Posts tagged as:

tobacco settlement

Microblog 2008-11-16

by Walter Olson on November 16, 2008

Microblog 2008-10-28

by Walter Olson on October 28, 2008

  • ’98 master tobacco settlement: not just bootleggers and Baptists, but also “televangelists.” [Morriss, Regulation, h/t Ted] #
  • Slants and biases in Associated Press reporting aren’t new, but they’ve become impossible to ignore [WaPo] #
  • Unplanned result of bailout: lenders back off from deals to sell distressed real estate at cut price [Coyote] #
  • GM needs to tear up contracts with its unions, retirees, and dealers, which means it needs bankruptcy [Bainbridge] #
  • No kidding: gorgeous photography of slime molds [English Russia] #
  • Blog primer on credit default swaps and other financial derivatives [Derivative Dribble] #
  • Wouldn’t it be more helpful to save the epithet “socialist” for times when it’s really, you know, accurate? [Ron Coleman] #
  • State of New York staring into fiscal chasm, years of $10 billion+ deficits [NYPost] #

Asbestos litigation has been around a long time. Early on, nothing like modern product liability law existed (see Richard Epstein’s discussion here); lawsuits resided in workplace injury law when filed in the 1920s and 30s, and were soon subsumed in workers compensation reforms.

Modern asbestos litigation began after the Selikoff study was published in 1964. In December 1965, Texas attorney Ward Stephenson filed a case on behalf of Claude Tomplait, who had worked as an asbestos insulator. Four years later, Stephenson extracted a settlement for $75,000 from seven defendants.

Notwithstanding this meager beginning, Stephenson persisted in asbestos litigation and won a major victory in Borel v. Fibreboard Paper Products Corp., 493 F.2d 1076 (1973), in which the Fifth Circuit Court of Appeals found asbestos manufacturers strictly liable for their workers’ injuries. The Borel court rejected statute of limitations, contributory negligence, and assumption of risk defenses; and modern asbestos product liability litigation was born.

The litigation got another shot in the arm when New Jersey attorney Karl Asch uncovered the “Sumner-Simpson papers,” which “described in great detail the efforts of Raybestos, Johns-Manville, and other manufacturers to find out about the hazards of asbestos, develop strategies to deal with them, and–most important–to keep that knowledge from the public and workers.” These documents were put to great effect by South Carolina lawyer Ron Motley, who actually used the papers to convince a South Carolina circuit judge to grant a new trial after a jury had ruled in favor of asbestos defendants. Motley of course went on to become an asbestos super-lawyer and an architect of the multibillion-dollar multistate tobacco settlement; his antics are well-known to long-time readers of this site.

Two more foundational cases are worthy of mention. In 1981, the D.C. Circuit ruled that insurers who had written asbestos policies were liable for the maximum insured between exposure and diagnosis, rather than only in the year of diagnosis. See Keene Corp. v Insurance Co. of North America, 667 F.2d 1034 (D.C. Cir. 1981). Given the long latency between asbestos exposure and ultimate illness, the level of insurance exposure was suddenly massive. Circuit Judge Patricia Wald warned that the court’s decision “requires a leap of logic from existing precedent, for it concerns diseases about which there is no medical certainty as to precisely how or when they occur.”

In 1982, the New Jersey Supreme Court threw out the “state of the art” defense for asbestos manufacturers, in essence holding that it mattered not whether business practice was the best available to the industry at the time the injury occurred. See Beshada v. Johns-Manville Products Corp., 442 A.2d 539 (N.J. 1982). The court opined, “The burden of illness from dangerous products such as asbestos should be placed upon those who profit from its production and, more generally, upon society at large which reaps the benefits of the various products our economy manufactures. ”

Thus, in less than a decade, the law was radically shifted, and asbestos litigation was born: “The decade after Borel saw 25,000 asbestos cases filed. By 1981, more than 200 companies and insurers had been sued; by 1982, defendants’ costs had topped $1 billion.” But these early years were just the beginning…

Big news day in the Scruggs scandals: a judge has turned down defense motions to throw out the charges and to suppress the evidence, a hearing on those motions has showcased the testimony of government informant Tim Balducci, and the government in responding to the motions has released extensive and often quite damning transcripts of the wiretap conversations among the principals. Folo as usual provides the most in-depth coverage, with posts on the judge’s rulings here and here, on the hearing and Balducci’s testimony here and in numerous preceding posts, and on the wiretap transcripts here and in numerous preceding posts. David Rossmiller is on the judge’s ruling here, and on the hearing and transcripts here. More: Patsy Brumfield, NEMDJ, was at the courthouse.

