Shyster-Proofing the Courts (Tips for the Tort Reform Crowd) - August 30, 2008
People have complained for years about how litigation is ruining this country. How lawyers cancer every corner of commerce, from the shakedown artists suing for every slip and fall, technical violation of an arcane statute creating strict liability or slightest breach of contract to the all the different stripes of "defense" counsel creating what seem to be nothing but mammoth bills for their clients in response.
There's no way to rid ourselves of the hyper-litigious or their advocates. Some people view the slightest basis for a legal claim as a bag of casino chips, and for every one of them there will always be a lawyer willing to walk him to the blackjack table. And anyone seriously interested in stopping the constant onslaught of frivolous litigation already knows the defense bar will never lead a charge to stop it. Lawsuits are their bread and butter, the fount of revenue that feeds them endless billable hours. They'd be as upset about tort reform as the plaintiff's lawyers.
The only way to address the problem is for citizens to petition their lawmakers for changes to the court rules. Shame the legislators into adjusting a playing field the lawyers have slanted in their favor. I'm not talking about damages caps, a loser pays scheme or any other draconian reforms. Those are sledgehammers where surgical strikes are needed. I'm talking about making a few well placed changes to seemingly minor court rules which would cause a substantial decrease in the number of dubious lawsuits prosecuted.
1. Immediate Mandatory Mediation
The chief impediment to early settlement in every piece of litigation is the same dysfunction that earned Paul Newman a beating in Cool Hand Luke - "failure to communicate." Disputes drag on forever in the courts more because of the litigation process than the parties' differing positions. As a plaintiff (or his lawyer on contingency) starts spending money to prosecute a case, expectations begin to rise. As the defendant spends money on his counsel, the amount he's willing to settle for decreases. At the same time the parties stop speaking to one another, communicating only through counsel and growing more and more disconnected.
In my experience, people are a lot more reasonable meeting face to face than they are speaking through their attorneys. Suppose we set up a system where instead of having the lawyers immediately take over the dialogue, after the filing of any case the parties were required to appear before a mediator who would grill them on their claims and defenses. They'd be allowed to have counsel with them outside the mediation room, like a grand jury appearance, but would otherwise be required to sit across from one another, look each other in the eye and explain in layman's terms why they should win. At the conclusion, the mediator would tell them each privately what he thought their chances were in the case. This might not be economically sensible for smaller suits, but it would put a chill into those opportunistic litigants trawling for lottery paydays. It would also create bargaining parameters for settlement before the parties have spent tens of thousands of dollars and feel like they have no choice but to go all the way to the courthouse.
2. Allow Expert Witnesses to be Deposed
If there's one evil at the heart of all that ails the tort system it's unscrupulous experts, a/k/a "whores." Amazingly, in many jurisdictions, for reasons no one has ever been able to explain credibly, parties are not allowed to depose the other side's expert as they would a common fact witness.1 The expert is only required to submit a report to the opponent spelling out generally what he intends to say at trial.
Some would say this is only fair - that experts are busy and can't be forced to appear for depositions in the numerous cases where they're simultaneously offering opinions, that the report is an adequate pre-trial codification of testimony. I'd say something else... I'd say an expert who expects to be paid thousands for his opinions ought to also be prepared to sit through a deposition and explain each and every basis for them. Particularly where the pertinent text of most reports is actually crafted by a lawyer, utilizing as many "wiggle words" as possible to allow the expert to shift his positions should evidence contradicting any of them arise later in the case.
I'd also ask the people who disagree what damage could be done by compelling greater transparency in advance of trial. Wouldn't the early education provided by expert depositions lead to more quick settlements? And what significant interest are we protecting by allowing experts to say what they like on paper without concern for having to explain their positions at a deposition? That structure only encourages unethical lawyers and experts who know most cases never go to trial to submit exaggerated and fraudulent reports, confident they'll enjoy all the settlement leverage the opinions provide without ever having to defend the gaping holes in their reasoning and analysis.
