Overlawyered: Chronicling The High Cost Of Our Legal System

Archive for June, 2007

California Supreme Court: Ladies’ Nights are Lawyers’ Nights

Last week, the California Supreme Court handed down yet another victory for abusive “antidiscrimination” litigation, ruling in favor of a California attorney who makes a business out of suing legitimate businesses for violations of California’s absurdly broad Unruh antidiscrimination law. Marc Angelucci and three of his fellow travelers sued the Century Supper Club, a nightclub, for charging women less than men on several occasions in 2002; although two lower courts found reasons to rule against them, the California Supreme Court ruled that their claims had merit. (Court decision: PDF)

Unfortunately, as a matter of law the Court is right. The Unruh law is written ridiculously, and it has no exception for bogus plaintiffs. (What’s the big deal? Just this: Unruh provides for a minimum of $4,000 damages, plus attorney’s fees, for successful plaintiffs, thus providing an incentive for Angelucci to turn an anti-Ladies’ Night crusade into a career. Even the California court recognized that its interpretation of the law improperly rewarded “professional plaintiffs and bounty-hunting attorneys,” but it (correctly) held that rewriting laws is for the legislature, not the courts.

Oh, and one of the plaintiffs’ lawyers in this case? Our old friend, Morse Mehrban. (Most recently covered: Apr. 17, and see links therein.) Mehrban and Angelucci have teamed up on these cases many times before.

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Particles in power steering fluid not responsible for crash

Many of the frivolous suits we cover here on Overlawyered are laugh-out-loud outrageous; but (as the plaintiff’s bar will trumpet in self-defense) these represent only a small fraction of lawsuits. (Of course, even at a small percentage, there’s enough of them for us to blog about them nearly every day.) Most of the suits that make up the “high cost of our legal system” are much more mundane — though not necessarily any less legally ridiculous or less costly. Take a decision handed down last month by the Fourth Circuit Court of Appeals involving a lawsuit against Nissan. (PDF)

In August 1997 — note the date here — a bunch of high school kids were driving around after school in a 1987 Nissan Sentra. The driver, who may or may not have been “speeding and driving recklessly,” depending on who you believe, lost control of the car. The car flipped over, and one of the passengers, Troy Boss (who, by the way, wasn’t wearing a seat belt), ended up paralyzed.

Thus endeth the tragic story, and thus beginneth Boss’s quest for deep pockets. (Which was also tragic, but only for Boss’s victims.) First, Boss settled his claims against the person actually responsible for the accident — Stacy Harmon, the driver of the car. Then, hunting around, Boss and his attorney decided that the only truly deep pocket they could find was Nissan, which somehow was responsible for a teenager crashing a 10-year old car. So, in February 2002 — five years after the accident — he filed a $50 million suit in Baltimore against Nissan, Jiffy Lube (which had done an oil change on the car), a company called Eberle Enterprises (which had done the state auto inspection when Harmon bought the car), and a woman named Elizabeth Aldridge (who had sold the used car to Harmon several months earlier for $750). The theory that Boss came up with? That Nissan manufactured the car defectively, in such a way that “particles” in the power steering fluid mysteriously jammed the steering mechanism in some way, causing the car to swerve.

But if that was Boss’s theory, you might wonder why Boss sued all those other defendants. What does an oil change have to do with power steering fluid? What does the prior owner of the car have to do with power steering fluid? What does a routine car inspection — which does not, by state law, involve power steering fluid — have to do with anything? The answer to all three questions? Nothing at all. So why were they in the case? One reason, and one reason only: by fraudulently joining them as defendants, Boss hoped to keep the case in state court, to destroy diversity. Under federal law, once the case has been in state court for a year, regardless of how fraudulent the reasons are, the case can’t be removed to federal court — and there was testimony in the case that Boss’s attorney had admitted he was deliberately stalling to get beyond the one year mark.

Read On…

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Are consumers and businesses enemies?

A reader writes: “Am I wrong to believe that businesses and consumers are natural enemies in that their economic interests are diametrically opposed?”

Yes, you’re wrong. Transactions don’t occur unless both parties are better off. Businesses thus only profit if they can create consumer surplus—the ability to sell a product at a price that is less than what a consumer values the good or service. Businesses’ interests are thus aligned with consumers who seek consumer surplus. Businesses more often prosper by creating satisfied consumers who become repeat customers who promote the business’s reputation rather than trying to extract every last ounce of wealth from them in a single transaction. This is why brand names and advertising are so important, because they are market signals of long-term commitment to customer satisfaction. It’s not profitable to invest in creating a brand name if one intends on having a bad reputation. (Note the key word “intends” there; no doubt one can intend to have good customer service and fail to achieve it, and I’m looking at you, Comcast.) And one will note that businesses that tend not to have repeat customers or rely on word of mouth are more likely businesses that have reputations of indifference about customer satisfaction: tourist traps, traveling carnivals, etc.

