Philadelphia Trial Lawyer Max Kennerly : Business and Commercial Litigation : Civil Attorney : The Beasley Firm : Philadelphia Pennsylvania

It's no surprise that trial lawyers are often drawn to politics -- politics and trials both hinge on facts, credibility and persuasion, and both are swayed by similar strategies, tactics, persistence, diligence, insight and, unfortunately, fabrications and passions.

That is part of why, this blog, unlike most practicing attorney blogs, often jumps into politics. I believe politicians and political strategists have a lot to teach trial lawyers, or at least do a lot from which trial lawyers can learn.

Or re-learn.

Two months ago I made a prediction that I did not see made anywhere else: that Sarah Palin was announced as John McCain's vice presidential running mate as part of a bait-and-switch strategy designed to disrupt the election narrative (in which John McCain was slowly losing the election), shore up social conservative support for McCain, and change expectations for his running mate.

I had many reasons to reach that conclusion, some of which you can read at the link, but chief among them in my mind was how the selection didn't make any sense.

Sure, a number of pundits identified plausible reasons for the selection, including discontent among former Hillary Clinton supporters, but, long before the election, polls have consistently shown that most voters are both very concerned about electing a president over the age of 65 and uncomfortable with the idea of a female president. Add to those existing preconditions the fact that the McCain team had apparently done no vetting or other investigation of Palin, who had minimal experience, was under investigation for ethical violations, and had not shown any understanding of national politics, and you had, at least in my interpretation, a preponderance of evidence suggesting all was not as it appeared to be.

Put another way, had the vaunted Karl Rove political machine really chosen, without any detailed investigation, an unqualified candidate the voters were predisposed not to like? And had they done so while also conceding their strongest argument, that McCain's experience trumped Obama's vision?

Apparently so. I was wrong.

Here's how Newsweek's embedded reporters described it after the election:

Pawlenty, the popular governor of a swing state the Republicans badly needed to win in November, was the safe choice. Salter especially liked Pawlenty's salt-of-the-earth qualities.

But McCain didn't want the safe choice. A top adviser would later recall that telling McCain that Pawlenty was "safe" was "like guaranteeing" that McCain would not pick him. Prodded by Schmidt and Rick Davis, McCain began asking about Palin, a first-term governor who had shaken up the Alaska political establishment by taking on her own party elders, who was fearless and defiant, who was … a little bit like McCain.

There was no strategy: McCain, Schmidt and Davis were thinking, as Stephen Colbert would say, with their guts.

In one sense, there is no need for self-reflection, as the end result was the one I wanted, so does it really matter how we got there? Yet, every trial lawyer has had a trial end successfully but not in the way they imagined. After they fought hard, trapped the opposing party in their own contradictions, marshalled their strongest evidence and highlighted their opponent's weakest evidence, the trial lawyers interviewed the jury afterwards and discovered the case the jurors decided bore little resemblance to the case the lawyers argued.

Sure, all the facts were the same, but in the end the jurors took the issues the lawyers thought were, respectively, dispositive and tangential, and flipped them. That's as much as reason to re-evaluate how you tried the case than if you had lost it.

So it's time to re-learn a lesson taught best to me by my brother, the theoretical physicist and poker player, who a while back related to me this strategic mental exercise:

Q: It's early in a no-limit Texas Hold 'Em tournament.  The last cards you've played to showdown were pocket kings for a flopped set that turned a boat.  Since then you've folded every single hand for the last 45 minutes.  From early position, you open-raise to 4 times the big blind with about 45 blinds behind.  What is your opponent thinking?

A: Nothing.

Sometimes, your complicated feigns are irrelevant and your opponent isn't feigning anything at all.

Sometimes, they're just thinking from the gut.

Next time you ask yourself, "what are they thinking?", consider that the answer could be "nothing."

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Another post at Drug & Device Law that makes me want to gnash my teeth:

... Does tort litigation improve the safety of drugs?

The plaintiffs' bar screams yes: It insists that lawsuits unearth new information that protect the public.

Is that true?

We haven't seen any empirical scholarhip on this point (though, Lord knows, it might exist, and we simply haven't come across it). And it's pretty hard to research this question, given the nature of what you're looking for.

But we've found a few authorities that suggest that tort litigation rarely contributes to protecting public health.

Thus, for example, Richard Epstein recently wrote:

"The drugs that usually generate the most litigation -- such as Rezulin and Vioxx -- usually are withdrawn before litigation commences. Indeed the plaintiffs' bar rightly free rides on FDA determinations, reducing the social gain from litigation."

Richard A. Epstein, "The Case For Field Preemption Of State Laws in Drug Cases," 103 Northwestern University Law Review Colloquy 54, 59-60 (2008) (and the usual link).

Why, pray tell, are pharmaceuticals so quick to withdraw these drugs when a problem is discovered? Maybe, just maybe, to avoid further civil liability?

Indeed, without tort litigation there would be no consequences at all to squeezing a little (or a lot) more profit out until the manufacturer reached the point of criminal liability.

I'd call that "unsafe."

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I guess I should not be surprised that insurance companies want in, they're the big holders of capital after banks:

The Treasury Department is dramatically expanding the scope of its bailout of the financial system with a plan to take ownership stakes in the nation's insurance companies, signaling new concerns about a sector of the economy whose troubles until now have been overshadowed by the banking industry, government and industry sources said.

Insurers, including The Hartford, Prudential and MetLife, have pushed the Bush administration to include them in the plan. Many firms have taken losses from mortgage-related securities and other investments and are struggling to replenish their coffers.

Government officials worry that the collapse of a major insurer could further destabilize the financial system because of the crucial role the companies play in backstopping a wide range of financial transactions, although the direct impact on holders of car, life and other insurance policies would be modest, industry officials said.

I guess I'll leave the question, "so why can't they just go bankrupt, don't they have trillions in assets and a whole market of debt insurance to cover this precise occurrence?" to finance experts and instead refer to my post on the AIG Bailout:

...

