Monday, November 26, 2007

Tort reform organizations and their efforts

Take a look at Point of Law's listing of tort reform organizations. There are lot of organizations doing a lot of work in the field. What is their effectiveness? How could they be more effecive? What additional contribution could a little guy like me make?

Quantification of societal costs

If the civil liability system ill serves societal purposes, and it is grossly exploited by the lawyers to enrich themselves, how does one calculate the economic costs to the society in order to try to quantify the magnitude of the problem?

This is an important question and probably not one that is easy to answer. In some sense, I am asking about "excess" or "unjustified" costs, and it would take an economist or two to come up with an appropriate defintion for "excess" or "unjustified," and who knows what kind of data assembly and analysis is needed to make estimates using the definitions in question.

For the time being, I will be free wheeling and speculative and say $250 billion a year.

A next question is, once there is some quantification, how much of a collective motivation is there for the body politic to strongly desire change? If $250 billion a year is a reasonable estimate, I think that amount makes determined efforts worthwhile.

Sunday, November 25, 2007

Starting this blog

I think I am getting close to a break through with the work I have done in 2007 with academics and professionals who work in the business ethics domain. F. Ethics organizations After I completed that work that is now indicated in this blog, I have, however, been at a loss as to the next step to take. I decided to start this blog as a next step.

Responses to email sending Judge Pauley letter

From an ethics officer who had previously written me
Hi, Mr. Shattuck. I read your very lively cover note, but fear that I may not be able to conduct a diligent reading of your letter to the judge for a few weeks. I hope you find a satisfying forum for your views. Maybe it would be even more effective if you could find a positive spin on this situation. Rather than coming across as saying that the entire legal system law works against ethics, what could we do so that the law and ethics would work with each other instead of against each other? I'm sure you at least imply a solution to the problem, but perhaps if you put the solution up front, there could be something to be gained. I realize that the problem with putting the solution first is that you haven't familiarized people with the problem. But I think it might be worth considering whether you should give people a taste of the positive up front: "Law and ethics would work together better if BLANK." Then go into why you're interested in this, stating the problem, and then come back to the positive solution.

At least in your cover letter, you adopted a tone that I think works best when you are preaching to the choir, creating enthusiasm in people who are already convinced. For the unconvinced, it seems to this one humble reader that a gentler approach might be more persuasive.

From a professor


That is an interesting and thought-provoking email. I am on my way to speak at the Ethics and Compliance Officer Association. Maybe, when I get back, we can touch base--

I replied
Thank you very much, Professor ______. I would be very interested in having further communication with you. I am sorry I am not able to be at the Los Angeles conference myself.

My most recent pitch sent my Judge Pauley letter

My last pitch to date at the academics and other professionals in the business ethics domain was this:

Subj: Case study of law undermining business ethics

Dear ________,

As you know from prior emails, I contend that certain aspects of the law undermine the inculcation and institutionalized practice of business ethics in corporations. I have detailed my argumentation in articles I am trying to publish and present in other ways, for consideration by ethics organizations, ethics officers, consultants and academics.

Set forth below is the text of a letter, dated September 10, 2007, I have sent to The Honorable William H. Pauley, III, United States district court judge for the Southern District of New York.

I think the subject matter of my letter presents an excellent case study of a situation in which the law has proceeded in a fashion that undermines the goals of ethicists and ethics officers to promulgate ethical behavior by corporations and employees.

This consequence happens from a combination things. These include a craven failure by the law to grapple with and make determinations for society's benefit of what is and is not wrongful or unethical, and a mindless willingness and propensity to penalize masses of innocent individuals and at the same time to let the few individuals who are actually culpable to go scot free and laugh their way to the bank. In this particular case, the ethical mockeries perpetrated by the legal system and its conservators are deliciously encapsulated in the way those outside the legal system (the defendants) are hauled into court for allegedly skimming millions and millions of dollars in little amounts from little people, and the way the insider judge then turns around and puts his stamp of approval on a skimming off by his insider lawyer cohorts of comparable millions and millions of dollars in little amounts from the very same little people.

I hope your consideration of this case study will influence you to give further consideration to the contentions I have been making that the law undermines the inculcation and institutionalized practice of business ethics in corporations. If you are at the ECOA conference in Los Angeles, I hope you will talk about this with others there.

Thank you.

Robert Shattuck

[text of letter to Judge Pauley]

September 10, 2007 letter to Judge Pauley

Saturday, November 24, 2007

Responses I got

Although I felt frustrated and stymied in the end, my interchanges with professionals working in the business ethics field were more respectable than what I encountered with the law professors. Below is a sampling of the former:

A corporate ethics officer to me:
Dear Mr. Shattuck - _______referred your email to me as I am _____'s North America Compliance Officer. We appreciate your contact. _____ has adopted a comprehensive Code of Conduct, the link to which I have attached. One of the central principles in our Code is that employees have a responsibility to ask questions and raise concerns ("Speak Up") if they become aware of conduct that does not seem right to them. Once and issue is raised, the Company investigates it to takes appropriate action, depending on the outcome of the investigation. While your article raises a number of interesting questions, the subject of the role of plaintiffs lawyers in our society is beyond the role of our Compliance & Integrity program at _______. Thank you.

Me back to him
Thank you for your reply, Mr. ______. I will look at the link you have provided. I know I am probably tilting at windmills, but I think there is a significant impediment out there to your achieving your business ethics goals. The impediment is very possibly something you can absolutely do nothing about. Ethics officers such as yourself are in the best position to know. I am striving mightily to get them to speak up. I have revised my article to do this in a more pointed fashion. I can only wish you will pass it on to fellow ethics officers and others, or give me names and I will send it to them.

Best wishes,

From an ethics magazine to me
We should definitely talk. We at ______ ran a feature story on "has compliance killed ethics." The law vs ethics debate is endless in its forms & length of the debate. I'd be happy to discuss this. But I think a more important question is why compliance & ethics officers are generally in such weak positions, & so unable to prevent serious executive crime. Regards, ___

From an ethics center to me
Hi Robert,
Thanks for the inquiry. Are you in a doctoral program that you're undertaking this research? I am not an ethics person (nor, actually, a staff member at the Center, though I do have an affiliation with them) and the Center doesn't really deal with ethics officers per se. If you have some university standing, you may want to contact teh Ethics and Compliance Officers Association, which is the professional organization for ethics officers, or the Ethics Resource Center in Washington, which deals with ethics officers. Their functions are pretty specific and they are typically not the same people as the corporate responsibility officers (or community relations, or corporate social responsibility, or corporate citzienship, by whatever name they go by).

But if you're sending them the document below, you are setting up a bias for their responses (a survey should be neutral so you get at least ostensibly objective answers, or at least not pre-biased)--and also not establishing the basis of your inquiry. Who is sponsoring this work? Why should they respond? Where is the survey instrument?

There may have been some work done on that question, but I don't follow the ethics literature all that closely. Two good sources would be Business Ethics Quarterly and the Journal of Business Ethics. If there's work like your question, those are likely outlets, as might be Business & Society (and Business and Society Review).

Best of luck, with your work,

From an academic to me

You’ve raised an interesting question. I think the reason this is tough is that the answer “depends.” And there are too many depends. Here is one: what do we mean by ethics? I like to define it as doing good. This is very different from the way most people implicitly define it: not doing bad. The more laws you have the more you need to focus on compliance (not doing bad) leaving less time for doing good. It also depends on the law. You will see in the current issue of Ethix (on the web at where I interviewed _______, she says SOX is a good thing, forcing corporate officers to take the responsibility they should have taken all along. Others have said SOX is overly restrictive—and you can find lots of examples of this. In the next issue of Ethix, Rob Pace from Goldman Sachs implies that many companies today are not going public because of the constraints of SOX. So taking one law, it would appear that it has both effects. So it is not clear to me that the question is clean. I am on my way back to the Central African Republic. There the lack of the rule of law is a major deterrent to doing business—you can’t enforce a contract. So some law is necessary to do business. Too much law complicates business and causes people to just try to meet the letter of the law. Every law has a loophole, and those looking to exploit it (e.g., Enron) will be able to do so. Susan Collins (US Senator from Maine) talks about this in an Ethix interview in the archives.

At least this is the way I see it. I hope it was helpful.

From a business professor to me
Dear Dr. Shattuck,

I would recommend three sources to read before going further:

1) Prof. Gary Weaver at the University of Delaware has published some work on this topic. Libraries that use the search engine Proquest or database ABI/Inform would enable you to find this quickly. His work, like the others below, includes citations to other existing studies.

2) They might also have the book "The Legalistic Organization" by Robert Bies and others.

3) There is research in law journals about the effects of various laws and whether these effects matched lawmakers' intentions. To find these, you would probably need to go to a university law school's library and ask the librarian for assistance.

I hope this is helpful to you!

From an assistant professor of management to me

I think this sounds very worthwhile. A lot of discussion has been happening about how S-OX encourages a compliance mentality rather than an ethics mentality. But, despite your kind words, I'm merely friends with a lot of business ethicists, I'm don't really do research in BE, so I'm not really up to speed on what topics have been researched in the area. Given publishing lag times and the recency of S-OX I wouldn't be a bit surprised if you can't find much on this. It would certainly be worth investigating post-S-OX no matter what previous work has been done. However, I'm not an expert in BE, my main work in the fields of CSR and Corporate Social Performance. So, I can't give a "for certain" answer on the state of extant work. You might ask Robert Phillips at the University of Richmond for some further advice. Also, I'm leaving SCU this summer so I can't help you with any of your access problems.

Have you tried contacted the Ethics Officers Association (or whatever the name of their professional group is)? They might be able to help facilitate the distribution of your survey. That said, I have no idea if they help with stuff like this.

Best of luck,

From a corporate lawyer to me
There are several issues raised by your questionnaire;
1. I get several questionnaire's a week and avoid most of them. The recipients of your questionnaire, probably just don't have the time. A half hour here, a half hour there. It really adds up for buy people who don't have enough time to do their work.
2. Anyone faced with these things are worried about confidentiality. You don't even suggest the answers will be confidential let alone assure them of that. No one reading your questionnaire has the slightest idea who you are, what you are going to do with their answers, etc.
3. It takes too long to get into your questionnaire and it is too open ended. People are more like to answer short definite questions.
4. My only suggestion is you get some know, trusted entity to run a questionnaire for you, but they probably wouldn't take to your long philosophical wind up. Good luck.

From a professor
Dear Robert:
You have an interesting question and a worthwhile one.

Another person that is working on a similar theme is John Hasnas from Georgetown University who recently wrote the book: "Trapped: When Acting Ethically Is Against the Law By John Hasnas".

If the e-mail you sent me is more or less like the e-mails that you have been sending to corporate ethics officers, I am not surprised that you have gotten a poor response. There is just too much text that takes too long to read. If I were you I would cut the text back to nothing longer than a quarter of a page. Better yet, I would not send out any text, but would instead send out a series of quick, short questions that I would like the ethics officers to respond to. It should take no more than one or two minutes to fill out your questionaire. Anything more than that and no one is going to want to respond. After all, each officer has to consider whether to spend the time responding to your question, or instead spend the time doing what his employer is paying him to do, or, perhaps, interacting with family, friends, etc. Would you, if you had the choice, spend perhaps half an hour reading a stranger's e-mail, or would you rather spend the time reading and responding to a friend's e-mail?

From a lawyer
Mr. Shatt:
Your research project may be an appropriate subject of inquiry, though it appears you have prejudged the issue before beginning. I am afraid that I cannot give you an introduction to a publication or or organization that might be interested in your work. Regards

From a professor of business ethics
Mr. Shattuck:

I have reviewed your email message and can only say that I am not surprised at your results thus far. I think the nature and complexity of your inquiry (and your request that those being surveyed read your accompanying essay) makes the task too onerous for busy people. You seem to be asking those to whom you send this email to respond to your point of view – not to the simple question with which you start off the communication.

You might be better advised to separate your survey aspirations from your essay aspirations. The latter can take the form of an article in an appropriate periodical. The former may require a more economical questionnaire with clarity about how the information will be used in pursuit of what ends (academic, other). It is still not an easy thing to obtain statistically reliable responses from the audience you seem to have in mind. These people are being polled a lot, I would think, and are understandably selective in their choices about answering such questions.

