Thursday, February 12, 2009

APPE follow up

#1 Interchange with one professor:


From: weil@iit.edu

To: RDShatt@aol.com

Sent: 2/2/2009 7:05:37 A.M. Central Standard Time

Subj: RE: APPE Executive Committee: Does the Law Undermine Business Ethics?

You have written to me several times before. I do not understand your ungrammatical and incoherent sentence below that begins “I believe….” Sincerely, Vivian Weil

From: RDShatt
To: weil@iit.edu
Sent: 2/2/2009 8:08:03 A.M. Central Standard Time
Subj: Re: APPE Executive Committee: Does the Law Undermine Business Ethics?

Thank you for replying, Professor Weil.

I reflected about the grammar at the time I wrote the sentence but left it alone. Also I can appreciate that the referent of "obstacle" is ambiguous. I don't know whether it is grammatically correct, but the referent of "that" is "making changes in the civil liability system". One of the definitions I find for "ken" is "range of vision" and I trust the word "ken" is ok.

Let me revise the sentence as follow:
"I believe there is an obstacle to getting such attention because my contention contains a thrust towards making changes in the civil liability system and that is simply beyond the ken of professionals in the business ethics field."

Also, perhaps I expressed myself more clearly in this letter I wrote to ECOA members, of which you may have received a copy.

With the foregoing clarifications, may I repeat my solicitation made in my email concerning whether you, as an academic in the business ethics field, have any comment about what I said in my email [beyond, of course, what you have said below].

Thank you.

Sincerely,
Robert Shattuck

#2 Interchange with another professor:

Dear Mr. Shattuck:

Your article seems to have at least two severe methodological problems: 1) How do you measure the effect of civil liability on business ethics. Without an accurate measure, it is hard to know what effect of any civil liability has. 2) Even with a measure of improved or declining ethics (something more than newspaper stories), there is a problem about measuring cause and effect. Civil liability have grown because of falling ethics, rather than ethics falling because of civil liability rules. Usually, this sort of cause-effect problem can be solved only statistical analysis of data over an extended period--if at all.I'm also curious why you do not extend your argument to the criminal law as well. When civil liability fails, government often falls back on the criminal law--as in the recent failure of a peanut processor in Virginia to meet basic health standards.


Dear Professor______,

Thank you very much for your reply.

I have not progressed to the point of thinking that statistically measuring anything is a predicate to advocating and following a course of action. It would be nice if such measurement could be done, and I have no problem with attempts to do it, but sometimes it is necessary to make one's best evaluation of the choices and act without the benefit of statistical evidence and measurement. For example, President Obama may, without the benefit of statistical measurement, change US policy and practice on torture and interrogation techniques on the basis of a contention that prior practices do not produce a benefit that outweighs the effects of negative world and/or public opinion, of increasing risks of torture applied to our own forces, and of helping terrorist recruitment.

The central contention in my article is that ultimately it is individual human beings who conceive, design and implement unethical and wrongful corporate activities, and that the law can best foster ethical business conduct by focusing on and using available economic resources to ferret out and sanction, whether under the criminal law or the civil law, those individuals who are responsible for the corporate wrongdoing. Instead of that, the civil liability system undermines this focus and distracts and diverts resources away from such focus and thereby ultimately undermines business ethics, as more fully explicated in my article.

Again, thank you for replying.

Sincerely,
Robert Shattuck

[the professor back to me]

You may underestimating the possibilities of statistical measurement. For work on torture, see, for example, Jean Maria Arrigo, “A Utilitarian Argument against Torture,” Science and Engineering Ethics 10.3 (2004):1–30. The best evidence in that area comes from a surprising source, the records of the Inquisition. An administration that had checked what was known before acting might have avoided the disaster the Bush administration brought upon itself and the country.Perhaps if we looked for it, we could find surprising sources for business ethics also. Sometimes we have to act without adequate evidence, but we should avoid such risky conduct wherever possible, don't you think? Changing the civil liability system is a big change. Republican efforts to reduce corporate liability to malpractice suits may have had something to do with the current low status to which business has sunk--not at all what they intended. Claims about what undermines what presuppose theories of human motivation, itself a vexed subject. That's why I am not inclined to rush in the direction you suggest--and why my first impulse is to ask, "What do we think? What do we know? What can we prove?"--



Dear Professor ______,

Thank you very much again for replying again.

