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

One of the true gems of the Internet is TED (Technology, Entertainment, Design), a nonprofit that invites luminaries from a wide variety of fields to give brief presentations about their signature ideas. A quick googling of "Best TED Talks" is well worth the hours of education and inspiration that will ensue.

I was thus disappointed to see that TED invited Philip K. Howard to talk about "Four ways to fix a broken legal system."

I have debunked Mr. Howard's work before (see my thoughts on his "Life Without Lawyers," his "health courts," and his claims about public support for tort reform). The bulk of his talk presents more of the same argument-by-anecdotes and generalized assertions that don't withstand a moment's scrutiny. Despite his claim around the 14:00 mark, I can safely assure my readers that we, as a society, do in fact still have seesaws, swingsets, and jungle gyms. Moreover, his overall argument that these problems are so insidious that you don't even notice them is, to me, unpersuasive.

About halfway through, Mr. Howard moves onto his four propositions, which are:

1. Judge law mainly by its effect on society, not individual situations
2. Trust in law is an essential condition of freedom. Distrust skews behavior towards failure
3. Law must set boundaries protecting an open field of freedom, not intercede in all disputes
4. To rebuild boundaries of freedom, two changes are essential: simplify the law and restore authority to judges and officials to apply law.

To call these propositions "vague" is an understatement.

That said, I generally agree with the first three. Indeed, it seems the irony of Mr. Howard's first proposition was lost on him; although his talk only mentions the former, for each funny story of a fishing lure with a warning label, there's a car manufacturer that bragged about avoiding a recall and ended up needlessly and carelessly endangering millions of people.

The fourth proposition, however, is where Mr. Howard and I diverge. It's not that I believe the law shouldn't be simple or that judges shouldn't apply the law; of course I do. I just don't believe it how he means it, which is to deny individuals the right to a jury trial.

But there's a bigger problem with his talk: the "authority to judges and officials to apply law" he claims should be "restored" never existed, and for good reason.

As part of his simplification argument, Mr. Howard gives, as an example, the United States Constitution. It's "only 16 pages" yet "worked well for over 200 years." Let's take a look at the Seventh Amendment thereto:

In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.

(See the link for primary sources on the Amendment.)

I don't know what Mr. Howard thinks the words "common law" and "rules of the common law" mean there, but to the Framers of the Constitution, "common law" referred to hundreds of years of confusing — and sometimes contradictory — English court opinions.

So much for simplification.

But simplification isn't really what Mr. Howard wants; he wants to get rid of "the right of trial by jury."

That's not "rebuilding" freedom, nor is it "restoring" the way the Founders intended the civil justice system to work. It is a rescission of the freedoms guaranteed by the Seventh Amendment, which expressly preserved the same right to jury trial that was embodied in the Magna Carta and was recognized long before.

Indeed, the English "common law" of which the Framers were so enamored did not give judges any "authority" to usurp the fact-finding role of the jury. Mr. Howard claims that he wants to give judges the power "to apply law," but they have always had that power -- what Mr. Howard really wants is to give judges the power to determine facts, a power that the Framers of the Constitution expressly denied them.

Mr. Howard doesn't want to fix the legal system, he wants to break it.

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link

Shepard Fairey, creator of the iconic "Hope" poster during Obama's Presidential campaign, is not perfect.

After the Associated Press claimed that Fairey's use of one of their images for the poster required authorization, Fairey — represented by the Fair Use Project at Stanford University — pre-emptively sued to establish (by way of a declaratory judgment action) that his transformation of the original image constituted "fair use" and thus did not infringe on their copyright.

Frankly, I thought he had a good case, but the suit hasn't gone well: last October, Fairey was forced to admit he spoliated and fabricated evidence:

"Throughout the case, there has been a question as to which Mannie Garcia photo I used as a reference to design the HOPE image," Fairey said. "The AP claimed it was one photo, and I claimed it was another."

New filings to the court, he said, "state for the record that the AP is correct about which photo I used...and that I was mistaken. While I initially believed that the photo I referenced was a different one, I discovered early on in the case that I was wrong. In an attempt to conceal my mistake I submitted false images and deleted other images."

You may be shocked to learn that people sometimes lie in civil litigation.

It's true. Just this week, I received a big stack of documents that the defendant in one of my cases thought I'd never see. Sure enough, they prove the defendant repeatedly lied under oath.

But no one outside of the case itself will care. If I take it to the U.S. Attorney's office, they will tell me to take it up with the judge in my case.

Unless, apparently, the Associated Press is involved:

Fairey sued the AP last February, asking a judge to declare that Fairey's artwork does not infringe any copyrights held by the AP. A month later, the AP countersued, saying the uncredited, uncompensated use of one of the news cooperative's photos violated copyright laws and signaled a threat to journalism.

The U.S. Attorney's office had a grand jury begin an investigation after Fairey said he erred about which AP photo he used as the basis for "HOPE" and had submitted false images and deleted other images to conceal his mistake.

Last I knew, the U.S. Attorney's office in every district had an unwritten policy of ignoring perjury in civil cases. Though such restraint often pains me — as the plaintiff's lawyer, I'm often the one who was lied to — I understand it. They have better things to do (e.g., prosecuting human trafficking), and the civil justice system already has methods for dealing with evidence tampering.

Which makes the investigation, at taxpayer expense and at the cost of valuable prosecutorial time and resources, all the more disturbing. Is the Associated Press more deserving of justice than my clients and the thousands of other litigants who every day endure the indignity of watching their adversary lie under oath? Doesn't the U.S. Attorney's Office for the Southern District of New York have something better to do?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

There's a myth — promoted by vested interests — that the United States is a free market economy.

Don't believe it. Even in the smallest of transactions, monopoly power still rules, dutifully skimming its unearned share.

"How Visa, Using Card Fees, Dominates a Market":

Competition, of course, usually forces prices lower. But for payment networks like Visa and MasterCard, competition in the card business is more about winning over banks that actually issue the cards than consumers who use them. Visa and MasterCard set the fees that merchants must pay the cardholder’s bank. And higher fees mean higher profits for banks, even if it means that merchants shift the cost to consumers.

Seizing on this odd twist, Visa enticed banks to embrace signature debit — the higher-priced method of handling debit cards — and turned over the fees to banks as an incentive to issue more Visa cards. At least initially, MasterCard and other rivals promoted PIN debit instead.

As debit cards became the preferred plastic in American wallets, Visa has turned its attention to PIN debit too and increased its market share even more. And it has succeeded — not by lowering the fees that merchants pay, but often by pushing them up, making its bank customers happier.

In an effort to catch up, MasterCard and other rivals eventually raised fees on debit cards too, sometimes higher than Visa, to try to woo bank customers back.

“What we witnessed was truly a perverse form of competition,” said Ronald Congemi, the former chief executive of Star Systems, one of the regional PIN-based networks that has struggled to compete with Visa. “They competed on the basis of raising prices. What other industry do you know that gets away with that?” 

As an old friend of mine wrote,

The present conditions of business cannot be accepted as satisfactory. There are too many who do not prosper enough, and of the few who prosper greatly there are certainly some whose prosperity does not mean well for the country. ... [W]e heartily approve the prosperity, no matter how great, of any man, if it comes as an incident to rendering service to the community; but we wish to shape conditions so that a greater number of the small men who are decent, industrious and energetic shall be able to succeed, and so that the big man who is dishonest shall not be allowed to succeed at all. ...

Wherever in any business the prosperity of the business man is obtained by lowering the wages of his workmen and charging an excessive price to the consumers we wish to interfere and stop such practices. We will not submit to that kind of prosperity any more than we will submit to prosperity obtained by swindling investors or getting unfair advantages over business rivals. ...

It is utterly hopeless to attempt to control the trusts merely by Antitrust Law, or by any law the same in principle, no matter what the modifications may be in detail. In the first place, these great corporations cannot possibly be controlled merely by a succession of lawsuits. The administrative branch of the Government must exercise such control.

Theodore Roosevelt said those words ninety-eight years ago. He was right then and is right today.

But these are different times; we can't rely on the administrative branch of the Government to exercise control, even when it claims it will. 

The process had only just started in Teddy Roosevelt's day:

The first federal regulatory agency, the Interstate Commerce Commission, was set up to regulate railroad freight rates in the 1880s. Soon thereafter, Richard Olney, a prominent railroad lawyer, came to Washington to serve as Grover Cleveland's attorney general. Olney's former boss asked him if he would help kill off the hated ICC. Olney's reply, handed down at the very dawn of Big Government, should be regarded as an urtext of the regulatory state:

"The Commission . . . is, or can be made, of great use to the railroads. It satisfies the popular clamor for a government supervision of the railroads, at the same time that that supervision is almost entirely nominal. Further, the older such a commission gets to be, the more inclined it will be found to take the business and railroad view of things. . . . The part of wisdom is not to destroy the Commission, but to utilize it."

Today, regulatory capture infects — literally infects — every aspect of our lives.

"Safety of Beef Processing Method Is Questioned":

 Officials at the United States Department of Agriculture endorsed the company’s ammonia treatment, and have said it destroys E. coli “to an undetectable level.” They decided it was so effective that in 2007, when the department began routine testing of meat used in hamburger sold to the general public, they exempted Beef Products.

With the U.S.D.A.’s stamp of approval, the company’s processed beef has become a mainstay in America’s hamburgers. McDonald’s, Burger King and other fast-food giants use it as a component in ground beef, as do grocery chains. The federal school lunch program used an estimated 5.5 million pounds of the processed beef last year alone.

But government and industry records obtained by The New York Times show that in testing for the school lunch program, E. coli and salmonella pathogens have been found dozens of times in Beef Products meat, challenging claims by the company and the U.S.D.A. about the effectiveness of the treatment. Since 2005, E. coli has been found 3 times and salmonella 48 times, including back-to-back incidents in August in which two 27,000-pound batches were found to be contaminated. The meat was caught before reaching lunch-rooms trays.

The last election has changed matters somewhat, including in terms of Antitrust. But make no mistake: the administrative branch of the Government is loathe to exercise control over the great corporations, and will just as often empower the great corporations against competitors and consumers as it will restrain them.

Thus, the primary method we have to control great corporations — whether to ensure a level playing field for competition or to protect ourselves from personal or financial injury — is "merely a succession of lawsuits."

Yet, a succession of lawsuits barely works to restrain corporate abuse and malfeasance. Consider Visa/Mastercard, which already paid $2 billion for manipulating merchants' processing fees, yet keep doing it. Jack-in-the-Box was nearly bankrupted by lawsuits following a multi-fatality outbreak of O157:H7 E. coli, yet it's still around, and E. coli still runs rampant in our food, particularly ground beef.

Today, however, we're forgotten what Teddy Roosevelt knew a century ago. Today, many of those same vested interests argue that the feeble option of the "mere succession of lawsuits" is too much. That even the involvement of the owners of corporations in corporate affairs is too much. That corporations are people, too, entitled to "speak" in elections just like you or me.

Don't believe it.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Via WhiteCoat, I see there's a new line of attack on patients' rights: blame lawyers for making patients sick in the first place. As Time's Wellness blog describes it,

The growing number of Methicillin resistant Staphylococcus aureus (MRSA) infections in hospitals may in part be driven by physicians' tendency to over-prescribe antibiotics to avoid being sued by disgruntled patients, according to a study published this past fall in the American Journal of Therapeutics.

And how did the study reach that conclusion? Here's the abstract of the study, Relationship Between Population Density of Attorneys and Prevalence of Methicillin-Resistant Staphylococcus aureus: Is Medical-Legal Pressure on Physicians a Driving Force Behind the Development of Antibiotic Resistance?:

We performed a hypothesis-generating study evaluating the perceived threat of lawsuits among physicians and methicillin resistance in Staphylococcus aureus. We found a correlation between the prevalence of methicillin resistance among clinical S. aureus isolates and both antibiotic prescriptions per capita and density of attorneys in countries in Europe and North America. We did not find a correlation between prevalence of methicillin resistance and physician density. Further investigation is warranted to study whether physicians' perceived fear of lawsuits, of which attorney density may be a crude surrogate marker, results in antibiotic prescription practices that contribute to the emergence of antimicrobial resistance among virulent pathogens such as S. aureus, with global implications on the ethics of the delivery of quality health care to all members of society.

Although there can be merit to a preliminary investigation of data, a "hypothesis-generating study" is, by definition, unscientific. The scientific method requires the investigator form the hypothesis before performing the experiment.

There's good reason for that; e.g., following the method helps guard against bias, which can cause investigators to draw spurious relationships from data.

Like the spurious relationship claimed between the "density of lawyers" in a given area and MRSA.

Despite the headline-grabbing conclusion in the abstract, Drs. Sakoulas, Wormser, Visintainer, Aronow, and Nadelman didn't actually find much evidence with which to blame lawyers for MRSA. As the study — which you have to pay to read, and thus the vast majority of people can't or won't read —  says:

Using the nonparametric test for trend, we noted a trend of increased lawyers per capita in states with higher percentages of MRSA, but this did not achieve statistical significance (P = 0.215). When analyzed in 2 groups, states with a prevalence of .40% MRSA in ICUs tended to have more attorneys per capita than those with a prevalence of ,40% MRSA (mean 347 vs. 288 per 100,000; mean rank 23.4 vs. 16.5; P = 0.08). The difference in physician density was less significant (300 vs. 257 per 100,000; mean rank 22.1 vs. 19.0; P = 0.42).

That is to say, the authors found no relationship between lawyers per capita and MRSA.

Instead, the authors found a relationship between lawyers per capita and MRSA after they narrowed the definition of "MRSA" to mean an abnormally high prevalence of MRSA in ICUs.

Does that mean that more lawyers in a given area causes an abnormally high prevalence of MRSA in ICUs?

No.

As every good scientist knows, correlation does not imply causation. This logical fallacy is so common, and so thoroughly disproven, that it has its own fancy Latin name: cum hoc ergo propter hoc.

The authors know that. As the study — that is, the part not available to the public — admits:

This study has a number of limitations, and therefore, its conclusions must be interpreted with caution. ... The relationships that emerged should only be considered as crude, not causal, associations because practice behavior was not assessed at the individual level and adjustment for confounders or other covariates was not conducted.

So let's recap what the "study" did:

1. Disregarded the scientific method; then,
2. Played around with data in the hopes of finding a link between lawyers and antibiotic-resistant bacteria; then,
3. Failed to find such a link; then,
4. Admittedly cherry-picked data until they could claim a weak correlation; then,
5. Admittedly made numerous assumptions about the link between "density of lawyers" and physicians' behavior; and finally,
6. Admittedly did not evaluate any other variables that could explain the correlation.

Nobel-worthy this is not.

But that's not what bugs me about the "study."

What bugs me is how supposedly objective researchers don't even try to conceal their motives anymore:

George Sakoulas, M.D., assistant professor of medicine and lead author of the study, concluded, "The findings suggest that more research is needed to evaluate the potential impact of medical liability concerns on the medical care system. The study findings hint toward the importance of medical tort reform as a way to reduce healthcare costs and improve quality. Another way might be to foster more judicious prescription of antibiotics based on science and evidence rather than on risk aversion."

Remember: Dr. Sakoulas didn't have any "findings [that] hint toward the importance of medical tort reform as a way to reduce healthcare costs and improve quality." He cherry-picked data until he found a weak correlation between lawyers per capita and an abnormally high prevalence of MRSA in intensive care units, a correlation he admitted could be entirely meaningless since he chose not to investigate other possible explanations.

That, however, is enough for him to jump right to "the importance of medical tort reform as a way to reduce healthcare costs and improve quality."

Sure.

Worse, we already know there's a better explanation for the weak correlation between lawyers and MRSA, an explanation that requires far fewer leaps in logic.

There's another fancy Latin phrase scientists use when faced with competing explanations: entia non sunt multiplicanda praeter necessitatem. The principle is better known as Occam's razor: 

Occam's razor states that the explanation of any phenomenon should make as few assumptions as possible, eliminating those that make no difference in the observable predictions of the explanatory hypothesis or theory. The principle is often expressed in Latin as the lex parsimoniae (translating to the law of parsimony, law of economy or law of succinctness). When competing hypotheses are equal in other respects, the principle recommends selection of the hypothesis that introduces the fewest assumptions and postulates the fewest entities while still sufficiently answering the question.

When faced with data suggesting a correlation between the "density of lawyers" and a high prevalence of MRSA in ICUs, there are at least two possible explanations:

1. The "density of lawyers" in a given area —  including lawyers who work for hospitals, lawyers who have devoted their careers to defending doctors, and lawyers who have never touched a medical malpractice file — specifically makes physicians more concerned about malpractice liability than they otherwise were, leading them to over-prescribe antibiotics; or,
2. The "density of lawyers" and a high prevalence of MRSA in ICUs are both determined by one or more common factors.

The first explanation — the one adopted by Dr. Sakoulas — requires making a lot of assumptions, such as (a) doctors know how "dense" their area is for lawyers; (b) that the "density" of lawyers really is "a crude surrogate marker" for the fear of a lawsuit, even though the authors themselves admit "there was no significant relationship between attorney density and number of paid malpractice claims per 1000 physicians at the state level;" and, (c) concern about malpractice liability specifically increases the likelihood that a physician will prescribe one of the antibiotics tied to increase MRSA development, over and above the numerous other factors that encourage the physician to prescribe the antibiotic.

That's an awful lot of assumptions.

The second explanation requires making a single assumption: that there is at least one factor that can lead to both a higher density of lawyers and a higher prevalence of MRSA in a given area.

One such factor comes to mind: the degree of urbanization.

MRSA is primarily an urban disease: it was first diagnosed in large, urban hospitals, thereafter spread faster in urban areas, and today is more prevalent in urban areas than in rural areas. The more urbanized an area is, the more prevalent MRSA will be.

Lawyers, too, are an urban phenomenon: the states with the highest "density" of lawyers (D.C., New York, Delaware, Massachusetts) are also the most urbanized, while the states with the lowest "density" of lawyers (North Dakota, Arkansas, South Dakota, Kansas, Idaho) are the least urbanized. The more urbanized an area is, the more lawyers it will likely have.

An increase in lawyers doesn't cause an increase in MRSA; urbanization causes both. Quod erat demonstrandum.

I don't doubt the authors — who included an infectious disease specialist and an epidemiologist — knew the relationship between a high prevalence of MRSA and urbanization. I also don't doubt the authors suspected the relationship between lawyer density and urbanization.

They just didn't want to let science get in the way of politics.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Overlawyered passes along a misleading description of the "tort reform" provisions in the Senate health care bill from an anonymous Capitol Hill source:

The “tort reform” section of Senator Reid’s substitute amendment is not merely meaningless, but is actually a significant giveaway to the trial lawyers. It is essentially a 5-year, 50-million dollar grant program to encourage states to develop more plaintiff-friendly alternatives to the current medical liability system.

Section 10607 (p.344 of the Manager’s) establishes a 5-year grant program. The program is administered by the HHS Secretary (Sebelius), in consultation with a review panel. The review panel is structured to ensure that trial lawyers are amply represented, with seats specifically reserved for “patient advocates,” “attorneys with expertise in representing patients,” and “patient safety experts.”

Of course, the unnamed source fails to note that health care companies, defense lawyers and insurance companies are "amply represented," too. Read the bill yourself: alongside the patient advocates on those panels are "Health care providers and health care organizations,” “Attorneys with expertise in representing patients and health care providers,” and “Medical malpractice insurers.”

The source also says:

Nothing about this language requires that the “alternative to litigation” decreases litigation costs.

Nonsense. In order to receive a grant, states have to show how their plan “improves access to liability insurance." After they receive a grant, states' plans will be evaluated by factors such as “the disposition of disputes and claims, including the length of time and estimated costs to all parties” and “the medical liability environment.”

The Pop Tort has a more reasonable view:

Here is some of what we like about it: it proposes to give money to states to consider litigation alternatives, but only programs that are shown to improve patient safety, are voluntary and allow patients to opt, and do not limit a patient’s legal rights.  Clearly, if this passes (the House bill currently has something similar), we will have our battles at the state level as certain well-funded forces try to impose anti-patient measures like “Health Courts.”  But we’ll cross that bridge, as they say….

Whatever is done, we hope it works to reduce errors, but not just in hospitals, (here, here, here, for example) but also those of incompetent individual doctors, who by the way already have more liability protections for their negligence than any other profession in the country. 

Frankly, the biggest problem in the debate over medical malpractice liability in this country is the absence of concrete data. There's no agreement on how much medical malpractice occurs or how much damage it causes, nor any agreement on the effect of health care providers' insurance premiums on access to medical care. There's also only one major study on the reliability of the medical malpractice system, which tort reformers and trial lawyers both read to say whatever they want it to say.

Much like with the Comparative Effectiveness Research proposals, the biggest benefit of these "demonstration programs" will likely not be the discovery of a perfect recipe for the medical malpractice system, but rather the accumulation of data that will inform future debates.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Via @pointoflaw, I learned of a recent column by Randy Cohen, who writes The Ethicist for The New York Times.

Last week, Cohen chose two inquiries:

and

Legal Ethics Forum rounds up some legal blogger reactions to the first inquiry.

The inquiries are awfully similar to one another. As noted by the article, the law firm had more qualified applicants than it could accept, and the potential patient was able to secure other medical treatment. It's a big world out there; you are not everyone's keeper.

Thus, Cohen had a simple answer for both:

Oops, my mistake: that should have been Cohen's simple answer for both.

Instead, that answer was solely for the doctor, who was free not to treat the trial lawyer because the doctor's political beliefs — i.e., his views on patient's right to recover for damages caused by medical malpractice — differed from the trial lawyer's.

Not so for the law firm. No, when it comes to Federalist Society members:

Cohen apparently didn't even see any conflict between the advice he gave the lawyer and the advice he gave doctor, and doesn't bother to defend the contradiction.

Which leaves us to speculate: What does Cohen think is the material difference between the two inquiries?

One possible answer: Cohen believes Federalist Society members and trial lawyers should be subject to special rules. Federalist Society members' political beliefs are good, trial lawyers' political beliefs are bad.

End of story.

Some ethics.