Best wishes,

From a professor
What you are doing isn't entirely clear, which may be why you are meeting with resistance. What you call a survey is really a request to comment on an argument that you are making that is highly critical of the corporations for which they work. It would take many hours to respond in writing, and you have given no explanation of what you are proposing to do with their responses. Is it for your own edification? Are you writing a book? Are you an investigative journalist who will write the great expose of corporate hypocrisy? Are you a blogger who will put their responses on the web with snide commentary on the side? Therefore, you have given no good reason why someone should put serious time into responding to you. So you are asking some association for assistance in, to put it unkindly, spamming its membership with a very time-consuming request that might be used to embarrass their employers. Posed that way, are you surprised that you are not getting a lot of help?

You have something to say. You should say it in an op-ed piece. If you are genuinely unsure about your convictions, think harder about your argument, and check your ideas with some insiders. Read the academic literature on the subject. Figure out how to have a few conversations with some ethics officers. But don't expect the S&P 500's 500 ethics officers to respond to an email.

All the best, and good luck.

From an editor of a business ethics journal
Dear Mr. Shattuck,

Thanks for your query. I’ve two general comments about the project:

My own experience shows that it often is very hard to get corporate officers to respond to ethics surveys, especially if they’ve little sense of the source of the survey (e.g. your survey vs. one authorized by, say, ECOA). There are a variety of reasons for this, but in part it involves the potential legal exposure for the company with regard to anything they might say. My book with Linda Trevino (Managing ethics in business organizations, Stanford University Press), has a few pages (or maybe paragraphs—I don’t remember exactly without looking) of discussion on this kind of data collection issue. If you’ve not done survey-based research before, I strongly encourage you to consider teaming up with another scholar who has a track record with it, as survey research on ethics in organizations raises a variety of extra issues.
The topic is a good one, I think, and of potential wide interest, though it’s not one I’ve specifically addressed with any care myself. John Hasnas at Georgetown U. recently published a book on this kind of issue, though, looking at how federal sentencing policy, RICO, etc. force managers into actions of questionable ethical quality. See his “Trapped: When acting ethically is against the law.” Hasnas approaches the issue from a legal and philosophical perspective, rather than with survey data, but his overall framework and analysis might give you some good insights. Also, by using a citation tracking source, you can see who else has citied his work, and thus get leads for other research on the topic. Hasnas probably has published some articles on the topic as well; there is one forthcoming in Business Ethics Quarterly.

I hope this is helpful to you. It’s a potentially important topic, so I wish you well with it.

I replied
Thank you very much for replying to me, Professor ________.

At this juncture, I appreciate that I am proceeding in a very amateurish fashion concerning my research project. I would like to give you a little background explanation for this.

I am a retired lawyer who is very much anti-plaintiffs lawyers. During the 2004 presidential campaign and at other times, I have done a lot of emailing in a more direct fashion on that issue, but with very little effect or response.

More recently, I gained awareness of the substantial domain of business ethics and of corporate ethics officers and academics who worked in that domain, and I perceived a wedge there for the propagation of my anti-plaintiffs' lawyers views. I thought that those ethics officers and academics would be open to consideration, discussion and debate as to whether the travesty in our legal system that has been wrought by the plaintiffs' lawyers and their aiders and abetters undermines achieving the goals that those ethics officers and academics are trying to achieve.

I spent a fair amount of time and effort trying to present my ideas in article form to ethics organizations, centers and academics, but to no avail. Having made no headway there, I decided I would try to contact ethics officers directly and converted my article to a survey email. Then, in the course of trying to disseminate my survey email to ethics officers (which, on my own, I am very handicapped in trying to do), I proceeded to go back to ethics organizations and academics, reporting the "research" I was undertaking, and to see whether that could get their interest when I could not get it before.

I believe that publication in article form in an ethics publication and/or the making of a presentation at an ethics conference should precede any serious research project. I am hoping that will still come about.

I am pleased that you think my topic is a good one and of potential wide interest.

You are the second person to mention Professor Hasnas. I need to check my records to see whether I have already tried to contact him, and, if I have not, I will be sure to do so.

Again, thank you for taking the time to offer your comments.


From an academic
The part of your argument that strikes me as the most interesting is your assertion that innocent employees are harmed by lawsuits against corporations embroiled in scandal and that civil suits tend to be directed against companies rather than individual perpetrators simply because that’s where the money is. If you focus on this aspect, you might be able to get a newspaper to publish this as an Op-ed. The piece would need to be shortened to around 650-750 words and it would be helpful to frame it around the anniversary of an actual case where employees were harmed in this way (perhaps your Merck example) in order to provide a news hook for the editorial staff. Targeting the local paper where the particular case occurred is probably your best bet.

If you prefer to keep the entire piece intact you might research online publications, particularly blogs, to see if any are a good fit. If not, you can always publish this yourself by creating a Web site or a blog of your own.

I hope this is helpful.

From a corporate ethics officer
Mr. Shattuck, thank you very much for sending us this very painstakingly
and diligently written article.

I think perhaps what might be keeping people from asking you to make a
presentation is that you haven't shared with us what might be called
your credentials. When organizations get these seminars together, which
can be quite expensive, they like to advertise speakers who are making
their living in business conduct, as ethics officers, professors,
consultants, attorneys, etc.

If I am reading your article correctly, I believe you are saying that
the law should not punish innocent people along with the guilty in a
corporation. It seems that the unspoken reference here would be to Enron
and its accounting firm. But it wasn't really the law that punished all
those people. The fraudsters at Enron made it go broke, and that's what
punished the innocent people there. Companies did not want to do
business with the tainted accounting firm, and that, more than anything,
is what put it out of business. You mention Vioxx and Merck in this
regard, pointing out that it was not fair to the innocent shareholders
that their stock fell thirty percent. But the law did not make the stock
fall. Some innocent Investors were disgusted or worried and sold their
shares; that's what drove them down for the other innocent investors who
held onto them. And, although the article doesn't explicitly mention it,
"the law" has put scores of executives behind bars in the last few years
for various forms of skullduggery.

You should probably also consider seeing if tort reform publications are
interested in this article. I am no expert on tort reform, but I think
your points about it would probably reach a wider audience if you first
acknowledged that the American justice system is predicated on having a
lawyer to argue each opposing position in a case, and both lawyers
should be compensated for their services.

Mr. Shattuck, I will take the liberty of answering your questions as to
whether I see things as you do. I do see the points you're making. But
things look a little different to me, standing in my own shoes. Perhaps
I am sheltered, working for a company that really does make integrity,
and earning the trust of our stakeholders, top priority. We have spent a
lot of time on various types of communication, training, and having
quite a number of people involved in justly looking into concerns that
employees raise regarding whether a particular thing is the right thing
to do. We are making integrity a conscious part of our way of life at
work and we are not alone. The papers are filled with bad news; we won't
make headlines for this. However, I'm not trying to say that everything
is rosy, or that you shouldn't be raising these issues and expounding
your views. Exchanging views is salutary. Perhaps you will figure out
how to make the legal system work the way it should.

I wish you the best of luck in your communications efforts. I wonder if
it would help if you told more of your own personal story along with
your "common sense" perspective. What sparked your interest in business
conduct and tort reform? That human interest touch might help you in
your search for publication.

From another corporate ethics officer
I apologize for the delay in responding to this message. I've been out of town. I've now read your article and congratulate you for a very thoughtful and well-written piece. The tension between legal compliance and ethics is an interesting one and you eloquently express many of the key issues. Unfortunately, I am at a loss as to where you can go to get this piece published. I do not know any publishers and am not closely aligned with any publications. I'm sorry I can't be more help to you.

From a third ethics officer

First let me apologize for taking so long to acknowledge receipt of your note . In my position as Manager of Business Integrity for ________ Corporation, I receive several requests, some similar to yours.

Although I have read your email in its entirety, I respectfully prefer to abstain from commenting on the efficacy of your article, as we do not feel _______ is necessarily qualified to judge the merits of its content. Also, _______'s Ethics and Business Integrity policies are clearly outlined on our Web site if you would like to review them in the context of your article.

With that said, I wish you well in your endeavors.

I noted a Wall Street Journal article about the above corporation and I wrote back:

I noticed the below Wall Street Journal article reporting on ______'s settlement with the CFTC concerning alleged price manipulation. The article does not report any sanctions against ______ employees.

As you may remember, my article argues that the law undermines business ethics insofar as it does not penalize individuals who perpetrate corporate wrongdoing and instead penalizes innocent individuals, such as stockholders, other company employees and customers of a corporation who are penalized when the corporation is penalized. Insofar as employees see that happening, the efforts of corporate ethics officers such as yourself to inculcate the institutionalized practice of ethical behavior by employees is undermined, as my article argues.

As my article states, you are in a better position than I to evaluate the validity of my article's contentions, and I regret that you feel you must abstain from commenting.

Again, however, I thank you for taking the time to read my article.

From a consultant
I think you have something interesting to say. Why don’t you try Ethisphere magazine? They are “out there” with original stuff, not just regurgitating the stuff every organizational ethics professional has read a thousand times before. You’re nothing if not original. I think your blurb about your position would help editors want to take a closer look. If you can’t find the name/contact info for the Ethisphere magazine editor, let me know and I’ll try to dig it out.

From an academic
Dear Mr. Shattuck,

I’m afraid I’m unable to offer any special access to the ECOA or other organisations in this area. I’ve read your article and while suggestive, if I may offer a couple of comments, I believe it would benefit from rigorous editing as it is very dense; clearer distinctions need to be made about what you are suggesting re the connection between plantiff lawyer compensation and the bottom line impact on business ethics programs: this is not at all clear. Companies regard lawsuits as a cost of doing business and I cannot from the article alone draw conclusions about how business is impeded thereby. The Vioxx case is an interesting one, but what’s the connection? To be blunt, arguments from a commonsense perspective have no weight as there should be a way to document behaviours and outcomes, so a review some of the relevant literature on this subject might serve to strengthen the article. Finally, and my suggestions are by no means exhaustive, you might want to consider establishing your qualifications and experience at the outset of the article—are you a business executive or lawyer, for example—which would lend weight to your observations. I’m afraid these are simply observations based on my very limited knowledge of the subject matter, and you should take them accordingly. I wish you all the best in moving your article to print, but can offer no further assistance.

Kind regards,

Part of my response to above academic
My article has gone through much editing and revision, and I am sorry if there remains a lack of clarity.

If the law undermines business ethics in the manner my article describes, the link with plaintiffs' lawyers' compensation is that such compensation is, in my opinion, the main driving force in causing the law to have the undesirable aspects that contribute to the adverse consequence for business ethics. When there is an adverse effect on something, it is usually helpful to understand the root cause, as will better inform an overall evaluation of the situation.

When you say lawsuits are a cost of doing business, that only begins the inquiry of whether they are reasonable costs from a societal point of view. If the costs are reasonable, then any adverse ramifications for business ethics may simply be required to be tolerated. Whether the costs and other aspects of our civil liability system are reasonable and justifiable is not something normally within the purview of ethics officers and academics, but it certainly becomes a consideration in evaluating the thrust of my article.

The Vioxx case is an excellent example for asking the question of what would best serve societal interests in a balanced way with respect to such situations (including the desirability of defining and promoting ethical business behavior by employees and punishing them for unethical behavior). My article is highly suggestive of some of my views. Further, I think any intelligent and reasonably informed layperson is capable of having worthwhile opinion on this question. Do you have a view on the Vioxx case?

I agree that more is required than argumentation based on common knowledge and experience about human nature and a common sense analysis of what is needed for society to obtain ethical behavior. My article says that and it expressly solicits input from ethics officers and academics in the field. ("You have front line involvement with employees, the environment in which they work, elaborate corporate codes of business ethics, and employees' thinking, psychology, decision making process and resultant actions. Accordingly, I want to ask you, is my answer that is based on common knowledge and common sense analysis borne out by what you see up close that happens?") I am more than willing to spend time documenting behaviors and outcomes, but to do so I first need information at the source. I will continue plugging away trying to get it.

Again, thank you for your thoughtful response.

I emailed with various prefatory material

In some cases I emailed Does the Law Undermine Business Ethics? without any prefatory explanation.

In other cases, I cast my emailing of Does the Law Undermine Business Ethics? in the form of a survey project I was attempting and prefaced it with:

Dear Sir or Madam,

I am surveying corporate ethics officers on the question posed below of whether the law undermines business ethics, such survey being in the form of an email to such officers as set out below.