3. Give Frivolous Litigation Claims Teeth and Allow Expert Witnesses to Be Sued in Such Claims
Most jurisdictions have frivolous litigation statutes which allow a party succeeding in the defense of a baseless claim to sue his opponent. Sadly, these claims are seldom filed and rarely if ever successful. The problem is the nebulous nature of the "frivolous" standard and the reluctance of most courts to allow such claims to proceed. There exist few if any benchmarks defining when a claim is baseless or filed in bad faith, allowing judges to craft standards from case to case, usually with an eye toward denying the claim.2
If the legislature were to pass a statute, however, defining clear and certain parameters of "frivolous" (more than three quarters of the jury finding the claim to have been brought with no credible basis or a determination that the plaintiff fabricated his allegations), you'd see a lot more wrongly accused defendants bringing frivolous litigation claims, with an accompanying decrease in specious lawsuits.
Secondarily, in the same fashion parties and their counsel may be sued for raising frivolous claims or defenses, expert witnesses should also be subject to liability. This would bring much needed oversight to the shadowy "professional witness" industry in which thousands of mercenary experts who do little more than give opinions in legal matters provide dozens to thousands of reports in various cases every year, all with impunity.3
4. Eliminate Referral Fees
In every large city, in the economically disadvantaged parts of town where people view injuries as potential tort windfalls, there are at least a dozen storefront "law offices" that do nothing but package opportunistic injury claims, usually for minor slips and falls and fender benders. They then feed those cases to actual practicing lawyers for a "referral fee."4 And they're not the only ones. Some of the most prominent plaintiff's firms you see advertising on television fund a substantial portion of their cash flow by merely brokering these cases to other lawyers. And as you might have guessed already, a large percentage of the these claims are dubious "nuisance" actions, not infrequently brought by recidivist "professional plaintiffs" - exactly the sludge that logjams the court system, drives businesses away from cities and causes insurance rates to skyrocket.
The quickest, easiest way to get rid of these predatory claims and the parasitic business models they spawn? Eliminate referral fees. Billable hour lawyers don't have to pay one third of the income they derive from referred clients to the colleague sending them the business. Why should a lawyer paid on a contingency basis have to give up a chunk of his or her fee to a referral lawyer? The referral fee also harms the courts by forcing the lawyer bringing the case to jack up his demand to offset the cost of the referral lawyer's cut, causing actions which could be settled early to linger in the system.
At a bare minimum, referral fees should be capped at ten to fifteen percent of any recovery, a percentage more in line with that afforded to brokers in comparable industries. That or they should be made payable exclusively to lawyers demonstrating that their firms actually file suit in and prosecute at least one half of the cases in which they hold an economic interest. In one stroke of the pen such legislation would eliminate a huge percentage of the flimsiest, silliest cases burdening the court system.5
These are just a handful of the endless ways people could begin to lessen the staggering economic and societal costs hyper-litigious individuals and their counsel foist on us every day. Of course, to get any of this done you'd have to take on an army of lawyers, so yes, I realize this piece could be categorized as fantasy, perhaps the first fairy tale I've written.
On the other hand, if nobody offers these ideas we'll never know how much traction they can get or how many other reforms they might spur. Litigation's stranglehold on our society is strong, but it's not terminal yet. We can reverse it. With a bit of tenacity we can marginalize attorneys back to an appropriate modest level of influence in our culture. Here's to hoping someone with the resources and time to make these ideas a reality happens upon them. If you know such a person, pass this on to him.
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1 In Pennsylvania experts can only be deposed upon application to the court showing unique and compelling circumstances necessitating such testimony. Pa. R.Civ.P 4003.5
2 Deferring to, or leaning on, the vague and outdated notion that every litigant deserves his day in court and should bear his own costs, even if dragged there for no decent reason.
3 Asbestos Fund Bars 9 Doctors - New York Times
4 A standard referral fee is one third of the prosecuting lawyer's contingency fee in the case.
5 You might say this emphasis on legislative solutions cuts against a free-market approach. I don't think so. Law isn't a free market. It's a license-leveraging scheme, and one that compels involuntary participation and redistribution, in all but a few respects the exact opposite of a free market.
