In 1789, American forefather Benjamin Franklin wrote, “In this world nothing can be said to be certain, except death and taxes.” Fast forward to 2009, and it seems that some of our elected officials are trying to amend Franklin’s two certainties by adding a third: lawsuits.
The U.S. is already the most litigious country in the world, imposing a tort cost of around a quarter of a trillion dollars each year.
In this day and age where billion dollar price tags are tossed around D.C. without the bat of an eye, the cost of America’s lawsuit system still hits home – a 2008 study revealed that every family of four pays more than $3,300 every year due to our out-of-control lawsuit system.
With unemployment climbing and household budgets being stretched thin, you might think that lawmakers would try to fix our damaged civil justice system that rewards plaintiffs’ lawyers at the expense of everyone else. But you would be wrong.
In fact, some in Congress are attempting to pass laws allowing trial lawyers to file even more lawsuits in courtrooms across the country. In major pieces of legislation introduced this session of Congress, provisions have crept in to expand the cost and reach of America’s lawsuit system.
Legislation to overhaul the U.S. financial sector? Check.
In order to increase government oversight of consumer financial products, such as mortgages and credit cards, a bill was introduced this summer to establish the Consumer Financial Protection Agency, or CFPA. Among numerous other powers, the legislation would grant CFPA the ability to restrict or ban mandatory arbitration clauses in consumer financial services contracts – forcing more disputes into an already overburdened court system and giving trial lawyers a new source of revenue.
The climate change bill? Check.
The House-passed cap-and-trade energy bill would allow lawsuits to be filed against makers of home appliances, lighting products, plumbing fixtures, and heating and air conditioning products for violations of the sweeping new energy conservation standards created under the bill.
Medical device legislation? Check.
Those who create life saving medical devices would be forced to spend more of their time in the courtroom and less of it in the lab because some in Congress are trying to undermine the federal government’s authority to set the safety standards for their products. Under one bill making its way through Congress, doctors and scientists would no longer be the ultimate authorities for setting national safety standards for medical devices like artificial hip joints or heart stents. Instead, trial lawyers and lay juries would be enlisted to establish safety standards through lawsuits on the state level decided on a case-by-case basis.
All in all, at least 36 liability expanding bills and provisions have already been introduced this Congress – putting it on track to be the most pro-lawsuit session in recent memory. The U.S. Chamber Institute for Legal Reform is keeping tabs on all of these measures on the website www.TrialLawyerEarmarks.com.
As the economic downturn stretches on, businesses are doing all they can to retain workers and stay afloat. Unfortunately, some lawmakers, oblivious to their struggles, are trying to pile on even more potentially door-shuttering causes of action that enrich trial lawyers and put our brittle economy at further risk.
Death and taxes are inevitable. Lawsuits don’t need to be.
This week, the trial lawyer “pay to play” scandal continues to unfold, ratcheting up the public attention and the impetus for Congress and the S.E.C. to act.
Yesterday’s New York Times editorial, lauding the S.E.C.’s new rules to end pay to play for public pension funds and 529 college savings plans invested by states, also concluded that, “There is also another very large loophole that needs to be closed: lawyers make huge fees negotiating contracts for the state and the S.E.C. has no control over lawyers unless they are fronting for investors.” Read the full editorial here.
Today, the Wall Street Journal editorializes for the sixth time on the scandal that has exposed the broad extent of the problem of trial lawyers making campaign contributions to elected officials and then being hired by those same officials to bring lucrative contingency fee lawsuits on behalf of the state. In this case, it’s the Commonwealth of Pennsylvania, and the official in question is the governor, Ed Rendell. The Journal points out that it is unusual for a state supreme court to take up a case from the appellate level before it has been concluded. The fact that the Pennsylvania Supreme Court is doing so here underscores the seriousness of the issue.
These editorials should bolster Senator Bennett of Utah’s efforts to shed light on this unseemly practice. He sent a letter to the S.E.C. this month urging that its rules include trial lawyer “pay to play.” Other members of Congress concerned about this practice should do the same.
