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June 2010 Archives

State of Louisiana loses Vioxx case

Russell Jackson has details; Louisiana essentially brought a lawsuit with vague allegations of wrongdoing but no evidence that their was any causal relationship to any economic harm the state allegedly suffered. The federal court decision involved the sort of parens patriae lawsuit that the SPILL Act is trying to send back to state court.

"The End of Objector Blackmail?"

Professor Brian Fitzpatrick has an interesting piece in the Vanderbilt Law Review on the holdout problem in class action objections, and efforts by plaintiffs' attorneys to get around it:

Tom Goldstein and Stephen Bainbridge have some thoughts about this morning's upcoming announcement of the decision of the critical case on Sarbanes-Oxley's constitutionality.


Glenn Reynolds reports that Journolist, Ezra Klein's now-defunct private mailing list for DC liberal writers, was used to "link up the older, more established set with the younger up-and-comers, all to better staff newspapers, magazines, and institutions with liberals." Reynolds and a blogger pose the question whether this violated employment discrimination laws. While it's certainly an example of media bias, I'd be hesitant to suggest that networking events present employment discrimination problems. There isn't any evidence that Journolist excluded women or minorities, and no legitimate legal requirement for the list to have quotas before acting as a job-matching tool.

My take on L'Affair Weigel: the Washington Post sold Weigel to its readership as an example of its outreach to conservatives to make up for the fact that they had several blog-reporters who didn't hide their cheerleading for liberal causes. Someone gave the Post the faulty idea that Weigel was the conservative analogue of Ezra Klein. If it was Weigel himself, he took the job under false pretenses, and the blowup was bound to happen sooner or later; if it was the Post's screwup because they didn't communicate to Weigel that that was why they were hiring him, then they should have resolved the problem by giving him a different beat. See also good analysis from David Frum.

Maureen Dowd gets it wrong on cellphone warnings. Even aside from the foolishness of having municipalities regulate interstate commerce labeling requirements (what happens when Chicago decides that cell-phone warning labels should be in a different font than San Francisco does?), the San Francisco legislation is, as I noted in a January AOLNews piece, counterproductive to consumer safety and not, as Mayor Newsom would have it, "relatively benign."

The Kagan nomination, June 27

  • The Kagan hearings start tomorrow. George Will has some questions. [WaPo] So does the LA Times.
  • The military-at-Harvard issue will be big. [CSMonitor; NPR]
  • The last cases of the Supreme Court term will have some effect on the hearings. [FoxNews]
  • Dueling headlines: White House says it will get, but is pessimistic about, GOP votes. [Politico; BLT] A more interesting question is the vote of a swing-state Democrats like Blanche Lincoln.
  • Richard Epstein argues that the rebuttable presumption in favor of a presidential nomination means he supports Kagan. Wouldn't it be nice if Democrats reciprocated and a Republican president could nominate Epstein to the court? Sigh. [Daily Beast]
  • The Judge Aharon Barak issue goes mainstream. Sort of. [Politico; NYT whitewash]

Around the web, June 26

  • D. Mass. certifies medical monitoring class action against Philip Morris. [Boston Globe; Boston Globe]
  • How much of that $20B BP fund will go to lawyers? [Schonbrun @ Wash. Times; see also WSJ, NYDN]
  • Souter still espousing a living constitution. [Baker @ Wash. Times]
  • The financial regulation reform bill will cost 1.3 million jobs. [American Action Forum]
  • Overcriminalization annals: the case of Cory King. [WLF]
  • Is the US going to sue Arizona? [Commentary]
  • EPA proposes to regulate milk spills as strictly as oil spills. [Tabarrok]
  • Budweiser tries to enforce its exclusive World Cup sponsorship rights by having South African police arrest Dutch fans who wore a beer-sponsored miniskirt. [NowPublic; charges dropped, Yahoo Sports]

The House voted 216-209 Thursday to pass H.R. 5175, the DISCLOSE Act, unusual even by Capitol Hill standards in its cynical partisanship, crass exemptions for favored groups (labor unions and the NRA), and contempt for the First Amendment. It was a disheartening and aggravating debate to watch, but not too long. As Rep. Dan Lungren (R-CA) pointed out, the House has spent 10 hours debating the names of U.S. post offices, but the debate on H.R. 5175 itself was limited to a single hour. (It starts on page H4795 in The Congressional Record.)


The Rule of Pelican

Washington Post editorial eminence Ruth Marcus is aghast at U.S. District Court Martin Feldman blocking the Administration's six-month moratorium on deepwater drilling as arbitrary and capricious. She writes in a brief "PostPartisan" entry today, "Judicial activism in the deepwater drilling decision":

As the Supreme Court has explained, and Feldman quoted in his ruling, "an agency rule would be arbitrary and capricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise."

So, you might ask, in the context of the Gulf disaster and the moratorium: Has Judge Feldman seen pictures of those pelicans?

Feldman on Thursday refused the Administration's request to temporarily lift his stay.

Left-wing activists have been denouncing and even calling for the impeachment of Feldman, claiming he should have recused himself. Louisiana broadcaster and political commentator Jeff Crouere rebuts the claims, which are based on outdated information about Feldman's holdings. In "Judge Faces Death Threats After BP Gulf Oil Drilling Moratorium Ruling," Crouere reports that Feldman is being accompanied by a federal marshal security team after receiving threats.

Around the web, June 25

  • Ninth Circuit has 0-for-3 day in Supreme Court. [Fisher @ Forbes]
  • New IJ First Amendment blog.
  • "Is It Too Much to Ask That a Lawsuit Be 'Plausible'?" [Samp @ WLF]
  • NAM and Norquist oppose H.R. 4213. [Wood; me in 2009 on same subject]
  • Ninth Circuit stays district court order imposing punitive appellate bond on class action objection. [Recorder]
  • The beach house bailout. [Weekly Standard]
  • Queens prosecutors use hate crime law as means to punish mortgage fraud. [NYT]
  • Anti-prison rape organization. [Just Detention] The de facto elimination of the right to sue over prison rape is perhaps one place where tort reform has gone too far.

US v. Skilling

The Supreme Court unanimously agrees "honest services" law unconstitutionally vague, and votes 6-3 to limit it. [Skilling v. United States; NYT; WSJ; SCOTUSblog; Ribstein; Bainbridge; Fisher @ Forbes; Sandefur; Kirkendall; Hurt]

The Business Roundtable, President Obama's closest ally in the business community, has gotten around to realizing that the Obama administration is not a friend of the private sector. This week, it issued a 54-page report to outgoing OMB director Peter Orszag that details the Obama administration's job- and investment-killing initiatives. Page 33 deals with the administration's woeful record on tort reform:

A major area of concern is the lack of meaningful discussion about tort reform. Pending legislation will affect many different industries, significantly add to costs, reduce personal incomes and increase regulations. Yet, in no case has the government included tort reform in the mix. This inaction will worsen a challenging environment for businesses as they try to comply with a large body of new law under the overhanging threat of litigation.

Key areas of concern include (in descending order of importance):

* Medical Liability Reform: The new health care law failed to adequately address medical liability reform. Comprehensive reform must include ensuring appropriate remedies for negligence while limiting damages where there is no negligence; developing alternative mechanisms to resolve claims to so that those harmed by negligence can obtain appropriate relief; and encouraging providers to follow quality standards by supporting the adoption of medical practice guidelines by professional associations, that if followed by a physician, would serve as a complete defense to a malpractice action.

* HR 4115 ("Open Access to Courts Act"): This legislation would resurrect meritless complaints federal district courts could otherwise dismiss under U.S. Supreme Court standards expressed in the Twombly and Iqbal decisions. Those decisions allow the courts to dismiss complaints that allege no support for conclusory allegations and whose allegations are not credible. This bill, by prohibiting courts from dismissing a suit unless a defendant can prove beyond a reasonable doubt that there is no set of facts that would ever entitle the plaintiff to relief, will extend the life of meritless suits and will cost corporations (and therefore consumers) millions of dollars in litigation and discovery costs, diverting resources which could be productively used for investment, job creation and retention and economic growth. This bill should be rejected.

The Center for Class Action Fairness filed its reply brief in the Bluetooth case yesterday.

Kagan on tort reform

We've previously written about Kagan's role in the Clinton administration opposing product liability reform, an act that helped bankrupt two of the Big Three auto companies a decade later. Now we learn from the New York Times that Kagan all but single-handedly persuaded Clinton to veto the Private Securities Litigation Reform Act, which suggests that she'll care more about the effect on trial lawyers than on regular Americans when it comes to pleading standards cases. Furthermore, Kagan's clerkship memos to Justice Marshall suggest she was on the wrong side of DeShaney, putting her to the left of Stevens (well, the 1989 version of Stevens, anyway) on this issue. By the end of his tenure, Stevens was reflexively voting in favor of expanding the role of courts in society and against anything that might put reasonable limits on liability—he was the sole dissent in Twombly and Tellabs, for example. So while Kagan isn't likely to pull the Supreme Court that much further to the left, there is no reason to think she is a moderate on civil justice issues.

