknowledge that lawyers who pursue these careers tend to have very different modal beliefs and incentives. Let�s leave lucre aside, and stipulate that all these lawyers want to do well financially. In my experience, lawyers for individual clients see themselves as the last bastion of defense against the predations of either overreaching corporations or overreaching government. Your objections seem to go only to the former commitment, but in terms of the latter some plaintiff�s lawyers have quite principled objections to the sort of administrative compensation system that I would like to see replace malpractice litigation in the majority of situations. They express these in quasi-libertarian terms as discomfort with �social engineering� and a preference for helping individual clients vindicate infringement of their basic liberties in the insulated courtroom setting where nothing (supposedly) matters other than the single plaintiff and the single defendant. Class action lawyers, in my experience, are a totally different breed: �legal wholesalers� who lose interest in cases as soon as the need to explore individual situations in any detail becomes evident. As you relate, many class action lawyers see themselves as clientless policy entrepreneurs. The tobacco litigation is a perfect case in point: as several commentators have observed, the global tobacco settlement was a large, undemocratic tax on smokers that class action lawyers were paid a fortune to impose because elected officials didn�t want to.

Similar analyses can be made of the managed care and non-profit hospital class action litigation. I agree with you that the claims were a stretch legally, and that both the administrative costs and the potential damages were disproportionate to the public benefits. But the public policy problems were quite real. In the managed care litigation, the court was asked to decide what consumers should be told about their health care in a seemingly new, more competitive health care system. As Clark Havighurst has written, if these cases had been litigated to conclusion the courts would have been put in the ironic position of crafting aggregate information disclosure principles after decades of individual litigation in which those same courts resisted the idea that patients could ever make informed health care purchasing decisions. In the nonprofit hospital cases, it is quite true that people without insurance are charged much higher �list prices� than patients who have private insurers on their side to negotiate discounts. When I was a medical student, I noted that it �cost� much more to be seen at the public pediatric clinic in San Jose, California than in a plush private office in nearby Saratoga � nearly all patients at the public hospital had Medicaid, making the list price irrelevant, and the hospital was not about to miss out on overcharging an occasional paying patient who stumbled in. But failure to pay these higher rates has real consequences for patients in terms of their credit ratings, budgeting decisions, and self-esteem. In both cases, then, one can view class action litigation as a misguided attempt to do what the regulators wouldn�t. Some class action lawyers display amazing hubris when they publicly claim to be more effective than Congress in bringing powerful industries to heel, but one has to admit, however regretfully, that they occasionally have a point.

Turning to pharmaceutical litigation, we have many points of agreement: that the Vioxx judgment was absurd, that good drugs like Bendectin shouldn�t be forced off the market, that vaccines are not sufficiently profitable to cover potential liability without tort immunity and an alternative compensation arrangement. I�m more skeptical about the assertion that liability in general is crippling pharmaceutical innovation; these are successful companies that make terrific products and have every expectation of continuing to do so. They also have sophisticated ways to protect themselves: Dow Corning, I seem to recall, was a limited purpose joint venture that was driven into bankruptcy by breast implant litigation, but its structure assured that its much larger corporate parents would be spared. One more illustration of the fact that one could teach virtually every graduate program just using the pharmaceutical industry: medicine, business, law, most natural and social sciences, philosophy, even perhaps divinity.

It is rather hard to view the FDA as currently providing a comprehensive regulatory scheme because its political evolution has been piecemeal. It evolved over roughly 100 years � not smoothly but in leaps following scandals � from a disclosure statute to a screening process for safety to a screening process for efficacy. Interesting factoid: the pre-1938 FDA wasn�t empowered to stop the sale of sulfanilamide �elixir� because it was killing people, and could do so only because it was misbranded (an elixir means dissolved in alcohol; the manufacturer was using poisonous diethylene glycol instead). But the FDA has virtually no authority over physicians, and therefore can do next to nothing about �off-label� use. Nor does the FDA have authority to withhold approval for drugs that work no better than existing drugs, or drugs that are incredibly expensive for the benefit they offer. And post-marketing surveillance remains mediocre. How, then, can one rely on FDA to safeguard consumers and patients from all the serious risks involved in taking new drugs?

Of the points you make about pharmaceuticals, I�m most interested in the role of FDA regulation in adjudication of injury claims. I think preemption is the wrong path. Instead, I would very much like to see FDA�s expert determinations being used constructively in litigation to supplement adversarial testimony, and I would like to see evidence from drug product liability cases being used by FDA to assist its post-marketing surveillance efforts. For example, one could envision an administrative process within FDA being used to adjudicate personal injury claims and provide limited compensation. I was glad to see you express interest in an administrative adjudicatory scheme of some sort. I haven�t thought this through in the same detail as my malpractice proposals, but Cathie Struve recently published an article in Yale Law School�s health policy journal outlining a constructive relationship between civil procedure and administrative processes in pharmaceutical regulation. The key point is simply that one can improve the relationship between litigation and regulation rather than choosing one over the other.

I would be happy to discuss your specific FDA proposal with you at another time; I don�t think general readers would get much out of our debating the details in this forum. We would likely agree on many things, but disagree on a few based either on our making different policy choices or our having different predictions of the incentives created by a particular approach. For example, your argument that malpractice is more naturally governed by tort than product liability because �doctors are negligent all the time� is interesting, but my reaction is that doctors� negligence is defined by a professional standard that they set, while drug manufacturers have no such professional underpinnings. Do you mean to suggest that preemption of tort claims should depend on whether an industry is largely self-regulating (tort allowed) or largely regulated externally (tort disallowed)? That strikes me as the wrong line to draw, if lines can be drawn at all. Similarly, when you imply that healthy people should have an easier time than sick people asserting a claim for injury from medical care (including pharmaceuticals) because the latter assume the risk, there are conflicting values at issue. I certainly like the idea of holding drug companies to a stricter standard when they are marketing those products to marginal consumers than when they are serving the core group of patients who indisputably need their products (e.g., for Vioxx, people at high risk of gastrointestinal bleeding with older drugs). Informed consent law basically follows this paradigm. On the other hand, there are good reasons not to give a free pass to those who do a bad job treating the desperate. Loss-of-a-chance doctrines opt for this paradigm when they allow patients to sue even if they would more likely than not have died regardless of whether competent medical care was administered.