 

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link

Ashby Jones at the Wall Street Journal reports on absolute judicial immunity:

In January, federal prosecutors filed fraud charges against Mark A. Ciavarella and Michael T. Conahan, judges on the Luzerne County, Pa., Court of Common Pleas. Prosecutors alleged that the judges sent numerous juveniles to detention centers over several years in exchange for more than $2.6 million in kickbacks from the former co-owner of two centers.

After the criminal charges, several lawyers filed civil suits seeking monetary damages on behalf of dozens of children and their families against the judges and other defendants. They alleged, among other things, that the judges violated their civil rights.

...

In filings, the judges argued that judicial immunity insulated them from suits. A ruling on the motions is pending. Both judges declined to comment.

Legal experts say the plaintiffs face an uphill battle in piercing the immunity shield. Dating to 1872, the U.S. Supreme Court has repeatedly supported the notion that judges should express their legal convictions without having to worry about personal consequences. In perhaps the most widely cited Supreme Court case on judicial immunity, the court in 1978 rejected a suit filed by a woman against an Indiana judge who had years earlier ordered the woman -- who was then 15 and allegedly mentally impaired -- sterilized without her knowledge.

According to Arthur Hellman, a law professor at the University of Pittsburgh, judicial immunity doesn't protect judges from suits stemming from administrative decisions made while off the bench, like hiring and firing decisions. But immunity generally does extend to all judicial decisions in which the judge has proper jurisdiction, he says, even if a decision is made with "corrupt or malicious intent."

In Mr. Hellman's mind, the rule makes sense. Without it, the courts might be stacked with baseless lawsuits filed against judges. "On one level, it seems outrageous to ban someone from suing a corrupt judge," he says. "But if you allow plaintiffs to pierce the immunity by alleging bad motive, it opens the floodgates."

There is good reason for judicial immunity. Judges, more than any other government officials, determine who wins and who loses in our legal system. They do not pass general laws applicable to everyone like the legislature. They do not enforce the laws in general through multiple levels of supervision, collaboration, and procedures like the executive.

They spend weeks, months and years right in front of citizens with a lot to lose and then tell those citizens to their faces if they win or lose. It is very easy to blame a judge for a citizen's loss in a civil or criminal trial: the judge was the one who made it happen.

We thus cannot have judges hesitating in their good faith decisions about who loses because they fear litigation. The system just will not work; it's the judge's job to determine the loser.

That said, the Luzerne County case is different. We don't need to dive into the bigger questions of when and how immunity should be denied, because it's quite clear it should be denied here, for the two reasons raised by a group of former judges who filed an amicus brief in the case:

Application of immunity to judges who admitted under oath to engaging in a criminal scheme that lasted for years would indeed be "monstrous." [Quoting Judge Learned Hand in Gregorie v. Biddle, 177 F.2d 579 (2d Cir. 1949)] To find immunity would denigrate the respect of the public for the judiciary, which is dependent upon judges making decisions based on the law and the facts, rather than personal, corrupt motives. Moreover, denying Conahan and Ciavarella the privilege ofjudicial immunity in this case would not risk a flood of civil claims against other judges.

...

There is simply no way that Conahan's and Ciavarella's admittedly criminal arrangements with the detention facilities or their predetermination to detain juvenile offenders before any judicial proceeding even existed, can be considered judicial acts. Conahan's and Ciavarella's arguments to the contrary are disingenuous. They necessarily conceded that they acted non-judicially when they admitted to criminal conduct in violation of their judicial oath. Those admissions cannot be reconciled with their present assertion that they acted in a judicial capacity.

Exactly. Wherever it may be that judicial immunity should lie, we know it should not lie where a judge (1) admitted (or were convicted of) corruption or (2) acted wrongfully outside their judicial function.

The "immunity" underlying judicial immunity is — like qualified immunity for executive officials — an "immunity" from being sued. It is a deliberate policy choice to deny some worthy cases even a shot at proving entitlement to relief in exchange for ensuring unworthy cases do not waste judicial time or cause hesitation in the judicial process.

Here, there is no doubt as to the worthiness of plaintiffs' claims: the judges admitted corruption. There is also no doubt that the problem at here was not solely judicial, for there is nothing "judicial" about receiving payments under the table from a private party.

The United States Supreme Court is already considering a related issue, the extent of immunity for prosecutors who fabricate evidence, in Pottawattamie County v. McGhee. They will see this case coming down the pipeline; let's hope they understand the robes cloak only those decisions made for the right reasons.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Via Atrios, we have Stanley Fish's recent NYTimes column, The Rise and Fall of Academic Abstention:

As recently as 1979, legal academics Virginia Nordin and Harry Edwards were able to say that “historically American courts have adhered fairly consistently to the doctrine of academic abstention in order to avoid excessive judicial oversight of academic institutions” (Higher Education and the Law). Academic abstention is the doctrine (never formally promulgated) that courts should defer to colleges and universities when it comes to matters like promotions, curricula, admission policies, grading, tenure, etc. The reasoning is that courts lack the competence to monitor academic behavior; they should get out of the way and let the professionals do the job. “Courts are particularly ill-equipped,” Chief Justice Rehnquist declared in 1978, “to evaluate academic performance.” (Board of Curators of the University of Missouri v. Horowitz)

In 2009, courts still pay lip service to this doctrine but in practice, Amy Gajda tells us in her terrific new book, “The Trials of Academe,” they now boldly go where their predecessors feared to tread. Once, “if a student or faculty member had the temerity to bring a grievance to court, is was likely to be bounced out in short order.” Now, however, “courts feel free to enter . . . from the ground up, parceling out the right and obligations of each disputant down to the last dollar.” Indeed, “litigation and ‘rights talk’ have permeated every crease and wrinkle of academic life.”

Fish concludes,

When I began teaching in 1962 at the University of California in Berkeley, I asked older colleagues about the decorums and rules of the classroom. In response, I was given the Myron Brightfield rule. Brightfield was then a very senior member of the department. His rule (and I paraphrase) was, When you close the door, there’s nothing they can do to you. Those were the days, and they had their injustices as well as their advantages. Now we have justice, or at least the demand for justice, all the time and it may, Gajda suggests, be killing us.

Rubbish.

Fish highlights several cases to make his argument-by-anecdote. Let's look at his "favorite:"

My favorite (and Gajda’s, too) involves a student in osteopathic medicine who, after failing an important rotation, was dismissed because “he didn’t have the basic understanding that he should have as a fourth-year medical student.” The student sued on the grounds that he had been promised a degree by a phrase in a student handbook that described the program he was enrolled in as “a four-year curriculum leading to the DO degree.”

Anyone with the slightest familiarity with the way universities work would know that ‘”leading to” included the qualification “provided that the requirements for graduating were met” — a medical degree is not equivalent to the certificate you get for having completed six weeks of a summer camp — but the courts were persuaded to a more literal (and perverse) reading and awarded the plaintiff a partial tuition reimbursement. But he wanted more and he got it by arguing that he should receive an amount commensurate with the earnings he would have accumulated had the “promised” degree been conferred. Jurors ordered the medical school to pay him $4.3 million.

The case is Sharick v. Southeastern Univ. of the Health Scis., 780 So. 2d 136, (Fla. Dist. Ct. App. 3d Dist. 2000).

Indeed, as Fish says, anyone with "the slightest familiarity" with academia knows that the award of a degree is predicated on meeting the school's requirements — except, of course, for the school in question, which argued the student "contracted with [the school] solely to provide an education in exchange for payment of tuition." Id., 139 (emphasis added).

Got that? The school's argument was that, regardless of whether the student met the requirements, all the school contracted to do was "provide an education" and not actually award the degree. That is to say, the school argued that it was free to destroy the student's career for any reason, a bad reason, or no reason, so long as it had "educated" him in a way the student couldn't possibly use without the actual degree. The court disagreed. So do I. So, too, apparently, does Fish.

Contrary to Fish and Gadja's description, the student didn't allege the school "promised" a degree but didn't give it because he failed, he alleged that "Southeastern's decision to dismiss him [two months before his graduation] was arbitrary, capricious, and/or lacking any discernable rational basis." Id., 138. It's the only way he could recover under Florida law, in light of the "academic abstention" doctrine that Fish claims has been "increasingly narrowed to the point that it is in danger of vanishing."

A jury agreed with the student. In fact, the evidence against the school was so overwhelming that Southeastern didn't even appeal the jury's findings. The school only appealed the trial judge's rejection of their ridiculous and insulting "solely to provide an education" argument.

Let me tell you, as a plaintiff it's not easy to prove "arbitrary and capricious" behavior. It's one of the highest bars a plaintiff can ever face, and typically results in the plaintiff losing. Do you have any doubt that, if Southeastern had any credible defense at all, it would have appealed the jury's findings? All they had to show was some reason — any reason — justifying the student's dismissal and the verdict would have been overturned.

Yet, they didn't even try, presumably because they knew they couldn't. Rather than making things right, however, they forced him into over fifteen years of litigation, litigation which is still going on. See the most recent appeal, Nova Southeastern Univ. of the Health Scis., Inc. v. Sharick, 2009 Fla. App. LEXIS 12494 (Fla. Dist. Ct. App. 3d Dist. Aug. 26, 2009)

How are we to take Fish or Gadja seriously when their "favorite" example shows why academic institutions should not be above the law?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

I admire Judge Posner, one of the flag bearers for the law and economics movement. He is thoughtful, prolific, and has not succumbed to the extraordinary pressure judges feel to guard their actual thoughts and feelings. He is in every sense of the word an open book, and we should be grateful for that.

It also makes him the logical target for critics of any of the ideas he champions. Such is the case for my remarks below.

I rather enjoyed Posner's latest article, How I Became A Keynesian, which does as good a job as any at summarizing Keynes' core philosophy, until I came across this paragraph:

But the government may be able to arrest the decline--another of Keynes's central ideas, and one strongly resisted by the conservative economists of his time, as of today. It can reduce interest rates (by buying government bonds or other debt for cash, which increases the amount of money that banks are permitted to lend) in an effort to reduce the costs of active investment and thus encourage employment. Keynes urged this approach. But he also pointed out that it might not work well--as we have learned in the current downturn. The banks may lack confidence in "those who seek to borrow from them," so that "while the weakening of credit is sufficient to bring about a collapse, its strengthening, though a necessary condition of recovery, is not a sufficient condition." In fact, banks in America today are hoarding, rather than lending, most of the cash that they have received from the government's bailouts. The hoard may make the banks a little freer with lending, but the effect on economic activity, at least in the short run, may be tepid.

In sum: the government can "arrest" an economic decline by taking action to "reduce interest rates," but such has "not work[ed] well ... in the current downturn."

Perhaps he's correct. Then again, perhaps he was correct a month ago when he wrote that "the various factors that are responsible for the reduction in the rate of decline of output" last quarter are "probably impossible" to "disentangle:"

This assertion is groundless. No one has the faintest idea what effect the stimulus has had. My guess is that it has had some positive effect, because of its confidence-enhancing character that I mentiioned earlier and because some of the $100 billiion--though no one seems to know how much--has been spent rather than saved. But it is impossible to determine the net impact of the stimulus on GDP or employment because so much else has been happening to stimulate an economic recovery. Some people have had to dissave--turn savings into expenditures--because their income has fallen (maybe because they have become unemployed) below the level necessary to cover their basic expenses. Some people have had to replace durables that wore out. Foreign demand for U.S. products has risen some. (Dissaving, replacing durables, and export growth if the domestic currency loses value are standard nongovernmental spurs to recovery from a depression.) And the government has been doing a lot to stimulate recovery besides the stimulus--has in fact expended or guaranteed trillions of dollars in an effort to increase the amount of lending, which is essential to economic activity.

Disentangling the various factors that are responsible for the reduction in the rate of decline of output in the second quarter is probably impossible, but in any event has not, to my knowledge, been attempted--and certainly not in Romer's talk.

Which Posner do I believe? The one who asserts that "disentangling the various factors" affecting the economy "is probably impossible" (with whom economists vehemently disagree), or the one who asserts as a matter of fact that, of the "various factors" affecting the economy, government efforts to "reduce interest rates" "might not work well?"

Of course, Keynes himself famously responded to a critique that he had changed his mind about the causes of the Great Depression with: "When the facts change, I change my mind. What do you do, sir?"

The facts here, however, have not changed. The columns were published a month apart.

That, too, would be perfectly fine -- Richard Posner, the man, is entitled to his own thoughts and opinions and should change them as befits further thought, data, argument and experience -- but for the belief of many adherents to "law and economics"  that judges' interpretations and application of economic theory should color their judicial decisions.

There's a difference, of course, between the macroeconomics that trouble Posner and the microeconomics at play in most cases. And there's a difference, of course, between recognizing the contributions that economics can bring to legal policy decisions (which is what the original law and economics scholars, like Ronald Coase and Guido Calabresi, focused on) and enabling courts to decide cases by way of economic theories they are not even trained to understand, much less apply.

These distinctions, however, rapidly break down in actual practice. Witness the Twombly Supreme Court opinion, in which seven Justices, none of which have any formal training in economics, held the following as a matter of law:

The complaint makes its closest pass at a predicate for conspiracy with the claim that collusion was necessary because success by even one CLEC in an ILEC’s territory “would have revealed the degree to which competitive entry by CLECs would have been successful in the other territories.” Id., ¶50, App. 26–27. But, its logic aside, this general premise still fails to answer the point that there was just no need for joint encouragement to resist the 1996 Act; as the District Court said, “each ILEC has reason to want to avoid dealing with CLECs” and “each ILEC would attempt to keep CLECs out, regardless of the actions of the other ILECs.” ...

Plaintiffs’ second conspiracy theory rests on the competitive reticence among the ILECs themselves in the wake of the 1996 Act, which was supposedly passed in the “ ‘hop[e] that the large incumbent local monopoly companies … might attack their neighbors’ service areas, as they are the best situated to do so.’ ... Contrary to hope, the ILECs declined “ ‘to enter each other’s service territories in any significant way,’ ” Complaint ¶38, App. 20, and the local telephone and high speed Internet market remains highly compartmentalized geographically, with minimal competition. Based on this state of affairs, and perceiving the ILECs to be blessed with “especially attractive business opportunities” in surrounding markets dominated by other ILECs, the plaintiffs assert that the ILECs’ parallel conduct was “strongly suggestive of conspiracy.” Id., ¶40, App. 21.

But it was not suggestive of conspiracy, not if history teaches anything. In a traditionally unregulated industry with low barriers to entry, sparse competition among large firms dominating separate geographical segments of the market could very well signify illegal agreement, but here we have an obvious alternative explanation. In the decade preceding the 1996 Act and well before that, monopoly was the norm in telecommunications, not the exception. ... The ILECs were born in that world, doubtless liked the world the way it was, and surely knew the adage about him who lives by the sword. Hence, a natural explanation for the noncompetition alleged is that the former Government-sanctioned monopolists were sitting tight, expecting their neighbors to do the same thing.

 In fact, the complaint itself gives reasons to believe that the ILECs would see their best interests in keeping to their old turf. Although the complaint says generally that the ILECs passed up “especially attractive business opportunit[ies]” by declining to compete as CLECs against other ILECs, Complaint ¶40, App. 21, it does not allege that competition as CLECs was potentially any more lucrative than other opportunities being pursued by the ILECs during the same period and the complaint is replete with indications that any CLEC faced nearly insurmountable barriers to profitability owing to the ILECs’ flagrant resistance to the network sharing requirements of the 1996 Act, id., ¶47; App. 23–26. Not only that, but even without a monopolistic tradition and the peculiar difficulty of mandating shared networks, “[f]irms do not expand without limit and none of them enters every market that an outside observer might regard as profitable, or even a small portion of such markets.” Areeda & Hovenkamp ¶307d, at 155 (Supp. 2006) (commenting on the case at bar). The upshot is that Congress may have expected some ILECs to become CLECs in the legacy territories of other ILECs, but the disappointment does not make conspiracy plausible. We agree with the District Court’s assessment that antitrust conspiracy was not suggested by the facts adduced under either theory of the complaint, which thus fails to state a valid §1 claim.

Is the above economic analysis correct? We will never know -- even economists will never know -- since this economic theory was codified as law without anyone reviewing the empirical data, because the Supreme Court dismissed the case prior to any discovery.

Twombly is not some outlier case hurriedly drafted by an overworked trial judge. It is the thoughtfully considered, yet wholly uninformed, product of the highest court in the land.

That's the problem with law and economics: it creates the illusion of judicial competence to interpret and apply economic theories to individual cases. Such is particularly problematic these days because economics is in a state of intellectual collapse and is plagued by conflicts of interest, making it particularly ripe for misuse and abuse in other fields, like the law.

Now that Posner has seen the light and become a Keynesian, will he recognize the criticisms of law and economics and become a legal realist?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Walter Olson at Point of Law refers us to a proposal by a Democratic legislator in Maryland:

Primary-care providers who practice at federally qualified health centers do not need to purchase medical malpractice insurance. Why? The government promises to cover any claims against them under the Federal Tort Claims Act. If a patient has a successful malpractice case against the health center provider, the government becomes the insurer and agrees to pay the claim.

The national health reform debate should include a proposal to expand Federal Tort Claims Act coverage to all primary care providers, regardless of where they practice, and to certain specialists (such as obstetricians) where access to care is threatened. Doing so would have multiple benefits: Doctors, nurse practitioners and other primary care providers would be freed from the burdens of finding and paying for costly malpractice insurance; future medical students would have an incentive to choose primary care, addressing a critical shortage; and we would finally begin to bend the "cost curve" in health care.

A number of states, including Pennsylvania, already have state-administered medical malpractice insurance. In Pennsylvania,

32. What is Mcare?

“Mcare” stands for the Medical Care Availability and Reduction of Error Fund. It was created under Act 13 of 2002 and is the successor to the Medical Professional Liability Catastrophe Loss Fund, better known as the “CAT Fund.”

33. How does Mcare work?

Currently, Pennsylvania law requires physicians to carry a minimum of $1 million of medical malpractice coverage per incident, and physicians must have this coverage in order to be licensed. The first $500,000 of medical professional liability coverage per incident, which is called the basic or primary insurance layer, is obtained through the private insurance market. The second $500,000 of coverage per incident is provided by the state-administered Mcare Fund. Hospitals must also maintain medical malpractice coverage and their required amounts are higher -- $1 million worth of coverage for each incident and $4 million total coverage per year.

The fund is paid for primarily by a $.25 tax on every pack of cigarettes sold in Pennsylvania. Right now, the fund has a whopping $414 million surplus. All though the fund says that the surplus was caused by "the improvement in the medical malpractice climate in Pennsylvania," that's not the whole story.

Government-administered casualty insurance programs run the gambit from fair and equitable, like the September 11 fund administered by Kenneth Feinberg, to hostile and vexatious, like the Pennsylvania Property and Casualty Insurance Guaranty Association (intended to cover insurance claims against insurers that have become insolvent), which has been reprimanded by the Pennsylvania Supreme Court for its "slash and burn approach to protecting PPCIGA’s assets."

Pennsylvania's MCARE fund sits somewhere in the middle, and is not without its faults. Let me give you an example.

Not too long ago, I attended a court-ordered settlement conference in a medical malpractice action brought against two physicians and a hospital. The case was quite serious, with seven-figure damages, the absence of any good explanation for why the defendants did what they did, and highly damaging testimony by another physician at the hospital who had recognized the problem in a timely manner and yet had their recommendations for emergency treatment overruled.

The federal judge hearing the case (we were in federal court because the plaintiffs did not live in Pennsylvania) ordered the parties come to the conference with authority from the insurance carriers to settle. Such naturally included MCARE, which often ends up matching the contributions of the physicians and/or hospitals in a suit.

At the settlement conference one physician showed up ready to tender policy limits. The other physician and the hospital showed up with substantial authority and a willingness to negotiate.

MCARE sent a representative with little knowledge of the case and no authority to even begin negotiations, much less offer money. Such was, of course, a blatant violation of the court's order requiring the insurance carriers appear with authorization.

The judge was not amused, and so requested the MCARE representative phone home until they reached someone who could authorize a settlement.

The representative's efforts failed; not only did the representative not have any authority, but they couldn't find anyone who did. Such would have been a typical example of settlement-conference rope-a-dope but for the authorization phrase in the court's order. After the representative couldn't find anyone, the judge started making the calls, until they found the highest-ranking officer who was available, who they calmly informed was in violation of a federal court order, and as such should prepare for a visit by U.S. Marshals.

After that, MCARE changed its tune, and we settled the case by the end of the day. Like I said: MCARE is somewhere in the middle. Had it been PP&CIGA, I wouldn't have been surprised if they just dared the judge to send the Marshals out.

All of which is to say, it's not crazy to think that the government can run a liability insurance company, but the devil is in the details (Feinberg wrote a book about the difficulties of evaluating damages in 9/11 Fund), because government-administered casualty insurance programs have the same institutional incentives to thwart claimants, but don't have the same disincentives (such as the potential for bad faith lawsuits) against dilatory and obdurate conduct.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

In a stunning display of judicial activism, two conservative judges on the United States Court of Appeals for the District of Columbia re-wrote several recent Department of Defense regulations, a sixty-year-old Act of Congress, a basic principle of federalism upheld by dozens of Supreme Court opinions, and millenia of common law to dismiss the Saleh v. Titan Corporation and Ibrahim v. Titan Corporation lawsuits brought by more than a dozen Iraqis who "were beaten, electrocuted, raped, subjected to attacks by dogs, and otherwise abused by private contractors working as interpreters and interrogators at Abu Ghraib prison." Dissent op., p.1. The United States was not a defendant, nor were the military officers. The lawsuit was solely against the private contractors.

You already know the "allegations" -- you've probably already seen much of the evidence. There's no doubt what happened. It was "abhorrent" and "[doesn't] represent America” according to President Bush. Secretary Rumsfeld assured “[t]he people of the Middle East . . . that we will investigate fully, that we will find out the truth . . . and [that] justice will be served.” Dissent op., p. 2. Ilham Nassir Ibrahim isn't around for justice; he was beaten to death while in captivity. His widow is one of the plaintiffs.

