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January 2005 Archives

Taylor on Bush reforms

National Journal's always-thoughtful Stuart Taylor has a none-too-friendly take on President Bush's preferred federal tort reforms:

"Tort reform" is a dreary phrase for what could be a noble and exciting endeavor. It could be about fixing our system of justice so that more victims maimed by reckless conduct will get the compensation they need, when they need it; so that fewer good doctors and good companies will get soaked for misfortunes that weren't their fault; so that the insurance premiums and prices we all pay will no longer be inflated by legal waste, fraud, and abuse.

Measured against these aspirations, the three Bush-backed Band-Aids now before Congress are tired, unimaginative, incomplete, and -- in the case of a medical-malpractice bill that the House passed in 2003 -- deservedly doomed to defeat.

Taylor complains that the Class Action Fairness Act is needed, but that "the price of getting enough Democrats on board was to make the bill so vague as to leave ample opportunities for forum-shopping and for endless litigation over which court should hear which case." Particularly problematic is an amendment to exempt class actions "on behalf of the general public," which would seem to include the old-section-17200 style suits (in California), and the new-section-349 ones (in New York). Let's hope this gaping hole isn't in the final version, or the bill will be a silly exercise in posturing over substance.

Similarly, the need for asbestos reform is great, but Taylor worries that "the negotiations may well break down, and whether President Bush will make a difference remains to be seen." Recent bickering over the details of the proposal certainly lends credence to Taylor's concern. Thusfar, business and insurance companies have themselves been unable to agree, and the specter of Specter looms over Senate Judiciary Committee proceedings (see Nov. 11, Nov. 16, Nov. 18).

Taylor saves his major attack for the president's proposaed medical malpractice liability reform, which he questions on federalist grounds, suggests raises equity concerns, and asserts would fail to remedy the random, no-deterrence system that med-mal has become. Taylor suggests alternative proposals by Virginia's Jeff O'Connell -- in essence, the a variant of the "early offer" proposal O'Connell developed with Lester Brickman and Michael Horowitz for the Manhattan Institute in 1994 -- and Common Good's Phil Howard (see here) should instead be examined. Of course, both of those ideas, implemented at the national level, would raise the same federalist concerns Taylor outlines in response to the president's plan, a point Taylor sidesteps.

Supremes: contingent fees taxable

The Supreme Court ruled last week that contingent fees are taxable to the client, even if they pass through directly to the attorney. Calling the position of a client and his attorney the "quintessential principal-agent relationship," Justice Kennedy wrote for a unanimous court in determining that "as a general rule, when a litigant's recovery constitutes income, the litigant's income includes the portion of the recovery paid to the attorney as a contingent fee." The Association of Trial Lawyers of America and various public interest firms were displeased with the decision. (See full text of decision here.)

Superblogger and friend of PointOfLaw Stephen Bainbridge, who has a day job as a UCLA law professor specializing in the law of corporations, hosted an extremely interesting conference last Friday on corporate "social responsibility." A host of top scholars in the field participated; papers presented are available here. Professor Bainbridge gives an excellent rundown here. See also reactions by conference participants Tom Smith (University of San Diego, The Right Coast), Larry Ribstein (University of Illinois, Ideoblog), and Gordon Smith (University of Wisconsin, Conglomerate). Professor Bainbridge also commented last Wednesday on the topic, citing favorably to the recent feature in The Economist($). I largely share his, and The Economist's, skepticism; in my view, shareholder wealth maximization should be the sole responsibility of shareholder corporations, assuming compliance with laws and regulations (I can write more on that later). For a more extensive explication of the defense of shareholder wealth maximization, see Professor Bainbridge's article here.

Torts and torture

Over at Opinio Juris, Julian Ku opines:

Strangely enough, the war on terrorism is providing a slight boost for plaintiffs lawyers specializing in tort suits alleging violations of international law. This week, the UK released four men who had previously been detained at Guantanamo Bay. Lawyers for the detainees are threatening to sue.

Peggy McGuinness is more supportive of such suits.

Julian also clarifies the district court decision that has been described in some news sources as finding the Guantanamo tribunals to be unconstitutional:

[I]t is more accurate to say that the district court judge has refused to grant all of the U.S. government's motion to dismiss claims by certain detainees that their detention as enemy combatants in Guantanamo Bay violates the Constitution, federal law, treaties, and customary international law. Moreover, she also ruled in favor of the government on some issues we've discussed here dismissing some of plaintiffs claims for constitutional violations, finding broad sovereign immunity for claims under the Alien Tort Statute, and finding that the possible existence of a treaty violation makes their customary international law claims unnecessary.

For more of Julian's thoughts on the Alien Tort Statute see the article here that he co-authored with Berkeley's John Yoo. See also my thoughts on the topic a week ago, here. For more thoughts on torture and the war on terrorism, see the links Ted offered last week, which include thoughts by Andrew Sullivan, Marty Lederman, and MI's Heather Mac Donald. See also last week's debate between Mac Donald and John Hutson at Legal Affairs' Debate Club.

Obesity suit reinstated

The food-industry-defense Center for Consumer Freedom has its say. For more, see Jim's post last week. The same group, over the holidays, publicized its Santa Claus cookie obesity liability waiver.

West Virginia docs

Two rounds of malpractice reform by the legislature, in 2001 and 2003, have had a favorable effect, reports the Huntington Herald-Dispatch. The number of newly filed suits has dropped sharply; insurers are paying out only $1.06 for every dollar of premiums collected, as opposed to $1.82 in 1999. "The number of new permanent licenses issued by the West Virginia Board of Medicine, which dropped from 433 to 305 between 1997 and 2000, has increased since then. It rose from 305 to 377 between 2000 and 2004." Even real estate markets have benefited in Huntington, a regional medical hub, according to a local realtor.