Picking through the rich contents of the transcripts and Balducci’s testimony is going to keep Scruggsians busy for a good long time. In the meanwhile, some odds and ends:

* Want to review all the major events of the central alleged bribery case, skillfully narrated in chronological sequence? Of course you do. Folo’s NMC has it in six parts beginning here and ending here (follow links to find those in between).

* John Grisham’s “Too Dumb for Dickie” theory encounters some serious strain [Rossmiller and again]

* Mississippi legislature won’t give AG Jim Hood authority to wiretap his enemies suspected white-collar criminals. Gee, wonder why that might be? [WLBT via Lange] Plus: description of Hood as a Pez dispenser coughing out multi-million-dollar cases for his chums [Rossmiller]

* More unpretty details surface on Scruggs’s (and other lawyers) use of informants in Katrina litigation [Rossmiller] and tobacco [Lange]

* More Hood: prosecuting the accused judge-bribers “would be like prosecuting a relative” [Salter, Clarion-Ledger, Rossmiller, Folo]. Give back tainted money? “That’s up to DAGA [Democratic Attorneys General Association]” [Lange]

* Former Louisiana attorney general Richard Ieyoub gets a mention, as does Sen. Trent Lott [Folo, same] Update: feds investigating what Sen. Lott knew [WSJ]

* Small world, Mississippi: member of arbitration panel that awarded Scruggs huge fees was later hired by the tort potentate for legal work [Lange]

* Blogosphere has been a major source for breaking news on the scandal [LegalNewsLine]

* Liberal columnist Bill Minor recalls when a certain Sen. McCain let Dickie Scruggs and Mike Moore run their tobacco lobbying campaign out of his Hill office [NEMDJ via Folo; more at PBS "Frontline" and NY Times]

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It will evidently involve trying to get wiretap recordings excluded and seizing on a few of the (many, wandering and seemingly inconsistent) things that informant Tim Balducci said in conversation with Judge Lackey, some of which can be read as portraying Scruggs as out of the bribery loop — though such remarks can be read as simply reflecting the wish of a then conspirator to protect Mr. Scruggs’ plausible deniability, and although other remarks of Balducci’s point in the opposite direction. Coverage: Michael Kunzelman, AP/Biloxi Sun-Herald, Jan. 16; Anita Lee, “Attorney says Scruggs had no knowledge of Balducci’s attempted bribe; trial delayed”, Biloxi Sun-Herald, Jan. 16; Rossmiller, Jan. 16; Folo multiple guest posts). Update: David Rossmiller now has a more substantial post up analyzing the defense (Jan. 17).

The prosecution, for its part, on Tuesday unsealed some explosive new contentions in the case, alleging that mystery figure P.L. Blake, whose role in the disposition of tobacco settlement money has already been the subject of much discussion, was also a behind-the-scenes player in the attempted Lackey bribe. “In a Sept. 28 telephone call secretly tape-recorded by the government, [Steven] Patterson told Balducci his wife had just gotten off the phone with Blake, who had met with Scruggs, [Assistant U.S. Attorney Bob] Norman said.” (Jerry Mitchell, Jackson Clarion-Ledger, Jan. 16).

Yesterday’s guilty plea by Booneville, Miss. attorney Joseph (“Joey”) Langston in the attempted improper influencing of a Mississippi state judge would be major news even if it had nothing to do with the state’s most famous attorney, Richard (“Dickie”) Scruggs. That’s because Langston and his Langston Law Firm have themselves for years been important players on the national mass tort scene. The firm’s own website, along with search engines, can furnish some details:

