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May 2007 Archives

Lerach to quit?

The Washington Post is reporting that Bill Lerach is leaving his firm Lerach Coughlin, which he formed three years ago in a celebrated split from Milberg Weiss. The article by Carrie Johnson suggests that Lerach's departure might be linked to the reported decision by former Milberg partner David Bershad to explore possible cooperation agreements with prosecutors in the government's ongoing investigation of alleged improper payments to securities class action plaintiffs:

In May 2006, the Milberg Weiss law firm and partners Steven Schulman and David J. Bershad were indicted by the U.S. attorney in Los Angeles on multiple criminal charges stemming from what prosecutors called a more than 25-year-long scheme to pay people to serve as plaintiffs in large class-action lawsuits. At least one former client has been assisting the government with that case. The firm has been fighting the charges, and the individual partners, who held high-ranking positions and earned tens of millions of dollars in their heyday there, have presented a forceful defense.

Bershad may be interested in exploring settlement possibilities with the government, according to an article on the Wall Street Journal's Web site last night. The Journal reported that he may cooperate with prosecutors in exchange for leniency at sentencing.

Johnson also points to the link between Lerach and the pending Stoneridge case that Ted wrote about in today's Wall Street Journal:

As recently as last week, Lerach was prodding regulators. He published opinion pieces and joined with prominent union leaders to press the Securities and Exchange Commission to file court briefs that would make it easier for investors to collect money from investment banks and accounting firms that watched silently while their corporate clients engaged in misconduct.

We'd previously reported Lerach's lobbying of the SEC here, and his sniping at SEC Chairman Chris Cox here.

Does the solicitor general's office really want to follow a guy like Lerach in its approach to Stoneridge? One would only hope that his sudden departure might cause the government, at a minimum, to discount his heavy-handed tactics.

Ted on the SEC and Stoneridge

Our own Ted Frank has an op-ed in today's Wall Street Journal. Excerpt:

...The plaintiffs' bar is heavily lobbying the SEC to intervene in a pending Supreme Court case, Stoneridge v. Scientific-Atlanta, on the side of a gigantic expansion of private litigation.

The case's facts are straightforward: Charter Communications purchased set-top cable boxes but got back some of the money in the form of advertising bought by the vendors. Charter executives recorded the outgoing money as a "capital expenditure" (to be depreciated over several years) but the incoming money as revenue recorded within a single year, thus falsely inflating operating cash flow. Three Charter executives went to prison over the shenanigans. Plaintiffs' attorneys sued Charter and the executives, of course, but named as codefendants two of the vendors, Motorola and Scientific-Atlanta.

The suit makes little sense. The vendors had no say in how Charter accounted for or reported its transactions. Worse is the precedent it represents: How can a business function if it is potentially liable for hundreds of millions because those whom they trade with misreport a day-to-day transaction?...

Indeed, a 1994 Supreme Court decision on its face cuts off such "secondary liability" claims, but hope of reviving them springs eternal in the plaintiff's bar -- one reason for the P.R. campaign aimed at putting pressure on officials like SEC Chairman Chris Cox. (Ted Frank, "'Arbitrary and Unfair'", Wall Street Journal, May 31)(sub-only). Plus: here's the free AEI version.

By a 5-4 margin in Ledbetter v. Goodyear Tire and Rubber (PDF), the Supreme Court has ruled that the 180-day deadline for filing a discrimination lawsuit cannot be stretched to serve as the basis of the filing of suits today based on the lingering effects of employment decisions taken years ago. Hans Bader at CEI asks a question some major news organizations didn't seem to think worth asking: why didn't Ms. Ledbetter choose to sue under the Equal Pay Act, a separate federal statute that might have seemed more directly helpful in staking her complaint? And James Taranto seeks to vindicate the character of former Justice O'Connor from the insulting presumption that she would reflexively have voted in favor of a female plaintiff in an employment-bias case.

P.S. More at Volokh, from David Bernstein and Orin Kerr. Hans Bader has more on the O'Connor angle, noting that "Justice O�Connor rigorously enforced statutes of limitations, and she wasn�t the swing-vote on the Supreme Court in statute of limitations cases. A man, Justice Clarence Thomas, was." And Carolyn Elefant notes reactions from Profs. Secunda (critical of the majority reasoning) and Runkel (finds majority persuasive). The New York Times reacts, as is its wont, with an overwrought and silly editorial.

Trial began Tuesday in a state courtroom; the Milwaukee Journal-Sentinel's coverage is here, and Jane Genova is again blogging the day-by-day developments, as she did in the previous Rhode Island trial. This time around the defense is apparently going to lay greater stress than previously on the government's own role in promoting the material. Quoting the Journal-Sentinel:

After lead paint was banned in Baltimore in 1951, the first ban of its kind in the country, [defense lawyer Donald Scott] said, NL and the Lead Industry Association initiated a labeling standard.

"But the City of Milwaukee continued to specify lead paint for its architects and projects for the next 20 years," Scott said.

As we have had occasion to note elsewhere, a surprising number of products later sued over as defective and injurious do turn out to have been promoted for use by the government itself.

No, Congress has never seen fit to pass any general law prohibiting employers from according higher pay or faster promotions to employees whose commitment to the job is undiluted by family responsibilities at home. Which means advocates of such a prohibition are left to cobble together elements of sex discrimination law, family leave, disparate impact, disabled-rights law and so forth in hopes of attaining the same approximate result. The EEOC's new "Guidance on the Unlawful Disparate Treatment of Workers with Caregiving Responsibilities" may or may not hurry this process along. (A number of local jurisdictions, including Alaska, D.C., and various county and city governments, do have explicit bans.) Tresa Baldas at the NLJ covers the EEOC initiative and the rising volume of suits in this area; Richard Bales discusses here and here, and Michael Fox here, while the WorkLife Law Blog is devoted to promoting bans of this sort.

Sniping at SEC's Cox

Although even Rep. Barney Frank, not an easy customer to please, says Chris Cox "has done a good job" as head of the Securities and Exchange Commission, some of the usual suspects are not about to forgive Cox for his less-than-obliging attitude toward the Bill Lerachs of the world. A Bloomberg News article provides a perch for sniping from both named and unnamed sources; Lattman has more, while Prof. Bainbridge speculates on Cox's apparent enthusiasm for bringing insider-trading cases.

Via Ribstein, we find an abstract to a new paper by Peter Leeson, "An-arrgh-chy: The Law and Economics of Pirate Organization."

This paper investigates the internal governance institutions of violent criminal enterprise by examining the law, economics, and organization of pirates. To effectively organize their banditry, pirates required mechanisms to prevent internal predation, minimize crew conflict, and maximize piratical profit. I argue that pirates devised two institutions for this purpose. First, I analyze the system of piratical checks and balances that crews used to constrain captain predation. Second, I examine how pirates used democratic constitutions to minimize conflict and create piratical law and order. Remarkably, pirates adopted both of these institutions before the United States or England. Pirate governance created sufficient order and cooperation to make pirates one of the most sophisticated and successful criminal organizations in history.

More press coverage on Congoleum

From the New Jersey Law Journal (via Scheuerman) and the WSJ op-ed page. We covered the New Jersey court's decision in Congoleum v. ACE American Insurance Co., Mid-L-8908-01 (Mercer County, NJ 2007) with many links on May 21.

Gottlieb on NEJM and Avandia

Former FDA deputy commissioner Scott Gottlieb is scathing about NEJM's editorial on its Avandia study (May 24). Even the Lancet, hardly innocent of politicized discourse (e.g., Dec. 2003, Nov. 2006; see also Fred Kaplan, Slate, Oct. 2004 and NY Times editorial (reprinted @ Lott), Nov. 2004), is critical of NEJM's Avandia work. Of note:

Nor is this the first time that NEJM timed release of a deceptive publication to influence political debate. Its now-infamous December 2005 editorial on the Vioxx affair, titled "Expression of Concern," advanced factual distortions that internal NEJM emails later revealed were timed to divert attention away from a damaging deposition that one of the NEJM editors had given in a Vioxx trial and, instead, place blame on Merck.