Democratic State Sen. Evan Jenkins, who is also executive director of the West Virginia State Medical Association, said he thinks a 2001 enactment requiring plaintiff's lawyers to obtain a certificate of merit before proceeding "has had a significant impact on making sure that suits filed have merit". The 2003 round of reforms abolished joint liability, implemented a collateral-source offset, and put a cap of $250K on pain and suffering and other noneconomic damages.

Malpractice fears

Thomas Sowell weighs in.

UK's Economist

Daubert's reception in the states

Handy table here. P.S. More authoritative, if a bit more hassle to download, is David Bernstein's and Jeffrey D. Jackson's Jurimetrics paper here. And the Huron Consulting Group has an attractive and economical presentation here (PDF format), complete with key cases in each state. (Hat tip: Peter Nordberg).

The British Medical Journal has apologized for their bungled story about Lilly and Prozac.

Mississippi burning

As if to prove Alex Tabarrok's point about the unseemliness of judicial elections, a kerfuffle has arisen in Mississippi, where a plaintiff made the mistake of filing a brief accusing a justice of actual impropriety, rather than just the appearance of impropriety, through campaign donations. The recusal motion, filed after the appeal was decided, was denied as late (one is not allowed to play heads I win, tails requires a do-over), and the attorney was sanctioned. (Siobhan Morrissey, "Motion Moves Judge To Impose Sanctions", ABA Journal eReport, Jan. 28).

MTBE's cash leak

The litigation seeking to blame oil companies for (mostly mom-and-pop) gas stations' spills of the government-promoted fuel additive has already extracted nearly half a billion dollars, reports Law.com's The Recorder. (For our coverage, see Dec. 29 and links from there). A key figure on the plaintiff's side is Victor Sher, previously best known for directing the Sierra Club Legal Defense Fund (now EarthJustice) during the spotted owl controversy. Public water agencies, the primary complainant in MTBE cases, are ordinarily shy of litigation but have been brought on board by the lure of seemingly risk-free contingency deals. And it seems the MTBE campaign is going to serve as a model for blaming groundwater contamination more generally on original manufacturers of products that eventually find their way into water tables: Sher & Co. are "applying defective product arguments to a host of other chemicals, including pesticides, dry cleaning fluids, semiconductor solvents and compounds used to pressure-treat lumber. "

As part of the general national debate over medical negligence, there is movement in many states to toughen up disciplinary action against doctors, as by mandating that existing disciplinary boards conduct automatic investigations of doctors accused of certain kinds of misconduct. Might such measures afford new leverage to malpractice lawyers suing those doctors? Well, yes, they might, according to three attorneys discussing a new Pennsylvania law:

Because even a single act of negligence can now trigger an investigation of a board and the commencement of a disciplinary proceeding, astute malpractice defense counsel anticipate that initial malpractice complaints will be drafted with "triggering" events prominently alleged.

Tabarrok, Surowiecki on Vioxx

Over at Marginal Revolution, Alex Tabarrok (fresh off his Point of Law featured discussion) has some interesting thoughts on Vioxx and tort:

We have two systems of drug regulation in the United States, the FDA and tort law. Unfortunately, neither system works well. FDA incentives push for excess delay and excess cost and the tort system appears random if not perverse in its operation with good claims receiving nothing and bad claims receiving billions.

(see original for internal links)

Tabarrok points to James Surowiecki's New Yorker article, which notes:

A visit to the Rookery and the Robie House last week and this week's death of Philip Johnson (America's second-most-beloved Nazi, behind Colonel Klink) have got me thinking about architecture.

The current owners of a potentially lucrative piece of land are perturbed that an eccentric relative persuaded the Los Angeles Cultural Heritage Commission in a whimsical moment to designate a 22-foot stack of beer pallets as a historic monument. The multi-million-dollar sale is being delayed as neighbors use the garbage pile's monumental status to legally block the creation of an apartment complex. (Jessica Garrison, "Does It Stack Up as Art?", Los Angeles Times, Jan. 26). In Washington, New York, and Illinois, clever lawyers have a running business generating sizable federal tax breaks with "historic facade easements" for wealthy homeowners--who don't mind paying to make the commitment, because, in the case of Washington, DC, the city already bars changes to most facades in historic districts, and the prestige of the trust donation may actually improve the property value. Indeed, competing trusts in Washington are in litigation with one another over whether the newer entity's plaque for an essentially identical service infringes the incumbent's trademark. (Joe Stephens, "Loophole Pays Off on Upscale Buildings", Washington Post, Dec. 12 and links therein; John Metcalfe, "Plaque Attack", Washington City Paper, Dec. 3).

One downside of the city regulations, which can, with the stroke of a pen, severely limit the freedom of a land-owner without compensation for lost land-value, is that it creates perverse incentives for a building owner who has a potential white elephant on his or her hands. Houston was the home of James Wines's marvelous 1975 Indeterminate Facade Best Products showroom; when Best Products went out of business, a new owner brought in the wrecking ball without warning in July 2003. Sure, he might have asked preservationists to buy the building from him or face it going to a more economic use, but why risk them going to the courts to attempt to get an injunction? In the game theory of preservation, where preservationists have access to the power of the court to sidestep a negotiated settlement, an economically-minded owner will sometimes pre-emptively operate in secrecy, and some buildings that might have been preserved won't be because of the distortion to the bargaining process caused by the government intervention.

"How to Interrogate Terrorists"

The Manhattan Institute's own Heather Mac Donald (the recent winner of a $250,000 Bradley Foundation prize) has a fascinating piece by this title in City Journal that provides much needed perspective on the recent media discussion of the subject. The piece has provoked discussion, and Mac Donald has responded in a debate worth reading: Marty Lederman, Jan. 11; Mac Donald, Jan. 13; Andrew Sullivan, Jan. 12; Mac Donald, Jan. 13; Sullivan, Jan. 14; Mac Donald, Jan. 14; Sullivan, New York Times Book Review, Jan. 23; Lederman, Jan. 23; Mac Donald, Jan. 25.

