Victor Schwartz Archives - Shopfloor

Around the States, Civil Justice Reform to Improve Business Climate

By | Briefly Legal, Economy | No Comments

Gov. Scott Walker and the Wisconsin Legislature have led the way in 2011 in improving their state’s business climate by enacting a major civil justice reform package, but other states are aggressively following the same pro-jobs, pro-investment path. Sherman “Tiger” Joyce of the American Tort Reform Association reports promising developments in major states around the country in a piece in Metropolitan Corporate Counsel, Prospects for Tort Reform Strong in Many States.

Despite the shellacking its candidates took in last November’s elections, the nation’s always-formidable lawsuit industry remains optimistic about advancing its liability-expanding agenda here in Washington. What the new House majority may prevent plaintiffs bar lobbyists from achieving legislatively, they expect to achieve administratively through the regulatory agencies of the executive branch. Read More

Prepare to be Regulated Financially. By That, We Mean Sued

By | Briefly Legal, Regulations | 2 Comments

A major section of S. 3217, the Restoring American Financial Stability Act, establishes the Bureau of Consumer Financial Protection with the broad authority to enforce violations of whatever strikes its fancy. At the same time, the financial regulation bill empowers state attorneys general to embark on their own exciting adventures of enforcement.

The Section is Title X, entitled the Consumer Financial Protection Act of 2010. As the title’s Section 1031 lays out, the law gives the Bureau the authority to act against “a covered person or service provider” that commits “an unfair, deceptive, or abusive act or practice under Federal law in connection with any transaction with a consumer for a consumer financial product or service…”

So now “unfair” is going to be a crime? That’s a vague standard, as are all the terms used in the list of offenses. The Bureau is supposed to develop the rules that further define its authority, and one hopes those rules clarify and limit the offenses. But it wouldn’t surprise us that enough ambiguity remains to invite arbitrary enforcement based on subjective standards.

Even more worrisome is that the bill also authorizes the 50 states and their attorneys general to enforce the same provisions. From Section 1042, “Preservation of Enforcement Powers of States”:

1) ACTION BY STATE- The attorney general (or the equivalent thereof) of any State may bring a civil action in the name of such State, as parens patriae on behalf of natural persons residing in such State, in any district court of the United States in that State or in State court having jurisdiction over the defendant, to enforce provisions of this title or regulations issued thereunder and to secure remedies under provisions of this title or remedies otherwise provided under other law. A State regulator may bring a civil action or other appropriate proceeding to enforce the provisions of this title or regulations issued thereunder with respect to any entity that is State-chartered, incorporated, licensed, or otherwise authorized to do business under State law, and to secure remedies under provisions of this title or remedies otherwise provided under other provisions of law with respect to a State-chartered entity.

Alarmingly, there’s nothing in the legislation that would require the state AGs to stick to the same standards the Bureau of Consumer Financial Protection will promulgate. The state AGs will enjoy free rein to sue whomever they want in state court for a violation of this new consumer financial protection statute.

Some state attorneys general also engage in the dubious practice of hiring private law firms to carry out the state’s litigation. As Victor Schwartz, who chairs the Public Policy Group at Shook, Hardy & Bacon, explains it to us:

The primary motivation of these private attorneys is to maximize an award or settlement amount; motivations which may directly conflict with the public’s interest in ensuring that justice is achieved. This profit-seeking objective is particularly problematic when the private attorney works on a contingency basis.

It’s not hard to imagine: An ambitious attorney general deciding to file a civil suit on behalf of all the state’s citizens against some company that did something “unfair,” and then hand over the litigation to a private law firm interested in the biggest payout possible. It could be good politics, but it would be hell on the rule of law.

The Senate this afternoon again failed to invoke cloture on a motion to proceed on S. 3217, the financial regulation bill, by a vote of 57-41. The vote will undoubtedly elicit media coverage about the politics of the votes, the partisan positioning and who could be hurt for the 2010 elections. All worthy topics, but it would sure be nice if the delays were used by journalists and the public to look more closely at what’s in the bill. We shouldn’t have to wait until after the bill is passed to identify its invitations to litigation and political abuse.

Empowering Ambitious Attorneys General for a Reason

By | Briefly Legal, Regulations | No Comments

Victor Schwartz and Chris Appel of the law firm Shook,  Hardy & Bacon — with whom the NAM often works –have a new paper out via the Washington Legal Foundation detailing all the sub-rosa, quiet and sneaky places that members of Congress have written legislation to expand the opportunities for suing people. The method is to turn state attorneys general into ad hoc arms of enforcement for federal law.

The bill writing is done by the allies of the American Association for Justice, the trial lawyer lobby, who sees the legislative approach as supporting their cash-seeking litigation.

From “The Plaintiffs’ Bar’s Covert Effort To Expand State Attorney General Federal Enforcement Power:

What do the Consumer Product Safety Improvement Act, climate change legislation, the Data Accountability and Trust Act, the Federal Trade Commission Reauthorization Act, and the economic stimulus package have in common?  If you find yourself struggling for a satisfactory response, you are likely not alone.  The common thread is quietly buried in legislation with a far broader agenda in mind.  But embedded in each of these bills, and dozens of others, is a specific enforcement provision that allows a federal lawsuit to be initiated by a state’s attorney general.