Your overall take on regulation probably doesn�t differ hugely from mine, but I admit to being baffled by how you get there. You distrust courts. You distrust legislatures. But for some reason you seem willing to bet the farm on expert administrative agencies. In practice, of course, these bodies are seldom insulated from politics, but take direction from non-experts in the executive branch and constantly mix it up with both legislatures and courts. Remember how the FDA was complicit in breast implant litigation? It imposed the moratorium in large part because it feared being out of step with the courts and therefore the public, and the moratorium was a billion-dollar gift to the trial bar in surfacing plaintiffs and biasing jurors.

How far would you really trust administrative processes to make binding cost-benefit determinations? Let�s say � just picking a random example � that you love to eat very, very rare hamburgers. If an administrative agency, acting within its authority, determined that very rare hamburgers should be banned because of the risk of bacterial contamination, how would you feel? And if the agency didn�t ban very rare hamburgers, how would you feel about the restaurant that serves you a negligently contaminated one because it no longer has to worry about being held individually accountable in court?

Anyway, this has been a fun, interesting exchange, but all good things eventually must end. Here�s my bottom line on the Trial Lawyers, Inc.: Health Care report. To me, there is a huge disconnect between the sweeping assertions and unyielding positions contained in the report itself and the thoughtful, nuanced, open discussion that you and I are conducting. Painting the world in black and white is a trick of the trial bar (and of partisan politics). Both vocations follow adversarial scripts. We all know that reality shades gray. So why can�t we remember that in policy discussions? For example, as I said previously, I�m all for litigation reforms, including non-litigation avenues for individual redress, that incorporate attributes of a regulatory model where that model is superior. I just don�t see why embracing regulatory or self-regulatory processes requires totally condemning adjudicatory ones.

A related point in conclusion. Another trick of politicians and the trial bar is to make the opponent seem as big and scary and single-minded as possible. Take managed care litigation. Skilled plaintiff�s lawyers made it seem like every bad thing that happened to patients in the 1990s was the fault of HMOs. This was because managed care, at least as it developed initially, attempted to put commercial �brands� on what remained decentralized, disorganized processes of care. So every conceivable injury got lumped together under the brand-name umbrella, with predictable results in courts of law and public opinion. Think of Helen Hunt�s famous expletive in �As Good As It Gets�; if anything, managed care did better than unmanaged care treating asthma (which her character's son suffered from), not worse. Your report plays the same aggregation trick with personal injury lawyers. You know perfectly well that class action lawyers behave differently than lawyers representing individuals, and that specialists in particular fields behave differently than generalists. You know that the range of skills for lawyers is much wider than for physicians, with much lower median incomes. You know that many trial lawyers barely scrape by, and that many people with legitimate grievances have no place to turn for help. But you don�t acknowledge these subtleties in your report for fear of diluting or confusing your message. Instead, in a move that would make any litigator proud, you assemble a horrendous beast called Trial Lawyers, Inc.

Which brings me to my last question:

Why flatter trial lawyers by imitating them?

With warm regards,

Bill

PS As I promised in an earlier post, here are citations to a few articles on medical malpractice and on the relationship between lawyers and health care.

Selected Bibliography

Sage WM. Malpractice Insurance and the Emperor�s Clothes. DePaul Law Review 2005; 54(2): 463-484 (Clifford Symposium on tort law). Available at http://medliabilitypa.org/research/files/depaul-sage062105.pdf

Kessler DP, Sage WM, and Becker DJ. The Impact of Malpractice Reforms on the Supply of Physician Services. JAMA 2005; 293(21): 2618-2625. Available at http://jama.ama-assn.org/cgi/content/short/293/21/2618

Studdert DM, Mello MM, Sage WM, DesRoches CM, Peugh J, Zapert K, and Brennan TA. Defensive Medicine Among High-Risk Specialist Physicians During a Malpractice Crisis. JAMA 2005; 293(21): 2609-2617. Available at http://jama.ama-assn.org/cgi/content/short/293/21/2609

Black B, Silver C, Hyman DA, and Sage WM. Stability, Not Crisis: Medical Malpractice Claim Outcomes in Texas, 1988-2002. Journal of Empirical Legal Studies 2005; 2(2):207-259. Available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=770844

Sage WM. New Directions in Medical Liability Reform, in Malpractice and Medical Practice Handbook (Richard Anderson, ed.). Totowa, New Jersey: Humana Press 2005: 247-278.

Sage WM. Reputation, Malpractice Liability, and Medical Error, in Accountability: Patient Safety and Policy Reform (Virginia A. Sharpe, ed.). Washington, DC: Georgetown University Press 2004: 159-183. Available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=681925

Sage WM. The Forgotten Third: Liability Insurance and the Medical Malpractice Crisis. Health Affairs 2004; 23(4): 10-21 (lead article). Available at http://content.healthaffairs.org/cgi/content/abstract/23/4/10

Sage WM. Unfinished Business: How Litigation Relates to Health Care Regulation. Journal of Health Politics, Policy, and Law 2003; 28(2&3): 387-419 (special conference issue, �Who Shall Lead?�).

Sage WM. Medical Liability and Patient Safety. Health Affairs 2003; 22(4): 26-36.

Sage WM. Understanding the First Malpractice Crisis of the 21st Century, in 2003 Health Law Handbook (Alice G. Gosfield, ed.). St. Paul, Minnesota: West Group: 2003; 1-32. Available at http://medliabilitypa.org/research/law1103/chapter.pdf

Institute of Medicine. Fostering Rapid Advances in Health Care: Learning from System Demonstrations (Janet M. Corrigan, Ann Greiner, and Shari M. Erickson, eds.). Washington, DC: National Academies Press: 2002. Available at http://www.nap.edu/books/0309087074/html/

Sage WM. The Lawyerization of Medicine. Journal of Health Politics, Policy, and Law 2001; 26(5): 1179-1195 (Special Issue, Kenneth Arrow and the Changing Economics of Medical Care, Peter J. Hammer, Deborah Haas-Wilson, and William M. Sage, eds.).

