Archive for the ‘Walter Olson’ Category

The Fallacy of Loser Pays in Tort Litigation

OverlawyeredLast week at Overlawyered I had a little back and forth with its publisher, Walter Olson, on the concept of a loser-pays system. For those not familiar with the idea, this specifies that the loser of a lawsuit pays the legal fees of the winner. This is in contrast to the “American Rule” that says, generally, each side bears its own costs.

There are exceptions, of course, such as legal fees being part of a sanction for frivolous litigation, but we deal here today with the general rule.

There are two issues regarding the rule: The first is that it effectively closes the courthouse door to much of middle America. On one side in a typical tort case is likely to be a multi-billion dollar insurance company defending an auto collision or medical malpractice case, and on the other a person who may be struggling to work, or incapacitated and trying to figure out how to pay the mortgage or rent.

One side has incentive to run the meter and stall, and can readily afford to do so. If the litigant loses a simple issue of “who had the green light” then financial devastation may follow, but there is no such threat on the other side. The parties are not equal and the scales of justice unbalanced.

But the second issue is more interesting to me here because it deals with even broader public policy issues, and that came up with Olson’s comment responding to me:

A “legal system that only the wealthy can use” is not an accurate description of the pluses and minuses of the legal systems in the great majority of advanced democracies where loser-pays is the norm, such as Canada, the U.K., Scandinavia, the Netherlands, and so forth. It does, unfortunately, accurately describe some sectors of the American legal system (such as small high-merit claims and many injunctive matters) where neither fee shifts nor contingency fees are available. Oppose loser-pays if you like, but enough of the sloganeering.

The U.S. system here is compared to other nations with reputations for significant social service programs (and high taxes to pay for them). Universal health care is the most obvious example. The U.S., by contrast, has far less government involvement with our lives and some of the lowest taxes of any industrialized nation on earth.

If we close the court house door on people by making it more difficult to proceed, then what happens to those already injured? Well, they absorb the costs themselves until they are poor enough for the minimal social service programs that we have and then the taxpayer picks up the tab. And they remain poor, having now been victimized first by the negligence of others and then again by being forced to bear the financial burden.

The American Rule, as it now stands, is consistent with the parties working things out privately in court with minimal government intervention. Sure, verdicts can get tossed out if they are true outliers, but for the most part verdicts are respected.

The interesting part about this political discussion, I think, is that last week Overlawyered became affiliated with the Cato Institute, a libertarian think tank. While I certainly wouldn’t want to speak for them, it seems to me that a loser-pays system (and other tort “reform” measures that give protections and immunities to those who are negligent) garners greater government involvement in the lives of the populace, contrary to its own political philosophy.

If we want to shift the costs of injuries caused by negligence away from the tortfeasors and onto the backs of the taxpayers, then we need those Scandanavian government economies to accommodate that shift and provide the support.

The U.S., I think it’s clear, isn’t going that way.  We are faced with a choice as to whether we let parties duke things out privately or let the government come in with support. A nation can have one or the other. But what we can’t have, is both the stripping away of private rights at the same time that we have limited government support. That is not the model used by any industrialized nation that I know of.

Twittering With the Enemy (A Blogospheric Celebration)

Yesterday I re-tweeted something that Ted Frank wrote over at Point of Law; a piece about lawyers whining about no work. His point — after noting that he started up a successful public interest law firm dedicated to objecting to class actions that don’t treat the plaintiffs well — was that there were many good causes out there for lawyers to get involved with. Get off your ass, he effectively said, and go find a cause to represent.

The main point that I took, before he addressed a myriad of potential legal issues, was how much he enjoyed what he was doing as opposed to the career track toward academia he had anticipated. He wrote that he

discovered how much I like litigation when I have autonomy and don’t have to make arguments I don’t believe in, and discarded the idea of writing law-review articles no one would read. Today I have two attorneys working for me, a fascinating docket, and get to argue more appellate cases every six months than I did in my entire ten-year BigLaw career.

Frank’s political views, of course, are not universally shared, particularly by members of the plaintiff’s personal injury bar. But he did address, as I said, a number of issues that could be raised by lawyers looking for new career tracks.

