Overlawyered: Chronicling The High Cost Of Our Legal System

Archive for 2008

Racially “targeting” predatory subprime loans? The NAACP and Baltimore suits

Cross-posted from Point of Law.

Says the NAACP complaint: “In 2004, African-American homeowners who received subprime mortgage loans from Defendants were over 30% more likely to be issued a higher-rate loan than Caucasian borrowers with the same qualifications.” (¶ 1.) Thus, it concludes, the disparity “result[s] from a systematic and predatory targeting of African-Americans.” (¶ 6.)

Similarly, Baltimore’s suit argues that Wells Fargo is more likely to foreclose in African-American neighborhoods—and that suit does not even attempt to adjust for similar qualifications or finances, just alleging racial disparity.

Of course, there is a difference between being targeted for a subprime mortgage loan and accepting a subprime mortgage loan. And I don’t believe that African-American homeowners were targeted for subprime mortgage loans because they were African-American. They were targeted because they were homeowners.

Between 2001 and 2005, I was a law-firm associate, high-income, making multiples of what I make today at a thinktank. And, like I am today, I was also white. And the minute my adjustable-rate mortgage was registered in the title books in 2001, I got several solicitations a week in the mail from fly-by-night mortgage brokers offering to refinance my mortgage with ludicrous financial products. (And when I made the mistake of investigating on-line options for switching to a fixed-rate mortgage in 2004, I also got several e-mails a day and phone-calls a month on the same basis to the point that I switched e-mail providers.)

Somehow, I resisted refinancing with a mortgage that was not favorable to me in the long run—I took a 5.25% fixed-rate instead. But I sure was targeted with subprime opportunities, especially as the real-estate prices in my neighborhood skyrocketed about 10% a year. And if, with my skin-color, income, education-level, and impeccable credit-score, I was targeted, so was every homeowner and their grandmother.

To the extent a statistical study says minorities were, ceteris paribus, more likely to receive unfavorable mortgages than whites, the study reflects a specification error, perhaps in failing to account for different levels of consumer education. Another possibility: there is a lot of state-by-state regulation of the mortgage industry. Are subprime mortgages more likely in states with high minority populations, for example? Are subprime mortgage brokers more likely to be aggressive in urban areas in states on the coasts where real estate prices were increasing faster than average, and those states correspond to states with high minority populations?

Note that the CRL study that has been driving the debate and highlighted in the NAACP suit finds that for many types of loans, whites were “disadvantaged” relative to Hispanics, which would seem to count against a racial explanation (unless one believes that bankers hold a racial animus against whites and towards Hispanics) and more towards a geographic explanation.

Note also the irony that these same defendants were accused of failing to offer loans to African-Americans just a few years ago. (See also Apr. 1.)

Finally, note that the NAACP complaint is legally frivolous in at least one respect because of the lack of standing in a federal court. Domino’s Pizza, Inc. v. McDonald, 546 U.S. 470 (2006) (no § 1981 standing for third parties). (Baltimore brings no § 1981 claim.) Fair Housing Act standing is questionable, too, given the lack of allegation of injury to NAACP in particular, though that could be fairly easily rectified by an amended complaint, especially in the Ninth Circuit. Cf. Spann v. Colonial Vill., Inc., 899 F.2d 24 (D.C. Cir. 1990) (“[a]n organization cannot, of course, manufacture the injury necessary to maintain a suit from its expenditure of resources on that very suit”) (R. Bader Ginsburg, J.); Fair Housing of Marin v. Combs, 285 F.3d 899, 902 (9th Cir. 2002). N.B. that there is an amended version of the NAACP complaint that may already fix these issues. NAACP v. Ameriquest Mortgage Co., No. 8:07-cv-00794-AG-AN (C.D. Cal.). For some reason, this is not available on PACER, so I haven’t seen it.

Related: Jan. 8 (Krauss on Baltimore suit); Apr. 25 (me on third-party liability for subprime lending).

(Disclosure: I own less than $15,000 in stock in Citigroup, one of the defendants in the case.)

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Banning health clinics

Thanks to Glenn Reynolds for pointing out this story at the Boston Globe. Apparently there’s talk of banning the new clinics housed inside various Walmarts and CVS stores in Boston. As Glenn ponders, why would the lawmakers there want to eliminate affordable health care operated by the private sector? Also, Glenn links to this post which highlights how these clinics are doing things right.

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Florida Mulls Lawsuit Over Antipsychotic Programs

That’s the title of a post by Ed Silverman over at Pharalot. The issue is the use if atypical antipsychotics in children:

Florida Medicaid records show the number of children – some just months old – who were prescribed the drugs went from 9,364 seven years ago to 18,137 in 2006. No records for privately insured patients are available.

As I mentioned earlier this week, putting the blame on the pharmaceutical industry is an oversimplistic reaction to how psychiatry, psychology,and our culture have transformed childhood into a diagnostic checklist. As mentioned in Ed’s post, the litigation in Florida appears to be the recommendation by agencies receiving Medicaid funds to use these drugs in children with ADHD who also had tics. While none of the atypical antipsychotics, to my knowledge, are FDA approved for this condition, it is common knowledge among mental health professionals that the most effective treatment for tics are dopaminergic antagonists such as atypical antipsychotics. True, the recent National Institute of Health’s CATIE study demonstrated that most of the atypicals were no better than the older ones. But that doesn’t mean that the newer atypicals aren’t effective or an appropriate treatment. Perhaps, our current social construction of adolescence is partly to blame for the boom in mental health diagnosis in our children.

