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Delaware

Nigel Sykes, currently serving a 15-year sentence, is suing employees of Seasons Pizza in Newport, Del. who allegedly tackled him as he was robbing the pizzeria at gunpoint. His suit, filed without a lawyer, asks in excess of $260,000, saying employees of the dining establishment beat him up and poured hot soup on him. “While U.S. District Judge Sue L. Robinson tossed out several of Sykes’ claims, she allowed the case to move forward against the pizza employees, two arresting officers and Seasons.” Sykes, whom police linked to a series of robberies at a bank and various retail establishments, had filed an earlier suit with different factual allegations which was dismissed on procedural grounds. He has also claimed that he should be allowed to take back his plea in the criminal case, arguing in a motion, “I’m not good at making good choices.” [Sean O'Sullivan, Wilmington News Journal]

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Works for me: “Started by Kathleen Belfont, Blotto Gelato is a small ice cream business that includes alcohol in all of its products. Belfont reached out to Sen. Ernie Lopez, R-Lewes, when she realized she could not get a liquor license.” [WBOC via Laura Collier]

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“…Most companies roll over.” [Tim Lynch, Cato; WSJ; related on Federal Energy Regulatory Commission enforcement]

On this coming Monday, May 19, the Cato Institute is hosting a lunch on the subject of “Mugged by the State: When Regulators and Prosecutors Bully Citizens,” featuring Kevin Gates, Vice President, Powhatan Energy Fund; William Hurwitz, M.D., Pain Treatment Specialist; Lawrence Lewis, Engineer and Building Manager; and William Yeatman, Senior Fellow, Competitive Enterprise Institute; moderated by Tim Lynch, Director, Project on Criminal Justice, Cato Institute. You can watch live online at http://www.cato.org/live.

More: Cato podcast, brothers’ website, Philly.com (with an additional story of a man resisting the Delaware insurance commission after it took over his nightclub insurer). And: WSJ via John Cochrane on another FERC case.

“Delaware’s Supreme Court has ruled that corporations can adopt bylaws requiring an investor who sues and loses to pay the company’s legal costs, potentially upending the economics of a booming type of shareholder litigation.” [Tom Hals, Reuters via Federalist Society Blog]

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  • Following vindication, Mark Cuban begins transcribing transcripts of other SEC trials on his blog [Blog Maverick, background] “Why Settling With The SEC Can Be Worse Than Losing At Trial” [John J. Carney, David Choi and Francesca Harker]
  • Congress needs to investigate whether administration browbeat Standard & Poor’s over sovereign debt rating [John McGinnis]
  • As regs squeeze banks out of small business lending, will we like non-bank alternatives as well? [John Cochrane] More: Kevin Funnell;
  • Cash business can’t bank its proceeds: “Robber gangs terrorize Colorado pot shops” [NBC News]
  • “Will Plaintiff Lawyers Cut Down On The Choices In Your 401(k)?” [Daniel Fisher]
  • Does Delaware have an incentive to keep securities lawyers happy with big fees? [Bainbridge]
  • “It’s Time To Grill the Federal Reserve About Bitcoin” [Ira Stoll]

Banking and finance roundup

by Walter Olson on September 17, 2013

  • “You can’t prove that favoritism influenced FDIC” in going easy on brass at Chicago bank [Kevin Funnell]
  • Securities and Exchange Commission won’t give up bid for more power in stale cases despite 9-0 SCOTUS loss [my new Cato Institute]
  • Is JP Morgan paying an enforcement price for Dimon’s outspoken criticism of regulators? [Prof. Bainbridge; WSJ (reporting claims that "it took Mr. Dimon too long to shed a combative stance with regulators... In April the bank's two top regulators told Mr. Dimon and his board that they had lost trust in management.")] More on Standard & Poor’s claims that it was targeted for retaliation by federal government [Peter Henning, NYT DealBook, earlier]
  • Judge rules against law passed by Chicago on bank-owned vacant buildings [Chicago Real Estate Daily]
  • Post-merger derivative claims: “Delaware refuses to feed the sharks” [Bainbridge]
  • Payday lending fight pits New York regulator against some Indian tribes [Funnell, Native American Financial Service Association]
  • Stay on the line to learn more about the Verizon/Vodafone deal, or just press the star key to sue now [Daniel Fisher, Forbes]

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All 50 states have escheat laws awarding to state governments ownership of unclaimed property in business hands, which can range from bank, insurance, and stock holdings whose proper owners cannot be found to retail gift cards never cashed in. The revenue looms peculiarly large for the state of Delaware, because it is the state of incorporation for so many businesses. In recent years friction has been growing between the state and its corporate citizens as the state government has taken an increasingly aggressive stance in auditing corporations for unreported escheatable property. [WSJ] So far, perhaps, so routine (except for the parties to the dispute), but some accounts omit one of the most salient angles, summed up by one critic [Douglas Lindholm, IBD via Volokh] as follows:

Last year alone, Delaware seized $319.5 million from liquidated property while returning only $18.9 million of unclaimed property to its rightful owners.