When an insurer goes under on the state level, two processes go into motion: 

1. The insurer goes into bankruptcy and a governmental conservator / receiver is appointed, like in the Thabault v. PriceWaterhouseCoopers suit, where the Insurance Commission for Vermont is the receiver for the defunct Ambassador Insurance Company.
2. The insurer's obligations are picked up by a state-run non-profit guaranty association, like The Pennsylvania Property and Casualty Insurance Guaranty Association (PP&CIGA).

The two then work in tandem, with the receiver trying to get money wherever they can and the guaranty association operating to ensure at least some compensation for the claimants against parties insured by the defunct insurer.

Both insurance receivers and insurance guaranty associations have a reputation for being aggressive. In Thabault, the Commissioner in Vermont just had a $182.9 million verdict against the insurer's negligent accountants affirmed by the Third Circuit. In Pennsylvania, just last year PP&CIGA was reprimanded by the Pennsylvania Supreme Court for its “slash and burn approach to protecting PPCIGA’s assets." Carrozza v. Greenbaum, 591 Pa. 196, 215, 218 (2007).

...

Which raises a couple questions:

1. Will AIG file for bankruptcy if the current credit facility is not enough to keep operational? Doing so will, as discussed above, likely result in a total collapse as counterparties abandon their obligations.
2. Will the Federal Reserve attempt to use the insurance arm as a profit center to fund payments to the Federal Reserve or other creditors? Doing so imperils the reserve available for future claimants on the policies.
3. Will the Federal Reserve sell off the insurance arm? Doing so imperils the Federal Reserve's loan as well as the demands of other creditors.

That leaves the Federal Reserve balancing its own interests against those of claimants, the very sort of problem avoided by the normal receiver / guaranty association split. Who do you think will win out?

All those concerns apply here and more — what, exactly, is the government's objective? To wind these down with minimal disruption to the economy? To save the shareholders? To ensure policies can be paid? To keep the insurer's capital invested in the market? To avoid a bankruptcy that, but for a frozen credit market, would not have occurred? 

I'm assuming the latter two are the primary objectives but, well, just like with the banks there appears to be no exit strategies.

So, congratulations America, we've bought ourselves a couple more insurance companies!

Having gobbled up the banks and insurance company markets, what's next? In terms of size, next on the list are the oil companies, but they're doing just fine, so I suppose we'll move to conglomerates relating to consumer goods like General Electric, Wal-Mart and Altria, and we'll keep going until we buy that business Joe the Plumber had in mind.

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John Edwards' political career might be over, but he's still a punching-bag for the "tort reform" crowd.

He shouldn't be. Here's an example.

Stephen Bainbridge leaves his expertise and reveals himself at least a careless speaker, if not an outright fool. After Eric Johnson at PrawfsBlog discusses teaching a Torts class via John Edwards' Four Trials, Bainbridge criticizes Johnson for failing to note Edwards' "junk science," which Bainbridge 'proves' by block-quoting two spurious conservative articles, one from the Wall Street Journal and the other from the National Review, both decrying Edwards' prosecution of birth trauma cases alleging celebral palsy due to medical malpractice.

I've represented plaintiffs in birth injury cases alleging obstetrical malpractice caused celebral palsy. They're not junk science; they're common sense and good science, accepted and supported by every major medical organization.

I don't care that "delivery problems [are] not to blame for cerebral palsy in the 'vast majority' of cases." I don't sue obstetricians just because a child has CP. I sue obstetricians because the medical record and the testimony reveal malpractice resulting in extended hypoxia and acidosis of such a magnitude that it caused moderate or severe neonatal encephalopathy.

And why do I look for that? Because the American College of Obstetricians and Gynecologists (ACOG) Task Force on Neonatal Encephalopathy and Cerebral Palsy says that can cause cerebral palsy. In fact, this organization comprised solely of physicians, funded and supported by hospitals and insurance companies, even established criteria for such birth injury:

The criteria to define an acute intrapartum event sufficient to cause cerebral palsy, as modified by this Task Force from the template provided by the International Cerebral Palsy Task Force, are listed as follows:*

Essential criteria (must meet all four)

1. Evidence of a metabolic acidosis in fetal umbilical cord arterial blood obtained at delivery (pH <7 and base deficit =12 mmol/L)
2. Early onset of severe or moderate neonatal encephalopathy in infants born at 34 or more weeks of gestation
3. Cerebral palsy of the spastic quadriplegic or dyskinetic type†
4. Exclusion of other identifiable etiologies such as trauma, coagulation disorders, infectious conditions, or genetic disorders 

The fourth is often the most important in these cases. It doesn't matter how many hours a fetus spent in distress before being delivered, I can guarantee you the defense lawyer and insurance adjuster will find an smooth-talking local expert with a strong CV to say, in their fair and unbiased opinion, to a reasonable degree of medical certainty, that the baby's injuries were due to a stroke some undetermined number of days in advance, and thus the child's problems are definitely not the fault of the doctor or hospital.

It won't matter that, until smooth-talking Dr. Expert, not a single health care provider noticed or considered this "stroke." It won't matter that the opinion is based on pure speculation, and that it contradicts the placental pathology done at the time and the admitting diagnosis / discharge summary of the neonatologist. It'll come into the trial and will require you fight hard to rebut it, to prove it was hypoxic ischemic encephalopathy.

Sure, I think that's junk, but I'm a lawyer who gets paid to prove otherwise. So, again, ACOG:

Criteria that collectively suggest an intrapartum timing (within close proximity to labor and delivery, eg, 0-48 hours) but are nonspecific to asphyxial insults

1. A sentinel (signal) hypoxic event occurring immediately before or during labor
2. A sudden and sustained fetal bradycardia or the absence of fetal heart rate variability in the presence of persistent, late, or variable decelerations, usually after a hypoxic sentinel event when the pattern was previously normal
3. Apgar scores of 0-3 beyond 5 minutes
4. Onset of multisystem involvement within 72 hours of birth
5. Early imaging study showing evidence of acute nonfocal cerebral abnormality

There you go, my "junk science." That's what I'm looking for and that's often how I prove the causal element of my OB/CP cases.