My name is Bryan Quigley. Growing up in Springfield, Missouri, I was the only “Bryan Quigley” I knew. But now, thanks to instant information available on the Web and the explosion of social networking Web sites, I realize my name is not as unusual as I once assumed.
Quick searches on Facebook and LinkedIn tell me there are at least 22 others with the name “Bryan Quigley” around the world—including three in Northern Virginia, where I currently reside. Add those to the 132 “Brians” spelled with an “I”, and we have our own little Bryan/Brian Quigley army. But heaven forbid any one of us becomes rich and/or famous—we just might be facing a lawsuit.
Unfortunately, for Katie Perry, she knows this all too well.
Katie Perry, a fashion designer from Australia, has been sued by Katy Perry, the pop singer from the U.S, in order to prevent “Katie” (spelled with an “IE”) from using her own name as a trademark for her clothing line. Ironically enough, “Katy Perry” (spelled with a “Y”) is a stage name: she was born Katy Hudson.
I don’t know if Katie Perry the fashion designer can sing, but if this lawsuit succeeds, she may have to find a second career to pay for all the legal fees for the lawsuits brought by the more than 800 other “Katie/Katy Perrys” we found online.
We thought the “Katie/Katy Perry” lawsuit was a deserving nominee for our July Most Ridiculous Lawsuit of the Month Award. But whether it is the most ridiculous is up to you. Check out all the nominees and vote for your favorite:
- A San Diego attorney sued the Oakland Athletics for sex discrimination over a Mother’s Day giveaway at its ballpark;
- The jailed double-murderer sued the slain couple’s family for rights to his victims’ classic Chevy pickup;
- A KFC grilled chicken promotional giveaway triggered a lawsuit from a distraught customer when the food ran out; and,
- Ostracized after admitting steroid use, former big-leaguer Jose Canseco sued Major League Baseball and the players’ association for lost wages and defamation of character.
Go to www.FacesOfLawsuitAbuse.org and cast your vote today. And while you’re at it, check out June’s Most Ridiculous Lawsuit winner: the inmate who sued to avoid being named the Guinness Book of World Records’ most litigious person in the world.
To kill time in jail, some prisoners take up a hobby. In "The Shawshank Redemption," Andy Dufresne carved rocks into chess pieces. Paul Newman’s character in "Cool Hand Luke" plotted and attempted numerous escapes from prison. And in "The Longest Yard," Burt Reynolds put together a team of inmates to take on the guards in a game of football.
One nominee in this month’s Most Ridiculous Lawsuit Poll has his own way of passing his prison sentence – he files lawsuits. In fact, this Lexington, Kentucky inmate has filed so many lawsuits (against everyone from Britney Spears and New England Patriots coach Bill Belichick, to everything from the Eiffel Tower and Black History Month), that the Guinness Book of World Records wants to name him the most litigious person in the world. But there’s one catch: he’s filed a lawsuit against Guinness to prevent them from crowning him the king of lawsuits.
While this lawsuit might seem like an obvious winner for June’s Most Ridiculous Lawsuit poll, before voting for your favorite, check out the other suits:
- A lawsuit filed by a Kenyan man against women's organizations over the damages he’s sustained (including "mental anguish, stress, backaches, lack of concentration") due to their week-long national sex boycott;
- An ADA suit filed by a law student against his school after it expelled him for failing classes (his claimed learning disability only caused him to fail some classes, but not others); and
- And a lawsuit filed against a personal injury lawyer when one of the law firm’s chairs collapsed, injuring a potential client that was looking to file a different lawsuit.
We’ll see if any of these nominees can surpass the winner of last month’s Most Ridiculous Lawsuit poll, which earned nearly one out of every two votes cast. Congratulations to the lawsuit filed by a woman who suffered burns while handling wax that she had microwaved herself, claiming that the product should not be in the stream of commerce.
We find it encouraging that President Obama is acknowledging the lawsuit epidemic and its impact on America’s health care system, particularly as the Administration examines the critical issue of controlling healthcare costs.
Numerous studies have proven that our out-of-control lawsuit system is forcing physicians to practice defensive medicine to avoid costly liability lawsuits. According to the Harvard School of Public Health, as much as 40 percent of medical liability lawsuits are entirely groundless.
