Chronicling the high cost of our legal system
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It’s not known whether these phishing emails come literally from Nigeria or not; they promise payouts from a fund arising from a legal settlement over auction-rate securities [Business Insider] Compare Point of Law, Sept. 19 (emails invite victims to claim supposed share of oil company environmental hazard reparations).
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If you’re not following my other site, here’s some of what you’re missing:
Why not add Point of Law to your Google Reader or other RSS reader today, along of course with Overlawyered, if you haven’t yet?
Critics including the Securities and Exchange Commission dispute whether receivers really deserve $27 million for their work through May in cleaning up after the collapse of Texas businessman R. Allen Stanford’s empire. [AP/USA Today; earlier]
The New York Post reports on a putative class action brought by Marc Verzani complaining that Costco’s 16-oz shrimp platter doesn’t hold 16 ounces of shrimp. The SDNY judge noted that the platter holds other materials such as sauce and lemon wedges, and simultaneously denied and ridiculed the preliminary injunction motion. Verzani was alleging $40 million in annual damages.
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For frauds that fleeced investors of somewhere between $400 million and $700 million, depending on whom you listen to. [NYDN] “Prosecutors have also said that Mr. Dreier, 59, a graduate of Yale University and Harvard Law School, stole more than $46 million from his clients. … [In a letter to the judge Dreier] said that he began stealing in 2002, taking money from the settlement proceeds that were owed to a client.” [NYT]
Matthew Heller at On Point News fills in considerable background regarding the “Crunchberries” and “Froot Loops” lawsuits covered earlier in this space.
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A judge has tossed a California woman’s would-be class action lawsuit, however, finding that a reasonable consumer would not expect the brightly colored balls to be or contain actual berries or fruit. Per Kevin Underhill, Lowering the Bar: “Plaintiff did not explain why she could not reasonably have figured this out at any point during the four years she alleged she bought Cap’n Crunch with Crunchberries in reliance on defendant’s fraud.” More: California Civil Justice (same law firm sued over Froot Loops); update from Lowering the Bar.
And: Hal Hewell of Hewell Law Firm, which filed the suit, writes in comments that neither the plaintiff
nor her first amended complaint stated that she believed “crunchberries” was a real fruit (check it out on Pacer, along with our motion for reconsideration to get the full story). Your contention that she did is simply false and has exposed her to widespread (and unwarranted) ridicule.
Don’t let the facts get in the way of a good story…. You owe her an apology.
My response: Okay, let’s try to phrase things in a way highly favorable to Hewell and his client. The suit sought recovery against the cereal maker on the grounds a reasonable consumer would understand “Crunchberries” to contain actual fruit, whereas they apparently in fact contain only a little strawberry juice concentrate. (I’ve slightly expanded the first sentence above accordingly). In reaching his conclusion that the only course consistent with “personal responsibility and common sense” was to dismiss the case, the judge found it significant that it is common knowledge that no fruit known as a “crunchberry” grows wild or occurs naturally in any part of the world. Any reasonable consumer would therefore understand that the brightly colored balls must be a composite of ingredients not including that fictional berry, and (the judge found) could not reasonably claim to have been deceived by the monicker “CrunchBerries” into expecting something with more actual fruit content. Perhaps Mr. Hewell’s motion for reconsideration (PDF) will persuade the judge otherwise, and if so, I look forward to reporting that. (Update Jun. 15: judge denies reconsideration).
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Explosive testimony in a Los Angeles courtroom after a judge begins digging into indications of possible fraud in lawsuits by Nicaraguans against Dole Food alleging toxic harms from banana pesticides (L.A. Times via Cal Biz Lit, WSJ law blog; earlier at Overlawyered). The fraud went on for decades, a Dole lawyer charged, and included recruiting and coaching poor Nicaraguan men to pose as having been rendered sterile, even if they had children and had never worked on banana plantations. A California jury had awarded millions of dollars in one of a string of cases that drew controversy over the competence of stateside courts in evaluating claims over injuries that took place in foreign countries. According to the L.A. Times, one lawyer representing the plaintiff’s side in the litigation expressed regret over the actions of a co-counsel and said “all parties were in a nightmare situation.” Bloomberg:
Most of the employment records of Dole workers in Nicaragua were destroyed in the aftermath of the Sandinista revolution, opening the door to the fraudulent claims, Edelman said at the hearing.
