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February 2007 Archives

National Law Journal on obesity litigation

Attorney Lianne Pinchuk asks "Are Fast Food Lawsuits Likely to Be the Next 'Big Tobacco'?" Note the last paragraph:

Despite the lack of success of obesity-related personal injury cases thus far, it is important to remember that when allegations were first made against tobacco companies, the possibility of large verdicts seemed remote. It was only once the litigation reached the discovery phase and negative internal documents were revealed that large plaintiffs' verdicts became possible. The Big Food cases to date have generally not led to discovery, and only Big Food itself knows what damning documents may exist. If they do exist and are discovered by plaintiffs lawyers, they may provide ammunition for more suits and increasing verdicts. Right now, however, fast food companies are enjoying more protections than tobacco companies ever did, and it appears that Big Food is not the next Big Tobacco.

AEI's Phil Wallach perceptively writes us "Is it really plausible to imagine that plaintiffs� lawyers won�t find SOMETHING that they will call a smoking gun once given the access to the documents? If only the author had [written] 'seemingly' before 'damning,' I would feel a whole lot better about her thesis."

My take on obesity litigation is available at SSRN. Further discussion of this article by Jonathan Adler @ Volokh.

(Congratulate Phil: he just got into Yale and Harvard for grad school. Which means I'll need a new assistant in a few months. Did you know that the Institute has been featured as one of Washingtonian magazine's fifty-five great places to work?)

Backdating scandal

John Carney at Dealbreaker, along with Prof. Ribstein, try to sort out the hyperbole from the actual damage done.

R.I. lead paint ruling, cont'd

Hans Bader of the Competitive Enterprise Institute criticizes Judge Silverstein's ruling (see yesterday's post) and makes this point about one of the theories of liability in the case:

Moreover, the lead-paint lawsuit was based in part on speech by the lead paint trade association, the Lead Industries Association (LIA), which mounted a public campaign against a total ban on lead paint. That raises serious First Amendment problems.

The Noerr-Pennington immunity, a First Amendment doctrine recognized by both the U.S. Supreme Court and the California Supreme Court, immunizes companies and people from liability under the First Amendment for lobbying campaigns that would otherwise trigger liability. See BE&K Construction v. NLRB, 536 U.S. 516 (2002) (company immune from suit under federal law); White v. Lee, 227 F.3d 1214 (9th Cir. 2000) (citizens immune from liability under Fair Housing Act).

The Rhode Island judge tried to get around this by claiming that the jury did not punish paint companies for the LIA trade association�s speech itself, but rather only considered the trade association�s speech to show that individual paint companies �had knowledge of the LIA�s lobbying activities� and to shed light on the �purpose and character� of their actions.

That is a specious distinction. Similar reasoning was rejected by then-judge (now Supreme Court Justice) Samuel Alito in his decision in Pfizer v. Giles, 46 F.3d 1284 (3d Cir. 1995). In that decision, a federal appeals court overturned a trial judge�s refusal to dismiss a lawsuit against Pfizer, which manufactured asbestos, because the trial judge had relied on Pfizer�s membership in an asbestos trade association that engaged in lobbying, some of which was allegedly deceptive. That violated the First Amendment, which protects membership in a trade association that engages in protected speech, even if it also engages in some unprotected speech. (By contrast, there is no proof that the paint industry trade association engaged in any unprotected speech).

And Legal NewsLine has this article quoting Prof. Childs.

Still more on Philip Morris v. Williams

Anthony Sebok has an overview on Findlaw generally agreeing with the earlier assessment raised by me and Jim Copland. Plaintiffs' attorney Eric Turkewitz has similar points about the Justice Stevens dissent.

And Beck and Herrmann do a comprehensive analysis of the law of class actions and punitive damages documenting persuasively the point earlier raised by Mark Moller that Williams will have its most impact in the class-action certification context. (Update: Bill Childs comments.)

Voting Rights Act preclearance provisions

Abigail Thernstrom of the Manhattan Institute has this article (PDF) in the Georgetown Journal of Law & Public Policy on how Section 5 of the federal Voting Rights Act, which requires (some) localities to pre-clear changes in election rules to avoid adverse impact on minority voters, has evolved into something quite different from its original conception.

Boies chair at Tulane law school

The litigator is donating $1.5 million to the New Orleans institution to endow the David Boies Distinguished Chair in Law.

That's so not fair

Our newest featured column is the one I wrote last year for the Times Online about reports that disgruntled fans were thinking of suing Barbra Streisand for having come back out of concert retirement, thus diminishing the retrospective value of the "farewell concert" tickets they bought years ago. It's a good example, I argue, of the sorts of consumer annoyances that are better addressed by a round of jokes at the miscreant's expense than by legal action.

Hedge funds hit by employment suits

Peter Lattman, summarizing a W$J article:

Lawyers say employment lawsuits against hedge funds are on the rise. �Ten years ago, there were virtually no hedge-fund employment lawsuits; five years ago, there were a few,� says Jeffrey Liddle, managing partner at Liddle Robinson in New York. �Today, once a week we get a call.�

Big, though expected, ruling yesterday in the long-running Motley Rice extravaganza: "A judge on Monday ordered three former lead paint manufacturers to clean up contamination in Rhode Island and said he would appoint a special master to advise him on exactly what the companies should be required to do. Lawyers and financial analysts have said the cleanup could cost more than $1 billion." (Associated Press; Providence Business News; ruling (197 pages!) in PDF format; statement on behalf of some defendants; Providence Journal blog). Judge Michael Silverstein denied the companies' request for a new trial; appeal is considered likely. At Law and More, Jane Genova quotes a Wall Street source who says the paint makers' stocks were not hammered too badly because the ruling had been widely anticipated, and because Judge Silverstein refrained from naming a high dollar figure. More coverage at Genova's site here and here. A blog called Rhode Island's Future crows about the ruling, its author Matt Jerzyk freely admitting that he is not the most detached imaginable observer ("Disclosure: I am a law clerk at Motley Rice.") And Byron Steir has a post here. For previous coverage at this site, see, e.g., here, here, here, here, here, here, here, here, here, here and here, and Jim Copland's column here. Previous coverage at Overlawyered can be found here, here and here.

P.S. David Nieporent, guest-posting at Overlawyered, analyzes the ruling as a case study in "litigation as Robin Hood-style wealth redistribution".

The card-check "travesty"

Former UNITE HERE organizer Jennifer Jason, in House testimony Feb. 8 (PDF)(via Cleary):

Frankly, it isn't difficult to agitate someone in a short period of time, work them up to the point where they are feeling very upset, tell them that I have the solution, and that if they simply sign a card, the union will solve all of their problems. I know many workers who later, upon reflection, knew that they had been manipulated and asked for their card to be returned to them. The union's strategy, of course, was never to return or destroy such cards, but to include them in the official count towards the majority.

Michael Fox at Employer's Lawyer describes the bill's title ("Employee Free Choice Act") as "deceptive advertising":

How else can you describe a proposed statute whose principal, although not only, significant restructuring of the National Labor Relations Act is to eliminate secret elections...? ... Let there be no mistake, this portion of the bill exists for one reason only - unions have been spectacularly unsuccessful in convincing voters, i.e. the employees they seek to represent in collective bargaining, that the employees would be better off with a union than without it.

And Fox asks:

It is with some irony that more than 230 members of the U.S. House of Representatives elected by secret ballot are rushing to remove that right in the workplace from the voters who elected them. How many do you think would vote to abolish elections for their own Congressional seat if another candidate could produce a petition signed by a majority of voters?

The Examiner editorializes: "Abuses of workers' true wishes not only are potential, they are guaranteed. There is no 'free choice' in this travesty".

It says a lot about the new House of Representatives, none of it favorable, that it is expected to approve the measure easily. Earlier coverage here and here.

P.S. And here's George Will:

Tellingly, the act would forbid employers from trying to influence -- pressure? -- employees by improving their lot: It would fine employers who, to reduce the incentive to unionize, give workers "unilateral'' -- not negotiated -- improvements in compensation or working conditions. Clearly, the act aims less to help workers than to herd them as dues-payers into unions.

Yet more: What does sponsoring Rep. George Miller (D-Calif.) think of the idea, anyway? And Ivan Osorio at Capital Research Center's Labor Watch offers some historical background (PDF) on why union organizers regard card-check as their great hope.

Colorado Home Astroturf

Astroturf appears to be popular these days in Colorado.

As Walter noted in an earlier post today, the Independence Institute's Dave Kopel writes at Volokh pointing to his column in The Rocky Mountain News that unearths some less-than-full reporting at the Denver Post. It seems the newly left-tilting Colorado legislature is looking at a bill that would prohibit home buyers and home builders from contractually waiving buyers' rights to sue in tort, above any warranty. As Kopel notes:

The main proponent of the pro-lawsuit bill is the Colorado Home Alliance, which obviously played an important role in helping the Post with the article. The article quoted from real estate contracts which had been obtained by the alliance, and relied on the alliance for a text box which listed 19 builders that have used waivers.

Oddly enough, however, the article never quoted a named spokesperson from the alliance. The article, by way of background, discussed a failed 2004 ballot initiative (Amendment 34) that would have removed some legislatively imposed limits on homeowner lawsuits. Clay Vigoda - the political consultant who ran the pro-lawsuit initiative - also happens to be the registered owner of the Colorado Home Alliance Web site.

The Colorado Home Alliance and the Post both deserve praise for warning homebuyers about the dangers of signing a contract without carefully reading all the terms. But it's hard to see why an article that mentions the pro-34 campaign and the alliance wouldn't mention the overlap between the two groups.

But it gets better. Just who is the Colorado Home Alliance? I did a little digging to find out.

Washington Post on Williams case

The newspaper editorializes:

Regardless of what you think about tobacco companies, you should welcome last week's Supreme Court decision that repudiated an $80 million ruling against Philip Morris....Capping punitive damages is a task suited for state legislatures, and it's one states should complete.

