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

The Wall Street Journal (and their Law Blog) had an amusing piece recently about the jockeying underway for the position of lead counsel in the Toyota Motor Corporation Unintended Acceleration Marketing, Sales Practices, and Products Liability Multidistrict Litigation, which has been consolidated in the Central District of California:

Lawyer Daniel Becnel Jr. of Reserve, La., donated a kidney to his sick brother. Alexandria, La., attorney Richard Arsenault organized a symposium featuring a lawyer played by John Travolta in the movie "A Civil Action." New York lawyer Anita Jaskot's father is a doctor. She is also single and speaks Polish.

These are among the many personal morsels lawyers hope will help them win a lead spot in the litigation against Toyota Motor Corp., which has been consolidated in a Santa Ana, Calif., courtroom. ...

For the Japanese auto maker, which declined to comment for this story, billions of dollars in legal liability could be at stake as it fights suits tied to its recalls of vehicles because of sudden-acceleration issues. The lawyers' quest is a pot of as much as $500 million in fees. Only a few will share it.

For reference, here's David Becnel's, Richard Arsenault's, and Anita Jaskot's applications.

You can't blame them for pulling out all the stops. Judge James V. Selna specifically ordered:

[T]he Court presently intends to appoint plaintiffs’ lead counsel and liaison counsel. Applications for these positions must be filed with the clerk’s office on or before April 30, 2010. The Court will only consider attorneys who have filed an action in this litigation. The main criteria for these appointments are (1) knowledge and experience in prosecuting complex litigation, including class actions; (2) willingness and ability to commit to a time-consuming process; (3) ability to work cooperatively with others; and (4) access to sufficient resources to prosecute the litigation in a timely manner. Where appropriate, applications should also set forth attorney fee proposals, rates, and percentages that applicants expect to seek if the litigation succeeds in creating a common fund.

How intense and expensive can these cases get? 

Consider the class action filed back in 1996 on behalf of 300,000 Native Americans alleging the U.S. Department of the Interior mismanaged trust accounts and land under the Dawes Act of 1887. The suit tentatively settled for $3.4 billion a few months ago, but approval is being held up by the political process.

The case was driven by a team at Kilpatrick Stockton, which sunk more than $22 million in legal fees and expenses into the suit, through fourteen years of litigation, seven trials (totaling almost 28 weeks in trial), and 10 rounds of appeals against the most well-funded defendant in the world: the United States government.

But they weren't lead counsel.

That honor went to Dennis Gingold, a solo practitioner who used to represent big banks.

It wasn't easy:

Mr. GINGOLD: We gave [Blackfeet tribe leader and lead plaintiff Elouise Cobell] a commitment that no matter what it took, we would do what needs to be done to resolve this for the individual Indians, because it's the dark side of American history and we as lawyers have an obligation to correct it if we can.

SHAPIRO: How much of your time has this case taken up as a percentage of your total practice in the last 14 years?

Mr. GINGOLD: A hundred percent.

SHAPIRO: Really, this has been your sole case for the last 14 years?

Mr. GINGOLD: I haven't had a vacation since December of 1998. I've generally worked seven days a week on this case.

Twenty years ago Gingold organized the takeover of Baltimore Bancorp. That massive, hostile deal was like a vacation compared to the Indian Land Trust case, which swallowed up his whole professional and personal life for more than a dozen years.

But he did it, and did it well. You can't say he did the whole case by himself — Kilpatrick's $22 million contribution was essential — but you can say he managed the litigation by himself.

So what does it take to be lead counsel on a multidistrict class action? They need access to money, sure, but that can be effectively guaranteed by appointing multiple plaintiff's firms to the case.

What it really takes is dedication. As much as I'd like to see the Court adopt Philip Thomas' suggestion that the lawyers compete on an obstacle course — a process that would probably yield similar or better results to relying on the whimsical applications — my hope is that the most dedicated lawyer is chosen.

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As always when a major corporation is caught killing, maiming or poisoning innocent people, the apologists have come out in full force in defense of Toyota. This time, they're blaming senior citizens.

You see, old people become confused. They don't realize when they're accelerating and when they're braking. At least that's what I've been told by the usual suspects.