On the surface, this expansion of a state executive branch’s enforcement authority may appear inconsequential, a mere technical fix to ensure proper enforcement.  The reality underlying such provisions, however, is not so immaterial, and the provision’s appearance in federal legislation not quite so random.  Rather, the insertion of state attorney general enforcement provisions in select federal legislation is part of a coordinated effort by the organized plaintiffs’ bar to expand the power of these state law enforcement officers.  The American Association for Justice (AAJ) (formerly the Association of Trial Lawyers of America) and other groups that follow their lead have spent millions of dollars lobbying to modify federal legislation, including those provisions relating to state attorney general enforcement.

The payoff from the perspective of the AAJ and other groups is, like the answer to the initial question posed in this Legal Backgrounder, not immediately apparent.  After all, it would seem that the state attorney general’s office is unrelated to the practices and influences of personal injury trial lawyers.  In fact, the ties run so deep that it has become a viable profit-seeking activity for the AAJ and others to work directly to improve the power and autonomy of the state attorney general so that their members may join in expansive state-sponsored litigation.

This is a very important backgrounder on a strategy used by a powerful special interest aligned with members of Congress working to make the United States more litigious and less competitive.

Indeed, the legislation/litigation connection is woefully underreported in the mainstream media. We have seen no newspaper or broadcast story that reports the American Association for Justice’s guest speakers at their San Francisco convention, which include Tim Kaine, Democratic National Committee chairman and Governor of Virginia; Sen. Bob Menendez (D-NJ), head of the Democratic Senate Campaign Committee; Speaker of the House Nancy Pelosi; Rep. Henry Waxman, chairman of the House Energy and Commerce Committee and key author of the Consumer Product Safety Improvement Act; and Sen. Barbara Boxer, the nemesis of BPA and global warming. We reported it at Point of Law and then here at Shopfloor.org. Jim Geraghty at The Campaign Spot has noted the appearance of the peripatetic Tim Kaine in San Francisco, but that’s it.

Congressional and political party leaders hanging out and raising money with trial lawyers in San Francisco. Now why isn’t that a big story?

Twisting Public Nuisance Laws

By | Briefly Legal | One Comment

This AP story notes state courts in New Jersey and Missouri rejected public nuisance lawsuits against paint manufacturers last year, while a jury in Milwaukee ruled in favor of NL Industries, one of the defendants in the Rhode Island lead paint lawsuit.

Ohio is the only other state that has sued. Jim Gravelle, a spokesman for that state’s attorney general’s office, said lawyers in the office were interested in what the Supreme Court said because the arguments in both cases are very similar. But he said it does not affect Ohio’s lawsuit because that suit is based on Ohio law.

“This in no way restricts Ohio’s right to hold lead paint companies liable for the extreme harm they have caused Ohio citizens under public nuisance or other causes of action,” he said.

In no way? Really? Ohio has a new attorney general these days, not the same one (Marc Dann) who filed the original lawsuit in 2007. Dann’s judgment proved less than stellar, generally. Perhaps the new AG , Nancy Rogers, can re-evaluate the state’s case in light of the Rhode Island ruling and save the Ohio a lot of money in fruitless litigation.

As AG Rogers considers that option, we commend this article in the Washburn Law Journal, vol. 45, no. 3 (Spring 2006), “The Law of Public Nuisance: Maintaining Rational Boundaries on a Rational Tort,” by Victor Schwartz and Phil Goldberg of Shook, Hardy & Bacon:

In the movie “Zelig,” Woody Allen’s character was chameleonlike. His personality changed to fit his surroundings or needs at the moment. Throughout history, there have been various attempts to turn the tort of public nuisance into a Zelig-like legal theory as amorphous as the word “nuisance” itself.1 Recently, some state attorneys general and personal injury lawyers have been trying to convert the tort of public nuisance into a cutting edge legal theory and are using it in the most important mass litigations of our time. They are attempting to move public nuisance theory far outside its traditional boundaries by using it to sue product manufacturers in an effort to circumvent the well-defined structure of products liability law. If history and sound public policies guide courts, these lawsuits will fail.  Unlike the character Zelig, public nuisance theory has a rich history and distinct personality.  

We note that Phil was the lead drafter of the amicus brief the NAM joined in the Rhode Island case. So congratulations, and good arguing!

UPDATE (6 p.m.): LegalNewsline has a good review of the paltry few remaining public nuisance suits against paint manufacturers, including the state of Ohio’s: “A state judge has already dismissed the City of Toledo’s. Moellenberg said the public nuisance theory can’t survive an examination in Ohio. ‘(T)he plaintiffs (in Toledo) are represented by many of the same attorneys that brought the Columbus lawsuit, and they didn’t even appeal,’ Moellenberg said.” Charles Moellenberg is the Pittsburgh attorney with Jones Day who represented Sherwin-Williams.