I have worked on the staff of two leading medical journals, the British Medical Journal and the Journal of the American Medical Association. These institutions fill an invaluable role informing clinical practice and maintaining standards for how rigorous clinical research ought to be conducted. There is a problem when some journals let antipathy for business interests and left-leaning views interfere with the medical decisions that they make, bending standards or stepping outside their mandate, using their prestige and influence in ways that distort medical facts in the aim of influencing political outcomes.

Prestigious biomedical journals are important public health tools, provided they stick to their core business of weighing medical evidence and informing physicians of important practice advances. When they use shortcuts and shoddy analysis to fabricate criticism and doubt of drug regulation, they're no better than some politicians they increasingly comport with.

Scienceblogs on NEJM Avandia study

Two of the pseudonymous bloggers at Science Blogs are not impressed with the NEJM Avandia study (May 24).

Picker on Twombly

Chicago's Randy Picker makes a good point: balancing pleading requirements to reflect the unfairness and expense of discovery ignores the Supreme Court's role in those discovery rules.

The majority opinion makes no effort to explain how we as a society should confront this core one-sidedness of information. This is hardly just an antitrust problem. We will constantly confront information that is systematically more available to one side more than the other, and we will see that in cases across the board, including the discrimination cases that receive some attention in today�s opinions. The whole point of the federal rules of civil procedure�rules controlled by the Supreme Court�is to figure out exactly how to manage that one-sidedness.

The critical question isn�t how to frame the answer, the problem posed by footnote 10, but rather how to frame discovery, and more generally, how to manage the one-sidedness of information. It is the fear of discovery run amok that drives the majority opinion�see the extensive quotation in footnote 6 of the majority opinion of a 1989 article by Judge Frank Easterbrook�and yet the Court offers no guidance as to how matters might be improved.

Under the Rules Enabling Act, the rules of civil procedure are squarely in the Supreme Court�s hands. If the current discovery rules don�t work�in antitrust cases or other cases�the Court should fix them. This is a problem of institutional design entrusted to the Court by Congress. The opinion in Twombly acts as if the discovery rules come from Mars rather than the Supreme Court itself.

Charles Silver on insurance limits

Charles Silver has another post on the DMI blog on his studies; he even takes time to respond to one of the deranged anonymous commenters, though he has yet to address the critique of his previous post, even though it's been more than a month since I've made it. I'll be happy to post such a response on Point of Law if his hosts there are forbidding him from responding on that site.

Once again, Silver's post exhibits confirmation bias, stretching ambiguous data to reach conclusions that do not necessarily follow from the data.

Silver writes:

Malpractice payments stack up at the policy limits, suggesting that insurance policies cap recoveries even when patients deserve much more.

Well, that's one possible suggestion. Another possible suggestion is that malpractice payments stack up at the policy limits regardless of the merits of the case: in the game theory of litigation, the plaintiff always proposes a settlement at policy limits, and the defendant insurance company has to decide whether to accept the settlement offer or accept the risk of being liable for more than policy limits if the results go against the defendant. Insurance policy limits would thus provide a focal point for settlement even when patients deserve much less because they are suing without actionable malpractice, but there is some small percentage chance of a jackpot verdict that forces insurers to settle at policy limits in response to an offer to do so or risk bad-faith litigation. We simply do not know because the "quality of the case" variable is entirely absent from the Texas Department of Insurance dataset used by Silver, yet Silver draws conclusions by assuming, without evidence, the very premise that is challenged by reformers. The $1 million settlement could reflect a defendant getting away with $3 million in damages and 100% chance of losing, or it could be a lottery case where $20 million in damages is possible 4% of the time, with the other 96% of juries getting it right and awarding zero.

What we do know from Silver's dataset is that insurers do ignore insurance limits and settle for above policy limits a significant percentage of the time. Silver's hypothesis works only if one assumes the policy limits are firm; the alternative hypothesis works even if the policy limits are not firm—and Silver's dataset shows that, indeed, the policy limits are not absolute. Silver provides no explanation why insurers would settle some meritorious cases at policy limits and others above policy limits; it's not clear to me that any such explanation is possible. If, however, policy limits provide a focal point regardless of the merits of the case where there is a risk of a jackpot verdict, then Silver's results say nothing about the merits of reform in one direction or the other.

Silver also writes:

Doctors almost never use personal assets to resolve malpractice claims. The claim that �every physician is one lawsuit away from financial ruin� is a myth.

This is, once again, a non sequitur—"almost never" is hardly "never," especially to a risk-averse physician. (It's also unclear where Silver draws the premise from; the TDI dataset he uses does not collect data over the use of defendants' assets. Update: my mistake, it does.)

Perhaps the Silver paper does do analysis of the merits of the underlying cases and has a secret stash of data outside the TDI dataset such that he can draw such confident conclusions. (Update: here's the paper on SSRN.)

May 24 updates

"Flood" of Avandia litigation?

This week, NEJM released a meta-analysis that, after omitting six studies where there were no cardiac events, found a barely statistically significant relative risk of 1.43 of myocardial infarction from long-term use of diabetes drug Avandia (rosiglitazone). (A slightly higher relative risk of death from cardiac causes was not statistically significant, though also just barely.) Reuters reports that plaintiffs' lawyers are deciding whether they can create a mass tort litigation against GlaxoSmithKline, though some already confidently predict that they will (which suggests how important the supposed due diligence required by the rules and being conducted now is). Note that a relative risk of 1.43 means that 70% of people who suffered heart attacks while taking Avandia would have had heart attacks anyway. Avandia's warning label already warned of the risk of cardiovascular adverse events.

Hans Bader on Twombly

Brickman vs. Mencimer

No one has done more to expose systematic fraud and excessive fee-charging in mass tort litigation than Prof. Lester Brickman, so it's no surprise that he's made more than a few determined enemies along the way. Lately he was the target of ten pages' worth of hostile coverage in the recent book Blocking the Courthouse Door, by Stephanie Mencimer (an author we know is not accustomed to accept spoon feeding from trial lawyer sources, because she says so herself). Anyway, Prof. Brickman recently launched a website of his own and among its contents is this detailed response to Mencimer, in PDF format. He finds the passages in question to be replete with "false statements, errors, innuendo, and simply inaccurate reporting".

Speaking of which, it should be noted that a flip through the index of Blocking the Courthouse Door reveals Mencimer taking potshots at what she is pleased to refer to as the Manhattan Institute "of" Policy Research and its eminent founder "Anthony" Fisher.

More on subprime

Parade of new blogs

A few new ones that fall outside the usual policy-news-commentary boundaries: Adam Freedman, who writes the "Legal Lingo" column for New York Law Journal and other American Lawyer publications, has launched The Party of the First Part, a blog about legal terminology and "legalese". In This Case, edited by Tracey Broderick, is "The blog of people telling their stories about the law. Jury duty, jail time, divorce court, and more...." And Nicole Black, well known for her blog on New York law, Sui Generis, has started a separate blog for lighter items entitled Legal Antics.

Some arresting numbers from the Times (UK):

Why does it cost so much to go to court? In a judgment in April last year, Lord Justice Longmore said: �It is a well-known and rather disturbing fact that it costs far more to resolve intellectual property disputes in England than in other parts of the EEA [European Economic Area].�

Recently, the European Patent Office gathered information on the relative costs of litigation across Europe. It disclosed that to litigate a small to medium-sized patent case in England costs between three and ten times as much as the same case in Germany or the Netherlands.

Sir Hugh Laddie attributes the gap to the English system's attachment to "lengthy cross-examination and oral argument and, above all else, disclosure of documents". Alas, no comparison is included of the costs of litigating similar controversies in the U.S.

When privatization doesn't work

PoL contributor Jonathan B. Wilson has some further thoughts on government's use of contracting-out in affirmative-litigation cases (see May 19, etc.):

Government outsourcing would seem to work best when the tasks being outsourced are discrete and do not rely on an exercise of judgment as to the public interest. ...Private actors have no capacity to identify which outcomes are preferred in the public interest.

Litigation is an exercise in determining the self-interest of the litigants.

P.S. David Giacalone has some observations as well.

Katrina litigation update

David Rossmiller continues to have the best Katrina insurance litigation coverage in not just the blogosphere, but the entire media. It appears Scruggs is targeting Allstate these days.

