Overlawyered: Chronicling The High Cost Of Our Legal System

Posts Tagged ‘Delaware’

John Torkelsen in plea deal

John Torkelsen, once described by Fortune as “the damages expert of choice for the entire plaintiffs side of the securities bar”, is “expected to plead guilty to reporting false information to a government agency in a D.C. federal court Oct. 21.” The charge arises from Torkelsen’s actions in handling a venture capital fund, rather than from his courtroom work. Before now, however, Torkelsen has declined to cooperate with prosecutors, and a change in that posture could give new impetus to the ongoing federal investigation of the law firm of Milberg Weiss Bershad Hynes & Lerach, for whom Torkelsen was a “notoriously effective expert witness … in dozens of securities suits throughout the 1990s,” according to sources interviewed by Law.com. (Justin Scheck, “Charge Against Expert May Spur Probe of Milberg Weiss”, The Recorder, Oct. 10).

For more on Torkelsen and the venture capital controversy, see Barbara Fox, “Unraveling the Torkelsen Case”, U.S. 1, May 7, 2003. Peter Elkind’s Sept. 4, 2000 expose for Fortune (“The King of Pain is Hurting“) reported:

Torkelsen’s calculations of shareholder losses routinely supported the hundreds of millions of dollars Lerach sought — and he was fabulous in front of a jury should a company decide to fight….Over more than 20 years, Torkelsen’s firm, Princeton Venture Research, not only had made tens of millions working for Lerach’s firm Milberg — by far its biggest client — but also had become the damages expert of choice for the entire plaintiffs side of the securities bar….

He sent thousand-dollar gift baskets as baby presents, and he invited his many friends in the plaintiffs’ bar to an annual black-tie Christmas party that was mind-boggling in its extravagance. At one, guests arriving in Torkelsen-provided stretch limos were heralded by buglers and greeted by costumed Disney characters. Entertainment was invariably provided by a big-name act: Little Richard one year, Aretha Franklin another.

For more on the Milberg probe, see Jun. 27, Jun. 28, Aug. 29, Point of Law Aug. 8, etc. On the reliability of Torkelsen’s numbers as submitted to courts, see the Delaware Chancery Court’s memorandum (PDF) in Cinerama v. Technicolor (2004), a non-Milberg case, pp. 10 et seq.

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Suing anonymous bloggers

The Delaware Supreme Court has ruled that a defamation plaintiff is not automatically entitled to compel an internet service provider to lay bare the blogger’s identity, absent a showing of sufficient facts supporting the defamation case to defeat a motion for summary judgment. (J.L. Miller, “Del. court protects blogger’s identity”, WIlmington News-Journal, Oct. 6; Francis Pileggi, Oct. 6). Prof. Bainbridge (Oct. 6) calls it “a major win for bloggers and the First Amendment.”

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Class action fees slashed — or not

Last month Vice Chancellor Leo E. Strine Jr. of Delaware’s Chancery Court slashed by three-quarters a $4.95 million fee request by class action lawyers who intervened on behalf of shareholders in a dispute involving Cox Enterprises, the media company; he blasted some of the lawyers’ filings as “dashed off complaints” and “hastily drafted throwaways” and questioned whether they had done much to influence the final disposition of the transaction. In Atlanta, on the other hand, “Fulton Superior Court Judge Constance C. Russell awarded all of the requested $1.25 million in fees to Atlanta lawyers Corey D. Holzer and Michael I. Fistel Jr. of Holzer & Holzer; Steven J. Estep of Cohen, Cooper, Estep & Mudder; and other lawyers” in parallel class action litigation arising from the same dispute. “A key difference between the two cases was that a group of shareholders in the Delaware case filed official objections to the fee requests, while in Atlanta, the lawyer for those shareholders informally submitted information from the Delaware case to argue that the lawyers in the Fulton case provided little, if any, benefit to the shareholders they represented.” The objecting lawyer in both the Delaware and the Georgia proceedings was Elliott J. Weiss, a professor at the University of Arizona’s James E. Rogers College of Law. Apparently feeling that Weiss’s less-than-official submission could be brushed aside, Judge Russell issued an order approving the fees without elaboration. (Steven H. Pollak, “Ga. Lawyers in Cox Case Escape Fee-Slashing Endured by Delaware Counterparts”, Fulton County Daily Report, Jul. 18). More: Francis Pileggi (Jun. 24) has posted a copy of the Delaware decision (PDF) and Larry Ribstein has commented Jul. 20 (referring to “Chancellor Strine’s classic-to-be opinion”) and again Jul. 29 (“The vice chancellor paints a picture of truly parasitic lawyers inserting themselves into a corporate transaction and demanding to be paid big bucks to go away.”)

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Coleman v. Morgan Stanley

Financier Ronald Perelman wins $604 million, with a request for punitive damages still to come, against Morgan Stanley on claims that the Wall Street firm defrauded him seven years ago when he sold camping equipment maker Coleman to Sunbeam Corp., a Morgan client. (Bloomberg/New York Times/AP). The unexpectedly large verdict came after the Florida state judge presiding over the case blasted Morgan and its law firm for not responding in a forthcoming way to requests for discovery of electronically stored records, and instructed the jury to infer that the withheld documents demonstrated fraud. Blog commentary: Monica Bay, Francis Pileggi, Lisa Stone (and earlier), Litigation Support Guy (and again), Tom Kirkendall (and earlier), Really Think. More: jury votes $850 million in punitive damages (Jill Barton, “Perelman Wins $1.4 Billion Total in Suit Against Morgan Stanley”, AP/Law.com, May 19); Tom Kirkendall comments (May 18). Updates Dec. 17: Morgan Stanley files appeal; Mar. 22, 2007: appeals court overturns verdict.

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“Which merger deals draw lawsuits?”

…asks Forbes. Its answer: “The ones that are sure to generate big fees, of course.” University of Arizona law professor Elliott Weiss and New York University economist Lawrence White studied lawsuits filed in Delaware Chancery Court over mergers of Delaware companies between 1999 and 2001. Of 564 mergers, 104 attracted lawsuits, and there was a pattern: the deals sued over “were among the largest, often involved all-cash offers and in more than half the cases the acquiring company owned stock in the firm it was buying.” As it happens, “Delaware law subjects cash takeovers and buyouts by controlling shareholders to much tougher scrutiny than most stock-swap mergers” and in such deals acquirers frequently anticipate negotiations with independent directors, and thus enter a somewhat lower initial bid to leave scope for concessions. It is common, however, for the lawyers who sue to wait for the deal price to rise and then claim credit for having made that happen, thus entitling them to compensation: “according to the study, they sought and got fees averaging $1,800 an hour in the cases where the price rose.” The authors “conclude that in many cases lawyers are ‘exploiting their “license to litigate” primarily to enrich themselves.'” (Daniel Fisher, “Free Riders”, Feb. 14).

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“The county had no neurosurgeon, and the boy died”

Chester County, Pennsylvania:

The boy [a 17-year-old who had sustained head trauma in an auto accident] could not be treated at Brandywine Hospital in Coatesville because the trauma center had closed, so he was transferred to Crozier-Chester Medical Center in Delaware County….

‘The last neurosurgeon in Chester County was Sam Lyness, a world-class neurosurgeon,” [Robert] Surrick said, but Lyness left Pennsylvania when his malpractice premiums reached $383,000. With no neurosurgeons, Brandywine shut down its trauma center in 2002.

(Paul Carpenter, Allentown Morning Call, Nov. 28).

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Suffer the Poor

The practice of obstetrics is not easy. Doctors who deliver babies face long, late hours, life-threaatening complications that can spring up in a split second without warning, and the constant threat of litigation for events beyond their control. Now, the malpractice crisis is making it even harder, with doctors in crisis states like Pennsylvania finding themselves in a manpower crunch thanks to the exodus of obstetricians from the state. Not only are doctors leaving, but hospitals are shutting down their obstetrics departments:

According to the 2003 American College of Obstetricians and Gynecologists Survey on Medical Liability, 12.5 percent of OB/GYNs in Pennsylvania have stopped practicing OB and 57.5 percent have made some change in their practice because of issues with affordability or availability of liability coverage, including relocating, retiring, dropping OB, reducing number of deliveries, reducing amount of high-risk OB care, or reducing gynecological surgical procedures.

Those statistics, however, do not come close to revealing the extent of the current problem of obstetrician supply in the five-county Philadelphia region, which lost 25 percent of its staffed OB beds between 1993 and 2003, according to Delaware Valley Healthcare Council President Andrew Wigglesworth. Within the past 18 to 24 months, he says, the region lost 10 hospital OB departments, including those at MCP, Methodist, Nazareth, Warminster, Mercy Fitzgerald, Episcopal and Elkins Park; while OB services were also lost from hospital closures including City Line, Sacred Heart in Norristown and Community Hospital in Chester.

That means longer hours and a greater proportion of riskier cases for the hospitals and doctors who remain. Which means they’re more prone to errors. It also means that they can no longer spread themselves as thinly as they once did. Hospitals that once staffed inner city public health clinics are can no longer spare the staff to do so, leaving the poor without easily accessible prenatal care. Remember that the next time you hear John Edwards say that he has spent his career helping the down and out.

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Ups and downs of a $2.5 million verdict

Roller coaster, indeed: Maryland’s highest court has thrown out a jury’s $2.5 million verdict against the operator of the Six Flags amusement park at Largo over a 1999 incident in which park employees told a family that their 4-year-old daughter did not meet the height requirement for the Typhoon Sea Coaster ride. The family refused to get off the ride and there ensued an altercation with park employees which resulted in several family members being handcuffed and led away to security — none were apparently seriously hurt — before being let go an hour later. How did a dispute of this magnitude snowball into a $2.5 million jury verdict? Well, it seems that although the original charges against the park operators did not make an issue of race, lawyers for the plaintiffs (who are African-American) had repeatedly played up racial angles before the Prince Georges County jury. Finding “a significant probability that the verdict was influenced by improper and irrelevant insinuations by their attorneys and certain of their witnesses of racial discrimination by alleged employees of the corporate defendant,” the court ordered retrial (“Court of Appeals overturns $2.5 million award in Six Flags suit”, AP/InsideBaltimore, May 17; CoasterBuzz, May 18; Tierco v. Williams, opinion in PDF format)(via Insurance Defense Blog, Jun. 1). Just to guarantee the burning up of even more resources, the case spawned insurance coverage litigation (PDF) in Delaware.

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Rule of Lawyers thanks

Thanks to David Bernstein (Volokh Conspiracy, Jun. 2) for his kind words recommending that people buy my book The Rule of Lawyers, newly out in paperback. Also to Key Monk, who calls it “another good read” (Jun. 1). Reviews of the book, from numerous perspectives, can be found here. Also, we’ve noticed a few more reviews of the book online in addition to those previously noted: Richard R. Forsten, “It’s a Mad, Mad, Mad, Mad World”, In Re: (Delaware State Bar Association), Oct. 2003; “Keeping Up With New Legal Titles”, review by Harvey K. Morrell, 95 Law Library Journal (2003), (PDF)(scroll to p. 588)(“In clear, lucid prose Olson keeps the reader enthralled as he recounts his tales of horror”), and George Leef, “The Learning Curve #145 — Rule of Lawyers: A Feeding Frenzy of National Proportions”, Carolina Journal, May 24, 2004 (“sardonic wit. …a well-researched and deliciously written expose of a serious national problem.”) Evan Schaeffer (Jun. 5) already has sent off for his copy, Paul of Right Side of the Rainbow (Jun. 6) plans to do the same, and you should too (revised and bumped 6/7).

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Pennsylvania obstetrics

Consider having your baby somewhere else: hit hard by the state’s malpractice crisis, the “five-county Philadelphia region [lost] 25 percent of its staffed OB beds between 1993 and 2003, according to Delaware Valley Healthcare Council President Andrew Wigglesworth. Within the past 18 to 24 months, he says, the region lost 10 hospital OB departments, including those at MCP, Methodist, Nazareth, Warminster, Mercy Fitzgerald, Episcopal and Elkins Park; while OB services were also lost from hospital closures including City Line, Sacred Heart in Norristown and Community Hospital in Chester.

“Liability issues have put extraordinary pressure on OB programs in southeastern Pa., while well over 50 percent of practicing obstetricians in the region, perhaps closer to 75 percent, have become employees whose liability coverage is paid for by hospitals, says Wigglesworth, who adds that the trend toward employed OB status in southeastern Pa. has accelerated over the past three and a half years. ‘It is clear that, without the intervention of hospitals to employ and cover obstetricians in the region, we would have an extraordinary crisis, in terms of availability of OB services,’ he says…

“Wigglesworth [notes] that liability costs alone have approached two-thirds of the reimbursement level. …’Surviving’ OB programs in the region are mostly represented by teaching hospitals, including Hospital of the University of Pennsylvania (HUP), Pennsylvania Hospital, Einstein, Hahnemann, Jefferson and Temple.” (Christopher Guadagnino, “Obstetrician scarcity in Pennsylvania”, Physicians News Digest, May)(via Donna Rovito) (& letter to the editor Aug. 16).

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