Overlawyered: Chronicling The High Cost Of Our Legal System

Archive for February, 2006

Bloggers Challenge Class-Action Settlement

Charles Burck writes about the reaction to the Netflix class-action settlement. (Charles Burck, “Bloggers Challenge a Class-Action Settlement”, Corporate Board Member Magazine, March/April 2006). The opponents of the settlement cite two problems with the settlement: 1) Only the lawyers got cash, and 2) the coupons Netflix is sending to customers are really a low-cost marketing program for them, like locking you into a magazine subscription with a free first month, and doesn’t really punish Netflix or compensate customers at all. So, either there was no harm, and the suit was a big frivolous mess, or there was harm to customers, in which case the settlement utterly failed to redress it.

Apparently, there is a website to protest the settlement which announces a hearing set for tomorrow (Feb 22). Ted and Walter have been all over this on Nov 3, Jan 11, Jan 21

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Do Acts of God Still Exist?

No, I don’t mean to start a discussion over the existence of a deity or whether that entity intervenes in the material world. I am sure Walter would permanently disown me for starting such a food fight on his blog. No, what I mean is, does the legal term “act of god” have any meaning nowadays vis a vis liability, or are all damages now necessarily someone’s fault?

The other day I listed some of the litigation and threats of litigation we get in our public contact business (Feb 20). Another common claim we get is from damages our customers suffer to their property due to what I would call natural events or from meeting up with inevitable natural hazards (e.g. hitting a rock while off-roading). Let me give a specific example that is not real but is typical of these claims.

A customer drives into a National Forest campground we operate. During their stay, on a particularly windy day, several trees fall over including a large tree that crushes the roof of their camper. Is this an act of god? Or am I, as I can assure you every such customer and insurance lawyer out there seems to believe, liable for the damage to their car?

Well certainly, one criteria would be whether I exercised due care in maintaining the health of the trees in public areas. And in fact we have a hazard tree process where experts from the US Forest Service, whom a reasonable person would consider the best in their field, assess the health of trees in public areas and mark trees that might pose a danger of falling for us to remove. Lets posit that we had just completed this process, and the tree that fell looked healthy to all the experts. I guess the question is, in today’s legal environment, is there any such thing as being able to prove “all due care”, or in effect does the accident itself serve as prima facia evidence that due care was not exercised, even if no one can think of what else could be done? Comments are open.

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A vaccine database, contaminated

The federal government has established something called a Vaccine Adverse Event Reporting System to collect reports of possible side effects related to immunizations. Sounds like a useful tool for epidemiological study, right? Except that, it seems,

anyone can submit a report to it, and no one actually verifies the accuracy of the report. Indeed, James Laidler once tested the system by submitting a report that the influenza virus had turned him into The Incredible Hulk. The report was accepted and duly entered into the database.

A more serious problem with the self-submitted nature of the data is that it provides a way for vaccine scares to self-amplify: lawyers pressing compensation claims make a point of submitting their clients’ case histories to the VAERS, and before long — what do you know? — the database is showing a worrying rise in reported side effect incidents, which itself feeds the litigation. Now a study in Pediatrics traces the ways in which litigation-driven reporting has distorted the contents of the VAERS database, especially as regards the purported association of the preservative thimerosal with childhood autism. Respectful Insolence explains (Feb. 6 at old site, more recently blogging at ScienceBlogs)(via MedPundit) and also ties the story in to the disgraceful performance last year in Rolling Stone by celebrity demagogue Robert F. Kennedy, Jr. (Jun. 20 and Jun. 26, 2005). More: pediatrician Flea also weighs in (Feb. 22).

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New Class Action Against McDonalds

On Friday, a new class action lawsuit was filed against McDonald’s for not fully disclosing the presence of dairy products and wheat glutens in their french fries. The suit was prompted by McDonald’s admission two days earlier that their fries do include milk and wheat, at least in small amounts. The suit does not appear to list any specific instances of people being harmed by trace milk and wheat in french fries, though a separate suit filed in Miami by the parents of a 5-year old girl alleged the fries caused their daughter to get very ill (though according to the article the parents continued to feed the girl McDonalds fries for two years).

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My Favorite Lawsuit

As my guestblogging stint winds down here at Overlawyered, I wanted to reflect a moment on lawsuits I see around me every day. My company runs an outdoor recreation business, mainly running campgrounds on public lands. As a public contact business, we get people trying to make all kinds of strange claims against us.

For example, we have had at least two different people who needed an operation that they couldn’t afford come into our facility and fake an injury to try to get us to pay for the operation. Fortunately, in both cases, the individual involved lived locally and had tried the same stunt at several other local businesses, and we were able to get them to move their efforts on to some other business (we used to have the same philosophy about fire ants in Texas — you can’t get rid of them, you can only chase them onto your neighbor’s yard). We have also had several people try the same thing, but as employees, turning down office work and begging us to give them lots of physical labor, only to be hit with a workers comp claim within weeks.

