Judges move slower than markets but faster than the economics profession, a deadly combination.
– Judge Frank Easterbrook, “Comparative Advantage and Antitrust Law” (California Law Review, 1987).
The losers of a union election sued the winners in federal district court in Chicago, but it wasn’t a very impressive lawsuit. One plaintiff claimed that the threat of being fired caused an asthma attack, but since she in fact got a raise, and she had been having asthma attacks for 25 years, and there wasn’t any threat, her claim of intentional infliction of emotional distress didn’t get very far. The district court issued $80,000 in sanctions under Rule 11, just a fraction of the $200,000 that the defendants claimed to have paid in legal expenses, but James Gordon Banks objected to even this amount on the grounds that he was poor (though this was in some doubt, because of the assets in his wife’s name) and because he was only recently out of law school. Unfortunately for him, he drew Judge Easterbrook on the appeal, and we know that the judge does not suffer fools lightly:
If Banks really is a bad lawyer (as he depicts himself), and is poor because people are not willing to pay much, or at all, for his services, then he should turn from the practice of law to some other endeavor where he will do less harm. No court would say, in a medical-malpractice action, that a doctor whose low standards and poor skills caused a severe injury should be excused because he does not have very many patients. No more is a bad lawyer excused because he has few clients.
The $80,000 sanction was affirmed, and many took note of the humorous opinion: ABA Journal; UK Times OnLine; Wisconsin Law Journal; Courthouse News.
Relevant to a recent comment discussion, words of wisdom from Judge Easterbrook in IFC Credit Corp. v. United Business & Indus. Federal Credit Union:
Ever since Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991), enforced a forum-selection clause printed in tiny type on the back of a cruise-ship ticket, it has been hard to find decisions holding terms invalid on the ground that something is wrong with non-negotiable terms in form contracts. See also, e.g., Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 32 (1991) (unequal bargaining power does not justify refusal to enforce an arbitration clause in a form contract); Seawright v. American General Financial Services, Inc., 507 F.3d 967 (6th Cir.2007). As long as the market is competitive, sellers must adopt terms that buyers find acceptable; onerous terms just lead to lower prices. See, e.g., Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir.1997); ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir.1996); George L. Priest, A Theory of the Consumer Product Warranty, 90 Yale L.J. 1297 (1981). If buyers prefer juries, then an agreement waiving a jury comes with a lower price to compensate buyers for the loss-though if bench trials reduce the cost of litigation, then sellers may be better off even at the lower price, for they may save more in legal expenses than they forego in receipts from customers.
There is no difference in principle between the content of a seller’s form contract and the content of that seller’s products. The judiciary does not monitor the content of the products, demanding that a telecom switch provide 50 circuits even though the seller promised (and delivered) 40 circuits. It does not matter that the seller’s offer was non-negotiable (if, say, it offered 40-circuit boxes and 100-circuit boxes, but nothing in between); just so with procedural clauses, such as jury waivers. As long as the price is negotiable and the customer may shop elsewhere, consumer protection comes from competition rather than judicial intervention. Making the institution of contract unreliable by trying to adjust matters ex post in favor of the weaker party will just make weaker parties worse off in the long run. Original Great American Chocolate Chip Cookie Co. v. River Valley Cookies, Ltd., 970 F.2d 273, 282 (7th Cir.1992) (“The idea that favoring one side or the other in a class of contract disputes can redistribute wealth is one of the most persistent illusions of judicial power. It comes from failing to consider the full consequences of legal decisions. Courts deciding contract cases cannot durably shift the balance of advantages to the weaker side of the market; they can only make contracts more costly to that side in the future, because [the other side] will demand compensation for bearing onerous terms.”).
Certainly some corporate defendants deserve to take it in the shorts. Judge Easterbrook, in affirming a well-deserved $16 million FTC fine against a late-night infomercial purveyor of fraud, opines:
For the Q-Ray Ionized Bracelet, by contrast, all statements about how the product works—Q-Rays, ionization, enhancing the flow of bio-energy, and the like—are blather. Defendants might as well have said: “Beneficent creatures from the 17th Dimension use this bracelet as a beacon to locate people who need pain relief, and whisk them off to their homeworld every night to provide help in ways unknown to our science.”
