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loser pays

“An Alabama man who sued over being hit and kicked by police after leading them on a high-speed chase will get $1,000 in a settlement with the city of Birmingham, while his attorneys will take in $459,000, officials said Wednesday.” [Reuters/Yahoo] Readers may argue about whether this kind of outcome is fair, but note that it seems to happen more often, rather than less, in this country (with its putative “American Rule” that each side pays its own fees) than in other industrialized countries which tend more to follow “loser-pays” or “costs follow the event” fee principles. One reason for that is that the U.S. does not actually hew consistently to the so-called American Rule; across wide areas of litigation, including civil rights suits, it follows “one-way shift” principles in which prevailing plaintiffs but not prevailing defendants are entitled to fees, and whose encouragement to litigation is greater than either the American Rule or the loser-pays principle.

Related: The Pennsylvania legislature is moving to adopt a rule adopting one-way fees for some cases in which municipalities trample rights protected by the Bill of Rights’ Second Amendment, provoking peals of outrage (“dangerous,” “outrageous,” “threatens municipalities’ financial stability,” etc.) from elected officials few of whom seem to be on record objecting to one-way fee shifts when plaintiffs they like better are doing the suing. [Free Beacon]

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Banking and finance roundup

by Walter Olson on September 21, 2014

  • SEC regs suppress small business capital formation and that’s a shame [Commissioner Daniel Gallagher via Bainbridge]
  • Federally sponsored gripe site for financial institutions not likely to end well [Hester Peirce and Vera Soliman, Mercatus via Kevin Funnell]
  • Alleged terror payments “routed through” sued bank also went through major New York banks, which shouldn’t be surprising [Fisher]
  • Did mid-level managers in securitized mortgage finance know they were in a housing bubble but cynically go ahead? Evidence against [Cheng et al., American Economic Review via MR]
  • Shareholder litigation: “New ‘loser pays’ standard could curb abusive lawsuits” [Examiner editorial] Delaware take note: corporate by-law changes that cut off fee-seeking opportunism deserve acclaim [Keith Paul Bishop via Bainbridge]
  • NYT was hot on “Goldman Sachs manipulated aluminum market” allegations but judge wasn’t [Reuters, July 2013 NYT]
  • CFPB might shrug off discrimination and retaliation charges, but many of the firms it regulates could not afford to [Hans Bader]

August 4 roundup

by Walter Olson on August 4, 2014

  • Administration tees up massively expensive regulation docket for after election [Sam Batkins, American Action Forum]
  • More on FedEx’s resistance to fed demands that it snoop in boxes [WSJ Law Blog, earlier]
  • Ethics war escalates between Cuomo and U.S. Attorney Preet Bharara, but is sniping in press suitable role for prosecutor? [New York Post, Ira Stoll]
  • “Mom Hires Craigslist Driver for 9-Year-Old Son, Gets Thrown in Jail” [Lenore Skenazy]
  • One-way fee shifts, available to prevailing plaintiffs but not defendants: why aren’t they more controversial? [New Jersey Lawsuit Reform Watch]
  • Water shutoff woes sprang from Detroit’s “pay-if-you-want culture” [Nolan Finley, Detroit News]
  • “CPSC Still Trying to Crush Small Round Magnet Toys; Last Surviving American Seller Zen Magnets Fights Back” [Brian Doherty]

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Ken at Popehat has the story on a court’s ruling for fees and costs in Ergun Caner v. Jonathan Autry, filed by a religious leader who had come under criticism for less-than-forthright descriptions of his own past. “The court ruled that Caner (1) pursued the case after Autry took the videos down, (2) demanded, as a condition of settlement, that Autry’s young children sign a non-disparagement agreement, (3) delayed the case, (4) failed to seek discovery, opposed the motion to dismiss on the grounds that he needed to take discovery, but could not articulate what discovery he needed, (5) contradicted himself, (6) made unreasonable legal arguments without any support (like the ‘you must be qualified to criticize’ argument), and most importantly (7) filed the case to silence criticism.” Under the prevailing “American Rule” on fees it’s extremely hard for the victim of a meritless suit to recover attorney’s costs, but this one was extreme enough to be an exception.

