Wherein I’m supposedly worth three electoral votes is a post from Overlawyered - Chronicling the high cost of our legal system

For a more extended look at what’s wrong with Lerach’s article, let me recommend Joseph Nocera’s excellent column a week ago in the Times:

In the article, Mr. Lerach expresses zero remorse, positions his crimes as having hurt no one while serving a greater good and makes the absurd claim that he was railroaded by his political opponents.

It is a brazen, shameful piece of work — and it must infuriate the prosecutors who made the plea agreement with him, and the judge who accepted it, especially since Mr. Lerach wrote his own remorseful letter to the judge ahead of his sentencing. It also ought to infuriate anyone who cares about the law. Plenty of criminals head to prison still believing they’re above the law, but Mr. Lerach takes the cake.

Ted Frank has some further thoughts on that point. And note (from Nocera) that Lerach’s “everyone did it” swipes at his colleagues — which many, including we, have read as grounds for an investigation — are by no means passing without contradiction from colleagues:

Mr. Lerach’s statement has infuriated other plaintiffs’ lawyers. “It would just be unthinkable” to give kickbacks to lead plaintiffs, said Max Berger, of the firm Bernstein, Litowitz, Berger & Grossman. Added Sean Coffey, another Bernstein, Litowitz partner: “It is bad enough that this confessed criminal cheated for years to get an unfair advantage over his rival firms. But for this guy, on his way to prison, to say that everyone does it is just beyond the pale.”

(cross-posted from Point of Law; & welcome San Diego Union-Tribune blog readers).

P.S.: For another example of just how slippery Lerach’s careful phrasings can be, check this Roger Parloff post from an earlier point in the scandal. And Stephanie Mencimer, whose writings are nearly always criticized in this space, deserves due credit for seeing through Lerach’s “liberal folk-hero status” to the “pretty sleazy” realities beneath in this February article.

Rebutting Bill Lerach in Portfolio is a post from Overlawyered - Chronicling the high cost of our legal system

• Baptist Health’s argument didn’t come out of nowhere: it was expressly told to Luke at the time that “the program is binding on all employees” and her decision to “continue her current employment, after receiving notice of this Program, will mean that you have agreed to and are bound by the terms of this Program.”

• Luke agreed in court that she had notice of the program, that she understood the program, and that she continued working at the hospital.

• The court thus found that Luke consented to the agreement; in doing so, it didn’t act “contrary to established law” at all; several Alabama Supreme Court opinions recognized that continued employment is sufficient consideration to support an arbitration agreement, and that agreeing to remain employed by an employer with a mandatory arbitration program is conclusive evidence of assent. (Of course, under Erie, federal courts are bound by state supreme court interpretations of state law.)
• The district court’s opinion was affirmed per curiam by a three-judge panel of the Eleventh Circuit that included two Clinton appointees and a Carter/GHW Bush appointee.
• And, oh, by the way, Luke began arbitrating her case before the court even ruled, showing that she understood where the law actually was, though now she claims otherwise.

Luke, having received the benefit of an employment agreement that was able to offer her higher wages because of her agreement to arbitrate employment disputes, sought to rewrite the contract after already taking advantage of it. (Update: a commenter ironically signing him- or herself as the Multistate Bar Exam has a nice cite to the Restatement.)

Fonza Luke v. Baptist Medical Center is a post from Overlawyered - Chronicling the high cost of our legal system

Large corporations have long argued that class action lawyers are nothing more than extortionists who shake down big companies every time their stocks fall, forcing them to settle or risk fiscal ruin from a big jury verdict. Given what’s known now about how Lerach operated his law firm, it’s hard to say that the perception is only spin.

