AP takes a look at the relentless, money-driven efforts of state law enforcement officials and tobacco majors in league together to suppress competition from upstart cigarette-sellers, a story covered often on these columns (see Feb. 15, 2005; Feb. 28 and May 11, 2004, etc.) “‘It’s 46 state attorneys general, the 200 or so wealthiest trial lawyers in the world and the six largest tobacco companies against a bunch of very small businesses who are losing money,’ said Jeremy Bulow, an economics professor at Stanford University.” (Stephanie Stoughton, “Landmark tobacco settlement faces increasing challenges”, AP/Maryville (Tenn.) Daily Times, May 31).
Posts Tagged ‘attorneys general’
Update: Blockbuster late fees
To settle litigation filed by the attorneys general of 47 states, the Blockbuster video chain
has agreed to take down the “No Late Fees” signs in its video stores. Customers will continue to pay extra to rent movies for longer than a week — but Blockbuster won’t call that a late fee.
It will be a “restocking” fee or something similar.
The company also agreed to make refunds available for some customers who paid under the earlier policy, and to pay $630,000 to the state AGs for their pains. New Hampshire and Vermont declined to join the action, with the head of consumer protection in New Hampshire explaining that there hadn’t been complaints from his state’s customers; New Jersey continues to pursue its own suit (see Mar. 10). (Michael D. Sorkin, “Blockbuster settles case over signs advertising no late fees”, St. Louis Post-Dispatch, Mar. 30; Peter Lewis, “State settles Blockbuster late-fee allegations”, Seattle Times, Mar. 30; “N.H. opts out of Blockbuster late fees settlement”, Portsmouth Herald News, Mar. 31).
Canada: provincial tobacco copycat suits
Bad ideas from the U.S. hit Canada ten years later dept.: two Canadian provinces are seeking to replicate the success of state attorneys general in the U.S. and scoop up large amounts of money from tobacco companies through lawsuits without the bother of raising taxes. British Columbia’s legislature followed the lead of several U.S. states (Florida, Maryland and Vermont) and enacted an explicitly retroactive “we win, you lose” statute undercutting tobacco companies’ defenses against cost recoupment. Now Manitoba has joined in, its decision announced by Theresa Oswald, who bears the scary title of Healthy Living Minister. (“Manitoba to back B.C. in tobacco case”, CBC, Feb. 25)(B.C. law).
Lawsuit cash advances
The mushrooming “legal finance” industry offers to advance injury claimants cash on the barrel, to be repaid only if their suits are successful. Some firms have charged effective interest rates exceeding 100 percent a year, but the business generally operates beyond the reach of moneylending laws and has mostly escaped the sort of hostile attention that has been directed at say, the payday loan industry and its alleged “predatory lending“. That may be changing, however. New York Attorney General Eliot Spitzer (who says he gets only unflattering attention in this space?) has reached settlements calling for clearer disclosure of fees from at least ten litigation-cash-advance firms, including one based in New Jersey which billed a client $19,000 for a cash advance of $3,000 two and a half years earlier, later accepting a smaller sum. (Joseph P. Fried, “Waiting To Settle a Lawsuit? Beware of Cash Advances”, New York Times, Apr. 4). For a glimpse of how the business sometimes works, see Barbara Ross, “Costly trip for Zongo family”, New York Daily News, Feb. 14.
More: Financial Rounds (Apr. 5) points out that we shouldn’t assume the legal finance company is actually pocketing an extraordinarily high overall return on its cash advances since in cases where client/plaintiffs obtain neither a verdict nor a settlement it will lose the money. Fair enough; but once again suggestive of the near-parallel with subprime lenders, many of which also must write off a nontrivial share of debt holdings as uncollectable. Do legal finance companies (which of course can screen for case “collateral” based on quality) in fact suffer a rate of nonpayment that much exceeds that of so-called predatory lenders? It would be interesting to find out.