Would the ______ Center for the Study of Media Ethics & Law be in a position to sponsor and/or publish my research?

Thank you.


I also used:

Dear Professor _____________,

I am writing you this email because of your Scholar or Associate status at the __________ Center for Applied Ethics and your other standing in the field of ethics.

I am surveying corporate ethics officers on the question posed below of whether the law undermines business ethics, my survey being in the form of the email set out below.

This project is slow going for me. Among other things, I don't have ready access to email addresses for corporate ethics officers, and my email is going out in a very inefficient fashion. Also, I am having difficulty eliciting any interest or support of an organization or publication having a presence in the business ethics field, such as the Ethics and Compliance Officers Association.

I am trying to find if other persons have investigated or written about my research question of whether the law undermines business ethics. As yet I have not found anything.

I don't know if the reason for the foregoing situation is because the question I pose has such an obvious "yes" answer that no one is bothered to spend any time delving into it, or further whether such a yes answer simply reveals an elephant sitting in the middle of the room that no one wants to talk about.

Please tell me, if you would take the time: Is my research project a worthwhile area for inquiry? If you think it is worthwhile, could you give me a reference or introduction to an organization or publication that I might work with in pursuing my project? Do you have any other suggestions that might help me out?

Thank you.


Does the Civil Liability System Undermine Business Ethics?

A question for ethics officers, consultants and academics:

Does the Civil Liability System Undermine Business Ethics?

By Robert Shattuck

I address this question to corporate ethics officers and consultants and academics who work at developing systems and programs for the promulgation, inculcation and institutionalized practice of business ethics.

Do you think the law is an impediment to achieving your business ethics objectives?

I believe it is.

You, however, are better situated and equipped to investigate and answer the question than I.

I base my answer on common knowledge about human nature and common sense analysis of what is needed for society to be able to regulate behavior to be ethical. You can do me better. You who are ethics officers have front line involvement with employees, the environment in which employees work, and their thinking, psychology, decision making process and resultant actions in that environment. You who are academics may have done psychological studies or be aware of studies that tend to support or not support my answer.

Is my answer that is based on common knowledge and common sense analysis borne out by what you are able to discern close up and/or is it supported by psychological studies?

I very much hope you will take the time to consider this article and tell me what you think. I believe that the civil liability system is in need of further reform, and if business ethicists have views that the system undermines business ethics, I would want to use those views as an additional basis for advocating further reform in the civil liability system.

Human nature; how society tries to regulate behavior

The starting place for my inquiry is the common knowledge that people have about human nature and why and how society tries to regulate behavior that grows out of human nature. Let me lay out what I think we commonly know.

Probably growing out of the self-preservation instinct, self-seeking motivations in the human species are powerful and predominant; altruism is weak.

A fundament of societal organization is subservience of an individual’s self-seeking motivation to a greater common good. This is based on an analysis that promotion of the well being of a group can contribute to the well being of the individuals in the group.

Society has various mechanisms to mitigate self-seeking behavior and to alter it to promote a greater common good. These include religion; the promulgation of codes of conduct; bestowal of honors and esteem on exemplary individuals; formal education programs that teach ethics; and systems of shame and legal punishments for individuals who violate society’s strictures.

The attempt to regulate behavior occurs at the individual level and within organizational structures, such as corporations.

An individual’s powerful self-seeking motivations are for money, power, material possessions, social standing, sex, honor, esteem, aesthetic refinements, recreational pleasures and ego gratification. The first listed motivator of money can contribute significantly to the procuring of the other desired objects. Much of the motivation at a larger organizational level, such as a corporation, is a collective expression of the constituent individuals’ motivations to obtain money and other objects of their desires.

Lying, cheating, stealing, defrauding, misrepresentation, concealment, breach of fiduciary obligations, bribery, blackmail, harassment, and lack of proper regard for the interests of third parties, have great potential for individuals and larger units such as corporations to obtain money. This is done, however, at the expense of other individuals and other units in the society.

The role of human intelligence is a very significant factor. Equipped with that intelligence, the human species is excellently endowed to conceive and implement dishonest activities and to exploit knowledge and information that others are lacking.

The extent and pervasiveness of dishonest, self-seeking activities by human beings is difficult to gauge.

Dishonest activities that are carried out successfully are concealed, and any researcher trying to estimate the quantum of dishonest behavior by human beings is ignorant of what has been concealed.

Dishonest activities on a large scale that are discovered get reported in the news. There is an unending procession of publicity about wrongdoing in the commercial world. It seems extensive and exhibits interesting combinations of novelty and repetition, and sometimes surprising audacity and scope. In the “boom and bust” cycle of the past decade, we have been inundated during the “aftermath” past four years with exposures of many instances of large scale wrongdoing that was perpetrated during the “boom” part of the cycle.

In the daily news about commercial wrongdoing, gauging the aggregate amount is complicated by the presence of large swaths of gray areas of right and wrong and varying degrees of culpability of involved individuals. Also, to repeat, one never knows about wrongdoing that has taken place and that is not found out.

Dishonesty that occurs on a smaller scale is not newsworthy. Sometimes many small-scale activities of a similar, wrongful nature get reported in the aggregate. Most of us are aware of significant amounts of fraud that occur related to car insurance and car repairs, Medicare and Medicaid claims, identity theft and credit cards, cheating on taxes, overbilling on government contracts, and bribing of government officials to obtain commercial contracts. From lots of everyday experience, people are distrustful in hundreds of commercial transactions they enter into over their lifetime. All in all, it is fair to say that the total quantum of small-scale dishonesty is unknowable but that there is a lot of it that goes on.

Business ethics and the role of the law

Business ethics is supposed to counter and lessen the perpetration of dishonest activity in the commercial world.

As referred to above, business ethics, along with other forms of moral instruction imparted through religion and other institutions, are taught in society, and society has practices for bestowing honors and awards on exemplary individuals.

It is submitted, however, that, without legal punishments for individuals who violate society’s strictures, society would be feckless in its efforts to lessen dishonest commercial activities, and that society needs to be rigorous and exacting in designing and implementing its regime of legal punishments for this purpose. In this regard, it would be a troublesome sign if society was fooled into thinking that its system was functioning effectively.

What is needed in the law for it to be rigorous and exacting?

One component is close attention to whether something is done deliberately and intentionally, or whether it is done negligently, or whether it is without fault. If a party who is without fault is punished and forced to pay a cost, that can undermine the regime of legal punishments. First, it can deflect attention from making sure that intentional wrongdoers are punished (i.e., the potential for societal self-deception to the effect, well, costs were paid so punishment must have been meted out so the law must have been doing its job). Further it offers opportunity for guilty parties actively to avoid punishment by accomplishing a shift to innocent parties. Would be wrongdoers will be encouraged by the idea that the responsibility can be shifted away from them if they decide to go forward with their wrongdoing and it is found out. When innocent parties are punished while guilty ones escape responsibility, a general disrespect for the law is engendered, and that disrespect is detrimental of the law performing a purpose of fostering ethical business conduct.

As to intentional wrongdoing versus negligent wrongdoing, a regime of legal punishments might rightfully be less strict with negligent wrongdoing. This is on the basis that people, as regards intentional wrongdoing, can and should be required in an absolute way to choose consciously not do the wrong, whereas everyone is negligent to some degree from time to time and “zero tolerance” is not a realistic objective. In the case of negligence, the law can and should look closely where, for example, the negligence is slight and other intentional or other more negligent actions (including of the plaintiff) caused a loss, and the law might also take into account that available resources for investigating and punishing wrongdoing are limited, and intentional wrongdoing should have priority.

Further, the law needs to be a definite as possible in advance about what is wrongful and what is not wrongful. Unless a person is able to know what is wrongful and what is not wrongful, there the person is disabled from being able to make a decision not to do something that is wrongful, and the law will fail as a tool for fostering ethical behavior.

Differentiating among intentional wrongdoers, negligent wrongdoers, and parties who are without fault should be in the foreground in dealing with entities that represent conglomerations of individuals, such as corporations. Any corporate act of wrongdoing is designed and implemented by particular individuals in the corporation, but lots of other individuals may be wholly without fault and costs and punishments imposed on the corporation will be ultimately borne by these latter individuals. The discussion above about the importance of punishing guilty individuals, and of not punishing innocent individuals while guilty ones escape, applies in the context of a corporation, and the legal system needs to strive to impose costs and punishments on individuals who design and implement a corporate wrongdoing and to try to be sparring in imposing them on innocent individuals.

The environment in which corporate wrongdoing happens

A corporation’s main objective is to operate as profitably as possible. The greater the profits, the more shareholders and employees can be rewarded monetarily. There are pressures on a daily basis for employees to advance the corporation’s business. Time frames are relatively short, typically for the corporation to achieve the current year’s revenue and profit goals. Bonuses for the contributions that employees make are paid on an annual basis. The employees’ jobs are their means of livelihood and of providing for their families. Plugging away every day to keep the business running profitably and to give security for this year’s source of income is a top priority for employees.

A corporate wrongdoing will be something intended to benefit the corporation financially by increasing revenues, reducing expenses or avoiding or lessening losses in the business. The corporate acts that comprise the wrongdoing are conceived of, authorized by, and carried out by officers and employees of the corporation, frequently a small fraction of all the corporation’s officers and employees. Of the perpetrating group, some have fuller knowledge of the wrongful activity and others will have very limited awareness. Many employees will be completely ignorant of the wrongful actions of the corporation, as well shareholders and customers being ignorant that wrongdoing is going on.

The officers and employees who know what is going on participate as part of their job to do things to benefit the corporation’s business. Their participation evidences their value to the corporation, and their assumption is that they will be rewarded for that in the compensation they receive from the corporation.

If an officer or an employee who is part of the group that perpetrates the corporate wrongdoing thinks the activity is questionable or that it is a clear wrongdoing that has risks of being discovered, and if the officer or employee has qualms about what is being done, there is significant internalized pressure nonetheless to go along with what the corporation is doing and to not try to block the activity. Raising objections can be viewed negatively by one’s peers in the corporation or by higher ups and result in adverse impact on the employee’s status and compensation in the corporation. The actions in question may be in a gray area and not clearly wrong. A tipping factor for the employee to go along can be a perception that, if something untoward happens as a result, only the corporation as a whole will bear the brunt and the employee will escape any personal punishment for his role in the corporate wrongdoing.

In short, all corporations are in the business of earning profits, by going along the employee is just doing his job and what others want him to do, the requested action is possibly in a gray area anyway, his employer will not punish him for what he did, and any other corporation that might learn of his willingness to go along with what others wanted to him to do will not hold that against him in getting another job.

How the civil liability system undermines business ethics

Let us focus on how the civil liability system goes awry in attacking corporate wrongdoing. Not all of it has gone awry but a very significant component of it does. This is a component that has, by and large, been wrought by lawyers, and in particular by plaintiff’s lawyers. Let us consider them, their motivations that drive what they do, and what they have wrought in the law.

Plaintiffs’ lawyers are part of the human species and their most powerful motivations are the same self-seeking motivations that are the most powerful for the rest of us. For plaintiffs’ lawyers, the big money is in suing the corporation. This big money comes in small bits out of lot of different pockets, many of which are entirely innocent of the wrongdoing, including shareholders who may receive slightly reduced dividends, innocent employees who may suffer slightly reduced wages, or customers of the corporation who wind up paying slightly higher prices.

To the extent that is all that happens, and no special punishment is ever imposed on the group of officers and employees who have personal culpability in the wrongdoing, there is going to be a substantial failure of deterrence effect, to wit, the officers and employees who were responsible are confirmed in their previous view that the wrongdoing they participated in had short term favorable financial results for the corporation, they the officers and employees got rewarded for the year in the compensation they received, the wrongdoing might never come to light and everything would be the rosier for it, and it is too bad the wrongdoing was discovered, but the officers and employees have come away basically unscathed, and either their current employer corporation may try a new trick next time, or else they have proved their mettle and the next corporation that employs them will be interested in seeing what they can come up for it.

The question presented is the extent to which plaintiffs’ lawyers have an effect of undermining society’s efforts to be rigorous in fining, jailing and otherwise punishing corporate officers and employees who are responsible for conceiving, authorizing, designing and implementing corporate wrongdoing.

