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July 23, 2003

TORT REFORM....Frivolous lawsuits? Dwight Meredith says that, in fact, most of them never see the light of day: "They lose on motions to dismiss. They lose at summary judgment. They suffer directed verdicts. They lose before juries and they lose on appeal."

However, sometimes frivolous suits can serve a purpose even if they have no chance of winning, and today he provides a couple of good examples. Oddly, they don't come from the usual ambulance-chasing suspects....

Posted by Kevin Drum at July 23, 2003 10:16 AM | TrackBack


Comments

Most tort claims do indeed lose on a 12(b)6 motion, or on summary judgement, long before the case goes to trial.

But it costs thousands of dollars (if not tens, or hundreds of thousands) to manuever the case into position where it can be won on pre-trial motion.

The secret to good plaintiff's lawyering, like the secret to running a protection racket, is figuring out how much it will cost if your opponent chooses to fight, and how much he will pay to get you off his back and avoid the risk of (a) a drawn out fight; (b) an expensively gained summary judgement win or a dismissal; or (c) a potential loss at trial.

In other words, how to raise the stakes of the litigation to such an extent that the defendant is cowed into settling for a good amount, regardless of the merits.

Class action reform, which has been much in the news, is a good example of reform where it's needed. The prospect of losing a suit to hundreds of thousands of potential plaintiffs, then trying each and every single damages claim, is so financially daunting that most companies would rather sign a massive settlement agreement, then declare bankruptcy and restructure their debt in order to fund the judgment.

The bottom line is that relatively bogus suits cost billions, even if few of them get to trial.

Posted by: Omnibus Bill at July 23, 2003 10:34 AM | PERMALINK

Bill, are you a class action defense lawyer? Because I am, at least on a part-time basis, and it's not been my experience at all that defendants will be willing to settle to avoid litigation fees. In many--perhaps even most--of my cases, legal fees exceed all but the most pessimistic liability estimates. The defendants refuse to settle, even though fighting costs more money, because if they settle once, they will likely be hit with a deluge of suits.

As for costs, it's not as expensive to get through the early stages as you'd think. A 12(b)(6) motion (or, as is usually the case, its state law equivalent) usually takes about 40-50 hours to litigate completely, costing $10,000 or so. An opp cert proceeding takes probably twice that. So that's "only" $30,000 or so in legal fees for two shots at dismissing a class action before the really expensive discovery commences.

Posted by: Joe at July 23, 2003 10:53 AM | PERMALINK

His examples all serve a purpose, but I'm not sure that willy-nilly extending drug patents using frivolous lawsuits or letting Monsanto intimidate dairies is a laudable purpose. I'm all for punishing these kinds of frivolous lawsuits.

He ends with "Will a cap on damages for pain and suffering do anything whatsoever to prevent the type of frivolous litigation exemplified by suits designed only to extend drug patents or intimidate small dairies?" Answer. Nope. I've also heard that burglar alarms don't do anything to prevent fires. Word on the street is that SEC investigators don't stop many murders. Rumor has it that welfare benefits don't do much to stop sunburn. Stopping the kinds of frivolous lawsuits that Dwight outlines is a great idea, but would do nothing to stop ridiculous damage awards for suits that do make it through. If you want to argue that stopping frivolous lawsuits early and cheaply is a more important issue, go for it. But memo to Democrats: If you think your trial lawyers are pissed about damage caps, you can't even imagine how pissed they would be about the types of reform which would be needed to remedy the problem Dwight is outlining.

Posted by: Sebastian Holsclaw at July 23, 2003 10:58 AM | PERMALINK

Damn. After reading the post, I was gearing up for a good fight with Sebastian here. But once again, he disapoints by being sensible.

I have been concerned about the problem Dwight talks about, and not only with regards to Monsanto. It is also a big problem in arts and entertainment. Tons of legally persimible expression has been supressed by frivolous lawsuits from Mattel, Disney, etc., that the defendants could not afford to take to trial. But what is needed is better anti-SLAPP laws and intellectual property reform.

I quess I can quibble with Sebastian on the issue of emphasis. This is an example of how conservative say they are against something like "frivolous lawsuits", but all of their examples and legislative efforts are directed at supposed excesses of the less powerful beating up on the more powerful, when typically the more powerful use these things to beat up the less powerful even more. When confronted with the excesses of the powerful, it is all well and good for people like Sebastian to say, "Oh, yeah, I'm against that too." But for some reason they never seem to start or champion campiagns to end the abuses of the powerful.

