Author Archive

A new regulatory regime for tobacco?

Fred Smith, the president of the Competititve Enterprise Institute, makes the case against pending federal legislation that would “[p]ut the Food and Drug Administration in charge of regulating tobacco in exchange for a buyout of farming quotas.” The proposed deal would, according to Smith, “strengthen the nanny state at the expense of individual choice, increase black market activity, hurt lower-income consumers, and, perversely, create new health risks for all Americans.” (Fred L. Smith, Jr., “The FDA poses threat to our health, liberty,” Investor’s Business Daily, June 21 (PDF file)).

Quota buyout legislation was passed by the House of Representatives on June 17 as title VII (the “Fair and Equitable Tobacco Reform Act of 2004”) of H.R. 4520, the “American Jobs Creation Act of 2004.” The focus now shifts to the Senate, which is apparently considering the deal outlined by Smith’s op-ed. For more on this, see Will Snell & Kelly Tiller, “Fair and Equitable Tobacco Reform Act of 2004,” U. of Ky. Dept. of Ag. Econ., June 2004 (PDF file); Jasper Womach, “Tobacco Quota Buyout Proposals in the 108th Congress,” Congressional Research Service, updated April 6 (PDF file); Blake Brown & Gary Bullen, “Tobacco Buyout,” N.C. State U. Dept. of Ag. & Resource Economics.

Outsourcing enforcement in Mass

Massachusetts consumer protection law includes “item pricing” regulations.” A shopper who picks up an item marked $3.19, but is charged $3.59 at the checkout, has been the victim of a violation of these rules. If a state wishes to address such incidents, a practical question arises: how to enforce legal rules when they involve such trifling amounts of money per incident? Enter class action lawyers, naturally. According to the Boston Globe, Massachusetts Attorney General Thomas Reilly has farmed out the enforcement of these rules to a group of private attorneys — who are doing quite well for themselves. Cases against Home Depot and Wal-Mart have been settled; a settlement with Walgreen is pending. If the Walgreen settlement is finalized, the outcome of all this acitivity will be the payment of $3.2 million to the private attorneys, $3.9 million to “an eclectic group of charitable, consumer, and nonprofit groups,” and $425,000 to the AG’s Office. The list of favored groups includes, among others, the Roscoe Pound Institute and Public Citizen. The Globe points out that “it would be impossible to identify consumers hurt by item-pricing failures”; one of the private attorneys claims in the story that the payments to the favored groups will benefit Massachusetts residents, with most being used to “spur greater awareness of consumer rights.” Cases against other retailers (in addition to Walgreen) are pending. (Bruce Mohl, “Reilly turns to private enforcement of item pricing,” Boston Globe, June 27)

NEA lawsuit left behind?

The AP reports that the National Education Association’s plans to launch a legal challenge the No Child Left Behind Act have, thus far, come to naught. No state government has signed on to the proposed suit, announced a year ago, and NEA is rethinking its strategy. The NEA website offers its views on the Act here; Education Secretary Paige’s response to the NEA’s threat of a lawsuit last summer is here.

Academic notes

U. of Wisconsin law professor (and blogger) Ann Althouse is not exactly impressed by Judge Guido Calabresi’s apology for his ACS remarks: “You’d think someone who makes principles of democracy central to his legal argument wouldn’t stop at saying his argument is complicated and academic.” Her earlier post on this subject is also worth reading, as is Point of Law’s treatment.

The July-August issue of Legal Affairs magazine includes a debate on the question of American courts’ use of foreign law, featuring Judge Richard Posner (advising against) and Georgetown law professor Vicki Jackson (making the case in favor).

Scruggs watch

Last week lawyers associated with uber-tobacco lawyer Richard Scruggs fanned out across the country to file a dozen lawsuits against thirteen large non-profit hospitals in eight states. According to one press account, the lawsuits allege that “the institutions are not living up to their charitable missions, are overcharging uninsured patients and are using overly aggressive collection tactics.” (Rob Kaiser, “Class actions filed against non-profit hospitals,” Chicago Tribune, June 18) Scruggs characterizes the litigation as his attempt “to stop profiteering by nonprofit hospitals.” (Bill Lewis, “St. Thomas among hospitals accused of ‘profiteering,'” Nashville Tennessean, June 18)

The Tennessean article further explains:

“The lawsuit said Saint Thomas unfairly benefits from its long-held tax-exempt status, and the suit alleges a breach of contract, consumer fraud and deceptive business practices because Saint Thomas and the other nonprofits allegedly haven’t provided enough charity care in return for their tax exemptions….