Although softened considerably in their final form, the state's new rules curbing attorney promotion (coverage here, here, here and here) have not surprisingly resulted in a lawsuit, which has been slated for trial next month in federal court. Further coverage in the New York Law Journal (and more) and by Nicole Black.

P.S. Outrun by events: the parties have reportedly agreed to skip trial and proceed to judicial resolution in the absence of disputed factual issues. Eric Turkewitz has the details.

The Vermont Supreme Court ruled in Levine v. Wyeth, 2006 WL 3041078, that a jury could award millions of dollars of damages for failure to warn, notwithstanding the fact that the label for the drug, Phenergan, already included an FDA-approved warning of the possibility of the adverse side effect that Ms. Levine suffered; the Court announced that FDA warnings were a floor, rather than a ceiling, despite the explicit statement of the FDA that its approval of a label reflected both a floor and a ceiling. (Beck and Herrmann had a post last week that did a wonderful job refuting Levine.)

The certiorari petition to the Supreme Court has attracted amicus attention from the U.S. Chamber of Commerce and PhRMA (brief doesn't appear to be online), and a cert opposition from Public Citizen. Now the Supreme Court has asked for the opinion of the Solicitor General, which is a good opportunity for the Bush Administration to seek clarification of this important issue of state-court and plaintiffs' bar attempts to override federalism and have state laws trump FDA regulation to stick it to out-of-state defendants. [early word from Beck/Herrmann; WSJ via SCOTUSblog; Pharmalot; Supreme Court Today]

Update: The SCOTUSblog site has some other certiorari briefs.

Another Congoleum ruling

A New Jersey court absolved insurers from liability for asbestos claims from a collusive prepackaged bankruptcy. Nathan Koppel in today's WSJ:

Middlesex County Superior Court Judge Nicholas Stroumtsos Jr. concluded that the agreement was the result of collusion between Congoleum's former bankruptcy lawyers and lawyers representing asbestos claimants. The agreement "contains no meaningful provisions to ferret out fraudulent claims," he wrote.

See also the WSJ Law Blog (with additional links), the decision, and the Mass Tort Litigation Blog. Our earlier coverage: Feb. 13, Jun. 7, and other articles. Roger Parloff did a comprehensive expose in 2004 for Fortune ("Welcome to the New Asbestos Scandal", Sep. 6, 2004), which we had previously reported as subscriber-only.

In our newest Featured Column, senior editor Steve Malanga of the Manhattan Institute's City Journal has a warning:

In the wake of the tainted pet-food scandal, some pet owners, aided by trial lawyers and advocacy groups, are trying to achieve human-like status for their animals in our civil courts. If they succeed, it may become much more costly�and risky�to own a pet in America.

Steve's piece originally appeared in the Wall Street Journal, which had not long before run in its news pages an account of the controversy which seemed barely aware that there might be any principled or prudential reasons not to allow limitless damage claims over pet losses. More discussion at WSJ Law Blog here. For much more on the subject, see Overlawyered here, here, etc.

"Electrical sensitivity" syndrome

Sweden's efforts to de-recognize such a medical diagnosis as a basis for disability payments are getting some attention. And the syndrome isn't confined to Scandinavia, by any means.

Bell Atlantic v. Twombly

A minor procedural opinion released today by the Supreme Court is being treated a mere dismissal of a Milberg Weiss case alleging antitrust conspiracy, but it will have much larger implications.

Last year, Richard Epstein argued in a paper for AEI-Brookings that Federal Rule of Civil Procedure 8 was poorly situated to resolve motions to dismiss antitrust complaints. The Supreme Court appears to agree in today's 7-2 Bell Atlantic v. Twombly decision (even citing to the Epstein paper), and, by repudiating Conley v. Gibson's "no set of facts" standard, appears to reintroduce some element of fact-pleading back into the complaint procedure, thus making it easier to dismiss meritless complaints at the pleading stage. As discovery has gotten more and more expensive, this is an efficient rebalancing of the risks of false positives versus false negatives, but one would prefer the Supreme Court take action to modify Rule 8 rather than create a judicial overlay on the text of the rule. It is still a welcome change, and reduces the ability of plaintiffs' attorneys to bring extortionate complaints to be settled solely for nuisance value. Earlier discussion: Nov. 27.

Dan McLaughlin also analyzes the procedural implications of the decision.

The next Eliot Spitzer?

The New York Times casts about for a state attorney general to lionize, and settles on Ohio's Marc Dann.

We earlier discussed the significance of Stoneridge (Mar. 27; see also the related discussion over the Enron-related Regents v. CSFB case, where the Supreme Court is considering a petition for certiorari Apr. 5, Mar. 19, and May 17), which could lead to a tremendous unlegislated expansion in secondary liability in securities-fraud cases. Lyle Denniston reports that Justices Roberts and Breyer have recused themselves from the case, leaving a seven-justice panel. Six of those justices previously participated in Central Bank v. First Interstate Bank, a 5-4 decision that spoke of the importance of firmly circumscribed liability rules in the securities context. Justice Kennedy wrote the majority opinion, joined by Rehnquist, O'Connor, Scalia, and Thomas; the dissent was authored by Stevens, with Blackmun, Souter and Ginsburg joining. That leaves the current makeup of the court 3-3, with only Alito's vote unknown—assuming that the senior six justices honor their earlier stated positions, and that none of the dissenters recognize the importance of stare decisis. The petitioners will also presumably seek to ask Justice Kennedy to distinguish Central Bank and claim that the secondary liability they seek to impose here is really primary liability.

If the SEC decides to support Stoneridge, its brief is due June 11; if it decides to support Lerach's certiorari petition, its brief is due June 1. The SEC's position will not be dispositive by any stretch of the imagination; after all, it was on the losing side in Central Bank.

Update: Lyle Roberts reminds us that the Washington Post reported in April on Lerach's lobbying of the SEC over the issue.

Miller, Zin [Smati] and 16 other CEOs are in town for a conference organized by the Organization for International Investment (OFII). The group met Thursday with Treasury Secretary Henry Paulson, Democratic Caucus Chairman Rahm Emanuel (Ill.) and Sens. Trent Lott (R-Miss.) and Jeff Bingaman (D-N.M.). They told a handful of reporters on May 16 that litigation is a greater disincentive to doing business in the U.S. than fears that a protectionist Congress might impose new barriers to foreign trade and investment.

(The story does not identify who "Miller" is.) (Ian Swanson, "Foreign executives press for reform of litigation in United States", The Hill, May 17) (via Childs).

Nathan Koppel at WSJ Law Blog has a roundup. Key paragraph:

Some lawyers predicted that the indictment would be a swift death knell to Milberg. Arthur Andersen, after all, closed shop shortly after its 2002 indictment for allegedly destroying documents related to its Enron audits. Perhaps the reputational damage from an indictment poses a graver threat to a firm hired to audit financial statements than a firm hired to file lawsuits. Another thought: A defense-side law firm would arguably be hurt worse by an indictment. It�s hard to imagine corporate titans turning to a firm under a cloud.

Our coverage is here and here.

I had an op-ed in yesterday's Wall Street Journal ("Tort Travesty") hailing Superior Court Judge Jack Komar's ruling disqualifying private contingency-fee counsel from representing California government entities in lead-paint litigation, and hoping that other courts embrace the decision's logic recognizing the ethical flaws in such representation. The piece had already been in the hopper at the Journal, but was made more timely by this week's announcement that President Bush had signed an executive order barring the federal government from entering contingent-fee arrangements to compensate lawyers or witnesses. Lattman and Kopel @ Volokh have some discussion of that executive order. Separately, Amanda Bronstad at the NLJ covers efforts in seven states (OH, NJ, CA, MS, WS, KS, NV) to adopt greater transparency in the hiring of outside counsel (or reduce the use of such counsel generally) to cut down on the impression of cronyism and pay-for-play.

P.S. And here's yet more from Beck and Herrmann.

Forbes on consumer class actions

Michael Greve's "Harm-Less Lawsuits?" gets a favorable write-up in the latest issue of Forbes, together with a recounting of many cases familiar to Point of Law and Overlawyered readers, such as the Oshana Diet Coke case or the Engineers Local 68 litigation.

