The Supreme Court is poised to decide whether to hear an ExxonMobil subsidiary’s petition for relief from the $2.5 billion punitive award that a federal Appeals Court approved in one of the cases arising out of the catastrophic oil spill after the tanker Exxon Valdez hit a reef off the coast of Alaska 18 years ago.

That would be $2.5 billion on top of the $3.4 billion that the company has already paid to clean up the environmental damage, to compensate all injured fishermen and other parties, and to pay fines and settle claims with Alaska and the U.S. government.

The legal explanation for why Exxon should not pay a dime in punitive damages, let alone $2.5 billion, is complicated. But the fundamental folly underlying this and many other huge awards is pretty simple, in my opinion:

This punitive award would not punish any human being who had anything to do with the oil spill. (The ship’s captain has already been assessed $5,000 in punitive damages.) It would enrich only lawyers and Alaskans who have already been fully compensated for losses caused by the oil spill. And it would deter no future corporate misconduct, prevent no accidents, and serve no public interest of any kind, in any way.

This sort of award is, in other words, pure waste. And ultimately such awards come out of your pockets and mine.

To be specific, the $2.5 billion would initially be taken out of Exxon’s profits. This prospect has presumably depressed Exxon’s stock somewhat and may depress it more if the justices let the award stand. The people most immediately affected would be the millions of ordinary Americans who invest some of their savings in Exxon, mostly through pension funds.

The overpaid executives at the top of Exxon’s chain of command might lose a small percentage of their gigantic compensation packages if the award stands. But they would continue to be overpaid, as (in my view) are most top corporate executives.

And ultimately, the aggregate costs of thousands of such unwarranted awards are spread to all of us through higher prices and insurance premiums. The same is true of most, if not all, of the huge damage awards and settlements involving asbestos, silicosis, tobacco, and lead paint, among other major litigations. This is a price worth paying when necessary to compensate victims or deter misconduct. But most huge awards in recent years, including Exxon’s, serve no such purpose.

Where would Exxon’s $2.5 billion go? After the plaintiffs’ lawyers take their $484 million, the balance would go to a class of some 30,000 individual and organizational plaintiffs who have already been compensated.

This is not to deny that large punitive awards may occasionally help spur defendants and others to behave better in the future, in those unusual cases in which compensatory damage awards (often including vast sums for plaintiffs’ pain and suffering) are too small to create the right incentives. But the $3.4 billion already paid by Exxon is more than enough to make it and others exceedingly careful to avoid future tanker accidents. Especially because no jury has ever clearly found that anybody at Exxon did anything wrong, with the exceptions of the tanker’s possibly, but not provably, drunken captain and its third mate.

I also suspect that most of the total amount paid out in all of the punitive awards around the country, and in settlements driven by fear of such awards, similarly serves little or no useful social purpose. Indeed, the useless award against Exxon alone is larger than the sum of all other punitive awards for unintentional conduct affirmed by all federal Appeals Courts in all of American history.

In addition, studies show that juries are wildly unpredictable in awarding punitive damages. The consequence is that such awards, in the aggregate, may well do less to deter harmful conduct than to deter conduct that is, on balance, socially valuable even though it carries some risk of harm.

Three forces sustain this lunacy: 1) the entrepreneurship (if not greed) and political clout of plaintiffs’ attorneys, some of whom aggressively recruit clients who are not seriously injured, as illustrated by the recent guilty plea of securities-class-action superlawyer William Lerach for paying kickbacks to his "plantiffs"; 2) the populist fantasy that hitting big companies with huge punitive awards punishes individual corporate malefactors, or at least soaks the rich; and 3) the reluctance of courts and elected officials to get rid of claims that serve to enrich some people at the expense of the general public.

It’s also worth noting the disputed evidence that in the Exxon Valdez spill, nobody except the captain, Joseph Hazelwood (who left the bridge in violation of Exxon policy), and his third mate (who was thus alone when he failed to make a crucial turn to avoid the reef) did anything wrong.

In my opinion, it was unwise of Exxon executives to allow anyone with an alcohol problem to command what the plaintiffs correctly stressed was "an enormous vessel carrying toxic cargo across treacherous and resource-rich waters."

But the same U.S. Court of Appeals for the 9th Circuit that approved $2.5 billion in punitive damages, while halving the jury’s $5 billion award, admitted that there was substantial (albeit disputed) evidence that "Exxon followed a reasonable policy of fostering reporting and treatment by alcohol abusers, knew that Hazelwood had obtained treatment, did not know that he was an alcoholic, and did not know that he was taking command of his ship drunk."

Indeed, it might have been illegal for Exxon to fire Hazelwood had this occurred just two years later, after adoption of the Americans with Disabilities Act of 1990.

To be sure, the panel also noted that there was disputed testimony that high-level executives knew that the captain "had fallen off the wagon and was drinking on board their ships and in waterfront bars."

Whom did the jury believe? We don’t know. Under the trial judge’s instructions, once having found that the captain had acted recklessly, the jury was legally required to impute his recklessness to Exxon. This despite the fact that the captain had violated Exxon policy by leaving the bridge and getting drunk (if he did) on the job.

Exxon’s petition for Supreme Court review makes powerful arguments that federal maritime law — not to mention common sense — prohibited any punitive award based on imputed recklessness. The petition also shows that the award is so grossly excessive as to violate constitutional due process.

Similar folly is presented by the battle now raging in Congress over whether to immunize AT&T and Verizon, among others, from the dozens of lawsuits that seek to hit them for countless billions of dollars for cooperating with the Bush administration’s "terrorist surveillance program."

Only in America would anyone take seriously the notion that these companies should be penalized for trying to help prevent mass-murder terrorist attacks while relying on the government’s assurance (questionable though it was) that the program was legal.

If these lawsuits go forward, any jury awards or settlements will, as usual, come out of all of our pockets in the long run — this time in the form of higher prices for telecom services. Worse, the only significant monetary beneficiaries will be the plaintiffs’ attorneys and the mostly Democratic politicians on whom they shower campaign cash.

Few, if any, members of the plaintiff classes would see much money because few, if any, of the hundreds of millions of supposed "victims" of the surveillance program have been injured in any serious sense. Our "compensation" would be a few bucks or discount coupons.

To be sure, civil libertarians are allied with the plaintiffs’ attorneys on this issue because they hope that the litigation might intimidate telecoms into refusing to cooperate with government surveillance programs. The unintended, incidental beneficiaries of any such blow for privacy might also, of course, include Al Qaeda and others bent on mass-murdering Americans.

AT&T and Verizon (and Exxon) will survive. Meanwhile, the lawyers suing the telecoms essentially hope to take money from our left pockets, rake off a huge cut for themselves, and put what’s left into our right pockets. This emperor has no clothes.

The post Opening Argument – When Punitive Damages Make No Sense appeared first on Stuart Taylor, Jr..

Some of this is unfair to the multitalented Edwards, who won his many millions working hard for horribly injured clients and playing by the rules of the tort litigation game. But you don’t have to be a fan of corporate fat cats or the Bush-Cheney team (I am neither) to worry that under a Kerry-Edwards administration, the tort rules might become even more damaging to our economy and our over-lawyered culture than they are now.

Kerry and Edwards will be even more beholden than previous Democratic tickets to an ever-more-potent trial-lawyer lobby dedicated to that peculiar form of income redistribution that serves mainly to make the richest lawyers richer. And Edwards talks like a man who believes that the solution to every misfortune is to find a deep-pocketed villain.

I don’t know whether the Kerry-Edwards dependence on the trial-lawyer lobby would be worse for the country than the Bush-Cheney fealty to scandalously overpaid corporate kingpins and a myopically anti-lawsuit, anti-regulation, anti-tax ideology. And I am aware that the "greedy trial lawyer" moniker that some attach to Edwards is as crude a stereotype as the "greedy corporate plutocrat" label that others hang on Dick Cheney.