  • Per the firm’s website, it has represented thousands of persons claiming injury from pharmaceuticals, including fen-phen (Pondimin/Redux), Baycol, Rezulin, Lotronex, Propulsid and Vioxx. It was heavily involved in the actions against Bausch & Lomb over ReNu contact lens solution (and its former #2 Timothy Balducci, the first to plead in the widening round of corruption scandals, won appointment to the steering committee of that litigation.)
  • The Langston firm has represented thousands of asbestos claimants and says it has “significant” experience in the emerging field of manganese welding-rod litigation, also a specialty of the Scruggs law firm. The website AsbestosCrisis.com includes the Langston law firm in its listing of about thirty law firms deemed notable players on the plaintiff’s side of asbestos litigation (“Tiny firm founded by Joe Ray Langston powerhouse in Mississippi with 50-year roots in state political circles.”)
  • Langston appeared to play a sensitive insider role for Scruggs in the largest and most lucrative legal settlement in history, the tobacco-Medicaid deal between state attorneys general and cigarette companies, the ethical squalor of which was a central topic of my 2003 book The Rule of Lawyers; as mentioned previously, when Dickie Scruggs routed mysterious and extremely large tobacco payments to P.L. Blake, he used attorney Langston as intermediary.
  • Langston has repeatedly taken a high profile in the same fields of litigation as has Scruggs, including not only suits over asbestos, tobacco and welding rods but also two of Scruggs’s “signature” campaigns, those against HMOs/managed care companies and not-for-profit hospitals.
  • Though the firm is better known for its plaintiff’s-side work, the Langston firm’s “national practice” page asserts: “The Langston Law Firm virtually defined the role of ‘Resolution Counsel’ in the modern era of jurisprudence. Prominent domestic and foreign companies facing massive litigation have turned to The Langston Law Firm to create winning strategies to save their companies.”

Many commenters (as at David Rossmiller’s) have noted that Langston appears to have drawn an unusually favorable plea deal from federal investigators, who are granting him remarkably broad immunity as to uncharged offenses, and not even stipulating that he give up all ill-gotten funds. Presumably this signals that they expect Langston’s cooperation to be unusually extensive and valuable. One hopes that this cooperation will include the full and frank disclosure of any earlier corruption and misconduct there may have been in all the past litigation in which Langston has been involved. In particular, tobacco, asbestos, and pharmaceutical litigation have all raised suspicions in the past because of instances in which forum-shopping lawyers took lawsuits of national significance to relatively obscure local courts — quite often in Mississippi — and proceeded to get unusually favorable results which paved the way for the changing hands of very large sums in settlement nationally. Were all these results achieved honestly?

Incidentally, and because it may confuse those researching the matter on the web, it should be noted that there is a second prominent Mississippi plaintiff’s lawyer who bears the same surname but has not been involved in the recent Scruggs scandals, that being Joey’s brother Shane Langston, formerly of Jackson-based Langston, Sweet & Freese. Shane Langston, whose name turned up often in connection with the “hot spots” of pharmaceutical litigation of Southwest Mississippi, has more recently been in the news over client complaints regarding alleged mishandling of expenses related to the Kentucky fen-phen litigation scandals. [Family relationship between the two confirmed 1/16 on the strength of emails from several readers.] (& welcome WSJ Law Blog readers)

[First of a two-part post. The second part is here.]

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Scruggs indictment XI

by Walter Olson on December 17, 2007

Two noteworthy stories in the Mississippi press: Anita Lee of the Biloxi Sun-Herald takes a look at “Dickie Scruggs’ $50 million man: What did P.L. Blake do to earn all that money?” (Dec. 16; some earlier Blake discussion).

Blake will earn $50 million, court records show, for clipping newspaper articles and alerting Scruggs to maneuvering in political “cloakrooms,” as Scruggs put it, from Mississippi to Washington. …

Accounts of how Blake earned the money are vague and contradictory.

Even more surprising, Blake and Scruggs were unable to say whether they sealed their business agreement with a handshake or in writing.

A few points brought out in the article: “Scruggs said Tom Anderson, who then worked in Lott’s office, referred Blake to Scruggs.” Attorney General Mike Moore, nominally Scruggs’s public client after hiring him to advance the state’s interests in the tobacco litigation, was aware that Blake was being paid, though he professes surprise at how much. And Scruggs routed the $10 million in initial tobacco payments to Blake through attorney Joey Langston as intermediary. (more discussion)

The assignment of steady continuing payments to Blake over the life of the tobacco settlement distinctly resembles a gesture toward diverting a share of the tobacco proceeds (a contingency share, as it were) to reward and incentivize Blake, or perhaps Blake-and-others-too, to work for the success of the deal. [corrected 12:24 on proofreading after posting; I mistakenly used a wrong surname in place of "Blake" here and below.]

