The costs of litigation

Sun General Counsel Mike Dillon, writing about litigation, repeats something I’ve long said:

Litigation is costly. Incredibly costly. But it is not the expense that is the real issue, it’s the diversion of resources. Time employees spend reviewing e-mails and documents, educating lawyers and preparing for depositions is time away from the business. That’s the real cost of litigation.

Note that these costs are not included even in PRI’s $865-billion/year estimate of the expense of jackpot justice, much less the trial-lawyer critiques of the PRI study, which is why that number, even with its problems, may well be an underestimate of the true expense.

While Sun’s strategy of keeping quiet while litigation was pending may have made sense in this particular competitor-to-competitor litigation, I think it is a very large mistake in the context of trial lawyers and activists targeting companies.

Litigation and the honest working guy

Don Brunell, president of the Association of Washington Business, in the Daily Columbian (via Carter Wood):

There is a mistaken assumption that a small proprietor slapped with a lawsuit simply lets his insurance company handle it. Wrong. Many business owners shoulder the costs themselves out of fear of higher premiums or the risk that their insurance company will cancel their coverage. Some start-up businesses simply cannot afford liability insurance. In fact, the [Institute for Legal Reform] study shows that, in 2005, small business owners paid $20 billion out of their own pockets for court costs and out-of-court settlements.

Finally, the smallest businesses, those with revenues of less than $1 million, paid $31 billion in lawsuit-related costs. Let’s put that in perspective. These businesses, which represent just 6 percent of total business revenues, paid more than 20 percent of the national tort tab. These lawsuits really do hit the “little guy” who struggles to make ends meet.

Guest bloggers sought

It’s getting to be that season. Guest blogging for a week at Overlawyered is a great way to call attention to your blog (you do have one, don’t you?) or dip your toe into blogging if you’ve written in other formats. Return guestbloggers are more than welcome too. If the idea appeals to you, drop me a line at editor – at – [this domain name] – dot – com.

June 21 roundup

Damned if you do, damned if you don’t files: Cynthia Haddad v. Wal-Mart

Pharmacist Cynthia Haddad, when she left the pharmacy unattended, allowed a technician to use her computer security code to issue prescriptions, including a fraudulent prescription for a painkiller, something that could have exposed Wal-Mart to enormous liability if someone had been injured by the illegally dispensed drugs. So Wal-Mart fired Haddad. Haddad sued, claiming that the real reason Wal-Mart fired her was because she had asked for a raise to a manager-level salary, though she did not perform manager-level duties such as budgeting, and that it was thus sex discrimination. (Haddad claims that Wal-Mart “never” fired a male manager for her infraction, which seems implausible at best; Wal-Mart says it did fire male pharmacists for this. Why is this even a factual dispute for decision for a jury? This seems like a matter that merits a partial summary disposition to prevent one side from out-and-out lying.) This somehow got to a jury, which awarded $2 million, including $1 million in punitive damages. Among the questionable procedures used to railroad Wal-Mart at trial was permitting Haddad to present an attorney to testify as an expert witness on human resources procedures. Wal-Mart indicated it disagrees with the jury’s decision and is studying whether an appeal is worthwhile. Massachusetts courts are not a friendly place for defendants. Wal-Mart’s attorney did not comment to the press, permitting the plaintiffs’ lawyer to generate rather one-sided press coverage. [Berkshire Eagle June 19; Berkshire Eagle June 20; Reuters/USA Today; Massachusetts Lawyers Weekly]

Updates – June 20

Updating a few earlier stories we’ve discussed here…

  • Two weeks ago we noted that a new online attorney rating site, Avvo.com, was being threatened with a lawsuit by John Henry Browne, a disgruntled Seattle criminal defense attorney. (Jun. 10). Well, whatever the merits or weaknesses of Browne as an attorney, one thing you can say about him is that he doesn’t make idle threats; last week, he filed suit against Avvo. The suit, designated a class action, contends that Avvo’s ratings are flawed. From all accounts, that’s almost certainly true, but as I mentioned in my previous post, it’s not clear that this presents a valid cause of action; Avvo is entitled to rank lawyers differently than John Henry Browne wants them to. In an attempt to get around this problem, the complaint trots out various “consumer protection” arguments using notoriously vague and broad statutes that don’t require that the plaintiffs identify any consumers who have been harmed. (Illustrating perfectly the phenomenon Ted discussed on Jun. 18).

