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trial lawyer earmarks

New at Point of Law

by Walter Olson on February 20, 2010

Things you’re missing if you aren’t checking out my other site:

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The Progressive Policy Institute (!) criticizes a provision almost snuck into the health-care bill that would have been a windfall for trial lawyers at the expense of the rest of us. Earlier and earlier on Overlawyered, which was the first to publicize the provision.

Commentary’s Jennifer Rubin notices:

A friend points out a little nugget of absurdity and political mendacity in the Pelosi health-care bill. Remember Obama’s effort to try a “test” for tort reform? (We don’t actually need a test, since it has worked to lower medical malpractice coverage and help increase access to doctors in states that have tried it.) Well, Pelosi’s bill has an anti-tort-reform measure. On pages 1431-1433 of the 1990-page spellbinder, there is a financial incentive for states to try “alternative medical liability laws.” But look — you don’t get the incentive if you have a law that would “limit attorneys’ fees or impose caps on damages.”

In other words, Congress is providing a financial incentive to uncap damages. Marvelous.

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One can certainly see why ending tax deductions for punitive damages is a superficially appealing idea.

But the main effect will be to increase settlement pressure in cases where there are unjust punitive damages awards. Because settlements can be characterized as “compensatory” and tax-deductible while court-ordered judgments cannot, trial lawyers will be able to use the tax differential to discourage defendants from seeking appellate review. So one cannot expect very much tax revenue from this: “punitive damages” will drop precipitously, but money going to trial lawyers will go up. Moreover, appellate courts will have fewer opportunities to correct bad decisions by trial courts, creating more uncertainty in litigation, which raises litigation expenses because it will be harder to predict outcomes.

Note that taxpayers are not subsidizing punitive damages award deductions by businesses: the income “lost” because a defendant deducted the punitive damages award will be income realized by the plaintiff and his or her attorney. If the deduction is forbidden, the government will be, in effect, double-taxing the same money.

The Obama administration makes much of its claim of being pragmatic, rather than ideological, but this looks like an indirect giveaway to the trial bar rather than a source of government revenue. More: Walter at Point of Law; and my shining mug quoted at the Southeast Texas Record.

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Can anyone have seriously imagined that a retired worker from Goodyear would rise to national prominence over a case she lost at the U.S. Supreme Court regarding statute of limitations? And yet, at tonight’s Democratic National Convention, Lilly Ledbetter will take center stage for a few minutes.

No doubt we’ll hear about the Paycheck Fairness Act bill because she’s not endorsing anyone for President.  “Equal Pay for Equal Work” has been one of the talking points of the week.   

There’s been lots of talk of late about the act, which arose from the Ledbetter case (though there was also a Lilly Ledbetter Fair Pay Act bill out there as well). One of the bill’s co-sponsors, Rosa DeLauro commented on it on the Huffington Post late last week and I summarized the latest debate about the bill in a post as well.  Businesses and others have been critical of the act, even though it passed the U.S. House of Representatives last month  (Heritage WebMemo, 7/30; Examiner, 8/6; OpenMarket, 8/6). 

What’s missing from the debate about the bill, unfortunately, is a discussion about what the bill is about and should be about.   It’s not really about pay equity — after all, we already have the Equal Pay Act for that. It’s really about allowing indivdiuals to recover much more in the way of damages than they could otherwise recover (though you’d be hard-pressed to make heads or tails of it from the seemingly technical language used).   And frankly, there’s nothing wrong with advancing that goal if there was a fair debate on the merits.

But unfortunately, the public debate on the bill seems to fall into the classic stereotypes that each side rolls out with a piece of new legislation.  Proponents of the bill suggest that those who are for the bill are FOR pay equity, and those opposing the bill are AGAINST pay equity, which is just hyperbole.  Opponents of the bill have used hyperbole of their own, ignoring the fact that corporations have had to comply with the Equal Pay Act for years and that many are well-suited to address such claims.    

