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August 2010 Archives

Companies legally spend billions of dollars on advertisements that they hope kids will like. If kids like the ads enough, they may even tell their friends, and the best ads, like Verizon's "Can you hear me now?" commercials, become memes.

But fear not, the trial bar will rescue modern civilization from this disturbing trend by suing deep-pocketed Faceboook for allowing kids to use the software's "like" feature to express their approval of ads they find on the site. Next up: a lawsuit against pizza delivery companies for allowing teens to wear their t-shirts ironically?

Dumb law dept.: Dodd-Frank § 953(b)

Section 953(b) of Dodd-Frank directs the SEC to amend its executive compensation rule (Item 402 of Regulation S-K) to require disclosure of the: (1) median total annual compensation paid to all employees other than the chief executive officer; (2) the total annual compensation paid to the chief executive officer; and (3) the ratio between these two amounts.

This is, at the Financial Times notes, a logistical nightmare. It's also silly: two identically structured corporate pay scales could have wildly different ratios if one simply chooses to outsource all of its low-paid drudgework to outside firms, thus increasing its "median total annual compensation paid to all employees other than the chief executive officer." The major effect will be to deter companies from listing on US exchanges to avoid a pointless and expensive bureaucratic reporting requirement that adds no information to shareholders while driving up costs.

Update: Marc Hodak was ahead of the curve on this in March.

Unpublished letter to the NY Times

To the editor:

Peter Goodman takes issue with Toyota's public relations but offers no alternative. According to Goodman, it would be a pr mistake for Toyota to blame driver error for the panic over "sudden acceleration." But more and more evidence exonerates Toyota and demonstrates that the allegations of an electronic defect were lies driven by self-interested trial lawyers trying to manufacture hysteria. How precisely should Toyota defend itself when faced with a financially-motivated attack on its reputation abetted by an unskeptical media if the truth is insufficient?

"The Assault on the Elected Judiciary"

On September 9, Heritage is holding an event on judicial elections:

Is "Merit Selection" really apolitical, or does it just move the politics behind closed doors? Does elimination of elections create greater judicial independence, or turn our courts over to unelected elites by shutting out the electorate and reducing judicial accountability? Our distinguished panel, including Cliff Taylor, former Chief Justice of the Michigan Supreme Court, and Colleen Pero of Pero Consulting, Inc. will discuss a study by the American Justice Partnership that explores the advantages of judicial elections and exposes the well-financed and ideologically-driven movement to eliminate judicial elections and allow special interests to capture the American judiciary.

My July 2008 post as well as Jim Copland's post on the subject remain valid today, especially since Justice Cliff Taylor—who is speaking at the Heritage event—lost his election campaign.

[H]ere's the simple truth: If someone wants to sue you, they can. Easily, too. And Barbara Loe Fisher, the cofounder and president of the National Vaccine Information Center in Vienna, Virginia, the largest, oldest, and most influential of the watchdog groups that oppose universal vaccination, wanted to sue me. So she did.

Read the whole thing. (h/t J.B.)

Around the web, August 30

"Building a Nation of Know-Nothings"

New York Times writer Timothy Egan is infuriated that so many people think that Obama is a Muslim. It is easy enough to concede the truth: Obama is not a Muslim (though Obama surely has confused the question to voters who do not pay close attention by speaking so often of his Muslim roots). Thus we also must concede that 30-40% or so of Republicans believe something that is factually incorrect—though that number is surely inflated by the very act of the poll-taking. One would imagine a certain number of incorrect responses if the pollster also asked if Obama was Catholic, Mormon, or atheist; one also imagines that a number of voters are identifying Obama as a Muslim as a way to indicate dislike of Obama's policies rather than because that's how they would answer the trivia question posed to them on "Who Wants To Be A Millionaire?"

And so what? It's not like these voters' incorrect perceptions of Obama's religion are affecting civic discourse. These voters dislike Obama because of his policies, and wouldn't be swung to the D column if magically apprised of the truth about his religion. The bottom half of American voters, Republicans and Democrats alike, are ignorant about a lot of civic subjects. 67% of Democrats do not know that the Senate Majority Leader is Harry Reid; 70% of Democrats do not know that the Dow is at approximately 10,000. The difference is that the Times only thinks that examples of Republican ignorance are newsworthy and relevant to our civic enterprise, even though Republicans consistently outscore Democrats in polls testing political knowledge. Egan's bias in his echo-chamber is so ingrained that he doesn't even see that he is assuming that the default right-thinking position is Democratic orthodoxy, and that voters who disagree must be stupid or bigoted or evil.

In another blow to junk-science litigation, the Federal Circuit has upheld the decision by the federal Court of Claims in Cedillo v. Secretary of Health and Human Services. The appeals court determined that the special master's decision rejecting a causal link between autism and vaccines administered under the National Childhood Vaccine Injury Act of 1986 was "rationally supported by the evidence, well-articulated, and reasonable." The full opinion is here.

Surprisingly good news: the DOJ has weighed in on the AEP v. Connecticut certiorari petition, and asked the Supreme Court to reverse the Second Circuit decision permitting Connecticut to sue electric companies for carbon emissions on a nuisance theory. [NYT/Greenwire; WLF]


Update: Jonathan Adler isn't surprised.

Around the web, August 27

  • Intel CEO: US legal environment so hostile that it will cause tech decline. [CNET]
  • $2.2 million for the lawyers, $2080 for the class in California state Wells Fargo class action. [Schonbrun @ HuffPo]
  • WSJ posits that criticism of Feinberg comes from lawyers upset that they're not gettting a bigger slice of the $20B BP fund. [WSJ ($)]
  • The trial bar heads to Iraq. [WSJ ($)]
  • Lawyer recommends disbarment for Judge Joseph Bamberger in Kentucky fen-phen scandal four years after he resigned from bench over it. [Courier-Journal]
  • More on California $21M predatory pricing verdict. [Wright]
  • Eleventh Circuit amicus brief in Cappuccitti v. DirecTV cites Andrew Trask's must-read class-action blog. [WLF; earlier at POL]
  • New York Domestic Workers' Bill of Rights passes in slightly less onerous form than first proposed; includes mandatory overtime for live-in workers. [NLJ]
  • Two BigLaw firms sanctioned $2M for their role in meritless litigation filed by Ron Perelman against his in-laws. Appeals pending. [American Lawyer]
  • Renegade Republican Michigan Supreme Court Justice Elizabeth Weaver resigns shortly before election, which may give benefit to Democratic candidate who can now claim incumbency. [Free Press]
  • The hypocrisy of MoveOn.org. [IJ]
  • Was Blagojevich jury deliberately hung by career Dem as a political move? And did prosecutors decide not to strike this obviously problematic juror for fear of Batson problems? [Ace; Patterico]

My Investors Business Daily piece linked by Ted yesterday was inspired by the latest short update in the Center for Legal Policy's Trial Lawyers, Inc. series, focusing on the environment (see links to right). In addition to Connecticut v. American Electric Power, the report discusses other climate-change lawsuits, as well as environmental torts stemming from the BP Deepwater Horizon spill and toxic torts like those involving MTBE and atrazine.

Brian Bolduc discusses over at NRO.

More: Julian Morris, the executive director of the International Policy Network (and formerly Director of the Environment and Technology Programme of the Institute of Economic Affairs), reacts to the report.

Adam Cohen's head explodes

Adam Cohen's press agent keeps asking us to link to his work, though it consistently denigrates conservatives, often on intellectually dishonest grounds. (E.g., here and here and here and here and here and here.) The latest version of this finds Cohen mystified that a conservative like Judge Alex Kozinski would take a strong stand against government intrusiveness on privacy (through warrantless GPS tracking), though you'd think Cohen might notice a pattern about this after Justice Scalia's 2004 majority opinion in Thornton v. United States against warrantless infrared-sensor searches.

(Update: both Cohen and I forgot to mention that the DC Circuit opinion contradicting the Ninth Circuit opinion Cohen criticizes was written by... Doug Ginsburg.)

Dukes v. Wal-Mart certiorari petition

In a sharply divided 6-5 decision that conflicts with many decisions of this Court and other circuits, the en banc Ninth Circuit affirmed the certification of the largest employment class action in history. This nationwide class includes every woman employed for any period of time over the past decade, in any of Wal-Mart's approximately 3,400 separately managed stores, 41 regions, and 400 districts, and who held positions in any of approximately 53 departments and 170 different job classifications. The millions of class members collectively seek billions of dollars in monetary relief under Title VII of the Civil Rights Act of 1964, claiming that tens of thousands of Wal-Mart managers inflicted monetary injury on each and every individual class member in the same manner by intentionally discriminating against them because of their sex, in violation of the company's express anti-discrimination policy.

The questions presented are:

I. Whether claims for monetary relief can be certified under Federal Rule of Civil Procedure 23(b)(2)--which by its terms is limited to injunctive or corresponding declaratory relief--and, if so, under what circumstances.