The prohibition on unauthorized violence, even against prisoners, is universal to civilization. Under the Code of Hammurabi, if a prisoner like Ibrahim died "from blows or maltreatment," the responsible party's son was put to death. These days, torture for fun and profit without even the pretense of government authorization violates a panolopy of laws, including the Torture Victim Protection Act, the Racketeer Influenced and Corrupt Organizations Act, numerous common law torts (assault and battery, wrongful death and survival, intentional infliction of emotional distress, and negligence), government contracting laws, and various international laws and agreements.

To cover their bases, the plaintiffs sued under all of them. Surely at least one such claim would survive under centuries-old Anglo-American legal maxim -- reaffirmed by the most important Supreme Court decision in our history -- that "where there is a legal right, there is also a legal remedy by suit or action at law whenever that right is invaded?"

The plaintiffs' claims were strengthened by the absence of any Executive or Congressional action to stop them, despite numerous claims by the private contractors that the federal government had a substantial interest in the outcome of the case. The Bush and Obama administrations both declined to intervene in the case. Congress for a half-century now has authorized dozens of military actions which included the use of private contractors without passing a single law granting them immunity from suit.

The only related Congressional Act -- the Federal Tort Claims Act -- expressly says it "does not include any contractor with the United States.”  In fact, the only recent relevant action by either the Executive or Legislative branches is a regulation from the Bush-era Department of Defense stating that, for performance-based service contracts, "contractors [are] accountable for the negligent or willful actions of their employees, officers, and subcontractors." Dissent op., p. 22. The DoD further explained that "“[i]nappropriate use of force could subject a contractor or its subcontractors or employees to prosecution or civil liability under the laws of the United States and the host nation.” Id at p. 21.

The Supreme Court, too, has made it quite clear that, when a government contractor breaches its agreement with the government and thereby causes a third party harm, that contractor is responsible for the harm. In Miree v. DeKalb County, 433 U. S. 25 (1977), the victims of an airplane crash sued a county airport because it "breached the FAA [flight permission] contracts by owning and maintaining a garbage dump adjacent to the airport, and that the cause of the crash was the ingestion of birds swarming from the dump into the jet engines of the aircraft." After reiterating (consistent with prior law) that "the issue of whether to displace state law on an issue such as this is primarily a decision for Congress" and noting "Congress has chosen not to do so in this case," the Supreme Court affirmed the victims' right to sue. Keep that "primarily a decision for Congress" concept, a basic principle of federalism recently upheld in Wyeth v. Levine, in mind -- we'll come back to it later.

Why, then were the Abu Ghraib cases dismissed? Judicial activism, plain and simple: having no act of Congress, no Executive decision (in fact, regulations to the contrary), and no applicable Supreme Court precedent to support their preferred policy outcome, two conservative judges invented an entirely new judicial doctrine.

The judges didn't say that, of course. They claimed to be applying existing law.

A bit of background is required to see why that's not true. Though Miree is the general rule for lawsuits brought by third parties injuried by government contractors who breach their contracts, an exception for government manufacturers who perform their contracts properly was created by Boyle v. United Technologies Corp., 487 U.S. 500 (1988), where a United States Marine helicopter copilot was killed when his CH-53D helicopter crashed off the coast of Virginia Beach and he drowned. His family brought a lawsuit against the manufacturer of the CH-53D, alleging that the helicopter was defective because escape hatch opened out instead of inward, and thus was impossible to open underwater.

The Supreme Court held the family could not recover against the manufacturer because that design had been specifically required by the government, and thus the federal procurement specification "preempted" any claims of negligence, rendering the contractor immune from suit for following those specifications. Make no mistake: as the Supreme Court later described Boyle, preemption and immunity for government contractors applies only in the "special circumstance" where the “government has directed a contractor to do the very thing that is the subject of the claim.”  Correctional Services Corp. v. Malesko, 534 U.S. 61, 74 n.6 (2001)(applying the old Miree rule)

It's a sensible rule, even though one not enacted by Congress (as Miree and long-standing law said it should be). But it's also a very limited rule: as Justice Scalia wrote for the Supreme Court, it applies where "the asserted basis of the contractor's liability (specifically, the duty to equip helicopters with the sort of escape-hatch mechanism petitioner claims was necessary) is precisely contrary to the duty imposed by the Government contract (the duty to manufacture and deliver helicopters with the sort of escape-hatch mechanism shown by the specifications)."

Note those words: "precisely contrary." Scalia even gave an example of where it would not apply, such as where a government merely purchased air-conditioning units without any requirement contrary to a specific safety feature. As Scalia wrote, "no one suggests that state law would generally be preempted" if someone injured by the lack of that safety feature filed a lawsuit. Of course, absolutely no one suggested that a government contractor who breached their contract would be immune. As Scalia wrote, "conflict there must be" between the federal contract requirements and the lawsuit.

Compare "precisely contrary" and "conflict there must be" to Abu Ghraib, where the contractors intentionally breached their contracts through criminal conduct. Such is even less a case for preemption and immunity than Miree, where the breach was negligent, and which was reaffirmed by Boyle. Yet, Boyle is what the conservative judges claimed they were applying:

Slip op., p 13.

Did you catch all of that? The conservative judges took a twenty-year-old Supreme Court case admittedly involving the "special circumstance" where a plaintiff sued alleging a government manufacturer should have done the exact opposite of what the government told them to do, then, by way of a federal statute that expressly says it does not apply to contractors (the FTCA), the conservative judges applied that "special circumstances" to immunitize every private contractor in any "battle-field" -- which Abu Ghraib certainly wasn't -- who tortures and kills people without even the pretense of governmental authority.

In order to do that, the conservative judges also ran roughshod over the millenia-old prohibition on abusing prisoners, the centuries-old maxim that every right has a remedy, decades of precedent holding that Congress -- not the Courts -- is responsible for creating immunities, and recent crystal-clear Department of Defense regulations affirming that private contractors remain responsible for their wrongful conduct.

Judicial activism at its finest. Read the opinion yourself, if you dare. I recommend you start with the fine dissent by Judge Garland.

Continue Reading...

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

Philip K. Howard, whose nonsense medical malpractice "health courts" idea I've panned before, is back pushing more hooey from two insurance and corporate front groups, Common Good and the Committee for Economic Development:

Because modern medicine is so complex, reliability almost certainly requires some kind of special court.  This country has a long history of such courts, such as bankruptcy courts, and it's hard to imagine an area of society in greater need of special judicial expertise than health-care.  That's why a broad coalition has come out for pilot projects--including AARP, the AMA, the American College of Obstetricians and Gynecologists, the Joint Commission on the Accreditation of Health-care Organizations, and many others

That's what the American people want as well.  Today, Common Good and the Committee for Economic Development released a survey that showed an astonishingly high 83 percent of voters want Congress to address reform of the medical malpractice system as part of any health-care reform plan.  Moreover, even though the survey found that most Americans generally favor jury trials, for health-care disputes they overwhelmingly support special health courts--an extraordinary 67 percent support a new court system for health-care.

83% of voters want Howard's brand of tort reform? That's certainly the impression you get from his article.

Read the actual survey. I dare you.

Here's the extraordinarily vague question they asked:

DO YOU AGREE OR DISAGREE WITH THIS STATEMENT: As part of any health care reform plan, Congress needs to change the medical malpractice system so that cases are resolved quicker, and more reliably, on behalf of those who are in the right.

Like that 83%, I, too, agree with that statement, as would every trial lawyer, consumer advocate, and patient I know. Our clients wait years just to have their cases heard in court, where they are subject to a variety of "unreliable" variables, including biased defense experts who invent "medicine" out of whole cloth. 

But it doesn't mean a thing about tort reform. It means the people generally want "to secure the just, speedy, and inexpensive determination of every action and proceeding," which nobody opposes.

Nice try; while you insurance companies are at it, perhaps you'd like to explain why you trust voters to decide health care policy issues but not sit on medical malpractice juries?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

As Ashby Jones at the WSJ Law Blog notes:

For all those who’ve made lists of cases to watch heading into the fall, may we kindly suggest adding the Google Books case, if you haven’t already.

The backstory: Manhattan judge Denny Chin is currently sitting on a settlement reached last year between the search engine giant and publishers that would allow Google to sell digital books online. (A hearing on the case is scheduled for Oct. 7.)

Since the settlement was announced, a chorus of objectors has emerged, many of whom have howled that, were the deal allowed to go forward, Google would be allowed a near-monopoly on the publication of out-of-print books and other titles.

You can read the Google Books Settlement press release and proposed settlement here, where I casually described it as "good news for everyone," largely on the assumption that the Author's Guild had reached a settlement that would both make orphan works more accessible and provide compensation for such use. Such was how the settlement was described.

But the settlement is much bigger than that. Walter Olson at Overlawyered rounds up some criticism:

One blogger turns thumbs down on Google Books settlement [Patrick at Popehat] “Laundering orphan works legislation through a class action lawsuit”? [James Grimmelmann, ACS Blog via Mass Tort Lit] Much more: Lynn Chu/Writer’s Reps (who, I should note, has represented my literary interests on matters unrelated to this); WSJ Law Blog; Pasquale/ConcurOp.

The objections are worth considering. Principally, the objection is, as Chu writes,

The Google Book Settlement far exceeds any mere litigation settlement. Settlement is about damages for specific, past harms. This, by contrast, is a business proposal. The plaintiffs' claim was about the harm from Google’s book copying before January 5, 2009. After four years of self-serving business planning, what the parties now place before the court is no “settlement” of this claim at all, but a 335 page publishing and union contract—a proposal for a business venture they wish to present to the class.

Google, although generally a good corporate citizen, has often been cavalier about the rights and interests of individuals, particularly with regard to privacy and copyright, which, like the book settlement, affect the ability of individuals to control the content they produce. As such, there is reason to be suspicious.

One issue, however, seems to be missing from the debate so far: a general principle of governance is that, in the absence of regulation, social policy issues will be determined by litigation.

It is the second half of 2009.  He have affordable technology to unlock much of the collective wisdom of humanity and make it immediately accessible anywhere in the world. Indeed, we even have a well-regarded company ready and willing to do it for free.

That is not a mere business proposal. That is a social policy issue of considerable importance, one will may affect us for generations to come, particularly if, as academics have warned, the inaccurate metadata used by Google Books represents a "train wreck" for scholars. It should be the subject of legislative and executive attention; that is why we have representative government in the first place, to assess and to act upon (or intelligently decide not to act upon) social policy issues.

But it is not the subject of much legislative or executive attention, likely because our intellectual property regime is captive to a handful of corporations that believe they can and should control the bulk of culture forever. They like how things are going for them. They're not going to rock the boat over mere books; indeed, they probably like seeing Google centralize control over publishing the way the RIAA and MPAA have centralized control over music and film.

One consequence of this laissez-faire approach by the government is, as we see in the Google Books settlement, creation of "policy" by the judicial branch by way of litigation. Litigation, however, is particularly ill-suited to solve these problems, for the very reasons mentioned by the objectors, such as the lack of notice to, and participation by, millions of interested parties, including parties which will become interested in the future.

As such, we're stuck. An internationally-and-instantly-accessible, free-of-charge Library of Alexandria is, in theory, a wonderful idea. But so is reasonable protection for the rights of authors (and so is the assurance that appropriate metadata has been captured). And who will decide the wisdom of the new Library of Alexandria?

Judge Denny Chin. I have nothing against Judge Chin -- he may issue a ruling far superior to that which could have been produced by any Congressional subcommittee -- but I can assure you that the Framers of the Constitution had no intention of leaving such matters to him alone.

[UPDATE: Ask, and ye shall receive. The House of Representatives' Committee on the Judiciary is holding a hearing entitled, "Competition and Commerce in Digital Books." Hopefully, prepared remarks will be available on the site soon.]

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In recognition of the extraordinary circumstances, the Supreme Court has agreed to release the audio from the Citizens United v. Federal Election Commission argument soon after it is completed. It will be worth a listen, for the hearing is not only a highly unusual four-way argument involving the brand-new Solicitor General, two former Solicitors General and a legendary First Amendment lawyer:

The Court’s Day Call shows this sequence for the argument: Theodore B. Olson of Washington, arguing for Citizens United, 30 minutes [some of that time will be saved for rebuttal after all others have argued]; Floyd Abrams of New York, arguing for Senate Republican Leader Mitch McConnell of Kentucky, 10 minutes; Solicitor General Kagan, for the FEC, 30 minutes, and Seth P. Waxman of Washington (a former Solicitor General), for Sen. John McCain (R-Ariz.) and other present and former congressional sponsors of campaign finance legislation.

But also because it is a rare special session re-argument requested by the Court to address a decades-old principle of constitutional law that most people today take for granted:

The large stakes of this case were not really apparent when the Court first agreed to hear it last Nov. 14 — ten days after Americans had cast their ballots in the most recent federal elections.  At that time, Citizens United, a politically active group with strong conservative views, pressed the case primarily as a test of whether federal campaign finance restrictions applied to what it called “a broadcast feature-length documentary movie.”  There was some constitutional argument involved, but the case was primarily statutory in scope.  At the center of the case was Citizens United’s sharply critical portrayal of the presidential candidacy last year of Hillary Rodham Clinton.  The feature-length film was titled “Hillary: The Movie.”  The contents of that film have been all but obscured by the profound shift in the shape of the case that has since occurred.

After the Court heard oral argument on the case last March 24, and began debating in private how to decide it, some members of the Court — the public does not know who, or exactly why — apparently began viewing the case as a more fundamental inquiry into constitutional questions about corporations’ rights of political speech.   On the final day of the Term, the Court ordered the case reargued, and set the date for Sept. 9.  Lawyers were told to come back to debate whether the Court should overrule two of its most important precedents that had upheld curbs on campaign finance by corporations.

For more, read this SCOTUSBlog commentary, as well as the Wiki it links to, which has all the major briefs. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The print edition of September's Emergency Physicians Monthly features a debate between yours truly and WhiteCoat, EPM's in-house blogger on the subject, "Does Medical Malpractice Liability Impact Access To Emergency Care?"

I've posted the debate below, with footnotes added to show my sources. I believe WhiteCoat will update his with sources when he gets a chance; you can find his post here.

Opening Argument - Max Kennerly

 A 2006 American College of Surgeons report[1] concluded, "the single most important factor shaping the [emergency] surgical workforce today is declining reimbursement," a euphemism for cutthroat health insurer tactics. Last month, Bayonne Hospital sued Horizon Blue Cross Blue Shield for a parade of horribles, such as calling patients, lying about their coverage, and instructing them to leave the ED prior to screening or stabilization.[2]

Against this backdrop, malpractice premiums are at a per-physician thirty-year low. Unbiased analysis of their effect, however, is in short supply. A.M. Best, which rates insurers' creditworthiness for banks, says premiums represent 0.45% of national health care expenditures[3; see also *]; Towers Perrin, an insurance consulting firm, says 1.5%.[4] Least credible is the American Hospital Association, which relies on the Lewin Group[5], part of Ingenix, a UnitedHealth subsidiary that recently agreed to a $400 million settlement for manufacturing phony fees data to short-change physicians.[6]

After a decade of declining premiums and claims payments in the 1990s, the stock market collapsed, prompting insurers to raise premiums rapidly. In 2003, the peak of the increases, the General Accounting Office surveyed five states with "reported malpractice-related problems" (including Nevada and Mississippi) and four without for the impact of liability on access to care[7]. The GAO found no impact in the latter and "scattered" reductions in the former by providers of ER surgical coverage and obstetricians, most of whom also faulted other "long-standing factors" like reimbursement.  The GAO concluded most reports were "unsubstantiated" and that malpractice liability "did not widely affect access to health care."

The same report found little evidence of "defensive medicine," criticizing a widely-cited Health & Human Services report (the source of that "$300 billion" figure) for its transparently flawed generalization from two narrow examples of elderly heart disease treatment. In 2004, the Congressional Budget Office followed up on the H&HS report[8], even using the same methods, yet "found no evidence that restrictions on tort liability reduce medical spending," deeming the evidence for defensive medicine "weak or inconclusive" and noting "some so-called defensive medicine may be motivated less by liability concerns than by the income it generates for physicians or by the positive (albeit small) benefits to patients."

Such did little to stop a wave of "tort reform" in many states, like capping noneconomic damages and eliminating joint and several liability. Several years later, we have control and experimental groups in our laboratory of democracy.

The 2009 American College of Emergency Physicians' Report Card on the State of Emergency Medicine[9] is a revelation: of the ten states with an "A" or "B" grade for their "medical liability environment" (the most hostile to patients), six had an "F" for "access to emergency care," one had a "D-," two had a "C-," and one had a "B-," together averaging below a "D-."  Mississippi and Nevada, too, took WhiteCoat's "tort reform" advice: years later, they have, respectively, a "C" and "C+" for liability and a "C-" and an "F" for access to care. Conversely, the nine states with an "F" for liability earned the only "A," had only one "F," and averaged a "C" for access to care, better than the national average of "D-."

But, tort reformers say, there are other factors. That's my point: the impact of malpractice liability on access to care is so small it appears positive because it is dwarfed by other factors such as Aetna, Cigna and WellPoint, all of whom the AMA recently sued[10] for also using the bogus Ingenix database, and the increase in uninsured or underinsured patients. The big change in the past generation has not been an increase in malpractice premiums or claims (both are at historic lows in inflation-adjusted dollars [see 1]) but an extraordinary decrease in reimbursement.

A 2003 AMA report[11] found physicians lost $4.2 billion in annual revenue providing unreimbursed emergency care; compare that loss in a single field to the $4.7 billion paid in 2008 to resolve all malpractice claims nationwide[see 1]. The same study said emergency physicians incurred an annual average of $138,300 in uncollectable fees, double the average insurance premium for specialists and nine times the average premium for primary care physicians. It seems an ounce of reimbursement is worth a pound of tort reform.

Counter Argument - WhiteCoat

Doctors fear malpractice liability. And why shouldn’t they? Last month a woman was awarded $60 million dollars after a cosmetic surgeon allegedly botched her thigh lift. Medical malpractice law firms proudly display news releases about their multimillion dollar malpractice verdicts against physicians.

Does malpractice liability affect access to medical care, though? Access to medical care is limited by two factors: Available providers and willing providers. The best vascular surgery program in the world can’t help you if there’s no surgeon available or if you’re 150 miles away when your aortic aneurysm ruptures. Similarly, an abundance of nearby neurosurgeons helps no one with a brain hemorrhage if none of those neurosurgeons is willing to perform brain surgery.

What factors affect whether a provider is available or willing to provide services? Money undoubtedly affects access to care. Even though patients with Medicaid ostensibly have a means to pay for their care, they often have difficulty finding a physician to treat them because payments do not cover the costs of providing care. In this case, physicians may be available, but they are unwilling to provide care for the proposed payment. Conversely, patients with commercial insurance don’t seem to have such problems.

Liability also affects access to care. At first glance, it is easy to discount that effect. How could something that amounts to only 1.5% of total healthcare expenditures affect a physician’s willingness to provide care? The answer is that direct liability costs are only a small piece of the puzzle. Fear of liability creates a tremendous ripple effect. No physician wants to be at the receiving end of the next $60 million verdict. Residents in high-risk fields cite malpractice costs as by far the largest reason for leaving one state in favor of another. More than half of hospitals in medical liability crisis states have difficulty recruiting physicians, resulting in less physician coverage for their EDs. A survey of some Nevada Ob/Gyns showed that 60% planned to drop obstetrical coverage due to malpractice premium increases. Similarly, many Mississippi Ob/Gyns have dropped obstetrical care due to malpractice liability, leaving some counties with no obstetrical care at all. Trauma centers in several states have temporarily closed due to malpractice issues.

Texas tort reform shows that liability reduction can increase access to healthcare. Since tort reform was passed in Texas six years ago, the number of applications for physician licenses has increased dramatically. The number of emergency physicians has increased in 76 Texas counties – many of which were considered “underserved” for emergency care before tort reform. The number of malpractice insurers in Texas increased from 4 to more than 30 and insurance premiums dropped more than 40%. One Texas health system was able to spend $100 million extra dollars helping poor patients. That money had previously been held in reserves for legal defense fees and insurance premiums.

Some might try to draw conclusions by comparing metrics on ACEP’s Report Card. Doing so does not take into account multiple other factors affecting each metric. We cannot directly compare better access to higher liability any more than we can directly compare better access to colder climate. After all, states that scored worst in “access to care” were exclusively in the South and West United States – which generally have warmer climates.

Finally, defensive medicine costs our system up to $300 billion each year. Eliminating defensive medicine could provide each one of the 46 million uninsured patients in the US with $6500 in health care. Unfortunately, there is little tolerance for errors or misdiagnosis in medicine. While no lawyer will ever admit an expectation that medical care should be perfect, I still haven’t found a lawyer who will give me an example of a heart attack, a ruptured appendix, or a leaking cerebral aneurysm that it is OK to misdiagnose. Instead, doctors perform one low-yield test after another to “prove” that every haystack really doesn’t have a needle in it.

I respect Max and I respect his opinions. It just seems ironic that some of the strongest supporters of the notion that we can “sue our way to better health care” are those who stand to benefit the most from trying to do so.

 

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

You might recall last week's post Hospital Sues Health Insurance Company For Cheating Patients Out of Emergency Care. The allegations were depressing and outrageous, nothing less than an insurance company intimidating patients into risking their own health and safety so that the insurer could cheat a hospital out of reimbursements.

This week it's time to look at the practice of "rescission," whereby the insurance company digs deep into ambiguous policy questionnaires to find any excuse to deny coverage after a large claim has been made.

Taunter Media has a detailed analysis everyone needs to understand when health insurers and their enablers say rescission is "rare," that it affects only one-half of one-percent of insureds:

Half of the insured population uses virtually no health care at all.  The 80th percentile uses only $3,000 (2002 dollars, adjust a bit up for today).  You have to hit the 95th percentile to get anywhere interesting, and even there you have only $11,487 in costs.  It’s the 99th percentile, the people with over $35,000 of medical costs, who represent fully 22% of the entire nation’s medical costs.  These people have chronic, expensive conditions.  They are, to use a technical term, sick.