Don't buy it:

In the 50-second tape, crash victim Chris Lastrella begins by telling the dispatcher: “We're in a Lexus ... we're going north (state Route) 125 and our accelerator is stuck.”

The dispatcher asks where they are passing, and Lastrella is heard asking someone in the car where they are. He exclaims: “We're going 120 (mph)! Mission Gorge! We're in trouble – we can't – there's no brakes, Mission Gorge ... end freeway half mile.”

The dispatcher asks if they can turn the car off.

Lastrella doesn't answer and says repeatedly: “We are now approaching the intersection, we're approaching the intersection, we're approaching the intersection.”

The last sounds heard on the tape are someone saying “hold on” and “pray.” Lastrella says: “Oh shoot ... oh ... oh” Then a woman screams.

Killed in the crash were CHP officer Mark Saylor and his wife Cleofe who were both 45, their 13-year-old daughter Mahala, and Lastrella, 38, who was Cleofe Saylor's brother. All four lived in Chula Vista.

So much for blaming the victims for being too old to understand how to drive a car. A California Highway Patrol officer in his prime couldn't stop one of those death traps, so he, his wife, his daughter, and his brother-in-law paid with their lives because, at Toyota, Safety Is Job #2.

That case conveniently didn't make it into any of the articles blaming elderly drivers for the crashes.

Here's something else the corporate apologists won't tell you: lawsuits are the primary reason that cars are safer today than they were in the past.

In the 1970s and '80s, litigation was watched keenly by manufacturers and regulators as a kind of early warning system on safety defects, said Kelley, now semi-retired and consulting on auto product hazards from his home in Pebble Beach, Calif.

Steered by lawsuits and safety standards set by the National Highway Traffic Safety Administration after its creation in the late 1960s, automakers corrected design defects that had exposed drivers to impalement on gearshifts and lacerations from shattered auto glass.

Also in the 1960s, seat belts became widely adopted by automakers and crash tests were refined into a serious science.

The 1970s provided automakers with a wake-up call in the Grimshaw vs. Ford Motor Co. case, in which a California appeals court ordered the carmaker to pay $125 million in punitive damages to the victims of one of the Ford Pinto's fiery explosions. The huge punitive damages award followed evidence showing that Ford knew of the defect but failed to recall the vehicles for what was estimated to be an $11 repair. The award was reduced to $3.5 million in a post-verdict negotiation but nevertheless was one that signaled to the auto industry that it would be harshly sanctioned for ignoring known defects.

Improved seat belts and seat backs emerged in the 1980s, spurred by lawsuits brought on behalf of accident victims. Before three-point restraints were made mandatory a decade ago, back-seat occupants were prone to paralyzing injury when frontal crashes caused their upper bodies to fly toward the impact, smashing into seats, doors or other passengers.

Fact is: money talks. If it costs Toyota less to shuttle a few families to an untimely demise than to fix the problem, Toyota won't do it. 

Every time a car company today evaluates the safety of the car's gas tank and fuel system, an engineer, manager or lawyer at the company inevitably says,

Remember the Ford Pinto cases.

Then they check the gas tank and fuel system again. And again.

Next time a car company investigates reports of sudden acceleration, which would you prefer that engineer, manager or lawyer says,

Remember the Toyota cases.

or

Is it really worth issuing a recall?

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Ronald Miller has an excellent post about the timing of interrogatories in personal injury lawsuits.

One of the most effective weapons available to plaintiff's lawyers is the element of surprise. Although defendants typically begin lawsuits with far more information about the facts (and thus a better ability to marshal specific facts in their favor), they do not know what the plaintiff's lawyer knows or believes, and they do not know how the plaintiff's lawyer intends to prove his or her case.

Moreover, in some cases, the defendant's lawyer might not even take the time to learn all the relevant facts. Thus, as Miller notes,

[S]ome [defense] lawyers are going to learn the case when they get the file and get their client ready, regardless of the stage of the case. Others are going to not know the file at all and introduce themselves to the client and the case 10 minutes before the depositions. The theory behind waiting to serve interrogatories is that if you get the latter type of defense attorney, the defendant will take positions that don’t comport with the facts, logic or good strategy because they have not looked at the nuances of the case. Arguably, this logic would even hold up against a top notch lawyer because every lawyer, even well prepared lawyers, sees a case with a clearer lens on the courthouse steps than they do when preparing for a deposition.