Insight into answering the foregoing question can be obtained through a comparison of plaintiffs’ lawyers with governmental regulators, criminal prosecutors, state attorneys general and legislators, with a focus on their respective manners of compensation. The latter parties work on behalf of the public to design, implement and enforce laws and regulations and a regime of legal punishment to curtail dishonest commercial practices and conduct. The compensation they receive is reasonable for the work done, and in particular it is not geared to the dollar amount of economic activity that their public work affects (i.e., legislators and regulators don’t get paid millions of dollars because they put into effect large governmental budgets, levy commensurate amounts of taxes, and write and enforce laws and regulations that affect billions of dollars of economic activity and that impose and allocate large economic costs on and among businesses, consumers and other parties.)

Plaintiffs’ lawyers perform a similar public role in the design, implementation and enforcement of legal punishments to curtail dishonest commercial practices. Their compensation, which is huge, is geared to the amounts of economic activity that their work affects and to the economic costs that they get shifted around among various parties; the larger the scope of their lawsuits and the greater the dollar amount of the costs they can get shifted around, the greater their compensation. This manner of compensation of plaintiffs’ lawyers creates very powerful incentives for them to seek the objectives of (i) expansion of harms or detriments for which a payment should be made, (ii) higher rather than lower amounts that should be paid, (iii) expansion of liability where there is no fault, (iv) disregard of distinctions between intentionally culpable, negligently culpable and faultless parties, especially in the context of corporations comprised of a conglomeration of employees, shareholders and customers , (v) disregard of culpability of plaintiffs in their own injuries and harms, (vi) not having clear rules in advance about what is wrongful and what is not wrongful, so that a person does not know what is wrongful and cannot make a decision not to do a wrongful act, and exposing every decision and action to an ex post facto determination that it was wrongful and for which there is liability, (vii) disregard of rational cost/benefit principles, (viii) the invocation of junk science, and (ix) usurpation by them and the courts of the powers of the legislative branch and the executive branch regulatory apparatus.

These objectives of plaintiffs’ lawyers are inconsistent with the need, as discussed, for the law to be exacting in punishing and imposing costs on guilty individuals and in not punishing innocent individuals while guilty individuals are not held responsible, and of providing clear rules in advance about what is wrongful and what is not, in order that people may make a decision not to do a wrongful act. The plaintiffs’ lawyers have been very successful in achieving their objectives. This has bred contempt and disdain for the law, swallowed up large amounts of resources that could be available for other activities more effective for promoting business ethics, and has been otherwise distractive and undermining of society’s use of legal punishments to curtail commercial wrongdoing.

The Vioxx case as an example of how the law fails business ethics

Take for example the Vioxx litigation that is now working its way through the judiciary pipeline.

Let us start with all the shareholders who purchased Merck stock in the weeks leading up to the Vioxx announcement and who suffered an immediate 30% or so decline in value following the announcement. Profits that Merck made from Vioxx did not accrue to those shareholders, and they are entirely innocent of whatever wrongdoing Merck committed regarding Vioxx; nonetheless the legal liability system that is entrenched will give no consideration to those factors and results in that 30% being taken from them and contributed to the recovery that the plaintiffs eventually make.

Next consider, if Merck is guilty of wrongdoing, whether any officer or employee of Merck will be personally punished for his participation in the wrongdoing. There has been no indication that this is going to happen.

Next consider the hundreds of millions of dollars that plaintiffs’ attorneys will receive in the Merck litigation. Think how those sums might be alternatively expended in order to pay for programs and activities that would concretely advance protective and preventive objectives related to drugs such as Vioxx. These might include: greater FDA funding for post-drug approval monitoring and studies to detect adverse drug effects; design and implementation of better safeguards at the physician and patient level relative to decisions for a drug to be prescribed in a particular case; development of concrete protocols and guidelines for testing of drugs that drug companies could follow that would protect them against subsequent liability; development of concrete “conflict of interest” rules for researchers and physicians involved in testing or promoting a drug and punitive enforcement of the rules against researchers and physicians individually.

Ultimately, there is a question of what exactly the wrongdoing of Merck was, articulated with sufficient specificity, that Merck and other drug companies can have advance notice of such specifics so they can avoid “wrongdoing” in the future. For all the billions of dollars that might wind up getting paid in the Vioxx litigation, no such concrete guidance may be forthcoming at all from the litigation, and, if that is so, all that happens is effectively a huge transfer from one set of parties without fault to other parties who have suffered a harm not caused by any wrongdoing of the first parties.

The problem of the plaintiffs’ lawyers

The situation with Vioxx is emblematic of how plaintiffs’ lawyers cause a huge consumption of manpower, economic resources and mental attention and effort that has little or nothing to do with accomplishing reduction of corporate wrongdoing and is a corresponding enormous diversion of those resources from society’s efforts to reduce corporate wrongdoing.

In evaluating this argument that plaintiffs’ lawyers undermine the promotion of business ethics, we should not listen to the plaintiffs’ lawyers. Our country has seen enough in recent years of baneful effects of large amounts of compensation that create conflicts of interest and that that cause the recipient to advocate or follow a course of action that will increase that compensation and contrary to the better interests of other individuals and groups. Corporate executives standing to gain fortunes from stock options committed massive accounting frauds that contributed to maintaining and increasing lofty stock price levels that would enormously benefit them under their stock options and other compensation arrangements. Accountants have been charged with faulty accounting work arising from the conflict of having lucrative consulting work with the audit client. Stock analysts have been inappropriately influenced in their stock reports by reason of getting compensation based on investment banking business their employer gets from companies the analyst covers. Brokerage firms corrupted the IPO market by allocating stock in hidden exchanges for inflated commissions on unrelated transactions. Mutual funds and insurance brokers have acted in wrongful disregard of conflicts of interest in order to increase their revenues and profits.

Plaintiffs’ lawyers are no different. They are conflicted to the core by their compensation arrangements and are incapable of rendering to society any honest evaluation of how well the current civil liability system is in serving society’s objective of promoting ethical business behavior.


The above is a very descriptive, common sensical, common knowledge based explication of how the current state of the law undermines the promotion of ethical business conduct, and how the law results in a significant diversion of economic resources away from beneficial and desirable ethics programs and activities and misallocates those resources to wasteful and counterproductive uses.

Corporate ethics officers are in a special position to judge the validity of my arguments. They have front line involvement and first hand experience that specially enable them to discern circumstances and factors that abet or that impede the inculcation and institutionalized practice of business ethics in their corporation. They are in the best position to evaluate my descriptions of how the law affects the psychology and thinking of employees when it comes to deciding to engage in an unethical activity or not. To the extent ethics officers are uncertain about what I describe, they can conduct interviews and surveys of employees to find out about employee thinking and psychology. Academics working in the business ethics field also have a close in view of things and may may have done psychological studies or be aware of studies that tend to support or not support my answer.

I very much hope you will take the time to consider this article and tell me what you think. I believe that the civil liability system is in need of further reform, and if business ethicists have views that the system undermines business ethics, I would want to use those views as an additional basis for advocating further reform in the civil liability system..

2007 work on business ethics front

The preponderance of my efforts in 2007 has been to try to get the attention of ethics organizations, journals, academics, and corporate ethics officers. I tried numerous approaches. Let me reveal some of these in posts succeeding this post under the label F. Ethics organizations

What I have learned

A first main question is whether I (and other tort reform proponests) are basically right and the extent to which we are right about the civil liability system ill serving societal interests and the need for changes to improve significantly how such societal interests are being served.

In all my efforts I have not been able to elicit any respectable intellectual debate from the plaintiffs' lawyers side. I tried to draw out law professors in such debate, but could not do so. I have yet to find any such respectable debate. To me, this is significant evidence that I (and other tort reformeres) are basically right.

Any reader of this blog can try to decide for him or herself whether I (and other tort reformers) are basically right.

On the premise that I (and other tort reformers) are basically right, here are things I have learned.

The legal profession's priorities are first to serve its own economic interests and, in a pervasive and entrenched way, will take action to try to serve those interests and not society's interests when there is a conflict between the two.

In the realm of legislation and lobbying, the legal profession is just another "special interest" group, and a very powerful one at that.

Many judges either don't understand how the civil liability system ill serves balanced societal interests or they understand but are willing to support and advance the lawyers' interests against societal interests.

Legislators succumb to the blandishments and campaign contributions of the lawyers just as they do with other special interest, and legislators repeatedly fail to fulfill properly their obligations to evaluate societal interest and pass laws that advance societal interests and instead continue with their service to special interests.

There is an elitism, snobbism and a type of narrow mindedness in law professors and other academics that results in their unwillingness to lend their names and expertise to public pronouncements that could be helpful to citizens in their formulating their views about tort reform and trying to take action based on such view.

Plaintiffs' Lawyers Are Not That Good

The plaintiffs’ lawyers are not so good that they deserve the pay they get. They get their pay because they have rigged the legal system, and that should be changed.

The plaintiffs’ lawyers are actors in society's systems that, first, make transfers of money to citizens who have suffered damage and, second, punish, in the name of deterrence, persons whose actions cause damage to others.

Society should have these systems. Society does have them, the mechanisms are multi-faceted, and millions of workers are gainfully employed in the implementation of the same. For the most part these persons receive reasonable wages for the work they do.

A major structural component in the overall scheme is private insurance. Insurance works to protect citizens from losses by means of their paying premiums to insurance companies that, in turn, pay money out to insureds who have the misfortune of suffering an insured loss. There are costs in the administration of private insurance that include many employees involved in claims processing (clerical personnel, claims adjusters, investigators, etc.), not to mention battalions of salesmen trying to persuade customers that insurance protection is wise and the insurance offered by the salesman is better than another product. By reason of the regular operation of the laws of supply and demand in the labor marketplace, the employees in the industry generally receive reasonable and justifiable compensation for their work in the implementation of a private insurance system whose object is to make transfers of money as described.

Another money transfer system involves tax dollars, to wit, government welfare programs (including natural disaster relief). In this realm, society, through its elected representatives, decides that people who are needy for various reasons (including natural disaster) should have transferred to them money that comes out of taxes collected from the citizenry at large. Legislatures determine the amounts to be paid, and the programs employ many workers, at modest salaries, to determine who qualifies for welfare and to make and monitor payments. Because the programs cost taxpayers money, and because people do not like to pay taxes, pressures are generally present to keep costs down, including those of administration.
In addition, society has two parallel systems, its criminal law system and its governmental regulatory system, that mete out penalties such as jail sentences and fines to try to deter citizens from doing things that cause damage to other members of society. The governmental regulatory system includes forcing companies to pay for things like environmental clean up or back pay to employees where there has been unlawful discrimination in the workplace. This regulation can involve substantial amounts of money, and companies, which are trying to operate profitable businesses for their stockholders and employees, will resist making the payments.
In these two parallel systems, there are employed hundreds of thousands of police and other law enforcement agents, lawyers, prosecutors, investigators, scientists, researchers, accountants, legislators, judges and other administrative and clerical personnelf. These workers first write the criminal laws and governmental regulations that intimately affect both personal freedoms and trillions of dollars of economic commerce. More extensively, these employees carry out the wide range of activities needed to enforce the law and regulations, including investigating whether violations may have occurred. conducting tribunals to make legal determinations as to whether violations have in fact occurred, and determining and administering sanctions. The army of workers who toil in this area, under the economic laws of supply and demand, do so for reasonable wages. Tops might be $175,000 a year for a senior government lawyer.
This brings us to the plaintiffs’ lawyers, and the compensation they receive for the work they do.
As stated, the plaintiffs’ lawyers are actors in society's systems for making transfers of money to people who have suffered damage and for punishing, in the name of deterrence, those whose actions cause damage.

The question is: Do plaintiffs’ lawyers deserve the ungodly amounts of money they are paid?

Take automobile accidents as an example. Somewhere in the range of fifty thousand people a year are killed; the extent of non-fatal injuries and economic losses growing out of car accidents can only be guessed at. For discussion purposes, put annual aggregate losses at $150 billion (which has a semblance of rationality if the value of a human life is put at $1,000,000 as an approximation of the amount an average person would earn over twenty or twenty five years, which would put the loss of life component of the total loss in the range of $50 billion).
This $150 billion annual amount of losses from car accidents alone is a significant nut to crack for society's mechanisms for making transfers of money and punishing people to deter undesired behavior. A large part of the loss will be covered under private life, medical and property insurance (paid for out of insurance premiums paid by all insureds). A significant portion of the total loss likely goes without any compensation ($35 billion could be a guess of what this uncompensated amount might be).