It’s hard to see how some changes will have any real impact on employers.  For instance, one part changes the language regarding a “factor other than sex” defense that an employer can raise to a “bona fide factor other than sex”.   While one can debate the theorhetical differences in language, the real-world effect of the change is probably minimal for employers.  After all, do employers really make salary decisions and think “well, I can explain the differences with reason, but is it a ‘bona fide’ reason”?  And small businesses will be excluded from the act, in the same way that they are excluded from coverage under the Fair Labor Standards Act.

On the other hand, proponents of the bill gloss over the fact that removing some caps on compensatory and punitive damages — as the bill proposes — could have a significant effect on employers and the likelihood of lawsuits (one need only look at the rise of Title VII litigation after the Civil Rights Act of 1991 was passed for a historical perspective). 

Proponents also ignore the fact that the punitive damages portion of the bill would mark a change in philosophy regarding punitive damages (to see the changes in context, click here).  For example, one change would allow punitive damages to be awarded even when no intentional discrimination has been proved — which contradicts the traditional notion that punitive damages should be issued to punish the defendant for some type of malice or reckless behavior. 

The political reality is that some version of this bill is going to get passed and employers need to keep a watchful eye on the bill.  We’ll see in the upcoming weeks whether a compromise is eventually fashioned (much like the compromise being done for the ADA Amendments Act of 2008) or whether this is just political posturing in an election year.  Either way, here’s (perhaps foolishly) hoping that the debate on the bill’s merits gets more substantive than just slogans.

(At Point of Law, Walter Olson’s other site, Carter Wood provides his insights into tonight’s happenings as well.)

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Daniel Fisher usually understands legal issues and has done some good reporting about trial-lawyer abuses, so I was very disappointed in today’s Forbes.com story (which quotes me about Obama and CAFA). Most notably, it’s not true that tort reform is a “catchall phrase for legislative measures designed to make it harder for individuals to sue businesses”–many tort reforms make it easier for individuals with legitimate claims to sue businesses. Tort reforms are simply measures to improve the accuracy and efficiency of the civil justice system; they’re opposed by trial lawyers because they derive billions of dollars of wealth from inaccuracies and inefficiencies in the civil justice system, and supported by businesses and consumers that are the victims of such inaccuracies and inefficiencies.

The article also inaccurately characterizes the Obama-Clinton medical malpractice legislation, and furthers the idea of “Kennedy is a moderate,” blurring the role of the Supreme Court by implicitly endorsing the liberal idea of it as a political superlegislature rather than a judicial body with an obligation to follow the law. The focus on anti-preemption legislation, as opposed to some of the dozens of other pro-trial-lawyer-lobby bills pending in this Congress and likely to be renewed next Congress, is unusual. (Separately, I disagree with Jim Copland; I don’t think McCain would hesitate to veto the giveaways to the trial-lawyer lobby if they’re in single-purpose bills and not attached as hidden amendments to omnibus legislation.)

I’m less surprised than Fisher and Bill Childs that Obama is getting money from defense firms, or, more accurately, attorneys who work at defense firms. The legal establishment is overwhelmingly liberal (hence the 3:1 fundraising advantage Obama has), and many defense attorneys are perfectly happy with a status quo that requires companies to pay them millions of dollars to continue doing business. (Some are too happy, and have vocally supported ABA resolutions that would harm their clients–something their clients should pay closer attention to.)

While plaintiffs’ law firm contributions are often coordinated (sometimes a bit illegally, as when Tab Turner’s firm and Geoffrey Fieger’s firm were caught reimbursing their employees for donating to John Edwards), it’s a mistake to think the same thing happens in the defense bar, where attorneys are donating on an individual basis because they perceive future government administration (or Article III) jobs of a certain political caliber as pay-to-play or because they’re otherwise simply interested in the political process. Kirkland & Ellis may have tobacco and asbestos defense in its portfolio, and many alumni in the Bush administration, but most Kirkland attorneys are doing other things, and a disproportionate number of them at the Chicago-based firm are going to be former classmates of or students of Harvard Law graduate and Chicago Law lecturer Obama, and have the six- and seven-digit incomes to give maximum contributions–and it only takes a few dozen $4600 contributions to make a firm look like a big contributor.  (And, on the other hand, as if to demonstrate the bipartisan nature of most law firms, John McCain turned to a Republican attorney, former Reagan White House Counsel A.B. Culvahouse, at the largely Democratic O’Melveny & Myers to lead his vice presidential search.) During the primaries, the trial lawyers were giving most of their money to Edwards, Clinton, and Biden, but those fundraisers are now doing business with Obama, as the recent press coverage of Fred Baron shows.