Jenkins on overcriminalization

In today's Wall Street Journal (registration required), Holman Jenkins has an excellent column on the global tendency "to bring more charges of 'corporate manslaughter' against companies, as well as more attempts to make top executives themselves criminally liable." His interesting sidenote: the problem is more overseas: "so huge are the sums available through punitive damages in the U.S. civil legal system that few clamor for criminal prosecution as well."

2nd Circuit weighs in

The Second Circuit Court of Appeals yesterday reinstated the infamous obesity suit against McDonalds. The court ruled that in dismissing the action, U.S. District Judge Robert Sweet improperly interpreted section 349 of New York's Consumer Protection Act. N.Y. Gen. Bus. L. � 349(a)("Deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state are hereby declared unlawful."); (h)(enabling private rights of action).

According to the panel, the New York law "extends well beyond common-law fraud to cover a broad range of deceptive practices" and "does not require proof of the same essential elements (such as reliance) as common-law fraud." Instead, the court determined that a plaintiff under section 349 need only meet the "bare-bones notice-pleading requirements of [Federal Rule of Civil Procedure] 8(a)," rather than "pleading-with-particularity" as required by FRCP 9(b). The questions raised by Sweet in dismissing the case -- such as the plaintiffs' overall diet, exercise patterns, and family history -- did not need to be raised at the pleadings stage but rather "is the sort of information that is appropriately the subject of discovery."

The court, then, essentially interpreted the New York law to mean that any allegations of business fraud could survive a 12(b)(6) motion to dismiss -- and compel onerous and expensive discovery on a defendant -- even if the plaintiff failed even to suggest a link between the alleged fraud and the alleged harm. Is this the new version of California's recently deposed section 17200 (see here, here, and here)?

The full text of the opinion is here, and the amended complaint is here.

Yes, MICRA worked

Researchers at the RAND Corporation studied the pioneering California medical-malpractice law, and MedPundit Sydney Smith explains what they found.

Major pain for IT departments

That would be Sarbanes-Oxley, which was sold to the public as a control on mendacious top execs and their accountants. One of Virginia Postrel's correspondents gives particulars. And Larry Ribstein, who's been providing encyclopedic coverage of unintended Sarbox effects, adds another: pressure for companies to delist their stocks, which (if they succumb to the pressure) results in a shrinkage of disclosure.

Federalist Society

Jonathan Adler has some insights into the sources of its success.

ABA on jury reform, cont'd

Last month the American Bar Association "released a draft of recommendations to revamp the jury system, from keeping more details about jurors private to allowing them to take notes and discuss cases with one another during trials", to quote the New York Law Journal's summary. In line with what we forecast in our Aug. 24 post on the subject, the association's task force rejected ideas that would work to limit lawyers' power (such as limiting peremptory challenges) while cautiously endorsing some ideas that might empower juries (note-taking, etc.) and make the experience of serving on a jury more agreeable.

The results are at best a mixed bag. Some of the innovations in the proposed principles are either good ideas on their face or at least are deserving of experimentation. But there's also a certain amount of the usual wagon-circling against critics of current ways of doing things, as well as downright lamentable ideas here and there. For example, the principles seek to end the practice, followed in some courts, of keeping voir dire in the judge's hands (with lawyers free to suggest questions or lines of inquiry to the judge). Instead, they urge that lawyers be given broad powers to question prospective jurors directly, even though such power is often misused.

The proposals are scheduled to be put up for ratification next month.

$1,000 per American citizen

That's what the nation's liability insurance bill could cost by 2006 on current trends, says Tillinghast-Towers Perrin. The current size of the liability insurance market and related self-insurance is estimated at $245.7 billion or $845 per person, or more than $3300 per family-of-four; medical malpractice insurance made up $26.5 billion of that. In an acknowledgment of its significance, the litigation lobby has been conducting an amusingly hysterical campaign against the Tillinghast data series, claiming that the numbers "have no connection whatsoever to the costs of lawsuits, litigation or the courts" and "are completely irrelevant to any discussion of the civil justice system". See this, this, etc.

Featured discussion now complete

Our featured discussion on judicial elections and selections, which has been running the better part of two weeks, has now wrapped up. I'd like to thank Alex Tabarrok and David Rottman for their contributions and insights. If you haven't checked it out, read the full discussion here.

Suits against sovereigns

I wanted to bring our readers' attention to Opinio Juris, a new weblawg focusing on international law -- a topic underrepresented on the blogosphere. The blogs' contributors include Chris Borgen, a professor at St. John's, Peggy McGuinness, a professor at Missouri, and Julian Ku, a professor at Hofstra (Julian is a former law school classmate and housemate; see my reference here to his response to the Supreme Court's decision last summer on the Alien Torts Claims Act in Sosa v. Alvarez-Machain).

This weekend, Julian had a couple posts of interest:

Here, he refers to the Southern District's ruling dismissing civil suits against Saudi Arabia and various of its officials and subentities for the September 11 attacks, on sovereign immunity grounds. Alarmingly, however, the opinion "also casually endorsed the somewhat controversial 'aiding and abetting' theory of liability for violations of international law that is at the heart of many Alien Tort Statute lawsuits against corporations."

Here, he critiques international law guru John Norton Moore's recent column in Slate that attacks the D.C. Circuit for dismissing the claims of Gulf War POWs against the Iraqi government. Moore had compared the court's decision unfavorably to the Supreme Court's infamous Korematsu decision, which permitted the internment of Japanese-Americans during World War II (!?!). Moore also argued: "If the Court of Appeals decision stands in the Acree case, the consequences will be catastrophic. Future tyrants will hear the message, like a fire bell in the night, that the United States has little concern for its own POWs. Morale will decline in our armed forces as the reality sinks in that our government has sided with their torturers over them."

I have to agree with Julian that Moore's position is "wacky."

Class action reform

Panel discussion tomorrow afternoon, at AEI. Update: a video of the event is here.

Do not admit fault

Ann Althouse may regret posting this. Evan Schaeffer explains why.