Mencimer, though, gives too much credit to Lerach’s self-serving “corporate crime fighter” identity. Lerach sued indiscriminately. To the extent that a small proportion of the defendants in Milberg Weiss cases were actual wrongdoers, it was a function of a stopped clock being right twice a day. It was because Lerach sued so often without actual evidence of wrongdoing that his early suit against Enron was dismissed: when faced with the biggest corporate scandal in history, Lerach couldn’t actually make the case until after the fact. Given that the decades of jail time Enron and WorldCom executives are facing, and the fact that a Lerach suit was at least as likely to be against the innocent as the guilty, it’s hard to say that the Lerachs of the world added much in the way of deterrence of corporate wrongdoing, as opposed to the deterrence of corporate investment. All Milberg Weiss and its successors accomplished was to transfer wealth from investors to their own pockets, with a taste for the politicians like Bill Clinton and other Democrats who helped weaken or block efforts to reform the securities laws. Ken Lay raised a fraction as much money for Republicans without any sort of quid pro quo, yet his relationship to Bush has gotten far more attention than Lerach’s relationship to the Democrats and the favors they did for him at the expense of everyday investors.

The fall of William Lerach… in Mother Jones?! is a post from Overlawyered - Chronicling the high cost of our legal system

Employment lawyer Cathy Ventrell-Monsees testified before Congress in October that AAA data show that between January 2003 and March 31, 2007, of the 39 Halliburton cases that went all the way to a decision, Halliburton won 32, a win rate of 82 percent. Plaintiffs in employment litigation face a high bar in court trials as well, but even so, that figure is very high. Employers win about 64 percent of all employment cases at trial in federal court and about half in state court, according to data from the Justice Department’s Bureau of Justice Statistics (BJS).

The problem here is that this is apples and oranges: the 32 arbitration cases include cases that are dismissed on summary judgment, whereas the employment discrimination trials (which constitute well under 10% of all employment discrimination claims brought in court) necessarily omit the decisions where the plaintiffs lost on summary judgment. Moreover, it excludes the 96% of cases submitted to ADR that do not result in a full-fledged arbitration because the employee received a favorable result in mediation. (And that’s before we get to the fact that an arbitration decision is final, while the BJS statistics have no follow-up to see what happens on appeal to those larger plaintiff victories.) As multiple studies show, the typical employment plaintiff does far better in arbitration than in court, for far less expense.

Mencimer also repeats the canard that arbitration is problematic because it is “secretive,” though her ability to retell the case of Jamie Jones refutes that. I also note that earlier this week, I sent a request to Jones’s attorney, Todd Kelly, for a copy of her arbitration filings. (Recall that Jones moved for summary judgment in the arbitration, and only filed in court after helping to choose an arbitrator and spending fifteen months of discovery litigating the arbitration.) He hasn’t responded. If Jones’s arbitration is secret, it’s because she has chosen to make it so.

Jamie Leigh Jones & “Halliburton” III is a post from Overlawyered - Chronicling the high cost of our legal system

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?

Mencimer is actually complaining about the insistence of car-dealers to arbitrate claims, rather than the number of wheels on a vehicle. But the principle is precisely the same, and Mencimer’s complaint is just as invalid as Stencimer’s.

When certain choices are absent from a competitive market, there’s usually a good reason for it—such as a lack of consumer demand that makes the provision economically infeasible. After all, if consumers really wanted to pay the extra money for a car contract without a mandatory arbitration clause or a three-wheeled vehicle, car-dealers would have a strong incentive to offer it. Witness the boom in hybrid vehicles: a small percentage of consumers demanded greener vehicles, and they’re selling. It’s not the case that it’s impossible to enter the used-car market: witness the success of CarMax, which went public only ten years ago, and has a market capitalization of nearly $5 billion today. ATLA Autos could put up a big banner: “No Arbitration Clauses In Our Contracts!” the way CarMax made no-haggle sales popular.

But the fact of the matter is that arbitration clauses save consumers money, and ex ante, if you ask a consumer if they’d rather have the money or the right to make an extortionate claim in court over a contractual dispute where they’re in the wrong, they’d rather have the money. (If mandatory arbitration clauses weren’t actually money-saving, then, again, the market provides plenty of incentive to cut costs by removing them from the contracts.) A car-dealer that made a point of omitting arbitration clauses for its contract, and passing the higher legal expenses on to the consumer, would quickly find itself out of business.