That is, with ACOG guidelines. Are they junk, too? Is it all junk except for what some political hack writes to criticize John Edwards?

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Rick Hasen at Election Law Blog asks:

I wonder if this is the map that the McCain campaign has in mind, which would explain the recent focus on Pa. (Via Andrew Sullivan). I'll have to defer to others who follow this closely, but is there a realistic scenario where Sen. McCain can capture Pa. but lose Virginia and Colorado?

No. And no:

The big problem with such a strategy, however, is this:

4,060,647
2,917,747
869,707

Those are the current numbers of registered and active Democrats, Republicans and independents in Pennsylvania. Democrats make up more than half the total -- 52 percent, in fact -- well outdistancing the Republican's 33 percent. Suppose that McCain were to split Pennsylvania's independents with Obama and win Republicans 92-8. He would need to carry 23-24 percent of Pennsylvania's Democrats to win the state; George Bush carried 15 percent.

Next question?

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Mark Cuban has a new project, BailoutSleuth, "to help ensure that the [bailout] process, including the selection and compensation of contractors, is as transparent as possible."

I am shocked and surprised to tell you the transparency is already inadequate:

 

The Treasury Department has hired three outside firms this week to help administer its $700 billion, taxpayer-funded bailout of troubled banks. But some key details of those contracts remain a mystery.

 

The agreements with Bank of New York Mellon Corp. and Simpson Thacher & Bartlett LLP that the Treasury Department posted on its web site each had blacked-out paragraphs in the sections dealing with compensation.

 

The government's three-year contract with Bank of New York Mellon does not show how much the company will be paid to act as the master custodian of the bailout fund. The contract says that the bank will be paid a monthly fee, but that fee is blacked out.

 

The Treasury Department's six-month deal with Simpson Thacher for legal advice on equity purchases in U.S. banks has a value of $300,000. But the contract posted on the Treasury Department's web site Thursday did not show the hourly rates the government will be paying the firm. The figures for all the employee classifications, from partner to legal assistant, were redacted.

 

While we're at it, can I get a conflicts list before Foxes & Wolves, LLP, is given the keys to the hen house? Some of us clients are not so understanding.

 (via Open Congress)

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In case you didn't catch them earlier:

• Citigroup v. Wells Fargo in re Wachovia: Can You Simultaneously Sue in Federal and State Court?

• Padding A Breach of Contract Case with Fraud, Unjust Enrichment, and Tortious Interference

• Oops - A Thought On Typos and Proofreading

• The Watchmen Movie: Copyright Infringement, Injunctions, Options, Laches, and a Circuit Split All in One

• Barbie v. Bratz: What Went Wrong for Mattel and Right for MGA

 

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TalkLeft misfires:

Let's review exactly what Ifill asked:

IFILL: Governor, you mentioned a moment ago the constitution might give the vice president more power than it has in the past. Do you believe as Vice President Cheney does, that the Executive Branch does not hold complete sway over the office of the vice presidency, that it it is also a member of the Legislative Branch?

...

I submit that of the 3 people on the stage that night, Palin was the one who got it right on that question. Ifill had no idea what the issue was about and Biden was the one who got it just plain wrong. It is ridiculous that the Left and the Left allies in the Media tried to use this episode to attack Palin. For it was the Media and the Democratic candidate who embarrassed themselves in this episode, not Sarah Palin.

That is just crazy. Palin's response indicated that the Vice President's role was "flexible." Biden correctly noted that the VP's role is actually the most inflexible of any member of the Federal government: the VP breaks ties in the Senate and nothing else. Palin recommended expanding the powers of the office, a curious and dangerous idea which presupposes the VP has powers, which is entirely false.

The Twelth Amendment, it should be noted, does not expand or subtract from the VP's powers. It simply changes the mode of election.

As for this "legislative role" of the VP, Federalist No. 68 makes quite clear that the tie-breaking role is not legislative, but rather the President effectively entering a veto to definitively resolve the issue:

The appointment of an extraordinary person, as Vice-President, has been objected to as superfluous, if not mischievous. It has been alleged, that it would have been preferable to have authorized the Senate to elect out of their own body an officer answering that description. But two considerations seem to justify the ideas of the convention in this respect. One is, that to secure at all times the possibility of a definite resolution of the body, it is necessary that the President should have only a casting vote. And to take the senator of any State from his seat as senator, to place him in that of President of the Senate, would be to exchange, in regard to the State from which he came, a constant for a contingent vote. The other consideration is, that as the Vice-President may occasionally become a substitute for the President, in the supreme executive magistracy, all the reasons which recommend the mode of election prescribed for the one, apply with great if not with equal force to the manner of appointing the other. It is remarkable that in this, as in most other instances, the objection which is made would lie against the constitution of this State. We have a Lieutenant-Governor, chosen by the people at large, who presides in the Senate, and is the constitutional substitute for the Governor, in casualties similar to those which would authorize the Vice-President to exercise the authorities and discharge the duties of the President.

Emphasis added.

Again: Palin suggested the VP had powers which were "flexible" and should be expanded, without any details. The VP has a single function, with no flexibility, which begs the question of what, exactly, Palin wants to expand. Upon which she refused to elaborate.

Biden correctly corrected her on that.

 

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This story does not make me feel good:

The 3rd U.S. Circuit Court of Appeals' special investigative committee investigating alleged misconduct by the 9th Circuit's Chief Judge Alex Kozinski has hired Robert C. Heim, head of Dechert's litigation department, to run the probe.

A Dechert spokesperson confirmed that a team from Dechert and Morgan Lewis has been hired to conduct the investigation and has assigned Heim to lead the operation.

...

[Dechert] also declined to discuss the number of cases it may have pending before the 9th Circuit or how it would deal with potential conflict.

...

[Morgan Lewis] declined to elaborate or comment on potential for conflicts with cases pending in the 9th Circuit.

That won't do. Judge Kozinski is a duly-appointed federal judge, whose office is specifically protected for life by the Constitution. If the process is not transparent, it may as well be a farce.

