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August 2008 Archives

Gustav - Pets Go with the People

Today THE WALL STREET JOURNAL has a photo of a dog in a container, all ready to evacuate with its two-footed family. This change from Katrina days, when pets were left behind or owners stayed behind to be with them, is partly because of the power of the medium of blogging.

During Katrina, the call went out in the blogosphere to do what we could. And could I would with animal rescues.

One of the most poignant tales during that horror was of the boy who cried so hard he vomited when he realized he couldn't take Snowball on the bus out of New Orleans. Highlighting the Snowball tragedy, we volunteers in cyberspace helped get coverage of the lack of planning for pets during crises. Major media such as WSJ ran ongoing coverage. In Congress, Connecticut's Christopher Shays sponsored a bill restricting FEMA funds only to communities with provisions for pets during crises.

Gustav might be a monster but we humans can get through anything as long as we have our loved ones, including the four-footed ones.

Around the web, August 31

  • Despite all the environmental class action stuff? California litigation reformers host fund-raiser for Jerry Brown [Cal Law "Legal Pad"] More [Legal NewsLine]
  • West Virginia med-mal reform hasn't "blocked the courthouse door" [Wheeling News-Register]
  • Profile of secretive NAAG and its income sources: turns out it occupies a floor in a building owned by the tobacco-loot American Legacy Foundation [Daniel Fisher, Forbes]
  • More on Mel Weiss fee deal with former partners at Milberg [Portfolio]
  • Profile of Medical Justice, the "we help docs counterattack" group [Yes! Weekly, Greensboro, N.C.]
  • Pro-plaintiff expansion of False Claims Act moving through Congress is classic face-off of business and trial lawyers [NLJ]

It's six years after the Michael Skakel conviction for the 1975 Greenwich, Connecticut murder of Martha Moxley. There have been a number of rejected appeals to CT Superior/State, federal, and the U.S. Supreme courts for a review or new trial. One was filed by former U.S. Solicitor General Theodore Olson. But there could be new legal developments as the public relations push on behalf of Skakel's innocence heats up.

For example, tonight on ABC, the issue of newly discovered evidence received national attention on "48 Hours Mystery," reinforced on the local CT news. Michael's brother Steven and cousin Robert Kennedy Jr. are leading this campaign.

Among the new evidence is the alleged presence of two Bronx teenagers, one African-American and one Caucasian, in Greenwhich the night of the murder. According to a statement by their then peer Tony Bryant, their goal was to take a girl "caveman style," that is, accosting her in order to have sex. It is claimed they found golf clubs, one of which was a murder weapon, in the Skakel yard.

Steven and Robert are also critical of the defense conducted by Greenwich celebrity attorney Mickey Sherman and the "overzealous" prosecution by Jonathan Benedict. A review or new trial might not be their only objective. Skakel is up for parole in 2013.

"The Legal Limit" is packaged as a thriller. That suspense keeps readers immersed in questions about legal and moral relativism. Published this summer by Virginia circuit court judge Martin Clark, the plot line is straight from Cain and Abel, with lots of other biblical themes such as Joseph and his coat of many colors and the suffering of Job.

In 1984, a smug law student instinctively - read brotherly love - makes the decision to cover up an impulsive - read over a girl - murder by his shiftless brother. The chickens almost come to roost decades later when one brother is a commonwealth attorney and the other is serving a 40-something year sentence for selling drugs.

Reviewer Harriet Klausner opines, "Martin Clark makes a case that the law may be so blind that achieving justice often fails." The case presented in this book, which Clark says represents a composite of actual ones, might be argued in a law school, with experts from the legal academy, sociology, ethics, and psychology commenting.

Here is an excerpt from "The Legal Limit." For marketing purposes, Clark has been described as the thinking and drinking man's John Grisham. That will boost sales. But Clark's future as a fiction writer will be based on his courage to take on complex issues - with Chaucerian irony.

Publicly traded law firms, cont'd

Melbourne, Australia-based personal injury practice Slater & Gordon, famed as the first law firm to float a share offering to the public, seems to be continuing to perform well, with revenue up 27 percent (The Lawyer via ABA Journal). Earlier here and here.

A flurry of activity concerning the standards for corporate prosecutions, summarized nicely in a Wall Street Journal editorial today, "White-Collar Justice":

Congratulations to Lewis D. Kaplan, the federal judge whose withering critique of prosecutorial abuse in the KPMG tax-shelter case was vindicated yesterday by the Second Circuit Court of Appeals.

In fact, you can double that applause, because yesterday the Justice Department went further and once again rewrote its white-collar prosecution guidelines to accommodate Judge Kaplan's demolition. Whether Justice anticipated its legal defeat before the surrender is less important than the fact that it has now restored a measure of due process fairness to corporate defendants and their employees.

The Journal regards the new standards as the repudiation of the "Thompson Memo," a government overreaction to the Enron scandals that gave prosecutors in white-collar cases far too much power, inviting abuses.

Earlier Point of Law posts here, here here, and especially here, "Want leniency for your business? Knife your workers."

Not much to say about Alaska's governor, Sarah Palin, on legal reform issues (certainly a lot less than Sen. Joe Biden). The Pacific Research Institute's 2008 State Liability Index ranks Alaska as having the No. 2 legal climate in outputs (costs) and No. 16 in inputs (laws).

Both Sen. McCain and Gov. Palin proclaim her courage in "taking on big oil," irritating populist rhetoric and not encouraging as far legal philosophy goes, but then, Palin does come from the state where the Exxon Valdez oil spill left an unhappy, expensive legacy. After the Supreme Court's June decision in Exxon Shipping v. Baker, reducing the punitive damages awards, Palin reacted (from The Anchorage Daily News):

Gov. Sarah Palin said she is extremely disappointed with the decision saying the court "gutted the jury's decision on punitive damages" and undercut one of the principal deterrents for marine shipping accidents in Alaska.

"It is tragic that so many Alaska fishermen and their families have had their lives put on hold waiting for this decision," Palin said. "My heart goes out to those affected, especially the families of the thousands of Alaskans who passed away while waiting for justice."

More on the case at Scotuswiki. I don't find anything immediately from Palin commenting on the outrageous Kivalina lawsuit against energy companies (although the state has certainly helped the village of Kivalina against erosion). Earlier in August, the state of Alaska sued the Department of Interior over the listing of the polar bear as a threatened species under the Endangered Species Act.

"More lawyers in the boardroom"

There's the company's lawyer, of course, and then a separate lawyer to represent the directors, whose stance may be adverse to that of the company's; is a third lawyer going to have to be called in to help break ties? Sarbanes-Oxley is doing a lot to spread the trend, notes Law.com's Atlanta affiliate (& welcome Larry Ribstein readers).

I won't preach to the choir: Attorneys know the power of brilliant stagecraft bunded with an inspired performance. Isn't that how Steve Farese saved Mary Winkler from a murder conviction? So, no hyperbole from me about what could go down in American political history as Obama Thursday. The man took back the hearts and minds of Americans who had been persuaded that Barack Obama couldn't win.

Veering from their usual overwrought emotionality, the Dems tonight took on the buttoned-down presentation skills of the GOP to warm up the crowd for Barack Obama's acceptance speech.

There was reserved Susan Eisenhower, all lady, all political aristocrat as part of the Ike pedigree - but no longer a card-carrying Republican. She had now chosen to be an Independent.

Then military leadership in all their straight-arrow bearing came forth and declared Obama as their commander-in-chief.

The usually too-sunny Joe Biden grew a heart and indicated he and Obama were there for the "millions of Americans who have been knocked down."

The show-stopper was the real-people delegates. They told how they were doing well and then got "knocked down." One gave the Dems their new mantra. He was Barney Smith from the Midwest. He told the 75,000 gathered in the open air in that sports stadium that America needed a president who cared for Barney Smith before Smith Barney.

The man who the experts had written off then did the rest. The Baby Boomer I am experienced his oratory as a return to the eloquence of the Kennedy and Reagan eras.

My hunch is that the GOP strategists are returning to the drawing board. What they created for next week's performance will likely need to be overhauled. As a speechwriter, I wax euphoric that between Hillary Tuesday and Obama Thursday my industry has gotten plenty more respect and a surge in demand.

The plaintiff bar has made a good read on the confusion and fear - ethical, emotional and legal - of these volatile times.

In the court of law and of public opinion, it is arguing increasingly about the "right thing to do." That, of course, relies on natural-law theory [lex naturalis] or the fundamentalist belief that holds that there exists a law whose content and authority are established by nature, therefore valid everywhere. Throughout Rhode Island's lead paint public nuisance litigation and afterwards in taking on the state's Supreme Court decision in the media, Motley Rice spoke in terms of some universal legal and ethical code.

Natural law's power, points out Australian law professor David B. Goldman in "Globalisation and the Western Legal Tradition," comes from its deep roots in legal thought, dating back to ancient times. That has been reinforced both pragmatically and in the history of ideas by religious, literary, and political movements. Think the American Revolution which embodies belief in natural law in the "Declaration of Independence."

What the defense bar seems to be doing to neutralize this power includes arguments based on points of law, changing times, community mores, CSI-type evidence, mitigating circumstances, and cause/effect vs. mere correlation. The success of tort reform efforts has also tilted the legal system towards relativism instead of absolutist dictates.

Around the web, August 28

  • Should New York replace neurologically impaired infant litigation with no-fault fund? [Barringer/Berkowitz, NY Sun via Common Good]
  • Fifth Circuit denies Paul Minor's request for prison release [YallPolitics]
  • Federal judge sanctions attorney John Aretakis for "hijacking" pro bono tenant case to advance "scurrilous" vendetta against Roman Catholic Church [NYLJ]
  • U.K.: Should companies be legally obliged to retain records of old liability insurance, the better to facilitate asbestos litigation? [Times Online]
  • Plan administrators had better watch out, Supreme Court is expanding individual right to sue under ERISA [Motzenbecker/WLF on LaRue, PDF]
  • Oklahoma Attorney General Drew Edmondson, often criticized in this space, "leaning" toward run for governor in 2010 [Tulsa World courtesy U.S. Chamber]

Because my day job includes writing speeches and coaching speakers, media contacted me about Hillary's speech last night. My take was that she showed that the power of the speech is not dead in this digital age.

