Coyote Blog

I am renouncing my place of birth.  No, not my country.  For all its faults, I love the United States and miss it when I am away.  And no, not my birth state of Texas, despite its perceived great Satan status among the media elite.  I am not even renouncing my birth city of Houston, despite the fact I don't think I could ever return to the traffic and humidity.  I am taking the bold, original step of renouncing my birth hospital.  I was born at St. Luke's in the Texas Medical Center, and they are apparently going over to the dark side:

St. Luke's Episcopal Hospital's famed medical tower will soon be renamed for a
Houston lawyer who has made millions taking the health care industry to trial.

The plan to rename the edifice after John O'Quinn in recognition of a $25
million donation by his foundation has infuriated many St. Luke's doctors, who
last week began circulating a petition against it and Monday night convened an
emergency meeting of the medical executive committee.

"Perhaps you are unaware of the intensity of feelings held by many physicians
about Mr. John O'Quinn," says the petition, which is addressed to the Rev. Don
Wimberly, bishop of the Episcopal Diocese of Texas and chairman of the St.
Luke's Episcopal Health System board of directors. "The primary source of his
financial success has been representing plaintiffs in medical liability and
products liability cases, many of them groundless."

Where does the money come from?  In part from O'Quinn's baseless but infuriatingly successful suits over breast implants, which no serious medical study have shown to be dangerous:

A plaintiff's lawyer who often has sued doctors, O'Quinn made some of his
fortune on litigation involving breast implants, which bankrupted a company (Dow
Corning) even though the consensus later developed that the science didn't back
up the claims.

Another part of the money comes from pushing bogus asbestos claims that have kept most of the asbestos settlement money out of the hands of the truly sick:

In July 2005, a Corpus Christi federal judge fined O'Quinn's law firm for its
part helping to produce what she called bogus diagnoses involving the
occupational illness silicosis, a serious and occasionally fatal lung disease.
She said the claims "defy all medical knowledge" and the diagnoses were about
"litigation rather than health care."

More on the growing scandal in asbestos screening here and here.  Overlawyered has the whole store here, as well as links to plenty of background on Mr. O'Quinn.

Last week, Tyco's Dennis Kozlowski was found guilty of looting the shareholder's assets for his own personal gain.  Good.  Too many CEO's treat public companies as their own, rather than other peoples' companies for which they have fiduciary responsibility.  And, unlike the Dick Grasso mess I commented on earlier, this was a much clearer case of looting as opposed to just negotiating themselves a good deal.  (update:  Stephen Bainbridge has a different take here)

According to the Wall Street Journal, which requires a subscription:

The guilty verdicts are in for L. Dennis Kozlowski and Mark H. Swartz. For Tyco International Ltd., the company they looted, there may be more court dates to come.

Tyco was hit with dozens of shareholder lawsuits in
2002 and 2003 as the company disclosed waves of accounting problems
that sank its stock. It has restated results several times, going as
far back as 1998. A July 2003 restatement cut about a billion dollars
from pretax profit over several years.

The convictions
lend credence to the plaintiffs' allegations that Tyco was grossly
mismanaged. The suing shareholders already have a strong leg to stand
on: Tyco's string of past restatements amount to an admission that its
accounting was deeply faulty. Shareholders claim they were deceived by
accounting practices that presented rosy pictures of the performance of
the company and its acquisitions, then suffered losses following the
revelation of allegations against Mr. Kozlowski and the restatements.

I have never been able to justify most lawsuits by shareholders against companies in which they own shares.  Any successful verdict would effectively come out of the pockets of the company's owners who are.. the shareholders.  So in effect, shareholders are suing themselves, and, win or lose, they as a group end up with less than if the suit had never been started, since a good chunk of the payout goes to the lawyers.  The only way these suits make financial sense (except to the lawyers, like Bill Lerach) is if only a small subset of the shareholders participate, and then these are just vehicles for transferring money from half the shareholders to the other half, or in other words from one wronged party that does not engage in litigation to another wronged party who are aggressively litigious.  Is there really justice here?

OK, you could argue that many of these shareholders are not suing themselves, because they are past shareholders that dumped their stock at a loss.  But given these facts, these suits are even less fair.  If these suits are often made by past shareholders who held stock at the time certain wrongs were committed, they are paid by current and future shareholders, who may well have not even owned the company at the time of the abuses, and may in fact be participating in cleaning the company up.  So their argument is that because the company was run unethically when I owned it, I am going to sue the people who bought it from me and cleaned it up for my damages?  Though it never happens, the more fair approach would be for current shareholders to sue past shareholders for the mess they left.

The vast majority of these suits are dreamed up by attorneys for the benefit of attorneys.  They help shareholders not at all.

Postscript: There are a couple of circumstances where these suits are entirely justified.  The two that come to mind are:

• Suing a particular group of shareholders who somehow got disproportionate rights in the company or disproportionately benefited financially at the expense of other common shareholders.  A good example would be suing the Rigas family at Adelphia Communications for hosing the minority shareholders.  Note, however, I am talking not about suing the company, but suing certain owners who abused minority shareholders to their benefit.
• Suing to modify certain governance rules that are seen to be unethical or illegal.  I would hope this would be a last resort after trying a number of proxy fights and other remedies, but this can in certain circumstances be the last protection of minority shareholders abused by the majority.