But the symmetry is a bit false. Contrary to the media-fostered myth that trial lawyers are the scourge of the corporate plutocracy, their lawsuits have virtually no impact on overpaid corporate executives or malefactors such as those who conspired to hide the deadly dangers of tobacco and asbestos. Rather, the $230 billion-plus consumed annually by the lawsuit industry (according to the best available estimate) ultimately comes from the pockets of the same ordinary Americans whom the trial-lawyer lobby purports to champion — to the tune of more than $3,000 in higher prices and insurance premiums per family of four — as well as from small businesses, doctors, city governments, school systems, clergy members, Little League coaches, and many others.

This is not to deny that honest trial lawyers perform two essential functions: compensating injured victims of unsafe conduct, and deterring such conduct by visiting the costs of injuries on the economic interests that cause them. The problem is the overly broad liability rules created by state and federal judges and legislators at the behest of the trial-lawyer lobby. These rules long ago veered from giving victims a fair shake to rewarding abusive and unwarranted lawsuits. And the trial-lawyer lobby reflexively trashes every serious legislative move to combat the abuses.

A leading example is the inexcusable effort by Edwards and most other Senate Democrats to derail the class-action legislation now before the Senate. It would make much-needed changes in a system that often operates as an "extortion racket … in which truly crazy rules permit trial lawyers to cash in at the expense of businesses," in the words of a Washington Post editorial. And the proposed remedy — moving cases with nationwide impact to federal courts, in order to stop forum-shopping lawyers from exploiting connections to friendly state judges who help them pocket millions while their clients get coupons — is eminently fair to consumers.

Nor has Edwards shown any sign of supporting efforts to reform the multibillion-dollar asbestos litigation system, which has reaped huge rewards for big Kerry-Edwards backers such as Fred Baron of Texas, a former finance co-chair for Edwards who is now a big Kerry-Edwards fundraiser. The asbestos litigation has evolved over the past three decades from a laudable push to compensate thousands of people with asbestos-induced cancers and other diseases into "a malignant enterprise which mostly consists of a massive client-recruitment effort that accounts for as much as 90 percent of all claims currently being generated, supported by baseless medical evidence which is not generated by good-faith medical practice, but rather is primarily a function of the compensation paid, and by claimant testimony scripted by lawyers to identify exposure to certain defendants’ products."

This stunning indictment is copiously documented in a 137-page investigative article in January’s Pepperdine Law Review by professor Lester Brickman of Cardozo Law School. He is the leading critic of the 50,000 to 100,000 asbestos-related injury claims now being filed each year on behalf of people who, Brickman says, "have no discernable asbestos-related illness or impairment" in more than 80 percent of the cases.

But even apart from asbestos, tort litigation as we know it is appallingly inefficient: Only 22 percent of the more than $230 billion in estimated annual tort system costs goes to compensate alleged victims’ economic losses, according to Tillinghast-Towers Perrin, an actuarial firm; almost as much (19 percent) goes to the plaintiffs’ lawyers; another 14 percent goes to legal defense costs; 24 percent goes to payments for non-economic losses, mainly pain and suffering; and 21 percent goes to tort insurance overhead costs. Then there are the indirect costs, including an estimated $50 billion to $100 billion in unnecessary "defensive medicine" tests, and many thousands of lost jobs at more than 60 companies that have been bankrupted by asbestos lawsuits.

What are the chances that a Kerry-Edwards administration would slow down the trial-lawyer lobby’s gravy train? Or that it would reform a medical-malpractice system in which (according to the best estimates) 80 percent of claimants are not victims of malpractice and over 90 percent of actual victims receive no compensation — a system that has added as much as $2,000 to the cost of delivering a baby in Florida and has forced some good doctors out of lawsuit-plagued specialties such as obstetrics and surgery? Or that it would curb the kinds of lawsuits that punish people and companies that have done nothing wrong; that force New York City’s taxpayers to shell out over $500 million a year in tort awards and settlements (including $6.3 million to a pedestrian hit by a drunk driver who disregarded signs and mounted a curb that the jury later found to be too low); that deter development of better contraceptives and other liability-prone products; and that suffuse our society with a fear of litigation, evidenced by the removal of monkey bars and jungle gyms from public playgrounds and the reluctance of schools to discipline unruly students or fire incompetent teachers?

On the campaign trail, Edwards has reveled in the populist rhetoric that helped charm juries and make him rich, with his "two Americas" theme and his boast: "What I have been doing my entire life [is] fighting against big corporations, pharmaceutical companies, big insurance companies, big HMOs." (He rarely mentions all the doctors he sued.)

Try saying it this way: "What I have been doing my entire life is fighting against companies that create millions of jobs for Americans and help make this the world’s wealthiest country, that develop miracle cures for once-debilitating diseases, that enable us to buy cars and houses without fear of financial ruin, and that seek to put a lid on the soaring health care costs that threaten to bankrupt our nation."

Of course, some companies do bad things some of the time. But Edwards seems to suggest that most companies do bad things most of the time. "It’s as if Michael Moore checked into a spa and finishing school and emerged with good looks and polished manners," in the words of Walter Olson of the Manhattan Institute.

Edwards’s own legal career illustrates some of the lawsuit industry’s flaws. As detailed in my February 21 column, some of his victories were of doubtful merit, including an apparently unwarranted $4 million punitive award — on top of a more reasonable $2.5 million compensatory award — against the owner of a truck involved in a horrible accident. Edwards also won a fortune suing obstetricians and hospitals on behalf of babies born with cerebral palsy, at a time of accumulating medical evidence that botched deliveries are very rarely the cause of that disease. Cerebral palsy lawsuits have spurred doctors to order millions of medically unwarranted cesarean deliveries in recent decades.

Edwards has claimed that he took such cases only when he had strong evidence. Perhaps. But as he well knew, the lawsuit industry does nothing for the vast majority of babies with cerebral palsy whose claims don’t look like winners. And when a North Carolina state legislator sought in 1991 to create a special fund for all families victimized by the disease while curbing malpractice awards, Edwards helped defeat the bill, according to The New York Times.

So most brain-damaged babies’ families still got no help; malpractice premiums kept going higher; more and more medically unwarranted cesareans were done; and Edwards kept getting richer.
 

The post Opening Argument – Edwards and the Problem with the Trial-Lawyer Lobby appeared first on Stuart Taylor, Jr..

Edwards’s autobiography, Four Trials, shows the tort system at its best, serving the indispensable functions of compensating injured victims and deterring dangerous conduct. But that’s not all the book shows. And a preliminary look at Edwards’s legal career provides a window into the faux-populist pretenses and other flaws of the system that made this millworker’s son into a multimillionaire.

One of the book’s four trials grew out of a heartbreaking accident in which a 4-year-old boy was orphaned when a tractor-trailer killed both of his parents. The truck driver, who had jackknifed across the double yellow line into the path of the parents’ car after skidding to avoid rear-ending another car, pleaded guilty to reckless driving. Edwards, hired by the orphaned boy’s grandmother, sued the driver’s employer, a large textile company, and won a jury award of $2.5 million in compensatory damages plus $4 million in punitive damages. Assuming that Edwards (whose book never mentions his fees) took the standard contingent fee of about 33 percent — or more than $2 million — the award would cover the cost of the boy’s upbringing and leave him a millionaire three or four times over.

The compensatory award’s generosity seems appropriate, in light of the boy’s incalculable emotional loss and the need to deter unsafe driving. But why the $4 million in punitive damages? It was not to punish the driver, Edwards explains: The grandmother thought he "seemed like a decent man, and she believed his remorse was genuine." Rather, Edwards persuaded the jury to punish the employer for paying its drivers according to "how many miles [they] covered," and thus to send a message to the trucking industry to sin no more. Paying drivers by the mile, Edwards argued, encourages them to be reckless and stay behind the wheel too long.

But nowhere in the book’s 27-page discussion of this case does Edwards claim that this driver was violating the speed limit, or working more than the 12-hour shift allowed by law, or tired. Nowhere does he suggest that paying drivers by the mile was unusual in the trucking industry. Nowhere does he cite evidence that the driver decided to drive recklessly that day — after 27 years on the job — because he was paid by the mile. Nor does the book cite evidence that drivers paid by the mile are generally more reckless than those paid by the hour — who are, after all, often in a hurry to get home.

