Overlawyered: Chronicling The High Cost Of Our Legal System

Archive for February, 2006

Home Depot: I Couldn’t Do It Today

Bernie Marcus, who founded the Home Depot chain as a “regular guy” starting from one store, says that he couldn’t have done it in today’s legal environment.

…one share valuekiller lawsuit can kill a startup company. Back in 1978, those lawsuits were rare. Today, all you have to do is pick up a newspaper and read about one after another.

(IBD staff, “The Home Depot’s Bernie Marcus On Why He Couldn’t Do It Today”, Investors Business Daily, Jan 30 pdf). Mr. Marcus dedicates a lot of his philanthropy to tort-reform. When asked why, he said “I’m concerned for the next generation of entrepreneurs whose creativity, risk-taking and innovation are stifled by the current legal and regulatory climate. Will they be able to create the next Home Depot?” As one of those entrepreneurs, thanks! (see also Jan 15).

Filed under:

A Little Taste of Loser Pays?

My company is in the business of managing recreation sites, many of which are located in the National Forest. I deal with local Forest Service rangers all the time, and I’ll tell you they have an almost impossible job. They all joined the Forest Service because they wanted to be close to trees, but many of them find that the closest they get to trees every day is via the reams of paper they must generate in environmental impact studies and motions in lawsuits. Everything they try to do in the forest tends to be blocked legally by somebody, the most common opposition coming from environmental groups.

One federal judge may be raising the costs of filing such suits against everything….

While this is not really a true loser-pay system, and appeal bonds are fairly normal, they seldom cover the true costs of the delay and extra litigation. Apparently this bond is getting attention for being 10x larger than is typical. (Brett Wilkison, “Judge orders litigating enviros to pony up”, High Country News, Feb 6).

Filed under: , ,

Dozens Added to Providence Nightclub Fire Suit

In 2003, a terrible fire in a Providence night club killed a hundred people and injured many more. The fire apparently started when Great White’s (the live band) pyrotechnics ignited soundproofing foam around the stage. The victims initially filed suit against “four dozen defendants, include club owners Jeffrey and Michael Derderian and former Great White tour manager Daniel Biechele.” Biechele recently plead guilty to a hundred counts of involuntary manslaughter for igniting the pyrotechnics, and the club owners are fighting the same charges.

Now, as the statutory deadline (3 years apparently in Rhode Island) for new suits approaches, and perhaps given the disappointing depth of the current defendants’ pockets, the victims and their families have filed suit against “dozens” of others in the fire. The suit now names individual members of the band, the company that distributed the acoustic foam, and even Home Depot, for not “warning of the potential hazards” of the insulation they sold the club, despite the fact that the insulation Home Depot sold “is different from the foam ignited by the pyrotechnics”. (Eric Tucker, “New complaint filed in nightclub fire case”, Houston Chronicle, Feb 15)

Filed under: , , , ,

First lawyer indicted in Pellicano scandal

And very likely not the last: “A grand jury indicted prominent Hollywood attorney Terry Christensen on Wednesday for allegedly hiring investigator Anthony Pellicano to wiretap Lisa Bonder Kerkorian, the ex-wife of billionaire and former MGM owner Kirk Kerkorian. Christensen is accused of paying Pellicano at least $100,000 to illegally eavesdrop on Bonder Kerkorian’s conversations with her attorney, a court mediator and others to gain a tactical advantage in a legal dispute.” Christensen’s firm, Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro of Century City, vigorously denied the allegations. (Jesse Hiestand, “Lawyer indicted in Pellicano case”, Hollywood Reporter, Feb. 16; Greg Krikorian and Andrew Blankstein, “Entertainment Lawyer Indicted in Pellicano Probe”, Los Angeles Times, Feb. 15). For our earlier coverage, see Feb. 7, etc.

Filed under: ,

OpinionJournal.com “Federation of Sites” — we’re part of it

The excellent free website associated with the Wall Street Journal editorial page, OpinionJournal.com, today launched something it calls its “Federation of Sites“. It’s a collection of websites published by policy institutes, magazines, and so forth, along with five weblogs, of which we’re honored to be one. (The other four: Instapundit, Volokh Conspiracy, Virginia Postrel’s Dynamist, and Eduwonk). Needless to say, our views should not be attributed to them or vice versa, although they may occasionally select postings from this site to reprint there. Check it out here.

Filed under:

Shareholder Suits Reach New High

Apparently, 2005 was a record year for class-action securities settlements, (Patti Bond, “Class-Action Securities Settlements Set Record, Indianapolis Star, Feb 13)

If it has not become abundantly clear already, I am not a lawyer, so I can’t comment on the legal ins and outs. But from a philosophical standpoint, shareholder suits have never made much sense to me. While I can understand the shareholders of the company suing a minority shareholder who might be enriching themselves disproportionately (e.g. Rigas family at Adelphia), suits by shareholders against the company they own seem… crazy.

Any successful verdict for shareholders against the company would effectively come out of the pockets of the company’s owners who are.. the shareholders. So in effect, shareholders are suing themselves, and, win or lose, they as a group end up with less than if the suit had never been started, since a good chunk of the payout goes to the lawyers. The only way these suits make financial sense (except to the lawyers, like Bill Lerach) is if only a small subset of the shareholders participate, and then these are just vehicles for transferring money from half the shareholders to the other half, or in other words from one wronged party that does not engage in litigation to another wronged party who is aggressively litigious. Is there really justice here?