This is something our company has encountered a couple of times now:  There is apparently danger nowadays in posting warning signs.  Apparently, courts and juries are taking the position that by posting any warning at all, you are communicating to the public that you are taking on the task of warning them about any possible danger.  Then, when someone gets hurt by something you did not warn them about, they can argue that you are liable. Via Overlawyered:

Putting up signs warning visitors of the dangerous rip currents off New Jersey's
Long Beach might seem like an obvious step. "However, Long Beach Township
Attorney Richard Shackleton said there are liability issues to consider.
According to the law, the town does not have to warn people about natural
conditions, and if Long Beach put up a sign and a jury found its warnings to be
inadequate, the town could possibly be found liable for a drowning or injury.
Having no signs, he said, reduces the risk of being sued."

We have similarly had our attorneys and/or insurance inspectors recommend we take down a number of warning signs for this reason.  I have no idea how this outcome can be in the public interest.

Like a smoker trying to quit for the twenty-seventh time, I have tried really, really hard to limit the number tort-related rants in my blog lately.  I sometimes go for weeks without falling off the wagon,and then something comes along that is so insane, I can't resist.

Via Overlawyered.com comes this site from attorney Lewis Laska dedicated to outlining all the ways people too bored or incompetent to make money the old fashion way can try to support their lifestyles by suing Walmart.  Don't miss this page, where the attorney will sell you packets of information for how to sue for various occurrences, such as:

Parking Lots- Uneven Surface and Protrusions (16 items, $135)

Parking Lots- Improper Parking Lot Design or Marking (11 items, $90)

Entering the Store - Entranceway Floors and Floormats (21 items, $160)

Entering the Store - Doors and Doorways - Tracked-in Water (32 items,
$200)

Aisle Ways - In-Store Consumable Food on Floor (18 items, $160)

Aisle Ways - Out-of-Store Consumable Food on Floor (14 items, $120)

Aisle Ways - Unknown Substance on Floor (59 items, $200)

Aisle Ways - Packaged Product on Floor (14 items, $110)

Aisle Ways - Unpackaged Product on Floor (13 items, $100)

Merchandise - Merchandise Protruding (1 item, $15)

Shelving and Racks and Displays - Vegetable Produce Displays (1 item,
$15)

Shelving and Racks and Displays - Water/Condensation From
Vegetable/Refrigeration/Freezer Displays (6 items, $55)

Shopping Carts - Overloaded (4 items, $45)

Shopping Carts - Defective (4 items, $45)

This is only a very short sample of the whole list.  I especially like the packaged product on floor.  Get your friend to drop a box of Wheaties on the floor, and then you follow him and sue.  And how the heck is Wal-Mart at fault if you overload your own shopping cart?  Anyway, I am going to order one to see what I get.

By the way, I especially liked this whopper, I guess because he is trying to portray himself as the brave man taking on huge odds:

Most lawyers are not interested in filing suits against Wal-Mart.
The company is reluctant to settle cases promptly and fairly and almost
seems eager to take cases to trial. One of the goals of the Wal-Mart Litigation
Project is to identify lawyers who are ready, willing and able to sue the
company where a case has merit.

I hardly know where to start.  First, if lawyers are so reluctant to sue Wal-Mart, why does Wal-Mart have like 20,000 suits pending against it? (note the numbers in this article, and it is 4 years old) Second, you gotta love the part about the attorney put out because Wal-Mart won't play the part of the victim like other companies and actually demands their right to a trial.  In this one statement, you see exactly how the plaintiff's bar works - they don't really want to go to a trial.  They want to force a fast settlement that requires little of their own time and move on with their 30+% of the take.

Frequent readers of this site will know that I am a strong opponent of how the current tort system works.  However, I am not a big supporter of damage caps.  Damage caps may limit the harm of a broken tort system, but they don't fix the root problem - the jackpot justice that seeks wealth transfers from wealthy parties irrespective of who was really at fault.  For example, note this case, where teens who were not wearing their seat belts were killed by a driver breaking the speed limit and with a blood alcohol level over twice the legal limit.  The jury decided the accident was 90% the fault of... Ford, for designing a car with the same glass used by everyone else in the auto industry.  But the unfairness of the decision is only the beginning of the outright nuttiness and fraud by the plaintiff in this case.  Make sure to go to this article - you have to scroll to the article on Ford appealing frontier justice, but the extra finger work is justified.

I have written several times that one of the perverse effects of lawsuits aimed at unsafe products is that they generally punish any company that has an open, honest internal debate on safety.  However, as I wrote here, that honest internal debate is critical to selling safe products and services.

Today, Marginal Revolution links a New Yorker article that points out the same deadly paradox:

Merck would seem to have one big thing in its favor: the company voluntarily withdrew Vioxx from the market. But while Merck executives may have hoped to persuade people that they were acting responsibly, plaintiffs' attorneys have taken the withdrawal as an admission of guilt...internal company documents show that Merck employees were debating the safety of the drug for years before the recall.

