American Tort Reform Association

'Everybody Does It,' But Congress Doesn't Care

2008-04-21T03:59:00Z

In the wake of credit crises in both the mortgage and broader financial markets, Congress is busy conducting hearings and negotiating various proposals for regulatory reform with the executive branch.

Following corporate accounting scandals at Enron, WorldCom and elsewhere several years ago, Congress quickly went to work tightening the regulation of corporate governance.

“Regulation follows crisis as surely as mushrooms follow the rain,” wrote Yale law professor Jonathan Macey in a recent Wall Street Journal op-ed. So why has Congress yet to acknowledge, much less schedule a hearing, now that, within the past several months, three of the nation’s most powerful, widely known plaintiffs’ lawyers have all pled guilty to federal felonies in connection with their corruption of our civil justice system?

Melvyn Weiss of the firm formerly known as Milberg Weiss, his former law partner William Lerach, and Mississippi legend Richard “Dickie” Scruggs each copped to conspiracy charges – Weiss and Lerach for paying a stable of on-call shareholder clients used in trumped up securities litigation, and Scruggs for bribing a judge over the distribution of lawyers’ fees in a Hurricane Katrina insurance lawsuit.

Weiss and Lerach are largely credited or blamed, depending on one’s point of view, for inventing the modern securities class action wherein investors sue corporations and their senior executives for alleged fraud when stocks lose value. Since 1965, according to syndicated columnist George Will, Milberg Weiss had “won, often by tactics indistinguishable from extortion, $45 billion from corporations.” (The entire firm still faces federal racketeering charges.)

Scruggs, also an innovator and big-time operator, originally made a name for himself in asbestos cases. Then his so-called “home cookin’” helped force four tobacco giants into a landmark $246 billion settlement with 46 states and various private sector personal injury law firms in 1998. Scruggs’ firm stands to gain nearly a billion dollars from that settlement and had subsequently pursued numerous lawsuits and additional billions from insurers and other “deep pocket” defendants.

Talk about big business. Scruggs, Lerach and Weiss personified the industrialization of personal injury and securities litigation that, since the 1970s, has radically changed America’s legal climate, diminished the concept of personal responsibility and eroded the public’s respect for the rule of law, all while siphoning hundreds of billions of dollars in judgments and legal fees away from more economically productive use.

Scruggs, Lerach and Weiss have given a whole new meaning to the term “criminal lawyers.” And while no credible critic of America’s litigation industry alleges that all plaintiffs’ lawyers are criminals, Bill Lerach himself, using an “everybody does it” argument to minimize his crimes in an online interview published on the eve of his February sentencing, gave readers the impression that the problem may be widespread.

"Believe me, it was industry practice,” Lerach insisted, referring to lawyers’ unlawful payments to lead plaintiffs in class actions. There’s also a growing body of bullet-proof evidence documenting comparably endemic corruption in asbestos and silica litigation, and a 2006 Harvard School of Public Health study concluded that four out of every 10 medical malpractice lawsuits filed in America each year are “groundless.”

But this Congress doesn’t seem to care.

In the past, lawmakers showed an interest in reining in the trial bar’s abuses. The Class Action Reform Act, signed into law by President Bush in early 2005, has been credited with reducing the number of speculative, constitutionally questionable class actions that personal injury lawyers had previously shopped to friendly state court judges around the country, regardless of where the plaintiffs and defendants resided or did business, or where the alleged injuries in a given case may have taken place.

The U.S. House of Representatives also passed, in both 2004 and 2005, the Lawsuit Abuse Reduction Act (LARA), which aimed to reinstate serious sanctions for attorneys found by a judge to have filed a “frivolous” claim or motion. Both times, senators failed to consider the measure.

Without preventing plaintiffs from filing legitimate lawsuits in jurisdictions with actual connections to their alleged injuries, LARA would restore the mandatory sanctions for filing frivolous lawsuits that were eliminated in a controversial 1993 change to Federal Rule of Civil Procedure 11. These sanctions could include reimbursement of reasonable attorney’s fees and litigation costs.

Many foreign countries with which America competes economically already maintain such commonsense safeguards against lawsuit abuse. And the crimes of Dickie Scruggs, Bill Lerach and Mel Weiss aren’t qualitatively different than the crimes of Dennis Kozlowski at WorldCom or Jeff Skilling and the late Ken Lay at Enron. So why aren’t chairmen of the House and Senate judiciary committees and other congressional leaders calling for hearings into apparent corruption within the litigation industry?

Trial Bar's 'Tort Reform' Campaign Exposed

2008-03-24T14:00:00Z

The American Tort Reform Foundation has just published a new white paper detailing the coordinated efforts of personal injury lawyers to increase litigation and repeal or chip away at existing tort reform statutes enacted previously by state governments.

Why should anyone care? Because the front-page prosecutions of Bill Lerach and Dickie Scruggs, coupled with various tort reform court victories in recent years, make it easy enough for some in the media and elsewhere to believe that the plaintiffs’ bar is in retreat.

But as our white paper makes clear, personal injury lawyers and their allies are still aggressively, if subtly, on the march, particularly at the state level. Their new drive to expand liability and litigation markets has been quiet, but it’s robust and as opportunistic as ever.

The paper, Defrocking Tort Deform: Stopping Personal Injury Lawyers from Repealing Existing Tort Reforms and Expanding Rights to Sue in State Legislatures (PDF/828 KB), cites nearly 60 of the more than 80 separate bills proposed for serious consideration last year in more than two dozen state legislatures across the country. This year, at least 50 such bills have already been introduced in 19 statehouses.

Surprisingly, the national trial lawyers’ association criticized our paper a few weeks back, before it was published and before they’d read it, they’ve since admitted to Congressional Quarterly. Of course, they guessed wrong about its contents. Our paper is not an advocacy piece per se; it merely shines light on matters of public record wherein the enterprising personal injury bar is trying to grow its business.