This is why it’s frequently a mistake to characterize pro-plaintiff actions as “pro-consumer” actions. This is not a zero-sum game, and making businesses worse off can quite often also make consumers worse off. Even if consumers come out ahead retroactively in one particular transaction because they got a coupon in a class action that they wouldn’t have otherwise, or because one consumer realized a jackpot award for their misuse of a product, consumers can be losers in the long term in litigation because of higher prices and fewer choices, and this is true even if corporations don’t entirely pass the higher costs on to consumers and force the widows and orphans who are their shareholders to suffer reduced profits as well.

I support reforms that make consumers better off. I oppose the ones that don’t.

Update: Judge unseals Shell case fee carve-up

Updating our Apr. 9 item about the New Orleans federal judge who sealed the division of fees in the settlement of a class action:

Five attorneys who served on a closed-door committee that helped U.S. Judge Ivan Lemelle decide how to divvy up $6.6 million in legal fees in a settled federal lawsuit over tainted gasoline steered nearly half the money to their own firms, court records unsealed this week show.

Of 32 plaintiff’s attorneys and law firms involved in the case over fuel-gauge damage caused by contaminated gas made at Shell-Motiva refinery in Norco, the four top fee recipients — set to collect between $480,000 and $1.1 million — each had a member on the five-lawyer team that Lemelle formed last fall to recommend how much to pay the 79 lawyers who worked on the case. …

Dane Ciolino, a Loyola Law School ethics professor who petitioned the court to unseal the records on behalf of attorneys who claimed they were shortchanged, said Tuesday he was intrigued by the money roster.

“I think it’s very interesting that of five attorneys on the fee committee — those five out of the 32 firms (in the case) — managed to get roughly half the fees,” he said. “Being on the fee committee apparently is good work.”

The New Orleans Times-Picayune had also petitioned to unseal the records. (Michelle Krupa, “Lawyers steered settlement money to own firms”, New Orleans Times-Picayune, Jun. 5).

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Tobacco suit stresses race angle

“Accusing tobacco companies of preying on black people, a Miami attorney is seeking $1 billion in damages on behalf of a Coral Springs, Fla., woman whose mother and grandmother both died of smoking-related health problems.” Reporter Forrest Norman of the Daily Business Review, the south Florida legal paper, quotes me expressing skeptical opinions about the suit. In Florida’s earlier Engle tobacco litigation, plaintiff’s lawyer Stanley Rosenblatt came in for sharp criticism at the appeals level for the way he demagogued the racial angle; I covered the case here, here and here. This week’s case was brought by solo practitioner J.B. Harris, who said of the tobacco-company defendants, “If I could, I’d try to have them charged with genocide.” (“Suit Accuses Tobacco Firms of Targeting Black Consumers, Seeks $1 Billion in Damages”, Jun. 6).

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Vitamin drink said to cause priapism

A New York man has sued Novartis, maker of the health drink Boost Plus, saying he woke up the morning after drinking the concoction with a case of priapism — involuntary male sexual arousal — that landed him in the hospital. “The company would not comment, but its website “describes the drink as ‘a great tasting, high calorie, nutritionally complete oral supplement for people who require extra energy and protein in a limited volume,’ in vanilla, chocolate and strawberry.” Reader Michael McK. suggests that word of the lawsuit may serve to increase the drink’s sales. (“Man Sues Over Long-Lasting Erection”, AP/Breitbart, Jun. 5).

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The rule of law: Why is predictability important?