Sage WM. Enterprise Liability and the Emerging Managed Health Care System. Law & Contemporary Problems 1997; 60(2): 159-210 (symposium on medical malpractice law) (published in 1998).

A Business, Not a Profession - PointOfLaw Featured Discussion

Bill (or should I say Dr. Sage?),

I�m belatedly getting around to discussing what�s really at the core of the Trial Lawyers, Inc. project: the fact that trial lawyers today operate much more as a business than as a profession. I don�t think that this basic fact is really much in dispute, and I can hardly go into the point here in the depth that my colleague Walter Olson did some 14 years ago in The Litigation Explosion, or even in the depth that we went in the original Trial Lawyers, Inc. report. But let me try to give a synopsis of what I call the �business model� of the plaintiffs� bar. I�ll then turn to drug products liability, and finally I�ll touch on some of the medical malpractice liability proposals you�ve endorsed.

Law Goes From a Business To a Profession

Let�s begin with the underlying history and premises. Law historically, like medicine, has been a �profession.� That is, as opposed to general businesses, lawyers (and doctors), operate under special ethical rules of conduct (rules that, for better or worse, are typically set by the professionals themselves). There are important reasons for doctors and lawyers to be professionals. First and foremost, both professions represent patients/clients who are often unsophisticated in assessing the services being offered, so the professionals have to be scrupulous in providing a duty of care consistent with the patient�s/client�s interest. Doctors shouldn�t sell snake oil or unneeded surgeries. Lawyers shouldn�t bilk their clients with billable hours for unneeded work. And patients and clients need to be able to be totally honest with their doctors and lawyers, so they�re owed a duty of confidentiality.

Now, I think that these basic points should be relatively uncontroversial � as should the important counterpoint: the professionalism of medicine and law need not imply that there�s no place for market-based approaches, because incentives obviously do matter. Approaches that force medical patients to foot more of their own bill, as opposed to shifting their costs to a third party, will inevitably put downward pressure on costs. Aligning lawyers� incentives with those of their clients � as the contingency fee does � will keep attorneys from wasting time that they otherwise might.

When it comes to the legal profession, there�s a significant additional point to keep in mind � one that differs from the medical profession and all others. Practitioners of law, uniquely among those not in the government itself, have the power to take property from parties without their consent. Lawyers, through the courts, have unique access to the government�s monopoly over the use of force. Now, other businesses and professions can dupe people through fraud. The medical profession has some limited ability to take people�s freedom (e.g., by forcing people into psychiatric wards). Still, in general, law is the only American business, apart from crime, where the fruits of one�s labors are directly tied to one�s ability to take others� property without their consent. Crime, of course, is something we try to stop. But the ability to take property through the law is something the American system facilitates, in a manner unlike any other country.

A few features make American law unique. First, we have the contingency fee itself. Although some other countries are opening up to the idea, historically, the contingency fee is an American innovation. Its salutary effect is that it opens access to the courts to the less affluent and it aligns lawyers� incentives with their clients�, as noted above. Its downside? The contingency fee creates a direct, and powerful, incentive for lawyers to take as much property as possible. In the course of representing a single client, this effect is less pernicious (though, as Olson notes, the incentive to cheat, manufacture evidence, etc. � unbecoming an officer of the court, as those in the �legal profession� are supposed to be � is far greater when you have a vested interest in the outcome). But what we�ve seen in the plaintiffs� bar is the wholesale solicitation of clients (more on that later), many of whom aren�t really injured; and in the course of aggregative litigation (dramatically expanded since the 1960s by changes in Rule 23, which governs class actions), lawsuits where there isn�t really a client at all (if you doubt this, ask securities lawyer Bill Lerach, who once said he had the greatest legal practice in the world because he didn�t have any clients). The contingency fee is a direct inducement to litigate � and thus to take property by force. Olson analogizes the practice of enabling invading armies to keep whatever they plunder: it may help troop morale, but the consequences are predictable.

In addition to the contingency fee, the United States (apart from Alaska) has the �American rule,� i.e., the system wherein a party who unsuccessfully brings litigation doesn�t have to bear the other side�s costs. Low-value, good claims are discouraged, as I noted earlier in this discussion: lawyers working on a contingency fee don�t want to bear costs they�re unlikely to recoup. But the inverse is true, too: low probability cases are encouraged because the defendant�s litigation costs are sufficiently high that they�re willing to settle even very weak claims.

The latter incentive is significantly muted when defendants face repeated, similar claims; as game theory would suggest, to discourage low probability claims, a rational defendant would only settle repeat claims where the plaintiffs� lawyer had a positive expected value, i.e., where the expected verdict exceeds the plaintiffs� expected legal bills.

But in the American legal system, even for low probability claims, the expected value of a claim from the plaintiffs� lawyer�s perspective can be quite high � because juries regularly make erroneous findings of fact, and because they can slap defendants with exceptionally high punitive damages and difficult-to-review noneconomic damages. Contingency fee lawyers, with sufficient ability to disperse risk, can play a game with a positive expected return. It�s a gamble, but they have the house odds.

America�s decentralized federal system also creates a lot of opportunities for overlitigation. In general, federalism is a salutary American feature: it disperses power, and as Brandeis noted, can let states serve as �laboratories of democracy� with competing policy packages. Such varying policies generally create incentives that drive states toward efficient rules over the long run, since labor and capital are mobile. But as our nation�s experience with the Articles of Confederation showed, the devolutionary principle has its limits. Where states have incentives to impose costs on their neighboring states � say, by dumping their refuse in a river that flows next door � the federalist premise breaks down. As Tabarrok and Helland�s research on state judges shows, states (or, more precisely, elected state judges) have incentives to adopt loose liability laws so that they can impose costs on out-of-state defendants to the benefit of in-state plaintiffs. The absence of a federal choice of law regime means that states (like West Virginia) or localities (like Madison County, Illinois) can make litigation a cottage industry. When venues are easily shopped � as in products liability cases and, at least until this year, class actions � plaintiffs� lawyers can exploit these �magnet courts� to great benefit.

