Blawgletter®

WSJ Praises Court to Condemn Court System

All the world knows that use of asbestos in the United States skyrocketed during World War II but took a nosedive after the public started realizing its health hazards.  Between 1973 and 2005, total domestic consumption dropped from 803,000 metric tons to 2,400.  So says the National Cancer Institute, a part of the U.S. National Institutes of Health, a federal agency.

The WSJ editorial board apparently didn't get the memo.  Its members seem not to realize that an enormous drop-off in asbestos use would eventually result in an equally large decline in provable asbestosis claims.

So today the editors rail against the "tort bar" -- bet you didn't see that coming -- for "blanketing" dozens of "second-tier players" like W.R. Grace with weak asbestosis claims and thus pushing the companies into bankruptcy.  (Please ignore for the moment that in 2005 a federal grand jury indicted Grace and seven executives for knowingly exposing hundreds of workers to asbestos in a Montana vermiculite mine.  The case remains pending.)  The occasion this time?  The bankruptcy judge presiding over Grace's proceeding ruled that she won't estimate the amount of Grace's liability to asbestosis claimants until -- wait for it -- the claimants submit proof that they actually have asbestosis!

Leave it to the WSJ to argue that an example of the system working as it should proves the system's fundamental badness.

Blawgletter confesses that we don't know a great deal about asbestosis claims or how the bankruptcy estimation process works or if the Grace judge has set up a sensible process.  But we do know that the WSJ's editors almost daily attack the civil justice system as if it usually produces unfair outcomes.  As if the judiciary seldom gives Corporate America a break.  And as if our Founding Fathers must have forgotten how untrustworthy citizens are when the Founders enshrined, in the seventh amendment to the Constitution, the right to have a jury be the final arbiter of fact disputes in civil cases.

"In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law."

The Invisible Handy

Blawgletter adores the myth-busting thunderbolt hurling that goes on across the pond at Adam Smith's Lost Legacy. Why just today we read the estimable Gavin Kennedy electrocute those who misuse Mr. Smith's occasional invocation of the "invisible hand" figure of speech:

Nobody has yet accounted for the invisible hand in their use of it in markets, nor how it is alleged to operate as a disembodied body part, nor even what it adds to the theory of markets.

Adam Smith knew better than to make such a claim for the metaphor, which he used to a) describe as ‘pusillanimous superstition’ by pagan savages (History of Astronomy); b) to give literary flair to the behaviour of rich landlords feeding the ‘thousands they employed’ and their families (they could do no other and survive themselves) (Moral Sentiments), and c) to refer to the risk-avoidance by domestic merchants (Wealth Of Nations).

In none of the only three cases in which he used the metaphor of the invisible hand did he include its use in his theory of markets.

Zing!

We must confess to a similarly imperfect understanding of the Smithean oeuvre. Who knew, for example, that Mr. Smith knew nothing of "capitalism" -- a word that didn't exist until almost a century after he published Wealth of Nations? Thanks to Professor Kennedy for keeping us on our metaphorical toes.

Quote of the Day: Tariq Mahmood

My message [to the U.S. ambassador in Islamabad] was very simple, you love democracy, you live in a democracy, why do you want to deprive us? You are always supporting the dictator.

Tariq Mahmood, former president of Pakistan's Supreme Court Bar Association, in "Lawyers Rally Against Musharraf Government", NYT, Mar. 8, 2008.

Supporting Pakistani Lawyers and Rule of Law

Awhile back, Blawgletter posted Open Letter:  U.S. Should Support Pakistani Lawyers and Rule of Law.  Yesterday, a commenter alerted us to Black Flag Week in Pakistan and an international effort to make common cause with lawyers there.  The commenter referred to Achieving Our Country blog, which includes this information:

Who? We are a group of active blog participants whose primary connection is based in Glenn Greenwald’s blog on Salon.com. We came together as a group to work on raising awareness on issues facing our country and the world. We named ourselves PosseComment@US.

What? We are asking people to honor Black Flag Week, March 9-15, by wearing black armbands or black clothing, to support the Pakistani lawyers’ movement. These barristers are protesting, taking legal action, and being physically assaulted and jailed by their government, attempting to restore the rule of law in their country. They began one year ago, when President Pervez Musharraf illegally sacked the Chief Justice of the Supreme Court. Our goal is to support these lawyers in their efforts to restore democracy, the judiciary and the Constitution in Pakistan.

Why? Rule of law and democracy are fundamental to free societies everywhere. The lawyers’ movement in Pakistan recognizes this as a crucial nexus in the evolution of their society from the tyranny of a military dictatorship to a functioning democracy. Restoration of justice and the voice of the people in Pakistan could very well be critical to the future safety of not only America, but also to the rest of the world as well. We in the United States

have the freedom and the ability to act, to raise awareness and to show support for just causes. It is our responsibility to our own democracy to do so. It is the morally correct action to take.