Still, these are different issues that require different prescriptions. People like Sebastian may not be motivated to start or help us in these campaigns, but as he indicates, they won't stand in our way either. So if nothing ever changes, we can just blame ourselves for not pushing it.

Posted by: Decnavda at July 23, 2003 11:35 AM | PERMALINK

Sebastian,

If medical malpractice claims are frivolous, why punish the people that are actually hurt? The only way you could support med mal caps is if you think that nothing that could happen to you would be worth more than $250k in pain and suffering. How much is your arm worth to you? What if a doctor/hospital did something that caused you to lose the arm? Assume a perfectly healthy arm that should never have been touched. So playing major league baseball for a year ($300,000 minimum) is worth more than you losing your arm for life?

The med mal caps are all about helping the insurance industry make more money. If they were really concerned about frivolous lawsuits, why not mandate review boards of doctors before a case goes to trial?

If they want to lower premiums for some doctors in high risk specialties, spread the risk around. That is what insurance is supposed to do anyway, right?

Posted by: Bill at July 23, 2003 11:41 AM | PERMALINK

I should however, respond to Bill-
"The secret to good plaintiff's lawyering, like the secret to running a protection racket, is figuring out how much it will cost if your opponent chooses to fight, and how much he will pay to get you off his back and avoid the risk of (a) a drawn out fight; (b) an expensively gained summary judgement win or a dismissal; or (c) a potential loss at trial."

Well, yes, but for most plaintiff's lawyers, the costs exceed the potential reward for frivolous suits. Insurance companies have more money than God, and use it pay defense laywers who work by the hour to drag out suits with endless motions to raise the costs beyond possible recovery for the plaintiff's attorneys, so that even many legitimate suits do not get filed unless they have very high potential recovery, much less frivolous suits. While this may not make sense for the insurance angencies on a case by case basis, it is an overall strategy: They spend pliantiff's lawyers into submission in a few cases, and there by prevent many more from being filed.

Posted by: Decnavda at July 23, 2003 11:43 AM | PERMALINK

Coincidentally, I talked to a lawyer yesterday who was going on about people who, he was sure, entered, "Litigant" in the occupation box of the census form.
They are forever filing lawsuits, losing, going to appeal, going through all manner of nonsense, and frequently getting their filing fees waived. Since they represent themselves, there are no legal fees.
They're a pain in the butt, but their opponents always have to show up and pay fees and attorney bills.
The causes are varied. Too much noise when the kids are playing basketball. Public nuisance when they build a house downwind from a pig farm.
A farmer I know told me it cost him $30,000 to defend against the claims of two residents of a new subdivision built near his third-generation farm. He had some dairy cattle.
He won, but that's a lot of navy beans.

Posted by: Richard Aubrey at July 23, 2003 11:44 AM | PERMALINK

I meant "omnimus Bill".

Use the preview, button, Decnavda!

Posted by: Decnavda at July 23, 2003 11:45 AM | PERMALINK

Decnavda,

What are the odds?

Posted by: Bill at July 23, 2003 12:05 PM | PERMALINK

Sebastian, it ain't Dwight making the inapt comparison. Every time Republicans talk about tort reform and medmal caps, they yammer endlessly about frivolous lawsuits. Since, as you say, they aren't related, why do they do that?

As for "ridiculous damage awards," prove it. I've looked at the numbers in some detail, and there just doesn't seem to be a payout crisis. I'm willing to be proven wrong on this, but I'm not an ideologue on this issue and I just can't find the numbers to back up that claim. Payouts have risen about in line with inflation over the past decade.

In the non-medmal area, I don't know. But since the evidence of ridiculous awards seems to evaporate every time I try to look into it, I'm going to need some persuading on that score.

I would be delighted to support tort reform that (a) addressed actual problems, and (b) addressed corporate abuse, which I think is probably far more rampant than any other kind. Republicans, however, have shown little interest in this.