    Oh yes, and Browne also claims in the complaint that “at least two clients” of his fired him (in less than a week!) because of his “average” rating on Avvo. Let’s just say I’m rather skeptical of Mr. Browne’s ability to prove such a claim.

    The law firm handling this class action case? Overlawyered multiple repeat offender Hagens Berman. (Many links.)

  • Remember that lawsuit where Illinois Chief Justice Robert Thomas sued the Kane County Chronicle for defamation? (Apr. 2, Nov. 2006) Well, when last we heard, the libel award — originally an absurd $7 million — had been reduced to $4 million by the trial judge. Not surprisingly, the Chronicle still is unsatisfied, and does not feel it can get a fair shake from the very Illinois court system headed by Thomas; it has now filed a federal lawsuit claiming its constitutional rights have been violated. Named in the suit are Thomas, the trial judge who heard the case, and the rest of Thomas’s colleagues on the state Supreme Court.
  • Kellogg’s bows to threats of frivolous litigation coming from the Center for “Science” in the “Public Interest”; agrees to limit advertising of its cereals to children.

    Of course, this is portrayed as an issue of advertising, but as Michael Jacobson of CSPI admits, this litigation strategy is simply an attempt to drive products he disapproves of from the market. And now that Kellogg’s has capitulated, certain politicians are trying to force other companies to do the same.

    Originally: Jan. 2006.

  • We had previously reported (May 17) that the unfair competition lawsuit between Equal and Splenda had settled. Turns out that the two sides are still fighting, with each side accusing the other of reneging on the deal. (LI)

“Builders, Contractors Hammer Consumer Sites”

In two separate New Jersey cases, building contractors RSA Enterprises and WBG Builders are suing websites that carried consumer complaints about them; in a third case in Maryland, a suit by SCS Contracting Group names as defendant the well-known site Angie’s List, which compiles user reviews of home-improvement services. (Truman Lewis, ConsumerAffairs.com, May 4). More: John Kelly, “Homeowner’s Web Gripe Draws Contractor Lawsuit”, Washington Post, Mar. 13 (SCS Contracting versus Angie’s List); Eric Goldman, Apr. 25 (RSA Enterprises versus Rip-Off Report, and Google). P.S. Eric Goldman adds further details.

Oz: “Gambler loses, sues casino”

Behrouz Foroughi, 43, says he volunteered for the exclusion list at the Star City casino and was told he would be denied entry, but was admitted anyway and lost large sums due to his gambling compulsion. (Gemma Jones, Daily Telegraph, Jun. 19). Similar claims have been tried a number of times in the U.S. but without much success: see Apr. 28, 2004, Apr. 19, 2005, Nov. 22, 2005 (France), etc.

Flashback: the tort system in action in the case of Curtis Campbell

In 1981, Curtis Campbell (Campbell) was driving with his wife, Inez Preece Campbell, in Cache County, Utah. He decided to pass six vans traveling ahead of them on a two-lane highway. Todd Ospital was driving a small car approaching from the opposite direction. To avoid a head-on collision with Campbell, who by then was driving on the wrong side of the highway and toward oncoming traffic, Ospital swerved onto the shoulder, lost control of his automobile, and collided with a vehicle driven by Robert G. Slusher. Ospital was killed, and Slusher was rendered permanently disabled. The Campbells escaped unscathed.

Guess quickly: which plaintiff in the resulting twenty years of litigation won the biggest jury verdict?

How many of you say Ospital?

How many of you say Slusher?

You’re both wrong. The plaintiff with the biggest jury verdict was Curtis Campbell, whom a jury awarded an incredible $147.6 million.

Read On…