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Legally Insane: Trial Lawyers Abuse the System on the Gulf Coast

By | General | No Comments

The American public does not hold attorneys in high esteem. For every one Ben Matlock, there are at least two Lionel Hutzes or Saul Goodmans.

And perhaps nowhere do real-life attorneys come as close to their pop-culture caricatures than in Louisiana. The bayou is a breeding ground for enterprising trial lawyers who don’t let facts get in the way of a multimillion dollar jackpot. Their nicknames say it all: “The King of Torts,” “The General” and, of course, “Alligator Mick.”

The tort bar feeding frenzy has now set its sights on BP, which has diligently made amends following the Deepwater Horizon oil spill three years ago. So far, BP has paid more than $10 billion to satisfy claims of individuals, businesses and government and more than $14 billion for clean up.

Nevertheless, there are those who want to abuse the system and collect money they don’t deserve. Due to an egregious misreading of BP’s agreement settling claims against it, businesses that were not harmed by the spill have rushed to empty the company’s pockets.

For example, one rice mill 40 miles from the cost earned more in 2010—the year of the spill—than it did in the previous years. It received $21 million from the settlement administrator under this absurd interpretation of the agreement.

An alligator farm received almost $17 million, a sum that assumes the company would have tripled its profits.

Even businesses that have a tenuous (at best) connection to the Gulf are getting a piece of the action. A car dealer 100 miles from the coast collected $1.45 million. A law office in central Louisiana made more in 2010 than it did in previous years; it still got $3.3 million for its “losses” as a result of the spill.

And the list goes on.

Considering that there are injured parties who actually deserve compensation, you might think there would be widespread outrage about bad actors cutting in line. You’d be wrong.

Says one Lousiana attorney in Businessweek recently (in the appropriately titled piece, “How BP Got Screwed on Gulf Oil Spill Claims”):

“This is Louisiana, after all,” says Danny Abel, a longtime New Orleans plaintiffs’ lawyer not involved in the case. “A big foreign company with deep pockets and you’re surprised there’s a feeding frenzy? Come on, man.”

That’s just not right.

BP is now going to court to rectify this situation and fix the injustice, and there’s more at stake than just the company’s bottom line. When individuals abuse our tort system, everyone loses.

Not only is it unfair to deserving victims, it also drags down our economy. Tort costs drag down our economy—to the tune of about 2 percent of GDP—and make our country less competitive, hurting manufacturers from Baton Rouge to Bar Harbor.

Former Senator on EPA’s New Power Plant Regs

By | Around the States, Energy, Regulations | No Comments

Over the weekend, former Missouri Senator Kit Bond wrote in the Southeast Missourian about the Environmental Protection Agency’s Cross-State Air Pollution Rule, which requires power plants to reduce emissions of sulfur dioxide and nitrogen oxide.  (News coverage of the new rule here and here.)

Senator Bond writes that this new regulation will have a serious impact on coal-fired power plants:

Every time an American family turns on a light switch, heats a home in winter or air conditions that home in the summer, that family will pay higher utility bills. Workers who depend on coal-fired plants for paychecks will face unemployment when plants are closed. Rural communities that depend on tax revenue from utilities to fund schools will struggle to keep doors open for students when coal-fired facilities are shut down due to the cost of complying with EPA’s regulatory onslaught. And farmers and businesses — from the local pharmacy to drugstore — will face higher energy prices, making it more difficult to stay in business — let alone create jobs.

Senator Bond notes that, together with the Utility MACT regulations, this new rule will cost jobs. He writes,

Recent analysis from the National Economic Research Associates shows that by 2020 the cost of just two of the coming onslaught of regulations the Cross-State Air Pollution Rule and the Utility Maximum Achievable Control Technology rules — will be the loss of 1.4 million jobs and an averageutility bill increase, of 11.5 percent — and in some cases, more than 20 percent.

For more about the EPA’s regulatory agenda, be sure the visit the NAM’s No New Regs site.

Interesting Consensus in Texas

By | Around the States, Briefly Legal | No Comments

Texas Governor Rick Perry has signed legislation intended to deter frivolous lawsuits–so-called loser pays legislation.

