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February 2011 Archives

We're still waiting for this story to be reported by all those publications that campaigned so vigorously last year for passage of H.R. 847, the James Zadroga 9/11 Health and Compensation Act. From The Economic Times of India, "Govt to move WTO if Visa talks with US fail next month":

NEW DELHI: With the recent visit of US commerce secretary Gary Locke failing to address India's concern on professional visa fee increase and imposition of additional duties on government imports, the country will try for one last time to settle the issue bilaterally next month.

Commerce secretary Rahul Khullar will meet US undersecretary of commerce Francisco Sanchez in March to settle the issue, failing which India would approach the World Trade Organsation, or WTO, a senior official has said.

"We have already successfully demonstrated to the EU that we don't hesitate going to the WTO if we are wronged. It will not be any different with the US," a commerce department official told ET.

At issue is the final funding mechanism for the $4.2 billion Zadroga 9/11 bill: a 2 percent excise fee on foreign manufacturers/companies located in countries where the U.S. does not have an international procurement agreement, and an extension of fees until 2015 on H-1B and L-1 visas.

Both provisions hit India's software and other high-tech companies especially hard.

Only one media outlet we find has reported at any length on the U.S. reaction to India's unhappiness with the legislation, which reopens and expand the 9/11 compensation fund. That's the India-based CNBC-18, which interviewed Commerce Secretary Locke on the issue during Locke's visit to India earlier this month. The resulting story, "US visa fee hike temporary; not aimed at India: Gary Locke," is confusing, as if the Secretary and reporter were talking past one another.

The Senate Judiciary Committee is taking another run at the most controversial of President Obama's judicial nominees, holding a confirmation hearing this Wednesday on Goodwin Liu to serve on the Ninth Circuit.

Liu, a professor and associate dean at UC Berkeley (Boalt Hall), has been nominated three times: Feb. 24, 2010, Sept. 13, 2010, with the nominations expiring with Senate recesses; and this Jan. 5. Ed Whelan has written extensively on Liu's shortcomings at National Review Online.

On the House side, the Judiciary Subcommittee on Courts, Commercial and Administrative Law holds what could be a very informative hearing Monday, "The Administrative Procedure Act at 65 - Is Reform Needed to Create Jobs, Promote Economic Growth and Reduce Costs?" Witnesses:

  • Susan Dudley, Director, Regulatory Studies Center, The George Washington Institute of Public Policy. Dudley is the former head of the Office of Information and Regulatory Affairs in the Bush Administration.

  • Jeffrey A. Rosen, Esq., Kirkland & Ellis LLP, one of the nation's top experts on federal preemption.

  • Peter L. Strauss, Betts Professor of Law, Columbia Law School

On Wednesday, the Manhattan Institute released a new "finding," looking at executive-compensation shareholder proposals, as part of the Proxy Monitor project. Key findings include:

  • Labor unions are playing a big role here. "The two most frequent shareholder sponsors of proposals related to executive compensation have been the American Federation of State, County and Municipal Employees (AFSCME), with twenty-three proposals, and the AFL-CIO, with twelve. Overall, labor unions and their pension funds introduced 70 proposals related to executive compensation to Fortune 100 companies since 2008, constituting over 38 percent of all identified proposals coming to a vote."
  • Shareholders are electing to hold annual say-on-pay votes. "Under Dodd-Frank's Section 951, executive-compensation advisory votes are now mandatory for public companies. In 2011, companies with annual meetings scheduled after January 21 must hold a vote to determine the frequency of such votes, which under the statute can be every one to three years. Of the four companies in the Fortune 100 to have voted on the issue thus far--Johnson Controls (JCI), Costco (COST), Emerson Electric (EMR), and Tyson Foods (TSN)--shareholders have supported annual advisory votes on executive compensation at each company save Tyson, which has a dual-share structure giving insiders effective voting control."

I discuss the new finding in a podcast here. Read the whole thing here.

"Obama's Dangerous Divorce from DOMA"

I have an op-ed in today's Daily News expanding on my thoughts of the Obama administration's decision to stop defending DOMA in court. Lots of others have weighed in, including Jim Copland, Richard Epstein, and, at Volokh, Ilya Somin, David Bernstein, Orin Kerr, and Walter Dellinger.

At Overlawyered, Walter Olson has been covering the false patent-marking lawsuit wave, exacerbated by a recent Federal Circuit decision. Judge Polster rejected one such lawsuit. "The False Marking statute essentially represents a wholesale delegation of criminal law enforcement power to private entities with no control exercised by the Department of Justice." [Unique Product Solutions, Ltd. v. Hy-Grade Valve, Inc. via Gray on Claims (h/t F.B.)]

