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January 2012 Archives

Kenneth R. Feinberg, partner and founder of Feinberg Rozen and administrator of the government's two outside-the-courts victims' compensation funds for September 11 and the BP Deepwater spill discusses mass injuries and alternative dispute resolution in the American legal system. Mr. Feinberg explores the question of whether administrative claims resolution can complement, or perhaps substitute for, much modern mass litigation. Michael B. Mukasey, the 81st Attorney General of the United States, introduced Mr. Feinberg speaking at an event hosted by the Center for Legal Policy at the Manhattan Institute for Policy Research.

In the Cobell v. Salazar Indian trust class action settlement, class counsel made unrealistic promises to the class about when money from that settlement would be distributed. With over four separate appeals, including one from my client, Kimberly Craven, and post-fairness-hearing motions about whether the lead representative plaintiff, Elouise Cobell, was personally entitled to another $10.5 million from the settlement fund, the money has not yet been distributed, and class members are asking questions, including why there are appeals. Class counsel could simply make the briefing publicly available, or even summarize their arguments against the appeal. Instead, they announced falsely January 20 that the appealing objectors "each believes that you are not entitled to the relief (nor the payment of your trust funds) that has been provided in the settlement agreement," and then provided the addresses and phone numbers of the appellants and invited the hundreds of thousands of class members to contact the objectors. (The allegation is especially ironic, given that it is the class counsel who has defended the settlement approval and their $99 million fee (and $2.5 million in incentive payments to the class representatives) by arguing that class members are not entitled to anything, so anything they get makes the settlement fair, notwithstanding objectors' claims of intra-class conflicts and complaints that the settlement violates Wal-Mart v. Dukes in multiple ways.)

Fortunately for the cause of justice, the appellants are not so easily silenced by such unprecedented intimidation tactics. I'm quoted in two of the stories. [Indian Country Today; AP/WaPo; Lincoln Journal-Star]

Boing Boing commits racial profiling

British tourist Leigh Van Bryan, about to go to Los Angeles, joked on Twitter about digging up Marilyn Monroe's grave and destroying America. DHS found out somehow, detained Van Bryan and friend Emily Banting at the airport, and deported them back to Europe. Boing Boing correctly points out (via Alkon) that this is silly—but the reason we know this is silly is because you and I and Boing Boing are racially profiling. Native white British subjects haven't done any damage to America since they burned DC down in 1814, and are exceedingly unlikely to be serious about "destroying America." (As Boing Boing profiles Van Bryan: "He would not hurt anyone. He is gay.") But we want DHS to have the flexibility to detain hypothetical Islamic fundamentalist Mohammed Abbasi if he were to make a similar threat on the Internet that is less likely to be a joke. But we don't let DHS racially profile. That means that DHS has to treat everyone with the same insane level of scrutiny, which both results in silly false positives, like the deportation of Leigh van Bryan, and likely also results in false negatives, because resources diverted to investigating 88-year-old invalid grandmothers and gay Irish tweeters aren't being used to scrutinize Saudi college dropouts taking flight lessons. Perhaps we as a society prefer things this way rather than have a DHS that engages in racial profiling, but then we have to recognize that in the absence of profiling, the DHS will not have the discretion to use common sense to permit Van Bryan and Banting to spend their tourist dollars here. More at Daily Mail.

Update: and welcome Instapundit and Boing Boing readers. You'll note that, contrary to Boing Boing's characterization, I never say that I approve of racial profiling; there are unquantifiable benefits for a society that refuses to do so, especially for someone like me who is swarthy and could dress as Khalid Sheikh Mohammed for Halloween simply by not shaving. I merely note that the abstaining from racially profiling is not costless. A consequence of the failure to racially profile is that people who clearly are not Muslim terrorists are going to be treated as if they were Muslim terrorists, and that means that people who say they are going to "destroy America" cannot be assumed to be joking. Boing Boing huffily denies profiling, but that simply isn't true. The post author clearly thought some profiling was appropriate in evaluating this decision: as I noted above, he quoted the person who asserted that gay people aren't violent. Why did "conservatives" pick on this one post? We discussed it at our secret Vast Right Wing Conspiracy meetings. No, seriously, I saw the Boing Boing post on Amy Alkon's blog, noted that Boing Boing thought it relevant to mention that Van Bryan was gay to demonstrate that the DHS was being silly, and Glenn Reynolds saw my post on Facebook. Certainly, DHS will be more accurate if they act as an intelligent Bayesian, and react less harshly to gay Irish tweeters—but that would entail racial profiling.

Talking Freddie Mac on 89.3 KPCC-LA (NPR)

I'll be on the Patt Morrison show today at 1:06 p.m. Pacific rebutting the oversensationalized claim that Freddie Mac was "betting against struggling homeowners."

Gregory Conko, a senior fellow at the Competitive Enterprise Institute, a Washington D.C.-based think tank, asked an important question in a piece published on our sister blog Medical Progress Today. Who should be liable when a patient is injured by a generic drug?

In a case called Conte v. Wyeth, a California Intermediate Appellate Court in San Francisco held that, since plaintiffs can't sue a generic manufacturer for negligent failure to warn, then they should be able to sue the innovator manufacturer who had some control over the contested labeling -- even if the patient didn't take the innovator's product, and even if the innovator is no longer manufacturing the off-patent drug and therefore no longer keeping its labeling up to date.

Conko tackles the "reasonably foreseeable" theory that emerged from the Conte decision and discusses the potential implications that the broad adoption of such tort theory can have on innovation. While the analysis doesn't call for a particular legal solution, Conko provides insight into a potential Supreme Court issue.

Speaking of NY Times bias...

Demand outstrips supply for New York private schools, and thus tuition creeps upward faster than inflation and the cost of education elsewhere, reaching an astonishing $40,000/year at some schools. At no point does the New York Times article (h/t K.L.) identify what is causing the imbalance: regulatory barriers to entry that make it nearly impossible for new institutions to open and relieve some of the excess demand. Too, some of the excess demand is caused by the large difference in quality between private and public schools, a problem exacerbated by the amount of money public schools waste on union contracts designed to benefit low-quality teachers instead of students.

New York Times, January 28, 2012, "Filibustering Nominees Must End": editorial calls for end of filibustering of judicial nominations.