As if to demonstrate that their website is simply reflexively anti-reform rather than anything to do with the justice they supposedly aspire to, one of their trolling bloggers attacks the American Justice Partnership for seeking predictability in the law (and does so by quoting a positively deranged anonymous blogger). Of course, predictability—that like cases are treated alike—is a fundamental component of the definition of justice. The social benefits of the rule of law are so obvious that it should hardly be necessary to list them, but, aside from issues of fundamental fairness enshrined in our Constitution in the ex post facto clause among other places, predictability has other advantages. If a result is predictable, settlement is easier: there’s little point in continuing to litigate on either side, because additional money spent on lawyers cannot change the result. If a result is predictable, one can more easily conform conduct to be law-abiding. Corporations aren’t incentivized to break contracts with one another to see whether they can get a better deal in the courts; individuals and corporations know where the line is in dealing with the public and won’t step over it. And as I noted last year,

In banana republics across the globe, economies come to a standstill because the risk of confiscation or corruption keeps many investments from ever happening. The same danger occurs when the expropriation is conducted by lawyers in the name of “justice.” If businessmen and entrepreneurs—be they insurers, manufacturers of lifesaving pharmaceuticals, or the small businesses that deliver your packages—have to account for the risk that their contractual arrangements will be disregarded by courts, they have to raise prices to account for that risk. Such increased prices mean fewer contracts are signed and fewer businesses are started. Consumers are worse off, not just because they now have fewer options, but because the economy is smaller as jobs and opportunities are lost. The only beneficiaries are the lawyers.

The poster knows darn well that the idea of predictability in justice hardly originates with Dan Pero and reformers. As I once noted to the same poster in a comment thread:

Since when is predictability a component of justice?

Since at least Aristotle, and arguably even further back to Mosaic law and the Code of Hammurabi.

If a desire for predictability in law makes one a reformer, then one can certainly add Plato, Thomas Aquinas, Montesquieu, Justice Holmes, and Lord Chief Justice Bingham of Cornhill to the list of reformers. More recently, one can read Richard Epstein on the subject. Justinian Lane would serve himself better by reading more books and fewer anonymous blogs before he asks such silly questions.

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Use our product or we’ll sue

Two manufacturers of digital rights management (DRM) systems, Media Rights Technologies (MRT) and BlueBeat.com, “have issued cease and desist letters against Apple, Microsoft Real and Adobe for not including their technological protection measures in products like Windows, iPod and Flash Player.” (TechnoLlama, May 12; Louisville Music News, May 16, whose headline we have borrowed). Explains Podcasting News (May 12):

The companies are using an unusual interpretation of the Digital Millenium Copyright Act (DMCA) to make their case. The DMCA, signed into law by President Clinton in 1998, makes prohibits the manufacture of any product or technology that is designed for the purpose of circumventing a technological measure which effectively controls access to a copyrighted work or which protects the rights of copyright owners. According to the firms, mere avoidance of an effective copyright protection solution is a violation of the DMCA.

Freedom to Tinker (May 15) says that if you believe the companies’ legal claim is sound, “I have a bridge to sell you — and let me assure you that you’re legally compelled to buy it.”

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Update: Australian’s failed suicide try

A 19-year-old Australian who fell from a tree and was left quadriplegic after a failed suicide attempt has failed in his effort to lay legal blame on a mental hospital that had discharged him eleven days earlier. Timothy Walker “sued the Sydney West Health Service for negligence, claiming not enough was done to care for him prior to the accident. He claimed the hospital should have prescribed him anti-depressant or anti-psychotic medication, counselled him and detained him as an involuntary patient for at least two weeks for assessment.” However, a judge found that the health service had not rendered substandard care, that it properly declined to prescribe antidepressants because Walker would not promise to stay off liquor, and that it had followed up with home visits after Walker’s discharge, during which he reported feeling better. Walker will, at least notionally, be liable for the hospital’s legal expenses under the rule that costs follow the event (sometimes known as the “everywhere-but-America rule”). (Alyssa Braithwaite, “Would-be suicider fails in hospital sue bid”, AAP/Daily Telegraph, May 25). Earlier: May 9.

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Pearson update: Bogus pants lawsuit no longer about pants

Roy Pearson, the DC administrative law judge who made abusive litigation famous by suing his dry cleaner for $67 million over a pair of pants, has apparently heard all the public criticism he has received and taken it to heart. No longer is he asking for that kind of money over an article of clothing, according to the Examiner:

A customer who believes he was mistreated by a dry cleaner has dropped the pants from his suit.

Roy L. Pearson, who filed a $67 million lawsuit against the dry cleaning business that lost his pants, has lowered his demand. Now, he’s only asking for $54 million.

[…]

He is now focusing his claims on signs in the shop that have since been removed. The suit alleges that the three defendants, Jin Nam Chung, Soo Chung and their son, Ki Chung, committed fraud and misled consumers with signs that claimed “Satisfaction Guaranteed” and “Same Day Service.”

Oh, good. Now the lawsuit is only $54 million worth of frivolous instead of $67 million.

For all of you eagerly awaiting the outcome of this case, it is scheduled for trial on June 11.

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