Stossel the Apostle (JM)

Small Victories for Tort Reform

Just who decided to let Stossel write for the Wall Street Journal? I am serious about this. This is just crazy. Stop letting this man think he’s a legitimate journalist.

By JOHN STOSSEL
April 4, 2008; Page A12

Foes of lawsuit abuse have been writing gleefully about the fall of Dickie Scruggs, Bill Lerach and Melvyn Weiss. All three lawyers are likely to spend time in jail for plotting to bribe a judge (Scruggs) or paying kickbacks (Lerach and Weiss).

Good riddance.

Alright, for the first time we agree. Corrupt bad lawyers deserve to be punished, let’s just stop here and call it a day.

Locking them up will stop them from further damaging America – at least for a few years. But it's a small victory for reformers.

I call shenanigans on the word “reformers”. Jane Addams=reformer, Ralph Nader=reformer, Martin Luther=reform, John Stossel=selfish jackass.

New members of the parasite circus will just step forward to take their place. And what these aggressive class-action and securities lawyers do legally is more damaging to America than the crimes that Scruggs, Lerach and Weiss committed. They broke laws to cheat other lawyers out of some loot, but at least that barely hurt the public.

Ye gads, let’s begin with “parasite circus”. What in the world does this even mean. I suppose I would like to see a “parasite circus” it might be an interesting adventure involving a shrinking ray and Rick Moranis. I imagine this is very similar to what I imagined a “flea market” to be as a kid. Also, class action and securities lawyers are not a distinct type of people. Some class action suits are totally legitimate, like the ones against tobacco and that one in the book a “Civil Action” (Yes, I am aware that those were pretty obvious or silly examples, but Stossel does not deserve intensive research).

An editorial in this newspaper justifiably mocked Lerach for declaring his lawbreaking a mere "foot fault" ("I stepped over the line," he said). But at least paying off plaintiffs honestly reflects how such lawyers get rich. Often, they are less "officers of the court seeking justice" than businessmen colluding with plaintiffs in a lucrative extortion business. Legal extortion. But still extortion. Companies pay the lawyers to go away even when it's unclear that they did anything wrong.

I wish I could add a .wav file to this post with me saying “Whaaaaaaaaaaat?” in an incredulously cartoonish way. Not yelling “What?!” in anger, but more of a long, drawn out, deep voiced, sarcastic confusion.

A lot, and I mean a lot, of these companies are simply guilty. Just calling it “extortion” doesn’t mean it’s simply blackmail. They are forced to pay for having committed actions that harmed people. Yes, the system is not perfect, but the hell if you think I am going to start feeling bad for companies as opposed to the many people who had their life cut short because of, say, Vioxx.

Once companies pay, it's logical that the plaintiff/partner who helped the lawyers enrich themselves should get a cut of that loot. That's a fairer deal than what typical plaintiffs in class actions get: coupons or a check for perhaps $1.26.

What I appreciate about John Stossel is that he never exaggerates or strawmans. Nothing but straight talk from the man so bold he doesn’t believe in global warming.

A federal judge will soon decide whether to award Lerach his cut of what may be the biggest class-action legal fee ever. Lerach extorted – I mean persuaded – J.P. Morgan, Citigroup and a Canadian bank to give $695 million to him and other lawyers who claimed the banks were culpable in the Enron debacle. On March 19, 2007 an appellate court ruled that the banks were not culpable. But so what? Fairness doesn't necessarily govern this game. The game is more about rounding up lots of complainants and using America's one-sided legal system to terrorize businesses into settling.

Yes, one appellate court rules that these banks weren’t culpable, thus they were not. Q.E.D. Why did these banks settle? Is it because they were pretty certain a jury might hit them hard with a judgment? Yes. Here’s the thing, there are problems with tort law, but again “Woe is Citigroup and JPM!” is just not going to fly. Better that corporation get hurt than the people injured by said corporations, the deck is already completely stacked in their favor, so when corporations settle you can be pretty sure that most of time it is because they’ve done something questionable.