How? We have been working for the past week, sending emails and flyers, making calls, contacting groups we think might wish to help and posting informational pieces on the internet. Preparations in Pakistan have been building and they are expecting a massive turnout of supporters. It is absolutely crucial that displays of support for this movement be seen not only in Pakistan, but also here and elsewhere in the world, to convince the Pakistani senate and the incoming government to act, and to restore the institutions so crucial to a just government.

Where? Our effort is based at http://AchievingOurCountry.blogspot.com. We have established contacts with law schools, lawyers, civil rights groups and bloggers in order to disseminate this critical message. As the movement in Pakistan is primarily based among lawyers and law schools, it seemed appropriate to call on their counterparts here, in the United States, and elsewhere, for support. 

When? Aitzaz Ahsan, President of the Supreme Court Bar Association in Pakistan, has established the week of March 9-15 as Black Flag Week. Rallies, events and marches are being scheduled in Pakistan and we are encouraging supporting events.

For more information, please visit http://revolutionredux.wordpress.com/2008/03/02/pakistan-constitutions-and-the-rule-of-law/.

You go, Pakistan.

A New Federal Rule on Privilege Waiver?

On February 27, the U.S. Senate passed a bill to add Rule 502 to the Federal Rules of Evidence.  The text follows:

Rule 502. Attorney-Client Privilege and Work Product; Limitations on Waiver

The following provisions apply, in the circumstances set out, to disclosure of a communication or information covered by the attorney-client privilege or work-product protection.

(a) Disclosure Made in a Federal Proceeding or to a Federal Office or Agency; Scope of a Waiver- When the disclosure is made in a Federal proceeding or to a Federal office or agency and waives the attorney-client privilege or work-product protection, the waiver extends to an undisclosed communication or information in a Federal or State proceeding only if:

(1) the waiver is intentional;

(2) the disclosed and undisclosed communications or information concern the same subject matter; and

(3) they ought in fairness to be considered together.

(b) Inadvertent Disclosure- When made in a Federal proceeding or to a Federal office or agency, the disclosure does not operate as a waiver in a Federal or State proceeding if:

(1) the disclosure is inadvertent;

(2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and

(3) the holder promptly took reasonable steps to rectify the error, including (if applicable) following Federal Rule of Civil Procedure 26(b)(5)(B).

(c) Disclosure Made in a State Proceeding- When the disclosure is made in a State proceeding and is not the subject of a State-court order concerning waiver, the disclosure does not operate as a waiver in a Federal proceeding if the disclosure:

(1) would not be a waiver under this rule if it had been made in a Federal proceeding; or

(2) is not a waiver under the law of the State where the disclosure occurred.

(d) Controlling Effect of a Court Order- A Federal court may order that the privilege or protection is not waived by disclosure connected with the litigation pending before the court--in which event the disclosure is also not a waiver in any other Federal or State proceeding.

(e) Controlling Effect of a Party Agreement- An agreement on the effect of disclosure in a Federal proceeding is binding only on the parties to the agreement, unless it is incorporated into a court order.

(f) Controlling Effect of This Rule- Notwithstanding Rules 101 and 1101, this rule applies to State proceedings and to Federal court-annexed and Federal court-mandated arbitration proceedings, in the circumstances set out in the rule. And notwithstanding Rule 501, this rule applies even if State law provides the rule of decision.

(g) Definitions- In this rule:

(1) "attorney-client privilege" means the protection that applicable law provides for confidential attorney-client communications; and

(2) "work-product protection" means the protection that applicable law provides for tangible material (or its intangible equivalent) prepared in anticipation of litigation or for trial.

Our feed never wavers.

Twombly Takes Another Victim

The Ninth Circuit today affirmed dismissal of an antitrust case for failure to allege an actionable conspiracy under the pleading requirements of Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007).  Parallel conduct, without more, doesn't cut the Twombly mustard.  Kendall v. Visa U.S.A., Inc., No. 05-16549 (9th Cir. Mar. 7, 2008).

As Felix the Cat would say, righty-o.

Tim-berrrrrrrr!

Debate on Public Entities' Hiring of Contingent Fee Lawyers Rages Some More

Blawgletter just spotted a thoughtful anti post on the wisdom of using contingent fee arrangements to hire private counsel to prosecute public claims.  The post, in Bogartyag's Weblog, summarizes the recent spate of attention to the issue.  Then it gives four arguments against contingent fee deals with public entities:

We don’t have much to add to our previous post on this issue, but we’d like to highlight a few points as to which we don’t see much disagreement in the blogosphere.

First, even those who favor governments hiring contingent fee lawyers (and we do not count ourselves in that crowd) can’t seriously object to adding more transparency to that process. If the government is going to enter contracts that have the ability to make select private citizens richer than Croesus, that process should be open and public.