Through her speech, she accomplished plenty, including:

1. Like Al Gore, she transformed adversity into a new identity. That speech demonstrated that she had finally found her independent voice.

2. Resurrected a dying campaign. If the Democrats can handle themselves as well as Hillary did, then, hey, we'll give them a shot.

3. Moved the Democrats from the vestiges of JFK, especially the tone, content and gestures of the Kennedy-era rhetoric.

Based on how Hillary used to present herself on her feet and how she did last night, attorneys might find it useful to invest in assessing their rhetorical skills and having the courage to even adopt a new advocacy persona. There's one thing more: Adversity is increasingly proving to give those suffering major career setbacks a fresh competitive edge.

Pictures of Lilly

Lilly Ledbetter's remarks to the Democratic National Convention proved short and of no great impact in Denver yesterday, the standard marking of a box on a convention check list. (Her remarks are here.)

We thought her appearance in a prime evening spot might signal a final push by the congressional majorities to pass legislation reacting to Ledbetter v. Goodyear, a bill that would eliminate statutes of limitations in employment discrimination cases. And certainly the female members of Congress who had a platform Tuesday used her case in attacking McCain. (CQ Politics story.)

But Ledbetter's speech itself was unremarkable, overshadowed by the day's big story, the Hillary hubbub. Ledbetter:

We can't afford more of the same votes that deny women their equal rights. Barack Obama is on our side. He is fighting to fix this terrible ruling, and as president, he has promised to appoint justices who will enforce laws that protect everyday people like me. But this isn't a Democratic or a Republican issue. It's a fairness issue. And fortunately, there are some Republicans--and a lot of Democrats--who are on our side.

Sen. Obama did make an effort to attend and vote for cloture on H.R. 2831 in April, a good political move. (As did Sen. Clinton.)

The Birmingham News had a short story. For previous Point of Law posts on Ledbetter, go here.

The Business of Law

Law is a business. Yet, THE ECONOMIST pointed out last week, lawyers aren't businesslike enough.

Do you, for example, pay attention to numbers such as profit per partner [PPP] or cost-control strategies? Instead, most lawyers tend to focus narrowly at the assignment at hand, in worker-bee fashion. They miss the big picture of what's going on in the business. The result, especially visible in this downturn, is that the business unawares are often surprised at a layoff - and that they're among the axed. There's more.

This lack of knowledge and/or inattention to business spills over to customer service. In Jones Day Spring 2008 PRACTICE PERSPECTIVES Paul Pohl decried the tendency to approach a case "in isolation" as a legal problem. Instead that situation has to be seen "with an eye to the overall health and strategy of the an ongoing business." We all know how the case is won but the company goes bankrupt.

None of this is new, of course. Those who understood the fundamentals of business and operated their career strategically - often entrepreneurially - were the ones who survived, no matter what. They were also the ones who kept clients so satisfied that those clients brought in other ones. Thanks to all that business development, they made it to equity partner.

What is new is the reduced margin for error, both for law firms and for lawyers. The boom masked weaknesses. Now weekly there is a body count of reductions in force along with reduced PPP. This isn't likely to be temporary. The whole marketplace for legal services is changing. Clients like Pfizer concerned about fees are doing the changing. So is the competition like Valorem and Bates and Tyde with new models. Moreover, given the volatility, it's difficult or impossible to predict what practice areas will be in demand.

The short answer is given by Marshall Goldsmith. His mantra for changing times is: We're all entrepreneurs now. His book "What Got You Here Won't Get You There" has insight on changing, especially when we have the delusion we don't need to.

Lilly Ledbetter, the convention address

(Note: Dan Schwartz anticipates the Ledbetter speech and examines pay issues and legislation at Walter Olson's other website, Overlawyered, here. The more light that shines, the better....)

Today is Women's Equality Day, the kind of observance that prompts a presidential proclamation and various didactic exercises among the political classes. Democrats are highlighting the day at the Denver convention with the theme, "Renewing America's Promise," with women union leaders, union activists, and elected officials speaking. On today's convention agenda for a prime evening speaking spot, right before the keynoter, Mark Warner, is Lilly Ledbetter. As the schedule describes her:

Lily Ledbetter

Her actions against Goodyear Tire led to the passage of the Fair Pay Restoration Act

Actually, it's spelled "Lilly Ledbetter." And while the Ledbetter Fair Pay Act, H.R. 2831, did pass the House by a 225-199 vote on July 31, 2007, it was stopped in the Senate in April on a failed cloture vote, 56-42.

Tonight's lead-up, Ledbetter's remarks and the media commentary will no doubt contain similar misrepresentations, with the errors serving the cause of bad legislation that will prevent discrimination claims from being resolved quickly, in the process prompting a new wave of litigation.

Suppose Americans could fund litigation without contingency? That's already possible in England.

As Kevin LaCroix reports in THE D & O Diary, thanks to recent English case law, litigation can be treated as an investment asset. A third-party such as hedge or private equity funds can purchase the claim, sell securities in it, and then operate the case for a profit.

In the U.S., explains Sandeep Salva, that's not possible. In his April 25, 2008 article "Securities Class Actions in London," in CLASS ACTION LITIGATION, he notes in America, "claim assignment is prohibited to a purchaser who has not actually suffered an injury" - see "Independent Investor Protective League v. Saunders," (E.D. Pa. 1974).

The advantage is that this lessens the individual risk in England's "Loser Pays" system. Since barristers's fees tend to be higher than U.S. attorneys's, says Joseph Hetrick of Dechert Law Firm, Loser Pays can limit access to the court. The disadvantage, as Salva notes, is that industries, such as the securities market, might perceive this greater access as a severe threat and not do business in England.

In the U.S., given the controversy surrounding contingency in lawsuits filed by government entities using private law firms and by so-called "ambulance chasers," it might be useful to at least explore this approach now legal in England. Pending in the California Supreme Court is contingency in the Santa Clara lead paint public nuisance case. The trial court nixed contingency, the appeals court okayed it. The arguments against range from alleged violations of due process and separation of powers to the difficulty of government's control over the litigation. The arguments for, as in England, focus on access to the court.

Of course, Americans might not welcome the profit incentive incorporated so directly into the legal system.

State Farm v. Scruggs

Roger Parloff at Fortune now has -- not making this up -- a seven-part series on the affair, and it looks eminently worth reading (via YallPolitics).

Around the web, August 25

All-blog edition:

Working-class values and the CSI Effect should be mutually exclusive in legal persuasion, right? Wrong, I found out in interviewing the Rhode Island lead paint public nuisance jurors. They straddled both spheres just fine.

Those working-class values, which have become chic as we endure two recessions in less than a decade, celebrate compassion, community, resilience, and the work ethic. In "Limbo: Blue-Collar Roots, White-Collar Dreams," journalist Alfred Lubrano presents fresh prespectives on the world most of us baby boomers ran from.

The so-called CSI Effect, derived from popular crime TV shows, creates the expectation for and trust of scientific evidence. The RI lead jurors, primarily blue-collar, used both mindsets to come to a verdict. The hazards the children faced from lead paint were uppermost in their motivation to make the right decision. And they persisted through four months of a trial and eight days of deliberation to do just that, despite sickness and an abnormal lifestyle.

Simultaneously, they took copious notes - the court was one of the few which allowed that - to keep the so-called facts straight. They became deadlocked twice because of the lack of evidence. They got to a verdict only by pasting the judge's instructructions, which didn't require evidence, to the wall and going through them line-by-line. Subsequently the RI Supreme Court overturned the jury's verdict because of this lack of evidence.

My hunch is that these two very different modes of persuasion mesh in court because law is a unique institution. It's both rule-bound and subject to the community mores. Regarding the latter, the blue-collar ethos, just like in the counterculture 1970s, has become fashionable. That could change with an economic boom, which could revamp current legal rhetoric, especially for the plaintiff bar.

We're happy to announce that Jane Genova, whose blog Law and More we've linked innumerable times at Point of Law, will be guestblogging with us this week. Genova began blogging as an extension of her work in corporate speechwriting, ghostwriting and marketing, but the work soon took on a life of its own, especially after she began to concentrate on the high-stakes but under-reported field of lead paint litigation, which she's covered with extraordinary energy and detail at Law and More. She pioneered the in-person liveblogging of trials before that idea caught on elsewhere, notably in the landmark Rhode Island lead paint case, and has branched out into other law and business topics with a lively mix of content that includes insider interviews, tips on management and branding strategy, speculation on the stories behind the news, and personal asides.

Globalized everything, including financial markets, is creating new issues as well as controversies in law - both here in the U.S. and in other western nations.

One of them is what's called "f-cubed litigants." Those are foreign investors who bought shares of stock in U.S. corporations on foreign exchanges. When they discern securities fraud by those companies, reports The D & O Diary in May 2008, they want to file class-action suits in U.S. courts. Although nations ranging from Australia to England are introducing aspects of U.S. collective-style litigation, foreign investors prefer access to American justice. Cynically, that might be thought of globally as "jackpot justice." No surprise, the U.S. companies prefer access is denied.

Recently, U.S. courts, just as in the 1980s factor concentrate lawsuits [e.g. Factor VII and IX], have been avoiding those lawsuits, using both jurisdictional and forum non conveniens arguments. That is, the grounds presented are primarily practical: Overloaded U.S. courts.

Obviously, since financial markets are global, this could discourage foreign purchase of U.S. stocks. But it could keep U.S. corporations happy.

In an exclusive statement to this blog, Joseph Hetrick of Dechert Law Firm weighs in,

"If you're a foreign investor buying securities on a foreign exchange, it's unlikely you can bring suit in the U.S. unless you can show that the stock you bought was purely a U.S. company and that what you allege took place and was done entirely in the U.S. Otherwise it seems that U.S. federal courts will deny jurisdiction.

"This may seem out of date in a global economy but does it really trouble you that an English investor buying stock on the London exchange in a transaction with European connections is forced to proceed in London?"

The answer to Hetrick's rhetorical question will depend on how much foreign investors push to be heard in U.S. courts.

We'll be hearing lots more about this and other legal issues related to global financial markets. A heavy but useful backgrounder is "Globalisation and the Western Legal Tradition: Recurring Patterns of Law and Authority," by Australian law professor David B. Goldman.