Ted's absolutely right that it's very unusual for an administration to refuse to defend a duly signed federal statute, but it's hardly unprecedented. The closest relatively recent analogue of which I'm aware -- in which the constitutional rule being invoked in refusing to enforce the law is unsettled by the Supreme Court and politically charged -- is the George H.W. Bush administration's decision not to defend federal affirmative-action contracting in Metro Broadcasting. The acting solicitor general for that case was, interestingly, one John Roberts. See this interesting analysis from Marty Lederman.

Traditionally, the Justice Department has declined to defend a law when:

  1. The law is clearly unconstitutional under intervening Supreme Court decisions (not the case here, at least if the premise is that sexual orientation is entitled to heightened-scrutiny review, which the Court has never determined);

  2. The law infringes on Presidential powers (not the case here); or

  3. The President himself has openly stated that he believes the law to be unconstitutional (now the case here -- and likely a key reason why the attorney general invoked the president's position in his letter to the speaker)

Ed Whelan, no friend of the position that DOMA is unconstitutional, observes that "[t]oday's action at least has the modest virtue of bringing [the Obama administration's position] out into the open." Whelan has previously argued, with some force, that "the Obama administration has been sabotaging DOMA litigation from the outset." In general, litigation requires vigorous advocacy, though the aggressive participation of amici in this litigation removes a major obstacle otherwise inherent in an administration decision to give less than a full-throated defense.

The most interesting question to me is that posed by Dale Carpenter: who exactly, apart from the administration, has standing to defend this law? Where standing for an individual plaintiff would be pretty clear for the health-care law or affirmative-action program, it's not self-evident who exactly suffers the requisite harm here, if Congressional leaders aren't allowed to step in.

Also, there's an important point much of the coverage has been missing so far: the administration's position here extends only to Section 3 of the DOMA, which precludes same-sex married couples -- as recognized by their own state -- from receiving federal benefits due to married couples. Holder's letter does not express an opinion on DOMA's application of the Full Faith and Credit Clause to undergird states' decisions not to recognize other states' same-sex marriage licenses.

MORE: Here's an interesting article on the topic from Clinton-era Solicitor General Seth Waxman, related to his decision not to support a Congressional statute intended to overturn Miranda in Dickerson.

I'm not a fan of the Defense of Marriage Act, but I do have a large problem with the politicization of the role of the Department of Justice. Strip away the gay-rights issue and consider the question: what would Democrats say if, in 2013, President Sarah Palin announced that her Department of Justice would refuse to defend the constitutionality of Obamacare in court? There is no provision in the Constitution for a retroactive veto. Compare and contrast the Bush administration Department of Justice, which steadfastly (and successfully) defended McCain-Feingold and enforced FACEA. Earlier.

Update: Orin Kerr has the same thought.

Update on our February 21 and February 10 coverage: Kentucky Bar Association Trial Commissioner William Graham recommended that Chesley be disbarred and disgorge $7.6 million in excessive fees. If so, he likely faces reciprocal discipline in Ohio. [Opinion and Cincinnati Enquirer via Fisher @ Forbes; other links at ABA Journal]

Astonishingly, Chesley would get to keep the other $12.4 million under this recommendation.

Chesley's lawyers complain that the findings contradict the failure of the federal authorities to target Chesley in their investigation, but that perhaps says something about a politicized decision to use Chesley as an ineffective witness in the criminal prosecution.

POL discussed in January the attorneys who got Congress to pass authorization for a $3.4 billion settlement by promising to limit their fees to $99.9 million, and are now requesting $223 million. The request is drawing bipartisan opposition, according to Rob Capriccioso at Indian Country Today Media Network; his story quotes me extensively. (The Center for Class Action Fairness is not affiliated with the Manhattan Institute.)

TCPR panel on Tennessee tort reform

Schools for Misrule

Walter Olson's Schools for Misrule should be required reading for law students, and deserves a place on any Federalist Society member's bookshelf. MI's Minding the Campus features an excerpt; Larry Ribstein provides an interesting discussion of Olson's recent talk at the University of Illinois.

Beck has details about the decision. The good news is that Geier was not overruled, but it was substantially narrowed.

BREAKING: Bruesewitz v. Wyeth

In a major decision, the Supreme Court today ruled that the National Childhood Vaccine Injury Compensation Act of 1986 preempts state-law design-defect tort claims. The Court split 6-2, with Scalia writing for the majority; Justice Breyer concurred, and Justice Sotomayor dissented, joined by Justice Ginsburg. (Justice Kagan recused herself.) More to follow; the full opinion is here.

UPDATE: A Litigation Update (PDF) from the Washington Legal Foundation, which filed an amicus brief in the case.