Myrna Blyth's "Spin Sisters"

A few excerpts from this recent book about the world of women's magazines (St. Martin's Press, 2004), pp. 136-140:

"Of course, trial lawyers usually can't plant stories directly promoting their point of view in magazines, newspapers, and on television, though the Association of Trial Lawyers of America Web site is full of potential fear-factor stories that freelance writers use as sources. They also do this indirectly by hiring media relations groups that put out press releases to 'educate' reporters and editors....

"Now, if you were a mom who read that scary Redbook story, 'The Poison That Hid in Our Home', and were concerned enough to want more information, and go to the Web, you'd find the Lead Poisoning Resource Center. And you would also find that the Lead Poisoning Resource Center was set up by (surprise, surprise) [Ron] Motley's law firm."

And more: "In the spring of 2003, both a Family Circle article on the dangers of pressure-treated wood and a Parents magazine feature on 'sick' schools used information from the Environmental Working Group."

Senate situation, cont'd

"But ATLA considers Sen. Lindsey Graham, R-S.C. -- also a trial lawyer -- an ally, and sources predicted he would be more emboldened to push for their causes this year, now that he is not longer a newly elected senator. Meanwhile, the group said it expects to continue its strong relationships with Minority Leader Reid, Minority Whip Durbin and Senate Judiciary ranking member Patrick Leahy, D-Vt." (Molly M. Peterson, "Trial Lawyers Courting New Senate Allies For Tort Battles", CongressDaily PM, Jan. 13, not online).

Spin that wheel again

Jury awards $1.3 million in punitive damages; defense succeeds in obtaining retrial; next jury awards $30 million in punitives. Oops!

Starbucks managers

Latest overtime suit.

"Criminalizing corporate governance"

Larry Ribstein has hard-hitting posts on the subject here and here, winning accolades from, among others, Brad DeLong. For his comments on directors' personal liability, see links from Overlawyered, Jan. 7.

"Pharmaceuticals the next victim?"

Prof. Bainbridge last summer, quoting from his then-forthcoming (and now available) treatise on agency and partnership: "much transactional lawyering consists of building a paper record so that a dubious position later can be defended with a straight face."

Daubert's detractors

The American Medical Association may applaud the Supreme Court's efforts to exclude unsound science from the courtroom (see Jan. 4), but not all medical professionals share its enthusiasm. The American Public Health Association, to name one group, passed a resolution this past fall deploring Daubert and its effects. As Sally Satel has well documented, APHA has long aligned itself with a style of ostensibly progressive politics whose connection to traditional public health concerns can seem tenuous: see this piece (in 2001, by way of example, "the APHA put forth policy resolutions against national missile defense, the war in Southwest Asia, and the General Agreement on Trade in Services") and this one (APHA convention presenters keen on blaming capitalism and social inequality for disease).

Our editor: audio

Our editor Walter Olson recently sat for a 28-minute interview with Fox News chief judicial analyst Andrew Napolitano and DaimlerChrysler assistant general counsel Steve Hantler. Judge Napolitano acts as a moderator/facilitator, and Olson and Hantler discuss Walter's newest book, The Rule of Lawyers, as well as the trial bar's tactics, reasons for the business community's failure to respond successfully to the litigation explosion, likely next targets of the lawsuit industry, and keys to developing an effective tort reform strategy. The interview is available here (Windows Media Player) and here (others).

NYU Journal of Law & Liberty

Welcome to this new student-edited journal, whose inaugural issue consists of a symposium on the work of Hayek with contributions from such notables as Richard Epstein, Richard Posner, John Hasnas, Israel Kirzner and Alan Ebenstein.

Welcome National Review Online readers

Thanks to Ramesh Ponnuru for the mention.

More Media Matters

Last week, I referenced Sebastian Mallaby's excellent column in The Washington Post, "The Trouble with Torts." Yesterday, in response to criticisms from some quarters, he has another good follow-up, "Better Than Lawsuits: We Need a Smaller, Predictable System."

What did, and do, Mallaby's critics say? Well, the primary attack dog has been "Media Matters," a "not-for-profit progressive research and information center dedicated to comprehensively monitoring, analyzing, and correcting conservative misinformation in the U.S. media" (see Ted's dissection of one of their prior goofs here; Media Matters is headed by truth-challenged David Brock).

Media Matters initially jumped on Mallaby's first column by questioning Mallaby's assertions, given that he had relied on the study done by Tillinghast-Towers Perrin, which Media Matters called "a highly questionable study paid for by tort reform advocates." But that's not true. As Stuart Taylor noted in his extensive letter to Stephanie Mencimer, posted today on overlawyered.com, "while Tillinghast has accepted partial funding from tort reform groups in the past, since 2003 its reports on tort system costs have been funded internally." Moreover, like Mencimer, Media Matters "cites no evidence undermining Tillinghast�s assertion that its annual reports' purpose is 'to provide a straightforward, objective analysis of cost and trends, and not to support any particular point of view.'"

"Jury pool from hell"

Posner oops

At the Becker-Posner Blog, this week's topic is liability reform (Posner first, then Becker). Without seeking to respond to all of their views, some of which come across as persuasive and others as highly idiosyncratic, it is noteworthy that in Posner's second paragraph he asserts flatly that "malpractice insurance is not experience-rated -- physicians are not charged premiums based on their personal liability experience". The implication is that a physician who has faced several claims will pay no higher premium than one in the same specialty and locality who has never faced a claim, which will strike many readers as a curious and perhaps regrettable state of affairs if true.

But is it in fact true? The Michigan Medical Malpractice blogger begs to differ:

[P]rofessional liability insurers already do in fact use claims experience as a basis to set rates. A physician with one or two verdicts or settlements will pay more in premiums than a physician who has never been sued. Some companies will cancel policies for those with five, or three, or sometimes even one. Indeed, it is an unfortunate reality that many companies will jack up premiums for a physician who simply has a pending claim against him, regardless of whether it has merit or not.