Posted by: Kevin Drum at July 23, 2003 12:07 PM | PERMALINK

Dwight has touched on this issue before. He has pointed out that there are several potential solutions that would significantly reduce the incidence of frivolous lawsuits, the supposed target of tort reform. However, those who advocate tort reform never seem to look into these other solutions.

I'm with Kevin. The limited research I've done indicates that we really do not have a damage award crisis. Even more, this supposed crisis really has nothing to do with the current problem with insurance premiums. We've been down this road at least twice over the past 30 years. The rhetoric each time was the same; the news stories were the same; the anecdotal evidence was the same. Why should I believe that this time is different?

Posted by: PaulB at July 23, 2003 12:23 PM | PERMALINK

"A 12(b)(6) motion (or, as is usually the case, its state law equivalent) usually takes about 40-50 hours to litigate completely, costing $10,000 or so."

I would add, Joe seems to be on the expensive end of the defense bar. The insurance companies I deal with pay about half that. Of course, Joe is defending big time class action suits.

In most class action suits, incidently, not a lot is spent on litigating individual claims of damages, contrary to Omnibus Bill above. At least to my mind, the archetypical class action is one in which a tortfeasor does something like cause $5 of damage to 10 million customers--in other words, an amount too small to be worth litigating on an individual-by-individual basis, but large enough in the aggregate to be worth the time of the lawyers and judges.

Posted by: rea at July 23, 2003 12:28 PM | PERMALINK

Yeah, I'm at one of the more expensive firms in the country.

As for individual class action claimants, I largely agree. I will say that I recently concluded peripheral involvement in a case where cert was denied, yet plaintiff's counsel vigorously pursued the $80 claim of the lead plaintiff--in the particular jurisdiction we were in, they would get legal fees if successful, so winning or losing the $80 claim was the difference in collecting or not collecting the low six figure legal fees.

Posted by: Joe at July 23, 2003 12:40 PM | PERMALINK

Some years ago, I got a letter from the Special Master of the Denny's discrimination settlement. I was informed that if I didn't get my paperwork in, my settlement would be in jeopardy.
After a good number of phone calls, I got a live person and inquired what settlement that was.
It appears I had been discriminated against in Denny's as a result of my race.
I asked a few more questions and discovered my file was in the wrong file pile. I was supposed to be in the witness pile. So, I inquired, what did I witness?
I was one of four witnesses who had seen and signed a form about an act of racial discrimination at a Denny's in Flagstaff.
Neat, sez I. I've never been in Arizona.
The Social Security number was right. Date of birth? According to the DOB, I was three when I witnessed this vile act. Was there a specific protocol for interviewing three-year olds? The lady didn't know.
I got it, I said. I'm junior. My father's division trained in the California desert prior to shipping out in 1944 and the famous route 66 went from there to Flagstaff. Maybe they got the names and dates mixed up. She thought that was possible.
It turns out that there were so many victims of discrimination at Denny's that the payout, after attorney fees, was $3700, including to the unfortunate person who suffered in Flagstaff when I wasn't there.
I found out the names of the other witnesses, all from this area. Three of them I contacted said they'd never heard of this and never been to Arizona.
I talked to Denny's legal people and they acted as if this was so usual that there was no percentage in fighting it. They were right, of course. The usual suspects would howl racism.
Despite my efforts in their behalf, the ungrateful morons didn't send me so much as a coupon for a Grand Slam.
Anyway, it occurred to me then and since that there is more than one area of frivolity in some of these suits.

Posted by: Richard Aubrey at July 23, 2003 12:46 PM | PERMALINK

Hey, slow down there a bit, I was responding to a specific response to a specific legislative proposal. I wasn't talking about what I would do in an ideal world. I think the cost of defense for suits that never get to trial is actually a much more important issue than the one at hand, but it is also going to be fought even harder than the cap issue. So I'll take what I can get.

Ideally you don't want lawsuits with little or no merit to cost people (individuals or corporations)thousands of dollars. You also don't want to discourage people with real but hard to prove claims from suing. The current balance is very much in favor of people suing.

The most common proposal is to go to the British 'loser pays' model. I think that proposal is awful, because it would put a huge burden on people with difficult to prove claims. If they tried and failed to prove their claim, they would be even worse off than before.