* * *

If the top 5% is the absolute largest population for whom rescission would make sense [because the cost of care over time might substantially exceed premiums], the probability of having your policy canceled given that you have filed a claim is fully 10% (0.5% rescission/5.0% of the population).  If you take the LA Times estimate that $300mm was saved by abrogating 20,000 policies in California ($15,000/policy), you are somewhere in the 15% zone, depending on the convexity of the top section of population.  If, as I suspect, rescission is targeted toward the truly bankrupting cases – the top 1%, the folks with over $35,000 of annual claims who could never be profitable for the carrier – then the probability of having your policy torn up given a massively expensive condition is pushing 50%. One in two.  You have three times better odds playing Russian Roulette.

Of course rescission is targeted towards the most expensive claims; there's no point rescinding potentially profitable insureds, the point is to minimize payouts by the insurance company.

Every patient can be assured that, upon filing a major claim for chemotherapy or neurosurgery or the like, the insurance company will scour their medical records and application to find for any excuse to deny coverage.

The outrageous part is that half of these investigations of expensive claims result in rescission. Does anyone believe half of these people lied on their insurance forms? The insurance companies certainly don't, which is why the insurance companies refused Congress' suggestion they limit recission to cases of intentional fraud.

If you have health insurance, you have a 99% chance of never needing to worry about rescission because you won't end up costing the company much more than you pay in premiums.

But if you find yourself at any point in that 1% -- as hundreds of thousands of people in America will each year -- then your odds of actually having insurance when you need it are no better than a coin toss.

Patients on government-run Medicare or Medicaid need not worry about rescission.

Like I wrote before: keep these facts in mind next time someone tells you health care reform might involve "rationing." We've already got rationing, but right now it's done for profit, and done without any regard for your health or safety.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

[Apologies for the typo in the title -- unfortunately, I can't change it without damaging all the syndication links to the post. See also update below regarding the "downloading" and "sharing" distinction.]

Green Day's "Minority" is available for $0.99 on Amazon MP3.

Joel Tenenbaum will pay $22,500 for it (a total of $675,000 for 30 songs) because he downloaded and shared it through KaZaA, a peer-to-peer network.

Since Warner Music apparently didn't bother proving any actual damages beyond the $0.99 for Tenenbaum's personal use of the song, we must assume that $21,499.01 of the award is for punitive damages.*

Tenenbaum and other activists have argued such an award is unconstitutional. The issue is "unsettled," but doesn't look good for Tenenbaum: previously, in Eldred and Grokster, the Supreme Court bent over backwards for copyright owners by, respectively, nullifying a clause of the United States Constitution and inventing an entirely new federal common law cause of action for copyright holders.

If the Tenenbaum situation had been reversed -- if Warner Music had ripped off Tenenbaum by fraudulently selling him an MP3 then revoking his access to it, which Warner (through the RIAA) claims they can do -- then there would be no question on the limit of the punitive damages. As the Supreme Court held in State Farm v. Campbell:

Our jurisprudence and the principles it has now established demonstrate, however, that, in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process. In Has lip, in upholding a punitive damages award, we concluded that an award of more than four times the amount of compensatory damages might be close to the line of constitutional impropriety. 499 U. S., at 23-24. We cited that 4-to-1 ratio again in Gore. 517 U. S., at 581. The Court further referenced a long legislative history, dating back over 700 years and going forward to today, providing for sanctions of double, treble, or quadruple damages to deter and punish. Id., at 581, and n. 33. While these ratios are not binding, they are instructive. They demonstrate what should be obvious: Single-digit multipliers are more likely to comport with due process, while still achieving the State's goals of deterrence and retribution, than awards with ratios in range of 500 to 1, id., at 582, or, in this case, of 145 to 1.

(emphasis added)

The unconstitutional 145-to-1 verdict is but a tiny fraction of the 21,716-to-1 awarded against Tenenbaum. Tenenbaum's award is thus a no-brainer under existing due process / constitutional precedent: it's grossly excessive and unreasonable.

The only question is if we have one set of laws for lawsuits against big corporations and another set for lawsuits by big corporations.

Continue Reading...

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link

In today's Wall Street Journal:

Good news: The Pennsylvania Supreme Court has agreed to hear an unusual but important legal challenge in a case involving Governor Ed Rendell’s hiring of a contingency fee law firm to sue a drug manufacturer on behalf of the state.

The lawsuit—which we first wrote about in April—concerns Bailey Perrin & Bailey, a Houston law firm tapped by the Rendell administration to prosecute Janssen Phamaceuticals over the marketing of its antipsychotic drug Risperdal. When states lack the resources or expertise to bring certain suits, it’s not uncommon for them to seek help from private lawyers. ...

In agreeing to hear the challenge, the state Supreme Court said it will consider, among other things, “whether Bailey Perrin Bailey, LLP, should be disqualified because the due process guarantees of the United States and Pennsylvania Constitutions prohibit the Commonwealth from delegating the exercise of its sovereign powers to private counsel with a direct contingent financial interest in the outcome of the litigation.”

The WSJ makes a big deal out of donations the firm made to Governor Rendell's campaign while negotiating the contract. If there's an issue there, this appeal won't address it.

Drug & Device Law has a copy of the petition for review, which bizarrely claimed companies accused of ripping off taxpayers have a due process right to force the government to hire only lawyers who are "impartial."

Of course, everyone wants government officials to be "impartial." But once those impartial officials have made the decision to sue, common sense dictates they hire lawyers who will "act with commitment and dedication to the interests of the client and with zeal in advocacy upon the client’s behalf," as required by the Pennsylvania Rules of Professional Conduct.

The real issue is whether the Commonwealth may hire lawyers on the same terms as businesses and individuals do every day or if the Commonwealth is forced to use a particularly wasteful system invented by corporate lawyers that came to prominence in the 1970s (and is being rejected today) as a means of extracting greater profits from business clients by creating unnecessary work for recent law graduates.

You can guess what I think: the appeal is a blatant attempt to make litigation more expensive for the government, thereby making it harder for the government to sue companies when they cheat or injure taxpayers.

If there was pay-for-play, that's obviously illegal and unethical, but contingent fee litigation itself is a win-win for taxpayers, as it protects the public coffers (no fee if they lose), preserves state cash for other use (no billables to pay at the end of each month), and ensures the matter will be prosecuted in a prompt and efficient manner, rather than through the relentless fee churning that characterizes complex litigation billed by the hour.

Examples of waste by the hour aren't hard to find: the litigation (excluding trial) of a few trust documents at Princeton was reached $40 million for each side. The white collar criminal defense of an executive for accounting fraud was a "feeding frenzy" of $12 million. Compare that to the $0.00 that Pennsylvania taxpayers have paid so far for the prosecution of Commonwealth of Pennsylvania v. Janssen Pharmaceutica, Inc.

It should be noted that the "among other things" to be considered by the Pennsylvania Supreme Court are:

A. Whether 71 P.S. § 732-103 dictates that Petitioner lacks standing to
seek disqualification of Bailey Perrin Bailey, LLP on the basis of alleged
violations of constitutional law.

B. Whether the Attorneys Act, 71 P.S. § 732-101 et seq., authorizes the Office
of General Counsel’s contingent fee arrangement with Bailey Perrin Bailey, LLP.

C. Whether Bailey Perrin Bailey, LLP, should be disqualified because the
General Assembly did not authorize the contingent fee arrangement between
the Office of General Counsel and the law firm, such that the agreement
violates Article III, § 24 and the separation of powers mandate of the
Pennsylvania Constitution.

The first question is a substantial one. 71 P.S. § 732-103 reads in full:

No party to an action, other than a Commonwealth agency including the Departments of Auditor General and State Treasury and the Public Utility Commission, shall have standing to question the authority of the legal representation of the agency.

Such would appear to be a clear indication by the General Assembly that choice of counsel is a political question.

Nonetheless, an interesting and important case to watch. Will Pennsylvania taxpayers be required to open their wallets again?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The WSJ Law Blog spots an interesting development:

In June, as we blogged here, a San Francisco federal judge ruled that convicted terrorist Jose Padilla can sue Yoo, the Bush administration lawyer who authored some of the now famous war-on-terror memos, including one that opined the military can use “any means necessary” to hold suspected terrorists. ...

Yoo has now turned for help to Miguel Estrada, the powerhouse Gibson Dunn appellate litigator who was nominated by Bush to serve on the D.C. Circuit Court of Appeals. Estrada’s nomination was scuttled by Democrats, a point repeatedly harped on by Republican senators in the Sotomayor confirmation hearings. (Okay, we can only turn away from Sonia for so long.)

The Justice Department had been defending Yoo in the Padilla suit, but DOJ has agreed to foot the bill for Estrada’s services, according to an article today in The Recorder. Conflicts of interest are behind the change in counsel, ethics experts say.

“The department so far has been able to provide direct representation in this case by arguing that the lawsuit should be dismissed for qualified immunity reasons, and that remains the department’s position,” a Justice spokeswoman told the Recorder. “But as this case moves forward, the defendant deserves the opportunity to retain defense counsel that can make any and all arguments available on his behalf.”

I've discussed qualified immunity before on this blog. In short, as described by Harlow v. Fitzgerald, 457 U.S. 800 (1982):

government officials performing discretionary functions[] generally are shielded from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.

For more on the specific ruling in the case against Yoo, see this post by Jonathan Turley. Up until now, the Department of Justice (under Obama) had conducted Yoo's defense, and had angered civil libertarians by requesting the court dismiss Padilla's case on several grounds, including qualified immunity.

It's typical for federal government officials to be represented by the U.S. Attorneys and the Department of Justice, since the United States indemnifies its officials for damages awarded against them for conduct taken as part of their office, including for constitutional violations.

A "conflict of interest" isn't the right way to describe what happened here. The Department of Justice and Yoo have the same interest, which is to dismiss the case promptly or to minimize their liability.

What really happened here is revealed by the bolded quote above. It appears Yoo is going to make arguments on his behalf that the Department of Justice itself is unwilling to support.

That's good news for civil libertarians. Even though the Department of Justice initially sought to dismiss the suit on standard "qualified immunity" grounds, it appears the Department of Justice will not support Yoo's actual constitutional arguments, like how the President is "free from the constraints" of the Fourth Amendment (and the rest of the Bill of Rights) even when ordering domestic military action. (If the Department of Justice agreed, there would be no need to withdraw.)

Indeed, the Department of Justice might end up admitting that Yoo's opinions were erroneous and did not accurately state the law. Were I Padilla's lawyers, the first discovery I'd send would be a request for admission to the the United States establishing that.

A important case to watch, and perhaps the only vehicle by which we'll have a legal accounting of what really happened behind closed doors in the Bush years.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

The Conglomerate catches a political bait-and-switch afoot in the TARP regulations:

After the hullabaloo about the $440,000 AIG retreat in October 2008, and news in January of John Thain's $1.2 million office renovations, and the Citigroup plane fiasco, the luxury expenditures section of ARRA was inevitable.  The Act requires that the boards of TARP recipients adopt "a companywide policy regarding excessive or luxury expenditures ..." . . .

Buried in Treasury's June 15 interim final rule on TARP Standards for Compensation and Corporate Governance is a requirement that the boards of TARP recipients by September 19th "adopt an excessive or luxury expenditures policy, provide this policy to Treasury and its primary regulatory agency, and post the text of this policy on its Internet website, if the TARP recipient maintains a company website.  After adoption of the policy, the TARP recipient must maintain the policy during the remaining TARP period." 

As the executive summary explains, Sarbanes-Oxley provided a similar method of disclosure of codes of ethics under Section 406.  this doesn't work.  Letting companies make up their own rules and then disclose when they break them is a bad idea.  Clearly the incentive for the company is to make the policy as weak as possible.  

Note that these regulations, unlike Section 406, don't require disclosure of any waivers granted from the policy, just the policy itself and any amendments to it. 

It's just part of the modern Orwellian trend among corporations in which policies are given names describing them as the exact opposite of what they really are.

"Document retention" policies usually say little about retaining documents and a whole lot about destroying them. "Employee leave" and "sexual harassment" policies typically create Byzantine procedures for taking leave and filing complaints designed to provide a basis for terminating the employee or ignoring the harassment.

No surprise to see the government getting in on the act.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Via Overlawyered, the NYTimes says:

In closed-door talks, Mr. Obama has been making the case that reducing malpractice lawsuits — a goal of many doctors and Republicans — can help drive down health care costs, and should be considered as part of any health care overhaul, according to lawmakers of both parties, as well as A.M.A. officials.

It is a position that could hurt Mr. Obama with the left wing of his party and with trial lawyers who are major donors to Democratic campaigns. But one Democrat close to the president said Mr. Obama, who wants health legislation to have broad support, views addressing medical liability issues as a “credibility builder” — in effect, a bargaining chip that might keep doctors and, more important, Republicans, at the negotiating table.

The story (and apparently Obama) is exceedingly light on details, but suggests:

Mr. Obama has not endorsed capping malpractice jury awards, as did his predecessor, President George W. Bush. But as a senator, he advanced legislation aimed at reducing malpractice suits. And Dr. J. James Rohack, the incoming president of the medical association, said Mr. Obama told him at a meeting last month that he was open to offering some liability protection to doctors who follow standard guidelines for medical practice.

...

And any effort to restrict patients’ legal rights to sue will face tough opposition from the American Association for Justice, which represents trial lawyers and has met with Nancy-Ann DeParle, Mr. Obama’s point person for health reform, to express its concerns. Linda Lipsen, the association’s chief lobbyist, said practice guidelines were established by unregulated medical societies and “should not be conclusive” in a court of law.

What's that mean? I don't really know -- I suppose they want to make guidelines from the American College of Obstetricians and Gynecologists and the American College of Emergency Physicians have the force of law, or they want to incorporate them as a presumption of meeting the standard of care.

Without more detail, it's hard to comment on the effects of it. Yet, incorporating these guidelines could make the medical malpractice process even more litigious, since lawyers will argue over whether the guidelines applied and whether the doctor followed them.

With regard to the idea of incorporating them, as I wrote before discussing Comparative Effectiveness Research ("CER"), also pushed by Obama:

Put simply, CER will cut both ways. A doctor who does not utilize a CER-approved treatment will have a lot of explaining to do down the road if that treatment would have helped. Conversely, a plaintiff alleging a doctor should have used a CER-disapproved treatment will have a hard time convincing a jury that the doctor should have overridden the billion-dollar research.

From a liability / malpractice standpoint, doctors who abide by the standard of care should welcome the CER with open arms, as it will give them a powerful tool to wield when a plaintiff's lawyer later asks "why didn't you do _____?" They can quite honestly answer "because the CER says it's not effective."

That may apply the same to "College" guidelines. One problem, as mentioned above, is that the guidelines aren't necessarily set based on empirical data, and they're not reviewed by outside sources prior to publication. 

We'll have to wait and see for more information.

[UPDATE: Obama's speech to the American Medical Association included:

I recognize that it will be hard to make some of these changes if doctors feel like they are constantly looking over their shoulder for fear of lawsuits. Some doctors may feel the need to order more tests and treatments to avoid being legally vulnerable. That's a real issue. And while I'm not advocating caps on malpractice awards -- which I believe can be unfair to people who've been wrongfully harmed -- I do think we need to explore a range of ideas about how to put patient safety first, let doctors focus on practicing medicine, and encourage broader use of evidence-based guidelines. That's how we can scale back the excessive defensive medicine reinforcing our current system of more treatment rather than better care.

So he might be talking about CER after all. If so, I think that's a good thing for everyone. One problem for both physicians and plaintiffs is that, in many areas, the "standard of care" is frustratingly unclear. If CER can be used to create those standards, all the better.]

 

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

Following up on yesterday’s discussion of an emergency physician’s critique of medical malpractice reform in Pennsylvania, in which the physician claimed, without any evidence, that the number of defendants in malpractice cases has risen recently, negating many of the benefits of malpractice reform.

Put simply, he missed the boat. The number of defendants does not have much to do with the premiums by healthcare providers. It is just not an issue.

Three of the primary reforms of the Medical Care Availability and Reduction of Error (MCARE) Act of March 20, 2002, however, did have a substantial impact on medical malpractice in Pennsylvania.

Before we get to those though, let me reference another post of mine about contingent fee lawyers as venture capitalists. Medical malpractice plaintiffs are almost exclusively represented on a contingent fee basis, with the plaintiff’s law firm advancing all costs in the matter and not collecting any fee unless the injured patient recovers through a settlement or verdict. If the injured patient does recover, the firm will have its costs reimbursed from that recovery and will take a portion of the recovery as its attorneys fees.

All of which is to say that plaintiffs' attorneys already have a big financial incentive to bring only meritorious cases, since they don’t get paid and don’t get their expenses reimbursed if they lose.

Three of the major changes by the MCARE Act were:

1. tightening of requirements for qualifying expert physician witnesses,
2. requiring plaintiffs file a “certificate of merit” signed by a qualified physician prior to filing suit, and
3. requiring plaintiffs bring suit in the venue in which the malpractice occurred.

The expert witness qualifications and certificate of merit both have the same effect on medical malpractice cases: they make it a lot more expensive to file, litigate and try cases.

Expert fees are by far the largest cost in medical malpractice cases. An initial review by a non-specialist physician for purposes of obtaining a certificate of merit will cost a thousand dollars at least, often more, while a full review and expert report (not including trial testimony) will cost at least $10,000, usually much more. In complicated cases involving specialist physicians or multiple experts, expert fees alone will easily exceed $50,000 and can, in a single malpractice case, exceed $200,000.

The certificate of merit thus operates as a tax: if you want to file a medical malpractice suit, you will have to spend several thousand dollars before you can even start the process. The expert qualifications, in turn, removes from the potential pool a number of less qualified – and thus less expensive – experts.

For a well capitalized firm like The Beasley Firm with multiple established medical malpractice attorneys and a focus on trial, the effect of these two provisions is minor. Even without MCARE, all of our cases are reviewed extensively prior to agreeing to representation and filing suit, including through the use of outside expert physicians as consultants. Moreover, as a matter of pure trial advocacy, we seek out highly qualified experts, more than qualified under MCARE’s guidelines, because they are more effective in litigation and more credible at trial.

But that’s not the case for everyone, and the effect of the two expert provisions was to consolidate the medical malpractice market, with most solo and generalized personal injury attorneys leaving it altogether and referring their cases to more established and specialized attorneys and law firms.

The two expert provisions are probably the biggest reason for the drop in number of filings: now the bulk of cases are referred to and reviewed by firms better equipped to assess the viability of the claims, resulting in more rejections of weaker cases pre-suit.

Although I believe the MCARE expert requirements can be a bit tight in very specialized areas where the number of "qualified" experts across the country is in the double digits, it’s hard for me to complain about a procedural change that shuttles business to my firm while not substantially increasing costs (for the same reasons, you should probably take what I say with a grain of salt, as I am not unbiased here).

With regard to the venue restriction, normally a plaintiff (in any case) files in the county in which the “transaction or occurrence” happened. There are, however, numerous exceptions to this rule, leading to a concern about plaintiffs “gaming” the system by, for example, adding physicians located in plaintiff-friendly counties (like Philadelphia and Allegheny counties) for purposes of establishing venue then later dismissing them.

With the institution of the certificate of merit rules, the possibility of “gaming” was significantly, but not entirely, reduced, as it became much harder to simply add a defendant-physician to a lawsuit.

Although the venue provision likely only had a moderate effect on the number of filings, it likely had a substantial effect on the size of payouts made for settlements or verdicts. The reason for that is simple: by and large, suburban and rural juries award less to plaintiffs than urban juries. Moreover, regardless of the extent of such a phenomena, defense and plaintiffs' lawyers believe it to be the case, and so respectively offer and accept lower settlements.

If you are of the “tort reform” mindset, that is a good thing, since you presume that juries in general award too much.

I do not think I will change anyone’s mind on this subject, but I do want to raise the point that suburban and rural juries view medical malpractice liability in a different context from urban juries. The former are generally subjected to far more propaganda from the insurance lobby, a relentless assault of horror stories about hospitals closing and doctors leaving and greedy trial lawyers playing the jury slot machine on the road to jackpot justice. Suburban and rural jurors also typically have access to one, and only one, hospital, and are prohibited by law from knowing the amount of their verdict which will be covered by insurance rather than the hospital itself.

As such, I submit to you that plaintiffs in suburban and rural venues are not given a fair chance, as suburban and rural jurors are led to believe that they are in essence entering awards against themselves, rather than an insurance company.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

WhiteCoat (and later Walter Olson) directed me to this op-ed in the Pittsburgh Post Gazette by Gerald F. O’Malley, a Philadelphia-based emergency physician:

... Governor Rendell recently declared that Pennsylvania's malpractice lawsuit abuse crisis is over. Nothing could be further from the truth.

Rendell's announcement comes on the heels of the Pennsylvania Supreme Court's annual Malpractice Filings Report, but the court's numbers tell only a part of the story.

The Court reports only the number of cases filed -- not the number of litigants within those cases.

Most cases of alleged medical malpractice include multiple defendants as personal injury lawyers typically sue everyone whose name appears anywhere on the patients' chart.

...

The Court reports a statewide decrease of 41 percent in malpractice filings in 2008 -- but that is comparing the 2008 case filings against a "baseline" of cases filed in 2000-02. The meaningful statistics show 2008's numbers are only a 3 percent decrease from cases filed in 2007. The 3 percent number becomes irrelevant when the multiple litigants within each case are factored in.

You can read the Pennsylvania Supreme Court’s Annual Malpractice Report (PDF) and Governor Rendell’s press release.

Dr. O'Malley's argument is a complete mess.

First, his column references no numbers, figures or data at all, not even to support his primary argument that the number of defendants in medical malpractice cases has increased. I do not even know where he could find such data, as the number of defendants is not recorded by the Supreme Court's medical malpractice statistics.

Second, the number of defendants in a case has little to do with the decisions of the plaintiff’s attorney or the plaintiff. By law, before a patient in Pennsylvania can sue any healthcare provider, their attorney must obtain a certificate of merit from a duly licensed and qualified physician with regard to each defendant; doctors and hospitals can't just be added willy-nilly. 

Just as importantly, as a practical matter, plaintiff's lawyers must add every health care provider who could be responsible -- if they do not, then the defense lawyer for the health care provider most responsible for the harm will inevitably start pointing their fingers at everyone else. In such a situation, the "additional defendant" is in the case by name only, and is dismissed as soon as the "real" defendant is willing to stipulate that they will not point the finger at them.