Speaking in Nashville tonight

RIP Jack Calfee

Sadly, economist Jack Calfee passed away unexpectedly from a heart attack Wednesday night. He had written for Point of Law about the Vioxx litigation, and we frequently cited him about drug and vaccine regulation and litigation. Calfee also did important work on non-economic damages in the 1980s and 1990s. He had moderated panels for me and vice versa when I was at AEI; he was also a client. Jack will be missed, both as a scholar and as a friend. I'm sorry that I will miss his memorial service because of a preexisting commitment in California. Other memories: Sam Kazman; Tevi Troy; John Graham; Galen Institute.

"A nation of lawyers and judges"

Larry Ribstein's review of Benjamin Barton's new book, The Lawyer-Judge Bias, summarizes the countless ways the judicial system favors lawyers at the expense of other elements of society. I've previously noted that lawyers would go out of business if legal malpractice standards were anything like medical malpractice standards. And the bar is attempting to increase lawyer hegemony through the promotion of civil Gideon.

Ribstein suggests that changes in the legal information industry could reduce the power of lawyers, but I'm skeptical, given the control of the power of lawyers over what is and isn't permissible. Ribstein already took us up on our invitation to analyze how one state bar is trying to squelch attorneys' use of Groupon to provide cheaper legal services. The outsourcing of discovery will evaporate overnight the first time Wikileaks gets a hold of attorney-client privileged documents and a court helpfully rules that the mysterious privilege was waived when the document was sent overseas to non-American-licensed personnel. Meanwhile, in 2007, Democrat Charles Schumer and Iconoclast Michael Bloomberg called for reform, noting that our legal system was choking New York's competitiveness in the financial industry, and Congress responded with Dodd-Frank and the Obama administration pushed for a rollback of Supreme Court decisions reducing the scope of the abusiveness of the securities laws—even as the New York Stock Exchange finds it needs German help to survive.

Ken Feinberg and the Kentucky fen-phen suit

On February 10, we reported how a Kentucky appellate court threw out a summary judgment against the infamous Kentucky fen-phen attorneys, relying on a dispute of fact created by an expert report by Kenneth Feinberg that the attorneys' conduct (since resulting in some criminal convictions and disbarments) was handled "properly and ethically" and that he had seen "nothing that credibly suggests any misconduct by the attorneys."

Friday, Andrew Wolfson reported that that same expert report came up in the Kentucky disciplinary hearings against Stan Chesley, the famed Cincinnati lawyer who helped structure the settlement, and walked away with an outsize $20 million fee even as tens of millions were being stolen from the putative clients. Feinberg says that he wrote the affidavit as a favor to his friend Chesley, all of his information for his expert report came from what William Gallion chose to tell him and show him, and that he would have thrown the report in the wastebasket and never prepared the affidavit if he had known the truth. (Whether Feinberg would have stood by his expert report had Gallion paid Feinberg the $50,000 fee he had promised is a question for an alternative universe.) Feinberg admitted that he "knew nothing about the actual factual occurrences in this case" when he wrote the affidavit that was used to defeat summary judgment.

This happens all too often: ethics experts often take a set of facts favorably construed by their clients, put on blinders and do not conduct any investigation of the truth of those assumptions, and then issue an opinion that their client did no wrong, and judges accept the opinion without care for the methodology used to reach it, even though the expert essentially assumed the conclusion. In this case, the trial court does seem to have disregarded the Feinberg opinion, but apparently failed to provide sufficient reasoning to persuade the appellate court to do the same. On remand, the trial court can simply point to Feinberg's disavowal and issue the same result, but it appears that the attorneys for Gallion's victims are going to ask the Kentucky Supreme Court to do that, a questionable strategy, given that Feinberg's disavowal took place well after the underlying summary judgment.

Around the web, February 17

  • Texas asbestos and silicosis reform a success. [LNL; TCJL]
  • Elsewhere in Texas, Governor Perry proposes loser pays and making access to justice easier for smaller cases. [TCJL]
  • Extensive tort reform in Wisconsin undoes some bad Wisconsin Supreme Court decisions, caps punitive damages. [Sachse]
  • Multi-billion dollar judgment in Ecuador in Chevron lawsuit. Chevron has a webpage detailing its response to and summarizing the various collateral litigations, including a Hague international arbitration temporarily prohibiting international enforcement of the judgement.

  • "Climate Policy by Judicial Fiat: How Global Warming Lawsuits Subvert the Democratic Process" [Heritage]
  • Insider trading and the Sentencing Guidelines. [Ribstein]
  • Why is Obama meeting with a group that launders Chinese money? [Carney @ Examiner]
  • DOJ/DHS operation shuts down over 83,000 web sites for no reason. [Blackman]

Defensive medicine study

A study by Dr. John Flynn and medical student Robert Miller of bone and joint specialists presented at the AAOS conference finds that thirty-five percent of medical costs (and 20% of total tests) are driven by defensive medicine. [AP] This figure isn't perfect: the study is self-reported (which can lead to exaggeration), and there was no qualitative assessment of whether the defensive medicine resulted in benefits that partially offset the marginal costs, even if an individual test was not cost-effective. (Compare: the famous Kessler/McClellan study where only zero-benefit procedures were counted as defensive medicine.) But even if the study exaggerates the problem three-fold, it goes to show that the indirect costs of our medical malpractice system far exceed the direct costs.