The House Judiciary Committee today passed out of committee H.R. 5503, the Securing Protections for the Injured from Limitations on Liability Act, or SPILL Act. The vote was 16-11. Chairman John Conyers issued a news releasing the committee approval of the bill he sponsored, "Judiciary Panel Passes SPILL Act to Bring Liability Laws to the 21st Century, asserting that the legislation "updates" the "out of date and unfair laws," the Death on High Seas Act (1920), Jones Act (1920), and the Limitation on Liability Act (1851). According to Conyers, the bill:

  • It amends the Death on the High Seas Act and Jones Act to permit non-pecuniary damages.
  • It repeals the outdated Limitation on Liability Act.
  • It amends the Class Action Fairness Act to allow attorneys general to bring remedial actions in their own state courts.
  • It limits the ability of parties responsible for oil and similar spills to prevent their employees from speaking to the media.
  • It prevents parties responsible for oil spills from using the bankruptcy courts as a subterfuge to leave victims without adequate legal recourse.
  • It provides that these changes will apply to pending and future cases, consistent with previous liability law changes enacted by Congress.

Note the third bullet: The bill represents the first significant effort we can recall to undermine the Class Action Fairness Act of 2005 (or CAFA). The U.S. Chamber of Commerce joined by other business and legal reform groups sent a letter to the committee registering strong opposition to the provision.

This Court is persuaded that the public interest weighs in favor of granting a preliminary injunction. While a suspension of activities directed after a rational interpretation of the evidence could outweigh the impact on the plaintiffs and the public, here, the Court has found the plaintiffs would likely succeed in showing that the agency's decision was arbitrary and capricious. An invalid agency decision to suspend drilling of wells in depths of over 500 feet simply cannot justify the immeasurable effect on the plaintiffs, the local economy, the Gulf region, and the critical present-day aspect of the availability of domestic energy in this country. Accordingly, the plaintiffs' motion for preliminary injunction is GRANTED.

See Hornbeck Offshore Svcs., LLC v. Salazar, No. 10-1663 (E.D. La.) (Feldman, J.); NYT; Olson link roundup. The government will appeal, as well as try to get its ducks in a row on the administrative side.

Bill McClellan of the St. Louis Post-Dispatch writes about the Bachman v. A.G. Edwards case and settlement:

The case against Jones was murky. The payments from the mutual fund companies were not illegal. In fact, news accounts at the time said they were common, and were called revenue sharing. But the feds decided that Jones had not disclosed to its customers that brokers were getting extra money for steering clients into certain funds.

The feds did not make that allegation against A.G. Edwards, but the class-action lawyers figured that if this so-called revenue sharing was common, A.G. Edwards must be doing it, and so the lawyers went ahead and filed their lawsuit in April 2005 contending that Edwards was guilty of whatever it was that Jones had done.

As is typical in these cases, the defendant company denied all wrongdoing but eventually decided it was cheaper to pay off the lawyers than to wage a long legal battle. So A.G. Edwards rolled over, and the class-action lawyers negotiated a settlement in which their "clients" would get coupons while they themselves would get cash -- and bundles of it.

Update: Dan Fisher of Forbes comments here.

Big day Wednesday at the House Judiciary Committee, which has a business meeting scheduled for 10:15 a.m. to mark up:

H.R. 5503, the Securing Protections for the Injured from Limitations on Liability Act
Motion to authorize issuance of subpoenas to BP America for documents regarding its claims process relating to the Gulf oil spill
H.Res. 1455, Directing the Attorney General to transmit to the House of Representatives copies of certain communications relating to certain recommendations regarding administration appointments
H.R. 5281 the "Removal Clarification Act of 2010"; and
H.R.____, the "Prohibiting Interstate Commerce in Crush Videos Act of 2010"
H.R. 1020
, the "Arbitration Fairness Act of 2009"; and
H.R. 1237, the "Fairness in Nursing Home Arbitration Act of 2009"

Rep. John Conyers (D-MI) outlined the far-reaching H.R. 5503 in a news release when it was introduced on June 10, "Conyers and Melancon Introduce SPILL Act."

H.Res. 1455 is a privileged resolution demanding documents related to the White House offers of Administration jobs to Democrats to keep them out of Senate races in Pennsylvania and Utah Colorado. (Statement by Rep. Lamar Smith of Texas, the Republican sponsor.)

Consideration of the two anti-arbitration bills follows the Supreme Court's decision Monday in Rent-a-Center v. Jackson that reinforced the enforceability of arbitration clauses. (Opinion, Scotusblog entry.) The American Association for Justice, which has campaigned against arbitration, issued a statement from AAJ President Anthony Tarricone after the court's ruling Monday, "AAJ Response to Jackson v. Rent-a-Center SCOTUS Decision.

As for crush videos, the Supreme Court in April struck down the law banning the sale of videos depicting animal cruelty. (Washington Post story.) We'll see how the drafters attempt to negotiate the court's ruling. Judging by one bill, H.R. 5092, it looks like they may just ignore the First Amendment and pass a law anyway .

Schwartz on BP $20 billion fund

Victor Schwartz in the Washington Times correctly notes that the devil is in the details for the $20 billion BP fund. I can easily envision billions of dollars of the fund being siphoned to attorneys, rather than to victims, if it is not administered properly.

Bachman v. A.G. Edwards update

You may recall the $60 million settlement that wasn't to which CCAF objected. Judge Angela T. Quigless approved the settlement and approved the $21.6 million award of attorneys' fees and costs without addressing any of the objections.

And if you ever hear a class action attorney tell you that what they really care about is "access to justice," you have my permission to laugh sardonically. The Bachman attorneys (including Milberg LLP) have asked the court to require any objector-appellants (each of whom have about $20 at stake) to post a $325,000 appeal bond—despite the fact that Missouri law does not permit such a thing. CCAF filed an opposition to the request (citing Professor Fitzpatrick's recent article disapproving of excessive appeal bonds), and I was in St. Louis yesterday to argue at the hearing. We will see whether CCAF gets to appeal the judgment or has to appeal an illegal appeal bond order.

(CCAF is not affiliated with the Manhattan Institute.)

Rubin on Katrina and Deepwater

Emory professor Paul Rubin, a friend who's done a good bit of work on the litigation-reform front, extends Ted's Jones Act analysis in a broader discussion comparing the federal government's reactions to Deepwater Horizon and Hurricane Katrina, in today's Wall Street Journal.

Think Globally, Sue Locally

Yesterday morning, at a conference co-sponsored by the Manhattan Institute, the Institute for Legal Reform at the U.S. Chamber of Commerce released a new paper entitled "Think Globally, Sue Locally: Out-of-Court Tactics Employed by Plaintiffs, Their Lawyers, and Their Advocates in Transnational Tort Cases" (PDF). In cases involving the 1789 Alien Tort Statute as well as other litigation -- including U.S. litigation to enforce dubious, fraudulently obtained foreign verdicts -- plaintiffs' lawyers are increasingly trying to use American courts to recover for alleged conduct that happened overseas. As the report documents, such litigation is typically accompanied by out-of-court media, community organizing, investor-relations, and political tactics.

The study author, Jonathan Drimmer, wrote this piece in The Wall Street Journal discussing his findings.

Michele Kerr on teacher testing

Michele Kerr, who was almost mau-maued out of Stanford's graduate program in teaching because her blog disagreed with "progressive" views held by Stanford administrators, has an excellent op-ed in today's Washington Post about the need for good metrics in teacher performance assessment:

Teachers can't be evaluated on students who miss 10 percent of the class or don't have the prerequisite knowledge for success. Yet accepting these reasonable conditions might reveal that common rhetorical goals for education (everyone goes to college, algebra for eighth-graders) are, to put it bluntly, impossible. So we'll either continue the status quo at a stalemate or the states will make the tests so easy that the standards are meaningless.

Yes, some students are doing poorly because their teachers are terrible. Other students are doing poorly because they simply don't care, their parents don't care, their cognitive abilities aren't up to the task or some vicious combination of factors we haven't figured out -- with no regard to teacher quality. No one is eager to discover the size of that second group, so serious testing with teeth will go nowhere.

Problems in Afghanistan

For the record: in Hurricane Katrina, the Bush administration was able to get Jones Act restrictions that interfered with help from international ships waived on Day 3; for Deepwater Horizon, where international help is much more critical due to shortages of domestic shipping able to engage in oil-skimming, it's 60 days in, and the Obama administration still hasn't waived the Jones Act. Keith Hennessey, who was involved in the Bush White House process, explains; see also WSJ, Olson, Bader.

Given that the only purpose of the Jones Act is 1920-era protectionism of special interests against foreign competition at the expense of the American consumer, and given that this could be done with the stroke of a pen, this should be a much bigger scandal. But it appears that the Obama administration is stonewalling on the issue by falsely claiming that a Jones Act waiver would not make any difference; after all, if they do waive the Jones Act, and the public sees how much additional help European allies could have been providing all along, the comparison with the Bush administration will become even more unfavorable.

Around the web, June 19

  • "Personal Responsibility at the Founding" [City Journal]
  • Expose of Mohawk-style RICO class actions against employers for hiring illegal immigrants, and the potential adverse effect on jobs for American citizens. [Forbes]
  • Upcoming discussions in DC on role of Supreme Court: June 22, Rachel Brand v. Walter Dellinger; June 23, Jeremy Rabkin and Carrie Severino on role of international law in Supreme Court decisionmaking.
  • Obama coverup in New Black Panther Party case. For all the complaints about Bush administration politicization of the Civil Rights Division, one might expect some MSM attention to this. [Weekly Standard]
  • Ken Green on the BP $20 billion slush fund. [Forbes.com]
  • Schadenfreude dept.: John Edwards in exile. [Daily Beast]

The American Association for Justice's summer convention this year is in Vancouver, B.C., in mid-July. Naturally, there are more Canadian-oriented sessions than usual, and we find the agenda an interesting glimpse of legal perspectives and priorities north of the border. Ziplines!