I would have to say that I am having a great deal of difficulty in getting ethics academics and professionals just to initiate the process by the first step of considering the matter and asking and trying to answer tentatively your initial "What do we think?" question.

I don't know whether you have any interest in or time for this topic, but, if you do, I would love to dialogue more with you about it.

Sincerely,
Robert Shattuck

Mr. Shattuck:

Here's my take on your argument.

First, I think you have an overly simplified (economist's) view of the business corportations. Let me quote

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.

Most corporations I have interviewed officers of seem to think of themselves as in the business of making something--auto parts, cell phones, turbines, and so on. They want to make enough money to stay in business but they are not interested in "maximizing profit for investors". Indeed, the few companies when I interviewed officers, all MBAs, who held the maximize return position, are out of business. The scandals I studied do not seem to involve employees just doing their job. They were often aware that what they were being asked to do might be illegal, something beyond what an employer can properly ask. All the examples of 'gray areas' that make the news are actually black. This, of course, is just "what I think". But I think you need to put it beside what you think. The facts are themselves a problem in this area.Second, I don't think you have your history right. When government regulation is strict, there's not much need for plaintiff's lawyers. As we enter a world of "deregulation", most things go wrong and there's more work for plaintiff's lawyers. We've just been through 30 years of deregulation, so people may have fallen back on the plaintiff's bar as their last resort in the attempt to get justice. Yet, there has been some attempt to measure the "litigation explosion". The numbers I've seen suggest that the explosion, real enough, is in suits between corporations, not in suits by individuals against corporations. So, here you may have your facts wrong.You also seem at the end of your paper to get your incentives wrong. Civil liability is not about criminal guilt. It is primarily a way to internalize externalities, that is, to make actors pay for the full cost of what they do (especially if they have deep pockets as a result of capturing the positive value of what they do). So, the plaintiff's bar is, by suing, helping to correct for market failure. It would be better if this were done in a less expensive way. But deregulation has cut off most of those other options (the equivalent of the workmen's compensation system). The innocent stockholder whose company has been socked with a big judgment now has an incentive to find better management or change the policies that cost so much money. That's the market regulating itself.Give you something to think about?--

Dear Professor _______,

Thank you once again.

You raise significant points that are deserving of factoring in. I am starved for interlocutors to critique my argumentation, as you have initiated here, and I have great desire for dialogue. I don't, however, want to impose on you and out you off.

To try to keep from put you off, I would like to mention only your point about "gray" or "black."

One of the complaints about plaintiffs lawyers is they prefer that there not be delineation of what is black or white as would allow a person to make decisions in reliance on clear delineations of what is black and what is white. Rather, the plaintiffs lawyers prefer to be in a position to contend for liability (and hence attorneys fees for themselves) on finding ex post facto some possibly plausible basis for contending that something should have been done or should not have been done, and thereby give rise to liability. Further, there is an in terrorem element that results in a settlement without there ever being a determination of what is or is not wrongful action. In my article, I give as an example the Vioxx litigation and say the following:
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.
I have many more examples I would like to discuss, but I don't want to put you off.

Again, I very much appreciate your replying at all.

Sincerely,
Robert Shattuck

[the professor back to me]

The reason I said nothing about those two paragraphs of your is that I agree with them. But I think you have the causal mechanism wrong. The plaintiff's lawyers are basically Democrats. (At least, that's who they give most of their money to most years.) The people who cut back on FDA funding and loosened test standards were Republicans (who also attack plaintiff's lawyers). The lawyers' fees you lament are a byproduct of Republican deregulation, not the work of Democratic plaintiff's lawyers. So, I don't regard the plaintiff's lawyers are bad guys in this--any more than I would regard flies as the cause of garbage piling up. History is important in the analysis of social problems. The law journals actually contain a good deal of empirical research on this issue.I'm a philosopher; so, I only dabble in empirical stuff when I have. And, no doubt it's also because I'm a philosopher that I am not put off by an intelligent argument. But I do think you need to look at the empirical literature before you suggest cures for the problem you identify. Note: I agree that the problem exists. But, since I disagree about the cause, I may disagree about the cure.--


Dear Professor ____,

You continue to raise significant points.

In our system of government, the democratically elected legislative branch is supposed to enact the laws, the executive branch is supposed to execute the law, the regulatory function is something of a hybrid of the legislative and executive functions, and the judicial branch is supposed to be limited to applying the laws and regulations that have been enacted or promulgated to specific cases and interpreting such laws and regulations where there is ambiguity. The judicial branch is not supposed to make additional or different law or regulations from those enacted and promulgated by the legislative and executive branches.

