Peter Lattman reports that a jury took two hours to reject the claim that dodging a flying shrimp at a Benihana restaurant caused Jerry Colaitis’s death ten months later. Some opponents of liability reform might use this as evidence that the system works, but Benihana is still out the exorbitant cost of the attorney time required to prepare for and defend a four-week trial, which was certainly in the six digits, and perhaps the seven digits, effectively punishing them for not paying protection money. (Corey Kilgannon, “Jury to Decide if Flying Sizzling Shrimp Led to Man’s Death”, New York Times, Feb. 9). We were way in front of this story in the blogosphere, reporting on it Nov. 23, 2004 and Jan. 13.
Flying shrimp not so fatal after all
Peter Lattman reports that a jury took two hours to reject the claim that dodging a flying shrimp at a Benihana restaurant caused Jerry Colaitis’s death ten months later. Some opponents of liability reform might use this as evidence that the system works, but Benihana is still out the exorbitant cost of the attorney time […]
7 Comments
He should have ordered the DUCK!
I can think of no more pressing tort reform than “loser pays.”
The loser did pay: the plaintiff’s firm is out a few hundred thousand dollars spent preparing for a case that returned $0. A word of warning to future firms that may be tempted to bring cases built upon tenuous chains of causation. I applaud Benihana and/or their insurance carrier for putting the plaintiff to their proof.
As for the money Benihana and/or their insurance carrier has lost, (1) its a cost of doing business for Benihana (that’s why a meal costs $20.95 instead of $20.00. No biggie); (2) I suspect the cost of defense can be partially or completely written off as a tax loss by Benihana (although I’m not certain); and as far as the insurance carrier, this is why God created underwriters. I really don’t think anyone on the defense side is crying in their scotch after this one.
Just an aside: as far as “loser pays,” be careful what you wish for. I can imagine a situation as follows: company gets sued for personal injury, cocky defense lawyer thinks they have it in the bag and so runs up the costs, plaintiff wins at trial, corporate defendant is stuck with a bill that is larger than it would have been otherwise.
Beware the unintended consequence.
that’s why a meal costs $20.95 instead of $20.00
I think most Overlawyered readers would prefer to have an effective 5% increase in their income levels in exchange for losing the opportunity to read about speculative lottery litigation.
Just an aside: as far as “loser pays,” be careful what you wish for. I can imagine a situation as follows: company gets sued for personal injury, cocky defense lawyer thinks they have it in the bag and so runs up the costs, plaintiff wins at trial, corporate defendant is stuck with a bill that is larger than it would have been otherwise.
Cocky defense lawyers who run up bills that their clients pay get fired. Or don’t get their full fees awarded and then have to write them off. I had a lawyer who ran up a bill in a fee-shifting case, and when the judge refused to award the full fee, the lawyer didn’t get the full fee from me, either.
I suspect the cost of defense can be partially or completely written off as a tax loss by Benihana (although I’m not certain); and as far as the insurance carrier, this is why God created underwriters.
Your comment implies that you think these social costs are a free lunch that are harvested straight from the money tree, and therefore are of no consequence.
Unintended consequence #2 of a loser pays system: the creation of a perverse incentive for plaintiff’s lawyers to bring to trial winning cases with little monetary value. Under the current system, these cases largely go unlitigated, or are consolidated into a class action or MDL (a mechanism preferred by most corporations, rather than having to fight a thousand cases in a hundred different jurisdictions). Under a loser pays system, suddenly these “nominal” cases have value–namely, the cost of the fees they could generate for a plaintiff’s firm.
It is, however, an academic debate, as such a system will never arise in the face of opposition from publicly-traded corporations. Case in point: Merck’s vigorous, case by case defense of every Vioxx suit, so as to dissuade those looking for a quick settlement on weak facts. The same strategy worked in the PPA litigation. Under a loser pays system, however, this strategy becomes much more costly–because Merck has, and will, lose some cases (just as some PPA cases were lost by the pharmaceuticals, for nominal damages–under loser pays, those nominal damages become exorbitant).
DG: “I suspect the cost of defense can be partially or completely written off as a tax loss by Benihana (although I’m not certain); and as far as the insurance carrier, this is why God created underwriters.”
TF: “Your comment implies that you think these social costs are a free lunch that are harvested straight from the money tree, and therefore are of no consequence.”
My comment implies that I think not all social costs can be eliminated. There is no perfectly efficient system for maintaining an ordered society. All too often, when legal, political, or cultural “reforms” are enacted, social cost isn’t eliminated, it is simply altered in form and/or shifted from one segment of society to another. I believe the case of a loser pays system is a perfect example of this–it would certainly change the dynamics of litigation (i.e., alter where the costs appear and how they are incurred), but the net social costs would remain the same.
Now, this is not to say that I believe the justice system is already as socially efficient as it can be. It is not. There is room for reform. But a universal loser pays system isn’t reform–it merely repackages the costs so that we forget about them for awhile.
Merck’s vigorous, case by case defense of every Vioxx suit, so as to dissuade those looking for a quick settlement on weak facts. The same strategy worked in the PPA litigation. Under a loser pays system, however, this strategy becomes much more costly
This analysis is clearly erroneous. It becomes cheaper for a defendant to litigate cases where the plaintiffs have a low chance of success, and more expensive for the plaintiff to bring speculative lottery cases with questionable evidence of causation. One need only look at the UK, where Vioxx cases simply aren’t being brought because legal insurers who cover “loser pays” fees in the case of a loss who have looked at the facts don’t believe the cases are worth the candle and refuse to bankroll them.
In terms of PPA, an offer-of-judgment system where the plaintiff unreasonably asks for a billion, the defendant offers the real damages of $10,000, and the jury awards $3,000 would require the plaintiff to pay the defendants’ legal fees, so I fail to see adverse consequences.
“Unintended consequence No. 2” is a feature, rather than a bug. Better to have lawyers devoting resources to helping plaintiffs with meritorious cases (and defendants immediately agreeing to pay those claims rather than face an award of reasonable attorneys’ fees) than plaintiffs with longshot lottery suits.
David Galalis’s original comment that we shouldn’t care about the costs of litigation because insurers will pay them and defendants can write off legal expenses on their taxes sure is a strange way to communicate his allegedly intended idea that “not all social costs can be eliminated.” This is a truism to be sure, but doesn’t explain why we shouldn’t care about the very real losses imposed by the status quo when more efficient alternatives are available.