Posted by PhilaLawyer at 12:05 PM
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Brilliant sir.
PL: Thank you, but it's obvious stuff. If you have any additional ideas, please offer them.
Posted by: Conor at August 30, 2008 03:03 PM
Great piece. I think you found a good niche in writing with this; I mean popularizing arcane legal matters that are actually pretty important.
PL: Now somebody just has to implement the suggestions.
Posted by: Lupu at August 31, 2008 02:05 AM
These are great ideas that unfortunately will not be taken seriously for a long, long time. Much like the current prison system in the U.S., which if properly reformed could save society million's and actually rehabilitate minor offenders, there are simply too many people making too much money for any change to occur. Not to mention that the average citizen would see prosecutors and defense attorneys in agreement over not wanting change and would either assume it isn't necessary or think it hopeless to oppose both sides of the courtroom in an attempt to make litigation less of a quagmire.
Mandatory mediation, on the other hand, can and should be implemented. Parties, if given not only the face to face, but also a realistic opinion of their chances, would be less likely to take their case as far as it will go, and equitable settlements would become more commonplace. Good Idea. I'll see what I can do.
PL: The mission statement going into the thing should be akin to Bill Clinton's famous statement about abortion - injury suits should be "safe, legal and rare." Statistically every plaintiff's firm must bring a certain number of frivolous cases a year to keep their doors open. That's just a fact, and mightily as they'd try, every injury lawyer knows that's the truth. They have to take a certain number of cases to keep up cash flow and all those cases cannot be valid. They are also forced to take sleazy cases because if they don't take the junk the lawyers referring them cases won't send them the good stuff. That needs to stop. Lawsuits should not be viewed as business propositions. Ever.
And of course, all this applies to the defense bar as well. I've seen people raise amazing defenses, justified with "Well, we had to argue something." That's true, but the firm doesn't need to turn a case it knows it will inevitably lose into a full on war, fattening itself on fee income from the client which could be allocated toward an early settlement.
By the way, prosecutors should also be audited and any found to have engaged in selective prosecution for political reasons or to help his own career should be disbarred. There's nothing more vile than prosecutors attacking high profile defendants to make names for themselves.
Posted by: Sean W at September 1, 2008 10:04 AM
I just stumbled on your blog through Tucker's and I'm absolutely hooked, so thanks for that.
Love the intelligence and the insight into law this blog brings. I'm looking to work at a big law firm (as an legal assistant), so during every interview, I picture that the guy interviewing me is you and he doesn't want to be there as much I as don't want to be there. Hopefully it works.
PL: That can be applied to almost any corporatized job. Being in the same office in the same building with the same people every day is just not human.
Posted by: nlion at September 1, 2008 11:59 PM
On the legal assistant front: any advice?
PL: You'd have to be a bit more specific. In what regard?
Posted by: nlion at September 2, 2008 08:43 AM
Not bad reforms, but some Devil's Advocate (not Al Pacino, just a phrase) comments:
1. Mandatory mediation sounds great, in theory but is not practical in other areas of the law, and in specific cases. Maybe an initial screening by a Judge for Mediation should be mandatory. Domestic Relations Cases have seen this trend, but sometimes causes violent people to be partnered in a closed room with their victim, same in tort litigation based upon violent or criminal act.
2. Expert Depos - Thankfully PA is in the minority. However, the downside is actually fattening the pockets of the Expert Witness, who will surely charge for their time. Plus who pays this expert's exhorbitant fee for the depo (typically at $300+ per hour). If it is the plaintiff, you exclude those who might be ligitimately injured but without resources sufficient for this aspect of the litigation process (yes, typically plaintiff's counsel fronts expenses, but if no recovery, the plaintiff still has to pay....)
3. Frivolous Litigation Claims - Like the holding of expert "whores" feet to the fire. This may, however, only encourage more litigation, though in a different form. Defendants are often just as angry as the plaintiff (if not more so) and every case that results in a defense verdict will lead to a new piece of litigation (almost without exception).
