Corp Reform - Not Tort Reform

Sprint: "It's our policy" to break the law

Every now and again, I get a reminder of why I want to be a plaintiff's lawyer.  This morning, my mother called to let me know she's canceling our Sprint cell phone plan.  We're on a family plan with 4 lines.  We've been customers for a little over seven years, and have never had any disputes or late payments.  But last month, my parents happened to look through their Sprint bill and discovered something interesting.  For the last 3 and a half years, Sprint has been charging us about $6 bucks a month in Texas state and local taxes.  The problem is that none of us have lived in Texas for 3 and a half years... and Sprint has also been charging Nevada state and and local taxes.  Obviously, that's about $250.00 that we shouldn't have paid Sprint.

Needless to say, we disputed that with Sprint and asked for a credit.  It's taken about a week of telephone tag, but we finally heard back from Sprint.  They're only willing to refund the past three month's worth of illegal taxes because it took so long for my parents to discover their error.  That's just "their policy."

Why is it that it's OK for a big corporation to have a policy of ripping off consumers, but it's horrible for consumers to rip off big corporations?  What do you think would happen if we underpaid Sprint $6 bucks a month for three years, and when caught told Sprint that we'd only refund them three month's worth because it took them so long to catch our error?  I imagine they'd use the oppressive credit reporting system to blackmail us into paying.

The odds are that this will probably end up in court because Sprint plans on charging $800 in early cancellation fees, when they clearly breached their contract.  Let's be honest - it will be ridiculous to go to court over this.  But what's the alternative?  Letting Sprint overcharge us because it's too costly to go to court?  To hell with that.  I once spent $160 in filing costs over an $18 overcharge that a notoriously corrupt company refused to correct for me.  It took three months, but they settled and gave me my $18 and my filing costs.  Again, a ridiculous lawsuit.  But I'll be damned if I was going to let someone steal twenty bucks for me.

I was fortunate enough to be able to file that suit myself.  And my family is fortunate enough that my father is an attorney, so he'll be able to handle any legal matters himself.  But the millions of consumers out there who get ripped off and aren't attorneys don't fare as well.  No lawyer will touch cases like these on a contingency basis because the dollar amount is so small, and no rational consumer will spend $1,500+ to hire an attorney to recover my $20 or my parents' $250. 

Meanwhile, as consumers across the country are ripped off to the tune of millions - perhaps even billions - of dollars a year, corporate America has convinced us that "frivolous lawsuits" are a drain on the economy and that we need to make it harder to sue them.  Too bad no one wants to make it harder for corporations to rip us off, eh?

How it was in the good old days - before greedy trial lawyers ruined America

The problem with trial lawyers is that they think they have the right to tell business owners how best to run their businesses.  With the benefit of 20/20 hindsight, trial lawyers point the finger of blame whenever an unfortunate business makes a prudent, but incorrect decision.

Greedy trial lawyers meddle in virtually every industry and drive up the prices of all our products and services.  Every business decision made has to take into consideration the predatory litigation lobby, and not what's best for the business.  No wonder so many businesses are driven into bankruptcy!

The situation is only as bad as it is because activist judges and politicians in the wallet of the trial bar extended tort doctrines to dubious causes of action.  It didn't used to be this way.  There once was a time when corporations were free to run their businesses as they saw fit, and when entrepreneurs weren't held hostage by trial lawyers. 

If only we had meaningful tort reform, we could return to a time of fairness and efficiency in commerce.  A time perhaps best exemplified by the manner in which White Star Lines handled the tragic loss of the Titanic.  Thanks to a common-sense attitude towards compensating the victims, the management of White Star saved the company from ruin.  Were an identical tragedy to occur today, the company would surely be devoured by ravenous trial lawyers and greedy family members unwilling to accept reasonable compensation.

Let's take a trip back to the good old days and see how White Star Lines handled the crisis:

In 2002, new evidence surfaced, revealing that the Titanic’s owners expected, and in fact demanded fees for the return of bodies.White Star was the Enron of its day; a succession of callous acts without end. Through letters that still survive, historians have long known that Ismay’s line notified the widows of the Titanic’s bandsmen (notwithstanding the fact that their husbands did much to prevent panic on the port side by playing cheery ragtime music) that 75% of the money owed them was being withheld, based on the premise that their husbands had entertained passengers only halfway through one leg of what was to have been a two-way trip. Furthermore, White Star judged that it was only fair to warn the widows that there would be little left over from the remaining 25% because they would have to “settle a bill” for the loss of their husbands’ uniforms.

