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Jonathan Wilson is an
Atlanta attorney with more than 19 years of experience guiding growing private and public companies. He currently serves
as the outside general counsel of several companies and is the former general counsel of Web.com.com (NASDAQ: WWWW) and EasyLink
Services (NASDAQ: ESIC). He is also the founding chair of the Renewable Energy Committee of the American Bar Association's
Public Utility Section.
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Monday, January 31, 2005
Georgia Legislature Tries to Pre-empt Obesity Litigation
Proposed H.B. 196, introduced in the past few days, would pre-empt litigation of the type at issue in Pelman v. McDonalds by expressly stating that restaurants and food manufacturers are not responsible for the obesity effects of the long-term
consumption of their products.
The bill states in part:
Except as provided in Code Section 26-2-433, a manufacturer,
packer, distributor, carrier, holder, seller, marketer, or advertiser of a food, as defined in Section 201(f) of the federal
act, 21 U.S.C. Section 321(f), or an association of one or more such entities, shall not be subject to civil liability
arising under any law of this state for any claim arising out of weight gain, obesity, a health condition associated with
weight gain or obesity, or other generally-known generally known condition allegedly caused by or allegedly
likely to result from long-term consumption of food.
It's sad that we need the legislature to specify the acts for which
there should be no liability, but that is the inevitable outcome when the judicial system allows plaintiffs excessive
creativity in dreaming up new causes of action.
Sunday, January 30, 2005
Teens Get It
It's not very recent, but it's news to me.
A survey published by California Citizens Against Lawsuit Abuse claims that 95% of teenagers surveyed agree with the statement, "People should take responsibility for their actions instead of filing a lawsuit and blaming others."
The poll also found a resounding majority believed that lawsuits were filed mostly in the hopes of a jackpot recovery.
I'm generally skeptical of polls involving teenagers but it makes you wonder if even teenagers are this jaded when thinking
about our legal system.
Happy Election Day, Iraq!
A voter turnout far in excess of any recent U.S. Presidential election.
Saturday, January 29, 2005
Democrats: Please Nominate this Woman!
Incredible. Some on the left are suggesting that Barbara Boxer is the Democrat's best hope in 2008.
Republicans couldn't hope to be that lucky. Barbara Boxer has long been a plaything of the plaintiffs' bar and has a voting record that would give any Republican challenger a field day.
Her most recent brain-child is legislation that would "codify" the rule in Roe v. Wade. (Would that be the emanations or the penumbras, Madame Senator).
Staged Iraqi Bomb Photos?
Blogger Obsidian Order has an excellent collection of recent photos of Iraqi car boms and an analysis that suggests that the journalists were tipped in advance. How else could they have been at just the right spot in order
to photograph the bombs detonating?
Friday, January 28, 2005
Reform Moves Forward in Georgia
A source tells me that Senate Bill 3 was passed out of the Georgia Senate Judiciary Committee last night. The bill includes protections for emergency room
doctors, modifications to the collateral source rule and an attorney fee-shifting offer of judgment rule.
All eyes now turn to the House to see what form of bill the leadership will propose.
Wednesday, January 26, 2005
More on McDonald's Opinion
Although the story will likely get a lot of media attention today along with the usual follow-up stories on (a) the national
problem of obesity and (b) out of control class action lawsuits, the Second Circuit's opinion actually concerns a
fairly narrow procedural question.
That question is whether a private right of action under Section 349 of the New York Consumer Protection Act requires
a plaintiff to plead actual reliance on the allegedly deceptive advertising.
According to the Second Circuit's opinion (which is a scant six pages long) New York law establishes that the plaintiff
need not plead actual reliance. The Second Circuit claims that, even though the trial court conceded that reliance was
not a necessary element of the complaint, it dismissed the complaint under Rule 12(b)(6) because "[p]laintiffs have failed
. . . to draw an adequate causal connection between their consumpption of McDonald's food and their alleged injuries."
Pellman II, 2003 U.S. Dist. LEXIS 15202 at *30.
The Second Circuit concluded that this search for an "adequate causal connection" was not required under Sec. 349 and
that Rule 8(a) required only the basic pleading that the plaintiff suffered injury "by reason of" deceptive advertising.
