In March a San Francisco jury returned a defense verdict in Ellen Pao’s widely publicized sex discrimination suit against Kleiner Perkins. As so often when a lawsuit story sounds over, however, that’s been just the prelude to further wrangling over a possible settlement: Kleiner says Pao has demanded $2.7 million in exchange for not pursuing an appeal, while Kleiner, citing a spurned pre-trial offer that it says triggers the operation of California’s offer-of-settlement law, has asked a court to order Pao to pay nearly $1 million in expert witness fees and other costs. Davey Alba at Wired reports and quotes me on several aspects.
- All aboard! “Louisiana AG hires nine private law firms, 17 attorneys for federal antitrust pharmaceutical lawsuit” [Legal NewsLine]
- National Association of Insurance Commissioners has, and exploits, legally privileged status as collector of insurance data. Time for open access [Ray Lehmann]
- Europe’s antitrust charges against Google remind us of “the poverty of the standard antitrust doctrine” [Pierre Lemieux]
- Court blasts Morrison Foerster for ‘nonsensical’ legal theories and ‘carnival fun house’ arguments [ABA Journal]
- “Trolls aren’t the primary problem with the patent system. They’re just the problem Congress is willing to fix.” [Timothy Lee, Vox] What makes you think lawyers and rent-seekers aren’t going to turn “patent reform” to their own purposes? [Mark Mills]
- “It only goes that one direction, too.” Rachel Maddow recognizes the fairness problem with one-way fee shifting, this one time [Huffington Post on pro-defendant Colorado firearms law]
- CPSC still going after Zen Magnets, which isn’t backing down [Nancy Nord, earlier]
- Critics say by naming payment processors in massive enforcement action over debt collection practices, CFPB is implementing its own version of Operation Choke Point [Kent Hoover/Business Journals; Barbara Mishkin, Ballard Spahr; Iain Murray, CEI]
- Green sprout in Amish country: “Bank of Bird-in-Hand is the only new bank to open in the U.S. since 2010, when the Dodd-Frank law was passed” [WSJ via Tyler Cowen; Kevin Funnell on smothering of new (de novo) bank formation; Ira Stoll (auto-plays ad) on growth of non-bank lenders]
- “Quicken Loans Sues DOJ; Claims ‘Political Agenda’ Driving Pressure to Settle” [W$J; J.C. Reindl, Detroit Free Press]
- Shocker: after years of Sen. Warren’s tongue-lashings, some banks consider not giving to Democrats. Is that even legal? [Reuters] “Elizabeth Warren’s Extraordinarily Bad Idea For A Financial Transactions Tax” [Tim Worstall]
- Still raging on: Delaware debate about fee-shifting corporate bylaws as deterrent to low-value shareholder litigation [Prof. Bainbridge first, second, third posts]
- “How a Business Owner Becomes Criminally Liable for How Customers Spend ATM Withdrawals” [Elizabeth Nolan Brown, Reason]
- New York financial regulator pushes to install government monitors at firms where no misconduct has been legally established [Robert Anello, Forbes]
We posted earlier about a court’s dismissal after five years of the suit by Santa Fe, N.M. resident Arthur Firstenberg against neighbor Raphaela Monribot, over his claims that her electronic devices were exacerbating his condition of “electromagnetic hypersensitivity.” Don’t miss George Johnson’s excellent New York Times write-up, which fills in many more details:
…I assumed the case would be quickly dismissed. Instead, in 2010, it entered the maze of hamster tubes that make up the judicial system.
…About a week ago, after the Court of Appeals upheld the decision, I stopped by the office of Ms. Monribot’s lawyer, Christopher Graeser, with a tape measure. The files for the case sat in boxes on a table. Piled together, the pages would reach more than six feet high.
Court costs, not counting lawyers’ fees, had come to almost $85,000, or more than $1,000 an inch. Because of what the court described as Mr. Firstenberg’s “inability to pay,” the bill went instead to Ms. Monribot’s landlord’s insurance company — as if someone had slipped on an icy sidewalk, or pretended to.
Mr. Graeser and another lawyer, Joseph Romero, represented her pro bono, writing off an estimated $200,000 in legal fees.
A San Francisco jury has found no improper gender discrimination or retaliation by Kleiner Perkins and returned a defense verdict in Ellen Pao’s high-profile lawsuit [Mashable, Roger Parloff/Fortune (noting judge’s evidentiary rulings favorable to Pao)] Pao’s “lawyers also missed out on a payday that could have reached into the millions of dollars.” In particular, “had Pao won on any of her claims, under California law her legal team, led by longtime San Francisco employment lawyers Alan Exelrod and Therese Lawless, could have sought all its fees from Kleiner.” [Reuters] One-way fee-shifting rules like those in discrimination law, especially with the further “win on any claim, collect all legal fees including those spent pursuing losing claims” refinement, diverge sharply from the principles of two-way loser pays followed in other advanced nations, but have the result (and the intent) of strongly incentivizing speculative litigation. The only real way to go further would be to order defendants to pay both sides’ fees even when the defendants win outright, as Kleiner did; but as of yet even California law does not go that far.
P.S. Apparently even a lost case counts as valuable promotion for the California plaintiff’s employment bar [Margaret Cronin Fisk, Bloomberg, auto-plays]
HB 274’s motion-to-dismiss/fee-shifting provision is getting more use than some foresaw at the time [Angela Morris, Texas Lawyer, quoting Austin attorney David Chamberlain]
Six months ago the Delaware Supreme Court upheld the right of an enterprise to include a loser-pays provision in its bylaws, specifying that losing shareholder-litigants would have to contribute reasonable legal fees to compensate what would otherwise be loss to other owners. Since then there’s been a concerted campaign to overturn the ruling, either in the Delaware legislature or if necessary elsewhere. But as I argue in a new Cato post, allowing scope for freedom of contract of this sort is one of the best and most promising ways to avert an ever-rising toll of litigation. Contractually specified alternatives to courtroom wrangling have played a vital role, and are under attack for that very reason, in curbing litigation areas like workplace and consumer arbitration, shrinkwrap and click-through disclaimers of liability, and risk disclaimers at ballparks and elsewhere. (& Stephen Bainbridge).
To the extent America has made progress in recent years in rolling back the extreme litigiousness of earlier years, one main reason has been the courts’ increased willingness to respect the libertarian and classical liberal principle of freedom of contract. Most legal disputes arise between parties with prior dealings, and if they have been left free in those dealings to specify who bears the risks when things go wrong, the result will often be to cut off the need for expensive and open-ended litigation afterward.
More on the Delaware bylaw controversy: D & O Diary (scroll), Andrew Trask on state of the merger class action, WSJ Law Blog first and second, Daniel Fisher, and ABA Journal in June, Alison Frankel/Reuters (forum selection bylaws).
“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]
- 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]
- 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]