Usually, this kind of thing gets trial lawyers riled up, and this occasion was no different.  The Wall Street Journal‘s Law Blog reports,

Texans for Lawsuit Reform, a pro-business group, hailed the measure, saying in a statement that it was “bitterly opposed by the Texas Trial Lawyer Association until the last minutes of deliberation.”

But what about those last minutes of deliberation?  It turns out that the final bill received the support of both the legal reform group and the trial lawyers.  The Texas Lawyer explains,

Groups that previously fought on opposing sides — Texans for Lawsuit Reform and the Texas Trial Lawyers Association, among others — lined up in support of Committee Substitute House Bill 274….

Speaking in interviews before the Senate passed the bill, Mike Gallagher, past president of Texas Trial Lawyers Association and Alan Waldrop, outside counsel for Texans for Lawsuit Reform, shared their views on the committee substitute.

“It’s obviously much better than the House version,” said Gallagher, who said he participated in “heated negotiations” over the substitute bill. He said he thought the Senate would not pass loser pays without trial lawyers’ input.

It’s not often you see those two groups joining hands.  Nevertheless, tort reformers seem optimistic.  See here for example.  And here’s a more tempered view of an earlier, less watered down version of the bill.

Activist Ignore Evidence to Back Shakedown Suit Against Chevron

By | Briefly Legal, Energy | 5 Comments

Activists and apologists for the shakedown litigation over supposed environmental damage in Ecuador once again tried to turn Chevron’s annual stockholders’ meeting in San Ramon, Calif., into a circus today. By now the Amazon Watch theatrics are old hat, and the cause they support — a lawsuit orchestrated by U.S. trial lawyers — has been revealed as fundamentally corrupt. Flying a banner off a bridge to promote a contingency-fee lawsuit demonstrates only witless fanaticism.

Chevron put together a short video to present its side of the case to the stockholders, shown at the meeting after Amazon Watch’s Atossa Soltani raised the issue. Its showing produced a round of vigorous applause from the attendees.

Concise and pointed. Very well done.

We wrap up the trial lawyer, activist, politician and media alliance that has gone after Chevron in a post immediately below, “More than a Lawsuit: A Circle of Political Pressure Against Chevron.”

More than a Lawsuit: A Circle of Political Pressure Against Chevron

By | Briefly Legal, Energy, Trade | No Comments

Chevron’s Dilemma: Creating an Untenable Situation for a Multinational – Winter 2009

Chevron held its annual stockholders meeting in San Ramon, Calif., today, and environmental activists again demanded that the company settle a lawsuit brought against it in Ecuador. But new documents show these demands, like most before them, to be serving not justice but instead the pecuniary interests of a small group of contingency-fee lawyers and their allies.

The U.S. trial lawyers suing Chevron over alleged environmental damage in Ecuador have worked from a sophisticated political and PR plan that has sought to use Congress, state governments and major media and even directly influence President Obama to force the oil company into a settlement.

Documents obtained by Chevron in court proceedings* reveal the true nature of the campaign against the company: It’s not about using the law to find the truth, but rather applying the maximum amount of political pressure to extort billions of dollars from the U.S. corporate target. From those billions, the American contingency-fee attorneys and their operatives would take a huge share for their own enrichment.

Effectively using the discovery process to delve deep into the scheme, Chevron has uncovered sufficient proof of wrongdoing to bring a federal racketeering suit against the key actors behind the shakedown lawsuit.

Evidence of fraud at the heart of the anti-Chevron campaign has led a U.S. federal judge to block any effort by the “Lago Agrio” plaintiffs and their U.S. lawyers to collect on an $18 billion judgment handed down by an Ecuadorian court against the San Ramon, California company.

Chevron is the target because the company acquired Texaco in 2001; Texaco had operated in Ecuador’s Amazon in a consortium with the state-owned oil company, Petroecuador, from the 1960s until 1992. Texaco remediated any environmental damage before it left Ecuador, while Petroecuador continued operations (and pollution).