Bible ploy backfires
25-year-old Rhonda Maloney’s car was stuck in the snow early one February morning. Robert Harlan stopped, but not to help: he admittedly raped Maloney. Maloney escaped Harlan’s vehicle and flagged down a passing motorist, Jaquie Creazzo. Harlan responded to Creazzo’s rescue attempt by chasing after her, shooting her three times just outside the Thornton, Colorado police station, paralyzing her in the process. Harlan escaped; Maloney’s body, beaten and shot, was found seven days later. DNA and fingerprint evidence led to Harlan, who conceded the act in his trial, but sought to blame it on drugs. Nevertheless, a jury convicted him of first-degree murder.
At the penalty hearing, two women testified that Harlan had sexually assaulted them, as well. The jury was then instructed by the judge, as per Colorado law at the time, to make an “individual moral assessment” in deciding whether Harlan should receive a life sentence or the death penalty. (As a wise judge once noted to me, the judicial system cannot decide whether someone will die, but only when.)
In the closing arguments, Harlan’s attorneys invoked the Bible, and G-d’s mercy on Abraham, and asked the jury to impose a life sentence. With these instructions, some of the jurors allegedly consulted the Bible itself, and one juror says that a few considered the relevant provisions in Leviticus that countenanced a death sentence for murder. Eight years after the trial, the jurors were dragged in front of the court to testify; several jurors denied seeing a Bible in the jury room, but the judge resolved the disagreement by finding that the jurors did consult the Bible. By a 3-2 vote the Colorado Supreme Court affirmed. The death sentence was revoked, and a life sentence without parole was given.
Tough question: we probably don’t want Leviticus to be the law of the land. The pork lobby would never countenance Leviticus 11:7-8. On the other hand, the Colorado Supreme Court acknowledged that it would’ve been appropriate for a juror to speak the phrase “eye for an eye” in the course of argument during deliberations. And, indeed, during the voir dire, Harlan’s attorney asked one of the jurors about his feeling about that maxim. If jurors can be trusted with following the law in the face of an oral discussion, why does the written word have such power to cloud jurors’ minds? The precedent won’t matter much: Colorado changed its law in 1999 to have judges determine death sentences, though, of course, Ring v. Arizona put the jury back in charge of the decision. It seems a hair was split awfully thin to overturn a death sentence. The dissent seems to have the better of of the argument. (People v. Harlan (Colo. Mar. 28, 2005)); People v. Harlan, 8 P.3d 448 (Colo. 2000); Kirk Johnson, “Colorado Court Bars Execution Because Jurors Consulted Bible”, NY Times, Mar. 29; History Channel documentary; “Murderers’ Row”, Westword, Jun. 7, 2001; Colorado Attorney General Ken Salazar press release, Jun. 24, 2002). The Coloradoans Against the Death Penalty page on the case has additional links. Why didn’t the Court let a new jury resolve the question instead of simply impose a life sentence? I don’t know the answer to that.
Side trivia note: in November 2001, Justin Goetz, armed with three firearms, set the Creazzo family’s car on fire and threatened to shoot his ex-girlfriend, Creazzo’s daughter–but the paralyzed Creazzo defended herself by shooting Goetz first. (Sue Lindsay, “Man sentenced in bid to gun down good Samaritan (17 years in slay attempt)”, Rocky Mountain News, Oct. 3, 2002; AWARE page on Creazzo).
Update: Virginia not-so-primitive, and state mini-FMAs
The Virginia legislature has voted to repeal the state’s law, the only one of its kind in the nation, prohibiting insurance companies from offering coverage of domestic partners as part of employer-provided health plans (see May 31, 2004, next-to-last paragraph). Gov. Mark Warner (D) has announced his intent to sign the bill. The Virginia Chamber of Commerce backed the repeal, citing principles of economic liberty: “If you believe in a free market, then restrictions like this don’t make any sense,” said Chamber vice president for public policy Stephen D. Haner. The repeal was strenuously opposed, however, by Religious Right figures such as Del. Robert Marshall (R-Manassas), and passed the House of Delegates by only a 49-48 margin (Pamela Stallsmith, “House backs letting firms extend health benefits”, Richmond Times-Dispatch, Feb. 25; Lou Chibbaro, Jr., “Va. DP ban repealed by 1 vote”, Washington Blade, Mar. 4; Tim Hulsey, Feb. 25).