OK, you could argue that many of these shareholders are not suing themselves, because they are past shareholders that dumped their stock at a loss. But given these facts, these suits are even less fair. If these suits are made by past shareholders who held stock (ie, were the owners) at the time certain wrongs were committed, they are in fact paid by current and future shareholders who may well have not even owned the company at the time of the abuses, and who may in fact be participating in cleaning the company up. So these litigants are in effect making the argument that because the company was run unethically when they owned it, they are going to sue the people who bought it from them and cleaned it up? Shouldn’t the payment be the other way around, with past owners paying current owners for the mess they left?

Filed under: , ,

Making Everyone a Lawyer

This is a bit off-topic from litigation, but one of the issues I touch on from time to time in my own blog is just how hard the government makes it to conduct business. While Ted and Walter seem to enjoy what they do, not all of us want to shuffle documents through the legal system every day.

As brief background, my small business runs recreation facilities on public lands under concession contracts. This week we won our first contract with the National Park Service, to run a restaurant and a couple of marinas in Colorado. Since this is our first foray into that state, there are a lot of legal hoops we must jump through to get all the permissions we need to conduct business in Colorado. In fact, as I describe on my blog, my work list is up to 20 fairly time-consuming approvals we need to obtain. And I am sure this list will grow. Even after years in a state, we still can have some random inspector coming by looking for our (fill-in-the-blank) licence, which we had never heard of to that point. My favorite so far is probably Kentucky’s requirement that I get a licence to sell eggs.

About six months ago, a business school professor asked if I would just write down what I was working on that day, as a part of a lesson in entrepreneurship for his students. Later, I posted the list on my blog. I ended the post by saying, “An alien from another planet in reading this post might question whether I am really working for myself or this ‘government’ entity”

Filed under: ,

Asbestos Trust-Fund Legislation Defeated

The Senate has apparently defeated the bill that would create a $140 billion trust fund to pay asbestos claims (Charles Hunt, “The Senate Defeats Asbestos Trust-fund Legislation” The Washington Times, Feb 15).

Whether this represents a final defeat of the measure is unclear, since there seem to be a number of procedural questions surrounding the bill. The Wall Street Journal ($) had an interesting editorial yesterday (2/14), which described the bill basically as deeply-flawed legislation to try to correct a deeply-flawed litigation situation.

You can see the vote count here, but, in a fairly unique outcome in these hyper-partisan times, both Democrats and Republicans were split on this one.

Update: Made a few changes to the links to try to better match Ted and Walter’s style

Ted has more on the bills prospects at Point of Law, as well as a whole archive of following the asbestos mess.

Filed under: , ,

And Now, Stepping Up to the Plate…

Greetings, Overlawyered readers. My name is Warren Meyer, and Walter, who generally strikes me as a sane and stable person, has had some odd lapse in judgement and asked that I come in and guest blog this week. After blogging on my own site for a little over a year now, I feel like a long-time minor leaguer finally stepping up to the plate in the majors for his first at-bat.

I am particularly pleased to be here, since Overlawyered has the distinction of being the first blog I ever regularly read, long before I even knew what a blog was. As a small business owner, I often found myself asking, “am I crazy?” Ted and Walter, via the stories they write about outrageous litigation in Overlawyered, help give me some comfort that no, maybe its the rest of the world that’s gone nuts.

My regular home is at Coyote Blog, where I stray off-topic far more than Ted and Walter, but I generally focus on issues related to business, government, and libertarian philosophy. I appreciate Walter’s lending me the keys to his blog for this week, and I will try to keep it between the lines better than I do at my own site.

Update: Calif. high court hears “Friends” harassment case

Back in the news:

The California Supreme Court heard arguments yesterday in a lawsuit brought by a writing assistant fired from the program, Amaani Lyle, who contends that the profanity-riddled and sex-laden diatribes of “Friends” writers constituted sexual harassment.

The company that produced the show, Warner Brothers, claims that programs about sex and relationships require frank and freewheeling discussion of the subject matter. The company has also warned that allowing Ms. Lyle to proceed with her case could put a strait-jacket on writers and dilute the quality of what Americans see on movies and TV.

(Josh Gerstein, “Sex Harassment Is Alleged By a Writer of ‘Friends'”, New York Sun, Feb. 15). According to the L.A. Times, yesterday’s session did not appear to go well for the plaintiff:

During a hearing in Sacramento, two of the state high court’s justices observed that Amaani Lyle, 32, was warned before she was hired for “Friends” that she would be subjected to sexually explicit talk in the writers’ room….

Justice Joyce L. Kennard appeared to find it significant that Warner Bros. had told Lyle to expect “a lot of sexual talk, very frank talk and at times vulgar” language. “She said, ‘No problem,’ ” Kennard related.

(Maura Dolan, “Justices Skeptical of ‘Friends’ Suit”, Los Angeles Times, Feb. 15). For our earlier coverage of the case, see Apr. 23, Jul. 19, Jul. 31, Oct. 19, and Nov. 17, 2004. Our coverage of harassment law generally is here.

Filed under: