Overlawyered: Chronicling The High Cost Of Our Legal System

Breaking: Wood v. John O’Quinn ruling

Courtesy of one of the winning attorneys, Overlawyered is the first to have the July 18 arbitration ruling on-line, which, as we reported earlier, rejected O’Quinn’s affirmative defenses and finds that O’Quinn’s overbilling and breach of fiduciary duties to his clients requires him to pay $35.7 million in damages plus interest and attorneys’ fees. Not a great number of surprises in this if you’ve been following our previous coverage (Apr. 15, Jun. 9, Jul. 19), but there is one interesting disclosure: note how O’Quinn used $3 million of plaintiffs’ money to surreptitiously fund a “Baylor study” on breast implants and make it seem like it was something other than a litigation-generated study.

Once again, let us note the irony that trial lawyers recognize the value of mandatory arbitration agreements, even as they wish to deprive other professions of the ability to use them.

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How The Litigation Lottery Kills Shareholder Value

Any event that wiped out $684 billion in shareholder wealth would be described by economists as disastrous. Congress would immediately order hearings, dragging the offending parties before the TV cameras and rushing to offer legislation to rectify the problem.

Yet $684 billion is the amount shareholders lose every year as a result of America’s out-of-control legal system – a figure released in a study by the Pacific Research Institute (PRI).

PRI’s Dr. Lawrence McQuillan examined prior economic “event studies” and determined that the median loss of market value due to a lawsuit was $3.86 million (in 2006 dollars). He then estimated that approximately 177,000 tort cases are filed against publicly traded companies in a given year – generating a yearly loss of $684 billion in shareholder wealth.

With the lawsuit industry booming, that might actually be a conservative estimate. Recent blockbuster cases – such as the litigation threat following Merck’s decision to pull Vioxx – wiped out $25 billion in shareholder value in a single day.

Of course, trial lawyers want us to think that only CEOs and Wall Street tycoons feel the heat from litigation-induced stock plunges. But the most recent figures from the Investment Company Institute tell us that nearly 55 million Americans own mutual funds – 60 percent of which earn less than $100,000 per year. Today, over 50 percent of Americans own stock, compared to just 17 percent in 1980.

The democratization of the equity markets over the past 25 years has extended stock ownership well onto Main Street – from families saving for their children’s education in popular 529 plans to middle class workers socking away retirement funds in their IRAs and 401Ks. Maybe Congress should order hearings after all – and make personal injury lawyers answer for abusing our legal system to pick the pockets of America’s investor class.

Steve Hantler

July 20 roundup

  • Despite seeming majority support in both houses, conference committee on the Hill drops protection against lawsuits for “John Does” who report suspicious security behavior to authorities [PowerLine, Malkin; see May 11, etc.]

  • U.K. town advises holders of allotment gardens: you could be liable if trespasser gets hurt vandalizing your trellises [Gloucestershire Echo; Cheltenham, Prestbury, etc.]

  • School groundskeeper fired for illiteracy sues under ADA; suit’s future may depend on whether he can allege underlying predisposition such as dyslexia [St. Louis Post-Dispatch, StLRecruiting]

  • Large Pakistan bank should pay for my husband’s murder, says Mariane Pearl in lawsuit [NYSun]

  • Tell it to the EEOC, bud: Pennsylvania survey of law firm “diversity” finds plaintiff’s firms lag well behind their business/defense counterparts when it comes to hiring minorities [Legal Intelligencer first and second pieces]

  • Spare a tear for Gov. Spitzer, never realized public life would be such a rough and tumble affair [Kirkendall]

  • Trail of bogus auto accidents and “runners” leads to West Orange, N.J. lawyer and his law firm, say prosecutors [NJLJ; related New Jersey report on insurance fraud, PDF]

  • I’m interviewed re: the Giuliani announcement [Paul Mirengoff @ PowerLine] and publicity in National Journal is nice too [Blog-O-Meter]

  • Two Australian grave owners sue for damages over loss of feng shui [Melbourne Age]

  • You have to let me use your bathroom, I’ve got a note from my doctor [Robert Guest on Texas legislation]

  • New at Point of Law: University of Alberta lawprof Moin Yahya is guestblogging this week on Conrad Black trial, extraterritoriality, antitrust, etc.

  • Quadriplegic sues Florida strip club under ADA because its lap dance room not wheelchair accessible [five years ago on Overlawyered]

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Breaking: John O’Quinn ordered to refund $35 million

Houston plaintiff lawyer John O’Quinn has been ordered to refund at least $35.7 million to more than 3,000 former breast implant litigation clients, according to an arbitration panel decision released today.

With interest and attorneys’ fees, O’Quinn could owe almost $60 million.

O’Quinn required his former clients to agree to mandatory arbitration (a money-saving option the plaintiffs’ bar wishes to preclude other businesses from using). “[I]mproper general expense deductions included professional association dues, flowers, fundraising, other lawyer’s fees, and overhead, the arbitrators said.” A dissenting arbitrator suggested that O’Quinn should also be liable for using money to fund a public relations campaign on his work. (Mary Flood, Houston Chronicle, Jul. 19).

Overlawyered broke this story Apr. 15, and had a followup post June 9.

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Something is Rotten in the State of Delaware

Why have some of the trial bar’s heaviest hitters in asbestos litigation infested Delaware – firms like including Simmons Cooper, Baron and Budd, and the Lanier law firm?

