The significance of Roy Pearson

by David Nieporent on June 27, 2007

As we’ve covered, Roy Pearson lost his $67 million lawsuit against his dry cleaners. Predictably, Bizarro-Overlawyered is trumpeting the outcome as evidence that the system works, that the “system has effective, built-in checks against such things.” I doubt many Overlawyered readers buy into that spin, but just in case, here are a few reminders about this case that, to the extent it had any merit at all, should have been a small claims suit:

  1. The Chungs offered Pearson $12,000 to drop this suit. If he had not been so greedy, they’d have been out that much money, plus a year’s worth of legal costs. The fact that our legal system enables people to extort tens of thousands of undeserved dollars from others is not evidence that there are “effective, built-in checks” on frivolous litigation.

  2. Putting aside any money issues, this lawsuit was filed on June 7, 2005; for more than two years, this case has been hanging over the Chungs’ heads. That’s two years of legal and financial uncertainty. Two years where they couldn’t make any significant business decisions because they had the possibility of an eight figure liability hanging over their heads. The fact that someone can drag out a case almost too small to have been on Judge Judy for two years is not evidence that there are “effective, built-in checks” on frivolous litigation.

  3. The Chungs “won” the case, but Pearson used the legal system to impose what was likely $100,000 in legal costs on them. Of course, there is a motion for sanctions pending against Pearson, but there are no guarantees here. Courts are very reluctant to impose sanctions, and even when they do (as the court probably will here) they very rarely impose sanctions sufficient to make the defendants whole. Note that sanctions are not automatic; the Chungs had to pay their attorney even more money to prepare a motion for sanctions. The fact that the Chungs have to endure two years of frivolous litigation and then cross their fingers and hope the judge awards them their legal fees is not evidence that there are “effective, built-in checks” on frivolous litigation.

  4. Oh, one other problem: the Examiner reported, even before the decision, that Pearson’s chances of keeping his job were slim. I think most reasonable people agree that Pearson hasn’t quite demonstrated that he’s fit to be a judge. But if he loses his job, the chances of the Chungs ever collecting any part of those sanctions drop from slim to none. (Their chances of recouping their losses are low to begin with — is it likely Pearson has $100,000 sitting around?)

  5. And let’s not forget one other party to this case, also abused by Roy Pearson: the taxpayers of the District of Columbia, who have to pay for the legal system. And they have no chance to get reimbursed.

  6. Finally, remember that the case is not necessarily over. It would be insane for Pearson to appeal, but that hasn’t proved to be a limiting factor in his actions in the past. The worst that happens is that he gets slapped with more sanctions, which he’ll never pay.

{ 17 comments }

1 Dr. Mary Johnson 06.27.07 at 1:42 am

Great post on a shameful (for the legal profession) situation.

2 Bill W 06.27.07 at 9:04 am

I’m new to your site, so maybe the answer to this is elsewhere, but what sort of practical solutions do you propose? The legal system has to judge each case on its merits. Should there be more laws to penalize those who use the legal system to intimidate people?

3 Bumper 06.27.07 at 11:13 am

Perhaps disbarment is the most appropriate punishment for Pearson?

4 Mahlon 06.27.07 at 11:42 am

Litigation entails so much more than fees. Well said.

5 Ted 06.27.07 at 1:12 pm

You left out the most important one:

#7. While Pearson is too deluded to successfully use the justice system, and is thus a relatively minor player in it, more sophisticated plaintiffs’ law firms have used the same tactics to extort billions of dollars in consumer class actions using the same legal theories as Pearson that even Kia Franklin acknowledges are “abusive” though she won’t speak out against those attorneys.

6 Julian Wan 06.27.07 at 1:21 pm

There must be still more to this story – who hired this guy? He doesn’t have a stellar career and wasn’t even working as a lawyer then suddenly he’s a judge? How did that happen?