Wheedling neurosurgeons

It's really vital that you cover emergency rooms, although you can't be forced to do so. So please, just ignore the economic incentives (via KevinMD; see also Ted's mention at Overlawyered).

Home-defect lawsuit wars

Ever since Colorado enacted legislation limiting construction-defect suits, the state's trial lawyers have made it a high priority to roll back those limits. David Kopel leads a discussion at Volokh Conspiracy based on a Denver Post article and his own Rocky Mountain News column. We covered the 2004 Colorado ballot fight on the subject, in which voters rejected a lawyer-promoted initative by a wide margin, here and here.

Behind the Times Select screen:

...if all there was to the story were reasonable people contesting water versus wind, it would be sane. In general, that is how things have played out in Louisiana and Alabama, which don�t have the same kind of litigious environment as Mississippi does.

That does not mean it is not tragic for those whose houses were destroyed by flood in those states, nor does it mean that there isn�t something seriously wrong with an insurance system that forces these kind of water-wind distinctions. What it does mean is that the people in those two states aren�t trying to abrogate the terms of the contract they�ve signed with their insurers. It is hard to see how an economy can function if contracts are not upheld.

But in Mississippi, the insurance contract has been largely tossed aside by the power of litigation � and the belief that the insurance companies, especially State Farm, should pay up no matter what the cause of the damage. Not that anyone is about to characterize it that way.

And Kimberley Strassel at the WSJ chronicles Sen. Lott's "ferocious campaign of political revenge". More: Coyote Blog.

Merck will not be allowed to argue or introduce evidence:

  • that a verdict for the plaintiff will adversely impact pharmaceutical companies' ability to develop new medications

  • that the case may cause an increase in the cost of pharmaceutical drugs to the public

  • that several key Merck employees in charge of Vioxx took the drug

  • that a large percentage of the medical community would like Vioxx placed back on the market

  • that the Food and Drug Administration's approval of Vioxx on four separate occasions means that Merck met its standard of care and fulfilled its duty to warn

  • that it could not change its Vioxx label to include warnings of heart risks without approval from the FDA

(Steve Gonzalez, "Vioxx lawyers strategize over evidence in Madison County", Madison County Record, Feb. 22). There's certainly an argument to leave out the public policy arguments in the case, but one hopes that it is being applied uniformly: nearly every plaintiffs' closing argument I've read about asks jurors to send a message to drug companies about the importance of drug safety, and there seems an imbalance if defendants are not allowed to make their own arguments on that score.

Seventy-three potential jurors are filling out a 22-page questionnaire in the case of Schwaller v. Merck (No. 05-L-000687). 52-year-old Patricia Schwaller had a fatal heart attack in August 2003, and her husband blames it on her alleged 20 months of Vioxx usage. [St. Louis Post-Dispatch]

Randy Maniloff wins the award for best one-liner so far:

Mr. Hood�s feelings toward State Farm are reminiscent of that great joke recounted by Alvy Singer in Woody Allen�s �Annie Hall�: �The food in this place is really terrible. Yes, and such small portions.�

David Rossmiller comments. Speaking of circuses, State Farm has moved to recuse Judge Senter and there has been supplemental briefing in Woullard regarding the settlement class action. David Rossmiller's blogging is on the case. Earlier POL coverage: Feb. 16 (State Farm withdrawal); Jan. 30 (Woullard); Jan. 12 (Broussard).

Update: Madison County Vioxx forum shopping

On Oct. 15, 2005, I described how trial lawyers were forum-shopping in Madison County: they would file the cases of ten unrelated plaintiffs (perhaps one of whom lived in Illinois) in a single suit, name an Illinois pharmacist or Illinois doctors as a defendant (though they had no intent of bringing the pharmacist or doctors to trial), and claim the presence of the Illinois pharmacist and Illinois plaintiff in the same suit defeated complete diversity for all ten cases and precluded their removal to federal court.

It is an encouraging sign of reform that not even Madison County judges are standing for these shenanigans. In one such ten-plaintiff package deal (a different one than the one I described), after an unsuccessful federal removal, Merck moved to sever the ten cases in Madison County. Judge Daniel Stack agreed; Merck then successfully removed seven of the cases to federal court (where the trial lawyers have been attempting to re-consolidate them and get them remanded again). Now Judge Stack has agreed to transfer the cases of the remaining three Illinois plaintiffs to their home counties across the state, rather than permit litigation tourism in Madison County. The plaintiffs are getting away with some forum-shopping: they allegedly "forgot" to name an Illinois pharmacist as a defendant in one case but said "We can fix that." (Steve Korris, "Judge Stack transfers Vioxx cases out of Madison County", Madison County Record, Feb. 22).

Note that this fraudulent joinder that eventually resulted in a successful removal would be misclassified as an "erroneous removal" under the flawed Eisenberg/Morrison study on "erroneous removal" because of the initial improper remand of the improperly joined plaintiffs by S.D. Ill. Judge Murphy.

John McWhorter vs. Jonathan Kozol

The Manhattan Institute's own John McWhorter takes on the influential bard of school finance equalization (more here and here).

Origins of limited liability

Prof. Bainbridge punctures a couple of durable myths about the subject, pointing out that the idea of limited corporate liability, and the principle of treating corporations as legal persons, were by no means judicially devised innovations imposed by 19th century American courts (& more).

Sticking to the suburbs

Two radiology practices announce that they're going to stop servicing hospitals located within the city of Baltimore (St. Agnes and Good Samaritan, respectively). Guess why?

Illinois legislative agenda

Liability reformers will face uphill sledding in Springfield this year, but they've got an agenda lined up nonetheless.

"Pray to the hurricane gods"

Spectacular irresponsibility from Florida lawmakers on homeowner's insurance, as reported in the Washington Post:

Last month, state legislators voted in an emergency session to lower insurance rates, primarily in South Florida, by pledging tens of billions in public money to affected homeowners if a major hurricane or two strikes again.

Since neither the state's catastrophe fund nor the state-chartered insurance company has anywhere near enough money on hand to pay the claims they may now be required to pay after a major hurricane, the measure is considered a gamble, even by proponents....

Critics have decried the measure as irresponsible. Under the legislation, in the event of a major hurricane, the state will pay claims by taxing home, automobile and some other types of insurance policies sold in the state.

The measure promises as much as $32 billion from the state's catastrophe fund to pay homeowner's claims after a storm, although the fund currently has less than $1 billion in it. It also decrees a rate cut for the state-run insurer that handles a lot of coastal homeowner business, although current rates are already considered too low to reflect risk and the company ran out of money in 2004 and 2005. Florida Gov. Charlie Crist (R), a former attorney general of his state, is a backer of the new scheme. More discussion at Reason "Hit and Run": Ronald Bailey, Radley Balko.

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.

Mark Moller of the Cato Institute spots some language in the majority opinion that could be helpful for defendants facing large, heterogeneous class action claims like the one in Dukes v. Wal-Mart.

Blawg Review #96

The latest edition of the weekly carnival of law-related blog posts is at South Carolina Appellate Law Blog, and links to posts of Ted's and mine. Last week's was hosted by E.L. Eversman at AutoMuse, which specializes in automotive consumer advocacy.

"Worried in America"

John Stossel has a two-hour prime time special set to air Friday on ABC. Rumor has it that, among other topics, John will be addressing vaccine scares and the silicone breast implant affair.

The California Department of Justice improperly concealed tens of millions of dollars worth of contracts with lobbyists, consultants, legal firms -- even couriers and parking garages -- in violation of its own confidentiality rules, an Associated Press investigation has found. ...All the contracts reviewed were issued between 2003 and last year, when Bill Lockyer, a Democrat, was attorney general and headed the Justice Department. ... The Justice Department is the only state agency permitted to label records as "confidential" and omit them from the contracts database.

Officials at the department deny intentional wrongdoing, but apparently the marking of contracts as "confidential" became a real habit:

After initially refusing to disclose names of hidden contractors --the department said it would be too laborious to review so many -- officials agreed to inspect a sample of 131 contracts. The finding: only 12 were correctly labeled confidential. ... The results suggest hundreds and perhaps 1,000 or more of all the contracts labeled confidential could have received the designation in error.

Among the contracts wrongly classified as confidential:

--Two no-bid contracts, worth as much as $489,000, for Washington lobbyists The Ferguson Group. The president of the company, W. Roger Gwinn, was legislative director for former Rep. Vic Fazio, D-Calif., a Lockyer friend. The Ferguson Group referred questions to the Justice Department. The agency says the contract will not be renewed.

--A $2 million contract to the law firm Cotkin, Collins & Ginsberg, which has donated to Lockyer's political committees. Robert G. Wilson, managing partner, said firm officials were unaware the contract was labeled confidential. He said the firm began working on the long-running insurance case before Lockyer took office.

The W$J draws some conclusions about the importance of sunshine in remedying tendencies toward cronyism in the operation of AG offices, particularly in the hiring of outside law firms to sue defendants.

: Lockyer responds to the WSJ's editorial in a Mar. 1 letter to the paper ($). He says the mistakes were inadvertent rather than an attempt to conceal anything, that the Washington lobbyist was selected in a competitive process and had obtained good results, and that the Cotkin, Collins & Ginsberg law firm had been hired long before he became AG and contributed very little ($750) to his campaign.

More on Philip Morris v. Williams

Beck and Herrmann celebrate the decision for providing the first bright-line rule in the constitutionalization of punitive damages awards: "[T]he Constitution�s Due Process Clause forbids a state to use a punitive damages award to punish a defendant for injury that it inflicts upon nonparties or those whom they directly represent, i.e., injury that it inflicts upon those who are, essentially, strangers to the litigation." But I tend to agree with Bruce Nye's view that the practical effect before juries is going to be next to nothing and with Jay Feinman's view that the ultimate effect will be to muddy the law until the Court revisits the issue again.