Third, the number of defendants in Pennsylvania malpractice cases does not play a significant role in increasing or decreasing the insurance premiums paid by doctors and hospitals. Adding a defendant does nothing to increase plaintiff's damages (and thus the size of the settlement or verdict), and it generally makes it harder to prove liability and win the case, because it makes the whole trial more complicated. 

In short, Dr. O’Malley is making an issue out of nothing. Indeed, Dr. O’Malley practically admits as much in his article by not recommending anything that could be done to fix this “problem.” His argument is thus as meaningless as it is baseless.

But let’s talk about some of the facts here.

First, the most comprehensive study done on medical malpractice verdicts by a team of researchers at Harvard Medical School found that three-quarters of all plaintiffs who won had indeed suffered injury to due medical malpractice, and that one-quarter of those plaintiffs who lost had also suffered medical malpractice.

Second, the malpractice filings report shows that more than 80% of plaintiffs in Pennsylvania lose at trial.

Keep those two facts in mind: more than 4 out of 5 plaintiffs lose, and those that do win should win.

Yet, Dr. O’Malley notes:

Since May 2002, when Act 13 was passed requiring physicians to self report when sued for malpractice, more than half of the state's 25,000 doctors have been sued. The Pennsylvania Medical Board, an agency of state government, found that only a fraction of all malpractice cases merit any action which is an indication that rampant medical liability lawsuit abuse exists in Pennsylvania.

I don’t know the polite way to say this: Dr. O’Malley has no idea what he is talking about.

You can read the Pennsylvania Medical Board’s mission statement yourself. The Board “regulates the practice of medical through the licensure, registration and certification of members of the medical profession in the Commonwealth of Pennsylvania.” It has no interest in, and makes no findings with regard to, medical malpractice.

Indeed, the only time the board and medical malpractice liability intersect is when, by way of malpractice, a doctor shows himself to be “an immediate danger to the public health and safety.” You can read some of the recent disciplinary actions here. Other than "immediate danger," the board generally only takes "action" when a doctor, for example, is “convicted of a felony in a federal court” or “failed to report information regarding disciplinary action by a healthcare licensing authority of another state.”

But maybe the Board of Medicine should become more involved in medical malpractice. Here's a critical finding from the most recent National Practitioner Data Bank report:

Physicians with at least two Malpractice Payment Reports were responsible for the majority of Malpractice Payment Reports for physicians: Approximately 33.2 percent of the 146,309 physicians with Malpractice Payment Reports had 2 or more such reports. These 48,566 physicians had a total of 138,199 Malpractice Payment Reports. This was 58.6 percent of the 235,942 Malpractice Payment Reports in the NPDB for physicians.

A few physicians were responsible for a large proportion of malpractice payment dollars paid: The 1 percent of physicians with the largest total payments in the NPDB were responsible for about 11.7 percent of all the money paid for physicians in malpractice judgments or settlements reported to the NPDB. The 5 percent of physicians with the largest total payments in the NPDB were responsible for just under a third (31.4 percent) of the total dollars paid for physicians. Eleven percent (11.6 percent) of physicians with at least one malpractice payment were responsible for half of all malpractice dollars paid from September 1, 1990 through December 31, 2006.

In Pennsylvania, generally half of the payments from the CAT / MCARE fund (which uses taxpayer funds to provide additional malpractice insurance) are made to settle claims against just 2% of doctors.

Fact is, there is a small minority of doctors who are simply terrible at their jobs, just as there are a small number of incompetent lawyers, bank tellers, teachers, cops, engineers, office managers, and every other occupation. In most occupations, though, these people are weeded out over time, but in the distorted marketplace of medical malpractice insurance, the taxpayer foots the bill to keep these bad doctors in practice. That's why physician insurance premiums are so high: to pay for the claims brought against a tiny minority of incompetent doctors who repeatedly injured patients.

Truth is, filings and payouts in medical malpractice in Pennsylvania have declined dramatically, and you have to go back 10 years to find out the last time so little was paid to resolve claims. Malpractice reform is "working" even under the health care providers' and insurance companies' definition: far less is being paid to injured patients than was in the past, even as the population grows.

So how did that happen? We will talk about that in the next post, going into the three major changes made by MCARE: tightening the rules for qualifying experts, restricting the venue in which plaintiffs can file suit and requiring certificates of merit prior to filing suit.

• Email This
• Print
• Comments (2)
• Trackbacks (1)
• Share Link

Tim Ferriss, author of The 4-Hour Workweek, has been covering Soticism lately, most recently with a post on Seneca's "On The Shortness Of Life," including this passage:

Vices beset us and surround us on every side, and they do not permit us to rise anew and lift up our eyes for the discernment of truth, but they keep us down when once they have overwhelmed us and we are chained to lust. Their victims are never allowed to return to their true selves; if ever they chance to find some release, like the waters of the deep sea which continue to heave even after the storm is past, they are tossed about, and no rest from their lusts abides.

Think you that I am speaking of the wretches whose evils are admitted? Look at those whose prosperity men flock to behold; they are smothered by their blessings. To how many are riches a burden! From how many do eloquence and the daily straining to display their powers draw forth blood! How many are pale from constant pleasures! To how many does the throng of clients that crowd about them leave no freedom! In short, run through the list of all these men from the lowest to the highest—this man desires an advocate, this one answers the call, that one is on trial, that one defends him, that one gives sentence; no one asserts his claim to himself, everyone is wasted for the sake of another.

Ask about the men whose names are known by heart, and you will see that these are the marks that distinguish them: A cultivates B and B cultivates C; no one is his own master. And then certain men show the most senseless indignation—they complain of the insolence of their superiors, because they were too busy to see them when they wished an audience! But can anyone have the hardihood to complain of the pride of another when he himself has no time to attend to himself?

After all, no matter who you are, the great man does sometimes look toward you even if his face is insolent, he does sometimes condescend to listen to your words, he permits you to appear at his side; but you never deign to look upon yourself, to give ear to yourself. There is no reason, therefore, to count anyone in debt for such services, seeing that, when you performed them, you had no wish for another’s company, but could not endure your own.

What Seneca would think of Above The Law's 2008 survey, in which more than half of ATL's BigLaw associate readers broke 2000 billable hours?

The Attorney Work / Life Balance Calculator shows that, assuming two weeks vacation, eleven holidays, five personal days, a half-hour commute and an unbillable hour a day (lunch, administration, water cooler, etc), then those associates are spending at least the 10.5 best hours of every workday in the office, car, courtroom, or conference room.

Throw in 6.7 hours of sleep every workday, a quarter-hour getting ready before and a quarter-hour decompressing after, a half-hour finding or making dinner, and they're left with, at the most generous, 5.8 tired hours a weekday to themselves, plus the weekends, unless the partner calls them in.

Maybe that's enough. Maybe they like what they do and where they're going, they owe no apologies for that. I like what I do. So do many lawyers.

But life's too short to do anything because you "should."

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

The WSJ Law Blog points us to an Op-Ed in the NYTimes:

Restoring a foundation of trust requires a new system of medical justice. Medical cases are now decided jury by jury, without consistent application of medical standards. According to a 2006 study in the New England Journal of Medicine, around 25 percent of cases where there was no identifiable error resulted in malpractice payments. Nor is the system effective for injured patients — according to the same study, 54 cents of every dollar paid in malpractice cases goes to administrative expenses like lawyers, experts and courts.

America needs special health courts aimed not at stopping lawsuits but at delivering fair and reliable decisions. A special court would provide expedited proceedings with knowledgeable staff that would work to settle claims quickly. Trials would be conducted before a judge who is advised by a neutral expert, with written rulings on standards of care.

With a special health court, damages would consist of all lost income and medical costs, plus “pain and suffering” based on a set schedule depending on the severity of the injury. All information about each incident, including details learned in settlements, would be compiled and disseminated so that doctors and hospitals could learn from their errors. Proponents of special health courts have estimated that the total cost of such a new liability system would be about the same as the existing system — less than 2 percent of America’s total health care costs. One benefit would be that the quicker, streamlined system would compensate far more people, with drastically lower legal costs. Most important, it would restore faith in the reliability of medical justice.

The author is none other than Philip Howard, whose latest screed, Life Without Lawyers, cautioned Americans against the devastating effect warning labels have had on our quality of life.

His column is loaded with unsupported references to standard boogeymen like defensive medicine, but let's just focus on the special health courts. Though described in bombastic terms, Howard's proposed system is different in only three respects:

1. the jury is removed and medical malpractice becomes a bench trial before judges;
2. independent experts are (apparently) removed and replaced by a single "neutral" expert chosen by an unspecific procedure; and,
3. the judge is limited in the damages they can award to "lost income and medical costs, plus 'pain and suffering' based on a set schedule depending on the severity of the injury."

I do not see how the first and second part would "free[] doctors from worries about unnecessary and unreasonable malpractice claims." I have known many judges who have presided over many medical malpractice cases, but I have never heard a judge say they felt they personally had the expertise to evaluate whether the standard of care was breached or not any better than a jury. In fact, I have frequently heard the opposite.

Bearing that in mind, would such a system result in more "reliable" malpractice results than our current jury system?

Let's go back to that "2006 study in the New England Journal of Medicine" Howard references, which was unveiled to the public through a press release from the researchers titled "Study Casts Doubt on Claims That the Medical Malpractice System Is Plagued By Frivolous Lawsuits." Here's what they found:

The researchers analyzed past malpractice claims to judge the volume of meritless lawsuits and determine their outcomes. Their findings suggest that portraits of a malpractice system riddled with frivolous lawsuits are overblown. Although nearly one third of claims lacked clear-cut evidence of medical error, most of these suits did not receive compensation. In fact, the number of meritorious claims that did not get paid was actually larger than the group of meritless claims that were paid. The findings appear in the May 11, 2006 issue of The New England Journal of Medicine.

“Some critics have suggested that the malpractice system is inundated with groundless lawsuits, and that whether a plaintiff recovers money is like a random ‘lottery,’ virtually unrelated to whether the claim has merit,” said lead author David Studdert, associate professor of law and public health at HSPH. “These findings cast doubt on that view by showing that most malpractice claims involve medical error and serious injury, and that claims with merit are far more likely to be paid than claims without merit.”

...

Most claims (72%) that did not involve error did not receive compensation. When they did, the payments were lower, on average, than payments for claims that did involve error ($313,205 vs. $521,560). Among claims that involved error, 73% received compensation. “Overall, the malpractice system appears to be getting it right about three quarters of the time,” said Studdert. “That’s far from a perfect record, but it’s not bad, especially considering that questions of error and negligence can be complex.” The 27% of cases with outcomes that didn’t match their merit included claims that went unpaid even though the injury was caused by an error (16%); claims that were paid but did not involve error (10%); and claims that were paid but did not appear to involve a treatment-related injury (0.4%).

So our current system gets it right "three quarters of the time," and, when it gets it wrong, favors the doctors -- would Howard's system beat that?

Probably not; such a system is unlikely to make results any more "reliable" than now, unless you presume that judges are systematically biased in favor of one side or the other. The judges in Howard's proposal -- none of whom have particular expertise in medicine -- will be wholly dependent upon the "neutral expert" for their understanding of the medicine. Worse, unlike the jury in a medical malpractice action today, they will not have the benefit of seeing a cross examination or in considering the views of multiple experts. 

Ironically, Howard's process for chosing a "neutral" expert and the materials they opine on will probably make medical malpractice litigation more contentious, expensive, and uncertain because it will at best resemble the Markman process used in evaluating patent disputes. Markman hearings often involve the selection of a "neutral expert" in helping the judge determine the meaning of a patent, a process loathed by patent attorneys for adding "a whole new level of lawyering, cost, delay and, some say, uncertainty to patent litigation." So there goes parts 1 and 2.

That leaves Howard with a single proposal: limiting damages, for which he proposes a system like workers' compensation, which covers economic losses and provides a pre-set amount for particular damages. [We'll put aside for this post the fact that, as a practical matter, medical malpractice cases are already typically limited by the size of the defendant's insurance policy;  very rarely do plaintiffs ever collect or even attempt to collect amounts over that.]

The problem here is that workers' compensation is, and always has been, construed as a bargain: in exchange for reliable compensation, the workers give up their right to a jury trial on damages. But Howard doesn't propose any quid to go along with his quo -- patients are just supposed to give up their rights to damages without receiving any increased certainty in their compensation if they are injured.

If Howard really wanted to create "fair and reliable" results, he'd propose something along the lines of the National Vaccine Injury Compensation Program, which, inter alia, provides compensation for the plaintiff's attorneys even if a meritorious suit does not prevail, thereby ensuring no one is left behind by the process.

But that's not what Howard really wants.

• Email This
• Print
• Comments
• Trackbacks (1)
• Share Link

I know, it's a long-shot, but when I see this:

Above the Law has been able to confirm that Ballard Spahr has officially pushed back start dates for its incoming first year associates. A tipster summarizes the details:

On Friday Ballard Spahr told its incoming class that it is delaying start dates until September 2010. There will be a $45,000 stipend offered.... The firm claims it will try to help the incoming associates find these jobs.

... Getting the money is contingent upon finding a job, but the firm is not limiting the work to public interest legal work. Incoming first years are encouraged to find employment at host of places, doing legal or non-legal work in certain circumstances.

[As noted by The Legal Intelligencer, Blank Rome and Morgan Lewis & Bockius have taken similar steps.]

And this:

Members of Philadelphia's seven-month-old Criminal Justice Advisory Board said the mayor's plan would force the city's courtrooms to shut down for 15 days in 2010 and result in the loss of several dozen prosecutors' jobs. ...

Nutter's proposed spending plan would reduce the District Attorney's Office budget to $25 million - a level of spending it has not seen since 2000.

The cut in the prosecutors' budget represents a 22 percent decrease from the $32 million the office was slated to get in the new budget, before the national financial crisis forced Philadelphia and cities nationwide to rein in spending.

I think, surely we can find a way to place some of these students where their legal services could be put to use for the public?

The DA has already been hit hard, having rescinded its offers to its incoming attorneys, who have had to scramble to find new work long after hiring season (to the extent it existed) closed. It's unjust and unfair to 'replace' those dedicated young lawyers with others who didn't even want the work in the first place, but that's the reality of Philadelphia's budget.

Art, Lynne, how 'bout it? First-years aren't so bad, some even go solo.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In law school, financial fraud is so simple -- Gollum tells Frodo something that isn't true, Frodo relies on the false statement, then Gollum steals the precious and runs away.

The reality is a little more complicated. Take, for example, what New Line Cinema did to Peter Jackson for the Lord of the Rings trilogy, prompting Jackson to sue:

The suit charges that the company used pre-emptive bidding (meaning a process closed to external parties) rather than open bidding for subsidiary rights to such things as "Lord of the Rings" books, DVD's and merchandise. Therefore, New Line received far less than market value for these rights, the suit says.

Most of those rights went to other companies in the New Line family or under the Time Warner corporate umbrella, like Warner Brothers International, Warner Records and Warner Books. So while the deals would not hurt Time Warner's bottom line, they would lower the overall gross revenues related to the film, which is the figure Mr. Jackson's percentage is based on.

According to people on both sides of Mr. Jackson's lawsuit, the claim strikes at the heart of the modern vertically integrated media company. One of the apparent - though largely unproven - benefits of media integration is the ability of conglomerates like the Walt Disney Company, Time Warner, the News Corporation, Viacom, Sony and General Electric to sell subsidiary rights to the many divisions within the company.

After 408 docket entries, including such fun as a $125,000 sanction order for defendant's refusal to comply with discovery, the case was settled.

In my own practice, these types of unfair insider deals with alter-ego entities comprise the bulk of financial fraud amongst members of a partnership, limited liability company (LLC), or corporation. The method of the fraud is dependent upon the target. If a partner wants to defraud another partner, they will set up a sham alter-ego entity and then engage in blatantly unfair transactions with it. If a partner or group of partners want to defraud an outside auditor or shareholders, they will set up a sham alter-ego entity and then unload assets or liabilities onto that entity.

That's what Enron and AIG both did to hide the fact that both were taking on liabilities and debt far greater than they could hope to repay if the market went south: they created baloney entities and deals that masked the source and destination of funds, assets and liabilities.

Given the frequency of this fraud, and Wall Street's evident skill in utilizing it, I was none too pleased to see Geithner's WSJ Op-Ed and this announcement:

• The Process for Purchasing Assets Through The Legacy Loans Program: Purchasing assets in the Legacy Loans Program will occur through the following process:
  • Banks Identify the Assets They Wish to Sell: To start the process, banks will decide which assets – usually a pool of loans – they would like to sell. The FDIC will conduct an analysis to determine the amount of funding it is willing to guarantee. Leverage will not exceed a 6-to-1 debt-to-equity ratio. Assets eligible for purchase will be determined by the participating banks, their primary regulators, the FDIC and Treasury. Financial institutions of all sizes will be eligible to sell assets.
  • Pools Are Auctioned Off to the Highest Bidder: The FDIC will conduct an auction for these pools of loans. The highest bidder will have access to the Public-Private Investment Program to fund 50 percent of the equity requirement of their purchase.
  • Financing Is Provided Through FDIC Guarantee: If the seller accepts the purchase price, the buyer would receive financing by issuing debt guaranteed by the FDIC. The FDIC-guaranteed debt would be collateralized by the purchased assets and the FDIC would receive a fee in return for its guarantee.
  • Private Sector Partners Manage the Assets:Once the assets have been sold, private fund managers will control and manage the assets until final liquidation, subject to strict FDIC oversight.

Liberal economists like Paul Krugman are on balance opposed, with the notable exception of Brad Delong.

But let's put aside economics and look at it from the perspective of a Wall Street banker.

Considering the Treasury's stubborn refusal to even identify the recipients of existing bailout funds (with rare exceptions, like the partial list of AIG counterparties) and penchant for creating its own slew of vehicles (for example, the Term Auction Facility, the Term Securities Lending Facility, the Primary Dealer Credit Facility, the Commercial Paper Funding Facility, the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Money Market Investor Funding Facility, and Maiden Lane I, II and III), I have little doubt the new process will be as transparent as a chunk of coal.

Wall Street and their lawyers -- one of whom almost got a top spot at Treasury -- will have little trouble creating a slew of Special Purpose Vehicles / Entities (or repurposing existing, loss-laden hedge funds) for the sole purpose of bidding the price even higher than the expected value and unleashing that huge, 85% no-recourse Federal loan guarantee.

That makes the whole thing a win-win for Wall Street: it's like setting up "Toxic Assets LLC" then using an >85% government subsidy to "buy" everything at your own garage sale at inflated prices.

If your junk is worthless, it doesn't matter, since you set a price more than high enough to make a profit when you first sold it, taking into consideration the modest capital you put into Toxic Assets LLC.

I'm sure Treasury will put together a handful of half-hearted competitive bidding limitations that will say the exact same company that owns the assets can't bid on them, and I'm sure Wall Street will have no trouble finding its way around these limitations. I then expect to see these "legacy assets" go for sale at impressive, expectation-shattering levels, which will be hailed as a success.

A few months or years later, totally unexpected, the entities that bought these "legacy assets" will go bankrupt, pleading that they did the best they could to help the American taxpayer, and, gee whiz, we lost some money, too.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The top officials at Treasury have already set aside all of the broad governmental powers available (claiming we are a "nation of laws"), so let's look at the United States purely as an angel investor which saw a large company faltering and swooped in with an 80% equity investment. Uncle Sam has just learned about the following (AIGFP is the “Financial Products” division of AIG, the morons responsible for wiring the global economy to explode by writing trillions of dollars in undercapitalized “credit default swap” policies):

In the first quarter of 2008 [a few months prior to the equity purchase], AIGFP adopted a retention plan for about 400 employees that provided guaranteed payments to employees if they worked through specified payment dates (or either resigned for good reason or was terminated without cause before the relevant dates). At the time, AIGFP was expected to have a valuable, on-going role at AIG. The plan was implemented because there was a significant risk of departures among employees at AIGFP, and given the $2.7 trillion of derivative positions at AIGFP at that time, retention incentives appeared to be in the best interest of all of AIG’s stakeholders. The program was evidenced by a written plan distributed to employees and by individual agreements executed by them.

For senior management the plan provides that 2008 and 2009 compensation will be 75% of 2007 expected compensation levels. Other participants are set at the full 2007 level. This resulted in a $313 million total for 2008 and a $327 million total for 2009 (because some employees who had other guaranteed compensation for 2008 were excluded for that year).

Frustratingly, had AIG merely gone bankrupt instead being saved by the investment, then these would likely be voidable by the trustee as excessive insider transactions under 11 USC § 547. (Indeed, if AIG goes bankrupt soon, we’re still within the “1 year and 90 days” window to use § 547.)

At the moment, we don’t have the text of the contracts, and so can’t determine if any of the doctrines listed in this exhaustive Concurring Opinions post would apply. Personally, I think commercial impracticability / frustration of purpose are realistic options here given AIG’s total dependence upon the government’s grace.

But let’s assume the contract is, on its face, iron-clad, properly drafted, formed, accepted, and with all conditions met.

What’s a cheated shareholder to do?

Unsurprisingly, American International Group, Inc., was incorporated in Delaware, the least-shareholder-friendly jurisdiction in the country (which is why management loves it), so we’ll look to Delaware law.

Generally, prior to launching a derivative suit on behalf of the company, a shareholder must send a demand letter to the board of directors, demanding they, in this instance, not go through with the transaction. Here, however, a court would likely find the demand letter requirement excused as “futile” given AIG CEO Edward Liddy’s letter to Treasury Secretary Geithner asserting that AIG intended to go through with the payments despite his complaints.

So we’re past the first hurdle, and can sue on behalf of AIG, as shareholders at the time this payment is being made. But the bar is set quite high for us. Unsurprisingly,

The AIG certificate of incorporation has a § 102(b)(7) clause that insulates AIG's directors from liability for monetary damages for any harm flowing from their gross negligence. See Malpiede v. Townson, 780 A.2d 1075, 1095-96 (Del. 2001) (affirming the dismissal of a duty of care claim where the corporation's charter had an exculpatory provision).