If reporters or others at some point succeed in reaching and questioning Blake, who is said to have moved to Alabama, presumably one of the questions worth asking him will be: is he really the final recipient and ultimate beneficiary of all that impressive cash flow — declaring it on his income tax, having all the funds available for his personal use, and so forth — or does he pass/has he passed some of the money along to anyone else? If he keeps it all, it’s no wonder the questions will keep re-echoing about whether his services could really have been worth that much. If it turns out he is passing/has passed some of it along to another actor or actors, why would things have been arranged that way? One possibility — though not the only one, of course — is that such further beneficiary or beneficiaries might not wish to be known publicly as holding a share in the payouts of the great tobacco project. (Update: a Monday article by Anita Lee in the Sun-Herald (“Blake’s information ‘right-on’”, Dec. 17) quotes Moore saying that Blake seemed to have accurate intelligence in what was going on in tobacco-industry and Republican circles.)

The other noteworthy story is by Jerry Mitchell in the Jackson Clarion-Ledger (“Feds probe Hinds case under scrutiny”, Dec. 16). It confirms that one of the “bodies buried” that Balducci told federal agents about relates to the Luckey/Wilson asbestos fee matter, which was eventually split into two legal proceedings, both hard-fought, with Luckey faring better than Wilson in the legal battle against Scruggs. In addition, the search warrant for the Langston law firm sought documents relating to the Wilson case “as well as documents regarding payments to Jackson lawyer Ed Peters, who played no known role in the case. In 2001, Peters retired as Hinds County district attorney.”

An active comment thread at Lotus/folo includes additional information about Peters, among other topics, and also passes along details about some of non-wannabe Timothy Balducci’s past involvements in high-stakes litigation, from his own promotional material. A sampling:

In 2006, Tim was Lead Counsel in Mississippi’s successful prosecution of securities fraud claims against Citigroup in Federal District Court in New York. His success in representing the state in so many complex litigations was a major factor which contributed to his selection by the Commonwealth of Kentucky to prosecute an action on its behalf to recover over $1 Billion dollars in government funds from a major chemical manufacturer. Also, the United States District Court in Charleston, South Carolina, selected Tim to serve on the National Leadership Committee for the ReNu contact lens solution litigation against Bausch & Lomb.

Notes a commenter: “it’s amazing how much lawyering these tiny law firms seem to get done. It’s just as amazing that he gets it done with *no reported decisions.* Pretty strange.”

Alan Lange at Y’All Politics is back with a synopsis of Scruggs’s current troubles, and as always don’t miss the David Rossmiller updates (Dec. 15 and Dec. 16).

Scruggs indictment IX

by Walter Olson on December 12, 2007

Yes, it seems there were wiretaps. Defendants will be seeing evidence from the prosecution momentarily which might (or might not) be the trigger for further flipping and early plea deals, if such there will be.

There is enormous curiosity (e.g.) about P.L. Blake, to whom Scruggs says he paid $10 million (and tens of millions more in future payments) for vaguely described intelligence services aimed at swaying political influentials during the tobacco caper. Per a 1997 account posted at Y’All Politics, “Blake pleaded ‘no contest’ in 1988 to a federal charge that he conspired to bribe officials of the now-defunct Mississippi Bank to secure favorable loan terms.” The same article, citing reporting in the Jackson Clarion-Ledger, reports that Blake was in close phone contact between 1994 and 1996 with eventually-disgraced state Auditor Steve Patterson, who after leaving office went into partnership with Timothy Balducci and is one of the five indicted in the current Scruggs affair. Per AP, “Patterson was a banker at Mississippi Bank before his 1984-1987 tenure as head of the Mississippi Democratic Party.”

David Rossmiller, as so often, is out front with a report filling in background on two other controversies involving Blake. One arose from a venture into the grain storage business which landed him in a Texas dispute in which his attorney was none other than Fred Thompson, later a Tennessee senator and presidential candidate. The other arose from his cordial dealings with a former chief of staff to Sen. Trent Lott (R-Mississippi).