From a scientific perspective, this is hardly damning. The internal debates about the drug's safety were just that"”debates, with different scientists arguing for and against the drug....While that kind of weighing of risk and benefit may be medically rational, in the legal arena it's poison. Nothing infuriates juries like finding out that companies knew about dangers and then "balanced" them away. In fact, any kind of risk-benefit analysis, honest or not, is likely to get you in trouble with juries....Viscusi has shown that people are inclined to award heftier punitive damages against a company that had performed a risk analysis before selling a product than a company that didn't bother to. Even if the company puts a very high value on each life, the fact that it has weighed costs against benefits is, in itself, reprehensible. "We're just numbers, I feel, to them" is how a juror in the G.M. case put it. "Statistics. That's something that is wrong."...

Before a jury, then, a firm is better off being ignorant than informed.

Over the last two days, Phoenix put out an order to boil tap water before drinking and not to bathe or shower.  Many restaurants closed for the two day period, and many many people went out and loaded up on expensive bottled water.

What I found interesting was that through the whole "crisis", and now after the fact, Phoenix officials continued to say that they thought the water was safe, that they had not gotten any bad test results, but that people still shouldn't use the water "as a precaution".

Given the current state of liability and torts, I probably would have done the same in their shoes, but is this really the world we want?  There are costs to shutting off water in a city of 2 million plus people.  Shouldn't those costs be justified by some real risk? 

When I was an engineer, my job was often to rule on whether some condition was "safe".  Every day I had to make decisions like "should we shut this part of the plant down, or can we keep running it safely".  Certainly we wanted to err on the side of safety, but ruling every little concern as cause for shutdown would have caused the plant to be shut down almost all the time.  In that job, I had to take responsibility and make a decision, balancing risks and costs.  People want to say that shutting the plant (or the water system) at every hint of a problem is the "responsible" thing to do -- but in fact it is just the opposite.  It is an avoidance, both of decision-making and responsibility.

Unfortunately, no one wants to make such decisions anymore.  My wife's mammogram had something on it the doctor said he was 100% sure was just an artifact of the photography, but to cover his butt he said he had to get her to go have a biopsy (painful, expensive, and time-consuming) which was of course negative.  We are loading the economy down with risk-defense costs, an invisible tax that is already hammering the medical field.

But beyond just the costs, at what point does this hair-trigger defensive posture lead to a chicken-little syndrome where no one pays attention to warnings any more?  I know that the next time we get a warning about Phoenix water, I will be much less likely to be careful, because I remember that the last time nothing was really wrong with the water.  How many people pay attention to homeland security alerts any more?  Do you even bother to read warning labels any more, on the off chance it is a useful warning and not a "this toaster should not be used as a water ski" type warning?

I must be going crazy.  First this, and now comes this story, via Overlawyered.com:

A former Inglewood police officer [Jeremy Morese] who was fired for punching a black teenager and slamming him against a patrol car was awarded $1.6 million Tuesday by the jury in a discrimination lawsuit he and his partner brought against the city [note that the teenager was handcuffed at the time]

OK, we won't even get into the fact that employers should be able to fire "at-will" employees for just about any old reason.  How, though, have we gotten to a world where a police department can't fire an officer who abused a handcuffed man? 

It gets better, though:

the jury was unanimous in awarding $810,000 to Morse's partner, Bijan Darvish, who had been disciplined in connection with the 2002 incident.

Darvish was suspended 10 days (presumably without pay) for falsifying a report to cover up for his partner's abusive actions.  Ignore for a moment whether a 10 day suspension is the right punishment for his actions (I would have fired the guy), but ask - how is $810,000 proper recompense for a 10 day suspension, even if the suspension was totally invalid?  The main damage was lost pay -- but on this basis the $810,000 for 10 days pay would represent $29,565,000 for a whole year.   I guess I need to quit my job and go sign up as a police officer in Inglewood, because they sure as heck make more money than I do.

By the way, if I was an African-American, I would sure as hell stay away from Inglewood, or any other community that pays million dollar rewards to cops that beat the hell out of black people.

I have written a lot on my frustration with the tort system.  If I had to summarize my issue in one sentence, it is that the system has moved away from assessing damages against parties truly guilty of substantial negligence or malpractice and has instead shifted to granting payouts to the injured, charging whoever happened to be nearby with deep pockets with the cost (see the tort thought experiment here). 

The result in this current system is that the innocent at best get high insurance premiums and at worst have to fight for years against ridiculous suits.  At the same time, the truly harmed fail to get compensation in a system clogged with BS claims, and the worst, truly bad doctors continue to practice.

But, as I said in the title, just because I am passionate about the tort system being broken does not mean that real damages aren't occurring.  For example, this story via Kevin Drum about medical interns:

In New York City residents routinely begin their day at six or seven in the morning, work twelve hours, then stay on call all night. In a practice that I think is particularly cruel, they typically don't get home until noon the following day "” several hours after morning rounds.

I have never, never understood why having interns practice medicine while sleep-deprived makes them better doctors.  This is fraternity hazing, plain and simple (not to mention cost reduction for hospitals).  I find it astounding that this practice still exists today, with the complexity that is modern medicine.  Astonishingly, most doctors seem to support this practice.  I find it even more astonishing that some smart attorney's haven't found a way to bring suit against hospitals for the plainly dangerous practice.  It is a great example of what I said above about what is wrong with the system - OB's are getting sued every day for birth defects they had no power to correct or prevent, but hospitals get away with this clearly dangerous practice?

UPDATE:

Reason has more here.  They make the interesting point that doctors support this hazing because it is a way to deter doctors from the field, in the same way as does occupational licensing, thus raising salaries. 