II. Whether the certification order conforms to the requirements of Title VII, the Due Process Clause, the Seventh Amendment, the Rules Enabling Act, and Federal Rule of Civil Procedure 23.

Phrased like that, you have to think the Supreme Court is going to grant the petition for certiorari and reverse the lawless Dukes v. Wal-Mart decision. Earlier.

The Los Angeles Times waits until several weeks after the financial reform bill is passed to note the disastrous Maxine-Waters-inspired 42 "Offices of Minority and Women Inclusion" bureaucracy (and, presumably, quota regulations) required by the bill. [LA Times; earlier]

Copland on climate-change suits

MI's Jim Copland is in today's Investor's Business Daily discussing Attorney General Richard Blumenthal's attempt to hijack national environmental policy on carbon.

Around the web, August 25

Nye has details. Take advantage of the next five weeks and let FASB know what a disaster their proposed disclosure rules will be. Earlier.

Suing banks over ATM crime

"Atlanta attorney Melvin Hewitt is on a mission: to hold banks and financial institutions accountable for crimes committed at ATMs and night deposit boxes." Never mentioned in the National Law Journal story is that such liability, combined with jackpot justice, would essentially make ATMs uneconomic. Fortunately, to date, courts have largely rejected such claims, though Hewitt has apparently been able to generate a couple of settlements without ever winning a case. Meanwhile, I saw a 174-word warning at an ATM in Bethesda, Maryland, surely generated in anticipation of suits by lawyers like Hewitt (who disingenuously suggests that all banks have to do is "Put up signage," as if he wouldn't sue over the quality of the signage if a robbery occurred anyway). Such warnings likely increase the chances that I get robbed while standing at an ATM, since I'm standing in one place distracted by trying to decipher if I'm being warned of something that isn't open and obvious.

Overwarning over grilled chicken

PhIP (2-Amino-1-methyl-6-phenylimidazo[4,5-b]pyridine) has been found in cooked meat and fish at concentrations of up to 70 ng/g. This was enough to induce an activist group into suing California restaurants over Prop 65 cancer warnings for grilled chicken; a California appeals court sided on the side of overwarning, despite the lack of evidence that cooking byproduct PHiP has any carcinogenic effect at cooked-chicken levels. [Fisher @ Forbes; WSJ Law Blog; IARC summary; earlier on Overlawyered]

Cincinnati Enquirer on Stan Chesley

If you want a link from this blog, you could do worse than to call me "a brilliant lawyer and polemicist." Bad Lawyer lets us know about Cincinnati Enquirer coverage by Jim Hannah of the Kentucky disciplinary charges we discussed earlier, which apparently include an investigation into another mass-tort settlement with the local Catholic Church diocese. (For the record, I am not "anti-plaintiff"; indeed, my legal practice these days is almost exclusively with plaintiffs ill-served by their attorneys.)

Marc Williams of Nelson Mullins Riley & Scarborough, LLP, the immediate past president of DRI, writes us:

Deposing the CEO

A frequent tactic of the plaintiffs' bar is to insist upon and seek court orders of depositions of high-ranking corporate officials. (To be fair, the same is true in business vs. business litigation, where it's a tit-for-tat tactic that I participated in as a BigLaw litigator. My apologies to the executives I was partially responsible for haling in from Japan.) The deposition serves two purposes. First, by taking a day or two out of a busy executive's schedule, one imposes substantial costs upon an opponent that increases the chance of settlement to get out from under the extortionate discovery burden. Second, and this is especially true in personal-injury cases, a skilled attorney can demonstrate the ignorance of a CEO to the micro-details of decisions made three or more levels below him, and persuade a jury unfamiliar with the structure of a big corporation that this is evidence of callousness meriting findings of liability and punitive damages. (The government's Enron Task Force shamefully used similar demagogic tactics in their prosecution of Ken Lay and Jeff Skilling.) The problem for defendants is exacerbated because it's often difficult for a defense attorney to get on an often-overconfident executive's calendar to adequately prepare him or her for the deposition.

Two recent opinions see through this tactic for what it is, and decline to compel so-called "apex" depositions. Sean Wajert discusses the Michigan case Alberto v. Toyota Mot. Co. (Mich. App. Aug. 5, 2010); and Judge Easterbrook's opinion similarly declines to find error in a district court refusing apex depositions in FM Industries v. Citicorp Credit Svcs. (7th Cir. Jul. 22, 2010):

This was extortionate discovery, the kind a litigant undertakes when it hopes to be paid to go away and spare opponents the expense of vindicating their rights. FM Industries' attempt to force Charles Prince, then the chairman of Citigroup's board of directors, and Sanford Weill, his predecessor, to submit to depositions, even though they had nothing to do with Citicorp's use of TUCANS, is further evidence that FM Industries and its lawyers were engaged in an abuse of legal process.

An early-offer/full-disclosure system may have reduced medical malpractice costs for the University of Michigan Health System in the last decade, but I find it hard to ascribe a great deal of confidence in the small-sample results because medical-malpractice results are "lumpy": all it takes is one outlier (or even just moderately right-tailed) jury verdict in the 1995-2001 timeframe before the apology system was put into place to completely distort the results. If anyone has a link to an ungated version, I'd love to see if this was a factor and/or acknowledged. [AIM abstract; WSJ Health Blog]

Regardless, it's probative evidence: it's entirely possible that early settlements plus the signaling that the hospital will quickly settle meritorious claims reduces the friction of litigation expenses (in part by deterring the meritless suits) so that total costs go down even as errors that previously would have been undetected result in settlements. And even if full disclosure did turn out to marginally increase litigation costs, one would expect it to result in more money going to pay compensation and less money to pay lawyers, as well as to improve the quality of medical care by discouraging defensive medicine, so that might well be a worthwhile tradeoff. One hopes that we see more institutions bravely experiment like this.

Around the web, August 20

  • More shenanigans in the Skilled Healthcare $671 million verdict: apparently one of the jurors is friends with one of the plaintiffs (the plaintiffs deny this). [Bloomberg]
  • Is Sholom Rubashkin's 27-year sentence just? [NLJ]
  • Et tu, Bobby Jindal? Louisiana governor retains Baron & Budd in BP litigation, which pretty much means that Louisiana taxpayer dollars will be funding Democratic candidates. [Fisher @ Forbes]
  • Second Circuit reaffirms Judge Weinstein's decision in the Egilman/Zyprexa protective-order end-around. [WLF]
  • Massachusetts federal district court rejects settlement involving entirely unrelated cy pres slush fund. [Class Action Defense]
  • Kansas federal district court rejects Costco fuel settlement providing $0 for the class and $10M for the attorneys, if not for that obvious reason. [CCAF]
  • The convoluted law of set-off in California. [Toxics Defense]

Branham v. Ford $31M verdict overturned

In 2006, I wrote:

In May 2001, Cheryl Jane Hale was driving four children to a sleepover in her 1987 Ford Bronco. She didn't bother to have the children wear their seat belts, so, when she took her eyes off the road to argue with the backseat passengers, and thus drove off the road and flipped the car, 12-year-old Jesse Branham was thrown from the car and suffered brain damage. A jury in Hampton County, South Carolina (the second jury to be impaneled--the first one was dismissed in a mistrial when it was discovered after two weeks of trial that five of the jurors were former clients of Branham's lawyers) decided that this was only 45% Hale's fault, held Ford 55% responsible, which puts Ford entirely on the hook for $31 million in damages.

On Monday, the South Carolina Supreme Court reversed because of prejudicial closing arguments that relied heavily on inadmissible evidence. More importantly for lawyers practicing in South Carolina, the Court adopted "the risk-utility test with its requirement of showing a feasible alternative design."

How bad of a judicial hellhole is Hampton County? Though Hale was a co-defendant, she cooperated with the plaintiffs throughout the trial in their case against Ford, even sitting at the plaintiffs' table; but because the judge classified Hale as a co-defendant, it meant that Hale got half of the peremptory challenges of the "defense." More from Comer; no press coverage that I've seen yet.

I've long wondered why Stan Chesley, who walked away with over $20 million of a $200 million settlement where the vast majority of the proceeds were siphoned away from the putative clients for the benefit of the attorneys and the presiding judge, did not face the criminal and disciplinary charges of his co-counsel, even though he was counsel of record on the case for years. Dan Fisher reports that some chickens are finally coming home to roost. The case got some attention because the two Kentucky lawyers eventually convicted of fraud used some of the ill-gotten gains to purchase the future two-time Horse of the Year Curlin. Earlier on Overlawyered.