Tony Mauro quotes Point of Law blogger and GMU Law Professor Michael Krauss agreeing with this last point:

�It seems, then, that jurors can think about harm to others in deciding that the conduct was awful enough to merit punitive damages� in the first place, said Michael Krauss, torts professor at George Mason University School of Law. �But then they can�t think about it anymore, because when they set the amount of the the damage award, the Court is saying it has to reflect only the harm to the plaintiff. You�ll have to wash your brain out� between steps.

Krauss adds, �How you force the jury into this intellectual straightjacket isn�t clear. What is clear is that this issue will be back before the Court.�

Jim Copland commented earlier on Point of Law. I'm quoted in this Forbes.com story, though I appear to have been sufficiently muddy in my conversation to cause the reporter to conflate two different points I was attempting to make about the jurisprudence of the justices. (Note to self: learn to speak in shorter soundbites.) Other blog and press coverage: Markel, Financial Times, WSJ.

Update: and Ethan Leib and Bill Childs have excellent posts. Bashman has a roundup of press-coverage, including an excellent WSJ editorial.

And Doug Kmiec isn't impressed with the opinion.

Rossmiller on the Hood press conference

Jim Hood gave a press conference about State Farm's decision to cease writing new insurance policies in Mississippi; David Rossmiller dialed in, and has an entertaining, if disturbing, account:

Last Friday I dialed the conference call number for Mississippi Attorney General Jim Hood's press conference and listened in amazement as an elected state official called State Farm " a cult," "decadent" and "robber barons." All this because of State Farm's decision not to underwrite new homeowners and commercial insurance in the state because of the legal and business climate there. Then Hood proposed legislation to, in essence, make them stay. If what Hood said is true, wouldn't the state be better off without them? I mean, who wants to buy insurance from a decadent cult of robber barons? ...

[Hood] claimed recent cases in federal court established that flood or "storm surge" was covered under State Farm's homeowners policies. For anyone who has been paying attention, you know this is not only wrong but offensively ignorant of the basic facts. Remember, this is the guy who was conducting a criminal probe of State Farm's claims adjusting practices, and he apparently has absolutely no idea of what is going on!

Earlier: Feb. 16.

Initial thoughts on Philip Morris

A few key points:

  1. The decision doesn't reach whether the punitive damages award is actually excessive. Rather, it remands in light of the Court's clarified position that punitive damages, while permissible to punish "reprehensible" conduct, cannot "punish for harm caused [to]strangers" to the litigation. The Court thus draws a procedural rather than a substantive line, focusing on jury instructions, which may limit the reach of the BMW-Campbell-Williams cases over the long run.

  2. Chief Justice Roberts and Justice Alito are with the majority in a 5-4 split--taking the position previously assumed by Chief Justice Rehnquist and Justice O'Connor, in opposition to the position taken by Justices Thomas and Scalia. They are joined by Justices Breyer (author of the opinion), Souter, and Kennedy, all long-standing in their view that the Fourteenth Amendment constrains state punitive damage awards. Justice Ginsburg remains in the Thomas-Scalia camp.

  3. Interestingly, Justice John Paul Stevens, in the majority in State Farm v. Campbell and BMW v. Gore, here switches sides. He rejects the majority's formulation that punitive damages cannot "punish for harm caused strangers." In essence, Steven's position is that the tobacco companies' conduct was so "egregious" that it warrants the enormous punitive award.

  4. A side note in Justice Stevens' dissent: he analogizes punitive damages to criminal sanctions, saying, "This justification for punitive damages has even greater salience when, as in this case, the award is payable in whole or in part to the State rather than to the private litigant" (citation omitted). Such rationale is a further caution on such reforms, already questioned by our own Walter Olson.

Philip Morris v. Williams opinion

The Court's opinion in Philip Morris USA v. Williams, No. 05-1256, is available here. (Via Bashman)

Oregon Supreme Court Decision Thrown Out

The Supreme Court just overturned the $79.5 M Oregon punitives award against Philip Morris USA, in a 5-4 decision. Justice Breyer, for the court, ruled that assigning punitives based on damages suffered by non-plaintiffs was the equivalent of a "taking of property from the defendant without due process."

More when a link to the decision is available, and when I have been able to read it.

The California Supreme Court just altered its interpretation of the state's statute of limitation, allowing perhaps thousands of tobacco related suits that otherwise would have been rejected. As Law.com reports, the Sacramento Supremes rejected the industry's claim that the statute starts to run when smokers discover they're addicted to cigarettes -- a rationale based on a previous 9th Circuit decision. Instead, the court essentially found that California's two-year statute of limitations begins when the smoker is diagnosed with a disease caused by the cigarettes.

In a case referred to the court by a 9th Circuit panel, the justices unanimously ruled that two emphysema sufferers could go forward with their lawsuits against the tobacco industry.

The industry had argued that they should have sued years ago, when they first learned they were addicted, based on Soliman v. Philip Morris, 311 F.3d 966 (9th Cir. 2002). But no "appreciable physical harm" occurred until plaintiffs were aware of their ailment, ruled the court. Grisham v. Philip Morris, 07 C.D.O.S. 1653.

"Tobacco litigation in California is back in business," exulted Richard Daynard of the Tobacco Products Liability Project.

About that "war on science"

Have conservatives, Republicans, or business types lately been distinctively guilty of ignoring or manipulating science, as author Chris Mooney charges? Jonathan Adler (Volokh) takes (partial) issue.

National Law Journal op-eds

They've frequently been offline and un-linkable in the past, but now they promise to begin turning up on the website of the widely known public radio show on law, Justice Talking.

Adam Liptak on Buell-Wilson

Adam Liptak's column on the Buell-Wilson case (temporary NYT $elect passthrough via Bashman) touches on many of the same issues I raised in my Liability Outlook on the case.

From occasional PoL contributor David Bernstein (George Mason U. School of Law) (via TortsProf), an SSRN paper whose full title is "Expert Witnesses, Adversarial Bias, and the (Partial) Failure of the Daubert Revolution". Abstract:

This manuscript raises two questions that have been surprisingly missing from the voluminous law review literature on expert evidence since the landmark Daubert decision. First, what is the underlying rationale for the replacement of the old qualifications-only, let-it-all standard for expert testimony with Daubert/Federal Rule of Evidence 702's requirement that all expert testimony be subject to a stringent reliability test? Second, once we have identified this rationale, has the �Daubert revolution� succeeded on its own terms?

I conclude that the implicit rationale for the reliability test is to preserve the perceived advantages of the adversarial system, while mitigating the harms to the courts' truth-seeking function by the inevitable strong biases that accompany adversarial expert testimony. These biases include the conscious biases of hired guns, the unconscious biases of other paid experts, and the selection biases that result from the fact that attorneys �shop� for their experts from a large pool of qualified individuals.

Rule 702 thus attempts to serve a worthy goal, but it far from fully succeeds in efficiently achieving this goal. First, in the context of forensic expertise in criminal cases, Rule 702 does nothing to address the huge gaps in resources between the prosecution and most defendants that severely inhibit defendants' ability to challenge unreliable prosecution expert testimony.

Second, Rule 702, applied correctly, does succeed in barring �junk science� causation evidence in toxic torts cases. However, it does so at the expense of excluding speculative evidence supporting causation, even when most experts in the field would conclude that the relevant evidence is a sufficient basis from which to find causation by a preponderance of the evidence. While Rule 702 is easily preferable to the prior overly permissive regime, it likely goes too far in insisting on a reliability test that makes the courtroom stricter about causation evidence than is the scientific community itself. The way around this problem is to amend Rule 702 to allow courts to admit educated guesses about causation, but only when nonpartisan experts, not subject to adversarial bias, are willing to make such guesses.

Finally, Rule 702 puts severe restrictions on the testimony of experience-based testimony by connoisseurs. Such experts may only testify if their field of expertise is a legitimate one, and they have proven to the court that they truly have the expertise they claim. Rule 702 also properly prevents attorneys from shopping for outlier and hired gun connoisseurs, given that there is no objective way for a jury to determine whether an experience-based expert's views are correct or representative of other experts in the field. Therefore, in the context of connoisseur testimony, courts should either replace adversarial experts with a panel of nonpartisan experts, or only allow an adversarial expert to testify if his conclusions are consistent with those of a nonpartisan advisory panel.

More here.

Venue selection and bankruptcy outcomes

Wei Wang (Queen's University School of Business) has investigated the question. SSRN abstract:

Using recovery of defaulted corporate debt from Standard and Poor's LossStats Database and bankruptcy filing information from Bankruptcy Research Database during the period 1987 through 2004, we find that the choice of bankruptcy filing venue has a significant impact on defaulted debt recovery. Creditors achieve 35% smaller recoveries in bankruptcies filed in Delaware or New York than in other states. Recoveries are found to be lower in New York than Delaware. This can be explained as a large proportion of tort bankruptcies, which lead to lower expected recovery, were filed in New York. We also find that creditors are expected to recover more if the bankruptcy case is filed in the home state. In comparison with previous findings, prepackaged bankruptcies are found to lead to higher recovery. In addition, we find that the average recovery rates of defaulted firms that did not formally file for bankruptcy are 40% higher than the recovery of bankrupted firms. This shows that creditors expect bankruptcy costs to be high in bankruptcy negotiation and reorganization.

"Clear and convincing" evidence

Bill Childs corrects the hyperbole of Utah plaintiff's lawyers fighting a proposal for a "clear and convincing" standard for emergency room liability: "it's not remotely accurate to say that [such a standard] makes it 'virtually impossible' to win a lawsuit". A newspaper account had let the characterization pass unchallenged.

