Posts Tagged ‘procedure’

Sarbanes/Oxley as subsidized discovery

Jane Galt’s pseudonymous co-blogger, “Mindles H. Dreck”, has a link-filled commentary on recent developments in financial and corporate law Mar. 14) with too many interesting contents to enumerate here. It begins: “I submit to you that regulators of commerce in the United States are gradually: Subsidizing discovery for both public and private litigants; Substituting subjective standards of fraud and misbehavior for specific guidelines”. Among recent regulatory initiatives aimed at “creating a paper trail for litigators” are requirements for: “permanent retention and storage of internal and external email in non-alterable, third-party maintained media; substantial, sworn disclosure of procedures and safeguards (via Sarbanes-Oxley, for instance); the identification of key individuals that should become the focus of any government or litigation action (via designation of key officers and departments, and the Sarbanes-Oxley mechanism of written representations)”. The result of these rules will predictably be to accelerate the spread of various defensive practices through the corporate and financial world, such as more discussion of business matters on a strictly verbal basis with nothing committed to writing. Equally interesting is the question of who definitely does not have to maintain a discovery trail to facilitate outside scrutiny: “I recently had a billing dispute with a securities lawyer. I referred to an email he had written some months before estimating charges for the assignment. He informed me that his firm’s policy is to permanently destroy all email over three months old in order to protect the firm and its clients. Given the requirements for email retention in the financial industry (interpreting which his firm makes a pretty penny), I found this hysterically funny.”

Mississippi changes venue and joinder rules

The Mississippi Supreme Court has reformed its joinder and venue rules to make both forum shopping and unfair mass tort litigation more difficult. The changes stem from a recent case where 56 plaintiffs sued 42 doctors and a drug manufacturer in Jones County, where only one of the plaintiffs resided. Mississippi state law has no provision for class actions, and judges had attempted to get around this by broad application of joinder rules. (AP, Feb. 21; Davis Brister, “Ruling Could Have Major Impact on Tort Reform”, WLBT, Feb. 20; Janssen Pharmaceutica v. Armond; rule and comment changes).

Aside from the forum shopping, such overly permissive joinder is often fundamentally unfair to defendants, who may be forced to try cases where their issues are entirely different from the central issues in the case. Pending before the Mississippi Supreme Court now is the case of 3M Company v. Johnson, where six plaintiffs with a minor lung impairment that did not restrict their activities won a $150 million judgment in rural Holmes County against 3M for allegedly defective face masks in the middle of a much larger proceeding involving many other defendants and asbestos manufacturing–even though 3M’s masks were never designed for asbestos protection, and some of the plaintiffs had no evidence that they had ever used a 3M mask. The plaintiffs did not work together; the defendants were being sued under different theories and different sets of facts, permitting the plaintiffs to introduce large amounts of evidence about manufacturers’ supposed careless marketing of asbestos-containing products that had nothing to do with 3M. (Washington Legal Foundation press release and amicus brief). Update Jan. 22, 2005: Mississippi high court throws out verdict against 3M.

Forum shopping

Two Germans had a contract dispute with their former employer, German media giant Bertelsmann AG, regarding a European joint venture. The contract, written in German, required the application of German law, and (according to the defense) the major dispute was over the meaning of a German term in the contract. So where to sue? California, of course! The jury came through with a verdict of over a quarter-billion dollars, and their verdict form was apparently sufficiently muddled that the plaintiffs are going to argue that they were meant to receive over a billion dollars. The defense argues that part of the problem is a mistranslation of “participation” into “equity.” (Greg Risling, “Calif. Jury Rules Against Bertelsmann”, AP, Dec. 12; Gina Keating, “Jury Faults Bertelsmann in AOL Europe Suit”, Reuters, Dec. 11).

Update, Jan. 6, 2004: The plaintiffs’ attorney confirms that the main dispute was over interpretation of a clause in the German-language contract, but argues that it would have been “prohibitively costly” for the plaintiffs to bring the case in Germany–which, based on my experience in a number of cases where critical documents are not in English, and require expensive translation, strikes me as extraordinarily unlikely that the case would have been more expensive in Germany, much less prohibitively so if plaintiffs had a sincere belief that their case was worth in the billions. But the reporter does not challenge the assertion. (Nora Lockwood Tooher, “Two German Entrepreneurs Win $255 Million”, Lawyers Weekly USA, 2004).

UK: prolific race litigant restrained

Following up on an item from Jun. 12-15: “The reign of Britain’s most prolific race discrimination litigant could be over. After 82 employment tribunal cases, more than ?74,000 of public money and ?500,000 spent by companies defending themselves against him, Omorotu Francis Ayovuare has been stopped in his tracks by Lord Goldsmith, the Attorney General. Lawyers for the Attorney General persuaded a High Court judge to issue a ‘restriction of proceedings order’ against Mr Ayovuare, whose litigiousness was revealed by the Telegraph in June. He must now get permission from a judge each time he wants to bring a new tribunal or continue an existing case.” American courts also have similar (though infrequently used) procedures by which judges can restrain inveterate litigants. (Adam Lusher, “Attorney General bans race litigant after 82 cases”, Daily Telegraph, Nov. 23).

S. 17200 horror stories

Tim Sandefur collects them, too: “[I]n another currently pending case, a trial court hearing a class action lawsuit with class members from across the nation — but suing in California — held that it could simply ignore the choice of law clauses of the contracts from 48 other states, because ?17200 is more broadly written than any other ‘consumer protection’ law, and therefore it violated public policy to require litigants from other states to litigate there even though the contracts they signed required them to do so.” (Dec. 3). See also Oct. 26; Nov. 24; Steven Greenhut, “How California’s Consumer Laws Legalize Extortion”, Foundation for Economic Education, May.