Yes, thousands of individuals may have legitimate claims that Vioxx injured them. But that's not what this suit is about--nor are many others. Most rely on broadly written consumer-protection laws that don't require plaintiffs to prove they were injured, or, in some states, even misled by the company they're suing. It's a lot easier than having to find physical damages.

(Daniel Fisher, "Plaintiffs' Paradise", Forbes, May 21).

Comey at Ashcroft's hospital bed

Former OLC head Douglas Kmiec reviews James Comey's testimony and concludes that no one—Comey, Gonzales, nor the hyperventilating critics of the Bush administration who compare it to Watergate—comes off very well.

Update: Marty Lederman has a detailed must-read response with the advantage of not having to comply with op-ed space restrictions; point #4 is particularly interesting.

Update to the update: Kmiec responds in turn. NB this nice paragraph:

[I]f President Reagan or then- campaigning George H.W. Bush had disagreed with my exercise of legal judgment, I would have conceded their authority to override my conclusion without thinking I needed to resign. Of course, if the President seldom found my advice useful, that would be a different matter. As it was, the politics of elections allowed President-elect Bush to make his own unfettered choice of who should and should not be removed from a presidential appointment without explaining himself to me � but then, I may be wandering into another topic that involves Mr. Gonzales.

No, not $2,402 each. The $2,402 represents the total redemption of coupons by a 1,500,000-member class, or $0.0016 per class member. The Illinois state court (in the judicial hellhole of Cook County) awarded plaintiffs' attorneys Gary K. Shipman of Shipman & Wright $1,000,000, presumably because they represented the face value of the unlikely-to-be-redeemed coupons to be in the millions of dollars. A North Carolina state judge was not impressed after he forced the forum-shopping attorneys (and defendants) to reveal the results of the settlement before dismissing a parallel lawsuit. (Moody v. Sears, Roebuck, & Co.) (via Nick Pace of RAND Institute at CL&P Blog).

Note that the widely-publicized Eisenberg/Miller class-action study, regularly cited for the proposition that state courts were no worse than federal courts in terms of awarding attorneys' fees, would have erroneously calculated this attorney fee as 14% or so of the total settlement value, rather than the actual number of 100%. Garbage in, garbage out.

Pace mistakenly thinks that the class members were deprived of a remedy. Not really, though consumers are certainly worse off because of such litigation. Problems like this arise because a Sears is only willing to settle a frivolous consumer-fraud suit for nuisance amounts, and the plaintiffs' attorneys just want a paycheck, so Sears is willing to pay the protection money to make the meritless lawsuit go away, since it will cost more in litigation expense to defend itself. When neither the plaintiffs' attorneys nor the judge cares about the class members, plaintiffs' attorneys can extract, as here, 99.9% of the settlement amount. If, on the other hand, a court ensures that the majority of a nuisance settlement must go to the ostensible plaintiffs, the plaintiffs' attorneys will be less likely to find it profitable to bring the meritless suit and try to extort a settlement, because defendants will be more likely to find it worthwhile to defend against the suit, and the suit won't happen in the first place. Which does make consumers better off, because then they realize a substantial part of the savings of doing business when there's less protection money paid off to plaintiffs' lawyers like Gary Shipman.

The Class Action Fairness Act fixes these matters—or at least it does in the cases where federal judges apply its rules and accept jurisdiction. First, CAFA effectively consolidates national class actions into a single federal jurisdiction, defendants are unable to play one plaintiffs' attorney off of another, as happens when plaintiffs file several dozen identical and parallel class actions. Second, CAFA requires federal judges to apply meaningful scrutiny to class-action settlements and the award of attorneys' fees, especially coupon settlements like this one. A $2402 coupon redemption with a million-dollar attorneys' fee would have been impossible under CAFA.

When, however, judges misread the jurisdictional provisions of CAFA and remand legitimate removals back to the state courts that routinely approve such travesties, they undo the whole point of the legislation, and hurt consumers in the bargain. That Public Citizen regularly argues for such narrow readings of CAFA suggests their true interests lie with trial attorneys, rather than consumers, and that the true consumer advocates are those who support civil justice reform. (Cross-posted to Overlawyered)

FDA scandal! Or is it?

A front-page story in yesterday's Wall Street Journal by Jane Zhang (via Stier) expresses one-sided dismay that HHS blocked an FDA safety effort on E. coli contamination in produce.

"Among other things, the FDA outlined a three-year effort that would pump $76 million into its coffers to monitor produce safety and impose stringent rules on growers and processors to prevent contamination. Such a campaign could cut produce-related outbreaks of illness in half, the FDA officials said."

There are 356 cases of produce-borne E. coli a year. Regulators wanted to spend $76 million to prevent a little over 500 cases of E. coli? Maybe taxpayers would prefer to have one less case of E. coli nationwide instead of $140,000, but it doesn't seem so self-evident that the argument should be ignored entirely, as the story does.

Simple-minded folk on the left sometimes pooh-pooh this sort of cost-benefit analysis as "safety is too expensive," an appallingly arrogant pronouncement of proud ignorance. How much should we spend to eradicate E. coli? Why stop at $76 million to just reduce the small number of cases by half? Why not spend the entire nation's GNP to completely eradicate E. coli contamination of produce?

The answer is obvious to the intellectually honest: if we as a society spend that much money on one small problem, larger problems will necessarily go unaddressed, and we are all worse off. Resources are scarce, rather than unlimited, and not every problem can be solved.

The Wall Street Journal story doesn't even mention how expensive the costs would be to produce-growers beyond the taxpayer layout of expenditures. Would the increased price to fruits and vegetables cause poor people to switch to less healthy carbohydrates and fats in their diet, and increase obesity and health risks that more than offset any small gains from reduced E. coli contamination? I don't know—but it's a question that should be at least asked.

The interesting quote is this one: "Major players in the fresh-produce industry, hurt by sinking sales after the recent outbreaks, support mandatory steps to prevent accidental contamination."

Unmentioned is that this is an interesting case of a collective-action problem exacerbated by government regulation. No one wants to be the first mover, only to learn that the government is going to require a completely different safety scheme that will require a second set of expenditures. If there wasn't the risk of government action, the market would have found the right level of safety that satisfied consumer demands at a price consumers were willing to pay for that safety.

Pollock on Sarbanes-Oxley

AEI's Alex Pollock writes on American.com:

[W]e can say there are two competing theories:

A. Sarbanes-Oxley is bad for investors because the costs are excessive relative to the benefits, and

B. Sarbanes-Oxley is good for investors because it protects them and makes them willing to pay more for securities.

Theory B is usually used as an argument for keeping Sarbanes-Oxley Section 404 mandatory, but it is actually a great argument for making it voluntary.

Harold Meyerson on Enron

The Washington Post's Harold Meyerson ("Enron's Enablers", May 9) correctly identifies the litigation against Enron's investment banks as a place where money was stolen from shareholders, but blames the wrong party. The real scandal is that trial lawyers were able to extort $7.3 billion dollars from shareholders of companies that violated no law by threatening dozens of innocent bystanders (many of whom also lost money in the Enron collapse) with bankrupting liability. If William Lerach and his crew thought they had a legitimate chance of winning their suits, they breached their fiduciary duty to their clients by settling for pennies on the dollar and leaving tens of billions of dollars on the table. While Meyerson bemoans the damage to some 401(k)s from Enron's bankruptcy (and overinflates the real damage by using the overinflated price of Enron stock to calculate it), he ignores the damage done to many other investors' 401(k)s that held stock in these innocent victims of Lerach's protection-money scheme, or the fact that the trial lawyers will be taking home hundreds of millions of dollars that formerly belonged to innocent investors.

Meyerson singles out the Nigerian barge deal as an example of supposed Merrill Lynch wrongdoing but fails to note that the Justice Department was forced to drop all criminal charges against Merrill Lynch officials for lack of evidence of any illegality. If Meyerson is looking for Nigerian-barge-related injustice, perhaps he should inquire about the Merrill Lynch executives who spent nearly a year in prison over trumped-up charges that were vacated by the court of appeals, and about the journalists baying for blood who contributed to that rush to judgment while failing to note that the government's conspiracy theory made no economic sense and would have had no material effect on Enron's balance sheets.