Eugene Volokh has details though, alas, no precedential opinion to forestall similar future motions. We discussed the case earlier. But as Orin Kerr says in the comments, "We'll see what the en banc Third Circuit has to say about THAT."

As I suggested earlier, "It seems to me that if a client is aggrieved by a commentator publicizing the arguments of his attorney's briefs, his remedy is to sue his attorneys for legal malpractice for making those arguments in the public record rather than to ask the court to censor that work."

So says the Legal Newsline story, but the only observer quoted is me, so take it with a grain of salt. The affiliated Congressional Civil Justice Caucus Academy is hosting a briefing on Thursday.

S&M Brands v. Caldwell

Michael Greve discusses the pending cert petition in a case that will determine whether the Compact Clause means anything—and invokes the Supreme Court's recent rediscovery of the Tonnage Clause to suggest the case may have legs. (Via Kopel @ Volokh.) The Competitive Enterprise Institute, behind the unsuccessful-to-date suit, has an excellent summary page on the subject. As Daniel Fisher notes, one of the amicus briefs features the odd couple of Richard Epstein and Nader attorney Alan Morrison.

Chief Judge Jonathan Lippman of New York's high court will today announce the most sweeping rules ever regarding judges and election money, stating that "'no case shall be assigned' by court administrators to a judge when the lawyers or any of the participants involved donated $2,500 or more in the preceding two years." [NY Times]

There's no question that there is a problem in New York: as the Times article notes, there have been appalling quid pro quo arrangements where judges appoint campaign contributors to lucrative estate management positions that can generate millions in fees. But, as with other Chief Judge Lippman policy proposals, I wonder whether the unintended consequences have been entirely thought through. If I'm in New York state court, and dislike the judge my case has been assigned to, can I get a new judge for the mere cost of $2,500? If there's a twelve-judge division, can a $27,500 investment ensure that I get the one judge I'd prefer my case to be assigned to?

"Toyota's a Victim, Not a Villain"

Eric Dezenhall in the Daily Beast on the unholy alliance that suffers no consequences for being wrong in badmouthing Toyota over sudden acceleration. See also Ed Wallace at Bloomberg BusinessWeek via Overlawyered.

Tort reform and federalism

The last few days have seen some fascinating discussion worth reading about the relationship between tort reform and federalism: William Jacobson, Stephen Bainbridge (citing a 2004 Volokh analysis), Ilya Somin @ Volokh. See also Roll Call ($).

As Ilya pointed out in 2007, "Most people - even most constitutional lawyers - think of federalism as a system of limitations on central government power. But in many situations, it actually entails limits on the power of state governments as well." Federalism is really about the division between federal and state powers. Given the expansion of the federal role in the last seventy-five years, that usually means state's rights. But it's not just that.

Recall that the main failing of the Articles of Confederation was that it failed to promote interstate commerce: states would seek to benefit themselves at the expense of trade among the whole. The Constitution, by establishing a stronger federal government at the center of the union that would regulate and thus promote interstate commerce, created a structure to prevent states from interfering with interstate commerce. As Michael Greve has written, throughout the nineteenth century, the Supreme Court regularly intervened to protect this structure in a way unthinkable today, reversing state courts and legislatures dozens of times when they acted lawlessly to interfere with interstate commerce just on general legal principles.

The structural problem of states acting to expropriate the gains of interstate commerce for themselves continues today. And the Supreme Court has abdicated its structural role, most notably in Erie, where it disdained the idea of federal common law. Previously, federal diversity jurisdiction gave plaintiffs and defendants a predictable choice of law: a plaintiff could sue a defendant in the defendant's home state court (and thus have the defendant's home state law applied), or a plaintiff could sue a defendant elsewhere, have the case removed to federal court, where a default federal common law would apply. Thus, states had little incentive to try to structure their law to interfere with interstate commerce: it would simply chase business out of the state.

Erie wrecked that dynamic. Now, state courts and state governments had every incentive to arrange their legal affairs to benefit in-state plaintiffs at the expense of out-of-state defendants; federal diversity jurisdiction provided no protection because the federal court would just apply the pro-plaintiff state law.

This is why Congress must get involved. When a state passes tort reform for, say, product liability, it is doing so against the impulses of a collective action problem. But it is doing so at the expense of its own citizens, who will bear the costs as plaintiffs, while the benefits are spread amongst the fifty states. Michigan industry isn't protected by Michigan's friendly pro-preemption law: such companies still get sued elsewhere and subjected to bad state law elsewhere, while are still protected by the Michigan law even if they're located out of state. But Michigan plaintiffs do have their cases thrown out of court, and they become a visible force asking the state to repeal the good law promoting interstate commerce.