More: Lots more on this issue -- including scraps of evidence pointing in puzzlingly contradictory directions -- from Martin Grace (Jan. 19 and Jan. 20, citing this board), and in Posner's own comment section. Peter Nordberg also comments. This 1994 Wharton paper by Patricia Danzon calls experience rating in malpractice insurance "very crude, both because insurers lack the necessary information and possibly because of political pressures." Yet more: Martin Grace, Feb. 23.

Stuart Taylor, Jr. of Newsweek and National Journal has written a detailed, point-by-point rebuttal to Stephanie Mencimer, whose articles assailing liability reformers have been a low point in the recent history of the Washington Monthly. Curiously or otherwise, the Monthly's editors seem to be refusing to post his letter or acknowledge his response to Mencimer's attack on his work. I've got much more on the story at Overlawyered, including a copy of Taylor's letter posted with his permission.

...quoth Matt Yglesias. More: he responds to a critic; and check out Nathan Newman posts here and here.

British Medical Journal embarrassed

Someone with an interest in attacking Lilly, the drugmaker, approached the BMJ proffering documents that had supposedly mysteriously vanished since a famous lawsuit a decade ago and which were said to implicate Lilly in knowing that its antidepressant Prozac was more dangerous than it let on. Hundreds of news stories followed, uniformly harmful to the company's reputation. But as the New York Times's Barry Meier reports, there are many problems with the documents: some have been in circulation for years, while Lilly has plausible rebuttals of others which the BMJ did not invite it to provide before running its damaging article. (Incidentally, the plaintiff's lawyers who handled the decade-old case against Lilly say they weren't consulted regarding the documents, and another leading anti-Prozac lawyer says he wasn't involved either.) I've had occasion to criticize the BMJ before, on Overlawyered, regarding the case of anti-tobacco academic Richard Daynard (updates).

Wall Street research lawsuits

They're not going well for plaintiffs, reports the WSJ (sub-$). After the 2003 settlement in which 10 Wall Street firms agreed to pay $1.4 billion in fines and restitution over charges of having improperly tilted their stock research to favor underwriting clients, class action lawyers "spen[t] millions of dollars on television and newspaper ads in search of people who lost money on WorldCom and other stocks mentioned in the settlement." But "[s]ecurities-industry arbitration panels have rejected the vast majority of cases decided so far." "'We bet big, and so far we have lost big,' says Richard Lott, an attorney with Levin, Papantonio, Thomas, Mitchell, Echsner & Proctor, a large class-action firm in Pensacola, Fla. Most of the arbitration cases stemming from the stock-research settlement have been filed by Mr. Lott's firm and another pair of lawyers, James Hooper and Robert Weiss, who are based in Orlando and Jericho, N.Y., respectively."

Bush's inaugural address this week

...will highlight liability reform, or so London's Daily Telegraph hears (via Captain's Quarters). Update Jan. 21: they were misinformed, no mentions of it.

Sacramento's revolving door

From Cal Law (sub-$)(The Recorder, Jan. 10):

Ellen Corbett, former chairwoman of the California Assembly Judiciary Committee, has gone to work for one of her main allies in the fight against tort reform, San Francisco's Sturdevant Law Firm.

Firm founder James Sturdevant was president of Consumer Attorneys of California in 2004, Corbett's last year in the Assembly. Under Corbett, the Judiciary Committee was ground zero for several battles between business interests and the plaintiff bar, including the fight over changing California's unfair competition law....

Corbett, a Democrat who represented the San Leandro area, was termed out when the last legislative session ended in September, but is currently raising money to run for state Senate in 2006....

John Sullivan, president of the pro-tort reform Civil Justice Association of California and a frequent critic of the close relationship between the plaintiff bar and Democrats, laughed when he heard Corbett was going to work with Sturdevant, calling it "par for the course."...

Corbett, who did not return a phone call seeking comment Friday, has never made excuses about her relationship with the plaintiff bar, saying what they do jibes with her political philosophy.

Global warming suits

Reuters has an update. One plaintiff in a pending suit against U.S. development agencies, which accuses their projects of contributing to global warming, is the city of Arcata, Calif.

Bob Herbert at it again

In today's New York Times, Bob Herbert again trumpets the ATLA line by claiming that President Bush's proposal to prohibit punitive damage against drug companies who had complied with FDA regulations is "both unwarranted and dangerous." (For our previous refutations of Herbert's pro-trial-lawyer claims, see June 22, June 22, June 23, June 28, June 29.) Herbert goes so far as to assert:

[T]he [Bush] administration is like an ardent lover in its zeal to shower the rich and powerful with every imaginable benefit. So tucked like a gleaming diamond in proposed legislation to curb malpractice lawsuits is a provision that would give an unconscionable degree of protection to firms responsible for drugs or medical devices that turn out to be harmful.

Herbert points to Vioxx and Celebrex, and Prozac -- you know, the claim that it increases the likelihood of suicide in teens -- to point to bogeymen that punitive damages would supposedly do a good job of punishing or deterring. He claims, relying on his favorite "consumer" advocate Joanne Doroshow, head of the trial-lawyer-front-group "Center for Justice and Democracy" (check out their site -- the center exists only to support pro-trial-lawyer positions; its backers include Ralph Nader and board members Erin Brockovich and Michael Moore; see Ted's post here on their most recent report): "The whole idea behind punitive damages is to severely punish the most egregious offenders. Huge punitive damage awards are supposed to serve as a deterrent to extremely bad behavior."

But do punitive damages really do that?

Mississippi courts

Much improved these days, say mass tort defense lawyers, since the scaling back of the state's once distinctively liberal joinder rules.

