The Washington Primaries

August 25, 2008

I’ll write more later but first a couple of quick comments on the primary results. Sam Reed, the Secretary of State was the pronounced favorite, which I thought was encouraging. Mr. Reed is the traditional sort of Republican, the Dan Evans sort of politician who subordinates party interest to public interest.

He is competent, ethical and trustworthy. He does not bow to the extremists who have taken over the state Republican party, people who seem to profess winning at any cost.

Our local Republican Party of course suffers from a disregard of the Constitution in its zeal to win, advocating the disregard of the 14th Amendment in its just adopted platform. It has been lock step with the Bush Administration in its position on FISA and the Administration’s disregard of the the 4th Amendment. The party sanctions the hate-politics of its attack dog the B.I.A.W. Sam Reed is cut out of better cloth.

The Attorney General’s race between the incumbent and John Ladenburg could not present more divergent styles. Our current Attorney General campaigns on tort reform using misleading statistics, then argues against this in politically popular cases such a Exxon Valdez, when political pressure mounted for a distressed property law here, he proposed legislation, then argued to the real estate special interests that the legislature was to blame for being overly protective.

Our Attorney General seems to be trying to appeal to everyone, while maintaining his corporate base and receiving substantial corporate donations.

His deficiencies as Attorney General are compensated for by adroit political maneuvering. He has launched, as of a few months ago, an email campaign, publicizing the “successes” of his office. This seems to me to be a highly questionable use of public funds.

John Ladenburg on the other hand is an adept administrator with a commendable track record as Executive of Pierce County. His rather low key style has served to resolve problems and issues that the incumbent uses to factionalize the electorate and drive people apart.


Tort Reform Can’t Muster Enough Signatures to Get on Ballot in Oregon.

July 15, 2008

Tort Reform is an initiative sponsored by largely by insurance companies with two main goals: Blocking access to the courts and reducing awards to people who have been found at trial to have been wronged. In Oregon an initiative fell short of the required number of signatures to get on the fall ballot.

This initiative was a very clever attempt to deprive many of the people who cannot afford a lawsuit from bringing claims by putting limits on contingent fees. The initiative would limit fees to 25% for awards of $25,000 or less and then to 10% of amounts in excess of $25,000. This would effectively deprive many of any opportunity to have a trial because lawyers would not be able to afford many contingency cases.

Here is what is not commonly known. First, contingent fees are most commonly charged in personal injury cases to people who cannot afford a lawsuit. Without a contingent fee, they could not go to court.

States already have limits on what a lawyer can receive as compensation. If a person thinks that a lawyer received too much as a contingency fee, they can ask the bar association to review the fee. Bar associations are rather diligent about this and at least in Washington have the power to reduce the fee but they will not increase it. The bar association does in fact reduce fees it determines were too high.

The purpose of the initiative is to further reduce compensation so as to deter lawyers from taking cases that promise hard work but involve limited damages.

This cap would put the injured person at a severe disadvantage in most lawsuits with insurance companies which routinely pay a great deal more for defense than what the plaintiff’s lawyer could hope to receive. It would tilt the playing field rather dramatically in favor of the insurance company.

I would guess that a fairly routine trial takes at least 200 hours of time for a lawyer. It is not uncommon to invest 500 hours or more on a trial. So for a lawsuit that involved a claim that was $25,000, the lawyer would receive a maximum of about $35 an hour if he or she was successful. If the claim was challenging, perhaps half of that, maybe less. If they lose, then there is no compensation. Meanwhile insurance companies pay their litigators four to eight times that amount (sometimes more than that) on an hourly basis.

In order to cover overhead, personal injury lawyers would have to limit the number of smaller contingent fee cases they took on.  On the face of it, the only segment of society that would benefit by this would be the stock holders of the insurance companies. To the degree that people who cannot afford a lawsuit are denied an opportunity to go to court (this would be most of the middle class), the society as a whole is destabilized.

It would be potentially economically disastrous to take challenging cases that took a lot of time, even if the claim was substantial. On a claim for $1 million the maximum allowed to a lawyer would be about $104, 000. If it took 1000 hours to win, then the lawyer would receive about $100 per hour. This is about half to a third, or less, of what an experienced trial lawyer would charge. It would be enough to cover overhead and leave a profit but it would be devastating to most firms to lose or receive a smaller award. So the economic incentives would not be high for taking on a large challenging case.