Finally, American lawyers today are able, in a rather �unprofessional� way, to hawk their services. Prior to the late 1970s, the basic American norm on lawyer solicitation generally was in accord with Lincoln�s suggestion that we �discourage litigation.� But by 1977, the Supreme Court called the �underutilization� of lawyers in America a problem, Bates v. Arizona, 433 U.S. 350, 376 (1977) � and upheld lawyers� right to advertise the availability and price of their services. By 1988, the Court extended that right to direct-mail solicitation. See Shapiro v. Kentucky Bar Association, 486 U.S. 466 (1988). I tend to be a free speech purist, but it�s hard not to acknowledge that the ability to advertise is directly related to the de-professionalization of the plaintiffs� bar and the litigation explosion in America.

The Trial Bar's Business Model

These incentives all matter. And they�ve led to a plaintiffs� bar that to a significant extent works as a sophisticated business, not as a profession. How so?

Marketing. To be successful, any business must attract customers. The plaintiffs� bar of course lacks traditional customers: the people who pay plaintiffs� lawyers aren�t willingly parting with their money, but rather are being forced to do so. That captive customer base is the key feature that makes the plaintiffs� bar so successful. To get at those customers, however, the plaintiffs� bar must attract clients. That�s something the plaintiffs� bar is able to do today with a very high level of sophistication:

o Television, radio, and print ads. One day when you�re home sick, just check out the ads that run during those annoying daytime talk shows. Or turn on BET for a while. You�ll see scores of plaintiffs� lawyer advertisements, going after the trial bar�s attractive client base.

o Internet-based solicitation. There are increasingly targeted banner adds, sites where you can sign up �for the money you may be due,� and targeted emails (have you gotten a Vioxx solicitation lately?).

o Automatic clients. While advertising is the bread and butter of the mass tort bar, the class action bar has it easy � they just need to find a name plaintiff (sometimes itself a dubious task: just ask Milberg Weiss), and everyone else comes in, automatically, under Rule 23, unless they bother to �opt out� of the class.

In the health care context, we see all these methods of gathering clients. When Scruggs and Boies, and later Milberg Weiss, sued HMOs under civil RICO, they developed a class action. Ditto for Scruggs�s suits against nonprofit hospitals. TV, print, and internet client solicitation for pharmaceutical mass torts are ubiquitous. Internet ads seeking clients whose babies were born with cerebral palsy shout, �Your child's cerebral palsy may be the result of a medical mistake. Don't get mad. Get Even!�

Division of markets and labor. Some �trial lawyers� make their wares without ever pretending to go to trial � they�re client grabbers. They round up folks and sell off their claims. Other lawyers are negotiators, and others actually go to trial. Such division of labor in and of itself isn�t troublesome, and increases efficiency. The problem is that trial lawyers, at least in much mass tort litigation, don�t really �compete� for customers in the traditional sense. They work with the client aggregators to gobble up as many clients as possible � clients who aren�t really picking their lawyers based on any real criteria at all. There�s to a significant extent a division of the market � you get yours, I get mine � and the process creates a major barrier to new entrants. Of course, an enterprising plaintiffs� lawyer can join the big boys� club by winning a landmark case: but it�s a long-shot, and the existing players have sufficient capital to carve up much of the market for themselves. There�s a lot of rivalry, but not a lot of price competition: contingency fees are essentially standard, as Lester Brickman has shown.

Product development. Lawyers don�t make products, but they do try to develop successful lines of business. Anyone with a deep pocket is a potential target. As Trial Lawyers, Inc.: Health Care shows in significant detail, in health care, every market segment has been in the trial bar�s crosshairs � doctors, hospitals, and nursing homes; drug and device makers; HMOs. �Developing� a product line is an expensive process, but one lawyers spend a lot of time and money on. Conferences on various types of litigation are abundant. ATLA makes information on various �litigation groups� available on its website. Now, many of these techniques relax the barriers to entry already mentioned. But the key for the trial bar is to share knowledge and score wins � because wins beget settlements. The competition to gather clients is the only real rivalry in town.

Business Analysis

If you were to do Michael Porter�s �Five Forces� industry analysis of the litigation market, Trial Lawyers, Inc. would score big:

Buyers (i.e., defendants) have no power, apart from imposing costs on plaintiffs under the American rule.

� Since expert witnesses willing to prostitute themselves for money are readily available, the only supplier power the trial bar faces comes from the West/Lexis electronic legal research duopoly, which itself is weakening in the internet era.

� The trial bar faces no real substitutes, since its access to the courts is unique.

Competition among plaintiffs� lawyers is fierce, but only for initial client solicitation, and then not on price . . .

� . . . owing in significant part to the substantial barriers to entry in the mass tort/class action market, already discussed.

Now don�t get me wrong � being a plaintiffs� lawyer per se isn�t necessarily an easy road. There are a lot of lawyers who have a hard time squeaking by. What Trial Lawyers, Inc. is about is those market leaders � the guys who are able to dominate the class action and mass tort bars � and they have a pretty lucrative business indeed.

The Problem of Law as a Business

So what�s the problem? I�m a supporter of free markets � you even characterize me as a �shill� for �big business.� What�s wrong with lawyers acting more like businesses? Well, as I�ve already suggested, the problem is that the lawyers� business, unlike others, doesn�t inherently generate value but rather redistributes through force. If I sell you a product or service, we both benefit, assuming there�s no fraud or duress and that we�re both able to assess our self-interest. I value your money more than the product or service I sell, and you value the product or service more than the money you pay. Redistribution by force doesn�t work that way. Party A, the plaintiff, takes from party B, the defendant. Party A is better off, but party B is worse off. And there�s a net social loss in that the scarce resources spent taking from party A and giving to party B could have been spent elsewhere, i.e., generating goods or services of value.

So the real question we should use to evaluate litigation is whether it adds any value apart from redistribution itself, and whether that value added, if any, exceeds the extremely high transaction costs and opportunity costs inherent in the system. There�s nothing wrong in principle with lawyers making a lot of money. The problem presented in the litigation context is (a) whether that money is reflective of real value added for the client, and (b) whether that money should have been redistributed in the first place � i.e., whether a real harm that �should� be compensated occurred, as judged from the standpoint of either fairness or efficiency. (Ultimately, in the world of tort, I think that the fairness and efficiency criteria for (b) wind up the same: even if we buy into the notion that you advance in your last post that the way society treats its weakest members matters � and I agree to some extent � the tort system is about as inefficient a means of general redistribution as we could possibly devise.)