Why did the American Tort Reform Association (ATRA) place Delaware – which has always had a business-friendly reputation – on its “watch list” in the 2005 and 2006 editions of its “Judicial Hellholes” report?

One thing’s for sure – the trial bar’s legal talent isn’t circling Delaware because they love the state’s beautiful beaches.

The problem arises from a series of Delaware Supreme Court decisions that gave trial lawyers the green light to file hundreds of toxic tort cases. Out-of-state law firms are now busy turning Delaware into Ground Zero of the asbestos-litigation morass, but the overwhelming majority of plaintiffs have no connection to Delaware whatsoever. Approximately 80% of the plaintiffs in asbestos cases have never set foot in Delaware.

The numbers are startling. According to ATRA, in the year following May 2004 only 61 asbestos claims were filed in Delaware. But over the next 16 months, 272 asbestos cases were filed – a 345% increase. That number has now increased to 525 asbestos cases filed since May 1, 2005.

Due to this flood of lawsuits, the Delaware Superior Court has scheduled trials in as many as 85 cases to begin on a single day. The Court has also ordered defendants to try multiple cases in multiple courtrooms at the same time.

There are other warning signs. Delaware allows joint and several liability and has no limits on punitive damages. And newly-elected Attorney General Beau Biden is a former plaintiff’s asbestos lawyer.

Other states – such as Texas and Mississippi – have countered the flood of out-of-state lawsuits by enacting venue reforms – a measure that could help prevent the trial bar from turning Delaware into a “judicial hellhole.”

Steve Hantler

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Who was the first legal blogger?

According to Robert Ambrogi of Legal Blog Watch, it may have been me (Jul. 16; more). I actually don’t remember whether there were any other law-related blogs when I started out eight years ago. Pioneers like Eugene Volokh were at that point doing things on the internet, but not yet blogging. It’s also possible that there might have been something going that is no longer published, so that Overlawyered might qualify as the oldest surviving legal blog.

Our very first post is here. For several days after that I believe the only reader was me, since I waited until a few posts were up before I began notifying friends about the site.

Also, David Giacalone contributes a haiku for the occasion (scroll).

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“Family Of Girl Who Married Teacher Sues School District”

Wilmington, N.C.: “The parents of a 16-year-old girl who recently married a 40-year-old former high school coach have filed a lawsuit against the Brunswick County Board of Education, saying school officials failed to protect their daughter.” According to the school board, administrators at South Brunswick High School “closely monitored and limited” the apparent mentoring relationship between student Windy Hager and track coach Brenton Wuchae “but never found evidence of any romance.” On Jun. 18 Wuchae resigned his position and married Ms. Hager. Superintendent Katie McGee stated the next day that “when dealing with tenured employees, suspicion alone cannot warrant dismissal.” Now parents Dennis (“Bubba”) and Betty Hager are suing the school for not doing more, and “have said they reluctantly signed a consent form allowing their daughter to marry her coach”. (AP/WSOC-TV, Jul. 11; WWAY first and second reports; Brunswick Beacon; Wilmington Star-News; ABCNews.com)(via Above the Law).

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Who Wins From Lawsuit Abuse? Hint: It’s Not You or Me.

Some in the news media and elsewhere would have us believe that recent legal reforms have made it a tough time to be a plaintiff’s attorney.

Sounds good, but nobody told that to the trial bar.

The fact is, tort costs in the U.S. jumped 46% in just the pasts five years. As noted in this space yesterday, a new study by the Pacific Research Institute reports that the total direct and indirect costs of lawsuits are a staggering $865 billion (for context, the U.S. spends only about $108 billion a year fighting the war in Iraq).

And one need look no further than a few headlines of late to see our lawsuit happy culture is alive and well. Everyone knows about the $54 million “pantsuit” — that is but one of countless, lesser known meritless suits happening on any given day. Consider:

· “Injured Kid’s Mom Sues ‘Slide Fool’ Coach” A 12-year-old Little League player was injured sliding into second base and his mother filed a lawsuit claiming poor coaching.
· “Perfume Lawsuit.” A Detroit city employee is suing because she claims her co-worker’s perform makes her sick.
· “Cheerleader’s family to sue school district” A Texas couple plans to sue their local school board because their daughter did not make the cheerleading squad.

You and I pay for these abusive lawsuits through higher consumer costs, higher taxes, lost jobs and stifled innovation. And the trial lawyers? With apologies to Mark Twain, rumors of their deaths have been greatly exaggerated. They are alive and well…just ask the Little League coach, the perfume wearer or the Cheerleading captain. I wonder who will be next?

Steve Hantler

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Climbed electric tower on dare

On a $5 dare from friends, 13-year-old Justin Porter climbed 35 feet up an electric transmission tower. Who was to know such an adventure might prove dangerous? 19,700 volts later, his mother, Anna Thebeau, is suing the electric utility, Ameren, saying it should have fenced off the tower against trespassers, should have posted a big warning sign on it, should have designed it so that it could not be climbed up, and should have insulated the wires far overhead. (Jim Suhr, “Ameren asks judge to toss lawsuit over boy who fell from tower”, AP/Bloomington, Ill., Pantagraph, Jun. 12; Steve Gonzalez, “Boy was negligent in climbing power pole, Ameren argues”, Madison County Record, Jun. 11; Brian Noggle (“Because teenagers heed all signs and obey all posted rules”), May 13, 2005). More zapped pylon-climbers here and here (& welcome Michelle Malkin readers).

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