New York Times, March 13, 2003, "Hold Firm on Estrada": editorial calls for Senate Democrats to refuse to hold a vote on nomination of Miguel Estrada. "The criticism [of the filibuster] rings hollow, given that some Republicans making it... voted to filibuster when President Clinton nominated Richard Paez" to the Ninth Circuit.

Might I suggest that the New York Times's criticism of the filibuster "rings hollow" today?

Of course, Paez got an up-or-down vote, got seated, and then proceeded to demonstrate why Republicans voted against him with a series of decisions abusing his judicial authority. The Bush-nominated judges who got seated by virtue of the Gang of 14 compromise after the original filibuster have served admirably without controversy, as surely as the several other judges who remained filibustered because of the compromise, such as Miguel Estrada, would have. (Disclosure: I have a case pending before one of those judges, Janice Rogers Brown. I also have two cases pending before the Ninth Circuit without panel assignments, and I'm adverse against Estrada's firm in one of those cases.)

There is a principled argument to be made against the judicial filibuster of nominations. After eight years of supporting such filibusters, the Times doesn't have the moral authority to make it until it admits its earlier mistake or until after eight years of Democratic administrations, whichever comes first. Barack Obama should nominate Miguel Estrada (just as George W. Bush nominated a filibustered Clinton Fourth Circuit nominee, Roger Gregory) before complaining about D.C. Circuit filibusters.

The Second Circuit has ruled that Chevron must challenge the Ecuadorian judgment against it jurisdiction by jurisdiction rather than asking a US court to enjoin enforcement globally. The ruling is likely to have an adverse effect on Chevron's collateral RICO litigation against the plaintiffs. Meanwhile, you wouldn't know anything was fishy going on if you relied on Time Magazine's one-sided coverage instead of Alison Frankel's. [Frankel; Frankel; Frankel; Time; NYLJ; New Yorker via OL]

Around the web, January 27

  • That amendments to the Lacey Act make it impossible for American businesses to comply with importation regulations (as in the case of Gibson Guitar) without risking draconian criminal consequences is viewed by environmentalists and domestic producer special interests as a feature, rather than a bug. [Strassel]
  • The Engle progeny tobacco cases and their curious view of claim preclusion start to arrive in the U.S. Supreme Court. [SCOTUSBlog; Lahav]

  • Dumb class action against Nutella now looks to reward attorneys with millions. [Jackson; OL]

  • Business groups seeking change to Philadelphia courts' unfair reverse bifurcation procedures. [LNL]
  • Judge McConnell not impressed by OLC opinion on recess appointments. [AFS]
  • Loudoun County, Virginia taxpayers on hook for tens of thousands of dollars because governmental body's scorched-earth litigation against citizen who took a legal photo of a Board of Equalization meeting. [WaPo (h/t D.A.)]
  • Government-created shortage of Adderall and Ritalin; meanwhile, some trial lawyers putting profits ahead of people and seeking to ban entirely. [Star-Tribune; OL; Alkon; LA Weekly; L&S]

  • Mitt Romney's true tax rate is over 44%. [Tax Prof]
  • Annals of the improbable alibi. [ABAJ]

A new daily read: the Liberty Law Blog

Michael Greve and Michael Rappaport are now blogging at a new site called the Liberty Law Blog, which immediately leaps into the must-reads of the day. Recent posts include a discussion of how Federalist No. 15 predicted the inherent constitutional flaws of the European Union and an analysis of the "state coercion" argument against PPACA. And don't miss that site's podcasts with Michael Greve and Walter Olson about their new books.

My latest Manhattan Moment column discusses the SOPA legislation fiasco, the successful protest against it, and why this experience can serve as a teaching moment of the importance of limited-government principles.

Reuters fact check

An excellent Mark Hemingway Weekly Standard piece explored the intellectual dishonesty of supposedly neutral "fact-checking," which often turns into a way for reporters to insert their opinions into a contentious political debate. Recently, I noted hypocrisy in President Obama's State of the Union speech: "It is ironic that Obama is calling for a 90-day 'simple up or down' vote on judicial nominees when he is the only sitting president in American history who has voted to filibuster a judicial nomination." Reuters decided to fact-check this. Of course, a fact check that is a fact-check would be a single word long: "true." Obama is the only sitting president in American history who has voted to filibuster a judicial nomination. Even aside from a discussion of the Fortas nomination controversy that never mentions the severe ethical issues that caused him to resign from the Court entirely (instead it was the opposition of "Republicans as well as Southern Democrats"), the article is a nice demonstration of how much in the tank the media will be for Obama this year. Reuters went on at length how my analysis was "disingenuous"; after all, many presidents were never senators, so never had the opportunity to vote against cloture on a judicial nomination. Which misses the point. Obama isn't any less hypocritical if JFK or Warren Harding had also filibustered judicial nominations. But anything to discredit criticism of Obama.

CJD still lying about hot coffee

Litigation-lobby front Center for Justice and Democracy is still falsely claiming that McDonald's "coffee was as hot as a car radiator." As we've previously noted, "A car radiator temperature, between chemical coolants and pressurization, is between 195 and 225 degrees Fahrenheit. Stella Liebeck's coffee was between 170 and 180 degrees, and would rapidly cool when exposed to room temperature."

Note also the humor in CJD's use of the passive voice: Liebeck was injured when "McDonald's coffee spilled in her lap." Well, who could complain about a lawsuit where coffee magically spilled itself? Oh, Stella Liebeck spilled the coffee on herself? Gee, that would seem a fact relevant to the assignation of proximate causation when evaluating whether it's appropriate to criticize a court that allowed this case to get to a jury, unlike over 90% of other courts that have dealt with cases similarly claiming that hot coffee was a "defective product."

Liebeck's injuries came from dumping an entire cup of coffee in her own lap while sitting in a car without a cup-holder, and then sitting in that hot coffee for well over a minute while wearing absorbent clothing. As Liebeck's own lawyer claimed, any coffee hotter than 140 degrees would be "unsafe" in those conditions. Unless you wish juries to have the power to punish vendors like McDonald's and Starbucks and Dunkin Donuts and everyone else that commercially sells coffee, that's no more McDonald's fault than it is Liebeck's auto manufacturer or sweatpants manufacturer.

That CJD and Susan Saladoff single out the poster child of abusive litigation as the point of attack on the tort reform movement—without ever fairly addressing the actual arguments tort reformers make—shows the bankruptcy of that attack.

