Overlawyered: Chronicling The High Cost Of Our Legal System

Posts Tagged ‘Public Citizen’

War is peace, freedom is slavery, and trial lawyer earmarks are “consumer-friendly”

The Consumerist blog is supposed to be a pro-consumer blog, but it’s amazing how often their political agenda is really a trial-lawyer agenda that hurts consumers. Many of the 2007 bills Carey Greenberg highlights as consumer-friendly are quite the opposite:

  • H.R. 3010: Arbitration Fairness Act of 2007
    What It Does: Raises costs to and reduces choices for consumers and lowers employee wages by forcing consumers and employees to pass up the benefits of mandatory arbitration, whether they wish to or not. More at Overlawyered, and on SSRN.
    Status: Hearings held in both the House and Senate. Likely to be vetoed if passed.

Read On…

Filed under: , , , , ,

Arbitration and the free market

Let us imagine a writer for a left-wing magazine, we’ll call her Mephanie Stencimer, who wants to buy a car. But she has particular tastes: she doesn’t just want any old car. She wants a three-wheeled vehicle, perhaps because the feng shui is better, perhaps because she wants to spend less money on tires forced upon her by Big Rubber. She goes from car-dealer to car-dealer around town, but every single one of the dastardly businessmen insist that her only choice is a four-wheeled vehicle. She patiently explains the aesthetics of the triangular approach, but they shrug their shoulders and tell her it’s out of their hands and she has to have a four-wheeled car or nothing. Finally, she surrenders her preference for the three-wheeled vehicle, and takes a model with the extra wheel.

If you were to take seriously the arguments of Stephanie Mencimer at Mother Jones and the commenters there, and perhaps the occasional judge, this is an outrageous “contract of adhesion” that should be outlawed: Stencimer didn’t have a choice, didn’t have the bargaining power to make the auto-dealer sell her a three-wheeled car, and was forced to buy an extra wheel. But is this really a problematic failure of the market that requires government intervention?

Read On…

Filed under: , , , , , , ,

“Halliburton”, gang rape, and fear of arbitration: the Jamie Leigh Jones case

(Update, December 16: And welcome, Consumerist readers. For more on the anti-consumer campaign against arbitration, see the Overlawyered arbitration section. Consumerist’s headline “Mandatory Binding Arbitration Means Alleged Halliburton Rapists Could Go Free” is entirely false. Aside from the fact that it does not appear the alleged rapists worked for Halliburton, the issue of whether Jones is contractually obligated to arbitrate her employment dispute with her employer is entirely unrelated to whether the government underinvestigated a criminal complaint against rapists. They are two entirely separate issues. It’s not the first time that Consumerist has reprinted misleading arguments against arbitration—a shame, because mandatory binding arbitration helps consumers, and Consumerist should care more about consumers than the trial lawyers who are lobbying for an anti-consumer law.)

In February 2006, Jamie Leigh Jones filed an arbitration complaint, complaining that, for her administrative assistant job with KBR in the Iraq Green Zone, she was placed in an all-male dorm for living arrangements, and a co-worker sexually assaulted her. (KBR says the co-worker claimed the sex was consensual, though Jones claims physical injuries, such as burst breast implants and torn pectoral muscles, that are plainly not consistent with consensual sex. The EEOC’s Letter of Determination credited the allegation of sexual assault.)

Fifteen months later, after extensive discovery in the arbitration, Jones, who lives in Houston, and whose lawyer is based in Houston, and who worked for KBR in Houston, sued KBR and a bunch of other entities (including Halliburton, for whom she never worked, and the United States), in federal court in Beaumont, Texas. The claims were suddenly of much more outrageous conduct: the original allegation of a single he-said/she-said sexual assault was now an allegation of gang rape by several unknown John Doe rapists who worked as firemen (though she did make a claim of multiple rape to the EEOC, though it is unclear when that claim was made); she claims that after she reported the rape, “Halliburton locked her in a container” (the EEOC found that KBR provided immediate medical treatment and safety and shipped her home immediately) and she threw in an allegation that a “sexual favor” she provided a supervisor in Houston was the result of improper “influence.” (But she no longer makes the implausible claim that she was living in an all-male dorm in Iraq.)

