Saturday, November 24, 2007

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.

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