4. Referral fees are basically evil. Though not as widespread where I practice, the idea that 2 different attorneys get to feed at the trough, does encourage outsized settlement demands and encourages avarice in the small dollar claim. A cap (applicable to the referrer) of 5% of the attorney's fees received by the actual litigator (further capped at $1000.00 max if recovery is substantial enough) might cut the referral industry to size.
Mediation should be more widespread. Expert "Whores" are more evil in many ways that the "crazed ambulance chaser" that society moans about most. Depos of experts should be freely done, but some resolution on the expense of these depos needs to be addressed. Maybe also a cap on the number of depos to be done by both sides would discourage excessive hourly billing (once had simple slip & fall where counsel for a co-defendant deposed 24 witnesses...).
All in all pretty good thoughts.
PL:
In order...
1. Cases are screened for mediation in many jurisdictions. Sadly, the process when engaged is usually a joke because it is lawyer-controlled. I am talking about a mediation where the mediator has a chance to get into the client's heads and shut the case down before the lawyers take control. I'm not concerned about the violence issue. I find most litigants outside family court are shrewd, rational and calculating sorts.
2. In personal injury the PI lawyers, not the plaintiff, pay the expert costs. In commercial work, the clients can afford the excess expert costs.
3. Any uptick in frivolous litigation claims would be washed out and then some by the considerable decrease in frivolous plaintiff's claims.
4. Agreed on everything in your last two paragraphs except that I think capping referral fees at 5% would be a bit too harsh, which is why I advocated 10-15%.
Posted by: FrattyLite at September 2, 2008 09:11 AM
PL -
We agree in many areas, but apparently your typical client is a more well to do business or the insurance carrier. Your proposals are fantastic for Federal Court, but are potentially problematic for state courts. Thus, the Ham & Egg Lawyer has a slightly different experience.
#1 - My point was not to put the mediation decision in the hands of the litigant's counsel but, in theory, the nuetral judge. Too many cases involve nut jobs on one side or the other (many pro se).
#2 - The PI Factories are willing to take some of these losses. Some of the smaller time guys, seek to collect these funds back. I had to turn down doing that type of work from smaller PI lawyers, twice.
#3 - We'll just have to agree to disagree on that minor point. I can't tell you how many consults I've had with people who just want to sue because they have been sued (again typically small businesses, w/o internal legal departments, or individuals)...
#4 - Ok, you win. National commercials asking if you have been injured by Redux will still flood the TV at 15%.
Love the blog. Like these ideas. (waiting on my 4:30 after my 4:00 cancelled).
PL: No, we don't differ that much. I've worked in wildly varying areas...
As to your points, I think exhausting the assholes who like to file lawsuits by allowing the person on the other side of each claim and counterclaim to whack them with frivolous litigation damages is the best solution in the world.
Posted by: FrattyLite at September 2, 2008 03:28 PM
PL,
good ideas, but please be a bit more specific. otherwise, the analysis suffers from simple inapplicability and the non-lawyers get confused.
i'll presume you are talking state court here, else #1 and #2 do not apply. in federal court, one must to endure the 'ENE' (or whatever acronym chosen by a given District) for the early neutral evaluation. basically mandatory mediation, altho lawyers run the show. still, it's there so maybe tweak it to be like the grand jury scenario you propose. and toss in something like California Code of Civil Procedure 998. i play in federal court, so i could be off on the cite, but whatever. this law penalizes a party who forces a trial only to end up with less than they were offered in settlement. experts are amenable to deposition under the FRCP, so chuck #2.
further, you are talking civil suits, but some of the comments address criminal cases. let's tackle these civil reforms before we get into the issues of crimial justice system, like prosecutorial discretion and the failure of the penal system on all levels.
back to the reforms. how the fuck are you gonna convince 50 legislatures to adopt 'em? some folks groove on the concept of the 50 states being li'l laboratories that experiment with policies so the federal govt can chose the best ones. but in reality, that doesn't happen. look at the drinking age - that was forced on the states, else they lost highway funds. best to acknowledge this fact. go to where the big-stakes cases are and change the FRCP...let the states follow. rather than a 'race to the bottom' like DE corporate law, it'll be a race to the top.
put that in yer pipe and smoke it.
ps- thanks for all the great reading. found tucker's site and then your original blog while procrastinating maybe 5 yrs back during 3L and studying for the bar exam. am a 1%er, but mask it during normal business hours to bring home the bacon. lookin forward to your book.
