Recently in Loser Pays Category

Another strong reaction from the bench to scorched-earth practices in litigation:

A Massachusetts U.S. District Court judge fined Medtronic Sofamor Danek Inc. and related companies $10 million for the behavior of its trial lawyers at Dewey & LeBoeuf while fighting a patent case brought by DePuy Spine Inc.

Senior District Judge Edward F. Harrington also ordered Medtronic Sofamor, which makes spinal implant devices, to pay some of the plaintiffs' attorney fees. ...

"The defendants prolonged the proceedings unnecessarily (thus unduly imposing upon the jury's time), they sought to mislead both the jury and the Court, and they flouted the governing claim construction as set forth by the Federal Circuit," Harrington wrote.

(Sheri Qualters, National Law Journal, Feb. 28).

In 1993 the U.S. Congress, urged on by organized litigators, gutted Rule 11, which for ten years had provided relatively strong remedies to those targeted by groundless litigation in federal courts. It's time to look again at the case for a stronger Rule 11, argue Zeke J. Roeser and Karen Harned (National Federation of Independent Business, in a new article for the Federalist Society's Engage (cross-posted from Point of Law).

U. S District Court Judge Robert Matsch recently got so infuriated by the conduct of McDermott, Will and Emery attorneys Terrance McMahon and Vera Elson that he overturned a jury's $51 million verdict, then ordered the lawyers to pay the fees and costs of the opposing lawyers, a sum that could total several million dollars. (Denver Post, Feb. 25)

From the decision (Medtronic Navigation, Inc. v. BrainLAB Medizinische, 2008 WL 410413):

In essence, the response from the plaintiff and MWE, through new counsel, is that the Court had the obligation to stop any trial conduct that stepped over the line of zealous advocacy. In short, they argue that they should not be held responsible for what they were able to get away with during the trial presentation. The adamant denial that there was any abuse of advocacy in this case is in disregard of what this Court has already concluded and displays the same arrogance that has colored this case almost from its inception. Throughout these proceedings Medtronic and the MWE lawyers have demonstrated that when they are faced with adverse court rulings, they proceed undeterred, with only superficial observance of the court's determinations. Such conduct supports the conclusion that after the Markman rulings, Medtronic's primary objective in pursuing this litigation was to put economic pressure on its competitor in the market.

Medtronic's counsel proceeded cavalierly, with reckless indifference to the merits of Medtronic's infringement claims. The continued prosecution of a claim after its lack of merit has become apparent warrants sanctions under § 1927. At trial, MWE's conduct was in disregard for the duty of candor, reflecting an attitude of “what can I get away with?” Throughout the trial, the MWE lawyers artfully avoided the limitations of the patent claims and created an illusion of infringement. They did so with full awareness that their case was without merit.

"The New Jersey Supreme Court has agreed to review a case that could determine whether a lawyer is liable for furthering a client's illegitimate purpose in pursuing litigation." A lower New Jersey court had ruled that even if a lawyer knew his client was moved by an improper purpose in filing a lawsuit, he could not be held liable unless he was pursuing an illegitimate purpose of his own (as opposed to furthering the client's illegitimate purpose). On top of it all, the lawyer's former client was defending an action for malicious process on the grounds that he'd relied on the lawyer's advice in suing. Since this was the same lawyer who was disclaiming all responsibility for the results of the advice, the overall effect might be seen as that of a shell game in which responsibility for the wrongful lawsuit was to be found under whichever walnut shell -- attorney or client -- wasn't being lifted for inspection. (Mary Pat Gallagher, "N.J. Supreme Court to Take Up Issue of Lawyer's Liability for Client's Baseless Claim", New Jersey Law Journal, Jan. 31)(LoBiondo v. Schwartz).

As one of our reader/informants sums up this litigation against a Kentucky surgeon filed by (and backfiring against) a Tennessee attorney: "Plaintiff lawyer (who is a JD/MD) gets sued by both his plaintiff client and the defendant doctor and he loses to both." (Andrew Wolfson, "Attorney is loser in malpractice lawsuit", Louisville Courier-Journal, Nov. 28; Childs, Dec. 27). More on countersuits by doctors: Point of Law, Dec. 20.