To put the paper in broader context, understand that for more than 30 years, personal injury lawyers worked through the courts to fight reasonable limits on lawsuit abuse. This process became known as “judicial nullification of tort reform.”

But now, the plaintiffs’ bar has opened a second front, seeking to roll back tort reforms and create new litigation rights through the legislative process. Often enough, these efforts aren’t overtly led by recognized trial lawyer associations, but by so-called ‘consumer groups’ closely allied with the trial lawyers.

From explicitly authorizing new types of lawsuits and implied causes of action to the deputizing of private lawyers by activist state attorneys general, and from expanding consumer laws and limits on damages awards to the extension or elimination of statutes of limitation and repose, the tort bar’s well-orchestrated, well-financed campaign at the state level dovetails with its comparable pursuit of “trial lawyer earmarks” in Congress.

Tort lawyers comprise one of the nation’s richest special interests and collectively contribute more money to political campaigns than just about any other industry group. This makes their influence with legislators and other elected officials a serious concern. We hope our white paper will help tort reform advocates in state capitals understand what they’re up against and how they can better defend against it.

(The white paper specifically references bills in Alabama, Arkansas, California, Colorado, Connecticut, the District of Columbia, Florida, Illinois, Iowa, Louisiana, Maine, Maryland, Michigan, Minnesota, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, Rhode Island, South Carolina, Texas and Washington.)

Another $54 Million Consumer Lawsuit in D.C.

2008-02-25T16:36:00Z

In light of another absurd $54 million consumer protection lawsuit filed in the District of Columbia, the American Tort Reform Association has again urged local policymakers to make reasonable reforms to the city’s well-intentioned but easily exploited Consumer Protection and Procedures Act. Full text of our recent letter to D.C. Mayor Adrian Fenty, City Council Chairman Vincent Gray and two key Council committee chairpersons, Phil Mendelson and Mary Cheh, follows below:

February 14, 2008

RE: Another $54 Million Consumer Protection Lawsuit Highlights Need for Reforms

Dear Mayor Fenty, Chairman Gray and Chairpersons Mendelson and Cheh:

As you likely know by now, another absurd $54 million consumer protection lawsuit, Campbell v. Best Buy, has been filed in D.C. Superior Court. Among other things, the plaintiff has told reporters that, in pursuit of media attention, she capriciously chose to pursue the same amount of damages that former administrative law judge Roy Pearson Jr. vindictively sought from his neighborhood dry cleaners in the infamous “pantsuit” that became internationally embarrassing for the District last year.

At that time, my organization and others urged reasonable reforms to the District’s well-intentioned but loosely worded Consumer Protection and Procedures Act (CPPA) which would help protect the integrity of the law and our courts. Now that another opportunistic plaintiff is exploiting D.C.’s consumer protection law ― at considerable expense to taxpayers and consumers ― we again urge you to consider the following reforms:

· Provide that consumers can recover their actual losses as well as reasonable attorneys fees, not an arbitrary and excessive $1,500 per violation regardless of their injury, except in cases when it can be shown that a defendant’s actions were knowingly and willfully fraudulent or deceptive, and

· Permit only those consumers who experienced a loss because they actually relied on a fraudulent or deceptive advertisement or representation to bring a lawsuit, not those who vaguely claim harm to others or the general public.

Unlike other states, the District's CPPA is uniquely attractive to plaintiffs’ lawyers because it allows claims regardless of whether a consumer was injured or suffered a loss. (California had the only other such law, and the havoc it wreaked on small businesses in particular led voters to amend it by initiative in 2004.) The extraordinarily high amount of statutory damages provided for by D.C.’s consumer protection law also serves as an additional incentive for self-interested individuals to engage in lawsuit abuse, even as the public interest suffers.

If, as policymakers, you want to limit such outrageous manipulation of the city’s consumer protection law before late-night comics brand D.C. “Home of the $54 Million Lawsuits;” and if you want to make it easier for small and large District businesses to thrive, employ more residents and generate more tax revenue while providing consumers with lower, more competitive prices for goods and services, please work to enact these simple reforms.

Respectfully yours,

Sherman Joyce

CC: D.C. City Council Members Carol Schwartz, David Catania, Kwame Brown, Jim Graham, Jack Evans, Muriel Bowser, Harry Thomas Jr., Tommy wells, Yvette Alexander and Marion Barry

* * *

The more recent $54 million lawsuit was filed last November by a District resident whose laptop computer was allegedly lost or stolen when she left it for repairs at a Best Buy location in D.C.

WARNING: Tort Lawyers' Solicitations May Be Hazardous to Your Health

2008-01-21T04:59:00Z

It’s bad enough when plaintiffs’ lawyers unlawfully pay clients to serve as props in speculative shareholder litigation, bribe judges or conspire to present fraudulent medical evidence in thousands of lawsuits that crowd court dockets and delay justice for those with legitimate health claims.

But now there’s evidence that personal injury lawyers’ brazenly deceptive online trolling for new clients is actually putting the health of Americans at risk. Lives are at stake, and Congress and state bar associations should act.

A recently published report from the New York-based Center for Medicine in the Public Interest (http://drugwonks.com/CMPI_Insta_American_Study_01_08_08.pdf) demonstrates that many Americans are routinely misled when conducting Internet searches about illnesses or medical conditions from which they or loved ones suffer.

CMPI says its analysis revealed that Internet search results are “dominated by Web sites paid for and sponsored by either class action law firms or legal marketing sites searching for plaintiff referrals.”

Robert Goldberg, CMPI vice president and coauthor of the report, said, “What we found was not only disturbing, but dangerous to public health.” Millions of Americans now resort to Google searches more readily than consultations with the family physician, he explained. “People trust, and make decisions, based on information they find online.”

But with few exceptions, Goldberg added, the information that he and colleagues found online “had no medical authority whatsoever. In many cases, we found lawyers posing as medical experts.”