Second, no one seems to object to competitive bidding for these lucrative contracts. If the government is going to hire private lawyers, surely it should strive for a reasonably low price. (We didn’t write the “lowest price” there, because we believe that the cheapest lawyer is not necessarily the lawyer most likely to win your case.)

Third, when governments hire private contingent fee lawyers, those lawyers have a personal interest in maximizing the recovery of money damages, from which the fee will be paid. Maximizing damages, instead of seeking, say, broader injunctive relief, will not necessarily represent the preferred public policy. We know that the client — the government — is ultimately making the decision to settle, but even the most sophisticated client relies heavily on counsel — the boots on the ground — for advice. When that counsel has a personal interest in maximizing monetary recovery, sound government policy can be placed at risk.

Fourth, permitting the executive branch — attorneys general — to extract private money for government use infringes on the legislative branch’s historic control of the government’s taxing authority. We understand that this already occurs, to a limited extent, when the government imposes civil fines and the like. Call us fools, if you like, but we just think people act differently when billions of dollars are placed on the table.

The first three points strike us as worth talking about.  Indeed, we would like to see someone develop a set of guidelines for hiring private counsel on a contingent fee basis, including discussion relating to (1) transparency, (2) competitive bidding, and (3) oversight and allocation of decision-making authority on matters of strategy, trial, and settlement.

The fourth argument -- that contingent fees infringe on legislative prerogatives -- seems a tad over the top.  Do we really want senators and representatives dictating to attorneys general which specific lawsuits to prosecute and which ones not to?  That way lies madness.

It's a bit nutty.

Bad 30(b)(6) Witnesses Justified Draconian Sanction

A different Draco.

The Seventh Circuit upheld dismissal of a complaint as a sanction for failing to abide by an order compelling plaintiffs to present knowledgeable witnesses to testify at a Rule 30(b)(6) deposition.  After noting the "draconian" nature of the sanction and its status as a "last resort", the court said:

That doesn't mean . . . that it can never be used.  Even Draco got it right every once in awhile, and today, when district courts have several hundred cases on their dockets, there are times when the "draconian" remedy is appropos.  And that time was reached in this case.

Banco del Atlantico, S.A. v. Woods Industries Inc., No. 07-2238, slip op. at 8 (7th Cir. Mar. 7, 2008).

Fans of ancient Greece will recall that, before Draco, Athens hadn't written down its legal code.  Draco reduced his notions of law and justice to writing and posted copies of the code around the city for all to see.  The law-giver earned immortality for "draconian" measures by specifying death as the penalty for minor crimes and, more recently, as the namesake of Harry Potter's Slytherin rival, Draco Malfoy.

Happy Friday.

Quote of the Day: Doug Petkus

There is no basis in fact or law for this award or for the earlier compensatory-damage award.  We are confident in our position of appeal.

Doug Petkus, spokesperson for Wyeth, after a federal jury awarded $19.4 million in punitive damages for causing Donna Scroggin to develop breast cancer from her use of Wyeth's hormone-replacement therapy.

Can you say "I got nothin"?  Sure.  We knew you could.

Ninth Circuit Enforces Law Firm's Promise to Pay Co-Counsel

The Ninth Circuit today upheld summary judgment against Law Firm A for shortchanging Law Firm B on the latter's share of a $10.1 million contingent fee.  Brown & Bain, P.A. v. John M. O'Quinn, No. 06-15931 (9th Cir. Mar. 6, 2008). 

The losing outfit (Firm A) engaged Firm B to help handle an environmental contamination case against Motorola for 900 claimants in the Phoenix area.  The engagement letter promised that Firm A would pay Firm B hourly fees at a cut rate.  It also provided that, once Firm A recovered enough money to cover the fees it paid to Firm B, Firm A would pay Firm B an additional amount per hour out of the excess.  Firm B received hourly fees of $2.9 million from Firm A for about 26,000 hours of work. 

The case settled for $26.3 million.  After paying itself $13.7 million in "costs", Firm A disbursed $2.5 million -- less than 10 percent of the settlement money -- to the clients.

The district court and the Ninth Circuit held that Firm A owed an additional $3.3 million to Firm B.  Both rejected Firm A's argument that it didn't have to pay Firm B more until Firm A recovered all its litigation "costs".  They also concluded that Firm A failed to prove excessiveness of Firm B's fee, particularly in light of the fact that the additional money for Firm B didn't lessen the clients' net recoveries.  Finally, both courts found no evidence that Firm B failed to do its job properly.

Blawgletter views Brown & Bain as a cautionary tale for law firms that band together to prosecute contingent fee cases.  It tells us that courts will strictly enforce fee agreements between the firms.  Also that they will cast a gimlet eye on ethical arguments -- especially if accepting them won't put more money in clients' pockets.

Our feed enjoys casting a gimlet eye on stuff.