A guestblogger will be joining us momentarily, and I'll be posting less over the holidays. Meanwhile, my pipeline is still backed up with items from the past year that deserve a more serious treatment than a hurried roundup mention permits. Here are four of them:

• More docs moving to Texas? Watch out, they must be quacks! After the New York Times reported that doctors seemed to be showing fresh interest in practicing in Texas since its enactment of litigation reforms, our frequent sparring partner Eric Turkewitz of New York Personal Injury Law Blog quickly countered by noting that disciplinary actions in the state are way up, and -- quite a jump here -- concluded with a suggestion that the newly arriving docs must be causing quality problems. Among bloggers who took this idea and ran with it: Phillip Martin of Burnt Orange Report. Then Prof. Childs had to spoil the fun by asking whether the doctors being disciplined were in fact newcomers to the state and found that, to judge by an initial sampling, no, they're not. And the medical blogs then knocked the remaining props out from under the reform-made-care-worse theory by linking to coverage documenting how the increase in disciplinary actions reflected the Texas medical board's concerted recent effort to get tough on doctors -- too tough, said many critics. In other words, the Texas medical profession was doing exactly what many skeptics demanded it do -- submit to stricter oversight in exchange for liability reform -- and now that very submission was being cited as if it proved that standards of care were slipping.
• Uninjured car owners can sue GM over seatbacks. No class members claim to have been injured, but Maryland appeals court allows class action over cost of replacing allegedly weak seatbacks in GM cars. [DLA Piper; opinion, PDF; Maryland Courts Watcher]
• The litigious stylings of Jonathan Lee Riches. We mostly ignore litigants who file handwritten pleadings from prison cells complaining of obviously hallucinated events, but there's no getting around it: the South Carolina convict has become a pop culture phenomenon with his scores of lawsuits against sports figures, President Bush, Perez Hilton, William Lerach and Elvis Presley over a host of imagined legal injuries. Some of the coverage: The Smoking Gun, Dreadnaught, Deadspin, Justia, Above the Law. He even has several Facebook fan groups.
• Taxpayers and vaccine-compensation lawyers. Under the federally enacted vaccine-compensation program, notes Kathleen Seidel, "a petitioner who brings a claim in good faith is entitled to reimbursement for reasonable attorneys’ fees and costs, regardless of whether the claim is successful." (Forget about loser-pays; this ensures that taxpayer-defendants can win but pay the other side's fees anyway.) What sorts of bills do you think attorneys file for reimbursement under those circumstances? Yep, very optimistic bills, in which they expect taxpayers to shell out for their attendance at "advocacy group meetings, and attendance at a conference of trial lawyers representing autism plaintiffs". In this case, HHS successfully appealed (PDF) an order that it pay the fees. Seidel's Neurodiversity blog offers a remarkable trove of insight into litigation relating to autism causation theories, vaccines and thimerosal, and this post is no exception. (Updated to include links.)

More stories that shouldn't get away in another post to come.

Earlier this week, we quoted an Australian newspaper that Michael Flatley had won an "$11 million settlement" in his lawsuit against Tyna Marie Robertson, a woman who had falsely accused him of rape and tried to extort him through the threat of litigation, and speculated that Robertson's other romantic shenanigans with the wealthy may permit her to pay it. Alas, other press coverage reveals that this was not a settlement, but a default judgment, which suggests the inability to pay for a lawyer to defend herself as well as to pay Flatley. On Point's report of the default judgment notes that Robertson's child support litigation claims she has $6 to her name. Flatley did come to an undisclosed financial settlement with D. Dean Mauro, the attorney who handled Robertson's claim, so there will be some justice done.

After the glamourpuss tort-chaser's campaign over environmental contamination at the high school met with one reverse after another in court, ending in a judicial ruling of no merit, plaintiff's lawyers have now agreed to reimburse the city and school district of Beverly Hills for a not insignificant chunk of their legal expenses in defending the claims, in the sum of $450,000. As readers of this site know, prevailing defendants very seldom recover fees from losing plaintiffs or their lawyers in American litigation. The Civil Justice Association of California has details (Oct. 9).