UK insurance company FirstAssist will offer a new litigation insurance product designed for class actions and other complex suits, the Financial Times reports. While businesses may worry that the product will lower barriers to anti-growth litigation, this news demonstrates that a loser-pays rule can work in the context of complex claims.

Plaintiffs filing personal injury claims in England and Wales usually purchase so-called after-the-event (ATE) insurance, which protects the purchaser against liability for the opposing party's legal fees in the event that the case is lost. ATE insurance received a big boost in popularity when parliament cut off public aid for most tort suits and legalized conditional (or contingency) fees in the late 1990s.

This new move by FirstAssist shows that legal expenses insurance can scale up to meet the needs of large plaintiff groups, sending one more objection to loser pays in the U.S. by the wayside.

The National Association of Manufacturers, where I work, tallies the votes of all members of Congress, selecting "key votes" as identified by a committee of our member manufacturers. I've posted Sen. Biden's voting record at Shopfloor.org here. (A few formatting problems.)

Included in the listing is a selection of key votes on legal reform issues from the 106th-109th Congress, i.e., 1999-2006. We ranked 13 votes, and Sen. Biden was opposed to the NAM's position -- the legal reform position -- all 13 times. In other words, a 0 percent ranking.

You can see the entire list here. Scroll down.

Andrew Grossman of Heritage, who has been tracking the details of the bills to expand the Americans with Disabilities Act by overturning Supreme Court cases that had gone favorably to defendants, discerns a big difference between the House and Senate versions of the wired-for-passage legislation:

The Senate's ADA Amendments Act represents a real and tangible improvement over the House version, which would have abandoned a large body of important case law, throwing the employment disability law into disarray. In contrast, the Senate's approach, while still bad policy on the whole, is far less damaging to the law, and for that reason, its impact on the economy, the international competitiveness of U.S. businesses, and employment is likely to be far less. Now is not the right time to expand ADA coverage, but if legislation is inevitable, Congress should still reject approaches that muddy the meaning of the law and would inflict unnecessary pain across the economy.

The National Law Journal covered the legislation (and very one-sidedly, too) here. Relatedly, the D.C. Circuit has recently brought both sleeping disorders and sexual dysfunction within the scope of the ADA as covered disabilities.

Two-to-one opinion by a panel of the U.S. Court of Appeals for the District of Columbia Circuit, upholding the creation of a nonprofit board to set auditing requirements and oversee accounting firms that audit public companies. The authority of the Public Company Accounting Oversight Board had been challenged by Beckstead and Watts, a Nevada accounting firm, and the Free Enterprise Fund, as violating the constitutional separation of powers.

The ruling is here. From Washington Post, "Appeals Court Upholds Sarbanes-Oxley Act":

In dissent, Judge Brett M. Kavanaugh wrote that Sarbanes-Oxley renders the accounting oversight board "unaccountable and divorced from Presidential control to a degree not previously countenanced in our constitutional structure." He said "such unaccountable power is inconsistent with individual liberty.

Kavanaugh also termed the case "the most important separation-of-powers case regarding the President's appointment and removal powers to reach the courts in the last 20 years."

On and off the ballot in Michigan

Some news coverage and commentary on the state Court of Appeals' ruling that will keep a radical, partisan scheme to reorganize Michigan's government off the ballot. The court ruled that the proposed constitutional amendment amounts to a "general revision" of the state's Constitution, which requires a constitutional convention. We can expect Reform Michigan Government Now to appeal, with minimal prospects of success; the labor-backed group was trying to reorganize state government so its allies in the Democratic Party could control the next round of redistricting.

Around the web, August 22

All-toxic-tort edition:

Congress passed H.R. 6304, the FISA Amendments Act, in July and President Bush signed it quickly into law, praising the legislation as a necessary if much-delayed updating of the federal authority to monitor foreign electronic communications. The bill also provided retroactive legal immunity from lawsuits against telecommunication companies that acceded to federal orders to assist in the surveillance. Some 40 lawsuits had been filed against the companies, litigation that represented both political attacks against the Administration and trial lawyer desire for yet another payday at the expense of business and America's investors.

Wired is now reporting that the 9th U.S. Circuit Court of Appeals today sent the most prominent of the lawsuits against the telecoms, a class-action case, Hepting v. AT&T, back down to the district court. The ruling simply says: "In light of the FISA Amendments Act of 2008, Pub. L. No. 110-261, we remand this case to the district court. We retain jurisdiction over any further appeals."

Wired concludes: "Now the Attorney General need only send a letter to [District] Judge [Vaughn] Walker, certifying that each telecom did or did not participate. If they did, the government must show Walker a copy of the legal assurances the government gave the companies. Then Walker must dismiss the cases."

That's right. The new law requires the telecoms to only demonstrate evidence their assistance to the government was based on an order. The Electronic Frontier Foundation, which has been providing legal counsel on the suits, including Hepting, has threatened further litigation but offered little in the way of specifics.

Hans Bader at the Competitive Enterprise Institute examined the constitutional issues surrounding telecom immunity in a post today at the OpenMarket.org blog, noting that even law professors like Howard Wasserman who dislike immunity as a matter of policy regard the legal question as clear: Retroactive immunity is constitutional.

Earlier posts here.

UPDATE And here's EFF's legal brief objecting to the government's motion to hold the appeal in abeyance.

UPDATE The Electronic Frontier Foundation blogs on the ruling. Seems like they're hailing a victory.

Jonathan Adler reports at National Review Online:

Michigan "Reform" Off of Ballot -- For Now   [Jonathan Adler]
A Michigan appellate court has ruled that a "reform" initiative designed to shift control of the entire state government, including the judiciary, should not be on the November ballot.  Coverage here and here.  I wrote about the initiative for NRO here

This is the scheme backed by organized labor that, among many other changes, would reduce the number of Supreme Court and appellate court judges, kicking off Republican appointees in the process. The goal was to gain control of all branches of government in time for the next round of redistricting after the 2010 census.

Earlier posts...

UPDATE (10:48 a.m.): The Court of Appeals ruling is available here as a .pdf file.

UPDATE (1:25 p.m.): The court's opinion is unsparing. From the conclusion:

The RMGN initiative petition is overarching, of a reach and expanse never before seen of any constitutional initiative in Michigan's long history. It proposes fundamentally to design the very framework of the Michigan Constitution of 1963, which emerged after an historic convention and subsequent voter approval. The issue is not whether the motivation for the proposed changes is altruistic or parochial. And the issue is not whether any one or several or all of the proposals in the RMGN initiative petition are warranted or make sound public policy. The issue is that our present Constitution contains specific language requiring that any proposal of the magnitude and enormity of the RMGN initiative petition must be submitted to a constitutional convention, and then to the citizens for approval. We may not blithely ignore or conveniently overlook Const 1963, art 12, ยง 3, requiring a constitutional convention for any "general revision." The Michigan Constitution has transcended, and will continue to transcend, the lifetime of any single constituency, and it demands no less than a rigorous application of its prescribed methods for modification.

Grand jury and Scruggs scandal

In case you thought the Mississippi saga was over, there are signs of impending action in the scandal's (thus far unresolved) Peters-DeLaughter branch.

Plus: "Earwigging Haiku" at David Rossmiller's comments section.

"The rush to reregulate"

AEI's Robert Hahn and Peter Passell: "Tighter regulation of the financial markets is almost certainly in the cards. But reregulation could have unintended consequences, bolstering the power of well-organized interest groups, reducing access to capital, and undermining America's competitive position. It is easy to fall into bad regulation during crisis situations, and it is hard to dig out." New regulatory proposals, Hahn and Passell argue, should be evaluated on the basis of a range of maxims that include "Focus on Systemic Damage", "Beware Fighting the Last War", "Emphasize Transparency", and "Public Money Should Come With Strings Attached".

"In stark contrast with the past," notes David Owsiany, "Ohio's highest court recently upheld caps on non-economic and punitive damages in Arbino v. Johnson & Johnson and a ten-year product liability statute of repose in Groch v. General Motors Corp." In the new issue of the Federalist Society's State Court Docket Watch (PDF, article begins on p. 2) Owsiany analyzes the two cases and contrasts them with the Ohio court's earlier, deplorable insistence on substituting its own policy views for those of the state's legislature. At the Buckeye Institute's blog, Owsiany notes that the fate of such decisions may hang in the electoral balance with two of the reform-tolerant justices, Justice Evelyn Lundberg Stratton and Maureen O'Connor, up for reelection in 2008. He also mentions the recent Manhattan Institute publication, Trial Lawyers Inc. -- Ohio (more on which).

A failure of the free market? Not exactly (via Bader, emphasis added):

Internal documents show that even late in the housing bubble, [federal-government-sponsored] Fannie Mae was drawn to risky loans by a variety of temptations, including the desire to increase its market share and fulfill government quotas for the support of low-income borrowers.

At policyholders' expense

The trial lawyers' answer for New York's tanking medical malpractice fund: raise premiums on property, casualty, and health-insurance policyholders to keep the money flowing. At least that's the position attributed in this story to familiar Litigation Lobby figure Joanne Doroshow, whose Center for Justice and Democracy the reporter quaintly labels a "consumer" group despite its eagerness to make blameless consumers pay higher bills in hopes of heading off pressure for litigation reform.

Cuomo as Wall Street enforcer

Stop the presses? My Manhattan Institute colleague Nicole Gelinas has relatively kind words for the financial enforcement efforts of New York attorney general Andrew Cuomo, at least as compared with his predecessor, the ever-overreaching Eliot Spitzer.

Around the web, August 19

  • Judge Ward has attracted so many patent plaintiffs to his E.D. Tex. courtroom that its "rocket docket" is slowing down [Texas Lawyer]
  • Pennsylvania Gov. Ed Rendell picks Houston chum Kenneth Bailey of Bailey Perrin Bailey to go after Johnson & Johnson in high stakes Risperdal marketing suit [Legal NewsLine, more]
  • Ted Frank on Mirapex compulsive-gambling suit [Examiner, Overlawyered]
  • Motley Rice is griping (and griping and griping) about being done out of its big lead paint payday by the Rhode Island Supreme Court [Genova]
  • Humane Society lacks standing to challenge New York economic development grant to foie gras maker [NYLJ]
  • Unwise judicial selection methods do not equal unconstitutional: a look back at NY's Lopez-Torres case [Haden/Anderson, Fed. Soc.'s Engage; related, Boog/Judicial Reports]

"Every" apartment building erected since 1991 in New York City may be out of compliance. And say goodbye to foyer closets in future, since the space may be needed to let wheelchairs pass each other. The New York Times reported the bad news this morning, and Hans Bader of CEI notes the irony:

the building owners already spent hundreds of millions of dollars to ensure compliance with New York City's own disabilities-discrimination law, Local Law 58, which was viewed by many as being more exacting than the ADA. Now, 100,000 apartments may need to be redesigned in New York City alone.