I propose that 'loser pays' be applied to motions to dismiss. If your full claim gets tossed for reasons which you should have been able to discover long before the motion, you pay for the normal defense costs to that point. If you bring a motion to dismiss and it fails, you pay for the costs of opposing the motion. (I know this is not symmetric. I'm trying to reduce frivolous litigation, with a protection designed to avoid giving defense counsel a free hand to file frivolous motions to dismiss.) I'm not sure how I would balance partial dismissals. Clearly you need to provide for payment even of partial dismissals because otherwise you will get the problem of 30 completely frivolous claims packaged with 1 barely colorable claim and the proposal will totally fail. Whatever compromise system you come up with could probably be applied on some level to summary judgment motions later. Anyway, the plaintiff's bar would be even more nuts about this proposal than they are about damage caps, but I think the proposal is worth looking at if you really want to reform the tort system.

Damage award caps deal with the obvious problem, my proposal deals with the behind the scenes problem. I also want to mention that so far as I know the caps only apply to non-physical damages. Your hospital bills and such no matter how large are going to get paid for by the tort-feasor.

Posted by: Sebastian Holsclaw at July 23, 2003 12:51 PM | PERMALINK

Good God that last sentence is ugly. How about: the tort-feasor is going to be paying your hospital bills no matter how large they may be.

Posted by: Sebastian Holsclaw at July 23, 2003 12:54 PM | PERMALINK

I wouldn't say that there are different types of "frivolity." There are different problems inherent in different types of suits. With respect to class actions, you run into the plaintiff's attorney-driven travesties where counsel gets rich and the purported "victims" get a $10-off coupon for there next automobile purchase that less than 5% of them will ever use. These should--and have been, to some extent--be curtailed by the courts by rigorous review of settlements and plaintiff's legal fees.

Then there are the single suits that invariably result in astronomical payouts (medmal being the best example). I have no problem with reform, per se. I DO have a problem with the reforms being suggested by the administration. The huge jury verdicts--the ones that cost insurers the most money--invariably come from legitimate claims.

If you want to reform the system, make Rule 11 sanctions easier to get (lord knows it would make my job less difficult). Lower the burden for fee shifting. But don't preclude payment for a class of claims where the plaintiff is undeniably greviously injured or killed, and legitimate wrongdoing has occurred.

Posted by: Joe at July 23, 2003 12:58 PM | PERMALINK

"I propose that 'loser pays' be applied to motions to dismiss. If your full claim gets tossed for reasons which you should have been able to discover long before the motion, you pay for the normal defense costs to that point."

Sebastian, that's not right. Motions to dismiss are not just mechanisms for eiliminating frivilous claims, they are also mechanisms for resolving cases that turn on issues of law rather than fact. If your case gets tossed because the judge resolves a close question of law against you, you shouldn't be sanctioned.

Posted by: rea at July 23, 2003 01:12 PM | PERMALINK

I blogged on the upcoming election in Texas on an amendment to cap non-economic damages, today. I'd love feedback on it. Check it out, here.

Thanks.

Posted by: ByronUT at July 23, 2003 01:41 PM | PERMALINK

Rea, my proposal is a work in progress, not a finished product. We could propose that the judge may reduce fees for the very close claims. To my knowledge, nearly all motions to dismiss are based on 'questions of law' because questions of fact are reserved for the jury. Many of them aren't very close calls.

Posted by: Sebastian Holsclaw at July 23, 2003 02:11 PM | PERMALINK

I get tired of the tort reform argument always popping up. If the pro-business lobby hadn't spent the last 25 years tearing down the regulatory system in this county, the admittedly piecemeal and draconian tort system wouldn't be as necessary.

Starting from the assumption that consumers and workers need protection and a means of redress (either from strong regulation or the tort system), it's obvious that rebuilding the regulatory system is the most efficient, cost-effective and fair option.

A) consumers are protected ante facto (or is it a priori?),

b) all consumers and workers are protected and can achieve redress, and not just ones with good lawyers and easy cases,

c) businesses and consumers can better predict the outcomes of a regulatory system than a jury, and can plan accordingly.

Posted by: geo at July 23, 2003 02:14 PM | PERMALINK

If c) were true, I would support the idea of increased regulation.