This collective action problem can only be solved when federal entities step in. Ideally, that would be the Supreme Court enforcing preemption and the dormant commerce clause and the appropriate relationship between federal authority oversight of national economic activity while state and local government oversees local economic activity. But the Court has all but endorsed an upside-down version of federalism, signing off on a broad view of the federal government's power under the commerce clause, while abdicating a role in most situations where state law is interfering with federal interstate commerce, such as presuming a lack of preemption in cases like Wyeth v. Levine. (The Court's incoherent punitive damages jurisprudence, which it locates in "substantive due process" rather than its commerce clause authority, is a source of concern. I am skeptical that there are still five votes on the Court to intervene in such cases.)

With the Supreme Court taking itself out of the picture and, worse, exacerbating the problem, it falls to Congress to step in with tort reform: creating federal standards and jurisdiction for cases affecting the nationwide economy. Congress did that procedurally with consumer class actions with the Class Action Fairness Act in 2005, all but ending the concept of the magnet jurisdiction that happily certified bad nationwide class actions and nationwide class action settlements for the benefit of local lawyers at the expense of consumers and interstate commerce. It did that with securities law with SLUSA. It needs to step in and create federal standards for product liability, as it attempted to do in the 1990's before Clinton vetoed the bill.

But does it need to do that for medical malpractice law? I'm of two minds here. On the one hand, medical expenditures are increasing a federal budget item, and bad malpractice law is effectively forcing federal taxpayers to spend more money. On the other hand, medical malpractice is a local issue. When Pennsylvania or Illinois decides to create a medical malpractice regime that favors lawyers at the expense of doctors and patients, they do so at their own expense, rather than at the expense of the other states in interstate commerce. (Indeed, a Texas benefits when doctors flee Pennsylvania and Illinois for a more sensible legal regime.) I can see an argument for a patient paying their doctor with federal money being limited (or even prohibited) from a medical malpractice suit as a means to encourage doctors to accept federal program payments that might be lower. I don't see much of a federal concern for attempting to change Pennsylvania's or Illinois's medical malpractice laws on a top-down basis, even though doing so would be good for Pennsylvania or Illinois.

In another post, I'll explain where I agree and disagree with Michael Krauss and Robert Levy's 2004 analysis of the question.

Merger lawsuits

I'm quoted in a Reuters story about merger lawsuits and their quick settlements:

Settlements often come fast, and plaintiffs' lawyers share in the spoils -- $500,000 in a typical lawsuit, Advisen said.

"The real problem, I think, is in cases where lawyers win a few extra sentences of disclosure and walk away with $1 million of fees," said Ted Frank, who founded the Center for Class Action Fairness and often challenges proposed settlements.

Lawyers and researchers say the proliferation of lawsuits reflects increased competition among firms.

"There are some bottom feeders on the plaintiffs' side," said Adam Savett, a director at the Claims Compensation Bureau LLC, which monitors class-action claims for investors. "Their modus operandi is throw up a lot of stuff on the wall and try to get a quick settlement, and move on."


Typically, an individual or institutional investor sues a target company or its directors, seeking class-action status and alleging a breach of fiduciary duty to shareholders.


"Defense lawyers benefit from this game," Travis Laster, a vice chancellor in Delaware Chancery Court, said at a December hearing. "They get to bill hours without any meaningful reputational risk from a loss. They then get to get a cheap settlement for their client. Disclosures are cheap."

Frank, of the Center for Class Action Fairness, said it was up to judges to decide if these settlements have much benefit.

"Judges should consider whether these provisions actually create value for shareholders," he said, "or amount to a rearranging of the deck chairs to create the illusion of value to justify attorneys' fees."

(The Center for Class Action Fairness is not affiliated with the Manhattan Institute.)

Around the web, February 13

  • Tort reform in Wisconsin? Package passed to undo bad Wisconsin Supreme Court decisions, establish Daubert standards, cap punitive damages. [Sachse; Shopfloor; ALEC; NFIB]
  • "Uncommon Law: Ruminations on Public Nuisance" [Faulk @ BEPress]
  • Does David Frum want to criminalize agency costs? [Bainbridge]
  • How bad is the California Supreme Court's Kwikset decision? [Jackson; CJAC; Overlawyered]
  • Some plaintiffs' lawyers pretend that their real Toyota sudden acceleration lawsuit is over the lack of a brake override (which wouldn't prevent driver error); others continue to promote their junk science theory. [NLJ]
  • "Does America have a lawyer problem, or a law problem?" [Reynolds @ Washington Examiner]