Read this story at Overlawyered.com (you are welcome to try the linked article in the KC newspaper, but take my word for it, the registration is a pain with lots of attempted spamming (you might try bugmenot instead).  Here is the gist:

Car veers into truck's lane...and so a jury has ordered the trucking company, Auction Transport Inc., to pay $22.5 million over the resulting injuries to a young passenger in the accident, which occurred at rush hour on Kansas City's I-435. Mary Coleman's car, allegedly sideswiped by a third vehicle, had careened in front of the truck, but attorneys argued that the truck driver had been "driving too fast in congested traffic and not watching the road." The jury found the trucking company responsible for just less than half the fault of the accident -- a greater share of fault than the allegedly sideswiping driver -- and Coleman for hardly any of it.

So, surprisingly enough, three vehicles involved, two with limited resources and one with deep pockets.  Guess who is liable - the deep pockets of course, despite the fact that he was the only driver among the three who stayed in his lane!

Now, here is the thought experiment.  Move the truck with deep pockets into any of the other two roles.  Imagine first that it was the car that nudged the plaintiff into the other lane.  Imagine next that the truck was the one nudged into oncoming traffic and hit the plaintiff.  In these two cases, if they had gone to trial, who would have gotten the blame?  I would bet you that in either case, the truck with the deep pockets would have been given most of the blame in either of these cases.

So where is the fairness?  Why should blame be based on bank account size, and not actual actions?  Is there anything more than coercive wealth transfer going on here?  Does this constitute justice? 

By the way, I continue to say that limiting damages misses the point of what is wrong with the tort system and the malpractice system.  Congress and state legislatures have got to find a way to bring some sanity to the tort process, where legitimately harmed people can still get compensated for damages, however large those damages may be, but otherwise innocent people who happen to have deep pockets and somehow find themselves nearby a legitimate accident don't have to worry about being held at fault.  Babies are sometimes born with birth defects, people sometimes slip on perfectly safe sidewalks, and car accidents are sometimes just that: accidents.  I make this same point over and over here.

Update:  oops, left off the link.  Fixed now

There are legitimate concerns that need to be addressed in putting together tort reform legislation; and there are shortcomings, as usual, in the GWB proposals (see below).  This, however, via Kevin Drum, is grasping at straws by tort reform's opponents.  Drum cites a recent UC San Diego Study described here that shows that there are a disproportionate number of medication errors in the first few days of the month.  The study claims that this is due to pharmacists being overworked and making mistakes because they claim poor people all rush to buy their drugs after their government checks arrive.

Kevin Drum cites this study as evidence that malpractice tort reform is misguided, because, as he puts it "one of the causes of malpractice lawsuits is "” surprise! "” malpractice".

OK, its hard to know where to start.  Though I am a supporter of tort reform, I would probably not have gotten worked up enough to bother to post.  However, this is another example where science and "studies" are misunderstood and perverted in the media, which DOES tick me off enough to write.  Here goes:

• This study has nothing to do with medical malpractice!  The debate is around doctors and doctors getting driven out of business by their malpractice rates.  What do pharmacist mistakes have anything to do with the types of medical malpractice and medical malpractice insurance rates.  The departure of doctors from certain counties has nothing to do with pharmacy errors.
• Though the authors and Mr. Drum wish to imply that all the medication mistakes measured are by medical professionals, the study in fact includes:

"wrong drug given or taken," or "accidental overdose of drug," or "drug taken inadvertently."

Note that of the four categories of mistakes above and included in the numbers (wrong drug given, wrong drug taken, accidental overdose, and drug taken inadvertently), three of the four are reasonably the fault of the individual taking the drug, not the pharmacist.  However, since most supporters of the current tort system tend to reject the notion individual responsibility, I guess this little issue was ignored. 

• The authors never have anything to say about Mr. Drum's point, ie they do not correlate these deaths with actual malpractice suits, so it is impossible to actually make Mr. Drum's point in the first paragraph.  The best evidence I have seen is equivocal - it says that a large number of lawsuits are baloney, but that a large number of true malpractice victims go uncompensated.
• The authors actually have no evidence, other than their supposition, that these deaths are due to pharmacists being overworked.  They did not do any research into the specific cases involved - they just surveyed notoriously inaccurate death certificates.  In fact, though it may be in the actual report, I don't see any evidence that demand actually increases or that pharmacists are indeed overworked the first few days of the month - they just seem to hypothesize it without proof.  And, if there really is more work load the first few days of the month, they never mention any data on staffing - presumably if there is such a trend, pharmacies may actually staff up for it, which would also defeat their supposition.  My business gets more traffic on certain days of the year and we staff for it.

OK, while we are on the topic of medical tort reform, I will offer up a couple of more thoughts beyond just the silly use of this study:

• No one denies that some malpractice torts are from real malpractice.  Wrong legs ARE cut off, etc.  No one wants to protect people who are guilty of obvious malpractice.
• The issue is less with the existence of medical torts but with their enormous escalation in the last 10-20 years.  To argue that malpractice torts mostly result from real malpractice, you have to argue that the incidence of real malpractice has gone up dramatically over the last 20 years.  That may be, given the great increase in complexity of medicine, but I doubt it is the entire explanation

As usual, part of the problem in this argument is that GWB and his minions suck at getting a message out that can drive a consensus.  Here is my alternate message on medical malpractice:

The system today is broken for two reasons: 

• First, bad doctors and real malpractice is not punished strongly enough, and some of the worst practitioners go on to hurt more and more people.   Insurance today spreads the cost of bad medicine to all doctors, reducing the negative impact on the worst.  In addition, insurance premiums and torts are a poor substitute for better discipline and penalty systems for bad medicine
• Second, too many good doctors are punished with suits because they had bad outcomes from good medicine.  Sometimes babies are born with birth defects, sometimes medications that help millions have unpredictably bad side effects for a few unlucky people, and sometimes people die and there is nothing that can be done.