The US got the claim dismissed quickly (Jones hasn’t yet followed the appropriate administrative claims procedure); the case was transferred back to Houston where it belonged (the trial lawyer’s ludicrous brief in opposition didn’t help). But the fact that the defendants are pointing out that the lawsuit over a pending arbitration violates 28 U.S.C. § 1927 and are asking for the court to mandate only one single proceeding in arbitration rather than a multiplicity of parallel proceedings, is now being treated as a cause célèbre by the left-wing blogosphere in its campaign against the contractual freedom to arbitrate. (Note that two elements explicitly designed to arouse the ire and inflame the passions of the left—Halliburton and gang-rape—only came about after Jones switched attorneys.)

The Public Citizen blog complains that “the allegations of corporate and governmental misconduct will never see the light of day” in arbitration. Which is absurd:

1) For crying out loud, her case is on 20/20, which, as is its ken, happily unquestioningly gives the plaintiffs’ opening statement in handy manipulative video newsertainment form without mentioning any of the counterevidence. That sort of widespread publicity is hardly the lack of “light of day.” (Update, Dec. 15: the KBR arbitration procedure provides a transcript without confidentiality restrictions, permitting exactly the same publicity as an open court proceeding.)
2) If the government fails to offer Jones an adequate settlement for their alleged bungling of the criminal investigation, she has recourse under the Federal Tort Claims Act against the federal government—though she likely will not have any more recourse against them than any other criminal victim does when the government fails to protect them against crime or prosecute the criminal.
3) If the court system is about having recourse for injuries, she has that recourse. The judicial system is not for public storytelling; if you want to send a message, use Western Union (or ABC News, as the case may be).

20/20 repeats the meaningless claim that “In recent testimony before Congress, employment lawyer Cathy Ventrell-Monsees said that Halliburton won more than 80 percent of arbitration proceedings brought against it”—meaningless because (1) it doesn’t include the cases that settle before arbitration with a favorable result to the employee and (2) there’s no comparison with how well such employees would do in the far more expensive forum of litigation (where the vast majority of employees lose at trial as well). (Update, Dec. 16: KBR (which is not Halliburton) says that 96% of employee claims settle before they get to an arbitrator.)

20/20 also adds the claim (absent in the arbitration and in the otherwise-lurid civil complaint) that Jones was threatened that she would be fired if she sought medical treatment.

Read On…

Filed under: , , , , , ,

Behind those “unfair arbitration” numbers

Last month Public Citizen drew extensive and largely uncritical publicity for a report blasting credit card arbitration. The report’s most dramatic number, picked up by many papers, was based on newly available California data: “In a sample of 19,300 cases, arbitrators ruled in favor of consumers 5 percent of the time.” (Phuong Cat Le, “Binding arbitration a loser for consumer”, Seattle Post-Intelligencer, Sept. 27). Such results, charged a Public Citizen official, show “a stunning bias against consumers”. Kansas City Star consumer columnist Paul Wenske’s reaction was typical: “Would you agree to let someone arbitrate your dispute with a credit card company if you knew he or she almost always decided in favor of the company?” (“When you sign up for a credit card, you sign up for arbitration”, Oct. 6). It was all a great publicity coup for the litigation lobby, which has been gearing up a campaign to do away with predispute arbitration agreements that divert potentially lucrative disputes away from the lawsuit system.

If, however, you happened to read Bob Ambrogi’s Legal Blog Watch entry on the story, you might have noticed the following reader comment:

Bob, I am an arbitrator for NAF [National Arbitration Forum]. My statistics would show that I rule for the Claimant in an extremely high percentage of cases. The statistic is misleading as 95% plus cases are default cases, where the consumer never bothers to answer.

Posted by: legal eagle | Sep 28, 2007 1:19:06 PM

And there you have the little trick behind Public Citizen’s sensational assertion that only 5 percent of consumers manage to beat the house. The vast majority of cases that go before the arbitrators are in fact uncontested collections, which present no active dispute to resolve one way or the other. Where there is an active dispute, it is plain that consumers’ win rate is very much higher than 5 percent. Why did so many journalists in recent weeks convey the mistaken impression that there’s almost no hope of success for the consumer who contests the lender’s story at arbitration? Because those journalists were falling into a hole skillfully dug for them by Public Citizen.