Let’s make clear why an argument Mencimer repeats is dishonest. Mencimer quotes former Georgia Governor Roy Barnes that “a mandatory arbitration clause is ‘a contract for a crime.’ It’s a sign that the bank knows it’s going to rip us off in some fashion, or if not us specifically, people like us, and it doesn’t want to pay if it gets caught.” Not so. A mandatory arbitration clause is a way to make sure that dishonest consumers don’t raise prices for the honest consumers. The vast majority of arbitrations (as well as court-adjudicated business/consumer disputes) involve default or otherwise uncontested judgments against deadbeats who didn’t pay their bills—which is why you hear so much about the supposed 96% or 99% success rate of business in arbitration, when the actual success rate in contested arbitrations is actually better for consumers than in court. I won’t link to it, but a Google search readily finds numerous products available to people teaching how to use the court system to scam creditors out of legitimate collections by raising their expenses; the only people who benefit from court versus arbitration are those who hope to abuse legal procedures to delay the inevitable (or to make collection so painful and expensive that they can finagle a reduction in debt). By using the mandatory arbitration mechanism to reduce the expense of collections, the auto-dealer or bank can provide a less expensive service to the honest consumer who plans to honor their debts. (Mencimer complains that her car loan was for 9%, but that doesn’t mean that it wouldn’t have been at an even higher rate had arbitration not been available.)

Now, perhaps I’m wrong; perhaps consumers are better off overall if they don’t have mandatory arbitration clauses. But why have Congress dictate that? Why not let the market decide? As CarMax demonstrated by offering a new no-haggle model of selling vehicles and CommerceBank demonstrated by offering banking without bankers’ hours, there’s no monopoly of car dealers or banks prohibiting entry by innovators offering new business models: get some of the trial lawyer billionaires funding Public Citizen screeds against arbitration to instead fund new businesses to offer different choices, and let consumers decide for themselves whether they want the lower prices that mandatory arbitration clauses make possible. Heck, the trial-lawyer-funded businesses could even waive non-economic damages caps, venue reform, and all of the tort reforms Mencimer and Public Citizen dislike. Nothing makes businesses yield faster than competition and consumer demand.

Of course, what’s really happening is that consumers don’t want the expensive legal “protections” that the litigation lobby are railing about. Trial lawyers thus try to get Congress to pass laws to force consumers to take them. If the local auto-dealers association heavily lobbied Congress to legally mandate consumers to force them to buy overpriced “rust protection” or “anti-rhinocerous-trampling” plans that benefited only the auto dealers, consumer groups would quite properly raise an uproar. It’s a sad commentary how badly the consumer movement has been captured by the litigation lobby that the consumer groups are failing to raise a similar uproar at the self-dealing of the litigation lobby regarding the anti-consumer anti-arbitration legislation pending in Congress.

Further reading: Christopher R. Drahozal, “Unfair” Arbitration Clauses, 2001 U. ILL. L. REV. 695; Stephen J. Ware, Paying the Price of Process: Judicial Regulation of Consumer Arbitration Agreements, 2001 J. DISPUTE RESOLUTION 89; Christopher R. Drahozal, Privatizing Civil Justice: Commercial Arbitration and the Civil Justice System, 9 KAN. J.L. & PUB. POL’Y. 578 (2000). Peter B. Rutledge, Whither Arbitration, 6 GEORGETOWN J. L & PUB. POL’Y __ (forthcoming 2008), ExpressO Available at: http://works.bepress.com/peter_rutledge/2. The three-wheeled example comes from Doug Baird’s Contracts class at Chicago, and can be found in Douglas G. Baird, The Boilerplate Puzzle, 104 MICH. L. REV. 933 (2006).

Earlier on Overlawyered: Oct. 18; Nov. 27.

