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July 2010 Archives

George Person, who retired July 3 after 27 years at the National Highway Traffic Safety Administration, has blown the whistle and accused NHTSA officials of refusing to release findings favorable to Toyota in its sudden acceleration investigation:

"The agency has for too long ignored what I believe is the root cause of these unintended acceleration cases," he said. "It's driver error. It's pedal misapplication and that's what this data shows."

Mr. Person said he believes Transportation Department officials are "sitting on" this data because it could revive criticism that NHTSA is too close to the auto maker and has not looked hard enough for electrical flaws in Toyota vehicles.

"It has become very political. There is a lot of anger towards Toyota," Mr. Person said. Transportation officials "are hoping against hope that they find something that points back to a flaw in Toyota vehicles."

(Update: Not noted by the WSJ: the head of NHTSA is a former lobbyist for the trial lawyers' association.)

When Apple introduced its iPhone into a smartphone market where it had 0% market share, it cut a deal with AT&T Mobility to make it the exclusive provider of cell phone service. In exchange, ATTM subsidized the price of every iPhone by $450, thus ensuring that more consumers would be able to purchase iPhones, and introducing additional competition into the smartphone market.

Nonetheless, trial lawyers sued, bringing a class action alleging that this basic business arrangement violated the antitrust laws because it threatened to monopolize the previously non-existent market for "iPhone telephone service."

This is ludicrous on its face. The smartphone market is more competitive than ever: in addition to the longstanding Blackberry, there's new entrants Droid and HTC Evo (and vis-a-vis the latter, see this NSFW, but very funny, video). Without the phone carrier subsidization, many iPhone owners (including me) would be unable to afford an iPhone, and are clearly better off because of the exclusivity deal. Nonetheless, the Northern District of California has certified a class action over the practice—and not just any class, but a Rule 23(b)(2) mandatory class, meaning that every iPhone owner with an AT&T Mobility two-year contract is now involuntarily represented by attorneys that apparently care more about the possibility of extortionate settlement profit than the clients they purportedly represent.

The Center for Class Action Fairness (which is not affiliated with the Manhattan Institute) is in talks with a number of iPhone owners who are concerned about being represented by class counsel who don't have their best interest at heart, and considering filing papers moving to intervene and decertify the class. But economic experts willing to go on the record to refute quack antitrust analysis are not cheap; before we blow a good chunk of our annual budget on one, we're curious if there's anyone out there willing to work for a discount rate or, better yet, pro bono. (In the alternative, if there's another public-interest law firm out there who'd like to take the lead role on this, I am happy to serve pro bono as both the client class member iPhone owner and as the expert witness, as well as assist on the legal side. Unfortunately, legal rules prohibit me from serving as both lead attorney and as a witness.)

On the radio this morning

I'll be discussing the United States v. Arizona ruling on a number of radio stations:

KOA Denver, CO 0705AM ET
KFAB Omaha, NE 0715AM ET
WTAM Cleveland, OH 0745AM ET
WTVN Columbus, OH 0810AM ET
WPTI Greensborough, NC 0820AM ET
KFBK Sacramento, CA 0838AM ET
KLIN Lincoln, NE 0935AM ET
WHAS Louisville, KY 1005AM ET

Heather Mac Donald's take pretty much says it all. One hopes the pending Chamber of Commerce v. Candelaria Supreme Court case short-circuits what looks to be years of litigation over SB 1070.

A tiny percentage of Volkswagen and Audi sunroofs will leak into the vehicle unless care is taken to keep the plenum clear of debris; a class action was brought over this. Let's assume for the moment that plaintiffs are correct that this is something that Volkswagen is liable for, and that there are contractual remedies for VW not foolproofing the cars against this problem. What's remarkable is how the parties settled the case in such a way so that wildly inefficient remedies would maximize attorneys' fees at the expense of the class. The settlement is structured as follows:

  1. A million class members will get nothing but a letter telling them to check the plenum when they go for their 40,000-mile service.

  2. VW will perform an expensive preventative service action on some, but not all, VWs that might suffer this problem.

  3. An $8 million settlement fund is set up to pay damages for some, but not all, VWs that have suffered damage

The economic expert for the plaintiff made some remarkable calculations. For example, he valued the letter at over $29 million. After all, if you get a letter informing you of a potential benefit, that letter is worth just as much as the benefit itself—never mind that Volkswagen dealers charge $400 to $800 for 40,000-mile service, and can easily choose to raise the price $30 to account for the extra labor in performing the extra task during the maintenance service. So if Apple ever settles a class action by sending you a letter telling you you can buy a $700 iPad for $700, that is, according to the expert, indistinguishable from Apple writing each consumer a check for $700.

Let's look at #2 for a second. According to the plaintiff's own expert, VW will spend $55 million on that service action. According to the same expert, if VW does not perform the maintenance, those vehicles will suffer $24 million in damage. (The expert then remarkably triple-counts this as a benefit to the class: the $24 million in damage avoided, plus $55 million in VW expenses for the service action, plus another $24 million for the avoided diminution of value of the vehicle that would have occurred if the vehicles suffered damage and then weren't repaired. Thus, according to the expert, this component of the settlement is worth over $103 million.) Spending $55 million to avoid $24 million in damage is the very definition of economic inefficiency.

But consumers lose out. Some of the class members who are getting nothing but a letter—including one of my clients—have suffered actual damage from sunroof leakage. They're not getting paid under this settlement and are being forced to release their claims, which are no less meritorious than the claims that are getting paid.

The only possible reason for plaintiffs' attorneys to insist upon this convoluted remedy is to increase attorneys' fees. By making Volkswagen engage in wasteful spending, they pump up the alleged value of the settlement and then argue that they're entitled to over $23 million in attorneys' fees and costs, to be paid separately by Volkswagen.

It would have been very easy to structure a settlement so that Volkswagen created a $48 million fund to cover repairs to every vehicle that suffered water damage from a sunroof leak. Every VW owner who had the problem in the past or in the future would be able to collect; Volkswagen would be out of pocket $48 million instead of $70-$90 million; the attorneys could have made a plausible claim for $10 million in attorneys' fees and costs from the fund, which would still be close to twice an exaggerated lodestar. Instead, the parties negotiated a settlement that made everyone—consumers and Volkswagen—worse off. Well, everyone except the attorneys, if Judge Patty Shwartz buys the quack economic testimony and awards the full fee request.

Under Rule 23(e), a judge is not to approve a settlement unless it is "fair, adequate, and reasonable." It is hard to see how this settlement is fair or reasonable; and it demonstrates the failure of legal ethics that the class attorneys could structure this settlement and make that fee request without fear of sanction, even as they put their own interests ahead of their clients.

The four-hour fairness hearing, consisting mostly of the economic expert rationalizing his calculation and the attorneys arguing over fees, was last Monday in a Newark federal courtroom. I look forward to seeing how the judge will rule.

Cappuccitti v. DirecTV, Inc.

The Class Action Fairness Act created 28 U.S.C. § 1332(d), a new category of federal diversity jurisdiction for class actions that exceeded $5 million in value. The Eleventh Circuit just issued an opinion proclaiming that CAFA jurisdiction only exists when the § 1332(a) requirement of more than $75,000 in controversy applies to at least one class plaintiff. This extraordinarily tendentious reading of the statute contradicts every other circuit to examine the issue—including the Eleventh. [Trask; Andrews @ Forbes; Steinman] Expect a 9-0 per curiam decision from the Supreme Court in the near future, assuming an en banc court doesn't correct the travesty.

Chairman Henry Waxman (D-CA) of the House Energy and Commerce last week started the rolling on what's likely to be a year-long campaign to expand regulation of (and no doubt litigation against) the chemical industry and companies that use chemicals in their products. The legislative vehicle is H.R. 5820, the Toxic Chemicals Safety Act, an update of the 1976 law that gave the EPA authority "to require reporting, record-keeping and testing requirements, and restrictions relating to chemical substances and/or mixtures."

The new bill was introduced on July 22 and announced in a release, "Chairmen Rush, Waxman Release H.R. 5820, The Toxic Chemicals Safety Act." Rush is Rep. Bobby Rush (D-IL), chairman of the Subcommittee on Commerce, Trade, and Consumer Protection that will first consider the bill. He said, "The introduction of this legislation marks a major step forward in our efforts to bring to current industry standards an important statute that, once it becomes law, will permanently shine the bright light of public disclosure on a range of chemicals that consumers encounter in a diverse array of products they use each and every day."

Sec. 2617 of the current law gives the EPA broad authority to preempt state and local regulations of covered chemicals through orders and the agency's rule-making process. Not so in the Waxman/Rush version. From the text of H.R. 5820:

Section 18 of the Toxic Substances Control Act (15 U.S.C. 2617) is amended to read as follows:


'Nothing in this Act affects the right of a State or political subdivision of a State or a tribe
to adopt or enforce any regulation, requirement, or standard of performance
that is different from or in addition to a regulation, requirement, liability,
or standard of performance established pursuant to this Act unless compliance
with both this Act and the State or political subdivision of a State or tribe
regulation, requirement, or standard of performance is impossible.'.