Again, the system would work much better and insurance companies would save significant a amount of money if they settled cases promptly instead of being highly adversarial from the beginning. John Ladenburg’s statistics from Pierce County show this quite clearly. (See my entry on June 20.) Instead of trying to create a system that prejudices the rights of injured people, the insurance companies could achieve actually a better result for their bottom line by just investing their efforts in prompt, reasonable settlements. This would have the added benefit of reducing the role of trial lawyers in the system and thereby give more money to the injured person.


The Exxon Valdez Decision and Punitive Damages

July 9, 2008

Exxon Shipping Co. v. Baker (the Exxon Valdez decision) provides an interesting look at our Supreme Court, particularly since so many of the members were selected by our country’s first administration composed of former oil executives.

The decision derives from the worst environmental disaster in our country’s history, when millions of gallons of oil were leaked into Prince William Sound in Alaska. The oil came from a supertanker (over 900 feet long) whose drunken captain had left the vessel in the hands of an unlicensed third mate who could not negotiate the passage. The ship ran aground on a reef. Wildlife was destroyed, a habitat rendered toxic and all the people who depended on Prince William Sound for their livelihood, including fishermen in Alaska, Washington, as well as elsewhere, were ruined. The devastation was overwhelming. Even now nineteen years later, oil stained gravel and sand lies just below the surface on the shore.

The captain had a history of alcohol abuse and was still intoxicated eleven hours after the incident. Exxon was found by a jury to have acted recklessly, and the jury awarded $5 billion in punitive damages. Exxon appealed, questioning on a number of grounds the punitive damage award.

Before arriving at the Supreme Court, the case was considered by the Ninth Circuit Court of Appeals. That court upheld the jury’s right to award punitive damages, but cut the amount of the punitive damages award in half.

Exxon petitioned the Supreme Court for review hoping to convince it that punitive damages were in appropriate and failing that that even half of the jury’s award was excessive.

Washington’s Attorney General, an ardent tort reform proponent, who campaigned against large jury awards, saw an opportunity for publicity. While actually claiming to his constituents that large jury awards and excessive litigation costs prevented the State of Washington from correcting to the conduct that gave rise to the litigation against the State, he undertook to champion the cause for punitive damages to the Supreme Court. He argued for the right to punitive damages and asked that the $5 billion award be restored.

In a very unusual decision, the Court announced that it was evenly divided on the question of whether punitive damages could be awarded against a corporation under maritime law. The Court said that it would not render a decision on that point, leaving the decision of the Ninth Circuit in place. (With nine members you might wonder how the Court could be evenly divided. Justice Alito recused himself, presumably because of some association with Exxon, creating an even number of justices deciding this case.) In the next few years from two to four of the members of the Court will be replaced and a reconstituted Court could then decide this issue.

The Court, without examining the right to punitive damages under maritime, law chose to consider whether such damages were prohibited by the Clean Water Act and, if not, whether the award was excessive. What is odd about this is that the Court left open the opportunity for it to later decide that there were no punitive damages available under the maritime law, undercutting the entire decision.

This very narrow ruling is becoming a trademark of the new Roberts Court. The new Chief Justice attempts to avoid sweeping decisions and tries to limit them to the facts of the case while seeking to avoid fractious split decisions. In this decision he selected issues that were less divisive than the question of whether punitive damages were available under maritime law.

The Court, after finding the the Clean Water Act did not preempt maritime common law, discussed the roots of punitive damages, tracing it back to English common law, codes from the Middle Ages and even the Code of Hammurabi. The decision quotes from an 18th century American decision where punitive damages were awarded against the Secretary of State for an unlawful search of someone’s papers. (They apparently had different sensibilities then, although maybe not in the case of the Attorney General.)

The Court said that punitive damages were “wildly” accepted by American courts by the middle of the 19th century. At that time they were called “exemplary damages” a more favorable term, and were invoked in cases involving extraordinary wrongdoing. Their purpose was said to be to set an example for the sake of deterence. They were also said to compensate for intangible injuries that were not a part of the legal definition of compensatory damages. The court noted that the concept of compensatory damages has broadened so that this justification no longer applies. Today the Court said that punitive damages serve the purposes of retribution and deterrence and are reserved for outrageous conduct that is recklessly indifferent to the rights of others or otherwise deplorable.