An argument the plaintiffs' lawyers have is that the legislative branch and regulatory apparatus are corrupt and fail to represent properly their public constituency in the policy decisions they make, the laws they enact, the regulations they promulgate, and their enforcement of the same.I agree that the legislative branch is corrupt and the regulatory apparatus is tainted.I would only like the plaintiffs' lawyers to say, "We agree with your analysis and arguments about the civil liability system and the reforms that are needed, but you need to do something about the corrupt legislatures in the United States."To which I say to the plaintiffs' lawyers, "Let us be join arms and use some of your billions of dollars of revenues to proclaim to the public the corruption of its legislatures and campaign to defeat all incumbent legislators on general principles."

It continues to be a pleasure dialoguing with you.

Sincerely,
Robert Shattuck

[the professor back to me]

Wasn't this a line in Man from La Manche?--"'To which I say to the plaintiffs' lawyers, "Let us be join arms and use some of your billions of dollars of revenues to proclaim to the public the corruption of its legislatures and campaign to defeat all incumbent legislators on general principles."'

[me to the professor]

Why I feel so strongly and Why I feel so strongly about plaintiffs lawyers

[the professor to me]

Why do you think plaintiff's lawyers have "fooled" anyone? Their status is relatively low in polls (though above used car sellers). Stirring up litigation has been looked upon for many centuries. Are you sure you're not kicking someone who's already down (rather than, like Don Quixote, fighting an "unwinnable fight", as I first thought)? Anyway, step 1 has got to be to check your facts


Dear Professor _____,

Again, thank you for replying.

I think the main "fact" that you are referring to is the extent to which the current condition of the civil liability system is an organic societal reaction to compensate for a long period of deregulation, as opposed to being a result of plaintiffs lawyers aggressively molding the system to expand their litigation domain and to increase their riches derived from that system which they have done without due regard to societal interests (which require balancing) in the civil liability system and in ways detrimental to those societal interests and how they are balanced.

I am not sure how one goes about establishing the above "fact" one way or the other. My inclination would be to survey and evaluate, on an individual basis or in a more collective way, legal cases that transpire and ask how well societal interests are being served or are being ill served in those legal cases, and in the latter case why are they being ill served.

I think societal interests were ill served in the Vioxx litigation that I use as an example in my article. I think you indicated you agreed with me. If you are interested, go to http://www.overlawyered.com/ for an excellent chronicle and compendium of cases and developments in the civil liability system, start reviewing the same, and ask yourself how well societal interests are being served in balanced way in the cases you read about. I will be more than pleased to discuss with you what you find and think.

Sincerely,
Robert Shattuck

[the professor to me]

My point about the "fact" was that I've seen articles in law journals that did systematic studies on a large scale, for example, measuring increase in various classes of cases, comparing payouts over time using inflation-adjusted data, and so on. Your method tends to pick up the foam on the surface of the sea, missing the larger reality beneath.--


Dear Professor _____,

The leading authors of whom I am aware are Eisenberg and Miller. This link lists Eisenberg's articles:
http://library2.lawschool.cornell.edu/facbib/faculty.asp?facid=46&alphapage=0

There are a number of articles I would like to read. The below article on the list particularly jumps out, but all I can get free online is the abstract.

"Attorney Fees in Class Action Settlements: An Empirical Study" (with Geoffrey P. Miller), 1 Journal of Empirical Legal Studies 27-78 (2004).

Abstract: Study of two comprehensive class action case data sets covering 1993-2002 shows that the amount of client recovery is overwhelmingly the most important determinant of the attorneys' fee award. Even in cases in which the courts engage in the lodestar calculation (the product of reasonable hours and a reasonable hourly rate), the client's recovery generally explains the pattern of awards better than the lodestar. Thus, the time and expense of a lodestar calculation may be wasteful. We also find no robust evidence that either recoveries for plaintiffs or fees of their attorneys increased over time. The mean fee award in common fund cases is well below the widely-quoted one-third figure, constituting 21.9 percent of the recovery across all cases for a comprehensive data set of published cases. A scaling effect exists: fees constitute a lower percent of the client's recovery as the client's recovery increases. Fees are also correlated with risk: the presence of high risk is associated with a higher fee, while low risk cases generate below-average fees. Fees as a percent of class recovery were found to be higher in federal than state court. The presence of "soft" relief (such as injunctive relief or coupons) has no material effect on the fee, whether or not the soft relief was calculated in the quantified benefit for the class used as the basis for computing the attorney's fee. The study also addressed costs and expenses. Like fees, these displayed significant scale effects. The paper proposes a simple methodology by which courts can evaluate the reasonableness of fee requests.

