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September 2011 Archives

An important Federalist Society white paper on how trial-lawyer-stacked judiciaries are vetoting civil justice reforms in a number of states, and looking at a number of upcoming state-court cases challenging caps on damages.

Around the web, September 30

  • Texas loser pays: just packaging? [Olson]
  • Interesting quantitative statistics in this study of the relationship between top BigLaw firms and top law schools. [Oyer/Schaefer]

  • Jerry Brown vetos AB 559, which would've reversed a rare California Supreme Court case limiting attorneys' fees. (The attorney had asked for $870,000 in fees for winning $11k for his client.) [veto message; CJAC]
  • Judge Sparks defends "kindergarten" order. [WSJ Law Blog; earlier]
  • Refuting Elizabeth Warren's "soak-the-rich" non sequiturs. [Powell; Hinkle; de Rugy; Instapundit]
  • Brian Leiter keeps giving me reasons to stop giving money to University of Chicago Law School. [Bernstein @ Volokh]

  • Latest dumb policy proposal: forgiving student loans. [Wolfers]
  • Ford Motor pulls anti-bailout ad. Under government pressure to do so? [Detroit News; Kaus; Cato; earlier]

  • The Atlantic weighs in about the unworkability of the proposal in Barack Obama's American Jobs Act to permit litigation over alleged discrimination against the unemployed; Point of Law readers already knew that.

    What's in the water in Wisconsin?

    Left-wing thuggishness is disturbingly common there, and not just in the recent unsuccessful union demonstrations to protect their special-interest privileged status from taxpayers.

    • I'm not particularly surprised that the math shows that the University Wisconsin undergraduate and law schools racially discriminate against whites: such racial discrimination is a matter of course in higher education, and I'm surprised that there aren't more entrepreneurial conservative activists taking this sort of thing on in the courtrooms instead of just writing op-eds. What surprises me is the brazenness with which students and administrators violently shut down a press conference on the subject, and how the left defends such violations of freedom of speech. [CHE (with great link roundup); see also OL]

    • "[O]n September 16, [University of Wisconsin-Stout (UWS) theater professor James] Miller placed a new poster on his office door in response to [the university's] censorship. The poster read 'Warning: Fascism' and included a cartoon image of a silhouetted police officer striking a civilian. The poster mocked, 'Fascism can cause blunt head trauma and/or violent death. Keep fascism away from children and pets.'" The university demanded he take that poster down because of the reference to "violent death." FIRE is on the case.
    • Why hasn't Wisconsin Supreme Court Justice Ann Walsh Bradley faced any discipline for making false allegations against a fellow justice? [Blaska]
    • Meanwhile, though Governor Scott Walker won a victory for taxpayers against unions, the victory may only be termporary. In previous rollbacks of excessive union benefits—even rollbacks caused by bankruptcy, patient unions just waited for a future friendly government, and got those same excessive benefits restored retroactively. [Greve @ Fed Soc]

    Important WSJ article about the decline of mens rea in federal criminal statutes, and the resulting havoc that can be wreaked on innocent citizens by empowered prosecutors. In the example of the responsible corporate officer doctrine, businessmen can be criminally charged for acts of their employees, even when neither the boss nor employee had criminal intent. (More: Corporate Counsel; FDA Law Blog; NYT]

    Relatedly, the New York Times notes how the threat of overcharging can result in forcing citizens with legitimate claims of innocence to plea bargain.

    Around the web, September 27

    Even the ABA objects to Department of Labor proposal to require disclosure of all consultants on labor-relations issues, something a Chamber of Commerce official calls the biggest giveaway to organized labor in this administration. The proposed rule would have broad implications, and would certainly lead to job-killing litigation over minor collateral issues relating to the edges of its scope. [WSJ; NLPC; ABA; Chamber of Commerce; Vorys]

    Liability for thee, but not for me

    As David Oliver points out, we correctly don't hold scientists liable for making mistakes in cutting-edge science; when an Italy even considers the issue, as they did in an unsuccessful criminal prosecution of scientists that failed to predict a deadly earthquake, we justifiably ridicule them. Science is a process of trial and error, and we want scientists to explore hypotheses that might be wrong without fear of legal consequence for failure. So why do we hold manufacturers liable for failing to anticipate the future judgments of lay juries evaluating the predictions of scientists presented at trial testimony, most of which are arguable at best?

    Of course, this sort of double-standard is common. We don't hold lawyers liable for the larger effects on society when they use abusive litigation to make us less safe by driving safe and effective products from the marketplace. We let juries second-guess doctors when experts disagree over the correct course of medicine, but give that discretion to attorneys free from liability.