Any system of resolving routine consumer collections, including traditional courtroom litigation, is likely to generate a high rate of default judgments or their procedural equivalent. The National Arbitration Forum at its website refers to one pertinent study which it summarizes as follows:

Default Judgments Against Consumers: Has the System Failed? (Sterling & Schrag, 1990; 67 Denv. U. L. Rev. 357, 360-61)

A Georgetown University law professor analyzed a sample of claims filed in 1988 against consumers in the Small Claims and Conciliation Branch of the Superior Court of the District of Columbia. The small claims procedure did not require the consumer to submit a written answer. Instead, the consumer only had to show up in court at the specified time. Nevertheless, according to the study, 74% of the cases resulted in a default judgment. In 22% of the cases, the consumer acceded to full liability. In the remaining 4%, the plaintiff voluntarily dismissed the case. None of the cases resulted in a trial.

Making full allowance for the somewhat different mix of cases in the two instances, one still is left here with an even lower “consumer win rate” than in the California data. And a recent news story from Texas about debt collection by lawsuit includes an allegation that more than 80 percent of consumers fail to contest the matter, resulting in default judgments; if creditors are winning even half of the contested cases, the resulting “consumer win rate” is below 10 percent. (Teresa McUsic, “Unpaid credit-card bills giving rise to lawsuits”, Fort Worth Star-Telegram, Aug. 31).

Of course, some of us would suspect that Public Citizen’s really major beef with arbitration clauses is not so much with the way they divert the collections process away from the courts, but with a quite different effect they have on litigation: they impede the filing of class actions by the entrepreneurial plaintiff’s bar (arbitration clauses typically rule out class treatment of complaints, which means law firms who’ve signed up one client can’t proceed to enroll millions of other cardholders as plaintiffs too without their say-so). But of course the casual newspaper reader is likely to be a good bit more sympathetic to individual consumers supposedly facing a deck stacked 95-to-5 against them than with the business reverses of class action law firms who find themselves no longer able to extract the sorts of fee-driven settlements they once did.

Filed under: , , ,

October 8 Roundup

Filed under: , , , , ,

July 9 roundup

  • Judge Ramos disallows settlement of Citigroup directors derivative suit: deal had met defendants’ needs, plaintiff’s lawyers’ too, but not shareholders’ [PDF of decision courtesy NY Lawyer]

  • Drove a golf cart into the path of his car as it was being repossessed, jury decides he deserves $56,837 [MC Record]

  • Per ACOG, 92 percent of NY ob/gyns say they’ve been sued at least once [NY Post edit; more]

  • New British online-gambling law could trip up some virtual-world/massively multiplayer online games [GamesIndustry.biz]

  • Good news for bloggers: Iowa-based site can’t be sued in New York just because it answered questions from NY reader and accepted NY donations [Best Van Lines v. Walker, Second Circuit; McLaughlin]

  • Another great idea from Public Citizen: let’s not use new drugs till they’ve been on the market for seven years [Pharmalot via KevinMD]

  • After conviction of Mississippi trial lawyer Paul Minor in judicial corruption scandal, squabbling drags on over sentencing [Jackson Clarion-Ledger]

  • Conservative public interest law firms “can win some big cases [but] are notorious for lacking follow-through” [Tushnet, L.A. Times]

  • Contestants in Australian business dispute probably wound up spending more on the litigation than had been at stake in the first place [Sydney Morning Herald]

  • New at Point of Law: New Hampshire governor vetoes trial lawyers’ bill; global warming litigation to be bigger than tobacco?; the Times notices HIPAA;

  • It’s my emotional-support dog, and my lawyer says you have to let it into your store [eight years ago on Overlawyered, before these stories started getting common]

Filed under: , , , , , , , , , , ,

Update: Kia Franklin and Roy Pearson and the $67 million pants

I’d like to make a correction. In my earlier post, I suggested that Milberg Weiss Justice Fellow Kia Franklin thought that Judge Roy Pearson’s $67 million lawsuit over a pair of pants was frivolous. I appear to have been mistaken in attributing such a common-sense view to her. Franklin has a lengthy post protesting that, while she thinks Pearson’s lawsuit is “ridiculous” and “crazy” (she has also called it “obscene”), she does not think it is “frivolous.” We regret the error.

But it is a useful illustration: when those who oppose civil justice reform say they don’t think frivolous litigation is a problem, it is because they define “frivolous litigation” so narrowly that even Roy Pearson’s lawsuit is not frivolous in their eyes. Well, that’s one way to make problems go away, by using doublespeak or narrow technical legal definitions to pretend they don’t exist instead of suggesting that there is a problem with the narrow technical legal definition.