The Ontario Trial Lawyers Association has posted the agenda for the sessions sponsored by the the AAJ's Canadian Caucus on Sunday, July 11, "Torts Canadian Style: Preparation, Persuasion & Preparation." The first two sessions:


In this session, our panelists will discuss negligence claims arising from a variety of outdoor activities. Discussions will include typical scenarios, waivers, strategy and practical considerations of pursuing each type of claim. The session is intended to give a quick highlight of litigating in each potential claim area.

  • Zipline Injuries - Pamela Boles (BC)
  • Snow Boarding/Ski Hill Injuries - Judith A. Hull (ON)
  • ATVs & Motor Bike Injuries - TBA
  • Pool Injuries - Jim Scarfone (ON)
  • Small Boating Craft Injuries - Roger Watts (BC)
  • Horseback Riding Injuries - Catherine Willson (ON)


In 1978, the Supreme Court of Canada decided a "trilogy" of personal injury cases that imposed a judicial cap on non-pecuniary damages of $100,000 (currently approximately $300,000 revised for inflation). Two leading Canadian lawyers will discuss strategies for litigating under the Canadian cap, and for expanding claims for pain and suffering to the fullest extent possible. Commentary from the bench will follow these presentations.

  • Barbara Legate (ON)
  • Joseph Murphy (BC)

  • The Hon. Justice Nate Smith (BC)

    On CNBC this afternoon

    I'm taping an interview about the $20B BP fund that will be sound-bited some time during CNBC's "Street Signs" at 2pm Eastern today.

    Update: Or not. I seem to have been bumped.

    I won't say that very often, but, let the ABA Journal explain:

    Haas & Gottlieb had an agreement with its client, David Addison, that one-third of any money recovered in a bankruptcy litigation would go to the law firm.

    But the Scarsdale, N.Y., firm didn't have that same arrangement with his ex-wife, who was entitled to half of Addison's recovery under an equitable distribution agreement. Hence, Haas & Gottlieb wasn't entitled to the one-third it sought from Addison's ex, Ieda Fuller, of her share of an approximately $145,000 award in the bankruptcy case, a New York Supreme Court judge has ruled.

    The court seems to have disregarded the equitable issues involved, notwithstanding the doctrine of the common fund, or the inefficiencies if Haas gets its full fee from Addison and Addison has to then collect half from Fuller.

    From Reuters, "(Reuters) - Senators on Wednesday beat back a House measure giving shareholders the power to sue third parties such as banks and accountants not directly involved in securities fraud."

    Sen. Chris Dodd (D-CT) instead won support for a GAO study of securities fraud and the effects of the Stoneridge v. Scientific Atlanta ruling. See also Dow-Jones, earlier POL post.

    In a recent piece in the Harvard Journal of Law & Public Policy, I predicted the "lonely death" of public campaign financing. The point was that public financing schemes that provided what are often called "rescue funds," i.e., additional public money for candidates who face an opponent (or independent opposition) that has spent more than some triggering amount. So, for example, if I am a publicly financed candidate who is running against an internet billionaire or a well financed independent campaign against me (undoubtedly by some group that is for "the children"), I can get additional public money to match the expenditures against me.

    My argument was that these asymetrical financing systems are probably uconstitutional and that, as a result, any public financing system will be dwarfed by self financed candidates, independent expenditures or, increasingly, opposition campaigns whose use of the internet and bundling is likely to dwarf any politically feasible amount of public financing.

    The argument was based, in significant part, on the Supreme Court's decision in Davis v. FECin which the Court struck down the McCain-Feingold's Millionaire Amendment - a provision that, among other things, raised the campaign contribution limits for those facing self-financed candidates who exceed a certain expenditure amount. The majority saw this as an impermissable burden on the speech rights of the self financing candidate.

    Some argue that providing additional funding is different than raising contribution limits. I don't think so and explain why in the Harvard JL & PP piece.

    We may soon find out. In McComish v. Bennett, the Ninth Circuit reversed a district court decision invalidating the rescue funds provisions (referred to as trigger funds) of Arizona's Clean Elections Act.

    But the Supreme Court has stayedthe mandate of the Ninth Circuit (leaving the district court's injunction against the disbursement of the trigger funds in place) pending resolution of any petition for certiorari.

    I see a reversal of the Ninth Circuit. Given the Court's willingness, in the zero sum game of an election, to see a benefit to one's opponent that is triggered by constitutionally protected speech as a burden on that speech and its rejection (in both Davis and Citizens United) of the idea that burdens on speech can be justified by a desire to level the playing field, I continue to believe that rescue fund schemes are extremely vulnerable to constitutional challenge.

    Cross Posted at Marquette University Law School Faculty Blog.

    Fallout from the ludicrous $356 million Teva Pharmaceuticals verdict (and earlier): Teva is announcing that it "will stop production of its sedative propofol, which many worry will intensify an already existing shortage of one of the most widely used anesthetics in the United States." [Simons via Overlawyered] Propofol is also one of the safest anesthetics, so consumer safety is hurt as well. It's a shame when trial lawyers put profits ahead of people.

    (It's possible that problems at a manufacturing plant also contributed to, or even are the sole cause, of the decision: Teva has only cited "business reasons." However, propofol is a generic drug with low margins sold for a low price, so outsized jury verdicts threatening to extract the entirety of a company's profits over one low-margin drug in its portfolio surely can't be a positive factor.)

    Congress passed laws restricting checking overdraft fees, a genius marketing tool that effectively had banks' irresponsible customers subsidizing their responsible customers, and permitted banks to offer free checking to the latter. Now banks are finding free checking accounts unprofitable, and will have to return to monthly fees—which will drive many poor people away from the banking system and to the far more expensive check-cashing services, leaving them unambiguously worse off. Even those who get to keep high-minimum free checking accounts will be effectively paying the hidden opportunity cost of lower interest rates. Thanks, Elizabeth Warren and her ilk! [WSJ]

    Remember, kids: paternalistic elimination of consumer choice always leaves consumers worse off. There's a reason market equilibria develop around checking overdraft fees.

    The House-Senate conference committee has been meeting on H.R. 4173, the financial reform bill, and among the points of negotiation is whether the bill should expand the grounds for private civil actions for aiding and abetting in securities fraud -- i.e., overturning the U.S. Supreme Court decision in Stoneridge Investment Partners v. Scientific Atlanta.

    Rep. Maxine Waters (D-CA) is offering the amendment on the behalf of the House conferees, even thought the version of the bill that passed the House didn't have the Stoneridge language in it. And neither did the Senate! When the Senate was debating the bill, Sen. Arlen Specter (D-PA) urged the cosponsors to come to floor to support him in his amendment, but no one did. (Specter had sponsored a stand-alone bill, S. 1551, to reverse Stoneridge, as well.)

    It's shoddy lawmaking to try to add extraneous amendments via a conference committee without the provision having passed one of the two chambers first. It happens, but it's arrogant and invites disregard for Congress.

    My employers, the National Association of Manufacturers, strongly supports the U.S. Supreme Court's 2008 Stoneridge decision, which protects manufacturers from unfairly being held liable in securities litigation solely because they might have deeper pockets than the company that engaged in securities fraud.

    Around the web, June 16

    • Arlington, Virginia, taxpayers have paid a law firm $744,000 to allege that a proposed set of high-occupancy-toll lanes on I-395 is racially discriminatory—and that understates the taxpayer waste, since the defendant is the state of Virginia and the federal government, who are paying their own lawyers. [Sun Gazette (h/t M.B.)]
    • Obama administration "running roughshod" over rule of law with respect to BP. [WSJ]
    • Similar problems accrue from Obama administration actions in Chrysler bankruptcy. [Roe/Skeel @SSRN via Bainbridge via @walterolson]
    • Can courts impose liability on a non-policymaking attorney? Miguel Estrada argues no on behalf of John Yoo before the Ninth Circuit on appeal from a bad district court decision refusing to throw out the Padilla case. [SF Chronicle; Yoo @ WSJ]
    • NY state looking to raise caps on attorneys' fees in medical-malpractice litigation. [NY Post]
    • Louisiana Senate passes bill to permit state AG to hire contingency-fee attorneys. Still needs to get past House and Gov. Jindal. [Legal Newsline]
    • Be careful when going on vacation if you live in Seattle; police there refuse to evict trespassing squatters. [Seattle Times]
    • Trial lawyer asserts that there is nothing on Point of Law addressing how to compensate mesothelioma victims (but see), misrepresents law-and-economics view on status quo, then has the chutzpah to suggest it is tort reformers who suffer from "epistemic closure." [Crede]

    The Dewey v. Volkswagen settlement where attorneys are asking for over $23 million for recovering an $8 million reimbursement fund for a small subset of the class (but attributing tens of millions of dollars to a valuation of injunctive relief where VW and Audi send a letter to class members) has gotten a lot of reaction around the Internet. (E.g., Major, Olson (and commenters), Pero, CJAC, Passat World.)