The problem with the plaintiffs� bar today, for critics like me, is that it often exploits its clients and that it taxes society with litigation that it shouldn�t, leading to substantial dead weight loss today and perverse incentives not to invest and innovate for tomorrow. Though the tort system in its classic form did offer a means of redress for injured parties whose injuries were wrongly caused by others, the system is ill-equipped to be a general insurance scheme, Prosser, Traynor, et al. be damned. And though the classic common law tort system was generally efficient and served to deter harmful behaviors, the system is ill-equipped to be a general, comprehensive regulatory regime, Calabresi, Posner et al. notwithstanding.

But today, the perverted tort system is what we have. Far from its roots as a profession representing clients and owing a general duty to the public, the plaintiffs� bar is a big business tapping into the American legal system�s unique rules that enable it to feed at the trough. The trial bar�s business success owes not to natural monopoly but to its rule-enabled abuse of lawyers� unique access to the government�s monopoly on the use of force. And perhaps the most sophisticated part of the lawyers� business model � their government relations and public relations efforts, which we detail at length in our Trial Lawyers, Inc. report � are geared specifically toward protecting the rules that make their government-enabled monopoly so valuable: unregulated contingency fees, the lack of a loser pays rule, maximum jury discretion, loose evidentiary requirements, loose aggregation requirements, unlimited damages, and easy venue shopping, to name a handful already discussed.

Torts for Drugs and Medical Devices

OK, so now that I�ve gone on at length about the business model of the trial bar, I�ll move into the other, specific element I said I�d cover: the mass tort problem as it relates to drug and medical device litigation, and my preferred response (preemption). Americans� health care has been radically improved in the past generation or two in large part due to dramatic innovations in the development of pills and products that prolong life or make our lives easier to live. Bacterial scourges that once wrecked havoc have been all but eliminated, as Huber noted in the article I cited in my last post. Drugs and medical devices constitute only 11 percent of health care spending � most still goes to doctors and hospitals � but they�ve revolutionized health care. People who were bedridden and needed full-time care are now able to walk and function without assistance; people who were institutionalized can now take a pill and interact in normal society; people who would have dropped dead prematurely of a heart attack can keep their cholesterol down with a host of medications.

The medical innovations that have so changed our health care have occurred regardless of the litigation explosion, but let�s not pretend that lawsuits don�t matter on the margin. And the marginal impact on companies� incentives is sizable. As I point out in my director�s message in Trial Lawyers, Inc.: Health Care, the estimated liability costs of Vioxx and Fen Phen, alone, are roughly ten times their respective companies� research and development budgets. On an annualized basis, the cost of those two mass torts comes to roughly ten percent of the entire U.S. pharmaceutical industry�s revenues (the percentage would be lower if we account for the time value of money, but these aren�t super-delayed torts like asbestos). That�s a punch that packs quite a wallop.

And the punch is also, far too often, below the belt. We�ve seen lawsuits bankrupt companies with billions in liabilities over products that aren�t unsafe (e.g., the breast implant litigation). We�ve seen lawsuits force useful drugs from the market that aren�t unsafe (e.g., Bendectin). We�ve seen lawsuits saddle companies with far more liability than their products actually caused by flooding the system with bogus claims generated by fraudulent screening systems that are mass production systems �that would be the envy of Henry Ford� (e.g., Fen Phen). We develop these and other examples in much more detail in Trial Lawyers, Inc.: Health Care.

The point? Just as our system of adversarial trials before juries makes a mess of med-mal cases, it gets it wrong an awful lot in products liability cases. That�s the biggest problem with the stylized law and economic models that Calabresi, Posner and their successors developed for tort law: they assume that trial outcomes, on average, get it right. What we see is that trial outcomes, on average, get it wrong. Let me stress that when I say �on average,� I don�t mean that most juries get it wrong. They don�t have to for the expected return of trials to be way off base. You just need the odd jury to produce outlandish results, with outlandish dollar verdicts, to throw off the average verdict � and the expected return from litigation � dramatically.

The law-and-economic theory of tort regulation in essence tries to make the courts a regulator of choice � despite the fact that trial outcomes don�t come close to approaching a proper cost-benefit analysis and that the administrative costs of running the system are exceptionally high. The system lacks the fundamental principle of the rule of law, that is, predictable outcomes.

In criticizing �regulation through litigation,� I don�t mean to ignore the trenchant critique of regulation. Adopting overly strict ex ante rules can stifle innovation. There�s something to be said for setting up clear overarching guidelines � simple rules, in Epstein�s terms � and punishing harms ex post.

But for ex post penalties to work, we have to have some confidence that they will be rationally related to the harms they penalize, so that actors appropriately internalize their costs. When it comes to mass tort drug and medical device litigation, I simply lack confidence that the penalties will make sense. In addition to the aforementioned examples, take the Angleton, Texas verdict recently levied against Merck when a 59-year-old man with clogged arteries died of a heart arrhythmia (a condition no scientific testing has shown to be linked to Vioxx), after taking Vioxx for 8 months (10 months less than the length of time for which scientific testing has linked Vioxx to heart attacks), in moderate doses (notwithstanding that Vioxx has only been linked to heart attacks when used in heavy doses as an experimental treatment for precancerous intestinal polyps). Carol Ernst, the deceased�s wife of one year, scored a verdict over $250 million. Will that verdict be substantially reduced? Yes, largely due to Texas�s punitive damage caps � but the $24 million in �mental anguish� damages aren�t capped, and they will prove difficult to review.

As my colleague Peter Huber noted in Liability, �jurors, who generally can reach sensible judgments about people, perform much less well when they sit in judgment on technology.� In part, jurors� failings are due to a lack of technical expertise. Jurors also fail because they �face accidents up close� without the �broader vision, dominated by the individual case.� In addition, jurors are particularly prone to hindsight bias, �the natural human tendency after an accident to see the outcome as predictable � and therefore, easy to affix blame,� which �makes the defendant[s] appear more culpable than they really are,� Steven Hantler, The Seven Myths of Highly Effective Plaintiffs� Lawyers, Manhattan Institute Civil Justice Forum 42, at 13 (April 2004). Finally, jurors tend to penalize the new while accepting the old, which clearly threatens innovation. Aspirin and ibuprofen kill 16,500 people a year due to gastrointestinal side effects � the very problem Vioxx and other Cox-2 inhibitors are designed to avoid � but you�ll never see Bayer getting slapped with aspirin liability.