Others have mentioned or anticipated State Farm's withdrawal from the Mississippi homeowners' and commercial insurance markets in the wake of the Jim Hood/Dickie Scruggs campaign against them (Krauss; Olson; Wallace; Adams; Rossmiller). But how many tie in Hurricane Katrina, Dickie Scruggs, Jim Hood, Trent Lott, and William Wordsworth? I provide a historical perspective in today's American.

Dickie Scruggs and Jim Hood have a proposed solution to the State Farm withdrawal: tell them they can't write auto insurance, either. That will make Mississippians better off!

More than 5000 suits have been filed; Wyeth has now won both federal trials (Sep. 17), and lost a state trial in Pennsylvania where the judge overturned a punitive damages award. [AP/Law.com]

Interestingly, the plaintiffs appear to be hanging their case on a study allegedly showing a relative risk of 1.24 for Prempro (Wyeth claims the relative risk is smaller). If so, one wonders how these cases are getting to the jury: even a relative risk of 1.24 suggests that over 80% of women taking Prempro who get breast cancer would have had breast cancer anyway.

Tomlinson v. Allstate Insurance

The federal Louisiana Katrina insurance lawsuit was dropped right before it went to the jury, presumably in a walk-away settlement to avoid sanctions after it was revealed that the plaintiff couple (the wife of which is a lawyer) triple-dipped a damages claim by (1) having Allstate pay for a lease for living expenses (2) that the Tomlinsons also sought as "damages" (3) even though the rent was paid to themselves because they owned the rental property. The couple was forced to resort to the implausible argument that fraud doesn't nullify an entire claim for insurance damages, though the contract says otherwise. David Rossmiller has a more complete report (including the briefs). Full AP coverage is more complete than the version printed in the Chicago Tribune that Rossmiller linked to; the published version only hints at the problem.

Europe: Americanizing its way of law?

"Will the American style of litigation and regulation take over in Europe?" ask two lawyer/commentators in the Times Online. "The evidence that we are a more litigious society or that we are becoming American in our approach to the law is inconclusive." However, Britain and many other EU governments are making class actions easier to organize; meanwhile, stateside courts are exporting U.S. law through extraterritorial applications of jurisdiction. And antitrust actions, to name one category, seem to be gathering new momentum in U.K. courts, per a W$J report last month.

More: And here's The Economist on the advent of U.S.-style class actions (via Steir).

"Voter intimidation" and card checks

Dan McLaughlin on Congress's rush to repeal the secret-ballot precondition for compulsory union recognition in the workplace:

Republicans, for some time now, have been pushing for fairly tame measures to prevent voter fraud, most of which revolve around requiring voters to show some form of identification and otherwise leave a record that enables a determination of who, precisely, voted. In response to these common-sense proposals and other efforts to assure the integrity of the ballot, Democrats invariably complain that Republicans are engaging in some form of voter intimidation. Apparently, according to Democrats, even the mere act of having to properly identify yourself is so intimidating as to inhibit the right to vote.

Well. Now that the Democrats are in the majority, they are hard at work on legislation in another election context that will go far beyond mere identification, and eliminate secret ballots entirely, allowing voters to be pressured, even by their co-workers and in their own homes, to vote a specific way....

Remember this: any Democrat who votes in favor of a "card check" system, in which union organizers are looking right over the voter's shoulder, should absolutely never be taken seriously again in arguing that far less intrusive efforts to simply identify voters who cast secret ballots in the privacy of a voting booth is somehow "voter intimidation."

On Wednesday the House Education and Labor Committee approved the card-check bill on a party-line vote. Earlier: Feb. 2.

Update Mar. 18: blog coverage of the issue includes Mickey Kaus and Megan McArdle (critical of bill), Lindsay Beyerstein at Majikthise (all for it, who needs secret ballots anyway?), and Union-Free Employer (picking apart a particularly ill-considered, even for that newspaper, editorial). See also Tresa Baldas's coverage in the NLJ.

Around the web, February 15

  • David Stirling and Tim Sandefur of Pacific Legal Foundation have an op-ed urging Jerry Brown to drop his "frivolous 'global warming' suit." [San Francisco Chronicle; PLF brief]
  • Kreitzman Mortensen & Borden post on the Dukes case. [Representing Management]
  • SEC files brief in Tellabs seeking stricter pleading standards for scienter in civil securities cases. [SEC via Roberts]
  • Failure-to-warn case against Wyeth over Prempro held preempted. [Erichson; Pharmalot]
  • Do plaintiffs' lawyers avoid federal court to avoid Daubert? [Bernstein @ Volokh (Nordberg and Frank comment)]
  • Victor Schwartz et al.: "Toward Neutral Principles of Stare Decisis in Tort Law" [South Carolina Law Review via AJP]
  • Bone screws and informed consent. [Beck and Herrmann]
  • Klick, Kobayashi, and Ribstein: "We find that employment in franchise industries is significantly reduced when states enact restrictions on franchisor termination rights and the effect is larger when states limit the ability to contract around these restrictions." [SSRN]

From her Legalities blog:

Judges write opinions. Judges get criticized. Judges continue writing opinions, some for the rest of their lives (i.e., life tenure). It�s called democracy. I find it quite astonishing that criticism could be considered a threat to judicial independence and has been the topic of recent speeches and conferences and, now, it seemed, congressional hearings. Certainly, there have been times in our history when the Court and its justices have come under greater attack. �Impeach Earl Warren� billboards are an obvious example, but the best instance in modern history is the ad hominen attacks on Justice Thomas. Maybe someone can help me out here, but I just can�t remember any speeches or editorials raising concerns about judicial independence when the New York Times was calling him the �Youngest, Cruelest Justice� and when countless other commentators were eviscerating him for his views, which were grounded in the law. Anyone?

The trouble with cy pres

Class action settlements often require donations to public-interest groups. Defendants are amenable to this, because it means that the punishment is a meaningless shift of money that would have been spent on charity anyway; plaintiffs' attorneys like this, because it increases the size of the apparent "relief" that justifies high attorneys' fees; judges go along, sometimes because they like the causes their money is supporting. (And those causes are often allies of the trial bar, thus encouraging more litigation down the line.) Little wonder that trial lawyer Michael Hausfeld spoke of the importance of cy pres at yesterday's Federalist Society Panel.

Another problem that may well be more common if investigated more fully: kickbacks. In the now infamous Kentucky fen-phen settlement, millions were diverted to a new charity that then paid the judge as a board member (OL Mar. 6). And now it is revealed that another $1 million of the settlement (negotiated by plaintiffs' bar star and top Democratic Party donor Stanley Chesley, who received $20 million for his troubles) went to Florida A&M Law School—which agreed to pay one of the lawyers, Shirley Cunningham, $100,000/year for a no-show professorship. A Florida state investigation calls evidence of criminal activity "inconclusive," but suggests the school seek its money back. (Andrew Wolfson, "Ky. lawyer's Florida A&M pay 'not earned'", Louisville Courier-Journal, Feb. 8). (Similarly: Peter Lattman on Richard Epstein on a donation to Seton Hall; for a general overview relatively sympathetic to trial lawyers, see Geoffrey P. Miller & Lori S. Singer, Nonpecuniary Class Action Settlements, 60 Law & Contemp. Probs. 97 (1997).)

More on Kentucky fen-phen scandal: OL Feb. 14 and links therein.

Nocera on "ridiculous" slurs against AEI

Behind the TimesSelect wall, New York Times business columnist Joe Nocera had this to say Saturday about the absurdities lately flung around Left Blogistan:

Some of the accusations hurled at Exxon Mobil are ridiculous � the �bribery� allegation turned out to be an effort by two American Enterprise Institute scholars to solicit articles from a range of global warming experts for a book they were putting together. They were paying $10,000 an article. (And Exxon Mobil, which contributes a minuscule portion of the group�s budget, knew nothing about the book until the accusations showed up in the papers.)

Meanwhile, at the prominent environmentalist magazine Grist, David Roberts and Andrew Dessler have written an account of the controversy that, while anything but uncritical of AEI, also firmly rejects the "sensationalist" approach of the Guardian story, "rich with insinuation", which "presented a highly charged interpretation as fact".

Drugmaker liability in Michigan

Bill Childs and Pharmalot have more on the efforts by trial lawyers and Democratic lawmakers in Michigan to do away with that state's unique-in-the-nation liability protections for drug designs and warnings that are duly approved by the federal government. More here, here, here, and here; last June the Manhattan Institute's Trial Lawyers Inc. project published a report defending the present law.

I spoke today on a lunch panel on the Class Action Fairness Act with defense attorney John Beisner and plaintiffs' attorneys Michael Hausfeld and John Stoia; the Federalist Society has the event available as an MP3.

Yahoo! News reports that State Farm no longer trusts Mississippi's legal system to enforce its contracts. The state's "current legal and political environment is simply untenable. We're just not in a position to accept any additional risk in this homeowners' market," said public affairs VP Mike Fernandez.

The damage this time was caused by federal courts, as readers of this e-zine know very well. One might think that State Farm's decision will exacerbate hostility toward the company -- I imagine some interesting simulations were undertaken before this decision was reached.

Our newest featured column at right is Jim Copland's article from the December Chief Executive. It begins:

At the turn of the 20th century, most American companies were incorporated in the state of New Jersey. Today, of course, public companies are typically chartered in Delaware.

How did New Jersey lose the valuable corporate charter business to its southern neighbor? As New Jersey's governor, Woodrow Wilson led a crusade to "trust bust" big businesses through the state's unique position as the incorporation state of choice. Predictably, however, businesses chafed at the new restrictions and moved to Delaware, which had incorporation laws identical to New Jersey's old regime. Today, Delaware's low taxes are due in part to Wilson's folly; the state earns over 40 percent of its general revenues from incorporation fees.