    Today, the Center for Class Action Fairness filed an objection on behalf of four class members, including one who gets nothing despite water leakage into the passenger compartment that required over $1000 of repairs. The fairness hearing is July 26. Oddly (but all too typically), objections are due before the parties make their filings and present their evidence for the fairness of the settlement, so we'll need to make a supplemental filing July 12 to address the expert report's valuation of the injunctive relief.

    The case is Dewey v. Volkswagen AG, No. 07-CV-2249 (D.N.J.). (CCAF is not affiliated with the Manhattan Institute.)

    "Disclosed to Death"

    Kai Falkenberg has written an excellent piece in Forbes about the problems of over-disclosure and over-warning, drawing on the research of Omri Ben-Shahar and Carl Schneider.

    Last Friday, the Department Health and Human Services announced $25 million in grant awards under its The HHS Patient Safety and Medical Liability Initiative, the Administration's attempt to neutralize the tort reform element in the campaign debates over health care. Whether it was the timing or the underwhelming nature of the announcement -- grants! to universities! -- the major news media barely noticed. California Health Line has a good summary of the thin coverage, some written in anticipation of the reports. (Earlier POL post.)

    In a post at the White House blog, OMB health care advisor Dr. Ezekiel Emanuel took note of the support of the American Medical Association:

    The grants were praised by J. James Rohack, M.D., the President of the American Medical Association who said "The AMA is pleased that federal medical liability reform demonstration projects are quickly moving forward, with $25 million in grants to state programs announced today."

    Such effusive praise. The entire statement from Dr. Rohack is at the AMA website, "AMA-Supported Federal Medical Liability Grants Move Forward," and its most interesting point is the lack of any reference to damage caps, long an AMA priority.

    The Senate Judiciary Committee is scheduled to vote Thursday, June 17, on the nomination of Rhode Island trial lawyer and lead-paint litigator John "Jack" McConnell to be a U.S. District Court Judge. McConnell is the Motley Rice partner and campaign contributor who orchestrated the state's public nuisance lawsuit against paint manufacturers. The committee vote was postponed from last week. (Earlier POL posts.)

    In sort-of-related news, "American Association for Justice Honors Trial Lawyer Ron Motley with Lifetime Achievement Award." Motley will receive the honor at the AAJ's summer convention next month in Vancouver, B.C.

    MI's Marie Gryphon discusses BP in a Cato podcast.

    Dr. Ezekiel Emanuel, a health care advisor in the Office of Management and Budget, used the White House blog to provide the Administration's rationale for the $25 million in grants awarded for patient safety and medical liability projects. (Earlier POL post.) Emanuel writes, "An Important Step on Medical Malpractice Reform":

    The 20 grants awarded today by the Agency for Healthcare Research and Quality (AHRQ) are an important step in the right direction. They will fund programs that aim to reduce avoidable injuries. For instance, one program in Massachusetts aims to reduce errors in primary care physician offices, particularly concerning medications and referrals. Another in Minnesota targets patient safety around childbirth by instituting best practices at 16 hospitals statewide and determining if there is a correlation between fewer complications in childbirth and malpractice suits targeted at obstetricians. A third, in Oregon, will develop and work to implement a "safe harbor" system in which physicians who prove they adhered to evidence based guidelines are protected from frivolous lawsuits.

    Many of these grants will rigorously test so-called "disclosure and early offer" interventions, which was the keystone of a 2005 medical malpractice bill proposed by then-Senators Obama and Clinton. These interventions inform injured patients and families promptly and make efforts to provide prompt and fair compensation.

    Philip K. Howard, head of the legal reform group Common Good, issued a statement following Secretary Kathleen Sebelius announcement of the grant awards. Howard said:

    While some of these projects might improve the process when patients are injured by medical error, none of them protects doctors from lawsuits where there were no errors. This unreliability drives defensive medicine. The Department of Health and Human Services is avoiding the reality that a new reliable system of medical justice is needed to end defensive medicine, a practice which contributes to the unsustainable growth in health care costs. The trial lawyers, a major contributor to Congressional campaign coffers, are the only beneficiary of the current system, and Washington appears unwilling to take them on, especially in an election year. We'll see in the fall elections if voters are still happy to have special interests put ahead of the public interest.

    We tend to think the primary reason for the grants is a political one. During the general election campaign, if a challenger charges, "Congress and the Administration just ignored tort reform in the health care debate," the incumbent can say, "That's not true. The Administration right now is examining what works and what doesn't..."

    Background ...

    UPDATE (12:55 p.m.): We should note that Common Good advocates creation of "health courts" to handle medical liability cases. Other groups like the American Tort Reform Association hold up caps on non-economic damages as more a direct reform, already proven successful in Texas and other states.

    We are accused of "intellectual dishonesty and callousness" for summarizing a case where a Sacramento jury awarded $28 million in punitive damages for a fatal bedsore with the sentence "$28 million in punitive damages for bedsore in Sacramento."

    Not sure where the dishonesty was there, especially given the availability of more information in the links: as those links noted, 79-year-old Francis Tanner fell and fractured her hip in a nursing home; she then died from a bedsore—the same ailment that killed Christopher Reeve, who had the best round-the-clock medical care money could buy, as well as numerous other invalids. A jury found the nursing home liable, even though the deadly pressure sore occurred in a different facility. We weren't hiding anything. If anything, the case was far more egregious than we hinted at.

    The "compensatory" damages for the wrongful death were $1.1 million, which is a figure that clearly already includes a punitive element, and is certainly more than deterrence enough for nursing homes to take reasonable measures to attempt to protect their inhabitants from gravity and from side effects from immobility. Punitive damages were then assessed at an illegal 25.5:1 ratio over the already-inflated compensatory damages figure. The punitive damages were also biased because the jury heard evidence of the defendant's balance sheets, which means that the company was being punished for its size, rather than for its conduct. That's hardly just.

    Though this runaway jury verdict is likely to be reined in by the trial or appellate courts, the nursing home community is still on the hook for disproportionate millions of dollars. (And given that the jury was so obviously prejudiced when it came to the damages question that remittitur is all but mandatory, I see no reason to think that they were reasoned when resolving the liability question, though I recognize that courts mysteriously assume otherwise.)

    By 1998, one out of every four Medicaid dollars in Florida spent on nursing homes was going to pay for tort litigation, in large part because of regular multi-million dollar awards for common events like bedsores. Tort reform in Florida prevented nursing homes being driven out of business; the reform was supported by even the AARP, which recognized that jackpot damages were hurting the elderly in the long run—and that trial lawyers were being far more "callous" about the problems of the elderly because they were putting trial-lawyer profits ahead of people than any proponent of reform was.

    I can be accused of assuming too much knowledge in my readers; just because I immediately remembered a 2005 POL column discussing the issue or years of Overlawyered posts on the subject doesn't mean someone coming to a new post in 2010 recognizes the shorthand for the problem. So I'm guilty of failing to repeat myself to unpack the issue of bedsore liability, an inherent problem in any roundup post, given that any given bullet point could be expanded to hundreds of words—similar quibbles can be made with the Turkewitz roundup that alerted me to the criticism. But I note that Crede says nothing in his post that defends the utter lawlessness of the verdict, which was the central point of the links.

    Around the web, June 12

    • The case against another immigration amnesty. [Mac Donald @ Forbes]
    • Obama administration persuades Supreme Court to revisit Geier preemption case in Williamson v. Mazda. [Beck; WSJ; ScotusWiki]
    • SCOTUS stays Arizona attempt to penalize free speech in elections. Expect a reversal of the Ninth Circuit. [IJ; WaPo]
    • Why looks-discrimination suits are a bad idea. [Slate]
    • Dole urges swift end to case to protect witnesses regarding fraudulent Nicaraugan sterility claims. [AP/WaPo]
    • Governor Crist can't remember why he opposed Sotomayor. [St. Pete Times]
    • Reevaluating Summers's heresy on women in science. [Tierney @ NYT]

    The Kagan nomination, June 12

    • WaPo take on the first batch of memos and the second batch of released memos. Note the analog to e-discovery: the electronic records—tens of thousands of emails where Kagan did not annotate in pen—remain unreleased, but the Clinton administration has released more documents for Kagan than the Reagan administration did for Alito or Roberts. That's not because the Reagan administration was more secretive, but because the late 1990s generated many more documents than the 1980s did, increasing the expense of discovery costs in the process.
    • Impasse over scheduling of hearing, which is two weeks away with 80,000 or so emails remaining unreleased. [Levey]
    • Sessions and Kyl point to Kagan memos for Marshall as examples of results-oriented jurisprudence, though the evidence they use is thin: the adjective "not sympathetic" can also mean unsympathetic to the legal strength of an argument. [Bloomberg]
    • Documents about Kagan's views on Jones v. Clinton withheld from public, though not Senate Judiciary Committee. [AP]
    • The Clinton documents show Kagan's support for a narrowly-threaded needle in the infamous Piscataway Board of Education v. Taxman case. [Crawford @ CBS]
    • Good biographical feature. [WaPo]

    From the Department of Health and Human Services, a news release announcing the HHS Patient Safety and Medical Liability initiative.