I happened to read this chapter while riding in the back of a metered taxicab on Interstate 95. The cabbie was paid by the mile, as are most cabbies. Does this make them reckless? Not that I’ve heard. Like truck drivers, they know that reckless driving can get them ticketed, arrested, smashed up, or even killed. And if we, as a society, want truckers to drive more slowly — which would increase the cost to consumers of moving cargo — the way to do it is to adopt and enforce lower speed limits.

It may have been emotionally satisfying for this jury to "punish" the "half-billion-dollar corporation" fingered by Edwards as the villain. But unless Edwards left his best evidence out of the book, there was no villain, except perhaps the driver. And while some cases really do have villains, damage awards against their companies rarely punish them. It is virtually unheard of for executives to be fired or demoted because of such awards. And the costs, initially paid by insurance companies and innocent stockholders, typically end up being spread across America in the form of higher insurance premiums and prices.

In short, the $4 million punitive award of which Edwards is so proud ultimately came out of the pockets of the same ordinary, hardworking Americans whose champion he purports to be — and a big chunk of it went into the pockets of John Edwards.

Four Trials also discusses the first of Edwards’s many lawsuits against obstetricians and hospitals on behalf of babies born with cerebral palsy — perhaps his most lucrative specialty. But the book does not mention the growing medical consensus that in the overwhelming majority of cases, this severe form of brain damage is not the fault of botched deliveries, but instead relates to causes long before birth. (Some of the most compelling evidence has come to light since Edwards’s last cerebral palsy lawsuit, in the mid-1990s; some was publicly known by 1989.) Nor does the book mention the evidence that fear of such lawsuits has spurred doctors to order millions of medically unwarranted Caesarean deliveries in recent decades.

Edwards has said that he took cerebral palsy cases only when he had strong evidence that a botched delivery was to blame. That assertion may be tested in the months ahead. In any event, it was never any secret that the tort system does nothing for the vast majority of babies with cerebral palsy, because their cases don’t look like winners to lawyers. A North Carolina state legislator proposed, unsuccessfully, to address this inequity in 1991 by creating a special fund for all such families to share, while limiting malpractice awards. Edwards opposed the bill, according to The New York Times, calling it a baby tax. But a baby tax already exists: the malpractice premiums paid by obstetricians. And Edwards did much to increase those premiums.

None of this is to deny the need for a muscular tort system. But the current system is woefully inefficient at compensating victims, leaving most with little or nothing — because their claims don’t appear lucrative enough to lawyers such as Edwards — while making millionaires of the small percentage who win big. And of each dollar that goes into the tort system, only 22 cents is used to compensate economic losses. The rest goes to pain-and-suffering and punitive awards (24 cents), legal costs (33 cents), and insurance overhead (21 cents).

"When people buy products, in effect they are purchasing an insurance policy for subsequent tort-liability payoffs," explains professor W. Kip Viscusi of Harvard Law School. "The real question is whether people would choose to buy that kind of insurance voluntarily. Clearly, people would like to have their basic earnings-loss and medical needs covered. But few, if any, people would buy an insurance lottery ticket that would give them a chance at a jackpot award, since that is not the kind of insurance people value."

The tort system has done a better job of deterring dangerous conduct and making products safer. But it has reached and passed the point of carrying deterrence too far — for example, by forcing doctors who seek to insulate themselves from liability to order tens of billions of dollars in medically unnecessary tests; by driving malpractice premiums so high as to force some doctors to flee obstetrics and other high-risk specialties; by vastly increasing the costs of vaccines and some other vital products; and by making it unsafe for companies to develop products that could benefit pregnant women and other high-risk groups.

Whether the tort reforms proposed by President Bush would make the system better or worse is a subject for another column. But this system needs an overhaul.

It would be unfair to condemn Edwards for taking the system as he found it and playing by its rules. But his apparent opposition so far to any and all serious legal reforms and his deep indebtedness to the trial-lawyer lobby are causes for concern. More important in terms of the larger issues facing the country, Edwards’s business-bashing, anti-free-trade, us-against-them campaign rhetoric, unlike John Kerry’s, seems sincere. Edwards sounds as if he believes in his bones that behind every misfortune there must be a wealthy villain.

If so, President Bush may not be the only national candidate who sees the world in black-and-white simplicities. And while Bush seems all too wedded to the plutocratic notion that what’s good for rich Republicans is good for the country, Edwards seems all too comfortable with the populist myth that what’s good for rich trial lawyers is good for those he has called "real people." 

The post Opening Argument – John Edwards: The Lawsuit Industry Puts Its Best Face Forward appeared first on Stuart Taylor, Jr..

Hence, Congress has essentially immunized the airlines (by limiting their liabilities to their insurance coverage) and other possible defendants while appropriating more than $4.5 billion for a victims fund, governed by an administrative process designed to afford swift and adequate compensation by channeling claims away from the courts and awards away from the lawyers. Even the head of the lawsuit-happy Association of Trial Lawyers of America, apparently anxious to keep the rapacity of its members and the irrationalities of the civil justice system out of the spotlight, called for "a moratorium on civil lawsuits that might arise out of these awful events."

While spurred by the unparalleled enormity of these mass murders, these adaptations also reflect an implicit recognition of the deep flaws in our tort litigation system. And the impulse to avoid litigation over September 11 should spur deeper thought about how to remedy these flaws: The system leaves most accident victims uncompensated, is most generous to those least in need, "compensates" some who are not victims, and often soaks corporate defendants that did little or nothing wrong. It also squanders most of the money exacted from defendants and insurers-more than 60 percent, in most cases-on legal costs, including fees so large as to make many lawyers fabulously rich.

Perverse as it may seem to sue airlines and building owners for failing to prevent mass murders, these lawsuits-and there will be lawsuits, plenty of them, mostly by affluent plaintiffs unsatisfied with their shares of the congressionally appropriated fund-will be little more far-fetched than many other suits. They will represent a reductio ad absurdum of a system already awash in absurdities.

The major chemical companies that had sold Agent Orange to the government for use in Vietnam were forced in 1984 to pay $180 million to settle suits by thousands of sick veterans who were almost certainly mistaken in attributing their ailments to Agent Orange. The manufacturers of silicon breast implants have paid more than $7 billion to women with terrible illnesses that almost certainly were not caused by breast implants. Crime victims routinely sue motels, schools, and others for failing to do enough to protect them from criminals. Lawsuits and threatened lawsuits have depressed the stocks of entire industries, especially the managed care industry.

The lawyers who became rich from the initially justifiable lawsuits that bankrupted virtually every company in the asbestos industry have enlarged the pot by launching massive litigation wars against other companies that had only the most glancing connection to the stuff, and no reason to know of its dangers. Many and perhaps most of the clients recruited by these lawyers as plaintiffs in recent years have not been and never will be made sick by asbestos. Those who do become sick will have fewer and fewer solvent defendants left to sue. And so on, and on.

Two popular illusions sustain this litigation lottery: that ever-wider corporate liability is a good way to compensate injured people in need, and that the system punishes malefactors of wealth. In fact, only a small minority of accident victims (excepting those hurt in auto accidents) have the resources to sue and win. Most receive no compensation at all. And in some areas, the correlation between persons harmed by negligent conduct and those who win compensation seems almost random, with outcomes turning less upon moral desert than upon legal technicalities, the skills of the lawyers, and the whims of judges and juries.

At the same time, the urge to find someone to compensate accident victims has stretched the concepts of negligence and legal fault to the point of imposing liability upon many corporate defendants that have done little or nothing wrong. And even when companies have done wrong, the responsible officials are rarely affected by lawsuits, and the companies themselves and their insurers usually pass the costs along to the rest of us through higher prices. So tenuous has the connection between fault and liability become that companies are reluctant to develop products-such as contraceptives and the new vaccines that we need to protect us from bioterrorism-that may become targets for lawsuits.

The outlines of the federal government’s September 11 compensation plan, ably crafted by Kenneth Feinberg, the special master appointed to distribute the funds, show how an administrative program can improve on the litigation system, at least in mass-injury cases. People seriously hurt in the September 11 attacks and survivors of the approximately 3,000 who were killed can get swift, certain governmental payments if they give up the right to sue anybody but the terrorists. The specific amounts, ranging from about $300,000 to more than $4 million for next of kin, will be determined by formulas depending on the murdered victim’s age, income level, number of dependents, and other factors. None of the money will be spent assigning blame, and little will be spent on determining who gets how much. There also will be no punitive damages and relatively limited payments to families for the pain and suffering of dead victims.