Companies could fight and win, but that distracts managers from what they ought to be doing. And they might get a bad jury and lose the entire company. It's safer to settle.

Companies balance these risks, they will often offer nuisance payments, but if there is no merit to the charge they usually fight it. What is your solution? Get rid of lawsuits?

Our legal system invites lawyers to act like bullies. For "20/20" tonight, I report on a class-action lawyer who's suing his neighbor for smoking in her own apartment. Toxins are "being breathed every day by our 4-year-old," says Jonathan Selbin of Lieff, Cabraser, Heimann & Bernstein. His frightened neighbor had the apartment manager seal off air ducts between the two apartments, but Mr. Selbin sued anyway, claiming smoke was in the hallway. Mr. Selbin's neighbor was unusually feisty in going to the media to fight back, at least for a while. But last night, she decided to settle. After all, Mr. Selbin had written her that he had a legal advantage, because he and his wife "are both lawyers, and both litigators, for whom the usual barriers to litigation are minimal." Right. Mr. Selbin wrote ABC, "I have recovered more than $2 billion in cash for consumers defrauded by companies. I am proud of what I do." He wouldn't tell us how much of the $2 billion he kept.

Way to plug your show there Stossel. Also cherry-picking stories is very very persuasive. Are you sure you couldn’t find a more frivolous lawsuit to profile?

What do we get from this kind of "private law enforcement"? Very little. James Copland of the Manhattan Institute points out, "The small, diversified investor is as likely to be a buyer as a seller and thus a payer in a class action settlement. The 'little guy' pays money to himself." Actually, it's worse than that: Little guys come out behind because the lawyers pocket so much.

Ahh, The Manhattan Institute, a place that promotes “economic choice” and “individual responsibility”, thus totally unbiased. Also I have no idea what in the world that above paragraph meant. Somehow, I think Stossel was trying to claim that the “little guy” was hurt by big business having to give these payouts. He doesn’t give any evidence, he just cites a vague study from a totally objective organization.

If securities class actions really deterred fraud, their high cost might be justified. But research from St. John's Law School Prof. Michael Perino shows that most of these lawsuits follow SEC investigations. The lawyers don't unearth frauds. They come in like vultures after the problem is already revealed. We pay for that.

Lawsuits aren’t supposed to unearth fraud, they deter fraud. I mean is this really that difficult of a concept. If I know that I can be hit with nearly unlimited legal penalties should I commit securities fraud I am less apt to take that risk. Financial experts are very good at risk calculation, if you take away the possibility of limitless penalties they will be able to game the system and determine when major fraud is worth the risk. This is very very bad.

Onerous as the legal fees are, the nastier cost is the loss of so many good things. Weiss's former firm got companies to pay $45 billion in damages. That's $45 billion that will not create new jobs or life-saving drugs.

Hah hah hah hah hah, this is the most disingenuous argument I have ever seen. I want people to just guess how much of that 45 billion would have been used to produce new jobs or drugs. Also in the Stossel world several suffering people would still be suffering with no compensation.

The fear also reduces options. After Dickie Scruggs filed his post-Katrina class action against insurance companies, State Farm, citing an "untenable legal environment," stopped insuring homes in Mississippi.

But having tons of options with no regulation or legal recourse is awesome. I can select between seven companies that can screw me at will. Yes, Mr. Stossel, may I please sign up to live in your Utopian society?

America needs judges willing to say "no" to legal bullies. America also needs the legal standard that works in most of the world: "loser pays." Without reform, the parasites will take away your money and your choices.

I am not even sure what Stossel is advocating for here. “Saying ‘no’”?! I mean, judges are free to throw out frivolous lawsuits. Are you just advocating to get rid of lawsuits altogether, I am confused. Why is this printed in the WSJ? Also, “loser pays” is a terrible system that deters poor people from suing companies and deters important class action suits from being filed. It’s just another statutory way to advantage the rich over the poor in the legal system. We already have a semblance of “loser pays”, judges and juries can award legal fees in the case of truly frivolous lawsuits. This is a much better system than a systematic rule that only advantages corporations and Stosselian crazies.