    The Department of Health & Human Services' (HHS's) Agency for Healthcare Research and Quality (AHRQ) ) today announced grants to support efforts by States and health systems to implement and evaluate patient safety approaches and medical liability reforms. The demonstration and planning grants are part of the patient safety and medical liability initiative that President Obama announced during a September 9, 2009, address to a joint session of Congress.

    The Wall Street Journal previewed the announcement, "U.S. to Begin Handing out Grants to Reduce Medical Malpractice Suits."

    Overall funding for the initiative is $25 million, with $23 million allocated to grants and $2 million for the final evaluation contract. The three funding areas:

    • Grants to jump-start and evaluate efforts. Three-year grants of up to $3 million to States and health systems for implementation and evaluation of patient safety and medical liability demonstrations.
    • Planning grants. One year grants of up to $300,000 to States and health systems in order to plan to implement and evaluate patient safety and medical liability demonstrations.
    • Review of existing initiatives. In December 2009, AHRQ issued a review of reforms to the medical liability system and their impact on health care quality, patient safety, and medical liability claims.

    Here's the list of awards for the demonstration grants, and this is the list of planning grants. From just a quick read of the limited materials that are available, the emphasis appears to be on making more information available for patients and encouraging communication with medical personnel on the theory this will reduce litigation. For example, from the demonstration grants:


    On CNBC, in Politico

    I'm quoted in Politico today and will be on CNBC at 1:45 pm Eastern, discussing the Obama administration's badgering of British Petroleum on specious theories of legal liability.

    BP Bailout?

    MI's Nicole Gelinas suggests in the New York Post that the government will have to "bail out" British Petroleum over the oil spill, but that seems unlikely. Even if the US imposes the maximum $4300/barrel penalty under environmental laws for the spill, and it turns out that 4.5 million barrels of oil were spilled between the initial explosion and the August relief well, that's a $19.35 billion fine for a company that makes $20 billion in profits a year and has nearly $7 billion cash on hand. Add in a few billion more for damages and lawyers and cleanup costs, and the company—which has a $100 billion market cap after shedding 50% of its value in the stock market in the last few months—clearly doesn't need a bailout.

    If anything, Britain is rightly concerned that the pensioners who rely on the $10.5 billion/year that BP pays in dividends are going to have wealth unfairly extracted by the US government and private attorneys. For example, the US government has devastated the energy industry with a six-month moratorium on deepwater drilling, but Secretary of the Interior Ken Salazar claims that the government will ask for compensation from BP for the government's overreaction. There is no cognizable legal theory to justify such a demand, but the government is likely to use the stick of criminal indictment to extort additional money from the company. Already, Obama has publicly criticized BP for being willing to continue its dividend payments.

    Separately, the cleanup is being severely hampered by the US government's refusal to permit foreign shipping competition into the Gulf by an emergency waiver of the protectionist Jones Act.

    Coupon settlement in DC approved

    "Some 15,000 students paid between $2,380 and $2,729 to attend" 2009 inauguration conferences organized by Envision EMI, which class action attorneys claimed, quite plausibly, was a ripoff. So the class members get... two $625 coupons for two more conferences from the same substandard vendor. And those coupons have several limitations, including the fact that only ten percent of seats at any given conference are eligible for coupon use. The settlement is characterized as a "$17 million settlement" in the press, though in fact claims will certainly be much lower. (If fewer than $8 million is awarded, the remainder will go to cy pres, but the settlement does not specify the cy pres recipient.) The lawyers, including the Hausfeld LLP firm, will get over $1.4 million. Several state attorneys general objected, but the court approved the settlement anyway, while holding the fee award in abeyance. Looks like the students will be getting ripped off twice.

    Wake up to lawsuits!

    The "Litigation at Sunrise" presentations at the American Association for Justice's semi-annual conventions preview new, up-and-coming ways to sue (mostly) business. Creative, cutting-edge or far-fetched, the topics do promise additional costs to the economy and an expansion of American litigiousness.

    Children's dental centers are a target? How interesting ....

    AAJ's summer convention this year is July 10-14 in Vancouver, B.C., and the schedule lists two "Litigation at Sunrise Sessions." Here, then, are the topics being presented by attorneys from the United States. (Canadians are also presenting Monday but on broader areas.)


    • Tripping Up the Utility Company: Millan v. PAWC, Lawrence Spegar, PA
    • Gardasil, Melissa Fry Hague, PA
    • The Effect of General Releases on Qui Tam Cases, Loren Jacobson, TX
    • Vaginal Mesh, Mark T. Sadaka
    • Radiation Overexposure, Emily Hawk Raley, AL
    • Quick-Set Infusion Sets: Another Metronic Recall, Yvonne M. Flaherty, MN
    • Toyota Sudden Acceleration and Other Resources from the AAJ Exchange, R. Graham Esdale, AL
    • Foodborne Illness, Richard J. Arsenault, LA


    • DUI Fatalities, Troy N. Giatras, WV
    • The Dangers of Magnets in Toys, Sim Osborn, WA
    • Litigation Against Children's Dental Clinics (Small Smiles), Pamela A. Borgess, OH
    • Patent Infringement Damages, Christopher A. Seidl, MN
    • Industrial Farming, Richard H. Middleton, Jr., GA
    • Federal Labor Standards Act, Amanda A. Farahany, GA
    • Fighting Mandatory Arbitration After Rent-A-Center, F. Paul Bland, DC
    • ABCs of IRS Whistleblower Fraud Cases, Laura Baughman, TX
    • Elevator Accidents, Dale K. Perdue, OH
    • Plastic Surgery Malpractice, Spencer M. Aronfeld, FL

    The Heritage Foundation's Robert Alt and Brian Walsh add to the chorus of critics questioning the Justice Department's announced criminal prosecution of BP, while the spill is ongoing:

    It's possible that criminal wrongdoing occurred, but the current approach -- one that all but announces that criminal charges will be brought and then seeks to identify the crime and decide who will be designated as the criminal -- undermines the criminal-justice system and Americans' respect for the law. Whenever high-ranking law-enforcement officials select their targets in this manner, it evokes disturbing echoes of a statement Harvard law professor Alan Dershowitz has attributed to the head of Stalin's secret police, Lavrenti Beria: "Show me the man, and I'll find you the crime."

    Two stories in a single day about preemption? Remarkable! First we had a column in The Examiner (see post below) and now a thorough piece from Dow-Jones, "Auto Makers Fight US Measure That Could Lead To More Civil Lawsuits," writing about the anti-preemption amendment added by Rep. Bruce Braley (D-IA):

    WASHINGTON -(Dow Jones)- A U.S. congressional proposal backed by consumer advocates and plaintiffs' lawyers could make it easier for Americans to sue auto makers over vehicle defects.

    The story notes Braley's career as a trial lawyer who sued over safety issues.

    As for the Senate version of the Motor Vehicle Safety Act, S. 3302, it passed out of the Commerce Committee on unanimous consent following perhaps two minutes worth of discussion. Chairman Jay Rockefeller's opening statement is here. There was a brief note of the Sen. Kerry's amendment to require "quiet vehicles" -- e.g., hybrids and electric cars -- to make a noise so blind people and others will be aware of their presence.

    But that's just a minor addition, an aftermarket parts, as it were.

    David Freddoso of The Examiner is one of the few reporters/columnists to write consistently about the efforts in Congress to expand litigation through legislation. Today he shines the light on Rep. Henry Waxman's amendment to gut federal preemption via the pending Motor Vehicle Safety Act, H.R. 5381. As we summarized in this post, Waxman's amendment would ban as well as retroactively vitiate federal preemption language in National Highway Traffic Safety Administration regulations.

    The value of preemption is difficult to explain in layman's terms, but Freddoso does a good job in the column, "Making automobiles safe, or making trial lawyers rich?," concluding:

    There are legitimate arguments for and against federal rules that pre-empt state lawsuits. But for automakers, whose products are already regulated by the federal government under the Constitution's interstate commerce clause, the combination of stringent federal standards and fickle state juries represents the worst of all worlds. They must follow federal rules under penalty of law, but then randomly selected, non-expert jurors can essentially ignore those rules and find fault with their designs anyway.

    That won't make you any safer on the highway, but it will make a lot of lawyers very rich.

    Victor Schwartz and Cary Silverman of Shook, Hardy and Bacon delve into the legal issues in a new article in the Tulane Law Review, "Preemption of State Common Law by Federal Agency Action: Striking the Appropriate Balance that Protects Public Safety":

    In today's Washington Examiner, my colleague Marie Gryphon argues that "looking for whose ass to kick" in the BP oil-spill saga -- at least when that involves the Justice Department's announced criminal probe -- might make the disaster response itself less effective:

    BP had a conflict of interest with its own people as soon as criminal charges came into play. Corporations can't be jailed, so BP's likely plea bargain would consist of a combination of fines and federal supervision. The size of such fines can range from nominal to ruinous depending on whether BP "fully cooperates" with prosecutors.

    In recent years, the DOJ has regularly pressured corporate defendants to cooperate by "voluntarily" waiving their attorney-client privilege. Once the privilege is waived, anything any employee ever told the corporate counsel becomes part of the public record of the case.

    "Make no mistake," states the Web site of prominent defense firm Bullivant Houser Bailey PC, "the Justice Department's position is that if the corporation wants to avoid criminal prosecution it better be willing to throw its agents and employees under the bus."

