AAJ Archives - Shopfloor

Cross-Border Trucking, the Opportunities, the Lawsuits

By | Briefly Legal, General, Trade, Transportation | One Comment

The 30-day comment period ended Friday for the Federal Motor Carrier Safety Administration’s proposed rules to put into effect the long-delayed cross-border Mexican trucking program required under the North American Free Trade Agreement. (Docket: FMCSA-2011-0097).

The Riverside (Calif.) Press-Enterprise offered a thorough report on the issue, albeit with a headline one can argue over, “Cross-border trucking and tariffs — hard to balance.” To exporters of agricultural and manufactured goods, it doesn’t seem that hard at all. The tariffs tilted the scales heavily in a bad direction, and enacting the cross-border trucking program restores the balance.

Much of the effect in California has been on agricultural products, including dates, table grapes, lettuce and other crops grown in eastern Riverside County. Dave Kranz, a spokesman for the California Farm Bureau, said the tariff on table grapes, as high as 45 percent initially, cost growers 70 percent of their Mexican market.

Doug Goudie, director of international trade policy for the National Association of Manufacturers, said adding on that kind of tariff drives away customers and damages American producers. Goudie said he knows of one Mexican firm that is buying potato products grown in Canada, which he said was absurd because the products had to move through the U.S. to get to the destination.

“If you have to add 25 cents to every dollar for everything you’re trying to sell, pretty soon a Chinese or a Canadian product looks a lot better,” Goudie said.

Once the program is place, there will be more economic activity on both sides of the border. Increased opportunity, investment and wealth means trial lawyers will follow with bogus, hyped, shakedown lawsuits. (Where have we seen that before?) The American Association for Justice, the trial lawyer lobby, is setting the stage for litigation with its comments to the FMCSA, described in a news release, “Mexican-Based Trucks Should Carry Adequate Insurance: NAFTA Trucking Provisions Lack Protections for Motorists Injured in Accidents.

The important thing for the U.S. plaintiffs’ lawyers is to get their assertion on record that the insurance requirements are inadequate. Personal injury attorneys can then point to their regulatory submission to broaden the targets of their litigation from Mexican operators/insurers to more deep-pocket U.S. companies.

Trial Lawyers Still Lobbying for Their $1.6 Billion Tax Break

By | Briefly Legal, Taxation | No Comments

The latest lobbying disclosure report from American Association for Justice reveals the trial lawyers to still be working Congress and the Treasury Department to finagle a $1.6 billion tax break for its members, a sort of stimulus bill for suing people.

The AAJ’s first quarter lobbying report filed April 15 lists the U.S. House and Senate as targets on the issue, “Lobbying with regard to the deduction of attorney-advanced expenses and court costs in contigency [sic] fee cases.” (The AAJ reported $850,000 in lobbying expenses for the period, down from the $910,000 reported in the fourth quarter of 2010.)

We last wrote about the issue in October, so to recap: Under current law, the IRS does not permit lawyers to deduct expenses advanced to clients in contingency suits — “we only get paid if you win!” — because the agency considers the money a loan. Deductions are only permitted after the case comes to end, either with a judgment or settlement, or if the client loses the case and default on the loan. These kind of arrangements allow lawyers to front cases even though most states outlaw “champerty,” i.e., direct financing of suits. (For more on champerty, see this discussion by Barry Barnett.)

This special interest tax break erupted into controversy in 2009 when Legal Newsline reported that the AAJ’s top lobbyist, Linda Lipsen, told members the group hoped to sneak the tax break through Congress by quietly “tucking it into” another bill. When the publicity worked against the legislation the AAJ moved to a backup plan: just having the Treasury Department grant the tax break through a tax interpretation or other action.

A widespread outcry greeted news of the Treasury maneuver, but the AAJ continues to pursue it. In the first quarter, the AAJ paid the tax specialists at the Washington Tax Group to work the issue, not just with Congress but also the Treasury Department. The $10,000 reported lobbying expenditures for the quarter is down from the $40,000 the previous quarter.

No tax-lawyer-tax-break bill has been introduced yet in the 112th Congress, and one suspects members will be reluctant to sponsor the legislation. After all, last session’s Democratic sponsors, Rep. Artur Davis of Alabama (H.R. 2519) and Sen. Arlen Specter of Pennsylvania (S. 437) both lost elections and are out of Congress.