The medical liability issue is one of a number of critically important issues facing the country in this historic healthcare debate. We look forward to working with all parties to find remedies – damage caps, health courts or other effective reforms – that can protect doctors, patients and taxpayers from the ailments caused by excessive medical liability litigation.
However, it is important to note that medical liability reform alone is not enough to balance out the threats posed by an employer pay-or-play mandate, a new government-run insurance plan, or an unelected bureaucracy that takes decisions away from employers, employees, insurers, doctors, and patients.
America, the land of pioneers, has become known for its innovation. When Thomas Edison invented the light bulb and when Neil Armstrong walked on the moon, the spirit of America’s ingenuity changed the world. But there are a few American ideas that other countries would rather quarantine to our borders – among them, America’s failed experiment with class action lawsuits.
Indeed, the body of evidence against America’s class action lawsuit system is vast, which is why it is so troubling that, today, Europe seems on the verge of adopting a very similar system. In recent months, two Directorates General in the European Commission have forwarded proposals to create a class action system vulnerable to the same type of abuse we face in the U.S.
The class action lawsuit was created in the 1960s, as the U.S. federal courts attempted to make the American legal system more accessible and less expensive for consumers by creating a legal mechanism that allowed many plaintiffs with similar claims to file one collective lawsuit.
Class action lawsuits held great promise of benefit for the broad society. For business, it seemed practical to address identical cases at one time, saving years and millions in added legal costs. Consumers would have access to high quality legal counsel in a collective manner without up-front costs. And the plaintiffs’ lawyers would get paid a share of the winnings on contingency fee if they prevailed in the case.
But, in the ensuing forty years, America’s experiment with the class action lawsuit has belly flopped. Of the three parties involved, trial lawyers have benefitted substantially, while consumers and businesses pay the price for frequent abuse of the system.
Instead of creating efficiencies in the lawsuit process, class actions have increasingly been used as a weapon to extract mega settlements from businesses that often must decide between the risky “bet the company” path of a trial with a possible crippling jury award or agreeing to settle for a certain—and certainly large—amount.
Consumers also have not reaped the benefits first envisioned in class action lawsuits either. In fact, 74 percent of Americans believed the class action system drives up prices and should be restrained (Penn, Schoen & Berland Associates). We see the impact of those costs not only in American bank accounts but on a macroeconomic scale as well. Class actions are one of the primary reasons tort costs amount to 1.9 percent of the GDP in the United States as compared to 0.5-0.7 percent in other OECD countries.
Lawyers, however, make out very well, as they receive much of the money consumers pour into the class action system. Often, plaintiffs’ lawyers arrange settlements that provide for millions of dollars in lawyers’ fees and leave the plaintiffs themselves with relatively small awards, or, in some cases, coupons for products or future services from the very company by which they were supposedly wronged.
For example, a class action suit was filed against the manufacturers of BlueTooth headsets, alleging that they should have warned that high volume could result in hearing loss. The plaintiffs’ lawyers negotiated a settlement in February 2009 by which the defendant companies have to pay $1.2 million to issue warnings about hearing loss, $100,000 to the charities of the plaintiffs’ lawyers’ choice, and up to $850,000 to the plaintiffs’ lawyers themselves. However, the consumers, on whose behalf the suit was filed in the first place, got nothing at all.
For those reasons, European policymakers repeatedly promise their constituents that they have no intention of recreating the American class action system. Unfortunately, if the EU implements the proposal to create class actions in antitrust or consumer cases, it may face similar consequences, as the proposals contain many of the U.S. system’s most problematic features.
Most importantly, they allow for a variety of litigation financing schemes that incentivize plaintiffs, plaintiffs’ lawyers, and consumer organizations to file myriad lawsuits with the promise of sizeable profits. Mechanisms like third party funding – which permits a third party to invest in the outcome of the lawsuit by fronting costs – create incentives to file lawsuits. If the suit fails, it costs the plaintiffs nothing. However, if they prevail, the plaintiffs and their lawyers stand to reap enormous profits. And, unfortunately, the plaintiffs often prevail in even the most frivolous of suits. Many defendants will fork over settlements – no matter how ridiculous the claim – because it is cheaper than enduring a long, costly legal process.
