ABC Good Morning America signs on to the litigation lobby war against freedom of contract by parroting a Public Citizen anecdote about the supposed horrors of arbitration–though the underlying problem (mistaken identity of Anastasiya Komarova) had nothing to do with the arbitration proceeding. Needless to say, none of the benefits of arbitration to consumers was mentioned, and only Public Citizen’s one-sided and misleading statistics were used. Nathan Burchfiel is on the case.
Posts Tagged ‘arbitration’
May 28 roundup
- More on that New Mexico claim of “electro-sensitive” Wi-Fi allergy: quoted complainant is a longtime activist who’s written an anti-microwave book [VNUNet, USA Today “On Deadline” via ABA Journal]
- Your wisecracks belong to us: “Giant Wall of Legal Disclaimers” at Monsters Inc. Laugh Floor at Disneyland [Lileks; h/t Carter Wood]
- New at Point of Law: AAJ commissions a poll on arbitration and gets the results it wants; carbon nanotubes, tomorrow’s asbestos? California will require lawyers operating without professional liability insurance to inform clients of that fact (earlier here and here); and much more.
- Actuaries being sued for underestimating funding woes of public pension plans [NY Times via ABA Journal]
- City of Santa Monica and other defendants will pay $21 million to wrap up lawsuits from elderly driver’s 2003 rampage through downtown farmers’ market [L.A. Times; earlier]
- Sequel to Giants Stadium/Aramark dramshop case, which won a gigantic award later set aside, is fee claim by fired lawyer for plaintiff [NJLJ; Rosemarie Arnold site]
- Privacy law with an asterisk: federal law curbing access to drivers license databases has exemption that lets lawyers purchase personal data to help in litigation [Daily Business Review]
- Terror of FEMA: formaldehyde in Katrina trailers looks to emerge as mass toxic injury claim, and maybe we’ll find out fifteen years hence whether there was anything to it [AP/NOCB]
- Suit by “ABC” firm alleges that Yellow Book let other advertisers improperly sneak in with earlier alphabetical entries [Madison County Record]
- Gun law compliance, something for the little people? A tale from Chicago’s Board of Aldermen [Sun-Times, Ald. Richard Mell]
- Think twice about commissioning a mural for your building since federal law may restrain you from reclaiming the wall at a later date [four years ago on Overlawyered]
Plaintiff: my lawyers cut unfair side deal with Prudential
The law firm of Leeds Morelli & Brown has recently been embroiled in controversy over episodes in which it has settled batches of employment discrimination claims while contemporaneously entering agreements in which the defendants agree to hire it (the Leeds Morelli firm) for substantial sums. Now an African-American woman who was once a vice president at Prudential Insurance and then sued the company for racial bias as a Leeds Morelli client “is asking a federal judge to set aside an arbitration award, alleging her lawyers were given improper financial inducement to keep her claim and hundreds of others out of court. According to Linda Guyden, the company paid $5 million to the law firm representing her and 358 other employees, in return for which Prudential’s total exposure was capped at $10 million and the claims were kept secret just as the company was about to be taken public.” (Mary Pat Gallagher, “Bias Plaintiff Says Lawyer Sell-Out Warrants Vacating of Arbitration”, New Jersey Law Journal, Apr. 8). For a cognate controversy over Leeds Morelli’s settlement of employment claims with Nextel Corp., see Leigh Jones, “Columbia’s Simon Blasts Professors’ Role in Nextel Bias Case”, National Law Journal, Nov. 26; Bluestone, New York Attorney Malpractice Blog, Feb. 12, 2007.
Public Citizen and Arbitration
Lawsuit abuse kills puppies
Blogger Rogier van Bakel is furious (via Balko (h/t Slim)) at his local SPCA because they would rather put a dog to sleep than place it with his family with small children. See, they’re worried about getting sued if the dog bites one of the children. van Bakel can’t believe it: he’s even willing to sign a waiver!
His anger is misdirected. The SPCA didn’t kill his dog; trial lawyers did. Courts’ failure to recognize the right of parties to contract out of excessive liability means that the SPCA has to protect itself against attorneys, and can only do so if they avoid situations where they might be sued. With 20/20 hindsight, the would-be John Edwards will say to a jury: “The SPCA has placed other dogs that bit small children and has been sued for it, yet they continue to place dogs with small children!”, and demand punitive damages. Between judges who won’t recognize the right of contract when it interferes with a lawyer’s paycheck, and legislative efforts to prevent parties from agreeing to contract out of the high costs of the liability system, von Bakel cannot distinguish himself from the families who would blame the SPCA if a dog-attack occurs. The offer of a waiver does not help: the SPCA can’t afford to take the risk that an adoptive family will renege on its agreement not to sue if the dog attacks a child.