There are three different reactions that I’ve seen, though I think the last one might be the most important…stick with me here, because this time I have an actual point to make.

The first reaction to the Frank piece came  from Max Kennerly (First Lesson For New Plaintiff’s Lawyers: If It Was Easy, Everyone Would Be Doing It). Kennerly is always a good read, and he gets into the nitty gritty of the details of the clients and lawyers actually meeting each other:

plaintiffs’ law firms don’t just discover viable legal claims somewhere in the world and file them, they only enter the picture after clients find and hire the lawyersMarketing lawyers is hard work.

He goes on to discuss — and I won’t give it all here because I think you should head over to his site and read it yourself — the extraordinary difficulties of the entire contingent fee arrangement and trying to fund mass actions:

Frank is arguing for inexperienced, poorly capitalized lawyers to dive right into expensive and prolonged complex litigation involving procedural mechanisms (e.g., the class action) and causes of action (e.g., antitrust) that are routinely attacked by no less a force than the United States Supreme Court against defendants with essentially unlimited resources, like “Ivy League schools” and “the Obama administration.”

The second objection comes from Elie Mystel over at Above the Law. First he identifies the problem:

the problem is that “the reason” most people went to law school was “money.” The “cause” most people signed up for was “risk-averse earning potential.” Frank is essentially telling a group of mercenaries to find a cause they believe in and fight for free for a time, and then the money will come. And it’d be great advice except for that fact that most mercenaries didn’t get into the business for a cause, they’re in it for the cash.

But from there Mystel digs deeper and points the finger at the law schools that teach legal theory, as opposed to the actual practice of law. Young, unemployed lawyers are simply not up to the task of doing what Frank advocates because they’ve never been taught. He notes:

Not everybody has the skills to start their own business, and it’s not like law school spends a lot of time — or any time whatsoever — teaching and training people in the art of making money with a J.D. Heck, there are hard-working, incredibly intelligent partners at law firms who have no freaking clue how to market themselves or their legal expertise. We call them “service partners,” and they’d probably be working for the hourly rates of an SAT tutor if it weren’t for “rainmakers” with business savvy who know how best to turn talent into money.

Scraping clients together is hard, not everybody knows how to do it, and law schools aren’t teaching people.

And finally, there is a third objection that I didn’t expect, and the one I consider most important. This one comes from “Michael” on Twitter, who was displeased that I (and Dave Waterbury) re-tweeted Frank’s piece to begin with:

@Turkewitz @dewesq55 Really? Sending a link advocating undercutting standard fees on contingency fees = asking for a race to the bottom.

That is correct, I re-tweeted something even though I had disagreements with parts of it and even though Frank has a long history of being a tort “deformer” whose political views I oppose. And you know what? I once hired him as my attorney anyway. I explained that in detail a few years ago: Turkewitz v. Yahoo (Meet My Lawyer, Ted Frank).

Now the point I wanted to make — I told you I would get here: When I was just a baby blogger, some six years ago, I was irritated by some point or article that Walter Olson noted at Overlawyered and wrote a response. And Olson proceeded to give me the best damn lesson in blogging that I ever received: He amended his post to say, and for an opposing view, see Turkewitz. WTF?

“The enemy” had just given me link juice and readers. It took just a heartbeat to fully comprehend the nature of the blogosphere. We are not islands unto ourselves, but this is an ongoing conversation. Nor is this a conversation to be had solely among those with whom we agree. What good is that?

Unlike many politicians (and arguing spouses) that simply talk past each other, barely even acknowledging the position of the other, Olson engaged. And with less than a year under my belt, he then added me to his blogroll (which I wrote about).

Frank wrote something that was interesting. People responded. They may agree or disagree with him, but this is what makes for a vibrant blogosphere. Let us celebrate.

Why is this important? Because many still don’t get it, with social media gurus telling clients to fill their blogs with all manner of Google friendly search terms regardless of the dreck it produces. This is a favorite topic of people like Scott Greenfield and Brian Tannebaum.