WSJ: "FASB's Tort Bar Gift"

The perfect crime

If there's somebody you want to murder, there's apparently still time to buy a Toyota (any model, apparently), run over them at high speed, and then call this guy, whom the National Law Journal interviews unskeptically. I'd only try this once, however, because even Robert Hilliard might get a little suspicious if you were a "victim of sudden acceleration" twice. Earlier on Koua Fong Lee, whose 1996 Toyota Camry isn't even subject to recall. I'm almost regretting speaking out on the issue and passing up the chance for my one free kill.

Randy Maniloff has a new paper on bad-faith insurance claims in the August 5 issue of Mealey's Emerging Insurance Disputes. I discussed the issue with Marie Gryphon here.

The documentary "Capturing the Friedmans" was an astonishing tale of a Long Island family caught up in a 1980s child-sex-abuse prosecution hysteria. One of the participants, Jesse Friedman, petitioned the federal courts for relief, but was ineligible for habeas corpus; still, the Second Circuit was critical of how Nassau County law enforcement handled the case. [NY Times; Bernstein @ Volokh]

Michael Cernovich is less sanguine about the quasi-happy ending.

Update: CNN reporting (via ABAJ) that Nassau County prosecutors are investigating reopening the case.

In the 1998 case of Felzen v. Andreas, the Seventh Circuit suggested that it was looking for an opportunity to take action against derivative shareholder strike suits, suits where a shareholder purportedly sues on behalf of the corporation, but in reality is seeking legal extortion to drop the suit:

Rule 23.1 provides for notice to shareholders only in the event of dismissal or settlement, so that other investors may contest the faithfulness or honesty of the self-appointed plaintiffs; we do not doubt that this monitoring is often useful and that intervention to facilitate an appeal could be justified. Many thoughtful students of the subject conclude, with empirical support, that derivative actions do little to promote sound management and often hurt the firm by diverting the managers' time from running the business while diverting the firm's resources to the plaintiffs' lawyers without providing a corresponding benefit. Janet Cooper Alexander, Do the Merits Matter? A Study of Settlements in Securities Class Actions, 43 Stan. L.Rev. 497 (1991); Reinier Kraakman, Hyun Park & Steven Shavell, When are Shareholder Suits in Shareholder Interests?, 82 Geo. L.J. 1733 (1994); Roberta Romano, The Shareholder Suit: Litigation Without Foundation?, 7 J.L. Econ. & Org. 55 (1991); Mark L. Cross, Wallace N. Davidson & John H. Thornton, The Impact of Directors' and Officers' Liability Suits on Firm Value, 56 J. Risk & Insurance 128 (1989); Daniel R. Fischel & Michael Bradley, The Role of Liability Rules and the Derivative Suit in Corporate Law: A Theoretical and Empirical Analysis, 71 Cornell L.Rev. 261 (1986). The two shareholder-appellants in this case believe that the modest settlement, half of which will be paid to counsel, exemplifies this problem.

Unfortunately, the appeal in Felzen was thrown out on technical grounds, and no one has taken up the challenge, perhaps because it's more lucrative to agree to be paid off for withdrawing an objection to a bad settlement than for successfully challenging the bad settlement.

Until now. Plaintiffs brought a meritless derivative-shareholder suit over an alleged technical violation of the Clayton Act; the corporation found it cheaper to pay the plaintiffs' attorneys $925,000 to go away than to defend the suit. But the shareholders get nothing, so they're worse off because of the litigation.

Unfortunately for the plaintiffs, not only did they sue in the Northern District of Illinois, they sued a corporation, Sears Holding Corporation, where I own shares. After attempting to foreclose objections by mailing out notice three days before objections were due, the parties agreed to a new notice schedule, and I have moved to intervene and dismiss the action for failure to meet the Rule 23.1(a) standard for shareholder representation. The case is Robert F. Booth Trust v. Crowley, No. 09-5314 (N.D. Ill.) and the fairness hearing is August 27 in Chicago. (The Manhattan Institute is not associated with this litigation.)

Judge Posner opinion on overwarning

The Seventh Circuit finds preemption in a case involving Children's Motrin, but also, interestingly, that additional warnings could not be said to be merited because the "resulting information overload would make label warnings worthless to consumers." Drug and Device Law has extensive details, and the case is interesting for many other reasons.

Robinson v. McNeil Consumer Healthcare, __ F.3d __, No. 09-4011, slip op. at 14-15 (7th Cir. Aug. 11, 2010) (Posner, J.) (citing Troy A. Paredes, "Information Overload and its Consequences for Securities Regulation," 81 Wash. U. L.Q. 417, 440-43 (2003); Howard Latin, "'Good' Warnings, Bad Products, and Cognitive Limitations," 41 UCLA L. Rev. 1193, 1211-15 (1994); Richard Craswell, "Taking Information Seriously: Misrepresentation and Nondisclosure in Contract Law and Elsewhere," 92 Va. L. Rev. 565, 583-85 (2006); and Mark Geistfeld, "Inadequate Product Warnings and Causation," 30 U. Mich. J.L. Reform 309, 322 (1997))

A new study by Carol Kane from the AMA counts the number of suits doctors have faced, and finds that 61% of doctors over 55 have been sued in their lifetimes, raising the med-mal insurance rates of the other 39%. [American Med. News]

I think the 61% number has some marginal relevance. In the med-mal debate, I keep hearing claims like "Good doctors don't get sued" and "The vast majority of claims are paid by a small percentage of doctors." (The latter is trivially true, but is a meaningless statistical artifact without predictive power in the med-mal context.) When the majority of doctors face medical malpractice lawsuits (90% when one narrows it to oft-sued specialties like surgery), it suggests that doctors are getting sued for practice, rather than malpractice.

Chamber of Commerce on FASB 5

The Chamber explains in detail why FASB 5 is a very bad idea that will simply encourage litigation. Earlier.


A bowdlerized version of the 1995 sleezy thriller, "Jade," showed up on local television over the weekend. (This is the movie that turned David Caruso into a superstar.) An amusing scene involves Gov. Lew Edwards (Richard Crenna) being shown incriminating photos by Caruso's character, the local prosecutor, David Corelli.

Edwards: If you drag me into this, David, if my name even shows up on the periphery of this, you better get the **** out of California because you'll have as much future as Jerry Brown.

Corelli: Who's Jerry Brown?

President Obama on Tuesday, Aug. 10, signed into law H.R. 2765, the Securing the Protection of our Enduring and Established Constitutional Heritage Act, or the "SPEECH Act." As the House Committee report summarizes, the law is supposed to discourage plaintiffs from going to foreign courts in which it is easier to sue authors for libel, Britain being the most common example:

H.R. 2765 is intended to dissuade potential defamation plaintiffs from circumventing First Amendment protections by filing suit in foreign jurisdictions that lack similar protections. Specifically, the bill amends title 28 of the United States Code to add provisions to prevent U.S. courts from recognizing or enforcing a foreign defamation judgment when (1) such judgment is inconsistent with the First Amendment; (2) enforcement would be inconsistent with Section 230 of the Communications Act of 1934, providing immunity for interactive computer services from suits based on content hosted by such services; or (3) the foreign court's assertion of personal jurisdiction over the defamation defendant is inconsistent with the due process standards of the United States Constitution. H.R. 2765 also contains a fee-shifting provision that allows a court to award a reasonable attorney's fee to a party that successfully resists recognition or enforcement of a foreign defamation judgment based on one of the grounds enumerated in the bill.

Publisher's Weekly reports the background: "Libel tourism came to international prominence in 2005, when Saudi billionaire Sheikh Khalid bin Mahfouz sued New York-based author Rachel Ehrenfeld in a British Court over her book Funding Evil. Even though the book was not published in the U.K., 23 copies purchased via the Internet provided Mahfouz with enough grounds to sue Ehrenfeld in England, where libel judgments are easier to obtain. Ehrenfeld refused to participate in the proceedings, was ordered to pay £10,000 and legal costs. In response, New York and five other states passed their own libel tourism laws."

From The Guardian blog (U.K.), "Obama seals off US journalists and authors from Britain's libel laws." See also earlier POL post.

Via Chamblee Burch and Solum, David Rosenberg and Luke McCloud have written a paper proposing that the "problem" of nationwide federal diversity class actions where there are differences in state law that would normally preclude class certification be resolved by a judicially-created "average law," whereby the rights of class members subject to plaintiff-friendly state laws be abrogated to benefit class members who are subject to state laws that are not as plaintiff-friendly. The paper claims to "refute objections to using the average law approach" without once mentioning the Rules Enabling Act, 28 U.S.C. § 2072(b), and its provision that judicially-created procedural rules "shall not abridge, enlarge or modify any substantive right."

Now, if Rosenberg wants to argue that Erie was wrongly decided and there are sound reasons for application of federal common law in federal diversity cases, I'd be sympathetic to that claim, though Erie is so ingrained in our constitutional DNA that I've found even some of the most ambitious conservative constitutional scholars are loathe to question it. And if Erie is to continue to be applied to individual diversity cases, I fail to see how it does not preclude the Rosenberg proposal.

