Blawgletter read this morning in the WSJ an op-ed item that totes up the annual costs of "excessive" tort litigation, arriving at an estimate of $865.37 billion.  Blawgletter also studied the Pacific Research Institute paper that explains the authors’ methodology.  Blawgletter’s  inescapable conclusion?  That tort lawsuits produce only human misery and homicide.

How, you may ask, does going to court shuffle off the mortal coil?  According to the authors, the fatalities result from raising health care costs (through defensive medicine), sucking money from safety-enhancing R&D, and pushing risk-reducing products from the market.  They estimate that too much tort litigation has cost 77,000 lives.

What should we do?  The authors propose "comprehensive tort reforms" — but, alas, don’t "venture to propose a specific litigation-reform agenda."

But, before turning in your law license and yourself into the authorities, consider possible shortcomings in the study.  For now, at least, leave to one side its name — Jackpot Justice:  The True Cost of America’s Tort System — which to some may imply less than complete objectivity on the part of the authors.  Not to mention the Pacific Research Institute itself, whose major contributors include Altria, Pfizer, and Microsoft.  And never mind that the study makes no attempt to determine the beneficial effects of tort litigation.  Let’s look instead at what the authors did:

  • They determine "excessive" tort costs by comparing U.S. expenditures, as a percentage of gross domestic product, with average expenditures in Poland, Spain, Italy, Japan, and other "industrialized" countries.  The authors don’t explain why they think these nations, on average, have achieved tort lawsuit nirvana or whether the universal availability of health care helps explain their lower litigation costs.  Nor do they tell us why the U.S. should spend less of its GDP than Italy, Germany, Spain, and Belgium do.
  • They muddle the definition of "torts".  Their anecdotes concern personal injury cases exclusively, but "torts" for them includes "defamation, misrepresentation, invasion of right to privacy, trespass against land and personal property, conversion, nuisance, and infringement on trademarks, patents, and copyrights."  They even sweep in "class actions", apparently without regard to the underlying claims, which may involve non-tort causes of action like breach of contract, violations of civil rights, and antitrust.
  • They count the cost of "defensive medicine" as purely negative — even if it produces better health care and more favorable patient outcomes and even if factors other than fear of a lawsuit prompted the additional measures.
  • They use a single research paper to justify their conclusion that tort lawsuits kill people.  The paper itself concluded that at least one kind of "tort reform" increased accidental death rates.  Plus, according to the abstract, it dealt only with deaths from non-motor vehicle accidents and a handful of "reforms" that apply only, if at all, in the personal injury context.

Blawgletter could go on, but we see our time has expired.  Count Blawgletter skeptical.

Barry Barnett

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A decision today by the Federal Circuit may encourage patent holders to sue for infringement first and discuss settlement later.  In SanDisk Corp. v. STMicroelectronics, Inc., 05-1300 (Fed. Cir. Mar. 26, 2007), the court reversed dismissal of SanDisk’s declaratory judgment lawsuit for lack of a "case or controversy" between SanDisk and STMicroelectronics over infringement of ST’s flash memory patents — despite ST’s unilateral promise, during licensing negotiations, not to sue SanDisk.

In footnote 1, the court suggests that ST could have avoided the result by getting SanDisk to sign a "suitable confidentiality agreement."  The court doesn’t explain how confidentiality would stave off litigation.

Blawgletter’s thoughts:  If you want to extend a pre-suit olive branch to a possible infringer, gently insist that he first sign an agreement that obligates him not to file suit before you do.  If he balks, tell him "sorry, mate, but I can’t risk it.  SanDisk leaves me no choice."  Otherwise, you may find yourself litigating, as ST now does, far from home (Carrollton, Texas, in the case of ST) and in your adversary’s back yard (San Jose, California).

Barry Barnett

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The U.S. Supreme Court today agreed to review the underpinnings of the Fifth Circuit’s 2-1 decision last week to decertify a class of Enron shareholders.  In Stoneridge Investment Partners, LLS v. Scientific-Atlanta, Inc., No. 06-43 (U.S. Mar. 26, 2007) (order granting cert. here), the Court will consider whether the Eighth Circuit erred in limiting liability under section 10 of the Securities Exchange Act and Rule 10b-5 to defendants who directly misrepresented facts, omitted facts they had a duty to disclose, or engaged in manipulative buying or selling.  The Fifth Circuit adopted the Eighth Circuit’s analysis and rejected the Ninth Circuit’s contrary approach. 