Drug price controls and new drug R&D

In a short article in the fall 2004 issue of Regulation (scroll down to p. 4), John Vernon, of the U. of Connecticut, issues a sober warning about proposals to regulate pharmaceutical prices. Vernon and his colleagues have determined that for every 10% reduction in pharmaceutical prices, the industry spends 5.83% less on new drug research. It follows that if additional government regulation in this area actually reduced drug prices, this would necessarily involve a reduction in the number of new drugs developed and brought to market. Vernon estimates the number of "life-years" lost as a result of a range of price reductions via regulation -- for example: a 10% reduction in prices leads to the loss of 40.1 million life-years. A more aggressive policy that results in a 50% reduction in prices would cost 178.8 million life-years.

His bottom line: "any benefits associated with improved access to today's medicines through price controls must be weighed carefully against the potential long-run costs."

Well worth reading.

Music to answer interrogatories by

At ManagedMusic.com one can book the services of "Dr. Sam and the Frivolous Action Blues Band", who perform at professional and corporate meetings and events. Among the tunes on their album Goin' Bare: "A Ploy Named Countersue", "The Jury Consultant Blues" and "Back Spasm Woman". (Not included: "These Foolish Things Incline Me To Sue" and "If I Knew You Were Loaded I'd Have Faked An Ache".)

Max Boot on Lowndes County, Ala.

Thanks to Alex Tabarrok at our current Featured Discussion for pointing to a resource we hadn't known was online: the Denver Post has reprinted a very interesting chapter from Max Boot's book Out of Order built around an account of the unusual brand of justice on display in Lowndes County, Ala., where famed tort attorneys James Butler and Jere Beasley won a $150 million jury verdict against GM in the courtroom of Judge A. Ted Bozeman in a case alleging a defective door latch in a Chevy Blazer.

"States flex prosecutorial muscle"

Helpful Washington Post survey article on state attorneys general and their penchant for regulation through litigation.

Employment: class-action-quake

The Wal-Mart class certification, overtime and employee-classification suits, pension and age-bias actions, all add up to one mighty ominous trend, according to Corporate Counsel: "'The 8.0 earthquake in employment and labor law has to be the use of class actions as a tool,' says Garry Mathiason, a San Francisco-based partner at labor and employment firm Littler Mendelson -- where the class action caseload has doubled in the past year. 'There's not a corporation in America that hasn't been affected by it.'"

Med mal in the Senate

The vote count still isn't anywhere near there for the doctors, at least not if they need to overcome a Democratic filibuster, according to a report last month in the New York Times:

In the Senate this year, only one Democrat, Zell Miller of Georgia, favored limits on lawsuits, and he did not run for re-election. Three Republicans opposed limits: Michael D. Crapo of Idaho, Lindsey Graham of South Carolina and Richard C. Shelby of Alabama, who were courtroom lawyers before they entered politics.
Of four incoming GOP senators who replace Democrats, one is Florida's Martinez, whose background is in trial lawyering. Last year, malpractice limits won only 48 or 49 votes in the 100-member body, and 60 votes are needed to overcome a filibuster.

ATLA's boast: we shaped press coverage

An acquaintance who's a member of the Association of Trial Lawyers of America was kind enough to forward a recent email to supporters from that organization in which ATLA president Todd A. Smith boasts about the lobby's success in getting across its point of view in the press last week during President Bush's well-publicized series of speeches on liability reform. (No online link). Among media "scores" for ATLA: "more than fifteen print stories in national and local media highlighting how caps hurt victims" including articles in the AP/Reuters, St. Louis Post-Dispatch, Washington Post (two of them), with more in the pipeline in Newsday and elsewhere. The letter also speaks of "coordinating efforts" with groups ostensibly representing other than trial lawyer interests, and names a bunch of such groups: old reliables like the Center for Justice and Democracy and Foundation for Taxpayer and Consumer Rights, as well as the up-and-coming Environmental Working Group. Participating in "news conference calls" aimed at the press "were Congresswoman Jan Schakowsky of Illinois, former Missouri Insurance Commissioner Jay Angoff, William McNary of USAction and Citizen Action/Illinois, Doug Heller from the Foundation for Taxpayer and Consumer Rights, Joanne Doroshow from the Center for Justice and Democracy, and an Illinois medical malpractice victim. More than 30 reporters participated in the calls, including ABC, NBC, the New York Times, and the Washington Post."

Tort reform programming note

The Washington Legal Foundation will host a program on "State and Federal Priorities for Reforming the Legal System" this Thursday, January 13, from 9 to 10:15 AM ET. Speakers include Victor Schwartz, Patrick Hanlon, and James Wootton. It apparently will be webcast live. Details here.

Georgia emergency medicine

Medical liability reform has built up a big head of steam in Georgia, a state in which Republicans have just succeeded in organizing the legislature with the aid of conservative Democrats. Rep. Thomas Bordeaux (D-Savannah), a plaintiff's lawyer who has stoutly defended trial lawyer interests, will no longer chair the House Judiciary Committee; the new speaker will be Rep. Glenn Richardson (R-Dallas), who as it happens has also filed med-mal suits in his legal practice but says he supports tort reform.

Aside from the inevitable caps on non-economic damages generally, the Atlanta paper reports,

The proposed law also would prevent a malpractice victim from collecting any jury award for pain and suffering for a doctor's negligence committed during the first 24 hours of a visit to an emergency room.
Over at Cut to Cure, Bard Parker reacts favorably to this provision:
I like this a great deal. Many patients in this situation fall under EMTALA, perhaps the most expensive unfunded federal mandate in existence. Physicians are forced to provide care in stressful situations to patients that may or may not have coverage, and in the case of trauma patients, are likely to sue someone anyway. The risk/reward calculation in this situation has forced many subspecialists to withdraw from emergency room coverage.

New Jersey doctor shortage

On the way? Or has it already arrived? Hardest-hit are said to be ob/gyns, neurosurgeons, neonatologists "and several other high-risk specialties".

Featured Discussion underway now

As I indicated before the holidays, we are fortunate to have two outstanding legal thinkers kick off our year with a discussion of judicial election and selection systems. Following the excesses of the past year's judicial elections, are we better off with an appointment system, whether or not akin to the federal model? Are electoral systems -- which are unlikely to go away in the many states where they exist -- capable of producing good judges?