Note that language: "is impossible." It's as if the litigation lobby had written the language to prevent any and all federal preemption.

Chairman Rush's subcommittee holds the first House committee hearing on the bill Thursday, July 27. Details here.

For purposes of disclosure: The National Association of Manufacturers, my employers, issued a statement upon introduction of the bill, "Manufacturers Concerned With Toxic Chemicals Safety Act."

Another activist AG bites the dust

Hans Bader of the Competitive Enterprise Institute recently released a report, "The Nation's Worst State Attorneys General," identifying the six worst AG abusers of the rule of law. The list:

1. Jerry Brown, California
2. Richard Blumenthal, Connecticut
3. Drew Edmondson, Oklahoma
4. Patrick Lynch, Rhode Island
5. Darrell McGraw, West Virginia
6. William Sorrell, Vermont

On July 15, Patrick Lynch dropped out of the Democratic race for the gubernatorial nomination in Rhode Island, no doubt anticipating the CEI dissection of his career.

On Tuesday, after 16 years as Oklahoma's AG, Drew Edmondson lost the Democratic nomination for governor, barely edged out by Lt. Gov. Jari Askins.

It's a good start, Hans!

UPDATE (1:45 p.m.): The Wall Street Journal examines Mississippi AG Jim Hood at length today as he again attempts to exploit the "plaintiffs bar-attorney general nexus," to bring BP oil spill litigation into state courts. It's a nicely thorough editorial, "Mississippi Justice on Email." But not a top six offender? Well, he'd make the top ten, Bader reports.

Guest bloggers wanted August 2-6

Hey, loyal readers: between now and August 9, I have due a Ninth Circuit brief, a Supreme Court amicus brief, a state court of appeals motion, four cross-country flights, and a court-ordered mediation (and associated mediation brief). If you're interested in guest-blogging for Point of Law, now would be a great time to let me know. Email me at editor at pointoflaw dot com.

Antoninetti v. Chipotle

Walter Olson calls our attention to this week's Ninth Circuit decision Antoninetti v. Chipotle, where a panel including Judge Reinhardt ruled that Chipotle's business model of allowing customers watch their burritos being made at 45-inch-high counters violated the ADA because the counters were too high for those in wheelchairs to watch. (Chipotle instead would take ingredients to a customer's table, and even let the wheelchair-bound taste them from serving cups.)

Objectionable enough (it's far from clear how Chipotle can accommodate the wheelchair-bound to the Ninth's satisfaction while both observing health and OSHA codes and permitting customers to view their food being made), but the appellate court was especially activist in overruling the finding of fact of the district court that there was no need for an injunction because there was no irreparable injury to the plaintiff, who specialized in bringing ADA suits:

The [district] court found that Antoninetti had failed to show irreparable injury because he had not revisited either restaurant after Chipotle adopted its written policy and because his "purported desire to return to the [r]estaurants is neither concrete nor sincere or supported by the facts." It also stated that Antoninetti's "history as a plaintiff in accessibility litigation supports this Court's finding that his purported desire to return to the [r]estaurants is not sincere. Since immigrating to the United States in 1991, Plaintiff has sued over twenty business entities for alleged accessibility violations, and, in all (but one) of those cases, he never returned to the establishment he sued after settling the case and obtaining a cash payment."

Antoninetti's analysis rejecting that finding contradicts, but does not cite, Molski v. Evergreen Dynasty Corp., 500 F.3d 1407 (9th Cir. 2007), creating an intra-circuit split.

(It's funny that I regularly think of Molski v. Evergreen Dynasty Corp. when I talk about problems with the ADA, and regularly cite Molski v. Gleich, a case reversing the approval of a lawyer-friendly class action settlement, when writing class-action briefs, but had not made the connection that it was the same Molski behind the two sets of unethical behavior before today.)

Last year, U.S. District Judge Lacy H. Thornburg of Asheville, N.C., agreed with the arguments of North Carolina Attorney General Roy Cooper's lawsuit that claimed the Tennessee Valley Authority's coal-fired power plants in Tennessee and Alabama created a public nuisance because they harmed the airshed in western North Carolina. On Monday, a three-judge panel of the 4th U.S. Circuit Court of Appeals sitting in Richmond, Va., reversed the judgment. From the opinion in State of North Carolina v. TVA, written by Judge J. Harvie Wilkinson III:

The Tennessee Valley Authority (TVA) appeals an injunction requiring immediate installation of emissions controls at four TVA electricity generating plants in Alabama and Tennessee. The injunction was based on the district court's determination that the TVA plants' emissions constitute a public nuisance in North Carolina. As a result, the court imposed specific emissions caps and emissions control technologies that must be completed by --.

This ruling was flawed for several reasons. If allowed to stand, the injunction would encourage courts to use vague public nuisance standards to scuttle the nation's carefully created system for accommodating the need for energy production and the need for clean air. The result would be a balkanization of clean air regulations and a confused patchwork of standards, to the detriment of industry and the environment alike. Moreover, the injunction improperly applied home state law extraterritorially, in direct contradiction to the Supreme Court's decision in International Paper Co. v. Ouellette, 479 U.S. 481 (1987). Finally, even if it could be assumed that the North Carolina district court did apply Alabama and Tennessee law, it is difficult to understand how an activity expressly permitted and extensively regulated by both federal and state government could somehow constitute a public nuisance. For these reasons, the judgment must be reversed.

Good to see a federal court practice restraint in contrast to, say, the 2nd Circuit in Connecticut v. American Electric Power. (Coverage: AP, Birmingham News, Legal Newsline.)

UPDATE (5:15 p.m. Wednesday): Good summary story from Greenwire at NYT, "TVA's Air Pollution Isn't an Interstate Nuisance, 4th Circuit Rules," with the helpful specificity of referring to the common law nature of federal public nuisance law. Otherwise, this ruling has made a surprisingly little amount of news.

On the House suspension calendar today is H.R.5281, the Removal Clarification Act of 2010, sponsored by Rep. Hank Johnson (D-GA). The CRS bill description:

Amends the federal judicial code with respect to removal to an appropriate U.S. district court from a state court of: (1) any civil action against the United States or a federal agency or officer, or specified others; or (2) a criminal prosecution commenced in a state court against any of them.

Declares that civil actions and criminal prosecutions include any proceeding in which a judicial order, including a subpoena for testimony or documents, is sought or issued.

When introducing the legislation, Rep. Johnson said the bill was meant to reaffirm the ability of a federal officer being sued in his official capacity to remove the litigation from the state to federal courts in certain cases, to wit:

Around the web, July 27

On Monday, the California Supreme Court endorsed the corruption of local government hiring contingent-fee lawyers to prosecute cases, notwithstanding its earlier precedent forbidding such a conflict of interest, siding with an appellate court that had reversed a trial-court disqualification of attorneys. [CJAC; Legal Newsline; Mercury News; Steele; Santa Clara v. Superior Court.] We discussed the issue thoroughly in 2008, including a column by John Sullivan. The question now is whether defendants are permitted to engage in discovery of the attorneys suing them (since the Court has created a fact-bound test for determining the required "neutrality" of the contingency-fee attorneys) or whether the "neutrality" test will be de facto toothless and satisfied with the formality of a figurehead government official at the apex of the lawsuit.

You will recall that some of the contingency-fee contracts at issue in this lawsuit explicitly violated the neutrality test, but the appellate court decided to honor self-serving parol evidence; the California Supreme Court did reverse this disingenuousness, requiring that the contingency-fee contracts be modified.

The good news is that the decision is narrowly drawn: the Court relied upon the fact that this was a lead-paint suit so there was no risk that an ongoing business practice would be enjoined, and used that fact pattern to distinguish Clancy. Which means that most other contingency-fee suits could still be challenged.

The bad news is that the Court spoke of an abusive lead-paint public-nuisance suit as if it was an entirely appropriate use of the public-nuisance doctrine, which is certain to lead to more regulation by litigation and empowerment of the attorney general's office. (Which makes one wonder why Jerry Brown is running for governor, since, except for patronage possibilities, the California attorney general is now a more powerful position.)

(Update: Carter Wood, Walter Olson, and James Beck weigh in.)

One of the supposed great crimes of the Bush administration was the "politicization" of the Department of Justice, a drumbeat we heard repeatedly from the mainstream media (even as a politically-motivated criminal investigation eventually found no wrongdoing). But nothing the Bush administration did compares to what the Obama administration is doing openly.