No doubt. On the other hand,

The advantage in first obtaining answers to interrogatories is that the answers should help the attorney determine who should be deposed, what questions should be asked of those deponents and what documents should be obtained in the case.

Of course, another highly effective weapon is the truth. Much as how cynics say that you should tell the truth because it is easier to remember, a lawyer will always be able to handle surprise at trial if his or her theory of the case is consistent with the truth. Conversely, a lawyer who presents a theory that is inconsistent with the truth (even if presented in good faith, such as when the lawyer was simply unaware of a particular fact) is exposed to the risk that a "surprise" fact will contradict their theory and take the whole case down with it.

For me, then, when determining how much discovery I want to do prior to a deposition, I consider how much I know about the witness's story and about the truth, and how much more I need to know about the witness's story and the truth. Thus, while I rarely send out comprehensive interrogatories prior to a deposition, I will usually send out enough to know the witness's position with regard to the major issues in the case. Odds are, the defense lawyer will have figured out those issues (and prepared the witness) even if they only picked up the file a few days before the deposition, so it's pointless to blind myself to those facts.

Finally, in my personal experience trickery of any form, even ethical trickery that is entirely within the bounds of professionalism, is a waste of time, and you have more to lose by attempting it than by simply investigating the case thoroughly and proving it in the most clear, concise and compelling manner possible.

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Among the many creative “legal” ideas floating around on the internet is:

If you set up an LLC for yourself and conduct all your business through it, the LLC will be liable in a lawsuit but you won't.

Last week, I was asked if this "asset protection strategy" worked.

No, it doesn't.

Conducting your personal business through an LLC provides no protection against a tort verdict, the type of liability that most people are worried about. The use of corporate forms -- like LLCs, S-Corporations, or Incorporation -- has many important purposes, but avoiding personal tort liability for your own conduct is not one of them.

To see why, let's start with some background.

What's a "tort?"

"Tort" is the Norman word for "wrong." There are three main types of legal wrongs: criminal wrongs, contractual wrongs, and tort wrongs.

A "criminal" wrong is an offense against the state: we as a society made it illegal to smoke pot, you did it anyway, here's your punishment. A "contractual" wrong is a failure to do something you agreed to do: I gave you $20 to mow my lawn, you didn't do it, I want my money back.

Everything else is a "tort" wrong. The most common tort is "negligence," which includes most lawsuits, like car accidents, medical malpractice, or slip and fall. In negligence, you had a general duty to do something in a reasonable way (like drive your car safely) and you messed up, so you have to pay for the harm you caused. Another type of "tort" is an intentional tort, like defamation or tortious interference with business relations: you purposefully hurt me, so you should pay for the damage.

When most people say they're worried about "getting sued," they're usually talking about being responsible a large tort verdict arising from a catastrophic injury or wrongful death.

What's an LLC?

A limited liability company is a type of business association recognized by state and federal governments as a legal entity independent of its owners and employees. On behalf of the owners, the company can, for example, own property and enter into contracts.

For our purposes here, we do not need to go into the differences between a limited liability company, an S-corporation, full incorporation, or a limited partnership. (I exclude general partnership and sole proprietorship because neither claims to limit liability at all.) All of them serve the same basic purpose, which is to protect investors from incurring any liability greater than the amount they invested into the company. The Economist described the purpose of limited liability a couple years ago:

Before limited liability, shareholders risked going bust, even into a debtors’ prison maybe, if their company did. Few would buy shares in a firm unless they knew its managers well and could monitor their activities, especially their borrowing, closely. Now, quite passive investors could afford to risk capital—but only what they chose—with entrepreneurs. This unlocked vast sums previously put in safe investments; it also freed new companies from the burden of fixed-interest debt. The way was open to finance the mounting capital needs of the new railways and factories that were to transform the world.