Nicaraguan witnesses for Dole whose faces were hidden and whose voices were distorted to prevent identification, said in videotaped statements shown in court that they feared retribution if it became known they provided information to company investigators.
“They even would set fire to my house, even with my family in there,” one witness said. “These people don’t care.”
The cases of thousands more plaintiffs from poor banana-growing countries are waiting for trial in Los Angeles; Dow Chemical is also a defendant, because it manufactured the pesticide. [Update Apr. 24: judge tosses two consolidated lawsuits against Dole]
For another dramatic episode in which poor Latin American plaintiffs have surfaced in U.S. courts with hard-to-disprove claims, see the case of purportedly illegitimate Guatemalan children left fatherless by international air crashes (Nov. 29, 2000).
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In a year of frauds, Roger Parloff at Fortune finds that for “brazen theatricality” the New York lawyer’s may qualify as the gaudiest of all. More: Metafilter.
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Call it karma? Among Bernard Madoff’s victims, Eric Turkewitz has discovered*, is none other than the infamous Morris Eisen, who made a ton of money in personal injury practice by faking evidence for his cases (highlights: taking a pickax to a pothole before photographing it, using a shrunken replica of a ruler so as to magnify the seeming size of defects in photographs, and calling the same “witness” for two different accidents, who happened to be serving time upstate for forgery at the time of both). Eisen was disbarred, served time, and paid some money, but “clearly” was left with “substantial assets”, notes Turkewitz, including a residence in Fisher Island, Florida. (Wikipedia: “According to the U.S. Census Bureau, Fisher Island had the highest per capita income of any place in the United States in 2000.”) I wrote about the Eisen scandal in my first book, The Litigation Explosion, the relevant PDF chapter of which is available at Point of Law; also see this City Journal piece.
*OK, “learned from one of his readers”; see comments.
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Ray Pellecchia at the NYSE blog Exchanges (via Salmon) writes that had Harry Markopolos sounded the alarm about Bernard Madoff by putting his charges up on a blog, instead of taking them to the SEC and selected investors, there’s a good chance the Madoff scheme would have come tumbling down in short order — except, of course, for the not-unreasonable fear that Madoff might have sued.
P.S.: Unrelatedly, this AP report quotes Markopolos as testifying to the Hill panel yesterday that “the SEC is overlawyered”. (Most of the news accounts, however, insert a hyphen in the quote: ‘over-lawyered’”.)
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Ultralitigious inmate Jonathan Lee Riches has filed a motion attempting to insert himself into the Bernard Madoff legal quagmire, but a federal court has rebuffed his efforts. That may make Riches the only person in the country not to have a legitimate legal grievance against Madoff [NYT DealBook via Christopher Fountain]
“I’m a capital ‘D’ Dumbass,” Houston lawyer Richard T. Howell Jr. said about the incident. His law firm is however suing on the grounds that the bank should have better explained the check-clearing process. The scam artist posed as a businessman in Japan who wanted to become a client of Howell’s firm. [Texas Lawyer, TechDirt]
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Those were the words of lawyers for Bernard Madoff about his sending through the mail to relatives and intimates — thus potentially spiriting away from the victims of his fraud — what turned out an estimated $1 million in jewelry and gem-encrusted watches. Eartha Kitt should have lived just a few more weeks to see it:
In retrospect, you do wonder whether she may have been getting at something with that mention of an “old-fashioned fence”.
(& welcome Andrew Sullivan readers).
Soon, baby soon. Walter Olson’s new year’s resolution is to return to blogging at Overlawyered.
What are you resolving to accomplish in the new year?
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Con artists, lawyers, and people who deserve a punch in the face:
Walter Olson will be back soon enough, but I’ll note that I have come to appreciate just how good a blogger he is, and how hard Walter works in keeping this site going over the past few days. Perhaps you might show him your appreciation? Vote early, and vote often.