Update, Dec. 16: Further data on arbitration win-rates in contested arbitration.

Update, Dec. 17: As Mencimer documents in her story, she sure showed the car dealers: she bought her desired vehicle on Craigslist from a West Virginia man. And that’s the way the market works: if enough people think like Mencimer does, auto dealers will have the incentive to offer an arbitration-free contract to attract their business. Of course, as commenter JP points out, Mencimer’s irrational hatred of arbitration almost certainly made her worse off:

Note that the practical result of all of her time and effort is that she now has the right to sue an individual (who likely has no assets since he’s selling his car due to a divorce), in court in a different state (where the seller lives and the transaction took place). For that she gave up the right to a local arbitration with a dealership that’s not only likely to be solvent, but also probably has the ability to resolve most issues that might arise.

Arbitration and the free market is a post from Overlawyered - Chronicling the high cost of our legal system

Well — as Ted points out in the comments to her post — I had said “thousands,” not “millions.” But the bigger problem with what she wrote is that she dramatically underestimates the burden and cost of litigation. We’ll put aside the fact that her proposal — to have paralegals file boilerplate responses — would constitute legal malpractice on the part of the defense attorney. Of course it’s cheaper when cases can be decided (as Mencimer suggests) “with no discovery, no depositions and apparently not even a court appearance” — although it’s not clear from the Econo Lodge case that in fact there were no court appearances. But other cases, even ones that are completely meritless, require a lot more before the defendant can be vindicated.

Case in point: Kinderstart v. Google. The complaint was yet another attempt to sue Google over its rankings of web pages for search results. (Another suit along those same lines: Mar 1) Only part of the case was frivolous (the federal judge awarded sanctions against the plaintiff on two points (PDF of sanctions decision), but the entire case was meritless, as the court ruled (PDF). Google is a private business, and the courts keep rejecting the notion that lawyers should decide how Google can rank websites. Every claim made by Kinderstart was resoundingly rejected; Eric Goldman has the gory details.

But even though the case was dismissed before discovery even began, that didn’t make it — contrary to the beliefs of so many anti-tort reformers such as Mencimer — quick. In fact, it took a full year to dismiss the case (and there’s always the possibility of appeal). So why, if it was such a loser, did it take so long? Because after the court dismissed it the first time, the judge allowed the plaintiffs to amend the complaint; in all there three versions of the complaint filed. Google had to respond to each one, and there were in-court hearings each time Google moved to dismiss the case. Google also had to file an anti-SLAPP motion, a motion to strike the complaint, and a motion for sanctions.

Google “won” this case, and even won a yet-to-be-calculated sanctions award. But in the end, it took a year and Google spent, conservatively, tens of thousands of dollars to do it, even without discovery. Now, I don’t expect every non-lawyer to realize how long and expensive the legal process is — but Mencimer holds herself out as a pundit on tort reform; you’d think she’d have a little more of a sense of how the system works.

(Previous mention of this case, Oct. 2006.)

There’s no such thing as cheap litigation is a post from Overlawyered - Chronicling the high cost of our legal system

Should I even respond? She’s right that I didn’t flip burgers; I just cleaned the restrooms and shelved milk at the local supermarket for $3.35/hour, manning the registers when the manager could bear the complaints about the checkout boy who was too stupid to know the difference between nectarines and peaches when ringing up produce. My brother did fry chicken at the Church’s down the street, however. But that doesn’t make my policy arguments any more correct. Nor does it make my arguments any more right because I spent weekends as a teenager going through dumpsters with my unemployed father as we looked for discarded Sunday newspapers because of the coupon inserts in them that we could hoard and use on triple-coupon day at the local grocery, or that I took a ninety-minute ride on public transportation (Algiers bus downtown, then St. Charles Ave. streetcar) to my racially-mixed public high school, or that I turned down admissions at both Yale undergrad and Yale Law because I couldn’t afford their financial aid packages, or that I didn’t own a car until a couple of weeks before my 29th birthday (and then it was a out-of-model-year Chevy Malibu that I bought by saving points on a GM credit card that I had maxed out), or that my 1999 third-quarter bonus was a cause for celebration because it allowed me to reach zero net worth, any more than it makes Mencimer’s arguments wrong because she lives in a house twice as large as mine and assessed at over a million dollars and, as a freelancer that doesn’t employ anyone, has little chance of directly suffering the consequences of lawsuit abuse and is wealthy enough not to feel the full pain of its indirect effects on job creation or consumer prices.