    You thought that company lawyer represented you? Too bad.

    Unlike lawyers representing BP itself (which has every incentive in the world to contain the spill as quickly as possible), a lawyer representing an individual employee has one simple goal: to keep the client out of jail. He or she is ethically obligated to advise the client to stop talking about the well, the rig and what might have gone wrong if clamming up will serve that goal. The result could be a breakdown of communication that the country can ill afford.

    The editorial board of USA Today comes out in favor of Anti-SLAPP laws, which make it harder to sue when First Amendment values of free speech or petitioning the government are potentially chilled. (SLAPP is an acronym for "strategic lawsuits against public participation.") I agree, but in a short response piece I argue that the Anti-SLAPP rules should be the norm rather than the exception.

    Strong-form Anti-SLAPP laws, like California's, limit speech-infringing litigation in two primary ways: first, discovery is stayed unless plaintiffs can show a likelihood of success on the merits; and second, prevailing defendants are allowed to recover attorney's fees and costs. As I note in my piece, these rules are the exception in the U.S. but the norm in almost all of the rest of the world.

    Thanks to our editor, Ted Frank, for discussions on this topic that helped to inform my piece. Any errors in the piece are of course my own.

    But you can be sure, it's not an apology tour.

    William Lerach, who made hundreds of millions of dollars in class-action securities litigation and then went to prison, was one of scores of speakers today at America's Future Now! conference, a gathering of left-leaning activists organized by the Campaign for America's Future.

    He held down a meeting room at the Omni Shoreham for an hour over lunchtime to present a "special issue briefing" entitled "America's Broken Retirement Plans and Retirement Systems: Another 'Gift' From Wall Street." (From the conference agenda.)

    We always knew that Lerach believed in wealth redistribution, but in a more self-serving sort of way. Now he's apparently selling himself as a progressive redistributor. It's a tough sell, as the alt-weekly San Diego Reader made clear in a recent piece, "Out of Prison, Living in Luxury." The author, Don Bauder, has no truck with banks, whom he scores for "plutocratic thievery," but neither is Lerach a hero in his view.

    Lerach, who recently emerged from an almost two-year stretch in prison, is greatly responsible for this rigged game. As an attorney who filed hundreds of class-action suits against corporations, he became a bigger fraudster than a lot of the companies he was pursuing. First, he filed many dubious suits, rejoicing when 90 percent of the companies decided to settle for millions of dollars rather than spend the time and money fighting. That stratagem wasn't illegal, but it was grossly unethical -- the classic shakedown. Companies called it getting "Lerached." Second, Lerach and his firms paid fat kickbacks to shifty characters to become plaintiffs in those lawsuits. That was illegal, landing Lerach in prison.

    Now he is out, residing comfortably in one of the county's most luxurious spreads, a cliffside villa in La Jolla. He is worth an estimated $700 million. The government made him pay a mere $7.5 million for his crimes.

    Right. Here's the Sept. 18, 2007, news release from the U.S. Attorney's Office in San Diego after Lerach agreed to plead guilty. Why would self-styled progressive reformers hang out with a convicted felon? Oh, right, he is worth an estimated $700 million. No enemies on the monied left.

    We have yet to see any blog reports and just a few Tweets from Lerach's remarks, but will continue looking. In the meantime, we marvel at his audacious brazenness as captured in his conference bio:

    William S. Lerach - lecturer, writer and investor advocate.

    For decades, Mr. Lerach was one of the leading securities lawyers in the United States. He headed up the prosecution of hundreds of securities class and stockholder derivative actions which resulted in billions of dollars of recoveries for defrauded shareholders from Wall Street banks, big accounting firms, corporations and insurance companies. Mr. Lerach has been the subject of considerable media attention and is a frequent commentator on economic and political matters and securities and corporate law. His career was recently chronicled in the best-selling book "Circle of Greed."

    The subject of considerable media attention!


    In Forbes, Harvey Silverglate makes some sound predictions how the Goldman Sachs case is going to play out, given the tremendous leverage the federal government has over the firm with the tools in the criminal prosecutors' arsenal. One could argue that this is rough justice, given the degree to which Goldman Sachs gamed taxpayer-funded bailouts to its advantage, but far better to have a world where there were neither politically-connected bailouts nor essentially random criminal prosecutions over profitable business practices.

    Cy pres bill in Ohio House

    I've previously written about the problem of cy pres, charitable donations used to expand the apparent value of class action settlements that often serve as double-compensation for the trial lawyers. One particular Ohio law firm, Dworken & Bernstein, has demonstrated this problem first-hand by regularly negotiating for cy pres awards in settlements that otherwise are pretty lackadaisical in terms of class benefits, getting the settlement approved by claiming the cy pres award is a benefit to the class (even when it benefits a charity affiliated with the judge, or is a local charity despite the fact that the money is supposed to be going to a national class), and then taking personal credit for the donation in ceremonies with oversized checks, as if the money being donated was the law firm's rather than that of their clients. (The website's stock photo of the grateful child with the flower is particularly compelling.)

    Public choice aficionados would be fascinated by recent Ohio developments where the Dworken firm has lined up multiple charities to support pernicious legislation, HB 427, that would enshrine this conflict of interest and breach of fiduciary duty to one's clients into Ohio law. On May 18, I testified before an Ohio House committee on the subject.

    "The Trouble with Cases"

    Frederick Schauer and Richard Zeckhauser:

    For several decades now a debate has raged about policy-making by litigation. Spurred by the way in which tobacco, environmental, and other litigation has functioned as an alternative form of regulation, the debate is about whether policy-making or regulation by litigation is more or less socially desirable than more traditional policy-making by ex ante rule-making by legislatures or administrative agencies. In this paper we enter the debate, but not to come down on one side or another, all things considered, of the litigation versus ex ante rule-making regulatory debate. Rather, we seek to show that any form of regulation that is dominated by high-salience particular cases is highly likely, because of the availability heuristic and related problems of representativeness, to make necessarily general policy on the basis of unwarranted assumptions about the typicality of one or a few high-salience cases or events. And although this problem is virtually inevitable in regulation by litigation, it is far from absent even in ex ante rule-making, because such rule-making increasingly takes place in the wake of, and dominated by, particularly notorious and often unrepresentative outlier events. In weighing the value of regulation by ex ante rule-making against the value of regulation by litigation, it is important for society to recognize that any regulatory form is less effective just insofar as it is unable to transcend the distorting effect of high-salience unrepresentative examples.

    Around the web, June 7

    • Price controls on interchange fees for debit and prepaid cards will cost consumers in the long run. [Zywicki @ WaTi]
    • There's no honor among thieves plaintiffs' lawyers. Lerach Coughlin stiffs a chicken-catcher. [Trask]
    • Customer sends email to AT&T CEO, gets lawyer scare letter in response. [Wired (h/t M.C.)]
    • Elena Kagan's pro bono record is thin. [Severino @ JCN]

    Around the web, June 5

    • California appeals court: juries can attribute fault to US Navy in asbestos cases. [Legal Newsline; Collins v. Plant Insulation Co. (MS Word)]
    • Absolutely no scientific evidence that Pampers Dry Max diapers causes, rather than prevents, rashes (some small percentage of babies will always have rashes, and millions of diapers have been sold), but post hoc reasoning and Facebook panic have led to government investigation and class actions. [Wajert; Reuters; P&G]
    • "Patton is one of those opinions that leads you to ask the fundamental question 'Why do we need a class action in this instance?'... What can be achieved by injecting a class action into the situation, other than creating a large claim for counsel fees?" [Jackson]
    • "More attorneys exploring third-party litigation funding." [NYLJ via WSJ Law Blog; see also Beisner/Miller/Rubin @ ILR]
    • Heritage Foundation event on the myth of conservative judicial activism, June 16. [Heritage]
    • Three states now make it illegal to record police officers. One would think simply uttering "Rodney King" would be sufficient to get legislatures to strike down these laws, but apparently not. [McElroy]
    • And the smoking gun in Kagan's Clinton White House papers is revealed. [Clinton Library PDF from Box 073 Folder 5]

    Before breaking for the Memorial Day reces, Democratic leadership in the House of Representatives had hoped to push through on the final Friday H.R. 5175, the DISCLOSE Act, to limit speech in response to the Citizens United v. FEC decision. But the House Rules Committee canceled its committee meeting and the bill never made it to the floor.

    Looking at the both the Rules Committee and House floor schedule for next week, we find no mention of the bill. Have the faux passions cooled, partisan motivations waned? Doubt it, but the bill's absence is curious.

    On the Senate side, the Judiciary Committee has items of interest. Tuesday morning the full committee holds a hearing, "The Risky Business of Big Oil: Have Recent Court Decisions and Liability Caps Encouraged Irresponsible Corporate Behavior?" So far the only witnesses scheduled are Christopher Jones of Keogh, Cox and Wilson of Baton Rouge; Jack Coleman, managing partner, EnergyNorthAmerica, LLC, and formerly a Republican counsel for the House Committee on Natural Resources; and Tom Galligan, president, Colby Sawyer College in New London, NH.