Neither of these firms have irreplaceable skills essential for a full and fair evaluation of Kozinski's conduct, nor is there any compelling reason to permit them to operate under the appearance of impropriety.

If there is no conflict, they should say so, and say how they'll either avoid or handle future conflicts. If there is a conflict, they need to get out or come up with some safeguards before they do any work.

We are not working in a gray area here: everyone else in the law exercises an abundance of caution at all times with regard to conflicts. If there's a conflict, you don't do it. Simple.

Why shouldn't that apply here, when we're tugging at one of the very threads woven into the fabric of our democracy?

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Over at PhilaLawyer, an anonymous (and largely humor-focused) part of the Rudius blog network, there are four ideas for "Shyster-Proofing the Courts:"

1. Immediate Mandatory Mediation
2. Allow Expert Witnesses to be Deposed
3. Give Frivolous Litigation Claims Teeth and Allow Expert Witnesses to Be Sued in Such Claims
4. Eliminate Referral Fees

First, let's keep something important in mind: the bulk of civil cases involve automobile accidents. So in some sense we're really missing the boat unless we're talking about that specifically. That said, I doubt any of these would make a difference.

1. Immediate Mandatory Mediation

Because I work on a contingent fee, I would like nothing better than to settle cases as quickly as possible.. Settlement puts money in my pocket, does not require my own money put out on the street for costs and fees, and puts my client back on their feet, a particular concern in personal injury and medical malpractice cases. So don't think I am ever the one driving the litigation.

Problem is, even a hypothetically perfect insurance company that promptly and fairly evaluates every claim, sets an appropriate reserve, and begins negotiation has multiple incentives not to settle early. The insurance company makes a return on every single penny in their reserves, a return that evaporates the moment they tender a check to me. The insurance company also typically starts blind on damages; they know a lot about their insured's liability, but very little about my client's medical expenses, lost wages, and the impact the injury has had on their life, and for obvious reasons the insurance company is not going to take my word for any of them. Finally, the insurance does not know how highly I really value the case. The only way they believe they can estimate my bottomline is by pushing back against me and seeing how I respond. Even at a firm with a strong reputation for taking cases to trial and for rejecting weaker (even though meritorious) cases, there is still a belief among insurers and defense counsel that some of the cases are "nuisance value" cases taken to maintain cash flow, with little expectation of a substantial settlement or verdict.

In the real world, the above analysis does not even happen at the insurance company until the case is ready for trial. The insurance adjuster, who, as a cog in a bureacracy, has the primary goal of demonstrating their usefulness to the bureaucracy by creating an extensive paper trail, frequently does not even bother to set a reserve for the case until trial schedules have been finalized. Similarly, the defense attorney, who gets paid by the 10th of the hour they spend defending the case, has little incentive to encourage a swift resolution of the case, thereby extinguishing a source of income and appearing feckless in the face of controversy.

Thus, by and large early mandatory mediation conferences will function as a subsidy for defense lawyers — by giving them something else to bill for — and a tax on plaintiff's lawyers — by taking them away from their other contingent fee cases. At the conference, the defense attorney will have authority only for a nuisance value while the plaintiff's attorney (who will be a junior associate, if the firm has them) will have authority only for the highest number the plaintiff's attorney can reasonably demand. If there is some external force which could drive early settlement, that force will do so regardless of court intervention.

2. Allow Expert Witnesses to be Deposed

That's already the case in the federal system. While it probably does reduce the need for trial because it puts almost everything on the table, it won't do anything to cut back on litigation. The point about having experts who write bogus opinions expecting a case will never go to trial is well taken, but that's already factored into our current system — if one of the sides thinks the expert will pull out the event at trial, they'll just push the case straight to trial, extracting a favorable settlement while teaching the other side a lesson. Adding a deposition, which would naturally have to occur after discovery (as it does in the federal system), won't really change that dynamic, it just slightly advances the time when the expert pulls out. There might be some savings to that, since it obviates the need for full trial preparation, but those savings would be minimal.

I don't think expert witness depositions are a bad idea, I just don't think they will result in any significant savings. Moreover, in cases worth less than, say, $100,000, expert witness depositions could have the perverse effect of making settlement less likely, because they hike up the costs of bringing the case to trial, thereby requiring the plaintiff and their attorney to raise the demand accordingly to protect the amount they get in the end, which in turn makes it less likely the insurer will meet the demand.

3. Give Frivolous Litigation Claims Teeth and Allow Expert Witnesses to Be Sued in Such Claims

Frivolous lawsuits are already actionable in most states, and are frequently acted upon right here in Philadelphia County. In Pennsylvania, there is specific statutory authorization for them under the so-called Dragonetti Act, named after the first attorney to get really walloped under it. The elements of such a wrongful use of civil proceedings suit seem reasonable to me:

§ 8351.  Wrongful use of civil proceedings

(a) ELEMENTS OF ACTION.-- A person who takes part in the procurement, initiation or continuation of civil proceedings against another is subject to liability to the other for wrongful use of civil proceedings:
 
   (1) He acts in a grossly negligent manner or without probable cause and
   primarily for a purpose other than that of securing the proper
   discovery, joinder of parties or adjudication of the claim in which the
   proceedings are based; and
 
   (2) The proceedings have terminated in favor of the person against whom
   they are brought.

...

§ 8352.  Existence of probable cause

A person who takes part in the procurement, initiation or continuation of civil proceedings against another has probable cause for doing so if he reasonably believes in the existence of the facts upon which the claim is based, and either:
 
   (1) Reasonably believes that under those facts the claim may be valid
   under the existing or developing law;
 
   (2) Believes to this effect in reliance upon the advice of counsel,
   sought in good faith and given after full disclosure of all relevant
   facts within his knowledge and information; or
 
   (3) Believes as an attorney of record, in good faith that his
   procurement, initiation or continuation of a civil cause is not
   intended to merely harass or maliciously injure the opposite party.