This summer Viking published a book by journalist Joy Horowitz entitled Parts Per Million: The Poisoning of Beverly Hills High School which, as its subtitle implies, would appear to place much credence in the lawsuits' claims of disease causation from oil wells on the high school campus (undated L.A. Times review by Robin Abcarian). For the side of the story that proved more convincing to the courts, see the work of Norma Zager and Eric Umansky here and here as well as this article in Time. Brockovich herself, incidentally, now has a blog of her own.

Eric Goldman calls the case of BidZirk v. Smith, filed by a South Carolina eBay reseller against the blogger who'd criticized its services, "a flagship example of how a pernicious and misguided plaintiff with a thin skin can ruin a blogger's life." Maybe "ruin" is no longer the operative term, since a federal court has just thrown out the case. Among the court's determinations: calling a company's founder a "yes man" is opinion and not actionable as defamation (Oct. 28 and, before that, Nov. 21, 2006; decision (PDF)). More: Ron Coleman fingers as a culprit the "American Rule" (no shifting of fees) under which "there is for all practical purposes no downside to suing someone on the most preposterous of grounds and losing -- hence making the bringing of meritless litigation a part of every large company’s toolkit for silencing criticism and destroying smaller competitors."

Canada has moved toward more liberal allowance of class-action litigation in recent years; it has also, like most non-U.S. countries, chosen to retain its historic principle of "loser-pays", or "costs follow the event", fee shifting. What happens when prevailing defendants seek an award of costs against losing class plaintiffs, assuming that the individual class members cannot be reached for the purposes of assessing costs? In a bitterly fought lawsuit over unclaimed veterans' pension accounts, the federal government in Ottawa went after three class lawyers for C$4 million in costs out of their own pockets. The Ontario Court of Appeal denied its petition, but the lawyers say they feel chilled from organizing more such suits. In all, the federal government spent an estimated C$6 million in legal fees and C$10 million in other costs successfully defending the pension suit. (Randy Richmond, "Ottawa claimed denying justice", London Free Press, Sept. 20). Earlier London Free Press reports by Randy Richmond on underlying lawsuit: "One Last Battle: Dark Politics", Oct. 30, 2006; "An ugly fight for veterans' benefits", Oct. 31.

It's sparking further discussion:

Hey, Davis Wright Tremaine, and your clients, the parents who sued the district: This is insane.

You argue this isn't to enrich the firm, but to punish the district. The theory is that the fees, at $1.8 million and rising, are a lash to whip the district for its bad race-based deeds.

When I called the lawyers Tuesday, they compared it to, among other cases, their pro bono defense of a prisoner beaten by L.A. jail guards.

This makes no sense. Seattle's policy wasn't intended to hurt anyone, let alone beat them to a pulp.

(Danny Westneat, "The bill just keeps going up", Seattle Times, Sept. 19; Emily Heffter, "Billing in 'pro bono' cases is fodder for ethics debate", Seattle Times, Sept. 18; Above the Law, Sept. 18).

No matter how absurd a lawsuit is, the plaintiff usually has an elaborate, ingenuous theory to explain why he deserves to be compensated for injuries caused in some convoluted, indirect way by the nefarious defendant, and the obligatory disclaimer about the case "not being about the money" is usually tacked on. Usually. And then there's James Schlimpert, president of Oklahoma-based Garage Storage Cabinets LLC.

When asked why he brought a suit against a competitor (Don Mitchell/MGCS) for misappropriation of trade secrets and tortious interference with his company's dealer contracts, he explained, forthrightly:

When deposed, GSC President John Schlimpert testified that his company held no trade secrets, had no exclusive dealer contracts, and had filed the lawsuit for the sole purpose of putting MGCS out of business.

“I am amazed in some respects that the plaintiff said that, and he said it more than once, said his purpose was to put them out of business,” reads the court record issued by the District Court of Payne County, Honorable Larry Brooks, judge. “I think, under the plaintiff’s stated purpose, he was bringing it just to be vexatious to the defendants. I think it’s vexatious litigation.”

Wow. Still, for anybody who wasn't already convinced by the Roy Pearson case, the history of the suit illustrates the difficulty courts have in protecting defendants from frivolous suits.