And Rosenberg's "average law" isn't even "federal common law." Rosenberg proposes "statistical sampling" to get to the right result, but that presupposes that individual state laws are one-dimensional algorithms where one plugs in a set of class members and a defendant's actions and the result spits out "$100" or "$200" or some other damages number—never mind that even in the single-state single-law scenario, there are often substantial factual disputes. The paper doesn't explain the practical realities of how, for example, one averages differing states' conceptions of reliance in consumer fraud cases or different statutes of limitation or different unjust enrichment laws or different scienter requirements. These are frequently binary variables not conducive to analog averaging. How can the "average law" be resolved on a summary judgment motion, much less at a manageable jury trial? How does one construct a jury instruction for 72% reliance?

If the answer is "No, no, we're proposing to hold several dozen individual trials, and then aggregate the results across the class," that holds its own problems. In a class of millions, one would need hundreds of trials to avoid the small-sample problem; even if one is satisfied with a "sample of 50 claims" (p. 23), why is statistical-sampling-of-dozens-of-claims-in-a-single-class superior to refusing to certify a class unless it is broken up into multiple subclasses?

I saw her quoted on television complaining about the length of credit card contracts being "tricks and traps," and it's apparently a regular talking point:

In 1980, according to the Wall Street Journal, the typical credit card contract was about a page and a half long. It told you about the interest rate, about being late and that was pretty much it. Today, the typical credit card contract according to the Wall Street Journal is about 31 pages long. So, tricks and traps? It's that other 29 and a half pages.

To which I respond, "No, Professor Warren. The reason that credit-card contracts are 31 pages long is because your trial-lawyer buddies persistently sued credit-card companies for failure to disclose, and the lawyers kept making them add more and more to credit-card contracts to settle past or avoid future lawsuits. And all of this could have been avoided if you permit credit-card customers to opt out of the expensive and inefficient legal system that requires such overdisclosure, except your future Consumer Financial Protection Bureau is almost certain to bar consumer choice to agree to arbitrate these disputes."

Perhaps if Warren is appointed CFPB head, she'll require credit-card contracts to be a page and a half long again—and then start a new cycle of state-law class actions complaining about failure to disclose and arguing that CFPB regulations don't preempt those lawsuits. That'll surely make lawyers better off; consumers, not so much.

Judge Barbier, the MDL judge for Deepwater Horizon (BP) oil spill cases, spoke today at a Louisiana trial-lawyer conference. Nothing inherently wrong with that, but it creates unneeded controversy when they refuse to let the press in, even when the reporter offered to pay the $424 fee. I'm quoted in the Louisiana Record story on the controversy.

In 1994, Judge G. Ross Anderson recused himself from further participation in Cameron v. General Motors Corp. because of the content of remarks he made at the 1993 South Carolina Trial Lawyer's Association Auto Torts Seminar held in Atlanta, Georgia. I have no blanket objection to a judge speaking to a group of trial lawyers or defense lawyers. The panel discussion where Judge Barbier spoke does have a fairly neutral description; one hopes that the content of Judge Barbier's remarks to the trial lawyers would not provide grounds for questioning his impartiality, and, if Judge Barbier's remarks were as anodyne as I would expect them to be, one hopes that the trial lawyers release those remarks to the public so that Judge Barbier's impartiality is not questioned unfairly.

I just learned of this good April 26 Canadian Business article on the Toyota sudden acceleration controversy; I'm quoted.

BP mass tort fraud

As I've long warned, where there is a mass tort, there is mass tort fraud. Applications for Gulf of Mexico fishing licenses are up 60 percent. This is presumably not because of the economic incentive to fish in the Gulf of Mexico but rather because BP is asking for proof of a fishing license to pay claims for lost fishing income. A source tells the Daily Mail that 10% of the claims could be fraudulent; it's conceivably much more than that.

Around the web, August 13

  • Nonsensical "predatory pricing" case could bankrupt newspaper, reducing competition in San Francisco. [Welch @ Reason via Overlawyered]

  • As a purchaser of Eclipse mints, I am intrigued by this Eclipse class-action settlement where the attorneys are asking for 33% of a $6M fund that is likely to mostly end up in a cy pres slush fund. [Jackson]
  • A postmortem on Burrow v. Arce, a corrupt aggregate settlement, and whether new ALI rules on aggregate litigation would make any difference. [Brickman @ SSRN via TortsProf]
  • New Federal Initiatives Project Paper on Title IX [Schmauch @ Fed Soc]
  • The Democrats have inadvertently performed a beautiful empirical test proving the proposition that increasing unemployment benefits increases unemployment. [Lott]

Perry v. Schwarzenegger standing issue

Judge Walker refused to grant a stay of his ruling in Perry v. Schwarzenegger. At the moment, the California governor and attorney general are refusing to defend Prop 8, and Judge Walker held that the intervenors, the organizations that supported Prop 8, might not have standing to appeal his ruling.

If Perry v. Schwarzenegger ends up standing because of a lack of appellate standing, there will be great irony. Because Governor Schwarzenegger himself would not have been elected governor if not for the same issue of appellate standing being resolved in favor of intervenors.

In 2003, the ACLU and others sued to stop the California recall election of Governor Davis on dubious constitutional grounds. Naturally, Governor Davis and his allies in the attorney general's office refused to defend the suit on more than a perfunctory basis, but the district court permitted the sponsors of the recall to intervene. The district court ruled against the injunction; a three-judge panel of remarkably activist judges reversed and enjoined the election. It was the proponents of the recall (for whom I was one of the attorneys) who successfully moved for en banc review that struck down the injunction, paving the way for Governor Schwarzenegger to be elected. And no one raised the standing question.

Update: Ed Whelan cites to the Prop 8 brief, which pretty clearly demonstrates standing under the conjunction of Karcher v. May, 484 U.S. 72, 82 (1987) and California law in Building Indus. Ass'n v. City of Camarillo (Cal. 1986). I don't know what Judge Walker was thinking. Earlier.

Around the web, August 12

  • NHTSA finally admits that driver error is the reason behind sudden acceleration to date. Meanwhile, in Minnesota, Koua Fong Lee, who killed two people when he drove his Toyota into an Oldsmobile at 70-90 mph, released from prison after blaming Toyota for his accident. [OL roundup; WaPo; see also O'Rourke quoted at Atlantic]
  • FASB resuscitates its horrible "Please disclose your litigation strategy and internal litigation estimates in your public filings so the other side knows how much to demand from you in settlement and can ensure that you pay even more if it goes to a jury trial" proposal. This really isn't getting enough attention. [Cal Biz Lit; Beck]
  • Eleventh Circuit adopts common-sense approach to removal jurisdiction. That's an improvement over its previous contrary-to-logic approach. [Drug & Device Law; Roe v. Michelin N. Am., Inc.]
  • Hearing ordered over Napoli Bern overcharging its clients in 9/11 litigation. [NYLJ]
  • FTC gets the right to manage design of Intel's new chips. (Disclosure: I briefly represented AMD as they were preparing their ultimately successful litigation against Intel, so I can't really speak about this case to the degree I wish to.) [Wright]
  • Oil-spill MDL assigned to former trial-lawyer judge in New Orleans. [WSJ]
  • iPhone evidence saves defendant from false rape charge. [Turley]

Penn & Teller Thursday on vaccines

Penn & Teller's unmentionably named show on the Showtime network does a great job debunking all sorts of matters; tomorrow, they'll turn their attention to the trial-lawyer-driven vaccine controversy that has needlessly put thousands of children at risk.

It's hard to have any sympathy at all for viewers of child pornography -- the author of this note finds such people despicable and deserving of criminal punishment. What about tort liability, though? Does a viewer of a film of a young girl being abused by her uncle, "cause" harm to the girl? That's what a U.S. District judge has decided. Northern District of New York Judge Gary L. Sharpe has ruled that a "consumer" of child pornography is liable for the emotional and psychological damage suffered by sex abuse victims (under 18 U.S.C. §2259(b)(1), which allows awarding compensation for the "care required to address the long term effects of their [victims'] abuse."). This even though the "consumer" viewed the film privately and without the victim's knowledge.

This rejection of traditional notions of proximate cause is being appealed to the Second Circuit. One might have thought that the uncle, who abused his niece and distributed the film of this abuse, is the legal cause of the victim's anguish. That is what the Fifth Circuit ruled in a case involving the same victim. Judge Sharpe, though, held the viewer liable to pay over $48,000 for psychological counselling under a "substantial factor" theory of causation. Under such a rationale, would readers of a defamatory publication be liable to the defamed party? Gven the capability of disseminating illegal electronic images, and given new technology that can trace when such images are downloaded, the ultimate outcome of this case will be very interesting to follow.

This case is reported here at Law.com.