Now, perhaps we as a society do not want shelters to place animals in homes with small children. Or perhaps we do. But shouldn’t that be a decision that rests with a legislature, rather than random chance and a jury? But when a jury has the power to exact uncapped damages, an SPCA has to anticipate the regulation through litigation.
van Bakel and Balko direct readers to other organizations that have not yet been saddled with a lawsuit demanding such practices, but they will surely follow in the SPCA’s footsteps when the lawyers get a hold of them. The long-term solution is to insist on elected officials who will appoint judges who respect freedom of contract, and who will pass tort reform measures that put common-sense limits on the power of courts to interfere with every-day activity. Even now in Congress is debating S. 1782, which would put further limits on the power of consumers to opt out of expensive litigation, and receive the benefits of lower costs and increased choice; while President Bush will veto such legislation, an Obama administration with a Democratic Congress would surely vote it into law.
For more on the Congressional and trial-lawyer campaign to reduce consumer choice, see the Overlawyered arbitration section.
Apologies to Mr. van Bakel for the misspelling of his name in the original version of the post.
Fonza Luke v. Baptist Medical Center
Stephanie Mencimer: “That’s when the surprise came: Baptist Health argued that Luke had given up her right to sue back in 1997 when the hospital presented the arbitration agreement—even though she’d refused to sign. Simply by continuing to show up for work, Baptist’s lawyers said, she’d agreed to the terms. Acting contrary to established contract law, which requires both parties to consent to a contract before it becomes binding, a federal judge accepted the hospital’s argument.” Shocking, huh? But not true. Mencimer gets both the facts and the law wrong:
- Baptist Health’s argument didn’t come out of nowhere: it was expressly told to Luke at the time that “the program is binding on all employees” and her decision to “continue her current employment, after receiving notice of this Program, will mean that you have agreed to and are bound by the terms of this Program.”
- Luke agreed in court that she had notice of the program, that she understood the program, and that she continued working at the hospital.
- The court thus found that Luke consented to the agreement; in doing so, it didn’t act “contrary to established law” at all; several Alabama Supreme Court opinions recognized that continued employment is sufficient consideration to support an arbitration agreement, and that agreeing to remain employed by an employer with a mandatory arbitration program is conclusive evidence of assent. (Of course, under Erie, federal courts are bound by state supreme court interpretations of state law.)
- The district court’s opinion was affirmed per curiam by a three-judge panel of the Eleventh Circuit that included two Clinton appointees and a Carter/GHW Bush appointee.
- And, oh, by the way, Luke began arbitrating her case before the court even ruled, showing that she understood where the law actually was, though now she claims otherwise.
Luke, having received the benefit of an employment agreement that was able to offer her higher wages because of her agreement to arbitrate employment disputes, sought to rewrite the contract after already taking advantage of it. (Update: a commenter ironically signing him- or herself as the Multistate Bar Exam has a nice cite to the Restatement.)
Arbitration and “coercion”
Relevant to a recent comment discussion, words of wisdom from Judge Easterbrook in IFC Credit Corp. v. United Business & Indus. Federal Credit Union:
Ever since Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991), enforced a forum-selection clause printed in tiny type on the back of a cruise-ship ticket, it has been hard to find decisions holding terms invalid on the ground that something is wrong with non-negotiable terms in form contracts. See also, e.g., Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 32 (1991) (unequal bargaining power does not justify refusal to enforce an arbitration clause in a form contract); Seawright v. American General Financial Services, Inc., 507 F.3d 967 (6th Cir.2007). As long as the market is competitive, sellers must adopt terms that buyers find acceptable; onerous terms just lead to lower prices. See, e.g., Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir.1997); ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir.1996); George L. Priest, A Theory of the Consumer Product Warranty, 90 Yale L.J. 1297 (1981). If buyers prefer juries, then an agreement waiving a jury comes with a lower price to compensate buyers for the loss-though if bench trials reduce the cost of litigation, then sellers may be better off even at the lower price, for they may save more in legal expenses than they forego in receipts from customers.
There is no difference in principle between the content of a seller’s form contract and the content of that seller’s products. The judiciary does not monitor the content of the products, demanding that a telecom switch provide 50 circuits even though the seller promised (and delivered) 40 circuits. It does not matter that the seller’s offer was non-negotiable (if, say, it offered 40-circuit boxes and 100-circuit boxes, but nothing in between); just so with procedural clauses, such as jury waivers. As long as the price is negotiable and the customer may shop elsewhere, consumer protection comes from competition rather than judicial intervention. Making the institution of contract unreliable by trying to adjust matters ex post in favor of the weaker party will just make weaker parties worse off in the long run. Original Great American Chocolate Chip Cookie Co. v. River Valley Cookies, Ltd., 970 F.2d 273, 282 (7th Cir.1992) (“The idea that favoring one side or the other in a class of contract disputes can redistribute wealth is one of the most persistent illusions of judicial power. It comes from failing to consider the full consequences of legal decisions. Courts deciding contract cases cannot durably shift the balance of advantages to the weaker side of the market; they can only make contracts more costly to that side in the future, because [the other side] will demand compensation for bearing onerous terms.”).