Read On…

Filed under: , , , , ,

The Litigation Lobby’s “frivolous” bait-and-switch: the Judge Roy Pearson pants-suit

Second Milberg Weiss Justice Fellow, same as the first? Bizarro-Overlawyered twists itself into contortions over the infamous $54 million Judge Pearson pants-suit. Cyrus Dugger’s replacement as Milberg Weiss Justice Fellow, Kia Franklin, recognizes that the anti-reform cause can’t be seen endorsing the patently-ridiculous lawsuit that is the laughingstock of the world. So, she dances over the issue: yes, this case is frivolous, but frivolous cases are rare, so there are no lessons to learn from the fact that a small business was forced to pay tens of thousands of dollars litigating an overbroad consumer-fraud claim, to the point that it was willing to pay $12,000 over a pair of pants to make the lawsuit go away and stop the financial bleeding.

Her evidence is a Public Citizen study—but she ignores our 2006 post noting that Public Citizen got its math wrong, and even distorts the distorted statistic beyond what Public Citizen claimed. (Public Citizen gerrymandered its claim to falsely say businesses were 69% more likely to be sanctioned for frivolousness than individual tort plaintiffs, but Franklin misreads that to say individuals, which is false even by Public Citizen’s numbers, which found by its own measure that individuals were sanctioned for frivolousness 86% more often than corporations. Note also the difference between the inaccurate “more likely” and “more often.”)

The really funny thing is that, under the Public Citizen narrow definition of “frivolous lawsuit” used in its study, Judge Pearson’s suit is not frivolous! When politicians speak of “frivolous” cases, they use it in the everyday English sense of “silly”: they mean the meritless cases, where, because of far-fetched legal theories, junk science, or overbroad liability rules, plaintiffs seek or realize recovery far beyond what makes good social policy—cases like Roy Pearson’s. Public Citizen’s study, however, in a typical litigation-lobby bait-and-switch (see, e.g., the Kerry/Edwards malpractice reform plan), defines “frivolous” with the narrow technical legal definition so that it can conclude (like Franklin) that frivolous litigation is “rare” and thus not a problem. (Amazing how many problems disappear when you assume them away.) The definition is so narrow that Pearson’s suit is outside of it: Pearson defeated motions to dismiss and for summary judgment, and received a $12,000 offer of judgment. (Pearson is apparently sufficiently emotionally troubled that he thinks he has a better shot seeking tens of millions from a couple of immigrant Korean dry cleaners than the thousands of dollars offered in settlement for a pair of pants, even though the judge who will be ruling on his case has given him plenty of hints that he has no hope of success.) The Pearson suit would have been excluded from Public Citizen’s count of frivolous suits for a second reason: Public Citizen ignored pro se lawsuits brought by attorneys like Pearson in its count of frivolous suits, as it had to to deflate the number of sanctions issued against individual tort plaintiffs and falsely claim that corporations are sanctioned more often.

We’re excited to see Franklin join the world of reformers and recognize that many more lawsuits are frivolous than what Public Citizen recognizes. We encourage her to read the data and arguments of those she mistakenly claims to oppose, and to scrutinize those she mistakenly thinks are her allies a bit more closely. Why is it alright for wealthy white trial lawyers to extort billions from big business using the same ad terrorem tactics (and even the same consumer-protection laws!) as a poor African-American pro se did to extort $12,000 from a small business? We encourage Franklin to examine the Association of Trial Lawyers of America’s racial double-standard.

And since Franklin agrees that the Pearson lawsuit is frivolous, we are eager to hear how she would define a frivolous lawsuit, and hope that she uses that definition consistently for both the Milberg Weisses of the world as well as African-American city employees.

Filed under: , , , , , ,

“Pro Bono” doesn’t mean cheap

One of the secrets of so-called “pro bono” work is that it often isn’t pro bono at all. Instead, it’s really contingency work: firms don’t bill their clients, but if they win, they recover their fees under various statutes, such as the Voting Rights Act, that require the loser — often the government — to pay the attorneys fees of the winner. These statutes are designed to incentivize law firms to take these cases — cases where the plaintiffs often can’t pay and where there’s no big monetary award at stake from which the attorneys can take a cut.

But if the attorneys would take the cases anyway, even if they didn’t get paid all that money, does it really make sense for the courts to award them all their fees? Last month, in a Voting Rights Act case, the Second Circuit said, “Not necessarily.” (PDF.) Rather, the courts should look at how much the plaintiffs would have to pay in the marketplace to convince lawyers to take the cases, and should award fees on that basis. The courts should consider whether these lawyers are really taking the cases “to promote the lawyer’s own reputational or societal goals” — and if so, the court should only award a portion of the fees. (One factor the Second Circuit glosses over is that many of the large law firms that take these cases — Gibson, Dunn & Crutcher handled this particular case — don’t really care about the fees; they really use these cases as a way to provide free training to their younger attorneys without having to risk cases involving their paying clients.)