“He criticized the hospitals named in the lawsuits for charging what he said were their highest rates to patients who do not have insurance, while giving discounts to big insurance companies. If the poor or uninsured patients cannot pay their bills, the hospitals garnishee wages and bank accounts, seize houses and force people into bankruptcy, he said.”

University of Chicago law professor Richard Epstein, quoted in the Tribune article, had this reaction: “Dicky Scruggs has got a lot of money, and he’s looking for a lot of trouble,” Epstein said. “The question is, what’s the law that’s being violated?”

Brookings study of state regulation

I became aware only this week of the publication earlier this year of Paul Teske’s book, Regulation in the States, by the Brookings Institution Press. I have not yet read it, and so cannot recommend it to you from that vantage point. However, the abstract looks interesting, I think it might interest a substantial set of Overlawyered readers, and the time of a guest blogger is short. So, here’s a clip from the book’s abstract:

“Regulation in the States provides original quantitative analyses of state-level regulation across all the states in ten important sectors such as telecommunications, electricity, and professional licensing. Each section uses the same template for research and discussion, enabling cross-comparison among industries. Teske finds that commonly held fears of regulatory capture by industry are overblown, as are worries about an inevitable ‘race to the bottom.’ Legislatures and agencies still tend to base their policy decisions on their own ideologies and analysis. Teske also examines important exceptions, however, such as the case of occupational regulation.”

For a short, mostly favorable review by a political scientist, click here.

State AGs on drugs

Those who follow the activities of state attorneys general know of their interest in the pharmaceutical industry. Last week, Vermont AG William Sorrell was named president of the National Association of Attorneys General (NAAG) for 2004-05. In his presidential address, Sorell announced that “the issue of drug pricing” would be NAAG’s “particular focus” during his tenure. Sorrell raised the following questions:

“What drives our high drug prices? Is it true that the pharmaceutical industry is the most profitable industry in this country? Is it true that our national spending on prescription drugs more than tripled from 1990 to 2001? Do research and development costs explain the prices we pay? What are the effects of advertising and other forms of marketing on demand for prescription drugs and the amounts we pay for them? If it is true that industry direct-to-consumer advertising expenditures increased seven times between 1995 and 2001, why has this been so and how are prices affected by these increases?

“What about conduct by companies that have violated state and federal antitrust, consumer protection and other laws? Is this another cost driver? And how transparent is the prescription drug marketing and distribution system? Why are cheaper generic equivalents neither prescribed by more doctors nor desired by more patients?”

There is a NAAG meeting scheduled for Chicago in January on this subject.

For more on this subject, go to this post on Point of Law.

On the importance of secure property rights

“Everyone knows” the institution of private proprety is important to a society, but proving just how important has, somewhat surprisingly, been tricky. A new paper by Daron Acemoglu (MIT), Simon Johnson (MIT), and James Robinson (Berkeley), makes the case that “differences in economic institutions appear to be the robust causal factor underlying the differences in income per capita across countries.” (Emphasis added.) The authors define good “economic institutions” as including “enforcement of property rights for a broad cross-section of society so that all individuals have an incentive to invest, innovate and take part in economic activity.” Additionally, there must be “some degree of equality of opportunity in society, including such things as equality before the law, so that those with good investment opportunities can take advantage of them.” In an earlier paper, the authors coined the term “institutions of private property” to cover this idea, and the term “extractive institutions” to cover situations where “the rule of law and property rights are absent for large majorities of the population.”

The paper, Institutions as the Fundamental Cause of Long-Run Growth, makes fascinating reading, even for a non-economist. It is available for purchase from the National Bureau of Economic Research (NBER subscribers can download it for free). A less-than-final draft, dated April 29, is also available on Professor Acemoglu’s webpage.

Hyundai wins one in Alabama

Lowndes County, Alabama, has a reputation for being a rather plaintiff-friendly jurisdiction. On Tuesday, however, a jury there returned a verdict in favor of Hyundai Motor Co. in a wrongful death suit. In 1999, Christine Graham was killed “when her 2,300-pound Hyundai Excel was struck by a 79,000-pound Freightliner 18-wheeler going more than 60 miles per hour. Attorneys for the Graham family argued that a faulty seat belt and door latch design contributed to her death in the accident. Hyundai attorneys said the seat belt and door latch met all safety standards and the sheer force of the accident caused the woman’s death.” The case had been tried once before, in July 2002, ending in a hung jury that voted 10-2 in Hyundai’s favor. (Michael Tomberlin, “Hyundai prevails in crash lawsuit,” Birmingham News, June 24).

It’s interesting to note that Hyundai is building its first US assembly plant in adjacent Montgomery Country. When opened in 2005, the $1 billion facility will employ 2,000 people. I’ll leave it to others to divine whether this had any effect on the outcome of Hyundai’s case.