In May of last year a judge dismissed a former police officer’s defamation suit against the Carroll Times Herald, published in the small town of Carroll, Iowa. “Even though the newspaper handily won the case, the legal expenses have left the family-owned local newspaper in financial peril.” [Meagan Flynn, Washington Post/Arkansas Democrat-Gazette]
Excellent interview with Dan Klein, a George Mason economist bound by family and professional ties to Sweden, where his wife and daughter live. Among other things, confirms what I’ve been saying for years about comparative litigation climates:
Klein: Sweden does pretty well in the economic freedom ranking, currently 43rd of 162 in the Fraser ranking and 19th of 169 in the Heritage ranking. Incidentally, a significant advantage of Sweden over the US is civil law and litigation. The US system is terrible, as it does not have loser-pays and generally makes for shakedowns and extortion. Like most countries Sweden has loser-pays and no exorbitant and capricious damages. I believe that the freedom indexes do not pick up this advantage to Sweden, but I’m not sure. I’ll bet that per capita the US has ten times as much litigation and ten times as many lawyers as Sweden does. A sane court system shows up in ordinary life in Sweden, where trust and flexibility make possible things you don’t see in the US from fear of legal shakedown.
He goes on to recount a tale of emergency medicine that would very likely have gone differently in the United States. [Anders Ydstedt, interviewer, Svensk Tidskrift]
- Advice to Mark Calabria, newly installed as head of the Federal Housing Finance Administration, or FHFA [Arnold Kling; more on what to do with Fannie and Freddie]
- Bad blood between Joe Biden and Elizabeth Warren on consumer bankruptcy issue goes back decades [Matthew Yglesias, Vox]
- “Financial planning websites consistently emphasize paying off revolving high-interest debt before saving for retirement (unless a company offers a match rate).” But state-mandated auto-IRAs nudge workers the other way [Aaron Yelowitz, Cato, earlier]
- Competition for incorporation: “Nevada adopts fee-shifting: Should Delaware worry?” [Stephen Bainbridge]
- “The True Winners and Losers of Financial Regulation” [Diego Zuluaga] Fed vs. narrow banks [John Cochrane, more]
- FATCA was the bad fairy’s curse at the royal baby shower: “Welcome to Tax Hell, Little Earl of Sussex” [Suzanne Lucas, earlier]
- Waco biker prosecutions — a dragnet affair in which many bystanders were hit with charges, kept in jail on unaffordable bail, and lost their jobs — end after four years with all charges dropped; many deaths resulted from police fire [Brian Doherty, Reason; earlier and more]
- “Lawsuit: You did business with someone who did business with someone who committed a crime against me, so you’re also liable.” [Ted Frank describing suit against SalesForce alleging that its business management software assisted sexually oriented online business BackPage; Mike Masnick, TechDirt]
- “Our waterways policy is crony capitalism disguised as patriotism” [George Will, syndicated/Atlanta Journal Constitution] “The Jones Act Fleet: High Costs and Limited Capabilities” [Colin Grabow, Cato at Liberty] More on the maritime protectionism law, all from Grabow at Cato: Sen. Mike Lee introduces repeal bill; extending the law further? counting the costs for Puerto Rico; production of new ship no cause for celebration. And on East Coast freight traffic congestion [Dan Ikenson and Colin Grabow, New York Post]
- If you were born yesterday, you may be the target reader for a Gannett/USA Today and Arizona Republic piece attacking model state laws, the Goldwater Institute, and the American Legislative Exchange Council (ALEC) [critical threads by Julian Sanchez and Tim Sandefur]
- On attorneys’ fees, “The English Rule and the American Rule” [Federalist Society Policy Brief video with R. Hugh Lumpkin]
- Big Lawyers On Campus: “How Class-Action Lawyers Help Their Alma Maters” [James Copland, Bloomberg Opinion on cy pres practice; earlier here, here, etc.]
Reader B.B., an attorney, writes:
In Michigan, the American Rule for paying attorney fees has been abolished in civil cases valued at more than $25,000 when filed. I am curious whether anyone has done an analysis to see if this has changed the cost of medical care in Michigan and states that have similarly adopted “loser pays” procedures. I often hear the argument that this is a needed reform, but I never hear an analysis of how this reform has worked where implemented.
In Michigan civil cases valued over $25,000 when filed are argued before a three-attorney panel during pre-trial proceedings. The panel then assigns a value to the case. If both parties accept that value, the case is settled. If either party rejects that value, that party must do 10% better than that value at trial, or they are deemed to have lost, and then they pay the other side’s attorney fees. A plaintiff could get a jury verdict of $100,000 and be deemed the loser if he rejected an award of $90,909.10 or more. This system can be far more punitive than the English Rule.