In February 2002, documentary film-maker Rip Mackenzie sent a dispatch describing a letter demonstrating once and for all time that there was probably no subterranean marsh into which White Star was unwilling to descend.

Written on White Star stationary and dated two weeks after the sinking, the letter was addressed to Sarah Gill of Somerset, England, in reply to her inquiry about the fate of second class passenger John Gill, her childhood sweetheart and husband of two months.

The owners of the Titanic demanded of Sarah a fee of 20 pounds ($1400 in year 2002 dollars), or her husband’s body would “regrettably” have to be buried in Halifax. White Star used this letter as an opportunity to stress that the sinking of the Royal Mail Steamer Titanic was no one’s responsibility . . . as if driving a ship full speed ahead into the night, toward an ice field about which the bridge had been repeatedly warned . . as if . . .

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“The sinking was an unfortunate accident, [for which] we cannot be held responsible. We regret that we do not see our way to bring home the bodies of those recovered free of expense, and in cases where it is desired for this to be done, it can be carried out only if the body was in a fit state to be returned, and upon receiving a deposit of 20 pounds on account of the expenses.”

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Given the precedent of how White Star treated with widows of Wallace Hartley, Jock Hume, and the other bandsmen (whose families found settlement of the “uniform account” doubly difficult after corporate lawyers declared violinists and cellists “not crew, but officially passengers, therefore not covered under the Workmen’s Compensation Act”), the Sarah Gill discovery should bring no sense of surprise. The behavior of J. Bruce Ismay and his legal team at White Star begins to look increasingly analogous to a car thief who manages to get away with billing his victims for the labor of dismantling their cars and selling the parts.

Source: Charles Pellegrino Web Site

Remember White Star Lines the next time some corporate sock puppet tells you we need tort reform.  If it weren't for "greedy trial lawyers" it's entirely possible that airlines would bill the families of dead captains for the cost of their uniforms. 

Technorati tags: trial lawyers, greedy trial lawyers, tort reform, Titanic, White Star Lines, punitive damages, damage caps, predatory lawyers

Lawrence McQuillan Just Can't Stop Making Stuff Up

I wonder if Lawrence McQuillan of the Pacific Research Institute spent more time making up his fictional study of tort costs, or defending his study against those who expose it for being the sham that it is?  I've lost track of all the letters-to-the-editor I've seen by McQuillan that attempt to prop up his rickety study.  Here's an excerpt of another one that McQuillan wrote in response to Ralph Cook's letter to the editor. 

Cook stated that a Tillinghast-Towers Perrin report contains "a long list of costs not at all associated with the civil justice system." We disagree.

The report includes costs such as fender-benders and insurance CEO salaries, as Cook mentioned, because it is a comprehensive accounting of direct tort costs. Fender-benders are torts, and the tort-related portion of CEO salaries is an overhead cost of making tort-damage payments. (Emphasis added.)

Source: Your views- al.com

Funny - whenever I look at an annual report of an insurer, it doesn't break down it's CEO's compensation by "tort-related" compensation.  What the hell is that supposed to mean, anyway?  Does that mean that if 25% of an insurer's business is based on liability insurance that 25% of the CEO's salary is tort-related?  Or is it a measure of how much time the CEO spends tending the liability portion of the business?  If so, did insurers send McQuillan the timecards for their CEOs?

I think I've got it! The "tort-related portion of CEO salaries" is just a meaningless term that McQuillan made up to hide the fact his meaningless study relies on meaningless information to come to a misleading conclusion! 

McQuillan and the PRI have been taken to task by many leading economists, scholars, and jurist.  Judge Richard Posner wrote a scathing critique of their study, and he used phrases like "adding apples and oranges," "assume without evidence or analysis," and "fictitious."  Some of the better portions of Posner's critique are below:

"...It is impossible to determine from Tillinghast-Towers Perrin’s report what the sources for most of its data are, and so the figures I have quoted must be taken with a grain of salt; indeed, so far as I can tell, they may be completely unreliable. They are almost certainly exaggerated, given the financial connection between the firm and the insurance industry...