More important than damage caps, both for truly injured patients and good doctors, is to bring scientific sanity to the system, and to make sure that bad medicine, not bad outcomes, are punished.

By the way, in a previous post Mr. Drum said that there is no cost to "frivolous" suits since they don't go to court.  This is quite wrong:

• I am not in medicine, but I am in a public contact business that gets some slip and fall suits, but I assure you that your insurance premiums can go up substantially even for suits that don't go to trial
• You still have to have a lawyer at $400 or so an hour to defend against a frivolous suit.  You can't walk in the first day and say, "hey judge, this is BS, let's drop it".  I have spent tens of thousands of dollars before frivolous suits against me get dropped
• Frivolous suits do go to trial and can win.  Just think McDonald's coffee.

And yes, I have had experience with frivolous suits.  In one case, a person who claims to have stepped on a nail head protruding from a board in our campground sued us for sexual dysfunction.  That case is still active more than 3 years later!  In another case, a person claimed to have hurt her knee falling on some steps.  Excluding the issue of why I am at fault if she fell down a perfectly safe set of steps, we eventually discovered that she had hurt her knee several weeks earlier, had no medical insurance, and was visiting a number of local businesses making the same claim to try to get someone to pay for an operation.

So please, don't lecture me on frivolous suits.  When Mr. Drum has to pay $400 an hour to defend a suit from someone who got an infected paper cut while reading his article in a magazine, then he can talk about why frivolous suits are OK.  However, he is right in this respect - I don't think the answer is capping damages.  The answer is having a way to defeat these things, to drop them out of the system quickly and inexpensively.  To have some kind of sanity filter.  This would help those of us subject to BS suits, and would help the truly injured get to trial faster.

This story surprises me not at all, and, if you are a reader of this site and my Florida horror stories, you will not be surprised that it occurred in Florida.  After driving all the neurosurgeons out of town with frivolous malpractice suits, plaintiffs lawyers are now suing...because there are no neurosurgeons:

Florida, the family of the late Barbara Masterson is suing West Boca Medical Center because hospital staff was unable to locate a neurosurgeon willing to come to the scene to perform life-saving surgery after a stroke. "The incident occurred in February, when Palm Beach County neurosurgeons were refusing to perform emergency services for fear of skyrocketing malpractice costs."

Also see this story about a recent death in Pennsylvania because all the neurosurgeons had been run out of town.

Our family actually has a personal experience with this.  My dad (81 years old) broke his neck while at his ranch in central Wyoming.  As he was cared for in Casper, the largest city in the state, we soon found it impossible to get any quality time with the neurosurgeon, since there was only one left in all of the central part of the state!  Eventually, they got his neck stabilized enough to fly him to Texas on a medical evac jet where he could get real care and eventually surgery (happy ending, all is well and all the appendages still work fine).

From Overlawyered.com comes the story that the anti-tort reform Center for Justice & Democracy is upset about this bit of legal immunity:

Many farmers use anhydrous ammonia as fertilizer, because it provides vital nitrogen nutrients to the soil. The combustible material is produced in Louisiana, and then shipped to the Midwest on barges or through pipelines, and then stored on tanks on farms. However, ammonia is also useful for making illegal methamphetamines, and thefts are a regular problem. (KOMU-TV, "Law Officers Fight Ammonia Thefts", May 19). If a thief injures himself tampering with an ammonia tank, should he be able to sue the farmer for the injury? Three states, Kansas, Missouri, and Wyoming, say no, and provide immunity for those who store, handle, or own ammonia equipment from suit by thieves. Legislatures are considering the issue in other midwestern states.

I find this hard to argue with, unless of course you are a tort lawyer and want to sue over anything any time.  In fact, I have an even better idea.  I propose the following law:

Citizens shall be immune from any suit for injuries or damages incurred by someone committing a crime against them.

I reported a similar story last week, but here is another:  Workers get $211,000 in back salary, their lawyers ask for $2,570,000 in fees.

This post could also be titled Reason #634 to be scared of doing business in California.  In a frightening trend, California passes yet another law giving citizens and their lawyers seeking unearned windfalls to police small, picky violations of regulations by filing large and expensive-to-fight suits (see also sue-your-boss law)  From the central Californian Santa Maria Times the story of Jarek Molski, who makes a very good living for himself suing public businesses over tiny, technical ADA violations:

Molski's suit against the Hitching Post in Casmalia alleged a wheelchair ramp was too steep, and the bathroom wasn't accessible because the toilet was a half inch too close to the wall; and the sink was three inches too high, and the soap dispenser was too high.

What do such picayune violations cost?  Mr. Molski averages a $20,000 settlement in such cases, though usually demands much more at first.  And, by the crazy Unruh law in California, targets get no time to redress these faults before up to $4000 per day per violation can be extorted sued for.