Helping us answer these questions are Alex Tabarrok and David Rottman. Alex is a professor of economics at George Mason; many of you may know him from the weblog Marginal Revolution, which he runs with Tyler Cowen. Along with Claremont McKenna's Eric Helland, Alex authored "The Effect of Electoral Institutions on Tort Awards," which examined whether partisan elected judges redistributed wealth from out-of-state defendants to in-state plaintiffs.

David is Principal Court Research Consultant at the National Center for State Courts. For almost 20 years, he has examined American courts. In 2000, the NCSC issued an exhaustive study, "Call to Action: Statement of the National Summit On Improving Judicial Selection" (PDF). The study includes both comprehensive data on varying election/selection systems around the nation as well as 20 proposals for reform.

Our discussion kicks off this week (here). We hope you'll find it interesting!

New Tillinghast study

Tillinghast-Towers Perrin, the consulting firm that is the definitive source for overall tort system costs, has released its 2004 Update (PDF). According to the study, 2003 tort costs grew 5.4%, a slowdown from the 13-15% growth in the two previous years but still faster than the overall economy's 4.9% growth rate. Sebastian Mallaby has a column in today's Washington Post, "The Trouble with Torts":

In 2003, according to Tillinghast, the tort system cost $246 billion -- meaning that the average American paid $845 for it via more expensive goods and services. But the really shocking thing is where the billions went. Injured plaintiffs -- the fabled little guys for whom the system is supposedly designed -- got less than half the money. . . .

So the tort system's administrative costs are a scandal. But are its other costs much better? Of the 46 cents per dollar in the system that actually make it to plaintiffs, 22 cents are paid out to compensate people for economic damages, including damaged property, lost wages and medical expenses. The other 24 cents are paid to compensate plaintiffs for "pain and suffering." Should we really want a system that pays out billions for emotional distress? A little thought suggests we shouldn't.

A tort system is a form of insurance: Consumers accept higher prices for products and services in exchange for the chance to be compensated if the product or service harms them. Outside the tort system, we have plenty of examples of people buying insurance or warranties. People insure their cars, homes, refrigerators; they want protection against financial setbacks. But people don't buy much insurance to protect themselves from pain and suffering; their revealed preference is that they don't want it. So why have a tort system that provides over $50 billion in pain-and-suffering awards annually? . . . .

Bush is pushing three kinds of tort reform, and all of them are worthy. But the ultimate goal should be to shrink the tort system radically. Measured as a share of GDP, America's tort system is more than twice as expensive as it was in 1960, twice as expensive as the current systems in France or Canada, and three times as expensive as the system in Britain. A reasonable goal for the American tort system is to halve it.

The Washington Post editorial board also weighs in, in a pro-reform column.

Pennsylvania medical countersuits

Although current law is set up to make it exceptionally difficult for innocent doctors to file successful countersuits over having been named in groundless medical malpractice suits (see Mar. 14, reprinting an October 2003 item from Overlawyered), the Pennsylvania Medical Society last year launched a project to assist doctors in pursuing such countersuits. It has already claimed one success, extracting an apology and an unspecified monetary payment from a lawyer who'd wrongly sued a gynecological oncologist but could not produce an expert to support her allegations.

Media Matters matters

The David Brock-run Media Matters for America accuses the Washington Post of botching its litigation reform coverage--but then proceeds to make a gigantic error of its own.

MMFA complains that the Post discussed the debate over whether malpractice reform would reduce malpractice insurance rates without resolving it. MMFA contends that the question isn't debatable: the Bush administration is wrong. Why? MMFA quotes the CBO on health insurance rates. Unfortunately, doctors can't get malpractice insurance by buying health insurance.

This is what MMFA gets for relying on ATLA fact sheets instead of primary sources. In fact, what the CBO said about malpractice insurance rates was that the administration proposal "would lower premiums nationwide by an average of 25 percent to 30 percent from the levels likely to occur under current law."

MMFA also misrepresents the CBO on the question of defensive medicine by claiming that the CBO said there was "no evidence that restrictions on tort liability reduce medical spending." This is quote mining: in context, CBO was referring solely to whether a particular statistical methodology supported the hypothesis, and supports it solely with that conclusory sentence. In fact, the CBO cites a number of studies showing that litigation reform does reduce unnecessary defensive medicine costs, and calls the issue of defensive medicine savings an open question meriting further research. (HHS, in comparison, citing a Quarterly Journal of Economics study, argues that defensive medicine cost savings from litigation reform would be in the tens of billions.)

It's interesting that MMFA treats the CBO as authoritative when it incorrectly thinks that the CBO doesn't support litigation reform. One wonders whether MMFA will correct itself and chastise the Washington Post for being too solicitous of trial lawyers now that it should know that its authoritative source actually provides support for President Bush's proposal.

MMFA might be in need of some litigation reform themselves. The Sinclair Group, upset at MMFA's claims that it led a successful boycott of the broadcaster, has threatened that it "will aggressively pursue any organization or any individual" who commits "trade defamation."

Calif: punitives in contract cases?

J. Craig Williams sounds the alarm about a new California Supreme Court opinion (authored, whether curiously or not, by libertarian-admired Justice Janice Rogers Brown) which would seem to open a door for lawyers to start claiming punitive damages in contract disputes. More: George Wallace, however, considers concern about the case overblown, suggesting that it leaves the tort/contract frontier little if at all changed (Jan. 8).

New York-area hospitals

Their liability insurance costs have surged by nearly 150 percent since 1999, says a new study (PDF) from the Greater New York Hospital Association. The Times has a report.

Question that answers itself

Why is an Alabama Trial Lawyers Association blog arguing that record profits by property insurers is evidence that liability reform isn't needed for class actions, asbestos, and medical malpractice? I suppose they expect property insurers are supposed to subsidize the completely different medical malpractice mutual insurers out of the goodness of their hearts. And never mind that the profitability of property insurers is measured over timeframes much longer than a single year.