...The authors of Jackpot Justice know the difference between a cost, which in economic terms is a reduction in the amount of valuable resources, and a transfer of wealth from one person to another that doesn't reduce the total amount of resources but merely redistributes them. The $128 billion figure is a transfer, not a cost...

...The sum of $328 billion and $359 billion is $687 billion, which is almost $200 billion short of the authors' grand total of $865 billion. The excess malpractice costs and accidental-death costs they estimate at less than $50 billion, so there is still a big gap. I can't figure out how they fill it....

...The figure, however--the authors' estimate of the net social loss created by our tort system--is, as I have tried to show, fictitious."

Source: The Becker-Posner Blog: Is the Tort System Costing the United States $865 Billion a Year?--Posner

I wonder if McQuillan includes the cost of preparing his propaganda about the tort system in his estimates of the cost of the tort system? 

Technorati tags: Lawrence McQuillan, Pacific Research Institute, PRI, tort tax, tort reform, propaganda, Richard Posner, Ralph Cook, CEO Salaries, pure fiction

Ralph Cook on the PRI "Study" that claims tort costs are pushing a trillion bucks a year

Ralph Cook wrote a letter to the editor in which he criticizes the propaganda  study issued by the Pacific Research Institute:

The $865 billion figure PRI advertises contains a long list of costs not at all associated with the civil justice system. For example, the Tillinghast study which PRI calls the "gold standard" and bases much of its study on, says tort costs in the United States are around $279 billion. Business Week, one of the corporate community's most trusted publications, said Tillinghast's total included "everything from payouts for fender-benders to the salaries of insurance CEOs," and is "a wild exaggeration." With Tillinghast's grossly exaggerated total tort costs of $279 billion, PRI's total, largely based on and more than three times Tillinghast's, is even more far-fetched.

Source: montgomeryadvertiser.com ::  Inflated figure undercuts premise

The "reform" movement has a history of relying on made-up data.  Regular readers will recall Professor Fink's take on another bogus study.

Technorati tags: PRI, Pacific Research Institute, propaganda, Ralph Cook, Tillinghast, tort tax, tort reform

Social irresponsibility must be the answer, then!

Ted Frank at the AEI will be moderating a discussion today about managing corporate image.  I wish I was close enough to D.C. to attend, as the debate might explain why being socially irresponsible - outsourcing jobs, moving factories to countries with lax environmental laws, encouraging your employees to apply for Medicaid, getting life insurance on employees with dangerous jobs instead of improving safety conditions - is the better business practice. 

Does corporate social responsibility represent a good business strategy in the long run, or has reputation management become, in effect, an apology for making money? If so, does this trend ultimately pose a threat to free enterprise?

Source: PointofLaw.com | PointOfLaw Forum: Corporate Image Advertising and the Future of Free Enterprise

To answer the question posed above, reputation management has become, in effect, an apology for making money by exploiting workers, polluting or otherwise damaging the Earth, and putting profits well ahead of safety. 

Ted notes that Steven Hantler of DaimlerChrysler (Is it going to be Chrysler again?) will be attending.  Hantler might be familiar to you for his policy of adopting scorched Earth litigation tactics for the sole purpose of discouraging trial lawyers from suing his employer, even if the underlying case is meritorious.  Hantler also gained a reputation as being a hypocrite for spending "six figures" to defend an $8,000 claim, and then arguing that the winning plaintiff wasn't entitled to $143,000 in attorney's fees.  Apparently, "loser pays" is only fair to corporations when they aren't the loser.

Technorati tags: Steven Hantler, AEI, Steve Hantler, social responsibility, social irresponsibility

Better never than late...

The National Association of Manufacturers just yesterday posted about the incredibly flawed study done by the Pacific Research Institute about the supposed costs of the tort system:

"Out-of-control litigation and a broken legal climate cost Americans the equivalent of almost $10,000 for every family of four, a study by the Pacific Research Institute has determined. Here to describe his findings from "Jackpot Justice: The True Cost of America's Tort System" is the study’s author, Lawrence J. McQuillan, PRI’s Director of Business and Economic Studies. Renee Giachino of The American Justice Partnership adds the AJP's latest news and views on tort reform.

America’s aging infrastructure is a major factor in manufacturing’s ability to compete. John Horsley, executive director of the American Association of State Highway and Transportation Officials, highlights a new report that lays out the full scope of the problem." (Emphasis added.)