Compounding the inherent problems jurors have in assessing drug liability are the many structural elements of the American legal regime that enable lawyers to game the system. Widely used drugs wind up as mass torts, and lawyers can flood the system by recruiting thousands of claimants, some of whom have an actual injury caused by the drug but many of whom do not. Lawyers and defendants both know that jurors will occasionally be duped, so the cases will have settlement value, and the lawyers will only get burned if a thoughtful and energetic judge takes the time to really look into the pool of claimants, as has recently happened in Fen Phen and silicosis cases.

What jurors often fail to realize, at least for new medications, is that pharmaceuticals that save or help most people, but kill or injure some small subset of users, are often drugs that nevertheless should be on the market. To get through the onerous FDA review process, drugs must go through substantial testing for both safety and efficacy. The point of the federal regulatory regime � which is far from perfect, admittedly � is to perform a basic cost-benefit analysis. The safety-effectiveness trade-off is a function of the magnitude of effects � the harms prevented and the harms caused. A drug that kills 1 in 100 users but is the only treatment for an otherwise fatal illness, and increases the likelihood of survival from 0 to 50 percent, is clearly a drug that should be on the market. Any rational consumer afflicted with the fatal disease would choose to take the drug. Any doctor would recommend that his patient afflicted with the disease take the drug. If the disease being treated is 99 percent likely to cause death, the calculus doesn�t change.

Of course, in the real world, choices are rarely so black and white. Ailments aren�t necessarily fatal, and they often vary in degree, and side effects vary depending on patient profile. The job of the FDA is to determine if a drug, on balance, is sufficiently safe and effective to be on the market at all; and to determine what warnings and other information on the drug should be presented, and how, so that consumers � in reliance on their doctors � can make reasoned decisions about whether taking a medication is for them worth the risk.

That drug liabilities should be �known� and �reasonable� so that patients and doctors make informed decisions to assume risk was classically a key feature of how tort law handled drug liability � as long as the risks of using the product were known, drug makers were traditionally insulated from liability for their products unless they had been faultily manufactured (i.e., they�d made a �bad batch�). See Restatement of the Law 2d, Torts, � 402A comment k (American Law Institute 1965) (asserting that the manufacturer of drugs �is not to be held to strict liability for unfortunate consequences attending their use merely because he has undertaken to supply the public with an apparently useful and desirable product, attended with a known but apparently reasonable risk�). Paradoxically, though, even as the federal government developed a comprehensive regime to regulate drugs on the market � with the aforementioned safety and efficacy testing, as well as tediously precise dissemination of warning labels and information � the protection for drug manufacturers whose products were �apparently useful� but had a �known but apparently reasonable risk� came to be gutted by the courts.

The Solution: FDA Preemption

Hence my call for FDA preemption. Let me clarify exactly what I mean. If the FDA approves a product, and the drug manufacturer was not fraudulent in its FDA submissions, the manufacturer should not be held liable for harms caused by its products that were known to the FDA and, at the FDA�s discretion, publicized in labeling or otherwise as the FDA best saw fit to require. The FDA permits the drug on the market that kills 1 in 100 people but saves half of the 99 percent who otherwise would die? Those 1 percent killed have no claim. Likewise with any other person injured by a drug if such injury is a side effect known and publicized at the time the drug was prescribed.

Now, what about those claims � like Vioxx and Fen Phen � in which an initially unobserved side effect becomes evident through subsequent testing? We may not want to foreclose all potential for redress here. I�d be worried then about too much FDA Type II error � i.e., if the FDA knew that anyone injured by a drug it had approved had no recourse whatsoever if an undiscovered side effect cropped up, it would face that much more institutional pressure to order larger, and longer, tests. The public would suffer, as good drugs were kept off the market for too long.

So for those classes of injuries that cropped up in later testing, post-FDA approval, we might well want a compensation scheme for injured parties who took the drugs. But the claims shouldn�t be in tort! Remember that the traditional tort rule was merely that a drug be �apparently� reasonable. A drug manufacturer who complies with the FDA process but subsequently discovers a defect hasn�t committed a �wrong,� even though its product has caused injury to some individuals who weren�t fully aware of their own risks at the time they took the drug. Acknowledging that patients who are injured by drug side effects unknown at the time of FDA approval need not imply that we muddy our tort system with these claims and process them in the administratively expensive and imprecise way that the litigation process necessarily involves.

Fortunately, we have a pretty good template for handling drug claims outside the courts in the Vaccine Injury Compensation Program, which Congress established in 1986 after lawsuits threatened to wipe out vital children�s vaccines. (Vaccines present a special case: we want people to take them, because we�re all better off if they do. But there�s an inherent free rider problem in that if everyone else is vaccinated, you lose some of your incentive to assume the costs � and the risks � of taking the vaccine yourself.) The VICP operates efficiently, at 9 percent administrative cost. It effectively weeds out bad claims but generously compensates good claims. A comparable program could handle all drug claims, rejecting outright any premised on harms that were disclosed by FDA requirement at the time the drug was prescribed, and allowing claims to go forward for injuries actually caused by side effects that were unknown at the time of prescription. And if the FDA decided to add a new side effect warning to a drug, while permitting it to still stay on the market, suits by individuals who subsequently took the drug would of course also be barred.

The key caveat to the FDA preemption I propose is that the drug manufacturer was not fraudulent in its FDA submissions. If the manufacturer did in fact lie to the FDA, it should lose its statutory safe harbor � because it did do a �wrong,� and its drug was not �apparently reasonable� as the FDA had assumed. But lawyers shouldn�t be able to circumvent the statutory preemption merely by making this claim, which would be routine in all drug lawsuits and gut the regime�s whole effectiveness. Rather, the FDA � or another independent body � should have to make a ruling that the company had been fraudulent. Only then would the company lose its safe harbor protection.