This history lesson is apropos today, as the U.S. appears to be losing its long-established grip on the market for publicly traded securities.

"Dangerous When in Power"

A March 2007 Reason article is a must-read for its historical description of how so many mass torts arise from the plaintiffs' bar blaming deep-pocketed private industry for health catastrophes caused by government policy:

The wider conventional view [treats] hazardous products as a sort of standing reproach to capitalism: Businesses foist such products on us in search of profit, the narrative goes, while government protects us from them. And there is much in the asbestos debacle that does reflect discredit on private companies' actions.

Yet the government, our alleged protector, has done much at all levels to promote products later assailed as needlessly unsafe, from tobacco to lead paint, from cheap handguns to Agent Orange. Often the state is at least as aware of the risks as the businesses that distribute the product, and in at least as good a position to control or prevent them. But-shaped and propelled by the incentives provided by our litigation system-our process of organized blame hardly ever puts the government in the dock.

And, hey: it's written by Walter Olson, so you know it's going to be good. Read the whole thing. (Cross-posted at Overlawyered.)

(P.S. by W.O.: Thanks, Ted -- the piece is being linked and discussed at quite a few places around the blogosphere, including Glenn Reynolds, Reason "Hit and Run", The Economist's Free Exchange, Bill Childs, Byron Steir at Mass Tort Litigation Blog, David Hardy's Arms and the Law, and Prof. Bainbridge).

Plus: And yet more, from business historian (and friend) John Steele Gordon at the American Heritage blog.

Quotations from Judith Vladeck

One of the more colorful and quotable members of the plaintiff's employment bar was Judith Vladeck of Manhattan, who died last month at 83. A few anecdotes from the obits:

  • "Employment lawyer Larry Lorber recalls one case in which he represented a financial-services company. Ms. Vladeck threatened 'to go through the 32nd floor and depose every executive in every office,' says Mr. Lorber, who convinced his client to settle. He wouldn't have done so, he adds, if a less-dogged lawyer had brought the case. 'If we didn't settle, it would have been World War III and why go through that?' Mr. Lorber says. [W$J]
  • "In the trial prior to the Western Electric settlement, she kept a red folder containing an obscene cartoon that depicted her client, who claimed it was dropped on her desk at work by a co-worker. 'Whenever I thought the judge's attention was flagging, I'd start to wave it around,' Ms. Vladeck told the New York Times in 1994." [W$J]
  • Regarding her demands in a discrimination case against City University of New York: "'If we were to calculate the real back pay in this case, they'd have to take Brooklyn College and City College and auction them off to pay the damages.' This despite � or perhaps because � she was an alumna of [CUNY campus] Hunter College." [NY Sun]
  • "She would refer to the firm � Vladeck, Waldman, Elias & Engelhard � as 'the last socialist law firm in America,' her nephew Charney Bromberg told the Forward." [The Forward, of which she was longtime general counsel] Asked if she had ever represented an employer, Ms. Vladeck once told a reporter: �Are you kidding? Never.� [NYT]
  • "Ms. Vladeck was one of the original plaintiff's side attorneys who was in it because of her passion for advocating for the rights of those she believed were discriminated against. In the early days, this was a time when there were no compensatory and punitive damages like there are today. Sadly, unlike Ms. Vladeck some of the plaintiff's lawyers today joined the fray because of the availability of compensatory and punitive damages available after the passage of the Civil Rights Act of 1991, not because they are passionate about employee rights." [Diane Pfadenhauer]

Connecticut mulls regulating hedge funds

The trick, of course, for state AG and "Eliot Spitzer Mini-Me" Richard Blumenthal, is to avoid driving them to other states. (Carney @ Dealbreaker via Ribstein).

Shadow juries in Atlantic City

Between ten and thirteen casually-dressed people are sitting in the audience in the Atlantic City Vioxx trial in Judge Higbee's coutroom. They're apparently making $125/day plus lunch to serve as a "shadow jury" who are interviewed over the phone to provide feedback to those who hired them. Neither plaintiffs nor defendants would acknowledge to Newhouse News hiring the focus group (the shadow jurors themselves are not told to avoid slanting them), and Newhouse News would not speculate. (Susan Todd, "When lawyers want to know what the Vioxx jurors are thinking ... the shadow jury knows", Feb. 13 (via Pharmalot)).

But we can speculate: Merck denies hiring the group, and plaintiffs' attorney Mark Lanier merely stated "Don't believe everything you hear." The fact that the focus group is being paid by "Market Research Dallas" suggests (but doesn't guarantee) involvement by Dallas-based attorney Lisa Blue, who consulted with Mark Lanier in the Ernst trial and came up with the successful idea that Lanier hint to the jurors the possibility of appearing on Oprah if they returned a big verdict.

In a 77-page order (available at AEI, Feb. 13), Judge Weinstein upheld his injunction, and made findings that New York Times reporter Alex Berenson, along with Dr. David Egilman and attorney James Gottstein conspired to violate the protective order. "Here, a reporter was deeply involved in the effort to illegally obtain the documents." Several other individuals were ordered to return documents they received from Gottstein. The damage has been done to Lilly, however, and there is no injunction against websites that did not receive the documents from the conspirators. (Update: see also Childs.)

(Earlier: Dec. 20, Jan. 8, Jan. 30, and Feb. 6.)

Asbestos bankruptcies, cont'd

Per a W$J editorial, judges have dealt defeats recently to the asbestos plaintiff's bar in two bankruptcy cases. In the W.R. Grace case, a judge ruled -- contrary to scare stories that have been in circulation for a while -- that vermiculite attic insulation that contains some asbestos does not in itself pose an unreasonable risk of injury to homeowners or others. And in the Congoleum case, a judge refused to approve a reorganization plan that protected the interests of management and asbestos lawyers at the expense of insurers. For more on asbestos bankruptcies, see, e.g., here, here and (Congoleum:) here.

Was Milberg satisfied, or just shy?

Did the class of workers being represented get enough relief that the lawsuit could be dropped? Or did turning on the light make the law firm scurry away?

Plaintiffs' firm Milberg, Weiss & Bershad voluntarily dismissed a nationwide employment class action late last year against Wal-Mart, saying that the retailer three months earlier had changed its policy on health care coverage. But the move to dismiss came just two weeks after the Atlanta federal judge handling the case told defense attorneys they could probe "highly irregular" payments to the lead plaintiff by the local counsel....

The dismissal came after a federal judge in Georgia allowed Wal-Mart's attorneys to conduct more discovery regarding payments to Lisa Smith Mauldin by George Stein, the Georgia lawyer who was serving as local counsel at the time. The judge also refused to allow Milberg Weiss to appoint a new lead plaintiff in the case until the discovery had been completed.

"Stein's payments to Mauldin are highly irregular and at the very least create the appearance of impropriety," wrote U.S. District Judge Julie E. Carnes of Atlanta in a Nov. 22, 2006, order. "Moreover, Milberg Weiss was recently indicted on charges of recruiting and paying plaintiffs to participate in class action lawsuits."

Stein, who has withdrawn from the case, has admitted paying Mauldin checks totaling $2,250, but denies that it was to induce her to sue Wal-Mart or that Milberg knew about it.

The Japanese way of (non-)litigation

It's a lot different from ours, according to Utah attorney Craig Perry, writing in Corporate Counselor:

American companies would be well advised to follow the Japanese lead in focusing on maintaining healthy business relationships to avoid disputes. Litigation with a Japanese company is significantly more expensive and difficult than with another U.S. company, whether the lawsuit is in the United States or Japan. Only companies with significant legal budgets would willingly initiate a lawsuit in Japan.

Even in the United States, however, litigation with a Japanese company presents its own unique set of challenges. In addition to language issues, the Japanese government allows only very limited discovery from its citizens. For example, a Japanese citizen cannot be compelled to give deposition testimony. Even if they do so voluntarily, the deposition must be conducted under the direction of a U.S. consular officer in one of only four rooms available for this purpose in the entire country. Understandably, these rooms are generally scheduled many months in advance.

"[F]ocusing on maintaining healthy business relationships to avoid disputes" -- what a concept....

Guestbloggers welcome

From time to time we bring on guests to post at Point of Law, generally for a week. It's a great way for practicing lawyers, academics, journalists or other professionals (even non-lawyers!) to give blogging a try, and an equally good way for established bloggers to reach a new audience. If you think this sounds like fun, just drop an email to editor - [at] - thisdomainname.com.

"The problem with [Dahlia] Lithwick's formulation is its utter failure to distinguish between law and policy." I think it may be time to devise a keyboard macro for that (e.g., here and here).

Next up: even more C-sections?

"A small study finds intracranial bleeding in newborns is significantly associated with vaginal delivery". Ob/gyn blog The Well-Timed Period suspects that malpractice lawyers will eagerly seize on the news, whether or not it actually bolsters the case for (even) greater use of caesarean sections.

Libertarian-leaning judges

Were Reagan and Bush I more likely to appoint them than Bush II, and if so, why? David Bernstein @ Volokh wonders.

Pharmaceutical pricing class actions

Sherman Joyce of ATRA is critical of the suits, farmed out by state AGs and other plaintiffs to law firms like Hagens Berman for a share of the proceeds. Earlier coverage here, here, etc.

A fifth UC law school?

The regents of the University of California recently voted to establish a fifth taxpayer-supported law school, this one at UC Irvine and having a special emphasis on training "public interest" lawyers representing "underserved communities". (No, nothing at all ideological about that mission or terminology. Why do you ask?) The California Postsecondary Education Commission (CPEC), an advisory body which counsels the governor and the Legislature on higher ed expansions, recommended against the new school in September, and Velma Montoya, a former member of the Regents board, thinks the Commission was right (& welcome Prof. Bainbridge readers). Update: more here.

Was backdating material?

A defense summary judgment motion in an SEC civil backdating case (linked here (Feb. 9)) clearly raises this issue. I discuss the motion here, and in more detail here.