In fact, the tort lawyers’ masquerading Web sites are shamelessly designed to gin up clients for speculative litigation. Rather than getting unbiased, scientifically sound information, visitors to these sites unknowingly get skewed, misleading information that hypes risks, ignores benefits and can actually frighten them away from life-saving drugs or treatments.

Typically such Web sites eventually lead visitors to a page that ominously suggests, “If you’ve taken Drug X, you may be at considerable risk for Side Effect Y, and you may have grounds for a lawsuit.”

Among four telling case studies, the CMPI report cites an article based on “questionable methodologies” and a biased editorial that were published together in the New England Journal of Medicine in May 2007, making unfounded allegations that use of the FDA-approved and widely prescribed diabetes drug Avandia could lead to cardiovascular disease. According to the report, media stories and Internet postings quickly proliferated, as did trial lawyer efforts to drive litigation against the drug’s maker.

“Despite all of the scientific evidence that demonstrates Avandia effectively treats diabetes, patients may choose not to take the medication based on the information they find online, even though the benefits of the medication far outweigh the risks,” the CMPI report warns.

A recent Merrill Lynch analysis also concluded that “Some patients appear to have simply been scared off . . . Avandia” and “alternative oral medications.” Of course, diabetes comprises a growing epidemic in America and, if untreated, can lead to blindness, even loss of limbs.

Blithely ironic or just ruthlessly efficient, personal injury lawyers have also targeted the beneficial anti-psychotic Zyprexa for allegedly increasing the risk of ― you guessed it ― diabetes.

CMPI’s report doesn’t cover Zyprexa but, in a survey reported by the Associated Press in June 2007, more than half of 402 randomly surveyed psychiatrists who treat patients with bipolar disorder or schizophrenia indicated that some of those patients stopped taking the drug or reduced their dosage upon seeing lawyers’ advertisements. So, in its drive to file ever more groundless lawsuits, the tort bar has put the mental health of a particularly vulnerable universe of patients at considerable risk.

And in what may constitute the most egregious example of trial lawyer selfishness, the very lives of another vulnerable universe of patients, young people taking antidepressants, have also been jeopardized.

The CMPI report details how baseless allegations linking certain antidepressants to increased risks of suicide in young people appear to have taken a heartbreaking toll. Negative coverage online and in traditional media resulted in “a sharp decrease in antidepressant prescriptions” as families resisted such prescriptions for their youngsters and, fearing litigation, doctors stopped writing them.

“At the same time,” the report observes, “there was an increase in depression and suicide.”

But rather than acknowledge a problem and lead her membership in a voluntary embrace of transparency and accountability, Kathleen Flynn Peterson, president of the tort bar’s American Association for Justice, has instead attacked CMPI’s report, calling it "laughable at best" and saying its "dubious methodology consists of nothing but Google searches."

Since the report is primarily about Google searches, Peterson is willfully avoiding its point, leaving to state bar associations the responsibility for ending lawyers’ inherently misleading client recruitment. Minimally, all lawyers should be required to identify themselves clearly and conspicuously on Web sites they sponsor. And since there’s nothing “laughable” about risks to public health, Congress should commence appropriate oversight, too.

Accountability for Trial Lawyers, Too

2007-11-21T04:59:00Z

Notorious trial lawyer William S. Lerach made a career and multimillion dollar fortune driving unprecedented shareholder class-action litigation − sometimes over as little as a one-day drop in a company’s stock value – which served, among other things, to destroy or significantly weaken many jobs-providing, wealth-creating companies. Yet in the November 11 edition of the Washington Post he criticized at considerable length corporate “CEOs who line their pockets while making stupid decisions that rob shareholders and pensioners of billions of dollars.”

Talk about the pot calling the kettle black.

Lerach, acting essentially as a CEO himself, led his former law firm, Milberg Weiss, in an illegal conspiracy to pay off a stable of ready-made, on-call shareholder plaintiffs, according to the Justice Department’s 2006 indictment of the entire firm, as well as Lerach and other individuals. His recent guilty plea includes an agreement, yet to be approved by a federal judge, which will have him serve at least a year in prison and pay an $8 million fine.

Apparently still in denial, however, Lerach’s article would have readers believe his criminality was a response to bad corporate leaders acting in zealous pursuit of personal gain. The problem is that he, too, was one of those bad actors. And his article and history of litigation abuse makes clear that he will not or cannot distinguish between lawful, if unsuccessful business decisions and criminal acts, such as those he or the ringleaders of the Enron fraud perpetrated.

Indeed, Lerach confuses the larger-than-anticipated losses of Citigroup and Merrill Lynch in the subprime mortgage market with his own illegal transgressions. The boards of the two financial powerhouses held their respective CEOs responsible for their bad business decisions by dismissing them. No criminal allegations have been made with respect to the actions by the former Citigroup and Merrill Lynch chiefs.

Like all fallible human beings, corporate executives can make poor judgments. But when they commit self-interested crimes they cross a bright line. In this regard, Bill Lerach may have more in common with those he criticizes than he's willing to admit.

A September 2004 expose in Fortune magazine reported that Lerach once boasted, "I have the greatest practice of law in the world. I have no clients," meaning that it was he and his law firm, not shareholders seeking legitimate redress, who were actually generating the giant and hugely lucrative wave of securities litigation.

Lerach and his former firm were so zealous in their pursuit of damage awards from defendant companies that a Chicago jury in 1999 "hit Milberg Weiss with a $45 million judgment for abuse of the legal process, after a five-week trial that focused squarely on Lerach's reputation for vindictiveness," according to Fortune. Fearing additional punitive damages, the firm settled the case for $50 million.

Much of this could have been foreseen in the 1980s when, instead of letting injured persons take the initiative by seeking legal help, overly aggressive solicitation of clients by trial lawyers become more common. With the ultimate solicitation, paying clients to sue, Lerach crossed that bright line into criminal conduct.

