Overlawyered: Chronicling The High Cost Of Our Legal System

After the trial, a red carpet for jurors

They do something nice for you, you do something nice for them:

[Santa Ana, Calif. attorney] Daniel J. Callahan took respect for a jury to a whole new level. His client manufactured blood analyzers used to diagnose illnesses, and it claimed it was defrauded by a firm that supplied its circuit boards. The jury returned a verdict of $934 million. After it was over, he invited jurors to a party at his home. And sent limousines to pick them up.

“Oh my God,” some of his friends said. “You did that?”

“Yeah,” he told them. “It’s legal.”

— David Hechler, “Winning: Successful Trial Strategies from 10 of the Nation’s Top Litigators”, National Law Journal, Jun. 21 (PDF — reprinted at Akin Gump site). And from the same publication:

When his client’s recent rape trial ended in a hung jury, defense lawyer Joseph G. Cavallo decided to hire some of the jurors to get advice, to the tune of $50 an hour. While hiring a juror is not a crime or prohibited by professional conduct rules in most states, ethicists disagree about the propriety of the ever more common practice.”

— Leonard Post, “Hiring Former Jurors as Trial Consultants Catches On”, National Law Journal, Aug. 27. And see Sept. 13 and Sept. 17-19, 1999 (after jury deadlocks in tax fraud trial of eccentric NYC businessman Abe Hirschfeld, he hands each juror a check for $2,500; not seen as illegal; other cases cited).

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Next: a Federal Tobacco Agency?

So what happens if the Bush Justice Department does manage to convince a federal judge (see Sept. 21, etc.) that the U.S. tobacco industry has constituted a “racketeering enterprise” for these many years and ought to pay the government $280 billion? Forbes traces some of the likely fiscal consequences: bankruptcy for even very large tobacco manufacturers; a de facto federal ownership stake in the industry through its role as chief creditor; and higher prices for smokers, who presumably count as an innocent party.

Oddly, the Forbes account has nothing to say about the consequences of a federal victory for the group that currently milks the most money out of the tobacco business, namely the state governments and plaintiff’s lawyers who yearly pocket vast sums from the 1998 multistate settlement (along with, in the former case, vast revenues from taxes distinct from the settlement). A good chunk of this expected future flow of settlement money has already been “securitized”, thus securing a short-term cash windfall for the states and lawyers, by selling it to bond investors; presumably the owners of these bonds are also at risk. Now, as asserted property interests go, the interest of these various parties in the future stream of ill-gotten income from the settlement heist has scant claim to be regarded as sacrosanct; still, it will hardly improve this nation’s reputation for security of property for this industry to be pillaged a second time through flimsy legal theories wielded by high authority. (Daniel Fisher, “Smoking dopes”, Forbes, Sept. 22).

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Calif. anti-Microsoft lawyers to get $112M, not $270M

Townsend and Townsend and Crew and its cohorts are getting only a vast pile of money, not a super-extra-vast pile, for purporting to represent a huge class of California consumers in what Judge Paul Alvarado acknowledged was the not-particularly-risky Golden State car in the Microsoft litigation train. (Brenda Sandburg, “Judge Slashes Fees in Microsoft Class Action”, The Recorder, Sept. 14). For our earlier coverage, see Mar. 31 and May 12 (California cases) and Jan. 11, Jul. 9 and Jul. 25 (fees in MS antitrust suits generally).

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IRS ordered to pay damages for taxpayer’s emotional distress

Now here’s a case you might think would really open the floodgates: Prof. Paul Caron of the University of Cincinnati reports at TaxProf (Sept. 17) that a court has ordered the Internal Revenue Service to pay a taxpayer $10,000 for the emotional distress occasioned by its overzealous collection techniques. The case arose in bankruptcy proceedings, however, and its relevance as precedent for solvent taxpayers is not clear. The $10,000 will be paid at the expense of other taxpayers who presumably will surrender their money in a way that involves no emotional distress for them.