Judge Walter lambastes Lerach

In 2008, I wrote:

In today's NY Times, Joe Nocera lambastes Bill Lerach's lack of remorse and notes that his crimes weren't victimless. To which I would add: given that Lerach's Portfolio defense of his crimes demonstrates that he lied in his sentencing letter to the court and the allocution he made, and given that Lerach got a reduced sentence under the Guidelines for "acceptance of responsibility" because of those false representations, why isn't the government looking to make a criminal contempt or perjury charge? (We'll give John Keker the benefit of the doubt that he didn't know what was in Lerach's heart when he falsely told the court "Mr. Lerach has stepped up and accepted responsibility.") Surely Judge John Walter doesn't condone this sort of thing.

Amanda Bronstad reports:

Walter then cited several recent newspaper articles in which Lerach appeared to indicate that he wouldn't have done anything differently, despite having served a prison sentence, and that the case was simply a "political prosecution."

Lerach "still denies that he did anything wrong," Walter said. "He misled and fooled the court into believing he had remorse at the time of his sentencing." Walter said that he now believes the sentence was "way too lenient" and regretted having accepted Lerach's plea deal.

That answers one of my questions; I'm still wondering where the perjury charge is.

Judge Walter went on to deny Lerach's request to have his corporation-bashing class at University of California-Irvine count towards the "community service" aspect of his plea bargain. Coverage elsewhere before the ruling: Olson; Politico; Main Justice.

Good Budds with President Obama

President Obama attended a Democratic Senatorial Campaign Committee fundraiser Monday at the Highland Park, Texas, home of Russell Budd, president of Baron & Budd P.C., one of the nation's premier plaintiff's firms.

Baron & Budd is also one of the premier law firms trying to cash in on the Deepwater Horizon spill.

The White House pressured BP into establishing a $20 billion escrow fund to compensate people harmed by the oil spill, appointing Ken Feinberg as the independent administrator to manage the fund. Kimberly Strassel interviewed Feinberg for a lengthy piece in last weekend's Wall Street Journal, "Mr. Fairness." In it, Feinberg explained the animating principles behind the fund:

Payout rules will be based broadly on federal oil-spill law and Gulf-state tort law, though they will also be "more generous" than what a court might reward. That approach, he says, will encourage claimants into the fund, foregoing the "long, litigation route" and allowing BP to "corral as many claimants as possible." The overall message, he says, is this: "If we're not going to pay, nobody's going to pay. That's my philosophy on this thing."

Yet President Obama is embracing one of the leading opponents of this approach toward compensation, turning to the litigation industry for campaign cash. It seems ... inconsistent.

More from the Texas Lawyer Blog, "President Obama to break bread with Russell Budd, 90 others at fundraiser":

Bill White, a Houston lawyer who is the Democratic candidate for Texas governor, is not attending the private fundraiser, but Budd says a number of lawyers will be in the crowd, including U.S. Trade Representative and former Dallas Mayor Ron Kirk;  American Association for Justice Vice President Mary Alice McLarty, of Dallas' McLarty Law Firm; and Domingo Garcia of Domingo Garcia P.C.of Dallas. 

News coverage ...

UPDATE (2:15 p.m.): The White House has posted the President's remarks from the DSCC fundraiser here. How strange to attack "special interests" at a political fundraiser hosted by trial lawyers.

AT&T Mobility v. Concepcion

The Ninth Circuit's holding in Concepcion v. AT&T Mobility, barring an arbitration clause that prohibits class actions as "unconscionable," rests upon a belief in the exceptionalism of class actions, namely, that they are a uniquely superior form of dispute resolution the availability of which is necessary to vindicate consumer rights. But, as the Center for Class Action Fairness's experience indicates, class actions are far from an exceptional vehicle for providing consumers with meaningful access to justice.  Yesterday, the Center filed an amicus brief in the Supreme Court case of AT&T Mobility v. Concepcion (No. 08-893) in support of the petitioners.  O'Melveny & Myers attorneys Brian Brooks, Charles Borden, and R. Seth Davis did a phenomenal job with the brief, and we're grateful for their help.  Public Citizen, which ironically represents the anti-consumer/anti-arbitration/pro-trial-lawyer side in the name of paternalism, has a page devoted to the case with links and resources, though the weight of those links and resources is pro-paternalism; the left side of the blogosphere has paid far more attention to this case than the right side.  Among the briefs is one filed by a number of law professors I know and admire, including (but not limited to) Randy Barnett, Henry Butler, Richard Epstein, Michael Krauss, Geoff Manne, Michael Moreland, Larry Ribstein, and Josh Wright; it raises important points about unconscionability and freedom of contract.

(CCAF is not affiliated with the Manhattan Institute.)

CCAF Ninth Circuit appeal - In re Yahoo!

Yesterday the Center for Class Action Fairness filed the opening brief in the appeal of the In re Yahoo! settlement approval. We make a process argument--the district court gave no reasoning for its decision, which by itself requires remand--but we also argue the substantive issue that no court could reasonably approve a $0-for-the-class/$4.3 million-for-the-attorneys settlement. Don't miss pp. 39-43, where we cite Seinfeld. (The Center is not affiliated with the Manhattan Institute.)

Via Beck, a New Jersey appellate court has released Kendall v. Hoffman-La Roche, Inc., slip op. (N.J. Super. A.D. August 5, 2010), a case about Accutane. The plaintiff argued that the statute of limitations should be tolled because there were so many "conspicuous" warnings for his Accutane about birth defects and suicide risks that he was unaware that the package also warned about the abdominal or bowel problems that he wished to sue upon. Of course, making the birth-defect or suicide warnings less "conspicuous" would open up Hoffman-La Roche to liability for those injuries. It's a demonstration of the moral bankruptcy of failure-to-warn law that a defendant is effectively supposed to guess which side effect a particular patient might have and tailor a personalized warning to them.

The good news/bad news for pharma is that Kendall throws out the verdict on other grounds (the trial judge permitted the plaintiffs to introduce evidence that there were a number of complaints about side effects but not the defendants to introduce evidence about the much-larger denominator and make the statistical "so what?" argument). So Hoffman-La Roche will not be able to raise this appalling legal holding before a higher court unless the plaintiff appeals.

Priester v. Cromer (S.C. Aug. 2, 2010)

Underage Preston Cromer was drunk driving and speeding in the early morning hours of August 17, 2002, when he drove off the road and rolled his Ford F-150 pickup. Cromer's infant son was not wearing his seatbelt (nor, I imagine, was in a car seat), and was ejected from the vehicle and died.

This was, Cromer's mother argued, the financial responsibility of Ford, because it used tempered glass instead of laminated glass. Of course, while laminated glass reduces the risk of ejection to unbelted passengers, it increases the risk of injury to belted passengers, and no one has developed shape-shifting technology that permits vehicle windows to shift depending whether passengers are belted. In reality, trial lawyers will always sue, because there is no requirement for jurors to be consistent: if there's an injury in a laminated-glass case, the lawyers can sue for failure to use tempered safety glass, and, as in this case, vice versa.

Fortunately, the South Carolina Supreme Court held that this lawsuit was preempted by NHTSA regulations. But keep in mind that this is exactly the sort of lawsuit that trial lawyers and the Obama administration want to promote when they oppose preemption. [Priester v. Cromer via Scheuerman]

With the Senate heading into a month-long recess when it adjourned last Thursday, Senate rules required either a unanimous consent to hold over nominees or the nominations had to be returned to the White House. The judicial nominees who were sent back were the most politically controversial ones, objected to by Senate Republicans (as well as business groups and critics of judicial activism).

  • John J. McConnell, Jr., of Rhode Island, to be United States District Judge for the District of Rhode Island.

  • Goodwin Liu, of California, to be United States Circuit Judge for the Ninth Circuit.

  • Robert Neil Chatigny, of Connecticut, to be United States Circuit Judge for the Second Circuit.

  • Edward Milton Chen, of California, to be United States District Judge for the Northern District of California.

  • Louis B. Butler, Jr., of Wisconsin, to be United States District Judge for the
    Western District of Wisconsin.

Also returned to the President was Mary L. Smith, of Illinois, to be an Assistant Attorney General, nominated to head the tax division at Justice.

Butler, Chen (and Smith) went through the same process at the end of 2009, and President Obama renominated them all. Renomination remains the most likely course of action this time, as well, but the President could also make recess appointments -- good through the end of 2011 -- or withdraw the nominations. Recess appointments are rarely used for judicial nominees, though.

Democratic Senators defended all these judicial nominations in a series of floor speeches on July 29. (See POL, "Senate moves slowly ...") Jim Copland wrote about the Liu, Butler and McConnell nominations last May in this POL post.

In the most recent issue of the Manhattan Institute's City Journal, Jim Manzi has a fascinating piece on the limits of social science. I posted my initial reaction to the piece on Marquette University Law School's faculty blog. His observation are particularly timely in light of the recent decision of a district court judge in Perry v. Schwarzenegger striking down California's constitutional amendment limiting marriage to one man and one woman.