In the D. Mass. case Gill v. Office of Personnel Management, plaintiffs are suing over the constitutionality of the Defense of Marriage Act, which defines "marriage" for purposes of federal statutes to exclude gay marriages and civil unions. DOMA is both a burden and a benefit to gay couples: on the one hand, they're excluded from certain government benefits; on the other, two-income couples save thousands of dollars a year in federal taxes from the marriage penalty. I'm not a huge fan of DOMA, and I imagine Obama DOJ officials like it even less.

Nevertheless, it is accepted that the executive branch is to defend the constitutionality of laws previously passed, even if the executive branch does not like the law.

Yet that is exactly what the Obama DOJ civil division did in Gill. Ed Whelan has been detailing the issue. Sure enough, the district court, thanks to the government's brief, declared DOMA unconstitutional, something it could not have done if the government's brief had not explicitly argued that there was no rational basis for the statute.

I'm not unhappy with the end result, but I'm disheartened by the lawless process with which that end result was achieved. And I'm astonished that there hasn't been a huge scandal over the politicization of the Civil Division. President Bush was criticized for signing statements, but when push came to shove, it defended the laws. See, for example, then-Deputy Solicitor General Paul Clement's able efforts on behalf of McCain-Feingold during the Bush administration. Imagine the scandal if the Bush administration had tried to undermine the statute by arguing that it violated the First Amendment.

The double standard isn't just troubling for its evidence of media bias; it serves to shift the judicial system to the left. Conservatives uphold the laws; liberals undermine them when it serves their political purposes. This is a problem that goes far beyond matters like the New Black Panther Party, a case that the mainstream media can easily dismiss pace Thernstrom. There needs to be scrutiny of how the Obama administration is systematically politicizing the Justice Department. One potentially fruitful investigation would be asking how many Federalist Society members were hired by the Honors program in the last two summers.

Around the web, July 26

  • Obama administration made illegal race-based decisions when closing GM and Chrysler dealerships. [Bader @ Examiner]
  • Taxpayers will indirectly fund AIG bailout of trial lawyers. [D&O Diary]
  • More job-killing from the Obama administration, in a "regulatory avalanche" of new obligations and liabilities. [Ogletree Deakins via OL]

  • San Diego lawyer resuscitates Molski strategy of threatening strike suits for ADA violations. [ABAJ]
  • Epstein and Yoo on liberal bias in law schools. I'll happily be a datapoint for the proposition that there exist conservatives who "don't want to go through the hassle of a biased hiring and promotion process." [Ricochet]
  • The mistrust industry. [Ribstein @ Forbes]
  • Beatles tribute band sues another Beatles tribute band for imitation. [Post @ Volokh]
  • Pharmaceutical industry loves Harry Reid these days. Which makes me considerably less inclined to speak out when the Reid-led Congress decides to give trial lawyers additional tools to sue the industry; for all I know, that was just part of the deal PhRMA cut for itself. [Timothy Carney @ DC Examiner]

They may spell it "overcriminalisation," but the British newspaper takes the problem on in two freely accessible pieces from this week's print issue. The cover story, "Rough Justice," critiques both the expansion of American criminal law and the size of its penalties. Money quote:

IN 2000 four Americans were charged with importing lobster tails in plastic bags rather than cardboard boxes, in violation of a Honduran regulation that Honduras no longer enforces. They had fallen foul of the Lacey Act, which bars Americans from breaking foreign rules when hunting or fishing. The original intent was to prevent Americans from, say, poaching elephants in Kenya. But it has been interpreted to mean that they must abide by every footling wildlife regulation on Earth. The lobstermen had no idea they were breaking the law. Yet three of them got eight years apiece. Two are still in jail.

A companion piece, "Too Many Laws, Too Many Prisoners," tells the story of George Norris, a 65-year-old Texan who spent 17 months in federal prison for a paperwork violation on some orchids he sold to an undercover federal officer. His orchid business was largely a hobby -- he had never profited more than $20k per year -- but neither this nor his age prevented the feds from sending three trucks full of flak-jacketed, armed men to detain him and search his home. Norris' subsequent arrest mystified his fellow federal jailbirds:

In March 2004, five months after the raid, Mr Norris was indicted, handcuffed and thrown into a cell with a suspected murderer and two suspected drug-dealers. When told why he was there, "they thought it hilarious." One asked: "What do you do with these things? Smoke 'em?"

Both pieces are worth a read.

The Times has an interactive poll that supposedly matches up one's opinions with the Supreme Court's, but, remarkably, every single question misrepresents the issues in front of the court. For example, it poses the question of Heller as "In general, do you agree or disagree that an individual should have a right to have a registered handgun at home?" But that's not the question the Court was confronted with: the Court decided whether the Constitution protects such a right. There's no "should" about it. By treating the judicial branch as a superlegislature making policy decisions divorced from legal considerations, the Times assumes that all judges are judicial activists.

Around the web, July 24

  • Eleventh Circuit: Engle tobacco case only applies to claim preclusion, not issue preclusion. [Brown v. R.J. Reynolds; Forbes; Bashman]
  • Daniel Schwartz suggests that the Second Circuit decision in District Lodge 26 v. United Tech. Corp. dampens the business judgment rule, but I don't find it as scary. Pratt & Whitney signed a bad collective bargaining agreement that obviated their ability to use business judgment in the future, and the court said as much when enforcing that CBA. Could it apply to employment contracts? Absolutely—which is why executives with for-cause employment agreements can walk away with small fortunes when a board of directors uses its business judgment to fire them. That the court rejected a Pratt & Whitney's erroneous use of the business-judgment defense shouldn't worry those who appropriately use that doctrine.
  • "Persuade me that this is about securities fraud rather than politics." Dell benefits from the "Apple Rule": the government doesn't come down like a hammer on popular CEOs. [Ribstein]
  • Slate calls for Ken Feinberg to ignore the law and turn the $20B BP claim fund into an all-purpose slush fund. [Slate]

  • Innocent identity theft victim can't get himself from Washington state sex offender registry. [Greenfield]

  • Rep. Alan Grayson attempts to have standing requirement removed in DC consumer protection law. [PLF via OL]
  • How does progressive darling Elizabeth Warren interpret data? [Wright, compiling links; McArdle]
  • Let's put the Shirley Sherrod story in the proper context before it gets reinterpreted by the media. [Examiner]
  • iPhone saves client from erroneous bench warrant. [iPhoneJD]

An entrepreneur has formed a company called Righthaven to purchase the right to sue infringers of newspaper copyrights, using the threat of huge Copyright Act damages—$150,000 an infringement—in the hopes of generating quick settlements. It has brought eighty suits to date against websites that have copied Las Vegas Review-Journal stories verbatim, but, one defendant alleges, doesn't always follow the takedown notice procedures of the Digital Millennium Copyright Act first. [Wired; LVRJ; LVRJ (h/t CC)]

On the radio this morning

I'll be discussing the Obama administration's suit against Arizona this morning on several radio stations.

WREC Memphis, TN 0710AM ET
WCHV Charlottesville, VA 0720AM ET
WHAS Louisville, KY 0740AM ET
WOC Davenport, IA 0750AM ET
WRVA Richmond, VA 0807AM ET
WTVN Columbus, OH 0815AM ET
WNYM New York, NY 0825AM ET
WILM Wilmington, DE 0835AM ET

Arizona's motion to dismiss gives a nice overview of the statute and the emptiness of the federal claims. The preemption claim looks increasingly laughable: 8 U.S.C. § 1357(g)(10) authorizes local authorities to make immigration arrests; 8 U.S.C. § 1373(a) mandates that the federal government provide to state and local authorities, upon request, the "immigration status, lawful or unlawful, of any individual"; the bill's penalties are parallel with those in federal law.

The Albany Law Review publishes what looks to be a remarkable satire of leftist law review articles, but for the resume of the author that indicates that, no, this is actually the thought process of a tenured law professor. (h/t A.S.):

Consider the Chandrasekhar Limit as a jurisprudence: Death appears as a peculiar shadow, a one-way surface, an event horizon. There is no exit, just a dearly-departed-shaped nothing. Some things are worse than death. How dark can it be? What is the blackness of blackness? The black hole of science and of the fiction of science has a one-way surface, an event horizon, into which objects can fall, but out of which nothing comes, not even light. Is death like this? And what could be worse? Is there a death that is more--and therefore worse--than death? Primitive accumulation is mass murder beyond the limit.