  • "Arbitration records lift curtain on Milberg's legal woes" [NLJ]
  • Paging the Truth on the Market bloggers! When it comes to the North Carolina State Bar regulating attorneys overcharging clients, they're slow or unwilling to act, but they're quick on the draw when it comes to innovations that might lead to increased competition and lower fees: "Proposed NC Ethics Opinion Says Lawyers Can't Ethically Offer Groupon Deals." [ABAJ]
  • Andrew Grossman testifies to Senate Judiciary Committee that there isn't a free lunch when you let bankruptcy courts coerce mortgage modifications. [Senate Judiciary Committee]

  • Arbitrator awards $7.5 million to non-tenured teachers fired by Michelle Rhee. Thanks, teachers' union! [Washington Examiner]

An impressive volume from the Kauffmann Foundation, with authors including Robert Litan, Henry Butler and Larry Ribstein, Gillian Hadfield, Mark Lemley, George Priest, Peter Schuck, and Hal Scott. Abstract:

The United States economy is struggling to recover from its worst economic downturn since the Great Depression. After several huge doses of conventional macroeconomic stimulus - deficit-spending and monetary stimulus - policymakers are understandably eager to find innovative no-cost ways of sustaining growth both in the short and long runs.

In response to this challenge, the Kauffman Foundation convened a number of America's leading legal scholars and social scientists during the summer of 2010 to present and discuss their ideas for changing legal rules and policies to promote innovation and accelerate U.S. economic growth. This meeting led to the publication of Rules for Growth: Promoting Innovation and Growth Through Legal Reform, a comprehensive and groundbreaking volume of essays prescribing a new set of growth-promoting policies for policymakers, legal scholars, economists, and business men and women.

Some of the top Rules include:

• Reforming U.S. immigration laws so that more high-skilled immigrants can launch businesses in the United States.

• Improving university technology licensing practices so university-generated innovation is more quickly and efficiently commercialized.

• Moving away from taxes on income that penalize risk-taking, innovation, and employment while shifting toward a more consumption-based tax system that encourages saving that funds investment. In addition, the research tax credit should be redesigned and made permanent.

• Overhauling local zoning rules to facilitate the formation of innovative companies.

• Urging judges to take a more expansive view of flexible business contracts that are increasingly used by innovative firms.

• Urging antitrust enforcers and courts to define markets more in global terms to reflect contemporary realities, resist antitrust enforcement from countries with less sound antitrust regimes, and prohibit industry trade protection and subsidies.

• Reforming the intellectual property system to allow for a post-grant opposition process and address the large patent application backlog by allowing applicants to pay for more rapid patent reviews.

• Authorizing corporate entities to form digitally and use software as a means for setting out agreements and bylaws governing corporate activities.

The collective essays in the book propose a new way of thinking about the legal system that should be of interest to policymakers and academic scholars alike. Moreover, the ideas presented here, if embodied in law, would augment a sustained increase in U.S. economic growth, improving living standards for U.S. residents and for many in the rest of the world.

(h/t D.F.)

Lester Brickman speaking in New York

Bipartisan civil justice caucus in Congress

On February 10, 2011, 6 members of the United States House of Representatives announced the formation of the bipartisan Congressional Civil Justice Caucus. The Caucus' founding members include Co-Chairs Rep. Bob Goodlatte (R-VA) and Rep. Dan Boren (D-OK) as well as Rep. Trent Franks (R-AZ), Rep. Jim Matheson (D-UT), Rep. Collin C. Peterson (D-MN), and Rep. Lamar S. Smith (R-TX).

Democratic support for civil justice reform is important and good news—there's no reason for this not to be a bipartisan issue—but with a Republican House, the roadblock to reform is in the Senate and executive branch. [New GMU Law & Econ website; Press release; Lysaught video; ILR statement]

In 2007, a Kentucky trial court judge ruled that Kentucky fen-phen lawyers William Gallion, Shirley Cunningham, and Melbourne Mills Jr. owed $42 million to their clients as a matter of law. An appeals court has held that an expert opinion (by Kenneth Feinberg!) claiming that the three (two of whom have since been convicted of criminal charges) acted "ethically" created an issue of fact requiring trial. The suit will proceed against the three and Stan Chesley, who has confidential disciplinary charges pending against him in Kentucky; "Bar Counsel officials have stated in his disciplinary proceedings that they're seeking Chesley's disbarment." (Jon Newberry, "Court paves way for new fen-phen trial", Cincinnati Business Courier, Feb. 9; Cunningham v. Abbott (Ky. App. 2011).)