    On KPCC today

    I'm scheduled to be on KPCC (Los Angeles), 89.3 FM, today at 1:06 PM Pacific to discuss mortgage litigation.

    New York state law has no provision for awarding attorney fees to objectors who improve class action settlements; while most courts recognize the "common fund" aspect of awarding fees, New York courts do not. The absence of statutory authority has meant that class members, who already have little incentive to challenge unfair settlements, do not even have the hope of winning fees. A law has since passed the legislature to fix this loophole; this may be the first explicit statutory authority for class-action objectors to recover fees. [Reuters]

    Gabriel Bonilla v. Motel 6

    Speaking of third-party liability for crime, consider the case of Bonilla v. Motel 6 (W.D. Pa.) via On Point.

    Gabriel Bonilla was staying in Room 225 in the Motel 6 at Washington, Pennsylvania, on June 13, 2008, when he discovered that his neighbors in Room 227, Trey Willis and Richard Pruden, were filming a pornographic movie. The parties recognized the opportunity for a deal, and Bonilla won the right to have sex with the "actresses" for $30. Unfortunately, Bonilla's apparent preference for sexual activity was not on the menu, and when he persisted over the objections of the pimps, there was an altercation that resulted in Willis and Pruden slashing Bonilla with a knife and breaking his nose. Willis and Pruden are serving four to ten years for the assault, so Bonilla has sued the deep pocket, Motel 6, for failing to protect him. Federal district court Judge David Stewart Cercone, a George W. Bush appointee, rejected Motel 6's argument that "procuring sex through pimps is an illegal and obviously dangerous activity and that innkeepers cannot be held liable when a guest patronizes a prostitute and is injured as a result."

    I've long criticized a silly judgment in New York state court that the Port Authority was 68% responsible for the 1993 terrorist bombing of the World Trade Center, potentially putting them on the hook for $1.8 billion in damages.

    The good news is that today the New York Court of Appeal struck down that decision, reversing lower courts; the bad news is that the decision was only 4-3, and on the narrow ground of governmental immunity under New York statutes, rather than any sort of rational interpretation of the principle of causation. [NY Court of Appeals via Bashman; earlier @ WSJ]

    Troy Davis

    Before one calls the Troy Davis execution a miscarriage of justice, as many reporters have knee-jerkingly indicated, one might want to read the 172-page opinion by a Clinton-appointed federal judge calling the late-invented claim of innocence "smoke and mirrors." More: Erickson, noting that of the seven witnesses who "recanted," only two materially changed their testimony, and Davis's lawyers refused to permit them to testify under oath in the habeas hearing.

    Certainly, there are arguments against the death penalty. Davis's "innocence" isn't one of them. Coincidentally, as the NAACP played the race card, Texas executed white supremacist Lawrence Brewer for the race-motivated torture-murder of James Byrd, Jr. by dragging. Give credit to the NCADP and the Nation for a consistency I haven't seen elsewhere on the Internet.

    More: Charles Lane.

    Jim Copland speaks with Harvey Pitt, former chairman of the Securities and Exchange Commission, about shareholder proposal trends over the last four years and how the SEC has changed since Dodd-Frank.

    Relatedly, the Manhattan Institute releases its Fall 2011 Proxy Monitor report. Among its findings: shareholder proposals are sponsored by a small subset of shareholders; labor unions' shareholder activism appears potentially linked to union organizing campaigns and motivated by concerns other than shareholder return. "On balance, the empirical evidence analyzed in this report tends to throw into question the push for 'shareholder democracy' and suggests that shareholder activism in the form of shareholder proposals submitted on the proxy ballots of publicly traded companies may be more a vehicle for interest-group capture of corporations rather than for mitigating agency costs and improving shareholder returns."

    Meanwhile, "say on pay" is already having an adverse effect on one corporation: Cincinnati Bell was one of the very tiny minority of companies whose "say on pay" shareholder vote rejected the executive compensation package. Since such votes are only supposed to be advisory without creating a fiduciary duty, and the independent board members believed the compensation package sound, the package was approved anyway. And now they're the subject of a federal complaint in the Southern District of Ohio that will almost certainly cost shareholders more than the executive compensation package itself. [NECA-IBEW Pension Fund v. Cox via Frankel]

    This is one of a surge of lawsuits prompted by say-on-pay votes, as Reuters reported in May and Professor Bainbridge had predicted, despite the fact that Congress rejected a proposed cause of action. See also: Bainbridge, earlier on POL.