Around the web, July 22

  • Fifth Circuit: Reasonable to dismiss individual Vioxx MDL cases where plaintiffs failed to produce supporting expert report. [Wajert]
  • Third Circuit tightens standard for class certification in settlement classes. (Congratulations to blogger Howard Bashman, who argued the appeal.) [Legal Intelligencer; Sullivan v. DB Investments]
  • Only eight out of 149 entry-level law-school tenure-track hires in 2005, 2007, and 2009 were identifiably conservative. Jim Lindgren comments @ Volokh. [NLJ; Spencer & Phillips @ SSRN]
  • No charges in politically-motivated investigation of politically-motivated firings of political appointee U.S. Attorneys. [AP/Fox]
  • Anonymous support for DISCLOSE Act, which will restrict anonymous speech. [Center for Competitive Politics via IJ]
  • Five myths about the death penalty. [WaPo]
  • Canada moves toward a free-market health-care model. [Gratzer]
  • The ultimate NHTSA defect safety complaint. [Fumento via Overlawyered]

Conrad Black is free

...on bail during appeal in the wake of the Skilling decision. [Globe and Mail]

I wrote about the case for the American Spectator in 2008.

Wednesday, MI's Marie Gryphon wrote about the Skilling case for the National Law Journal.

Tuesday, the Center for Class Action Fairness filed its opening brief appealing the approval of a class action settlement against AOL.  CCAF (which is not affiliated with the Manhattan Institute) focused its appeal on the problematic cy pres award in that case:

Silicosis mass tort fraud update

There are between 5,122-5,831 individuals with silicosis claims in a consolidated mass tort litigation in Harris County, Texas. But in 2005, the Texas legislature passed a law requiring such claimants to provide medical evidence of a "minimum level of impairment."

The results? Only 54 of the over 5000 plaintiffs even attempted to meet the standard—and only 21 of those 54 actually did so. [Legal Newsline]

In other words, over 99% of the lawsuits brought were meritless, but without tort reform, the lawyers would have overwhelmed defendants and effectively stole from the innocent in the resulting settlements. And with such a guaranteed cash cow, there would be more than 5000 plaintiffs: new suits dried up once standards were established.

But don't count on any of the trial lawyers involved being brought to justice for their attempted fraud on the court.

Sean Wajert tells us of a remarkable failure-to-warn case, Steven Morris v. Harley-Davidson Motor Co., et al., No. 3:09-cv-74 (M.D. Ga.).

Harley-Davidson's warnings included:

  • A warning in the owners' manual that exceeding the Gross Vehicle Weight Rating of 420 additional pounds over curb weight can affect stability and handling, which could result in death or serious injury.
  • An explanation in the owner's manual that the Gross Vehicle Weight Rating is the sum of the weight of the motorcycle, accessories, and the maximum weight of the rider, passenger and cargo that can be safely carried.
  • GVWR is shown on the information plate located on the frame steering head.
  • A warning in the owner's manual stating "Do not pull a trailer with a motorcycle. Pulling a trailer can cause tire overload, reduced braking efficiency and adversely affect stability and handling, which could result in death or serious injury."
  • A warning inside the storage compartment on the back end of the motorcycle that overloading the comparment with too much weight could cause loss of control and death or serious injury.

The 250-pound Morris, however, never read the Owner's Manual, and claims not to have seen any of the warnings on the bike itself. So when he took his 204-pound wife for a ride on his Ultra Classic motorcycle while pulling a trailer, and had a crash that killed his wife and injured himself, he blames Harley-Davidson Motor for "failure to warn." Silly enough, but the fact that the court has let the case proceed demonstrates that the legal community misunderstands the English-language concept of "failure." It's not clear what Harley could have done differently other than put its purchasers through a mandatory five-hour class.

Of course, the real-world reason that people don't read their owner's manuals is because failure-to-warn litigation has overloaded the manuals with pointless and obvious warnings, making the manuals bulky and intimidating. If owner's manuals could focus on the most important issues without fear of liability for failure to include everything, people would be more likely to read them and pay attention to the warnings. Just another way that trial lawyers have put profits ahead of people.

Popcorn lung suit dismissed

The plaintiff had relied upon faulty expert testimony of Dr. David Egilman, whom we have previously seen on this site regarding Vioxx, Zyprexa, Neurontin, and his own litigation against defense attorneys. [National Law Journal via Scheuermann]

Atrazine litigation in Madison County

I'm quoted in a Legal Newsline piece about Baron & Budd and Korein Tillery class actions in Madison County over alleged seepage of the herbicide atrazine into the country's water supplies.

The suits seem meritless: "if a 150-pound adult drank literally thousands of gallons of water with atrazine at three parts-per-billion every day for 70 years, she still would not reach the exposure level at which no adverse impact has been detected in the laboratory." The EPA just re-registered the herbicide in 2006 after a twelve-year review of 6000 studies showing no evidence of carcinogenic effect, and the three-parts-per-billion safety standard has a thousand-fold safety factor.

The effects on agriculture and the economy if the lawsuits succeeded would be enormous; a huge chunk of the country's grain production is reliant on atrazine to maximize yields. A study by a University of Chicago economist, Don Coursey, found that there would be 21,000 to 46,000 jobs lost; one presumes food prices would rise substantially if we lose $2 billion of crop yields.

That's not just the US economy at stake. The price spike in grains in 2007-2008 caused by the rise in the price of oil and world biofuel policy diverting grains to ethanol production is blamed for a world food crisis that caused political unrest in dozens of nations and was responsible for who knows how many thousands of starvation deaths. It could happen again. Just another example of trial lawyers putting profits ahead of people.

See also Hudson Institute's Center for Global Food Issues and a farmers' organization blog on the subject, though with 161 Facebook followers as of early Monday morning, it's not exactly a cause that's going viral.

Around the web, July 19

A California legislator has sponsored a bill to end serpentine's status as state rock because of its (thin) connection to asbestos-related illnesses, legislation that has now passed the state Senate. A common reaction is expressed in this Imperial Valley Press editorial:

You've got to hand it to state Sen. Gloria Romero, D-Los Angeles, who obviously knows a burning issue in need of a legislative fire retardant when she sees one. And, really, who can argue with her premise that there is no more pressing matter right now than the fitness of a rock called serpentine to remain as the state's official geological symbol?

After all, it's not as if California has a $20-billion budget deficit to close, overcrowded prisons or underfunded schools teetering on the brink or anything.

The media love these sorts of stories. In a former life as a legislative reporter in North Dakota, I remember excessive attention being paid to a state fossil, state horse and state dance. But in those cases, the advocacy was parochial, promotional and ultimately harmless, e.g., "If we declare the Nokota the state horse, more people will want to visit Emmons County."

In this case, the national story (even international) story warrants attention because the legislation is another clever attempt to expand asbestos-related liability and litigation. The Asbestos Disease Awareness Organization helped write the bill, and the Consumer Attorneys of California are pushing it -- no matter that when asbestos does occur in naturally occurring serpentine, it poses no realistic risk to anyone's health.

Dan Walters, the Sacramento Bee columnist, summarizes:

Were S.B. 624 to become law, declaring serpentine as carcinogenic, it could widen the opportunities for lawsuits against owners of property with naturally occurring outcroppings of serpentine. And it's become a new skirmish in the perennial war between personal injury lawyers and the business-backed Civil Justice Association of California.

"I've heard that personal injury lawyers will leave no stone unturned in their hunt for new cases, but this is ridiculous," said John Sullivan, the association's president.

Could purely symbolic resolutions really serve the goals of the litigation industry? Last Wednesday the U.S. House Committee on Oversight and Government Reform reported out H.Res. 771, "Supporting the goals and ideals of a National Mesothelioma Awareness Day." Excerpt:

Whereas workers exposed on a daily basis over a long period of time are most at risk, but even short-term exposures can cause the disease and an exposure to asbestos for as little as one month can result in mesothelioma 20-50 years later;

Whereas asbestos was used in the construction of virtually all office buildings, public schools, and homes built before 1975 and asbestos is still on the United States market in over 3,000 products;

Whereas there is no known safe level of exposure to asbestos;

Etc. We await the TV ads, "Even Congress has declared asbestos a killer, and warns that any exposure can be deadly..."

P.S. Here's the text and legislative history of SB 624. And here's Peter Falk shouting "Serpentine!" From "The In-Laws."

Just a reminder that if you are an attorney or an academic or a reporter that uses PACER, you should also be using the free Firefox "RECAP" extension for your browser.

There were 3000-5000 workers on Dole banana plantations in pre-Sandinista Nicaragua, but trial lawyers were able to find 14,000 plaintiffs to sue Dole alleging that pesticides on the plantations caused sterility. The trial lawyers were able to trick the Tellez v. Dole jury into believing the claims of the fake banana workers. Despite the attempt at a multi-billion-dollar fraud on an innocent defendant, the judge refused to sanction the attorneys involved, and we can guess that the bar association or Obama Justice Department will not get involved, either. [NLJ; AP/WaPo; Corporate Counsel; LA Times; Bloomberg]

Separately, in the same case, the WSJ Law Blog, Hollywood Reporter and Carter Wood cover Jason Glaser, a documentarian who said he was secretly working for plaintiffs' lawyers for $17,000 a month.