Critics have no shortage of complaints: that Feinberg’s unavoidably cold-blooded charts place a far higher dollar value on the life of an investment banker than on that of a janitor; that the plan guarantees the investment banker’s survivors far less than they might hope to win in successful lawsuits if Congress had not shielded potential defendants; that it reduces awards to people who receive life insurance payments or pensions but not to those who get generous amounts from private charities. Such complaints reflect the inherent arbitrariness of all efforts to place monetary values on human lives. But Feinberg’s chart is far less arbitrary, and more egalitarian, than are litigated court awards and settlements, which are typically more generous to affluent plaintiffs (whose lost income is larger) and skewed by the luck of the draw inherent in the litigation lottery.

Largely lost in the unedifying squabbles over who should get how much is the unfairness inherent in the plan itself, which was propelled into law by a (justifiable) one-time rush of national generosity to those most directly affected by an attack on the nation itself. Most of the survivors would have received little or nothing (excepting any private life insurance) had their loved ones died in the Oklahoma City bombing, for example. They have no more compelling a moral or legal claim to compensation from the government or anyone else-except the terrorists-than do the victims of other acts of terrorism, ordinary murders, or freak events such as tornados. The reason that Congress needed to shield the airlines and others from lawsuits was simply that the courts cannot be relied upon to shield blameless defendants.

It is easier to identify the litigation system’s flaws than to come up with workable fixes, let alone get them past the trial lawyers’ lobby. Junking the tort system, barring contingency fees, or putting arbitrary caps on real (economic) damages would leave victims even worse off than they are now. For all its inadequacy as a compensation system, the threat of liability for real negligence is reasonably effective at motivating companies and individuals to make safety a priority. And removing or blunting that threat would offend most people’s sense of justice.

But the system is badly in need of reforms, which should be carefully crafted to serve the same general purposes that Congress and Feinberg seek to serve in the case of the September 11 victims. The most-obvious benefits to possible defendants would come from shielding those who did little or nothing wrong, eliminating (or at least curbing) runaway punitive damages, avoiding double payments to privately insured plaintiffs, and holding down legal costs. But a balanced reform program would also benefit deserving accident victims, by adopting incentives to spur prompt, reasonable settlements without years of litigation, and by judiciously curbing unreasonably large contingency fees. The September 11 fund also provides a precedent for Congress to provide a safety net for other injured people who lack legitimate legal remedies or private insurance, by moving closer to a governmentally funded social insurance program for all innocent, seriously injured victims of accidents and criminal violence.

In the past, most tort reform proposals supported by the corporate sector and conservatives have been solely for the benefit of defendants. The congressional response to September 11 could be a step toward an enlightened liberal-conservative coalition to help injured people too, by providing prompt, efficient compensation and by attacking legal waste.

The post Legal Affairs – How 9/11 Shines a Spotlight on Litigation Lottery appeared first on Stuart Taylor, Jr..

Angry to the tune of one-seventh of a trillion dollars. But the jurors (as well as the judge) are deluding themselves if they think that they have punished anyone for all those lies, even if the award survives on appeal (an unlikely scenario). And the only "message" is that our liability system has become deeply irrational. What else to call it when six unrepresentative jurors from one city can vent their anger by seeking to expropriate an entire industry-one that most Americans think should not have to pay sick smokers anything?

The big lies on which the vast, perverse edifice of tobacco litigation (and much other litigation) has been erected are the notions that large damage awards punish corporate wrongdoers-thereby "sending a message" that will spur businesses to behave-and compensate their victims.

Not one wrongdoer (or other human being) has ever been significantly impoverished or otherwise punished by a tobacco lawsuit. And not one ever will be, even if the industry is driven into bankruptcy. (Another unlikely scenario, now that the biggest stakeholders in big tobacco’s survival and profitability are the 50 state governments.) Rather, the mass of litigation brought by smokers, states, the Clinton Administration, and others quite clearly operates not as punishment, but as a national tax that no representative body has ever voted to impose. This tax falls primarily upon big tobacco’s supposed victims and secondarily upon the rest of us.

If you want to see who is being punished, don’t look at the tobacco companies, which can’t be punished. Don’t look at the top executives-most of them dead, retired, or moved on to other fields-who made their fortunes orchestrating deceptive campaigns to minimize the risks and addictiveness of smoking. (None of them are being sued, or prosecuted.) Look instead at the mostly low-level workers who cluster outside big-city office buildings sucking in nicotine hits. The vast majority will never see a dime in compensation. But thanks to tobacco lawsuits, they (and all other smokers) are already paying an average of $2.81 for a pack of coffin nails-a 37 percent increase since November 1998.

That’s expensive enough to pinch millions of low-income nicotine addicts. But it’s unclear whether even doubling or tripling current prices (a real possibility) would save many teenagers from becoming addicted in the first place. After all, teens don’t have much trouble getting illegal drugs, which are costlier than tobacco will ever be.

If you want to see who benefits from these lawsuits, don’t look at sick smokers, who-with a minuscule, random handful of exceptions-will pay far more in higher cigarette prices than they will ever recover in compensation. Look, instead, at the folks who sponsor and support the litigation: the very, very rich lawyers who rake in many billions in fees; their allies in the "public interest" groups who get much of the publicity and some of the money; the public officials/plaintiffs, who reap revenues, campaign contributions, and publicity; and even some of the judges and jurors, who love being queens for a day.

"This is one of the great shell games of the modern era," in the words of professor Lester Brickman of Benjamin N. Cardozo School of Law. "This is shifting money from your left pocket to your right pocket, with the lawyers collecting a transit fee of 10, 20, or 30 percent."

It’s easy to miss the forest that is tobacco litigation for all the trees, such as the fact that hundreds of thousands of people die from smoking-related illnesses each year; that 3,000 teenagers start smoking every day; that a bunch of tobacco moguls (now dead, or very old) supposedly conspired at a meeting 47 years ago to conceal evidence that smoking causes disease; that such deceptions continued for decades; that big tobacco used deceptive advertising (although smoking has long been notoriously dangerous) to hook new smokers; that millions are addicted (although millions have quit); and so on.

All true. All reason enough to condemn the tobacco industry-along with the federal government for fattening its coffers with tobacco taxes while subsidizing the cultivation, sale, and use of this dangerous product. And the state governments. And the military, for promoting smoking by its personnel. And Hollywood, for glamorizing smoking. And others.

But although tobacco lawsuits did some good years ago by unearthing proof of the companies’ deceptions and forcing them to stop advertising to teenagers, lawsuits now do bad guys virtually no harm and smokers very little good. We cannot punish a tobacco company-any more than we can punish a ham sandwich-and it is idiotic for our legal system to pretend that we can. Tobacco companies are inanimate corporations. Taking money from them will not punish the high-level malefactors who are no longer there, as is typical in the once-rare but rapidly proliferating species of lawsuit that seeks money for possible misconduct that is decades old. Although corporate liability for recent misconduct may indirectly affect top executives and create economic incentives to avoid future misconduct, the deterrent value dissipates to the vanishing point when a company’s punishment comes years and years after the misconduct.

The way to punish misconduct by executives is to sue them personally or prosecute them criminally. But plaintiffs’ attorneys rarely go after individuals, because corporations have more money and fewer legal defenses. And the Clinton Justice Department has been unable to make a criminal case against a single top tobacco executive-not even the seven who famously testified in 1994 that nicotine was not "addictive," while playing Clintonesque word games about what addictive means.

Are we punishing big tobacco’s stockholders for owning shares in socially irresponsible companies? Not really. Sure, all the litigation over the past few years has depressed tobacco stocks. But large institutions that invest the pension funds and the other assets of millions of ordinary Americans hold most tobacco-company stocks. And like wealthy individuals, they keep only small percentages of their diversified portfolios in any one industry. So at worst, they would suffer only modest losses, which would be spread through much of the population.

And remember, after the tobacco companies had agreed in 1998 to pay $246 billion over 25 years to "reimburse" the 50 states for their smoking-related medical expenditures, their stocks rose. The reason: This was a pretty good deal for the companies, albeit a lousy deal for smokers.