Unfortunately, Lerach-like conduct is no longer uncommon.

As I testified recently before the House Transportation and Commerce Committee regarding litigation within the railroad industry, representatives of the United Transportation Union pleaded guilty to accepting payments of up to $30,000 from a law firm for steering union members with injury claims to that firm. Meanwhile, CSX Inc. investigated asbestos claims brought against it in West Virginia and discovered that the doctor who purportedly signed off on the medical evidence adduced by plaintiffs in those cases could not be located. As it turned out, there’s no record of any doctor by that name.

A federal district judge in Texas has essentially declared fraudulent thousands of asbestosis and silicosis claims wherein the same chest X-ray was used again and again for different claimants. And a federal grand jury in New York is investigating similar claims there.

Tying these and many comparable instances back to business decisions and our economy, it should be clear that fraudulent and otherwise corrupt lawsuits take a sizeable, anti-competitive toll. Every dollar spent defending against or settling such lawsuits is a dollar that won’t be spent on research and development, job creation, worker and retiree benefits, new technologies, training, or shareholder dividends.

Since the nation’s Trust Busting era began well over a century ago, holding the leaders of American corporations accountable for their decision-making has been of great public interest, driving the motivations of countless regulators, legislators and courts. Collectively, the three branches of government endeavor to balance protections for consumers, shareholders and the public at large with the flexibility business leaders need to be productive, provide employment for American workers and otherwise positively contribute to our successful and dynamic capitalist economy.

After the Enron episode, Congress promptly enacted tough anti-corruption laws with stiff penalties to hold business leaders accountable. In our post-Lerach world, Congress should strongly consider enacting legislation to hold corrupt trial lawyers similarly accountable, especially if, as Lerach himself suggested, the plaintiffs’ bar is to act as the fourth branch of government, unchecked by constitutional protections, in an undemocratic quest to “regulate” others with threats of financially devastating bet-the-company litigation.

Litigation Industry Growth Strategies

2007-10-21T03:59:00Z

Within the past year, Business Week (“How Business Trounced the Trial Lawyers,” Jan. 8, 2007), the National Law Journal (“A Different Sort of Trial for Plaintiffs,” Oct. 17, 2006) and other respected media outlets had reported that the modern tort reform wars, raging for more than a decade, had finally come to an end. Reformers, declared the media, had decisively vanquished the trial bar.

But those of us manning the barricades against the formidable forces of America’s personal injury bar know the war isn’t over. Though we may occasionally win a tactical victory on this front or that, we are resigned to an overarching strategic battle that may last as long as the Republic.

In the meantime, however, a lead story in the Wall Street Journal last month did report that America’s job market for lawyers is waning and growth in the litigation industry, which boomed well ahead of overall economic growth in the early 1990s, has leveled off.

A federal judge in Texas and a grand jury in New York have focused overdue attention on conspiracies between lawyers and doctors who bring fraudulent asbestos and silica lawsuits against various industrial defendants and their insurers. Transportation giant CSX, Inc. has countersued a prominent Pittsburgh-based law firm that adduced plaintiff medical records, purporting to prove asbestos exposure, “signed” by a doctor who never existed.

Attorneys specializing in stockholder class action lawsuits aren’t faring well these days, either. Milberg Weiss, the firm that largely pioneered this type of litigation, is under federal indictment for paying illegal kickbacks to lead plaintiffs. Several key individuals have either pled guilty or face stiff criminal penalties if convicted at trial.

Thus DukeUniversity law professor James Cox may have had a point when he recently told USA Today, “It’s getting harder for plaintiffs’ attorneys to make a living.”

But those whose livelihoods revolve around suing the rest of us are not jumping out of windows or considering career changes. Instead, the personal injury litigation industry has begun to retool. It has developed aggressive new growth strategies that rely on unmatched political influence at state and federal levels.

Changes at the Top

After a focus group-tested name change and the hiring of a new chief executive from the world of public relations last year, the Association of Trial Lawyers of America is now calling itself the American Association for Justice and has otherwise beefed up its communications staff for an all-out counteroffensive through next year’s presidential election and beyond.

Last year’s midterm elections resulted in new leadership on Capitol Hill, too. Having helped secure new majorities in both houses of Congress with their campaign contributions, personal injury lawyers now want help from those majorities in expanding litigation opportunities.

According to OpenSecrets.org, the specialized Web site of the nonpartisan Center for Responsive Politics, no single industry group has contributed more to political campaigns since 1990 than lawyers. In fact, the litigation industry’s nearly $784 million in campaign cash donated in that timeframe easily exceeds that of the oil and gas, pharmaceutical, tobacco, insurance, and gambling and casino industries combined.

Spreading that cash around to key committee chairman and others, the trial lawyer lobby has pushed a series of what my colleague, American Tort Reform Association general counsel Victor Schwartz, has dubbed, “trial lawyer earmarks.” As a major element of the litigation industry’s new growth strategy, such earmarks often appear as seemingly innocuous clauses buried in voluminous legislation.

A less than innocuous example of a trial lawyer earmark was included in the House bill updating the Foreign Intelligence Surveillance Act. Having already filed roughly 40 lawsuits seeking billions of dollars in alleged damages from telecommunications companies that had cooperated with government counterterrorism investigations in the wake of 9/11, the plaintiffs’ bar pushed majority leaders to include in the bill a provision allowing them to continue that litigation.

For the sake of both our national security and the health of our economy’s vibrant telecommunications sector, House leadership was forced by wiser heads in the White House and Senate to withdraw the onerous bill last week. But it’s astounding to think that the litigation lobby came as close as it did to having lawmakers subject to speculative legal attacks those companies the Washington Post called “patriotic corporate citizens” acting “in a difficult and uncharted environment.”