My point relates not to same sex marriage itself, but Judge Walker's use of social science evidence and how that might relate to constitutional litigation generally. The key question is the extent to which courts ought to rely on social science evidence to overturn the laws enacted by voters and their elected representatives. This question extends well beyond the matter of same sex marriage.

According to Judge Walker, social science evidence has proven that same sex marriage will have no impact on the mores and vitality of marriage between heterosexuals and that it has proven "beyond any doubt that parents' genders are irrelevant to children's developmental outcomes."

It is certainly true that most academics who have devoted themselves to the study of gay and lesbian isses believe these assertions. But it is quite another matter to say that they have proven them. Our experience with same sex marriage is quite recent and limited. It is not clear that there is enough data to draw any conclusions about its long term impact.

As for the "genderless" nature of parenting, there are severe methodological difficulties in obtaining randomly selected comparable samples of gay and lesbian couples raising children. Comparision groups of heterosexual parents are often not limited to intact married couples raising their biological tradition and there are very few, if any, adequate longitundinal studies.

But beyond this, Manzi's article suggests that it may be difficult to ever say - at least by the standards of the physical science - what the impacts of same sex marriage are or will be. While his article focused on implications for policy making, there are lessons for judicial decisionmaking as well. A large part of Judge Walker's decision is given over to declaring the judgment of a majority of California's voters as irrational because social science purports to establish that what they believe to be true is not.

The question is not an easy one. Traditional equal protection analysis requires some scrutiny of the justificaton for legal distinctions. But it may well be that social science evidence needs to be viewed with greater skepticism than shown by Judge Walker in Perry. Constitutional litigation ought not to be seen as a battle of experts who attempt to claim the dispassion and robustness of the physical sciences to resolve contested issues of social policy.

Anti-Prop 8. Anti-Perry.

Ok. I don't like Prop 8. I support gay marriage. I like Vaughn Walker (and, full disclosure, I have a case pending in front of him). I like Ted Olson. I still think Perry v. Schwarzenegger is a bad decision.

Judge Walker struck down Prop 8 using the test of "rational basis review," whereby a court is to defer to the lawmaker so long as there is a rational basis for the law. In practice, the categorization means that courts stay out of the question; courts don't reweigh the evidence in favor or against a legislative pronouncement, even when the legislative reasoning is foolish. Now, certainly there are normative arguments that the rational basis test should have more teeth in it than that. (Here's one.) But as a positive matter, it does not. Nevertheless, Judge Walker took evidence, and made factual findings disputing the bases for Prop 8. Objectively, these factual findings are likely correct; but there was no legal basis for the evidentiary reweighing in the first place—judges do not second-guess the legislature (or, in this case, the electorate).

Judge Walker then found that "moral disapproval" could not be a rational basis for a law. But there are lots of laws where the basis is "moral disapproval." And outside the doctrine of the right to privacy, such laws are consistently upheld by the courts. Hey, I'm a libertarian; if we're going to have a new constitutional paradigm that laws cannot be based on "moral disapproval," great, let's get rid of the anti-prostitution and gambling and bigamy laws, too, and I won't have to fly to Las Vegas to find a casino dealing double-deck blackjack. It would be hard to justify laws against dogfighting without the crutch of "moral disapproval." (And if we're going to scrutinize the purity of motivation behind enactments, then we have another reason why Obamacare is unconstitutional, as is lots of economic regulation, and the infamous Lochner case was correctly decided.)

Now, down the road, Perry will reach the Supreme Court. And when it does, circa 2012, I imagine that the Court will strike down Prop 8 and other anti-gay marriage laws by deciding that the rational-basis test does not apply to laws discriminating against homosexuals, and that the appropriate test under the Equal Protection Clause is "intermediate scrutiny," and Prop 8 will not survive that new test. (Such a decision would reconcile a number of inconsistencies in Justice Kennedy's jurisprudence, and barring any other changes in court composition between now and then, Kennedy would almost certainly be the swing vote. Nate Silver gives the good legal-realist explanation why Kennedy is going to side with the liberals—and the fact that a fifth justice could be said to think in such a lawless way puts the lie to the idea that we have a "conservative" Supreme Court.) But it will be clear that the Court is making new law in reaching that result. The Supreme Court can do that, up to a point; it can hold that it was incorrect for courts to interpret the Equal Protection Clause to permit discrimination against homosexuals, just as a few decades ago it decided that it was incorrect for courts to interpret the Equal Protection Clause to permit discrimination against women without "intermediate scrutiny." But lower courts do not have that authority.

If you want to see the difference between judicial activism and judicial restraint, take a look at a decision like Judge Posner's in Khan v. State Oil. Posner faced the same situation that Judge Walker did: irrational precedent leading to an irrational result. Posner explained at length why the precedent was incorrect, and why the result was bad. And then he followed the irrational precedent, and reached the irrational result: because only the Supreme Court can reverse a Supreme Court decision. (And, indeed, the Supreme Court "reversed" Judge Posner's ruling, and adopted instead his analysis, all the while acknowledging that Posner acted appropriately in ruling the way he did.)

Judge Walker could have written an opinion like Judge Posner's, making the same arguments, then decrying the fact that the rational-basis test permitted such a law to stand, and calling for either a stronger rational-basis test, or the use of "intermediate" or "strict" scrutiny when it came to laws that discriminated against homosexuals. But he didn't. Instead, Judge Walker misapplied precedent to reach the result he preferred. It may be the "right" result that a good philosopher-king would reach, but American judges are not empowered to act as a wise super-legislature to correct the mistakes of the other branches; the Founders explicitly rejected the idea of a judicial veto. Judge Walker is a judge, inferior in the constitutional structure to the Supreme Court, who does not have the authority to create a new constitutional paradigm.

And when judges act lawlessly to create rights they like, it means they can act lawlessly to take away rights they don't like. Just as we do not waive constitutional protections against self-incrimination and the right to a fair trial for the most egregious murderer, just as we give First Amendment protection to the most abhorrent speech, we should give appropriate judicial deference to laws we might find to be dumb. Fidelity to the constitutional structure is far more important in the long run than my personal preferences on any given issue.

See also Dale Carpenter.

Lawrence McQuillan and Hovannes Abramyanof the Pacific Research Institute have been drawing on PRI's "2010 U.S. Tort Liability Index" for columns that connect the costs of the civil justice system with economic growth and jobs.

The recommendations for California are particularly apt. From "How Lawsuit Reform Could Help California Recover":

Asbestos awards in California's more plaintiff-friendly counties such as Alameda and San Francisco average $3 million more than in other counties, according to an article in the American Bar Association Journal. Every business day, on average, personal injury lawyers also file nearly five class-action lawsuits in the Golden State. That destroys jobs in California.

Entrepreneurs prefer to start, expand, or relocate businesses in states with balanced tort systems that discourage excessive litigation. These decisions matter a great deal. In 2006, job growth was 57 percent greater in the 10 states with the best tort climates than in the 10 worst states.

Business leaders remain leery of California because of its sky-high tort costs and skewed courtrooms, where business defendants lose at trial 65 percent of the time. The fear of lawsuits also causes companies to withdraw or withhold beneficial products.

Also, at AOL News, "Here's one way states can create jobs."

Around the web, August 5

  • The U.S. Senate convenes today at 9:30 a.m., with the first issue of the day being  H.R.1586, the legislative vehicle to ship federal taxpayer dollars to the states for Medicaid and local teacher funding. Democratic leadership hopes to reach an agreement on the final confirmation vote for Elena Kagan to serve on the U.S. Supreme Court. Her confirmation is a done deal, but we'll be watching to see if U.S. District Court Judge Vaughn Walker's overturning of California's Proposition 8, banning same-sex marriages, emerges as a point of debate. SFGate.com has Walker's 138-page ruling here as a .pdf.

  • Justice Ruth Bader Ginsburg is ecstatic about another woman serving on the court, New York Daily News reports.  Since we're now determining the merit of nominations based on demographics, consider this fact: Kagan's confirmation would make it four justices from New York City on the court.

  • San Francisco Chronicle, "Chevron: Outtakes prove collusion with expert," reports on the company's filing in U.S. District Court, Southern District of New York, based on outtakes from "Crude," that showed trial lawyers orchestrating an "independent" special master's report on environmental damage in Ecuador. (See earlier POL post.) The lawyers' reliably bumptious flack, Karen Hinton, says in effect, "Who you going to believe? Me or your lying eyes?" Just read Chevron's memorandum. (More at Shopfloor, "Chevron 'Cherrypicks' Film Footage? That's Hilarious.")