These proposals take a similar approach to forum shopping – by which parties could file in the most plaintiff-friendly member country forums, each of which would be empowered to make damaging, EU-wide decisions. Furthermore, the proposals would allow for duplicative litigation that negates the “efficiency” the EU hopes to achieve with class actions. The proposals may even allow for the same case to be pending in all 27 countries on behalf of the same group of plaintiffs. Some of the European Commissions’ reports on the topic acknowledge the “danger” of forum shopping. Yet, they do not propose significant preventive measures.
The proposals also claim to recognize the value of alternative dispute resolution (ADR) – an out-of-court procedure that has helped prevent countless abusive lawsuits in the U.S. – but they do not take any steps toward implementation. According to the European Parliamentary Report on one of the proposals, ADR procedures are “an efficient alternative to collective redress, offer fair and quick out-of-court settlement, and should be encouraged.” Yet, the proposals do not propose any specific ADR procedures, and, in the absence of concrete recommendations, ADR is unlikely to play a significant role in the new framework.
Not only do the proposals invite the same abuses we contend with in the U.S., they would likely attract the U.S. plaintiffs’ bar that has created them. Policymakers contend that European lawyers do not have the same exploitive, entrepreneurial tendencies as does the American plaintiffs’ bar. But what they seem to have overlooked is that American plaintiffs’ lawyers are looking to file class actions in Europe themselves.
U.S. trial lawyers are well aware of the progress towards class actions in Europe, and they are anxiously awaiting the opening of a new market. Some are calling European embassies to see if any bills have passed yet. And others are already opening European offices.
Hausfeld LLP, a U.S.-based class action firm, opened a London office and has been actively advocating for U.S.-style class actions in Europe. Likewise, a New York-based plaintiffs’ firm, Labaton Sucharow & Rudoff, formed an alliance with Italian and German law firms to represent European investors in complex securities cases and class actions. The list goes on.
Just as the U.S. federal courts did fifty years ago, European public officials have the best of intentions. But Europe also has the advantage of America’s experience, and the failed experiment of class actions proves that this is one American innovation Europe should not want to import.
There is little debate that the consequence of eliminating federal preemption of state laws is more lawsuits. In January, the plaintiffs’ lawyer lobby announced their top priority was to gut preemption—which in reality translates into windfall profits for their members.
This debate is about allowing plaintiffs’ lawyers to open the floodgates of litigation against America’s employers.
The days of employers doing business in a single locality are long gone. Today’s markets are global and know few geographic boundaries. With the click of a mouse, businesses reach their customers everywhere the World Wide Web can reach. When it comes to commerce, America is truly the ‘United States.’
Removing federal preemption forces employers to navigate a confusing, often contradictory patchwork quilt of 50 sets of laws and regulations. The end effect is an economic system that ensnares employers into the costly morass of litigation at the hands of America’s plaintiffs’ lawyers. Employers must pay to defend themselves against an extortionate legal system, often at the expense of creating or saving jobs.
It’s difficult to conceive of the difference between the need for a uniform national standard for automobile fuel efficiency on the one hand, while embracing a fifty-state patchwork quilt approach when it comes to lawsuits. The only difference is that the latter benefits one key special interest group.
Removing preemption runs completely counter to the goal of stabilizing the economy and growing jobs—except for those in the lawsuit business.
There is no doubt that Florida legislators have seen the recent series of editorials (one, two, three) in the Wall Street Journal outlining the latest national disgrace for the plaintiffs’ bar – pay-to-play scandals involving state officials across the country.
The stories are classic old-style politics: a special interest (private plaintiffs’ lawyers) make campaign contributions to state officials (in this case, attorneys general and one governor), and in return are hired with lucrative contingency fee contracts (typically resulting in multi-million dollar paydays) in deals done behind closed doors and often without competitive bids.
While the Wall Street Journal’s series highlighted the problem states, it extolled Florida’s push to reform these contingency fee agreements thanks to Florida Attorney General Bill McCollum, who doesn’t believe in doing the public’s business the shady, behind-closed-doors, pay-to-play way. General McCollum has championed legislation that would require him and future Florida AGs to do the public’s business, believe it or not, in public.