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Even more on autism and thimerosal

Ronald Bailey at Reason’s blog Hit & Run discusses a recent article by Stephanie Desmon in the Baltimore Sun on the topic. Ron rightly mentions the end result of all the fuss over thimerosal in vaccines: worried parents, unvaccinated kids and more expensive vaccines. As I mentioned earlier this week, a recent study in the Archives of General Psychiatry also cast doubt on the supposed link.

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Cerqueira v. American Airlines

“Robert Loblaw” at the blog Decision of the Day, has this post on the case of Cerqueira v. American Airlines. In sum, after being booted off the plane for some suspicious behavior, plaintiff John Cerqueiia, thought he would sue. After winning an award $130,000 in compensatory damages and $270,000 in punitive damages the case was appealed. The First Circuit reversed:

On appeal, the First Circuit vacates the award and grants judgment for the defendants. In an opinion that is heavy on the factual details of the incident – and particularly the facts as they appeared at the time to the key decision makers – the First concludes that the jury instructions were incorrect. Among other things, the district court refused to provide instructions about the security provisions of Federal Aviation Act that governed the captain’s actions. In light of the flawed instructions, the Court concludes that the verdict cannot stand.

Moreover, the Court concludes that there is no evidence to sustain the jury’s conclusion that the plaintiff was discriminated against because he appeared to be middle eastern. In particular, neither of the two key decision makers – the captain and a manager in American’s Dallas headquarters – even saw the plaintiff until trial, and there is no other evidence to suggest that their decision was based on assumptions about the plaintiff’s race. Accordingly, the defendants are entitled to judgment notwithstanding the verdict.

Irrespective of the appellate decision, the initial jury verdict of $400,000 says a lot about how justice seems proportionality unfair and unmeasured given the facts of this case.

(Earlier at Overlawyered: Jan. 17.) Update Mar. 2: Cerqueira responds.

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The Nataline Sarkisyan case: I’m just shocked, shocked, to learn Edwards has lied again

To the surprise of no one sensible, it turns out that John Edwards’s and Daily Kos’s claims about Nataline Sarkisyan, the 17-year-old California woman who recently died awaiting a liver transplant, are false:

  • Independent reviewing doctors unanimously recommended against the liver transplant as too risky, which is why CIGNA refused to grant approval.
  • CIGNA changed its mind in response to political pressure and publicity, but their delay in approval probably would not have affected Sarkisyan, as several reports indicate her treating medical institution, UCLA, would not have waited for insurance approval if a donor organ became available. (For example, Forbes.)
  • And, of course, US patients are far more likely to get organ transplants (and survive organ transplants) than patients in single-payer health care systems—so Edwards has absolutely no solution for the problem of people getting sick and dying in a world of scarcity.

Scott Gottlieb has details in the Wall Street Journal. Attorney Mark Geragos has been retained to sue CIGNA, though CIGNA was only administering Sarkisyan’s health insurance plan, and would have suffered no financial repercussions from approving the transplant.

(Disclosure: I own between $15,000 and $50,000 in stock in CIGNA.)

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AFF January Roundtable: “Don’t Be Evil”: Privacy in the Age of Google

America’s Future Foundation is holding a January 16 panel on this topic:

In less than a decade, Google has grown from a Ph.D. research project to be the indispensable tool of the information economy. With the objective of making all information instantly and universally accessible, Google now controls the principal index to the internet and the email traffic of millions, while adding new features such as maps replete with street-level photos cataloging the non-virtual world. As governments around the world seek to harness this information for good or evil, please join us on January 16th to discuss what we stand to gain and lose from this relentless indexing of information.

Joining us in the discussion will be Marc Rotenberg, Executive Director of the Electronic Privacy Information Center (EPIC), Cord Blomquist of the Competitive Enterprise Institute, and Amber Taylor of O’Melveny & Myers LLP. Moderating this discussion will be Chris Pope of the American Enterprise Institute.

Free for AFF members, $5 for non-members.

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Judge: “Monumental” discovery violations fit for bar discipline

“On Monday, U.S. Magistrate Judge Barbara Major sanctioned five attorneys from Day Casebeer Madrid & Batchelder and one from Heller Ehrman for their roles in ‘monumental’ discovery violations in a patent infringement case between Qualcomm Inc. and Broadcom Corp. She also sanctioned Qualcomm for intentionally withholding ‘tens of thousands of e-mails’ that it should’ve turned over during the litigation. … Major wrote that the attorneys may have violated California Rules of Professional Conduct that prohibit lawyers from suppressing evidence (5-220) and misleading a judge or a jury by false statements (5-200).” (Zusha Elinson, “Will Harsh Ruling Over Qualcomm Discovery Increase Chances of Bar Discipline?”, The Recorder, Jan. 9; “Six Lawyers in Qualcomm Case Sanctioned for ‘Monumental’ Discovery Violations”, Jan. 8; WSJ law blog)

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The evils of food

Kim Severson of the New York Times has this article on the growing interest among parents of food allergies:

Record numbers of parents are heading to doctors concerned that their children are allergic to a long list of foods. States are passing laws requiring schools to have policies protecting children with food allergies. But no one knows why the number of allergies seems to be on the rise, or even if they are rising as fast as some believe.

Ms. O’Brien and leading allergy researchers agree that few reliable studies on food allergies exist. The best estimates suggest that 4 to 8 percent of young children suffer from them, though the reactions tend to grow less serious and less frequent as children grow older.

Even though the science is weak, new laws and policies are enacted under the banner of child safety. Yet as David Bernstein points out, we’ve been down this road before.

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