So the Treasury remains the lobbying target. We trust the House Ways and Means Committee will continue to pay close attention to the issue. The last thing the economy needs is tax subsidies for more speculative lawsuits.

Earlier Shopfloor.org reporting here.

I’d Rather Buy a Mattress

By | Briefly Legal | No Comments

That’s from the American Association for Justice’s home page, advertising to its trial lawyer members a Presidents’ Day discount on informational packages on how to sue productive members of society. Thank goodness that sale is over.

Seems like a good time to post an excerpt from Abraham Lincoln’s 1850 “Notes for a Law Lecture“:

Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser — in fees, expenses, and waste of time. As a peacemaker the lawyer has a superior opportunity of being a good man. There will still be business enough.

Never stir up litigation. A worse man can scarcely be found than one who does this. Who can be more nearly a fiend than he who habitually overhauls the register of deeds in search of defects in titles, whereon to stir up strife, and put money in his pocket? A moral tone ought to be infused into the profession which should drive such men out of it.

Also, from David Freddoso, Washington Examiner:

A detailed Washington Examiner analysis of the top 110 plaintiffs’ firms in America shows that their employees and partners gave about $7.3 million to political campaigns during the last cycle, with almost every penny — 97 percent — going to Democrats. The remaining 3 percent was split almost evenly between independent Senate candidate Charlie Crist of Florida and Republican candidates for federal office.

The political action committee of the American Association for Justice, the trial lawyers’ top trade group, was equally friendly to Democrats, giving the party and its candidates 97 percent of AAJ’s $2.7 million in 2010 contributions.

Medical Devices, Liability Reform, and Defensive Medicine

By | Briefly Legal, Health Care, Innovation, Regulations | No Comments

The House Energy and Commerce holds a hearing this morning, “Impact of Medical Device Regulation on Jobs and Patients,” to examine the state of the medical device industry and the impact of regulations on job creation and patient access.

It’s a timely topic. Working on H.R. 5, the medical liability reform bill, the House Judiciary Committee rejected an amendment (Amdt. 15) sponsored by Rep. Mike Quiqley (D-IL) to strike the “safe harbor” provisions that would preclude punitive damages in litigation against FDA-approved medical devices and drugs. We discussed the importance of that language in a post Wednesday, “Why Medical Liability Matters to Manufacturers.”

Elsewhere in the world of medical liability, a new study provides further documentation that the threat of lawsuits drives doctors to conduct unnecessary and expensive tests, driving up health care cost. From the American Academy of Orthopaedic Surgeons, “Healthcare Spending: Study Shows High Imaging Costs for Defensive Purposes“:

Nearly 35 percent of all the imaging costs ordered for 2,068 orthopaedic patient encounters in Pennsylvania were ordered for defensive purposes, according to a new study presented today at the 2011 Annual Meeting of the American Academy of Orthopaedic Surgeons (AAOS).

For many years now, some physicians have ordered specific diagnostic procedures that are of little or no benefit to a patient, largely to protect themselves from a lawsuit. Until now, however, efforts to actually measure defensive medicine practices have been limited primarily to surveys sent to physicians. Such surveys would simply ask whether or not that individual actually practiced defensive medicine.

“This is the first study we know of that looked at the actual practice decisions of physicians regarding defensive imaging in real time — prospectively done,” says John Flynn, MD.

And here’s the agenda for the summer convention in New York City of the American Association for Justice, the trial lawyers’ lobby. You’ll see that AAJ’s members are very interested in suing doctors, drug makers and medical device manufacturers.

In a Better World, Trial Lawyers Would Apologize to Toyota and the Public

By | Briefly Legal | One Comment

We write often about the combine of trial lawyers, politicians, activists and PR flacks, aided by a sympathetic media, campaigning against companies in hopes of a cash payout and the expansion of the regulatory state. The attacks against Toyota provide a good example of this pernicious phenomenon.