How does tort liability work in the context of an LLC?

Most everyone knows, although not by name, "vicarious liability" and "the doctrine of respondeat superior." If, in the course and scope of your employment, you cause someone else harm, then your employer is liable for your conduct. 

Here's what you probably don't know:

An agent is subject to liability to a third party harmed by the agent's tortious conduct. Unless an applicable statute provides otherwise, an actor remains subject to liability although the actor acts as an agent or an employee, with actual or apparent authority, or within the scope of employment.

Restatement of the Law, Third, Agency § 7.01 (emphasis added).

(An aside about The Restatement: The Restatement is an intense effort of lawyers, professors and judges organized by the American Law Institute to reduce to writing the legal community's consensus regarding general principles of law applied across the country. "Agency" is the subject of this particular Restatement, and "Third" means it's the third version, which was published in 2006. For reference of how intense these efforts are, the Second version was published in 1958. In case you're wondering, the Second version also said “[a]n agent who does an act otherwise a tort is not relieved from liability by the fact that he acted at the command of the principal or on account of the principal …")

An "agent" is a broader definition of "employee:" it's anyone acting on behalf of the company.

Let me reiterate what that all means: the general legal rule across the country is that individuals acting on behalf of a company are personally liable for their tortious conduct, even if they did so on behalf of the company.

Don't believe this "Restatement?" Want some case law? Here's a case from the Virgin Islands less than a month ago, noting in passing the cases it found with minimal research:

Terr. of the U.S.V.I. v. Goldman, Sachs & Co., 937 A.2d 760, 794 n.153 (Del. Ch. 2007) ('Officers and directors may be held individually liable for personal participation in tortious acts even though performed solely for the benefit of the corporation[.]') (quotation omitted); Armed Forces Ins. Exch. v. Harrison, 2003 UT 14, 70 P.3d 35, 41 (Utah 2003); Miller v. Keyser, 90 S.W.3d 712, 717 (Tex. 2002); Saltiel v. GSI Consultants, Inc., 170 N.J. 297, 788 A.2d 268, 273 (N.J. 2002); Haupt v. Miller, 514 N.W.2d 905, 909 (Iowa 1994); Camacho v. 1440 Rhode Island Ave. Corp., 620 A.2d 242, 246-47 (D.C. 1993); Weir v. McGill, 203 Ga. App. 431, 417 S.E.2d 57, 59 (Ga. 1992); Hecker v. Ravenna Bank, 237 Neb. 810, 468 N.W.2d 88, 95 (Neb. 1991); Ingram v. Machel & Jr. Auto Repair, Inc., 148 A.D.2d 324, 325, 538 N.Y.S.2d 539 (N.Y. App. Div. 1989); Mississippi Printing Co. v. Maris, West & Baker, Inc., 492 So. 2d 977, 978 (Miss. 1986); Wyatt v. Union Mortg. Co., 24 Cal. 3d 773, 157 Cal. Rptr. 392, 598 P.2d 45, 52 (Cal. 1979); Jabczenski v. Southern Pac. Memorial Hosp., 119 Ariz. 15, 579 P.2d 53, 57 (Ariz. Ct. App. 1978); Taylor v. Alston, 79 N.M. 643, 447 P.2d 523, 525 (N.M. Ct. App. 1968); New Eng. Box Co. v. Gilbert, 100 N.H. 257, 123 A.2d 833, 835 (N.H. 1956)."

Addie v. Kjaer, 2009 U.S. Dist. LEXIS 36110, at *21–12 (D.V.I. Apr. 28, 2009)(noting, "The Court has come across no jurisdiction that applies a contrary rule.").

Insurance and employee indemnification are so common today that this distinction is not often appreciated, but it's still the law. If Warren Buffet defrauded Mom and Pop’s Ice Cream Stand wholly for the benefit of Berkshire Hathaway, he would personally be on the hook for the damage just the same as Berkshire.

Let's go back to your personal LLC. Assume you hit a pedestrian with a car, defame someone in a blog post, or cause a building fire. It doesn't matter if you were "employed" by your LLC when you did it -- you will still be personally liable, as will the LLC that "employed" you.