Finally, Meyerson's article fails to note that no Enron employee was required to hold his entire 401(k) investment portfolio in Enron stock. Charles Prestwood has only himself to blame for the fact that his entire 401(k) was wiped out; if he had followed basic investment principles of diversification, his pension fund would still have several hundred thousand dollars even after Enron's collapse.

An executive order signed today bars United States government agencies from hiring contingent-fee attorneys or expert witnesses to litigate on behalf of the government. The Institute for Legal Reform applauded the decision, and called for state governments to follow suit. A California court recently struck down such arrangements in that state as an inherently unethical conflict of interest. See County of Santa Clara v. Atlantic Richfield Company, No. 1-00-CV-788657 (Cal. Super. Ct. Apr. 4, 2007) (via the increasingly indispensable Beck and Herrmann). (Cross-posted at Overlawyered.)

As Ted noted in February, Beck and Herrmann have been tracking in detail proposals from the American Law Institute for a Restatement of "Principles of the Law of Aggregate Litigation". The ALI has revised its draft proposal, with results that our authors characterize as "three steps forward, two steps back". They include much cogent supporting detail, including a mini-history of the high toll exacted by aggregation in the Agent Orange litigation. Separately, they chide the Ford Motor Company for embracing (in a case called Kelly v. Ford) a theory of aggregation that advances the company's litigation interests over the short term (by getting Michigan law applied to knock out punitive damages claims nationwide) but in so doing (they argue) provides plaintiff's counsel with a logic that could cost Ford and other defendants billions in other cases to come.

Backaches and compensation

An article in JAMA suggests that regional back pain is extremely common and can mostly be attributed to natural processes of aging. Too bad so many entrenched professionals -- doctors, chiropractors and lawyers -- are invested in the costly and adversarial search for injury and thus compensation (ABCNews.com via KevinMD).

Poor Ben Stein

Now Brad DeLong is on his case, and it isn't pretty (via Kirkendall)(more).

Around the web, May 16

Special employment-law edition:

  • Brazilian beer taster wins worker's comp claim after developing alcoholism [WaPo]

  • In Rockwell case, Supreme Court led by Scalia somewhat tightens up on False Claims Act whistleblower lawsuits [NLJ, Workplace Law Prof]; House holds hearing on expanding such suits [Workplace Law Prof again]

  • Pharmaceutical sales reps are latest growth area for overtime lawyers [NLJ]

  • Lack of mentoring proves expensive: Morgan Stanley sets aside $46 million to settle gender-bias employment charges [AP/Law.com]

  • Reason for Alvin Lurie to smile: another court rejects "cash-balance" pension plan challenge [Workplace Law Prof yet again]

"Oxy Morons"

AEI's Sally Satel in today's WSJ on the $635 million federal plea deal reached by Purdue Pharma, makers of the time-release narcotic Oxycontin:

the price for those already in pain promises to be steep. Pharmaceutical development of improved slow-acting opiate medications may be derailed by fresh paranoia. More law-abiding physicians wary of litigation and regulatory scrutiny may withdraw from prescribing potent painkillers. It is hard enough for pain patients to get treatment. This newest injection of malignant hype is the last thing they need.

On the role in the Oxycontin saga of contingency-fee lawyers hired by the attorney general of West Virginia, see our entries here and here. More: Jacob Sullum.

P.S. To clarify, if anyone is confused: the new plea deal is with a U.S. attorney and is not directly related to the settlement of West Virginia claims three years ago. More: Jeff Stier (American Council on Science and Health), Huffington Post.

Earlier: May 11, May 8, Apr. 5, Apr. 4, etc.

  • Barbara Bonar gets supporting testimony in her claims against Stan Chesley, but loses bench trial in case she brought over questionable settlement over Catholic church sex abuse. Bonar, the next president of the Kentucky Bar, will appeal. In the meantime, she faces trumped up ethics charges for representing class member opt-out settlements. (Andrew Wolfson, "Covington lawyer loses fee dispute case", Louisville Courier-Journal, May 12).
  • Angela Ford, who is bringing the lawsuit on behalf of Kentucky fen-phen victims ripped off by their attorneys against their co-counsel, Stan Chesley, is now also facing what seems to me retaliatory political pressure; a Hamilton County, Ohio, judge, apparently unaware of deposition commissions, is complaining that she subpoenaed an Ohio witness without being licensed to practice law in that state. For some reason, a Kentucky judge, Stanley Billingsley, is testifying on behalf of Chesley. An American Home Products witness contradicted defendants' claims that they "set aside" some settlement money for future Kentucky claimants (who, under the U.S. Supreme Court Amchem precedent, could not be bound by the settlement). And the parties are in mediation tomorrow and Thursday, which, judging by Chesley's attorney's complaints about press coverage, implies a confidential settlement is near. Next court hearing is May 31. (Shelly Whitehead, "Fen-phen suit heads to mediation", Cincinnati Post, Apr. 24; Beth Musgrave and Jim Warren, "Lawyers meet Wednesday to try to reach deal on fen-phen millions", Lexington Herald-Leader, May 14).
  • Angela Ford herself has a website, which is not surprising, but it does include a remarkable resource of publicly-available court documents related to the Abbott v. Chesley case.

We've reported before (here and here) on the campaign by activists to establish a cause of action arising from "workplace bullying". Efforts to get the courts to create such a right have not fared well, but the National Law Journal reports growing interest around the state legislatures:

Connecticut, for example, wants to outlaw "threatening, intimidating or humiliating" conduct by a boss or co-worker and would ban repeated insults and epithets. The proposal doesn't specify a penalty, but would only give workers the grounds to sue.

New York's anti-bullying legislation targets malicious conduct by supervisors that hurts employees either physically or psychologically. Mental health harm could include humiliation, stress, loss of sleep, severe anxiety and depression. The bill also would punish retaliation of the complainant or anyone who helps the complainant.

As management lawyers warn, enactments of this sort could result in a large new volume of litigation; the ample scope for differences of opinion about what constitutes hurtful sarcasm or a humiliating memo style could turn the courts into ongoing "superpersonnel departments" dispensing financial balm for injured feelings in the workplace.

That's what three clients are alleging in court papers about Bill Lerach's $10 million settlement in 2004 of a securities case called Yusty v. Tut Systems. Carlos Horacio Yusty, Andres Jaramillo, and Rodrigo Jaramillo say that by the time they got wind of the settlement two years later, all the proceeds had been distributed and Lerach and partner Darren Robbins of Lerach Coughlin had cashed a $2.5 million fee. The trio's lawyer, Bruce Murphy of Vero Beach, Fla., also says he was done out of a referral fee. The class-action sultan's (and Robbins's) response to the charges isn't known yet. Roger Parloff of Fortune has a full report (Legal Pad, May 13)(cross-posted from Overlawyered).

"The baby scramble"

A new study in Health Affairs by Mello, Studdert, Schumi, Brennan and Sage (SSRN abstract via Childs) finds, contrary to what might have been expected, that the supply of high-risk specialists in most medical specialties did not decline markedly in the three years following 1999, when insurance rates spiked upward. The big exception: obstetrics and gynecology, where the supply dropped 8 percent. Opponents of liability reform seized on the study as proof that concern about departing doctors was overblown. The state medical society, for its part, doesn't find the new study conclusive.

Few advocates on either side, however, are denying the crisis afflicting ob-gyn practice in Pennsylvania. The number of hospitals in Philadelphia that will deliver babies has dropped from 19 to 8 over the past decade. Statewide, 33 have closed over the same period. Reports the Inquirer:

The health council [Delaware Valley Healthcare Council, a hospital group] said the Medical Liability Monitor estimated malpractice insurance costs for obstetrician/gynecologists at $160,000 a year in the Philadelphia area. Some hospitals are now self-insured and gave widely varying estimates of their expenses. The hospitals must buy liability insurance not only for doctors they employ, but also for the hospitals themselves.

Reports the Bucks County Courier-Times:

The big loss of doctors is particularly distressing for Patrick Knaus, vice president of strategy and business development at St. Mary Medical Center in Middletown.

"Where is the next generation coming from? It is really impossible almost to recruit OB doctors into Southeastern Pennsylvania," he said. "It�s a really difficult situation."

More from a surgeon in the Philadelphia Daily News.