42 Pa.C.S. § 8351 et seq.
 

If there is a way to improve these elements, I would love to hear it. I personally can't think of any way of strengthening it without making it, at best, confusing and, at worst, a violation of the rights of due process and access to the courts.

As for moving against experts, there is always perjury. Beyond that, it's hard to imagine a worse idea than intimidating witnesses not to say what they really think. The point about this honest experts is, again, well taken, and I have tangled with my fair share of them, but such annoyances must be balanced against minor concerns like truth, justice and fairness. The best you can do now to retaliate against a lying expert is to report them to whatever professional organization of which they are a member, which hopefully have a deterrent effect against future offenders. I am loath to really encourage that idea, though, because by and large professional associations have a serious pro-defense bias, the natural result of a (perhaps understandable) desire to protect and shield their members from liability.

4. Eliminate Referral Fees

I have no idea how that would help anything. Plaintiffs lawyers bill on a contingent fee; if the case is meritless, they're a waste of time and money to pursue. Indeed, referral fees in my opinion actually reduce the number of cases filed, because they cut into the fee earned by the attorney actually pursuing the matter, thus requiring the case be stronger and have larger damages than if the case been brought in directly. Moreover, if there really is a problem of "recidivist professional plaintiffs," what good would it do to eliminate referral fees? They'll simply go to the same attorneys over and over or they'll find attorneys on their own — they're among the few people who really can find the right attorney for them on their own.

More importantly, referral fees serve a critical purpose in the civil justice system, introducing economic efficiency to an ordinarily inefficient process: the selection of a personal injury attorney by a nonlawyer. Corporate lawyers and clients don't need anything like a referral system because, as part of their paying jobs, they interact with all kinds of attorneys and generally have connections that can set them up with the right person for the job.

Your typical Wal-Mart or Wawa cashier hasn't the faintest clue about what to do when they get paralyzed by a drunk truck driver or when their spouse's brain gets blown out by an overdose of Heparin. Most lawyers don't even know to whom they'd turn in the event of a catastrophic injury. The referral system creates an incentive for the initial attorneys not just to half-assedly send a case away, but to diligently choose an appropriate attorney who can get the best result for the client.

Finally, and to me this is the most important function of the referral system, referral fees — specifically large referral fees — encourage attorneys who are not really qualified to handle large matters to refer those matters out to attorneys who are qualified. I cannot tell you the number of times I have been referred a case either because "it's just too big for me" or because "after I filed suit, the defense attorneys went nuclear on me." That is a good thing; attorneys should have no hesitation to radio SOS when the waters get rough. Eliminating referral fees gives them an incentive to hold on to these cases and "do their best," which is frequently not in the client's best interest.

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Kevin Drum starts a roundup:

Paul Krugman opposes the Paulson/Bernanke bank rescue because there's no guarantee it will work. Atrios doesn't like it because it gives Paulson a blank check with no oversight. Brad DeLong doesn't like it because it lacks necessary reforms to balance the bailout. Sebastian Mallaby, by contrast, just doesn't like it, period.

Mark Thoma wants a share of the companies we save, Dean Baker thinks "a poorly designed auction system will be a fiasco, wasting taxpayers dollars and rewarding the most effective liars," and Robert Reich thinks we should just have a big bankruptcy workout (like the Resolution Trust Company).

Robert Shiller wants fundamental mortgage reform putting all mortgages on a continuous-workout basis; Wall Street has already said that permitting workouts even after personal bankruptcy is a "deal killer."

Their "deal" (link is to the draft text) is $700 billion with no end game, no oversight, no limitations, no review by courts or congress, no clear benefit to us and no loss to them for their recklessness and outright fraud.

That's not a "deal," it's a robbery.

Call your Congressmen Monday and say: no deal.

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I don't mean to intrude upon the jurisdiction of the financial blogs. If you'd like to know more about the financial aspect of the AIG loan, here's The Big Picture and the Economist's View, both of which link all over the place.

I'd like to talk about the legal structure of the "loan," given its resemblance to an entity that plaintiffs' attorneys like myself frequently encounter: the insurance guaranty assocation. As we'll see below, the loan creates obligations similar to those of a guaranty association, but with a problematic twist: the federal government now not only must decide how to conserve capital available for future insurance claimants, but also what to do with the assets and value of the insurance company itself, two functions typically given to different parties in ordinary insurance company liquidations.

More below.

[UPDATED: The powers that be have deigned to fill us in on the details. The loan is quite traditional, despite prior reporting, and the Federal Reserve does not hold an interest unless and until the loan is not repaid in 24 months. The below analysis thus still applies, but not until that default in two years.]

Continue Reading...

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Now the Federal Reserve owns 80% of the largest insurer.

It already owns the largest holder of residential mortgages, and the largest broker dealer.

Of course, no one could have seen this coming, except for the entire United States political economy from roughly 1933–1980.

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The Sarah Palin bait-and-switch, which I first blogged about here, continues.

First with sexism charges, just like with Miers:

Apparently realizing that the Sarah Palin rollout is going badly, the GOP is holding a series of press conferences here in St. Paul to push back.

Underway now is a presser with female GOP officials talking about the purported "smear campaign" against Palin. "The Republican Party will not stand by while Sarah Palin is subjected to sexist attacks," says McCain surrogate Carly Fiorina, comparing it to sexist comments endured by Hillary Clinton during the primary.

Then with outlandish claims of victimization by unnamed sources:

In an extraordinary and emotional interview, Steve Schmidt said his campaign feels "under siege" by wave after wave of news inquiries that have questioned whether Palin is really the mother of a 4-month-old baby, whether her amniotic fluid had been tested and whether she would submit to a DNA test to establish the child's parentage.

Arguing that the media queries are being fueled by "every rumor and smear" posted on left-wing Web sites, Schmidt said mainstream journalists are giving "closer scrutiny" to McCain's little-known running mate than to Democratic presidential nominee Barack Obama.

"News inquiries" by "mainstream journalists?" Is Schmidt too polite to name names? Too forgiving to point the finger at supposedly professional journalists following "every rumor and smear?" This quiet piety from the same campaign that canceled an interview with Larry King in retaliation for aggressive questioning?