    Around the web, September 20

    • The problem of overcriminalization in the Foreign Corrupt Practices Act: does the UK handle bribery cases better? [Economist; Reuters]
    • More on Oasis patent troll case. [Frankel; earlier]
    • The two "kindergarten"-snark judges are each spanked. [Texas Lawyer; Delaware Online; earlier]

    • Reason settles several meritless libel lawsuits brought against it for $0 after much procedural wrangling, but is still on the hook for the cost of defending itself, demonstrating the need for national anti-SLAPP law. [Sullum; Techdirt; Public Citizen; Public Citizen; Volokh; Bennett]
    • Parent threatened by government for allowing child to ride bicycle to school. [BikeWalk Tennessee via Alkon]

    • The need for better teacher evaluation metrics. [Washington Examiner]
    • What media bias? A telling slur on libertarianism by Adam Gopnik of the New York Times. [Boaz]
    • Ford ad slams competitors for their role in taking bailout money. [USNWR]

    Congressional hearing on asbestos fraud

    A House Judiciary subcommittee explored the problem of asbestos fraud and asbestos bankruptcy trusts on September 9. Professor Lester Brickman's testimony presents a good summary of the issue. Businessman Mike Carter testified about the effect on job creation from his family business being repeatedly sued (104 times by 2223 individual plaintiffs) as a tertiary defendant—despite never manufacturing an asbestos product or ever facing a workers' compensation claim for asbestos-related injury. (See also ILR.) Moody's has said that "[r]ecent disclosures by three insurance companies regarding increased asbestos claims are a 'warning flag' for those companies and the U.S. property and casualty industry as a whole." [LNL; LNL; Main Justice; RAND]

    Multi-defendant patent suits

    Briefing is proceeding in the Federal Circuit over the legality of shotgun complaints that name dozens of unrelated patent defendants. Such lawsuits can create coordination problems and multiply costs across defendants. The Eastern District of Texas invariably allows them to proceed. [WSJ via Google News; WSJ Law Blog] (Of course, it's not just in patent cases where a plaintiff tries to sue dozens of defendants to create a tactical advantage in coordination problems.)

    Section 19 of the Patent Reform Act likely to be signed by President Obama today cracks down on such abuses. So naturally, there's a race to the courthouse to file before the bill takes effect. Rick Frenkel tells us that in the E.D. Tex., N.D. Ill., and D. Del. alone, there were 27 non-practicing entity (i.e., trolls) patent cases filed against an astonishing 417 defendants.

    About those poverty figures...

    There's a lot of sturm und drung how the poverty figures are up to the highest levels since 1993. Of course, those figures fail to account for most of the government assistance given to the poor: increasing anti-poverty programs won't improve the poverty rate. Given that most "poor" Americans have luxuries that the average American didn't have 40 years ago, we perhaps need a better metric for evaluating the poverty problem.

    California SB 469

    Sitting on Governor Jerry Brown's desk is a union-pushed bill, SB 469, that would create an extra layer of state bureaucracy whenever a Wal-Mart or SuperTarget seeks to open. The fact that the legislature passed this ridiculous bill when the state has 12% unemployment shows how legislators care more about special-interest union concerns than the interests of its citizenry. [Cal Watchdog]

    Do you have an elderly relative whom you're assisting by ensuring that they're paying their bills on time? Well, according to the federal government, you're a sucker. In 2002, Detroit resident Warren Hollis took out a reverse mortgage on the home of his mother, Texana Hollis, and then ignored months of warnings from the U.S. Department of Housing and Urban Development that he was late paying $7,000 in property taxes. "I kept it from her because I didn't want to worry her," he told a local news station. So HUD foreclosed and evicted Ms. Hollis. News reports incorrectly stated that the dispute was over $59.95, there was a public uproar, and the agency has responded by agreeing to waive the taxes and allow Ms. Hollis and her two grown children to move back in. So where do I go to ask the federal government to waive $7,000 of my taxes without penalty? [Detroit News and AP/WaPo, h/t BDJ]

    Kerr on Computer Fraud and Abuse Act

    As an excellent WSJ op-ed by Orin Kerr notes, the Computer Fraud and Abuse Act has been interpreted ridiculously broadly by the Department of Justice to cover all sorts of relatively harmless computer activity that has nothing to do with the hacking it was originally aimed at—and the Obama administration wants to encourage further overcriminalization by making even these minor violations felonies.

    Charles Lane via Mickey Kaus:

    "I agree that there are some rules and regulations that put an unnecessary burden on businesses at a time when they can least afford it," Obama told the Congress. So why the heck would he create another one?

    The problems with this bill are no surprise to Point of Law readers.