I have previously written on the extortionate lawsuits against banks who dared to business with Enron before its bankruptcy, using implausible conspiracy theories by which the banks agree to lose money to help Enron further a fraud; the suits seek to hold the banks liable for $40 billion, so many have settled for pennies on the dollar—in some cases not much more than the actual unrecoverable costs of defending the suit over several years—rather than risk gigantic liability. Since not even the most ardent academic defenders of the litigation system argue that juries get complex financial cases correct 95% of the time, paying blackmail to Lerach Coughlin is a reasonable financial decision. (Snide reflexive defenders of the litigation lobby argue that no one would settle for a billion dollars when they've done nothing wrong, but this doesn't explain why plaintiffs would surrender $39 billion in value if they're so obviously in the right.)

Two financial firms, CSFB and Merrill Lynch, however, have refused to give in to the extortion, and have fought a shrugging district court's class certification ruling to the Fifth Circuit, which held oral argument Monday. [Bloomberg/NYT] The AEI Liability Project has posted the briefs at the February 9 entry in the "Documents in the News" page.

State-level False Claims Acts

The federal False Claims Act allows private litigants to file bounty-hunting actions against federal contractors for alleged overcharges, pocketing a share of the winnings if the actions succeed. It's developed into a prized cash cow for the emergent qui tam bar, which in turn eagerly urges states to adopt mini-False Claims Acts of their own. The Colorado Civil Justice League has been monitoring such a bill in Colorado, HB 1144, which as drafted would actually have gone significantly farther than the federal version of the law. ("CCJL Under the Dome", Feb. 2, currently on main page of CCJL site). Per the CCJL's fact sheet on the bill (PDF format), the drafted version would weaken defendants' due process protections compared with the federal law; eliminate specific intent to defraud for some violations; create a new claim for treble damages in cases of "inadvertent receipt" of funds with no intent to defraud; and allow copycats to collect bounties over alleged frauds already brought to light in another state. Following protests from the League, the bill's sponsor is said to have agreed to amend the bill so that it goes no farther than its federal equivalent. But what happens in states where the critics of this sort of thing are less well organized?

More on qui tam/False Claims Act litigation here.

"Seldom has the word 'regional' been used in such a patently pejorative sense." Urban expert Julia Vitullo-Martin of the Manhattan Institute weighs in on the Bloomberg/Schumer/McKinsey report, at the Institute's Center for Rethinking Development.

Blawg Review #94

The latest edition of the weekly carnival of law-related blog posts is at Diane Levin's Online Guide to Mediation. Last week's was hosted by Kevin Thompson at CyberLaw Central. Both contain lots of recommended reading, and both link to posts here (and posts at Overlawyered, too).

More on Dukes v. Wal-Mart

(Our earlier coverage of the Ninth Circuit decision.)

Hans Bader comments on the case and is even angrier than I am about the lawlessness of it. He reminds us of Professor Fried's earlier critique of Dukes author Judge Harry Pregerson:

Judge Pregerson is most famous for repeatedly defying the U.S. Supreme Court in the Robert Alton Harris case, in which he repeatedly blocked the execution of a vicious killer who murdered two boys in cold blood and then ate their dinner while they lay dying nearby, even after the Supreme Court had set aside his stays of execution as baseless. (Harvard Law Professor Charles Fried wrote a scholarly analysis of Pregerson�s actions aptly titled Impudence). Pregerson had also dissented against life sentences for violent criminals, which he regards as typically being cruel and unusual punishment.

At his own judicial confirmation hearing before the Senate, Judge Pregerson openly boasted that if the law conflicted with his own values, he would choose to apply his own values instead of the law.

As Tim Sandefur noted about the same judge four years ago, the proper remedy for this lawlessness is impeachment.

Bloomberg has the standard laudatory piece on victorious plaintiffs' attorney Brad Seligman. One substantive detail:

In the Wal-Mart case, he showed U.S. District Court Judge Martin Jenkins an e-mail by the retailer's top personnel executive saying the company had no system for telling hourly employees how to earn promotions to management. Jenkins cited the e-mail when he granted the case class-action status in June 2004, the ruling Wal-Mart appealed.

Of course, that sort of evidence, properly construed in an intellectually honest manner against the requirements of Federal Rule of Civil Procedure 23, is evidence that class treatment is not appropriate: if there is discrimination (and any large organization made up of fallible humans is bound to have some somewhere), it is discrimination happening on an individualized basis in particular stores or even particular departments of particular stores. As Brian Van Vleck notes:

For example, to the extent that Wal-Mart promulgated centralized personnel policies and procedures, the majority found that these supported a finding of �commonality.� Yet, to the extent Wal-Mart lacked such centrally imposed policies, the majority held that that, too, was evidence of �commonality� -- because it demonstrated a �common� policy of permitting subjective decisions by local managers. Predictably, Wal-Mart had no way of escaping this logical Catch-22.

The dangers of the Restatement

The original idea behind the influential Restatement series produced by the American Law Institute was to gather prominent academics together to divine a consensus in the common law and create a sort of statute-like guide to those principles, "restating" what was already law. It is questionable whether the Restatement ever lived up to those ideals, in practice it has been used to ratchet the system to be ever more plaintiff-friendly; courts would view the Restatement as a floor of minimum plaintiffs' rights, while not hesitating to nullify any principles in the Restatement that protected the ability of defendants to defend themselves. (I covered one such example in California in last month's AEI Liability Outlook.) A new Restatement would come forward setting forth these new principles, and the Slinky would continue to march up the stairs.

In many cases, the Restatement is not a restatement at all, but an aspirational document hoping to persuade courts to change the law, and sometimes ALI goes even farther and propounds "Principles" openly seeking to do just that. Given the possibility and prevalence of judicial law-making, and the prestige and influence of ALI, it is important to pay attention to what the American Law Institute is doing.

Beck and Herrmann do just that in their must-read analysis of the draft of ALI's "Principles of the Law of Aggregate Litigation." The two document in great detail the efforts of the ALI in "Preliminary Draft No. 4 (Sep. 21, 2006) ($)" to undo precedent protecting defendants and expand the use of the class action, often at the expense of constitutional rights:

Right at the beginning, the Principles are �consciously breaking� with the terminology found in almost all applicable class action rules � dispensing with �predominance,� �superiority,� and the rest of the familiar analytical framework in favor of terms used in a 2005 law review article. However, those terms do not track any Rule enacted by any jurisdiction, state or federal. By jettisoning the legal requirements of the applicable rules, and the mature and well-developed body of case law that has grown up around those rules, the principles are profoundly destructive of existing law.

Read the whole thing.

The AP reports that a Pequannock, New Jersey school district is adopting a policy that allows officials to randomly test students for alcohol consumed as much as three days before the test (i.e., on weekends for tests administered on Mondays and Tuesdays). If students test positive, their parents will be told. They'll also get counseling, but won't be kicked off teams or kept from after-school activities.

The ACLU is ready to sue for invasion of privacy, apparently. [Will LSDAS will be able to obtain test results along with the high school transcript?] I wonder if parents will be able to "opt out" of the testing program for their children. What kind of parent would choose to opt out? On the other hand, would our children's consumption of a bit of wine at the Friday evening Sabbath meal wear off by Monday's test? Enquiring minds want to know!

So said the experienced director of the Tobacco Products Liability Project at Northeastern University. In this case, it's very hard to imagine a jury not finding against Lorillard, Corp. in an astounding case of defective marketing. The Worcester Telegram & Gazette reports on a case involving Marie Evans, who died in 2002 at age 54. She had been a smoker for 40 years.

According to the suit, Ms. Evans and other black children started recieving free Newport cigarettes in her Boston neighborhood when she was 9 years old. She at first traded the cigarettes for candy, but started smoking herself at 13. Lawyers for her son, Will Evans, allege that Ms. Evans was too young to recognize the hazards of smoking and was pulled in by advertising specifically aimed at blacks.

The cigarette giveaways apparently violated a law against giving cigarettes to minors.

Lorillard attempted to exclude, as a matter of law, liability for any harm to Evans that occurred after 1969, when Congress required cigarettes to carry a warning label and when Ms. Evans was 21. Evans's health problems allegedly did not begin until she suffered a heart attack in 1984. The trial judge denied Lorillard's motion -- so Lorillard will have to argue the proximate causation issue to the jury.

I think 75% is an understatement....

For those of us who thought we had seen it all, The Texas Lawyer [reproduced in Law.com -- thanks to my student, Jon Strang, for the hat tip] reports on an astounding case. Two San Antonio lawyers, married to each other, face trial on theft charges. [NB I regret missing the earlier coverage on Overlawyered: Feb. 6 and links therein.] It is alleged that the wife initiated sexual liaisons with four men whom the husband then threatened with litigation unless they compensated him for his "emotional distress." Over $144,000 was apparently garnered by the couple in such "settlements."

Ted Roberts, principal in Ted H. Roberts in San Antonio, is apparently certified in personal injury law and civil trial law by the Texas Board of Legal Specialization. Mary Roberts' primary areas of practice include ethics and legal malpractice....

I so wish I were making this up. And I'm so glad I'm not the one who taught Ms. Roberts Legal Ethics.

Most jurisdictions recognize that drunken misbehavior is the responsibility of the drunk and of no one else. Not so progressive New Jersey, where servers of alcohol may be held liable for the acts of those who overindulge. [When will supermarkets be held liable for obesity?] But even in the Garden State more than enough is sometimes enough. As the New Jersey Law Journal (reported in Law.com) notes, the NJ Supremes have just turned down an appeal of an intermediate court's decision quashing a $105 million verdict against a Giants stadium beer vendor.