Update, January 27: Welcome, readers of the dishonest "Pop Tort" blog. Note how they cherry-pick a couple of websites that say that radiator temperatures are 190 degrees. Of course, 190 degrees is hotter than Stella Liebeck's coffee (which, even if was "held" at 190 degrees, which there was no evidence of, would rapidly drop in temperature as soon as it stopped being held at that temperature); moreover, most websites give much higher temperatures for car radiators: "Most engines today are designed to operate within a "normal" temperature range of about 195 to 220 degrees F"; (same); many thermostats are set at 195 degrees for car radiators, etc. The only reason to use the "car radiator" analogy is to mislead. At best, a car radiator has such a wide range of temperatures that it is meaningless to use the analogy; if you're saying that Stella Liebeck's coffee is as "hot as a car radiator" because you're claiming that car radiators are 160 degrees, well, Starbucks and Dunkin Donuts and McDonald's and Burger King and Wendy's and Caribou Coffee and 7-Eleven and Cosi are selling coffee today that's hotter than 160 degrees—much less the 140 degrees that Stella Liebeck's lawyer claims makes coffee "unreasonably dangerous."

Note further how Pop Tort makes up a brand new theory of liability for McDonald's—that the cups were not capable of holding hot coffee—that not even Stella Liebeck's lawyer had the chutzpah to argue. Of course, there's no evidence for the proposition that McDonald's was selling coffee in cups that would collapse if "poked by a finger"; if they were, then the rate of injury from coffee spills would be far higher than 1-in-23-million cups (i.e., several times less likely than being struck by lightning).

Note further that CJD still has no answers for the actual arguments tort reformers make against the Liebeck verdict and the judge's erroneous legal decision to let the case get to a jury. Instead, all their website offers is ignorant snark. The question remains: if CJD is in the right, why can't they simply address the issues? Their reliance on dishonest arguments and misleading non sequiturs seems to be part of their business model.

Obama State of the Union speech

Some thoughts on Barack Obama's State of the Union speech, which was more of a stump speech than anything else:

  • It is ironic that Obama is calling for a 90-day "simple up or down" vote on judicial nominees when he is the only sitting president in American history who has voted to filibuster a judicial nomination—and that was for someone well within the mainstream like Justice Alito.

  • We've previously commented on the faux populism of the "Buffett Rule" that Obama has made the centerpiece of his tax policy.
  • The fundamental economic unsoundness and ignorance of Obama is demonstrated by lines like "Over a thousand Americans are working today because we stopped a surge in Chinese tires." How much poorer are Americans and how many Americans lost their jobs because Americans are now paying higher prices for tires? How much less competitive are American vehicle exports because Americans are paying higher prices for tires? How much displacement of private investment will occur because Obama wishes to incur more public debt by creating a new bureaucracy, a "Trade Enforcement Unit," to raise prices on Americans?
  • Obama "call[s] on every State to require that all students stay in high school until they graduate or turn eighteen." The public schools of the District of Columbia are already unable to teach their students because teachers have no power to discipline bad actors in the classroom. How much worse will that subpar education be when teenage thugs who don't want to be in school are instead disrupting classes? How much will schools have to water down their curriculum to "pass" that bottom decile who don't have the intellectual firepower to handle high school classes at the expense of the other 90% of students?
  • I'd be more impressed that Obama calls for "[tearing] down regulations that prevent aspiring entrepreneurs from getting the financing to grow" if he weren't proposing and implementing so many new regulations that do just that. PPACA in particular is a job-killer.
  • The idea that we need a government program to help "manufacturers eliminate energy waste in their factories and give businesses incentives to upgrade their buildings" strikes me as insane. If manufacturers can profitably cut energy waste and build in energy efficiency, they don't need a government incentive to do so; if the government incentive is for making unprofitable energy-saving decisions, then that's just burning taxpayer dollars. If you think that reducing energy consumption is a good thing, then have the guts to implement a Pigouvian tax on energy consumption (which will by itself incentivize spending on energy savings) instead of increasing taxes on earning income and investment.

"When Lawyers Become Trolls"

A WSJ article finds that top patent attorneys are discovering that it's more lucrative to vertically integrate and represent their own patent-holding companies. So John Desmarais, with the help of venture capitalists, has formed Round Rock Research LLC, purchased Micron Technologies' portfolio of 4200 patents, and is making more money licensing and suing over it than he was in private practice. A troll can more effectively use a patent—valid or invalid—offensively in litigation than a business that actually makes things: the cost of a troll to litigate is less because it does not have the same sort of defensive discovery costs, or adverse collateral business consequences that might come from suing its customers. Thus, a legitimate business like Micron can unlock some of the unrealized value of its patent portfolio by selling it to a patent troll. This increases the returns to invention, but at the cost of increased transactions costs to the industry, and it is far from clear that the benefits outweigh the costs.

If nothing else, defendants will find that they have to pay their patent attorneys more as both demand increases and supply decreases. Too, as the returns to a science education plus legal education increase, we will see more human capital diverted from scientifically-productive positions to legal jobs that are simply societal transactions costs.

There is an interesting divorce of interests in a transaction like Micron's. Patent-litigation defendants can challenge the validity of a patent, and that often entails discovery of the inventors, which is a real cost to the inventors' employers. If the details of the Micron-Round Rock transaction ever become public, it would be interesting to see who is bearing the costs of that discovery, and how the contractual terms govern Micron's long-term obligations to Round Rock or the risk of patent invalidation.

Romney and self-deporting

Andrew Sullivan and others sneer at Romney's debate proposal that illegal immigration can be resolved through "self-deporting," but the idea is sound. If enforcing regulations on employers means that illegal aliens face worse economic conditions by their presence in the United States than they would by staying south of the border, there won't be illegal aliens because they won't come in the first place, and leave if they're already here. There's certainly evidence that the recession reduced illegal immigration over the last four years; there's no reason to think that illegal aliens don't respond to economic incentives. (Indeed, the main problem with amnesty proposals is that they encourage future illegal immigration in the hopes that they'll receive the next generation's amnesty.) Federal policy can make a big difference here. The Obama administration's hypocritical upside-down-federalism lawsuits against Arizona and Alabama for attempting to reduce the costs of illegal immigration, refusal to enforce deportation law, and attempts to encourage voting fraud by suing states that dare to require ID at the polls are all examples of the policy going 180 degrees the wrong way.