Not only did the five largest tobacco companies pass on the costs to smokers through price increases, they also ingeniously crafted the deal to protect themselves from competition, to prevent discounters and foreign producers from increasing their tiny market shares, and to fix prices. Walter Olson explained how it works in Reason magazine:

"The word for this process is cartelization, and the irony is that had cigarette executives met privately among themselves to raise prices, freeze market shares, confine small competitors to minor allocations on the fringe of the market, and penalize defectors and new entrants, they could have been sent to prison as antitrust violators-quite possibly by the very same attorneys general who sued them in this case…. This way it’s all legal."

No wonder big tobacco agreed to reward the states’ contingent-fee lawyers with $500 million a year in "fees," payable in perpetuity. The settlement’s bottom line, Olson adds, "is that smokers pay generously, while the other parties get cut in to a sweetheart deal: State governments quietly turn the same tobacco companies they publicly vilify into captive milch cows for future spending, the attorneys general grab political credit, and the companies get protected from competition. And, not at all by happenstance, the private lawyers who served as middlemen will reap a vast fortune, probably tens of billions of dollars, in what are being called fees."

Public health groups defend this massive rip-off by stressing that higher cigarette prices and the 1998 settlement’s advertising curbs hold down teen smoking. Whether this is true remains to be seen. Even if it is, there is a far more legitimate, and less expensive, way to achieve the same goal. It’s called Congress.

The post Legal Affairs – Tobacco Lawsuits: Taxing the Victims To Enrich Their Lawyers appeared first on Stuart Taylor, Jr..

The two "named plaintiffs" will get $25,000 each. Their lawyers, who also seem to be my lawyers–and perhaps yours as well, now that they have filed copycat class actions against four other major computer-makers–will get $147.5 million. And the beauty of it is that my Toshiba works just fine! There is, I should report, an imperfection buried deep in a semiconductor chip called the "floppy-disk controller." Under certain unusual conditions, it could conceivably destroy or corrupt data without warning consumers or alerting them to the source of the problem. Very unusual conditions: Neither I nor my daughter (the primary owner) has ever had a problem with the laptop. Nor are we likely to have one.

Toshiba, the world’s largest maker of laptops, says that not one of its 5.5 million "victims" had ever reported a problem attributable to this "defect" before last March, when the lawsuit was filed.

Nobody has publicly contradicted this. Toshiba also says that even when it tried to get its laptops to malfunction, it could replicate the alleged data-loss problem only by saving a file to a floppy disk and simultaneously doing other memory-intensive tasks, such as playing a video game. The company denies that this amounts to a defect. Indeed, so remote is the possibility that our laptop will ever seriously malfunction that I may not get around to downloading the free software "patch" that Toshiba has provided as part of the settlement. So why did Toshiba agree to pay a penalty with a face amount of $2.1 billion? Why was the company (by its own account) afraid that fighting in court might have cost it as much as $9.5 billion? Two possibilities present themselves: 1) Toshiba did something really bad and covered it up, leaving even victimized consumers in the dark; or 2) this settlement–like thousands of others paid every year by companies all over America–was a tribute to the madness of our legal system by a company whose conduct could be made to look bad to a jury. It does appear that Toshiba and other companies were warned of the imperfection more than a decade ago. The first warnings came in 1986, when IBM informed NEC Corp., which first made the widely imitated floppy-disk controller chip in 1978, that it could cause data losses in some circumstances. Government agencies are looking into the possibility of misconduct. Maybe they’ll find some. But I doubt it. Toshiba may not have been as careful about quality as, say, Apple; that’s one of the reasons Apple’s computers are more expensive. But how likely is it that Toshiba was aware of a serious defect but for more than a decade did nothing to fix it, even though fixing it seems to be easy and cheap? It’s harder still to believe that–if this were a serious defect–18 other companies would have continued to sell computers with similar defects, as the plaintiffs’ lawyers allege. The 18 include the four that the lawyers sued in the wake of the Toshiba settlement: Hewlett-Packard Co., Compaq Computer Corp., Packard Bell NEC, and eMachines. Some of these 18 companies were well aware of the imperfection. They apparently decided that it would have no serious impact on their customers. Now they are getting an education in the stunning ability of our legal system to transform inconsequential imperfections into huge liabilities. One increasingly powerful engine of such liabilities is that ever-more-pervasive phenomenon, the lawsuit primarily to benefit lawyers.

The Toshiba case is hardly the most egregious example: In some other cases, the fees of the plaintiffs’ lawyers have dwarfed the benefits (if any) to the entire plaintiff class. The lawyers who sued Toshiba–led by asbestos-tobacco millionaire (or is it billionaire?) Wayne Reaud of Beaumont, Texas–will get 200,000 times as much as any individual member of the plaintiff class (except the two named plaintiffs). This $147.5 million fee may look like small change compared with the billions that lawyers, including Reaud, are collecting for suing tobacco companies. But it would still be enough to pay, for example, the combined annual salaries of more than 4,000 Americans at $35,000 apiece. Also cashing in is a software engineer named Phillip Adams, who investigated the imperfections in floppy-disk controllers while at IBM and later launched a personal crusade to get them fixed. While working closely with the lawyers who sued Toshiba, Adams has also filed at least four related lawsuits of his own under state and federal false-claims laws. Meanwhile, the Toshiba settlement’s benefits to class members are so modest that fewer than half are expected to collect their coupons. That’s why Toshiba expects to pay out less than half of the $2.1 billion and has promised that if class members don’t bother to collect enough coupons (and cash) to cost the company $1 billion, it will make up the difference by giving equipment to charity. As for the named plaintiffs, they complained not of any real problems but only of having been sold "defective" laptops–which fosters the suspicion that the $147.5 million legal team could not find a single consumer who could prove any real damages. One of the named plaintiffs (Ethan Shaw) is himself a lawyer, as are two of those in the copycat class actions. Shaw, like Reaud, is from Beaumont, where the cases were filed. Why Beaumont? The town is such a famed magnet for plaintiffs lawyers that Professor Lester Brickman of Yeshiva University’s Cardozo law school calls it "the Barbary Coast of class action litigation." And such is the genius of our legal system that a lawyer planning a nationwide class action can shop all over the country in search of the most pro-plaintiff courthouse available. If Toshiba had gambled on a trial before a Beaumont jury, the plaintiffs’ legal team could have used Adams to testify that this is a very serious problem indeed; in court papers they have conjured up fantastic visions of families plunged into financial chaos, medical prescriptions being scrambled, airliners falling from the sky, and other "clear risk[s] to public health and safety," all resulting from an "insidious scheme." The lawyers could have performed a carefully rehearsed demonstration of a Toshiba laptop’s floppy-disk drive going haywire. They could have pumped up the damage claims by introducing documents showing that Toshiba had been warned of the "defect" by NEC but had refused (arrogantly!) either to fix it or to warn customers (concealment!). "Ladies and gentlemen of the jury," the closing argument might have gone, "send them a message!" And since this is a huge, $42 billion corporation (not to mention Pearl Harbor and all that), only a multibillion-dollar message will get their attention! Suppose that you were a Toshiba executive facing such a trial. Suppose that you were advised that four out of five juries (even in America!) would throw out the case–but the fifth might just hit you for $9.5 billion. What would you do? Toshiba decided to pay a billion dollars in tribute. It appears to be the first computer company so severely mulcted for such inconsequential "defects." It won’t be the last. In the short run, such payments come out of corporate profits. In the long run, they add up to what has appropriately been called a "tort tax," one that is passed along to consumers in the form of higher prices. We have long paid tort taxes on products ranging from stepladders to medical care, not to mention cigarettes. Now it looks as if we’ll be paying them on computers and software, too. The costs increasingly dwarf any benefits that may flow from lawsuits like the one against Toshiba. And the costs will keep rising unless and until Congress clamps down hard on runaway damage awards. Perhaps the computer industry will come to see that it needs to help persuade Congress to do just that. Meanwhile, having paid my own share of tort taxes, I might as well collect my little rebate from Toshiba. After all, you will be paying for it, whether I collect it or not.