Roller rinks

They're in decline locally, per the Times: even aside from real estate pressures, �'The liability insurance is just too high for most people,' said Debbie LeClair, 49, the manager of Fun Station USA in Danbury, Conn."

Throwing out an obsolete PC

It can prove a costly mistake if it contains information arguably relevant to a legal dispute you're in, thus allowing your adversary to request an "adverse inference instruction" from the judge (and that's quite aside from exposure to "tort of spoliation" claims and suchlike add-ons). George Lenard tells of an illustrative case.

Citing, among other reasons, separation of powers, the nature of the school funding controversy as a non-justiciable political question, and the lack of plaintiff standing (opinion/news coverage). Would that high courts in New York (and many other states) had shown the same good sense.

Rebuff to Grasso case

Overstepping his lawful authority in the course of a zealous prosecution? That can't be the Eliot Spitzer we know. It must be some other Eliot Spitzer.

Last week at Washington's National Press Club there was a daylong conference on �The Failure of Conservatism�; a session billed as discussing �how conservatives failed the economy" included as one of its panelists �Bill Lerach, leading securities lawyer�. The Washington Examiner doesn't think the choice of Lerach does much for the credibility of the two sponsoring groups, the American Prospect magazine and Campaign for America.

The considerable discussion kicked up by our co-blogger Michael Krauss's WSJ op-ed (see posts here and here) reminds me that since the Manhattan Institute began its work on legal policy more than twenty years ago, it's repeatedly called attention to choice-of-law principles as a key to understanding the problems of the modern liability system. An early high point came in 1988 when I had the chance to commission an article from one of our era's pre-eminent legal scholars, Michael McConnell, entitled "A Choice-of-Law Approach to Products-Liability Reform", which is currently available on JSTOR and has been widely cited in the years since. (It appeared in a volume I edited entitled New Directions in Liability Law, co-sponsored by the Academy of Political Science, which boasts an unusually wide range of contributions from prominent academics on all sides of the liability debate.) In that article, then-professor, now-judge McConnell suggested that one principled, coherent and predictable way of resolving conflicts would be to fix the applicable law as that of the state of first consumer sale.

Manhattan Institute Senior Fellow Peter Huber has also written compellingly (not online, so far as I know) on choice-of-law issues. And my own chapter on the subject from The Litigation Explosion, Chapter 9 ("Have Lawsuit, Will Travel") is here as a PDF as part of our sampling of online chapters from that book.

Charles Krauthammer very nicely defends Giuliani's intellectually honest pro-choice/anti-Roe position (and debate answer) against attacks of "pandering" from the left and right:

Democrats are pro-choice and have an abortion litmus test for judges they would nominate to the Supreme Court. Giuliani is pro-choice but has no such litmus test. The key phrase in his answer is "strict constructionist judge." On judicial issues in general he believes in "strict constructionism," the common conservative view that we don't want judges citing penumbral emanations and other constitutional vapors to justify inventing new rights they fancy the country needs.

However, one strict constructionist might look at Roe v. Wade as the constitutional travesty it is and decide to repeal it. Another strict constructionist judge could, with equal conviction, decide that after 35 years the habits and mores shaped by Roe v. Wade are so ingrained in society that it should not be overturned.

And there is precedent for strict constructionists accepting even bad constitutional rulings after the passage of time. The most famous recent example is Chief Justice William Rehnquist for years opposing the original 1966 Miranda ruling as "legislating from the bench" but upholding it in 2000 on the grounds that it had become so ingrained in American life that its precedential authority trumped its bastard constitutional origins. (He used different words.) In a country with a rational debate about abortion, Giuliani would simply have been asked how he would regulate (up to and including banning) abortion. That's not a relevant question here because neither presidents nor legislatures nor referendums decide this. Judges do. All presidents do is appoint judges.

David Lat breaks the story of an appalling Department of Justice document production screwup in the DOJ-attorney-firing scandal that was only a scandal because the DOJ failed to forthrightly say "Yes, we made political firings, because these are political positions and we wanted to make political hirings of attorneys who agreed with the executive branch's priorities, just as every president has done since the office of U.S. Attorney was established" when the story first broke.

Now the DOJ has so damaged its credibility that it gives license to the New York Times' Adam Cohen to engage in what would otherwise be ludicrous conspiracy-mongering over Deborah Yang. Gibson Dunn (earlier criticized for its perceived lack of "diversity" to the extent of losing clients) had an opportunity to hire a well-qualified "twofer" female minority as a partner and up its diversity numbers, and is now being slimed in Congressional hearings for doing just that. (Gibson Dunn refuted the story in an interview with Peter Lattman.)

Oklahoma reform veto

WSJ editorializes today (sub-only). Gov. Brad Henry may "have assumed he'd never have to act on his promises because a heretofore Democratic Senate could always be counted on to kill any reform. ...Mr. Henry says he wants to work out a compromise, but he delayed his veto long enough to give the Legislature little time in this session." Earlier here, here, here, and here.

That was quick. A ballot initiative may follow. Earlier: here and here.

West Virginia venue reform

The state chamber of commerce backed a bill signed into law last month by Gov. Joe Manchin, but the U.S. Chamber of Commerce assails the measure as "fatally flawed" and not meaningful. It's an uphill slog for litigation reformers in the Mountain State, reports Insurance Journal: "The Legislature's Democrat-controlled House of Delegates elected a trial lawyer as its speaker in January. Trial lawyers also chair the judiciary committees in both the House and Senate."

Brian Tamanaha helps rescue American law's supposed Age of Formalism from some of the caricatures painted by later Realist partisans (via Kerr).

Return of the Akaka bill

Health court blogging

Prof. Bainbridge on Sarbox

His new book, The Complete Guide to Sarbanes-Oxley, is now shipping from Amazon.

Nicole Black has tips for law bloggers who want to get noticed. And don't forget this classic advice from Eugene Volokh on promoting one's blog.

Trial lawyers win a round, with Gov. Ritter signing a bill that curtails efforts to contract around prospective litigation between homeowners and developers. Earlier coverage here, here, etc. Sen. Andy McElhany (R-Colorado Springs) notes that the trial bar has been playing offense in the Colorado legislature this year, and with success on a growing list of issues.

David Rossmiller continues to have good coverage of E.A. Renfroe & Co.'s seeking criminal contempt charges against Scruggs for his violation of a protective order. Earlier: Mar. 19 (and Rossmiller Mar. 6).

Discussion of our coblogger's WSJ oped (and see also the earlier Cato work) at the Volokh Conspiracy led by Ilya Somin; I agree with Larry Ribstein's take, but take it a step farther: why constrain consumers and manufacturers to choosing amongst 51 product-liability regimes? Why not permit the two to agree upon their own crafted set of rules?

Relatedly, Beck & Herrmann discuss Kelly v. Ford, a Pennsylvania district court case where defense counsel succeeded in a clever, but perhaps short-sighted, choice-of-law gambit.

Around the web, May 8

  • Gov. Schwarzenegger declares support for California class action reform [CJAC; earlier]

  • Judge dismisses Katrina wrongful-death claims against U.S. government [Times-Picayune; Jurist]

  • Cost of lawsuits? Of lawsuit abuse? Some problems/cautions/caveats regarding those widely bandied-about figures [Bialik/WSJ, WSJ Law Blog]

  • Okay, so it's a given that the Columbia Journalism Review would be clueless about insurance controversies, but you'd think George Soros would have better uses for his money than to support warmed-over Dickie Scruggs-ism on the subject ["Insurance Transparency Project"]

  • Advocates have been hoping to break through with a big damages win over "anesthesia awareness" during surgery, and a dramatic W.V. case may fit the bill [Fox News]

  • Illinois trial lawyers pushing legislature for grief damages in wrongful-death cases [Post-Dispatch]

  • Good primer from Beck and Herrmann on "municipal cost recovery rule", which bars most suits that seek to recoup public expenditures [Drug & Device Law]

Alito's voting record

Influence of legal academia

It's not always in the direction you might expect, as with liberal lawprofs' role in revitalizing the individual-rights view of the Second Amendment (more from Volokh conspirators here and here).