In Massachusetts in the last 10 years, Ms. Audesse said, "one-fourth of 1 percent of all the doctors - 98 of the 37,369 doctors - accounted for more than 13 percent of all the malpractice payments, $134 million of the $1 billion in total payments." (Robert Pear, "Panel Seeks Better Disciplining of Doctors", New York Times, January 5.)
Does this prove that "more effective disciplining of incompetent doctors could significantly alleviate the problem of medical malpractice litigation"? Not by itself.

President Bush's 43-minute speech in Madison County yesterday called for a medical liability bill to be passed this year, and added calls for class action reform and asbestos reform. White House policy advisor Kristen Silverberg answered questions about medical liability reform. The problem has only grown worse since HHS issued a 2003 report calling for systematic reform, with potential savings to the federal government of $28-$50 billion a year, and to the economy of much more. Legislation has not been introduced yet, but it will likely be similar to last term's H.R. 5, The HEALTH Act of 2003.

Naturally, the American Trial Lawyers Association is up in arms to protect the billions they take from the status quo. They've published a "fact sheet" aimed at the arguments Bush made in his speech; at least one legislator, Rep. Jan Schakowsky, has already parroted it word for word on her web site. Par for the course, ATLA resorts to quote-mining because it can't win the debate on the facts.

In the American Spectator, Bill Tucker calls Madison County a "rotten borough" and recounts some of the procedural tricks lawyers use to get venue there in cases with no particular relation to the county (as in a class action against Wyndham Hotels, which has no facilities in Madison County). (Thanks for the mention, too.) The Chicago Tribune has one of its usual excellent editorials (" Welcome to Madison County, Mr. President. Just hold on to your wallet."). And St. Louis Post-Dispatch columnist Bill McClellan, who knows a thing or two from personal experience about the talons of the Madison County plaintiff's bar, sits in on some proceedings in a Granite City courtroom (the James Blair Down case) with amusing results.

ERISA suits

The class action securities bar is piling in, reports the NLJ, as it realizes that cases on behalf of pension beneficiaries have a lot in common with cases on behalf of investors.

Regulating drugs in court

The Vioxx fiasco is likely to spell bad news for consumers, argue Richard Epstein (quoted in Forbes), David Henderson and Charles R. Hooper, Larry Ribstein and Holman Jenkins (WSJ-$).

Subsidizing docs' insurance

That's the supposed compromise just arrived at between Maryland Gov. Robert Ehrlich and Democratic legislators to address the state's malpractice crisis, but Point of Law contributor Michael Krauss, writing in the Baltimore Sun, warns that it's the wrong path (see also Dec. 14). More: a WSJ ($) editorial updates the situation. After the initial offer of a compromise by Gov. Ehrlich, Democrats in the Maryland legislature rejected the liability curbs but took and ran with the idea of subsidizing doctors' malpractice coverage, drawing up plans for a steep new tax on HMOs toward that purpose, and defying the governor's threatened veto of the idea.

AMA wants expert reform

Correctly concluding that damage caps aren't enough, organized medicine now is getting ready to tackle the issue of scientific testimony: "Reining in medical expert witnesses was perhaps the most talked-about idea at the American Medical Association Interim Meeting here in December." Among ideas advanced: getting more states to adopt Daubert principles.

To quote George Wallace at Declarations & Exclusions, "What do you do when you are an attorney ready for Christmas vacation and your worthy opponent insists you must stick around and litigate a dispute over production of documents? If you are Texas attorney Michael P. Lynn, you file a rhyming brief � la Seuss." (PDF). Snopes has more.

Bush to Madison County

Also from Madison County: President George W. Bush will be visiting the infamous magnet court jurisdiction this Wednesday. According to the St. Louis Post-Dispatch:

Presidential visits typically are arranged to highlight a success story, such as an overachieving Head Start program or a thriving small business. But Wednesday's presidential visit - the first to Madison County by a sitting president since Jimmy Carter stopped in Alton during a 1979 Mississippi River cruise - appears to be based on the county's reputation in some circles as a haven for so-called frivolous lawsuits.

Two weeks ago, the county's reputation was reaffirmed by the American Tort Reform Association, who again named it the worst "judicial hellhole" in the nation. And as our editor noted this morning, "George Priest, the Yale law professor (and friend of this site), at last month's White House panel on lawsuit abuse, 'specifically mentioned Madison County. He said the county was one "where trial lawyers and judges, I don't want to say conspire, but have a mutually symbiotic relationship."'"

But both Georges should be careful, or they might just face a SLAPP suit from Rex Carr, the (in)famous libel attorney who represents Judge Gordon Maag in his post-election-defeat $110 million defamation suit that I discussed in detail before the holidays (see Dec. 24, Dec. 23, Dec. 21).

Madison County asbestos slowdown?

The St. Louis Post-Dispatch recently reported that a law firm that has dominated Madison County asbestos litigation seems to be rapidly scaling back its prosecution of such suits, perhaps in anticipation of a less favorable legal climate. According to reporter Paul Hampel:

* The SimmonsCooper firm's asbestos work, formerly led by Randy Bono, is now being handled by a different partner who is, according to some on the defense side, moving quickly to settle cases instead of trying to squeeze them for top dollar;

* Two other local firms, however, have stepped up their filing efforts, and a lawyer involved in assisting one of those firms boasts of bringing Texas claimants to Madison County to avoid the effect of last year's tort reforms in the Lone Star State;

* "Mesothelioma claims worth at least $1 billion when resolved were filed last year in Madison County"; about 30 percent of the mesothelioma lawsuits brought nationally last year were filed in the small Illinois county;

* George Priest, the Yale law professor (and friend of this site), at last month's White House panel on lawsuit abuse, "specifically mentioned Madison County. He said the county was one 'where trial lawyers and judges, I don't want to say conspire, but have a mutually symbiotic relationship.'"

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.