February 5, 2010

Around the web, February 5

• One-way injury fee shifts? More on ominous procedural proposals in England and Wales [Burch, Mass Tort Lit]
• Client-chasing legal "news services" often inaccurately recount air mishaps [Aero-News.net via Steele, LEF]
• Feds to probe alleged cluster of cleft palate cases near Kettleman City, Calif. waste dump [L.A. Times, more]
• Saying "So..." in a certain way might let slip your Yale Law background [Horwitz, Prawfs]
• In an unfree country, corrupt officialdom may be better than the alternative [FCPA Blog, more]
• Lots of trade associations expressing policy views in one place: Biz Central (via Pat Cleary)

December 30, 2009

"Investor Who Backed Unsuccessful Lawsuit Is Liable for Defendants' Legal Fees"

The logic of a Florida decision might pose a challenge to the whole burgeoning business of litigation funding and lawsuit finance. And certainly there'd seem to be good reason to arrange matters so that that those who stimulate and enable litigation in search of an upside payoff share in the downside risk as well. [Longstreth/AmLaw]

December 9, 2009

Sens. Graham, Chambliss propose partial loser-pays for some med-mal suits

"United States Senators Lindsey Graham (R-SC) and Saxby Chambliss (R-GA) introduced legislation [last month] that would require the loser to pay the winner in some medical malpractice suits. The Fair Resolution of Medical Liability Disputes Act of 2009 would require initial nonbinding arbitration for med mal claims prior to going to court. Either party could reject the arbiter's decision and proceed to trial. However, by so doing, the loser-pays mandate is activated." It would apply where a party did less well than the offer it had spurned, unless a judge finds the shift "unjust", and would cover only costs incurred after the arbiter's decision. [Robinette, TortsProf; Atlanta Journal-Constitution; David Dunlap/Charleston Post and Courier]

September 1, 2009

Around the web, September 1

• Former Senator Bill Bradley proposes an Obamacare compromise: "Tax Reform's Lesson for Health Care Reform" [NY Times]. One critic gloats/scoffs that Republicans aren't serious about malpractice reform except as an opposition issue since they didn't try it when in office [Jonathan Zasloff, SameFacts] And I have a link roundup at Overlawyered on the subject.
• Bahind the bankruptcy-claims capitulation, political brute force: "Chrysler yielded to pressure from consumer groups that aggressively lobbied for a law requiring warning stickers on used Chrysler vehicles, an effort which would have reduced the value of the vehicles." [Day]
• Penn lawprof Tom Baker, whose policy views tend toward the opposite of those espoused here, has some good insights on shortcomings of insurance company data as a way of assessing litigation trends [SSRN via Mass Tort Prof]
• Imagine that, injured parties seeking damages: "Civil Rights Defendants Going After Attorney Fees" [The Recorder]
• Trial lawyers' political activism in California has been bad news for that state's economy [John Sullivan (CJAC), SF Chronicle]
• "Securities Class Actions to Come to India?" [Karlsgodt]

July 10, 2009

Class actions come to Italy

As part of a "so-called development package". [Reuters via Karlsgodt]. But it'll differ sharply from the American model: "Under the law, effective from January 2010, consumers teaming up in class actions will have to turn to the judge individually to request compensation, exposing them to possible costs and fines if the suit is rejected."

July 1, 2009

Around the web, July 1

• My other blog, Overlawyered, turns ten years old today -- so far as anyone knows, the oldest weblog on law [Overlawyered]
• Look before you leap, guys: report for British courts suggests weakening loser-pays rule for class/collective actions [Hartley]
• You've probably never heard of this obscure federal appointee, but if EFCA passes he could soon be deciding your firm's labor future [ShopFloor]
• Blawg Review #218 [Adrian Dayton's Marketing Strategy and the Law]
• Fluoride -- yes, the same stuff dentists recommend and that figured in the plot of Dr. Strangelove -- is latest high-profile chemical set for mandatory warnings under California's Prop 65 [Cal Biz Lit, Popehat]
  
• Back pay awards for illegal-alien workers, notwithstanding the Supreme Court's ruling in Hoffman Plastics? [Workplace Prof]

June 5, 2009

Around the web, June 5

• Return of the rickety "medical crises cause most consumer bankruptcies" meme [McArdle, more; earlier here, here, etc.]
• Texas: bill advances that would make it easier for injured contract workers to sue property owners [San Antonio Express-News]
• Minnesota county officials denounce "one-way loser-pays" insurance proposal in legislature [Minneapolis St. Paul Business Journal]
• Plenty on the docket for lead as legal issue [Law and More/Cordrey, Mealey's]
  
• Imagine a legislative "compromise" on union organizing that in practice resulted in unions winning most organizational elections. Actually, that describes the current system [ShopFloor]
• When it comes to dubious Alien Tort Statute cases, bogus banana-worker claims are just the start [IBD editorial, related]
  

June 3, 2009

Thoughts on litigation financing

I'd like to opine briefly on the notion of litigation financing, which our editor referenced this morning, eliciting a very thoughtful reply from Larry Ribstein.

Walter has generally been a critic of the erosion of traditional restrictions on maintenance and champerty, dating back to his wonderful discussion of contingency fees in The Litigation Explosion (the chapter is available here). Like Walter, Lester Brickman, and others, I'm generally troubled by the perverse effects contigency fees can generate (for more, see my discussion with Alex Tabarrok here), though I wouldn't go so far as to eliminate such arrangements entirely, even assuming such were politically feasible.