At 2 pm today, an AEI panel will discuss the ramifications of the Supreme Court's recent decision reversing the EPA's refusal to regulate greenhouse gases. Speakers include Jonathan Adler (of Volokh Conspiracy fame), Jeffrey Clark (who argued the lower-court case when he was with the Justice Department), Cato's Mark Moller, Professors Lisa Heinzerling and David Schoenbrod, and AEI's Joel Schwartz. There will be a C-SPAN3 broadcast.

According to the Madison County Record, attorney Stephen Tillery has teamed up with Judge Nicholas Byron in an attempt to revive the Price v. Philip Morris class action arising from the marketing of "light" cigarettes, which resulted in a $10 billion award but which the Illinois Supreme Court appeared to doom in a December 2005 ruling (more)

Latest, from the Daily Business Review, in the tawdry saga related here and here: "Louis Robles, a nationally prominent Miami plaintiffs attorney who was charged with stealing millions of dollars from thousands of asbestos clients nationwide, has accepted a plea deal that calls for him to serve 10 years in prison and provide full restitution to his victims. ...The plea deal is the latest chapter in the spectacular fall of the class action and mass tort lawyer, who was a star in the South Florida legal community. Robles at one time had 40 lawyers on his staff and more than 12,000 class action clients around the country. He focused on asbestos cases, traveling around the country in a van with a doctor and X-ray machine, signing up clients and advertising on national television."

New at Overlawyered

Stories you might have missed if you're not reading my (and Ted's, and David Nieporent's) other site:

More on Microsoft Iowa settlement

More details emerged in late April about the software giant's settlement of the consumer antitrust case we covered here and here, distinguished for the plaintiffs' bizarre "lost innovation" damages theory. Notes Peter Lattman at the WSJ law blog, "The plaintiffs' lawyers �- led by Roxanne Conlin [of Des Moines] and Rick Hagstrom of Zelle Hoffman in Minneapolis �- seek $75.5 million in fees and expenses." Microsoft will protest the fee demand. "In March, it objected to the $22.6 million in fees requested in a similar settlment in Wisconsin which involved the same plaintiffs� lawyers. Some of the plaintiffs lawyers, Microsoft claimed, seek to be compensated at a rate of $4,702.50 per hour. Said Microsoft's lawyers: 'This is grossly excessive by any measure, and truly proves the maxim that human greed has no bounds.'"

As for Iowa consumers themselves, if experience is any indication, most will pass up their chance to seek reimbursement, and payouts to them will probably fall well below the $75 million the lawyers are asking. Microsoft is also supposed to make some gesture toward donating a substantial share of unclaimed funds in the form of computers for needy Iowa schools. In the past, however, school-computer-donation programs have often proved less burdensome to tech companies than they might appear at first glance. One reason is that the computers donated are not necessarily the latest and most saleable models; another is that school donations serve a helpful marketing purpose of attaching novice users (and school districts themselves) to a company's proprietary technology, guiding them into the role of future customers.

OSHA and its critics

Just out in The American: our own Jim Copland pokes some holes in New York Times reporter Stephen Labaton's supposed expose of lax enforcement practices at the Occupational Safety and Health Administration:

...here�s the rub: under Bush�s tenure, American workplaces have actually gotten safer. From 2000 to 2005, workplace fatalities fell from 5,920 to 5,702�a slightly better annual rate of improvement than under Bill Clinton�s tenure. Non-fatal workplace injuries have also fallen from 6.1 to 4.6 cases per 100 workers, a decline of almost 25 percent.

Apparently, these real results matter less to the Times and its quoted experts than the fact that Bush -� who explicitly campaigned on a platform of reducing regulatory complexity �- has rolled back favored policies, streamlined others, embraced voluntary compliance programs, and failed to regulate in safety advocates� favored areas.

California class action reform

Assemblywoman Nicole Parra, a moderate Democrat from the Central Valley, has introduced AB 1505, which would revamp California class action law, borrowing some principles from its federal counterpart. The Civil Justice Association of California is enthusiastic about the bill, hearings on which are scheduled for the Assembly Judiciary Committee May 8. More: The Recorder, Bakersfield Californian.

Three Stooges reruns

It's not clear they'd pass muster under the FCC's evolving mission to protect young viewers from gratuitous violence, notes Adam Thierer in City Journal. More: Julian Sanchez.

The bill for clerical abuse

It'll be higher than you might think, argues Villanova law dean Mark Sargent (via Bainbridge):

Who, then, will pay? Not the molesters, not the long-dead or retired bishops and chancery officials who enabled them, and not even the superiors who are still in office. The bill will be paid by closing and selling off older, marginal parishes that can barely support themselves in the inner cities and poor rural areas. It will be paid by closing Catholic schools already stressed by the increasing cost of providing private education, particularly to the poor. As usual, the poor will pay, but they won�t be the only ones.

The church in America is a bit like a rust-belt manufacturing company with responsibility for the pensions and health care of tens of thousands of retirees who far outnumber current employees. The church has a significant number of aging priests, women religious, and lay employees with pensions it has to support. In the same way that mass tort liabilities can threaten pension systems in manufacturing companies, these settlements risk the church�s capacity to meet its pension obligations. The scale of this threat is not yet certain, because little is publicly known about church pension programs, but the threat cannot be dismissed.

The indifference of at least some victims and advocates to these problems, their assumption that the bishops are cynically crying poverty, and their tendency to treat every diocese as if it were as bad as the worst ones, suggest that they want not only to be compensated, but to burn down the house.

Many lower courts in Illinois use a unique evidentiary rule stemming from a decision in Lipke v. Celotex Corp., 153 Ill. App. 3d 498, 505 N.E.2d 1213 (1987), which held that exposure to other asbestos products manufactured by non-parties is inadmissible in asbestos litigation. (See also Oct. 1, 2004.) Thus, a plaintiff could sue 100 defendants claiming they manufactured the asbestos products that caused his injuries, settle with 99 of them, and then, at trial, not only claim that it was the sole non-settling defendant's asbestos product that caused his injuries, but preclude any evidence of any other exposure from reaching the jury. This not only distorted the causation inquiry but was a judicial nullification of state law on limitations on joint and several liability, and effectively forced hundreds of defendants to pay billions of dollars of extortion money. (The ones who dared fight, such as U.S. Steel in the Whittington case, quickly learned the wisdom of yielding.)

Finally, a defendant has appealed a Lipke ruling up the chain in the case of Nolan v. Weil-McLain, and the Illinois Supreme Court is considering the case. The amicus brief of parties supporting civil justice is online at NAM's website.

The recent reasonableness of Madison County courts to begin enforcing forum non conveniens rules mean that an end to Lipke will not have the effect it would have had when southern Illinois was much more of a magnet jurisdiction for asbestos litigation, but the Illinois Supreme Court's likely reconciliation of outlier Illinois lower court tort law with that in the rest of the Western world will still be an improvement.

Though the Illinois Supreme Court is a court that respects the rule of law much more than it used to, ending Lipke is not a guarantee. For example, in a 2006 case, Langenhorst v. Norfolk S. Ry., the Court by a 4-3 vote endorsed the Illinois Trial Lawyers Association position that it was acceptable for the estate of a Clinton County resident killed in Clinton County by an out-of-state defendant bring suit in St. Clair County, because the defendant railroad also had train tracks there. That St. Clair County is Madison County's sister judicial hellhole surely had nothing to do with the forum-shopping decision. (Ironically, Langenhorst may have died because the local hospital did not have a neurologist on staff capable of attending to his injuries, though the opinion does not indicate if the delay in airlifting him to St. Louis was in itself fatal. Of course, neither Langenhorst nor Norfolk Southern is allowed to make claims against Illinois trial lawyers for their role in the absence of adequate medical care in rural Southern Illinois.)

"Are U.S. IPOs D.O.A.?"

Our newest Featured Column is Jim Copland's, on the law's role in driving public stock issuance offshore.

The federal Equal Employment Opportunity Commission has over the years been broadly hostile to employer policies requiring that employees speak English on the job, viewing such policies as improperly tending to screen out workers of protected national origin. Federal courts haven't always agreed with the agency's views on the question, however; in a 2003 case the Salvation Army, the venerable religious institution, was upheld in its right to fire a worker who'd refused to speak English when asked to do so by her boss. Now the EEOC has taken the Salvation Army back to court again, in a case where two clothes sorters at an Army facility in Framingham, Mass., outside Boston, lost their jobs after supervisors decided to start enforcing an existing speak-English policy. Bloggers (e.g. Never Yet Melted) have been noticing the story as a flashpoint in the assimilation/immigration wars, and Pittsburgh Tribune-Review has coverage. For more on legal attacks on "English-only" policies, see Overlawyered posts here and here. (& welcome Michelle Malkin readers).

