A price tag on not screening for merit: “A lawyer representing three people who sued their co-workers seeking a share of their $315 million lottery win was ordered Tuesday to pay a nearly $382,000 fine. Orange County [California] Judge Michael Brenner ordered attorney Mark H. Williams to pay the seven lottery winners after determining he pursued the lawsuits knowing the allegations lacked merit. The amount was the equivalent to legal fees incurred by the ‘Lucky Seven,’ who pooled money to buy the winning Mega Millions multistate lottery ticket, said defense attorney Larry S. Zeman.” Williams, of Long Beach, Calif., represented “three co-workers who claimed they deserved a share of the jackpot because of an oral agreement that everyone would be included whenever they pooled their money to buy tickets”. (AP/Contra Costa Times, Mar. 20).
Posts Tagged ‘loser pays’
Frivolous suits and inadequate sanctions, redux
A frolic and detour over at Bizarro-Overlawyered led me to this post over at The Tortellini, which parrots the common trial lawyer argument that there’s no need for tort reform because courts currently have the power to sanction frivolous lawsuits. But the example cited actually demonstrates exactly the opposite: current procedures are insufficient for preventing frivolous litigation.
In 2004, an Ohio resident named Thomas Starks arrived at an Econo Lodge in Tennessee at 4:40 AM. He spent a few hours relaxing, and then went to sleep at 7:30 AM. A few hours later the hotel called to wake him up, saying that he had missed the 11:00 AM checkout time. I guess he was cranky from lack of sleep, because he insisted that he hadn’t stayed for a full day and therefore shouldn’t have to pay the full day’s room rental rate of $46. Eventually, he paid up and left.
The horrible treatment by the hotel in forcing him to actually pay for his room led, as you can probably guess, to a lawsuit (filed pro se) against Econo Lodge and Choice Hotels — but, for some reason, not the operators of the Econo Lodge franchise in question. Starks demanded a $46 refund, $750,000 in damages, and a lifetime pass to stay free at Econo Lodge (I’m not making this up. If you can figure out why someone with $750,000 would stay at an Econo Lodge, let me know.)
The lawsuit was ultimately dismissed; for the many reasons explained by the court (PDF of opinion):
But Starks proceeded to sue the wrong people, in the wrong place, for a wrong wrong: (1) it wasn’t a wrong, (2) Hamilton County, Ohio, was not the right place, and (3) and even if there were a wrong, it wasn’t committed by these defendants.
Indeed, the court found this suit so flagrantly frivolous that it assessed sanctions of $2,500 against Mr. Starks. So what’s the problem? Well, perhaps it might be clearer if I point out that the above quote is actually from the appellate court. That’s right: Mr. Starks filed this suit, had it dismissed, and then had the nerve to appeal the trial court’s ruling. Only at that latter stage of the case were these sanctions — which almost certainly do not come close to compensating the defendants for their legal fees — imposed. (The court left the door open to possibly increasing the sanctions if the attorneys filed additional paperwork, but did not guarantee it; in any case, the judges were skeptical that the defendants would ever be able to collect.) And even so, one of the judges felt the need to apologize for the sanctions: “While the court system must remain open for the redress of a citizen’s perceived injustices, there is a point at which even the most liberal interpretation of personal rights fails in the light of common sense. This is one such case.”
Montana verdict against Gibson Dunn upheld
Via the WSJ Law Blog, the Montana Supreme Court has upheld a verdict against the law firm of Gibson, Dunn & Crutcher for pursuing a meritless lawsuit; we covered the trial Feb. 9, 2005. The Wall Street Journal weighed in Mar. 16, 2006. Punitive damages were reduced from $20 million to $9.9 million. Gibson Dunn has indicated it will appeal.
Inadequate sanctions
As I’ve previously mentioned, one of my pet peeves is the claim by the trial lawyer crowd that tort reform is unnecessary because judges already have the power to punish lawyers who file frivolous lawsuits. Technically, this claim is true. But it relies upon an extremely narrow definition of “frivolous” — the vast majority of absurd cases covered here on Overlawyered are not considered frivolous by current legal standards — and those who practice know how rare it is for judges to actually issue sanctions.
Take John Aretakis. He’s a New York attorney who has carved a legal niche for himself suing the Catholic Church over sexual abuse by priests. Well, to be more precise, the legal niche he occupied, according to a federal judge’s ruling last month, was filing a series of “utterly baseless” lawsuits against the Church, in which he ignored the law, misrepresented the law to the court, filed cut-and-paste complaints without proofreading them, and filed and publicized the suits for the improper purpose of embarrassing and humiliating Church officials. (AP, North Country Gazette).
Although this was not the first such lawsuit filed by Aretakis — or the second, or the third — and even though his suits have been uniformly rejected, this is the first time a judge has sanctioned him for his behavior. The court described the suit harshly as follows:
Taking Mr. Aretakis’s behavior in this case as a whole, it is clear that his conduct is sanctionable because it is sloppy and unprofessional; the pleadings are so far removed from adequate that they cannot be said to have been filed in good faith or after a reasonable inquiry; the bulk of the allegations dealing with sexual abuse are wholly irrelevant to the RICO claim, and; the Title VII claim is admittedly without basis in law.