In 2005, a Bergen County Superior Court jury found the stadium vending company, Harry M. Stevens Inc., and its parent Aramark Corp., liable for $30 million in compensatory damages and $75 million in punitive damages. That decision was quashed, as the trial judge had admitted into evidence testimony about the "culture of drunkenness" at the stadium [involving alcohol supplied by fans themselves, at tailgate events, for example]. The appellate court laconically noted that only evidence relating to liquor served by the defense to a visibly intoxicated fan (who after the game drove away and severely injured the nine-year-old plaintiff) would be admissible.

The Appellate Division ruling also allows the jury to allocate fault to other defendants: The Gallery, a bar the drunk driver visited after the game; Michael Holder, a friend who bought liquor for Lanzaro; the New York Giants and the National Football League. The cases against them had been dismissed after either summary judgment or settlements, and the jury had not been allowed to apportion any of the liability to them.

Whoever presides at the trial also will also have to decide whether the vendors' parent company can be excused from the case. Aramark Corp., the parent company of the vendors, argued that the plaintiff lacks any evidence that the majority shareholder has responsibility in the service of liquor.

"Due to multiple errors in the course of the trial, we reverse and remand for a new trial," wrote the appellate court panel last August. New Jersey courts have been disdainful of tort law for years now -- perhaps the state Supremes' refusal to grant cert in this case is an omen that sound tort doctrine may be making a slight comeback in the Garden State.

Earlier coverage on Overlawyered, including a link to Verni v. Harry M. Stevens: August 4 and links therein.

"Torts, Crises and Soup Sandwiches"

R. Carter Langston has begun a series of podcasts on litigation reform; four are in the can so far, at lengths of 25-45 minutes, with guests that have included Home Depot founder Bernie Marcus and ABC's John Stossel (via American Justice Partnership).

In the NLJ, Michael Starr and Christine M. Wilson of Hogan & Hartson discuss increasing legal pressure to accommodate employees' religious beliefs, even at the cost of offending other employees or rewriting otherwise uniform corporate policies. As happens so often, employers can get sued either way:

When an employee's religiously based need to proselytize or affirmatively oppose sinfulness conflicts with an employer's diversity policies or is experienced as harassing by co-workers, employers that reflexively enforce their anti-harassment policies run the risk of liability for religious discrimination. Some effort to accommodate the employee's religious practice must be made.

More asbestos liability seepage

The First Circuit has just held that an insurer whose liability policy was cancelled by an insured is nonetheless on the hook for the full annual amount of coverage.

In 1967, Employers Surplus Lines Insurance Co. issued an excess umbrella liability policy to Georgia-Pacific Corp. that provided a $10 million annual aggregate limit and a $10 million per-occurrence limit. Three months after the policy was issued, Georgia-Pacific found a cheaper policy from the Insurance Company of the State of Pennsylvania and cancelled the Employers policy. Only one-quarter of the annual premium was paid.

Decades later, Georgia-Pacific presented Employers' successor, OneBeacon Insurance Co., with $10 million of asbestos product-liability losses. OneBeacon maintained that its liability was capped at $2.5 million because the policy was in effect for only one-quarter of the year.

The District Court granted summary judgment to Georgia-Pacific and the First Circuit affirmed, holding that nowhere did the insurance contract contemplate proration of the annual aggregate limit. Preseumably the contract could have been cancelled after one day in force, and the full amount of asbestos liability would have been incurred.

Watch for limits or (if they are disallowed by state insurance regulators) steep cancellation penalties in the future.

Joe Grundfest, writing in today's WSJ, notes that securities class actions are down and suggests that might be because of the rise in corporate criminal prosecutions. Even if that explanation is correct, I wonder whether we're better off.

In Dukes v. Wal-Mart, a decision that should be long studied for its intellectual dishonesty, a divided court upheld the class certification of a million-plus-member class with disparate individualized claims and absolutely no way to try the case (which seeks punitive damages, no less) with adequate fairness and due process for unnamed class members or the defendant. Objections were brushed aside: after all, if the class is truly problematic, the district judge who made the dishonest certification can choose to decertify the class. (Never mind that this is precisely backwards: the Committee Notes to Rule 23 say "A court that is not satisfied that the requirements of Rule 23 have been met should refuse certification until they have been met.") Statistical evidence that the Supreme Court has said was insufficient was held sufficient; class members that the Supreme Court have said have no standing were given standing; a punitive-damages procedure the Supreme Court has said violates due process was considered sufficient; all in order to shoehorn the class into a "typicality" requirement that could not be met otherwise, demonstrating the danger of class actions where the procedural tail wags the substantive dog. The Court also found, at the request of the plaintiffs' lawyers, that declaratory and injunctive relief "predominate" under Rule 23(b)(2), a matter of procedural convenience rather than intellectual honesty about the law when the compensatory and punitive damages sought rise into the hundreds of billions.

As Judge Kleinfeld's dissent points out, "The Civil Rights Act expressly prohibits orders requiring the reinstatement, promotion, or payment of back pay to anyone injured 'for any reason other than discrimination.'" No matter to the two-judge majority: the substantive law bends to the procedural necessity of extorting billions from Wal-Mart, though here they are at least not dishonest, just lawless, frankly admitting that they prefer "rough justice" to what the law requires.

"Help us, Governor Spitzer!"

Nicole Gelinas of the Manhattan Institute, whose article on capital market competitiveness is our featured column of the moment, has an article in the new City Journal (published by MI) urging Gov. Spitzer to use every means at his disposal to attack the endemic corruption and fiscal mismanagement of New York government. The piece ranges widely over a variety of topics (Medicaid, school failure, public employee pensions, conflicts of interests in Albany, the Wicks Law, etc.) but of particular interest to this site's readers is the following passage:

Absurd personal-injury claims, including claims for pain and suffering, hammer New York municipalities, too. Gotham alone pays out over $500 million in awards and settlements each year, up nearly eightfold since the late seventies, after adjusting for inflation. Costs are so high, the city�s law department explains, in part because "even when a jury finds the city only slightly at fault," state law requires Gotham to �foot the whole bill." Abuses abound, including a case in which a driver, high on cocaine and heroin, swerved wildly around a New York City sanitation truck, injuring three pedestrians. A jury found Gotham 23 percent at fault�the truck driver might have made an illegal turn�but the city had to pay the full $18 million awarded.

To reduce such unjustifiable payouts, New York�s cities and towns have long petitioned Albany to set up a court of claims, modeled on the one that the state uses to adjudicate claims against it. Under such a system, appointed judges, not softhearted jurors, would hear claims and determine liability. But yet another Albany conspirator against the public�the trial lawyers� lobby�has foiled sensible change, again by rallying the powerful Silver to its side.

Not that it had to work too hard. Silver�s support for the litigious status quo is even more self-interested than it appears. Consider one huge trial-lawyer payout during the nineties. As Albany reporting vet Jay Gallagher describes the case in his book The Politics of Decline, two adult brothers, Virgil and John Brown, climbed over a railing at Coney Island and jumped off a pier into shallow water, breaking their necks. The brothers made headlines when they won a $104 million judgment against city taxpayers (later cut by two-thirds by an appeals court). Who represented the Brown brothers, taking home an estimated $8�12 million fee for his trouble? Attorney Harvey Weitz, of the law firm Weitz & Luxenberg, where Speaker Silver himself is on permanent retainer, for an undisclosed amount.

Arthur Allen, "Vaccine"

New, promising-looking, and doing well on Amazon, this is a journalist's in-depth exploration of the history of vaccines and controversies over their alleged side effects. Henry Miller, in the W$J, writes:

With the near disappearance of virulent infectious disease, Mr. Allen writes, "other diseases of childhood -- autism, juvenile diabetes, Attention Deficit Hyperactivity Disorder, asthma -- have become more visible." Vaccines have even been blamed for them. Notably, the mercury-containing vaccine preservative thimerosal has been blamed for autism. But as Mr. Allen observes, there is no persuasive evidence for this claim. He comments wryly that even after thimerosal "was long gone from vaccines, people kept discovering that their children were being made autistic by it." Little wonder that vaccination rates have dwindled -- and deadly outbreaks of measles, mumps and whooping cough are more common....

What is needed is a dose of political courage and a jab of common sense -- to inform the public, ease the regulatory burden and thwart unreasonable, rampant litigation. Bringing about such changes will be, I fear, about as easy as dragging a child to the doctor for a painful shot.

The author's website and blog for the book is here. Orac (Respectful Insolence) has extensive coverage, most recently here as well as at these links.

Jerry Brown: more usual than first thought

The Wall Street Journal's editorial board takes on Jerry Brown's suit against auto manufacturers. Earlier: here and here.

What are they teaching at Harvard Law?

It doesn't take long for an anonymous commenter and David Rossmiller to demolish Harvard 3L Christopher Robertson's unreasoned-if-heavily-footnoted insurance company conspiracy theory, posted on Professor Elizabeth Warren's blog.

Update: A good comment from Larry Ribstein and from Martin Grace.

(Earlier: Dec. 20, Jan. 8, and Jan. 30.)

To no one's surprise, the New York Times declines the invitation for Alex Berenson to testify, citing its view of First Amendment "news gathering" privileges. The letter's position seems overstated: I didn't see the New York Times agreeing to take a default judgment in the Hatfill case (Jan. 6) rather than submit to document discovery.

It puts Eli Lilly in an awkward position, since the testimony certainly showed Berenson conspiring to violate the protective order, but going after him for criminal contempt of court would make him a press martyr rather than create a disincentive for other reporters to flout the law. One questions, however, why this is a decision for Lilly rather than the U.S. Attorney.

Update: Bill Childs posts a copy of the Times's letter. While AP has covered the tale of the invitation, still no reporting of it in the New York Times itself.

From a report in London's Evening Standard Dec. 12 on the controversy over NASDAQ's interest in buying the London Stock Exchange:

Critics such as Mayor Ken Livingstone warn that the takeover could have very serious implications for London's position as the world's pre-eminent international finance centre.