Of course, Romney discussing the issue in jargon that even pundits don't understand and the fact that the political discourse is so debased that ignorant pundits feel it appropriate to use snark in response are two obstacles that he faces in the road to the White House.

After successfully growing its mortgage unit, MetLife has decided to shut the division down firing 4, 300 workers in the process. The reason cited by the Fortune 50 company was an "uncertain marketplace and regulatory environment."

Hans Bader, senior attorney and counsel for special projects with the Competitive Enterprise Institute, identified a distinct culprit for this large job loss: the Dodd-Frank Wall Street Reform and Consumer Protection Act.

MetLife entered the mortgage market in 2008, and managed to achieve a "rising market share" despite a difficult economy and the collapse of the housing market. "Then came Dodd-Frank," and other new legal and regulatory risks and burdens for mortgage lenders. MetLife as a whole was hit with restrictions harmful to shareholders because of its mortgage business, even though "mortgages were less than 1% of MetLife's overall business." So it wanted to sell the mortgage unit to Bank of America or Wells Fargo to escape from those regulations. But it couldn't sell the mortgage unit, because those big banks don't want a new mortgage unit, since their existing mortgage business is already unattractive due to "the Obama Administration's various efforts to halt foreclosures" through government pressure, and "the robo-signing pseudo-scandal" involving the nation's biggest banks -- which will soon have to pay billions to state attorney generals and certain mortgage borrowers even though no one current on their mortgage payments has ever been foreclosed upon due to robo-signing. "So MetLife concluded it was better to shut down its [mortgage] operations, take a $90 million to $110 million after-tax charge, and move on." Its "investors cheered" its escape from Dodd-Frank's tentacles, and its stock price rose in response.

The Lowell Milken Institute for Business Law and Policy at UCLA School of Law is accepting applications for the Lowell Milken Institute Law Teaching Fellowship. The Institute describes the fellowship as follows:

This fellowship is a full-time, year-round, one or two academic-year position (approximately July 2012 through June 2013 or June 2014). The position involves law teaching, legal and policy research and writing, preparing to go on the law teaching market, and assisting with organizing projects such as conferences and workshops, and teaching. No degree will be offered as part of the Fellowship program.

Fellowship candidates must hold a JD degree from an ABA accredited law school and be committed to a career of law teaching and scholarship in the field of business law and policy. Applicants should have demonstrated an outstanding aptitude for independent legal research, preferably through research and/or writing as a law student or through exceptional legal experience after law school. Law Teaching Fellowship candidates must have strong academic records that will make them highly competitive for law teaching jobs.

Applications are due by March 1, 2012. More information about the Institute and on the fellowship can be found here.

Brooklyn Law professor Jason Mazzone and Heritage Foundation visiting legal fellow Andrew Grossman debate the constitutionality of President Obama's recess appointment of CFPB director Richard Cordray and three members of the NLRB.

Professor Mazzone's first comment articulates a unique national security argument in defense of the President's recess appointment authority. The featured discussion promises to be lively and thoughtful; please check back throughout the week as the discussion continues.

McClintic v. Lithia Motors

In 2010, the Center for Class Action Fairness filed a successful objection to the Classmates.com class action settlement in Judge Richard A. Jones's court in the Western District of Washington. He's since become one of the best judges on the bench in dealing with class action settlements. In McClintic v. Lithia Motors (h/t A.S.), Jones, citing two Center Ninth Circuit victories, made a number of important points in rejecting a class action settlement at the preliminary approval stage:

  • Injunctions to follow the law are meaningless and not a benefit to the class. All too often a court is willing to rubber-stamp a settlement that does nothing but promise prospective injunctive relief. If the class has been injured, this promise to a different set of people in a consumer class action is thin gruel. As the Center notes in a recent Ninth Circuit appeal, prospective relief might not even be a benefit to that second set if the defendant raises its prices to compensate for the change in business practices.
  • Jones rejected a cy pres provision when there were undercompensated class members. That's the way it should work: class counsel's first duty is to the class, rather than to third-party charities, and money should only flow to cy pres as a last resort.
  • Rule 23(e)(3) means what it says. If there's a secret side agreement, it should be disclosed to the court.
  • "One hallmark of a reasonable settlement agreement is that it makes participation as easy as possible, whether class members wish to make a claim, opt out, or object." Huzzah.
Jones also criticized a "kicker" provision that ran afoul of Bluetooth.

All this is especially impressive because it was a small-stakes class action with only a few thousand class members where it was improbable that anyone would object at all. Jones was willing to create more work for himself to get the law right and treat absent class members fairly, instead of taking the easy way out and rubber-stamping a settlement.

New victims of the Rothstein Ponzi scheme

Now-disbarred attorney and shanda-fur-die-goyim Scott Rothstein is in prison awaiting trial for defrauding investors in a $1.2 billion Ponzi scheme that told investors they were buying shares of future litigation settlements. Press attention has focused on light-hearted aspects: Rothstein regularly firing his attorneys in an effort to delay trial; Rothstein admitting in a deposition that he discouraged a marijuana-dealing scheme (but not the use of an escort service) in his office for fear it would draw attention to the Ponzi scheme. Rothstein funneled "payouts" to investors through his law firm's TD Bank account; he also faked a TD Bank website and put together a fake TD Bank office (with the help of, according to Rothstein, a bribed TD Bank vice president) to facilitate the scheme. This was, said one disgruntled investor, TD Bank's fault, and a Texas federal jury in Corpus Christi has awarded $67 million, over half of which is punitive damages, against the bank, which has not been charged criminally. But when it comes to assigning fault in the civil justice system, deep pockets are more important than culpability. It's not clear if Rothstein is telling the truth about the vice president, who denies ever receiving money from Rothstein, but the now-fired vice president's invocation of the Fifth Amendment 160 times surely made an impression on the jury, to the detriment of his ex-employer. A different set of investors is about to proceed in Florida state court on the same theory. [ABAJ; Bloomberg; Business Week; Sun-Sentinal]

Before Rothstein was caught, he was one of the larger abusers of SLAPP threats, which makes you wonder what other lawyers who threaten libel suits on a dime are hiding.