Unclear on the concept
Bizarro-Overlawyered hasn’t quite gotten the hang of how to put forward their propaganda campaign to deprive consumers of the choice of arbitrating disputes.
A New Orleans woman, Patricia Dicorte, says she got ripped off by her contractor in May 2007, so she took him to an arbitrator, and in July 2007—a fraction of the time it would take in a civil suit of that magnitude—she had an arbitration ruling in her favor for $219 thousand. Unfortunately for her, she then took it to the cesspool of Orleans Parish Courts for enforcement, and Democratic Judge Yada Magee—a colleague of the cousin of the contractor—violated the Federal Arbitration Act and threw out the arbitrator’s ruling. (Dennis Woltering, “Despite arbitrator’s ruling woman still fighting contractor”, WWL-TV, Feb. 25). This will eventually be reinstated on appeal at some unnecessary expense, but somehow Kia Franklin is advertising this fiasco as an example of problems with arbitration (!), rather than as a problem with the judicial hellhole of New Orleans. (If the judge isn’t willing to give a fair ruling for the consumer in something as straightforward and administrative as arbitration judgment enforcement, what makes Franklin think that the consumer would have had a better chance with that judge in a civil trial?)
Judge Magee is best known for railroading negligence findings for 1800 plaintiffs against Dow Chemical in bogus silicone breast implant litigation in 1997, a decision thrown out by a Louisiana appellate court in 2002. Spitzfaden v. Dow Corning Corp., 833 So.2d 512 (La. App. 2002).
Scruggs: government releases wiretap transcripts
Big news day in the Scruggs scandals: a judge has turned down defense motions to throw out the charges and to suppress the evidence, a hearing on those motions has showcased the testimony of government informant Tim Balducci, and the government in responding to the motions has released extensive and often quite damning transcripts of the wiretap conversations among the principals. Folo as usual provides the most in-depth coverage, with posts on the judge’s rulings here and here, on the hearing and Balducci’s testimony here and in numerous preceding posts, and on the wiretap transcripts here and in numerous preceding posts. David Rossmiller is on the judge’s ruling here, and on the hearing and transcripts here. More: Patsy Brumfield, NEMDJ, was at the courthouse.
Picking through the rich contents of the transcripts and Balducci’s testimony is going to keep Scruggsians busy for a good long time. In the meanwhile, some odds and ends:
* Want to review all the major events of the central alleged bribery case, skillfully narrated in chronological sequence? Of course you do. Folo’s NMC has it in six parts beginning here and ending here (follow links to find those in between).
* John Grisham’s “Too Dumb for Dickie” theory encounters some serious strain [Rossmiller and again]
* Mississippi legislature won’t give AG Jim Hood authority to wiretap his enemies suspected white-collar criminals. Gee, wonder why that might be? [WLBT via Lange] Plus: description of Hood as a Pez dispenser coughing out multi-million-dollar cases for his chums [Rossmiller]
* More unpretty details surface on Scruggs’s (and other lawyers) use of informants in Katrina litigation [Rossmiller] and tobacco [Lange]
* More Hood: prosecuting the accused judge-bribers “would be like prosecuting a relative” [Salter, Clarion-Ledger, Rossmiller, Folo]. Give back tainted money? “That’s up to DAGA [Democratic Attorneys General Association]” [Lange]
* Former Louisiana attorney general Richard Ieyoub gets a mention, as does Sen. Trent Lott [Folo, same] Update: feds investigating what Sen. Lott knew [WSJ]
* Small world, Mississippi: member of arbitration panel that awarded Scruggs huge fees was later hired by the tort potentate for legal work [Lange]
* Blogosphere has been a major source for breaking news on the scandal [LegalNewsLine]
* Liberal columnist Bill Minor recalls when a certain Sen. McCain let Dickie Scruggs and Mike Moore run their tobacco lobbying campaign out of his Hill office [NEMDJ via Folo; more at PBS “Frontline” and NY Times]
Early termination cell phone fees
Lawyers purporting to act on behalf of Verizon Wireless customers are seeking $1 billion, and an arbitrator says the claim can go forward as a class action. Wait a minute, aren’t we always hearing that arbitration is set up so this sort of action would never stand a chance? (Jeffrey Silva, “Verizon Wireless faces class action over ETFs”, RCR Wireless News, Jan. 28; Jason Mick, DailyTech, Jan. 30).