Plaintiffs' lawyer lies about Toyota

So: an anonymous blog quotes an unnamed NHTSA official saying that Toyota "planted" the WSJ story showing that NHTSA testing revealed that driver error was behind the reports of sudden acceleration.

Let's assume that the story is true: heaven forfend that Toyota tell the press that evidence exonerates it. Note that the unnamed NHTSA spokesperson doesn't say that the WSJ story is false. She even says that NHTSA knew the Journal was going to run the story. So where's the scandal? Toyota isn't allowed to talk to the press?

Nevertheless, we have a Missouri plaintiffs lawyer attacking me for previously linking to the WSJ story. He claims (without any evidence) that Toyota misled the public, but the report he links to doesn't say that. And he has now imagined "hundreds" of deaths from Toyota "sudden acceleration"—when there aren't even hundreds of fatal accident reports to NHTSA of sudden acceleration (keeping in mind that any plaintiffs' lawyer can make an accident report to NHTSA accusing a vehicle of sudden acceleration). Once again we have plaintiffs' lawyers acting as if it is problematic for a defendant to defend itself when it is being lied about in a smear campaign. Accord Jalopnik.

Without any evidence that the Wall Street Journal story is false (and plenty of empirical evidence that it is true) I see nothing to apologize for. Mr. Brett Emison, however, is in a different position, as he goes out on a limb to make multiple false statements. Assuming no political interference (a not especially-safe assumption in the Obama administration, which has repeatedly politicized science when it served its purposes), don't be surprised when the NHTSA report says exactly what the Journal reported it will.

Update, July 17: Mr. Emison repeats his lie. Recall that he accused sudden acceleration of causing "hundreds" of deaths. He now acknowledges (though doesn't correct his earlier exaggeration) that the maximum accusation is 102—but continues to claim it as "more than 100 deaths reported as caused by sudden acceleration." This is wrong on two counts. First, the 102 number includes the four deaths from the idiosyncratic San Diego floor-mat incident—and as tragic and avoidable as that accident was, it was not caused by an electronic defect. (Amazingly, Emison even makes reference to the San Diego incident in his post, so he knows he's exaggerating.) Second, Mr. Emison is relying entirely on complaints to NHTSA (often made by plaintiffs' lawyers with self-serving falsehoods) to get to the 102 number, so the correct number is zero: there are more than 100 deaths where someone has made a claim of sudden acceleration, but zero where there is credible evidence of sudden acceleration from an electronic defect being the cause.

There are a number of class actions pending where trial lawyers accuse Toyota of causing "economic harm" to Toyota owners because of the reduction in Bluebook value in the wake of the sudden acceleration reporting. Ironically, the entirety of the economic damage is the result of the false hysteria whipped up by dishonest lawyers, either deliberately or with reckless disregard for the truth. If the lawyers in question were truly adequate representatives of the class of Toyota owners, they would be suing themselves.

Ironically, Toyota, even when one includes the 102 deaths in controversy, has one of the best safety records on the road. The hysteria over lawyer-invented claims of sudden acceleration have likely caused many purchasers to switch to less safe vehicles where they have a greater chance of dying in a fatal accident. The phony scandal ginned up by trial lawyers will, at the end of the day, have killed more people than the imaginary electronic defect. Remember: trial lawyer lies don't just steal, they kill. Just another example of trial lawyers putting profits ahead of people.

ESPN sportscaster Erin Andrews has sued the Marriott and Radisson hotel chains for invasion of privacy, for lax security that allowed a stalker to videotape her (through the door's peephole) undressing inside her hotel room. I had raised this possibility in my Torts classroom back when Ms. Andrews' stalker, Michael Barrett, was arrested. Hotels do have affirmative duties toward their guests, and the only real issue at hand will be whether the jurisdiction whose law applies (she is suing in Chicago, but the incidents occurred in Milwaukee and Nashville) allows suits for emotional distress in the absence of physical contact or injury. The complaint alleges that the stalker was able to obtain information about Ms. Andrews' hotel room number by phoning the hotels -- if true, this is clearly negligent.

Here's the story, in the ABA Journal.

Wrapping up its annual convention in Vancouver, B.C., the American Association for Justice has announced its new president, C. Gibson Vance, a  stockholder with the Alabama firm of Beasley Allen. Here's the AAJ's news release, "American Association for Justice Announces C. Gibson Vance as President for 2010-2011."

Like many membership organizations, the trial lawyers group has a standard process through which elected leadership rises through the major offices; Vance went from president-elect to president, succeeding Anthony Tarricone of the Boston firm of Kreindler & Kreindler, P.C.

The interesting development is the election of the Dallas attorney, Mary Alice McLarty of The McLarty Firm, P.C., as vice president. She challenged Richard Golomb of the Philadelphia firm, Golomb & Honick, P.C., who had been slotted in for the post and anticipated becoming president in 2012.(A March 2010 commentary by Golomb ended with the attribution, "Richard Golomb is a founding partner of Golomb & Honik in the firm's Philadelphia office. He is also secretary of The American Association of Justice and will become vice president in July.")

In her campaign statement (since removed from the AAJ's public site), McLarty forthrightly called for addressing the AAJ's membership and financing difficulties:

AAJ has seen a serious membership drop. I will advocate for a new plan for membership recruiting and retention with a regional approach, including a sales force of dedicated AAJ staff, placed around the country working with state TLAs. I will actively participate in this effort.

I will raise money and make sure it's being well spent. While on the Executive Committee in 2008-09, I was one of the first to recognize and advocate for a much needed management change. We need leaders with the judgment to recognize when things aren't working and the courage to speak up.

The pitch toward regional activism and fund-raising must have struck a chord with membership, even as the AAJ increasingly focuses its efforts on Washington, D.C. -- such as lobbying for a tax deduction for contingency fee litigation.

UPDATE (6:49 p.m.): A video of C. Gibson Vance talking up AAJ.

Trial lawyer lobbyist (and now AAJ (f.k.a. ATLA) president CEO) Linda Lipsen ruefully told her annual convention last year that a bill by Senator Specter to give trial lawyers a tax break could not pass as a stand-alone and that it would need to be "tuck[ed]" into another bill. That legislative effort failed: no one wanted to be giving away $1.6 billion in tax money to trial lawyers to bring job-destroying contingency-fee lawsuits in this economy. But Ms. Lipsen, reports Legal Newsline, has good news for the convention this year regardless: the Obama administration is going to do an end-around its own party's Congress by enacting the bill through new administrative tax regulations. See also Dan Fisher @ Forbes, Overlawyered, WLF, earlier on POL.

The issue is the tax-deductability of loans trial lawyers give their clients when bringing litigation. Under current tax law, the loans are treated as loans, and cannot be deducted unless the client does not pay the loan back at the end of the litigation. The tax break would treat the loans as a cost of doing business, and permit deduction immediately—which is, one would think, problematic if state bar associations enforced their own ethical rules, which prohibit lawyers advancing money to clients as expenses except as a bona fide loan. But don't count on any investigations by professional responsibility committees to see whether transactions classified as ethical loans are being called business expenses when reported to the IRS.

That said, if professional responsibility committees won't act, defendants should. Defendants can conduct discovery into whether plaintiffs have received loans from their lawyers, and, if so, conduct reasonable investigations into whether the law firm deducted the "loan" on its taxes the next year. If so, there is a good-faith basis to bring a lawsuit for champerty in many states. (A simple inquiry letter asking the attorney to state under penalty of perjury that they did not deduct the loan on their taxes should be sufficient for Rule 11 purposes to create a reasonable inference to bring a complaint on grounds of information and belief.) Alas, the organized defense bar is probably too cowardly to take that step, and too many corporate general counsels do not insist upon muscular defense representation.

The release of emails from the Scruggs Katrina Group's PR firm shows David Rossmiller getting under the skin of some corrupt lawyers and their PR flacks. See this must-read post from David Rossmiller: the quote in this post title ain't the half of it. It's great to see him back blogging.

A post for Fed Jur buffs only

Parties in a class action agree to submit to the jurisdiction of an Article I magistrate under 28 U.S.C. § 636(c).  Then they settle the case.  Objectors show up, but have not consented to have the case heard by a magistrate.  Does the magistrate still have jurisdiction or does an Article III judge have to weigh in? 

Section 636(c) requires consent by "parties."  Are unnamed class members parties under § 636(c)?  One can't just give the answer of a blanket "no"; the statute and federal rules are silent, and Devlin v. Scardelletti, 536 U.S. 1 (2002), says that class members are sometimes "parties," and sometimes not. 

The problem, of course, is the possibility of heads-I-win/tails-you-lose gamesmanship, with an objector throwing a wrench into the proceedings by protesting after the fact that the court didn't have jurisdiction.  See, e.g., Mark I, Inc. v. Gruber, 38 F.3d 369, 370 (7th Cir. 1994) (vacating final decision of magistrate made after two years of litigation on jurisdictional grounds). To a certain extent, the Mark I problem has been eliminated by Roell v. Withrow, 538 U.S. 580, 590 (2003), which allows a court to infer consent by acquiescence. More worrying is the possibility that an objector in good faith appeals a magistrate's ruling to an appellate court, only to learn that the appellate court does not have jurisdiction and she missed the deadline for appealing to the district court.

It's an interesting academic question, but litigants don't like the uncertainty of academic questions.  It's come up in an objection CCAF (which is unaffiliated with the Manhattan Institute) made, and we've asked the court for clarification--since no one else seems to have even thought of the issue.

Well, perhaps someone did think of it.  A so-called professional objector has the incentive to sandbag, since the business model is to lose at the district court level and then threaten a colorable appeal that would delay the class counsel payday unless paid off; a defendant is likely indifferent to delay.  What astonishes me most, however, is that plaintiffs' attorneys asking the court for $2900/hour, and presumably concerned about "professional objectors" coming in and holding up the settlement and their attorneys' fees, didn't anticipate this potentially fatal flaw.  If the attorneys who think they're worth $2900/hour are missing this basic issue-spotting that I caught, maybe I'm worth $3000/hour and even more underpaid than I thought.  (And in that case, you, loyal reader, have just benefited from $1500 worth of my time.)

Via John Steele, the Ninth Circuit suspends Walter Lack for six months for his role in misrepresenting a faulty default judgment in a foreign court as the real thing. Thomas Girardi, whose name was on the briefs, but denied having anything to do with the actual briefing, got a reprimand. Earlier.

WSJ (h/t C.W.):

The U.S. Department of Transportation has analyzed dozens of data recorders from Toyota Motor Corp. vehicles involved in accidents blamed on sudden acceleration and found that at the time of the crashes, throttles were wide open and the brakes were not engaged, people familiar with the findings said.

In other words, driver error, except in the one-in-a-million instances when a gas pedal was trapped by a poorly-installed floor mat. Will plaintiffs' lawyers who have been conspiracy-theorizing about a non-existent electronic defect withdraw their class actions and product-liability suits, much less apologize? Don't count on it. Earlier.

Around the web, July 13

Around the web, July 12

  • With punitive damages yet to be awarded, jury imposes statutory damages of $613 million on Skilled Healthcare for allegedly failing a statutory requirement of nurse-to-patient ratio, an amount that may preclude an appeal bond if not lowered in the district court. Skilled Healthcare says it disagrees with the verdict, but doesn't deign to tell anyone why, assuring one-sided media coverage. Plaintiffs' lawyer says he wants to change the way nursing homes do business in California, which may well be correct: if statutory damages are close to $20,000/patient ($500/patient/day), one can expect nursing home costs to rise accordingly, but that's a legislative decision to transfer money from patients and taxpayers to lawyers. [Contra Costa Times; LA Times; Reuters]
  • Posner on the financial reform bill. [Bloomberg]
  • A modest proposal requiring legislators to give the same care to legislation as their campaign ads. [WSJ letter via Boudreaux]
  • Elements of Arizona law previously unsuccessfully challenged in Rhode Island (albeit not on preemption grounds). [McCarthy @ Corner]
  • McDonald's takes on the nanny state. [Reason]
  • Defending Iqbal and Twombly. [Rickard]
  • Where's the threatened cascade of corporate money in politics after Citizens United? [Bainbridge]

Another hit-piece on Toyota

An AP story by Jim Muhr lionizes David Gilbert and insinuates Toyota applied improper pressure without fairly reporting the simple fact that Gilbert's claims about sudden acceleration were intellectually dishonest—rather, it simply quotes Gilbert as saying that the refutation was an attempt to pressure him. Given the use of internal university documents without any mention of their provenance, the story was almost certainly hand-crafted and hand-delivered by plaintiffs' lawyers. (Earlier.)

The Fox Business Channel, in addition to last night's televised Stossel show on "The Trouble with Lawyers," filmed a separate audience question-and-answer session with John, me, and guest Crystal Chodes. It's available only on the web:

Topics covered include the reasons for American legal exceptionalism, the cost of litigation, lawyers' political influence, and tort liability for environmental catastrophes like the BP oil spill.

The full televised show is re-running tonight at 10pm EST; Saturday, July 10, at 9pm and midnight EST; and Sunday, July 11, at 10pm EST on Fox Business Channel.

The tort liability price tag for small businesses was $133.4 billion in the US in 2008, according to a new study from the Institute for Legal Reform performed by NERA (press release). The methodology appears to be piggybacking off of the Towers Perrin study.

The $133.4 billion number is both an overestimate and an underestimate. On the one hand, no one is proposing eliminating the liability system entirely, so there is always going to be some baseline of liability expense for business; on the other, this study, like the Towers Perrin study, only measures the direct expense of litigation, and does not measure the indirect expenses that almost certainly overwhelm the impact of the direct expenses. An earlier ILR poll discussed, though did not attempt to quantify, some of these indirect expenses. In 2009, I gave a rough quantification that suggested the costs of excessive liability, once the indirect costs were considered, could easily be more than $600 billion a year.

Stossel, 9pm Eastern tonight

If you don't need to hear LeBron James's announcement live, tonight's show on the Fox Business Channel is entitled "The Trouble with Lawyers," and will feature POL's Jim Copland, Bob Dorigo Jones, Steve Hantler, and Geoffrey Fieger, inter alia. Stossel wrote an op-ed yesterday on the subject.

MI's Diana Furchtgott-Roth discovers a land-mine in Section 342 of the Dodd-Frank bill, which creates 20 fully-staffed Offices of Minority and Women Inclusion to create new employment law requirements in the financial sector.

Right before leaving for its July 4th recess, the House of Representatives passed H.R. 5503, the Securing Protections for the Injured from Limitations on Liability Act, or SPILL Act, the bill to expand and make retroactive liability for offshore accidents, including the BP Deepwater Horizon accident.

The final House version of the bill does NOT include changes to the Class Action Fairness Act that were included in the legislation passed out of the House Judiciary Committee (which we wrote about here and here). Rep. Gerald Nadler (D-NY) and Rep. Maxine Waters (D-CA) both unhappily noted its omission in their floor statements.

Waters (Page H5335):

[While] I fully support H.R. 5503, I am very disappointed that critical amendments to the Class Action Fairness Act (CAFA) as well as my amendment that would have legally nullified BP's original attempts to make their $5,000 payouts legal settlements were taken out of the bill. All we have now is BP's word that they will not enforce these waivers or honor the $75 million liability cap current law provides. However, this is unacceptable.

Nadler (Page H5336):

I do want to say, however, that I am disappointed with a few changes that have been made since the bill passed the Judiciary Committee. A provision to deny the enforceability of ``gag orders'' that reportedly were being used by BP has been removed. Such secrecy agreements only serve to deny the public access to necessary information. And, a common sense change to the Class Action Fairness Act to ensure states could pursue actions on behalf of their own citizens in state court was stripped as well.

Business and civil justice reform groups sent a joint letter to the Judiciary committee on June 23 protesting the original inclusion of the provisions meant to undermine the Class Action Fairness Act.

You have to admire the frankness of Mary Alice McLarty of the Dallas law firm of McLarty, P.C. She's running for vice president of the American Association for Justice and in her statement of candidacy does more to acknowledge the AAJ's membership and financial difficulties than any of the association's current leadership:

AAJ has seen a serious membership drop. I will advocate for a new plan for membership recruiting and retention with a regional approach, including a sales force of dedicated AAJ staff, placed around the country working with state TLAs. I will actively participate in this effort.

I will raise money and make sure it's being well spent. While on the Executive Committee in 2008-09, I was one of the first to recognize and advocate for a much needed management change. We need leaders with the judgment to recognize when things aren't working and the courage to speak up.

Compare that to the statement of the other candidate for vice president, Richard M. Golomb of the Philadelphia law firm of Golomb & Honik, P.C.:

AAJ has come a long way in the past ten months under the extraordinary leadership of Anthony Tarricone. I think, in my own way, I was of help and would like to continue in the leadership of this great organization while serving our members, the civil justice system, and the folks we represent. Let's continue to move forward.

Golomb is currently secretary and is already looking forward to being AAJ president "in the all important election year of 2012."

Insurgent vs. old guard! Founder of a small personal injury firm vs. big-time Philadelphia trial lawyer. It's a great story line, especially if you add the context of the AAJ becoming ever more focused on Washington, hiring its top D.C. lobbyist as its CEO and devoting less energy on state concerns to focus on lobbying Congress and the White House. Golomb's statement prominently notes his role in helping defeat medical liability reform: "At the request of Linda Lipsen and Anthony Tarricone, chairing a $1,200,000 fundraising effort ("Protecting Patients Rights") to help defeat efforts to include medical malpractice "reform" in the Obama Healthcare Reform Bill."