An important but usually ignored question is how much protection is needed. Should the guy who uses his vacuum cleaner hose for sexual gratification be allowed to sue for his injuries? Should a woman who fails to understand that coffee is hot be allowed to sue when she spills all over herself? Should a person who is breaking into your house and falls through the skylight get to sue you for unsafe positioning of the skylight? Should Buck Knives be held responsible if Dahmer uses their brand to chop up children?

Posted by: Sebastian Holsclaw at July 23, 2003 02:43 PM | PERMALINK

Ah Sebastian, all the usual urban legends.

Come now, you must know that most of those things you mention are either flatly untrue or else wildly exaggerated? I do get tired of the same three or four examples being pulled out time and again to try and prove that the entire tort system is out of control.

The McDonald's coffee suit, of course, is real, but I find that most people who actually read the facts of the case -- as the jury did -- discover that the award wasn't really unreasonable at all.

Posted by: Kevin Drum at July 23, 2003 03:29 PM | PERMALINK

However, I am excited to learn new lingo! From now on I shall refer to "12(b)6 motions" as if I actually knew what they were!

Posted by: Kevin Drum at July 23, 2003 03:30 PM | PERMALINK

Most tort claims do indeed lose on a 12(b)(6) motion, or on summary judgement, long before the case goes to trial.

I don't know about that; it can be very hard to get some kinds of claims dismissed, and some juridictions are very hostile to motion practice. The biggest problem is neither the totally frivolous suit nor the extreme award, in my view, but the almost-frivolous, just-barely-past-Rule 11 ridiculous lawsuit and the abuse of class actions to make social policy, both of which lead to a lot of essentially extortionate settlements.

For med mal, I'd support caps on pain & suffering and especially punitive damages. Pain & suffering is real and should be compensated, but it's also subject to abuse because it's so open-ended. But perhaps the best reform is the current proposal to get more megabucks class actions out of state court, where they tend to congregate in a few jurisdictions. (I'm all for federalism, but not at the expense of letting a couple of counties set policy for the whole national economy).

Posted by: Crank at July 23, 2003 03:48 PM | PERMALINK

Actually at one time or another I have personally read each of those cases I cited (except the Buck Knives one, I made that up but I think it is perfectly plausible because they should have known when placing their items in the stream of commerce that they could be used for criminal purposes.) But even if you don't like those, can we all agree that Monsanto shouldn't be suing dairy farmers over the lack of hormone claims? Can we all agree that their threats are an abuse of the system? I see stuff like that all the time.

Posted by: Sebastian Holsclaw at July 23, 2003 03:51 PM | PERMALINK

Crank,

Again, I ask and no one (Sebastian?) has heretofore answered, is $250k for a life time of pain and suffering fair?

Saying, as Sebastian does, "the tort-feasor is going to be paying your hospital bills no matter how large they may be."

How nice, if you cause pain and injury to me you will cover my medical expenses. And my lost income? Wow! How kind to compensate the expenses that you are responsible for. That was the issue in the McDonald's claim. The settlement MickeyD's offered didn't even cover her medical bills. And the final award was reduced by the judge, the initial jury verdict was out of control, in the judge's opinion. Too bad we only have judges as the last safeguard to out of control juries. Maybe we need more government control, since judges and juries are only citizens and need the federal government to make decisions for us.

What self-respecting Libertarian would be in favor of federal caps? I thought gov. control was bad. Let the market decide!!!!!

Posted by: Bill at July 23, 2003 04:13 PM | PERMALINK

Kevin, for your own edification, a 12(b)(6) motion is a motion to dismiss a complaint because the allegations of the complaint, if true, do not support a valid claim. It's commonly couched as a "Motion to Dismiss for Failure to State a Claim Upon Which Relief May Be Granted."

As a quick example, in order to state a valid breach of contract claim, a valid contract must exist. In order for a contract to exist, there must be consideration. In other words, if I promise to give you my car, but you do not agree to pay me for it, it's not a valid contract (because there is no consideration), and you couldn't assert a valid breach of contract claim if I renege on the promise.

Now let's say I make such a promise, renege on it, and you sue me. In your complaint, we'll assume that you plead the facts accurately and specify that I promised to give you my car in exchange for absolutely nothing. I would then move the court to dismiss your breach of contract claim under 12(b)(6) of the Federal Rules of Civil Procedure. It's a quick and easy way to dispose of claims without taking (costly)depositions or undergoing (usually even more costly) discovery. Most states have similar dismissal statutes. Some states also will allow for dismissal in other situations--for example, in my state, the rules of civil procedure allow the court to dismiss a complaint at the outset based on an affirmative defense (for example, that the complaint is precluded by the statute of limitations).