On a related topic, last November Michigan voters approved a constitutional amendment providing that “the union of one man and one woman in marriage shall be the only agreement recognized as a marriage or similar union for any purpose” (see Nov. 2). At the time, opponents argued that the measure might well be interpreted to forbid cities, state universities and other public entities from offering domestic partnership benefits to their employees, but proponents of the measure dismissed that notion: a spokeswoman for Citizens for the Protection of Marriage, a group heavily backed by Michigan’s seven Catholic dioceses, told the Detroit News “nothing that’s on the books is going to change. We continue to confuse this issue by bringing in speculation.” However, with the amendment now in effect, the state’s attorney general — to cheers from most of the amendment’s organized backers — has issued an advisory opinion stating that it does indeed prohibit the city of Kalamazoo from providing DP benefits to its employees after the expiration of their current union contract. (Ed Finnerty, “City under fire over same-sex benefits plan”, Kalamazoo Gazette, Mar. 17; Claire Cummings and Melissa Domsic, “Cox: No future same-sex employee benefits”, State News (Michigan State U.), Mar. 17). Don Herzog of Left2Right, who has assembled plenty of links on the story, aptly labels the sequence of events “Bait and Switch” (Feb. 11 and Mar. 18). Update: Feb. 17, 2007 (Mich. appeals court rules benefits illegal under amendment).
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.
N.Y. tobacco fee fracas
Attorney H. Neal Conolly quit the firm of Thuillez, Ford, Gold & Conolly shortly before it won the right to be part of the team of law firms representing the state of New York in the tobacco litigation. He argues, though, that having been involved in a “work in progress” he’s entitled to a share of the $84.3 million in fees payable to his former partners. “Six firms, including the politically connected Thuillez partnership, received a total of $625 million in fees for their role in negotiating the tobacco settlement. Thuillez Ford has had close ties to the Pataki administration and the administration of then New York Attorney General Dennis C. Vacco.” The fees work out to about $13,000 an hour. (John Caher, “Attorney’s Bid for Share of $84.3 Million Fee Moves Forward”, New York Law Journal, Jan. 12). More on N.Y. tobacco fees: see, among other posts, May 11-13, 2001, Jul. 30-31, 2002, and Aug. 10, 2003.
Ohio AG: Attorneys that challenged election results should be sanctioned
“Ohio Attorney General Jim Petro has asked the Ohio Supreme Court to sanction four lawyers who handled a legal challenge, later withdrawn, to last year’s presidential election in Ohio.” The challenge focused on the long lines faced by voters, a claimed shortage of voting machines in African-American neighborhoods, and potential fraud. The AG’s motion calls the election challenge “meritless” and claims it was done for “partisan political purposes.” The motion continues, “A contest proceeding is not a toy for idle hands. It is not to be used to make a political point, or to be used as a discovery tool, or used to inconvenience or harass public officials, or to be used as a publicity gimmick. [It] is a wholly inappropriate forum to address the localized problems of long lines, shortages of machines, failing to receive notice of the proper voting precinct or casting of provisional ballots.” (Reginald Fields, “Attorney general’s call to punish lawyer is reply to election challenge,” Cleveland Plain-Dealer, Jan. 19; Editorial, “Blaming the messengers,” N.Y. Times, Feb. 3). See also earlier posts (Dec. 20; Dec. 15.)
At times they even talk alike
New York’s Eliot Spitzer and Connecticut’s Richard Blumenthal, both subjects of longstanding coverage in this space, go back quite a way together and share a similar approach toward the duties of the state attorney general. A new story from AP’s Hartford bureau is kind enough to quote me saying some not-very-acerbic things about them. (Jan. 23: Stephen Singer, “Friendship another tie between two like-minded attorneys general”, Newsday, and Stamford Advocate).