I stumbled into being a reformer because I saw first-hand that the litigation system wasn’t working; that judges were making lawless rulings; that plaintiffs were bringing and winning bogus products liability suits; that there were magnet jurisdictions where meritless class actions were being brought and rubber-stamped certified by elected judges; that entrepreneurs were being crushed by litigation expenses, sometimes at the behest of hourly lawyers who oversold them on the possibilities of being a plaintiff in circumstances troublingly close to self-dealing. (That the very first case I worked on was a sudden acceleration suit did a lot to disillusion me about Ralph Nader’s gang of lawyers: while the plaintiffs’ bar was going on at great length about cruise controls whose magic defect was more likely to strike elderly and short drivers, their noise was drowning out consumer awareness of legitimate safety improvements like shift-interlock.)

Mencimer’s analysis is a simplistic one: Republicans support reform; Mencimer doesn’t like Republicans; therefore, reform is bad, to the point that she knee-jerkingly defends a lawsuit over a flag accident brought against Dixie Flag—who didn’t even manufacture the flag or flagpole.

I’m a reformer for the same reason I became a lawyer: because I care about justice and fairness, and now recognize that the long-term damage short-sighted attorneys do to our economy through externalities is sorely underaddressed.

To the extent that education does prevent accidents, think of the good Mencimer could do if she trained her sights on what lawyers have done to the public school systems (also: Nov. 14, 2003). A shame that she’s instead carrying water for the millionaires of ATLA, and fairly thoughtlessly at that. It’s all fun and games to bash the insurance companies until the innocent lose their jobs.

Affluence and Accidents and Ad Hominems is a post from Overlawyered - Chronicling the high cost of our legal system

A California court has interpreted that state’s Unruh Civil Rights Act to only provide $4000 penalties in the case of intentional violations of the law; while this is a good public policy result in the abstract, I’m personally wary of the court using its judicial power to rewrite the poor legislation. It also doesn’t fix the problem with the federal law. (Gunther v. Lin; Wendy Thomas Russell, “Court ruling puts crimp in disability lawsuits”, Long Beach Press Telegram, Nov. 19). And in Florida, the press is just getting around to noticing the drive-by problem because of Robert Cohen’s 300 suits. (Kelli Kennedy, “‘Drive by’ suits rake in dough for attorneys”, AP/Miami Herald, Nov. 28 (h/t W.F.)). Even reflexive reform opponent Stephanie Mencimer takes notice and can’t defend the parasitic lawyering involved, but manages to spin the issue to implausibly blame the Republicans for the problem—though the ADA’s civil remedies were drafted by Democrats when they controlled Congress in 1991.

More drive-by disability suits is a post from Overlawyered - Chronicling the high cost of our legal system

Mencimer, a frequent contributor to such journals as Mother Jones and the Washington Monthly (see Jan. 19, 2005), has set up a website (previously noted by Ted) to promote her new book. It’s not unproductive of chuckles, in its way. For example, in one post earlier this month (Nov. 10), criticizing media coverage of patent hellhole Marshall, Texas, she piously avers that reporters should disclose who fed them tips. A fascinating idea! Does this mean she’ll be sure to disclose in her own writings who fed her tips? Or is this new standard only supposed to apply to journalism she disapproves of?

“Don’t let Walter Olson have the say on this subject!” is a post from Overlawyered - Chronicling the high cost of our legal system