7 david chichka 06.27.07 at 1:29 pm

It seems to me that a lot of commenters are talking about Pearson’s greed, as here. I haven’t read all the coverage, but is there any indication that he was looking for more money? After all, there’s no way he was going to get millions from the Chungs. From what I have read, it seems that Pearson is actually obsessive, and would have pressed even had the Chungs made a larger settlement offer.

Which brings up a second point. Had Pearson accepted the offer, would the case ever have become so well-known? If not, it would have been just another case of legal extortion. Certainly not an indication of “effective, built-in checks against such things.”

8 jb 06.27.07 at 2:03 pm

This case shows, among other things, the weakness of systemic solutions to the tort crisis. The statutes Pearson sued under, if applied rationally, are not ridiculous. What is ridiculous is the implementation.

It also shows that loser-pays is not the answer. Loser-pays wouldn’t help the Chungs here, not would it help most businesses sued by jackpot-seekers (who almost never would have the kind of money the businesses’ lawyers charge). On the contrary, it would make the system even more jackpot-oriented–plaintiffs could sue knowing that, if they won, their award wouldn’t be reduced by the amount they had to pay their lawyers.

Another solution that I don’t think will help is damage caps. Any damage cap that’s low enough to not serve as a jackpot target will be low enough to not serve as a deterrent against legitimate causes of action, especially against large corporations. And there’s really no one else besides the plaintiff to whom punitive damages can reasonably be assigned.

What is needed is to change incentives, so these frivolous (in layman’s terms) lawsuits are smacked down at the beginning rather than the end. I’m also really not sure how to do that.

9 Kia 06.27.07 at 5:44 pm

Great to know I’m on Ted’s mind whenever he thinks of pants.

May I suggest a slight modification to his comment?

#7. While Pearson is too deluded to successfully use the justice system, and is thus a relatively minor player in it… tort deformers like Ted Frank will surely capitlize on this story while ignoring the major players who are stealing billions of dollars from American citizens under the protection of tort reform measures that give them lawsuit immunity.

10 Dick King 06.27.07 at 5:50 pm

Loser Pays would work, but it should be assessed against the lawyer, not the plaintiff, and if the lawyer can’t or won’t pay the loser’s fee he would be disbarred. This is just because lawyers do many cases and can therefore self-insure the small number of cases a competent lawyer will get wrong.

The judge could in close cases acknowledge that the case was close enough that the loser does not deserve to be penalized, but the norm would be that the loser, who caused everyone time and trouble by not folding their hand, should pay the other party for the problems they caused.

Perhaps that’s not quite fair from Day 1, but I would like to propose the following rule: At any time, either party can make a formal offer to the other party of a result. If they make such an offer, the other party can either accept or reject the offer. If the other party rejects the offer, and the case continues to trial, and the other party does not do any better at trial than they would have done if they had taken the offer, then they pay all legal fees incurred by the offerer after the offer.

There can be two of these offers live at a time, one by each party. For example, if the plaintiff offers to take $10,000 and the defendant counteroffers that they will pay $2000, then if the judgment is $2000 or less the plaintiff pays post-offer legal fees, if the result runs from $2001-$9999 everyone pays their own fee, and if it’s $10,000 or more then the defense was frivolous and the defendant pays post-offer legal fees by the plaintiff.

This proposal is half-baked, fees would have to not be inflated, and something would have to be done to define the fee in contingency and pro-bono cases, but I would like to open this discussion.

-dk

11 Peter Nordberg 06.27.07 at 5:53 pm

Everyone deplores this case, or should. I’m a plaintiff’s lawyer most of the time, and I would scarcely invoke it as proof that the “system works.” It should have been squelched far sooner. In fact, for all I know, it would have been, had the right steps been taken. I’m not up on the procedural history, but this case seems to have spun far out of control, in ways that cases don’t have to, under the existing rules, and to a degree that they usually don’t.

The real question, for me, is whether the case is representative. If it is indeed representative, there should be thousands of cases just like it, and we may as well get to discussing those. If it’s not representative, then I’m not sure why we would dwell on it.