  • Legal NewsLine (U.S. Chamber), "Trial lawyer tax break attracts attention of two dozen senators." Twenty-four Republicans Senators led by Sen. John Thune of South Dakota send a letter to Treasury Secretary Geithner warning against granting the $1.6 billion deduction for expenses from contingency-fee lawsuits. Yes, not only is it bad policy, as John Park of the Heritage Foundation explained recently, it's bad politics for the Democrats. Sen. Chuck Grassley (R-IA) went after his Democratic opponent, Des Moines attorney Roxanne Conlin, on the issue, an attack made more stinging because she's the former president of the Association of Trial Lawyers of America.

  • Politico reports on the ubiquitous campaign "trackers," digitally recording candidate events in the hopes someone says or does something OUTRAGEOUS. GOP trackers were at the American Association for Justice's convention in Vancouver, B.C., Politico claims: "In that instance, the National Republican Senatorial Committee had actually deployed several teams of trackers to Vancouver, British Columbia, after discovering that numerous Democratic Senate nominees from across the country would be attending fundraisers held at a trial lawyers convention."

  • Every so often it's an informative exercise to do an online news search for the phrase, "class-action lawsuit." Also gulp-inducing: "Toyota and lawsuit."

  • And to circle back to the top, let's thank Congress for spending federal dollars to pay for local teacher salaries and benefits. Otherwise, teacher unions would sue. Like this: "The Chicago Teachers Union has filed a federal lawsuit against the Chicago Public Schools in an attempt to halt the dismissals of hundreds of teachers and support staff." It's a due process claim.

Business and legal reform groups last week filed an amicus brief with the Nevada Supreme Court, urging the court to reconsider its decision in Bahena v. Goodyear that deprived the company of its ability to defend itself in a product liability case.

A Clark County trial court issued originally ordered sanctions to punish what it considered to be discovery violations by Goodyear Tire & Rubber Co. in a lawsuit over a fatal automobile accident allegedly caused by a defective tire. The district court struck Goodyear's answer as to liability and damages. No defense possible, which explains why this kind of sanction is called the "civil death penalty."

On July 1, the state Supreme Court upheld the penalty despite the absence of any finding that the company had engaged in willful or malicious conduct during discovery or that the issue prejudiced the plaintiffs' case. (Opinion here.) The result was a $30 million judgment against the company.

The brief, available here, argues:

This Court's decision in Bahena v. Goodyear Tire was a shot heard around the United States business community. The ruling deprived a business of its most fundamental right in the American civil litigation system: the constitutional right to defend oneself in court. When the trial court struck Goodyear's answer, it took away Goodyear's right to defend itself against Plaintiffs' charges. Goodyear was precluded from showing that the tire in question was not defective, that its tire did not cause the accident, that its product was misused or that instructions were not followed. Goodyear was deemed liable. Full stop. No defenses allowed. All that was left for the jury to decide was how much Goodyear would have to pay. The finality of striking a defendant's answer as to liability is the reason the sanction is nicknamed "the civil death penalty" in some courts and the business community throughout the United States.

Joining my employers at the National Association of Manufacturers in the brief were the NFIB Small Business Legal Center, American Tort Reform Association, American Insurance Association and the National Chamber Litigation Center, Inc. Counsel were Victor Schwartz and Phil Goldberg of Shook, Hardy and Bacon.

It's asking a lot for the court to reconsider its decision, but the case is alarming for both the extreme outcome and its potential setting of precedent: Case law overwhelmingly holds that an order striking all defenses to liability dictates the outcome of a case, and due process protections are required. If Nevada can so easily remove constitutional due process protections, companies will face more difficult litigation burdens there that could make it into a magnet litigation jurisdiction.

The ruling further creates an incentive for plaintiffs to make discovery as long and complicated as possible in the hopes that the defendant company makes an error - one that could be seized on as enough to justify this "civil death penalty."

Sherman "Tiger" Joyce of the American Tort Reform Association wrote a column for the Washington Legal Foundation last September on the issue. "The Emerging Business Threat Of Civil 'Death Penalty' Sanctions," reported on the previous infliction of the civil death penalty in Florida. A Broward County trial judge applied the "civil death penalty" against E.I. DuPont De Nemours, striking all of DuPont's defenses in a case alleging that a formulation of the company's fungicide Benlate(TM) harmed part of the shrimp population in Ecuador in the early 1990s. Joyce writes:

Here's the personal injury lawyers' "civil death penalty" playbook: Incite discovery disputes and accuse defendants of failing to comply with discovery requests and court orders. Repeat this step several times. When the judge is sufficiently irritated with the defendants, go for the knock-out punch by arguing that defendant's repeated attempts to "obstruct justice" displays the defendant's incurable bad faith for which no sanction short of the "civil death penalty" will do.

Around the web, August 4

Cross-posted from Shopfloor.org.

Now, THIS is a blockbuster. Footage from the documentary-style film, "Crude," reveals that U.S. trial lawyers strategized with a supposedly independent court-appointed expert in Ecuador who went on to recommmend penalizing Chevron $27.4 billion for environmental damage in the Amazon.

In a court filing today in U.S. District Court, Southern District of New York, attorneys for Chevron detailed the collusion among Steven Donziger, the U.S. trial lawyer who has masterminded the suit, the Ecuadorian lawyers who serve as the public face of the anti-Chevron campaign, and Richard Cabrera, an engineer later appointed as the court's "special master" charged with assessing the pollution and damages. It is Cabrera who recommended the $27.4 billion damage figure, earning him praise from anti-Chevron activists who hailed his findings as proof of the company's greed and criminality.

The damning revelations are the result of Chevron's successful legal efforts to gain access to outtakes from the movie, "Crude," which the director, Joe Berlinger, claimed to be a fair and balanced effort to show both sides in the litigation over Texaco's operations in Ecuador between 1964 and 1990. Chevron purchased Texaco in 2001. Berlinger claimed journalistic privilege and fought to keep control of the footage, but was ordered by the Second Circuit Court of Appeals on July 15 to turn over relevant material. The review by Chevron's lawyers of the first batch of outtakes shows that not only that the legal case against Chevron is built on lies, but that Berlinger's reputation as a serious, fair-minded documentarian is hollow.

The opening of Chevron's memorandum filed today reads like a good movie, with the added virtue of being true. From the document, "Chevron Corporation's Memorandum of Law in Support of Motion for a Preservation Order, and to supplement and enforce the subpoenas," filed by Chevron's attorney, Randy Mastro, with Gibson Dunn & Crutcher:

"Hold on a second, you know, this is Ecuador. . . . You can say whatever you want and at the end of the day, there's a thousand people around the courthouse, you're going to get what you want. Sorry, but it's true." "Because at the end of the day, this is all for the Court just a bunch of smoke and mirrors and bullshit. It really is. We have enough, to get money, to win." Ex. F at 195-05.1 So says Lago Agrio Plaintiffs' counsel and New York licensed lawyer Steven Donziger in an outtake from Crude produced just days ago pursuant to the orders of this Court and the Second Circuit. Donziger makes these statements during a meeting with Plaintiffs' U.S. environmental consultants Charles Champ, Ann Maest, and Dick Kamp, after Maest tells him, point blank, that they need evidence of groundwater contamination, because Plaintiffs did not submit any and "right now all the reports are saying it's just at the pits and the stations and nothing has spread anywhere at all." Id. When Champ continues to press on the lack of evidence, Donziger looks at the camera and says, "There's another point I got to make . . . with these guys, but I can't get this on camera," and then the camera goes off. Id.

Chevron has thus far been able to review only a small fraction of the outtakes produced, but already it is clear that they contain conclusive evidence that Plaintiffs' counsel, consultants, and associates have knowingly participated in a fraudulent enterprise to corrupt the legal proceedings pending in Ecuador against Chevron. The express goal of their scheme is to procure a fraudulent, multi-billion dollar damages recommendation from a supposedly independent "Special Master," and then to use that fraudulent recommendation either to extort a settlement from Chevron or to obtain a fraudulent judgment from the Ecuadorian court.

We've uploaded the court filing here. (Scribd here.) The 39-page document provides a wealth of details about the sordid orchestration of the claims against Chevron, with Steven Donziger being the cynical conductor.

After the U.S. District Court for the Eastern District of Virginia on Monday allowed Virginia's constitutional challenge to proceed against the new federal health care law, the White House blogged a response from Stephanie Cutter, Assistant to the President for Special Projects. She began her post, "On Today's Ruling in Virginia," with:

Since the enactment of health reform legislation in March, several state Attorneys General have filed lawsuits challenging the constitutionality of the Affordable Care Act. Having failed in the legislative arena, opponents of reform are now turning to the courts in an attempt to overturn the work of the democratically elected branches of government. This is nothing new. We saw this with the Social Security Act, the Civil Rights Act, and the Voting Rights Act - constitutional challenges were brought to all three of these monumental pieces of legislation, and all of those challenges failed. So too will the challenge to health reform.

That's a lot of invidiousness packed into a single paragraph, especially for so early in the judicial process. How soon will it be before officials accuse the law's opponents of civil rights violations?