Today, the Department of Transportation and the National Highway Transportation Safety Administration announced the results of an in-depth scientific study that found no basis for the claims that vehicles’ electronic systems produced unintended acceleration. (Toyota statement.) Transportation Secretary Ray LaHood said: “We enlisted the best and brightest engineers to study Toyota’s electronics systems, and the verdict is in. There is no electronic-based cause for unintended high-speed acceleration in Toyotas.”

Organizers of the corporate calumny against Toyota should be held accountable. The trial lawyers and their allies damaged the company’s reputation and sales, created unnecessary fears in the American public, and added to the “tort tax” that afflicts the U.S. economy.

Let’s start with the trial lawyers. The American Association for Justice, the main trial lawyer lobby, kept up a steady attack against Toyota, even dedicating the September 2010 cover of its monthly magazine, Trial, to the unfounded charges, “Toyota’s Deadly Secrets.” Just search the AAJ website for the term “Toyota” to see the unceasing promotion of litigation — class action suits, product liability suits, insurance complaints, even RICO claims.

The trial lawyer campaign was amplified last year by then-Chairman Henry Waxman (D-CA) of the House Energy and Commerce Committee. A subcommittee hearing in February 2010, “Response by Toyota and NHTSA to Incidents of Sudden Unintended Acceleration,” painted the company as an offender, failing to meet its corporate responsibilities. Another hearing in May repeated the allegations, complete with the release of subpoenaed documents that served the purposes of anti-Toyota litigation. The House Oversight Committee also promoted the charges, holding a hearing in February, “Toyota Gas Pedals: Is the Public at Risk?” The answer was no. Read More

Still Trying for the Trial Lawyer Tax Break

By | Briefly Legal, General, Taxation | 2 Comments

The American Association for Justice is trying to keep this story out of the news, but according to the latest disclosure reports the AAJ is still heavily lobbying Congress and the Obama Administration for a $1.6 billion trial lawyer tax break that would encourage even more litigation.

Third Quarter 2010 lobbying disclosure reports at the House Clerk’s Office reveal that the Washington Tax Group LLC spent $40,000 in the three-month period lobbying on behalf of the AAJ for the legislation to allow a tax deduction for litigation expenses advanced by the attorneys in contingency fee cases. Not only did the tax lobbyists appeal to the House and Senate, which have before it two bills (H.R. 2519 and S. 437, respectively), but they also contacted the U.S. Treasury.

The trial lawyers turned to Treasury after its congressional lobbying the special-interest tax break drew unflattering attention. A tax interpretation or some other administrative action by Treasury might achieve the same policy goal with via less public (i.e., democratic) means, they figured.

Thankfully, news of the more surreptitious strategy also got out, and there’s even more fierce opposition from business groups (NAM-signed letter) and medical associations, including the American Medical Association.

The ranking Republicans on the House Ways and Means Committee and Senate Finance Committee have written Treasury Secretary Geithner demanding more information and documentation. Tax policy is indeed a matter best left to the policymakers, that is, Congress.

According to the AAJ’s own 3rd Quarter lobbying form, the association lobbied the Senate and House on the legislation but did not approach Treasury. Well, that’s why you hire the experts.

P.S. Trial lawyers occasionally try to claim that the new tax treatment would be fair, just like the way other businesses are handled. See, for example, this recent National Law Journal op-ed by Brian Kabateck and Karen Liao, attorneys in Los Angeles. But as the AMA and other medical groups wrote Geithner in a Sept. 1 letter:

[A] change in tax policy by the Treasury Department would conflict with long-standing state ethics rules against trial attorneys providing financial assistance to clients without the expectation of being paid back upon the successful conclusion of the case. These rules are meant to prevent a conflict of interest whereby a trial attorney’s financial stake in a case is put ahead of the client’s desire for justice.

A Pretty Quiet Congress on Tort Reform, Liability Front

By | Briefly Legal, Taxation | No Comments

At the Manhattan Institute’s Point of Law blog, we have two reports on the 111th Congress, the absence of tort reform and the general failure of bills to expand liability and litigation. It was pretty quiet in the world of civil justice reform.

Also at Point of Law, we  noted the claims of the American Association for Justice, the trial lawyer lobby, that it had achieved some notable successes during the session. Notice AAJ’s emphasis on preemption.

Congress returns for its lame-duck session on Nov. 15, and it would be a good thing for Congress not to push for action on civil justice or liability-related legislation. There is one priority, and one priority only for the lame duck: Taxes.