Thus, in order to "protect your assets," you need to put enough money into the LLC that it can completely pay any tort judgment against you, or else the injured person can go for your assets long after it has bankrupted the LLC. That just defeats the nominal purpose of the LLC (to avoid liability), since you'll have to pay the same amount anyway, just through the LLC.

Again, there are plenty of reasons for setting up an LLC, such as protecting investors, limiting contractual liability, limiting liability arising from employee's conduct, and a host of business and tax uses, but avoiding personal liability for your own conduct isn't one of them.

There's an easier and more effective way. Buy good personal liability insurance and buy an umbrella liability insurance policy. If you're running a business, buy a good business insurance policy (including liability) and an umbrella policy for it, too. If your business is unusual, or you're worried about a particular risk, look for risk-specific insurance, like media policies which cover defamation. Don't skimp -- get at least $1 million in coverage, or more depending on your own risks.

Then you'll be covered for most tort verdicts (keep in mind some states prohibit insuring intentional conduct, and insurance policies can carve out whatever exceptions / exemptions they want).

No trickery needed, just some money and foresight.

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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.]

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EDD Update points us to this article from Wes Billingsley in the Texas Lawyer:

... all too often, lawyers raise spoliation claims not for legitimate reasons but instead to turn cases lacking substantive merit into opportunities to procure a quick settlement.

...

Openly challenge spoliation allegations through candid discussions with opposing counsel. Often these discussions may become technical in nature and require greater client involvement, but they should reveal quickly whether there is merit to the other side's claims, sometimes even before an opponent files a sanctions motion.

When legitimate concerns about a client's ESI [electronically stored information] do exist, explore other sources from which to obtain the electronic documents. Do not become fixated -- or let the other side fixate -- on the fact that documents from a specific source may no longer be available. The amended rules require that relevant documents be produced once; if the client produces documents from a server or backup tapes, that should be sufficient to refute a spoliation claim that alleges the documents were not also produced from a particular source, such as an individual's personal computer.

If only it were that simple... Unfortunately, the "spurious" spoliation allegation is frequently the only way I can get the other side to actually produce all of the documents I requested.

Take, for example, a typical tractor-trailer trucking accident. The Federal Motor Carrier Safety Regulations (49 CFR Part 325 et seq., which have been adopted wholesale by every state of which I'm aware) impose very specific requirements upon motor carriers for the retention of a wide variety of "supporting documents," including bills of lading, waybills, fuel receipts, you name it.

Part 379.7 ("Preservation of Records") should be ideal for plaintiff's lawyers, as it requires:

The records shall be indexed and retained in such a manner as will render them readily accessible. The company shall have facilities available to locate, identify and produce legible paper copies of the records.

That is, it's supposed to be trivially easy for trucking companies to produce these records. If the Department of Transportation asked, they'd have them on the spot.

But when I ask for them, my request is "too vague" and "overly broad" and it would be "unduly burdensome" to produce them. "Candid discussions" get nowhere; motions get somewhere.

Of course, once they are "produced," it soon becomes apparent that I have 90% of the documents I don't care about and 5% of the ones I do.

What to do? Well, I could file yet another discovery motion to clog up the courts after my "candid discussion" fails, or I could inform defense counsel that their failure to retain these documents represents spoliation, and that my experts will testify such missing documents could have revealed whatever it is I'm trying to prove.

Is such an allegation "spurious?" I don't think so, I genuinely believe that the failure to preserve records like that creates a factual issue for the jury to consider. Why not sit down and have a candid discussion with defense counsel about that? It usually gets better results than hearing from defense counsel, over and over again, that certain documents don't exist when you know they should.

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

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

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

1. Immediate Mandatory Mediation

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

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

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

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

2. Allow Expert Witnesses to be Deposed

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

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

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

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

§ 8351.  Wrongful use of civil proceedings

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

...

§ 8352.  Existence of probable cause

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

42 Pa.C.S. § 8351 et seq.
 

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

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

4. Eliminate Referral Fees

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

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

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

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

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The "Truck Injury Lawyer Blog" points us to a new development in the world of trucking accidents:

In his recent article, Premiums Fall 10% to 50% As New Firms Enter Market, Frederick Kiel describes the effect that the drop in premiums has on the trucking companies, as these new insurance companies are offering across the board rates to trucking companies in an effort to compete for their business. ...