On the criminal law and regulatory fronts, the police and the courts try to reduce the amount of drunk driving that goes on in the country, and the National Highway Traffic Safety Administration spends substantial amounts budgeted to it by Congress in carrying out extensive regulatory activities to try to improve car and highway safety.

Then come the plaintiffs’ lawyers -- the ones who get a judge and jury to extract $100,000,000 from an automobile company regarding, for example, an accident involving a vehicle whose fuel tanks arguably could have been mounted in an overall safer way (but maybe not, the safety of the totality of the engineering involved being a bit complex to evaluate intelligently), plus possibly a drunk driver plaintiff who was the most to blame for the accident. For his work, the trial lawyer gets to keep, say, $33,000,000, at an effective rate of compensation of, say, $15,000 per hour of work.

That $33,000,000 eventually comes out of higher prices for cars or lower wages for auto industry employees or lower returns to pension funds owning stock in the company's stock. People who do not like paying taxes for welfare programs should also object if they are being nicked by higher car prices or lower wages or reduced stock returns in their 401(k) retirement plan, in order for plaintiffs’ lawyers to be compensated at the rate of $15,000 per hour.
Looked at another way, $33 million could pay for a lot of services of legislators, government lawyers, investigators, judges, and other regulatory bureaucrats, working for reasonable compensation, who are engaged in the serious business of designing and administering the criminal law system and the governmental regulatory system that endeavors to get persons (including automobile manufacturers) not to do things (including building unsafe cars) that damage other members of society.

Do the plaintiffs’ lawyers, for the role they play and the work they do, deserve to be paid what they get paid? If they do not deserve their pay, how do they manage nonetheless to get the pay?
The answer to the first question is, in the opinion of many people, all things considered, categorically, no, plaintiffs’ lawyers do not deserve what they get paid.

The plaintiffs’ lawyers will reply that it is all a free market economy, and, if entertainers and sports stars can command stratospheric levels of compensation under free and open competition of public performers, then, by the same free market principles, the plaintiffs’ lawyers deserve whatever they can obtain by way of what they do in the legal system, it being open to all lawyers to compete there and bid down legal fees if legal fees are too high.

There is a telling difference. People who, by the millions, shell out $50 or $100 of their hard earned money (or their parents' hard earned money) for a ticket to a basketball game or a rock concert do so because of the pleasure they derive from attendance, and, in terms of alternative uses of their money, they choose to buy the ticket as opposed to use for another purpose. That being the case, one is able (perhaps reluctantly) to accept the ungodly amounts received by sports and rock stars who provide the desired pleasurable experience better than anyone else.
The plaintiffs’ lawyers, on the other hand, have rigged the legal system so that the pay they receive is decided by judges and juries who are not spending their own money, who do not think in terms of alternative use for the money, and who frequently act as if the money is not coming out of anyone's pocket. This mentality results in mindless verdicts, and the plaintiff, who stands to have bestowed on him stupendous fortune growing out of his misfortune, is not going to quibble about the prospect of $33,000,000 out of $100,000,000 going to the trial lawyer, the guy who makes it all happen.

A rigged system is the answer to the second question of how the plaintiffs’ lawyers get the outrageous amounts they get.

This brings us to today's mother of all trial lawyer takedowns, namely, the tobacco settlement or settlements. The national settlement has been swept off the table for now, but one can be certain that the mind boggling scores of billions of dollars the plaintiffs’ lawyers have in mind for themselves ($92,000 per hour of work, Senator Gramm recently estimated) will remain on the table in one way or another (individual state settlements, massive fallback tort litigation, renewal of national settlement efforts next year, new targets such as computer keyboard manufacturers and repetitive stress injuries).

Society, through its political, legislative and legal processes, and subject to constitutional limitations, is entitled to decide, and should decide, as a matter of public policy, the amounts, if any, under all circumstances considered, that should be extracted from the tobacco industry (and the tobacco industry's stockholders, customers and employees), and also the use of the money that is extracted.

Society has gone lunatic, however. if it allows plaintiffs’ lawyers to be compensated to the tune of $92,000 per hour for the tobacco related work they have done. More like one thousand dollars per hour might pass for justifiable.

The plaintiffs’ lawyers are just not that good, except in how well they have rigged the legal system over the years and, from there, bootstrapped themselves into a central position in the public policy arena to exact mind boggling tribute in connection with society's public policy decisions related to the tobacco industry. The untrammeled greed of the plaintiffs’ lawyers has been bad enough running amuck in a rigged legal system; to witness its unleashing in entire realms of public policy is positively sickening.

Tort Law in Black and White

There is black and white in the tort law. A test of our legal and governmental institutions is whether a capacity exists to see the black and white and to act in a responsive manner. For a long time the nation's legal profession and its legislatures, regulatory agencies and criminal law apparatus have exhibited an abominable collective failure. This is properly reportable to the citizenry.

What is black and white in the tort law?

It is black and white that a civil society rightfully seeks mechanisms for compensating its members in certain situations when they suffer physical and economic harms.

It is black and white that the body politic also rightfully seeks to regulate the activities of its members to lessen harms they may do to one another and to achieve a deterrent effect by punishing those whose deliberate or negligent actions cause damage to others.

It is black and white that our society has at its disposal a variety of mechanisms for providing compensation to members who experience losses. These include private insurance arrangements, welfare programs, natural disaster relief, charities and a civil law liability system.

It is black and white that our body politic has an extensive governmental regulatory regime and a criminal law system that regulate the activities of society's members to lessen the damage they may do to one another and to punish in the name of deterrence those who deliberately or negligently cause harm.

It is black and white that no payments are "free," and all the payments come out of someone's pocket. The range of sources of the payments includes private insurance premiums, taxes paid to the government, gifts made to charities, and higher prices for goods and services so businesses can cover the liabilities that are imposed on them, or lower wages for employees of the businesses or reduced profits for their owners.

It is black and white that economic resources are scarce, not all losses can be fully compensated to the extent a caring society would wish, and society is confronted with an extraordinarily complex (and frequently heart wrenching) task of deciding who should get compensated how much for what losses and from what source of payment. Examples are innumerable. Soldiers are asked to give up their lives for their country or suffer grievous and lasting injuries and for whom the government must decide how much tax monies should be provided in the way of compensation. Yearly tens of thousands of mothers and fathers die of cancer and other diseases, leaving children deprived of needed financial resources and critical elements of a nurturing family environment; and society must decide what to do about the losses these families suffer. Fifty thousand people are killed annually on the nation’s highways, the extent and cost of disabling injuries can only be guessed at, and society must have ways to provide some remedial compensation. Other losses for which society can well wish to provide compensation result from natural disasters, other accidents, potentially beneficial medical procedures, physical and economic crimes, drug, alcohol and gambling addictions, extreme social and educational deprivation, mental illnesses, and environmental pollution. Society cannot come anywhere close to making everyone entirely whole for all their losses, and a caring society will want to be judicious in allocating the scarce resources that are available among all the potentially deserving recipients of compensatory payments.

Not as black and white, but still quite obvious, is that, when it comes to regulating the activities of society's members and meting out, in the name of deterrence, monetary fines and jail sentences as punishments, society thinks it would be wrong for government regulators and prosecutors to be paid according to how much in fines they collect or how much jail time they get people sentenced for. Also, regulatory fines do not go into private pockets but rather into the government’s coffers and are available for carrying out its regulatory activities.

That is the black and white.

What then are the failings of the legal profession and of legislatures, regulatory agencies and the criminal law system?

The failings are discernable in connection with a civil jury in Hale County, Alabama, awarding $500,000,000 in punitive damages to three plaintiffs who were lied to by Whirlpool Corporation to the effect that the plaintiffs would have to make payments for about three years for a satellite dish, which would total roughly $1000, where in fact the contract called for payments for about 4-1/2 years totalling about $1600, or, in other words the plaintiff was to be cheated out of $600.

There should be no doubt that the job of the legislature of Alabama, the state's regulatory agencies and its criminal law system includes endeavoring to protect Alabama citizens from Whirlpool lying to customers and cheating them out of $600.

Accordingly, one could conclude that, if it is needed for the state of Alabama to resort to a $500,000,000 punitive damage verdict against Whirlpool in order to protect Alabama citizens, there has been an abominable failure of the Alabama legislature, regulatory agencies and criminal law apparatus in doing their job of regulating Whirlpool's activities and imposing fines and jail sentences to deter Whirlpool from doing what it did. A $500,000,000 punitive damages verdict seems preposterous overkill. Before resorting to that, it would behoove the citizens of Alabama first to make a wholesale eviction from office of the incumbent legislature, regulatory agencies, and criminal law apparatus, and replace them with a new set of legislators, regulators, prosecutors and judges to see if the new group could do better in dealing with Whirlpool so that a $500,0000,000 punitive damage verdict can be foregone. Further, if new officials are not successful and it is concluded that such a penalty is ultimately needed, hopefully the new officials would have the sense to arrange for the penalty to be paid into the state's coffers and be available to support regulatory efforts generally for the benefit all Alabama citizens, instead of allowing the penalty to be poured into the pockets of three private plaintiffs and their attorneys.

The possibility needs to be recognized, however, that there has not been such an egregious job failure on the part of the legislature, regulators and criminal law system as is suggested above. Conceivably it is a sham argument that $500,000,000 punitive damage verdicts are needed as a result of failure by the legislature, regulatory agencies and criminal law apparatus in regulating the activities of society's members and meting out punishments for deterrent purposes. The argument may be a pretense to distract from something else that is going on with $500,000,000 punitive damage verdicts. The truth of the matter may be that the civil liability system has been shanghaied by a bunch of greedy lawyers who are running it for the purpose of enriching themselves, and $500,000,000 punitive damage verdicts are reflective only of how successful they have been in achieving their objective, and not at all reflective of a need society has as a result of any egregious and irremediable failure of the regulatory agencies and criminal law apparatus.

The problem is that, if this alternative explanation of things is correct, and the first suggested job failure is not so egregious as suggested, then the legislators, regulators, prosecutors, and judges are guilty of a second failure that would be equally deserving of condemnation. This second failure would be the failure to stand up and defend themselves, and say the truth of the matter, to wit, that the regulatory regime and criminal law apparatus are not so deficient, the argument that they are irremediably deficient to such a degree that $500,000,000 punitive damage verdicts are needed is a sham and subterfuge, a bunch of greedy lawyers has hijacked the civil law liability system for their own enrichment, and that system needs to be reclaimed by and for the people in order for it to serve properly society’s legitimate goals of judiciously providing compensation for losses that citizens suffer.

A further possibility here is that Alabama’s legislators, regulators, prosecutors and judges do not understand sufficiently what is black and white about tort law and may not know of the pretense argument being made by the lawyers who have hijacked the civil liability system. If there is a lack of understanding, a partial excuse would exist for those officials failing to stand up in their own defense and failing to tell the public the truth about what is really going on.

Such a partial excuse would, however, point to a final failing, and perhaps the worst failing, which would be that of the legal profession as a whole. That profession is best trained to know and understand what is black and white in the tort law, to examine whether significant deficiencies in the regulatory and criminal law systems exist, to evaluate whether any inadequacies are so substantial and irremediable that alternative means must be found to regulate and to mete out punishments, to decide whether $500,000,000 punitive damage verdicts are needed, and to reach conclusions about whether the civil liability system has been hijacked by greedy lawyers who are running it to enrich themselves and to the detriment of serving society's purposes. Surely the legal profession's obligations to society at large would include informing the legislatures, regulators, prosecutors and judges about such matters. This would be particularly so if those officials lack an adequate understanding of things, and thus are not able to state their own defense against the hijacking lawyers who would assert that $500,000,000 punitive damage verdicts are needed, and further are not able to find the way to seize back the hijacked civil liability system from those lawyers so that the system can serve the citizens the way it should. For the legal profession not to fulfill such an obligation would seem the worst failing of all those considered here.