Harper’s blogger Scott Horton has now published his take, as is his wont heavily dependent on hush-hush (but no doubt wholly trustworthy) confidential sources who float all sorts of theories about scoundrelly doings by the highly placed. He winds up with a theory that would pull Sen. Lott into it (though with no allegation of criminality) by way of the Acker contempt matter, as distinct from either the Balducci/Lackey bribery attempt or, say, the Paul Minor affair. Of Horton’s many anonymously sourced speculations, the one that caught my eye was tucked into a footnote: “A law enforcement official I interviewed, who for professional reasons asked to remain anonymous, told me that Scruggs’s junior partner Sidney Backstrom might take the same road as Balducci.” Now that is news a rumor (more). (Update Tues. evening: Backstrom’s attorney Frank Trapp flatly denies that anything of the sort is in the works: Patsy R. Brumfield, “Backstrom firm on innocence, his attorney says”, Northeast Mississippi Daily Journal, Dec. 12.)

This is probably a good place to apprise readers who aren’t aware of it that 25-odd years ago, while first gaining a footing in the policy world, I worked briefly on Capitol Hill drafting research papers for a committee then headed by Mr. Lott. We only talked a couple of times, I had never set foot in the state of Mississippi at the time, and I’m pretty sure he wouldn’t recognize me on the street, but if you’re a conspiracy theorist about such matters, there you have it.

At Y’All Politics, commenter “lawdoctor1960″ has some speculation as to why the remarkable deposition of Scruggs in the Luckey case didn’t get more media or political attention at the time.

Welcome Andrew Sullivan, David Rossmiller, Y’All Politics readers.

Attorney Tim Balducci’s role as deputized lawyer for the state of Mississippi in the MCI and Zyprexa cases is drawing public scrutiny, and may result in pressure for reform of AG outside contracting.

We’ve started a new “Scandals” category for readers who want quick access to coverage of the Mississippi mess, also stocked with some earlier links to coverage of such earlier blow-ups as Milberg Weiss/Lerach, Kentucky fen-phen, the Paul Minor affair, etc. For those who are following Scruggs posts in sequence, be aware that yesterday’s first and second posts fell outside the numbering scheme.

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Once among the South’s most financially successful and politically influential plaintiff’s lawyers, attorney Paul Minor was sentenced on Friday to 11 years in federal prison following his conviction in a judicial bribery scandal we’ve covered extensively at this site. Two former judges convicted in the case, John Whitfield and Wes Teel, drew sentences of 110 months and 70 months respectively. Minor’s lawyers had asked that he be sentenced to time served, and supporters had sent letters by the sackful asking for leniency. (“Gulf Coast lawyer Paul Minor gets 11 years in prison for bribing Miss. judges”, AP/Natchez Democrat, Sept. 7; Jimmie Gates, “Minor, ex-judges sentenced in bribery case”, Jackson Clarion Ledger, Sept. 7).

Judge Henry Wingate also fined Minor $2.75 million and ordered him to pay $1.5 million in restitution, not quite as telling a blow to his fortunes as one might assume, given that “Minor earns up to $2.5 million a year from a settlement with tobacco companies,” not to mention all the other money he’s made (Robin Fitzgerald, “‘Lady Justice Is Sobbing”, Biloxi Sun-Herald, Sept. 8). Minor is also being sued by insurer USF&G, which paid out a $1.5 million settlement to a bank represented by Minor in a case before Judge Teel. (Julie Goodman, “Minor’s legal woes won’t end when he goes to prison”, Jackson Clarion Ledger, Sept. 8).

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August 22 roundup

by Walter Olson on August 22, 2007

  • Criminal charges dropped against Oregon 13-year-olds over fanny-swatting in school corridors [CBSNews.com, Malkin, KGW.com and AP; earlier]

  • Elasticity of “medical error” concept: Medicare will stop paying hospitals for treatment of “reasonably preventable” injuries that happen in hospitals, such as patient falls — we all know those are preventable given enough duct tape [NCPA, Right Side of the Rainbow; and before assuming that bed sores invariably result from negligent care, read this](more: Turkewitz)

  • Yale University Press beats back libel suit in California court by Muslim charity over allegations in book scrutinizing terrorist group Hamas [Zincavage]

  • Law firms, including Philadelphia’s senatorially connected Kline & Specter, already advertising for clients following Mattel toy recall [Childs]