Interestingly, in footnote 4 of the opinion we learn why this pleading threshhold is so low. Apparently Sec. 349
was originally capable of being enforced only by the Attorney General. In 1980, however, the NY legislature amended
Sec. 349 to create a private right of action. As a result, while common-law fraud would ordinarily require a plaintiff
plead "reasonable reliance" there is no similar requirement in Sec. 349.
While I'm naturally sympathetic to the pundits who want to condemn cases like this one, the real fault is not with the
courts but rather with the legislature. If the NY legislature wants to avoid suits like this one, it needs to amend
statutes like Sec. 349 which permit private suits on such a flimsy basis.
McDonald's lawyers are probably not very worried, however. The trial court has focused on the difficulty the plaintiffs'
will having in proving causation. While causation may not be a required element of pleading, even the Second Circuit agrees
that it will be a required element of proof at trial.
If the plaintiffs' in Pelman cannot surmount this hurdle in discovery, their complaint may very well be vulnerable to
a defense motion for summary judgment.
McDonald's Obesity Suit Goes Forward
Law.com has an excellent background piece here.
According to the description of the opinion, the part of the claim that the Second Circuit will allow to proceed arises
under Section 349 of New York's deceptive advertising law, which allows plaintiffs to sue even without pleading actual reliance
on the allegedly deceptive advertising.
7:37 am est
Tuesday, January 25, 2005
Asbestos Reform Waiting
Reports suggest that Senate Judiciary Chair Arlen Specter may act soon on asbestos reform.
Although asbestos liability has been a chronic issue for decades, it has only grown in importance as the potential for
claims has increased over time.
Of course, the usual suspects still oppose reform and business interests have only themselves to blame if they cannot
push a reform bill across the finish line at this point. One lobbyist is quoted to say, "It is possible to beat the ATLA [in the Senate] but only if the business community is unified."
Friday, January 21, 2005
Out of Balance Profiled in Atlanta Business Chronicle
Thanks to the Atlanta Business Chronicle for a great article about Out of Balance.
Thursday, January 20, 2005
Stuart Taylor, Jr. v. Stephanie Mencimer
It seems that Mencimer ran a piece in the October 2004 that criticized reporting by Taylor and Evan Thomas on the topic of tort reform.
Mencimer's piece was pretty brutal and full of ad hominem attacks. She attacked what she called the "Myth
of Frivolous Lawsuits" through re-cycled talking points from the Litigation Lobby.
Taylor responded with a point-by-point refutation of Mencimer's piece in a letter to the editor of Washington Monthly. Strangely, Washington Monthly's editors have not
run the refutation as a letter to the editor or otherwise.
This debate bears watching because it illustrates how the Litigation Lobby responds to the reasoning of reform advocates.
If we can't talk intelligently about the need for litigation reform how can we hope legislators will think seriously about
it? (Or perhaps that is the hope of the Litigation Lobby?)
Watch this column for future updates on this topic. Who is Stephanie Mencimer? Who are her
sources? How are they connected to the Litigation Lobby?
6:56 am est
Wednesday, January 19, 2005
Doing What You Do Best
Dick Morris writes in today's New York Post that second Presidential terms "usually end in failure" because Presidents usually spend
their first terms doing what they do well and flounder in their second terms when they move outside their areas of expertise.
Numerous other pundits have made the some point in recent days.
President Bush may well prove the exception to that rule, however, as he spent his first term doing what he wasn't expected
to do best: foreign affairs and defense.
Remember all the coloquy during the 2000 election? Remember the interviewer who tried to quiz Bush on the names
of foreign leaders? Remember the SNL skit: "guy number three"?
Bush was supposed to be a foreign policy dunce and he campaigned on domestic themes, including the "compassionate conservative"
issues of social security reform and education.
His No Child Left Behind Act achieved his education agenda but social security reform is still on the table. The
bulk of his first term, however, was consumed by September 11, Afghanistan, Iraq and the War on Terror.
Assuming that Bush's second term does not open a new front in the war on terror his agenda should return to what it was
going to be in 2000: reforming social security, ending junk lawsuits, reforming the tax code and other domestic themes.