There is black and white in the tort law. For a long time an abominable collective failure has occurred on the part of the legal profession and the legislatures, regulatory agencies and criminal law apparatus to recognize the black and white and to act responsively for the citizens they serve. One cannot be entirely optimistic that these parties will sort out anytime soon their respective failings. The legislature in Alabama may be in the process of taking a positive step. The citizens, in all events, should be informed of what is black and white and should know about the collective failure that has gone on for many years.


By Robert Shattuck

We the citizens know usually we can only expect to be taken advantage of by the politicians and the special interests. The electorate periodically needs to find one of those infrequent election situations where we are given a good collective chance to kick back at this or that politician or special interest group that has been particularly egregious in doing a number on the rest of us. The tort liability issue in connection with the Alabama Supreme Court justice elections next month is such an opportunity.

In order to avoid dealing in vague references, I will define what a "special interest" is. A "special interest" is any group for whom the making of election campaign contributions is nothing other than a rational and calculated business decision, that weighs the expected economic benefit to be derived from the influence over legislative votes or other governmental action that can be obtained, against the amount of the contribution. If the former is greater than the latter, the contribution will be made; otherwise not. While the certainty and amount of the sought after benefit cannot be calculated with definiteness, the telltale sign of a special interest group is that the complete explanation for its making a campaign contribution is that the group has, to the best of its ability, concluded that the expected economic benefit is greater than the amount of the contribution, in other words, your textbook profit maximizing, capitalistic, business decision. This is properly devoid of altruistic considerations, such as whether good government that maximizes our collective social welfare is being promoted.

Do not get me wrong. I am a fervent believer in capitalism, free markets and Adam's Smith's invisible hand. I generally place myself in strenuous opposition to socialistic or communistic things.

There is, however, a contradiction between representative democratic government and capitalistic behavior, and there is a area where a smidgen of socialism needs to creep in, in order for democracy to work decently. The contradiction is, unfortunately, central, and not peripheral, to the better working of government for our common good.

Quite simply, to a great extent we have bad government that is extremely wasteful because we have created an environment in which the most influence goes to special interests whose political involvement is capitalistic and who make their campaign contributions and support their candidates based exclusively on their profit making business calculation that the expected economic benefit to be derived is greater than the amount of the contribution. The special interests are presumably successful in ultimately extracting economic benefits that are greater than the campaign contributions. If not, they would be dumb businessmen who should be, and eventually will be, removed from their jobs for losing money in the transaction, instead of making money for whosever economic interests they represent and who pay them to make money and not lose money.

On the other hand, we can make significant progress towards achieving good government by increasing the influence of citizens who involve themselves in the political process for reasons other than profit and loss business calculations and who bring a desire to see the totality of government work better for all the citizens and not solely a desire to profit themselves from a narrow area of governmental activity that happens to be susceptible to their exploitation. That kind of talk is, of course, exactly the smidgen or more of socialism that is referred to above, i.e., political involvement that seeks the larger good of all and that does not relentlessly and narrowly look after the interests of old, number one, which is the hallmark of capitalism and the selfish virtue in the palm of Adam Smith's invisible hand.

Unfortunately, as most everyone knows, human nature being what it is, the impulse of capitalism, because it is always looking out for number one, is strong, and the impulse of altruism and socialism is weak. In the political arena, the stronger impetus of capitalism decimates the pathetically weak, good government seeking citizens and the overall social weal whose cause they seek to advance.

This triumph of capitalism in our representative democracy produces the government bazaar that we have today in the United States. Essentially, a gigantic federal budget of a trillion or two dollars, plus untold amounts not showing up in the budget but affected by the government's actions. is perpetually up for grabs. And grab and grab we send our Senators and Representatives to Washington to do. The same thing takes place on a smaller scale in our fifty state governments. In reality, just about all of us are part of one special interest or another in the big grab, as much as some of us would rather have our presence felt as altruistic, good government seeking citizens. That socialistic bent, as indicated, gets trampled day after day amidst the profit maximizing, capitalistic special interest elephants plodding the turf in Washington and in our state capitals.

In the big grab at our government bazaar, it is not as if the entire amount of the government budget disappears into a black hole from which no citizens benefit. In our free for all lunge at the government's goodies, the citizens collectively get benefits that are of value to them, and all is not waste. The price that we pay, however, is that there is enormous waste in the form of pork and the like in the budget itself, and large inefficiencies in areas that are outside the budget but that are nonetheless affected by government action. Also, there can be great unfairness because some of the patrons at the government bazaar (one could say snorfers at the trough) are much more successful than others in how much they are able to chow down for themselves.
None of us with aspirations for man's better potential can be happy with the government bazaar we have created, and many of us rightfully react with disgust and revulsion, if not shame, at our political handiwork. We are sad and disappointed, or perhaps cynical, that individual citizens believe they can do little about the monstrosity we have created.

Election time is a time to behold the monstrosity, and an occasion to look deep into the disgust we feel; and it is an opportunity perhaps to cast cynicism aside, and a vote that singularly registers how nauseous we are. Election time is when a little effort should be given to looking for and hopefully finding a particularly hoggish snorfer at the government bazaar. Locate a grabber that has the potential to really stir the ire of hordes of citizens, by how crafty and brazen and, ultimately indecently out of bounds, the pig has been in royally milking a situation and doing a super number on the rest of the citizens.

I will, in connection with next month's Alabama Supreme Court elections, examine tort liability law and plaintiffs' lawyers in subsequent parts of this series.

By Robert Shattuck

Imagine yourself and a number of other citizens sitting around a table as a lawmaking body. You are trying to decide what monetary payments should be made and how they should be made to persons or their families if and when the person dies or experiences bodily injury, or suffers mental or psychological trauma, or incurs financial or other economic losses.

In trying to determine the proper role for government and the law in this area, you and your fellow lawmakers first come to the conclusion that, no matter what ideas or system you come up with, if payments are going to be made when a person experiences physical or economic losses or harm, any payments to the person or his family, one way or the other, come out of someone's pocket. As an example, your lawmaking body considers the mechanism of private insurance for the making of payments to cover losses. With insurance, the many private parties who desire the insurance coverage pay premiums that create a pool of funds from which payments are made to cover losses. Payments deplete the pool of funds, which must be kept continually replenished from ongoing premiums for the pool. It is thus clear how, under private insurance, payments made to one person to compensate him for loss or damage come out of the pockets of other people.

If the government makes payments to compensate people for loss of life or for other harm and damage, the government uses the taxes it collects from all its citizens to make these payments. Accordingly, here, your imaginary lawmaking body is again confronted with the seemingly inescapable fact of life, namely, that if payments are going to be made to harmed individuals, those payments have to come out of someone's pocket. Moving along in your review, your group is also able to discern that, if a third party, such as a corporation, is called on to make a payment to a harmed person or his family, the payment again has to come out of someone else's pocket. It may be the pocket of the shareholders who own the corporation, or it may be the pocket of employees who are paid smaller wages and salaries in order to enable the corporation to make the payment. Alternatively, the pocket may be that of customers who are charged higher prices so that the corporation gets the money needed for the payment. The corporation could have insurance to cover the payment. In this case, however, your lawmaking body perceives that the payment still comes out of someone's pocket, including not only the shareholders, employees and customers of the corporation in question who bear the burden of paying the premiums for the insurance coverage, but also out of the pockets of shareholders, employees and customers of all the other corporations that also purchase the same insurance and pay the premiums that create the insurance pool from which payments are made.

In sum, your lawmaking body confirms to itself the adage that there is no free lunch and that, in any system you come up with to make payments to injured persons, the payments have to come from somewhere and out of someone else's pocket. Harsh as the reality of the "no free lunch" syndrome is, you and your fellow lawmakers swear that you will always keep it in mind no matter what governmental policy you decide on.

In proceeding forward on your policymaking mission, one of your group says that he is quite impressed by the attributes of private insurance arrangements. Private insurance, he argues, maximizes freedom of choice of individuals to decide what losses they want to insure against, and for how much, and what level of premiums they are willing to pay to be covered. If a person thinks his life is worth $10,000.000, well then, by God, let him buy that amount of life insurance, and more power to him if he makes enough money to pay the $50,000 or whatever a year premium it takes to buy that much insurance. This proponent of private insurance avers that, as we know, if a $10,000,000 death benefit is going to be paid, it has got to come out of someone's pocket. At least this guy (and others like him) are paying very substantial premiums into the pool of funds needed to make the payment. Leaving the matter to be handled through private insurance beats the hell out of some idea like having the government come up with the $10,000,000 death benefit from, say, an additional nickel ($.05) tax on each and every one of 200,000,000 citizens in the country (200,000,000 x $.05 = $10,000,000), or nicking the shareholders, employees and customers of the corporation where the guy happens to work for more substantial, but nonetheless manageable, amounts to cover the ten mill.

If people are worried about becoming disabled in an accident, the private insurance proponent says, let them buy disability insurance. Again, freedom of choice is maximized regarding how much disability insurance is obtained and how much one contributes of one's own funds to the pool that will be used to make the disability payments. No one is coerced into, say, paying taxes to the government in order to allow the government to make disability payments.

After not a great deal of discussion, your imaginary lawmaking body is quite impressed with the attributes of private insurance arrangements and concludes that they should play a very large role in the system you want to devise for your citizens for the making of payments to persons who experience losses and damages.

At this point, another member of your group vouches that private insurance arrangements alone will not do all that is needed or appropriate. In some circumstance, she says, a person cannot afford to or should not be expected to purchase private insurance for a loss or damage in question, and that fairness and justice in certain circumstances cry out for a payment to funded other than pursuant to private insurance arrangements. For example, if and when America has the military draft, and young men and women are required to enter into battle on behalf of our country with the certainty that some of them will lose their lives or be physically maimed for life or emotionally traumatized, surely they and their loved ones are entitled to more than the opportunity to purchase private insurance to cover the loss and damage.

Yes, the entirety of your imaginary lawmaking body quickly agrees that justice and fairness require more than private insurance arrangements. Further, if ever the value of a single human life is priceless, it is the life of a young person who has laid it down for his or her country in the line of military duty, and, as priceless as that life is, an effort needs to be made to place an inadequate value on the life and to determine an amount of compensation to be paid to the loved ones of the person who has made the ultimate sacrifice for his or her country. As discomforting as the exercise is, your imaginary lawmaking body, after debate, decides that the loved ones of any person lost in the line of military duty should be paid $1,000,000 out of the government's tax revenues (equal to a one half cent tax on each of 200,000,000 citizens of the country).
Having persevered through the foregoing somber exercise of ascribing a value to the most priceless of commodities, that of a human life, your lawmaking group pauses to ask of themselves whether, with the espousal of private insurance arrangements and government payments to cover things like harmed military personnel and victims of natural disasters, the group has completed its policymaking mission related to devising a system for the making of payments to persons experiencing loss and damage, and the government's role therein. One of your group mentions welfare programs and says that welfare programs could be viewed as a system for making payments to persons who have experienced losses and damages and have therefore fallen into a category that qualifies for government welfare payments. With the mention of the welfare system, your lawmaking body first does a quick check of its adopted governing principle that there is no "free lunch" in the arena of making payments to persons experiencing loss and harm. Alas, unfortunately, welfare payments have to be paid from taxes (or from government borrowings that have to be paid from taxes) and, like all the other payment arrangements your group has considered, came out of someone's pocket. Once again it is confirmed there is no "free lunch" here either.

Although by this time only mildly disappointed in not finding a "free lunch" elixir in the welfare system, your group acknowledges that the welfare system needs to be considered as part of society's overall scheme in providing payments to persons who experience loss and damage. Welfare being such a morass, mess and difficult problem, your group chooses not to dwell exceedingly long on the exact role that the government welfare system should play in providing a source of payments to persons who experience damage and loss, although clearly it potentially plays an extremely large role. The size of the role is arguably measured in hundreds of billions of dollars a year.

"O.K., are we done now?" pipes up one of the quieter members of your group, who is getting hungry.

"What, are you a dummy or something?" interjects another of your imaginary august body, who has been lying low in the discussion up to this point. She continues, clearly experiencing no pangs of hunger whatsoever. "Not everything is pure accident you know. There are tons of people in our beloved country who are mean, vicious, dishonest, negligent and worse, and who cause untold amounts of harm and damage to millions and tens of millions of our citizens. They must be made to pay! They must be deterred! They must be punished!"