The problem with any system that shifts the burden of paying for attorney fees to the loser is that it disproportionately impacts the middle class. A poor person does not have to worry about becoming liable to pay the other side’s attorney fees because they don’t have it and the insurance company won’t pursue it. If the insurance company attempts to take what little assets they might have, they will just file for bankruptcy. The insurance company does not have to worry about becoming liable to pay attorney fees because it is a cost borne equally by all insurance companies that do business in Michigan. They just price that risk, like every other risk, into the insurance premium. Only a person who has assets that would not be protected in bankruptcy, and is not wealthy enough to risk paying the other side’s attorney fees, is impacted by a system that shifts the burden to the loser.
So those would be two interesting questions for anyone concerned about the issue to consider: Have “loser pays” systems actually changed medical costs in states that have adopted them, and can “loser pays” systems impact enough litigants to have any effect at all?
Reactions from readers knowledgeable about Michigan legal practice?
A Florida law allows persons who have undergone treatment after auto mishaps to sign over to the medical provider their right to sue their insurer under so-called PIP (personal injury protection) auto coverage. Under the provisions of this assignment of benefits (AOB) law, when the medical provider sues, it is entitled to one-way attorney’s fees (payable if it prevails, but not if it loses). These attorneys’ fees can dwarf the underlying sums being sued over — amounting to about $40,000 following a $790 win in one extreme case.
Now Florida attorneys are rolling out tens of thousands of AOB suits, many of small enough quantum that they can be filed in small claims court, even if the fee entitlement thereby triggered is not so small. In Volusia County, where small claims filings more than doubled to over 12,000 cases in 2017, “a single local law firm accounted for all of that increase — and then some — by filing 8,400 cases that year…. In one example, Advantacare of Florida, represented by Kimberly Simoes, filed a lawsuit against State Farm saying the company had not paid it for services it rendered to Stephen Smith. Advantacare was awarded $789.62 according to court files. Simoes was awarded $39,985 in attorney’s fees. Attorney Mark Cederberg was awarded $3,500 for his expert testimony regarding whether Simoes’ fees were reasonable. About a month after the attorney’s fees were awarded, Advantacare dismissed the lawsuit.” [Frank Fernandez, Daytona Beach News-Journal; earlier here and here]
As I have written elsewhere, the true two-way loser-pays systems that operate in most other legal systems take care to avoid the fee-escalation incentives that typify many one-way fee entitlement laws in the U.S. In particular, they tend to hold fee recoveries below actual outlays, and often decline to reimburse fees unnecessarily expended.
- “One-Sided Loser Pays Is the Worst of Both Worlds” [Mark Pulliam at his new blog Misrule of Law, and thanks for mention]
- My first piece for Quillette debunks claims of jump in rate at which gay men are being murdered in U.S.;
- Welcome news: Department of Justice memo advises DoJ attorneys to seek dismissal of meritless False Claims Act suits [Reuters, Federalist Society teleforum with Brandon Moss, Greg Herbers/WLF, Michael Granston memo]
- Empirical evidence on factors that lead to approval of low-quality patents [Timothy Lee, ArsTechnica, noting ideas for improving patent review process: (1) eliminate issuance fees, (2) limit re-applications, (3) give senior examiners more time per patent]
- “Will we see tort reform in the midterms?” [Joseph Cotto interview with me for San Francisco Review of Books, YouTube audio, 33:51]
- FSMA will drive many smaller farmers/foodmakers out of business, only question is how many [Baylen Linnekin, our earlier]
Is that good news, or not? My new post at Cato at Liberty:
According to news reports last week, the legislature in Oklahoma passed, and Gov. Mary Fallin then signed, a bill whose wording directs judges to award reasonable attorneys’ fees and costs in cases of civil litigation. The provision was part of a bill on certain child abuse lawsuits, and its Senate sponsor said it was believed that the fee provision applied only to those cases until on a closer reading “it seems evident that it makes all civil cases … loser pays,” said Sen. David Holt. “But nobody caught that.”
As someone who has been writing in favor of the loser-pays principle since my first book, The Litigation Explosion, you might expect my reaction to this news (once I stopped laughing) to be positive. After all, there’s nothing wrong with a legislature enacting good policies through inadvertence. (For some legislatures, that seems to be the only way they do enact good policies.)
Sober second thoughts, however, will be less cheerful….