(Gibson, Dunn’s credibility when making their fee request presumably wasn’t enhanced by the fact that they had previously tried to bill over $100,000 for 300 hours of work when “the entire argument section of the brief on this single-issue appeal occupied barely six pages.”)

But Adam Liptak (Time$elect, May 28) reports that many civil rights groups and other “public interest organizations” are up in arms over this decision, terrified that they might be forced to shop around for attorneys instead of getting taxpayers to pay for attorneys at the highest big firm rates for their causes:

In a flurry of legal filings last week, the lawyers, supported by two bar associations and 29 public interest organizations — including the Urban Justice Center, Public Citizen, the Natural Resources Defense Council and several affiliates of the American Civil Liberties Union — begged the court to reconsider.

“It really is a dangerous decision,” said David Udell, a lawyer with the Brennan Center for Justice at New York University, which represents the public interest groups. “What the court does is say that legal work is less valuable when the lawyers’ hearts are in it.”

That’s not actually what the court said at all; what the court said was that lawyers shouldn’t get paid more by taxpayers than they would if they were hired on the open market.

Filed under: , , ,

Moody v Sears: Lawyers, $1M. Class, $2,402.

No, not $2,402 each. The $2,402 represents the total redemption of coupons by a 1,500,000-member class, or $0.0016 per class member. The Illinois state court (in the judicial hellhole of Cook County) awarded plaintiffs’ attorneys Gary K. Shipman of Shipman & Wright $1,000,000, presumably because they represented the face value of the unlikely-to-be-redeemed coupons to be in the millions of dollars. A North Carolina state judge was not impressed after he forced the forum-shopping attorneys (and defendants) to reveal the results of the settlement before dismissing a parallel lawsuit. (Moody v. Sears, Roebuck, & Co.) (via Nick Pace of RAND Institute at CL&P Blog).

Note that the widely-publicized Eisenberg/Miller class-action study, regularly cited for the proposition that state courts were no worse than federal courts in terms of awarding attorneys’ fees, would have erroneously calculated this attorney fee as 14% or so of the total settlement value, rather than the actual number of 100%. Garbage in, garbage out.

Pace mistakenly thinks that the class members were deprived of a remedy. Not really, though consumers are certainly worse off because of such litigation. Problems like this arise because a Sears is only willing to settle a frivolous consumer-fraud suit for nuisance amounts, and the plaintiffs’ attorneys just want a paycheck, so Sears is willing to pay the protection money to make the meritless lawsuit go away, since it will cost more in litigation expense to defend itself. When neither the plaintiffs’ attorneys nor the judge cares about the class members, plaintiffs’ attorneys can extract, as here, 99.9% of the settlement amount. If, on the other hand, a court ensures that the majority of a nuisance settlement must go to the ostensible plaintiffs, the plaintiffs’ attorneys will be less likely to find it profitable to bring the meritless suit and try to extort a settlement, because defendants will be more likely to find it worthwhile to defend against the suit, and the suit won’t happen in the first place. Which does make consumers better off, because then they realize a substantial part of the savings of doing business when there’s less protection money paid off to plaintiffs’ lawyers like Gary Shipman.

The Class Action Fairness Act fixes these matters—or at least it does in the cases where federal judges apply its rules and accept jurisdiction. First, CAFA effectively consolidates national class actions into a single federal jurisdiction, defendants are unable to play one plaintiffs’ attorney off of another, as happens when plaintiffs file several dozen identical and parallel class actions. Second, CAFA requires federal judges to apply meaningful scrutiny to class-action settlements and the award of attorneys’ fees, especially coupon settlements like this one. A $2402 coupon redemption with a million-dollar attorneys’ fee would have been impossible under CAFA.

When, however, judges misread the jurisdictional provisions of CAFA and remand legitimate removals back to the state courts that routinely approve such travesties, they undo the whole point of the legislation, and hurt consumers in the bargain. That Public Citizen regularly argues for such narrow readings of CAFA suggests their true interests lie with trial attorneys, rather than consumers, and that the true consumer advocates are those who support civil justice reform. (Cross-posted to Point of Law)

Filed under: , , , ,