The hungry, quiet imaginary lawmaker slumps into his seat, despairing of a meal anytime soon.

To be continued.

By Robert Shattuck

Any good and just society of human beings wants to implement mechanisms and systems that, under appropriate circumstances, provide compensation or reimbursement to members of the society who experience physical or economic loss or damage in their lives. Also, such a society will seek to prevent such losses, harms and damages from occurring to begin with, by means of punishing persons who willfully or negligently cause them to happen. Punishment can conveniently dovetail with the first objective of compensation by making the perpetrator at least pay for the loss, harm or damage he causes. No one has any quarrel with the foregoing objectives of a society or with a society taking steps to implement mechanisms and systems that seek to advance such social goals.

As discussed in an earlier part of this series, a conscientious society will appreciate that there are no "free lunches" and, whenever you talk about compensation and payments to injured members of society, amounts that are paid to the injured party always come out of someone's pocket. That someone may be all the citizens who pay taxes to a government which might make the payment, or it might be the private parties who make insurance premium payments that create a pool of funds from which the payment in question is made. The someone else whose pockets can be gone into are a corporation's shareholders, employees and/or customers, who, by means of a less valuable ownership interest, or through reduced wages and salaries or higher prices charged for goods and services, become a funding source if a corporation is called on to make to an injured party.

In its repertoire of mechanisms and systems for providing compensation to members of the society who have suffered losses and harm, an intelligent society perceives the valuable and significant roles that private insurance arrangements and public welfare programs can and should play in the overall scheme for trying to achieve the social goals in question. In making compensation for damage and loss, it is sometimes becomes necessary for society to place a value on things that are priceless, such as human life. For example, society seemingly needs to decide how much the government should pay to the loved ones of a person who is drafted into the military and lays down his life in the line of duty to his country. Maybe society thinks $10,000 is appropriate, or $1,000,000, or $10,000,000. The citizens of the society, or their elected representatives, simply have to decide what they think is right and appropriate in these regards, and then levy the taxes needed to make the payments.

In terms of preventing or trying to prevent injury from occurring to begin with, society has at its disposal several tools. One is the tool of governmental regulation. This can extend to virtually any area of human activity whose regulation is thought needed to lessen the occurrence of harm and injury to members of society. A society also has the tool of the criminal law for throwing people in jail who deliberately do things that harm others. Further, society has its civil liability system under which persons who do things that harm others can be forced to pay for the loss or damage that occurs and who may be subjected to punitive damages as a special possible deterrent against the doing of things that society does not want done.

The tool of regulation entails a government agency spelling out permitted conduct and prohibited conduct on the part of the persons being regulated and the use of fines and other sanctions in order to try to obtain compliance with the regulations that have been promulgated. Three things are noteworthy in this arena. First, to curtail zealotry on the part of the regulators and to promote even handedness and objectivity in how the regulators pursue their mission, employees of the agency are not compensated on the basis of the dollar amount of fines they are able to collect from the regulated parties. Second, fines that are collected generally go into the government's coffers for use in carrying on its regulatory activities or for other government purposes and do not go to enrich any particular private persons. Third, the regulators are generally enjoined, in prescribing permitted and prohibited behaviors, to employ cost/benefit principles and to try to promulgate regulations compliance with which will overall have a greater benefit to society than the overall cost that is involved in complying with the regulations.
In the realm of the criminal law, it is worthy of similar note that prosecutors are not paid according to how many convictions they obtain or how many years they throw people in jail for. As in the area of governmental regulation, the reason for this is presumably a belief that too great a price would be paid in terms of fairness, justice and evenhandedness if we paid our government prosecutors according to their sentencing record for the year. In other words, even though there is a neutral judge in the courtroom, when it comes to punishing people, society is very skittish and thinks the prosecutor (like the regulator) has a duty to be evenhanded and it is intolerable to undermine that duty by providing any financial incentive to the prosecutor (or regulator) to seek higher levels, in preference to lower levels, of punishment.
Let us now turn to our tort liability system.

I start out by asking about the appropriateness of plaintiffs' lawyers receiving any compensation based on the amount of punitive damages awarded to their clients. The purpose of punitive damages is not to compensate for the plaintiff's loss or harm but rather to achieve the deterrent effect that is connoted by the term punishment. In order to deter you from doing such and such, we will throw you in jail, or make you pay a fine, or make you pay punitive damages, if you do such and such. As indicated above, society is very squeamish and sensitive about government regulators and government prosecutors getting carried away in their respective missions of punishing people for doing things that society says they must not do, and as result we adamantly decline to compensate government regulators and prosecutors on the basis of how much in fines they collect from regulated parties or based on how many convictions they obtain or how many years they get people thrown in jail for. This being so, I ask, what is special about plaintiffs' lawyers and the punitive damages that they seek to impose on the defendant solely for purposes of punishment and the deterrent effect of punishment? If justice, fairness and evenhandedness are at risk of overly zealous regulators and prosecutors if they are paid according to fines, convictions and years in jail obtained, who on earth could not think that justice, fairness and evenhandedness of punishment are not severely jeopardized in the hands of plaintiffs' lawyers lusting after million dollar and ten million dollar and hundred million dollar legal fees to be gained by swirling into hurricane force the untrammelled emotions of twelve jurors, oh so scientifically picked, to slap this particular huge and faceless corporation with untold millions of dollars of punitive damages?

I next ask another simple question. In the punitive damages arena, how and why are justice and society appropriately served by the plaintiff receiving a punitive damages award in lieu of the government and the citizens as a whole being the beneficiary of the award? Keep in mind that, by definition, the plaintiff's compensatory damages are supposed to cover the plaintiff for his loss and damage to the extent the law determines he is entitled to be so compensated, and punitive damages are intended solely to achieve the standard deterrent effect that punishment as a lesson to the defendant and to others is supposed to have. Keep also in mind that in other instances where financial punishments are imposed, such as in the levying of fines in the governmental agency regulatory arena, the fine is received by the government and available to benefit the citizens as a whole, such as being used to fund the government agency's enforcement activities against others and thereby further advance the reason for the fine to begin with, to wit, getting the regulated persons to do what society says they should do and not do what society says they should not do. Thus, a plaintiff, who has been compensated for his loss through compensatory damages, is simply not entitled to the windfall of punitive damages as well, instead of such punitive damages going to the government for the benefit of the citizens as a whole and used, in particular, in one or more ways directly to try to prevent in the future, by the defendant or others, the behavior in question that triggers the punitive damages to begin with.
Besides the foregoing practical observation that punitive damages, like fines levied by a regulatory agency, should be paid to the government and benefit the citizens as a whole by being used to combat future behavior like the behavior which is the subject of the punitive damages imposition, there are equally significant, but more abstract, considerations of what justice under the law is supposed to be about. Most of us sort of know that our tort law liability system has become a gigantic lottery. If you are lucky, your son dies in a fiery, side on crash of a GM pick up truck with fuel tanks mounted on the side, and not only can you collect two or three million dollars compensatory damages, but you can hit the super grand jackpot and collect $100,000,000 punitive damages. If you are unlucky, your beloved son has been drafted into the army, sent to Vietnam to fight for his country, and dies a horrible death in a horrible battle, and you collect, what, maybe nothing, maybe $10,000. Or maybe your daughter gets carjacked, raped, and killed, and no "deep pocket" anywhere or anyhow can be found, and you get nothing.
I know Americans love a lottery, and maybe that love is so deep that our citizens want our tort liability system also to be the lottery it is. If so, God help us in trying advance any cause of reasonable justice under our tort law or in any other realm where justice, which is inherently antithetical to random chance, must compete with having to appease a thirst for the thrill of a gamble and outcomes based on chance.

Up to this point, I have not had much good to say about our tort liability system. I will try to speak more favorably in the next part of this editorial.

By Robert Shattuck

Our tort liability law has the dual purpose of compensating persons who have experienced loss and damage caused by other members of society and of punishing the defendant in order to try to achieve a deterrent effect by means of a lesson that either a person must not do what the defendant did or else the person will pay a price.

We can fervently wish that every loss or damage under the sun will be compensated for, and handsomely too. If your son goes into the army to serve his country and gets killed in Somalia, we can very fervently wish that you should be paid $10,000,000 to try to compensate you for that which is priceless and has been lost. If your mother gets cancer and dies at age 30, we would fervently wish that a trust fund of $5,000,000 could be set up for you to provide potential recompense to you in your upbringing for having lost that which is irreplaceable.

Alas, for every payment made to somebody, there needs to be somebody else who must come up with the amounts needed to make the payment and to put in a hard day's work to do so. We did not pay $10,000,000 to the family of each solder who was killed in Vietnam, and a tax bill levying an income surtax on wages and salaries in order to do so would not have gotten very far in Congress. At the same time, the country has fulfilled and continues to fulfill significant obligations, such as Veterans' Administration hospitals for survivors, regardless of our unwillingness to take it upon ourselves to make large payments to families of the dead. Similarly, our government, in its social security program, makes limited payments to help provide support to those who become disabled, possibly quadriplegic, but we generally do not think we can afford to set up trust funds that will cover any and all possible medical needs for the rest of the entire possible length of a person's life, including an inflation hedge. Our heart wishes we could, but our head tells us we cannot afford to do it. We try to make reasonable decisions to do what we think we can afford to do, but losses, harm and damage in life, alas, are too universal and too widespread (after all, everyone dies in the end) to allow for much extravagance if even significant generosity in reaching into our tax coffers to provide compensation.
As for getting people to do what society thinks they should do and not do what they should not do, we have criminal laws and we have governmental regulatory agencies. Our criminal law system has become pathetic. Far too few murderers, rapists, burglars, con men, environmental polluters, tax cheats and medicaid and medicaid fraud abusers are caught in their crimes, a seemingly infinitesimal number are sent to jail, and those who are imprisoned seem to be put away too slowly and get released too soon in order to teach them and others an effective lesson that crime does not pay. As a result, many in the country are near giving up on our criminal law system as a means to get people to do what they are supposed to do and not do what they are not supposed to do.

We also employ ever more massive and pervasive governmental regulation to try to get people to do what society thinks they should do, such as build safe products, have safe workplaces, not pollute the environment, adequately test new drugs and medical devices, and so on, and so on. Ongoing policy debate transpires year after year among legislative bodies, government regulators, the regulated parties, and affected citizens as to what is cost effective in terms of the costs involved to achieve various levels of safety or protection in the environment, in consumer products, and in the workplace. There are those who advocate, in certain circumstances, that very high levels of costs should be paid in order to achieve very small incremental
improvements in the level of safety or protection, say, against the presence of cancer causing agents in a pesticide (e.g., one part per one hundred million is not acceptable and it must be one part per billion). Creative ideas get proposed, such as allowing rights to pollute the air to be bought and sold in order to achieve the best cost/benefit results, and some are appalled by such a notion. Many consumers argue that the regulators are too lax, and industry frequently thinks the regulators go too far. There is always the risk of corruption of the regulators, and oversight is needed to make sure out and out bribery does not take place, as well as to address the more subtle problem of the "revolving door" between industry and the regulatory agencies. In short, governmental regulation is a massive, but far from perfect, attempted solution to society's age old quest of trying to get people to do what society wants them to do and not do what society does not want them to do.

If criminal law and governmental regulation together fall short in terms of getting people to do what society wants them to do, it is time to bring them front and center -- the plaintiffs' lawyers, be they the solution from heaven or the parasite from hell.

If, as stated, our tort liability law system has the dual objective of compensating those who are damaged and of punishing anyone with any money who has anything whatsoever to do with a harm that has been inflicted, that system has succeeded in the most royal of royal spades. If anyone, anywhere, anyhow, has experienced any loss or damage, physical, financial, psychological or emotional, and if there is anyone with any money anywhere in the vicinity who could be said to have anything whatsoever to do with the loss or harm, the plaintiffs' lawyers have created the most phenomenonally successful system imaginable for maximizing the amount of money the person experiencing the loss can recover and socking the defendant with staggering if not fatal financial penalties that get more and more incredible.

The only question is, what defense can be mounted of what has been done in the name of sanity and rationality. Or, in other words, is this any way to run a candy store?