"New Talk" discussion of loser-pays

Philip Howard's new online discussion series, New Talk, is back today with a discussion of loser-pays, moderated by Rebecca Love Kourlis. I'm one of the discussants, as is Marie Gryphon of the Manhattan Institute's Center for Legal Policy, and a galaxy of others, including several law professors who can be expected to oppose the idea strongly. You can tune in here.

More: publicity from Kevin Williamson at NRO Media Blog.

Guestblogger thanks

Thanks to Peggy Little for holding the fort last week during my absence. Our planned guestblogger for this week unfortunately had to withdraw at the last minute, but we should have at least part of our regular crew, including me, on hand posting through the week.

There's been quite a bit of critical attention paid here to the Financial Accounting Standard Board's proposal to require expanded reporting of contingent liabilities, "Disclosure of Certain Loss Contingencies--an amendment of FASB Statements No. 5 and 141(R)." So it seems it seems fair to note the comments from FASB's chairman, Robert H. Herz. In today's Wall Street Journal, Herz takes issue with the Journal's blistering of the proposal in last week's editorial, "FASB's Lawyer Bonanza."

Herz writes, "FASB Seeks to Inform Investors, Not Whack Companies":

The Financial Accounting Standards Board is not proposing that companies change their current accounting for the cost of ongoing litigation. Rather, our proposal would require additional disclosure in the footnotes to the financial statements. It is a proposal, not a "demand," and is subject to our normal extensive public due process.

Under the proposal, the amount that would be required to be disclosed is the claim amount, or, if there is no claim amount, the company's best estimate of its maximum exposure to loss. The Board attempted to insure the proposal would not require a company to "[show] its hand to plaintiffs' attorneys" as the editorial says. For example, the proposal allows companies to aggregate claim amounts, so that the plaintiffs attorneys would not be able to identify specific cases. We have also proposed an exemption for certain disclosure situations that would be clearly prejudicial to the company.

We've put the entire letter in the extended entry.

It appears that FASB has completed the online posting of comments to the proposal, reaching 226 as of last Friday. The deadline was August 8. Critics outnumber the supporters nine to one, we'd estimate (and supporters don't think it goes far enough).

Around the web, August 18

The Examiner newspaper's new Sunday edition has a package on William Lerach, the trial lawyer extraordinaire now imprisoned for the Milberg Weiss class-action fraud.


  • St. Louis Post-Dispatch: "A lawsuit testing the constitutionality of Illinois' medical malpractice reforms is expected to come before the state's Supreme Court this fall -- and with it the very real possibility that the law will be nixed."
  • Letter to the editor, New York Times, "Settle, or Go to Trial?": "We are concerned that a study previewed in "The Cost of Not Settling a Lawsuit" (Business Day, Aug. 8) reinforces ingrained negative misperceptions of how our legal system works." John H. Martin, Marc E. Williams, Huntington, W.Va., president and president-elect of DRI, the Voice of the Defense Bar.
  • Birmingham News, "Candidate calls for an appointed judiciary": "Deborah Bell Paseur, a Democratic candidate for Alabama Supreme Court, said Thursday she favors appointing judges and letting voters decide if they should be retained. "
  • Los Angeles Times, obituary for James E. Ludlam. "Ludlam probably will be best remembered as one of the principal authors of the Medical Injury Compensation Reform Act of 1975, which alleviated a crisis in California because physicians were leaving the state and giving up their practices over prohibitively high malpractice insurance premiums caused by runaway jury awards. ...The landmark legislation, which brought down malpractice insurance premiums in California and, among other things, set a limit of $250,000 on damages for pain and suffering, is considered a national model for tort reform."

Judge Freedman's elevation

The New York Post's editorialists detect some good news for the city in Judge Helen Freedman's ascent to the appeals bench, in that she'll have to stop running the city's homeless programs via decree the way she's been doing for the past 25 years. But the bad news...

MBIA mulls suing hedge fund

The mortgage insurer risks losing Felix Salmon's sympathy with its threats to sue persistent critic Bill Ackman's Pershing Square Capital Management LP for driving down the price of its stock.

Med mal "loss of a chance", cont'd

Regarding the Massachusetts Supreme Court's recent unilateral liberalization of the doctrine, one of the same questions I keep asking also bothers Anthony Sebok: why are less-than-even probabilities supposed to be taken into account for the purposes of increasing recoveries, but never for reducing them? Thus a 49 cent likelihood of negligent harm will now pay off at 49 cents on the dollar, while a 51 percent likelihood will pay off not at 51 cents, but at 100, as before. Awfully convenient, that, no?

Walter Olson recently posted on key points made in an important article by George Krueger and Judd Serotta about cy pres settlements in the August 6, 2008 Wall Street Journal. In a nutshell, these "cy pres" proceedings represent a new species of legal activity whereby judges assign portions of lawsuit settlements or recoveries to non-party persons or entities chosen by them as somehow approximating the goal of the legal proceeding. (Long-time POL contributor Ted Frank has recently published a scholarly article on this new phenomenon.) These "approximation" awards are just one aspect of the larger problem created by regulation through litigation -- though a particularly alarming one. Point of Law has numerous contemporaneous prior posts on these developments. These cy pres practices are even more widespread and far-reaching than those attorneys report, and suffer from manifold constitutional and legal infirmities.

The good news? Any student in a high school civics class can recognize this racket.

Krueger and Serotta's central point is that these wealth transfers by judges of millions of dollars extracted from defendants in our state and federal courts given to institutions like legal aid societies or universities which were never injured, who possess no standing to sue, and who are chosen in an ad hoc and unreviewable process violate the federal Constitution's case and controversy clause. These ad hoc remedies additionally violate state and federal constitutions's due process clauses and that legal infirmity should be addressed before a case proceeds to settlement or trial, not at some much later date when a judge is trying to figure out what to do with millions of undistributable cash paid by a class action defendant. (I am indebted to Martin Newhouse, President of the New England Legal Foundation, for articulating this latter point.)

Kreuger and Serotta limited their discussion to private class action suits. But this practice of cy pres distribution is in widespread use by state and federal governmental officials, and represents an unconstitutional abuse of power. Consider a few examples:

  • In 2004, Mass. AG Thomas Reilly sued Walgreens, Home Depot and Wal-Mart for violations of state "item pricing" regulations" that arise when a shopper picks up an unmarked item or an item that is marked $3.19 but is charged $3.59 at the checkout. Rather than try to return such zero-to-trifling amounts of money per incident to the injured consumers, the state hired class action lawyers and richly compensated them. According to the Boston Globe, the proposed settlement involved the payment of $3.2 million to the private attorneys, $3.9 million to "an eclectic group of charitable, consumer, and nonprofit groups," and $425,000 to the AG's Office. The list of favored groups "includes $150,000 for the Massachusetts Bar Association, $120,000 each for the American Heart Association, the American Cancer Society, and the Juvenile Diabetes Research Foundation; $100,000 each for the National Consumer Law Center, the Roscoe Pound Institute of Washington, the New England Patients' Rights Group, and the attorney general's office; $50,000 for Public Citizen, and $40,000 for the Greater Boston Jewish Coalition for Literacy." (See earlier POL post by Mike DeBow) Meanwhile the overcharged consumers get nothing. (To add irony to idiocy, a recent detailed study shows that the item pricing laws themselves raise retail prices for consumers in states that have such laws.)
  • The U.S. attorney for New Jersey, Christopher J. Christie, entered into a deferred prosecution agreement ("DPA") with Bristol-Myers Squibb because of a potential securities violation for inflating its quarterly earnings by a business practice known as channel-stuffing. As an article in the Wall Street Journal noted, "[t}he naive reader might think that a DPA should prohibit the firm from engaging in future conduct of the sort that got it into hot water in the first place." (Richard Epstein, The Deferred Prosecution Racket, WSJ, 11/28/06). The "most striking evidence of the abuse of power is paragraph 20 of the agreement, which requires Bristol-Myers to endow a chair at Seton Hall University School of Law," Mr. Christie's alma mater, "for teaching business ethics."
  • West Virginia AG Darrell McGraw's office appointed special assistant attorneys general and outside counsel to sue pharmaceutical companies and software giant Microsoft, among others and received multi-million dollar recoveries. But the settlement dollars don't make their way into the state's treasury for the Legislature to disperse. Although an editorial from the Wheeling Intelligencer called it a "disturbing philosophy" that the AG's "office keeps the money - millions of dollars." The editorial stated. "He ought to turn the windfalls over to the state treasurer, of course ... McGraw seems to view the money as his own personal hole card in the popularity contest that politics can be."
    McGraw's free-wheeling exercise of the power of the purse has drawn the wrath not only of state legislators, but the federal government. Kim Strassel of the Wall Street Journal reports:
    Mr. McGraw had sued on behalf of state agencies (including the state's Medicaid program) -- yet his office kept the rest of the settlement money.The federal government, which pays a significant portion of the state's Medicaid bills, remains furious the program received none of the settlement, and is now threatening to withhold millions in Medicaid money. . . .[Nonetheless] Mr. McGraw remains relatively popular in the state, in part because one of his greatest innovations has been the art (as with the OxyContin suit) of turning settlement proceeds into political patronage. When the West Virginia attorney general crafts a settlement, he makes sure it goes to his own office, where he doles it out with great fanfare to universities, health-care centers and county commissions. In January, he grandly announced that a $12 million settlement he'd negotiated with Visa and MasterCard would be going to fund statewide sales-tax holidays.

These cy pres arrangements represent a complete breakdown of the rule of law. In addition to violating the case and controversy and/or due process provisions of state and federal constitutions, they violate the doctrine of separation of powers. Recoveries in lawsuits brought by governmental entities belong to the state or federal treasury and may be expended only by the legislature.

Robert McClelland, Attorney-General in Australia's Labor Party government, proposed measure aimed at widening "access to justice" but "warn[ed] it would be unfortunate if Australia were to go down the American path, with costly speculative cases bogging the courts and leading to soaring insurance costs."

Texas is famous for having enacted some of the nation's strongest laws aimed at curbing litigation, yet as Texans for Lawsuit Reform notes, there is a hole in the donut, an inexplicable and deplorable gap:

It always comes as a surprise to Texans that there is no remedy against a plaintiff who brings a money damages lawsuit that has no merit whatsoever, which is filed primarily to harass, intimidate, extort a settlement, or achieve some other wrongful purpose. This continues to be true, despite all of the reforms enacted by the Texas Legislature and our state's courts over the last fifteen years to discourage non-meritorious and abusive litigation.

None of those reforms directly affect the truly extreme case where a lawsuit is primarily filed for an improper purpose and when it is clear that there are no facts or no law to justify the lawsuit.

To deal with this extreme and unusual kind of case, TLR proposes that the Legislature adopt an effective remedy by updating the long-established Texas "malicious prosecution" cause of action by adopting the updated principles published by the American Law Institute (ALI) in Section 674 of its "Restatement (Second) of Torts." The ALI is a respected national group of lawyers and scholars whose recommendations are considered persuasive to both courts and legislatures.

Rather than the somewhat misleading term "Malicious Prosecution" (which sounds like a criminal law issue), the ALI uses the more descriptive term, "Wrongful Use of Civil Proceedings."...

The President today signed into law H.R. 4040, the Consumer Product Safety Improvement Act of 2008. No bill signing ceremony.

This ConsumerAffairs.com account highlights provisions that many in the business world believe will invite new waves of expensive litigation: "The bill also will create the first comprehensive publicly accessible consumer complaint database, give the CPSC new resources to protect the public, increase civil penalties that CPSC can assess against violators of CPSC laws, and protect whistleblowers who report product safety defects." Along with additional enforcement authority for state attorneys general, and you've got a full banquet table to serve the plaintiff's bar. The database, in particular, is a great place to attack companies' reputations and gin up a public scare.

Activists also hail the ban on phthalates, which as we've noted previously represents a major step toward establishing the precautionary principle as the new regulatory standard in the United States. (For more on that topic, see these Shopfloor.org posts.)


That's quite a claim for any piece of legislation.

Judicial selection and the ABA

(Peggy beat us to commenting on the WSJ's editorial, but since we've got a few links....)

The American Bar Association endorsed merit selection of federal judges at its annual meeting last week, and the Wall Street Journal's opinion editors are sharply critical in today's lead editorial, "The ABA Plots a Judicial Coup," calling it "latest lawyer-led attempt to strip judicial selection from future Presidents." The Journal reacts to the comments of the ABA's incoming President Thomas Wells, who says the goal is to avoid "really rancorous debates" and expeditiously fill judicial openings.

We admire Mr. Wells's high-mindedness. But surely he must have heard that merit selection merely takes the partisan politics out of the public eye and into backrooms stocked with political insiders. In states that have adopted the ostensibly nonpartisan system, it has given disproportionate influence to the state trial bars that control selection commissions and have steadily marched state courts to the left.

That may not be Mr. Wells's intention, but it's no accident that outfits like the George Soros-bankrolled Justice at Stake have lobbied for precisely this kind of "merit" selection. The group cheered the ABA proposal this week, and pledged its support. "Judges are not politicians in robes, nor are they prizes to be won by aggressive special interests," executive director Bert Brandenburg remarked. Unless, of course, the "special interest" is the lawyers' guild. Then it's all just one happy meritocracy.

Such a process would exclude an Antonin Scalia while anointing a "consensus" David Souter, WSJ writes.

American Bar Association news release and earlier news release, and the resolution in question, No. 118. The Justice at Stake news release praising the move is here.

The issue of judicial merit selection prompted a spirited exchange last month here at Point of Law.com, as Walter Olson questioned the wisdom of business making popular election of judges such a priority. (See also here, and Ted Frank here, and etc.)

Dan Pero at AmericanCourthouse.com is the most indefatigable advocate of election as an open and representative means of choosing judicial positions. He's keeping close watch on the Soros-financed efforts in support of the closed judicial shop. (UPDATE: And here is Dan's reaction to the WSJ editorial.)

Next big venue where the issue may be engaged, the American Judges Association's annual conference, Sept. 7-12 in Hawaii. The brochure and agenda list no specific meeting on the topic, though.

  • Do high heels cause schizophrenia? In Scared Senseless, Ronald Bailey reviews Geoffrey C. Kabat's recent book entitled Hyping Health Risks, in which this and other, more influential health scares such as electromagnetic fields, cancer clusters, radon gas, passive smoking exposure, cell phones, flu shots and the like are analyzed in the context of the economics and incentives of current science research practice and funding. Dr. Kabat, who found himself in the midst of heated controversy over the funding of his own smoking research, provides a knowledgeable window into the conjunction of science, the public health media, and law.
  • Can a 100 year old book long sunk into obscurity, once heralded as a landmark study of American political society, offer a fresh insight into our political culture? The current New Yorker provides a fresh assessment of Arthur Fisher Bentley's TheProcess of Government: A Study of Social Pressures and asks the important question, does the wrangling of interest groups corrupt politics - or constitute it? The article takes on Thomas Frank's latest attempt to tell the benighted U.S. electorate that they don't know what they are doing.
  • What does that Harvard MBA actually teach you? More importantly, what do its possessors do to our markets? In what is described as a "horrifying and very funny memoir," Ahead of the Curve, Philip Delves Broughton immerses himself in the weird culture of entitlement, decadence and fatuous therapeutics including "bonding games," "personal development exercises" and other biz school antics. The review closes with:
  • "this wonderful bit of data from a study by a banking analyst who tried to track the American equity markets in relation to the number of HBS graduates who chose to go to work in finance each year. If the figure was less than 10%, the market went up not long after. More than 30% and the market was headed for a crash. In 2006, Mr. Broughton reports, 42% of the HBS grads went to work in finance. Right on schedule."
  • Ask yourself, would you design a system of higher education like this?:
    First, we will set up a single goal to represent educational success, which will take four years to achieve no matter what is being taught. We will attach an economic reward to it that seldom has anything to do with what has been learned. We will urge large numbers of people who do not possess adequate ability to try to achieve the goal, wait until they have spent a lot of time and money, and then deny it to them. We will stigmatize everyone who doesn't meet the goal. We will call the goal a "BA."
    Charles Murray proposes a new way of thinking about higher education that tuition-strapped parents and loan-laden students might want to do some hard thinking about before blindly chasing today's prohibitively expensive and increasingly devalued bachelor's degree.

Today's Wall Street Journal reports on an alarming judicial coup proposed by the ABA:

According to the proposal, future federal judges would be selected not by an elected President, but with the aid of home-state Senators and a bipartisan commission that would provide a list of recommended nominees for judicial vacancies. The White House would then select a candidate from the preapproved list. The commission would be created by the two Senators from each state to offer up consensus choices for federal nominees.

Right. Just what we need. Less democratic accountability and more influence from the self-proclaimed "fourth" branch of lawyers into the selection of judges. As the opinion piece notes, states that have experimented with this so-called "merit" (paging Mr. Orwell) selection of judges have found that back-room, lawyer-controlled lists were being forced on the political, accountable branches. The ABA's past record of deeming "unqualified" judges who do not conform with its expansionist view of judicial power makes it a particularly compromised and unqualified arbiter.

The ABA is nothing more than a trade group for an already too-influential profession and its proposal to give itself, and ultimately an unelected lawyer-loaded commission, a role of this constitutional magnitude is what they politely call hubristic.

Around the Web - August 13, 2008

Employment Law
Micro-inequities such as not getting a chummy nickname or being taken out to lunch are the focus of a recent ABA journal article claiming they have a big work impact.

Are we all disabled now? Shyness as a disability. And more on ADA abusers, arguing that such abuses will ultimately harm legitimate disability claims.

Green Fatigue, Global Warming and the Therapeutic Something or Other

Yikes! You know carbon footprints are stepping on toes when not one, but two New York Times bloggers confess to green fatigue and concerns about a nanny nation.

NYU medical school clinic prescribes house plants for allegedly polluted indoor air, sunflowers for soil believed to contain lead, window treatments, tadpoles and succulents - to help people translate their environmental anxiety into concrete action. This clinician has a lab coat, a mock medicine cabinet, but no M.D. The New York Times describes her as an artist, designer and engineer to whom patients can bring their environmental concerns for her prescriptions. A professor of environmental medicine at the NYU School of Medicine describes this as a service that is needed to show people that they can "do something" about these anxieties. And who is subsidizing this?

In light of the above, a recent Wall Street Journal opinion piece on global warming as public hysteria - is recommended reading - and re-reading.

Preemption, the Congressional maneuvers

Below we note today's Wall Street Journal article, "Plaintiffs' Lawyers Fight Restrictions On Product-Liability Suits," a good primer on the political and lobbying battles over preemption, i.e., federal regulations that preempt state laws and prevent tort claims in state courts. The Journal's Law Blog also looks at the issue and directs the reader to the Journal's editorial today, "Devices for Lawyers." The opinion piece assesses the move in Congress to overturn the Supreme Court's decision in Riegel v. Medtronic, a medical preemption case.

The Court's decision makes sense for many reasons, not least to avoid creating a sort of double-jeopardy for companies -- first having to run the FDA approval maze, then allowing a nationwide quilt of different laws and standards to second-guess that approval. In 1976 Congress passed the Medical Device Amendments, establishing a national standard with express pre-emption language barring states from imposing their own requirements.

The Supreme Court decision nonetheless sent up yowls of rage from the likes of Democratic House baron Henry Waxman, who said the decision "strips consumers of the rights they've had for decades." Who writes this stuff for Henry? Far from representing a radical departure in the law, the Court's reasoning upheld what had become a common opinion in the federal court system. In half a dozen holdings, federal circuit courts had already ruled in favor of pre-emption, covering states from Texas to Illinois to Pennsylvania.