  • Supreme Court tackling patent law in several cases this term [Sartori and Aga, WLF; Richard Epstein; Kristen Osenga/Prawfs] New fee-shifting regime announced in Octane Fitness already bringing relief to litigants [Ars Technica on Lumen View/FindTheBest case]
  • Copyright claims on intrinsically newsworthy material: curious claim concerning suicide note [Eugene Volokh] “Is it copyright infringement to post a lawyer’s cease-and-desist letter?” Australian university seems to think so [same]
  • Fate of Prenda Law model spirals downward [Ars Technica, Volokh, EFF]
  • Comedian Adam Carolla has “decided to make himself the focus of the Personal Audio suit against podcasters.” [Steven Malanga]
  • Why, as a textbook author, Alex Tabarrok has concluded copyright law is out of control [Marginal Revolution]
  • Remembering when patent examiners were celebrities (in the 19th Century) [Slate]
  • Someone sends Jim Harper a dubious DMCA takedown notice, and this is his response [Cato]

“Don’t settle”

by Walter Olson on May 26, 2014

Newegg fights a patent assertion entity:

Most companies choose not to recover their legal fees in patent suits because prevailing defendants are required to demonstrate that a plaintiff acted in bad faith. This is extremely difficult to prove and it’s usually easier to just walk away and count your losses – unless your name is [Newegg chief legal officer] Lee Cheng…

Thanks to the efforts of Lee Cheng and his legal team, the Federal Circuit Court of Appeals ordered a trial court to reconsider its earlier denial of Newegg’s request for attorneys’ fees and costs in the patent infringement lawsuit brought on by SUS. Newegg pursued justice in the matter because it is consistent with our corporate mission of bringing the benefits of technology and technology products to our valued customers. And, when defendants settle these frivolous claims, it’s always the customer that ends up paying. We care too much about our loyal customers to subject them to paying these trolls.

Don’t settle.

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The defendant in the Duluth doctor-rating defamation case that we recounted here and here “told the Star Tribune he spent the equivalent of two years’ income, some of which he had to borrow from relatives who supplied the money by raiding their retirement funds.” The Minnesota Supreme Court eventually ruled that his comments were protected opinion. The doctor/plaintiff, for his part, spent $60,000 pursuing the suit. [Twin Cities Business]

The same article, a “Lawsuits of the Year 2013″ feature, also recounts how a couple under the influence of “sovereign citizen” teachings “filed more than $250 billion in liens, and other claims, against those they considered the cause of their problems, including [Hennepin County Sheriff Rich] Stanek, county attorneys and other court officials. The liens were filed against vehicles, houses and even mineral rights.” When Stanek went to refinance his property, he discovered he had been hit with $25 million in liens which took “several years” to remove entirely. The husband of the couple was sent to prison.

“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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  • Court will hear case of mariner charged with Sarbanes-Oxley records-destruction violation for discarding undersized fish [Jonathan Adler, Eugene Volokh, Daniel Fisher]
  • SCOTUS goes 9-0 for wider patent fee shifting in Octane Fitness v. ICON and Highmark v. Allcare Health Management System Inc. [Ars Technica, ABA Journal, earlier]
  • Constitutional principle that Washington must not give some states preference over others could face test in New Jersey NCAA/gambling case [Ilya Shapiro, Cato]
  • Supreme Court grants certiorari in Dart Cherokee Basin Operating Co. v. Owens, a class action procedure case on CAFA removal [Donald Falk, Mayer Brown Class Defense Blog]
  • “Supreme Court’s Daimler decision makes it a good year for general jurisdiction clarity” [Mark Moller, WLF, earlier] Decision calls into question “the jurisdictional basis for this country’s litigation hellholes” [Beck]
  • How liberals learned to love restrictive standing doctrine [Eugene Kontorovich, more]
  • “California Shouldn’t Be Able to Impose Regulations on Businesses Outside of California” [Ilya Shapiro on cert petition in Rocky Mountain Farmers Union v. Corey (fuel standards)]

A court has awarded costs against a Dublin family that sued a restaurant for not warning that if they allowed their two-year-old to put her finger down the metal lid of a sugar dispenser, she might have trouble pulling it out again. The balky lid had to be cut off at a hospital. [Mirror]

The vote was 325 to 91, with Reps. John Conyers (D-Mich.) and Mel Watt (D-N.C.) leading the opposition. Timothy Lee discusses in the Washington Post. While I haven’t tried to get into the details, the general drift looks quite good to me. One major provision requires those filing suits to plead with some specificity what the infringement is; another provides for losing parties to compensate prevailing parties toward the cost of the litigation in more cases; yet another attempts to forestall expensive discovery in cases destined to fail on other grounds. Readers who recall my first book, The Litigation Explosion, will recall that I recommended procedural reform as the most promising way to address the incentives to overlitigiousness in our legal system and in particular identified lack of fee shifting, anything-goes pleadings, and wide-open discovery as among the system’s key deficits. So, yes, developments like this make me feel I was on the right track.

Equal time dept.: Richard Epstein takes a different view.