Sunday, January 16, 2005
The Ownership Society
Much has been made of the President's desire to create an " ownership society", changing the attitudes of Americans from perceiving themselves as passive recipients of government largesse to stakeholders
and owners of their nation and their government.
The connection between this paradigm shift and litigation reform could not be more clear, as the Economist notes. With ownership comes responsibility and it is responsibility that is lacking under the American rule of litigation.
Under the American rule, each party to a lawsuit bears its own attorneys' fees. As a consequence, a misguided plaintiff
can drag a defendant into court and waste hundreds of thousands of the defendant's dollars in attorneys' fees, but bear
no responsibility when his case is ultimately dismissed.
Friday, January 14, 2005
Public Support for Tort Reform
She notes that 73% of those surveyed in the recent Kaiser Family Foundation piece supported an independent medical review
of malpractice cases before those cases could be filed.
1:07 pm est
Thursday, January 13, 2005
Modest Attorneys Fees
McKesson Corp. agreed to pay $960 million to settle a securities class action arising out of a 1999 accounting scandal
and subsequent meltdown in its stock price.
The plaintiffs' attorney refused to discuss how much of the settlement would be set aside for the fees of the plaintiffs'
lawyers, indicating that his cut would be " modest by 9th Circuit standards." I feel better already.
Wednesday, January 12, 2005
Fun and Games With Statistics in Misleading Survey on Tort Reform
A survey by the Kaiser Family Foundation is making the rounds today and is likely to show up in the debate over litigation reform.
The survey purports to establish that "most Americans" think that the cost of healthcare is more important than malpractice
lawsuits and that reforming malpractice litigation is 11th on respondents' list of concerns.
Some articles cite a 2002 Congressional Budget Office study that concluded that litigation accounted for only 2% of overall
healthcare spending. Opponents of reform will likely use this kind of misleading survey data to argue that
the public "just doesn't care" about litigation reform.
This kind of study is misleading because it suggests that reforming malpractice litigation is an either/or proposition
in competition with the cost of health care. In fact, there is no reason why policy-makers can't address both.
It is also fundamentally misleading to ask respondents to rank their concerns. If you were dying
of some kind of disease, suffering horrible pain, and a survey asked you, "Which is worse, the pain you are suffering or the
disease?" many would identify the pain as their chief concern. People react to symptoms, not causes.
When stated differently, a vast majority of Americans believe that the litigation system needs reform. Seventy-four
percent of respondents would support changes in the law that give malpractice victims compensation
for their actual injuries but place reasonable limits on awards for noneconomic damages according to
a survey by the pro-reform group Common Good,
Monday, January 10, 2005
Sebastian Mallaby on Torts
The Washington Post editorial page and
Sebastian Mallaby (writing on the Post’s Op/Ed page) both come out in favor of tort reform.
The editorial endorses the long-suffering
Class Action Fairness Act, which would tweak the diversity jurisdiction rules to allow more nationwide
class actions to find their way into federal court. CAFA got a hearing and passed the House in 2003 but was killed by
Democrats in the Senate.
Mallaby’s column doesn’t
endorse a solution, but it does hit the nail on the head when it comes to the problem. Mallaby cites the Tillinghast-Towers-Perrin analysis (well-known to tort reform advocates), indicating that there is more than
$200 billion annually in excess cost in the system and that there is a transaction cost “inefficiency” in the range of 56%. My own calculations put the annual excess waste at something
north of $280 billion.
He writes:
"The haphazard nature of tort payouts undermines the
potentially salutary effect on corporate behavior. If manufacturers can't predict what they might be sued for and how
much, they won't reach rational decisions about making their products safer. Sure enough, studies of injury rates often
find no evidence that a rise in litigation is follows by an increase in safety."
I can't help agreeing with his conclusion:
"Bush is pushing three kinds of tort reform, and all
of them are worthy. But the ultimate goal should be to shrink the tort system radically. Measured as a share of
GDP, America's tort system is more than twice as expensive as it was in 1960, twice as expensive as the current systems in
France or Canada, and three times as expensive as the system in Britain. A reasonable goal for the American tort system
is to halve it."