Delaware does this through an unfair, onerous and expensive audit system that “looks back” to 1981, and contrives unclaimed property if the company doesn’t have records for all those years. This process often costs companies millions of dollars, mires them in years of audits, and forces them to deal with third-party auditors who are motivated by contingent fees to invent unclaimed property where none exists.

Kelmar, which conducts most of the audits for the Delaware Department of Finance and works on a contingent fee, was paid more than $30 million in the second half of 2012 alone.

Again and again — whether in forfeiture laws entitling law enforcers to a share of the booty seized, or percentage awards for informants under whistleblower laws, or traffic camera systems in which the operators of the cameras get a share of ticket revenue, contingency fees for participants in law enforcement prove deeply problematic. In my chapter on contingency fees in The Litigation Explosion, I summed things up this way:

Contingency fees tend to be disfavored in professions to whom the interests of others are helplessly entrusted, where misconduct is hard to monitor…. Giving traffic cops contingency fees by hinging their bonuses on whether they make a ticket quota arouses widespread anger because it so obviously tempts the officer running under quota to be unfair to the motorist. The same is true of giving tax collectors contingency fees by hinging their bonuses on how many deductions they disallow or how many assets they seize. (“Tax farming,” the old system where private parties were deputized to collect taxes and keep some of the haul for themselves, was abolished long ago in well-run countries, not because it was the least bit inefficient — it was a favorite way for Roman emperors to extract revenue from conquered provinces — but because it encouraged brutality and trampling of due process in tax collection.)

Delaware seems to have gotten its image in trouble through a variant on tax farming. Let’s hope a lesson is being learned.

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July 27 roundup

by Walter Olson on July 27, 2012

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The Economist on “Why American firms cannot do deals without being sued”:

In 2005, 39% of M&A deals were challenged by lawsuits, one study found. By 2011 a hefty 96% of acquisitions worth more than $500m were attracting suits…

J. Travis Laster of Delaware’s Chancery Court [has] become an outspoken public critic of “worthless”, “sue-on-every-deal” lawsuits. In March he told one group of plaintiffs’ lawyers: “I don’t think for a moment that 90%—or based on recent numbers, 95%—of deals are the result of a breach of fiduciary duty.”

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  • Gov. Walker’s public sector labor reforms popular with Wisconsin voters, and have saved taxpayers a fortune [Morrissey, Fund, Marquette poll (public favors new law by 50-43 margin] What would FDR say? [Dalmia, The Daily]
  • “Why you should stop attending diversity training” [Suzanne Lucas, CBS MarketWatch, following up on our earlier post]
  • The gang that couldn’t regulate straight: “Court rebuffs Labor Department on sales rep overtime” [Dan Fisher, Forbes] Lack of quorum trips up NLRB on “quickie”/ambush elections scheme [Workplace Prof]
  • Not all claimed “gun rights” are authentic, some come at expense of the vital principle of at-will employment [Bainbridge]
  • Brace yourself, legal academics at work on a Restatement of Employment Law [Michael Fox]
  • “Why Delaware’s Proposed Workplace Privacy Act Is All Wrong” [Molly DiBianca]
  • USA Today on lawyers’ role in growth of Social Security disability rolls [Ira Stoll]

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February 14 roundup

by Walter Olson on February 14, 2012

  • “Brazil Sues Twitter in Bid to Ban Speed Trap and Roadblock Warnings” [ABA Journal]
  • Obama nominates Michigan trial lawyer Marietta Robinson to vacancy on Consumer Product Safety Commission, ensuring aggressively pro-regulatory majority [Bluey, Heritage]
  • “AMA reports show high cost of malpractice suits” [HCFN] “Average expense to defend against a medical liability claim in 2010 was $47,158″ [American Medical News, more] Survey of 1,200 orthopedic surgeons finds defensive medicine rife, at cost of billions, accounting for 7 percent of all hospital admissions [MedPageToday]
  • “Sue us only in Delaware” bylaws would kill off forum-shopping and what fun is that? [Bainbridge, Reuters]
  • Trial by media: Lefty “SourceWatch” posts, then deletes, docs from Madison County pesticide suit [Madison County Record]
  • Think you’ve beaten FCPA rap? Meet the obscure “Travel Act” [Mike Emmick, Reuters] Federal court expands “honest services fraud” in lobbying case [Paul Enzinna, Point of Law]
  • “On the horrors of getting approval for an ice-cream parlour in San Francisco” [NYT via Doctorow/BoingBoing]