You can see the Eighth Circuit decision here, the one from the Fifth Circuit here, and the Ninth Circuit’s here.  Also check out our posts on the Enron opinion here and here.

Blawgletter notes, with a teeny dot of satisfaction, that we highlighted the possibility of Supreme Court review last Wednesday.

Barry Barnett

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Do you know any lawyers who’ll do whatever their clients tell them to do?  Or, worse, whatever they think their clients want them to do?  Who leap whenever clients say jump — and out of habit pirouette even when they don’t hear their masters’ voice?

Blawgletter hopes you don’t know any like that.  Blawgletter also wishes that our profession didn’t have any either.

The lawyer’s job doesn’t consist in doing others’ bidding.  It instead involves zealously seeking legitimate client goals through fair, honest, and proper means.  Weak lawyers — however smart and regardless of their credentials — take zeal for the client’s interest beyond its proper sphere.  They lose themselves, and their duties to our profession and the public, in their clients’ shadow.  They may prosper for a time, but no one will admire them or, more important, trust them for the thing that, in Blawgletter’s view, defines the lawyer’s role — independent professional judgment.

As the country music song says, you have to stand for something or you’ll fall for anything.

Get to the point, Blawgletter hears you say.  Okay, then.  Clients who hire weak lawyers seek them out precisely for their weakness.  They don’t want independent professional judgment.  They want their way.  And Blawgletter suspects that they also hold the law and its practitioners in something near contempt.

We’ve read and heard a lot in the last week about the ousting of lawyers who didn’t show as much loyalty to their client as the client wished.  We also know that other lawyers, believing they did what the client desired, developed and executed the particulars of the dismissal plan.  Blawgletter believes that the oustees should wear their cashiering as a badge of pride and a symbol of strength.  They did their job.

The real weak performers — the weakling lawyers who ousted the strong ones in the client’s name — remain at their posts, ready to provide similar services to their client again.  Fredo lives.  For now.

Barry Barnett

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Vonage

As you will recall, earlier this month a federal jury in Alexandria, Virginia, found that Vonage’s internet telephone service infringes Verizon patent claims and awarded Verizon $58 million plus future royalties.  Yesterday, the trial judge said he would issue a permanent injunction against further infringement but would wait two weeks so he can consider Vonage’s motion to stay the injunction pending appeal to the Federal Circuit.  U.S. District Judge Claude Hilton set a hearing on the stay motion for March 30, 2007.

Barry Barnett

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Way back on January 5, Blawgletter summarized the four antitrust cases that the U.S. Supreme Court has taken on for its 2006 Term.  For convenience, we’ll reproduce the summary here:

  • Bell Atlantic Corp. v. Twombly — The standard for pleading a price-fixing conspiracy.  Must you give who-what-when-where particulars?
  • Leegin Creative Leather Products, Inc. v. PSKS, Inc. — Does a manufacturer/distributor’s requiring resellers to charge minimum prices violate the Sherman Act per se?
  • Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co. — Requirements for a "predatory buying" antitrust claim.  Does the buyer have to lose money on the item that it bought too much of?  Must it also stand a good chance of recouping the loss?
  • Credit Suisse First Boston v. Billing — Do federal laws that regulate the buying and selling of securities (stocks, bonds, and the like) provide immunity for conduct that would otherwise violate federal antitrust law?

The parties argued Twombly on November 27, 2006.  We have no ruling yet. On January 20, the Court handed down its Weyerhaeuser opinion.  Short version:  plaintiffs lost.  See post here.

This coming week, the Justices will hear arguments in the last pair of the antitrust foursome.  On Monday, March 26, the Court will consider Leegin ("Questions Presented" here), and on the next day Their Honors will give a listen to Credit Suisse (here).  Blawgletter will post transcripts of the arguments as soon as the Court makes them available.

Another case of supreme importance to public companies also goes forward next week, specifically on March 28.  The case, Tellabs Inc. v. Makor Issues & Rights, Ltd., No. 06-484, involves pleading requirements for securities fraud cases under the Private Securities Litigation Reform Act of 1995 (here).  A victory for defendants may sharply reduce the viability of actions to enforce the Securities Exchange Act through civil lawsuits.