Not only would the Transparency in Private Attorney Contracts (TiPAC) legislation require future Florida AGs to do open bidding on lawsuit contingency fee contracts, it would cap attorneys’ fees at $50 million.
As with all legislation, the TiPAC bill has been a political football as it worked its way through the Florida legislature. It passed the House. It passed the Senate with amendments. But as with any legislation worth anything, there was and remains an ongoing fight from special interest groups (plaintiffs’ lawyers) to kill, amend, stall, and/or water down the bill.
The legislative process is always a little messy, and almost never results in a final bill that looks exactly like the original proposal.
And that’s where we are as I write. The Senate has inserted an amendment that would allow the AG to lift the $50 million cap on attorneys’ fees only with a majority vote of the cabinet.
While this may give some pause, let’s be clear: the TiPAC bill, even with this amendment, is a major victory for those seeking to eliminate back-door deals, no-bid contracts and needless lawsuits.
Requiring a majority vote of the Florida cabinet maintains a check on the state attorney general and preserves the intent of the bill to stop the AG’s office from being used as a political payback machine and a piggy bank for Florida’s plaintiffs’ lawyers.
The Florida legislature has moved the TiPAC bill to the goal line. It should pass this legislation right now, before the game clock runs out.
Passage of this bill will put Florida in the vanguard of good, open and honest government. Failure to act will be a major missed opportunity. The legislature should punch it over the goal line.
Anti-arbitration advocates want more disputes taken to court, so they have been peddling studies and anecdotes to make the case against arbitration, including the ironically named Arbitration Fairness Act. Yet, they continue to ignore a growing body of evidence that verifies the benefits of the 84-year old arbitration system.
In a bipartisan survey released in 2008, 71 percent of likely voters opposed efforts by Congress to remove arbitration agreements from consumer contracts, and 82 percent preferred arbitration to litigation as a means to settle a serious dispute with a company.
Also, earlier this year, the Searle Civil Justice Institute completed the most comprehensive empirical research projects to date on the use of consumer arbitration. Instead of the narrow focus relied on by pro-lawsuit special interest groups, Searle looked at a broad array of disputes—including credit card cases and cases involving products and services across the economy—and concluded that arbitration continues to provide consumers with fair, inexpensive and unbiased access to justice.
Congress owes it to the American consumer to look past the rhetoric and examine all the facts before it considers eliminating a proven system of consumer justice.
A case study from the Wall Street Journal:
State Attorneys General regularly hire private plaintiffs lawyers on a contingency-fee basis to prosecute cases. The trial bar returns the favor with campaign donations to state office holders. And despite the inherent conflicts of interest and questionable ethics of the practice, corporate defendants have rarely challenged such arrangements. Which is why a motion pending before the Pennsylvania Supreme Court is so remarkable -- and deserves more public attention....Under terms of the contingency-fee contract, Bailey Perrin receives up to 15% of any settlement or judgment. Even better for the lawyers, the state is barred from settling for nonmonetary relief "unless the settlement also provides reasonably for the compensation of [Bailey Perrin] by [Janssen] for the services provided by the law firm under this contract."
State prosecutors are supposed to be motivated by a sense of public responsibility for the interests of justice. Law firms have other motivations, and no-bid contingency-fee deals encourage lawyers with a financial stake in a case to try meritless claims or ask for exorbitant awards. That serves neither taxpayers nor justice...
Already this year we have seen Congress further this disservice to the taxpayer by authorizing state attorneys general to enforce the federal Truth-In-Lending Act with private civil lawsuits and expanding state AG authority to enforce violations of the federal Health Information Privacy and Accountability Act (HIPAA). Not to mention the ongoing CPSIA debate.
In 1999 Former Clinton Secretary of Labor Robert Reich famously wrote: "The era of big government may be over, but the era of regulation through litigation has just begun.*" Through contingency-fee contracts, state attorneys general have found a way to do both.
* It is worth noting that Reich issued this as a statement of praise, not alarm, horror, or scorn.