  • First class action against RIAA over its scattershot anticopying suit campaign [P2PNet]

  • Four Oklahoma inmates claim copyright to their own names, demand millions from warden for using those names without permission, then things really start getting wild [UK Telegraph and TechDirt via Coleman]

  • UCLA’s Lynn LoPucki, scourge of corporate bankruptcy bar, has another study out documenting soaring fees [WSJ Law Blog]

  • Man who knifed school headmaster to death is expected to win right to remain in Britain on grounds deporting him would violate his human rights [Telegraph]

  • Among targets of zero tolerance bans: jingle of ice cream trucks in NYC, screaming on Sacramento rollercoasters [ABCNews.com]

  • Does California antidiscrimination law require doctors to provide artificial insemination to lesbian client against religious scruples? [The Recorder]

  • Alabama tobacco farmers got $500,000 from national tobacco settlement, though fewer than 300 acres of tobacco are grown in Alabama [five years ago on Overlawyered]

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July 6 roundup

by Walter Olson on July 6, 2007

  • How to handle illegal alien’s slip-fall suit against supermarket? With some delicacy: jury told only that plaintiff “couldn’t legally work in this country” [Oroville, Calif., Mercury-Register]

  • Sorry, docs: “I hate doctors” beats out “I hate lawyers” as a Google search result [Bioethics Discussion Blog via KevinMD]

  • Virginia adopts harrowingly punitive schedule of traffic fines. Its sponsor: lawmaker whose day job is defending motorists [Washington Post; NRO "The Corner"; Ribstein; our earlier report]

  • A businessman in London is suing Google for “publishing” (by indexing) allegedly defamatory material, and, boy, will the Internet ever be a different place if he wins [Independent (U.K.), Volokh]

  • Federal indictment charges Houston injury lawyer secretly paid $3 million to two Hartford Insurance claims adjusters in connection with $34 million in silicosis settlements [PoL]

  • Mississippi high court rules invalid former AG Mike Moore’s slush-fund diversion of $20 million/year in tobacco settlement money to evade legislative oversight [Sun-Herald, Bader; also this PoL roundup]

  • More RIAA-suit horrors, this time from Washington state [Seattle P-I] Prospects for a counterattack? [Pasquale, Concurring Opinions]

  • California Assembly votes to require pet owners to sterilize mixed-breed dogs and cats, while UK animal rights authority mulls rights for invertebrates [Mangu-Ward and Bailey, Reason]

  • Here come the tainted-Chinese-export suits, with many American defendants on the hook [Parloff, Fortune] Plus: car with the “E COLI” license plate may be driving lawyer to work [WSJ Law Blog]

  • Gimme those antiquities: Peru vs. Yale on Machu Picchu relics [Zincavage]

  • Dick Schaap med-mal case evokes shifting theories from celebrated lawyer Tom Moore [two years ago at Overlawyered]

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The piece’s subtitle: “How greed, hubris and high-stakes lobbying laid waste to the $246 billion tobacco settlement”. Without necessarily endorsing every point in the piece — this is the ABA Journal, after all — it’s still striking how what was once a lonely critique of the settlement has now been accepted as history’s verdict:

The only big winners in the litigation appear to be the tobacco companies, the state treasurers and the lawyers who represented both sides….

…$15 billion has been awarded to the private lawyers hired by the state attorneys general. That’s the largest attorney fee award in history. More than $100 million — Big Tobacco won’t say precisely how much — has been paid to the lawyers defending the companies.

“The tobacco litigation was a failure of historic proportions,” says Linda Eads, a law professor at Southern Methodist University’s Dedman School of Law in Dallas. “A complete and utter failure in every sense.”

(Mark Curriden, “Up in Smoke”, ABA Journal, March).

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One of the tricks states have used in recent years to raise money without raising taxes is to sue companies for the products they manufacture, on the legal theory that the use of those products lead to increased state health care spending. (The most prominent example, obviously, is the tobacco Master Settlement Agreement.) Not surprisingly, it often turns out that this legal theory is more of a pretext by state attorney generals to get their names in the paper than it is to actually remedy the alleged harms caused by the companies.