Barry Barnett

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This item appeared in the October 2006 issue of Barnett’s Notes on Commercial Litigation.

I don’t watch Curb Your Enthusiasm, but a recent incident prompted me to run an Internet search on it. And on that Googling hangs a story.

The American Lawyer published an article about the firm during my first year as an associate. It attributed a quote to Your Editor. I’d apparently babbled to the reporter that "at Susman Godfrey, you eat what you kill." Of that specific utterance I had no memory, but I did like the quote.

Recalling that long-ago philological glory led me, hopefully, to Google eat what you kill. The search returned a gratifying 35.6 million hits. But none of them credited or even mentioned Your Editor. Rats!

One result, on WordSpy, did give a good definition: "The business philosophy that a person who accomplishes something should get the full financial benefit that results from that accomplishment." But, to my dismay, WordSpy listed the "Earliest Citation" as a September 1987 article . Double rats!

A factotum (at length) tracked down a copy of the American Lawyer article. As you can see here, this gem of legal journalism bears a publication date of September 1986 — a full twelvemonth before WordSpy’s "Earliest Citation".

A skeptical client, overhearing my claim of eat what you kill coinage, related that a character in Curb Your Enthusiasm had similarly asserted provenance of a famous saying. I Googled curb your enthusiasm and found that, in the "The Nanny from Hell" episode, Richard Lewis had indeed tried to persuade the publisher of Bartlett’s Familiar Quotations to add "[blank] from hell" to Bartlett’s and to name Lewis as originator.

Aha! Your Editor’s thirst for fame as progenitor of eat what you kill soared. No longer did I want mere credit for a phrase that WordSpy says "is now quite common throughout the business world." No, Your Editor desired the prestige, the acclaim, the immortality that inclusion in Bartlett’s assures.

Good luck with that, I hear you saying, probably under your breath. But I defy you to find a pre-September 1986 printing of eat what you kill in its modern sense.

As I await your reply, let me offer some thoughts about what eat what you kill signifies in the context of practicing law, specifically commercial trial law. Several sources, including the book Eat What You Kill: The Fall of a Wall Street Lawyer (2004), emphasize the perils of linking compensation to business-getting. The real-life subject of the book allowed the rewards of making rain to blind him to his ethical lapses. Bad stuff ensued. Other commentators condemn the intra-firm competition, resentment, and selfishness that they imagine an eat what you kill philosophy breeds.

Sorry, but I don’t see it that way. I perceive no conflict between high ethical standards and high earnings. The one promotes the other. Lawyers and clients who think otherwise have misjudged reality.

Nor do I believe that eating what you kill corrodes a firm’s soul, certainly not at a commercial trial firm. Trial work in commercial cases, by its nature, requires collaboration. Its intensity and complexity demand collegial relationships and respect among professionals. And it rewards excellence and spreads success, especially in contingent fee cases.

Eat what you kill doesn’t provide long-term security. But business people want performance from their lawyers. If they think of their lawyers’ security at all, they want it to result from producing results for them.

Barry Barnett

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Mrfreeze
Remember Mr. Freeze?

The D.C. Circuit today upheld a preliminary injunction freezing all assets of a company that participated in a fraudulent scheme.  The scam involved a consultant that the plaintiff, Ellipso, Inc., hired to obtain financing for it.  The consultant got the loan alright, but he didn’t disclose that he held a personal financial interest in the lender.  Ellipso pledged shares of stock in another company to secure the loan.  The collateral’s value at first represented twice the amount of the loan, but over time the value increased more than 10-fold.  After discovering the fraud, Ellipso sued to undo the loan and moved for a preliminary injunction to stop the consultant and the lender from disposing of the collateral.  The district court granted the motion and ordered a freeze on all of the lender’s assets, which consisted almost entirely of the stock and proceeds from selling some of the shares.  The court of appeals affirmed.  Ellipso, Inc. v. Mann, No. 05-7181 (D.C. Cir. Mar. 23, 2007).

The interesting part of the opinion addresses an argument that the defendants did not make — that an asset freeze exceeded the district court’s authority.  The court noted that such an order may issue only if the seeker of the freeze demonstrates "an equitable claim to the assets."  In Ellipso’s case, the company did assert that it equitably owned the collateral and should get it back as a result of undoing the fraudulent loan transaction.  Very smart, Blawgletter thinks.

Barry Barnett

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