Prevailing parties in patent suits can win attorneys’ fees from losing opponents in cases deemed “exceptional.” “Under the test used to identify exceptional cases, cases must be objectively baseless and brought in bad faith.” That is already a painfully narrow exception, allowing for large volumes of poorly founded litigation, but two cases before the Supreme Court this term may provide clarity on when courts can deem cases “exceptional” and suitable for a fee shift. Broader use of fee shifts — presumably by way of deeming at least some swath of losing cases “exceptional” — would be one way of addressing the patent troll problem that would not call for new legislation. [ABA Journal, related, Corporate Counsel (arguments that judiciary can deal with trolls on its own]

In other developments, the Federal Trade Commission has voted to proceed with an inquiry into the patent troll problem [New York Times] and the Government Accountability Office has released a long-awaited report on the issue [Mike Hogan and Gregory Hillyer, Legal Intelligencer]

Patent trolls roundup

by Walter Olson on September 6, 2013

More coverage for the Frank Buckley-edited new book on overlegalization, The American Disease [Richard Reinsch/Library of Law and Liberty, Alejandro Chafuen/Forbes] Here’s Buckley in the National Post:

If litigation rates are four times smaller in Canada than the United States, this should not occasion surprise: Subsidize something and you get more of it; penalize it and you get less of it.

Differences in legal ethics matter, too. In America, more than elsewhere, lawyers are encouraged to advance their client’s interests without regard to the interests of justice in the particular case or broader social concerns. American lawyers’ professional culture is unique in permitting and implicitly encouraging them to assert novel theories of recovery, coach witnesses, and wear down their opponents through burdensome pretrial discovery.

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Medical roundup

by Walter Olson on July 25, 2013

  • Crisis of sterile injectables rages on, among victims are premature infants who need parenteral nutrition [Washingtonian ("Even if the FDA’s doing something terrible, we can’t criticize them. They regulate us.") via Tabarrok, earlier here, here, here, etc.]
  • “Tweets not medical advice” [@Caduceusblogger via @jackshafer]
  • “Why Your Dog Can Get Vaccinated Against Lyme Disease And You Can’t” [Curt Nickisch, WBUR]
  • Cites distinctive Connecticut law: “Hospital Successfully Sues its Patient’s Attorneys for Filing a Vexatious Malpractice Suit” [Alex Stein, Bill of Health]
  • Should adversarial medical examinations be videotaped? [Turkewitz]
  • “Lawyers Have Learned To Distort Pharmacovigilance Signals” [Oliver on FDA Adverse Event Reporting System (FAERS), earlier]
  • Causation from nasal decongestant at issue: “Judge orders UW to pay $15M to Snoqualmie family” [KING5]
  • “The ban on compensated transplant organ donation has led to hundreds of thousands of excess deaths. A ban on compensated sperm and egg donation would lead to a dearth of lives.” [Alex Tabarrok, related on Canada]

A lawyer who’d been widely and scathingly criticized over his handling of a case — unfairly he thought — proceeded to sue bloggers and journalists for defamation, so many that the total of defendants reached 74. It’s over now, but a New York state judge declined to award sanctions, which may possibly say something about the difficulty of obtaining sanctions under today’s prevailing legal standards, especially in New York. [Tom Crane, San Antonio Employment Law Blog; Popehat ("Our legal system is so broken that it can take years to resolve even the most patently vexatious, harassing, and incompetently prosecuted lawsuits like this one.")]

P.S. “Loser pays would have been valuable here. Costs to each defendant would teach a memorable lesson.” [@erikmagraken]

  • We’re worth it: lawyers in credit card case want judge to award them $720 million [Alison Frankel, Reuters] Johnson & Johnson will fight $181 million payday for private lawyers in Arkansas Risperdal case [Legal NewsLine]
  • British Columbia, Canada: “Lawyer Ordered To Pay Costs Personally For ‘Shoddy Piece Of Counsel Work’” [Erik Magraken] Ontario client questions lawyer’s fee [Law Times]
  • Sixth Circuit: attorneys fees statute not intended to cover dry cleaning and mini-blinds [Legal Ethics Forum]
  • Indiana lawmaker goes back to drawing board on loser-pays bill [Indiana Law Blog]
  • ‘Shocked’ by $3M legal fee in fatal car-crash case, judge tells lawyers to pay plaintiff lawyer $50K [ABA Journal]
  • Seth Katsuya Endo, “Should Evidence of Settlement Negotiations Affect Attorneys’ Fees Awards?” [SSRN via Legal Ethics Forum] /li>
  • In Israel, more of a discretionary loser-pays arrangement [Eisenberg et al, SSRN via @tedfrank]
  • British cabbie beats ticket, recovers only some of his legal costs. Still better than he’d do here, right? [Daily Mail]
  • Turnaround guru Wilbur Ross: current structure of bankruptcy fees encourages lawyer “hyperactivity” [Reuters]

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