The post Legal – How I Hit The Class Action Jackpot appeared first on Stuart Taylor, Jr..

Using fake resumes and concealing their true identities to get jobs, the testers carried hidden cameras and microphones to document a pattern of crude racial epithets and other racial harassment by supervisors and fellow workers.

When confronted with the evidence, the supermarket chain counterattacked by hitting the civil rights organization with a $7.5 billion lawsuit in the chain’s home state of North Carolina, with claims for racketeering, mail fraud, common law fraud, and trespass, among others. The trial judge let some of these claims go to a jury, which slammed the civil rights group with $5.5 million in punitive damages for using fraudulent tactics to obtain evidence.

Actually, I made the case up. But the facts closely track those leading to the Jan. 22 jury award of $5.5 million in punitive damages against ABC for the 1992 hidden-camera expose" of Food Lion Inc. by "PrimeTime Live." The main differences are that ABC broadcast some of the hidden-camera tapes-in a program the truthfulness of which Food Lion chose not to challenge in court-and that ABC was not exposing racism, but the alleged mislabeling and selling of out-of-date foods, including spoiled meat and fish that had been bleached and food rescued (at management’s direction) from garbage dumpsters. Food Lion says the broadcast was inaccurate and unfair.

Anyone who would be alarmed by the implications of my civil rights hypothetical should be alarmed by the $5.5 million penalty against ABC. If upheld on appeal, it would clear the way for similar awards against others who use undercover investigative techniques, whether to expose racism, or the selling of spoiled meat, or other wrongdoing. It might also lead to liability for the types of deception more routinely employed not only by civil rights testers, but also by restaurant critics and others who conceal their true identities or purposes in order to gain information.

But even some journalists applaud Food Lion and the jury for giving "PrimeTime Live" its comeuppance. Jonathan Yardley of The Washington Post, for example, celebrated the punishment of ABC for "self-evidently deceptive, dishonest tactics" and "cheap entertainment masquerading as investigative reporting."

I don’t like journalistic deception either, except when essential to getting important stories-like Nellie Ely’s undercover expose of mental asylums a century ago, or Upton Sinclair’s expose of Chicago’s slaughterhouses in The Jungle in 1906. Nor do I much like tabloid TV.

But punitive damages are not the right remedy for journalistic bad taste-certainly not when (as here) the undercover news gathering is not clearly illegal, and the plaintiff does not prove any falsehood or defamation. And juries should not be deciding whether such an expose should be hailed as a public service or punished as sensationalism.

Chief Judge Richard Posner of the U.S. Court of Appeals for the 7th Circuit-no pro-press patsy he-put it well in dismissing fraud and trespass claims against ABC under Illinois and other state laws for another "PrimeTime Live" hidden-camera expose, in J.H. Desnick, M.D., Eye Services v. ABC, 44F3d 1345 (1995):

[T]o protect a vigorous market in ideas and opinions… "tabloid" style investigative television reportage, conducted by networks desperate for viewers in an increasingly competitive television market… although it is often shrill, one-sided, and offensive, and sometimes defamatory … is entitled to all the safeguards with which the Supreme Court has surrounded liability for defamation…. If the broadcast itself does not contain actionable defamation, and no established rights are invaded in the process of creating it…, then die target has no legal remedy even if the investigatory tactics used by the network are surreptitious, confrontational, unscrupulous, and ungentlemanly. In short, the First Amendment protects schlock journalism too, just as the Supreme Court’s 1988 decision in Hustler Magazine v. Falwell protected the scabrous Larry Flynt’s publication of an "ad parody" depicting Jerry Falwell having sex with his mother in an outhouse.

Of course, Posner disclaimed the notion that the First Amendment privileges reporters in search of scoops to violate generally applicable laws. Nor does ABC claim any such privilege in the Food Lion case.

Some kind of limited news-gathering privilege might be supportable in theory. The First Amendment does bar laws "abridging the freedom of speech, or of the press," and those last four words should be construed to add something.

But in practice, any such claim of privilege would be a sure loser, both because the media are not loved and because of Supreme Court precedents like Cohen v. Cowles Media (1991), which held that the press "has no special immunity from the application of general laws."

ABC’s main arguments against any damage award to Food lion are that (1) ABC’s undercover techniques broke no law, no matter how sleazy they may seem to some jurors and journalists; (2) even if ABC did violate some North Carolina law, Food Lion could not recover any of the billions of dollars it claimed to have suffered as a result of the broadcast, because Food lion did not sue for defamation or challenge the truthfulness of the broadcast in court; and (3) the trial judge should have barred any punitive award for reasons including the danger of chilling constitutionally protected speech.

The first of these arguments is reasonable, if unlikely to prevail in this case; the second was properly upheld by the trial judge: the third is compelling and should be a winner.

As to the legality of ABC’s conduct, not every deception amounts to fraud. That ton typically involves use of deception to deprive the victim of money or property. Nor does every deception to gain access to commercial premises amount to trespass.

ABC’s deception of Food Lion was, to be sure. relatively elaborate: In addition to using phony resumes and lies to get their jobs, the two ABC investigators also spent more than a week as Food n employees, working harder at poking around hi hidden mini-cameras for ABC than at wrapping meat for Food Lion.

But it is at least debatable whether U.S. District Judge N. Carlton Tilley Jr.. of Greensboro, was correct in holding that this conduct could be found to be fraud, trespass, and breach of fiduciary duty under North Carolina law.

Thus, ABC and its employees cannot be said to e acted in deliberate disregard of any clear legal duty. That’s one of the reasons the punitive award should be overturned, both under state law and under the Supreme Court’s holding last year in BMW v. Gore that the Constitution bars grossly excessive punitive awards, especially for conduct clearly unlawful.

A second reason for striking down the punitive award is its wild disproportion-a 3,900-to-1 ratio, compared with 400-to-1 in BMW v. Gore-to the award of a mere $1,402 in actual damages. Since judge had precluded any award of "broadcast damages," the only compensatory damages were $1,400 that the jury found to be the cost to Food Lion of hiring, training, and paying employees who were secretly working for ABC. plus $2 in nominal damages for trespass and breach of fiduciary duty.

A third reason for striking down die punitive award is the danger to First Amendment values in allowing juries to punish the publication of truthful exposes, under die pretext of punishing unlawful news-gathering techniques that, in fact, do relatively little harm. The Supreme Court has long recognized the need for safeguards against punitive awards in defamation suits that could chill protected speech; similar safeguards are necessary in suits like this one.

Food Lion’s best argument for a punitive award was that it is the only way to deter ABC and others from doing the same thing again, and again, in pursuit of ratings and profits. Such an argument might be minimally plausible (if not convincing) in a future case-if and when ABC or someone else does do it again (in North Carolina). But it doesn’t make much sense in this case, given the absence of prior notice that such undercover techniques were unlawful in North Carolina.

Nor was there anything so malicious or oppressive about ABC’s conduct as to warrant a punitive award. ABC did not kill or batter anyone. It did not defraud anyone of money or property. It did not break and enter. It did not invade the privacy of anyone’s home, or eavesdrop on private conversations, or publish intimate details of anybody’s life. It was not found to have defamed anyone, or to have broadcast anything inaccurate or unfair.

ABC did expose some practices at Food Lion that prompted many viewers to do their shopping elsewhere. And that’s what this case is really about.

The post Smashing Undercover Journalism appeared first on Stuart Taylor, Jr..

"Reforms" like the English "loser pays" rule and numerical caps on damages, which are in the House Republicans’ Contract With America, would surely stop some unwarranted suits, but they would also thwart many injured people with legitimate claims.

There are some better ideas in the hopper-ideas aimed at slashing billions in wasteful litigation costs rather than shielding business from liability to injured individuals. One of the most intriguing, endorsed by an impressive array of legal luminaries, seems well-designed to help deserving plaintiffs get swifter, surer compensation and to ease the litigation burden on business (as well as on plaintiffs)-and all without limiting any plaintiff’s right to seek full redress.

What’s the trick? You guessed it: Take it out of the lawyers’ hide.

But this proposal is not the kind of crude, probably counterproductive fee cap that some states have passed. It is an ingenious, largely self-executing mechanism aimed at restricting contingent fees to cases in which lawyers really earn them, while promoting early settlements in the many cases in which liability is easy to establish.