So is this an isolated incident?  Well, Mr. Molski is but one person in the ADA lawsuit business, and

As of Friday, 528 cases were listed under Molski's name in federal civil courts

Without reasonable standards, and with huge gains to be made for picayune rules interpretations, one victim summed it up this way:

"I've talked to about five people in Solvang and Cambria who have been sued twice in the last year," Stricklin said. "They're stuck. Unless you close your doors, somebody else can come along and sue you, and that's why we're fighting. If they can see that we're not going to roll over and settle, they'll think twice about going to trial."

My Proposal

So, I would like to propose my own Unruh II law.  I propose that in California, every citizen now has the right to sue any other person they observe violating any sort of traffic law.  If you observe someone speeding, doing a rolling stop at a stop sign, failing to signal a lane change or turn, with a burned out tail light, not wearing a seat belt, jaywalking, etc, you may now sue them for $4000 per occurrence. 

Coming in future posts, I will propose Unruh III to empower citizens to sue over health code violations, Unruh IV to empower citizens to sue over fire code violations, and Unruh V to sue anyone for any reason if they have a net worth higher than you do.

It seems like a huge percentage of the people we fire for cause, even after warnings and write-ups, etc, immediately threaten to sue us or report us to the Department of Labor or both.  Several times a year, I get contacted by an employee's lawyer, though generally nothing comes of it except wasting a lot of my time.  Ditto the Department of Labor.  According to George's Employment Blawg, we are not alone:

In many Federal district courts, employment-related litigation represents 50% or more of all court filings, and approximately 98% of lawsuits are resolved outside of court.

Small businesses (i.e., businesses with fewer than 50 employees) are not exempt either. This newsletter notes that it is not uncommon for such businesses to have 3 or 4 claims of employment discrimination annually!

In many cases, I think the need to do this is psychological - a kind of face saving to convince themselves that their job failure was due to someone else's shortcomings rather than their own.  This article has some more advice on terminations to help cut down on suits.

Beyond this explanation, there are also people out there who want to deal with all problems through litigation.  I have had people send lawyers after the company when they never once brought their concerns to a manager -- they just went straight to a lawyer, either because that is the modern way or because they are looking for an opportunity for an easy pay-off.

Something I would love to see, but will never happen, is a list of "serial litigators" to avoid.  I know a couple of people tried this but got shut down.  Too bad.  We had one such person seek employment at one of our establishments.  This is all this person does for a "living" - seek employment, show up at the job interview limping with a cane, and then suing people for discrimination if he is not hired.  Apparently this person has nearly a hundred different lawsuits going. 

For this post, I will leave aside for a moment the unfairness of monetary penalties for ridiculous claims or the incredible erosion of individual responsibility that is being created by jackpot litigation.

In addition to these problems, runaway litigation is causing people and organizations everywhere to take defensive postures to protect themselves from suits, and many of these defensive tactics are generally not in the public's interest.  Here are some examples:

• College forces depressed students out of school to avoid potential liability if the student commits suicide.
• Swings are disappearing from playgrounds, subject first to liability suits and more recently to ADA suits
• Doctors spend billions on tests and drugs that are not necessary but prescribe anyway to cover their butt in lawsuits  (and here and here and here)

One area that bothers me a lot is the area of safety engineering, whether it be for cars or whatever.  I was a mechanical engineer at an oil refinery for several years.  A big part of my job was assessing if a certain condition was "safe" or "unsafe".  Very often, I was working with shades of gray - safety is never absolute.  In fact, the only real way to make a refinery 100% safe is the same way you make cars 100% safe:  you don't have any. 

The way we dealt with the gray was to have a lot of discussion.  I might observe that I was concerned with a certain situation, and my colleagues and I would discuss it.  With some additional research, we would generally reach a consensus on the best approach.  Because we usually made these trade-offs with an inherent bias to err towards safety, I can't think of a decision we made that led to a problem.  We did have several fires/explosions, and one man was killed in one of these, but each and every one was generally caused by some combination of factors we never anticipated, e.g:

there was a steam leak under the insulation of that pipe, and since the pipe was running at a lower temperature than expected, the water condensed, and it turned out the water had an unexpected contaminant such that when it came in contact with the flange bolts it caused an unusual crack propagation mode, made worse by the fact that the flange bolt material was not the kind specced because the vendor had made a mistake on delivery, and the flange eventually gave way and a fire started.

Yeah, this really happened- I include it to say that the situation is never like on the TV mini-series -- evil corporation skimps on 30 cent part knowing it created an unsafe situation.  Safety engineering means tough trade-offs, and, after a ton of work, problems usually occur in an area no one imagined.

Anyway, this is the type of thing I used to do, and doing it well relied mainly on open, honest dialog about safety problems.  Nowadays, however, my sense is that this open dialog in corporations may soon be over.  Corporations are legitimately worried that some young engineer like myself might have written a memo about a potential hazard, and that this memo will end up being exhibit A in some plaintiffs case that the company "knew about" some hazard and did nothing about it.  Think about all the cases you hear about, even the recent Vioxx case -- the center piece of every plaintiffs argument is often that the company "was warned" and is therefore truly evil, because it knew of the problem and did nothing.  The words "smoking gun memo" are practically attached to these lawsuits, but I have always asked myself - are these smoking guns that point to culpability, or are they in fact pointing to a robust safety engineering process?