We'll get to the source of this quote in a minute. For now, "gross negligence" isn't even enough to sue a director.

So who do we sue and what do we allege?

Like most plaintiffs, we start hobbled by a lack of information. What the heck does the white paper mean that “This amount is due pursuant to a retention plan entered into in early 2008?” Entered into by whom, and with whom, after what process?

Talking Points Memo points us to the NY Daily News regarding how AIGFP functioned:

Company auditor Joseph St. Denis became concerned about the Financial Products unit, but [Joseph Cassano, head of AIG Financial Products] barred him from checking.

St. Denis later quoted Cassano as saying, "I have deliberately excluded you ... because I was concerned that you would pollute the process."

St. Denis would recall Cassano saying he did not want to be promoted even further up the corporate ladder "because it would separate [him] from the money." St. Denis would remember Cassano telling him "AIG's corporate management was "scared to death" of him."

Oh my. That's not much of an internal process at all. It sounds like they're just running a criminal organization in there, or at the very least had inadequate internal controls that were too easily bypassed by the insiders.

We don't have to look far to figure out if we can sue for that. Just a month ago, the Delaware Court of Chancery (New Castle) refused to dismiss a shareholder complaint against AIG because,

The Complaint fairly supports the assertion that AIG's Inner Circle led a -- and I use this term with knowledge of its strength -- criminal organization. The diversity, pervasiveness, and materiality of the alleged financial wrongdoing at AIG is extraordinary. The proposition that Matthews and Tizzio, who the Complaint fairly alleges were directly knowledgeable of and involved in much of the wrongdoing, did not also know that AIG's internal controls were inadequate and too easily bypassed is not, for present purposes, an interpretation to ground a Rule 12(b)(6) dismissal order on. Indeed, for present purposes, it is inferable that even when Matthews and Tizzio were not directly complicitous in the wrongful schemes, they were aware of the schemes and knowingly failed to stop them. In that regard, I find it inferable that Matthews and Tizzio were aware of misconduct that should have been brought to the attention of AIG's independent directors (including the Audit Committee) but chose to conceal their knowledge, despite having a fiduciary duty to speak."

Am. Int'l Group, Inc. v. Greenberg, No. C.A. No. 769-VCS, 2009 Del. Ch. LEXIS 15, at *77–78 (Del. Ch. Feb. 10, 2009). For more, see the Delaware Corporate & Commercial Litigation Blog which, alongside The D&O Diary and the Harvard Law School Corporate Governance Forum, sets the bar for reporting on these cases.

In that suit, Greenberg, Matthews and Tizzio were all directors, who are the normal targets of shareholder suits, because their actions are generally insured by policies previously paid for by the company.

But we're not limited to them -- recent amendments to 10 Del. C. § 3114 assure us jurisdiction in Delaware over directors, trustees, members and officers of all corporations incorporated in Delaware. It's not clear exactly what Cassano's position was, but the "head" of anything is generally an officer of some sort. So we've got him, even if he's never set foot in Delaware. At the very least, we can sue whatever directors or officers were involved in this transaction -- several hundred million dollars doesn't walk out the door without someone blessing it.

Then what? Assuming even we can't prove outright fraud by these 400 employees, we still have the blatant breach of fiduciary duty by excluding the auditor. As such, the whole plan, even as it relates to "innocent" parties, can be reformulated under Delaware law:

The glaring problem with the defendants' argument is again a category error -- this is not a contract case involving the reformation of a contract to effectuate the parties' intent; it is a fiduciary duty case, and this court has broad discretion to remedy breaches of fiduciary duty, including reformation when, as here, that is appropriate to remedy a fiduciary violation. See, e.g., Thorpe v. CERBCO, Inc., 676 A.2d 436, 445 (Del. 1996) ('Delaware law dictates that the scope of recovery for a breach of the duty of loyalty is not to be determined narrowly.'); Taylor v. Jones, 2006 Del. Ch. LEXIS 100, 2006 WL 1510437, at (Del. Ch. May 25, 2006) (noting that a resulting trust may be an appropriate remedy even though the prerequisites to a resulting trust under the modern, majority approach were not present and that this court's 'historical readiness to adapt to the circumstances of each case and craft appropriate remedies . . . should not be lightly discarded or circumscribed'); Cantor Fitzgerald L.P. v. Cantor, 2001 Del. Ch. LEXIS 70, 2001 WL 536911, at (Del. Ch. May 11, 2001) (awarding fee shifting in as a remedy for a breach of the duty of loyalty despite an express contractual provision providing otherwise and explaining that 'when the facts demonstrate behavior as egregious as that here, the Court's normal deference to pre-negotiated partnership agreement provisions will yield to a conscientious effort to craft an appropriate remedy')."

GPC XLI L.L.C. v. Loral Space & Communs. Consol. Litig. (In re Loral Space & Communs. Consol. Litig.), C.A. No. 2808-VCS, C.A. No. 3022-VCS, 2008 Del. Ch. LEXIS 136, at *7–123–5–3–124 n.161 (Del. Ch. Sept. 19, 2008).

If we are a "nation of laws," why not use some of them?

UPDATE Steven M. Davidoff at DealBook gets it:

This was not a boilerplate contract. Rather, it was highly negotiated. And it was highly negotiated to pay retention fees at high levels without regard to performance. This is obviously shocking. But it makes me wonder: perhaps one area of direction here should be actually looking at who negotiated this and why?

It strikes me that the A.I.G. financial products division received an unbelievably sweet deal. Did its managers slip it under the radar? Did the managers act in good faith? And who at A.I.G. signed off on this and did they focus on the risks and rewards? Yet more avenues for possible litigation.

But of course, this is all merely a diversion for what should be the main focus: Where did the $170 billion go that taxpayers spent on A.I.G and why, and what we are going to do with A.I.G. going forward.

 

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

Among the many provisions included in Obama / Congress' "Stimulus Plan" passed in February is $1.1 billion for "comparative effectiveness" research ("CER"), which will finally start putting some money into figuring out if many of the medical treatments routinely prescribed across America at considerable expense are actually worth it. DB at Medical Rants is all in favor, but Kevin MD raises a red flag:

Newsweek's Sharon Begley comments on how patients can refuse to adhere to the findings of comparative effectiveness research by suing doctors who try to do so. As she points out, "What are [doctors] supposed to do when a patient demands antibiotics for a cold? for a child’s ear infection? when a patient demands an MRI for back pain or knee pain? If they refuse, several doctors told me, they can expect a call from the patient’s lawyer that afternoon."

...

Yes, physicians are the ones ultimately responsible for ordering unnecessary antibiotics or MRIs. But, the threat of malpractice is indeed a cloud that hangs over every decision a doctor makes. Just because Mr. Cross disagrees with that doesn't make it any less true, or any less of a factor.

The patient's lawyer will call that afternoon and... what? Threaten the doctor for complying with a Federally-approved de facto standard of care?

Put simply, CER will cut both ways. A doctor who does not utilize a CER-approved treatment will have a lot of explaining to do down the road if that treatment would have helped. Conversely, a plaintiff alleging a doctor should have used a CER-disapproved treatment will have a hard time convincing a jury that the doctor should have overridden the billion-dollar research.

From a liability / malpractice standpoint, doctors who abide by the standard of care should welcome the CER with open arms, as it will give them a powerful tool to wield when a plaintiff's lawyer later asks "why didn't you do _____?" They can quite honestly answer "because the CER says it's not effective."

• Email This
• Print
• Comments
• Trackbacks
• Share Link

As you've probably heard at sites like Overlawyered and Drug & Device Law, the sky is falling upon us because the Supreme Court didn't override Congress and the FDA and decide to pre-empt state failure-to-warn tort suits against prescription drug manufacturers.

If you don't know the basic facts, see SCOTUSBlog. Some initial commentary at the WSJ.

Wyeth manufactures pharmaceuticals, subject to FDA regulation. The FDA sets a minimum standard for the use of these drugs and their labeling; it does not dictate the text of warning labels, though it does have to approve them, which it does after intense lobbying by the manufacturers, lobbying generally unopposed by anyone at all, where the sole "evidence" are manufacturer-sponsored studies, studies which have repeatedly come under fire for conflicts of interest.

Nonetheless, under the "changes being effected" regulation, a drug company can unilaterally change its warning labels to improve patient safety.

Does this regulatory authority preclude all state tort suits alleging drug companies promoted or failed to warn against unsafe uses of these drugs?

Vested interests have spent a lot of money trying to convince judges (and the public) that this question is so hard to answer on purely legal grounds that it requires the judges start making policy instead of law.

Because the law is very clear, as the Supreme Court ruled, 6-3:

As it enlarged the FDA’s powers to “protect the public health” and “assure the safety, effectiveness, and reliability of drugs,” id., at 780, Congress took care to preserve state law. The 1962 amendments added a saving clause, indicating that a provision of state law would only be invalidated upon a “direct and positive conflict” with the FDCA [Food, Drug and Cosmetics Act]. §202, id., at 793. Consistent with that provision, state common-law suits “continued unabated despite . . . FDA regulation.” Riegel v. Medtronic, Inc., 552 U. S. ___, ___ (2008) (slip op., at 8) (GINSBURG, J., dissenting); see ibid., n. 11 (collecting state cases). And when Congress enacted an express pre-emption provision for medical devices in 1976, see §521, 90 Stat. 574 (codified at 21 U. S. C. §360k(a)), it declined to enact such a provision for prescription drugs.

Slip op. at 10.

Congress has had numerous opportunities, while amending the FDCA, to change that. It didn't.

The FDA has had numerous opportunities, while promulgating regulations with the force of law (as opposed to mere policy positions, which are not binding on courts), to change that. It didn't.

There was no "direct and positive conflict" between plaintiff's claims and the FDA approval.

There's nothing more to say here.

The Supreme Court is to be commended for refraining from telling Congress and the FDA they didn't know how to set policy, and for sticking to basic principles of judicial, statutory and regulatory interpretation.

Thanks for refraining from judicial activism.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

After the firestorm of criticism last week, including on this blog, Facebook CEO Mark Zuckerberg announced (on Facebook's blog and in a media conference call):

Beginning today, we are giving you a greater opportunity to voice your opinion over how Facebook is governed. We're starting this off by publishing two new documents for your review and comment. The first is the Facebook Principles, which defines your rights and will serve as the guiding framework behind any policy we'll consider—or the reason we won't consider others. The second document is the Statement of Rights and Responsibilities, which will replace the existing Terms of Use. With both documents, we tried hard to simplify the language so you have a clear understanding of how Facebook will be run. We've created separate groups for each document so you can read them and provide comments and feedback. You can find the Facebook Principles here and the Statement of Rights and Responsibilities here. Before these new proposals go into effect, you'll also have the ability to vote for or against proposed changes.

Credit where it is due: the new "Statement of Rights and Responsibilities" describes the legal relationship between users and Facebook the way that Facebook's officers have been describing it.

In short: users retain total control over their content, and can terminate Facebook's license at will. Users still can't really sue Facebook for anything, but might be able to sue developers or operators of third-party applications if they breach the new terms.

In long, start with governing law:

14.1 You will resolve any claim, cause of action or dispute (“claim”) you have with us arising out of or relating to this Statement or Facebook in a state or federal court located in Santa Clara County. The laws of the State of California will govern this Statement, as well as any claim that might arise between you and us, without regard to conflict of law provisions. You agree to submit to the personal jurisdiction of the courts located in Santa Clara County, California for the purpose of litigating all such claims.

Good news! As noted before, California has very pro-consumer laws. You'll also notice that Facebook got rid of the class action waiver (which was likely illegal anyway) and the arbitration requirement, too. No longer must you drop $6,000 or more just to start an arbitration against them.

Then, the licensing, the part that caused so much trouble last time:

You own all of the content and information you post on Facebook, including information about you and the actions you take (“content”). In order for us to share your content and provide you with our services, you agree to the following:

2.1 You give us permission to use, store, and share content you post on Facebook or otherwise make available to us (“post”), subject to your privacy and application settings.
2.2 You may delete your content or your account at any time with the understanding that removed information may persist in backup copies for a reasonable period of time (but will not be generally available to other users), and that content shared with others may remain until they delete it.
2.3 For content that is covered by intellectual property rights (like photos and videos), you specifically give us the following permission, subject to your privacy and application settings: you grant us a non-exclusive, transferable, sub-licensable, royalty-free, worldwide license to use, copy, publicly perform or display, distribute, modify, translate, and create derivative works of (“use”) any content you post on or in connection with Facebook. This license ends when you delete your content or your account.
2.4 We always appreciate your feedback or other suggestions about Facebook, but you understand that we may use them without any obligation to compensate you for them (just as you have no obligation to offer them).

(Emphasis mine). Finally! No more fussing around with ambiguity: Facebook twice reiterates that their license is "subject to your privacy and application settings," and that deleting either your content or your account terminates the license to that content.

That is exactly how users expect the system to operate. Facebook also omitted the annoying and erroneous "irrevocable" from the license.

I'll have more to say later. But let me raise one really interesting issue:

9. Special Provisions Applicable to Developers/Operators of Applications and Websites

If you are a developer or operator of a Platform application or a website using Connect (“application”), the following additional terms apply to you:

9.2 When users add your application or connect it to their Facebook account, they give permission for you to receive certain data relating to them. Your access to and use of that data will be limited as follows:
9.2.1 You will only use the data you receive for your application, and will only use it in connection with Facebook.
9.2.2 You will make it clear to users how you are going to use, display, or share their data.
9.2.3 You will not use, display, or share a user’s data in a manner inconsistent with the user’s privacy settings without the user’s consent.
9.2.4 You will delete all data you received from us relating to any user who removes or disconnects from your application unless the user gives you permission to keep it.
9.2.5 You will delete all data you received from Facebook if we disable your application or ask you to do so.
9.2.6 We can require you to update any data you have received from us.
9.2.7 We can limit your access to data.
9.2.8 You will not transfer the data you receive from us without our prior consent.
9.3 You will not give us data that you independently collect from a user or a user’s content without that user’s consent.

...

That would appear to make users "third-party beneficiaries" to Facebook's relationship with developers / operators of Facebook or Connect services. Which means users would likely have standing to sue if that developer / operator violated the terms, including violations of privacy settings (under 9.2.3).

Here's a California appellate court from just two weeks ago:

"Under Civil Code section 1559, a third party can enforce the terms of a contract 'made expressly for the benefit of [the] third person.' 'Expressly' in this context is interpreted to mean 'merely the negative of 'incidentally.'' (Gilbert Financial Corp. v. Steelform Contracting Co. (1978) 82 Cal.App.3d 65, 70 [145 Cal. Rptr. 448].) The contract need not be exclusively for the benefit of the third party in order to permit enforcement, and the third party does not need to be the sole or the primary beneficiary. Further, the third party need not be identified as a beneficiary, or even named, in the contract. (Prouty v. Gores Tecology Group, supra, 121 Cal.App.4th at pp. 1232–1233.) 'If the terms of the contract necessarily require the promisor to confer a benefit on a third person, then the contract, and hence the parties thereto, contemplate a benefit to the third person. The parties are presumed to intend the consequences of a performance of the contract.' (Joson v. Holmes Tuttle Lincoln-Merc. (1958) 160 Cal.App.2d 290, 297 [325 P.2d 193].)"

National Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Services Group, Inc., No. A120072, 2009 Cal. App. LEXIS 170, at *25–26 (Cal. Ct. App. Feb. 11, 2009).

Here's the statute itself:

A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.

Cal Civ Code § 1559 (2008).

That's great for users, but I'm sure developers and operators will have something to say about it Are they ready to be legally bound to users by Facebook's terms?

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

Now that Facebook has rescinded its "new" Terms, let's talk about 13 problems with the Terms, 2 questions to consider about the site, and 10 changes Facebook should make.

If you see “new Terms” below, that refers to the Terms Facebook enacted on February 4, 2009, then rescinded. “Old Terms” refers to the Terms in place before then, which are now the current terms.

13 THINGS YOU SHOULD KNOW ABOUT FACEBOOK'S CURRENT TERMS OF USE

1. Facebook wants to make money using your information. That doesn't make them evil; users worldwide are fine with Google, another free service,  reading their searches and emails to target advertising. But Facebook isn't a charity, and their current business model is aimed at sending you targeted advertising or at finding a way to monetize what they know about you. Keep that goal -- and not the goal of "sharing" -- in mind when you consider Facebook's Terms.  Keep in mind, too, what would happen with your information if Facebook was sold to another company. 

2. Facebook has the right to use your  information and content  "for any purpose, commercial, advertising or otherwise." Your use "automatically grants" them "an irrevocable, perpetual, non-exclusive, transferable, fully paid, worldwide license" to anything you  put on the service, and, for the new Terms, anything you enabled someone else to post, like if you put a "Share on Facebook" button on your blog. The old Terms permit you to terminate this license by removing your content from the site. The new Terms did not recognize that right of termination; Facebook could use your content forever, for any purpose, without your permission. That's what the hoopla was all about.

3. Facebook collects information on you from sources other than your posted content. As their Privacy policy says, "We may use information about you that we collect from other sources, including but not limited to newspapers and Internet sources such as blogs, instant messaging services, Facebook Platform developers and other users of Facebook, to supplement your profile."

4. Facebook has, in the past, broadcast user's private information in ways users didn't want or expect. Two notable examples were the "Beacon" service, which defaulted to broadcasting what users did on third-party sites (e.g., what products they bought) and the misleading "deactivation" policy, in which closing an account merely "deactivated" it without prohibiting access to any of the  content . Facebook has also been criticized for confusing privacy settings -- for example, by inputing your location you have automatically joined that locality's "network," and thus by default are accessible through searches by people in that area.

5. Facebook wants to use your name, likeness and image for their commercial purposes. The new Terms had a license not just your content, but your very identity,  which they could use  for commercial  purposes like using your name to endorse or market products.The reason Facebook wanted this additional license seems clear: the "Beacon" service above, which Facebook had to retreat from, likely violated existing laws in many states, particularly New York, prohibiting the use of another's likeness in an advertisement without proper consent and compensation. The new Terms tried to run  around those laws. Recall, too, that Facebook would have had that right forever.

6. Facebook can sell information about you to third parties. Their privacy policy says they may "use" your information "without identifying you as an individual," and that they "do not provide contact information to third party marketers without your permission." Everything else is fair game.

7. Facebook can delete your whole account without warning. Under both Terms, Facebook can pull the plug "for any or no reason, at any time in our sole discretion, with or without notice."

8. The content Terms are so onerous they ban even the "25 Things" meme. "User conduct" says "you agree not to use the Service or the Site to ... upload, post, transmit, share or otherwise make available any ... chain letters." Oops. The old Terms also ban "any content that we deem to be harmful, threatening, unlawful, defamatory, infringing, abusive, inflammatory, harassing, vulgar, obscene, fraudulent, invasive of privacy or publicity rights, hateful, or racially, ethnically or otherwise objectionable." The new Terms went a long way towards cleaning up those ridiculous prohibitions.

9. Facebook does not permit any commercial use whatsoever. The old Terms are very clear: "You understand that except for advertising programs offered by us on the Site (e.g., Facebook Flyers, Facebook Marketplace), the Service and the Site are available for your personal, non-commercial use only." The new Terms changed all that, requiring that your profile be for personal uses but allowing you to create Pages for commercial purposes.

10. Facebook isn't responsible if a third-party application abuses your personal information. From Facebook's privacy page: "However, while we have undertaken contractual and technical steps to restrict possible misuse of such information by such Platform Developers, we of course cannot and do not guarantee that all Platform Developers will abide by such agreements."

11. Facebook isn't liable if they lose your content, give you a virus or allow your account to be hacked. Under both Terms, the "Disclaimers" and "Limitation on Liability" have multiple provisions preventing you from suing them for just about anything. Here's one example: "Under no circumstances will the Company be responsible for any loss or damage, including any loss or damage to any User Content or personal injury or death, resulting from anyone's use of the Site or the Service, any User Content or Third Party Applications, Software or Content posted on or through the Site or the Service or transmitted to Users, or any interactions between users of the Site, whether online or offline."

12. If you can find a way to sue Facebook, you have to go through arbitration. The old Terms made you use the American Arbitration Association in the location determined by the AAA Rules (likely your domicile), whereas the new Terms make you use Judicial Arbitration and Mediation Services in Santa Clara County, California, though you're permitted to appear by phone. It's unclear why Facebook switched from AAA to JAMS; either way, be glad they're not using the National Arbitration Forum, which has been accused of stacking the deck in favor of defendants like credit card companies.

13. If you can find a way to sue and win in arbitration, your compensation is severely limited. The old terms' "limitation on liability" limit you to "the amount paid, if any, by you to company for the service during the term of membership," capped at $1000. The new terms entitle you to a minimum of $100, with a cap of "the amount paid by you, if any, to Facebook during the twelve months immediately preceding the day the act or omission occured that gave rise to your claim."

2 THINGS TO CONSIDER ABOUT FACEBOOK'S SITE:

14. What should the default privacy settings be? Should Facebook presume you want to share everything, some things, or nothing? And with whom should it presume you want to share? Your friends? Their friends? Their friends’ friends? What about people in your location or your former classmates? The default settings are very powerful, since they’re often not changed and because users are often confused by what the changes even mean, so they should be chosen carefully.

15. When one user deletes a post on Facebook, what should happen to other users' comments to that post? This scenario represents a larger issue for Facebook, one they were likely attempting to address with the new Terms. Facebook's primary purpose is to facility communication, usually in the form of one user posting a status update, link or photo and other users commenting in response to that update, link or photo. So who "owns" those comments?  Who "owns" a comment which quotes the original post? Don't look to the law:  the point of Terms is to  establish a relationship and  settle  questions.  How do users want or expect such a deletion to function?

10 THINGS USERS SHOULD ADVOCATE BE INCLUDED IN FACEBOOK'S NEW TERMS OF USE:

16. Users should retain the right to remove their own content from the system. Users expect and should have the right to remove any content from Facebook, and thereby terminate Facebook's license, at any time. That’s what the old Terms permitted, and it’s essential for any artist who, down the road, is asked to grant an “exclusive” license to their content.