What Waxman really wants, the Journal opines, is to "restore is the trial lawyer bingo that can net jackpot jury awards while wreaking havoc on national standards." The vehicle of restoration is the Medical Device Safety Act, introduced in the House by Rep. Frank Pallone (D-NJ) as H.R. 6381, and in the Senate by an absent Sen. Kennedy (D-MA) as S. 3398. You could almost hear the American Association for Justice shouting "Bingo!"

More on Medtronic and preemption here.

Around the web, August 13

  • Preemption, lobbying, Wyeth v. Levine, it's a roundup of one of the hot congressional/legal/political issues going in the Wall Street Journal, "Plaintiffs' Lawyers Fight Restrictions On Product-Liability Suits." (Previous posts here.)
  • Trial lawyers already fed up with Gov. Paterson? Citizen Action, a New York activist group funded by the plaintiff's bar, is working with unions to run attack ads against a property-tax cap being supported by Gov. David Paterson. The Legislature convenes for a special session today. From The New York Sun, "Unions Aim TV Ad Blitz At Paterson."
  • A rose, name, sweet, blah, blah, blah. The South Carolina Association of Trial Lawyers has changed its name to the South Carolina Association for Justice. From Brad Warthen's blog at The State.com. Warthen also suggests a list of the top five courtroom movie dramas. Ah, "Witness for the Prosecution." "You want to kiss me, ducky?"
  • Maryland attorneys are considering a challenge to Maryland's cap on punitive damages after a judge reduces a malpractice award from $4.5 million to $1.3 million. State law limits punitive damages to $650,000 per instance. Robert J. Goldman, of the Bethesda-based firm Finklestein & Horvitz P.C., says the cap is unconstitutional. From Gazette.net.
  • Ben Glass, the Virginia personal injury attorney, sells a training package for lawyers who want to increase their litigation success and income, Great Legal Marketing. He writes on his blog that "Trial," the magazine of the American Association for Justice, has rejected his latest ad because it talks too much about money. Here's the ad. Our guess about the ad's offense? It's just too declasse.
  • U.S. Supreme Court declines to rule on whether Exxon must pay interest on the punitive damages resulting from the Exxon Valdez oil spill, sending the decision back to the 9th Circuit. AP story.

"That's Not Blight. It's New Jersey"

Today's Wall Street Journal reports that last Thursday, a three judge panel of the New Jersey Appellate Division "actually sided with ordinary homeowners over a greedy local government and developer:

In their ruling, the judges unanimously reversed a lower-court decision giving the city of Long Branch a green light to pursue its redevelopment plan. That has put a serious crimp into the city's hopes for taking the homes of about a dozen longtime residents -- and turning them over to a developer to put up luxury condos in their place.

Institute for Justice attorneys represented the homeowners in this rebuke to Kelo.

FASB litigation accounting VI

FASB has updated its website this afternoon with comments submitted on its proposal to require more reporting on contingent liabilities resulting from litigation. (See earlier post, directly below.) We're up to 217 responses, and comments continue to be overwhelmingly critical.

And just to be clear about it, no matter how much the proposal is criticized by businesses -- who represent most of the comments -- we're not suggesting anything malign about FASB's proposal. The board's goal is improved transparency for investors and the public, which is a good thing, generally. The trouble is that the proposal could lead to misleading information and damaging, simply wrong statements being made public, while at the same time the attorney-client privilege is undermined. You could see how the pro-litigation crowd might take advantage of the the mixture of confusion and revealed strategies, but investors certainly aren't served by even more lawsuits.

BTW, we see that the Teamsters can be counted as members of the "pro-litigation crowd." James P. Hoffa's letter says FASB hasn't gone far enough in asking for disclosure of potential liabilities resulting from litigation.

Elsewhere, the WSJ Law Blog has a post on the drug companies' submission, using the Vioxx litigation as an example of circuitous litigation with hard-to-forecast contingencies. (We noted the blog comments at Shopfloor.org.)

The Washington Legal Foundation also submitted a letter that warrants notice. Excerpt:

The FASB has stated that investors and other users of financial statements have expressed concerns that the present rule is inadequate to aid financial statement users in assessing the likelihood, timing, and amount of future cash flows associated with loss contingencies. Exposure Draft, Summary. However, WLF does not believe that FASB has made a compelling case that the current standard, which has been in place for over 30 years, does not provide adequate information to investors. In that regard, we agree with the comments filed by Allergan on July 16, 2008, that only a few vocal proponents, unrepresentative of the investor community, are advocating this change and that the FASB should fully disclose to the public the empirical information it possessed that prompted these proposed changes.

Yes, indeed. Transparency.

UPDATE: More on the drug company submission at Pharmalot.

FASB litigation accounting V

Letters poured into the Financial Accounting Standards Board with last Friday's deadline for comments on "Disclosure of Certain Loss Contingencies--an amendment of FASB Statements No. 5 and 141(R)." Corporations don't like the proposal because -- among other things -- it would require highly speculative reporting about the possible results of litigation, casting unnecessary doubt about a company while giving trial lawyers another edge in their suits. Bar and counsel associations contend the new rules would violate attorney-client privilege.

As of this writing, there are 165 entries on FASB's site, with well over 90 percent critical of the proposal, we'd say. The few in favor we find are "socially conscious" investors of one sort or another, including Trillium Asset Management Corporation, a group of charitable foundations, and the Social Investment Forum. From the latter's letter:

While we are pleased with this important step and supportive of the progress it represents, there are a few points of concern that we would like to take this opportunity to raise briefly. In particular, SIF is concerned with how the draft treats severe long-term risks. At FAS 5 Exposure Draft paragraph 6, the draft only requires disclosure of severe financial threats that a company deems remotely probable if the issue is expected to be resolved within a year. Many of SIF's members are long-term investors and are acutely aware that there is a long and troubled history of companies underestimating the likelihood of severe financial threats - Enron, the subprime lending crisis, and asbestos liabilities are three recent examples. All too often we have seen that these momentous issues were looming for many years and eventually resulted in catastrophic consequences for investors. For these reasons, we believe FAS 5 should require companies to disclose all known severe threats whether or not they are expected to be resolved within a year. Recognizing the need to ensure that disclosures are made in a cost effective manner, SIF would like to suggest that "remotely probable" risks that are not expected to be resolved within one year be described in a narrative form, but would not need to be quantified other than to specify that they may be severe.

The bolded sentence is rephrased and bolded in the other letters cited. Short version: Guestimate.

The Association of Corporate Counsel submitted a letter stating the basic objection to this sort of speculation:

Even if the disclosure of litigation-related loss contingencies were a serious systemic problem, it is extremely doubtful that compelling companies and their lawyers to quantify litigation risks would yield more accurate financial statements. As every trial lawyer knows, litigation anywhere in the world -- but especially in American courts and before American juries -- inherently is unpredictable. The reaction of a single juror or the impact of a single ruling can have a dramatic and unanticipated impact. Indeed, it is highly doubtful that any company or lawyer who ever lost a billion-dollar case expected that result -- they were presumably surprised by the extent of the negative outcome. Had they expected to lose or to lose so badly, they surely would have settled. In this instance, requiring the losing lawyer or company to have produced a more precise description of the outcome would not have provided more accurate disclosure to investors. In short, the case has not been made for change.

BTW, the 800 lbs. gorilla of Cal-Pers submitted a letter, calling for expanded reporting of these contingent liabilities. More nuanced than the "socially aware" investors, but same basic arguments.

For Walter Olson's previous posts, see here, here, here, and here.

The State of Connecticut has brought suit against Bank of America's newly acquired Countrywide Financial Corp. alleging that Countrywide made loans that were unaffordable or unsuitable to the borrower in violation of the state's unfair trade practices and banking laws. Countrywide was recently acquired by B of A in a $2.5 billion deal last month. The lawsuit seeks civil penalties of as much as $100,000 per violation of the state banking laws and $5,000 per violation of the state consumer protection laws, disgorgement of allegedly ill-gotten gains and an order compelling the company to cease the disputed practices.

The Connecticut suit follows suits brought in June by the States of California, Illinois and Washington against the lender. The Connecticut Post further reports that the state AG seeks not only to halt all foreclosure activity by Countrywide, but undertake the extraordinary remedy to undo past foreclosures. In an interview, Blumenthal stated that "he would also attempt to return foreclosed homes, when possible, to people who lost them as a result of these unscrupulous loans. . . .If the houses have already been sold to other families, Blumenthal said, the state will seek enough compensation to enable those who unjustly lost their houses to get another one." "We're talking hundreds, likely thousands, of families," Blumenthal said. Blumenthal said he has asked Bank of America, Countrywide's parent company, to suspend all foreclosure activity until this issue can be resolved. Banking Commissioner Howard Pitkin said that the suit could suddenly leave a lot of people free of mortgages, and that the lawsuit seeks to invalidate not only subprime loans, but borrowers who took equity lines of credit on their houses.

If the loan was unsuitable and the borrower by definition unable to afford the home, Connecticut now seeks to reward the borrower with a mortgage free home, invalidation of duly commenced foreclosure sales and invalidation of too risky home equity loans. And if the foreclosed home is already gone, the AG seems to be saying Countrywide's successor's has got to provide a replacement home for the borrower. It will be interesting to see if the AG can deliver on these promises and important to track who pays for these extraordinary government-provided handouts and further who benefits from the state suits.

Another nagging question. Will Connecticut's AG apply the same regulatory zeal to Connecticut Democratic Senator and Chairman of the Senate Banking Committee Christopher Dodd's, sweetheart home financing deal with Countrywide that reportedly reduced the rate of two loans including his mortgage on his Connecticut home saving him $17,000 over the life of the loan? This would be the same Senator Dodd that is one of the prime movers of the taxpayer financed mortgage bailout.

Another political link? James A. Johnson, who had been head of presidential candidate Barack Obama's vice presidential search committee resigned abruptly in mid-June after days of intense scrutiny from the news media and political criticism that Johnson, a former chief executive of Fannie Mae, had received mortgages on favorable terms from Countrywide, a central player in the subprime lending crisis. Johnson and Senator Dodd are just two amongst many political players who appear to have received "friend" of Countrywide deals.