The campaign against Chevron is multifaceted and organized. We have referred to it as the “combine,” an alliance of trial lawyers, politicians, activists and supportive media. But the lawyers themselves depict the campaign as an encirclement, orchestrating numerous actors to pressure the company toward a settlement.

Above right is a chart created in January 2009 by Andrew Woods, an attorney who works with the Amazon Defense Coalition, the PR front group for New York trial lawyer Steven Donziger, his team of contingency-fee attorneys and the Ecuadorian plaintiffs suing Chevron. The document’s title is “Chevron’s Dilemma: Creating an Untenable Situation for a Multinational – Winter 2009.” (Click for a larger picture.)

Chevron submitted the chart on April 26 to the U.S. District Court for the Southern District of New York, one of a batch of 29 new submissions to support the company’s motion to hold Donziger in contempt for failing to disclose tens of thousands of documents he was under court order to make available to Chevron.

Each of the circles represents one of pressure points the lawyers are bringing to bear as they attempt to create “an untenable situation” for Chevron.

There’s the circle for “Crude,” the documentary-style film that director Joe Berlinger originally claimed was an independent and balanced exploration of the effects of oil development on Amazonian Indians. But New York trial lawyer Steven Donziger originally sold him on the project and subsequently Berlinger has conceded he let the lawyers make key editorial decisions to avoid undermining their storyline that Chevron is evil. In the circle you can see how the legal team planned to use the film:

“Crude” Film

  • To be shown in local communities of the [Chevron] Board of Directors; Can generate media attention in home communities of BOD members.
  • To be shown on Capitol Hill in coordination with Rep. McGovern
  • Potential screening in White House.

Rep. McGovern is Jim McGovern (D-MA), one of the lawyers’ key allies on Capitol Hill. He spoke at a showing of the film in downtown Washington in October 2009, recalling a trip he had made to Ecuador — here’s a photo of the Congressman with Donziger in the jungle — and describing his efforts to bring President Obama into the anti-Chevron fight. “Ramp up the pressure!” McGovern urged the crowd at the Landmark E-Street Theatre. (See earlier Shopfloor posts on the movie.)

President Obama gets his own circle [below right], denoted, “Ongoing pressure of new administration publicly unfriendly to big oil companies.” Not just unfriendly to big oil companies, the President was a Harvard Law School classmate and former basketball playing buddy of Steven Donziger. How about that for an avenue of influence?

The trial lawyers knew they had an ally. As a Senator, Obama joined Sen. Patrick Leahy in writing a letter in 2006 to then-U.S. Trade Representative Rob Portman, highlighting the cause of the Amazonian Indians against Chevron. The Senators rejected any efforts to tie U.S. trade preferences for Ecuador to the country’s treatment of Chevron in the litigation, telling Portman: “While we are not prejudging the outcome of the case, we do believe the 30,000 indigenous residents of Ecuador deserve their day in court.”

That being the corrupted and politicized courts of Ecuador, which in February produced a $18 billion judgment against the company.

While the White House has stayed out of the issue publicly, the Obama Administration continued to support trade preferences for Ecuador, despite the continued assault on democratic institutions and U.S. interests by the leftist government of Rafael Correa. Read More

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.

Hydrofracturing Produces Jobs, Energy, Wealth, Parasitic Lawsuits

By | Briefly Legal, Economy, Energy | One Comment

Reporting on shale gas and hydrofracturing, the public radio program Marketplace Morning Report today captures the classic American phenomenon at work: Innovation creates opportunity, investment and wealth, and trial lawyers follow with bogus, hyped, shake-down lawsuits.

From “Fracking employs plenty of lawyers“:

Sarah Gardner: The U.S. is awash in natural gas. But the latest drilling technology that’s made the glut possible isn’t winning any popularity awards. “Fracking” involves a high pressure cocktail of water, chemicals and sand injected into shale rock — deep underground. Gas companies are drilling wells from Pennsylvania to Wyoming, and it doesn’t always go smoothly.

Richard Lippes: There have been explosions of homes, there’s a lot of people who can now actually light their water.

Not winning any popularity awards? Too bad this worthy report starts with such a clunker. Every job that hydofracturing creates wins a popularity award with the worker. Every stream of income from a producing well wins a popularity award with the property owner. Every hundred million dollars of tax revenue wins a popularity award with the taxpayers and citizens of a state.