But the article is correct that the outlook for federal tort reform is grim, and that reformers are looking at rearguard actions defending against numerous attempts to make the system worse.

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I’m quoted by Quin Hillyer in an Examiner story today about the dozens of bills pending in Congress that engage in tort deform–favors for the trial bar. The new Trial Lawyer Earmarks website does a marvelous job documenting most of the bills out there, though one wishes it would provide direct links to THOMAS rather than forcing one to engage in separate searches. (Mislink and misspelling corrected.)

H.R. 6049, “The Renewable Energy and Job Creation Act, among other things, reduces taxes on lawyers with an offsetting increase in taxes on investment managers and corporations.” To the tune of $1.6 billion, literally transferred from the productive sectors of the economy to the parasitic sector. Carter Wood and Marc Hodak comment; Bush threatens a veto. (Separately, don’t miss Marc Hodak’s comments on Ted Kennedy’s glioma.)

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We’ve previously covered the Senate’s boon to trial lawyers at the expense of consumers and shareholders, the Consumer Product Safety Commission Act, S. 2663: Feb. 20; Feb. 25; Mar. 5. (The bill was amended somewhat since we complained but Democrats, on a party line vote, tabled critical amendments to prohibit the use of contingent-fee attorneys and permit prevailing parties to recover attorneys’ fees.) The House passed a somewhat more sensible version of the bill unanimously, but Pelosi, for some reason, is trying to bypass her chamber’s proponents in constructing the “conference committee” that will work out the differences between the bills in favor of those of trial lawyers. Today’s Washington Examiner has the unholy details.

Andrew M. Grossman and James L. Gattuso analyze the CPSC Reform Act, S. 2663 (the update to S. 2045). We discussed Feb. 20 and Feb. 25, as well as briefly Jan. 1. Update: After the jump, Senator DeMint’s office provides the “Top Ten Reasons to Oppose the CPSC “Reform” Act (S. 2663)”

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ACSH’s Jeff Stier in today’s New York Post:

CONGRESS is poised to pass a massive giveaway to the ambulance-chasing trial attorneys – under the guise of protecting consumers.

The proposed law [the CPSC Reform Act] would give the 50 state attorneys general new powers to sue the makers of allegedly unsafe products – and even to demand help in their suits from the federal Consumer Product Safety Commission.

Headline-hungry AGs will even be able to sue over products the CPSC has already found to be safe. In other words, national standards will effectively go out the window, as politically ambitious AGs compete to bash business so as to win popularity for future elections.

The legislation – which the House has already passed and the Senate’s likely to pass – would hamper CPSC’s mission by creating multiple unscientific “safety” standards. Each AG’s vision of what the latest scientific studies imply about purported dangers would prevail in a given state, rather than the CPSC’s own (far more expert) findings.

All this would mean a bonanza to trial lawyers – who’d stand to make hundreds of millions from relentless lawsuits within just a few years, since each state would become a new roulette-wheel of potential jury verdicts against manufacturers. …

Further encouraging bogus complaints, the bill would grant unprecedented “whistle-blower” protection to any employee who alleges a fear of product danger – an easy way to secure your job until your case is adjudicated.

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Roger Clegg on pending employment litigation legislation in Congress. I commented on the Lilly Ledbetter bill for NPR’s “Talking Justice” blog.