Around the web, February 10

  • TRO against collection in Chevron Ecuador case. [AP/NYT]
  • Responses to Laurence Tribe (NYT) on the Obamacare lawsuits. [Yoo @ Ricochet; Epstein @ Ricochet; Adler @ Volokh; Tabarrok; Instapundit roundup]
  • Zach Scruggs has already served his time for his role in the Scruggs bribery scandal, but is arguing to undo his guilty plea. [LNL]
  • Putative consumer fraud class action against sugary Nutella spread over the standard "part of a healthy breakfast" language. [WLF; OL link roundup]
  • New York Times and Washington Post continue to lie about Citizens United; the Times editorial page is particularly bad about legal issues, refusing even to issue corrections. [Atlantic; Volokh]
  • More media bias on judicial confirmations. [Whelan]
  • Sara Wexler on the pending Brueswitz v. Wyeth Supreme Court case. [DJCLPP Sidebar]
  • My oral argument in the Ninth Circuit in the Bluetooth class action settlement case. [CCAF]
  • Japanese anime satirizes American legal system. [Siouxsie via OL]

The text of Justice Alito's excellent Wriston Lecture is now on line; the video was posted earlier. Alito makes a similar point to one made here in July about New York Times coverage of Supreme Court decision-making.

Wacky warning - Super Bowl ad division

Kia recently released a one-minute commercial for its Optima with the premise that it was so desirable that increasingly implausible means were used to steal one: helicopter heist team steals one, has it stolen by Poseidon, who loses it to flying saucer, etc. At one point, 38 seconds in, aliens are seen driving the Optima fast on a mountainous interstellar world (green sky, multiple moons) when Mayan priests use interdimensional portals to swipe the vehicle and bring it to a pre-Columbian temple. The commercial was recently modified for broadcast from the Super Bowl version to add a disclaimer when the alien is driving it: "Professional driver on closed course. Do not attempt." Do not attempt to drive a Kia Optima on a mountainous interstellar world into an interdimensional portal!

"An Ecuadorian racket"

The Washington Times wonders when the Department of Justice will start investigating the fraudulent lawsuit against Chevron. Relatedly, Patton Boggs shames itself by bringing a frivolous suit for "tortious interference" against Chevron.

In the post below, "Labor Department promotes lawsuits," Ted highlighted the new partnership between the Department of Labor and the American Bar Association to put employees with complaints about their bosses in contact with contingency-fee lawyers.

But as we noted in a Shopfloor.org post Tuesday, "What about the Executive Order Barring Contingency Fee Lawyers?,"
there's a 2007 Executive Order still in effect that blocks Executive Branch agencies from hiring attorneys on contingency. The Obama Administration has let stand President George W. Bush's May 16, 2007, Executive Order No. 13433, "Protecting American Taxpayers From Payment of Contingency Fees." That order specifies:

(b) After the date of this order, no agency shall enter into a contingency fee agreement for legal or expert witness services addressed by section 1 of this order,  unless the Attorney General has determined that the  agency's entry into the agreement is required by law.

The DOL-ABA arrangement violates the spirit, if not the letter, of that Executive Order.

Terror suspects and Miranda

The Federalist Society sponsors a podcast debate between former judge Paul G. Cassell and Professor Amos N. Guiora of University of Utah Law.

Labor Department promotes lawsuits

The Department of Labor has created a telephone hotline that will refer complainants to private plaintiffs' attorneys. Awfully nice of the Obama administration to do marketing for a special interest group at the cost of taxpayer money and jobs. ATRA complains.

The report was no surprise to my readers, but it somehow surprised the stock market: Toyota stock went up 4%. [NYT]

So why did it take the government so long to release the report? As Walter Olson asks, "Did it make a difference that the federal government has taken a proprietor's interest in major Toyota competitors GM and Chrysler, or that a former trial lawyer lobbyist heads the National Highway Traffic Safety Administration? Those questions might be worth a hearing at the newly reconstituted House Energy and Commerce Committee."

Meanwhile, the entirely bogus "economic loss" class action against Toyota continues; the court refused to dismiss the case. I hope when a class certification motion is made, Toyota argues that the attorneys are not adequate representatives of the class because it is the class attorneys, by contributing to a pseudoscientific hysteria over nonexistent electronic flaws in Toyota, that created any economic loss. Certainly any settlement that pays any attorneys' fees will register an objection from this Prius owner.

"Bipartisanship" in judicial nominations

In 2003, George W. Bush nominated a former Democratic state legislator, the well-connected Henry Floyd, to the District of South Carolina. Eight years later, President Obama proposes promoting him to the Fourth Circuit—and gets praise for making "a rare cross-party choice."

Relatedly, Adam Liptak Kevin Sack of the New York Times and Ezra Klein, in discussing the healthcare reform litigation, describes the Fourth Circuit, likely to see an appeal in the case, as "conservative." This is a vestige of long-ago days. Today's Fourth Circuit consists of eight Democratic appointees and six Republican appointees—and one of those Republican appointees, Roger Gregory, really was a bipartisan appointment of George W. Bush, who renominated a Clinton appointee in a failed attempt to prevent Democratic filibusters of his nominees. If Judge Floyd, who has the support of Republican Senator Lindsey Graham, is confirmed, Clinton and Obama-nominated judges will make up two thirds of the court.