By coincidence, I recently objected in a class action in which Professor Miller filed an affidavit. I wrote Professor Miller [this email]


I have not heard back from Professor Miller yet and will not be surprised if I don't hear back.

Sincerely,
Robert Shattuck

[the professor to me]

Remind me again of the point of this letter. You have an article below, published in a respectable legal journal, that seems to show that the total rewards plaintiff's lawyers win has not been rising (in the low inflationary period 1993-2002), that contingent fees seem to average 21.9% rather than the 1/3 I generally hear about, and that recent court attempts to push down fees as a way to reduce the attractiveness of lawsuits for a contingency--the only recourse of the poor and middle class--the lodestar calculation--doesn't seem to work. You do not contest these claims directly. Instead you wrote Miller asking to cite a book responding to your articles. I'd have thought you could do your own literature search. No wonder he didn't answer.By the way, I sometimes don't get answers even when I send a piece to another scholar asking for comment. So, I'd advise you now that you have got your list of articles to read, to go and read them. Focus on the arguments, not on the personalities.-

[me to professor]

No, the article is Miller's.

It was a matter of coincidence that Miller filed an affidavit in a class action lawsuit in which I was an objector in the lawsuit, and I wrote the email in question to Miller telling him that I was an objector and had strong anti-plaintiffs lawyers views and inquiring what book (or article) he considered a good statement of the case in support of the plaintiffs lawyers and that responded to well known books and arguments that state the case against plaintiffs' lawyers. I am not aware of any such pro-plaintiffs lawyers books that do. I have asked various persons to be cited to such books and have not been directed to any books. I have googled and thus far have not turned up anything.

One excellent book stating the case against plaintiffs lawyers is The Rule of Lawyers by Walter Olson. I found this highly critical review of Olson's book: http://www.manhattan-institute.org/html/_nylawjournal-lawyers_rule.htm. I disagree strongly with the review. Maybe I will write to the author of the review. I have done my own writings which I think address at least some of the reviewer's criticisms. You can find my writings here: http://robertshattuck.blogspot.com/search/label/M.%20My%20writings and, perhaps with some redundancy, here: http://robertshattuck.blogspot.com/2007/11/then-i-got-verbose-with-professors.html

I wonder which one of you and me is going to get worn out first.

Sincerely,
Robert Shattuck

[the professor to me]

Me.--

[me to the professor]

Thank you very much for your time, Professor ____. I will move on in search of my next interlocutor. Hope you have a great year. Sincerely, Robert Shattuck

[the professor to me]

You're welcome.--

Follow up with Prof. Miller

From: RDShatt
To: geoffrey.miller@nyu.edu
Sent: 2/9/2009 8:06:44 A.M. Central Standard Time
Subj: Your articles regarding class action attorney' fees

Dear Professor Miller,

In follow up to my email of January 30th to you, I wish to indicate I am interested in some of your articles about class action attorneys' fees, such as "Attorney Fees in Class Action Settlements: An Empirical Study", 1 Journal of Empirical Legal Studies 27-78 (2004). I would like to read the entire article but thus far have accessed only this abstract:

Abstract: Study of two comprehensive class action case
data sets covering 1993-2002 shows that the amount of client recovery is
overwhelmingly the most important determinant of the attorneys' fee award. Even
in cases in which the courts engage in the lodestar calculation (the product of
reasonable hours and a reasonable hourly rate), the client's recovery generally
explains the pattern of awards better than the lodestar. Thus, the time and
expense of a lodestar calculation may be wasteful. We also find no robust
evidence that either recoveries for plaintiffs or fees of their attorneys
increased over time. The mean fee award in common fund cases is well below the
widely-quoted one-third figure, constituting 21.9 percent of the recovery across
all cases for a comprehensive data set of published cases. A scaling effect
exists: fees constitute a lower percent of the client's recovery as the client's
recovery increases. Fees are also correlated with risk: the presence of high
risk is associated with a higher fee, while low risk cases generate
below-average fees. Fees as a percent of class recovery were found to be higher
in federal than state court. The presence of "soft" relief (such as injunctive
relief or coupons) has no material effect on the fee, whether or not the soft
relief was calculated in the quantified benefit for the class used as the basis
for computing the attorney's fee. The study also addressed costs and expenses.
Like fees, these displayed significant scale effects. The paper proposes a
simple methodology by which courts can evaluate the reasonableness of fee
requests.