12 Bill W 06.27.07 at 9:34 pm

The problem with a straight “loser pays” system is that it could then be too risky for some actual legitimate claims to be filed, because if they are close cases on the merits and expensive to defend, they would not be brought in the first place because of the high risk of losing.

I’m not convinced there’s a big problem with the current system. There will always be cheaters, frauds, dishonest people, etc. in all walks of life, not just in the legal system. It would not be smart to overhaul the whole system just to deal with that minority.

13 OBQuiet 06.28.07 at 12:30 am

Bill W

Wouldn’t it be fairly easy for us to develop insurance for those cases? This is not that different from how many lawyers operate now. It would just involve a third party deciding how the risk was and how much they would need to to cover it.

And for small cases, would not the risk of bearing the transaction(legal) costs encourage BOTH sides to reach a reasonable accommodation? Plaintiff wants $10k. He might get it or he might be on the hook for paying the lawyers $2k. It the case is 50-50, he could expect $4K on average. On the dependents side, the math is similar, Might pay $0, might pay $14K. Expects to be out $7k. Of course, that 10K could be moved around by the jury so the numbers are a bit fluid and the two parties may feel the odds differ but it seems clear that there is a range of numbers that put both parties in a better position than rolling the dice at trial. Particularly if it would reduce that $2k legal fees.

I’m unclear on your point about the cost to defend. Should we allow plaintiffs to bring weak suits that they know will be expensive to defend since the defendant will likely settle so as not to incur those costs? In the current system, the suit ALWAYS costs the defendant which places a disproportionate burden on them to settle.

14 jb 06.28.07 at 4:29 am

Dick King’s proposal actually sounds good–“loser pays” is the default, and a judge can specifically rule to set that aside if he thinks the losing side had a reasonable case.

The real problem is, we hear about all these ridiculous cases where the plaintiff won some money. Until we stop those from happening, there’s no point in saddling defendants with further costs.

One idea I’d like to throw out, which would stop shotgun lawsuits, is “barbed filings.” Plaintiffs cannot unilaterally drop a case against a defendant without paying their lawyers’ fees. So if you named everyone who breathed on you in the last 5 years as a defandant, you’re stuck having to explain why each of them is at fault, and if any of them have money and a grudge they can refuse to be dropped, forcing you to argue to a verdict (which, because you have no case against them, you will lose and be liable for costs anyhow–and if you win anything from any other defendant, you have money to assess costs against).

15 David 06.28.07 at 5:19 pm

I feel bad for the Chungs, but how much is liability insurance for a dry cleaner? Like it or not, any service business should carry insurance against customer lawsuits as a cost of doing business.

16 David Nieporent 06.28.07 at 8:19 pm

David, while liability insurance would obviously pay if a customer sued over damaged or lost clothing, it’s not at all clear that it would even cover a consumer fraud claim.

Bill: “too risky for some actual legitimate claims to be filed, because if they are close cases on the merits and expensive to defend, they would not be brought in the first place because of the high risk of losing.”

If they’re that close on the merits, is it really such a problem to deter such cases? While it would deter a few barely-legitimate cases, it would benefit the many plaintiffs with stronger cases. Doesn’t that seem like a good tradeoff? Why do we want a public policy of encouraging people to bring weak cases?

I support loser pays, but jb’s point is important: many of these absurd cases win. Loser pays doesn’t solve that problem; we need substantive changes to the law, so that you can’t fall while skiing and sue everyone short of god for not telling you that gravity exists on mountains.

17 Petri 06.29.07 at 9:19 am

Oh my, if lawyers had to get insurance for legal costs of lost cases they might actually begin to feel empathy for some of the more ridiculous malpractice claims that doctors experience. I think this is a decent idea, if other professionals are responsible for their “losses,” why not hold a lawyer responsible for their courtroom losses and require them to have insurance against such losses. Instead of trying to convince the people to stop frivolous lawsuits put the pressure on the professionals to use more discretion in selecting cases to pursue.

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