The Washington Monthly’s Amy Sullivan really admires the lawsuit filed against the movie rental chain over its new “no more late fees” pricing structure, but blogger Mad Anthony doesn’t. See Jessica Seid, “Blockbuster sued over late fees”, CNN/Money, Feb. 18. Update Apr. 23: Blockbuster settles with AGs of 47 states.
Florida asks jury to cherry-pick
Alliance Capital Management fund manager Al Harrison was a contrarian. He invested in troubled companies whose stock value is depressed; the companies he picks rebound often enough that he gets a good return. Florida liked this strategy, and gave Harrison $344 million of public pension funds to invest in 1984; by 2001, he had turned it into $3.57 billion, an above-market 15% rate of return, albeit a volatile one that included some huge losses in technology stocks. Alas, this record of high-risk, high-return strategy includes one particular stock, Enron, that did particularly poorly, and there was a $281 million loss on that series of transactions–about a third of a percent of the $100 billion pension fund. (Pension participants aren’t affected by these fluctuations because Florida has a defined-benefit plan; if, however, the fund becomes insolvent, taxpayers would be on the hook to the extent federal law provides pension fund insurance.)
Now, with the benefit of hindsight, Florida is cherry-picking. Florida had access to data about what Harrison was trading throughout the term of Alliance’s contract with the state; Harrison’s trades were consistent with that contract; indeed, Alliance met the contract’s performance goal. But Florida is dissatisfied. Florida complains that Harrison’s portfolio construction wasn’t completely consistent with a description of strategy in an Alliance brochure issued in March 2000. And, with the benefit of hindsight, Florida has decided that it prefers the terms of that particular brochure to the terms of the contract, and is asking a jury to retroactively balance the portfolio and award the state a billion dollars in damages.
Florida also complains that there was an Alliance board member, Frank Savage, who coincidentally served as a board member for Enron. Alliance notes that Savage couldn’t have influenced trading without violating insider trading laws. (And, indeed, a Florida state attorney general investigation turned up nothing nefarious; Alliance had strict rules prohibiting board members from discussing investments in their associated corporations.)
Finally, Florida complans that Harrison overruled one of his analysts, Annie Tsao, who didn’t like Enron stock, without informing the state of Tsao’s opinion. Florida hasn’t indicated, however, that it will give back money for the profitable stock purchases where Harrison disagreed with one of his twenty analysts. (And apparently Tsao’s objective analysis had merely downgraded Enron from a top-rated 1 to a 2 while reaffirming her earnings outlook, though she subjectively expressed skepticism in at least some communications.) The idea that the investor should be notified every time there’s an internal disagreement between the fund manager and an analyst about a potential investment strategy seems questionable at best, but the state is inviting a jury to impose that rule retroactively. (David Royse, “Trial opens in retirement fund Enron loss case”, AP, Mar. 8; Joni James, “Who pays when a money manager makes a bad call?”, St. Petersburg Times, Mar. 6; Harriet Johnson Brackey, “Enron among various targets”, Miami Herald, Mar. 9; David Barboza, “Analyst Dropped Enron, but Her Firm Loaded Up”, NY Times, Oct. 15, 2002; James L. Rosica, “Trial centers on manager”, Tallahassee Democrat, Mar. 9; Joni James and Alfonso Chardy, “State’s losses get scrutiny”, Miami Herald, Feb. 27, 2002).
My firm represents Alliance in other matters. As with all of my posts, I speak for neither my firm nor any of its clients.
Michael O’Keefe, Sr. / ATLA on Med-Mal Reform
Reader Stan Sipple writes me that “a Louisiana attorney several years ago took you up on your proposal that plaintiffs’ attorneys should run insurance companies. Was this what the trial lawyers had in mind?”
Me, I’m sad; it’s been two weeks since I wrote that column. While ATLA issued a press release March 3 claiming and complaining that congressional legislation on caps won’t make medical malpractice insurance cheaper, they’re not taking advantage of my modest proposal how to simultaneously prove their point about tort reform, improve medical care, reduce malpractice insurance rates, and make more money. I can’t imagine why they’re passing up this opportunity if they believe what they say in their press release.
“SEC Chair Scolds Hedge Fund Lawyers”
“‘Think how much anguish we could have avoided if a few more lawyers had pointed out to their hedge fund clients that late trading of mutual fund shares is illegal, as are duplicitous market-timing arrangements,’ [Securities and Exchange Commission chair William] Donaldson told securities lawyers at the Practising Law Institute’s annual SEC Speaks conference.” (Ron Orol and Donna Block, The Deal, Mar. 8).
Update: Mohr v. DaimlerChrysler $53 million verdict
DaimlerChrysler statement on the suit after the jump; it’s almost scandalous what the press accounts (Feb. 26)left out, but not as scandalous as the verdict. The unbelted Vickie Mohr was killed from blunt force trauma to the back of the head–caused when she was hit by the 245-pound unbelted passenger in the backseat. (The jury found that passenger, Carolyn Jones, responsible for only a small percentage.) Brett McAfee, the 17-year-old driver who killed the two plaintiffs when he fell asleep at the wheel going 45 mph, but was found slightly less than half-responsible by the civil jury, pleaded no contest to vehicular homicide criminal charges. (via Dodgeforum, which has an impressive array of photos of the totalled Durango Caravan).