Specialized business courts

Through most of the 20th Century the preferred model in American court organization was that of the generalist court in which a given corps of judges applied a standard set of procedures to handle a wide, not to say bewildering, variety of cases. In the past couple of decades, however, there has been renewed interest in the idea of establishing specialized courts to handle some types of recurring or distinctive cases: intellectual property, complex mass torts, low-level drug offenses, and so forth. “More than a dozen states, including Massachusetts, Rhode Island and Connecticut, have introduced specialization into their courts to deal with business disputes. Some programs are recent and some, like those in New York and Delaware, have been operating for decades.” Removing complex commercial litigation to its own docket can assist in the development of greater judicial expertise, useful procedural innovation and more consistent law; it can also help unclog the schedules of courts that handle more conventional cases, according to its advocates. The success of specialized business courts is now encouraging other states to consider adopting the model, as is now the subject of discussion in Maine. (Andrew Grainger (New England Legal Foundation), “Business specialization in court system a good idea”, Portland Press-Herald, Oct. 31)(& letter to the editor, Dec. 6).

New York abolishes ad damnum

Late last month New York Gov. George Pataki signed into law a bill that will abolish the requirement that a personal injury or wrongful death lawsuit specify at the outset (in its “ad damnum” clause) the amount in dollar damages it is seeking. New York thus becomes the latest state to adopt a measure that is relatively rare among litigation reforms in eliciting widespread support from among both defense interests (example: American Medical Association model legislation, PDF) and the plaintiffs’ bar, which is perennially embarrassed by news items such as the one cited in yesterday’s New York Times about how a woman who survived the Staten Island Ferry catastrophe has demanded $200 million for a sore back and lost sleep. Lawyers “often will pick an astronomical figure for fear that a lower number will preclude their clients from recovering damages if they win a case” — or, of course, they may be seeking the publicity that often accompanies huge demands. The state bar association urged Pataki to sign the bill, saying it “will reduce pretrial publicity about how much money is sought from particular defendants, and deals with the common misunderstanding by the general public that the amount sued for is the amount actually obtained by plaintiffs.” (Joel Stashenko, “Pataki Signs Bill Eliminating Damage Amounts In Liability Suits”, AP/Newsday, Oct. 31).

Where eagles fear to litigate

Eagle Pass, Texas, in Maverick County along the Rio Grande, isn’t likely to shake its reputation for plaintiff-friendly jurisprudence any time soon, as a San Antonio Express-News profile makes clear. “L. Wayne Scott, a professor at St. Mary’s University Law School…. who has mediated civil cases in Eagle Pass, estimates defendants there are roughly 10 times more likely to lose than in conservative Dallas and two or three times more likely to fall than in San Antonio. … Indeed, the prospect of facing a jury in Eagle Pass — where Mayor Joaquin L. Rodriguez also is one of the city’s top plaintiff’s attorneys — frequently makes companies more willing to settle and in higher amounts than they would agree to in other venues.” Although a 1995 round of state tort reforms has somewhat curbed the rampant forum-shopping by which plaintiff’s lawyers used to bring suits from around the state to Eagle Pass, there is still a steady diet of cases to be had against major national defendants, including suits against automakers over road crashes and a case against Connecticut-based shotgun-maker O.F. Mossberg & Sons Inc. over a hunting accident that took place in another Texas county. Local plaintiff’s attorney Earl Herring says that a case worth $10,000 in Eagle Pass would be “worth $500 in Uvalde.” (Greg Jefferson, “Eagle Pass remains known as plaintiff’s attorney paradise”, Nov. 2).

Ordeal continues for 12 held captive in Oakland

“A criminal trial of three dismissed Oakland police officers accused of falsely arresting and beating suspects has become a marathon unusual even by the often plodding standards of American criminal justice. The trial began more than a year ago, and on Thursday the jury deliberated for a 55th day without reaching a verdict.” According to criminal justice historian Charles Weisselberg at the University of California’s Boalt Hall School of Law in Berkeley, the case’s extreme prolongation is not typical: “Weisselberg said, for example, that of 12,817 trials held in federal courts in the year ended September 2002, only 97 lasted more than 20 days and just one exceeded the 165 trial days this case has logged so far.” (Barbara Grady, “A Year Later, Judge Won’t Let Jury Go Home”, Reuters/Lycos, Sept. 29)

“Venue wish upon a star”

Okay, we picked it in part just as an excuse to quote that headline, but the story actually does show how litigation reform can work as intended: the Philadelphia Inquirer editorially hails a precipitous drop in filings of malpractice cases in that city since the state legislature enacted a bill (meant to curb forum-shopping by plaintiff’s lawyers) which requires that suits against doctors be filed where the care was delivered. It is not yet clear to what extent the drop in Philadelphia filings will be counterbalanced by an expected rise in filings in suburban and rural counties; some cases, which had been premised on the generosity or unpredictability of juries in the center city, may wind up not being filed at all. (editorial, Sept. 4; Josh Goldstein, “Medical lawsuits plummet in Phila.”, Aug. 31). The Pennsylvania Medical Society comments (other liability resources at its site).

In other Pennsylvania-related malpractice news, a website of doctors in neighboring New Jersey is posting the text of the “Liability Update” newsletter put out by PaMedSoc Legislative Issues Chair Donna Baver Rovito (sample), packed with news clips of interest to anyone interested in the medical liability crisis whether resident in Pennsylvania/New Jersey or not (mirror AOL site with comments) (also available at Politically Active Physicians’ Association (, click through “News and Information” on left column). [Corrected Sept. 13 to repair/improve nonworking links]