Look at the four faces you see in this post. That, my friends, is how blogging is supposed to be done. Break out the boxing gloves and debate the merits and to hell with what the social media gurus tell you about how Google thinks. Google, you may be surprised to learn, could be a tad smarter than you think.

Beer, Indians, Boycotts and Supply Chain Liability

Budweiser ad, 2007

Question for the day: If a beer company sells its brew to a distributor, who in turns sells it in massive quantities to a tiny village next to a dry Indian reservation, can there be liability within the supply chain for the extraordinary alcoholism and neurologically impaired children that are born from the alcoholics?

This issue raises its head thanks to NYT columnist Nicholas Kristof, who called last week for a boycott of all Anheuser-Busch products. There is a recently filed lawsuit in Nebraska by the Oglala Sioux on the subject, though his call for the boycott rests on grounds of immorality rather than illegality. Kristof frames the issue this way:

The human toll is evident here in Whiteclay [Nebraska]: men and women staggering on the street, or passed out, whispers of girls traded for alcohol. The town has a population of about 10 people, but it sells more than four million cans of beer and malt liquor annually — because it is the main channel through which alcohol illegally enters the Pine Ridge Indian Reservation [South Dakota] a few steps away.

Pine Ridge, one of America’s largest Indian reservations, bans alcohol. The Oglala Sioux who live there struggle to keep alcohol out, going so far as to arrest people for possession of a can of beer. But the tribe has no jurisdiction over Whiteclay because it is just outside the reservation boundary.

Before going further, read his column and then return.

Welcome back. That column was met with a furious retort by Walter Olson (senior fellow at the libertarian oriented Cato Institute and founder  of Overlawyered) in a column at Reason, ripping Kristof for being “insufferably moralistic,” among other things. He summarizes the lawsuit, making headlines in Nebraska and South Dakota, thusly:

Kristof asks readers to join his boycott of the leading brewer for (he says) improperly permitting its output to be sold in large volumes in tiny Whiteclay, Neb., just across the state line from the Oglala Sioux’s Pine Ridge Reservation in South Dakota. Though notionally dry, the reservation is in practice wracked with alcoholism.

Olson thinks it’s ludicrous to hold the manufacturer responsible for what the distributor is doing with the product once it’s out of their hands. He writes:

Those familiar with state beer regulation will recognize what’s going on here. Most states—specifically those with the “three-tier” system—carefully cultivate the profitability of the licensed beer wholesaling business by limiting the legal rights of brewers (as well as retailers and end-consumers) to work around them. If Nebraska is typical, that would make it unlawful for the brewers to arm-twist the wholesalers through economic threats into curtailing supplies to the Whiteclay border sellers.

Now, read  his column and return, because I’m about to add my two rupees to the debate. I’ll wait for you to come back.

OK, now it’s my turn.

While the issue seems novel, it really isn’t. Rare, yes, but there is precedent for trying to hold manufacturers liable for distributors engaging in nefarious conduct. This can happen with guns, pharmaceuticals, alcohol, fireworks, and most any other product that is both highly regulated and subject to differences in state laws (that create incentives to run product across jurisdictional lines). It isn’t just retailers that need to be careful —  for issues such as dram shop liability where a bartender serves an obviously intoxicated person  who then gets behind the wheel of a car and kills someone — but potentially others in the supply chain such as distributors and manufacturers.

Because there are so many different possible factual scenarios here, I’m only going to write generally about how such a suit might be successful, as its actual success would be highly dependent on the facts of the particular case. I could, after all, fill a page with caveats, qualifiers and disclaimers regarding the interplay of Nebraska, South Dakota and tribal laws, none of which I have particular knowledge of. So I write generally.

As a foundation to any suit, there would need to be some type of illegal or dangerous conduct, such as smuggling or dealing with counterfeit product. This type of conduct generates secondary markets, and if  the volume of product is high — be it guns, booze or other — there is a pretty good reason to suspect the manufacturers will know what is going on as they are likely turning profits based on the illegal conduct.