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January 3 roundup

by Walter Olson on January 3, 2012

  • Popehat’s Ken to the rescue after Maine lawyer/lawmaker assists naturopath in bullying critical blogger [Popehat]
  • Newt’s “patriotism made me stray” among highlights of the year in blame-shifting [Jacob Sullum]
  • Nifong sidekick, now in a spot of legal bother himself, hits back with lawsuit [K C Johnson, Durham in Wonderland]
  • Shareholder action: “Delaware approves $285 Million in Plaintiffs’ Lawyers’ Fees” [Bainbridge, WSJ Deal Journal, WSJ Law Blog]
  • “Even one death is too many — WE MUST BAN NETI POTS!” [NYDN via Christopher Tozzo]
  • Debatable premise of Joe Nocera analysis on Stephen Glass case: bar admission turn-down = “rest of his life … destroyed” [NYT, Howard Wasserman/Prawfs, earlier]
  • Who says Connecticut never reforms liability? Towns won protection last year from some recreation-land tort exposure [CFPA, earlier here, here]

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The baseline expectations in our legal system are such that when judges cast a skeptical eye on meritless cases — going so far as to be “almost” hostile toward them — it counts as newsworthy. I discuss in my new post at Cato at Liberty. More: Bainbridge. For more on the prosperous legal niche of filing lawsuits seeking to block corporate mergers, and then collecting fees when the target agrees to settle in order to get the deal done, see Dealbreaker (“Plaintiff’s Lawyer Tax on M&A”), Fox Business and WSJ.

The quota pressure in sports has been around for a while, but the idea of an enforcement push in hard academic disciplines may be getting extra encouragement from the very top:

Obama himself seems to have latched onto the idea. While praising Title IX’s impact on increasing women’s participation in athletics, he said, “If pursued with the necessary attention and enforcement, Title IX has the potential to make similar, striking advances in the opportunities that girls have in the science, technology, engineering, and mathematics (“STEM”) disciplines.” The nation’s university science, engineering, and mathematics departments may thus soon find themselves faced with the task of complying with a regulatory regime similar to the intercollegiate athletics three part test.

[Alison Somin, Federalist Society "Engage", PDF]

More: a John Stossel segment, and cutbacks in men’s sports at Delaware.

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Do as we say dept.

by Walter Olson on October 10, 2010

“Delaware Alcohol Enforcement Chief Resigns After DUI Arrest” [CBS Philly]

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Delaware Republicans

by Walter Olson on September 13, 2010

Senate candidate Christine O’Donnell, who’s been running even in polls leading up to tomorrow’s primary, demanded millions in a suit charging employment discrimination against her well-known conservative employer, The Intercollegiate Studies Institute. The details are worth a close look. [John McCormack, Weekly Standard] Even before the new revelations, Prof. Bainbridge was no fan.

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“When forced to defend their conduct and leadership role, original plaintiffs’ counsel approached the concept of candor to the tribunal as if attempting to sell me a used car,” wrote Vice Chancellor Travis Laster, ordering the replacement of shareholder lawyers in a case against Revlon Inc. “The lawsuit was consolidated from several complaints brought by law firms that Laster describes as ‘frequent filers’ — firms which often file cases on behalf of shareholders, sometimes within in minutes of a deal being announced.” [Reuters] More: Dave Hoffman, Concurring Opinions.

Annals of zero tolerance: in Newark, Delaware, 6-year-old Zachary Christie took “a camping utensil that can serve as a knife, fork and spoon to school. He was so excited about recently joining the Cub Scouts that he wanted to use it at lunch. School officials concluded that he had violated their zero-tolerance policy on weapons, and Zachary was suspended and now faces 45 days in the district’s reform school.” In other Delaware cases, a school district “expelled a seventh-grade girl who had used a utility knife to cut windows out of a paper house for a class project,” and “a third-grade girl was expelled for a year because her grandmother had sent a birthday cake to school, along with a knife to cut it.” [New York Times]

The policies do have their defenders: “‘There is no parent who wants to get a phone call where they hear that their child no longer has two good seeing eyes because there was a scuffle and someone pulled out a knife,’ said George Evans, the president of the Christina district’s school board. …Charles P. Ewing, a professor of law and psychology at the University at Buffalo Law School who has written about school safety issues, said he favored a strict zero-tolerance approach.” Blog reactions (some via Memeorandum): Sullum/Reason “Hit and Run”, Q and O, BoingBoing, Kate Harding/Salon “Broadsheet”, Below the Beltway, Tom Freeland/North Mississippi Commenter, Lowering the Bar.

P.S. He’s on the Today Show (via Skenazy). Scott Greenfield wants to call it a knife. After worldwide press attention and a large show of local support, the school board reversed its policy and allowed Zachary back (h/t comments). And now: “A 17-year-old Eagle Scout in upstate New York has been barred from stepping foot on school grounds for 20 days — for keeping a 2-inch pocketknife locked in a survival kit in his car.” [Fox News]

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