In his post, Larry notes that we should distinguish among types of litigation and that outside funding helps to "eliminate the potential conflict of interest between a corporate client with diversified investors and a risk-averse lawyer who may have an incentive to settle cases that could be productively litigated," excellent points that shouldn't be ignored. I also think Larry is largely correct in stating that legal-system problems would best be remedied "directly by rules constraining improper litigation practices [than] indirectly by constraining firms' ability to pursue the litigation."

The question remains, however, to what degree "outside litigation financing might increase the amount of socially inefficient litigation." As Walter perhaps would, I would tend to believe that the answer could be, "significantly."

In her December paper on loser pays, my colleague Marie Gryphon describes how our current system of litigation encourages what she calls "abusive litigation." She defines "abusive lawsuits" as those that have "have little legal merit, regardless of the magnitude of the recovery sought." Abusive suits in turn break down into "lottery suits" -- those that combine "low legal merit and very high stakes" -- and "nuisance suits" -- those that combine "modest stakes and little legal merit."

Lottery suits include class action and birth-defect litigation: the stakes are so high that such suits have a substantial settlement value, even if the probability of ultimate success is very low. By reducing barriers to entry, outside litigation financing would probably encourage more such suits.

What I'd worry about even more, though, are nuisance suits, which consist primarily of small-value "shakedown suits" and mass-tort "manufactured suits." As a theoretical matter, the existence of such suits at all is a bit of a puzzle, as Marie explains in her paper. The mass-tort context is perhaps easiest to see. If a lawyer has a portfolio of some cases -- say, asbestos claims -- that are valid, but others that are bunk, he can collect on the bunk cases precisely because it is too expensive for a corporate defendant to litigate each case through to final judgment, since his costs are never reimbursed under the American Rule. Outside financing improves the lot of legitimate plaintiffs in mass-tort situations precisely because it would get rid of risk aversion that leads plaintiffs' lawyers to settle such claims on the cheap; but for the same reason it improves the credible threat presented by manufactured claims and thus increases their settlement value. So the total cost of such litigation rises. How one might view this problem depends on how one views such litigation, but the evidence from asbestos, silicosis, and Fen-Phen suggests that the ratio of bad to good cases is actually quite high.

So where are we left? If we limited large-award contingency fees and adopted loser-pays principles, there's much to be said for outside litigation financing. Indeed, Marie's proposal itself calls for eliminating maintenance and champerty barriers to outside insurance, an important access need for a loser-pays reform. (In separate conversations, Tony Sebok has expressed to me a tentative embrace of loser pays combined with outside financing.) Absent such reforms, however, I share Walter's worry about the real-world consequences that outside litigation financing brings.

June 1, 2009

Around the web, June 1

• Uh-oh: British report proposes seriously curtailing centuries-old loser-pays protections for defendants [Times Online]
• Trial lawyers' drive to curtail predispute arbitration agreements endangers employers' interests [Jottings By an Employer's Lawyer]
• Louisiana gasket maker facing torrent of asbestos suits is latest in U.S. Chamber's featured "Faces of Lawsuit Abuse" [video, more]
• Malcolm Carlisle, "Collective Redress Without Collective Action Litigation: The Challenge for Europe" [WLF, PDF]
• "Parade of Amici in Santa Clara Lead Lawsuit" [Cordrey, Lexis/Nexis] Civil Justice Association of California amicus filing is kind enough to cite my writing, see p. 10 [brief, PDF, more]
• MBTA, the Boston-area transit agency, budgets $7 to $9 million a year for settling employee lawsuits [Globe]

April 8, 2009

Georgia Legislature Adopts Automatic Stay of Discovery Rule

The Georgia legislature recently adopted a bill (H.B. 29) that, in addition to allowing for electronic service of pleadings via email, imposes an automatic stay of discovery in civil suits where the defendant files a motion to dismiss at or before the time when an answer must be filed.

Governor Perdue has already commented favorably on the bill, so its passage seems likely.

The logic of the bill is that it allows the defendant to avoid (or at least delay) the expense of discovery until the court has the opportunity to rule on the preliminary motion. The rationale is that defendants who expect to be dismissed at the preliminary motion stage should be entitled to avoid the expense of discovery.

The reform would not, however, do anything to reduce the expense of litigation for those cases where the plaintiff's pleadings are logically valid but ultimately non-merit-worthy. A preliminary motion does not address the ultimate merits of the case, but merely asks whether the plaintiff's complaint "states a claim on which relief may be granted."

While nearly half of all complaints are dismissed through motions for summary judgment, very few are dismissed on a motion to dismiss of the kind contemplated in H.B. 29.

HB 29 was originally coupled with a loser-pays provision that would have imposed the defendant's attorneys' fees on the plaintiff if the preliminary motion to dismiss prevailed but that provision was booted (at least in part) because lawmakers could not adequately define the term "substantial merit" (the lack of which would have triggered the payment of attorneys fees). In addition, the provision could have complicated the use of Georgia's somewhat unique "offer of judgment" rule in O.C.G.A. 9-11-68.

Fellow Atlantan Ken Shigley predicts that H.B. 29 will prompt a "rash of frivolous motions to dismiss as a stalling tactic" but will eventually become "much ado about nothing."

He reasons that defendants who file frivolous motions to dismiss will be sanctioned for doing so and that this will eventually curtail the practice, an outcome that's hard to dispute, although I seem to have missed the plaintiff's bar using that argument in favor of H.B. 29 before it was passed.