In 2004, West Virginia settled with Purdue Pharma, the manufacturer of Oxycontin, over the increased Medicaid costs allegedly caused by addiction to the drug. The settlement was worth $10 million. Logically, then, that $10 million should have gone to the state’s Department of Health and Human Resources to defray Medicaid costs. But there was a problem. Two problems, actually. The first was that giving the money to the DHHR wouldn’t allow Darrell McGraw, the state Attorney General, to dole out money as he saw fit. The second was that the state shares its Medicaid expenses with the federal government, so giving money to the DHHR would enable the federal government to recover part of the settlement.

The first issue has caused political controversy in West Virginia, because McGraw has given out the settlement proceeds to pretty much everybody except the underfunded DHHR, including private law firms that he hired to work on the case. But even the money that the state actually kept was handed out by McGraw based on his personal whims ($500,000 to establish a state pharmacy school (!) at the University of Charleston) rather than by the state legislature, which is constitutionally tasked with making spending decisions about state money.

But the second issue may be causing legal controversy. Legalnewsline reports that the federal government is now investigating the state’s handling of the funds, trying to find out why it hasn’t been credited for its share of the Medicaid funds. But it’s not as if it’s a secret; the deputy attorney general recently testified as to their thinking:

“We have arranged a methodology that has prevented the federal government from coming back and seizing money,” Hughes said.

Or maybe not. If you’re going to try to cheat the federal government, you should probably be a little more subtle about it. No formal charges have been filed, to be sure, and the federal government may simply resolve the problem by withholding future federal payments to the state. But that certainly won’t fix the problem caused by McGraw’s behavior; it will leave a large hole in the state’s budget which could make them worse off than if he hadn’t sued Purdue in the first place.

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December 8 roundup

by Ted Frank on December 8, 2006

  • Can reformers declare victory? [Point of Law; American Lawyer]
  • Mississippi Supreme Court reaffirms: no litigation tourism for asbestos plaintiffs. [AP/Commercial Dispatch (h/t SB); Coleman v. A-Bex; Albert v. Allied Glove]
  • More asbestos frauds in the Wall Street Journal. [Point of Law]
  • LA judge will decide whether to censor Borat DVD. Earlier: Nov. 9. [Reuters]
  • Guacamole dip fallout: “Is the goal here to get guac with more avocados or to create more work for the abogados?” Earlier: Dec. 6. [LA Times via Bashman]
  • Quelle surprise: the tobacco settlement money is being treated by Missouri like general revenue, i.e., a tax. [Mass Tort Litigation Blog]
  • Quelle surprise: Stephanie Mencimer caught exaggerating case for plaintiffs’ lawyers. [Point of Law]
  • Epstein: What’s good for pharma is good for America. [Boston Globe]
  • Heather Mac Donald: No, the cops didn’t murder Sean Bell. [City Journal]
  • Well, suing several major Ontario Jewish organizations and releasing a press release that they’re all part of the Israel lobby is one way to convince people that you’re not a bigot, right? [Bernstein @ Volokh]
  • The case against (and for) Jeff Skilling helps explain why CEOs are paid so much. [Point of Law; Kirkendall]
  • Lame-duck Republican Congress wasting final hours with committee hearing on contract dispute, but one of the parties is famous, so it’s okay, right? [Kirkendall]
  • Environmental group on the web speaks out against Dihydrogen Monoxide. [DHMO.org]
  • The problem of Institutional Review Boards. [Carpenter @ Volokh; Point of Law]
  • Will Danny DeVito play Gretchen Morgenson in the movie? NY Times and Sen. Grassley get snookered by unsuccessful trial lawyer. [Ideoblog; WSJ]
  • New York Times web commenters are unimpressed with the fact that Nintendo needs to warn Wii users not to throw their remote. [The Lede]
  • “The conventional wisdom is that we would be better off if politically powerful leaders were less mediocre. Instead, my view is that we would be better off if mediocre political leaders were less powerful.” [Kling @ TCS Daily via Kirkendall]
  • “If Democrats allow lower prices here, they may even have to tolerate Wal-Mart.” [WSJ letter @ Cafe Hayek]
  • Lindsay Lohan wants to enlist Al Gore in a lawsuit against her former assistant. [Defamer; Access Hollywood]
  • Hey, we’ve slightly tweaked our right-hand sidebar. What do you think?