Martin Redish's 2009 Wholesale Justice is an attack on the constitutionality of class actions from the left. Plaintiffs' attorneys do not hesitate to act entrepreneurially and stake out aggressive positions for the expansion of liability. So, Mark Herrmann asks, where are the creative defense attorneys and corporate general counsels trying to build off of Redish to push back on class actions? [Also: Overlawyered; Lahav]

One can be highly skeptical that Redish will do much good at the district-court level. There's already a spectrum of judicial views of the class action, and the judges most likely to give a Redish argument a full airing are the judges who are already fairly applying Wal-Mart and Rule 23 to block abusive class actions. At the margin, Redish adds a lot of cost to develop a particular argument that adds little chance of success at the district court. But as I've argued before, general counsels and their defense attorneys need to be thinking more strategically about their law firms' litigation positions, focusing less on the individual battles, and more about ensuring the legal terrain is favorable. The plaintiffs' bar was able to tilt preemption doctrine in the wrong direction because their advocates were focused on coherent long-term goals, while pharmaceutical companies were hiring generalist Supreme Court advocates with impressive resumes but no history of thinking about these issues. Defendants need to play less whack-a-mole, and more chess: put in the investment at the district-court level to preserve the long-run appellate issue. There is a Supreme Court that has consistently held that the procedural efficiencies of the class action device do not permit the infringement of individual substantive rights, and, with rare exceptions, regularly slapped down lower courts that have tried to take shortcuts. Even if defendants may not have standing to raise some of Redish's arguments, there are surely public-interest organizations willing to represent absent class members who'd be willing to be the ones to float the proposition at the class-certification stage. Ahem.

The EEOC has settled a suit against Pepsi for $3.1 million: Pepsi was neutrally using criminal background checks "indiscriminately," including excluding applicants with pending criminal charges, and the EEOC alleged that this had an impermissible disparate impact against African-Americans. Pepsi immediately caved. [EEOC press release]


No good deed goes unpunished files

Margaret Johnston thought she was providing Christmas charity when she opened her home to two young homeless people. She changed her mind after they stole all her alcohol and started using drugs. Unfortunately for her, by then they had stayed three days, and law enforcement in Manatee County, Florida, refuses to enforce trespass laws for anyone who's been in the same place for three days. Police told her she needed a legal eviction order before they would act. Fortunately for Johnston, her unwanted guests accepted a payout to go away rather than forcing her through the lengthy expensive eviction process. But it seems a taking to me when police won't enforce property laws because of a local custom not on the law books. [WWSB via ATL]

In the mid-1960s, Lt. Patrick O'Neil served on the USS Oriskany, a 1940s-era aircraft carrier. O'Neil's work in the boiler-room exposed him to asbestos insulation manufactured by Johns Manville, and, decades later, he contracted mesothelioma. O'Neil isn't allowed to sue the Navy; Johns Manville is bankrupt from previous asbestos litigation. So O'Neil sued innocent third parties that happened to sell products to the Navy that didn't contain asbestos on the theory that they should have warned users about the risks of asbestos from other products that might be used in conjunction with their harmless products. O'Neil also sued a company that sold a part in 1943 that did contain asbestos (pursuant to Navy requirements), but whose asbestos components had been replaced by the time O'Neil encountered them.

Fortunately, in last week's O'Neil v. Crane, the California Supreme Court unanimously rejected this attempt to expand tort law beyond all moorings. When "the consequences of a negligent act must be limited to avoid an intolerable burden on society, policy considerations may dictate a cause of action should not be sanctioned no matter how foreseeable the risk." Unfortunately, in the absence of federal law on the subject, this means that future plaintiffs are simply going to forum-shop their asbestos litigation to other states that have not so dispositively rejected such expansive theories, so innocent manufacturers who happened to sell products to the Navy are not going to be off the hook yet. But good precedent is good precedent, and it's important that the California Supreme Court is willing to acknowledge that the fact that there are some injured plaintiffs who don't have recovery does not require courts to invent theories to permit collection from distant defendants. And as Beck points out, the decision has consequences for intermediate California courts that have held that pharmaceutical manufacturers can be held liable for the sales of similar products by generic manufacturers. [Jackson; Beck; Wajert; PLF; PLF amicus; Stier; Cal Biz Lit via @walterolson; LNL; Recorder/law.com; Ruskin]

DEA agent Lee Paige was being videotaped giving a speech to children at an Orlando recreation center, so when he shot himself in the leg during the talk, it became a YouTube viral sensation. A district court rejected his suit against the DEA, and, today, the DC Circuit affirmed. [BLT]

San Francisco sick leave followup

Five years ago today, we discussed San Francisco's sweeping Proposition F, imposing huge sick-leave administrative requirements on small employers, including families that hire babysitters. So how has it worked? Press coverage, building off of a left-wing thinktank survey, has been uniformly positive, with one employer admitting that the law imposed an additional $110,000 cost on him, but that he still liked the law. The Monitor didn't interview anyone who opposed the law, but the fact that two thirds of employers claim to support the law means that one third don't, and it's the marginal effects of the law that are important for public-policy purposes, yet no one has measured those.

The study is further double-edged, as it shows that many employees are not aware of the law, suggesting that the full cost has yet to be realized; too, the study does not interview the unemployed workers who do not have jobs because the sick-leave law made them unprofitable to hire. One reason that the law's effect may be muted is because there doesn't seem to be enforcement of the more draconian aspects of the law—which can change on a dime through public or private enforcement. Moreover, the press coverage does not mention that San Francisco's unemployment rate has more than doubled since the law was passed. Of course, there are confounding factors in the rise in the unemployment rate (I wouldn't contend that Prop F is the sole cause of the rise), but surely a $1000/employee/year increase in mandated benefit expense has some effect.

As I've noted before, these sorts of mandates are not free to employees. If San Francisco mandates an additional $1000/year in benefits to employees, employers are simply going to pay employees $1000/year less in wages. The effect will be heaviest on low-skill workers, who may be unprofitable to hire at the high combination of San Francisco's high minimum wage and benefits requirements, and thus lose jobs. These effects are very real, but aren't going to be captured in surveys. The press and the academic community have fallen short on the job here.

Felon voting, Santorum, and Romney

Last night's Republican debate featured an exchange between Senator Santorum and Governor Romney over the right of felons to vote. [CBS] Roger Clegg takes Santorum to task. See also Glassman and Lott in the 2005 New York Post.