Because the complaint, on its face, seemingly stated legitimate causes of action, the only way for Mitchell to establish that the suit was frivolous was to conduct discovery and take the deposition of the plaintiff. Then Mitchell had to get lucky; if Schlimpert hadn't foolishly admitted the fraudulent nature of his suit, the court would almost certainly treated the suit as legitimate. (Mitchell could still have won, but wouldn't have gotten sanctions.) Once Mitchell got lucky, he had to make a motion to the court to have the case thrown out.

Then, after having the case thrown out, Mitchell had to make a separate application to the court for sanctions -- he actually botched this procedure, but the court let the issue slide -- and then had to participate in a hearing to try to establish how much those sanctions should be. All of that cost more money, more attorneys fees, with no guarantee that these costs would be recouped. Indeed, in this case Mitchell asked for $49,300, and the judge awarded only $31,500, because Schlimpert was successful in finding an expert witness to convince the judge that the lower number should have been sufficient to beat his frivolous case.

Moreover, the judge refused to penalize the plaintiff's lawyer, finding that just because Schlimpert was acting in bad faith didn't mean his lawyer was.

And then, after all that, Schlimpert appealed. Finally, this month, the appeals court upheld the trial court's decision. And now Mitchell has to go back to the trial court, after having spent another $8,000 on the appeal, and has to hope the judge will make him whole.

P.S. In case you were wondering: this suit was filed in May 2003. It took 17 months from the time the suit was filed until the time the judge ruled in favor of Mitchell. It took another 17 months for the judge to award sanctions to Mitchell. After Schlimpert appealed, it took yet another 17 months for the appeals court to rule. In other words, more than four years elapsed. But -- as mentioned -- it's still not over, because now Mitchell has to return to the trial court, to be awarded fees because of Schlimpert's appeal.

My last post commented on Washington's Insurance Fair Conduct Act. The Act is up for public vote as Referendum 67. Check out the web sites advocating approval or rejection of the measure.

The "Approve 67" web site struck me as a bit demagogic--the main page shows a young girl clutching a teddy bear being comforted by (apparently) her father. The next shot is a man in a wheelchair, face cast sullenly downward. (Ostensibly suffering from insurance company malfeasance.) The final shot is a generic image of an emergency clinic. Then, under the "Take Action" column on your left there's a link to "Share Your Insurance Horror Story." (As of this writing there is a grand total of three "horror" stories.)

Under the endorsements tab, trial lawyers are notably absent--at least from the list. There are, however, multiple labor organizations as well as the Washington State Democratic Party. Under the "About Referendum 67" tab [with my comment]:

If an insurance company unfairly denies a legitimate claim, your only recourse is to sue. But if you win, the only thing they have to pay is the amount of the original claim [not true, just ask millionaire prankster dentist Robert Woo.] Referendum 67 creates an incentive [there already are incentives: coverage by waiver or estoppel, Olympic Steamship attorney fees and the Washington Consumer Protection Act (CPA)] to treat legitimate claims fairly by allowing the court to assess penalties if an insurance company illegally denies or delays payment of a legitimate claim.

Referendum 67 would help to ensure that the insurance industry honor their commitments to treat all policyholders honestly by making it against the law [it's already against the law, silly--see the existing RCW and WAC] to unreasonably delay or deny legitimate claims.

The News Tribune in its story Let’s not try to fix an insurance industry that’s not broken says:

That the system is working well is illustrated by a storm of a different sort: the windstorm that smashed into Western Washington earlier this year. Within less than four months of the event, according to a recent study, 90 percent of the 42,000 claims were settled, for $170 million in compensation. Most of the remaining claims remained unsettled due to lack of qualified contractors or the time needed to rebuild homes. Only three complaints were filed with the insurance commissioner’s office.

I don't know if I would characterize this legislation as a jackpot for trial lawyers, but it's probably unnecessary and will increase the frequency of litigated first party claims at the greater expense of the insurance paying public. It's up to Washington voters to get it right.

I discuss in today's American.

(Earlier: Dec. 25 and Aug. 20).