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Guest Post by Victoria Pynchon
This just in from my IP ADR Blog colleague Mike Young of Alston + Bird
I wish I was clever enough to make this stuff up, but I’m not. Only reality can be this bizarre.
A sexual harassment defendant settles the case for $1.3 million. Not satisfied with the usual “no admission of liability” clause found in most settlement agreements, Mr. Harasser insists on an adjudication of NON-liability as a condition to paying the $1.3 million.
Here’s how the parties work it:
As part of the settlement, the harassment dispute will be “arbitrated” based on stipulated facts. The defendant will have sole discretion in the selection of the “arbitrator” and will pay the entire fee. The stipulated facts are, essentially, “defendant is innocent and plaintiff is wrong.”
Not only does the settlement agreement set forth the stipulated facts for the “arbitration,” it also dictates the arbitration award, word for word (essentially “the defendant is innocent and the plaintiff is wrong), and then spells out the press release that will follow the “arbitration,” that the defendant was totally vindicated in the lawsuit by a defense award (leaving out, of course, the part about paying $1.3 million to the plaintiff).
With me so far?
A fake arbitration to be followed by a false press release…and then the defendant pays the $1.3 million.
This is pulling a fast one on the public and a perversion of the justice system since the fake arbitration award would inevitably be followed by an uncontested entry of judgment based on the arbitral award.
Were I the defendant, I would be pretty careful to select an arbitrator who I knew would go along with this, like my [hypothetical] sociopathic uncle. I certainly wouldn’t select a former judge and one of the State’s top private jurists.
But, what do I know. In this case, the defendant with the unilateral right to select the arbitrator for this “arbitration” selected a former San Francisco judge sitting on the prominent JAMS panel, Daniel Weinstein.
To no one’s surprise except maybe the defendant, the plaintiff didn’t show up for the “arbitration.” Why should she? Based on the stipulated facts, she already “lost” the “arbitration.” For reasons that are not fully explained in the subsequent legal opinion, but probably because Weinstein is smart and ethical enough to know a rat when he sees one running across his conference room table, Weinstein refused to participate in the sham proceeding.
As the defendant, what would you do now? I’d probably pay the $1.3 million and call it a day. Because the case had not been dismissed, the court called the parties in to see what was going on. The plaintiff said she wanted to enforce the settlement. The defendant said the plaintiff breached the settlement agreement by not showing up to the “arbitration,” and that the settlement agreement had a real arbitration provision so that any dispute over the agreement had to be arbitrated (the old fashioned way). The trial court read the settlement agreement for the first time, and then denied the defendant’s motion to compel arbitration.
Now would be a good time to pay up and move on. There’s been no publicity and no public disclosure of this bizarre effort to fool the press and public with a sham arbitration proceeding. But no. This defendant decided to appeal the denial of the motion to compel arbitration, making everything public.
Sure enough, the appellate court issued an opinion, not officially published but available on the web for the world to see at http://www.onpointnews.com/docs/charney2.pdf, in which this entire fake arbitration process is shared with readers like you and me.
Here you have an effort to create a false record for the purpose of issuing a misleading press release to fool the public into believing the defendant was exonerated. It’s certainly fraud but is it actionable by anyone? And because the attempt was foiled by this new Darwin Awards winner, no harm was ever done.
We praise the ethical decision of JAMS neutral Daniel Weinstein in refusing to join in this attempt to use JAMS, and eventually the Courts, to perpetrate a public fraud. Is there any question that an arbitrator who would go along with this sham would be violating his/her professional responsibilities (not to mention undermining JAMS’ sterling reputation)?
But where is the judicial outrage? In the appellate court opinion, none of the justices took the defendant to task. There is no indication that the trial court was shocked or concerned by the possibility that it was overseeing a settlement whose goal was to defraud the public.
The “A” in ADR does not mean “A”nything goes in the pursuit of expedited calendars. It is alternative, not anarchic.
[editor's note: see also Nov. 16 (American Apparel's view of episode)]
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