Generally speaking if there is intervening criminal conduct it would sever the issue of liability, setting the manufacturers and distributors free from potential liability. Trying to blame the gun maker (or brewer) for the acts of the criminal, after all, is certainly a tough task, particularly if the product has left the hands of the manufacturer free of any defect and remains free of defect.  But what if the manufacturer knew about the downstream criminal activity and was turning a blind eye to the conduct while it scooped up the profits of increased sales? Will a duty to act arise if the manufacturer  is able to control the actions of others within that supply chain?

That issue was raised years ago here in New York’s high court in a gun case, Hamilton v. Berretta. In Hamilton, relatives of people killed by gun violence in New York sued sued 49 handgun manufacturers in Federal court alleging, amongst other things, negligent marketing, ultra-hazardous activity and fraud. It was, in some sense, not that much different in concept from suing the beer companies here. The product left the manufacturers’ hands and was used, all too well, for its intended purpose.

In Hamilton, many of those gun manufacturers were found liable in a civil trial. The defendants obviously asked for dismissal, and the then-novel issue matter was appealed Second Circuit Court of Appeals. Unsure of how New York state courts would rule, the federal appeals court certified these two questions to New York’s top state court for a ruling — and I think you will see similarity to the beer case that Kristof and Olson discuss:

(1) Whether the defendants owed plaintiffs a duty to exercise reasonable care in the marketing and distribution of the handguns they manufacture?

(2) Whether liability in this case may be apportioned on a market share basis, and if so, how?

While the court answered both questions in the negative for that case, saying the the manufacturers were not shown to have any duty of care to those shot, the court didn’t rule out the possibility that, in the right circumstances, such a case could be brought. The court wrote:

Certainly too, a manufacturer may be held liable for complicity in dangerous or illegal activity (see, e.g.,Suchomajcz v Hummel Chem. Co., 524 F2d 19 [3d Cir 1975] [manufacturer sold chemicals to retailer with knowledge that retailer intended to use them in making and selling illegal firecracker assembly kits]).

Both sides in this beer case, and similar cases, will find a full exploration of the issues of duty, causation and liability in the Hamilton decision. While Hamilton was ultimately lost, it was lost on the difficult facts of that case. The court wrote:

This case challenges us to rethink traditional notions of duty, liability and causation. Tort law is ever changing; it is a reflection of the complexity and vitality of daily life. Although plaintiffs have presented us with a novel theory—negligent marketing of a potentially lethal yet legal product, based upon the acts not of one manufacturer, but of an industry—we are unconvinced that, on the record before us, the duty plaintiffs wish to impose is either reasonable or circumscribed. Nor does the market share theory of liability accurately measure defendants’ conduct. Whether, in a different case, a duty may arise remains a question for the future.

In the beer case, Olson raises the issue of a statutory inability by the beer manufactures to control the distributors. But what, exactly, will “control” mean? If, for example, a manufacturer becomes aware that illegal smuggling is going on, are they without recourse in terminating the relationship? Is a manufacturer supposed to ignore illegality, and thus become complicit in bootlegging?

I’m not going to say such a case is easy, and the facts of any one particular case may mean it isn’t even viable. But under the right factual scenario of a manufacturer turning a blind eye to illegal activity so that  it can increase its profits, it may not only be possible, but righteous. If the beer plaintiffs can articulate a sound cause of action and survive a motion to dismiss, discovery could expose manufacturers and distributors knowingly facilitating a significant bootlegging operation that would be scandalous if true. That alone, of course, won’t get them to the end zone of proving their case, but could greatly assist in the first step of any personal injury matter: proving that one person owed a duty of care to another.

Kristof, to his credit, didn’t rely on the lawsuit to initiate his boycott of Anheuser-Busch beers (writing, “I don’t know how the lawsuit will go…”). Instead, he is attempting to shame the company into improving the situation by curtailing massive beer sales into the reservation border area. This is, conceptually, similar to something I’ve done in the past in my itty bitty spot on the web, calling lawyers on the carpet for dubious marketing practices that might be on the acceptable line of the code of professional responsibility, but still smells bad.

Final thoughts: The lawsuit and the boycott will be interesting to watch, both from a lawyer’s perspective to see how a manufacturer or distributor might be held liable for a product that was criminally smuggled after it left their hands, quite possibly with their knowledge, and with how the company will react to the boycott, if at all. I’m hopeful that both Kristof and Olson will continue to write from their respective perches.