17. Facebook should not have any rights to user’s name, likeness or image except where specifically permitted. It’s reasonable for Facebook to get a blanket, revocable license from you for your content; the whole service works by distributing your content to others, and a blanket license enables them to easily introduce new features that distribute your content in new ways. Name and likeness are a completely different matter. Given Facebook’s poor history in the past regarding likenesses (e.g., the “Beacon” service), Facebook should be upfront about when it is going to use your likeness for a commercial purpose and should ask you for permission for that specific use.

18. Facebook’s Terms should be written (or summarized) in plain English. The controversial “licenses” term was a 120-word sentence that “granted” a “license” (a “license” defined by six adjectives) over the course of two subclauses (“(a)” and “(b),” which together included twenty different verbs), two sub-subclauses (“(a)(i)” and “(a)(ii)”), and a modifying end-clause (“each of (a) and (b)”) that ended with a legalese preposition (“thereof”). Possibly worse, the license included an ambiguous clause – “subject only to your privacy settings” – which caused numerous users to conclude, wrongly, that Facebook’s entire license was limited to the user’s privacy settings. The clause, at most, limited the license only for content posted, not content shared or the user’s likeness, and, at worst, actually reinforced that users retained no license control at all, but instead “only” the ability to limit privacy settings.

19. Facebook’s Terms should be built on trust, not distrust. “You agree” appears eleven times in the old Terms and fifteen times in the new Terms; “Facebook agrees” does not appear in either. Both Terms bear far more in common with the release people signed to be ridiculed by Borat than a mutual agreement. If Facebook says, like Gmail, that “We will not use any of your content for any purpose except to provide you with the Service,” they theoretically increase the likelihood of being sued, but they also make the relationship much clearer and more trusting.

20. Facebook should bear some legal and financial responsibility. As noted above, you are essentially a guest on Facebook's servers, and they can kick you off whenever they want, for "any or no reason." Unless the Terms include provisions that are legally enforceable, in an affordable manner, users have no “rights.” When Facebook says, “you can’t sue us, just trust us,” they really mean “we don’t trust ourselves enough not to make mistakes and get sued.” Even if you come up with a way to sue them, your damages are limited to what you paid Facebook ($0), a big problem given how a basic JAMS arbitration costs almost $8,000 just to get the ball rolling. Facebook has cause to be concerned about exposing itself to liability among 175 million users, but there is a comfortable middle ground where Facebook’s liability isn’t open-ended but users are still protected.

21. Facebook should only be permitted to delete or restrict your account for “cause.” As noted above, Facebook both can delete your account without warning and prohibits you from myriad activities online. 175 million users includes a lot of trolls, spammers, harassers, and con artists, and that’s okay – Facebook can reserve for itself broad reason for “cause,” like the new Terms included, such as if a user “intimidates or harasses any user” or “does anything that is illegal, infringing, fraudulent, malicious or could expose Facebook or the Facebook Service users to harm or liability.”

22. Facebook should agree to take reasonable steps to secure user’s personal information and should be required to report any disclosures. Know what happens if Facebook goofs and sends your personal, identifying information to third parties? Nothing. What happens if Facebook knows a third-party application is harvesting personal addresses and selling them to spammers and scam artists? Nothing. The liability here doesn’t have to be unlimited, but it should be something, possibly a set fee, like $250 per violation per user.

23. Facebook should guarantee the security of your content. Facebook expects and wants its users to put a substantial portion of their lives online, including extended conversations with friends. Users have every reason to expect, and to make Facebook responsible for, guaranteeing their data will not be lost or corrupted. Again, Facebook doesn’t have to be completely responsible for every lost customer a business suffers, but they should have a meaningful level of legal and financial responsibility.

24. Facebook should permit a jury trial of class actions against Facebook, with attorneys fees and costs if Facebook loses. The old terms illegally prohibit class actions. The new terms permit class actions, so long as you first arbitrate whether you can bring a class and you waive your right to a jury trial. Such a limitation might be illegal, too, and it flies in the face of Zuckerberg's claim that "we need to make sure the terms reflect the principles and values of the people using the service." There needs to be real, meaningful, enforceable responsibility when Facebook breaches one of the terms above.

25. Facebook should keep many of the new Terms. The new Terms changed the governing law to California (likely out of convenience), one of the most pro-consumer states in the nation. That’s great. It was also great how Facebook came up with specific ways for people to conduct business through Facebook. Finally, Facebook really did shorten the Terms and make them a little bit more coherent (such as in areas like “User Content”) and they shouldn’t shy away from that.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Jack Balkin at Balkinization refers us to a proposal recently submitted to "the Vice President, the Attorney General, and the chairs of the House and Senate Judiciary committees:"

§1. NUMBER OF JUSTICES SITTING TO DECIDE CASES ON THE MERITS; QUORUM. The Supreme Court shall generally sit as a Court of nine Justices but if necessary six Justices shall constitute a quorum. The Court may by rule authorize a single Justice to make provisional rulings when necessary.

§2. REGULARITY OF APPOINTMENTS. One Justice, and only one, shall be appointed during the first session of Congress after each federal election, unless during that Congress one or more appointments are required by Section 3. Each appointment shall become effective on August 1 of the year following the election. If an appointment under this section results in the availability of more than nine Justices, the nine who are junior in time of service shall sit to decide each appeal certified for its decision on the merits.

§3. VACANCIES. If a retirement, death or removal of a Justice results in there being fewer than nine Justices, including Senior Justices, a new Justice or Chief Justice shall be appointed and considered as the Justice required to be appointed during that Congress, if that appointment has not already been made. If more than one such vacancy arises, any additional appointment will be considered as the Justice required to be appointed during the next Congress for which no appointment has yet been made.

§4. THE OFFICE OF SENIOR JUSTICE. A Justice who is senior to nine or more Justices shall unless disabled continue to hold office as a Senior Justice. If there is a vacancy on the Court or if a Justice is recused a Senior Justice shall be called by the Chief Justice in reverse order of seniority to sit when needed to provide a nine-member Court to decide a case. A Senior Justice shall also participate in any other matter before the Court including decisions to grant or deny a petition for certiorari or to promulgate rules of court in compliance with the rules enabling provisions of Title 28.

I like Justice Ginsburg. Our constitutional doctrines should not be subject to the health of her pancreas.

The Supreme Court is the only governmental organization in which the health of a governmental officer is considered an appropriate determinate of what the organization does. Justice Stevens, whom I also like, is now 88 years old and has been setting national policy for 34 years.

The model proposed by Balkin et al is not new -- it's the same model that's been used successfully by the Federal Reserve for decades.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Via KevinMD, Atul Gawande has a lengthy and thoughtful article entitled "Getting There From Here:"

In 2007, fifty-seven million Americans had difficulty paying their medical bills, up fourteen million from 2003. On average, they had two thousand dollars in medical debt and had been contacted by a collection agency at least once. Because, in part, of underpayment, half of American hospitals operated at a loss in 2007. Today, large numbers of employers are limiting or dropping insurance coverage in order to stay afloat, or simply going under—even hospitals themselves.

Unfortunately, Gawande spoils an impressive history of other Western countries' experiences with annoying hyperbole like:

On the left, then, single-payer enthusiasts argue that the only coherent solution is to end private health insurance and replace it with a national insurance program. And, on the right, the free marketeers argue that the only coherent solution is to end public insurance and employer-controlled health benefits so that we can all buy our own coverage and put market forces to work.Neither side can stand the other. But both reserve special contempt for the pragmatists, who would build around the mess we have. The country has this one chance, the idealist maintains, to sweep away our inhumane, wasteful patchwork system and replace it with something new and more rational. So we should prepare for a bold overhaul, just as every other Western democracy has. True reform requires transformation at a stroke. But is this really the way it has occurred in other countries? The answer is no.

And sweeping generalizations like:

There’s a similar explanation for our employment-based health-care system. Like Switzerland, America made it through the war without damage to its domestic infrastructure. Unlike Switzerland, we sent much of our workforce abroad to fight. This led the Roosevelt Administration to impose national wage controls to prevent inflationary increases in labor costs. Employers who wanted to compete for workers could, however, offer commercial health insurance. That spurred our distinctive reliance on private insurance obtained through one’s place of employment—a source of troubles (for employers and the unemployed alike) that we’ve struggled with for six decades.

The rise of employer-offered health insurance wasn't the organic marketplace development Gawande suggests. It was a deliberate decision by the major industries after WWII designed to thwart calls for government-sponsored health care for all, lead by union leaders like UAW President Walter Reuther. 

It's hard to feel sorry for the major industries, the large employers and the hospitals when it comes to the downside of our employer-based health insurance system: they've fought comprehensive reform for decades, often out of a vague fear that a larger role for the government would lead us on a slippery slope towards communism and/or socialism (Ronald Reagan made a good buck back in the 1950s peddling that exact argument).

Either way, Gawande sees the likely path forward, even if he wrongfully claims that neither "left" nor "right" ever had his brilliant insight:

It won’t necessarily be clear what the final system will look like. Maybe employers will continue to slough off benefits, and that lifeboat will grow to become the entire system. Or maybe employers will decide to strengthen their benefits programs to attract employees, and American health care will emerge as a mixture of the new and the old. We could have Medicare for retirees, the V.A. for veterans, employer-organized insurance for some workers, federally organized insurance for others. The system will undoubtedly be messier than anything an idealist would devise. But the results would almost certainly be better.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Starting January 1st, PGW bumped up rates by over 5%, even as natural gas prices remain low and consumers elsewhere see cuts.

Why? Because CDR Financial Products, the financial advisory firm close to former Mayor Street (and previously, and currently, under FBI investigation), was paid $225,000 to set up a terrible "bond" deal with JP Morgan to finance $310 million PGW bonds in 2006 that netted JPM millions and will leave PGW's customers holding the bag.

Part of the deal was merely a bad idea: instead of issuing traditional fixed-rate bonds, PGW engaged in an "interest-rate swap," which is a specialty of CDR, a complicated form of variable-rate financing in which the borrower generally ends up taking on some risk of interest rates rising, but not as much as if they had simply issued a variable-rate bond.

Interest rates rose and now PGW is paying an extra $6 million per year over what they could have had with a fixed-rate bond issue. The fixed rate would have been 5.25; the original 'effective rate' of the swap was 3.67 and is now 7.25, hence the additional payments.

That happens, it's an accepted risk of interest-rate swaps, and a lot of entities and municipalities were still foolishly investing in variable-rate products in 2006, despite the obvious interest rate increases on the horizon.

The "biggest problem," however, as described by the Philadelphia Inquirer, is not so understandable:

When bond markets froze in the summer, FSA, like most other bond insurers, saw its credit ratings cut, and investors started fearing the bonds could default. They began dumping PGW bonds back to JPMorgan and the other banks.

...

JPMorgan told PGW in the fall that it couldn't afford to keep owning the bonds indefinitely. Under the deal, if the bonds can't be sold by July, PGW must pay the banks $60 million a year, for the next five years, until the value of the bonds is paid off. PGW says it can't afford that with its other debt.

PGW can cancel the swap agreement but, under the deal, might have to pay JPMorgan more than $30 million to compensate the bank for ending the arrangement early.

Or it can find a new lender willing to sell new bonds, probably at higher rates, Bisgaier added. "We have six months to fix this."

None of that should be PGW's problem. JPMorgan agreed to underwrite the bonds; at that point, the bonds should have become JPMorgan's responsibility. Normally, if the underwriter can't place the bonds, they hold on to them. If bondholders have clauses in their purchase agreement with JPM permitting them to rescind the deal and send the bonds back to JPM, that should be JPM's problem.

But that's not what happened here. For a less than 2% discount on the initial interest rate, PGW took on all of the risk of the bonds, including the risk of increased interest rates, the risk of bond insurer rating decline, and the risk of investors and their underwriter changing their minds.

That's exactly the opposite of how a 'bond' is supposed to work. A bond is supposed to provide the borrower with capital under the single requirement that they make timely interest and premium payments, which PGW continues to do. It should be just like a mortgage -- so long as the interest and premium is paid, a bank can't simply call a mulligan and ask for the money back if it's unhappy with the market for mortgages.

Indeed, the rigid nature of instruments like interest rate swaps is supposedly a big part of what's causing so much trouble on Wall Street, and why the Federal government has already provided banks $350 billion-plus in assistance to help them with these assets, with a loss of $64 billion and counting.

More questions need to be asked about this "deal" -- in the midst of systemic bank malfeasance and irrational exhuberance, how did PGW, and not JPM, end up on the losing end of a commonplace transaction? 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Today is Martin Luther King, Jr., Day of Service. MLKDay.Gov tells us,

Millions of Americans are expected to honor Dr. King and answer President-elect Obama’s call to service by volunteering on the January 19 King Holiday. More than 11,400 service projects are taking place across the country, more than double last year. Americans will make it “a day on, not a day off” by delivering meals, refurbishing schools, reading to children, signing up mentors, and much, much more.

Of course, you don't need a holiday to serve your nation. On January 8, 2009, Lasantha Wickramatunga, Chief Editor of Sri Lanka's secular, liberal, pro-democracy, pro-government transparency Sunday Leader was assassinated. He left behind an editorial to be published in the event of his assassination, titled And Then They Came For Me, which begins:

No other profession calls on its practitioners to lay down their lives for their art save the armed forces and, in Sri Lanka, journalism. In the course of the past few years, the independent media have increasingly come under attack. Electronic and print-media institutions have been burnt, bombed, sealed and coerced. Countless journalists have been harassed, threatened and killed. It has been my honour to belong to all those categories and now especially the last.

You can read the full article here.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Via Overlawyered, George Will at the Washington Post favorably reviews Philip K. Howard's "Life Without Lawyers:"

Long Beach, N.J., removed signs warning swimmers about riptides, although the oblivious tides continued. The warning label on a five-inch fishing lure with a three-pronged hook says "Harmful if swallowed"; the label on a letter opener says "Safety goggle recommended."

...

Defensive, and ludicrous, warning labels multiply because aggressiveness proliferates. Lawsuits express the theory that anyone should be able to sue to assert that someone is culpable for even an idiotic action by the plaintiff, such as swallowing a fishing lure.

Oh no! Not warning labels. Heaven forbid a company slap a sticker on their product pointing out some of the dangers that the manufacturer, which spent years testing and developing the product, has discovered.

I've never heard of any swallowed-fishing-lure lawsuits and George Will doesn't give any examples. I'd be surprised if a jury heard such "idiotic action" and didn't send the plaintiff home penniless. If a manufacturer thinks that's worth warning about, that's their business. How much does a sticker add to their bottom line? Less than 0.1% of the cost of the good?

Will saves the meat for, of course, a runaway jury:

A predictable byproduct of this theory is brazen cynicism, encouraged by what Howard calls trial lawyers "congregating at the intersection of human tragedy and human greed." So:

A volunteer for a Catholic charity in Milwaukee ran a red light and seriously injured another person. Because the volunteer did not have deep pockets, the injured person sued the archdiocese -- successfully, for $17 million.

The Charity Governance blog has a description of the case and a link to the Court of Appeals' opinion, which was upheld due to an even split by the Wisconsin Supreme Court.

George Will is tilting at windmills. The theory of 'respondeat superior' -- in which a 'master' is responsible for the conduct of their 'agent' -- is centuries old. In the Milwaukee case, it was undisputed the volunteer was acting in the course of her volunteering for the Christ King Legion of Mary, a volunteer organization staffed and run entirely by the Christ King church.

The question was whether the volunteer was also acting on behalf of Christ King itself, which had a poorly-worded insurance policy that appeared to cover volunteers working on behalf of church employees.

Mr. Hjalmer Heikkiknen (yes, the greedy, cynical man has a name) was 82-years-old at the time. Liability was not denied, as the volunteer had admittedly run a red light.

The accident caused Mr. Heikkiknen to lose a leg as well as all bladder and bowel function, so that he's now completely dependent on others, including his wife. The $17 million was broken down as $558,366.06 for past medical expenses, $750,000 for future medical expenses, $10,000,000 for past pain, suffering and disability, $5,000,000 for future pain, suffering and disability, and $500,000 to Amelia Heikkinen for loss of society and companionship.

Let's not be coy: Mr. Heikkiknen's will spend the rest of his life confined to his bed, with most of time directed towards cleaning and managing his bodily fluids because someone deliberately ran a red light in a rush to deliver a statue. $17 million sounds large, but it's less than half of the $40 million in coverage available. The church will pay not one penny for the case.

I doubt Mr. Heikkiknen will be around to spend much of it. Assuming Congress fixes the bizarre 0% estate tax rate that occurs solely in 2010, then after credits and deductions Mr. Heikkiknen's estate will likely be charged a tax between 30-50% of what's left when he passes away, making the government the principle beneficiary of the verdict.

The bigger issue here is what, exactly, was driving this case. There was no dispute the driver was negligent and no dispute the driver was acting in the course of her work for the church's volunteer group. One "dispute," if you want to call it that, is if the church's ambiguously worded insurance policy also covered the church's volunteer group. The other "dispute" was the exact number it would take to make Mr. Heikkiknen whole again.

It's possible that the insurance company promptly offered a reasonable settlement to cover Mr. Heikkiknen's medical bills, future cost of care, and an amount to alleviate the misery he has and will suffer, and Mr. Heikkiknen nonetheless held out from settling, possibly to leave behind a large inheritance for his wife and children.

It's also unlikely. More likely, the insurance company offered nothing or a pittance, banking that either they would eventually prevail on the terms of the ambiguous insurance contract they themselves drafted or Mr. Heikkiknen would die, severely reducing the potential award by proving that he 'only' spent a few months or years in his catastrophically injured state.

They almost won that bet, except that Wisconsin Supreme Court split evenly. Now the money the insurance company was investing (who knows where, likely the same mixture of public and private equity and government debt as most insurance companies) has now been converted into tax revenue, different investments in the same market, payments to medical providers, and some personal expenses for the Heikkiknen family.

And that's the worst example Howard and Will could find. I'm not impressed.

[UPDATE: Unsurprisingly, other plaintiffs' attorneys, like Brooks Schuelke, are unimpressed.]

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The Philadelphia Inquirer published a review of the just-released biography of Jim Beasley, the founder of my firm:

Legendary Philadelphia trial lawyer Jim Beasley achieved national fame - and vast wealth - by magically spinning humdrum details into compelling courtroom drama. Former Inquirer reporter Ralph Cipriano's account of Beasley's life, unfortunately, too often does the opposite. ...

Part of the problem is structural. The original book idea was for Beasley and Cipriano to write about Beasley's big cases, which are world-class: Epic battles against The Inquirer on behalf of Dick Sprague; Beasley versus boxing impresario Don King; Beasley winning a record $907 million wrongful-death verdict against fugitive murderer Ira Einhorn; Beasley as the first lawyer to serve legal process on the Taliban after 9/11 - followed by a $100 million-plus judgment.

It was a good plan.

But then Beasley died.

Still, Cipriano stuck with the one-case, one-chapter format. Deprived of Beasley's insights, however, Cipriano was forced to rely instead on juiceless trial transcripts, which are often stilted and obtuse. The result: a narrative that covers an impressively broad legal landscape, often interesting and insightful, but with a formulaic feel at odds with Beasley's verve and spontaneity.

It's not surprising that I have a more favorable view of the book -- look to the right and you can see a picture of the book's cover, which is link to the book's webpage. I know the author. I went to the law school that now bears Beasley's name and work at the firm Beasley founded.

I don't know David Marston and I don't think he meant to be unfair, but I do think one mistaken impression should be corrected: most of the book arose from original reporting, not trial transcripts, a distinction that comes across readily when reading it.

Take the cases listed above: Cipriano got the Inquirer editor, the judge, and the defense lawyer in Richard Sprague's case to talk, as well as the federal court mediator in the case against Don King. It's a fascinating read, better than you'll get in most trial or lawyer books, with a quick pace.

True, Beasley's own voice is not in the book, but so what? When's the last time you read a great biography, particularly one of a trial lawyer, with ample assistance from the subject? Even the most humble of subjects come across as arrogant and self-serving when opining upon their own legacy.

Truth be told, most "authorized" or "cooperative" biographies are terrible, with insufficient distance from their subjects. Robert Caro's The Power Broker, for example, one of the finest biographies ever written, was done without any assistance whatsoever from Robert Moses, but rather good old fashioned shoe leather and long conversations, pen and pad in hand, with Moses' contemporaries.

Martson also missed, to me, the critical part where Jim Beasley's personality shines through in the book: that awful title, Courtroom Cowboy, which caused Michael Smerconish to drop his head in his hands when Beasley chose it. You can't read words so self-assured without them smacking you in the face.

Which is how he wanted it.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

From the Associated Press:

Pardo's downward slide ended Christmas Eve, when the 45-year-old electrical engineer donned a Santa suit and massacred nine people at his former in-laws' house in Covina, where a family Christmas party was under way. He then used a homemade device disguised as a present to spray racing fuel that quickly sent the home up in flames.

Pardo had planned to flee to Canada following the killing spree but suffered third-degree burns in the fire — which melted part of the Santa suit to him — and decided to kill himself instead, investigators said. His body, with a bullet wound to the head, was found at his brother's home about 40 miles away.

...

Pardo had a 9-year-old son, Matthew, by another former girlfriend, Elena Lucano. He had not seen the child for years, but apparently was claiming him as a dependent for tax purposes. Lucano told the Los Angeles Times that she didn't know Pardo was claiming their son as a dependent.

The boy was left severely brain damaged as a toddler when he fell into a backyard swimming pool on Jan. 6, 2001 while Pardo was alone with him at his former home in Woodland Hills, according to attorney Jeffrey Alvirez, who represented Lucano in the resulting court case.

Medical costs reached $340,000. Lucano sued Pardo to obtain money from his $100,000 homeowner's insurance policy and about $36,000 was put into a trust fund for the boy, who requires constant care. Pardo never contributed any more money to the boy's care.

"He never spent a dime on his son," Alvirez said.

A high school girlfriend described Pardo as, back then, having been "a very easygoing person, a very friendly guy." Now he's the Santa Gunman, after years of ignoring his own disabled child.

I often hear that personal injury plaintiffs want to "get lucky" with their accident, that the most important consideration is to ensure no one gets a "windfall." No doubt, there are plenty of people who want to find a reason to sue or to profit from a trivial infraction. I reject cases like that every day.