    Dan Snyder dismisses his libel suit against Washington City Paper over a story he hadn't read that dared to criticize him. Washington City Paper did not recover its attorneys' fees, but one presumes that the credible threat of doing so under anti-SLAPP laws helped Snyder come to the decision to dismiss the suit earlier rather than later; both sides claim victory.

    Meanwhile, blogger Amy Alkon wrote about an intrusive TSA search; the TSA agent has demanded $500,000 to settle a potential libel action. Marc Randazza is on the case defending her First Amendment rights.

    Bluetooth ripples: "kicker" provisions

    In a typical class action settlement, there is a common settlement fund, and the attorney fee is deducted from the settlement fund, with the remainder to the class. Class attorneys, however, interested in protecting their fee award, may structure the fee award as coming from a fund "separate" from the common fund—with the "kicker" that any reduction in the fee request ordered by the court goes to the defendant, rather than the class. Remarkably, not only do class attorneys have the chutzpah to claim that this means that this is better for the class because "the defendant is paying the fee instead of the class," but some courts have affirmatively adopted this economic fiction. Of course, the money is all coming from the same place, and the class is unambiguously worse off if any reversion goes to the defendant instead of to the class. If the defendant is also agreeing to a "clear sailing" clause where it won't challenge the fee request, there may be no one with standing to challenge the fee. In short, the "kicker" provision in any class action settlement reflects the class attorneys putting their own interests ahead of their putative clients at their putative clients' expense.

    Since the beginning, the Center for Class Action Fairness has asked courts to look at the substance of settlement structures rather than the form, and treat these provisions as problematic, if not a per se breach of fiduciary duty: the "kicker" provision makes the class worse off but the class counsel better off. This was a frustrating battle: even citing to the academic work of scholars like Lester Brickman, the failure of courts to have previously paid attention to the economic fiction meant it was easy to ridicule our proposal. (Judge Posner mentioned it in passing once, but other courts ignored it entirely.) One district court opinion accused our argument of being "long on ideology and short on law," a quote that has been used against the Center in nearly every objection since, even though that same court awarded the Center attorneys' fees.

    So the Bluetooth decision is not only a landmark in being the first appellate court to discuss the problem in detail, but is a vindication for the Center: anyone who criticizes the Center using the Lonardo language of "short on law" can be rebutted by noting that we got an appellate court to agree with us where the Lonardo district court ignored us. This will be important in pending cases such as Sirius where Judge Baer was snowed by the economic fiction and found that "kicker" provisions are a benefit to the class because it means that the defendant, rather than the class is paying for the attorneys.

    Around the web, September 9

    • Are Americans more litigious? Where the legal system works and doesn't. [Rasmusen/Ramseyer @ SSRN; Fisher @ Forbes]

    • Questionable nastygram sent by plaintiffs' firm to client who disclosed mass-tort nuisance settlement offer. [Frankel; earlier]
    • More bad laws named after dead people: turns out fear of bath salts was unjustified, but law is still on books. [Balko]
    • Obama's illegal move on immigration. [Rivkin/Casey @ WaPo; earlier on Obama administration disregard for rule of law]
    • 9/13 Federalist Society debate in DC on confronting terrorism: Mukasey v. Barr. [Fed Soc]
    • Press coverage on the Cobell appeal. I am accused of having a "noted legal mind." [Cronkite News; BLD; CCAF]
    • Obama administration planning to freeze foreclosures? I'm skeptical that they'd be that irrational. [Bader]
    • Government failure and market failure: when comparing the performance of markets to government, markets look pretty darn good. [Becker @ WSJ]

    No evidence of health effects from WTC dust

    Two studies published in The Lancet find no statistically-significant evidence of increased cancer rates, lung ailments, or fatalities from exposure to World Trade Center dust. Out of 9000 firefighters, only nine came down with lung cancer. Not only was this figure less than half of the predicted rate, but all nine firefighters were smokers. [AP]

    Obesity and food stamps

    We can disagree about the appropriate role of government in combating the obesity crisis, but one would think that there's a consensus at least that government shouldn't be subsidizing obesity. Thus, Mayor Bloomberg asked that sugar-sweetened drinks be eliminated from the city's food-stamp program. But not only have federal officials rejected Bloomberg's proposal, they're considering a proposal from Yum! Foods—i.e. Taco Bell, Pizza Hut, Long John Silver's and KFC—to accept food stamps.