So, if we have gotten to the point where having internal people asking questions and challenging the company's product and process safety makes companies more vulnerable to lawsuits rather than less, then companies are going to start clamping down on the open internal dialog about safety.  And then the world really will be a less safe place.

UPDATE

Having written this post, I had a flashback to a training video I was shown early on at Exxon.  The video was anti-trust training, and the only message I remember is "don't write it down".  The message was mainly aimed at sales people, who tend to be gung ho and competitive and say things like "lets go out there and crush the competition this week".  This is all fine and good for Joe's Auto Body, but written on an Exxon letterhead, it becomes the central exhibit of some anti-trust trial.  Thus the don't write it down advice.  Anyway, I will be very sad, but not surprised, if they are now showing this video to the engineers as well.

From Overlawyered:  Another lawsuit where customers get the coupon, and lawyers get the cash.  I would love to see the use rate on the coupons out of these suits. I have gotten a few for like $1.24 off something that I threw away.  I mean, in several cases, the company was offering better coupons in the Sunday circular.

Though I thought it was kind of silly at first, I am coming around to supporting legislation that attorneys should get paid in the same currency as customers.

Also from Overlawyered is this good news about courts finally taking legal action against people who file fraudulent suits and claims:

A Fayette minister and a teacher are going to prison for their role in submitting phony Fen-Phen drug settlement claims in Jefferson County

Good, though we might have to have a massive amnesty in Mississippi or half the state could end up in jail.

Overlawyered.com is on a roll lately, with a number of articles that want to make you beat your head on the wall:

• Another nail in the coffin of individual responsibility
• Small harm, big suit
• Signs of hope in Mississippi
• Lawsuits reducing auto safety
• NBA - the next asbestos?
• Failed to prevent suicide

I give up - too many good ones to link.  Just go and keep scrolling - you don't want to miss the "breastaurant" suit, do you?

Maryland doctors are finally starting to shrug under the weight of the current tort system.  Apparently about 50 doctors have canceled elective procedures for a number of days to protest skyrocketing malpractice premiums.  (hat tip: Club for Growth)

What struck me is not necessarily the doctors' actions, which are representative of the state of mind of doctors across the country, but the whiny reaction:

"Actually what they`re doing is going against their doctor`s oath. The patient is more important than malpractice insurance and they have to realize that," said Washington County Hospital patient Brian Levasser.

Remember, these doctors have stopped doing elective surgeries.  So Mr. Levasser's penis enlargement or whatever will have to wait a few days.  He sounds just like Kip Chalmers on the train in Atlas Shrugged.

OK, here is something Mr. Levasser can try:  Go to work each day, work long hours, and do your absolute best in a critical profession.  Then, each day, just before you go home, roll three dice.  If the result is anything but 1-1-1, go home, have  a beer, and relax with your family.  However, on that unlucky day when you roll three ones, you lose everything - your job, your house, your savings, your reputation and your ability to work again in your chosen profession.  Note that you lose everything not because you did a bad job, but because something unlucky but inevitable happened (e.g. child born with a birth defect) and you were the one standing closest.  On the day after you rolled that 1-1-1 and lost everything, tell me malpractice insurance isn't important. 

Doctors used to be the people we looked up to and admired, the pillars of society; now, we treat them like galley slaves.  We keep you alive to serve this patient. So operate well and live.

(By the way, I am sympathetic to the first comment on the Club for Growth post.  Those of us in general business can sometimes get frustrated that doctors seem to be able to get attention on their frivolous suits where the rest of us cannot.  But I refuse the begrudge them that, and wish them well)

For those who still hold out belief that the tort system today is still primarily about justice rather than just hijacking deep pockets, read this post at overlawyered.com.  From an online ad:

We will show you how to prove you had taken Vioxx, to prove that you had related side effects, and to find a good lawyer to win your case. There are still places selling Vioxx after the recall, you can find them online. Merck is still 100% fully responsible for any side effect. If you purchase Vioxx now, not only you can sue Merck, you can also sue the pharmacy store for selling recalled products. The purchase is risk free, as Merck will pay you every penny you spend on Vioxx including tax and shipping fees.

Quick, buy some before they take it off the shelf, so you too can get in on the lawsuit!

By the way, this little tidbit, also via Overlawyered.com, gave me a chuckle.  A woman is suing a railroad for hitting her when she was walking down the railroad tracks.  In part, she is suing the train for "failure of its engineer to...yield the right of way".  LOL - I can't believe the train didn't swerve out of the way.

UPDATE #1

Legal Underground has a post critical of this article:

As grist for its anti-lawyer message, Overlawyered.com is featuring this obvious Internet hoax: "Get Your Million Dollars from Vioxx Lawsuit."  Does Walter Olson really think his readers are so gullible?

In the comments section, I responded as follows:

Hmmm. I am one of the listed disciples (lol). I am willing to believe the ad is non-serious, meaning that it was aimed more at getting traffic and probably was not written by a law firm, and am posting an update as such with a link to this site.