Around the Web, Feb. 8

And news releases on American Electric Power v. Connecticut: 

Around the web, February 5

  • Tenth Circuit affirms exclusion of junk-science expert in unreported opinion. [Graves v. Mazda Motor Corp. via ABA Litigation News]
  • Taco Bell aggressively defends against consumer-fraud suit; Chevron files RICO suit over trial lawyer fraud. On the other hand, Illinois Central RR's battle against asbestos fraud perhaps more expensive than simply accepting victimization—but only if one doesn't consider the deterrent effect. [Bulletproof Blog; AP/law.com; WSJ Law Blog; LNL]
  • MGA Entertainment sues Mattel, alleging a strategy to "litigate MGA to death." One sympathizes, but the Supreme Court has pretty much all but ruled out antitrust liability for overaggressive litigation. [CNBC via ABAJ]
  • Dan Snyder sues Washington City Paper and its owner over negative story. But why is the Simon Wiesenthal Center getting involved? [WaPo; WaPo]
  • Chamber of Commerce recognizes that Obama executive order on outdated/burdensome regulation doesn't apply to much of the regulatory state. [WSJ ($)]
  • Racist and violent rhetoric at a political rally, but it was Common Cause, rather than the Tea Party, so don't expect mainstream media coverage. [WSJ; Jennifer Rubin]
  • Bill Childs is looking for examples of usage of historians as experts. [Torts Prof]

Defibrillate or litigate?

Health Day, via Bloomberg, "Widespread Use of Defibrillators in Public Places Saves Lives: Study":

WEDNESDAY, Jan. 26 (HealthDay News) -- The odds of surviving cardiac arrest are greater if it is caused by a "shockable" arrhythmia and if bystanders can give CPR and a shock from a nearby automated external defibrillator (AED), a new study finds.

That's why one is more likely to survive if a cardiac arrest occurs in a busy public place, where there are people to witness and respond to the emergency and AEDs are available, the researchers noted.

Agenda, Sunday, Feb. 6, American Association for Justice, Automated External Defibrillator (AED) Litigation Group Meeting.


I. Summary of This Area of Law
a. Types of Cases
b. Legislation/Standards Involved

II. Updates
a. Legislation: Summary of Web site for All of United States
b. Laws/Regulations/(State by State)

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Ruth Bornsen never read the user manual for her North Dakota family business's Pragotrade meat grinder; she unilaterally decided that she did not need to use the plastic plunger to shove venison meat into the chute into the grinding mechanism, notwithstanding a diagram of fingers getting caught in the grinder. That didn't end well when the grinder removed four of fingers. This is, Bornsen says, Pragotrade's fault for making the chute large enough for her to put her hand in; there's also the standard failure-to-warn claim, because, after all, Bornsen wasn't warned by all the warnings, so Pragotrade should have put the warnings in different places. [Grand Forks Herald ($); Crookston Times]

"The Whooping Cough's Unnecessary Return"

In City Journal, Paul Howard and Jim Copland notes the role of plainitffs' lawyers and pseudo-science activists in California's deadly whooping cough epidemic. See also The New York Observer's review of Seth Mnookin's "The Panic Virus."

Six brothers, now ranging in age from 14 to 22 years old, sued Washington state, arguing that Child Protective Services should have done a better job of protecting them from abuse in their family home. The plaintiffs' lawyer describes some horrific abuse, but no adults have been charged with any crimes; still, the state has agreed to settle the lawsuit at taxpayer expense for $6.55 million. [Seattle Times via ABAJ] Leaving aside Washington's strange laws holding taxpayers accountable for criminal activity, one worries about further incentivizing Child Protective Services to be overaggressive in intervening in families.

"Actions speak louder than words"

Around the web, February 1

  • Conservative and libertarian alternatives to originalism? [Kerr @ Volokh reposting Fed Soc panel]
  • Manatt pays $25M to settle malicious prosecution suit. One place where liability should be expanded: more law firms should be sued for bringing bad lawsuits. [American Lawyer]
  • Evidence of the SOX effect on IPOs. [Ribstein]
  • Interview with Victor Schwartz [TortsProf]
  • Deep pockets files: driver under influence of marijuana kills two, and jury hits insurance company that issued him a $15,000 policy with a $50M verdict. [OL]
  • Scott Greenfield discusses a recent motion to seal in the Third Circuit. [Simple Justice]
  • "Lawyer fighting St. Louis class action settlement." [LNL]

Litigious charities

When you give money to the Susan G. Komen For A Cure Foundation, $1M/year of that money is used for lawyers to threaten other charities that use the phrase "for the cure"—who then have to spend their own resources either changing their name or dealing with lawyers. [V3; Colbert @ Huffington Post; Huffington Post]



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.