In a letter to the Office of Fair Trading, Mr Livingstone says the proposed takeover risks the traditionally free-wheeling City being throttled by US-style regulation [emphasis added] and warns that investment in the Stock Exchange could be curtailed.

Note to the New Yorker, Fortune, and other press organs who claim Mayor Bloomberg and Sen. Schumer are being excessively alarmist about capital market flight: when even the Castro-f�ting "Red Ken" says we're overregulating in this country, maybe we're really overregulating.

Emergency room doctor shortages

No prizes for guessing one of the reasons why. EMTALA doesn't help either (via KevinMD).

Boston readers

On Thursday, Feb. 15 the Federalist Society's Lawyers Division will be holding a roundtable in Boston to discuss consumer protection laws, and in particular the Massachusetts consumer protection statute, which has been increasingly visible as a source of litigation against nationwide businesses. Details here.

"Judge becomes national legal star"

Cleveland Plain Dealer profiles judge Harry Hanna, who cracked down on abusive asbestos litigation in his Cuyahoga County courtroom (more here and here):

Brayton Purcell "chose to weave a seemingly endless web of deceit," customizing each of its claims to fit Kananian - and not always telling the truth, Hanna wrote.

"In my 45 years of practicing law, I never expected to see lawyers lie like this," Hanna said in an interview from his chambers in the Old Lakeside Courthouse. "It was lies upon lies upon lies."...

"Courageous? I was just doing my job," said Hanna, 67, of University Heights, a retired judge appointed to oversee the county's asbestos docket in 1997. "It's just too bad it had to happen."

American Justice Partnership says the lesson is "that more defense counsel should take steps to convince judges to investigate asbestos fraud".

Law blogs

Discussed by Yale's Jack Balkin, with particular reference to the legal blogosphere's academic side.

The Guardian (UK) vs. AEI

David Frum has written a suitably impassioned riposte to the slurs against the American Enterprise Institute that have been circulating in parts of the blogosphere. The piece is worth reading even if you have not followed those slurs, in part because of its shrewd observation that organized campaigns against Big Oil, Big Tobacco, etc., are commonly disguised ways of imposing taxes or regulations on the consumers of those products, which the industry itself is usually quite capable of living with once the dust settles.

On a personal note, I was at AEI for several years in the early 1980s before coming to the Manhattan Institute, and my experience at that time was exactly like the one David describes when he writes about his more recent fellowship there:

I have never in my life been involved in an organization with more respect for intellectual freedom or greater commitment to intellectual integrity. Nobody in all that time has ever breathed a word to me suggesting that I should take this side or that of a particular debate.

More: Jonathan Adler @ Volokh.

Dodging Daubert

David Bernstein finds an ATLA publication frankly acknowledging that one motive for "many plaintiffs' attorneys" to head to state rather than federal court is to evade the federal courts' tougher scrutiny of expert evidence.

Orthopedists: bring back Vioxx

That's the result of a poll conducted by the polling company and CEI in a larger poll of orthopedists' attitudes towards the FDA: "80% said they would 'make Vioxx available again as a prescription drug,' compared to just 14% who would like the medication to remain off-limits."

Parloff on tobacco litigation

Roger Parloff has a thorough post on Altria's recent victories in tobacco litigation (updating his November 2004 article on the appeals) and the threats Altria still faces as it tries to spin off Kraft. Not mentioned: the Watson v. Philip Morris certiorari grant (Jan. 10; Jan. 13), which likely foresages a return to state court of three consumer-fraud class actions in Minnesota, Missouri, and Arkansas.

Federalist Society Event on CAFA

I'm speaking at the National Press Club February 14 on the Class Action Fairness Act.

On February 18, 2005 President Bush signed the Class Action Fairness Act into law. Two years later - on the Second Anniversary of the Act�s passage - this panel will consider the following questions. Has the act lived up to its name and restored �fairness� to the class action mechanism, or is there still more work to be done? Has expanded federal jurisdiction reduced forum shopping and the influence of so-called �magic� jurisdictions? Has the Consumer Class Action Bill of Rights improved the quality of class action settlements, particularly settlements composed, in whole or in part, of �coupon� compensation? Have the first two years of experience exposed any notable ambiguities or weaknesses in the act? How have the courts responded? Are the problems identified to date amenable to judicial resolution or is additional legislative action required?

Speakers Include:

* John Beisner, O'Melveny & Myers
* Theodore H. Frank, American Enterprise Institute
* Michael D. Hausfeld, Cohen, Milstein, Hausfeld & Toll
* John J. Stoia, Jr., Lerach Coughlin Stoia Geller Rudman & Robbins
* Charles E. Stuckey, State Farm Corporate Law Department
* John T. Delacourt, Kelley Drye Collier Shannon, Moderator

DATE: Wednesday, February 14, 2007
TIME: 12:00 noon � 2:00 p.m. (lunch will be served)
LOCATION: The National Press Club
529 14th Street, N.W.
13th Floor
Washington, D.C.

Cost: $20.00
E-mail info@fed-soc.org to RSVP or call (202) 822-8138.

Although he's taking a more conciliatory tone than predecessor Lockyer. (Egelko, SF Chronicle).

More Baron & Budd dissension

The Dallas-based asbestos-and-toxic-tort powerhouse faces another suit from a former partner. This time it's Charla Aldous alleging she was done out of a proper share of the firm's earnings. Earlier here, here, etc.

Card check for me, but not for thee

The mislabeled "Employee Free Choice Act" would do away with secret ballot elections in union certifications, instead installing unions as exclusive representatives once they proffer a majority of authorization cards signed by workers individually in settings where a 250-lb. Teamster may be looking over their shoulders ("You got a problem with that?") Comments Larry Lindsey in the W$J:

The final proof that this bill is about union power, and not worker choice, is revealed by its treatment of the flip side of unionization: decertification elections. These are secret ballot elections in which workers get to decide that they have had enough of the union. So under the Employee Free Choice Act can a majority of workers decertify the union by signing a card? Not on your life. Here unions want the chance to engage in a campaign to give workers both sides of the story -- and maybe do a better job of representing them -- before the union's fate is decided, by a secret-ballot vote.

Storm of demagogy

It isn't just Mississippi Attorney General Jim Hood who's undermining the future interests of insurance policyholders, argues the W$J today -- better keep an eye on Florida Gov. Charlie Crist (R-Caracas) as well.

Speculating on backdating

An article in today's WSJ indicates that some investors are making money betting on backdating companies. I have some thoughts on what the market is telling us about the backdating "scandal."

What docs pay, and where

According to the Litigation Lobby, limits on damages (like those in California's MICRA statute) have no great effect on the sums doctors must pay to insure themselves against liability claims. Here are some actual numbers on the differences, from the Orange County Register, and using premium data from the Doctor's Company (via KevinMD).


LA/Orange Counties, Calif., $83,000
Miami, $369,000
Chicago, $330,000
Las Vegas, $275,000

Obstetrics and gynecological surgery
LA/Orange Counties, Calif., $63,000
Miami, $248,000
Chicago, $221,000
Las Vegas, $219,000

For claims that the insurer-bashing Proposition 103 deserves credit for the low California rates, incidentally, see this post and this one ("about half of medical liability coverage in California is provided by entities that aren't even subject to Prop 103; and the measure's provisions requiring hearings following challenges of any rate increases above 15 percent have seldom kicked in because insurers haven't mostly pursued rate increases that high.")

That didn't take long: Section 203 of S. 349, a bill that purports to provide tax relief to business, claims it is going to fund itself with additional taxes on business by ending deductions for punitive damages. As Martin Grace notes in the insurance context, most of this tax increase from the random imposition of punitive damages is simply going to get passed on directly to American consumers as a cost of doing business.

What Grace doesn't note is that it's also a wealth transfer directly to trial lawyers. With punitive damages 50% or so more expensive to a defendant (but the same value to the trial lawyer), the law creates additional settlement pressure on defendants to settle a case before punitive damages are assessed rather than defend itself in court against unfair attacks. One can expect an increase in lottery litigation.

I disagree with Grace that none of this cost will fall on workers or investors. While many wealthier investors can shift investments away from litigation targets to friendlier environments, others have less fungible portfolios. There will be a decline in total economic activity at the margin, and this will hurt employment and investors at the margin as well. (Update: Grace has since modified his position to reflect the fact that the bill affects more than insurers, and has a good cite to the CBO study showing that 70% of the effect of corporate taxation falls on workers.)

Meanwhile, the total amount of punitive damages awarded in trial can be expected to go down as more defendants cave into extortion before verdict, and dishonest or foolish academics will point to this incomplete data as evidence that punitive damage law needs no reform while ignoring the ex ante effects of the law. The net effect is going to cost business and consumers more money; the net effect on government revenues is likely negative depending on whether the decline in jury verdicts more than offsets the increase in government take. In California, where a law was passed to directly tax punitive damages, the government take dropped to zero as plaintiffs' and defense attorneys simply negotiated around the new rule in settlements.

It's lose-lose for everybody—except, of course, the trial lawyers. Where's the outrage?

(AP/CNN reports that the bill also applies to court settlements paid by companies that have been sued, but Section 204 of the bill is limited solely to consent decrees in actions brought by the government, and has no effect on private causes of action.)

Steven G. Cooperman will plead guilty to taking $6.4 million in kickbacks from Milberg Weiss as a named class representative in seventy cases where they obtained more than $133 million in attorneys fees. The indicted firm, whose politically-connected lawyers are among the lead fundraisers for the Democratic Party, continues to deny the allegations. Trial is scheduled for January 2008. [WSJ; Bloomberg; Reuters; DOJ press release; The Recorder; LA Times; NY Times]

I discussed the Milberg Weiss indictment in testimony to Congress last year.



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.