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Per Jacob Sullum (Nov. 14),

Yesterday a federal judge in Louisiana rejected a motion to dismiss [the Competitive Enterprise Institute's] lawsuit challenging the Master Settlement Agreement that established a government-backed cigarette cartel for the benefit of state treasuries, trial lawyers, and the leading tobacco companies. The judge’s order is here [PDF]. CEI’s complaint and various other documents related to the case are here.

(see Aug. 4, 2005).

Also, Stanford economist Jeremy Bulow has published another in his series of always-excellent papers on the great tobacco robbery. As the Milken Institute’s Oct. 20 press release puts it, Bulow argues that

the public was conned: the tobacco companies passed on more than 100 percent of the cost to smokers, many states were locked into terrible financial settlements and billions in fees were set aside for trial lawyers.

“Few people trust tobacco companies, trial lawyers or politicians,” he writes. “But somehow when the three groups got together and spoke with one voice they were able to convince most people – particularly nonsmokers who benefit from higher cigarette tax revenue – that the settlement had achieved a noble public health goal. In reality, the settlement preserved tobacco companies’ profits, while it gave the trial lawyers an incredibly large ongoing source of income gouged from the hides of smokers, and handed state politicians bragging rights as Davids to Big Tobacco’s Goliath.”

(“The tobacco settlement: when trial lawyers meet tobacco execs”, Milken Institute Review, December)(reg). For more from Bulow, see PoL, Nov. 18, 2005, and Jan. 20 and May 18, 2006.

The 1998 multistate tobacco settlements were a central theme of my 2003 book The Rule of Lawyers and have been covered in depth on this site, including Aug. 4, 2005 and links from there, Sept. 11, 2005, and Jan. 3, 2006, as well as at Point of Law: May 17, Jul. 20 and Jul. 26, 2004, Oct. 6 and Oct. 14, 2005 and Mar. 20, Mar. 29 and Apr. 12, 2006.

September 11 litigation as an industry, courtesy of the asbestos/tobacco zillionaires from South Carolina:

While other lawyers have resolved most or all of their cases — at least 32 of the roughly 90 total lawsuits have settled — Motley Rice has settled only three. …According to several lawyers and plaintiffs in the case, Motley Rice has made unusually high settlement demands, often 5 to 10 times higher than similar plane crash cases. The higher demands stem from Motley’s calculations for what it calls “terror damages” — compensation for the amount of time frightened victims knew they were fated to die — of between $750,000 and $1 million a minute, according to those lawyers and clients, who requested that their names not be used because the settlement process is confidential.

The story deserves a place in the “Not About The Money” files because client after client informs the Boston Globe that their litigation stance is entirely unrelated to that disdained cash nexus; presumably it’s just happenstance that they have wound up represented by lawyers who are making monetary recovery a very high priority indeed. Somehow one is reminded of the character in Flannery O’Connor: “Mrs. Hopewell had no bad qualities of her own but she was able to use other people’s in such a constructive way that she never felt the lack.” (via Lattman)(cross-posted from Point of Law).

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Joining us this week as a guestblogger is Hans Bader, Counsel for Special Projects at the Competitive Enterprise Institute in Washington. Hans is a frequent visitor to our comments section; his current projects for CEI include constitutional challenges to the 1998 tobacco Master Settlement Agreement and to the Public Company Accounting Oversight Board created by Sarbanes-Oxley. Before joining CEI he was at the Center for Individual Rights where his work included constitutional and civil rights litigation, including free speech and workplace claims.

To celebrate Beaumont tobacco/asbestos lawyer Walter Umphrey’s seventieth birthday, fellow Texas Tobacco Five member John Eddie Williams took over a private aircraft hangar — Umphrey’s own, in fact — “moved out the two private jets and the helicopter, added on a two-story party tent and threw a no-holds-barred tribute to Umphrey.” Music was provided by Chuck Berry, Jerry Lee Lewis and Rotel and the Hot Tomatoes, performing on two different stages, and there was some pretty decent food too. Among the 400 attendees: gubernatorial candidate Carole Keeton Strayhorn. (Shelby Hodge, “Wild soiree in hangar was Western to the hilt”, Houston Chronicle, May 14). Of course it was a mere kaffeeklatsch compared with a Willie Gary or Mark Lanier party.

Now back to your previously scheduled news story about excessive CEO compensation.