PL: This is a website for all sorts of readers. Any more specificity and I'd put the reader to bed and lose the value of the general ideas offered. People get the thrust of what I'm saying, lawyers and non-lawyers. It's applicable where it's applicable and it's not applicable where it's not. I can't write for all fifty jurisdictions or put together twin articles to deal with fed and state issues simultaneously in this medium.
As to my comments, I respond to what people write. If they comment about jazz here I'll comment about jazz.
I'm not convincing any legislators to do anything. I'm offering ideas others can flesh out and build into policy. Or not. Think of it as seeding clouds.
I think the rule you're talking about refers to "Offers of Judgment." They do little to deter plaintiff's claims.
Thanks for the compliments on the writing. Happy to offer it to you.
Posted by: Diego at September 2, 2008 09:04 PM
Along the lines of the mediation idea, it's such a shame that there isn't a "department of common sense" that has to be consulted before any action can go further. Almost like a Minor League court system. I'm all for any idea that allows an outside, unbiased source to be able to say to the parties involved: "hey...this is a silly, frivilous action, and needs to be stopped. You don't deserve elventy bajillion dollars for slipping and falling in a parking lot. Take that ridiculous fake neck brace off and go home".
the system is so broken, and noone wants to hear any good ideas that would change it. How depressing.
PL: The system isn't broken. The system is geared by lawyers donating money to all the governmental players in the system to ensure the blind spots and loopholes on which those lawyers feed remain open. The system works perfectly for lawyers. If people want it fixed, they need to realize that the power of lawyers is largely illusory. Everyone's afraid of lawyers, but recall, there are only a million of us.
We can easily be overcome.
Posted by: digitalbroccoli at September 3, 2008 12:24 PM
Note: I work for a plaintiff's attorney at a PI firm and I'm a 3rd year law student.
Corporations need to do more of their legal work in house. I'm speaking mostly of insurance companies and other large corporations that are defendants in tort actions. Without adequate, competent legal counsel, they tend to get taken for a ride by outside counsel and, even on good claims, where they should pay out, they pay several times the damages in attorneys fees, and then go to trial and lose there. Or settle late.
Farming work out seems to be a corporate culture thing and a structure thing. I don't understand why they don't have their own counsel, since a lot of these corporations litigate the same type of issues over and over again. In any case, I thought I'd throw that one out there.
PL: There are a lot of "captured" defense firms owned by corporations. I think the reason for the outside entity has to do with liability and ethics issues. Mix the two and the corporation might become liable in ways it wasn't previously. That's just my guess.
That and no lawyer would want to toil for an insurer doing all of its slip and fall or auto accident defense.
Posted by: Joe at September 3, 2008 01:27 PM
I hope I not too late to comment. Anyway...
First, in California, which has more lawyers per capita than any other state, has implemented most of what you recommend. Mandatory ADR/mediation, experts can be deposed without leave of court, teeth in the malicious prosecution rules (look up anti-SLAPP).
Second, and more importantly, America forever claims itself to be a beacon of free-market capitalism. Yet, when it comes to holding the capitalists feet to the fire, suddenly, its the "good of society" as we attack lawyers. Moreover, given the number of careers that parasite off of human suffering, why is it that the idea of lawyers making money is somehow pernicious. Because the price of capitalism is sometimes you have to litigate? Tough sh%t. Yes, its bad when crooked lawyers engage in phoney shake-down lawsuits against small time businesses. But you know what, they get caught. And, given the imperfections of any system, I'll take the imperfections of no "tort reform" over the imperfectons of reform.