Here’s how it would work:

Any plaintiffs lawyer seeking a contingent fee in a personal-injury case would have to notify each defendant of the claim and provide routinely discoverable information about the plaintiff’s injuries, medical costs, and the like. The defendant could then make a settlement offer within 60 days, also accompanied by relevant discoverable information.

If such an early offer were made and accepted, the plaintiffs lawyer-having done little work-would be limited to hourly fees, capped at 10 percent of recoveries up to $100,000 and 5 percent of any additional amount.

If the offer were rejected, on the other hand, and the litigation proceeded, the plaintiffs lawyer could collect a percentage contingent fee, but only to the extent that any eventual recovery exceeded the rejected offer.

The idea is to induce defendants to make reasonable, early settlement offers (with the assurance that the plaintiff knows he will get most of the money) in all cases in which the defendant expects eventually to be held liable; to give plaintiffs and their lawyers incentives to accept unless they believe they can win substantially higher amounts through litigation; and thereby to increase plaintiffs’ net recoveries while slashing both sides’ legal costs.

Newly incorporated into a tort-reform bill sponsored by Senate Republicans Mitch McConnell of Kentucky and Spencer Abraham of Michigan, this proposal was published a year ago in a highly persuasive monograph, Rethinking Contingency Fees, by Michael Horowitz, then a senior fellow at the conservative Manhattan Institute (and now at the Hudson Institute), and two leading tort-law scholars, Professors Jeffrey O’Connell of the University of Virginia School of Law and Lester Brickman of Yeshiva University’s Benjamin N. Cardozo School of Law.

Their proposal neither limits plaintiffs’ rights to sue for whatever damages they think they deserve, nor restricts contingent fees for recoveries in excess of the defendant’s initial offer, nor affects fees at all when no such offer is made. Rather, the proposal seeks to calibrate contingent fees to the value added by the plaintiffs lawyer, to bring the lawyer’s financial incentives more into line, with her client’s interest in accepting a reasonable early offer, and to offset the gross inequality in bargaining power between tort victims and lawyers who present them with contingent-fee contracts of adhesion.

As such, the Brickman-Horowitz-O’Connell proposal seeks to put teeth into the longstanding (but largely unenforced) ethical obligation of lawyers not to charge excessive fees. That includes (or ought to include) an obligation not to seek a windfall by taking a whopping "contingency" percentage of an award, the recovery of which requires relatively little effort by the lawyer.

Ethics rules notwithstanding, there is ample evidence that most personal-injury lawyers charge contingent fees ranging well above 33 (or even 50) percent, even in the many cases in which the defendant’s liability is clear and the risk of non-recovery small. Brickman, a leading scholar on contingent fees, estimates that lawyers collect as much as $10 billion annually in windfall contingent fees in can’t-miss cases.

"The gap between ethical rules and ethical reality is thus both massive and growing in contingency fee representations," as Horowitz has asserted. Some consumer advocates agree that ripoffs of clients by contingent-fee lawyers are a serious evil.

And while the direct effect of the proposal would be to restrict fees charged by plaintiffs lawyers, it is designed to slash defense lawyers’ fees as well-by making it cheaper for defendants to offer reasonable, early settlements than to unleash their lawyers to run up billable hours while waging costly (and often abusive) wars of attrition.

Any proposal as novel and complex as this one carries some risk of unanticipated consequences, of course, and should be adopted only after careful, critical scrutiny. Perhaps a compelling critique can be made of the Brickman-Horowitz-O’Connell mechanism. But I haven’t seen one yet.

Critics like Barry Nace, past president of the Association of Trial Lawyers of America, have mischaracterized the proposal as an attack on the whole contingent-fee system; have protested that contingent fees are often essential to give injured victims access to the courts (an argument with which Horowitz, et al., readily agree); have contended that windfall contingent fees for lawyers who add little value are relatively rare (which is a crock); have asserted that windfall fees provide lawyers with the money they need to bring long-shot suits for other plaintiffs (which sounds inconsistent, and perhaps unethical); and have attacked the Manhattan Institute, under whose auspices the proposal was developed, as a corporate front. (It does get corporate funding, but Brickman, Horowitz, and O’Connell are thoughtful policy analysts, not corporate whores.)

Some of the same critiques have been made by tort defense lawyers, who also profit enormously from the wasteful litigation encouraged by the current tort system. Scandalously, the system pays out more money in legal fees and expenses than it does in compensation to injured plaintiffs.

Of course, the Brickman-Horowitz-O’Connell proposal is no panacea for all the tort system’s problems. It would not affect the many cases in which liability is vigorously contested, and, as Horowitz has written, "there will always be need for contingency fee services when new or contested facts need be established or when, despite the proposal, recalcitrant defendants refuse to offer fair compensation to deserving accident victims." But it could have a dramatic effect in the many cases in which the defendant’s liability is clear.

Among the distinguished lawyers who have endorsed the basic concept are Derek Bok, former president of Harvard University and former dean of Harvard Law School; Professor Roger Cramton of Cornell Law School; Norman Dorsen, former president of the American Civil Liberties Union; Professor Mary Ann Glendon of Harvard Law School; Professor Thomas Morgan of the George Washington University National Law Center, Robert Pitofsky, now chairman of the Federal Trade Commission; and Harry Wellington, dean of New York Law School.

They, along with prominent conservatives like former Judge Robert Bork and big-firm practitioners like the late Erwin Griswold of Jones, Day, Reavis & Pogue, were among 26 signatories of a letter, sent in February 1994, urging the American Bar Association’s Standing Committee on Ethics and Professional Responsibility to specify that lawyers have an ethical obligation to solicit early offers and not to charge contingent fees against such offers. The ABA committee declined in its Formal Opinion 94-389, made public Jan. 18.

The Brickman-Horowitz-O’Connell proposal also has some populist support from (among others) Voter Revolt, a consumer group that has teamed up with some business leaders to push for a 1996 California ballot initiative modeled on Brickman-Horowitz-O’Connell.

Of course, the effort of Sens. McConnell and Abraham to impose such rules on state as well as federal courts may superficially seem at odds with Republican preachments against the federal government telling states what to do and messing with the free market. But the McConnell-Abraham bill bows to federalism concerns by authorizing state legislatures to opt out. And smart Republicans (and Democrats) should not let New Federalist or free-market absolutism get in the way of judicious efforts to cut the enormous legal waste engendered by the current tort system or to protect unsophisticated tort victims from overreaching by their own lawyers.

Will the Republicans who run Congress and the business lobbyists who want to roll back plaintiffs’ rights settle for reforms like this one? It may be too sensible, and too evenhanded, for their style. Then again, with the blessing of so many legal luminaries, Brickman-Horowitz-O’Connell might just have a chance of doing something that the business lobbyists’ pet proposals still seem unlikely to do: passing Congress.

The post Making Litigation Not Pay appeared first on Stuart Taylor, Jr..

Will O.J. Simpson be a beneficiary of the latter tendency, opening a new celebrity chapter in the how-to-get-away-with-murder’book? Or might his case mark a salutary turn toward taking death seriously, by locking killers up for the rest of their natural lives?

It must be stipulated that not quite enough evidence has so far been disclosed (or tested by the rigors of trial) to be certain that Simpson wielded the knife that so savagely tore into his ex-wife and the male friend whose body fell next to hers. The presumption of innocence has its claims-even though I have trouble imagining why a man who thought that someone else had just killed the woman he loved would be acting the way Simpson has been acting. (Example: His self-regarding "suicide" note, which says that "if we had a problem, it’s because I loved her so much" and that "[a]t times I have felt like a battered husband or boyfriend.")

But if the evidence does prove that Simpson killed Nicole Brown Simpson and Ronald Goldman, he should spend the rest of his life’ behind bars. The law needs to teach people a lesson that it has not been teaching in recent decades: If you murder another human being, you will be put away forever. No excuses. No parole. Period.

(I’m against the death penalty, but that’s another column.)

Anything like a 10-years-for-manslaughter outcome in Simpson’s case would further entrench our law’s longstanding bad habit of trivializing the battery and murder of women by their husbands and lovers. It would also advance the pernicious new trend toward letting killers avoid serious punishment by combining appeals for sympathy with deterministic explanations of their criminal behavior.