As for the assertion from Lippes, the trial lawyer, that there are many who can now actually light their water? It’s false, a claim that’s supposed to inflame NIMBY sentiment against natural gas development and scare up clients. One scene of a fellow lighting water in his kitchen sink appeared in the agitprop film, “Gasland,” but the claims about fiery faucets have since been refuted and the entire movie debunked.

The Marketplace report also covers that activities of New York lawsuit engine Marc Bern, who specializes in environmental claims. Next up? The class-action lawsuit. Bern declares: “Wherever there is shale and there is natural gas trapped underneath, there will be litigation.” Isn’t that the sad truth. Just as where there is any creation of wealth in the U.S. economy, there will be trial lawyers. The more wealth, the more lawyers, which makes shale natural gas such a tempting target.

“Trial,” the monthly magazine of the American Association for Justice, hyped environmental litigation in its March issue, “Poisoned wells: dangers of natural gas drilling,” a piece authored by another plaintiffs’ attorney, William S. Friedlander. Environmental activists and litigators often team up in campaigns against energy, both exaggerating the risks to increase their potential income via membership dues or settlements, respectively.

Do we want a prosperous society, a growing economy, and a strong manufacturing base fueled by affordable natural gas, or do we want an elite class of trial lawyers and winners of the litigation lottery? Read More

One Trial Lawyer Who Should Not Be a Federal Judge

By | Briefly Legal | No Comments

Senate Majority Leader Harry Reid on Monday moved for a cloture vote on the nomination of John “Jack” McConnell to be a judge on the U.S. District Court for Rhode Island. McConnell has no judicial experience, but he did make millions the state tobacco lawsuits, transforming hundreds of thousands of dollars into political contributions.

McConnell was drove state’s egregious public nuisance suit over lead paint against paint manufacturers, in which then-Attorney General Sheldon Whitehouse farmed out the litigation to McConnell’s firm, Motley Rice, on a contingency basis. The Rhode Island Supreme Court unanimously rejected the suit in 2009.

A vote on cloture could happen as soon as Wednesday, but opposition from Senate Republicans and business is determined.

UPDATE (4:50 p.m.): Sen. John Cornyn (R-TX) releases a blistering “Dear Colleague” letter opposing cloture on McConnell’s nomination. Excerpt (via the Chamber’s Institute for Legal Reform): Read More

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.

More Questions about DOL’s ‘Bridge to Suing Employers’ Program

By | Briefly Legal, Labor Unions | No Comments

Last month we reported on the Obama Administration’s new “Bridge to Justice” program, in which Department of Labor farms out wage and hour complaints to contingency-fee attorneys recommended by the American Bar Association. Vice President Biden announced the plan last November, praising the program as an inventive, inexpensive new way to sue employers.

This mawkishly named scheme has drawn little subsequent attention, even though it promotes anti-business litigation and  violates the spirit of the Executive Order that bars federal agencies from hiring private attorneys on a contingency basis. This “Bridge to Justice” warrants serious scrutiny from Congress.

Committees could start by posing the questions raised in a blog post by Littller Mendelson attorney Tammy McCutchen, who served as administrator of the DOL’s Labor’s Wage and Hour Division from 2001 to 2004. From “Department of Labor to Provide Information and Documents from Wage-Hour Investigations to Employees and Plaintiffs’ Attorneys“:

  • Will the DOL require employees and their attorneys to file Freedom of Information Act requests before releasing information and documents from its investigation files?
  • What type of documents and information will the DOL be turning over to employees and their attorneys?
  • Will the employees’ attorneys be given the time records and payroll data that employers provided to the DOL during investigations (and which often include employee names, addresses, and Social Security numbers)?
  • Will the DOL provide employers with notice that it is turning over company information or documents?
  • Will employers be provided with the opportunity to object to release of confidential and proprietary company information?

A Department of Labor website and FAQ on the “Bridge to Justice” program addresses some of these questions, but from the perspective of the employee who wants to sue the employer. Read More