“Making Civil Justice Sane”

In the Manhattan Institute’s City Journal, Philip K. Howard, president of Common Good and a longtime friend of this site, contributes an essay on fixing our litigation system. Among his topics: the need for a robust principle of assumption of risk; lessons from the U.K., where a “compensation culture” has spread despite a set of legal procedures that is the dream of reformers on this side of the Atlantic; the role of summary judgment and Daubert review; and the role of predictable law in maintaining the principle of the rule of law (Spring).

Sarbanes-Oxley Challenged in Court

In 2002, Congress passed the Sarbanes-Oxley Act in response to the Enron scandal, greatly expanding regulation of American business. It sharply increased criminal penalties for securities law violations, and created an extremely broad new cause of action for employees seeking to sue over alleged retaliation. It also set up the Public Company Accounting Oversight Board (PCAOB) to regulate the accounting firms that audit America’s public companies. The PCAOB has generated endless red tape. Its rules micromanaging companies’ internal controls, which require auditors to examine such minute details as which employee has access to which computer password, cost the American economy billions of dollars, contributing to an overall price tag for Sarbanes-Oxley of at least $35 billion a year.

A small accounting firm, assisted by the Competitive Enterprise Institute, recently filed a lawsuit challenging the PCAOB as a violation of the Constitution’s Appointments Clause. The lawsuit points out that PCAOB’s board is neither appointed by the President with the consent of the Senate, as the Appointments Clause requires for the nation’s principal officers, nor is it picked by the head of an executive branch department, as the Clause requires for “inferior” officers. Yet the board exercises significant authority under federal law, including the power to investigate accounting firms and fine them up to $2 million for inadvertent violations of PCAOB rules. One of Sarbanes-Oxley’s sponsors candidly admitted that the PCAOB would effectively wield “massive, unchecked powers.” PCAOB board members are accountable only to the SEC, whose five commissioners, acting as a group, pick them to serve for a period of five years.

The PCAOB has moved to dismiss the lawsuit on procedural grounds, alleging that the constitutional arguments should have been presented first to the SEC rather than the courts, and that the accounting firm and its co-plaintiff, the Free Enterprise Fund, lack standing to challenge the manner in which the PCAOB’s board is appointed. Today, a federal district judge in Washington, D.C., will hear arguments on the PCAOB’s motion to dismiss.

“Middle-class peeves cost more money than exists”

Via R.J. Lehmann (Mar. 27), here are some figures indicating that the sum total of the alleged costs of other people’s bad behavior may well exceed the total sum of money in existence. To be more specific: start by adding up the claimed health expenses, productivity losses and other social costs of such indulgences as alcohol ($185 billion a year, it’s said with spurious precision), overeating ($115 billion), gambling ($54 billion), and so forth. Then throw in categories such as the costs of crime, time wasted by employees visiting web sites and watching sports events, and so forth. By the time you’re done, Lehmann says, you can “come up with a grand total of $7.39 trillion – well in excess of the $6.70 trillion that actually exists” — at least if you’re willing to include a few dodgy entries in the catalog, such as taxes. (Thomas C. Greene, The Register (UK), Mar. 16).

It’s not hard to see the relevance of this line of logic to themes often dealt with in this space. In the utopia of the litigators we would succeed in charging the social costs of our overeating to the food business, the costs of our gambling to the casinos and lotteries that led us on, the costs of 9/11 to assorted banks, airlines, building owners and Saudi nabobs, the costs of street crime to deep-pocketed entities guilty of negligent security, and so on and so forth for the costs of auto accidents, pharmaceutical side effects, failure to learn in school, domestic violence, etc. It would not be surprising if the sum total of all the different injuries, insults and indignities dealt out to the human race, if monetized at the rates prescribed by advocates, handily exceeded the sum total of wealth on hand to pay, even were the whole wealth of the world placed at the courts’ disposal.

From anti-gun litigation to hunter advocacy?

It seems Robert Ricker, active as an expert witness on the plaintiff’s side in lawsuits against the firearms industry, has now reinvented himself as a “sportsmen’s advocate”. David Hardy, at Arms and the Law, begs to differ with the notion that Ricker is a former “chief lobbyist for the NRA” [National Rifle Association]. (Jun. 25; see Phil Bloom, “New group defies NRA, Brady outfit on gun issues”, Fort Wayne Journal-Gazette, Jun. 25). At Washington Monthly, Christina Larson is promoting Ricker’s activities, but has met with some skepticism from commenters (Jun. 18 and Jun. 20).

Why the Jessica Cutler case matters

For some reason, we haven’t yet covered the Washingtonienne libel suit, where Little Rock law professor Robert Steinbuch revealed he was “R.S.” by filing suit against the infamous blogger, causing Judge Paul Friedman to comment, “I don’t know why this guy thought it was smart to file a lawsuit and lay out all of his private intimate details in an appendix to the complaint.”

Now Wonkette reports that Cutler’s third set of attorneys in the litigation Robert Steinbuch has filed against her, and has not yet retained new attorneys. Why might you care? Because Steinbuch, who waited until May 16, 2005 to complain about a May 4, 2004 blog post, is planning on arguing that every new blog post restarts the statute of limitations for a plaintiff wishing to complain about a blog. (T.R. Goldman, “A Man Scorned”, Legal Times, May 22). If Cutler defends against this argument pro se, Judge Friedman could be induced into an erroneous ruling that makes life difficult for bloggers everywhere. And there’s no reason that Steinbuch’s logic wouldn’t equally apply to computer databases like LEXIS that “republish” mainstream media articles upon request. One hopes Friedman will see through the Steinbuch argument.

A Limit to Special Treatment

A divided Massachusetts Supreme Court has held that disabled employees can be fired for misconduct regardless of whether it results from their disability. Mammone v. Harvard College involved a bi-polar receptionist for a Harvard museum, who was disciplined for misconduct that occurred while in a manic state. He handed out flyers attacking his employer’s wages and spent time on his personal computer rather than working, ignoring pleas from his supervisor to perform his assigned duties.

The court held that state handicap discrimination statutes only protect qualified handicapped people, and that a “disabled individual cannot be a qualified handicapped person ‘if he commits misconduct which would disqualify an individual who did not fall under the protection of the statute.’”

In dissent, Justice Greaney argued that employers should have to put up with “occasional displays of inappropriate, and sometimes bizarre, workplace behavior” resulting from an employee’s disability and give such employees a “measure of special treatment.”

The U.S. Supreme Court has yet to address this issue. The Americans with Disabilities Act distinguishes between alcoholics, whom it expressly recognizes can be disciplined for disability-related misconduct, and other disabilities, about which it is silent on the question of disability-related misconduct.

The Massachusetts courts are usually more pro-plaintiff than the federal courts. For example, they have rejected the U.S. Supreme Court’s conclusion that a correctable condition is not a protected disability.