FTC v. QT, Inc. (via Lattman).
We earlier covered Judge Easterbrook’s opinion in the Redwood v. Dobson case. On Evan Schaeffer’s Illinois Trial Practice Blog I commented:
A censure for instructing a witness not to answer seems strict, considering the practicality that most parties would prefer that result to cutting off the deposition, and one unfortunately cannot be assured of a federal district judge who is as familiar with the current rendition of Rule 30 as Judge Easterbrook is. (Indeed, the district court judge in Redwood erroneously applied Rule 30 according to the appellate opinion.)
If one were to walk the tightrope that Redwood presents us, I would recommend objecting as follows: “We find that question objectionable. I would prefer not to suspend the deposition here to seek a protective order, but Rule 30 offers me no other alternative. Can we agree that you will postpone this question until the end of the deposition, and we’ll seek the protective order then?” By doing this, one demonstrates good faith and places the burden on the questioner of choosing to end the deposition early over this question. That’s not complete protection by any means: the questioner can stand her ground, and then still seek sanctions for the costs of a second day of deposition if the protective order is denied. It’s an elaborate game of chicken, to be sure, and I’ve been on both sides of intimidating junior attorneys and having senior attorneys try to intimidate me in that game.
Now, in the American Lawyer, Northwestern Professor Steven Lubet stakes a similar position (via Civ Pro Prof Blog):
The Seventh Circuit might have thought the Redwood decision would “defuse . . . the heated feelings” at depositions, but it may well have the reverse effect of making litigation more contentious, potentially turning every deposition into a high-stakes confrontation. Lawyers already play enough chicken, and now they’re going to have to learn a new game-truth or dare.
Lubet complains that Redwood leaves attorneys with only the nuclear option of the expense of seeking a protective order; this isn’t quite the case, as my February comment above shows. But Lubet is correct that there is a problem in treating the victim the same as the originally misbehaving attorney.
Of course, the problem is less with the Seventh Circuit decision as much as with the very clear instruction of Fed. R. Civ. Proc. 30(d)(1) combined with the unwillingness of courts to enforce sanctions or provide adequate protective orders for over-aggressive discovery. If district courts were doing their jobs, that Seventh Circuit opinion wouldn’t look so frightening to practitioners, because attorneys would be behaving in the first place.
It may not quite reach Jamail-esque depths — almost nothing can survive that far down other than those curious tube worms that live on volcanic sulfide fumes — but the lawyerly unpleasantness in the case of Redwood v. Dobson (PDF) was plenty bad enough, as recounted in Judge Easterbrook’s entertaining opinion. Discussion: Evan Schaeffer’s Illinois Trial Practice, Prof. Bainbridge, Legal Ethics Forum.
The National Law Journal also has coverage of a “groundbreaking” Judge Easterbrook decision out of the federal appellate court in Chicago, In re Bridgestone/Firestone Inc. Tires Products Liability Litigation, holding that a federal decision against the creation of a nationwide class precludes state courts from deciding to the contrary. (John Beisner of my law firm, O’Melveny & Myers, represented Ford Motor Company and argued for the defense.) The decision is important because it limits the ability of class action plaintiffs’ attorneys to judge-shop; if a federal court denied the certification of a nationwide class, the same attorneys could go from state to state seeking a state court that would in a game of “heads I win, tails don’t count.” (Gary Young, “7th Circuit Limits State Court Certification of Class Actions,” National Law Journal, July 8.)
Many thanks to Walter Olson for giving me the keys to the website for the week. I greatly enjoyed the experience.
Greetings. My name is Ted Frank, and I’m honored to be your guest blogger for the week. I’m a former clerk for Judge Easterbrook and am currently practicing law as counsel in a Washington, D.C., firm, often on behalf of clients who are dealing with the types of lawsuits that Walter Olson has catalogued here for years.
Speaking of Judge Easterbrook, here is his opinion in McMahon v. Bunn-O-Matic, a classic variant of the plaintiff-who-spills-hot-coffee case.