These new insurance companies are offering low premiums in an effort to gain new business, a trend that has been seen intermittently since the 1980s. Perhaps now is the time to look at the minimum insurance required to be carried by tractor trailer companies. Congress set the minimum rates back in 1984 at $750,000 for some companies with most being required to carry $1,000,000. Inflation and time have eroded the value of the coverage. Medical bills and the costs associated with catastrophic injuries have risen dramatically. Today, in a catastrophic case, the minimum limits are paid and quickly spent. The injured are then left for the taxpayer to pay for through medicaid or some other assistance program.

$1 million frequently will not cover the damages in a catastrophic personal injury case, particularly not where there will be extensive continuing medical treatment. $1 million also frequently does not cover wrongful death damages, and it usually will not cover an accident where multiple people have catastrophic injuries.

although the article does not address it, an important point to keep in mind here is how much safer trucking these days should be given the depth and breadth real-time monitoring available to trucking companies. Traffic, weather, and driver alertness -- down to excruciatingly minor details -- are all readily apparent in real-time to fleet managers, thereby eliminating the bulk of the systematic risks faced by truckers that cause major motor vehicle accidents.

If trucking companies used this technology appropriately -- rather than using it solely to run their drivers right up to (and frequently beyond) the Federal Motor Carrier Safety Regulation limits -- and purchased adequate insurance, including insurance with coverage for each plaintiff, rather than the accident as a whole, the costs and financial risk of trucking would be dramatically reduced.

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If you haven't been following, Victoria Pynchon at the Settle It Now Negotiation Blog and I have been having a running discussion about The Settlement Unicorn, which I originally defined as follows:

I've heard of a mythical beast, which I'll call The Unicorn Settlement, where two hostile parties on the verge of a lawsuit get lawyers, almost file suit, and then, through deft representation, settle their differences peacefully and move on.

Let me exclude from The Unicorn a particular class of dispute, where two businesses with an ongoing relationship have a big dispute. I exclude that because, while I've seen many such disputes resolved pre-litigation, it has always been in the context of an ongoing relationship the value of which exceeds the value of the dispute. So I don't call that a "settlement of a case," I call it a "continuation of a business relationship."

Victoria most recently gave an example in a medical malpractice case, which caused me to move the goal posts:

Thus, when the parties agreed to mediate, there was likely $40-60,000 "on the table," which could either be used to help settle the case or could be thrown away on experts. As noted above, that sum alone -- putting aside attorneys' fees and all the other costs and issues -- likely represented between one quarter and one half of the eventual settlement value, and the lawyers, whom I am guessing were experienced in medical malpractice, both deserve credit for recognizing this economic waste.

But that's why I just can't verify this as an actual sighting of the mighty unicorn. To me, it's analytically similar to my initial example of two businesses who resolve their dispute not because they really reach an agreement, but because the cost of the dispute is less than the value of their continuing relationship. The equation above doesn't work in a wrongful death or birth injury case. It frequently doesn't apply in cases worth more than $250,000 and virtually never applies to cases worth more than $500,000.

So Victoria commented:

On to the main point, isn't there ALWAYS some "external" factor that brings litigating parties to the table?

Which external factors do you want to rule out for our poor unicorn?

I deftly didn't answer for several days [sorry, Vickie]. Let me clarify: my biggest issue with her example was my suspicion that the final settlement didn't substantially exceed the cost of continued litigation. As such, it doesn't really look like a genuine desire to settle, it looks like a cost-avoidance measure with a little bit of personal understanding (the scar) involved.

That's all well and good, and covers a lot of cases, but it's not what I'm looking for and what I think needs more consideration. What I'm looking for is a settlement reached, for substantial money, because the lawyers sat down, considered the case, and came to an agreement on its value.

The frustratingly inefficient process that nags at me is this: after my investigation of a case, I have a good idea of three different numbers:

1. the highest reasonable verdict value of the case;
2. the likely settlement / verdict value;
3. the lowest reasonable successful resolution.