Their FISA setback aside, trial lawyers are nonetheless pressuring Congress to deliver several additional earmarks, such as a lawsuit-promoting clause or two in anticipated housing legislation which will target deep pockets in the home loan industry following the subprime mortgage meltdown. And keep an eye on the plaintiff bar’s continuing efforts to repeal so-called “preemption” rules that keep lawsuits against federally regulated industries out of state courts.

State Fare

It is in state and county courts where, unlike federal courts, presiding judges tend to be elected and thus find themselves in need of periodic campaign contributions of their own. Not coincidentally, personal injury lawyers avoid appointed judges in federal courts if they can and instead prefer having their more creative cases heard by elected state and county judges. So no one should be surprised to learn that the litigation lobby also is working diligently in state legislatures – spreading campaign cash there, too – to open windows for more state-based lawsuits.

For example, in Illinois this year the trial bar successfully convinced lawmakers to pass and Governor Rod Blagojevich to sign legislation that significantly increased potential damage awards in wrongful death lawsuits. The new law adds grief, sorrow and mental suffering as measures for non-economic damages. But these new measures are unquantifiable and entirely subjective, and they leave jurors with no rational upper limit on awards, a third or so of which go to plaintiffs’ lawyers.

In Michigan this past January, after last year’s elections boosted the number of Lansing lawmakers sympathetic to the trial bar, a determined band in the House sought to repeal retroactively an 11-year old law that had preempted state lawsuits against pharmaceutical companies if the drug alleged to have caused injury had been approved previously by the federal Food and Drug Administration.

Shortly after Governor Jennifer Granholm had signaled her willingness to sign such a bill, Pfizer announced plans to close two plants in the state, which University of Michigan economists say account for 6,000 jobs. The bill was killed by last-minute maneuvering in the state Senate but may, incredibly, be reintroduced next year. So one has to ask: With the highest unemployment rate in the nation, why would Michigan would want to create more lawsuits instead of more jobs?

Attorneys General and Friends

As noted above, no single interest group or industry spends more than trial lawyers to grease the political skids. Rhode Island Senator Sheldon Whitehouse previously served as the OceanState’s attorney general and was able to move from Providence to Washington with generous help from the lawyers he invited to sue paint manufacturers.

Though these manufacturers had voluntarily stopped making lead-based paint decades ago and long before federal regulations required them to, an out of state law firm convinced then Attorney General Whitehouse to hire them on behalf of the state to bring a lawsuit, not based on standard product liability law, but on an unprecedented contortion of public nuisance law.

A sympathetic state judge’s eventual jury instructions all but guaranteed that the verdict would go against the defendants and it did. The case is on appeal and may make it all the way to the Supreme Court. But in the meantime, a troublesome precedent for backdoor relationships between attorneys general and private sector personal injury lawyers has been set. Many state attorneys general have now followed Whitehouse’s model in hiring their political supporters, deputizing them with the awesome power of the state, and unleashing them to sue entire industries for billions of dollars.

Long, Hard Slog

So clearly then, the war against lawsuit abuse is far from over. Wealthy and politically connected personal injury lawyers will continue exerting political influence within all three branches of government in a never-ending effort to grow their industry and expand opportunities for litigation.

All the while, a neighborhood dry cleaner in Washington is sued for $54 million over an allegedly lost pair of pants, a New York City florist is sued for $400,000 because a bride was disappointed by the color of her hydrangeas, and school districts across the country are canceling recess out fear that the parents of a clumsy kid who skins a knee may sue taxpayers. Of course, lawyers for some kids in desperate need of recess are suing restaurant chains and soft-drink makers, too, blaming them for childhood obesity.

Trial lawyers will deny it, but headline-generating litigation like this seriously erodes the public’s respect for, and trust in, our civil justice system. Perhaps as important, lawsuit abuse poses significant costs to our nation’s economy while eating away at our ability to compete globally. That’s why those of us dedicated to the cause of tort reform know we’re in for a long, hard slog against those who believe America needs more lawsuits, not fewer.

We’ll keep working to educate and inform the media and America’s citizens, voters and taxpayers. But only if they further pressure policymakers to rein in the litigation industry’s selfish shenanigans can lasting victories in the tort reform wars be won.

Ethics Code for AGs

2007-09-21T03:59:00Z

During the past decade, many state attorneys general have moved dramatically to transform America's legal landscape. Expanding their duties beyond the traditional scope of providing legal counsel to governors and state agencies while protecting consumers, some AGs have reinvented themselves as aggressive litigants seeking to shape public policy choices nationwide.

Proponents of this regulation-through-litigation approach argue that such activist attorneys general are merely pursuing public policy goals that legislatures and regulators have "failed" to meet. Opponents counter that the founders intended our system of political consensus-building and compromise to be deliberate and sometimes slow-going, and they worry that the AG-driven transformation of our policymaking process erodes the integrity of, and public confidence in, our legal system. Whether one supports or opposes the transformation of our judiciary into a third, largely unchecked policymaking branch, the nation's personal injury bar has been an integral part of it.

These private-sector firms and lawyers have joined forces with the new activist attorneys general. Their partnerships combine the far-reaching prosecutorial power of the state with the zeal of profit-seeking legal entrepreneurs in multistate lawsuits against various companies, even entire industries, and they have paid off.

The Tobacco Master Settlement Agreement, in which attorneys general from almost every state worked together and with personal injury lawyers to collect more than $250 billion in the course of 25 years, was a pioneering model that has frequently been replicated. Health care providers, paint and pigment manufacturers, automakers and energy companies have been targeted by AGs and trial lawyers, among others.

Given the billions of dollars often up for grabs in this high-stakes litigation, it's no wonder that more than a few abuses by the attorneys general-trial bar coalition have come to light.