Manufacturers Watching Preemption Cases at Supreme Court

By | Briefly Legal, General, Regulations | No Comments

The October term of the U.S. Supreme Court  opens today, and Marcia Coyle of the National Law Journal previews the session, “On the High Court’s Fall Docket, Few Blockbusters — but Plenty to Watch.” Among the issues of importance in business cases is federal preemption, that is, whether federal regulation of items in interstate commerce supersedes state regulation and litigation in state courts.

Four pre-emption challenges, including: two involving torts, Williamson v. Mazda Motor (auto safety standards) and Bruesewitz v. Wyeth (National Childhood Vaccine Injury Act); one restricting employers hiring undocumented aliens (Chamber of Commerce v. Whiting), and one challenging class action arbitration waivers (AT&T Mobility v. Concepcion).

The National Association of Manufacturers last week joined other business groups in filing an amicus brief in Williamson v. Mazda Motors. As our Manufacturing Law Center entry summarizes, preemption analysis is a settled and vital component of our nationwide system of health, safety and economic regulation:

This case involves whether an automobile manufacturer may be sued in state court for installing lap-only seatbelts in certain rear seating positions when the National Highway Traffic Safety Administration (NHTSA) specifically rejected such a requirement and gave manufacturers the freedom to choose either a lap-only or a lap/shoulder seatbelt configuration. The agency was delegated the authority to establish a coordinated national safety program, by issuing standards that take into account safety as well as the availability of technology and economic costs. It chose to offer manufacturers two design options, but this lawsuit would require a jury to re-examine the same safety, technological feasibility and cost-effectiveness issues that NHTSA balances under its rulemaking authority.

A copy of the amicus brief is available here. Joining the NAM in the brief are the Grocery Manufacturers Association, Lawyers for Civil Justice, and the American Tort Reform Association.

Coyle previously addressed the preemption issue in the article, “Big names, high stakes in quartet of pre-emption cases,” noting that new Justice Kagan will recuse herself because she argued three of the four cases as solicitor general for the Obama Administration. The Washington Post highlights the Kagan recusals in its court story today.

The trial lawyers’ trade association, the American Association for Justice, has lobbied extensively against federal preemption in Congress and Executive Branch agencies. The AAJ is pleased with its successes in expanding the venues for its product liability lawsuits.

Letter to Treasury: Don’t Give Trial Lawyers More Incentives to Sue

By | Briefly Legal, Taxation | 4 Comments

The National Association of Manufacturers has joined 75 business associations, legal reform groups and others in a letter to Treasury Secretary Timothy Geithner expressing strong opposition to any administrative move that would unilaterally grant a tax deduction for lawyers’ loans to the plaintiffs they’re representing in civil lawsuits.

This is the $1.6 billion tax break for trial lawyers that the American Association of Justice has failed to push through Congress. It almost fails the laugh test, and it certainly fails the political primary test. Chief sponsors of the legislation — Sen. Arlen Specter (D-PA) for S. 437 and Rep Artur Davis (D-AL) for H.R. 2519 — both lost their primaries, and no one has stepped forward to pick up the flag.

So AAJ went to its fall-back position, asking Treasury for a guidance or tax interpretation that would grant what Congress refuses to grant. Leading members of Congress have objected, saying that the Executive Branch should not supplant Congress is policymaking. Professional groups like the American Medical Association are alarmed (AMA letter), and business groups like the NAM protest the possibility of a huge tax break that would create an incentive for more litigation.

From the joint letter:

A change in IRS policy to permit the deduction envisioned by the trial bar is totally unwarranted. According to the Congressional Joint Committee on Taxation, permitting this deduction would result in a $1.572 billion loss of revenue for the federal government over a ten-year period.

Moreover, such change in policy would damage the economic recovery, not just as a result of losing billions in tax dollars, but also by fostering more questionable litigation. Contingency fee lawyers, enticed by the ability to immediately deduct their reimbursable expenses, would be more willing to take on new, spurious and highly speculative cases. Such a change in policy would further shift the litigation cost-benefit calculus to encourage pursuit of even more litigation. Ultimately, American taxpayers would bear the costs of this subsidized form of litigation. Read More