It seems to me it is one thing to investigate and determine what the facts show about amounts of attorneys' fees historically and whether fees in a particular case currently are in line or not in line with precedent, but it is also even more important to evaluate the benefits and detriments of the litigation to not only the plaintiffs but also to members of the public who are not parties to the litigation but for whom the litigation has consequences, in order to reach a determination of whether the litigation justifies the amount of the attorneys' fees.

My blog goes on ad nauseum why I think the amount of attorneys' fees is not justified.

Have you written an article, or can you cite me to an article, that does the kind of evaluation I am talking about and concludes that the amount of attorneys' fees is justified?

Thank you very much.

Sincerely,
Robert Shattuck


From: millerg@exchange.law.nyu.edu
To: RDShatt@aol.com
Sent: 2/9/2009 3:51:31 P.M. Central Standard Time
Subj: RE: Your articles regarding class action attorneys' fees

our paper was not normative in the sense of what fees should be but rather just asked what they are.
[Message delivered by NotifyLink]

Sunday, February 8, 2009

ABA Class Action Committee

Form of email sent to members of the ABA Class Action and Derivative Suits Committee


From: RDShatt
To:
Sent: 5/2/2008 _____P.M. Central Daylight Time
Subj: Pro bono request re Xerox class action securities lawsuit

Dear Mr. _____,

I am writing to you in your capacity as a member of the ABA Class Action and Derivative Suits Committee who is identified as being in the securities law field.

I have written a letter to The Honorable Alvin W. Thompson of the Connecticut federal district court (which letter you can find here) about a proposed settlement in a Xerox class action securities lawsuit. Further, I have contacted the Xerox Corporate Secretary and have gotten the subject matter of my letter put on the agenda for the Xerox Corporate Governance Committee at its May 22, 2008 meeting.

Among other things, I have solicited the Corporate Governance Committee to consider the manner in which the proposed settlement creates at least three categories of Xerox stockholders and bondholders and what the fiduciary obligations of the directors are to these categories of Xerox stockholders and bondholders.

My pro bono request to you is whether you would give me your views about such fiduciary obligations and whether such obligations can all be properly discharged in an approval by the directors of the settlement agreement.

Ms. Sandra Goldstein of Cravath, Swaine & Moore represents Xerox in the litigation and I have put the foregoing questions to her and asked her whether she will be in a position to advise the independent directors on them. Ms. Goldstein has replied that she is not at liberty to discuss the matter with me, so I do not know whether she considers herself in a position to render such advice to the independent directors. I would be more than happy to try to convert this pro bono request to a fee paying request to you by passing your name along to the Xerox Corporate Secretary if a lawyer is needed to advise the independent directors.

Thank you for your attention to this email.

Sincerely,
Robert Shattuck

Saturday, February 7, 2009

Association of Corporate Counsel

From: RDShatt
To: robert.roach@nyu.edu
Sent: 5/5/2008 3:17:39 P.M. Central Daylight Time
Subj: ACC Corporate Compliance & Ethics Committee

Dear Mr. Roach,

I am trying to contact the leadership of the ACC Corporate Compliance & Ethics Committee relative to my below described ideas and activities.

If you find anything in my ideas and activities meritorious of consideration, comment and/or action by the Committee, I would very much like to have discussion with you about the same.

Thank you.

Sincerely,
Robert Shattuck

From: RDShatt
To: merklinger@acc.com
CC: JHansen@theecoa.org
Sent: 4/29/2008 11:15:30 A.M. Central Daylight Time

Subj: Fwd: Request for email addresses

Dear Mr. or Ms. Merklinger,

I have not heard anything from you in response to the below email, so I guess I will proceed to find alternative ways to contact the leadership of the Corporate Compliance & Ethics Committee.

Thank you.

