Overlawyered: Chronicling The High Cost Of Our Legal System

Archive for 2006

Family buys cheap smoke detector; sues because it doesn’t work as well as expensive one

Most smoke detectors are ionization detectors; they effectively detect fast-moving high-temperature fires. But if a fire is a smoldering fire from, say, dropping a cigarette on a couch, cheaper smoke detectors do not do as good a job detecting it; for this, one needs a more expensive dual-detection device that also detects photoelectronic signals from such fires. The Hackert family of Schenectady owned two of the cheaper smoke detectors (and disabled one of them), were not woken by a smoldering fire on May 31, 2001, and two members of the family died. Their lawyers, of course, blamed the smoke detector manufacturers, though the smoke detector design was approved by Underwriters Laboratory and did not suffer from a manufacturing defect. A jury agreed, holding the manufacturers 65% responsible (the Hackerts were held 35% responsible for disabling one of their two smoke detectors) for not making a better detector.

A judge reduced the jury’s $6 million pain-and-suffering damages by half, finding that six minutes of pain and suffering wasn’t worth that much, but only highlighting the inherent arbitrariness of non-economic damages. (John Caher, “Judge Finds Three Minutes of Suffering in Fatal Fire Does Not Equal $3M in Damages”, New York Law Journal, Aug. 18).

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Mother’s Day Stadium Promotion: What’s “Frivolous” About It?

Regarding Walter’s post below, I’d just like to point out that the judge probably had no choice in declining to dismiss the lawsuit. Indeed, the plaintiffs may very well win.

What is often overlooked (but not by Walter) is that California has a monstrous law called the “Unruh Act” that specifically authorizes such a cause of action for what most people consider harmless, de minimis gender-based discrimination.

I’ve heard that there are California law firms that specialize in Unruh claims. I can remember back in high school watching Judge Wapner of “The People’s Court” arbitrate an Unruh claim over a “Ladies’ Night” at a California bar — the male plaintiff won.

So, we are dealing here not with a frivolous lawsuit, but with a frivolous law. Passed by frivolous politicians.

To whom, for some reason, judges are supposed to show great deference. Go figure.

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Update: Mother’s Day stadium promotion

An Orange County, Calif. judge has refused to dismiss attorney Alfred Rava’s lawsuit (May 11, May 23) claiming that the baseball Angels and a game sponsor “discriminated against men by giving tote bags to only women during a Mother’s Day baseball game”. (“Judge refuses to dismiss discrimination suit against Angels”, AP/San Francisco Chronicle, Aug. 17). P.S. More from the Boston Globe, Aug. 22.

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Paternalism and Your Money — Part Two

In Part One, I proposed the following heuristic regarding paternalism:

To summarize, although it is not a proper function of government to proscribe “bad” decision making, perhaps a few isolated, objectively defensible carve-outs can be allowed in which the government makes it just a little bit harder to make a bad decision. Perhaps. Stated differently, a paternalist exception that actually proves the libertarian rule should probably be embraced and not shunned.

But does this qualify as such an exception?

In a payday loan transaction, the lender makes a small advance (typically $100-$500) to its customer, agreeing to hold a personal check for the loan amount plus a fee until the customer’s next payday. … The borrower receives cash immediately. Fees charged can range from $15 to $30 on each $100 advanced, although the typical fee is at the lower end of that range.

The fee may seem modest when presented as a dollar amount, but when calculated as an annual percentage rate (APR), the cost is relatively high. A charge of $15 to borrow $100 for 14 days amounts to an APR of 391%. A survey by consumer advocates found APRs on 14-day payday loans ranging from 390% to 871%.

No fewer than five separate bills were introduced in this session of Congress to limit or even ban payday loans. No fewer than four federal financial regulatory agencies, including the Federal Reserve, have launched investigations of the practice. Not to mention the states.

Read On…

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Paternalism and Your Money — Part One

President Bush has signed H.R. 4, the Pension Protection Act of 2006, into law.

The bill is mostly sound and fury, signifying nothing. The Pension Benefit Guaranty Corporation will be “saved,” even though we were repeatedly assured until now that there was in fact nothing to “save” it from. Private employers will be required, over time, to go from 90% funding to 100% funding of their pension plans — which is nothing more than hollow accounting gimmickry. And the real volcanoes under the city — public employee pensions — are not addressed at all. Neither of course is the Social Security crisis.