    On Thursday, the Senate Judiciary Committee will vote on judicial nominations, including the controversial nomination of Rhode Island trial lawyer and lead paint litigator John "Jack" McConnell to be U.S. District Court Judge. Also on the schedule is President Obama's nomination to the Second Circuit of Robert Chatigny, a U.S. District Court judge in Connecticut. The Washington Times had a tough editorial recently on Chatigny's record that also criticized McConnell, "Sexual sadism, unleaded."

    There are two ways to address the problem of judicial activism. One is to ensure that only attorneys who respect the rule of law and the limited role of judges within the separation of powers end up on the bench. This is not always politically tenable: special interests can affect the appointment or election of judges; the organized bar is not always favorably inclined against judicial supremacy; and the perceived value of judicial independence has de facto eradicated the Founders' preferred check on out-of-control judges, impeachment.

    The other is for the legislature to more explicitly cabin the discretion of judges. For example, as an initial principle, judges should not be creating implied rights of action, but it sure doesn't hurt to have a "and-we-really-mean-it" law like that the state of Georgia just passed into law to emphasize how lawless it would be for judges to do so. The "lawsuit transparency" litigation, passed with large bipartisan majorities, expressly forbids "implied" causes of action by requiring any private cause of action to be stated explicitly within legislation. It's the first of its kind in the nation. [ALEC; Business Insurance; ILR]

    Around the web, June 4

    • Manhattan Institute event, June 10: Former AG Mukasey introducing Hudson Institute's Gabriel Schoenfeld on the press's role in publishing leaks of sensitive national-security information. [MI]
    • 17 out of 33 judges ruling on the question have stayed proceedings in litigation over the BP/Transocean oil spill. The real question is why the other 16 are requiring duplicative litigation activities given the near-certainty that a multi-district litigation will be created in July or August to consolidate pre-trial proceedings. For some reason, the NLJ coverage doesn't mention the pending motions before the Judicial Panel for Multi-District Litigation. [National Law Journal; Business Week]
    • Class action settlement over VW sunroofs: $8 million for repairs for class, $31.5 million for attorneys. Stay tuned about this one! [OL; Major; Settlement website]
    • ASM Capital buying claims in Madoff litigation for twenty cents on the dollar cash up front. The trustee expects to recover between 15 and 50 cents on the dollar eventually, which is quite remarkable, really. [WSJ via ABA Journal
    • The persecution of Gilbert Arenas. [Reason]
    • More on Dean Martha Minow's role in the Harvard email scandal. [Weekly Standard; MTC]
    • Annals of the obvious: Tweets on Twitter can be used as evidence in divorce cases. [Mid-Day (India)]
    • The danger of a government with unlimited power. [Will @ WaPo]

    Debrahlee Lorenzana is making a splash on the news with her claims she was fired from a Citibank bank because she was "too hot" in her fashion choices. But it's worth remembering that her lawyer, Jack Tuckner, once complained that the media didn't try to get both sides of the story before reporting lurid allegations about a sexual harassment case against him. So it's worth noting Citibank's side of the case: "Ms. Lorenzana has chosen to make numerous unfounded accusations and inaccurate statements against Citibank and several of our employees. While we will not discuss the details of her case, we can say that her termination was solely performance-based and not at all related to her appearance or attire. We are confident that when all of the facts and documentation are presented, the claim will be dismissed."

    The Pacific Research Institute has released its U.S. Tort Liability Index for 2010, again authored by PRI fellows Lawrence J. McQuillan and Hovannes Abramyan.

    I haven't yet had time to read the report, but I will note that this criticism by Andrew Sullivan is profoundly unfair. Sullivan calls PRI's decision to have Sarah Palin write a foreword to the report an example of "epistemic closure" and cites with apparent approval a reader claiming this choice exemplifies an "intellectual void" in think tanks. But Palin was obviously chosen because the state she governed until recently -- Alaska -- came in first in the PRI rankings, as she makes pretty clear in the brief foreword itself. Might PRI instead have chosen Marie Gryphon to talk about Alaska's unique-in-America loser pays rules? Sure. But picking the recently departed governor of the #1 state certainly makes sense.

    David Rittgers explains how Maryland police and prosecutors are misusing the state's wiretapping statute to deter citizens from recording police misconduct in plain view on I-95:

    [T]he Maryland wiretapping statute makes it a crime to record any conversation without the consent of all parties -- a "unanimous consent" law. Maryland is one of a dozen states with such a statute; most jurisdictions are less strict. The penalty can be up to five years in prison and up to a $10,000 fine. When the prosecutor asked for a $15,000 bond for a $10,000 crime, the judge questioned both this maneuver and the use of the law against Mr. Graber.

    The judge was right to ask how Mr. Graber came into custody. Maryland courts have consistently held that where there is no reasonable expectation of privacy, there is no violation of the wiretapping law. An assistant attorney general confirmed this reading of the law in a letter to the state legislature last year. Mr. Graber's conversation with the officers giving him a speeding ticket, on a public highway and observed by hundreds of motorists, could not have been in a more public setting. It seems certain that even if Mr. Graber is convicted he will win on appeal and have the verdict thrown out because of the state's overbroad reading of the wiretapping statute.

    The deterrent to recording police is still established.

    Much of our focus on overcriminalization has been on new laws that are overly vague or sweeping, but this case demonstrates that we should also look at older laws outrun by technological developments.

    The topic of conversation of baseball fans today is last night's Detroit Tigers-Cleveland Indians baseball game. Journeyman Tigers pitcher Armando Galarraga retired the first 26 batters he faced without allowing anyone to reach base. Only twenty times in over a century of baseball history has a pitcher successfully retired every batter he faced. Galarraga was about to become the twenty-first when Jason Donald grounded to first base and was thrown out by half a step—except umpire Jim Joyce called Donald safe. Detroit's manager argued the call, but umpires rarely change their minds; indeed, it's so rare that umpires change their minds that a 1969 incident involving Cleon Jones and shoe polish is part of baseball lore. After the game, Joyce admitted he had made a mistake that cost Galarraga his perfect game.

    Around the web, there are calls for Major League Baseball to retroactively award Galarraga a perfect game. A comparison is made to the "Pine Tar game" in 1983: an umpire reversed a George Brett home run for excessive pine tar on the bat, calling him out and ending the game with a New York Yankees victory over the Kansas City Royals; the American League reversed the call and ordered the last inning of the game replayed, with the Royals winning by virtue of the reinstated Brett home run.

    But the difference between the Galarraga game and the Pine Tar game is material. In the Pine Tar game, the umpire made an erroneous interpretation of the rules—the penalty for using a bat with too much pine tar is to remove the bat from the game rather than to call the batter out. The Royals protested the decision under applicable baseball procedure and got the erroneous application of rules reversed. In the Galarraga game, the umpire's error is one of a bad interpretation of facts: a judgment call that is not appealable or reviewable under MLB Rule 4.19.

    (Habeas aficionados will be interested to see that MLB Rule 4.19 has a "harmless error" component: even an umpire's mistaken application of the rules is not reviewable if it would not make a difference to the outcome of the game.)

    There's a similar distinction in law: appellate courts will review the legal decisions of lower-court judges de novo, i.e., from scratch, but give deference to their findings of fact, reversing only when "clearly erroneous"—which can sometimes lead to controversy whether a particular finding is factual or legal in nature. Congress has passed laws relating to habeas limiting the scope of appellate decisionmaking.

    There are naturally calls to change baseball rules to make more umpire judgment calls reviewable. In the National Football League, for example, teams are allowed a certain number of challenges to certain types of referee decisions, and officials review television footage of the play and can reverse the decision on the field if there is clear evidence of error. Of course, there is no such thing as a free lunch, and the increase in accuracy comes at a cost: lengthy delays as the game is stopped for game officials to peer into a television monitor and confer about what they've seen. It's not clear that baseball—whose games are already notoriously slow-paced, and getting slower by the year—can afford to add five to ten minutes a game for review calls. This is especially true because baseball's season is ten times longer than football's season, and because individual calls in a baseball game are less likely to affect the outcome of a game much less the outcome of a season. Even in the Galarraga game, the only effect of the blown call was trivia: the final score would have been 3-0 Tigers, either way. If anything, Galarraga is going to be more remembered for his 28-batter almost-perfect game than he would have been if the umpire had gotten the call right.

    The same question of finality and efficiency versus accuracy arises all the time in law: in deciding whether to permit interlocutory appeals or collateral review of decisions, what level of deference to give to finders of fact in reviewing their decisions, whether to declare a mistrial, and so on. Chief Justice Roberts famously used the analogy of an umpire calling balls and strikes to the appropriate role of a judge, but the lessons of baseball can go even further.

    Around the web, June 3

    • Criticism of SG office brief in Chamber of Commerce v. Candelaria. [Baker @ Volokh]
    • Big-firm patent lawyer John Desmarais opens up shop to litigate on behalf of his own patent portfolio. [BusinessWeek]
    • Foreclosure lawyer makes $1500/client for six hours work delaying legitimate foreclosures for months. [OL]
    • Empirical study provides partial support for Sunstein/Winter theory that standing doctrine arose to "insulate" New Deal from challenge. [Ho & Ross @ Stanford L. Rev. via @walterolson]
    • When is e-discovery too much of a burden? Courts wildly disagree. [law.com]
    • Effect of civil rights law on firefighting testing. [Marginal Revolution]
    • Roger Clegg on "stereotype threat." [MTC]
    • Federal court shuts down spammer-ridden web company. [Oregon Business Report via @roncoleman]
    • Gloria Allred complains that porn star's reservation at Ritz-Carlton was canceled. No comment from Rand Paul about Title II implications. [TMZ]

    Dan Troy and John O'Tuel have an important paper for WLF detailing the problem of the growing expense of wasteful discovery (less than 0.1% of pages produced in discovery are designated for use in trial) and suggest a number of tweaks for containing it:

    • A mechanism should be put in place to narrow the issues at the outset of the litigation. That could be accomplished by requiring either: 1) particularized fact pleading; or 2) requiring an early judicial determination of those issues to be tried, after which discovery of those issues, and only those issues, can begin in earnest. The latter proposal mirrors that put forward by the ACTL and is preferred.

    • A change in the scope of discoverable information is in order. Document discovery that requires production of 1,044 pages for every page marked for trial is grossly overbroad. Modifying the definition of discoverable information to those materials directly relevant to an issue to be tried would serve to reduce that inefficiency, reduce costs, allow adversaries to focus on those materials pertinent to their cases, and would bring cases more quickly to a point where they can be tried.

    • Presumptive limits on document discovery should be applied. One proposal discussed at the Federal Rules Advisory Committee conference was "Susman's Checklist." Part of that proposal suggested that discovery of information be limited to five custodians in the first instance, chosen by the requesting party. After production from those five custodians, an additional five custodians may be selected by the requesting party. After production from the second set of five custodians, no further discovery will be had absent a showing of good cause. This proposal is an amalgam of presumptive limits and phased discovery and combines the best attributes of both.

    • Finally, amendments to the Rules should be enacted that directly address preservation and permit spoliation sanctions only where willful conduct for the purpose of depriving another party of the use of the destroyed evidence results in actual prejudice to the other party. A clear preservation rule is needed to supply guidance to litigants in order to counteract inconsistent requirements established by courts around the country.

    Russell Jackson of Skadden Arps reports at his Consumer Class Action and Mass Torts blog on the Fifth Circuit's quorum difficulties in Comer v. Murphy Oil, the lawsuit claiming damages for global warming. On Friday, the Fifth Circuit effectively dismissed the original lawsuit because a late recusal had deprived the court of its quorum for en banc consideration of the suit.  

    "This, of course, creates a tremendous mess for those seeking to appeal to the U.S. Supreme Court.  And it threatens to overshadow the underlying substantive legal issues with a potpourri of procedural arguments," Jackson writes in "Fifth Circuit Punts on Global Warming En Banc Appeal."

    Jackson says the views of the dissenting judges foreshadow the arguments the Comer plaintiffs will make in appealing to the U.S .Supreme Court. He concludes:

    You can bet that the certiorari petitions to the U.S. Supreme Court will be chock full of arguments as to why the Fifth Circuit was wrong not to decide the Comer appeal. But the real underlying question remains more important: Do victims of natural disasters have standing to sue a subset of those who allegedly contribute to "climate change" based on the hypothesis that the disaster might have been milder if the ocean had been a few degrees cooler? The causal chain on such climate change theories are simply too attenuated to support legal standing. And the sooner we get a definitive ruling from the Supreme Court on that issue, the better off we'll be.

    Earlier posts here.

    UPDATE (1:40 pm.): AP's report today misses the news, that the original lawsuit had been vacated.

    The Connecticut Law Tribune reports that Barbara Izzarelli has obtained an $8 million jury verdict against RJ Reynolds, whose cigarettes she smoked for more than 20 years.

    Izzarelli was in her early teens in the 1970s when she began smoking Salems. She smoked heavily every day -- all day -- for more than 20 years. Then in 1996, at age 36, she developed larynx cancer. The following year she underwent a total laryngectomy, followed by radiation and chemotherapy treatments. She can no longer breathe through her mouth or nose; she uses a tube in her throat. Her diet consists of soft foods like pudding and mashed potatoes.

    Her suit charged RJ Reynolds with deliberately marketing attractive flip-top boxes to teens. Reynolds contested both the youth marketing claim and the causal link between Izzarelli's smoking and the kind of cancer from which she suffers. [Presumably Reynolds also alleged that, once an adult, Izzarelli smoked voluntarily -- but the news report doesn't mention this...] The Connecticut jury must have agreed with that defense, as it applied that state's comparative negligence rule and found Izzarelli 42% at fault. The court deducted that percentage from the jury's $13 million damage calculation.

    I have written at length about the Florida suits against Big Tobacco, but this suit is apparently the first successful product liability lawsuit in Connecticut by an individual plaintiff against a tobacco company. It was filed in 1999, shortly after the release of volumes of information following the settlement of the suit against Big Tobacco by the states' attorneys general. That information provided the fodder for Izzarelli's "youth marketing" claim. This verdict indicates that the Nutmeg state is fertile ground for other suits filed by residents who started smoking as teens.

    Abel v. Austin (Ky. App. 2010)

    The Kentucky fen-phen scandal appears to stretch to the Beasley Allen firm in Alabama, which horse-traded for several dozen plaintiffs who thought they were being represented by Kentucky attorneys William Gallion, Shirley A. Cunningham, or Melbourne Mills. The Alabama litigation settled for $47k per plaintiff with "minimal injuries," but the plaintiffs only received $29k. They sued over the other $18k, but we'll never find out what happened to it, because the defendants succeeded in having the claims barred by the statute of limitations. [Abel v. Austin]

    I'm quoted in a May 23 Maryland Daily Record story on professional objectors (and don't miss the correction at the bottom of the story).

    Because class action settlements bind class members absent from court proceedings, and because class action attorneys are negotiating their fees as part of the same settlement as the class settlement (even when they engage in the fiction of negotiating seriatim), Fed. R. Civ. Proc. 23(e) requires class action settlements to receive court approval as "fair, adequate, and reasonable" to ensure that class attorneys are not breaching their fiduciary duty to the class.

    This permits legitimate objections to the settlement. But it also permits holdups. If class attorneys are awarded a $4 million fee, but appeals of a class action settlement approval take two to three years, the time-value of money means that it's worth hundreds of thousands of dollars to the class attorneys to pay the objectors to go away. This leads to rent seeking.

    A reform to the Federal Rules of Civil Procedure was meant to address this problem: an objection cannot be withdrawn in district court without court approval. This certainly rids the system of the more blatant holdup payments that do nothing to benefit the class—though, given that the resulting proceeding will be non-adversary and any approval will not be appealed, there's little incentive for district courts not to rubber-stamp objection withdrawals.

    Of more concern is that there is no parallel rule in the Federal Rules of Appellate Procedure. Simply by filing a notice of appeal, a holdup objector can avoid the need for court approval: indeed, appellate court mediators formally will encourage settlement to lighten the appellate court's docket. There's some reduction in the value of the objection, because the buyoff comes later rather than sooner, affecting the time-value of money for both the objector and the class counsel, but there's no real reduction in the incentive for rent-seeking.

    Worse, the structure leads to perverse incentives: a rent-seeking or "professional" objector is likely to be financially better off if the district court denies the objection, permitting an immediate appeal—especially since many district courts are reluctant to award attorneys' fees to objectors even if the objection improved the settlement.

    This can lead to low-quality objections. Of course, even professional objectors can make legitimate objections: they object to bad settlements as well as reasonable settlements, and even win occasionally: see, e.g., Synfuel Tech. v. DHL Express, 463 F.3d 646 (7th Cir. 2006). But low-quality objections hurt consumers in four ways: first, poor objections lead to poor precedent that encourages judges to rubber-stamp bad settlements over objections; second, one would expect that class counsel anticipates the expense of buying off professional objectors, and builds that into the settlement fee, increasing the cost of class action litigation to the detriment of consumers; third, to the extent the settlement legitimately provides class members with benefits, rent-seeking delays reduce the value of the settlement to the class if the class counsel has not negotiated interest-bearing escrow accounts (which is why courts should condition findings of fairness on the establishment of such accounts); and fourth, there is a signaling problem whereby it is difficult for legitimate objections to be treated as legitimate objections because the objector cannot distinguish himself from rent-seeking objectors. (Indeed, an intelligent Bayesian would expect most objectors to be rent-seeking: for the same reasons we have class actions to aggregate litigation, an objector has no financial incentive to spend time and money petitioning the court over an unfairness to a settlement where an excessive attorneys' fee might deprive the class member of a few dollars or even less. This is why thoughtful courts do not equate lack of formal objections with class members' approval of the settlement.)

    My non-profit public-interest law firm, the Center for Class Action Fairness (which is not affiliated with the Manhattan Institute) resolves the signaling problem in a unique way: we announce in advance that we refuse to settle unless the settlement results in an objectively fair and reasonable settlement, and we refuse to request a fee for more than 4.4% of the additional pecuniary benefit to consumers; to date, we've never settled an objection. Our interests are to put consumer welfare first. This hasn't stopped class counsel from trying to tar us with the "professional objector" brush, but we can demonstrate that they're being dishonest if they accuse us making a bad-faith objection for profit.



    Rafael Mangual
    Project Manager,
    Legal Policy

    Manhattan Institute


    Published by the Manhattan Institute

    The Manhattan Insitute's Center for Legal Policy.