But despite this harsh description, the Court still declined to make the victims of this frivolous lawsuit whole; Aretakis was fined just $8,000 — far less than the defendants asked for — and told not to do it again.
And it wasn’t because Aretakis made such a good argument in his defense:
Not surprisingly, Mr. Aretakis’s response to the Motion for Sanctions does not respond in a meaningful way as to why sanctions are not appropriate here. Instead, Mr. Aretakis recounts an irrelevant action in Tucson, Arizona, and another regurgitation of thrice-told tales of sexual abuse, plus non-sequiturs concerning a drunken process server with felony convictions attempting to serve process, among other wholly irrelevant topics.
The text of the decision can be found here (PDF).
Update: C$341K trauma from seeing bottled fly
Updating our Apr. 26, 2005 entry, from Canada: “A Windsor, Ont., man lost out on a $341,775 court judgment yesterday, when the Ontario Court of Appeal ruled that a bottling company should not have been held liable for triggering a phobia of flies that altered his personality and killed his sex life.” No one in the Mustapha family consumed the fly, or any of the water that had come into contact with it, but Waddah (Martin) Mustapha said the unsettling sight had precipitated a disabling psychological aversion. The Ontario court — applying Canada’s costs-follow-the-event principle — assessed $30,000 in costs against Mustapha. (Kirk Makin, “Appeal court rules against man haunted by fly in water bottle”, Globe and Mail, Dec. 16; opinion in Mustapha and Culligan of Canada (PDF)). More: Supreme Court of Canada rules against Mustapha (May 23, 2008)
Lerach v. Wall Street Journal
Via Peter Lattman, Bill Lerach, unhappy with press coverage of an embarrassing defeat in an attempt to blackmail companies with meritless (but highly risky) litigation over Enron, sends the WSJ a nastygram, and the WSJ responds.
“Judge orders Illinois to pay up”
Loser-pays is alas the exception in our system, but it does have its moments: after a judge declared unconstitutional a law in the state of Illinois attempting to ban the sale of violent videogames to minors, U.S. District Judge Matthew Kennelly ordered the state to pay $510,250 in legal fees to the game sellers, and it seems Kennelly meant business, since he has announced “the time for waffling has passed” as to the state’s coming up with payment. (John O’Connor, “Judge wants legal-fee payment plan from Blagojevich”, AP/Chicago Tribune, Dec. 11; Mark Whiting, 1up.com, Dec. 12; Slashdot, Dec. 13 and comment thread at Slashdot which mentions us and includes some discussion of loser-pays generally.
Judge to Lerach: pay defendant’s fees
So rare and so useful when it happens: “The federal judge overseeing the Enron shareholders’ class-action lawsuit dismissed a $1 billion claim brought by plaintiffs’ lawyer William Lerach against investment firm Alliance Capital Management. And in an unusual move, Judge Melinda Harmon in Houston ordered that the plaintiffs pay Alliance’s attorney’s fees under Section 11(e) of the Securities Act.” Lerach had sued Alliance because one of its executives, Frank Savage, sat on Enron’s board, but Judge Harmon dismissed the suit, “ruling that the plaintiffs showed no evidence of wrongdoing on either Alliance’s or Savage’s part.” (WSJ Law Blog, Dec. 4; Peter Lattman, “Lerach’s Enron Lawsuit Against AllianceBernstein Is Dismissed”, Wall Street Journal, Dec. 2 (sub)). For Lerach’s side of the matter, see Floyd Norris, “In Unusual Ruling, Law Firm Is Told to Pay Opponent’s Legal Fees in Enron Case”, New York Times, Dec. 2. More: And here’s a (subscriber-only) WSJ editorial: “Loser pays”, Dec. 7.
Court: DeLuise can sue lawyer over lawsuit
Notwithstanding various impediments which ordinarily restrain civil defendants from filing countersuits — and particularly from naming their adversaries’ lawyers in those countersuits — a “Superior Court judge rejected a motion [last] Friday to throw out comedian Dom DeLuise’s lawsuit claiming his former daughter-in-law caused him emotional and financial distress when she sued him for $2 million.” Among defendants named in the lawsuit was attorney Steven Zelig and his law firm, which had represented Brigitte deLuise in her allegedly wrongful suit. Zelig argued that the state’s “SLAPP suit” statute should bar the comedian’s counteraction, but “Judge Judith C. Chirlin disagreed. ‘I find that there were sufficient grounds for the lawsuit to have been filed,’ she said. “There is a likelihood of it prevailing on the merits.'” The AP coverage doesn’t specify what the alleged problems were with the original suit, however (merely unfounded in law and fact? scandalous as well?) so it’s hard to know what implications there might be for the rights of defendants in other cases. (“L.A. Judge Lets DeLuise Lawsuit Proceed”, AP/CBSNews.com, Sept. 23). More: George Wallace, Decs and Excs, Sept. 29.
Pro-plaintiff liability reform
Here’s a case where loser-pays would have helped the plaintiff. Municipal liability is capped in Florida at $100,000. The city lawyer for Hollywood, Florida, refused to settle an auto accident case for $85,000, though he acknowledges the defense case is weak, because he (correctly) saw little downside. Hollywood is also appealing the jury verdict for the plaintiff. “Why not?” (John Holland, “Rejected crash settlement could cost Hollywood more than $1 million”, South Florida Sun-Sentinel, Aug. 4).