    Some might consider it cutesy when a judge threatens to shame lawyers over breaches of civility; it's the second time in a week that a judge has engaged in a well-publicized shaming of attorneys. But I have a serious problem with the way this judge handled it. Perhaps both parties are equally guilty of abusive behavior in this case, but I more frequently find that one party is dragging everyone down in the muck. Leave that to one side, though: the problem here is that the court, by ordering on Thursday that every lawyer show up in Delaware on the Sunday of Labor Day weekend for a possible overnight session of lectures unless the parties settle before then is abusively creating a conflict of interest between the attorneys and their clients. It's hard to say that any attorneys forced to settle under these circumstances are settling on terms best for their clients, when the attorneys' personal interests at avoiding humiliation are so much at stake. Indeed, if one takes Delaware Professional Conduct Rule 1.7 seriously, any attorney at risk of sanctions for not settling now has to get permission in writing to continue representation of their client.

    NLRB notice rule

    Around the web, September 2

    • If the antitrust laws are to protect competition, rather than competitors, why is Sprint's stock surging upon news of DOJ's suit to block the AT&T/T-Mobile merger? [Wright @ TOTM; more; Manne @ TOTM]

    • The need for FCPA reform; government prosecutions show overreach. [National Law Review and Gibson Dunn via Reuters via CJAC]
    • Jon Huntsman plan proposes repeal of Dodd-Frank and part of Sarbanes-Oxley. [Huntsman; WSJ]
    • Devil's bargain: Wall Street and the Martin Act. [Olson @ NY Post via OL]

    • Iowa Supreme Court rejects proposal to keep lawyer discipline secret. [Des Moines Register; earlier @ OL]
    • "Congress Resiscitating Honest Services Fraud" [Right on Crime]
    • This "article argues that a symbiotic relationship exists between plea bargaining and overcriminalization because these legal phenomena do not merely occupy the same space in our justice system, but also rely on each other for their very existence." [J L Econ & Policy @ SSRN]
    • Erwin Chemerinsky was kind enough to represent attorney Stephen Yagman without pay in his criminal trial and appeal; now Yagman is claiming ineffective assistance of counsel. [Patterico; earlier at POL and OL]

    • What media bias? A telling Freudian slip in a New York Times story. [Mac Donald]
    • Bluetooth decision a "small blow for common sense." The "Hearing Health Matters" summary is incorrect, though: the settlement was for class members who didn't suffer any hearing injury. That's how ridiculous it was. [TMCNet; Hearing Health Matters]

    In re HP Laserjet

    A small victory for the Center for Class Action Fairness LLC won a small victory in In re HP Laserjet Printer Litigation, when the court reduced the fee request for a worthless coupon class action settlement from $2.75M to $2M. On the other hand, the court applied the Bluetooth precedent incorrectly: that $750,000 will revert to HP, rather than the class, and the judge failed to find that the kicker provision provided any benefit to the class. And, remarkably, the fact that the class representative opposed the settlement carried no weight.

    Appeal bond in Cobell v. Salazar?

    AP's Matt Volz reports on the class counsel's attempt to impose an $8.3 million appeal bond on Kimberly Craven's appeal of the settlement approval. The story interviews class counsel, but not me, though it does quote from our brief without clearly indicating that such an appeal bond is expressly forbidden by D.C. Circuit precedent.

    Hollister brands its stores with a "porch" entrance with two steps; it contended that it complied with the ADA because there was a second entrance at ground level accessible to everyone. Not good enough, said disability advocates and the Department of Justice, and a federal district court judge agreed, holding that it was not enough to comply with regulations without regard to the unwritten "overarching aim" of the statute. [Denver Post via ABAJ]

    More on the Eastern District of Texas

    The lede is buried in this analysis by a set of jury consultants about the Eastern District of Texas: interviews with mock trial jury participants in the Eastern District of Texas suggests widespread jury nullification of basic principles of patent law. Of course, I always take a mock trial result with a huge grain of salt; it's impossible to simulate the same degree of seriousness (or of aggravation with the delays of a real-life trial) in a mock jury. That said, analyses by jury consultants are always fascinating for what they imply but leave unsaid: if the consultants have any value, it will only be because jury trials are more like a game-show with results dependent on issues other than the ultimate truth, and the consultants are selling the keys to winning the game-show. The paper does have this extraordinary anecdote:

    In 2008, Judge Ward of the Eastern District of Texas issued an order requiring anyone conducting a mock trial in the Marshall Division to reveal that a mock trial was taking place and to provide the names and addresses of the mock jurors. Mock trials had become so frequent in Marshall that the court was too often obliged to excuse jurors for cause because they had been mock jurors for the cases at hand.



    Rafael Mangual
    Project Manager,
    Legal Policy

    Manhattan Institute


    Published by the Manhattan Institute

    The Manhattan Insitute's Center for Legal Policy.