The association's membership meeting and elections are at its annual convention in Vancouver, B.C., which starts this weekend. AAJ members will also be voting on a dues increase to address the trial lawyer association's financial problems.

"Fraud in the air"

POL has previously discussed the role of doctors and lawyers in no-fault insurance fraud. Bruce Cranner of Frilot LLC writes us with news of an interesting lawsuit where an insurance company is fighting back:

GEICO is getting very serious about pervasive and well documented no-fault insurance fraud in New York. In a $1.8 million lawsuit filed in the Eastern District of New York on June 11 GEICO seeks compensatory and punitive damages damages under RICO and New York common law against medical professional companies operating an imaging center on Long Island. Among the defendants are members of the plaintiff's bar and a law firm, which certainly takes a claim for simple medical billing fraud and turns it into a strong indictment alleging true litigation racketeering. In summary, GEICO claims that two physicians, two medical professional corporations, a non-physician (and the medical professional corporations) and (OH!) two lawyers and Long Island Law firm engaged in a scheme to submit false or fraudulent claims for radiology services to GEICO associated with no-fault claims. In my view, the inclusion of lawyers on the defense side of the v. is very, very important. GEICO claims this will be the first of many such suits. Other insurance industry powerhouses are, allegedly, poised to follow the Geico Gekko into the warfare of fraud litigation too. Various estimates suggest that pervasive no-fault fraud in New York is costing policy holders big money; as much as 20% by some reports. The problem is a well documented disaster. But, is no-fault the real issue? Is this a case where the system is broken and truly needs to be fixed? Or, is there something else going on here?

On May 20, 2009, President Obama issued a memorandum to executive branch agencies, instructing his appointees to take a critical approach toward federal preemption of the states in the promulgating of regulations. The memorandum reads like a brief written in support of Arizona's immigration law. Excerpt:

From our Nation's founding, the American constitutional order has been a Federal system, ensuring a strong role for both the national Government and the States. The Federal Government's role in promoting the general welfare and guarding individual liberties is critical, but State law and national law often operate concurrently to provide independent safeguards for the public. Throughout our history, State and local governments have frequently protected health, safety, and the environment more aggressively than has the national Government.

An understanding of the important role of State governments in our Federal system is reflected in longstanding practices by executive departments and agencies, which have shown respect for the traditional prerogatives of the States. In recent years, however, notwithstanding Executive Order 13132 of August 4, 1999 (Federalism), executive departments and agencies have sometimes announced that their regulations preempt State law, including State common law, without explicit preemption by the Congress or an otherwise sufficient basis under applicable legal principles.

The purpose of this memorandum is to state the general policy of my Administration that preemption of State law by executive departments and agencies should be undertaken only with full consideration of the legitimate prerogatives of the States and with a sufficient legal basis for preemption. Executive departments and agencies should be mindful that in our Federal system, the citizens of the several States have distinctive circumstances and values, and that in many instances it is appropriate for them to apply to themselves rules and principles that reflect these circumstances and values. As Justice Brandeis explained more than 70 years ago, "[i]t is one of the happy incidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country."

The document was signed by President Barack Obama.

All oil, all the time

The New York Times this week reported on legislative efforts in Congress to expand liability in the case of maritime disasters, including the far-reaching and retroactive SPILL Act, which we've posted about here. The article, "Calls to Update Maritime Laws," briefly notes the role of the trial lawyers lobby:

With some of the proposed legislation promising bigger payments to victims' families, a lobbying group for plaintiffs' lawyers, the American Association of Justice, is among those pushing for changes. Several lawyers said they have had to turn down otherwise compelling cases because existing statutes can sharply limit recovery -- often in random and scattershot ways.

The AAJ holds its convention in Vancouver, B.C., starting this weekend, and in the annual change of top leadership, succeeding current President Anthony Tarricone will be be the current president-elect, C. Gibson Vance of Beasley, Allen, Crow, Methvin, Portis & Miles, PC in Montgomery, Ala.

Beasley Allen is the most prominent trial lawyers' law firm in Alabama, headed by the legendary former governor, lieutenant governor and still political king maker, Jere Beasley. As Beasley Allen's website make clear, the firm has geared up to be a leader in the flood of anti-BP litigation for the Deepwater Horizon accident and oil contamination. For example, "Beasley Allen files its first lawsuit in Alabama state court on behalf of property owners":

MONTGOMERY, ALA. (July 6, 2010) - Beasley, Allen, Crow, Methvin, Portis & Miles, P.C. has filed a lawsuit in the Circuit Court of Baldwin County, Ala., against British Petroleum ("BP") and several other companies with ties to the Deepwater Horizon oil spill. The firm represents James E. Fisher and Kate C. Fisher, who have incurred damages related to the disaster, including damage to their real and personal property, earning capacity, business income and use of natural resources. This is the first lawsuit related to the BP oil spill disaster to be filed by Beasley Allen in Alabama state court.

The first of many lawsuits, judging from the Jere Beasley Report blog's summary of the firm's strategy in a June 4 post, "Our Firm Will Be Involved In The BP Oil Spill Litigation."

The AAJ is full of factions -- check out the list of litigation groups meeting in Vancouver -- and one wonders whether members might resent having an association President so closely associated with just one line of attack. By making an attorney with Beasley Allen its president, the AAJ is declaring to the world, "Our priority is suing BP."

Other targets may breath a sigh of relief.

Around the web, July 7

  • Appalling scandal of DOJ Criminal overreach in the case of Sergio Masvidal. (I as yet take no position on Masvidal's lawsuit against American Express, though; he's appealing a district court's dismissal.) [Kirkendall; press release]

  • The McSweeney's piece about a young lawyer preventing a foreclosure through his willingness to sit on hold on the telephone for his client has gotten a lot of blogosphere attention, but I'm not sure I see the injustice about a family being forced to leave a home they knew they couldn't afford after lying about their income on the mortgage forms—or the justice of taxpayers subsidizing their staying there. Guess I'm a sucker for living within my means.
  • Vermont AG action gives clues how state AGs will enforce CPSIA. [WLF]
  • Update on H.R. 4678, the Foreign Manufacturers Legal Accountability Act. [Wajert; House hearing]
  • Kagan Vote Tracker. [SCOTUSreport]
  • Racial preferences law in California struck down. [PLF]

So let us get this straight: the Obama administration thinks that when it comes to the manufacture of automobiles or pharmaceuticals in interstate commerce, it is critical to permit individual states to impose liability on design or warning-label decisions made on a nationwide basis, even when those standards are inconsistent with federal regulatory standards, but when it comes to individual state legislature decisions about local law enforcement, it is critical to enjoin that action to prevent a "patchwork" of differing state policies. Talk about upside-down federalism.

Update: DOJ press release, complaint, and supporting brief for preliminary injunction.

Product recall fatigue

The Washington Post describes the phenomenon related to overwarning:

"The national recall system that's in place now just doesn't work," said Craig Wilson, assistant vice president for quality assurance and food safety at Costco. "We call it the Chicken Little syndrome. If you keep shouting at the wind -- 'The sky is falling! The sky is falling!' -- people literally become immune to the message."

(via Wolfman, whose post doesn't acknowledge to what extent Public Citizen and its allies have contributed to the problem, or the public-policy implications for current failure-to-warn law)

Forum-shopping annals: New York citizens sue a pharmaceutical company in state court in Philadelphia; defendants remove to federal court based on diversity jurisdiction.

In the case of Monroe v. Smithkline Beechem Corp., the district court erroneously ordered remand back to state court on June 25 because it decided the citizenship of a limited liability corporation using the legal standard for regular corporations. LLCs are treated like partnerships for purposes of determining citizenship, and the sole owner of the LLC in question is in Delaware. The LLC headquarters are in Pennsylvania, however, and, using the Hertz Co. v. Friend "nerve center" test for corporate citizenship rather than the test for LLCs, the district court remanded; a defendant may not remove a case on diversity jurisdiction grounds when it is brought in the defendant's home state. (The Legal Intelligencer story mentions this issue, but is too polite to note how badly the judge screwed up, and how frivolous the Kline & Specter claim to the contrary was.) This isn't a case where the removal was sloppy, either: I looked up the removal papers, and they plainly set out the GSK corporate structure and the standard for determining citizenship; at worst they can be faulted for not adding a legal citation to that standard, but they shouldn't need the belt-and-suspenders approach (though I bet those attorneys will use it in the future). Remands of removals are not appealable (except in the limited circumstances of Class Action Fairness Act jurisdiction), so unless Judge J. Curtis Joyner decides to correct his appalling legal error on the motion to reconsider, GSK is out of luck.