For a more legally minded reaction to the court, we refer you to the good folks at the Washington Legal Foundation, who just released a litigation update, "Court Rejects Government's Attempt to Dismiss Virginia's Legal Challenge."

Goodness knows, the use of dispersants to counteract the Gulf of Mexico oil spill warrants close attention and serious scientific follow-up. Unfortunately, it looks like Congress and the litigation industry are instead working in conjunction to maximize fear and liability over the chemicals.

On Friday, July 30, Rep. Edward J. Markey (D-MA), Chairman of the House Energy and Environment Subcommittee, released a letter and documents sent to National Incident Commander Thad Allen claiming that the U.S. Coast Guard allowed BP to use excessive amounts of "toxic dispersants" during the Gulf oil spill disaster.

And tomorrow, Aug. 4, the Senate Environmental and Public Works Committee will hold a hearing, Oversight Hearing on the Use of Oil Dispersants in the Deepwater Horizon Oil Spill.

Meanwhile, last week's news and PR wires brought us these items:

One imagines a world in which dispersants were not deployed. Headline: "Groups sue over failure to use most effective anti-spill weapon."

Senate moves slowly ...

The Washington Post today revisits a perennial story, that of the speed with which the Senate is confirming judicial nominations, "Senate moves slowly in confirming Obama's lower-court judicial nominees."

The story comes in the wake of Democrats taking to the Senate floor last Thursday, July 29, to demand confirmation votes on President Obama's federal judicial nominees. Sen. Mark Udall (D-CO) led the colloquy, starting on page S6476 of The Congressional Record.

Sen. Russell Feingold of Wisconsin praised Louis Butler Jr., the former Wisconsin Supreme Court Justice nominated for the U.S. District Court, Western District of Wisconsin. As this Wall Street Journal editorial recalls, voters in 2008 kicked Butler off the state Supreme Court, in part because of his liberal rulings against medical liability reform and his invention of "collective liability" for paint manfacturers. President Obama nominated him to the federal court in Oct. 2009 and renominated him last January.

Sens. Sheldon Whitehouse and Jack Reed of Rhode Island were also exercised about Republicans preventing a vote on John "Jack" McConnell, the Motley Rice attorney and Democratic contributor nominated to the U.S. District Court. Whitehouse attacked the U.S. Chamber of Commerce by name, posing the rhetorical question, "Do we want to let powerful out-of-State interests trump the better informed views of home State Senators about district court nominees? That is not the tradition of this body. I again ask my colleagues: Is this the tradition they want to set? If they open the door to out-of-State special interests trumping the considered judgment of home State Senators on district court nominees, will they ever get that door closed again? I submit it is a mistake for this body to go that road."

Alternatively, do we want Senators' parochial and political interests to always trump the public's objections to judicial nominees whose qualifications are solely political? Is that the road we want to go down?

Sen. Udall asked for unanimous consent several times to move the pending judicial candidates, with Sen. Jeff Sessions (R-AL) objecting. Two other controversial nominees who were stopped were Goodwin Liu to be a Ninth Circuit judge and Robert Chatigny to be on the Second Circuit. (Page S6486.)

Addendum: Originally appointed by Gov. Mike Doyle to the state Supreme Court to fill a vacancy, Justice Louis Butler was defeated in April 2008 for a full term by Burnett County Circuit Judge Michael Gableman. The expensive, rough-and-tumble campaign offended "good government" types, and Gableman became the target of a complaint based on one truthful TV ad. Last month the Wisconsin Judicial Commission decided not to take any action.

Class actions in the news

Miller-McCune has published a new article exploring class action abuses, which includes extensive quotes from our own Ted Frank.

(Note that although the author correctly cites Mississippi as a judicial hellhole, it's an inapt example for class action abuse, since the state lacks a class action rule. The state did have a problem, however, with improper joinders in mass-action torts, as described in this 2003 Manhattan Institute report.)

Around the web, August 3

  • Fumento on the absurd reporting of the Toyota sudden acceleration NHTSA investigation. [Fumento]
  • More sins of omission in US v. Arizona. [Mac Donald @ Corner; earlier]
  • E.D.N.Y. refuses to dismiss class action alleging that VitaminWater doesn't do enough to disclose, well, something that it already discloses. [Jackson]
  • "Stock-Option Backdating Cases Reflect Costs Of Overcriminalization" [Hody & Kwedar @ WLF]
  • Al Gore innocent, though the details of why are less likely to make headlines or late-night talk show monologues than the false allegations that dragged him through the mud. [Portland DA memo @ WaPo]
  • Oops. Federal dietary guidelines often wrong in hindsight. Cf. Woody Allen, Sleeper. [Malanga @ City Journal]

Conrad Black's Prison Experience

Conrad Black, a Canadian media magnate whose conviction under the reprehensibly vague "honest services" statute was unanimously vacated by the Supreme Court last month, was freed on $2 million bail pending a rehearing on the question of whether the prosecutor's use of the honest services theory amounted to harmless error.

In the New York Sun, Black writes that his 28 months in federal prison has made him a critic of overcriminalization and excessive federal prison sentences:

I had the opportunity to see why the United States has six to twelve times as many incarcerated people as other prosperous democracies, (Australia, Canada, France, Germany, Japan, and the United Kingdom), how the prison industry grew, and successfully sought more prisoners, longer sentences, and maximal possibilities of probation violations and a swift return to custody...Before I got into the maw of the U.S. legal system, I did not realize the country has 47 million people with a criminal record, (most for relatively trivial offenses,) or that prosecutors won more than 90% of their cases.

Consider the elevator

It's unquestionable that the elevator is one of the great inventions of the last two centuries. Skyscrapers—even the seventeen-story proto-skyscrapers of the late nineteenth century—would be infeasible without elevators. It's hard to imagine modern society without the elevator.

But elevators were unsafe by modern standards. In 1925, in the city of New York alone, 87 people died in elevator accidents, including 47 from falling into empty shafts and 36 crushed by closing doors. ("5,581 Deaths in 1925 Classed as Violent", New York Times, Oct. 19, 1926, via Deborah Blum's The Poisoner's Handbook).

Even if you were to believe every plaintiffs' lawyer's claim about Toyota sudden acceleration, it would mean that a Toyota owner would have less than a 1-in-a-million chance/year of dying in a Toyota sudden acceleration accident; the (false!) allegations have resulted in Congressional hearings, front-page headlines, regulators forcing recalls, hundreds of millions of dollars of litigation, and mass panic. Meanwhile, in 1925, a New Yorker had a greater than 1-in-100,000 chance/year of dying in an elevator accident, but no one even suggested abolishing the elevator; the carnage didn't even make the headline of the newspaper story where one can find the statistic.

Decades later, simply from market pressure, American elevators are safe (the modern safety elevator was developed decades before the litigation explosion). Searching Google News for counterexamples, I could only find an occasional injury (for example, a shaft fall in Wichita where the news coverage notes how unusual it is) and no deaths in recent months. In 2004, there were four deaths in New York City elevators, though the number of elevators had surely increased in 80 years, and at least some of those deaths involved passengers deliberately overriding safety equipment.

But I have to wonder if we would have had elevators at all if there had not been that transitional period when the safety kinks were worked out. In 1925, elevator manufacturers' and premises liability was constrained, even in New York, with the most liberal tort laws of the time: defendants had absolute defenses of assumption of the risk and contributory negligence; any victorious plaintiff would have proportional damages, rather than the outsized jackpot awards of today. (For example, one elevator accident I covered in Overlawyered had a $25 million claim. And that wasn't a death, but someone trapped in an office elevator for 42 hours over a weekend. Then there was the federal judge who wanted $21 million for falling on an escalator.)

How many inventions are we missing out on today because it's impossible to develop a first version that's safe enough to withstand the risk of product liability suits?

Around the web, August 2

  • The irony: Jim Hood consulted with Dickie Scruggs about how to complain to WSJ about editorial noting how tight he was with Scruggs. [WSJ; Rossmiller]

  • Fumento digs under the Skilled Healthcare case, finds a disturbing railroading that never should've gone to the jury. The gigantic appeal bond required by California law means that Skilled Healthcare has no recourse. [Fumento]

  • Ken Feinberg to disclose compensation for administering BP fund. [Stier]
  • Fraud in billion-dollar Department of Agriculture class action settlement? "If there are only 39,697 African-American farmers grand total in the entire country, then how can over 86,000 of them claim discrimination at the hands of the USDA? Where did the other 46,303 come from?" [Pajamas Media via Overlawyered]
  • Detroit will start breaking out "judgment tax levy" on its tax bills to show expense of litigation. [Bob Dorigo Jones]
  • Ben Nelson is first Democratic senator to oppose Elena Kagan. [press release]
  • Energy bills could require US to participate in global carbon credit scheme, to expense of US economy and benefit of European countries with less strict environmental rules. [Murray @ Wash. Times]



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.