All lies. No "mainstream journalist" asked him whether the amniotic fluid was tested.

Remember, no one knew Palin's daughter was pregnant. The campaign raised that issue specifically to create controversy. After requesting "privacy," both the daughter and the father of the child, whom the campaign named, will appear on stage at the convention.

Candidates do not seek privacy by disclosing their daughter's sex life and then parading her and her fiance on national television.  The lady doth protest too much, methinks .

 

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In my line of work, I deal with a lot of liars. Some professional, some amateurs. Some lie out of necessity, like the defendant who simply can't admit they were wrong, and some lie as a matter of course, like the lawyers with whom everything must be in writing. There's one thing they all have in common:

If you see a dirty trick work, you will see it used again.

And so it has come to pass that the political machine Karl Rove built has found itself in a tight spot and nominated a thinly-qualified women with no national reputation to one of the most important positions in government, a nomination that, for the moment, has blunted surging liberal momentum, shored up conservative base support, and changed the terms of a debate the Rove machine was losing.

Last time, it was Harriet Miers, who turned the Supreme Court nomination process on its head; before her, Bush was a below-50%-approval President with a Senate margin too thin to overcome a filibuster who was being pressured to replace the first woman on the Supreme Court, a moderate Republican, with another moderate, preferrably a woman. The ranking Democrat and Republican on the Judiciary Committee both recommended the nominee be pulled from outside the federal appellate courts, which had been packed for decades by conservative judicial activists.

She had no national reputation, no experience as a judge, and failed to complete the basic Judiciary Committee questionaire. Once nominated, there was never any serious effort to get her confirmed by the Senate. But by the end of the fiasco, the gender discussion had been completely reversed, with Laura Bush chiming in that Miers was the victim of sexism. Just as importantly, she was an evangelical who was expressly promised to the right wing to be for overturning Roe v. Wade, receiving prompt support from right-wing kingmakers like Dobson. Most importantly, by the time her nomination was withdrawn, the debate had moved from gender and politics to a single issue: experience.

Completely contrary to the initial requirements of all the power players -- including Specter, Leahy, and Clinton -- Miers was replaced by Samuel Alito, an appellate judge with a proven track record of conservative judicial activism considered unacceptable by most Democrats in the Senate. It didn't matter: a Democratic filibuster was thwarted by the Gang of 14 (including John McCain), and Alito was confirmed with a margin below that needed to thwart the filibuster.

It was, in retrospect, an impressive play: with essentially no political capital available, Karl Rove had replaced a moderate female justice with a right-wing activist male justice by changing the debate to remove the essential terms (female moderate from outside the federal appellate courts).

And so they came to mid-August 2008, when Obama had locked up the nomination, Hillary Clinton had started vigorously promoting Democratic unity, and McCain had become terminally locked 5-7 points behind and slipping, despite endless attacks on everything from Obama's religion to his patriotism. In a time when the vast majority of Americans think the country is on the wrong track, McCain's policies are effectively the same as those of the least-liked President since polling began in 1938 and his primary position is the indefinite extension of an deeply unpopular war.

To top everything off, McCain's party is slowly splintering between business-minded, pro-choice 'Rockefeller' Republicans wary of poor economic stewardship and social-activist, anti-choice evangelicals who deeply distrust McCain. A rightwing VP would shore up the base, but would probably lose just as many centrist and independent voters; a moderate VP would shore up McCain's lingering reputation as an independent, but completely alienate a base tired of years of more promises than action. 'The center cannot hold.'

There's ample conservative and liberal analysis out there that the Palin pick was "bold" or a "risk" or a "gambit" or an "act of desperation," depending on your affiliation. But one question has been unanswered: why would McCain disregard the advice of Karl Rove and pick, without any vetting, a candidate with extensive baggage due to be revealed just before the election?

Because McCain's bold or reckless or mavericky? No.

McCain fired Weaver, his longtime strategist, and replaced him with Schmidt, a Rove protege, for a reason: to have access to every underhanded play in the book, to do anything to win. The Rove machine was hired to think big.

And here's the big answer: Palin, like Harriet Miers, has a limited purpose. She's not the real candidate. She's there to change the terms of the debate.

Like with Miers, very few people have come out in favor of her as an actual Vice President (here are supportive conservatives nonetheless calling her "totally unqualified"). She never expressed any real interest in governance or foreign policy until a week ago. But that's not what she's there to do.

Like with Miers, the debate has changed. McCain blunted the media momentum of a speech considered among the finest of any convention, watched by 15% of America, more people than the Olympic opening or the American Idol finale. He shored up support with a conservative base that, for whatever reason, hates and distrusts him (bringing Dobson back in the fold and $7 million overnight in the process), turned the "historic campaign" theme on its head, and shined a new light on Obama's biggest weakness, that he's the most inexperienced Presidential candidate since Lincoln (which, frankly, shows how "experience" isn't everything it's cracked up to be).

But, like Miers, few think she could prevail in the end, and polls have already found her a potential liability. The combination of being inexperienced, unknown, female, and holding extreme political positions looks like it's simply too much for people to swallow. And that's okay:

She'll be gone before the election, replaced by someone with a national reputation, with more experience, who will immediately receive favorable media treatment.

It's too early to speculate on who that might be -- the decision will be electoral, based on who best improves McCain's chances at the time. Keep in mind, base voters tend to be fired up in advance, while swing voters leave their decision until the time of the election. Now that the base has been reassured and the opposition ensnared with the bait, I see two possibilities just before the election:

• a switch to a political moderate who, on position alone, can pull moderates and independents in swing states;
• a switch to a well-liked conservative who will have the benefit of entering the election with minimal time for either the opposition to mount an attack or the media to scrutinize.

Tom Ridge (pro-choice, Pennsylvania) would fit the former, Mike Huckabee (evangelical, well-liked) the latter. Given the context, and the crowd we're dealing with, I'm leaning towards the latter.