Friday, January 7, 2005
The New Tort of Grossing-me-out
It seems that one Austin Aitken, a “49 year-old part time paralegal” has sued NBC for $2.5 million because he found an episode of Fear Factor “barbaric.” (Who'd have guessed?) His handwritten complaint supposedly claims that
the episode – which featured contestants eating rats – made his blood pressure rise, resulting in light-headedness and vomiting. Allegedly, he became so upset that he became disoriented and ran into a doorway.
We certainly don’t
mean to make light of 49-year-old part-unemployed people running into doorways, but Mr. Aitken seems to be doing his best
to jockey for pole position in the 2005 Stupidest Lawsuit competition.
Although Mr. Aitken was quoted
as saying that he really only wanted to “send a message” (gee, I’ve never heard that one before) there’s nothing innocent
about what he's doing here. His real rationale is probably most accurately surmised from his response, when contacted
for an interview, that he had no comment “unless it is a paid interview situation.”
His lawsuit doesn’t stand a snowball’s chance in court, but what will be its practical effect? Somewhere there’s an associate counsel at NBC who has now docketed his company’s filing
deadline in this case. He’s probably retained outside counsel who no doubt are
billing NBC more than $300 an hour to research relevant cases, leading up to a Rule 11 letter to Mr. Aitken. If all goes well for NBC, Mr. Aitken will drop his suit after getting the letter and NBC will only have
spent about $10,000 for the privilege of receiving Mr. Aitken’s “message”.
If he doesn’t get
NBC’s message, Mr. Aitken may well let the case continue, driving up NBC’s attorneys fees.
Even a nutso case like this can easily run up fees in excess of $100,000.
Assuming the NBC wins,
will they every get their hundred grand back from Mr. Aitken? I don’t know what
they pay part-time paralegals in Cleveland, but he may not have to worry about it. Sadly,
judges are often sympathetic for pro se plaintiffs and may be reluctant to ruin one financially – even if he really deserves
it.
Another good example of why we need attorney fee-shifting rules in U.S. courts.
Bush Addresses Asbestos Litigation
Keeping up the week's them of litigation reform, President Bush today travels to Detroit to talk about the continuing problem of asbestos litigation.
Asbestos, of course, was used as an insulating material in construction as late as the 1950s. By 2001 there were
a little more than 500,000 claimants who claim to have been injured as a consequence. Most claims involve non-cancerous
lung damage, asbestosis, mesothelioma or other types of cancer.
Although asbestos litigation has been growing since the 1970s, new claims have risen rapidly through the 1990s and into
the 2000s. A Rand Institute for Civil Justice Study in 2001 reported that insurers by then had already paid more than $21 billion in claims. That figure represents,
of course, only the amount insurers had paid by then. Corporations (before they went bankrupt) had also paid billions.
By 2001, 41 companies had declared bankruptcy as a result of asbestos claims and 8 of those were since the year 2000.
Because there is no definitive data on the rate of malignant and nonmalignant disease among persons exposed to asbestos and
because some diseases may take years to develop (so that an exposed person may suffer no ill effects for decades) it
is unknown when the country will see its last asbestos claim. One estimate is that as many as 21 million Americans
may have been exposed to asbestos between 1950 and 1979.
As a consequence, the long-term economic impact of asbestos exposure and the ensuing litigation may be unclear for years.
During the 1980s, asbestos litigation was a booming industry as plaintiffs' firms aggressived litigated cases and defendants
scrambled to understand the size of their exposure. The 1982 Manville bankruptcy and the bankruptcies of many of
the other players, however, slowed down the process.
By the 1990s, asbestos litigation had subsided as claims were being paid out of the trusts established by bankrupt defendants.
By the late 1990s, however, the dramatic increase in new claims raised the likelihood that the trust funds would be inadequate
to compensate all future claimants and many of those funds changed their payment policies to restrict payments. As a
consequence, many plaintiffs who had settled for a claim against trust assets would now receive only a fraction of what they
had anticipated.
The exhaustion of the funds from the early asbestos defendants prompted a new generation of plaintiffs' lawyers to go
looking for more possible defendants and that has prompted a second round of asbestos litigation.