Source: This Week on America's Business

 

It would have been better if NAM had never cited the PRI's study, but it's embarrassing they cited it this late in the game.  Note that just one paragraph later they point out a real problem to manufacturers...

Technorati tags: NAM, National Association of Manufacturers, John Engler, Lawrence J. McQuillan, Pacific Research Institute, bogus study

Even MORE evidence that the U.S. Chamber is Full of It

I recently wrote about how Mississippi passed a bunch of "reforms" but still rank near the bottom of the Chamber's list.  Here's some additional evidence that the legal climate in a state isn't nearly as important to attracting new business as such old standbys like tax breaks and geographic location:  

JFP: Most of the people I know, back in 2004 were really intrigued with the idea of tort reform because we were led to believe that our insurance rates would go down, but nobody that I can think of are bragging that their rates went down. I know mine havenҒt. Were we supposed to actually benefit from that or was tort reform aimed to benefit somebody else?

Ross: Mississippi has benefited. I gave you Toyota as an example. After we fixed our legal system, it was no longer an obstruction to them coming here.

Former Gov. Ronnie Musgrove told the JFP that the issue of the states legal climate never came up in numerous conversations he had with Toyota executives in 2003.

ғToyota was comfortable with our business climate, Musgrove said. ԓWe had passed significant tort reform in 2002, and the Toyota proposal came in 2003. It just was not an issue for them.

Toyota Senior VP, Dennis Cuneo said in a company press article that Toyota passed over Mississippi for an $800 million Toyota plant in 2003 because of a number of factors unconnected to the stateԒs legal climate.

According to Cuneo, one of the crucialӔ factors in the decision to pick San Antonio was the big money Texas committed to build two separate rail accesses for the plant. The state also committed $116 million in training and tax breaks for the plant.

Arkansas officialswho had also been competing for the plantחadmitted to the Associated Press in 2003 that Toyota executives told them that the plant in Texas would be a doorway to a virtually untapped market of pick-up truck buyers in Mexico and Latin America. Texas, itself, was the biggest market of pick-up sales in the nation, and Toyota was looking to seduce Texans with a new home team.

Finally, the legal climate in Texas, according to the U.S. Chamber of Commerce, was not so rosy at the time either, with Texas ranking No. 46 out of 50 in judicial fairness in February of 2003the same month that Toyota decided on San Antonio. (Emphasis added.)

Source: Mississippi StateDesk

Not sure why the formatting is goofy.  But it's still not as goofy as the notion that the best way to attract new business is to gut your state's civil justice system.

Technorati tags: U.S. Chamber of Commerce, Mississippi, tort reform

Evidence that the U.S. Chamber's State Rankings are Crap

As you may know, the U.S. Chamber of Commerce puts out a bogus study every year that purportedly ranks the civil justice system in every state.  The rankings are determined by surveying various corporate attorneys and asking their opinions as to the fairness of every state's justice system.  To put that in perspective, it wouldn't be much different than asking career criminals to rate the fairness of every state's criminal justice system.  But I digress.

Perhaps the biggest problem with the U.S. Chamber's study is that a state's ranking doesn't seem to change very much even when a state passes the "reform" measures advocated by the Chamber.  For example:  

Notwithstanding the ballyhoo when tort reform was enacted by the 2004 Legislature that it cured what special interest groups called Mississippi's cesspool of jackpot justice, it seems those same groups now don't rate the state's reforms very highly...

The U.S. Chamber of Commerce, after pouring $1 million into Mississippi's 2000 Supreme Court races to elect its handpicked candidates. in 2003 rated Mississippi 50th in civil justice climate...

Mind you, in 2002 under Democratic Gov. Ronnie Musgrove, state lawmakers enacted a series of tort measures sought by the insurance industry. One limited non-economic damages to $500,000 until July 1, 2011, and scaled the limit up to $1 million by 2017; another reduced to two years the time in which suits could be brought against nursing homes; and another granted liability immunity to a number of health care providers.

But the reforms had not satisfied the U.S. Chamber and some other groups. Republican candidates in 2003 latched onto "tort reform" as a catch-phrase to get elected.