Andrew Wise, leading D.C. defense attorney at Miller Chevalier and James Copland, director of the Center for Legal Policy at the Manhattan Institute, discuss the 'Honest Services' Fraud Statute post Skilling v. U.S. and Wise's defense of Kevin Ring, a former lobbyist who was involved in the Jack Ambramoff Indian lobbying scandal. Andrew Wise offers updated insights on Congressional attempts to reverse Skilling and redefine 'honest services' fraud as he similarly discussed at a Manhattan Institute forum in 2010.

James Copland and Andrew Wise
by Manhattan Institute

FLSA and breast-feeding

Under a recent amendment to the federal Fair Labor Standards Act, employers must reconfigure their offices to create a dedicated disturbance-free space for breast-feeding mothers "that is inaccessible to other employees, and, in most cases, enable nursing mothers to refrigerate the expressed milk." Bathrooms don't count. The Department of Labor has started issuing citations enforcing the law, but employers need not worry about the additional expense says activist Danielle Rigg, because "Employers stand to win big from employees breastfeeding. Making it a top priority promotes less absenteeism, fewer healthcare costs and happier moms who are employees." [HuffPo via ABAJ] Which raises the question why, if it's so beneficial for employers to spend extra money on breast-feeding mothers, one needs a federal law imposing this practice upon employers.

These sorts of regulations are not free. Every time Congress or the courts or regulators impose an additional burden upon employers relating to employees, it increases the marginal cost of hiring employees: not just the compliance cost of the additional real estate in this case, but the additional costs of a legal and HR bureaucracy that has to keep track of all of the requirements and ensure compliance, and the additional taxes that go to enforcement. That comes directly out of the wages and other benefits employers are willing to pay employees, and means that, at the margin, some jobs will be lost as employers look for other ways to get productivity without more expensive employees. If Congress decided that every employee working eight hours a day should get a free $5 Starbucks gift card, employers will respond by reducing wages $5/day—or hiring fewer workers at the 8-hour/day mark. Congress may think it's benefiting employees when it mandates perks, but this is not a wealth transfer from employers to employees. Employees' marginal benefit must still exceed their marginal cost or they won't be employees. Instead it is a wealth transfer from all employees to breast-feeding mothers and non-productive bureaucrats, with a deadweight loss to society.

Now, certainly, we as a society can decide that this is a cost we should bear—though if there is social demand for this, one wonders why societal disapproval for businesses unfriendly to mothers is not sufficient to achieve this result without inefficient top-down enforcement that might be unduly Procrustean. And if Rigg is right, businesses will be excited to incur these additional marginal costs in exchange for the marginal benefits. But in an era of 8.5% unemployment, voters and policymakers should be looking closer at the question of whether it's better to have legislators or bottom-up voluntary transactions decide what employee benefits are worth wage and job cuts.

In the 1970's, the age of adulthood was generally moved from 21 to 18, permitting 18-year-olds to vote, serve on juries, and contract for themselves. There was a bit of a rollback in the 1980s regarding the sale of alcohol, but the biggest change came in 2009 with the CARD Act, Congress's intrusive "We know better than the market" bill regulating credit cards and forbidding those under 21 from obtaining one. Public Citizen's CLP Blog discovers what those of us on the right have known for a while: nanny-statism, by eliminating mutually beneficial voluntary transactions, has adverse consequences for society. The CARD Act does not just insult the dignity of 20-year-olds by infantilizing them, but hurts the rest of us by limiting the ability of 18-, 19-, and 20-year-olds from fully participating in society. As Andrew Schwartz points out, entrepreneurs like Bill Gates and Mark Zuckerberg got their start before the age of 21 with the help of credit-cards to finance their eventual multi-billion-dollar ventures. The next Mark Zuckerberg will need a lot more help from his parents, and may instead have to choose to run up $100,000 in debt at NYU getting a sociology degree.

Compucredit v. Greenwood

An 8-1 decision correctly enforces the default freedom of contract to arbitrate in a credit-card agreement in the absence of statutory language eliminating it, but look forward to litigation lobby supporters calling it an example of pro-business bias (notwithstanding the overwhelming bipartisan support for the decision) rather than an example of the Supreme Court correcting the Ninth Circuit's anti-business bias.

Eric Turkewitz confirms that this is an official policy (via Overlawyered), and that it appears to be litigation-driven—though, as Turkewitz argues, it may end up increasing civil liability to New York taxpayers in addition to the obvious increased threats to public safety.

Wherein George Soros wastes his money

At Media Matters, David Lyle is critical of my post about Michael Greve's new paper. But he exhibits no evidence of having read Greve's paper: he just asserts that it's wrong, without addressing the Commerce Clause issues Greve raises, much less the century and a half of Supreme Court precedent Greve discusses in support of his contentions.

Lyle is also critical of me because I correctly noted that the Court is not pro-business by any reasonable qualitative standard by... asserting the same flawed quantitative statistics that I had previously refuted as meaningless. Does Lyle address that refutation? Nope! He just repeats the assertion and pretends I never said anything about it, incorrectly insinuating that I was unaware of the argument.

Lyle does point to AT&T v. Concepcion and the unanimous decision in Wal-Mart v. Dukes, though he has no criticism of these decisions other than the result that they came out the way the Chamber of Commerce wanted. Of course, these are examples of the Supreme Court correctly applying the law to reverse the anti-business Ninth Circuit; in both instances, the decisions are good for consumers and employees, if bad for the litigation lobby special interest that Media Matters is for some reason mindlessly parroting. The fact that Media Matters has only snark on their side, rather than substance, is revealing.

Capriccioso on Cobell appeal

Indian Country Today looks at the latest filings in the Cobell v. Salazar appeal.

It's worth noting that, notwithstanding fulminations from the plaintiffs' attorneys, the appeal hasn't yet delayed the settlement at all: even if there had been no appeal, the settlement moneys still would not be distributed, because Elouise Cobell's collateral request for reconsideration of an extra $10.5 million to be paid to her (another document absent from the indiantrust.com website) is still pending at the district-court level.