Getting Back to Medical Malpractice

So that�s my take on drug liability. I�m very interested in your thoughts. Though this post is already some 5,000 words, I do want to spend a little time getting back to medical malpractice, and addressing your specific points raised in your prior post, because I don�t want us to �talk past each other.� I�ll also comment briefly on a couple of other ideas, at least one of which you�ve backed in the past.

Before I get specific, let me make a comment on my earlier invocation of Philip Howard and Common Good: I mentioned him not to imply wholehearted endorsement of his approach to medical malpractice liability but to show that the Manhattan Institute Center for Legal Policy has given a lot of attention to alternative approaches to medical malpractice reform � and relatively little to damage caps. Philip is a friend, and I think he�s done a lot both to show the problems with the American legal system and to think outside the box about solutions, but by saying that we�ve featured him in events I didn�t mean to suggest that his preferred solution gets it all right. (I would take a little issue with your statement, though, that �a genteel business lawyer like Philip is not generally perceived as moderate by groups that aren�t naturally sympathetic to tort reform� � his Common Good board of advisors includes folks like George McGovern and Bill Bradley, whom I wouldn�t call big business shills or right-wing extremists.)

Your Plan for Health Courts: Thoughts and Questions

Now let�s get to the IOM-endorsed administrative compensation scheme you outline. To begin with, I�d agree that to the extent we can take medical malpractice compensation outside the adversarial tort system, it�s a goal worthy of experimentation. The adversarial system stifles real disclosure and safety improvement in medicine, as I noted before (and as you agree, at least to some degree).

I also agree that in general it could make sense to leverage existing regulatory mechanisms as much as possible � much like I propose building from the existing FDA and VICP in handling drug liability. But note that the case here is different than for drugs, from the standpoint of one who�s interested in torts (you, admittedly, are more interested in health policy outcomes, not the overarching tort regime). I don�t think most drug lawsuits belong in tort because the mere fact that a drug causes a harmful side effect doesn�t mean that manufacturers have done anything wrong. Unless drug makers have lied to the FDA, they haven�t committed a products liability tort that should be actionable.

In contrast, doctors are negligent all the time. That doesn�t mean they�re bad people, or even bad doctors, but they�re often at fault for patient injuries. When doctors are at fault, they do commit what those of us who are interested in that area of the law would call a tort. So Philip�s notion of a more traditional legal regime � based in tort, but with specialized decision makers � is in some ways more attractive to tort scholars. When you start carving out special exceptions to tort, as with workers compensation, there may be unintended side effects over time. That doesn�t mean we shouldn�t do so; I just flag the issue.

And I think to make myself more open to your idea, I might interpret it as follows: we�re setting up a regulatory regime at the state level, much like the FDA functions at the federal level, that in itself is designed to screen medical provision to reduce injury. Presumptively, even if individual mistakes are made that cause harm, a provider that�s been compliant with the regulatory regime isn�t at fault in the tort context. Injuries, even avoidable ones, are an �apparent risk� in today�s health care world, and aren�t really torts in the traditional sense in that people assume those risks when they go to the hospital in the first place � at least if the hospital is complying with an adequate regulatory regime that ensures that on balance it�s not making more mistakes than it should. That doesn�t mean people injured � if such injuries are �avoidable� � shouldn�t receive any compensation; but it means the injuries don�t belong in tort, at least in most instances. I�m not sure if that�s a legitimate read of your idea, but such a rationale would make me a bit more comfortable that simply saying, �health care�s special, and we should carve it out of tort because it�s special.�

There are a couple of salient points to your approach as I understand it that I�d like to comment on � and if I�m off-base in my understanding of your proposal, let me know. First, as I read your idea, it�s optional to the health care provider, not mandatory. Such a feature is important, because if the proposal were to get mucked up � either in the legislature or by the regulators � providers could always stick with the status quo.

I think by now you probably have guessed that I�m very skeptical of the legislative process. Public choice theory suggests I should be. The more complicated proposals become, the more politicians can mess them up. Jeff O�Connell found this out the hard way with automobile no-fault, and your comments on Pennsylvania�s treatment of Phil Howard�s health courts idea suggests more of the same. Part of the appeal of �traditional� tort reforms � damage caps, elimination of joint-and-several liability, and the like � is that they�re simple; you�re either for them or against them, but you can�t come up with a beast that�s worse than the problem you�re trying to fix. Those who are critical of the Congress�s proposed fix on asbestos � a fix that�s as necessary as any in tort � have just that argument, i.e., that the complicated trust fund mechanism that�s made its way through the judiciary committee is worse than what we have now. I�m not saying those critics are right, but the current example is a good one in showing just how easy it is for complicated reform schemes, which are elegant in theory, to get messed up when our actual political actors get their hands on them. In any event, a proposal that gives providers an option, as I read yours to do, has that as a major plus at the very outset.

I also tend to like your reform�s emphasis on what seems to be an �early offer� mechanism: �Providers would have strong incentives to engage the patient in mediated discussions, and to offer prompt, fair compensation.� As I read your idea, in your post and in other variants I�ve seen, providers who opt into the system would be immune from suit but in turn would have to make an early offer to pay patients reasonable economic damages and noneconomic damages (according to a workers-comp-style schedule based on type of injury). Disagreements would be resolved administratively, in a process that avoided a lot of the nonsense we see in the regular courts.

I tend to like the �early offer� mechanism of your approach, because it mirrors a lot of the ideas we discuss in the tort reform community. In general, our tort system mistreats victims of injury not only through its cost but also through the length of time it takes individuals to collect. Jeff O�Connell�s new reform idea for medical malpractice uses just such an early offer mechanism, though it goes a bit further (Jeff�s idea is that early offers to compensate economic damages in full immunize doctors and hospitals from suits over basic negligence). Other tort reform ideas tap into early offers, too � often functioning as client protection mechanisms; e.g., Lester Brickman�s idea, developed about a decade ago with the Manhattan Institute, calls for attorney contingency fees to be collectible only for �value added� above a defendant�s early offer of settlement. And those of us who think that offer of judgment rules offer the best opportunity to introduce loser pays principles into American jurisprudence also welcome attention paid to early offer mechanisms.