It didn't take long for newly-inaugurated Republican Gov. Haley Barbour, who campaigned for tort reform, to get the 2004 Legislature to do the Chamber's bidding.

Barbour won enactment of a fixed $500,000 cap on pain and suffering damages in medical malpractice cases and a $1 million cap on all others, and also gave retailers a shield against product liability lawsuits...

But the U.S. Chamber of Commerce itself has now let the air out of the Mississippi tort reformers' balloon. Recently the Chamber's Institute for Legal Reforms (which initially stirred the pot on reform by ranking Mississippi 50th in 2003) in its 2007 ranking put the state's legal climate at only 49th.

Source: U.S. Chamber lets the air out of Miss. tort reformers' balloon - The Clarion-Ledger

Mississippi passed damage caps, elected pro-business anti-consumer judges, granted various immunities, and reduced statutes of limitations and only increased from 50th to 49th?  States ranked far higher that Mississippi in the Chamber's study have far fewer "reforms" in place.  Since there doesn't appear to be any correlation between a state's ranking and it's "reform" measures, the study should not be used as evidence that a state needs to pass any of the "reform" measures pushed by the Chamber.

Cross-posted to TortDeform 

Technorati tags: Mississippi, tort reform, U.S. Chamber of Commerce, damage caps, medical malpractice, product liability

PRI Propaganda Author Responds to Criticism

The author of the Pacific Research Institute's bogus study on the tort system responds to criticism in the following letter to the editor:

Our calculations are based on the best scholarly studies by the nation's top economists and legal scholars -- in fact, 34 studies written by 52 scholars. If one compares direct U.S. tort costs to the tort costs of other industrialized nations, for example, one realizes that the U.S. tort system is the most expensive in the industrialized world. At 2.2 percent of GDP, direct costs are bigger than our counterparts in Germany, France, Japan, and the United Kingdom.

Source: montgomeryadvertiser.com ::  Director of study defends work

OK, so we spend 2.2 percent of our GDP on the tort system.  (Maybe.)  So what?  How much should we spend?  2 percent?  1.5 percent?  .05 percent?

By stating the number and implying that it is too high, the "reformers" can always claim there's something wrong with the tort system.  What they won't do, and indeed what they can't do is state what percentage of the GDP the tort system should be, and then state what "reform" measures will lower the tort costs to that percentage.

Technorati tags: PRI, propaganda, tort costs, tort reform, Lawrence J. McQuillan, Pacific Research Institute, Ralph Cook

ILR Claims Disproven - Again.

Russ Bensing at The Briefcase writes about an email he received from the Institute for Legal "Reform" that mentions the "tort crisis" in his home state of Ohio.

"Now, I’m certainly not averse to pointing out the excesses of the tort system, as I did back here.  On the other hand, the “common sense reforms” the Institute lauds appear to be rather one-sided.  The “substantive progress made by the Ohio Legislature to fix the state’s lawsuit system over the last several years,” as the Institute phrases it, includes a new definition of employer intentional tort which actually requires that the employer have specifically intended to injure the employee.  As the Supreme Court noted the last two times it struck down an identically-worded statute, this could create a scenario in which an employer would be guilty of a crime but exempt from civil liability.

Interestingly, the Institute’s email coincided with the posting on the Supreme Court website of the Ohio Court Summary for 2006, a breakdown of cases being handled in Ohio’s courts.  One of the reports included in the summary is a tabulation of case filings, by type — professional tort, product liability, and so forth.  Out of curiosity, I compared the new case filings in various categories in the 2006 summary with the same info in the 1999 summary, the oldest one available on the court’s site.  That comparison doesn’t give a whole lot of support to the idea that Ohio is suffering from a litigation explosion, at least insofar as torts go.  New filings in professional torts are down 44% from 1999; product liability filings have decreased by 37%, and “other torts” have declined by 18%.  By comparison, new criminal cases, as you might expect, are a growth stock, climbing by 38% in the past seven years." (Emphasis added.)

Source: The Briefcase » Tort reform

Allowing corporations to commit crimes and not face civil liability... yeah, that sounds like an ILR idea.  And nevermind that tort filings are dropping like flies in Ohio; as long as there's a single tort claim filed, the ILR will claim a state is suffering from a crisis.

Technorati tags: Russ Bensing, The Briefcase, ILR, Chamber of Commerce, propaganda, Ohio, tort reform