In Nebraska punitive damages are barred entirely. In Washington, Louisiana, New Hampshire and Massachusetts they are permitted only when authorized by statute. (In Washington this nearly amounts to a bar on them as the legislature disfavors this aspect of the common law.) Two states have limited the type of rewards which may be recovered as exemplary damages and several have limited the amounts.

In an interesting and uncharacteristic detour the Court examined the laws of several other countries on the question of punitive damages and found that they were generally subject to tighter control than in American Courts.

The Court rejected the contentions of the tort reformers who claim that punitive damages are becoming extravagant. It stated that neither the amount of the awards nor the percentage of cases with punitive damages awards has increased over time. The Court said that the figures show restraint with respect to this type of award.

The Court though found fault in the lack of predictability of the amount of the awards and the lack of consistency in determining an appropriate amount. It announced that it would create criteria so that this element of damages would be rendered more predictable.

The Court noted that the criminal justice system’s sentencing function has the same purposes as a jury assessing punitive damages: retribution and deterrence. It found it noteworthy that the “indeterminate” sentencing system had been rejected and suggested that it would do the same thing for punitive damages awards, avoiding the “deserts of uncharted discretion.”

The court cited studies showing that the ratio of punitive damage awards to compensatory awards was less than 1:1, meaning that actual damage awards were on average more than the accompanying punitive damage award. Without much more discussion the Court decided that in maritime cases the limit on punitive damages would be the amount of the compensatory award.

Justice Scalia and Thomas separately concurred. Justice Thomas often seems to follow Justice Scalia’s views almost like a shadow. Scalia said that the reasoning here was correct but he disputes cases cited in the opinion that put a constitutional limit on punitive damages.

Justice Stevens dissented from the part of the opinion that imposed a limit on maritime punitive damages. His dissent shows the shallow, if not outright ignorant use of the term “activist judges,” Tort reformers often rant against judges usurping the role of the legislature and attribute that to “liberal judges.” Justice Stevens, sometimes called a liberal justice, opined that it is not the role of the Court to devise a formula to impose on juries. He said that this is a legislative function that ought to be reserved for Congress.

Justice Ginsburg, generally regarded as particularly thoughtful, shared Stevens’ aversion to the Court legislating damage limits. She pointed out that the majority acknowledged that there was no perceived urgency requiring the court to break from the common law tradition. She pointed out that the data that informed the decision showed that the traditional “abuse of discretion” standard by which punitive damages are traditionally reviewed functioned perfectly well. She also pointed out a number of unanswered questions about the decision.

Justice Breyer also filed a dissent, saying that he had no particular problem with the imposition of a ration like the one adopted but that it should not apply in extraordinary cases. He went on to point out the high degree of scrutiny that this award had received at the trial court level and what the Ninth Circuit Court called the “egregious” nature of Exxon’s conduct. As a special case exception he would have sustained the Ninth Circuit Court’s decision.

There are a number of interesting features to this case which I’ll discuss on another occasion. One quick observation. Broadly speaking punitive damages and criminal law address the same sort of conduct, as suggested by the Court in this decision. That is conduct that is deplorable or which recklessly endangers others or their rights. Punitive damages and sentencing have exactly the same purposes, to punish the guilty and to deter such conduct. You would think that people supportive of strong or harsh sentencing standards would support strong or harsh punitive damages standards. It turns out of course that generally speaking the people who support incarceration over rehabilitative purposes in sentencing favor the abolishment of punitive damages. There are racial and class distinctions between the two groups of defendants. Hopefully there is some other explanation for this apparent inconsistency.


Rob McKenna; I think I figured it out (Part 2)

June 26, 2008

I puzzled overnight how Rob McKenna could within a very short period of time issue apparently wildly contradictory statements. He says the courts are out of control with damages and the legislature needs to step in and impose limits. He also argues that courts should be able to disregard legislative limits on damages and he supports enormous punitive damages.