Priceless pets, cont’d
Boston: “The family of Cassius, the dog killed by leaking electricity from an old NStar Electric lamppost site, said last night it had turned down $200,000 in ‘comfort money’ from NStar and is demanding $740,000 from the utility or it will sue. The family said it picked the dollar figure because it equals NStar chief executive Thomas J. May’s annual salary.” It’s so hard to be an ordinary family grieving for a lost pet — much fairer if we were an affluent family grieving for a lost pet (Peter J. Howe, “Dog’s family demands $740,000”, Boston Globe, Mar. 8). For earlier stories on pets’ sentimental value and the dollar figures attached thereto, see Jul. 30, Nov. 21 and Dec. 10, 2003, etc.
More: Robert Ambrogi (LawSites) thinks I should have included more details from the Globe story that tend to cast the DeVito family’s suit in a more sympathetic light, such as that (his words): “The family would donate most of the $750,000 to the Massachusetts Society for the Prevention of Cruelty to Animals and the Animal Rescue League.” My response:
I wonder how you reach the conclusion that the family “would donate most of the $750,000” ($740,000 per the Globe) to animal charities. At the press conference, according to the Globe, attorney John G. Swomley — who was at pains to portray the suit as not a money grab — said the family plans on “keeping $200,000, plus enough to pay for four years of college for Kyle and his brother Alec, 10”. At, say, Boston College (currently $37,413 room and board, and who knows how high the figure’ll be by the time the boys are grown?) that amounts to roughly another $300,000 ($37K x four years x 2 boys), leaving $240,000 of the settlement. And assuming Swomley takes, say, 30% of the $740,000 = $220,000 for his fee, that would leave a grand total of $20,000 to go to the animal charities — assuming there aren’t expenses and that sort of thing to be charged against the remainder.
You’re probably right that I should have expanded my three-sentence summary of the case at Overlawyered to delve further into these matters, since they afford valuable insight into how lawyers can manage the p.r. aspects of their cases.
Further: his response. (& letter to the editor, Mar. 15).
Tsunami lawsuit
Pro sports & intellectual property
It’s become a thriving area for lawyers, with a growing volume of litigation much of it aimed at fan activity, such as fantasy sports leagues and web-based retransmission of game broadcasts (Tresa Baldas, “Pro Sports: Technology Changes Rules of the Game”, National Law Journal, Mar. 4).
Chimpanzee victim St. James Davis v. West Covina
Former NASCAR driver St. James Davis is in critical condition after losing a nose, a cheek, an eye, his lips, a foot, all of his fingers, his testicles, and part of his buttocks to a disturbingly gruesome chimpanzee attack at a wildlife sanctuary Thursday; his wife, LaDonna, also lost a thumb before the escaped chimps were shot by the sanctuary owners.
The Davises were visiting a different chimpanzee, their former pet, Moe. They had previously settled a civil rights lawsuit against West Covina for $100,000 as part of the fallout stemming from the city criminally charging the couple for keeping a dangerous animal. His lawyer, Gloria Allred, accused the city of overreacting when Moe bit a policeman and a woman in separate incidents, and succeeded in creating enough of a press-storm that the city backed down after having poured a quarter million dollars into Moe-related legal fees. (The policeman required $250,000 in medical treatment.) Davis won a previous lawsuit against West Covina in the 1960s allowing him to keep his chimpanzee in town because a judge held the chimp “doesn’t have the traits of a wild animal and was somewhat better behaved than some people.” But never fear, Ms. Allred is on this case also, and has been cited by the press as demanding “immediate answers”; the couple hasn’t decided whether they’ll sue. (David Pierson and Mitchell Landsberg, “A Primate Party Gone Horribly Awry”, Los Angeles Times, Mar. 5; Christina L. Esparza, “Saga of Moe takes a bizarre twist”, San Gabriel Valley Tribune, Mar. 3; Christina L. Esparza, Ruby Gonzales, and Karen Rubin, “Moe’s owners mauled”, San Gabriel Valley Tribune, Mar. 4; AP, Mar. 5; “Woman Has Faith in Chimps Despite Attack”, Good Morning America, Mar. 7; “Officials try to find what caused chimp attack”, KGET-17, Mar. 7; Cara Mia DiMassa, “2 Cities Can’t Get the Hang of Chimp’s Situation”, Los Angeles Times, May 10, 2002; Linda Deutsch, AP, Oct. 15, 1999; AFP, Feb. 4, 2000 (kibo commentary); Richard Winton, “Los Angeles to remain Moe-less”, Los Angeles Times, Jul. 21, 2001; Jeff Jardine, “Chimp charm is film illusion”, Modesto Bee, Mar. 6). Once upon a time, Moe was considered a leading candidate for the principle that animals should have court standing. (Amanda Onion, “Lawyers: Animals Should Be Able to Sue”, ABC News, May 13, 2002).
Iowa Poetry Awards
“An online group of self-described ‘literary watchdogs’ is threatening a class-action lawsuit against the UI Press, alleging that recent awards for poetry were unfairly given to writers with ‘illicit’ ties to the program. Postings at foetry.com demand a return of $20 reading fees after the 2004 Iowa Poetry Awards — open to anyone inside or outside the university — were given to people with ties to the UI. University officials note that the contest employs blind judging, in which the authors’ names are removed from the manuscripts.” (Drew Kerr, “Two allege bias in UI Press poetry awards”, Daily Iowan, Feb. 28)(via Schaeffer who got it from Maud Newton).