The Hertz decision raises interesting issues of "voting with one's feet." GSK is based in Philadelphia, where the state courts are notoriously plaintiff-friendly. It seems to hope to avoid removal jurisdiction problems by restructuring as an LLC based in Delaware, and that should work when courts apply the correct legal standards. If LLCs are eventually held to the "nerve center" test, corporations should give serious consideration to whether they should be based in states where the legal systems value the interests of trial lawyers over the public good. One problem tort reform advocates always have is the difficulty of demonstrating benefits from reform. While trial lawyers can always parade telegenic victims (even when, like Lilly Ledbetter, they're not actually victims), it's harder for reform advocates to point to the lives not saved, the drugs not developed, the jobs not created from the expenses of litigation abuse. Business needs to do a better job of publicly tying its decisions to the public-policy considerations involved. Pennsylvania might be much more inclined to rein in its abuses if it knew that thousands of jobs at GSK headquarters were about to decamp to Houston. If the issue of tort reform isn't significant enough to entice a company to vote with its feet, why should legislators care?

(Earlier on the issue of erroneous remands.)

There's been a lot of tort reform blogosphere fuss over the June 22 Forbes article on the Institutional Investor Educational Foundation, which is securities law firm Grant & Eisenhofer's organization for hosting securities law conferences attended at discounted rates by public pension officials. [Overlawyered; American Courthouse]

I personally don't see what's the big deal.

Certainly the Forbes article makes it seem like something shadowy is happening: IIEF is a private LLC (presumably owned by Grant & Eisenhofer), and it thus doesn't have the same transparency as a non-profit charity that files public tax returns as part of its 501(c)(3) requirements. But my thoughts are colored from having gotten on the IIEF mailing list; it's quite clear to anyone who receives its brochures that IIEF conferences are Grant & Eisenhofer marketing devices, and quite clever ones since one pays for the privilege of being marketed to (even if at a discount).

Perhaps the panels are pure propaganda? Perhaps: one the one hand, I was invited to one conference panel, where I spoke freely (if without pay) about problems I perceived in the class action arena; on the other hand, I've never been invited back, so perhaps they made a mistake the first time. (My panel was in a New York hotel's distinctly unglamorous basement conference room.) The audience was, as best I can tell, almost entirely future plaintiffs, so I'm not even sure what my perspective would add to a panel other than entertainment value even if panels are generally stacked to be pro-plaintiff. Other law firms (including defense law firms) sponsor similarly educational gatherings for potential clients that are about as closed to the public than IIEF's, and for one of those that I attend almost every year, I've never seen a plaintiff's lawyer invited.

Don't get me wrong; I oppose pay-for-play. But this doesn't seem to me to come close to rising to that level. Just because the securities litigation system is rife with counterproductive problems and full of rent seeking doesn't mean that every marketing technique lawyers engage in to participate in that rent seeking is inherently evil. The appearance-of-appearance-of-impropriety standard being used to tarnish IIEF is much more likely to get used by the bad guys to undermine good causes like the Foundation for Research on Economics & the Environment's seminars educating judges about basic economic theory.

With little debate and on a voice vote, the House on Thursday passed H.R. 5503, the Securing Protections for the Injured from Limitations on Liability Act, i.e, the SPILL Act. Sponsored by Rep. John Conyers (D-MI) the bill expands liability for offshore accidents, retroactive to Deepwater Horizon accident of April 20, 2010.

In the floor debate (starting on Page H5330 of The Congressional Record), Rep. Conyers noted the presence in the House gallery of family members of those killed in the accident and argued: "We have found that the current state of law regarding these liability issues is outdated, unfair and operates against our national interests.The three key laws all date from the mid-1800s--the Death on High Seas Act, the Jones Act, and the Limitation on Liability Act." Speaker of the House Nancy Pelosi spoke on the floor to add to the emotional appeals.

The bill was considered on the suspension calendar, usually reserved for non-controversial items that require a vote of two-thirds of the House to pass. It looked the the Republicans were wary of being attacked as uncaring apologists for BP, but Rep. Lamar Smith (R-TX), the ranking member of Judiciary, and Rep. Ted Poe (R-TX), both criticized the legislation for unnecessarily rewriting other law. As we've reported previously, the bill undermines the Class Action Fairness Act, and Rep. Poe mentioned other examples of its far-reaching impact:

H.R. 5503 repeals the Limitation of Liability Act, which is a drastic fundamental change in American maritime law. This change would end the longstanding practice in the United States that all maritime claims be determined in one Federal forum.

It also ends the limitation on U.S.vessels owners' liability, a limitation which is in place in virtually every other country in the maritime industry. The loss of this limitation will handicap U.S. ship owners in the competitive world of shipping.

The minority's comments in the House report on the legislation, Rept. 111-521, summarized the objections, starting with the lack of any committee hearing on the legislation before the bill was marked up and sent to the floor for a vote:

The US Chamber of Commerce's amicus brief in the Fifth Circuit case (lead attorney Ted Cruz) over the Obama administration's enjoined moratorium on deepwater drilling is now online, as is Governor Jindal's brief. I'd post the government brief, but they don't make it easy to find.

Kagan and "settled law"

Kagan deflected questions about her opinion on the Second Amendment by phrasing the issue as "settled law." Of course, Sotomayor did the same thing a year ago, and she was one of the four justices in the fervent dissent in McDonald v. City of Chicago—a dissent that made it quite clear that those justices would have overturned the Heller decision. Little surprise that the NRA has finally come out against the Kagan nomination. Note the similar, but substantially more dishonest, equivocation of the White House and Senator Schumer to Politico—Kagan never lied and said that Second Amendment supporters had nothing to fear.

Of course, I don't think justices have to give up the ghost after a 5-4 decision that they think is wrongly decided. But the Judiciary Committee should have done more to challenge what it means to a potential justice for something to be "settled law."

Apollo Group verdict reinstated

The Ninth Circuit reverses a district court decision throwing out a $277.5 million jury verdict. So, let's get this straight: the Ninth Circuit holds that it's simultaneously reasonable for the jury to hold that the securities market didn't adequately process earlier disclosures made by Apollo that it had regulatory issues while at the same time the law was assuming an efficient market on plaintiffs' loss causation theory to preserve class certification. Can't have it both ways: either there's an efficient market permitting loss-causation theories justifying class certification and additional disclosures on the same subject weren't corrective, or there isn't an efficient market and a fraud-on-the-market theory doesn't fly for purposes of class certification. Judge Kozinski, you should know better. One hopes an en banc court or the Supreme Court reverses this travesty. [In re Apollo Group (unpublished), reversing D. Ariz. opinion via D&O Diary; Arizona Republic]

Supreme Court roundup, July 2

The end of the term produced fireworks and fizzles.

Around the web, July 2

  • Heather Mac Donald on stop-and-frisk. [NYT]
  • Dodd-Frank Act penalizes prudence. [Gelinas @ NY Post]
  • No charges for clippings-cutter P.L. Blake in Scruggs bribery scandal. [Clarion-Ledger and Clarion-Ledger via Olson]
  • S.D.N.Y. approves 25% fee on $225 megafund backdating class action settlement in Comverse Technology case. "While it may be that a lower percentage would also be sufficient, this court will not pretend that it has the expertise necessary to divine the ideal percentage." Um, except that's what Rule 23(h)(3) requires you to do. [PSERS objection via NYLJ via WSJ Law Blog]
  • Lawyers scramble for BP claim funds. [WSJ]
  • Toyota wins a consumer-loss class action in California federal court! But on a crank case defect recall, not the big alleged sudden acceleration case. [Jackson]
  • Philadelphia court throws out third-party payor Risperdal claim. [D&D Law]
  • DOJ whistleblower on the politically-motivated decision to drop a case against the Black Panthers. [Wash Times]
  • More on the SF cell-phone regulation. [Cal Biz Lit; earlier on POL]
  • More on Business Roundtable "buyers' remorse" for Obama agenda. [Strassel; earlier on POL]

  • Title IX follies. [Young]
  • The Jones Act saves jobs at a cost to consumers of about $1M to $4M/job, which, of course, means that it really costs jobs. [Juneau Empire]

Copland on Kagan

What does it mean to be "properly deferential" asks MI's Jim Copland in yesterday's Washington Examiner.

Separately, Senator Tom Coburn was the only senator to hold Kagan's feet to the fire. He posed a hypothetical about the limits of the Commerce Clause: can the federal government mandate citizens eat fruits and vegetables every day? Kagan got out of it by endorsing the Supreme Court jurisprudence that the Commerce Clause does not apply to "non-economic activity"—but of course, nearly everything counts as economic activity under the left's version of the Commerce Clause, where all Congress would have to do pass this law is recite "findings" that the failure to eat fruits and vegetables had a deleterious effect on the nation's economy. [YouTube; Politico; LA Times]



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.