My problem in trying to figure this out was that I presumed that there was an over arching doctrine that somehow melded these two opposing positions.

No, the answer lies in the reason for espousing them. Tort reform, however unsupported by actual evidence, is a Republican campaign cornerstone. As a Republican candidate for Attorney General, Rob McKenna embraced the issue. The issue still has currency and Mr. McKenna uses the issue to gain publicity.

The Exxon Valdez case is internationally known and public sentiment lies almost entirely on the side of the victims of this environmental disaster. Mr. McKenna claims to have inserted himself into this case to rally other states into participating as advocates of the victims.

He took the politically popular position of advocating for exactly the opposite result from the one he had campaigned on. Governor Gregoire’s signature, high profile case was the suit against the tobacco companies. The tide of approval for this effort washed her up on the shores of the governor’s office. The Exxon Valdez case has the same sort of <i>cache</i> as the tobacco cases and could perhaps advance McKenna’s career in the same way.

McKenna, trying to have it both ways, publicly continued to speak out for tort reform while while using his office to seek the opposite result in the Exxon Valdez case.

He is trying to appear to be a big business tort reformer (the only real benefactors of this position are insurance companies and big businesses) and at the same time appear to be a hero to tort victims. The the notoriety of the Exxon Valdez case promised enough political advantage to compensate for whatever losses their might be from his big business base.

That’s the only coherent answer I could find. The principle that one derives from this is that Rob McKenna will say and do anything to advance his career.


Rob McKenna Thinks We Are Idiots.

March 22, 2008

Washington State’s Attorney General Rob McKenna really should be in the Bush administration. He demonstrates a presidential grasp of what he is doing. His opinions are not rational, at least that is the conclusion you must reach if his arguments are in fact the basis of his opinions.

Generally speaking tort law has two purposes: to compensate victims and to enforce rules of conduct that are accepted as societal standards. Its purpose is in part to help mold society into behavior patterns that are predictable and reasonable. A debate about tort reform should address the realization of those goals, then perhaps weigh the cost to society against the benefit of particular laws. You would expect a reasoned argument to discuss alternatives to the law in question and their relative merit.

Unfortunately it is never done that way. Often proponents of tort reform merely attempt to excite the general prejudice against trial lawyers. This is politically expedient but does nothing to advance our interest in living in a rational society. The other common argument is to throw out a figure and say that is how much money has been awarded for something. The argument proceeds by saying this figure is way too high and concludes with: ergo we should abolish that law. This is exactly how insurance companies look at things but this approach seems to have traction with the general public. In truth this is not an argument at all and again is little more than an appeal to prejudice or sometimes sympathy for the perpetrators of tortious conduct.

Mr. McKenna believes that sovereign immunity should be re-instituted in Washington after having been abandoned in the 1960’s. His argument goes like this: The State of Washington has paid over $500 million in the last 25 years. If the State could not be sued, it would not have to pay anything and there would be no problem. End of argument. He spices this up a little by adding that the trial lawyers are always expanding the State’s liability. With that he has pretty much covered everything.

Why didn’t we think of this with drunken driving?  That costs a lot too.  This would be a good approach to cutting down crime.  Make homicides legal.  Washington has already pursued this approach with construction defects and disasters.  Why not expand the approach.  It’s working isn’t it?


Illegal Immigrants’ Rights in Court

February 28, 2008

How do you feel about the question of whether an illegal immigrant should have the right to sue? Suits after all cost the county a lot of money. Not only that but the suit would presumably involve seeking an award against a lawful citizen, who would have to bear the expense of defense. We have been informed that the state budget for the courts is already critically low and this would create a further burden on the system. Thankfully, the answer to this question is “yes, they do have this right.” In this country there is not a class of residents who can be harmed or abused by others with impunity. To deny a class of people access to the courts is to render members of that class something akin to slaves.

Washington among all the states is very conservative in jury awards. The amount of damages juries parcel out is lower here than many other jurisdictions. Many states have punitive damages for egregious behavior but there is no such thing is Washington. (There is a limited right under the Consumer Protection Act (triple the amount of actual damages up to $10,000) and finally insurance companies that act in bad faith can now be penalized, but nothing is available in the usual lawsuit.) You combine low jury awards with the absence of punitive damages and you have to put Washington on the other end of the spectrum from say California (the land of milk and honey for plaintiffs).

