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Trial Lawyers, Inc.: K Street -- Federal Government Relations (I)

As my last installment on Trial Lawyers, Inc.: K Street, I'm scheduled to discuss the trial bar's federal efforts to expand litigation opportunities. Because the K Street report is national in scope, these efforts are extensively covered, and federal legislation comprises two subsections of the report, roughly twice as much material as is devoted to state activities. Thus, I'm breaking my posts into two parts: first, today, I'm going to go into already-passed legislation. Then, over the weekend, I'm going to do a second post with proposed/pending legislation. Finally, I'll add a brief concluding post, with a roadmap back over where we've been.

As we note in our report, the lawyers' aggressive affirmative agenda in Washington is something of a paradigm shift. "Until recently, the main purpose of Trial Lawyers, Inc.'s involvement in federal politics was to block reform legislation that would deny it various lucrative lines of business" -- such as Bill Clinton's veto of product liability reform legislation and securities class action reform legislation in the 1990s (the latter overridden and enacted), or Senate Democrats' stifling of medical-malpractice and asbestos litigation reforms during the Bush administration.

In the last two years, Congress has acted to expand consumer litigation, expand employment litigation, expand qui tam litigation, and limit private arbitration. Many of the pieces of federal legislation will be familiar to our readers, but a brief summary is still in order:

  • Consumer litigation. The Consumer Product Safety Improvement Act of 2008 has been a major source of controversy, as anyone who's been following Walter at all on Overlawyered or in his many writings at Forbes.com on the subject (see here, here, here, and here) is well aware. For these purposes, suffice to say that in addition to its many other failings, the CPSIA is a litigation time bomb, as the K Street report explains:
    To make things easy for the lawyers, the statute authorizes an open website for reporting violations -- which attorneys will doubtless use both to identify claims and "establish" purported wrongdoing. Also waiting in the wings are suits by pioneering, politically ambitious state attorneys general, who are authorized to enforce the law alongside the [Consumer Product Safety Commission]. As reported in Crain's Chicago Business, suits arising from the CPSIA are among the "most likely" successors to the litigation industry's long-standing asbestos-lawsuit profit center.
    Why did the CPSIA take such form? Well, here's a guess: it was "[h]awked by lawyer-allied consumer groups like the Public Interest Research Group," crafted in the House "under the watchful eye of Energy and Commerce Committee Chairman Henry Waxman (D-Cal.), a longtime ally of trial lawyers," and developed in the Senate by then-Commerce Committee counsel David Strickland, who (as Point of Law readers know) was once a registered lobbyist for the Association of Trial Lawyers of America.
  • Employment litigation. Anybody who hasn't been under a rock knows something about the Lilly Ledbetter Fair Pay Act of 2009. Spurred by the Supreme Court's controversial decision to enforce the statute of limitation in a Title VII pay discrimination case (gasp!), "fixing" the Court's decision became a cause celebre for the Left -- with plaintiff Lilly Ledbetter herself ultimately speaking in a prime slot at the Democratic National Convention. For all the hullabahoo about the Ledbetter decision, one would presume it was a close case -- and it was a 5-4 decision by the Court -- but it really wasn't very close on the facts themselves. As Ledbetter's deposition testimony makes clear (see the Joint Appendix at pp. 231-233, here (PDF)), "she had learned from a superior of a pay discrepancy in 1992, some six years before taking early retirement and filing her lawsuit; and . . . she had learned the specific amount she was underpaid in 1995, three years before filing, at which time she complained that she 'needed to earn an increase in pay . . . to get in line with where [her] peers were.' "
    Nevertheless, the Ledbetter Act was the first piece of legislation signed into law by President Obama. The new law not only reversed the Court's ruling but also effectively "gutted the statute of limitations in pay-discrimination claims entirely" and "dramatically expand[ed] the class of potential litigants in such suits by changing the long-standing rule that a claimant had to be an actual victim of discrimination; the new law states that anyone 'affected by' the discrimination being alleged can sue."
  • Qui tam litigation. Whistle-blower or qui tam litigation has become a big business, as we've repeatedly noted on Point of Law. These lawsuits are designed to allow individual "whistleblowers" to police frauds against the federal government. As the K Street report explains, federal qui tam laws "permit private attorneys representing whistle-blowers to obtain damages, on the government's behalf, of three times the amount of money lost in the alleged fraud. The whistle-blower and his attorney can collect up to 30 percent of these sums. The resulting windfalls can total tens of millions of dollars." Enabled by 1986 amendments to the False Claims Act (first enacted in 1863), qui tam suits have generated over $20 billion in claim payments over the last two and a half decades.
    As Walter reported here, in May 2009, President Obama signed into law the Fraud Enforcement and Recovery Act of 2009 (FERA), which "dramatically expands the scope of bounty-hunting litigation." FERA does so in two main ways. First, the new law reverses the Supreme Court's unanimous 2008 decision, Allison Engine Co. v. United States, which required that qui tam plaintiffs show that defendants actually intended to defraud the government (see section 4 of the bill, here). Second, "[t]he new law dramatically expands the plaintiffs' bar's reach in qui tam suits by allowing lawyers to go after subcontractors to businesses that do government work, though they never worked directly for the government themselves or intended to commit fraud." FERA was sponsored by Senate Judiciary Committee chairman Pat Leahy (D-Vt.), a long-time trial-bar ally.
  • Private arbitration. Finally, we come to the Franken amendment. Perhaps no piece of legislation has been more carelessly demagogued in the last year. Reacting to my assertion in The Wall Street Journal that "[t]he first legislative triumph for new Sen. Al Franken (D., Minn.), an amendment to the defense appropriations bill, foreclosed employment arbitration clauses for federal contractors," Center for Justice and Democracy executive director Joanne Doroshow had this to say on Wednesday: "Al Franken's amendment to the defense appropriation bill[] ensured that women who serve as military contractors and get brutally drugged and raped by their co-workers ought to be able to seek legal recourse in court." While that's technically true, it's also technically true that a bill calling for the execution of anyone who had worn Bruno Magli shoes would likely have ensured justice for Ron Goldman and Nicole Brown Simpson -- but that doesn't mean that the death penalty for one's choice of footwear is a good idea. It's easy to caricature virtually any piece of legislation in such a way that the legislation would help some sympathetic victim -- but that generally isn't very helpful in assessing the merits of such legislation, unless it's very narrowly tailored indeed.
    But such logic didn't stop the trial bar, its allies like Doroshow, and lots of gullible or dishonest media from exploiting the sad case of Jamie Leigh Jones in just such a fashion. (Regular readers of Overlawyered doubtless followed Ted Frank's extensive coverage of Ms. Jones's case and how it was being demagogued by the trial bar.)
    Ms. Jones's case is only of marginal value in understanding Franken's legislation, but here's a brief summary of the underlying facts of her case: By her own request, Ms. Jones, an employee of the engineering firm Kellogg Brown & Root (KBR), was transferred to Iraq in July 2005. Her stay in Iraq would be tragically cut short: Ms. Jones alleges that three days after beginning her new assignment in Iraq, she was drugged and raped in the co-ed barracks where she was housed. She filed for arbitration against her employer under her employment contract in February 2006, proceeded with arbitrator selection and discovery, then in May 2007 filed a separate claim -- with overlapping allegations and parties -- in federal court. KBR moved to consolidate the new suit under the pending arbitration proceedings, a move they ultimately lost when the Fifth Circuit determined, in September of last year, that the arbitration provision of Jones's contract was not enforceable because the core of her allegations were not "related to" her employment and "arising in" the workplace.
    In the interim, Ms. Jones's case, like Ms. Ledbetter's, had become a cause celebre of the Democratic Left -- being used as an exhibit for the perceived overall unfairness of arbitration clauses in employment contracts. Ms. Jones testifed before Congress in December 2007. And shortly after the Fifth Circuit gave her case a green light last fall, new Senator Al Franken (D-Minn.) took to the Senate floor and offered an amendment to the defense appropriations bill that would, he said, ensure that victims like Ms. Jones would never again have to wait three years for justice due to an unreasonable arbitration clause in an employment agreement. Franken insisted that his proposed legislation "narrowly target[ed] the most egregious violations."
    Except it didn't. As the K Street report explains, "Franken's legislation makes any arbitration clause in the employment contracts of any defense contractor inapplicable to 'any claim under Title VII of the Civil Rights Act of 1964' or 'any tort related to or arising out of' an 'intentional infliction of emotional distress' or 'negligent hiring, supervision, or retention.' " Such a sweeping prohibition against employment arbitration for defense contractors understandably concerned the 30 senators who voted against the Franken amendment; prohibiting arbitration clauses broadly for defense contractors can be expected to raise the cost of defense contracting (hitting our tax bills) and, at least arguably, to hurt many employees, with grievances far short of rape, who might be better off in arbitration than in court.
    But those senators were nevertheless trashed by the popular media, which bought into the silly argument that to oppose the Franken amendment was to support rape: "The Daily Show's Jon Stewart exclaimed, on the air, 'I understand we're a divided country, some disagreements on health care. How is anyone against this?' A video posted on the website of MSNBC's Rachel Maddow went viral, the Democratic Senatorial Campaign Committee went on the attack, and the Republican senators were mocked on a spoof Internet site, www.republicansforrape.org." Such is the level of discourse promulgated by the public-relations arm of Trial Lawyers, Inc.

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.