The best defense in these situations is a strong offense. To me, it seems the Obama campaign should have two goals now: 

• Creating a reigning storyline now that McCain's choice of Palin reflects the clearest exercise of his judgment to date. If she falls because he was too rash or didn't do enough investigation, he should take the blame.
• Making the campaign about the issues and about John McCain. McCain has been blatantly "lying" about Obama's policies and about Palin's past positions. It's an easy opportunity to prevent McCain from touting his old "straight talk" reputation, weakening his support among swing voters.

Will their gambit work? I don't know. I do know that, if it does, it'll be shame on us.

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One of the biggest, most dangerous medical scams in the United States is the residency system.

It operates entirely in the open, with government protection (more on that in a moment), and is rarely questioned even by its critics. Like this article in Slate about long medical resident hours, which result in overly fatigued residents making important decisions, versus "night float" positions, which result in inexperienced residents with little information about patients making important decisions:

Night float felt worse to me than working when I was exhausted, but is it really worse for patient care? The data are mixed. A study published in 2004 in the New England Journal of Medicine showed that interns working in an intensive-care unit made 36 percent more serious medical errors during a traditional schedule as compared with a schedule that eliminated extended work shifts and reduced the number of hours worked per week from 80 to 63. On the other hand, a study in the Journal of the American Medical Association appeared to indict the cross-coverage hospitals have been relying on to conform with the work limits. It showed that increasing cross-coverage in a large urban hospital caused delays in tests and an increased number of complications that could have been prevented, like drug reactions and infections. Work limits have other troubling consequences as well, including interruption of resident learning, fracturing of traditional hospital teams, and the creation of a kind of shift-work clock-watching mentality among young doctors.

The author, Sandeep Jauhar, goes on to advocate for better hand-off systems, which is all well and good. In the rest of capitalist society, though, when your business can't field enough employees to cover the work needed, you hire more employees.

That's the first part of the scam: US medical schools are nowhere near large enough to accommodate the demand for physicians. So there aren't enough residents to fill the need.

Great for medical residents, right? Given their scarcity, they can demand higher pay, better working conditions and reforms that make it less likely for them to make mistakes.

Except for the second part of the scam: the medical resident "matching" system is the most tightly controlled and effective monopoly / business trust in the country. All residents join a single hiring pool months in advance where they rank their preferences; later the hospitals rank them, and the pool allocates residents based on those "preferences."

Pay is uniformly abysmal everywhere and the hours are so bad they are literally unsafe for others. The new, "safer" system is to have a single resident bouncing between dozens of different specialties with little or no medical history easily available.

That's easy to cure: sue! Our antitrust laws are so tough that even two non-dominant grocery stores can't merge.

Great! And residents tried it in 2002, just to have Congress and the President arbitrarily declare it not a monopoly.

So there you have it: the guild of medical schools won't admit enough students to meet the market, and Congress won't let residents exercise the same legal rights available to everyone else. The result is no surprise: a residency system so brutal it's literally unsafe.

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Legal Blog Watch directs us to a profoundly stupid article:

As Silverglate relates in an article published this week in The Boston Phoenix, Harvard Law School wrestled in the early 1990s with the appropriateness of punishing students for engaging in satire and parody. At issue was a piece published in the Harvard Law Review's annual April Fool's Day issue, the Harvard Law Revue, in 1992, just a year after Obama, who'd been editor of the Law Review, graduated. The Law Revue piece, which Silverglate says was scathing, parodied an article just published in the Law Review that had been written by Mary Joe Frug, a feminist law professor who had been working on the article when she was murdered outside her Cambridge apartment. The parody article provoked a firestorm on campus, resulting in the law school's adoption of sexual harassment guidelines that Silverglate describes as an 11-page censorship code. In the "radioactive atmosphere" that permeated the campus at the time, even faculty members known for their support of free speech voted for the code, he writes.

Silverglate sees what happened at Harvard as symptomatic of a far more widespread trend to muzzle politically incorrect speech. It was a trend that began to emerge while Obama was still at Harvard and it is one, Silverglate believes, where Obama could help turn the course. "If Obama wants to be the nation's leader, he can start leading here. He needs to leave the atmosphere of censorship at the Harvard Law School and join the ranks of free men and women."

Silverglate followed up online. 

I'd say the article was merely wrong and flawed but for this nugget:

Today, the Law Review still puts out a written parody and conducts its annual dinner, while the Harvard Law School Drama Society produces an annual parody stage production. But none of the humor, especially that which is gender-related, has approached the frankness (or brutality, depending upon one’s point of view) of the Frug parody. One can argue, of course, that this is a good thing, depending upon one’s sense of the proper balance between social criticism and the need of some to be comfortable. Harvard Law, though, became undeniably less free than before the adoption of the guidelines.

Despite (or perhaps because of) this conscious effort on the Law Revue’s part to avoid controversy, its annual parody seems to become both less biting and, ironically, equally or more subject to an “insensitivity” attack every year. The same trend has affected the Drama Society. Students harshly criticized the 2006 stage parody, for example, at a tense campus forum in March of that year, citing multiple instances of negative racial stereotypes. According to the independent student-run Harvard Law Record, two suggestions for reform arose repeatedly at the forum, both of which reveal either a disdain for, or fundamental misunderstanding of, parody: “prohibiting the portrayal of actual students (and perhaps professors) altogether and implementing an opt-in/opt-out system whereby students could choose to be parodied or not.” (In other words, you can be criticized only if you want to be!)

The producers of the 2006 stage show offered a public apology to those who were offended. It was “nobody’s intention to hurt those parodied,” they said, suggesting that even the parodists had lost sight of the function traditionally performed by parody — namely, ridicule directed to the object of scorn. “The Parody plans to take consideration of all suggestions in their re-examination of the Parody going forward,” the apology stated, “and plans to address any concerns brought up by the HLS community in the future.” As for the nature of the “future,” that was also made clear: “Many students commented on the need for greater discussions on race, gender, and sexuality at HLS beyond the Parody context, and this open forum was a starting point for productive discussions to come.” Sensitivity training, in other words, rather than biting political and social parody, was in the law school’s future.