The Chamber-of-Commerce-backed LegalNewsLine has the details on the city's interest in employing a "public nuisance" theory of liability. And Wisconsin lawyers are filing more lead lawsuits against manufacturers following the Wisconsin Supreme Court's opening of the floodgates two years ago. For developments in Rhode Island, where Judge Michael Silverstein has refused a defense motion to delay the ordering of abatement, and Ohio, check Jane Genova's ongoing coverage.

Domino effect

Not all is well at Ave Maria School of Law (via Bainbridge).

PRI responds to Posner

Lawrence J. McQuillan and Hovannes Abramyan respond in detail point-by-point to Richard Posner's critique of the PRI "Jackpot Justice" study.

Their main objection is that Posner repeatedly characterized their report as a measure of the costs of the liability system, rather than that of the costs of excessive liability, but the original study can be at least partially blamed for that confusion given that some elements of the $865 billion figure in press release headlines were obtained by measuring total costs. But McQuillan and Abramyan do take down a number of Posner statements that misrepresent study findings.

I still take issue with PRI's use of Rubin & Shepherd. Some tort reforms, such as noneconomic damages caps, improve social welfare by reducing randomness and increasing accuracy in the litigation system. Other reforms, such as collateral source offsets or economic damages caps, operate as wealth-transfers to tortfeasors, and can be expected to decrease deterrence arbitrarily. And indeed, that is what Rubin & Shepherd (and several other studies, like Klick & Stratmann's work on infant mortality) find. All in all, the early version of the Rubin/Shepherd study found a loss of 2700 lives in 2004 vis-a-vis a baseline of a tort system without legislative constraints. But the total loss of lives attributable to "excess liability" is higher than that number, because the Rubin/Shepherd number is dampened by the number of lives cost by inefficient liability reductions. If every state adopted collateral-source reform, that wouldn't be an argument against the benefits of non-economic damages caps just because the Rubin-Shepherd number dipped below 2700 or even if it dipped below zero. (For example, imagine a highly inefficient reform that made it a felony to bring an unsuccessful malpractice suit. There's little question that such a law would cost lives; the numbers might even swamp the 2700-life figure in Rubin/Shepherd. But that the Rubin/Shepherd methodology would then conclude that the combination of efficient and inefficient reforms cost lives on balance would not be an argument against the efficient reforms.)

On the other hand, however, the PRI study measures the cumulative effect on the workforce of deaths over the last 24 years. This is another place where their study's measurements are inconsistent with measurements elsewhere in the study. Why measure cumulative loss of workforce when one is not measuring cumulative loss of innovation? In some places, the study is measuring the marginal cost of a broken liability system; in other places, the study is measuring the cumulative cost of decades of damage caused by the liability system. One measure or the other is alright, as long as it is made clear that this is what is being estimated, but it is problematic to add the two calculations in the same number.

In today's Wall St. Journal, subscribers will find my op-ed, sketching out my proposal for a federal choice-of-law rule to help resolve our products liability mess. As some know, this proposal was detailed in a Brigham Young Law Journal article. I welcome all comments.

Ross Billing Ethics Survey

WSJ Law Blog reports on Professor William Ross's recent survey of 251 attorneys, which indicates that most attorneys are aware of other attorneys who pad hours. I don't disagree with this conclusion, but I think the problems of bill-padding and double-billing likely pales in comparison to (1) the expense incurred by parties because of lawyers making overconfident recommendations to embark on misguided litigation where those recommendations happen to coincide with the interest of the attorney to bill more hours; and (2) the excessive billing caused by law-firm technological and human-resources inefficiencies that regularly result in the wheel being reinvented at client expense. A disturbing number of the hours I billed as an attorney came about because my firm got involved in a case where a lawyer with a creative theory of business-competition-through-litigation initiated a suit that ultimately cost his or her client more money in the long run.

Stephanie Mencimer (whose blog post headline seems to misunderstand the fact that the study did not involve self-reporting) sneers that this result should be trumpeted as loudly as well-publicized problems of plaintiffs' attorneys stealing from their clients (e.g., Kentucky fen-phen or the Milberg Weiss indictment). But there is a critical difference. Plaintiffs' attorneys are dealing with one-time players; attorneys for corporate defendants (and plaintiffs) are usually repeat players. Thus, the latter faces a certain degree of market discipline that a plaintiffs' attorney does not: sophisticated clients can compare and contrast bills and results from the different law firms they hire, as well as hire third-party analysts to scrutinize bills. A law firm whose bills are out of line with results will lose business in the long run. Plaintiffs' attorneys face no such disincentive, and their ability to capture rents present a much greater public-policy problem, not least because (unlike the case of defense counsel) it also creates the incentive to engage in litigation with negative externalities.

I especially like one easy customer-service-based solution to the potential problem of hourly bill padding. Seattle law firm Summit Law Group has an innovative policy of a "value adjustment line" on all of their bills: "We empower each of our customers with the right to adjust our billing, upward or downward, based on our customer�s perception of the value received, not ours." Summit claims that, over the years, clients have been more likely to adjust bills upward than downward. This obviously is much more likely to work in the repeat-player context where the law firm can fire the client as well as vice versa.

The U.S. Department of Justice, economic policeman to the world:

Telling your lies in Europe won�t necessarily help you, according to the two former prosecutors, who point to an increasingly aggressive assertion of jurisdiction by the DoJ. Three British bankers are awaiting trial in Texas on Enron-related allegations, while Ian Norris, the former chairman of Morgan Crucible, is appealing to the House of Lords against extradition to the United States in a price-fixing case. If you work for an American company, or if your company has issued stock in the US or is listed in the US or takes part in a cartel that affects the US, the DoJ reckons that you are in its bailiwick and are fair game.

�The US is looking to enforce the full extent of its jurisdiction,� Mr Berkowitz says [Latham & Watkins's Sean Berkowitz, formerly of DoJ].

That includes the Foreign Corrupt Practices Act, which was used against Statoil, the Norwegian oil company, which was accused of bribing Iranian officials.

Manhattan Institute vice president Howard Husock identifies some less-than-constructive housing legislation moving through the New York City Council. "The bill would bar landlords from discriminating against potential tenants who receive government rent subsidies. ... Property owners know well that the risk of getting problem tenants is greater by signing on to [the rent-subsidy program,] Section 8."

More on Oklahoma reform veto

The NAM's ShopFloor has reaction (here and here) to Gov. Brad Henry's veto of a comprehensive liability reform bill, and Brandon Dutcher offers some speculation about the possible logrolling origins of the veto (via BatesLine). Activist AG Drew Edmondson had urged such a veto, which Gov. Henry cited as a key factor in his decision. More: AJP interview with Oklahoma Senate co-president Glenn Coffee.

In recent years county-owned Westchester Medical Center sank into an embarrassing fiscal and operational crisis, resulting in the need for costly and elaborate bailout plans. Now County Executive Andrew Spano is blaming, not the county's own mismanagement of the large hospital complex, but auditors KPMG Peat Marwick, for failing to warn of trouble; he's asked the county board to authorize a lawsuit that would demand $200 million. And per the Journal-News, the county board is hiring as a consultant, to evaluate the feasibility of such an action, none other than White Plains-based Lowey Dannenberg Bemporad Selinger & Cohen PC, known for its work on behalf of class-action plaintiffs; Lowey Dannenberg's best-known partner happens to be married to Democratic Congresswoman Nita Lowey, whose district includes most of Westchester. Board Chairman William Ryan, D-White Plains, said the Lowey firm had been chosen because of its experience in litigation against accountants. According to its website, the Lowey firm gets around on the New York government-representation scene: its recent triumphs include "Appointed Lead Counsel Representing NYC Pension Funds and Class in Juniper Networks Securities Case" and "Retained by NYS Common Retirement Fund and Appointed Lead Counsel in Bayer AG Securities Litigation".



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.