Hoax? In my mind, its a hoax only if the legal advice is wrong or if you think no one would respond to the plea. I can't tell you if Vioxx can still be bought nowadays (that may be a hoax). However, if it was still on the shelf somewhere, ask yourself two honest questions:

1. Is there a lawyer out there who would happily try to make the case that a person who bought Vioxx after the recall can still be awarded damages?  Even if the attorney knew the person bought the Vioxx mainly to get in the class action?
2. Are there people out there who, if they thought it would get them in on a big class action, would go out today and load up on Vioxx solely to get a chance at having a lawsuit?

The honest answer is yes to both (just read the billboards in Florida). I mean, I would bet about any amount of money that someone out there has read this on the Internet and has tried to go buy Vioxx to get in on the jackpot. Guaranteed. Would any of you take the other side of this bet?

The fact that this ad may not be from a real lawyer does mean that I may have overstepped in painting law firms as being this bad (sorry), but I don't think its being fake in any way hurts the case that the notion of individual responsibility is on life support in this country.

By the way, after looking at Walter Olson's original post, I think he was pretty careful not to claim that the page was from a real law firm, and basically pointed to the same issues with the page's provenance that Legal Underground pointed out.

In the companies I have run, I have spent an inordinate amount of time dealing with a few really ridiculous lawsuits.  Here are two examples (that happened to companies I ran - this is not Internet hearsay or friend of a friend):

1. A visitor to one of our facilities claims to have stepped, while walking in his bare feet, on a nail that was on the ground.  He did not come to us for first aid, but called us later after he had left our facility.  He never could produce the nail, nor could we ever find one in the area, but we agreed to pay any small bills he had -- we assumed he might have gone to the emergency room for a tetanus shot or maybe to get a band-aid.  It turns out he eventually claimed that the injury caused him to - get ready -  experience sexual dysfunction, which he eventually sued us over when we refused to pay any treatment costs.
2. A woman came to our office at our facility limping, claiming to have fallen down the stairs and saying that we were gonna pay.  Despite the fact that it was a crowded area, no witnesses could be found.  We offered her a ride to the hospital which she refused.  Several of our employees thought we saw her come into the facility limping already.  Within the week, she was threatening to sue us for the cost of her knee operation.  Fortunately, since our employees saw her limping coming in, we did some more research, and members of her family told us she was also suing a restaurant she had visited the week before for the same injury.  It turns out she was uninsured, and had hurt her knee elsewhere, and was out trying to find some public business that she could get to pay for her operation. 

Given this experience, I am not going to apologize for believing that the referenced ad might be real.

UPDATE #2:

By the way, I don't think that Legal Underground was calling the train story a hoax, only the Vioxx.  By the way, the exact wording on the complaint against the railroad is even better than I thought:

"The [engineer] did not stop the train in a timely manner, and failed to yield the right of way to a pedestrian walking along the tracks in plain view"

A freight train's topping distance is measured in miles, even with full emergency braking.

She and her attorney's further argue:

that the railroad was negligent for failing to post signs warning 'of the dangers of walking near train tracks and that the tracks were actively in use

Lets leave aside the obvious point about individual responsibility, and ask what would happen if this were the legal standard, to have such signs.  To make sure someone saw one, you would have to have one say every 30 feet.  Since there are just over 200,000 miles of freight railroads in the North America that works out to a bit over 35,000,000 signs that need to be posted.  At $100 per sign this would cost $3.5 billion.

Here is the serious point:  Never would any legislature pass a law that said there had to be warning signs every 30 feet on railroads.  It would be way too costly for little benefit.  At grade crossings today, we have signs and flashing lights and even gates and still thousands of people a year drive in front of trains on grade crossings.  So, if we would never require it legislatively, how have we gotten to a point where a jury might effectively retroactively require such signs, and assess a multi-million dollar penalty for not doing it?

According to Overlawyered.com, notorious judicial hellhole Madison County, IL has elected a new set of judges much less likely to be in the pocket of the litigation bar.

Overlawyered.com has a roundup of how litigation-related propositions faired, the results are mostly good news for those of us shocked at the growing power of trial lawyers.

Why am I not surprised to hear this from a Florida attorney.

"Litigation is the No. 1 growth area. It's always recession-proof," said Peter Prieto, executive partner of the Miami office of Holland & Knight, in an interview.

If only our economy was litigation-proof. We operate in Florida because there are a lot of great recreation opportunities there - you can't transport them out of state. I am not sure why anyone else who could move their business out of Florida actually stays there.

Jeb gets a lot of press for being smarter than his brother George W., but George made a lot more progress on tort reform than Jeb has in his state.

courtesy of overlawyered.com

UPDATE#1

The world's whales, porpoises and dolphins have no standing to sue President Bush . Umm, I guess this is good news, though on the other hand what does it say that this even came up before a Circuit court of appeals (the ninth, of course).

UPDATE#2

Fixed link

When I first started this blog, I promised myself I would take the time to post featurettes on small business topics for which business school really did not prepare me.   The first such feature was on buying a business.

This week, I turn to the topic of workers comp. insurance.  Never in 2 years at one of the more storied business schools in the nation, nor in nearly 20 years at the largest corporations in the world, did I once encounter the topic of workers comp.  Now, since I bought my own business, I spend inordinate amounts of time dealing with it.

This article will focus on workers comp. from the employers point of view (most state web sites are useless to employers - they have reams of detail for workers on how to file claims or complaints, but nothing to help employers learn how it all works).

Continue reading ‘A Primer on Workers Comp.’ »