That $285 million Delaware award by Strine

Delaware Court of Chancery Chancellor Leo Strine has a reputation for scrutinizing fee awards more closely than most. So it was a surprise when, last month, he approved a $285 million fee award—amounting to $35,000/hour for 8000 hours of work—to attorneys who successfully prosecuted a case against Grupo Mexico over the terms of a transaction with a related entity that eventually resulted in a $2 billion judgment. (The attorneys had sought $428 million; the fee award will be augmented with another $15 million in interest.) [WSJ; Reuters; WSJ Law Blog] As Bainbridge and Frankel note, the opinion seems to be sending a message to attorneys afraid of Delaware's scrutiny of fee awards: stop jurisdiction-shopping elsewhere, as we'll take care of you if you bring a legitimate case here. (Of course that promise isn't going to stop forum-shopping for the frivolous "disclosure" cases that provide no benefit to shareholders in exchange for a quick million-dollar payment to the derivative shareholder counsel.)

I've on several occasions expressed impatience with the inaccurate myth that the Supreme Court is unreasonably pro-business: December 2010; March 2011; June 2011; July 2011, etc.

A new must-read paper by Michael Greve, forthcoming in the Charleston Law Review, tackles the same issue. But Greve goes further: he persuasively argues that the Constitution effectively anticipated that the Supreme Court would be pro-business, and that is a good thing. The structure of the constitution, via the Commerce Clause, anticipated that the parochial interests of individual states would attempt to extract the marginal value of interstate commerce, and that the federal system and Supremacy Clause would act as a check on those anti-business instincts of individual states for the greater good of the nation as a whole. Thus, states would improperly fetter business; the Supreme Court, acting in its constitutional capacity, would act to prevent these infringements on interstate commerce; the result would be a Court that is "pro-business" by the improper metric of counting noses for votes for and against business in individual cases. But today's Supreme Court falls far short of that constitutional and federalist ideal:

Upon inspection, the notion that the Roberts Court's jurisprudence heralds a restoration of unbridled capitalism--or, more modestly, of reliable rules of the road for commercial actors--proves untenable, if not downright absurd. It is true that the Supreme Court often rules for business. And this past Term, unlike in preceding years, those rulings have often been the work of a narrow 5-4 or 5-3 conservative majority. ... However, the pattern is hardly unbroken. Moreover, and far more important, the conservative Justices' pro-business decisions look like picking weeds in downtown Detroit or for that matter Mrs. Rand's crumbling New York--well-meant, but unlikely to improve the neighborhood on a lasting basis.

Update: Welcome Media Matters readers. I have responded to Mr. Lyle's snark.

January 9 Jakadrien Turner update

Jakadrien Turner has returned to the United States, and, though it's now clear that the mistaken deportation was entirely her fault (she fooled her own criminal defense attorney; waived the right to an attorney and to contest her deportation hearing; more recent photos show someone who could readily pass for 21 in the absence of contrary information; and had her fake identity verified after she had an interview with Colombian diplomatic officials who gave her a passport), her family is already promising to sue. There would be some poetic justice if the government responds to any such suit with the threat of criminal sanctions. Our foresightful contrarian coverage was noticed by the Christian Science Monitor and the TM Daily Post blog.

I'm not a Missouri lawyer, but I'm quoted in a Missouri Lawyers Media story on class action settlements, though not given a chance to rebut the ludicrous claim of the plaintiffs' lawyer that the objection to the rip-off Bachman v. A.G Edwards "proceeds from a false premise." Even the sloppy Missouri Court of Appeal decision found that the "vouchers" were "coupons"; they just refused to address the failure of the Missouri lower court to follow the law and value the coupons at something other than face value. Literally refused: it acknowledged that we had made the argument, and then did not rule on it or give any reason for rejecting it.

On December 8, 2011, after Senate Republicans blocked the confirmation of Richard Cordray, former Ohio attorney general nominated to serve as the first director of the Consumer Financial Protection Bureau, President Obama vowed that his administration would not give up on the appointment. On Wednesday, the President followed through on his pledge with a recess appointment of Cordray, officially expanding the authority of the CFPB over non-bank institutions/lenders that can offer loans to consumers.

While there was an expected partisan response to the President's strategy from both sides of the aisle, a serious and legitimate legal issue was identified by constitutional scholars. The issue is whether the President has the authority to make recess appointments while the Senate is hosting "pro forma" sessions for the purpose of blocking those appointments.

The White House argues that the President does indeed have such authority:

The Constitution gives the President the authority to make temporary recess appointments to fill vacant positions when the Senate is in recess, a power all recent Presidents have exercised. The Senate has effectively been in recess for weeks, and is expected to remain in recess for weeks. In an overt attempt to prevent the President from exercising his authority during this period, Republican Senators insisted on using a gimmick called "pro forma" sessions, which are sessions during which no Senate business is conducted and instead one or two Senators simply gavel in and out of session in a matter of seconds. But gimmicks do not override the President's constitutional authority to make appointments to keep the government running. Legal experts agree. In fact, the lawyers who advised President Bush on recess appointments wrote that the Senate cannot use sham "pro forma" sessions to prevent the President from exercising a constitutional power.

In response, Andrew Grossman, visiting legal fellow in The Heritage Foundation's Center for Legal and Judicial Studies and litigator at Baker & Hostetler, points to contradictions that could occur as a result of executive authority in deciding whether the Senate is functionally in session or not.

...on December 17, the Senate agreed to an order instituting "pro forma" sessions, of the kind the President now claims are actually recess. (See the PDF of the Congressional Record here.) But it was at one of those sessions, on December 23, that the Senate passed the payroll tax cut extension that the President signed into law later that day. (Again, see the Congressional Record entry.)

Of course, if the Senate was actually on recess that day, it couldn't have passed the bill, and the President couldn't have signed it into law. (The President has not claimed--at least, not yet--that he can enact laws that have not passed Congress.) But in that case, the President chose to respect the Senate's own view as to whether it was open for business.

As Andrew also notes, the Constitution vests the Senate with the express authority to "determine the rules of its proceedings."

Professor Richard Epstein and Professor John Yoo both identify the danger in the recognition of executive authority to determine whether the Senate is in session. Professor Epstein then articulates a strong textual argument in the interpretation of Article II, Section 2 of the Constitution concluding that Cordray's confirmation does not fall within the scope of the President's recess appointment authority. The U.S. Chamber of Commerce echoed that sentiment in their sharp admonition of the President's recess appointment calling it "unprecedented, constitutionally questionable, and puts the authority of the director and the validity of the bureau's work in legal jeopardy."

Among the many viewpoints expressed, we can probably all agree that this appointment is not likely to go unchallenged.