It would be an especially egregious travesty for Simpson to get off with a short stint in the loony bin, after having paid a bunch of lawyers and psychiatrists to beguile a starstruck jury into going easy on good old O.J. by finding him to have been temporarily insane.

Fortunately, this seems most unlikely, both because a Simpson insanity defense would probably not succeed and because, even if it did, he could end up spending the rest of his life locked up in a mental institution. California has narrowed the insanity defense over the past 15 years or so, doing away with jury instructions about "irresistible impulses" and other squishy verbal formulas that once stood as an invitation for murderers with money to pay top-notch legal and psychiatric talent to manufacture excuses.

If Simpson were to mount an insanity defense under current law, he would have to prove that (in the words of the standard jury instruction) "by reason of mental disease or defect, he was incapable of understanding the nature and quality of his act or incapable of distinguishing right from wrong at the time of the commission of the crime." Although hardly a model of clarity, this hoary common-law language could not easily accommodate the O. J. Simpson of the Hertz ads, no matter how much evidence might be produced about his obsession with his ex-wife, about recent depression, about old head injuries from his football days, and how that evidence might be spun into theories about diminished impulse control.

It’s not hard to imagine a chronic wife-beater who has the effrontery to call himself a "battered husband" claiming that he had lost his grip on reality and not known what he was doing that night: "I was home alone, watching a ballgame on TV, and the next thing I remember, I was in the limo on my way to the airport to catch the red-eye to Chicago for the Hertz meeting, and everything in between is a blank." But it is hard to imagine any jury-even a California jury-buying it. Especially from a man who broke down the door of his ex-wife’s home nine months ago and threatened her as she pleaded with a police dispatcher to send help, a man whose first line of defense has been that "I have nothing to do with Nicole’s murder." And unlike John Hinkley Jr.-who was found not guilty by reason of insanity of shooting President Ronald Reagan in large part because Hinckley’s prosecutors were saddled with the impossible burden of proving him sane beyond a reasonable doubt-Simpson would have the burden of proving himself insane. Here’s betting that his lawyers decide not to try.

It would be a lesser travesty for Simpson to get off with a conviction on, say, two counts of voluntary manslaughter, which would probably bring a sentence of 10 to 15 years in prison-even less if Simpson had a softheaded judge. Such an outcome is, unfortunately, far more likely than an insanity acquittal. Here’s how it would work:

The prosecution has charged Simpson with double murder in the first degree with "special circumstances," which make the crime a capital offense and give prosecutors the option of seeking the death penalty. (The fact that there were two victims is one such "special circumstance" under California law.) If convicted as charged, Simpson would get a mandatory sentence of life in prison without possibility of parole even if the prosecution decided not to ask the jury to impose a death sentence.

If the prosecution’s evidence is so strong as to preclude an "I didn’t do it" defense, and if Simpson decides against pleading insanity, the only viable defense strategy will be to claim that the killings were not planned or premeditated, but rather were committed on a sudden impulse in the heat of passion. Such passion might have been provoked by, for example, jealous rage on discovering his ex-wife with this other man, and perhaps aggravated by cocaine intoxication.

This might be a reasonably plausible line of attack on the first-degree murder charges, which (unlike second-degree murder) require the prosecution to prove premeditation and deliberation, in the sense of some degree of planning about whether and how to kill the victim. (If the prosecution finds the murder weapon, it will, of course, make the most of any evidence that Simpson brought it with him that night.)

A well-crafted defense might even convince jurors-especially any who were on those freeway overpasses the night of June 17, cheering on the world’s most famous fugitive-that Simpson’s heat of passion was so intense as to negate the element of malice aforethought that is required for a second-degree murder conviction. That would get him down to two voluntary manslaughters, for which the judge could send him to prison for as little as four years, although something closer to 15 years would be more likely.

In either event, O.J. Simpson would be a free man by his early 60s. And the message would go forth that if you brutally butcher two fellow human beings, it will cost you-not what it cost them, not even the rest of your life-but a few short years. At least, that’s all it will cost you if you’re a popular celebrity.

Such a manslaughter verdict would also perpetuate the long and sorry history of undue indulgence, by every society on this planet, of the battering, the brutalizing, and the killing of women by the men in their lives.

Why is it that our law has for centuries characterized such heat-of-passion killings as deserving of less punishment than those involving premeditation? To some extent this distinction reflects the assumption that planned killings are more culpable-and more subject to deterrence by the threat of maximum punishment-than are unplanned killings. I have my doubts about that. Is a man who goes into a rage and butchers the mother of his children really less culpable than, say, a robber who deliberately shoots his victim to avoid leaving a witness?

On this issue, some insight might be provided by the perspective of feminist legal theory. Maybe wife-killers are not just incidental beneficiaries of-but to some extent the unworthy inspiration for-the focus on premeditation as the key element of first-degree murder.

In the final analysis, the line between "premeditation" (which need only take an instant) and "heat of passion" (which can smolder for months before bursting into action) is drawn not by judges in their vaguely worded instructions, but by juries in their verdicts.

Here’s hoping that O.J. Simpson’s jury weighs any heat-of-passion defense in light of the evidence that Simpson (who in this scenario would necessarily be his own key witness) is a self-serving liar whose initial tactic was to describe himself as a wronged and innocent "battered husband." Here’s hoping the jury focuses less on what Simpson and his hired guns say about his state of mind than on what he allegedly did, as described by New York Times columnist Bob Herbert:

"Imagine a crazed and physically powerful man springing upon your mother, slashing and hacking away with a large knife until the main arteries in her neck are gone and her head is nearly severed and the blood is spurting and gushing in all directions.

"That’s what happened to Nicole Brown Simpson."

The post If O.J. Did It, Lock Him Up Forever appeared first on Stuart Taylor, Jr..

Each is threatened with multiple criminal trials on essentially the same charges. That may be legal, under various judge-made loopholes in the double-jeopardy clause. But it’s not fair. And it illustrates pervasive prosecutorial disregard for the spirit of the constitutional guarantee.

Prosecutors, armed with the awesome machinery of the criminal law, should be satisfied with one clean shot at a defendant, even if they miss. But more and more we see them forcing their quarry to spend years of their lives and millions of dollars to defend themselves even after winning acquittals, or near-acquittals.

Many in the press seem to see double-jeopardy rules as mere technicalities to be circumvented when they get in the way of a good show. And even the American Civil Liberties Union, understandably loath to let police brutality go unpunished, is waffling on its opposition to successive state and federal prosecutions.

But as the Supreme Court said in 1957, in Green v. United States, successive prosecutions undermine liberty by subjecting the defendant to "a continuing state of anxiety and insecurity, as well as enhancing the possibility that even though innocent he may be found guilty."

The potential for oppression by multiple prosecution is all the more apparent in white-collar and other complex cases. With trials grinding on for weeks or months, the million-dollar defense has become a routine necessity, leaving even acquitted defendants in financial ruin after a single trial, let alone two.

Elliott Abrams, the former State Department official who pleaded guilty to two misdemeanor counts of misleading Congress in the Iran-Contra affair rather than face a felony trial, captures part of the non-rich defendant’s ordeal in his forthcoming book, Undue Process:

"When you sit around with four lawyers, and you are paying, when you add it all up, maybe twelve hundred dollars an hour, that’s twenty dollars a minute. So when someone coughed, or spilled coffee, or when we took six minutes to order lunch, I would add it up, see the meter flipping, and smile. It costs me fifty dollars for everyone to go pee, I thought. A good cough is about a buck and a half.”

Clair George now faces the prospect of going through all this again, even after a four-week trial and six days of deliberations ended with a clear majority of the jurors favoring acquittal on all nine counts. The jury hung because of a few holdouts who wanted to convict George of misleading Congress and a grand jury in order to hide the Central Intelligence Agency’s role in the Iran-Contra affair.

But Independent Counsel Lawrence Walsh and his deputy Craig Gillen rushed to announce that they would have another go at George, the sooner the better.

The post Prosecutors Playing a Broken Record appeared first on Stuart Taylor, Jr..