There is another factor at play here. After 9/11 juries, at least in King County, shifted strongly toward the defense in lawsuits. They more frequently found against plaintiffs and tended to award lower amounts. Geography and current events play a large role in jury results.

Right now national security and immigration policy are hot topics and the two overlap. Mention of a party’s status as an illegal immigrant is potentially incendiary in the minds of a jury. With many juries this would create a strong bias against the person.

So the legal issue of the day is whether a person’s immigration status should be admitted in evidence. This is mainly resolved by determining whether it is relevant and relevance is determined by weighing probative value against prejudicial effect. A person’s immigration status is not a necessary element of any normal defense. (You can’t get off by saying “Sure I ran over the guy but he didn’t have his papers.”) All things being equal then a defendant does not have a right to inform the jury that the plaintiff is an illegal immigrant.

But it gets into evidence in other ways. An illegal immigrant in court must be careful about what he asks for. Monday the Washington Court of Appeals, Division I, held in Salas v. Hi-Tech Erectors, that if the plaintiff asks for lost future wages, the defendant can explain that he is an illegal immigrant, even though the admission of this evidence reduces his chance to win anything at all. This is an issue that various states courts are dealing with and one the Washington courts are likely to need to refine.

This decision affects the lives of similarly situated people. The case involved the construction industry which employs a disproportionately large portion of the illegal alien community in part because many will work for less than scale, many will take cash under the table and Mexican illegals are famous in the industry for working in inhospitable conditions and working extremely hard; they are highly valued workers.

Mr. Salas was working under illegally dangerous conditions (the construction company was cited) and was seriously injured. Serious injury to most illegal aliens means they will not be able to earn a living, either here or anywhere else. If they can no longer work and cannot recover for this lost income, courts do not offer a great deal of help to them.

This creates potential for abuse by employers. Many employers are already giving these people less money than they would have to pay for someone else’s work and many are already asking them to work in unsafe conditions. An employer’s knowledge that as a practical matter his employees cannot recover lost wages in the event of serious injury may serve as a disincentive to improve those conditions.


Tort Reform

January 19, 2008

The insurance industry and Chamber of Commerce have been resolute in the steady drum beat for tort reform. The “free-market think tank” Pacific Research Institute last March published a “report” assessing the annual cost of the American tort system at $865 billion per year. That’s a couple billion per day! (A number that wildly exceeds the sum of all tort judgments and is mostly attributable to “secondary effects.”) A month ago a Washington D.C. “nonprofit organization” the American Tort Reform Foundation, produced another “report” called Judicial Hellholes. This paper condemns judges and courts that have permitted high damage awards or are otherwise “unfriendly” to business interests. (Washington should be ashamed that it did not even register mention.)

These tort reform arguments are remarkably similar in that they do not make any serious effort to weigh competing interests or examine the nature of the the American people’s interest in inhibiting the action complained of in the lawsuits. It is presupposed that any harm done to business interests is a wrong to be avoided. This is propaganda not reasoning. This is one of those areas where the proponents take such an extreme position that discussion and dialogue cannot be pursued.

PRI’s “research” is a good example of how silly things have gotten. This report takes into account the amount of business lost as a result of lawsuits without considering what sort of business was lost, how the curbed business activities might have harmed society or how the absense of the business practices might have benefited people in general. The tobacco industry of course has lost a lot of money because of lawsuits but not everyone would call that wrong. This drop in profit by tobacco companies is offset by reduced health care costs and longer life spans, both of which are generally viewed favorably. Tort lawsuits have have resulted in a marked, measurable improvement in the environment, something that is favored in most circles. The tort of outrage has been used in Washington to abate racial slurs at work, a laudatory achievement in the eyes of many. Lawsuits substantially increased the safety of automobiles and reduced traffic deaths. Lawsuits are the means by which renegade corporations and corporate officers have been made responsible for criminal and fraudulent activity. They have been the means of recouping losses by stockholders and pension plan members.  There are countless other examples.

I hope some day these issues will be resolved by sane discussion of policy issues in which business interests will be seriously weighed against the interests of society.