The Washington Legislature recently passed and governor signed the “Insurance Fair Conduct Act” allowing first party claimants to recover treble (triple) damages and attorney fees for claims unreasonably denied. The Seattle Post Intelligencer’s story here lays out the pending battle between insurers and the trial bar. You see, the legislation is up for public vote in November and each side is scurrying to curry favor with the electorate.

Now, as an insurance consumer myself I expect high marks from my insurance company in the event of a loss. And, I have from time to time witnessed the recalcitrance of other insurers when tendering defense and indemnity to them (particularly in additional insured scenarios.) Few would disagree that insurers should promptly and cheerfully pay those claims they owe, period.

Kai Falkenberg's September 3 story in Forbes quotes me (though I promise I told the fact-checker that the Chung's legal bills were only $83,000) and Overlawyered guest-blogger Steve Hantler. The sidebar to the article lists a number of cases Overlawyered readers might be familiar with.

Before David Giacalone jumps down my throat, let me say that I had a lengthy interview with Falkenberg, detailing my views on pro se litigation, but only the throw-away anecdote about Roy Pearson's pants suit made it in. (Interestingly, the Supreme Court's decision this spring in Bell Atlantic v. Twombly helps resolve the problem I complained about in that December post.)

Update: Falkenberg writes to let me know that "Regarding the Chungs, the $100,000 references not just the $83,000 in legal fees but other costs associated with Pearson’s claim and was confirmed with their lawyer, Chris Manning." Fair enough (though I think Manning is including lost sales from Pearson's picketing the Chungs' shop, which one might argue does not really reflect legal costs). Let me clarify that I thought that Falkenberg wrote an excellent piece, especially given the limitations of space. Quote of note:

In a study of pro se suits brought between 1995 and 1999 in the federal district court in Manhattan, attorney Jonathan Rosenbloom found that a "disturbing" number of pro se cases were dismissed for asserting claims that were "delusional" or "wholly incredible." ... Rosenbloom also found a lot of frequent filers: Nearly half of the study's 765 pro se litigants filed at least one previous suit in that court, including one who filed 57 complaints in one year.

Are you really surprised? The D.C. Court of Appeals' average time for appeal is 575 days, implying a wait until 2009 for a decision, but one would hope a simple case like this could be disposed of faster.

In two cases in the last few months, federal judges have ordered the government to pay the defense costs of failed health care fraud prosecutions.

In Nevada, Judge Robert C. Jones awarded about $300,000, about 30% of the defense costs, to an Idaho doctor, finding that the losing case was frivolous because, the American Medical News reports, the government's experts contradicted other experts in the case. (There is presumably more to the story than this, as the same is true in nearly every criminal trial involving expert testimony.) Half the claims were dismissed before trial, and the others were adjudged not guilty by a jury. The government has appealed. (Amy Lynn Sorrel, "Judge rules criminal fraud case against Idaho doctor is frivolous", Aug. 20) (h/t P.N.).

And, in Texas, Judge Lynn Hughes awarded $391,000 to an Oklahoma attorney to cover part of his defense costs after being wrongly prosecuted on 54 counts of health insurance fraud. The court criticized prosecutors for misleading the grand jury and a "reckless disregard for the truth." Again, the government will appeal. (AP/Tulsa World, "U.S. ordered to pay OKC attorney", Aug. 13).

(AM post bumped for PM update.)

A judicial panel is still deciding whether the Great American Pants-Suit plaintiff will keep his job as an administrative judge. A delayed decision is expected early next week.

Update to the update: Marc Fisher is reporting that the decision will be to start the bureaucratic process of firing Pearson. Amazingly, the chief ALJ recommended reappointing Pearson&mdash:until Pearson showed his typical good judgment by blasting the chief ALJ in an internal email as "evil," causing his target to change his mind. Pearson will be entitled to a hearing (and who knows how many rounds of appeals) before he is officially fired; since April, he has been in a fully-paid no-work position as an "attorney-advisor."

...has requested reconsideration of the decision against him, and has filed a delusional brief in support. Rest assured his damages claims are more reasonable than before: he is now seeking only $35 million in damages.

The Chamber of Commerce fundraiser for the Chungs' defense fund to pay $83,000 in attorneys' fees defending against this suit is July 24.