Congratulations to Overlawyered


Overlawyered today celebrates its 10 year anniversary, making it the longest legally-themed blog around. It has also provided me with one of the biggest surprises that I’ve experienced, and invaluable lessons about how to blog.

Its proprietor, Walter Olson, uses the site to document the high cost of litigation. He has his conservative political views, which are often diametrically opposed to mine. In fact, if the proposals of the Manhattan Institute (where he is a fellow) were followed, the rights of many (if not all) of my clients would likely be eviscerated. That means we knock heads every so often, as I do with his co-blogger Ted Frank.

And despite this, while still in my rookie year blogging, he added me to the blog roll of his site. I wrote at that time, back in August 2007:

When pigs fly, I hear you say.

Would the oldest legal blog in America — dedicated to documenting the high cost of our legal system and, perhaps, savoring some of the outrageousness that exists (Pants Pearson, anyone?) for the anecdotal benefits — actually add a dyed-in-the-wool, 100% personal injury attorney to their blogroll? An individual that takes tort “reformers” to task every so often? One who is a guest contributor at Overlawyered’s arch nemesis, TortDeform? Well, yes. They would.

And he didn’t just add me to his blog roll, but he links to me with some frequency sending me a steady source of readers. And those links don’t just come in where I agree with him about a suit that was stupidly brought — and in a nation of 300 million that will happen with some frequency — but more often when I disagree with him on an issue. He is telling his own readers: And for the opposing view, see this post from a PI guy.

Lesson learned. Don’t ignore opposing views. Read them, consider them, and respond to them if you wish. It is the ideas that matter. Same as in the courtroom.

Another lesson is that he has never once made a personal attack, despite all my criticisms. Which is also something that every legal battle should embrace. Respond to the message, not the messenger. Judges hate personal attacks.

And another lesson: Admit mistakes when they happen. You can’t be constantly writing in the blogosphere, often quickly and with little editing, and not make mistakes. At his sister site, Point of Law, he showed the way mistakes are rectified.

And so, a tip of the hat today to Walter Olson. Not just for figuring out this blogging thing faster than any one else, but for doing it with class and style.

Overlawyered Adds Personal Injury Attorney To Blogroll

When pigs fly, I hear you say.

Would the oldest legal blog in America — dedicated to documenting the high cost of our legal system and, perhaps, savoring some of the outrageousness that exists (Pants Pearson, anyone?) for the anecdotal benefits — actually add a dyed-in-the-wool, 100% personal injury attorney to their blogroll? An individual that takes tort “reformers” to task every so often? One who is a guest contributor at Overlawyered’s arch nemesis, TortDeform? Well, yes. They would.

Has Overlawyered gone soft? Have they fallen under the spell of Judge Robert Bork’s new found convictions?

For reasons known only to those within the super-secret confines of the conservative Manhattan Institute (and senior fellow Walter Olson) that runs the site, they have added this trial lawyer (cough, cough, spit, spit) to their blogroll — apparently the only plaintiff’s PI attorney to appear there. And the blogger they added is still a rookie. Will Olson have to turn in his secret decoder ring for this? Will that trial lawyer guy be ostracized and banished from the PI Secret Society and have to turn in his own secret decoder ring?

Stay tuned. It seems that pigs can sprout wings.
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I don’t get around to updating my blogroll too often, but I think it’s time to add a few:

  • Overlawyered — Just for fun, I’ll place this entry right between TortDeform and The Tortellini. Excuse me while I grunt and flap my own new wings;
  • Kevin, M.D. — While Dr. Kevin Pho also has a position contrary to mine on some issues, he is a magnificent resource of stories and opinions from the field of medicine;
  • DeliberationsAnne Reed’s terrific blog on everything related to juries. Also a rookie;
  • Above the LawDavid Lat’s legal tabloid…need I really say more?
  • TortsProf — Brought to you by Prof. Bill Childs from Western New England School of Law, who does a great job rooting out tort cases from everywhere the sun shines, and some places it doesn’t.