But let's be clear: no one who needs a trial lawyer is "lucky." Most of my catastrophic injury or wrongful death cases look like Matthew's. A child, a loved one, or an "easygoing, friendly" person was going about their ordinary life, doing something everyone else has done, when something went terribly wrong.

It wasn't too long ago that Matthew's case would be considered a hunt for a "windfall;" after all, they were suing over something his own father did. Law students will recall Arizona's Broadbent v. Broadbent case, 184 Ariz. 74, 907 P.2d 43 (1995), a favorite of textbooks, which involved similar circumstances and the doctrine of "parental immunity."

There are obviously far more causes of the tragedy here -- from mental illness, to a messy divorce, to losing his job -- than his son's accident. But I can't help but wonder what Bruce Pardo's life would have been like if his son had never been injured. I'm sure he wondered, too.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Yesterday’s Wall Street Journal included an editorial by Dan Slater (who runs the WSJ Law Blog) called "The Debate Over Who Pays Fees When Litigants Mount Attacks," suggesting reconsideration of the “English Rule,” in which unsuccessful litigants are required to reimburse their opponent's legal fees and costs (a/k/a the “loser pays” system), as contrasted to the “American Rule,” in which each party bears their own legal expenses: 

Legal experts think a loser-pays system cuts down on frivolous suits. Those clearly hurt the U.S. The nation's tort system cost $245.7 billion in 2003, amounting to about 2.2% of total gross domestic product, according to a report from professional services firm Towers Perrin. The percentage of GDP spent on litigation was at least twice those in the U.K. and Germany.

At the same time, say experts, the insurance helps mitigate the pitfalls of a loser-pays system. "Insurance does move in to fill the gap for those suits that might not otherwise be brought in a loser-pays system," says Paul Lomas, a London-based litigator at Freshfields Bruckhaus Deringer.

Initially, a few factual corrections are in order.

First, the Towers Perrin study claiming that litigation costs amount to 2.2% of total gross domestic product has been roundly criticized as being baseless and inflated. For example, the study unfairly lumps together actual litigation costs, like attorneys fees, with the routine functioning of our torts and insurance system. As the Wall Street Journal itself noted over two years ago,

But here's the problem: critics of past years' studies -- and there are many -- say the number and the projections that come with it are deeply flawed. For instance, they include payments that don't involve the legal system at all. Say somebody smashes his car into the back of your new SUV and his insurance company sends you a $5,000 check to fix the damage. That gets counted as a tort cost in Tillinghast's number. Critics say it's just a transfer payment from somebody who wasn't driving carefully to somebody who has been legitimately wronged. How is that evidence of a system run amok?

"It's just so inflated," J. Robert Hunter, the director of insurance for the Consumer Federation of America and a former Texas insurance commissioner, says of the Tillinghast figure. Critics also argue that other insurance-industry costs that aren't the fault of a burdensome tort system -- such as the salaries of insurance-industry CEOs -- show up in its calculations.

"Math Divides Critics As Startling Toll of Torts Is Added Up," By LIAM PLEVEN, March 13, 2006; Page A2.

Second, plaintiff’s lawyers are in no sense “accustomed to being the exclusive financier of litigation.” The primary "financier" of litigation in America is the insurance industry, turning its good hands into boxing gloves when injured parties seek more than nominal compensation. Even in the context Slater is thinking about – the plaintiff's side of personal injury tort suits – there are hundreds of companies willing to loan money to plaintiff’s firms and/or plaintiffs for a piece of the eventual recovery. Ordinary business banks also loan to firms after performing the same due diligence they would with an company.

All of these companies, however, have the same restriction that would have to be imposed in a loser pays insurance system: the financier has absolutely no say as to whether the case will be settled or not. Such limitation is appropriate to ensure uncompromised decision-making and is analogous to similar barriers on the defense side, in which the defendant, with limited exceptions, retains control over whether to settle and where the defense lawyer nominally represents only the defendant and not the insurance carrier as well, so as not to divide the lawyer's loyalties and prejudice the defendant.

Third, most states already recognize a form of “loser pays” in the claim for wrongful use of civil proceedings, which permits the victims of frivolous lawsuits to recover damages caused by such frivolous lawsuits. It has bite here in Pennsylvania -- the "Dragonetti Act" has resulted in multi-million-dollar outcomes.

There's also, of course, the "loser pays" already at the heart of contingent fee cases: if I lose a case, I get nothing. No reimbursement for my time. No reimbursement for my expenses. Nothing. A total loss.

Which brings me to my primary objection to the loser pays system. I would not object to receiving a guaranteed income like my brethren of the defense bar instead of bearing the risk that years of effort and tens of thousands – potentially hundreds of thousands – of dollars will be spent in vain, but I would object, on grounds of fairness, to penalizing a party that brought a valid claim merely because they did not meet their burden of proof.

Consider a typical medical malpractice case. Most of the facts are uncontested. The dispute centers on whether the physician-defendant breached the standard of care, whether such breach caused any harm, and what damages resulted.

In all states of which I am aware, the first two elements require expert medical testimony. To even start a lawsuit here in Pennsylvania, I need a certificate of merit from a qualified physician establishing those two elements. To prevail at trial, obviously, I need in-court credible testimony from a qualified physician establishing those elements to a reasonable degree of medical certainty.

No expert testimony, no claim. Period. That is to say, by law the first two elements are matters entirely outside the understanding of any plaintiff except for physicians who happen to be victims of malpractice in the specialty they currently practice or teach.

If, in good faith, my client and I believed our qualified expert's opinion on matters the law says are beyond our understanding, why should we be punished if a jury accepts the defendant’s version instead of our's?

Deterrence? Of what? Claims a qualified expert physician thought were valid? Should I be deterred merely because the defense found someone to say otherwise? In medical malpractice, there's always some doctor somewhere willing to say that my client coincidentally suffered a heart attack or stroke or spontaneous decapitation regardless of the record or the probabilities.

Why would we want to deter valid claims? Isn't the point of a civil justice system to offer people the opportunity to present their claims in fair and open court?

I'm wary, too, of considering the lower litigation costs in Europe as a positive sign of judicial health (if, indeed, they are lower, given the inflated numbers of the US study). Many European countries routinely apply legal doctrines we consider abhorrent in the United States, such as the onerous standards applied to publishers in libel cases in the United Kingdom, standards incompatible with First Amendment principles of free speech.

When all is said and done, the effective result of loser pays, whether insured or not, is to change the civil system from one in which a plaintiff must convince a jury of the rightness of their cause with the preponderance of the evidence to one in which a potential client must convince a lawyer and/or insurance company of the rightness of their cause beyond a reasonable doubt. The client must convince the lawyer/insurer not only that their case is worth their damages, but that their case is worth well beyond their damages, to mitigate the direct loss the lawyer or insurer will incur if they lose.

The practical effect, then, would be to intimidate plaintiffs' lawyers like me into rejecting the vast majority of legitimate cases because, even though I may feel they have a strong likelihood of prevailing, I simply can't afford to test my luck with anything other than the handful of cases I'm sure will win.

UPDATE: Dan Slater got plenty of email, as he relates on the WSJ Law Blog.

• Email This
• Print
• Comments (1)
• Trackbacks (1)
• Share Link

Thomas Friedman misses the boat:

I have no sympathy for Madoff. But the fact is, his alleged Ponzi scheme was only slightly more outrageous than the "legal" scheme that Wall Street was running, fueled by cheap credit, low standards and high greed. What do you call giving a worker who makes only $14,000 a year a nothing-down and nothing-to-pay-for-two-years mortgage to buy a $750,000 home, and then bundling that mortgage with 100 others into bonds — which Moody's or Standard & Poors rate AAA — and then selling them to banks and pension funds the world over? That is what our financial industry was doing. If that isn't a pyramid scheme, what is?

Funny thing is, there really was a "legal" scheme connected to Madoff: it appears a substantial part of the money invested with him was not directly from clients, but through investment advisers who were specifically being paid huge sums of money (some on the 2% investment / 20% returns hedge fund fee scale) to perform due diligence and to ensure the investments were safe.

A number of these "advisers" -- perhaps all of them given the obviousness of the fraud -- did absolutely nothing at all to earn their money other than hand the money over to Madoff, no questions asked.

Textbook breach of fiduciary duty. If they misrepresented what due diligence they did, it's fraud, too.

There will be a reckoning.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

So far I've seen three legal blogs pick up on Senator Hillary Clinton's "Emoluments" problem if she's appointed to serve as Secretary of State: Adam B at DailyKos, Jack Balkin at Balkinzation, and Eugene Volokh at the Volokh Conspiracy. Great work by all three.

The situation is tailor-made for a first-year ConLaw exam. By Executive Order dated January 4, 2008, President Bush enacted cost-of-living adjustments ("COLA") for a wide variety of Executive Branch employees, including members of the uniformed service, judges and justices, administrative law judges, the employees of Veterans Affairs and, importantly, the Cabinet.

The latter is the problem for Clinton, who on January 4, 2008, was in the middle of a Senate term set to end in 2012. Article 1, Section 6, Clause 2 of the United States Constitution states:

No Senator or Representative shall, during the Time for which he was elected, be appointed to any civil Office under the Authority of the United States, which shall have been created, or the Emoluments whereof shall have been encreased during such time; and no Person holding any Office under the United States, shall be a Member of either House during his Continuance in Office.

[sic for "encreased"]. Andrew Malcolm at the LATimes reads this clause, shall we say, strictly:

We're not lawyers. But we do speak English. And to our eyes that constitutional clause doesn't say anything about getting around the provision by reducing or not benefiting from the increase of said "Emoluments."

It flat-out prohibits taking the civil office if the pay has been increased during the would-be appointee's elected term. Period. Which it has.

It depends on what you mean by "English," "reducing" and "increased."

Starting with "English," as Chief Justice John Marshall wrote (while interpreting another separation of powers issue under Article I) "we must never forget that it is a constitution we are expounding." McCulloch v. Maryland, 17 U.S. 316, 407 (1819). It's not a dinner menu; everything must be interpreted in context, with an eye to the multiple balances of powers and interests reflected by the Constitution's text as well as past interpretations and future consequences.

Moving on to "reducing," there's nothing wrong with a Constitutional "fix;" indeed, there's every reason to believe that's just as the Framers, who themselves drafted a compromise document, would want. Reducing salary is also how we fixed the issues arising from this clause three times in the past, like with the "Saxbe fix," named after Nixon's last Attorney General, for whom the Congress specifically reduced his pay back to where it was prior to his term in the Senate. (You can see the notes to 5 U.S.C. 5312 littered with all three prior "Compensation and Emoluments" fixes). If Obama wanted to "fix" this situation by rescinding the COLA adjustments for the Secretary of State, that would fit within the purposes of the clause, as described below.

As for "increased," that's not nearly as clear as Malcolm believes, because of the complexities of government. Bush's Executive Order did not arbitrarily increase emoluments -- instead, the Order merely published the new numbers required on an annual basis by a statute most recently amended in 1990. See notes to 5 U.S.C. 5303. The "increase" for Constitutional purposes thus arguably occurred back in 1990; Bush did nothing more than carry the existing numbers through the method established there, hardly the same thing as a deliberate increase in salary.

In sum, there's a strong argument that's there is no emoluments problem -- the emoluments at issue here were increased in 1990, long before Clinton's term.

Let's go back to the purposes of the clause itself.

The Founders' Constitution has all the primary sources you could want. In short, the clause was enacted to prevent legislators from creating officers (or making them more lucrative) and then appointing themselves (or forcing the Executive to appoint them), a form of above-board corruption that had been prevalent in the British Parliament and in the Virginia Legislature. Some of the Constitutional Convention, like George Mason, wanted a complete bar on members of the Legislature serving in the Executive Branch, while others, like Rufus King, felt any such prohibition would be "chimerical" and would prevent talented, qualified leaders from proper service. As with many issues, James Madison proposed a compromised which carried the day.

The situation with Senator Clinton seems to have proved Rufus King right. Over the past few years there have been no limits to the revolving-door, back-scratching system in which members of Congress routinely engaged in direct and indirect self-dealing against the public interest. Many of those not taking money explicitly (like Rep. Cunningham and Sen. Stevens) are nonetheless more than happy to spend the public's money on special interests to secure lucrative jobs for themselves after their time in Congress. Adding insult to injury, there's no suggestion that Senator Clinton's rumored appointment would be part of a self-patronage maneuver to enrich her or anyone else. Indeed, she never voted on the increase, as it was an executive order, and not even one designed to increase salaries, just to keep pace with inflation and generalized costs.

The emoluments clause thus is the "chimera" warned of at the Constitutional Convention that has done nothing to thwart corruption in generations (perhaps ever) and has now, for the fourth time, impeded the appointment of a qualified candidate who indisputably did not seek or take the job for pecuniary reasons. Yet, the language is still there in our Constitution and we must not disregard it out of political convenience -- few actions are worse for our democracy than establishing or condoning a disregard for the Constitution.

Which is why, the above analysis notwithstanding, I think on January 20, 2008, then-President Obama should reverse the Executive Order as it pertains to the Secretary of State and then appoint Senator Clinton. It wouldn't surprise me if he did exactly that; if he didn't want to spend political capital and attention dealing with Sen. Lieberman or Sec. Gates, I doubt he'd want to do it over a couple thousand dollars of Hillary Clinton's salary.

• Email This
• Print
• Comments
• Trackbacks (1)
• Share Link

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."

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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."

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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)

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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

 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.

 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

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.

UPDATED AGAIN: It's happened already (so much for two years!), we now directly own $40 Billion of AIG.]

Continue Reading...

• Email This
• Print
• Comments (1)
• Trackbacks (1)
• Share Link

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.

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

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 .

 

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments (2)
• Trackbacks (1)
• Share Link

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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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)

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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

Enjoy the weekend.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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."

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Justice Scalia says:

"Richard Nixon, when he lost to [John F.] Kennedy thought that the election had been stolen in Chicago, which was very likely true with the system at the time," Justice Antonin Scalia told The Telegraph.

"But he did not even think about bringing a court challenge. That was his prerogative. So you know if you don't like it, don't blame it on me.

"I didn't bring it into the courts. Mr Gore brought it into the courts.

"So if you don't like the courts getting involved talk to Mr Gore."

That's odd, I thought I remembered the opinion beginning:

GEORGE W. BUSH, et al., PETITIONERS v.
ALBERT GORE, Jr., et al.

on writ of certiorari to the florida supreme court

As in, a discretionary review of a state supreme court decision, which the United States Supreme Court reversed.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

From the Exxon v. Baker decision, which, under federal maritime law (foreshadowing future rulings on state civil law), cut a $2.5 billion punitive damages award down to $500 million, for a 1:1 ratio with compensatory damages:

The common sense of justice would surely bar penalties that reasonable people would think excessive for the harm caused in the circumstances.

Obviously. That's why we have juries, trial judges, appeal judges, and state supreme court judges to determine and review punitive damage awards. A jury, of course, is in far better position than an appeal judge years later to assess the real circumstances, being how they actually sit in the presence of the witnesses and, after swearing an oath, fairly consider all the evidence.

But the above quote is just a throwaway line, unconnected to any reasoning or holding. The Supreme Court actually held:

The real problem, it seems, is the stark unpredictability of punitive awards. Courts of law are concerned with fairness as consistency, and evidence that the median ratio of punitive to compensatory awards falls within a reasonable zone, or that punitive awards are infrequent, fails to tell us whether the spread between high and low individual awards is acceptable. The available data suggest it is not. A recent comprehensive study of punitive damages awarded by juries in state civil trials found a median ratio of punitive to compensatory awards of just 0.62:1, but a mean ratio of 2.90:1 and a standard deviation of 13.81.

Even to those of us unsophisticated in statistics, the thrust of these figures is clear: the spread is great, and the outlier cases subject defendants to punitive damages that dwarf the corresponding compensatories.

I have a proposal: would all persons who, in the future, are going to engage in intentional, wanton, willful, or reckless conduct, agree now to do so in a predictable fashion?

Seems to me the "real problem" is that life is complicated and -- shockingly -- unpredictable. It's no surprise that different defendants, in different cases with different facts, will be punished differently. It's also no surprise that a jury will find a given number sufficient to deter wrongdoing in one circumstance is insufficient to deter wrongdoing in another circumstance.

Confining and directing the method by which punitive damages are determined is appropriate; no one should be railroaded to punishment, or punished for conduct or harm unproven in court.

Arbitrarily asserting that punishment is not permitted to be as variable as the underlying conduct that was punished, however, is unconscionable.

• Email This
• Print
• Comments
• Trackbacks (2)
• Share Link

After much ado regarding AP's interpretation that the use of more than 5 words of a story required payment, the real core of the issue has been identified:

The sticking point for AP seems to be their belief that a headline-and-first-paragraph excerpt is not covered by fair use:

AP’s argument has been that a large percentage of the value of what they deliver is carefully packaged in that content and so the publishing of that information without permission was a copyright violation.

That's not unreasonable, like their apparent per-word demand was. I'll demur on whether they're correct that copying the headline-and-lede is more than permitted by the 'fair use doctrine.'

The AP's bigger problem is that facts cannot be copyrighted under the 'hot news' doctrine. As described in this thorough piece, while the AP can likely go after companies that copy and rephrase their content wholesale, what do they plan to do if a blogger sees news and then rewords the gist of it for their blog?

• Email This
• Print
• Comments
• Trackbacks
• Share Link

From the "no surprise" department, via TortDeform:

The American Medical Association issued its first health insurance report card at the group's annual meeting Monday. The primary focus is on how quickly and accurately doctors get paid.

"Physicians are spending 14 percent of their total revenue to simply obtain what they've earned," said Dr. William Dolan, an AMA board member.  (Emphasis added.)

The report card is an effort to reduce the cost of claims processing to doctors and help them as they negotiate contracts with insurance companies, he said. The report card will help patients if it reduces wasteful administrative costs, Dolan added.

The report card compares Medicare and seven national commercial health insurers on the timeliness and accuracy of claims processing. It is based on a random sample drawn from 3 million claims.

There are no grades like A, B and C, and many of the technical measures may not mean much to most patients. But business leaders and health policy makers are interested in cutting an estimated annual $210 billion in wasted administrative claims processing costs, AMA leaders said.  (Emphasis added.) Source: AMA issues first report card on health insurers - Yahoo! News

At least as of 2003, the Congressional Budget Office estimated malpractice costs as a whole at $24 billion, less than 2 percent of overall costs.

Don't blame the victims. Blame the culprits.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Via Word Spy:

My mind now expects to take in information the way the Net distributes it: in a swiftly moving stream of particles. Once I was a scuba diver in the sea of words. Now I zip along the surface like a guy on a Jet Ski.

—Nicholas Carr, American writer and editor, Atlantic Monthly, July 1, 2008

I have seen the point made over and over again, that modern society or the Internet or both has destroyed our attention spans, so that we expect rapidfire information and are unable to appreciate depth or subtlety anymore.

Fact is, for ages prolific readers have taught themselves how to quickly peruse useful information from nonfiction. I emphasize "peruse" because the word did not originally mean "to skim," it meant "to use thoroughly." The "inverted pyramid" of news reporting, beginning with the most important information first and slowly working in details as the story progresses, wasn't born with the internet.

Nonfiction, which comprises the bulk of the Internet (news, weblogs, reference, guides, directories) should not be any harder to digest than the subject matter itself -- the whole point of nonfiction writing is to convey information as simply as possible. If you spend a substantial amount of time reading qua reading, you should either practice your reading technique more or find better material to read.

There's a long section in Carr's article on an apparent change in Nietzche's work after he purchased a typewriter, which Carr uses as another example of technology changing the way we think. Problem is, the typewriter apparently made Nietzche's work shorter and tighter, the exact opposite of what would be expected when writing was made easier and thus lots of writing was made easier. Indeed, examples abound of teachers forbidding the use of computers or typewriters to write student papers because they somehow make it too easy, encouraging thought-dumping.

In my own experience, dictation (whether by human or computer transcription) has made my own writing shorter and tighter, because it forces me to think out my whole sentences before writing, a technique penalized by typewriters, computers, and certainly handwriting, where, if you stop to think before writing everything, you'll be there all day.

The above notwithstanding, when writing for the web you should be more brief than on paper. Why? Not because people are dumber the moment the read a computer, but because more people will read your post on the web than would read your article or book. It takes a lot of time, effort, and money to get an article or book into someone's hands, which shows they're already invested and interested in the content.

Not so with the web, where people frequently encounter material they certainly would not have sought out and purchased elsewhere. You have to grab those people quickly, since they're not really 'your readers,' they're people passing by.

Like jurors.

• Email This
• Print
• Comments
• Trackbacks (1)
• Share Link

From a Bloomberg article:

Business's Agenda

After the 2002 congressional elections, when Republicans bolstered their control of Congress and President George W. Bush vowed to fix what he called ``out-of-control'' litigation, corporate lobbyists drew up an agenda seeking to eliminate asbestos lawsuits, cap medical-malpractice payouts and curb class-action cases.

The plan, which might have resulted in savings of tens of billions of dollars in damages, court costs and legal fees, mostly failed, and the more lawyer-friendly Democrats returned to power in last year's elections.

"The plan, which might have resulted in savings of tens of billions of dollars in damages ..."

The only way to "save" damages is not to cause them in the first place. A verdict or settlement doesn't create or destroy any net wealth in society; it moves wealth from one party to another party based upon the court or jury's finding of the harm caused by the first party. The destruction of wealth occurred at the underlying wrongful incident.

What the author meant to write was, "The plan, which would have prevented individuals from receiving compensation for the billions of dollars of damages they suffered because of corporate and professional malfeasance ..."

Must have been a typo.

The other part, "court costs and legal fees," has an easy solution: defendants should offer to settle cases for their fair and just value. Fact is, even in the most obvious and egregious cases, most defendants -- particularly where an insurance company is underwriting everything -- don't even consider a fair settlement, much less offer one, until after spending tens of thousands (frequently hundreds of thousands, sometime millions) in defense attorney's fees.

I can't even count the number of cases I've seen where the defense attorney's fees clearly exceeded the plaintiff's demand.

• Email This
• Print
• Comments
• Trackbacks
• Share Link