Jakadrien Turner update

If you were betting on the true story of what happened to the 14-year-old American citizen deported to Colombia, I hope you paid attention to my odds-making. ABC News reports:

An ICE official told ABC News that people who do enter the US illegally often have no documentation whatsoever to identify them or a country of origin. So, they took Turner at her word when she insisted she was a 21-year-old Colombian citizen.

"[Turner] maintained this false identity throughout her local criminal proceedings in Texas where she was represented by a defense attorney and ultimately convicted," an ICE statement said. "At no time during these criminal proceedings was her identity determined to be false."

Once she was convicted, she was handed over to ICE, where she still said she was a Colombian citizen, even while being interviewed by a representative from the Colombian consulate. Eventually, the Colombian authorities agreed she was a Colombian citizen, and authorized her deportation, providing her with full Colombian citizenship upon arrival in the country.

Rights restrictions and new media

The absence of mandatory licensing means that contracts for music rights drafted years ago that failed to contemplate the ways new technology could be used adversely affect the quality of "ports" of movies to DVD or online-computer viewing. At NPR, Linda Holmes complains (via ALOTT5MA) about the resulting Netflix-butchering of "When Harry Met Sally." I discussed the countervailing issues in a 2006 Overlawyered post:

X owns the right from Y to use a song in a tv series, but, because of poor contract-drafting doesn't obtain the same right for use in the future medium of DVD. The song has become associated with the tv series, and is now worth more than it was ex ante; Y tries to extract economic rents that were generated by X. It's a sensible argument to say we shouldn't cry for the inside-baseball machinations of studios and music-rights holders jockeying for these economic rents; they had the ability to protect themselves, but failed to do so, and the problem will disappear in the future as entertainment lawyers learn to account for non-existent technology in current contracts. Still, in the short term, some deals will break down or not get made at all as the two sides play chicken, and consumers are a little bit poorer in the process. A society can choose to have a mandatory licensing scheme (as the US does in many other copyright areas) to prevent the loss of consumer surplus when these negotiations break down; or a society can choose to let copyright holders attempt to maximize their own utility and wealth, though at the expense of requiring expensive lawyers to negotiate these things, with the result that fewer beneficial deals get made. It's not immediately clear to me which is "better." ...

NB the difference between here and Kelo: in Kelo, either the homeowner or the city could use the land, but not both. But if I use a song in my documentary, I'm not preventing others from using it. That might not be enough to change one's conclusion, but it requires a different analysis, because the interests are different.

This isn't the place to discuss the economics of hold-out problems, but there's going to be negotiation friction when the ex-post value turns out to be much greater than the ex-ante value. Ex ante, the "Love and Marriage" song-rights-holders wouldn't have charged much for the DVD rights to "Married with Children"; after the show became a success, and the technology made it possible to market the show on DVD, the song-rights-holders can act as a holdout to demand the entire economic value of the DVD, even though their actual contribution is small. "So what?" is indeed one possible policy response, but it's not the only one.

The deportation of Jakadrien Turner

Jakadrien Turner, an African-American 14-year-old runaway from Dallas, was arrested for shoplifting hundreds of miles away in Houston. Rather than tell police who she was and risk being sent back home, she gave them the name of a 22-year-old Colombian. Houston police determined that the 22-year-old was subject to a deportation order, and transferred Turner to federal authorities, who deported her to Colombia. Several months later, Turner contacted her grandmother through Facebook, and the story has hit the media, and people are outraged. [WFAA; Gawker; Likko]

I don't think we have enough facts yet to be outraged at the deportation. It seems very improbable that authorities would knowingly deport an American citizen; as it is, illegal aliens can use the legal process to delay deportation for years and there are 1.1 million unenforced deportation orders. I am willing to wager money that when all the facts come out, Turner never told state or federal authorities her true identity or contested her deportation to Colombia. Teens—especially the sort who view themselves mature enough to run away from home—often have fake ID. Turner could well have decided, once she learned she was subject to deportation, that it was better to compound the lie and have the adventure of going to Colombia than facing the wrath of her family, the risk of juvenile delinquency prosecution, or even whatever was waiting for her if she was released from jail to the Houston streets. The fact that Turner waited several months after arriving in Colombia to express concern to her family (all the while participating on Facebook posing as a 21-year-old) suggests an element of preference to being in Colombia rather than having her family get her home: Colombia isn't a North Korean gulag.

Perhaps this isn't so. Perhaps Turner was being forcibly prevented from contacting her family once she was deported. Perhaps several American officials callously ignored pleadings of mistaken identity; if so, heads should roll. But there are very many more voluntary teenage runaways than involuntarily deported English-speaking American citizens; very few immigration officials have the incentive to risk their careers to deport an American citizen. So the smart money is on the voluntary deportation theory.

If Turner did not contest her identity or her deportation, it's hard to see what immigration officials should have done differently. There isn't a national biometric database of teenagers' (much less illegal aliens') fingerprints, DNA, dental records, or government microchip implants—and, normally, we think that to be a good thing. There's no reason to question the identity of someone who assumes an identity simultaneously with the adverse consequences that go along with that identity; there isn't even a reason to do so in the future, because the costs of doing so almost certainly outweigh the benefits of the extraordinarily rare scenario of a Jakadrien Turner. Unless we're going to stop deporting people entirely, there's no cost-effective means, short of infringing on the privacy rights of hundreds of millions of Americans, of preventing a Jakadrien Turner from deceiving immigration officials.

Berkeley anti-Israel protest litigation

The Blaze headline for a Tiffany Gabbay article is "CA JUDGE DEEMS RAMMING JEWISH WOMAN WITH SHOPPING CART 'FREE SPEECH'", but that's simply inaccurate.

Jessica Felber sued UC-Berkeley for "discrimination" for an incident where, when she was counter-protesting an anti-Israel demonstration, Muslim students jeered her with anti-Semitic slurs and one hit her with a shopping cart. But Berkeley had the assaulter arrested; the judge simply ruled that Berkeley was not liable for the violence and that free speech protected the two sets of demonstrators.

That's a good result for conservatives in the long run; any other result would have countenanced university crackdowns on conservative speech based on political correctness by "offended" students similarly complaining about hostile environments. Jihad Watch, critical of the court's decision, should be especially sensitive to this given how other nations less solicitous of free-speech rights turn the awesome power of government against criticism of Islam.

Elsewhere: SF Chron.



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.