Business Week reported on Friday that the SEC has now launched a formal investigation into Countrywide, according to a recent regulatory filing by the Bank of America. The filing does not specify the nature of the inquiry, but notes that the lender has responded to subpoenas issued after an informal inquiry was launched in November 2007 into former Countrywide chairman and CEO Angelo Mozilo's stock trades. Businessweek further quotes an article in the Los Angeles Times that reports "that the SEC probe centers on whether Mozilo's stock trades violated the law and whether the lender's financial disclosures misled investors. . . .The executive exercised options on thousands of shares of common stock through a prearranged trading plan, but the timing of changes in the stock-selling program drew shareholder criticism. The changes, which were made in the months before the company's stock plunged, allowed Mozilo to significantly increase his sales of Countrywide shares."

Connecticut's suit comes right before a court hearing on August 11, in which Businessweek notes that a U.S. Bankruptcy Court judge in Pittsburgh "is set to review an agreement in which Countrywide agreed to pay a bankruptcy trustee $325,000 to settle allegations that the mortgage lender sought improper fees or payments from bankrupt homeowners and otherwise violated bankruptcy court orders and regulations in nearly 300 cases. Countrywide acknowledged errors in handling some debts, but it had denied any systematic effort to thwart bankruptcy protections to collect money. (Update 8-16-08: The bankruptcy judge has declined to allow the settlement to go forward at this time.)
Countrywide is also among the companies being investigated by the FBI as part of the agency's probe into the financial services industry in the wake of the mortgage meltdown."

Finally, the WSJ reports today that the U.S. Justice Department has challenged this deal with the bankruptcy trustee, saying that the lender is trying to silence a critic of the company.

The Countrywide saga offers a heady mix of law and politics, as its CEO Mozilo, has also been identified as just one of the players in what the Wall Street Journal has dubbed the Fannie Mae Gang. Stay tuned.

I will be providing posts on legal developments this week while Walter Olson is on a well-deserved break. I am a Connecticut attorney who practices in the field of commercial litigation and appeals in state and federal courts, with a particular interest in appeals. I also publish on Regulation by Litigation, class actions, legal fees in mass litigation, book reviews and junk science in the courts(link not available, PDF is on request). I also direct, part-time, the Federalist Society Pro Bono Center, and serve on its national litigation section executive committee, co-chair its publications group, and have helped to organize national and local conferences on these and related matters. I also have an ongoing interest in the legal and collegiate academies, the therapeutic state, separation of powers, Supreme Court jurisprudence, and am at work on publications on contingency fees in governmental litigation, the states' attorneys general, and the student loan market. I am a 1984 graduate of Yale Law School, Yale College, B.A. 1977 and clerked for the Hon. Ralph K. Winter on the Second Circuit before entering into private practice. I am happily resigned from a large firm partnership and am pleased to report to the Point of Law lawyer/readers that there is a rewarding professional and writing life in the thereafter.

"... the NYT is not the place to look," writes Larry Ribstein, after dissecting a predictably tendentious column on the Sarbanes-Oxley law by the Times' Floyd Norris.

FASB litigation accounting IV

Beck and Herrmann weigh in with several links including one to the FASB's own page allowing the visitor to view copies of letters it's received commenting on the proposed standard. For example, V.P. and General Counsel Michael H. Gibbs of restaurant chain Whataburger writes:

1. There is absolutely no limit on what plaintiffs can demand - as such these outrageous demand amounts constitute hyperbole, disclosure of which has little, if any, bearing on what the actual reasonably estimable exposure might be.
2. These rules would require waiver of attorney client privilege for highly sensitive case assessment information in most states, including Texas.
3. These rules would therefore result in providing great benefits to plaintiff lawyers who would no doubt argue to juries that the maximum identified exposure is an admission of what should be paid (or at a minimum, the actual reserve would be such an admission). Notwithstanding the perceived benefit for accounting rules etc, what the jury will hear is "the company admits exposure of $ X".
4. Once disclosed or discoverable, the actual per claim reserve amount will become the floor demand of the other party in any dispute - after all, once reserved, it costs the company "nothing" from an accounting standpoint to pay that amount on that particular claim.
5. Perhaps worst of all, once individual case ranges are provided to accounting firms, it invites them to substitute their judgment for the professional opinion of counsel, as opposed to simply auditing the process used. If you give them numbers, they will be constitutionally incapable of avoiding the tendency to challenge the range, the probabilities, or any other calculations.

John A. Hepp of the Illinois CPA Society, on behalf of his society's relevant committee, deems the disclosure of short-term unlikely exposures "neither relevant nor beneficial":
The Committee is concerned that the inclusion of large numbers of cases, especially frivolous ones, will mask the actual exposure. There is an emerging body of academic research indicating that the "wordiness" of MD&A increases as news gets worse in an attempt to discourage users from reading the document or to overwhelm them with information in order to hide relevant disclosures.

And the U.S. Chamber's Institute for Legal Reform comments here. Earlier coverage here, here, and here.

It's anything but clear that New York City is legally liable for property losses from last year's storm flooding, but city comptroller William Thompson Jr. has gone out of his way to help potential plaintiffs by extending their deadline to sue. The Sun has the story, and quotes MI's Jim Copland.

McGovern on card check

A well known Democrat warns against doing away with the secret ballot so as to make it easier to install unions at the workplace. More on card check here.

Jim Hood settles State Farm case

The Mississippi attorney general is spinning the settlement of his 2007 breach of contract action as some sort of triumph, claiming that it arm-twisted the insurer into higher Katrina payouts. As David Rossmiller notes, that means Hood winds up claiming credit for having "caused" events that in fact occurred before he filed his lawsuit. Call it backdating!

"It's no secret that credit ratings agencies rate municipal and corporate debt differently," notes Jim Kim at Fierce Finance. Connecticut Attorney General Richard Blumenthal professes to be confident that these differences arise from antitrust violations, so he's launched litigation that evidently plays well to a constituency of his state's town and city governments, the "vast majority" of which, Blumenthal opines, are deserving of triple-A ratings. (Blumenthal shared the stage with the mayor of Waterbury, a city few would elevate as a model of fiscal probity.) It looks as if the rating agencies aren't planning to go without a fight:

McGraw-Hill Cos., which owns Standard & Poor's, said the lawsuits are "simply a case of a state attempting to use litigation to dictate what bond rating it receives."

More: WSJ and its law blog, Naked Capitalism (sympathetic to the municipal borrowers but skeptical that Blumenthal has a case).

Energy prices: supply and demand

Howell Raines supplies malarkey, and Joe Nocera demands a higher quality of evidence.

Federal Indian trust litigation

The U.S. Department of the Interior has been on trial for 12 years (!) for historically mismanaging the financial interests of Indian tribes, which it holds in trust; while observers from many political perspectives have agreed in criticizing the past mishandling of funds, there has been no consensus on how to evaluate or remedy the resulting losses. Now Judge James Robertson has set damages at $455 million, which is close to the government's own estimates and far from the $47 billion the tribes were demanding. Wrote the judge, in language that may possibly have some resonance in other reparations settings: "The Cobell case will no doubt stand, in some respects, as a cautionary tale about the limited ability of a court to right historical wrongs that could have been - and should have been - settled by the same political branches in recognition of their own failure to preserve the trust".

The disturbing proposal before the Financial Accounting Standards Board, much discussed recently in this space, is the topic of an editorial in today's WSJ:

The proposed change is open for comment until tomorrow, and FASB has been getting an earful. Senior litigators from 13 companies, including Pfizer, General Electric, DuPont, Boeing and McDonald's have signed a letter to FASB Chairman Robert Herz, objecting to the plan. "Too often, lawsuits are filed for publicity or to pressure companies, only to be dropped later," they wrote, and trying to estimate the fair value of liabilities at the outset "would be both flawed and misleading."

All of which raises the question, why mess with the current system? Under existing rules, putting a number on the potential cost of a lawsuit is required only when the defendant believes it is "probable" it will lose the case. At that stage of the game, some knowledge and calculation from the trial can actually inform the judgment and provide a reasonable service to investors.

Reader Jeff Holmstrand, of Wheeling, W.V.'s McDermott & Bonenberger, writes to foresee another problem to add to the list catalogued earlier: "Outside counsel giving honest opinions about a company's potential exposure and then having to review the client's financial statements to determine whether that risk was accurately reported -- a problem made even worse when there is potential insurance coverage."

More: Some noteworthy comments filed with the FASB by the business community, along with other links and commentary, at NAM "Shop Floor".

Where state AGs assemble

There will be people trying to sell them things (quotes our Jim Copland).

Around the web, August 7

Palmetto State predictable

There's a bit of news coverage and blogging about the South Carolina Trial Lawyers Association having Erin Brockovich address its annual convention this week. Brockovich speaks to lawyers! Fancy that. At least Brad Warthen's blog post at The State.com lets readers provide a few mythbusting comments. (For more of the Brockovich reality versus myth, see Ted Frank's post at Overlawyered.) And Brockovich's speaking fee is affordable, we'll give her that.

Beyond the supposed glamor, the conference agenda is informative enough, especially given South Carolina's prominence in the history of excessive litigation. Good interaction between judges and attorneys, lots of nuts and bolts sessions, and here are the talks that caught our eye:

11:00 a.m. - 11:30 a.m. "Toxic Tort: It's all about Causation, But don't forget Liability." W. Mullins McLeod Jr., Esq. Charleston, SC
11:30 a.m. - 12:00 "The Evolving Landscape of Environmental Litigation: Lessons from the Kivalina Lawsuit" Wm. Michael Gruenloh, Esq., Charleston, SC

And ...

9:00 a.m. - 9:30 a.m. "Business Court, A Slippery Slope" Gary W. Jackson, Esq., Charlotte, NC

Slippery? Funny. That's what we would have said about Kivalina.

Sheldon Silver and Counsel Financial

Today's New York Times reveals that Assembly Speaker Sheldon Silver is an investor in Counsel Financial, the litigation finance outfit, thus multiplying his potential conflicts of interest as Albany's leading guardian of Litigation Lobby interests. Counsel's book of business includes stakes in suits against the MTA and other state agencies whose legal environment is shaped by the legislature's enactments. Reporter Danny Hakim quotes our own James Copland as well as a number of other observers and gives some sense of the general controversies that have swirled about the litigation finance business. However, as readers of my write-up last fall at Overlawyered based on Buffalo News coverage are aware, the particular details of Counsel Financial's rise might raise an eyebrow or two on their own:

Counsel Financial Services LLC, which stakes injury lawyers pending their paydays, says it's "the largest provider of attorney loans in the United States and the only Law Firm Financing company endorsed by the AAJ (formerly ATLA)"; its friendly public face is a retired N.Y. judge while its founder is attorney Joseph DiNardo, suspended from practice in 2000 "after pleading guilty to filing a false federal tax return" and whose own lend-to-litigants operation, Plaintiff Support Services, shares an office suite with Counsel [Buffalo News] The firm's current listing of executives includes no mention of DiNardo, though a Jul. 19 GoogleCached version has him listed as President.