But one afterthought of the bill is worth looking at:

Employers can encourage their workers to save by automatically enrolling them 401(k) retirement accounts.

This proposal has been bouncing around for years. A good primer on the subject is available from the Congressional Research Service.

Read On…

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Big news day

Looking for commentary on recent developments in tobacco, Vioxx, or Katrina cases? Check our sister site, Point of Law, for extensive detailed discussion on all three, as well as Will Wilson on the perils of fifty state attorneys general negotiating Medicare fraud claims, information missing from the Wall Street Journal’s punitive damages debate, Michigan’s ban on asbestos bundled settlements, ABC’s John Stossel on the plaintiffs’ bar, and much, much more.

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Bureaucracy vs. Katrina recovery

Jonathan Rauch has a must-read dispatch from devastated St. Bernard Parish, Louisiana:

Cleanup and repair cost the school system tens of millions of dollars, but federal payment has been slow. Reimbursement for small projects goes through five to 10 weeks of federal and state review, according to David Fernandez, the school system’s financial manager. Any expenditure over $1 million is subject to another four to 12 weeks of review in Washington, he said.

This is the so-called “million-dollar queue.” “Anything over a million dollars has to be reported to Congress,” says Brown, the former FEMA director. “Why do you think that is? Congress wants to make an announcement.” In other words, members of Congress want to be the first to boast of a federal project in their district.

“This is all political,” Brown says. “It has nothing to do with good public policy.” …

On private property, even debris — including, for example, 1,600 tree stumps — had to be reviewed for archaeological value before FEMA would pay for removal.

(“Struggling to Survive”, National Journal, Aug. 11; “Stretchier Red Tape”, Aug. 11).

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Federal tobacco suit ruling

As Ted notes at Point of Law, Judge Gladys Kessler has ruled in partial favor of the federal government in its longstanding racketeering case against the tobacco industry (Jun. 21, 2005 and links from there), begun under the Clinton Administration (after much backstage string-pulling and blandishment by private plaintiff’s lawyers) and continued by the Bush Administration. In particular, Judge Kessler is ordering the tobacco companies to make admissions of fraud and racketeering that may prove damaging to them in future private litigation (you can see why those private lawyers were smart to lobby). She did, however, at various stages throw out or disallow large portions of the government’s case, including most of its sweeping demands for money.

A few preliminary comments, based on a reading of the shorter remedial section but not the 1,653-page ruling (PDF) itself:

1) It is now familiar, if still a scandal, that business decisions which would have been near-universally regarded as perfectly lawful at the time can retroactively be defined not only as giving rise to liability, but even as “racketeering”. By this point, with the “racketeering” label having been flung around (and sometimes with success) in so many garden-variety commercial disputes, it may be on the verge of losing its sting.

2) This case, however, was not of the garden variety. From the start, it sought to stigmatize as racketeering tobacco companies’ public advocacy efforts — their efforts to defend their product in public debate and marshal every good and bad argument on its behalf the same way a lawyer might, their P.R. efforts to plant favorable articles in the press, their support of groups like the Tobacco Institute, and so forth. The Justice Department’s complaint charges them, revealingly, with responsibility for taking “false and misleading positions on issues” (emphasis added) (see Sept. 23, 1999). It should be obvious (but apparently still isn’t) that lots and lots of other defendants, who are not for the moment as politically unpopular as tobacco companies, might also someday be in peril of legal charges for advancing false and misleading “positions on issues”.

3) Although Judge Kessler may have thrown out substantial portions of the feds’ case, the remedies she approved nonetheless impinge on values of free advocacy. Tobacco companies are to be ordered to admit in communications to consumers various supposed facts which they do not believe to be true, and which in fact may not be true (for example, that no particular formula for a cigarette’s ingredients is safer or more natural than any other) but which fit the desired anti-tobacco message. They are to be forbidden to utter a great many other statements which they believe to be true on the grounds that — well, basically on the grounds that the government disapproves of those statements and doesn’t want them aired as part of public debate.

4) It goes without saying that the advancement of erroneous or misleading arguments, the promotion of dubious science, etc. as part of an effort to sell one’s product line is not going to be deemed “racketeering” when certain other groups of professionals do it — say, politicians and lawyers.

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