One former Texas AG went to prison for writing a false contract to reward a personal injury lawyer and political ally who, in fact, had not actually done any work to secure Texas's share of the tobacco settlement. In California, an Associated Press investigation revealed that the former AG signed millions of dollars in contracts with politically connected lawyers and lobbyists, which he failed to make public as California law requires. And West Virginia's AG is now coming under increasing fire for his unwillingness to cede to the Legislature control over certain funds generated by state litigation.

Though a few judges have begun to push back, such as those in California, Illinois and Missouri who recently ruled against the contingency fee basis upon which private-sector attorneys were hired by government prosecutors to sue former lead paint manufacturers, it's nonetheless become clear that, if partnerships between state AGs and outside lawyers are truly to benefit the public interest, they must be made much more transparent and subject to greater scrutiny.

In fact, the American Tort Reform Association (ATRA) this past April released survey results from five representative states that indicated sizeable majorities of Americans favor such transparency and scrutiny. For example, roughly three-quarters of those surveyed said that their state's AG should routinely disclose all contracts with private attorneys and make those contracts available for public inspection via the Internet. Two-thirds said such contracts should be subject to competitive bidding. And another three-quarters majority favored the creation of a national code of ethics to govern such contracts.

Accordingly, ATRA is now offering for public debate such a transparency code appropriately based on public disclosure, competitive bidding, oversight and fiscal accountability. These principles track closely with model legislation known as the Private Attorney Retention Sunshine Act crafted by the American Legislative Exchange Council, which has already been enacted in at least seven states.

First, the transparency code calls for all contracts with outside counsel performing legal work in the name of the state to be publicly disclosed and posted on the Internet. Second, whenever possible, contracts with outside counsel should be competitively bid to ensure taxpayers are getting a good deal for a fair price. Third, given that the litigation in question often has significant, long-lasting policy ramifications, contingency fee-based contracts should be subject to review by state legislatures. Fourth, work done by lawyers under such contracts should be fully disclosed, detailing precisely what was done, how much time was spent and what fees were received from the state.

Finally, all funds comprising damages awards or settlements should be deposited in the state treasury for appropriation by the state Legislature, not distributed by the AG as he or she sees fit.

In light of the growing influence of AG-trial lawyer partnerships, advocates of good government are likely to endorse these guiding principles. Many states' laws are already based on these principles, or their AGs have independently adopted them. In any case, ATRA hopes our proposed transparency code will spur vigorous debate among AGs, legislators and other legal experts, which will lead to more accountability and, ultimately, greater public confidence in our legal system.

Read the details of ATRA's proposed code at www.atra.org .

Judge's Appeal Evidences 'Unappealing' Character

2007-08-21T18:49:00Z

Regular readers of this blog may know by now that Roy L. Pearson Jr., an administrative law judge (ALJ) here in the District of Columbia and the plaintiff in the internationally infamous multimillion-dollar lawsuit against his neighborhood dry cleaners, has decided that he has not yet had enough.

Though a Superior Court trial judge ruled against him unequivocally in June; and though the defendants publicly offered an olive branch when they announced they would not seek an order requiring him to pay the nearly $83,000 in attorneys fees they'd accrued in fending him off for more than two years, Pearson nonetheless last week filed a notice of intent to appeal his ludicrous at best, delusional at worst case to the D.C. Court of Appeals.

According to Ted Frank at at Overlawyered.com notes, the average appeal within that particular court takes roughly a year and a half to run its course. So the legal nightmare that Jin and Soo Chung, the immigrant owners of Customs Cleaners, have suffered will continue while pursuit of their American Dream is again deferred.

In the meantime, Pearson remains on the D.C. government payroll, receiving his six-figure ALJ salary at taxpayers' expense. Though the D.C. commission responsible for deciding whether or not he'll be reappointed to a full 10-year term has reportedly sent Pearson a confidential letter laying out the reasons why they do not intend to reappoint him, D.C.'s bureaucratic rules allow him to request yet another hearing at which he can appeal their decision, too.

It stands to reason that this unappealing character, as fond of appeals as he is, will undoubtedly make such a request, though a hearing's not likely to be scheduled before the middle of next month. ATRA will keep you posted.

'Pantsuit' Plaintiff Persists

2007-07-21T03:59:00Z

While meeting in Chicago at their annual convention this week, the nation’s personal injury lawyers – once known collectively as the Association of Trial Lawyers of America and now going by the focus group-tested American Association for Justice – will go out of their way to convince one another and anyone else who’ll listen that they stick up for the little guy and small businesses.

Of course, that will come as news to Soo and Jin Chung, the owners of a family operated dry cleaners in Washington, D.C. If you read my June 21 blog entry, “Perverting Consumer Protection,” you know the Chungs were infamously sued by Roy L. Pearson, an administrative law judge and former plaintiff’s lawyer, for tens of millions of dollars because they temporarily misplaced a pair of his pants while also displaying a “Satisfaction Guaranteed” sign above the cash register.

Since then, there’s been a bit of good news: After a two-day trial, D.C. Superior Court Judge Judith Bartnoff on June 25 ruled in favor of the Chungs, dismissing Pearson’s suit and his interpretation of D.C.’s consumer protection law as wholly “unreasonable.”

The bad news is that Pearson, who’s up for reappointment to his $100,000-a-year job with the city, doesn’t know when to quit. (Let D.C. Mayor Adrian Fenty know what you think about Pearson’s possible reappointment with an email to afenty@dc.gov.) Pearson filed a motion for reconsideration on July 10, asserting that Bartnoff’s original ruling was "manifestly in error" and that she should effectively overrule herself.

This past week she responded by again swatting Pearson down, rejecting his motion out of hand. But his motion was seen by many observers as merely a strategic prelude to a full-blown appeal, which he’s expected to file with the D.C. Court of Appeals any day now. If Pearson is a real-life Ahab, this perverted “pantsuit” has become his white whale.

All the while, legal bills and business losses continue to pile up for the hardworking Chungs. Though they had cheerfully pursued their own American Dream since immigrating from Korea 14 years ago, they’ve now been forced to suffer a costly two-year litigation nightmare at the hands of a greedy and seemingly vindictive lawyer who apparently wants to get rich off the sweat and labor of another.

While most good Americans appreciate the considerable contributions that small business owners like the Chungs make to our bustling national economy and can hope that D.C.’s appeals court will shut down Pearson’s absurdly frivolous lawsuit once and for all, there’s no guarantee.

Accordingly, my organization, the American Tort Reform Association, has teamed up with the U.S. Chamber of Commerce Institute for Legal Reform to co-host a July 24 fundraiser that will help defray some of the Chungs' business losses and legal expenses. A recent media advisory offers basic information about the fundraiser, and a trip to www.chungfundraiser.com can provide details about sponsorship opportunities and easy online registration. Even if you can’t make it to Washington for the July 24 event, you can still support the Chungs and make a contribution.

And not that it will surprise you, but we reached out to many of the trial lawyers gathered in Chicago this week for help with our fundraiser and they turned us down. Apparently, claiming that you stick up for the little guy is a lot easier than actually doing so.

Perverting Consumer Protection

2007-06-21T03:59:00Z

It isn’t every day that tort reformers and personal injury lawyers find themselves in agreement. But when the newly renamed American Association for Justice (formerly known as the Association of Trial Lawyers of America) recently joined the American Tort Reform Association and small business owners everywhere in condemning an outrageous and seemingly vengeful lawsuit against a neighborhood dry cleaning store, a rare opportunity for nonpartisan legal reform may have presented itself.

Many news junkies know by now that Washington, D.C., resident Roy Pearson Jr. sued his former dry cleaner – over a supposedly lost pair of pants – for a jaw-dropping sum that initially exceeded $65 million. (In a May 31 court filing, Pearson lowered his demand to $54 million.) No one would be shocked to learn that Pearson is an attorney who has practiced law for 25 years and thus knows well the ins and outs of D.C.’s well-intentioned but easily exploited Consumer Protection Procedures Act (CPPA). What is astounding, however, is that Pearson has been employed by the D.C. government for the last two years as an administrative law judge.

By definition, judges are expected to demonstrate a judicial temperament that helps ensure fairness, reasonableness and a thorough respect for the law. In fact, the 2001 law that established D.C.’s Office of Administrative Hearings requires that its administrative law judges possess such “judicial temperament” and, among other things, be “fair” and “impartial.”

Though an anonymous city official told a Washington Post columnist that those who’ll soon decide if Judge Pearson gets reappointed to his job with a six-figure salary at taxpayer expense can’t very well “retaliate against someone for exercising [his] constitutional . . . right to file a lawsuit,” Pearson’s is no ordinary lawsuit. Beyond its arguably vindictive nature, Pearson’s contorted claim against Custom Cleaners, recently heard at trial in D.C. Superior Court, also suggested a wanton disrespect for the law in its perversion of the District’s CPPA.

Leaving aside for the moment the question of Roy Pearson’s fitness to serve D.C. residents as a law judge, let’s first consider the consumer protection law – designed to protect against acts of fraud and false advertising – that Pearson manipulated to arrive at his multi-million dollar claim for damages.

“A Certain Class of Lawyers”

The District’s CPPA is like many state consumer protection acts (CPAs) written since the late 1960s in that it was generally modeled on the Federal Trade Commission Act passed by Congress in 1914. But federal lawmakers vested the power to enforce consumer protection laws in the government, not in private sector plaintiffs as many state laws do.

In fact, when Congress specifically excluded such a “private right of action” from the original federal law early last century, it proved to be more prescient than state and D.C. lawmakers were many decades later. Sen. William Joel Stone, a Democrat from Missouri, anticipated the likes of Roy Pearson and the industrialization of personal injury litigation when he convincingly warned his colleagues during debate in 1914 that, “[A] certain class of lawyers . . . will arise to ply the vocation of hunting up such . . . [law]suits,” the number of which “no man can estimate.”

While legislatures are not likely to rescind private rights of action in CPAs at this stage, they can and should work to establish what Cornell law professor James Henderson calls “sufficiently specific rules of litigation within which litigants – defendants as well as plaintiffs – can rationally make their case.”

But there’s nothing rational about a multimillion dollar lawsuit against a mom-and-pop dry cleaning operation. And there’s certainly nothing rational about letting creative lawyers quietly shake down countless other small business owners outside the media spotlight, yet it happens every day.

A recent survey of small business owners by the National Federation of Independent Business, a national nonprofit organization that represents small and independent businesses, found that about half of them were “very concerned” or “somewhat concerned” about the possibility of being sued. The average NFIB member has gross annual sales of $350,000, yet, according to the survey, one in 10 incurred legal expenses of $25,000 or more.

Not surprisingly, small businesses such as Custom Cleaners are increasingly targeted with frivolous consumer protection litigation because they don’t have the resources to defend themselves like larger companies do. Also, many CPAs – including D.C.’s – are particularly attractive to plaintiffs’ lawyers because they provide for minimum statutory damages or tripling of actual damages, and for an award of attorneys’ fees. And many judges have begun interpreting these laws rather loosely, too, wherein plaintiffs don’t even need to claim an injury or loss, much less knowledge of or reliance upon the allegedly “unfair or deceptive” commercial practice.

In Pearson’s case, the District’s law arguably allowed him to seek $1,500 for each day that the dry cleaner displayed window signs stating “Satisfaction Guaranteed” and “Same Day Service,” regardless of whether these signs had anything to do with his lost pants. His lawsuit also asks for a half-million dollars to compensate for the time he’s spent stubbornly pursuing it. His suit even suggests that D.C. law allows him to receive damages for mental suffering and rental car costs now that he needs to drive each weekend to another dry cleaner not within walking distance.

Simple Reforms and Judge Pearson’s Future

If D.C. Mayor Adrian Fenty, Council Chair Vincent Gray and other council members want to limit the abuse of the city’s consumer protection law and thus make it easier for honest, hardworking small business owners to thrive, they – along with like-minded state lawmakers around the country who face similar problems with abuse of their own CPAs – can make some simple changes that will go a long way in restoring fairness.

By requiring that a plaintiff prove that he or she actually relied on a supposedly fraudulent or deceptive advertisement or representation, lawmakers could drastically reduce CPA lawsuit abuse. After all, Roy Pearson’s claim against Custom Cleaners alleged that the display of standard signage somehow constituted a willful fraud punishable by a mind-boggling, potentially bankrupting civil damages award.

Policymakers also would do well to limit plaintiffs’ claims for damages to out-of-pocket costs, except in cases when it can be proved that a defendant’s actions were knowingly and willfully fraudulent or deceptive. In Pearson’s case against his cleaners, for example, his out-of-pocket costs, at most, would include the price of a replacement suit, alterations and any reasonable legal expenses.

As the mayor and council take these suggested reforms under advisement, the D.C. Bar Association and D.C.’s Commission on Tenure and Appointment of Administrative Law Judges (the bodies that will determine whether or not Pearson is reappointed to his law judgeship for a 10-year term) may wish to consider the advice of Melvin Welles, former chief administrative law judge at the National Labor Relations Board.

In part, Welles’ April 30 letter to the editor in the Washington Post read, “I would also direct any bar to which Mr. Pearson belongs to immediately disbar him and the District to remove him from his [law judge] position.”

Jon Haber, the CEO of the national trial lawyers group, offered a similarly scathing critique of Pearson in his May 8 letter to the D.C. Bar: “Our court system has no place for those who abuse the instruments of justice for personal gain or the intimidation of others.”

Most small business owners in the District agree and, along with other economy-growing, taxpaying entrepreneurs across the country, they want to see consumer protection laws reformed so such laws cannot be as readily abused by “a certain class of lawyers.”

'Free Gas' for Trial Lawyers

2007-05-21T16:22:00Z

As growing demand drives oil prices higher, local radio and gas stations sometimes team up to show special appreciation for their regular listeners and customers with popular “free gas” promotions. In what appears to be a comparable effort to show special appreciation for their most dependable campaign contributors, certain members of the House and Senate are now teaming up to provide a special giveaway to trial lawyers and activist state attorneys general.

Sen. Maria Cantwell (D-Wash.) has introduced the Petroleum Consumer Price Gouging Protection Act, S. 1263, which is likely to be considered as an amendment to a larger energy bill. Rep. Bart Stupak (D-Mich.) is driving a similar bill in the House, H.R. 1252, that may be voted on within days.

With some analysts predicting $4.00-a-gallon gas before summer is out, what could be wrong with legislation that purports to crack down on gasoline retailers and wholesalers who might consider taking unfair advantage of consumers? Plenty.

As currently written, the Senate bill is so full of ambiguities and subjective definitions that those in the business of selling gasoline would have no practical idea about what is permissible and impermissible by way of pricing formulas. About the only thing that the legislative language makes clear is this: some lawmakers seem perfectly content to score easy political points and leave the difficult work of actually defining the law to courts and the class action attorneys and headline-seeking attorneys general who would invariably file countless lawsuits.

Specifically, S. 1263 would severely punish petroleum suppliers who charge “unconscionably excessive” prices during emergencies, such as those that might result from a severe hurricane or terrorist attack. This sounds good, but what does it actually mean? The bill’s authors say an unconscionably excessive price is “grossly” higher than a supplier’s pre-emergency price, or a price that “grossly exceeds” the prices charged by other suppliers in the same market, or a price that takes “unfair” or “unconscionable” advantage of the emergency situation.

Such subjective terms have different meanings to different people. For example, is a per-gallon price “grossly” higher than a supplier’s pre-emergency price if it’s 10 cents higher? Is it “unfair” for a supplier to charge five cents more than she did prior to the emergency, regardless of post-emergency supply and demand? The legislation provides no answer to these questions, even though they would certainly arise in an emergency.

The bill does make an exception for price increases that are “attributable to increased operational costs,” but even this provides no meaningful framework for suppliers. What if the replacement cost for fuel is 15 cents higher than what the retailer last paid for it? Would he be permitted to pass that along to consumers as an “increased operational cost”? Again, the legislation doesn’t say.

The House bill is even more abstract. First, it doesn’t focus strictly on times of emergency. It would apply 365 days a year, rain or shine, boom or bust, war or peace. Every gasoline retailer and wholesaler in the country would live in day-to-day fear of criminal investigations, prosecutions and stiff fines and prison terms as specified in the bill. Optimistically presuming that most virtuous gas suppliers would manage to avoid criminal penalties, they’d still have to worry about private sector personal injury lawyers and abusive, potentially bankrupting class action lawsuits. Think I’m exaggerating?

The House bill’s prohibition against price gouging would apply whenever there are “unusual market conditions (whether real or perceived).” Real or perceived? Perceived by whom? It’s hard to imagine language more inviting to those who gin up litigation for a living.

The frighteningly subjective prohibitions contained in both S. 1263 and H.R. 1252 would prompt some politically motivated state attorneys general to respond to gas increases in a manner that, at best, would be unpredictable. The response from private law firms, on the other hand, would be entirely predictable. And in the latter case, many honest businessmen and women would be sued and subsequently crushed by substantial attorneys’ fees and the prospect of gigantic punitive damage awards for having done nothing more sinister than rely on a supply-and-demand pricing formula that has been the industry standard for decades and which routinely applies to bread, milk, housing – even umbrellas in a rain storm.

Since no member of Congress is naïve enough to think those added costs won’t eventually be passed on to consumers in one way or another, it’s fair to ask how any lawmaker could support such a giveaway to politically connected litigators at the expense of the driving public.