"Biting political and social parody?" Let's not mince words: the conduct deemed acceptable (and endorsed by the administration!) at the annual Parody would get most law students expelled at their schools and get most employees fired from their workplaces, and rightfully so.

The Parody, in general, portrays women as dumb whores and minorities as dumb criminals, and then, in specific, harnesses the most embarrassing rumors about people and then creates "humor" by implying the rumors are true. That's it. There is nothing political about the show, and it contains no social commentary: it's harassment, pure and simple.

It's outrageous, and it's been outrageous for years and yet is sponsored by the administration. The "sensitivity training" Silverglate whines about was nothing more than a phony 'apology' by the Parody that promises nothing more than "consideration" of being respectful of classmates, the type of respect required by all law schools that actually care about creating a productive and open environment where students can express themselves.

If you're going to claim restrictions on free speech, you're going to have to look farther than some immature method of harassment that is sponsored by the administration and routinely used to intimidate the weaker social groups. If Silverglate's so worried about free speech, why doesn't he look into the treatment of, say, atheist or pro-choice or anti-war college groups in the South? The only people muzzled at Harvard Law are the women and minorities who know that, if they get too bitchy or uppity, they will become targets of abuse.

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Sickening, but not unexpected:

In his New York Times review of Jane Mayer’s new book, The Dark Side, Alan Brinkley describes how by the end of 2005, torture advocates within the Bush administration were fighting to continue their extreme detainee program “because they feared being prosecuted should the program be halted and exposed.” In one White House meeting described by Mayer, Vice President Dick Cheney argued against releasing innocent detainees because “they’ll all get lawyers“:

By the end of 2005, those defending the regime of torture were no longer seeking primarily to protect the search for valuable intelligence. They were fighting for its survival, in the face of considerable evidence of the failure of SERE and other programs, because they feared being prosecuted should the program be halted and exposed. Even releasing detainees whom they knew to be entirely innocent was dangerous, since once released they could talk. “People will ask where they’ve been and ‘What have you been doing with them?’” Cheney said in a White House meeting. “They’ll all get lawyers.”

(HT: Noam Scheiber)

Perhaps Cheney should re-read the East Pediment at the Supreme Court. We have it here, too, at the Federal Courthouse where the Court of Appeals for the Third Circuit and District Court for the Eastern District of Pennsylvania both sit. Care to guess what word is on that hidden wall, what it is that is the guardian of liberty?

(image from flickr)

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Don't feel the need to post anything more than just this story.

Enjoy the weekend.

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In response to shareholder upheaval, billions in losses, and a 60% fall in stock price, CitiGroup completely revamps its Board of Directors:

Board member John Deutch, who previously held no chairmanships, has been named to lead the audit and risk committee, Citigroup said in a July 22 press release. Richard Parsons, former chair of the compensation committee, will head the nomination committee, while former nomination panel chair Alain Belda will lead the compensation committee.

Whoa, there, slow down. That's a lot of change for just a year of failure.

Thank goodness they'll wait another year or two and see how it goes before rocking the boat again.

That's why "I still believe there will be a continuing move to private equity, [with] a corresponding rise in intra-company commercial litigation and arbitration there, as I wrote before."

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The TaxProf links to two articles about how great/terrible it is that Sen. Obama taught law school:

Kyron Huigens (Cardozo) published an op-ed on law.com today:  Barack Obama, Legal Scholar:

I think I know Obama's mind. He's like me -- a legal scholar.

Obama is a graduate of one of the best law schools in the country and has taught on a part-time basis at one of the others. Every law school produces at least one scholarly journal, usually its flagship journal, that is edited by students. Obama was the president of the Harvard Law Review, a political office of sorts that, nevertheless, gave him an opportunity to work with accomplished, often brilliant, scholars.

...

For a less flattering view, see Donald Kochan (Chapman), Obama's Academic Credentials:

I do not dispute that he had a significant distinction teaching, as the University of Chicago recognizes.

But I think most academics expect people claiming to be academics (or former ones) to have some record of scholarship.

Are they serious?

Let's take for a moment John Yoo and Jack Balkin. John Yoo is now a law professor. Jack Balkin is a law professor.

Here's Jack Balkin on John Yoo's prior work:

My own conclusion is that Yoo and Bybee did violate their professional obligations to the President as constitutional actor, and to the country as a whole. The reason is a combination of their outrageous theory of presidential dictatorship and their all too eager assistance in what appears to be a conspiracy to commit war crimes. 

Note how Balkin didn't just conclude that Yoo had an erroneous interpretation of the law, but that Yoo had violated his professional duty in deliberately reaching a fallacious interpretation.

That's a lot of room for disagreement between two law professors.

I wouldn't say lawyers reflect the population as a whole, since they don't, but, ideologically, the law takes all kinds. The fact that someone taught law school is, to be sure, a distinction about which they should be proud, but it doesn't answer anything about how their mind works. Same goes for teaching without scholarship: as someone at a school like Chapman should know, the bulk of law professors have not spent their careers filling journals, that's generally reserved for "the best" law schools.

They've spent them teaching. As they should.

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This time through special interest legislation:

Thanks to an obsolete formula embedded in the current law, doctors who see Medicare patients had their fees cut by 10% on July 1. The House has passed a bill to restore the cut, but the Senate has yet to follow suit. Robert Pear explains why:

[President] Bush and many Republicans oppose the bill because it would finance an increase in doctors' fees by reducing federal payments to insurance companies that offer private Medicare Advantage plans as an alternative to the traditional government-run Medicare program.

Insurance companies and the White House argue that the bill would hurt beneficiaries who rely on private Medicare plans. America's Health Insurance Plans, a trade group, ran television advertisements last week, urging Congress to "stop cuts to Medicare Advantage."

... Forcing private insurers to operate as efficiently as the federal government is apparently asking too much of the GOP's free market acolytes. Better to cut doctors' fees instead.

See previously: Doctors Spend More Money On Insurance Billing Than Malpractice

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