Ultimately this is a sad story because of the many people affected by asbestos exposure. Those personal losses,
however, have not been well served by a litigation system that has been too slow and far too expensive to resolve their claims
efficiently. The Rand study estimated that the ultimate total cost of asbestos exposure could exceed $200 billion, a
substantial portion of which will have been consumed in litigation.
Thursday, January 6, 2005
Schwarzeneger Talks About Reforming Punitive Damages
California's "Governator", Arnold Schwarzeneger, is using his annual "state of the state" speech to exhort California's legislators to reform their ways. He asked legislators to change the way California adopts its budget to rein in spending and also
proposed taking state legislative redistricting out of the hands of legislators and into the hands of retired judges who would
(presumably) be free of political motives.
The Governor also waded into the treacherous waters of tort reform with a proposal that 75% of all punitive damages awards would be paid into a state fund. As I recount in my upcoming book, Out of Balance: Prescriptions for Reforming the Litigation System, this approach has been tried a handful of states.
In slightly less than half of those that tried it (Illinois and Georgia, for example) state supreme courts held the measure
to be unconstitutional.
Critics of tort reform have suggested that diverting punitive damages from the plaintiffs' who initiate lawsuits to state
coffers would remove the incentives for them to pursue certain kinds of litigation. And this is bad because . . . .
. ?
The problem with diversionary programs for punitive damages, in my view, is that they fail to cure the larger problem
which is the prevalence of punitive damages awards and their randomness. Havard Law School's Kip Viscusi has written extensively on the problems with punitive damages and has concluded that awards of punitive damages in tort cases
are substantially random.
That means that a business that is evaluating whether or not its actions are likely to result in legal liability faces
substantial uncertainty in calculating the costs of compliance. Indeed, as Professor Viscusi describes, in studies involving
mock jurors judging the actions of a hypothetical corporate defendant under varying scenarios it was apparent that the jurors
punished more heavily those companies that tried to evaluate the cost of compliance as opposed to those who
failed to comply but never considered the cost.
Punitive damages, then, fail to deter wrongdoing but do create incentives for litigation which drive up the cost of products
for all consumers.
If Governor Schwarzeneger (and other state legislators, for that matter) want to get serious about reducing the economic
impact of litigation, they should look to limit the availability of punitive damages awards, rather than holding out the hands
of the state treasury for a cut.
Wednesday, January 5, 2005
President Bush Visits #1 Judicial Hellhole
According to the ATRA:
In Illinois’ Madison and St. Clair Counties (numbers one and two on our 2004 list), more than 1100 healthcare providers
have been sued. More than half of the region’s 950 licensed physicians have been sued. Records show that 85 percent of these
suits resulted in no payment to the plaintiff. Together, both counties will have lost 161 physicians by the end of 2004.
Frivolous litigation costs the U.S. economy more than $280 billion every year and is clearly a systemic problem needs reform. But will President Bush do more than simply argue for limitations on
noneconomic damage awards (the so-called "pain and suffering" awards that are the stuff of medical malpractice litigation.
Limiting awards for noneconomic damages might help doctors and healthcare providers, but it won't do anything to stem
the 6 million civil suits filed every year against other productive parts of the economy.
Until the President and Congressional Republicans can get behind a comprehensive reform package that features limits
on punitive damages and rules that shift the burden of attorneys fees onto the plaintiffs' lawyers that provoke frivolous
litigation we'll not see much progress on the larger problem.
In Florida, for example, the legislature adopted a fee-shifting rule in which a party who was sued could offer the plaintiff a settlement. If the plaintiff refuses to settle, but subsequently
got less at trial than the amount of the offer, the plaintiff would be on the hook for the defendant's attorneys' fees.
Can federal policy-makers learn a lesson from the states?
7:54 am est
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Phone: 404-353-4833 | jbw@jonathanbwilson.com
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Jonathan B. Wilson is an Atlanta attorney at the law firm of Taylor English Duma LLP. Jonathan B. Wilson
provides legal advice to investors, companies and business executives involving corporate law, securities law, SEC matters,
intellectual property, website and Internet legal issues, start-ups, limited liability companies, partnerships, 1934 Act matters,
outsourcing, strategic alliance agreements, contracts, and other matters of importance to growing private and publicly-traded
companies.
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