Every year, we have hundreds more job applications than we have positions to fill, so we have to turn down a lot of qualified people for employment. It is often the case that when one of these people we turn down for employment considers themselves in a “protected” group, they call me threatening to sue. Several folks who were over 65 have threatened to sue me for age discrimination, which always makes me laugh, since the vast majority of the 500 people I employ are over 65 — many are over 80 and a few are even over 90! We have also had at least one person who interviewed in a wheelchair threaten to sue for discrimination against the handicapped, right up until we saw him playing football at the beach in our campground (and despite the fact that over 10% of my work force is disabled in some way).

We always have issues with employees who honestly believe that the courts are supposed to act as a grievance and appeals board for job terminations. I can’t even describe the large percentage of employees we terminate for cause who call me and tell me they are going to sue. Even when they don’t sue (and few do, since lawyers working on contingency need to see some hope of winning) they still cost me a ton of time, because I feel the need to personally investigate every one to make sure my managers are treating people the way they should. In many cases, we probably wouldn’t have hired the person involved in the first place because they have a history of poor performance and quick terminations, but it’s hard to find this out anymore since lawsuits have dissuaded many companies from responding honestly to reference checks.

Despite all of these, my favorite suit actually was against the company from who we bought most of our assets. One day, a male visitor was near the campground in bare feet, and claims to have stepped on a nail. The nail caused a small puncture wound on the bottom of his foot. Employees offered to get the man to the emergency room to treat the puncture and to get at tetanus shot, but the customer turned down care. Months passed, and the case was mostly forgotten. Until one day the company was given notice that the man was filing suit for sexual dysfunction. Apparently based on some medical logic I never understood, perhaps some strange acupuncture effect, the man claimed he was unable to perform sexually based on stepping on that nail. In a sane world, this would have been dismissed out of hand. However, years later, the suit lumbers on, continuing to generate legal bills and settlement pressure.

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Jackpot justice in Mississippi

“Larry Stewart said shortly after his father gave the agent money for a [million-dollar life insurance] policy, the elder Stewart had a stroke, lapsed into a coma and died about seven weeks later at age 73.” Strangely enough, the agent and Prudential didn’t have a record of the policy. A jury believed the Stewarts, because it’s common for 73-year-old men to have brand-new million-dollar life-insurance policies, and awarded $36.4 million against Prudential (and $9600 against the insurance agent), who will appeal. The $35 million punitive damages award would have been capped had the case been brought after liability reforms were passed in Mississippi in 2003. (Jimmie E. Gates, “$36.4M awarded in lawsuit”, The Clarion-Ledger, Feb. 17).

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Ford lost seven $20 million verdicts in 2005

This, according to a Bloomberg News count. Bloomberg dutifully quotes a law professor who argues that this means that Ford should change its litigation strategy of refusing to settle before trial. Is there any other profession where the professor of a subject is so regularly wrong about the practice of the subject?

Taking the cases to trial is cost-effective because Ford wins 70 percent to 80 percent of them, said spokeswoman Kathleen Vokes.

“We know from 13 years of experience that being ready, willing and able to defend our products and people, even in ‘judicial hellholes,’ is the most effective way to control litigation costs,” Vokes said. “The rare big verdict that is upheld on appeal is more than offset by all of the other cases that we win or settle on favorable terms.”

(Margaret Cronin Fisk, Bloomberg News, Feb. 16). The lede of the story, claiming that the strategy “cost” Ford $255 million, is inaccurate on multiple levels: first, it doesn’t count settlement costs for cases it did settle or its legal expenses; second, a verdict isn’t necessarily upheld by an appellate court, and thus may not represent an actual cost to Ford; third, the proper baseline is how much an alternative strategy would cost Ford. There are tens of thousands of automobile deaths and hundreds of thousands of auto injuries every year, and a large fraction of them, just by random chance, involve Ford vehicles. If Ford offered blank checks to everyone who sued it, how many more lawsuits would Ford face? The fact is that other auto manufacturers engage in the same strategy, and Ford just had especially bad luck in the lottery litigation game in 2005.

We covered four of the seven cases: Nov. 21; Nov. 17; May 29 and links therein; Mar. 21. And I owe readers a post about a fifth case, Jablonski, which I thought I had posted about, but didn’t. (The Munoz case (Jan. 26) was a 2006 case.) It says something about the commonness of a $20 million verdict that none of these five cases made national headlines, and that we missed the other two entirely, in my case because they slipped through my Google News filter.

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