Unspoken there is #4, a defense verdict / abandoning the case, which I guess you could say is a consideration, except that, given how I'm largely in the business of contingent fee cases, I'm not in the business of taking cases I think can't win. It's always a concern, but not for settlement: if I settle a case, I settle it at a "win" amount. Otherwise I go for #1 and don't look back.

Here's the frustrating part. Every insurer is different, as is every defense attorney, and certainly every defendant, and there are disincentives for all of them (respectively bureaucratic, financial, and emotional disincentives) not to settle early. And even though I've done defense work, I know I just don't get how this adjuster works, how this case is evaluated, how my client is lying, blah, blah blah.

But at some point the adjuster, lawyer and/or client will start throwing numbers around in their head. At least along the lawyers, the #2 numbers usually aren't that far apart, and will be within half (plus or minus) of what a judge / mediator would put on it for settlement purposes.

Time after time, I litigate a case for months / years, for which I've known #2, and after all that time and money, no one knows any more than when they started. Some defense lawyers will, after the close of discovery, start talking settlement. Others refuse to discuss until jury selection.

Now, in some circumstances, such litigation is inevitable. Take a birth injury (hypoxia) / medical malpractice case. The potential damages are enormous, and heavily dependent upon developmental / life care / economic assumptions. There's always a thrombophilia defense, there's always some Chair-of-Whatever who can describe how a fetal strip says the opposite of what it actually does. So we'll need to litigate, depose the doctors, find the experts, wave to the insurance surveillance, and get the whole thing ready for trial before appropriate numbers are offered.

On others, it's just plain silly. Here's a hypothetical: industrial product failed, 54yo male client spent 16 days in the hospital, lost $80,000 in wages while recovering in physical therapy for months, now earns $15,000 less per year at a crummier job, has a recurring severe pain in legs, and can't engage in normal physical recreation anymore. He'll need continuing care plus a couple surgeries.

There are thousands of cases like that every year, more than enough to get a contemporary sense of "what they're worth."

Months of discovery will create dozens of copies of his medical records, find out he had three workplace safety violations in the past 15 years (none related to the machine), and reveal the company has had two other incidents with this same product, but no smoking guns.

Just before trial, we're exactly where we started, except the insurance company is poorer $50,000-$150,000 in legal fees and experts, I've put out $20,000-50,000 in costs and experts, and my client has gone more than a year since filing suit living off loans from family to pay off the massive credit card debt and home equity loans they took on immediately after the accident.

Why did we mess around all that time? The defense lawyers would have known proving liability wouldn't be that hard for me, and that neither me nor my firm ever shows up to trial unprepared. All of their discovery was, at best, a half-hearted fishing expedition. The bulk of what they did was force me to "prove" things that should have been beyond any genuine dispute. Why couldn't we get this done sooner?

Victoria, do you have any examples of two parties sitting down, before largely completing litigation, and wrapping up a case for substantially more than nuisance / cost of suit? If so, what brought them to the table?

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From the Middle District of Pennsylvania:

In Pennsylvania, an individual who sustains injury in a motor vehicle collision that is aggravated by subsequent medical negligence may recover damages for both injuries either from the driver exclusively or from the driver and the negligent medical practitioner in tandem. See RESTATEMENT (SECOND) TORTS § 457 (s1965) [hereinafter "RESTATEMENT"]; Smialek v. Chrysler Motors Corp., 290 Pa. Super. 496, 434 A.2d 1253, 1258 (Pa. Super. Ct. 1981) (stating that "the original tortfeasor[ in an automobile collision] is . . . fully responsible . . . for the negligent manner in which a physician or surgeon treats the case"). The plaintiff may recover all damages solely from the negligent driver because subsequent faulty treatment is deemed to be a foreseeable consequence of the automobile accidence. See RESTATEMENT § 457 cmt. a ("[D]amages assessable against [a negligent driver] include not only the injury originally caused by the [driver's] negligence but also the harm resulting from the manner in which the medical, surgical, or hospital services are rendered"); Boggavarapu v. Ponist, 518 Pa. 162, 542 A.2d 516, 517 (Pa. 1988).