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Bounteous bankruptcies, cont’d: PG&E

A judge’s OK for fees in the insolvency of the giant California utility “puts the final tally for more than three years’ worth of work at about $450 million to $475 million, according to an accounting by the Office of the U.S. Trustee. Of the total, about $100 million goes to law firms representing the utility in different capacities. ” Milbank Tweed originally agreed to charge $595 per hour but now wants that figure revised upward. (Jeff Chorney, “Calif. Bankruptcy Judge OKs About $450 Million in PG&E Fees”, The Recorder, Sept. 16). See Jul. 23, Dec. 6, Nov. 26.

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Copyright litigation for trolls

“‘The trolls have made amazing comebacks. They just keep coming back from the dead,’ said IP attorney Parker Bagley, a partner at New York’s Milbank, Tweed, Hadley & McCloy who in the past has helped the Hummel figurine company protect its copyright status.” (Tresa Baldas, “Trolling for Copyrights”, National Law Journal, Sept. 21).

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ADA suits close another beloved eatery

Once again it’s happening in central California: “After more than 40 years in business, Roy’s Drive-In in Salinas is closing — in part because the owner can’t afford a lawsuit that accuses him of violating the Americans with Disabilities Act.” Jarek Molski of Woodland Hills in southern California, who uses a wheelchair, “is suing Patterson because he claims the restaurant is in violation of the Americans with Disabilities Act. Molski has sued over 200 small businesses for not meeting ADA requirements. …Built in the 1950s, Roy’s Drive-In does not have ramps to access the windows and restrooms, but employees say the business is accessible to all of their customers — including the disabled,” through car-hop service. The restaurant is scheduled to close today. (“Roy’s Drive-In Closing After 40 Years”, TheKSBWChannel.com, Sept. 20; Claudia Melendez, “Roy’s Drive-In to close”, Salinas Californian, Sept. 18). Last year (see Sept. 2, 2003) On Lock Sam, a beloved 105-year-old Chinese restaurant in Stockton, closed after being hit with an access suit.

Complainant Molski has been known to call himself “Sheriff”, and his activities (assisted by lawyer Thomas Frankovich) have caused an uproar lately in central California. His suits repeatedly recycle identical allegations concerning the lack of accessibility of establishments he says he has visited, and demand money over such putative misdeeds such as placing paper towel holders at an incorrect height. Hundreds of residents “filled the Morro Bay council chambers” after Molski hit a dozen local restaurants with suits. (Andrew Masuda, “Residents speak out over ADA lawsuits”, KSBY, Sept. 14). “Customers are calling Molski’s tactics a get-rich-quick scheme,” reported KSBY. Molski is “asking for $4,000 a day until the remodeling is completed,” says Ruth Florence, who owns Ahedo’s Mexican Restaurant in Grover Beach. “That’s ridiculous.” (Carina Corral, “China Bowl owner speaks out”, Sept. 15). More coverage on the same station: Sept. 8, Sept. 9, Sept. 10, Sept. 14.

Nor is Roy’s Drive-In the only casualty: “Owners of The Hungry Fisherman restaurant on Beach Street in Morro Bay say that Molski’s lawsuit caused the establishment to close after 28 years.” (Lindsay Christians, “Disability suits worry Morro Bay”, San Luis Obispo Tribune, Sept. 14). More coverage in the same paper: Sept. 11, Sept. 15, Sept. 15 again, Sept. 16, Sept. 18. San Diego-based lawyer Amy Vandeveld has also represented Molski (Matt Krasnowski, “Flood of ADA lawsuits irks small businesses”, Copley/San Diego Union-Tribune, Sept. 12). For Morse Mehrban’s recent activities in Fresno, see Jul. 9. For much more about disabled-rights filing mills, see Mar. 9 and links from there, and my City Journal article, “The ADA Shakedown Racket“. Update Dec. 12: judge declares Molski vexatious litigant.

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