Posted by: Joe at July 23, 2003 04:19 PM | PERMALINK

I'm not a libertarian. I support being able to sue for DAMAGES.

Lets be totally clear. Do you believe there is a tort problem at all? Obviously if you don't believe there is a problem you won't like my solution. Are we arguing about proposed solutions or are we arguing about the existence of a problem?

Posted by: Sebastian Holsclaw at July 23, 2003 04:20 PM | PERMALINK

Existance of a problem, mostly.

Posted by: Bill at July 23, 2003 05:05 PM | PERMALINK

"To my knowledge, nearly all motions to dismiss are based on 'questions of law' because questions of fact are reserved for the jury. Many of them aren't very close calls."

Sebastian, this sort of thing is pretty central to my practice (I do research & writing for a number of smaller firms on a contract basis). Maybe I'm biased, but I see a lot of these motions as being close calls (maybe nobody hires me for the simple ones).

Someday, I'd like to discuss our respctive practices, because a lot of your experience seems so radically different than mine. Whether that's the difference between San Diego and Grand Rapids, or because I'm older than you, or what, I can't say.

Posted by: rea at July 23, 2003 05:11 PM | PERMALINK

Sebastian-
"But even if you don't like those, can we all agree that Monsanto shouldn't be suing dairy farmers over the lack of hormone claims? Can we all agree that their threats are an abuse of the system? I see stuff like that all the time."

"Are we arguing about proposed solutions or are we arguing about the existence of a problem?"

Both. We all agree that the Monsanto case is a problem, and needs a solution. But conservatives often seem to suggest that the poor use the system to unfairly abuse the powerful as much as the other way around. There, I will argue with you as to the existence of the problem. Generally, plaintiff attorneys work on contigency fees and can not afford to bring frivolous suits, especially since, as I described above, the insurance companies spend them into submission as an overall strategy. But Monsanto and Disney pay their lawyers by the hour: They, unlike the poor, can AFFORD to abuse the system.

Posted by: Decnavda at July 23, 2003 06:11 PM | PERMALINK

Can I just say that I work for a contigency based plaintiff's firm. I'm not going to say any more about it in a way that could get me in trouble with my job, but just keep that in mind if you ever feel like reviewing what I'm saying about plaintiff abuses.

You can't make the rules based on the plaintiff. Our system may allow the rich to game it more, but the rules are the same. We don't get to make different legal standards for rich people. Rich people may hire better lawyers, but at least for the moment they work under the same laws. If you are going to make rules that will make Monsanto back off in the frivolous lawsuit department, they are going to make other plaintiff's lives hard too. If you are ok with the balance as it is, fine. Just don't live under the misconception that you are going to be able to target 'corporate' abuses without also hitting 'individual' abuses. They both exist, and they can both be expensive.

Posted by: Sebastian Holsclaw at July 23, 2003 07:51 PM | PERMALINK

One point--it seems to me that the issue of frivolous lawsuits is somewhat orthogonal to the issue of caps portions of non-economic damages (not non-physical, as Sebastian has suggested).

Now go, take on the day!

Posted by: raj at July 24, 2003 12:27 AM | PERMALINK

"Can I just say that I work for a contigency based plaintiff's firm. I'm not going to say any more about it in a way that could get me in trouble with my job . . ."

I understand, Sebastian, and I don't want to press you to for details in a public forum if you don't feel comfortable giving them. If you ever want to talk less publicly, my e-mail address is below. :)

Posted by: rea at July 24, 2003 02:12 PM | PERMALINK

Although it is truly ironic, Sebastian, that you do plaintiffs' work and most of my career has been defense, considering our respective politics . . . :)

Posted by: rea at July 24, 2003 02:15 PM | PERMALINK

rea-
Is it possible that maybe you and Sebastian are just both more aware than the rest of us about HOW bad the people you work with are, but not as aware of how bad the other side is?

Familiarity breeds contempt, maybe?

Posted by: Decnavda at July 25, 2003 09:43 AM | PERMALINK

Keep the good work.

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