However, if the plaintiff sues both the driver and the physician, liability should be allocated according to each tortfeasor's separate negligence. 1 See Frazier v. Harley Davidson Motor Co., 109 F.R.D. 293, 295-96 (W.D. Pa. 1985) (stating that negligent motorists and subsequently negligent physicians commit separately identifiable acts of negligent); Smith v. Pulcinella, 440 Pa. Super. 525, 656 A.2d 494, 497 (Pa. Super Ct. 1995); Harka v. Nabati, 337 Pa. Super. 617, 487 A.2d 432, 434 (Pa. Super Ct. 1985) (quoting Voyles v. Corwin, 295 Pa. Super. 126, 441 A.2d 381, 383 (Pa. Super. Ct. 1982)) ("[T]o the extent that the acts of the original tortfeasor and those of the physician are capable of separation, the damages should be apportioned accordingly."). The court determines as a matter of law whether injuries are capable of apportionment; however, the jury determines the value of the claim against each defendant. Voyles, 441 A.2d at 383.

Trout v. Milton S. Hershey Med. Ctr., 2008 U.S. Dist. LEXIS 65553 (emphasis added).

If the medical malpractice causes a catastrophic injury, there are very few situations in which you would want to proceed only against the car driver, not least because they likely have far less available insurance than the medical provider. Indeed, in this case the plaintiff's leg became necrotic and had to be amputated allegedly due to medical malpractice, an injury that, when combined with the accident itself, likely exceeds the insurance coverage of most drivers.

Then again, if neither the auto accident nor the medical malpractice was catastrophic, and the damages are within the coverage limits, the action can be substantially simplified by proceeding only against the car driver. You will still need expert medical testimony, but you might not get nearly the same fight as you would going against the medical provider directly. You might also have more settlement leverage against the car driver's insurance company because they run the risk of eating all of the damages at trial.

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If you're looking for contact information, please go to my Contact page.

The Beasley Firm's main website also profiles our Areas of Expertise.

The Beasley Firm typically represents plaintiffs in civil litigation and trials in Pennsylvania, New Jersey, Delaware and, on occasion, Washington, DC, and New York City. We take difficult plaintiffs' cases and see them all the way through investigation, filing, pleadings, discovery and trial, and through appeal and re-trial, too.

The Beasley Firm is a full-service civil litigation and trial law firm with a forty-year history of excellence. Our reputation as trial lawyers is unparalleled, with multiple record-setting verdicts, and the record (held by the founder) for million-dollar verdicts by a single attorney. Slade McLaughlin and I set a new verdict record -- for punitive damages in a Pennsylvania medical malpractice case -- in May of 2008.

The Beasley Firm is unique in that it has many attorneys who specialize in particular areas like automobile accidents or medical malpractice, multiple appellate attorneys, and many general practitioners who focus on cases that don't fit the normal pattern, all under one roof that retains the nimble energy of a boutique firm where everyone knows each other and bounces ideas off one another. We adapt as the case demands; if a case needs a dozen attorneys and assistants, it gets them.

Most firms put up lists of the types of cases they work on; it's hard to do that for us. In the past year we've worked on automobile accidents, aviation accidents, breach of contract breach of fiduciary duty, business torts, civil rights, commercial litigation, copyright infringement, defamation, dram shop, employment discrimination, fraud, insurance coverage / bad faith denials, medical malpractice, private equity / shareholder disputes, personal injury, product liability, wrongful death, and wrongful use of civil proceedings / abuse of process cases.

We use alternative dispute resolution methods like mediation frequently and have experience in commercial arbitration, including large, complex commercial disputes.

My practice is largely unlimited -- at any given time, I generally have multiple cases representing people who have been physically injured in accidents or through medical malpractice, and multiple cases representing people and businesses who have been financially injured through breaches of contract, breaches of fiduciary duty, or downright fraud.

If you think you have a case, please contact our offices for a case review. We don't charge to review cases and we generally represent plaintiffs on a contingent fee, where our fee depends upon our success. Please see the Contact page for contact info.

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