But when major, multi-national corporations cry "frivolous lawsuits" and "we need tort reform," no dice. All the benefits and none of the responsibility. In "Atlas Shrugged," the premise was the "creators" should go on strike as protest against those that seek to "tear them down." Hey, bring it on. I dare them.
PL: I was aware of California's reforms. They are not present in all of the other 49 states.
Lawyers who bring dubious claims are pernicious by definition. Is abusing your license to shake money out of a "capitalist" any different than stealing from him at gunpoint?
The parasitic nature of the lawsuit industry doesn't derive from the way it monetizes human suffering. It's the way it claws money out of innocent people by holding them to outrageous negligence standards in the many cases that should never be brought.
Specious litigation is not the "cost of capitalism." It's a license leveraging scheme that feeds off capitalist endeavors.
You're arguing absolutes here, by the way, where I was making a point regarding the volume of lawsuits. I have no issue with legitimate claims. It's the tornado of silly, little frivolous claims and ludicrous class actions that are the problem.
As to your shot at Rand, your "bring it on" proposition is a little late. Capitalists have already gone on strike against the costs of doing business in plaintiff-friendly venues like Philadelphia by leaving town. That's not the only reason businesses have been leaving those types of cities, but it's one of them.
Posted by: Tom at September 6, 2008 01:43 AM
I like the website a lot, it is great stuff.
On your "pass this on to someone" part, I know a few people, and, when, mentioning some of this stuff in passing they seemed intrigued. Even though they largely agree with you, they can't really bring you to their bosses as a citation for obvious political reasons (again, your stuff is great, but "square society" might take issue with you in some ways).
I was wondering if you have any outside sources/legal scholars that you know of recommending the same or similar things? Any comparative studies of total caseloads after reform in different jurisdictions? Also, how much of this would apply at a federal versus state level?
I know you have a lot going on, so if you don't know of such sources off the top of your head, you certainly don't need to dig. However, I would like to pass these ideas up the chain.
PL: I can't point to any specific academic papers. I selected these ideas and wrote about them in a sort of funny, general way because if I got into specifics I'd bore everybody, and I wanted the general concepts to be remembered, allowing others to flesh them out and come up with actual legislation based on their suggestions. I also wanted them to be easily digestible so that someone could pass them to the tort reform crowd to show them that if they'd stop focusing on big, easy fixes like damages caps and started attacking the court rules, they'd get a lot more done a lot more quickly.
But feel free to take those ideas, repackage them and sell them as your own. Buy a bunch of copies of my book for me if they garner you a bonus.
It wouldn't apply too much at the federal level because the most insidious nuisance actions are by definition well under the jurisdictional threshold. This is directed at state courts that have not yet implemented these reforms.
Posted by: Tortfeasor at September 15, 2008 12:23 AM
Hello,
I'm a Philadelphia trial lawyer who represents plaintiffs, the target of lots of "tort reform" attacks. I've posted a point by point response to your for recommendations over at my litigation and trial blog, linked to in this comment.
I don't think your proposals would make a substantial impact on the number of frivolous suits, while two of them could cause substantial damage. Indeed, I would bet that the elimination of referral fees would actually increase the number of meritless suits filed, as it would encourage inexperienced attorneys to test their luck on cases, rather than appropriately referring them to experienced attorneys for a thorough review.
I'd be happy to know your thoughts about my response. Good luck with your book launch.
PL: Thank you. I'll digest and respond to your points. I only ask that you give me a bit of time as I am stretched for the next couple days.
Posted by: Max Kennerly at September 23, 2008 10:03 AM
What are your thoughts as to the relevance of the tort for breach of statutory duty? Does your country even acknowledge an action for said tort as mine (Australia) does?
PL: I think that's strict liability here. Generally, the less torts the better. But then, there are some needed restraints on corporate excesses, so we do need some of those unfortunate statutory constructions.
Posted by: sam at October 9, 2008 04:27 PM
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