Now I fully realize that the early offer mechanism in your approach is just a part of the overall safety regime providers would have to opt into to qualify for immunity. But I like it, and in part I like it because I think it dovetails with other ideas that are important to the broader discussion over civil justice reform. Since that�s my primary focus � not just civil justice that affects health policy, but all civil justice � it�s a relevant consideration for me.

I�m not sure exactly how the idea would work in all respects. Let�s say someone claims he was harmed in an �avoidable injury,� but the provider never approached him about it or offered to pay. I�m guessing he�s still preempted from tort, as long as the provider has generally been compliant with its regulators? He still has to go through the administrative process � but perhaps the provider is socked with a penalty if the administrative tribunal determines that there was indeed an avoidable injury and the patient should have been informed and made an offer. Is that a reasonable reading of your approach?

I�m a bit more skeptical of your preferred implementation mechanism, namely Medicare, but more for reasons of political reality than anything else. If there�s a lobby more powerful than the trial bar, it�s the seniors� groups, and the AARP and ATLA tend to be tight. Any reform that the AARP might possibly view as lowering seniors� protections � and the trial bar would sell any change to the status quo as a lowering of seniors� protections � would be a non-starter politically. If you could persuade the AARP that it�s in seniors� interest to adopt a non-tort, administrative-law-judge approach to medical malpractice claims, I�m afraid that you could only do so by making the system exorbitantly costly. I may be overly cynical, but I do have concerns. (Note that my concerns with Medicare as a fulcrum for reform are more practical than theoretical. Indeed, as a purist, I�d much rather federal damage caps be imposed specifically on Medicare and Medicaid recipients, not preempt all state regimes, for reasons of federalism. But politically, such an approach wouldn�t wash.)

I tend to be more enthusiastic about employer-initiated approaches, i.e., letting employers offering health coverage through ERISA push their covered employees into an administrative plan. If the �big business� you accuse me of shilling for has any concern that�s bigger than litigation, it�s the cost of health insurance, and I think you might get business really motivated for such a reform if you could persuade business leaders it would actually work. Of course, ATLA might get labor to side with it in opposition, which could stifle reform, but I�m not totally sure that they would, especially if labor leaders were convinced they�d get some benefit back in lowered deductibles or higher wages.

Remaining Questions

A couple of other points before I sign off. First, I think that binding alternative dispute resolution could be a tenable reform. In theory, the Federal Arbitration Act enables such an approach, but in practice, state judges tend not to enforce arbitration and ADR provisions. What are your thoughts?

Also, I�d love to hear a bit more about your thoughts on enterprise liability, which I understand was once a major project of yours. To me, it seems as if private parties probably could contract for such a solution now, to a significant extent, but they don�t. Is that true, and if so, why do you think that is? How would legislation make a difference?

Anyway, at long last, I�m ready to catch up on my sleep (in anticipation of a big Thanksgiving meal). I think we�ve moved well beyond damage caps � and any accusations of who�s a �shill� for whom (though I really never meant to imply you were a �shill� for the trial lawyers!). I think I�ve given you quite a lot to chew on, and I look forward to hearing from you sometime after you�ve recovered from your turkey.

Jim

Brickman in Saturday's WSJ - PointOfLaw Forum

The weekend edition of the Wall Street Journal (subscriber-only link) carried an op-ed by Prof. Lester Brickman of Cardozo, one of this site's advisers, on the developing asbestos/silicosis scandal. A sample:

Lawyers spent millions to sponsor mass screenings of upwards of 750,000 industrial and construction workers. Of the 850,000 asbestos claimants that have so far brought suit against over 8,400 different defendants, about 600,000 have been recruited by these mass screenings....

Sitting in Judge [Janis] Jack's courtroom during the cross examinations was an assistant U.S. Attorney from the Southern District of New York. He was there because a federal grand jury had been convened in mid 2004 to consider possible criminal charges arising from claims of exposure to silica and asbestos, and the use of witness-coaching techniques to implant false memories about product exposure....

The next shoe to drop may be in federal court in New York. If indictments are forthcoming -- and lawyers who sponsored the mass screenings and collected billions of dollars in fees are among those indicted -- the ensuing process could shine a floodlight on a fraudulent scheme so massive as to qualify non-malignant asbestos litigation for entry into the pantheon of such great American frauds as Enron, WorldCom, OPM, Cr�dit Mobilier and Teapot Dome.

Wall Street Journal highlights asbestos bankruptcy scams - PointOfLaw Forum

Tuesday's Wall Street Journal ran a lead editorial (subscription required) chronicling the abusive practices that have so corrupted modern asbestos litigation.

The article led with the recent ruling by the Third Circuit Court of Appeals, In re: Kensington, that disqualified Senior District Judge Alfred M. Wolin from presiding over 3 of 5 consolidated asbestos bankruptcy proceedings, for Owens Corning, W.R. Grace, and USG Corp.

Asbestos: send in the prosecutors? - PointOfLaw Forum

Prof. Lester Brickman of Yeshiva University's Cardozo School of Law, a noted legal ethicist and the leading academic critic of the asbestos litigation, has a devastating new 137-page article out in the Pepperdine Law Review. His contention: mass attorney solicitation of claimants has combined with willfully unreliable medical screening and witness-coaching by law firms to generate hundreds of thousands of fundamentally fraudulent claims which are obtaining unjustified payouts in the billions and even tens of billions of dollars. The only likely catalyst for reform at this point, he argues, would be a full investigation by a grand jury armed with subpoena powers. (Stuart Taylor, Jr., Dec. 31; Paul Hampel, "Many asbestos suits are fraudulent, professor says", St. Louis Post-Dispatch, Jan. 13). The article, not online but available to those with LEXIS access or in law libraries, is Lester Brickman, "On the Theory Class's Theories of Asbestos Litigation: The Disconnect Between Scholarship and Reality", 31 Pepp. L. Rev. 33. For our coverage of asbestos, see, e.g., Nov. 12, Oct. 24, Sept. 25, and earlier posts.

[cross-posted from Overlawyered, where it ran Jan. 21, 2004]

According to Prof. Brickman, virtually all claims of nonmalignant injury from asbestos in today's courts are generated by way of attorney-sponsored screenings. Yet there is extensive reason to believe that much of the medical evidence generated by the screening process is bogus -� so much so that asbestos litigation itself may properly at this point be called a "malignant enterprise."
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