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Workplace bullying bills

by Ted Frank on February 7, 2008

As a Tennessee appellate court noted in rejecting Joan Frye’s lawsuit against her hospital employer, “[T]he fact that a supervisor is mean, hard to get along with, overbearing, bellig­erent or otherwise hostile and abusive does not violate civil rights statutes.” Some legislators are trying to change that (excited in part by Suffolk Law Professor David Yamada’s theory of making “bullying” actionable). The ABA Journal is the latest to note the trend. (The article unfortunately repeats the false smear against my colleague John Bolton.) As we noted last May,

Enactments of this sort could result in a large new volume of litigation; the ample scope for differences of opinion about what constitutes hurtful sarcasm or a humiliating memo style could turn the courts into ongoing “superpersonnel departments” dispensing financial balm for injured feelings in the workplace.

Employment attorney Richard Block is more blunt in the ABA Journal: “You’re talking about a lifetime annuity of work for employment lawyers.” Bills are pending in thirteen states.

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Lilly Ledbetter Fair Pay Act

by Ted Frank on February 4, 2008

My monthly post for NPR’s Talking Justice weblog is about their topic of the week, the Ledbetter Supreme Court case and the associated (and counterproductive) legislation passed by the House.

The Consumerist blog is supposed to be a pro-consumer blog, but it’s amazing how often their political agenda is really a trial-lawyer agenda that hurts consumers. Many of the 2007 bills Carey Greenberg highlights as consumer-friendly are quite the opposite:

  • H.R. 3010: Arbitration Fairness Act of 2007
    What It Does: Raises costs to and reduces choices for consumers and lowers employee wages by forcing consumers and employees to pass up the benefits of mandatory arbitration, whether they wish to or not. More at Overlawyered, and on SSRN.
    Status: Hearings held in both the House and Senate. Likely to be vetoed if passed.

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In Opinion Journal:

Even the tort bar understands how deeply loathed it is by the American public. The Association of Trial Lawyers of America didn’t last year change its name to the bland “American Association for Justice” for nothing.

So no, even the old liberal lawsuit bulls such as Henry Waxman or [Barney] Frank won’t start calling for the repeal of the 2005 Class Action Fairness Act, or for other blatant legislative assists to the trial bar. Instead, Democrats intend to reward the legal industry with more subtle payoffs. The most obvious gift will be a moratorium on further legal reform. Beyond that, Democrats will rely on two tried-and-tested tools to aid and abet the legal community. They’ve employed both in the past few weeks. …

A Democratic Congress means far more regulation, and any new regulation is an opportunity to insert a line or two giving the tort bar greater rights to sue. These provisions will be subtle and technical, designed to escape notice. But just in case they do raise a red flag, they’ll also be tucked into bipartisan or must-pass legislation (such as the Iraq supplemental), making it that much harder for Republicans or President Bush to shoot them down.

It’s a measure of how well Republicans played tort abuse to their political advantage that Democrats today are reluctant to brazenly flack for the legal class. If the GOP wants to keep it that way, it will have to start working harder to expose the quiet ways in which the left is now helping trial lawyers bilk the system.

The other means is by taxpayer-funded subpoenas and hearings to develop evidence and publicity for the trial bar.

Strassel claims that there is such an earmark created at the behest of ATLA, subtly providing an implied cause of action against chemical manufacturers in H.R. 1591, the soon-to-be-vetoed Iraq War supplemental funding bill. Indeed, the provision is difficult to find amidst the provisions for the milk income loss contract program and renewal grants for women’s business centers. I suspect Strassel is referring to the anti-preemption provision in Section 1501(a) of the bill, effectively permitting lawsuits against chemical facilities that comply with Department of Homeland Security regulations without once mentioning the word “lawsuit.” If there is a terrorist attack on a chemical facility, trial lawyers will have a deep pocket to blame.

Perhaps we, as a society, would agree with the Democratic Party and would prefer trial lawyers, instead of the Department of Homeland Security, to be in charge of chemical plant security. (Trial lawyers do have the advantage of getting to operate only in hindsight.) But shouldn’t that critical decision be made openly?