Maybe the Times will explore some of these questions in follow-up reporting.

Cy pres: a Constitutional infirmity?

George Krueger and Judd Serotta of Blank Rome, in today's WSJ, think the use of litigation slush funds might overstep the constitutional authority of the courts:

In our view, this as-near-as-possible remedy in class actions is defective. The Constitution provides for the resolution of "cases" and "controversies" between aggrieved parties. Courts are empowered to resolve those specific disputes, and not to transfer a corporate defendant's assets to an outside organization that has not appeared before the court. The Constitution does not give courts the authority to satisfy notions of "deterrence" by giving institutions like legal aid societies or universities windfalls when those entities are not even parties to the lawsuit.

The best solution would be to give the remainder of the uncollected funds back to the defendant; to those class members who have already collected their initial portion; or even to the government, thereby at least allowing society to benefit in some way, while still serving as a deterrent. Another solution would be to come up with a less arbitrary -- and more objective and disinterested -- mechanism for finding an appropriate beneficiary organization that shares the plaintiffs' common interests.

Krueger and Serotta also say a new round of class action reform is needed that would tie class counsel's compensation to "the reward actually recovered by class members, as opposed to the total claimed 'value' of the settlement".

FACTA hits Baton Rouge

Lisa Bezet says the gas pump at Albertson's printed out six digits of her credit card number when the federal law specifies at most five, so her lawyer would like class-action status in a suit ordering the grocer "to pay $100 to $1,000 for each receipt found to have included too many credit card numbers for thousands of customers," per The Advocate. She doesn't claim anyone misused the information or that she suffered any sort of financial loss from the lapse. Earlier on FACTA, the federal "gotcha" statute on credit slip privacy, here, here, here, here, and here.

Trial Lawyers Inc. update -- Ohio

The latest state-focused installment in the popular Manhattan Institute series covers the Buckeye State, scene of some intense liability battles in recent years. Among topics aired: the state's sharply divided Supreme Court, and its narrow swing in recent years toward deference to legislated legal reform; the brief, clownish reign of state Attorney General Marc Dann; and the career of the state's best-known tort lawyer, Stanley Chesley of Cincinnati. Earlier state-by-state reports have covered California, Michigan, and Illinois.

More: David Owsiany, Buckeye Blog (Buckeye Institute), Legal NewsLine.

Libya pact under fire

Illustrating one of the problems with opening the courts to tort litigation over offenses by foreign states, even the worst such states: by encouraging interests to crystallize around the litigation, they make it harder to achieve government-to-government diplomatic resolutions intended to restore peaceful relations (Crowell & Moring on plane-bombing victims, Motley Rice and IRA victims). More on terrorism suits against sovereign nations here and here.

Joseph Goldstein at the Sun writes of the case of Daniel Vargas, whose fight against misdemeanor charges for keeping an unlicensed revolver in his apartment just might put the quietus to New York City's obviously (post-Heller) unconstitutional gun possession laws. "In about half a dozen New York City cases reviewed by The New York Sun, defense lawyers have filed briefs arguing that the Supreme Court's decision requires the dismissal of gun possession charges against their clients."

For readers in the New York City area: Tomorrow evening (Tues.) I'm going to be one of three persons discussing the Constitution's Second Amendment, and the Supreme Court's Heller decision recognizing that it protects an individual and not merely a "collective" right, at a monthly meeting of the New York Civil Liberties Union. Details here. Also offering their views will be NYCLU's Arthur Eisenberg, a proponent of the collective-rights view, and Damon Root of Reason magazine, who discusses the event here. There will even be pizza and refreshments (cross-posted from Overlawyered).

Putting the boot to preemption

Acting on behalf of the ailing Sen. Ted Kennedy (D-MA), Sen. Pat Leahy (D-VT) on July 31 introduced legislation to overturn the U.S. Supreme Court decision in Riegel v. Medtronic, the Medical Device Safety Act of 2008, S. 3398. The bill is companion to H.R. 6381, and another attack on the principle of federal premption.

The Kennedy news release and bill summary and Sen. Harkin's statement (scroll down from here) both chastise medical device manufacturers for faulty manufacturing, failing to note that the heart catheter in the Riegel lawsuit was misused by the doctor. Both also claim the Supreme Court erred in reading Congressional intent as precluding litigation in state courts. Yet creation of a federal regulatory regime as a more efficient and ultimately safer system than state-based regulation was raison d'etre of the Medical Device Amendments of 1976, right?

The American Association for Justice issued a news release, nuanced as always, quoting new AAJ President Les Weisbrod: "Right now we have a dangerous system of careless corporations, complete immunity and consumers going unprotected. This bill would fix the current system by revoking the 'get out of jail free' card that medical device manufacturers were wrongly awarded." Yep, and replace it with a big Chance Card.

From CJAC:

The Judicial Conference of the United States formally opposes a personal injury lawyer-sponsored bill designed to deny judges the discretion to protect the privacy of individuals and businesses in litigation.

U.S. District Judge Mark J. Kravitz, who spoke on behalf of the Judicial Conference, urged a House Judiciary panel to reject the deceptively-named "Sunshine in Litigation Act," (H.R. 5884), because it "would make discovery more expensive, more burdensome, and more time-consuming, and would threaten important privacy issues."

"A more thorough and powerful criticism of the national personal injury lawyers' anti-privacy campaign could hardly be imagined," John H. Sullivan, president of the Civil Justice Association of California (CJAC), said of Kravitz's testimony....

A copy of the testimony is here (PDF).

Around the web, August 4

Update: Pharma-free expert list

Readers may recall Ted's commentary in May about a much-ballyhooed list of pharmaceutical experts who were said to be free of the taint of recent financial ties to drug companies. Slate contributors Shannon Brownlee and Jeanne Lenzer, who compiled the list, have now released it, confirming Ted's suspicion that some of the purportedly independent names on it would turn out instead to have ties to plaintiff's lawyers suing drug companies. Coverage: Beck & Herrmann, Pharmalot, TortsProf.

Inflicting transparency on the famously secretive Albany spending machine? The idea sounds just plain mean. (More coverage here, here, here, etc.)

Personal injury law weekly roundups

After successful runs at Eric Turkewitz's and Perlmutter & Schuelke, the weekly compilation has now been taken over by Bill Childs and colleagues at TortsProf. The first installment here includes links on such topics as Mirapex/compulsive gambling suits, the glacial pace of a Six Flags ride accident case, and Public Citizen's counterblast to a Chamber arbitration study.

"A Baby-Free New York"

The New York Post on the Long Island College Hospital obstetric closure, and New York's wider medical liability crisis (earlier).

Jerry Brown 2006 vs. Jerry Brown 2008

We would venture to introduce the two, but they might get to bickering about global warming litigation.

CPSC bill headed to President, etc.

Good week in Congress for those who welcome an increase in lawsuits over product liability and employment discrimination...

  • The Senate last night voted 89-3 to adopt the conference report for H.R. 4040, the CPSC Reform Act. It now goes to the President. Bill signing ceremony in Beijing? Probably not.

  • The House passed H.R. 1338, the Paycheck Fairness Act, by a vote to 247-178. No Democrats voted against the legislation, which the White House would veto were the bill to pass the Senate. The Republican opponents kept noting that employment discrimination on the basis of gender is already against the law; Rep. Buck McKeon (R-CA) said, "At the end of the day this bill will invite more lawyers to file more lawsuits because it offers them a bigger payday." Advocates used this talking point: "Women are paid on average 70 percent ...."

  • The House Committee on the Judiciary, Subcommittee on Commercial and Administrative Law, held a hearing yesterday on H.R. 5884, Sunshine in Litigation Act of 2008. This is the bill that would force disclosure of confidential or proprietary information in court proceedings and settlements. Testifying were Joseph F. Anderson, Jr., U.S. District Court for the District of South Carolina; and Mark R. Kravitz, U.S. District Court for the District of Columbia. The American Association for Justice issued a news release condemning business and "court secrecy" in product liability cases.

The ruling, by a California state judge, is a major win for class action lawyers who've been seeking to extract large sums from cellphone companies over the long prevalent practice of charging fees to consumers who leave contracts early. Sprint had prevailed in an earlier round of the case decided before a jury, but the judge's ruling invoked a different theory of liability. Declan McCullagh at CNet finds the lawsuit's logic "muddled": "Someone has to pay for the cost of the handset. The customer either pays upfront or, if it's subsidized by the carrier, over time in the form of an early termination fee that--in Sprint's case--was $200."

The Wall Street Journal last weekend editorialized on the very disturbing episode (referenced in this space in May) in which California "diversity" activists applied arm-twisting to the state's private foundations, threatening them with burdensome new legislation until they agreed to come across with more funds for minority causes. John Gizzi has an extensive analysis for the Capital Research Center which is well worth checking out, especially for readers in other states where similar campaigns are likely to gear up soon.

Souter's "icky Exxon" footnote

Ever since the high court's punitive damage decision in Exxon Shipping, commentators have been abuzz about Justice Souter's footnote disclaiming reliance on a major set of studies of jury behavior on the grounds that they had been in part financially supported by Exxon, a party in the case. The studies in question -- which had drawn on the participation of top-ranked academics including Chicago's Cass Sunstein -- had been ferociously attacked in the press as tainted by the funding, even though support of similar research by interested parties hardly counts as in any way unusual; in particular, earlier rounds of widely cited research on punitive damage issues were supported by plaintiffs' lawyer interests. Indeed, litigation-relevant research is carried on (and is taken under court consideration) in a variety of other settings every day with support from litigants.

Justice Souter appears to agree with the basic thrust of the jury-predictability studies. So why did he find it necessary to hold them at a distance as if with tongs, to avoid cooties? We may never know for sure, but Ron Coleman at Likelihood of Confusion offers what seems at least plausible psychological speculation.



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.