The plaintiffs' lawyers would say to us, look, all your criminal laws and all your governmental regulation are not adequate to keep Exxon from perpetrating the Valdez oil spill or to keep the breast implant makers from perpetrating their wrongdoing. You need us, the plaintiffs's lawyers (and our juries and judges), to sock it to Exxon for $10,000,000,000 (that's ten billion dollars) and to the breast implant makers for $4,000,000,000 and to whatever other deep pocket malefactor for whatever ungodly sum we can whip the jury into an emotional frenzy to deliver up to the court. Never mind that it is coming out of the hides of shareholders (which may include many widows and orphans)(remember it's only a small amount on each), or out of the hides of employees through reduced salaries and wages (or perhaps loss of a job if their employer, such as a general aviation aircraft manufacturer, is put out of business by the astounding success of us the plaintiffs' lawyers in working our magic with juries), or out of the hides of customers through higher prices. Never mind that all those individually small amounts that we the plaintiffs' attorneys successfully extract as punishment from all those taxpayers, shareholders, employees and customers, add up to a staggering amount going to a plaintiff who, admittedly deserving of sympathy, has been compensated with compensatory damages, and such money is not going to the government to help beef up the enforcement of its environmental, employee safety and consumer safety laws. We the plaintiffs lawyers are the greatest consumer safety law enforcers and environmental protectors the universe has ever seen, and you need to compensate us accordingly. If you could hire a hundred government prosecutors or government regulators for $75,000 a year apiece ($7,500,000), you are getting nowhere near the deterrent effect we the plaintiffs lawyers achieve when we knock up those shareholders, employees and customers for $100,000,000 in punitive damages and receive our holy one third contingency fee of $33,000,000 for our efforts.

That's what the plaintiffs' lawyers are saying to us. Do you buy it?

First, the taxpayers, shareholders, employees and customers who are ultimately paying the blood money in small amounts are generally innocent. The "guilty" employees who can reasonably be said to have responsibility for what has happened, be they the president of the corporation, or a project supervisor, or a plant manager, are probably only marginally punished if at all. America is notorious for what corporate presidents are paid when their corporations do not perform well, and it is unlikely their treatment will be severe simply because a large punitive damages verdict is won against their company. A project supervisor or plant manager may or may not be fired and may or may not deserve to be fired and may or may not find another job, the nature of his culpability and the precise deterrent effect as to future behavior both likely being murky.

While precise deterrent effect of the tort liability system is murky, the general in terrorem effect is clear. Everyone is petrified of the plaintiffs' lawyers but, like schizophrenic rats in cage, no one has any comfort about what can be done to keep them at bay. The benefits or detriments of the behavioral responses that are engendered throughout the nooks and crannies of our commercial, governmental and personal activities undoubtedly range across the board. I would not doubt that Exxon, as a result of the Valdez litigation, has implemented some oil spill readiness procedures that are desirable. I would also not doubt that there are drugs and medical devices that would be of net benefit to society but that are being kept out of the market because of possible legal liability exposure. I am sure hospitals have instituted procedures that lessen the chances of mistakes being made. At the same time, we have all heard about defensive medicine procedures that are unwarranted except for warding off legal liabilities and that have contributed to the country's health care cost problem.

The foregoing list of behavioral responses can be expanded ad infinitum. In judging our tort law liability system that has such a large impact on people's behavior, a very major consideration needs to be an overall evaluation of how members of society respond in their behavior. To the extent individual responses are counterproductive, disadvantageous or detrimental to the overall social good, the system needs a very close and very critical examination.
Like it or not, I think it is fairly clear and certain that the policy and decisionmaking process that is embodied in the plaintiffs' lawyers, twelve jurors and a judge in a courtroom, multiplied thousands of times over, is seriously deficient. For example, it is my understanding that the general aviation aircraft manufacturing business has been largely put out of business by the plaintiffs' lawyers. Maybe it should be and maybe it should not be, but I have no confidence that the right policy has been implemented in that regard through tort liability litigation, in which that policy question is out of bounds for debate by the parties. I think Congress should investigate and decide the matter, rather than the plaintiffs' lawyers, and their juries and judges. If Congress, after reviewing the pluses and minuses, decides the industry should not be closed down, in so doing Congress implicitly has concluded that the tort law liability system has imposed liabilities that should not have been imposed and Congress would then need to change the law concerning when liability will attach to the industry.

On a more global basis, because so much significance is attached in tort liability to what a corporation knew and when did it knew it, perhaps Congress needs to establish a mammoth repository of corporate information into which corporations could deposit all their studies and other information about products which government regulators could sift through to determine the known risks presented by a product. If, under appropriate administrative procedures, a product is concluded to present undue risks, its manufacture might be prohibited. If the regulators conclude that the benefits of the product outweigh the risks, and/or if the manufacturer makes disclosure of the risks to customers in a manner approved by the regulators, then no liability will attach if the risks in question come to fruition and, as a result, a loss or an injury occurs. I generally have immense antipathy to government regulation, but the foregoing suggestion seems to me far preferable to shareholders, employees and customers being responsible for $10,000,000 in compensatory damages and $100,000,000 in punitive damages because thirty years ago a member of a research team wrote a memorandum discussing a product risk and the corporation concluded the desirability and benefit of the product outweighed the risk.

I also think, if the behavior of a corporation or governmental entity is sufficiently wrongful as to warrant imposing a huge punitive damage award that is paid by largely innocent taxpayers, or shareholders, employees and customers of a corporation, we owe to those taxpayers, shareholders, employees and customers the obligation to target punishment against the persons who are the more responsible parties. If a plant manager knowingly allows his plant to violate environmental laws, and if this is serious enough to sock the innocent shareholders, other employees and customers of the corporation with a $100,000,000 punitive damages award, then surely it is serious enough to make sure you throw the plant manager in jail for a year or five years or something. I have previously suggested criminal law system is pathetically ineffective, and the plaintiffs lawyers may tell me I am naive if I think throwing plant managers in jail will stop him or other plant managers from allowing the environmental laws to be violated at their plants. The plaintiffs' lawyers may similarly contend that the only way Exxon will institute needed oil spill procedures is to stick them with ten billion dollars of punitives in the Valdez litigation. I will limit my response to saying that we should let Congress and our state legislatures debate and decide whether throwing plant managers (and company presidents where warranted) is a more cost effective deterrent or whether plaintiffs' lawyers running around getting $100,000,000 punitive damage awards (with $67,000,000 going in the plaintiff's pocket and $33,000,000 in the lawyer's) is more cost effective, or whether the government should get the $100,000,000 as a fine and spend it on its compliance activities.

By Robert Shattuck

We the citizens know usually we can only expect to be taken advantage of by the politicians and the special interests. The electorate needs to find one of those infrequent election situations where we are given a good collective chance to kick back at this or that politician or special interest that has been particularly egregious in doing a number on us. The tort liability issue in the Alabama Supreme Court justice elections next month is such an opportunity.
It is a great life for the plaintiffs' lawyers. Americans love a lottery, and in our tort liability law system we have gotten a humdinger. Say my child gets kidnapped by a vicious, sadistic child molester, hauled off to the woods, tortured and killed. There is a small probability that the perpetrator will be caught, brought to justice, and be thrown in prison for a long time or executed, but assume no governmental parole officer goofed, there is no one is sight I can sue, and that is the end of the story. In this case I have pulled a losing ticket in the lottery. Now, if I was lucky, I might have had a son who was driving a GM pickup with fuel tanks on the side and who got into a side on accident while drunk, in which the fuel tanks ignited and my son died in a horrible fiery death. In this case, I can hit the jackpot and collect a $50,000,000 punitive damages award against GM for putting the fuel tanks on the side of the truck.

Life is great for the plaintiffs' lawyers because they get to play the maestro of the lottery in ferreting out the "deep pockets" who are around, and collect 33% of the lottery winnings as a reward for their shakedown prowess. (Possibly the 33% compares favorably with the percentage a state that operates a numbers lottery withholds from the lottery ticket receipts before making the payout to the winner, but at least the takeout to the state can be used for the benefit of all citizens.) It's especially great because everyone is forced to buy tickets in the lottery. The prices for the involuntary participation in the lottery may be in the form of higher taxes if a woebegone municipality gets hit with a judgment, say, because an off duty policeman starts using his pistol in the wrong circumstances. Customers of a corporation can be forced to play through higher prices for goods and services that business must charge to cover liability insurance premiums or the legal judgments themselves if a business self insures. If plaintiffs' lawyers successfully hit a business for large punitive damages in, say, a sex discrimination lawsuit, perhaps other employees get to pay for their legal lottery tickets through reductions in pay that are needed to come up with funds to pay the plaintiff or plaintiffs and their attorneys. When you operating a gambling game, nothing is better than having a universe full of involuntary players.

Life is also fun for the plaintiffs lawyers in stoking juries to an emotional fever pitch to uncork a beaut of a damage award without any debate of what the consequences are of their jury verdict, combined with thousands of similar jury verdicts, year in and year out. The minds of the jurors can remain pure and need not be troubled by, hey, if big legal judgment after big legal judgment is piled up against general aviation aircraft manufacturers, maybe they will go out of business and a lot of decent people will lose their jobs. It would be no fun to talk jurors into a whopper of a punitive damages award and having to think about something like that.

And for God's sakes, keep Congress and state legislatures from meddling with the system. We don't want those guys asking why punitive damages should be a windfall to the plaintiff, instead going of to the government for product safety or work safety regulation activities, or why government regulators and government prosecuting attorneys are not paid according to the amount of fines they succeed in collecting or according to the number of years they can throw people in jail for, but plaintiffs attorneys are paid according to how much punitive damages they can hit a defendant for. We don't want legislators considering whether or not better criminal law enforcement or better government regulation is a preferable solution in trying to get corporations to conduct themselves the way society wants them to, as compared to the unpredictable in terrorem effect of the plaintiffs, attorneys and their gigantic, justice as a lottery game. We don't want legislative debate about whether or not the general aviation aircraft manufacturing business should be closed down.

In our government of the grab by the special interests (in which almost all citizens partake in one form or the other, regardless of the enormous waste and possible unfairness that some grabbers are better than others), it is to be expected that the plaintiffs' attorneys will be as formidable as any other special interest in exploiting and protecting their domain. We the citizens know and understand that they are only doing what every other special interest does.
But fair is fair. If a special interest cannot keep their legislators dumb and happy and instead have pushed too hard and too far that even their lawmaking friends cannot stomach the disgust they feel with the snorfing that has gone on at the trough, it is time for the special interest to back off. In such a case, the special interest is engaged in risky behavior if it decides to execute a snazzy "end around" to avoid a legislative body having acted against the group. An "end around" may get the citizens very, very irate.

Alabama's plaintiffs attorneys have recently taken overreaching to new heights. In 1987, our woeful, benighted, if not besotted, Alabama legislature actually took it into its hands and said enough is enough. Alabama's lawmakers concluded a stop sign was needed against an insane, out of control, tort liability law system of justice as a gigantic lottery, in which all citizens are forced to buy their lottery tickets, in order that Alabama plaintiffs attorneys may year in and year out rake in tens and hundreds of millions of dollars of attorneys fees. All had become too disgusting for our legislators to stomach, as nice as those plaintiffs' attorneys are to them. In an insane fit of rationality, our Alabama legislature passed a law that imposed a limitation on punitive damages.
Do you know what the plaintiffs' attorneys then did? Yup, got the Alabama Supreme Court do declare the limitation as unconstitutional, violation of the right to trial by jury or something. Just last year that was. See Henderson v. Alabama Power Company, 627 So. 2d 878 (Ala. 1993).
I mean fair is fair. If something is so rotten and so disgusting that the Alabama legislature passes a law against it, it is really rotten and disgusting, and its proponents should accept how rotten and disgusting they have been and plain back off. But not the Alabama plaintiffs' attorneys.
I know it's rare for we the citizens to be presented with much of an opportunity to really give politicians or a special interest group the real kick in the behind they deserve. But we have one in next month's Alabama Supreme Court justice elections. Give yourself a treat. Find out candidates lined up where in 1993 and lines up where now on the tort liability law issue and limitations on punitive damages, and let the plaintiffs' attorneys and their supreme court justices know that they have overreached just one too many times, that you have really gotten fed up and you are not going to take it anymore, and watch how you cast your ballot on election day in those supreme court justice elections.

Thank you for your immense patience and interest if you have stayed tuned through this multi-part editorial, and may you be rewarded for the same on election day next month.