Sincerely,
Robert Shattuck

From: RDShatt
To: merklinger@acc.com
CC: JHansen@theecoa.org
Sent: 4/21/2008 4:27:03 P.M. Central Daylight Time
Subj: Request for email addresses

Dear Mr. or Ms. Merklinger,

I am an amateur meddler who would like to request from you the email addresses for the leadership of the Corporate Compliance & Ethics Committee of the Association of Corporate Counsel.

The reason for this request is that I am engaged in an effort to bring about dialogue between corporate ethics officers and senior management about a subject that I have been pressing corporate ethics officers to consider and think about. The subject in question is a disconnect that I discern between the law and the propagation of ethical business behavior in corporations, the latter being the main purpose of corporate ethics officers. This disconnect is explained at some length in an article I have written entitled "Does the Law Undermine Business Ethics?", and that you may find at this link: Does the Law Undermine Business Ethics?

I have been in touch with Ms. Lisa Rickard, the President of the Institute for Legal Reform of the US Chamber of Commerce, urging that her organization, in the pursuit of its goals, have an interface with corporate ethics officers on this subject. Also, I have had extensive contact with the Ethics & Compliance Officers Association, and I see that Mr. John Hansen, who is a director of the ECOA and who is familiar with me, is Vice Chair of the Corporate Compliance & Ethics Committee.

The corporate counsel who are in the leadership of the Corporate Compliance & Ethics Committee manifestly have an interest in business ethics, and I would like to broach my ideas to these corporate counsel to see what they think about them.

If you could provide me with the email addresses for the leadership, I will be most appreciative. If you prefer not to provide me the addresses, but are willing to forward this email to the leadership, that would be very satisfactory too. If you are not is a position to provide me the email addresses or to forward this email to the leadership, please advise me of that fact so I can proceed to get in touch with the leadership by alternative means.

Thank you very much.

Sincerely,
Robert Shattuck

Email to ALEC Board members and state chairs

From: RDShatt
To:
Sent: 12/8/2008 ______. Central Standard Time
Subj: ALEC- Greed, anger, reform, repair, lawyers, judges

Greed, anger, reform, repair, lawyers, judges

Dear Rep. _________,

Our county is surveying the wreckage in its financial system and a serious threat to its economic functioning, and it is learning unhappy lessons.

One theme coming out is how compensation structures led to abusive disregard for the property of other parties and resulted in great harm.

The culprits that gave the country subprime included banks and mortgage companies that ginned up gobs of current income for themselves without due regard for whether the home purchaser could afford the house in the long run. This was enabled by investment banks and bankers who, for large underwriting fees and personal compensation, engineered the packaging of mortgage loans into securities that could be sold to investors around the world, which took the risk off the banks and mortgage companies, and offloaded it onto distant investors who, as things turned out, did not understand what they bought. Not all the packaged loans could be sold off, and in order to make their underwriting deals work and get their fees and hefty personal compensation, the management at investment banks used their shareholders' equity to take up some of the securities and stuck that undue risk on their shareholders. The subprime people also included the rating agencies that compromised their ratings work for the compensation they received from the underwriters. In Washington, the executives at Freddie Mac and Fannie Mae, in order to grow their exhorbitant compensation packages, were more than happy, using the taxpayer's nickel, to have Freddie Mac and Fannie Mae inflate the bubble that burst and that became the debacle.

The foregoing litany, which could be extended, has focused anger on compensation structures for corporate executives, managers and other persons that resulted in commercial banks, mortgage companies, investment banks and other parties doing things without proper regard for the assets, property and value belonging to other parties, such as home buyers, investors, shareholders and taxpayers, and that ultimately did trillions of dollars of financial damage and put the nation's economy at risk.

As the country looks for ways to dig out of its problems, and as a new administration comes to Washington to lead the effort, the country is getting immersed in a new economic regimen of governmental investment and oversight that was inconceivable a year ago. The government, investors and public are taking a close look at compensation structures that led to damage to the economy. Where public funds have been brought to bear, the government has dictated limitations on executive compensation and the payment of dividends to stockholders.

With with all this attention to trying to understand the causes of the crisis, including the role of compensation structures, and how best to repair and rebuild the economy, this review should include looking at the country's legal system, the costs it imposes on the country, the compensation structures for plaintiffs' lawyers, and how the same has harmed the economy in the past and will hinder its rebuilding.

For many years, there has been strenuous contention that the legal system has been exploited by the plaintiffs lawyers to enrich themselves by imposing unjustifiable costs for the economy. For an excellent chronicle of this, see http://www.overlawyered.com/. Further consider how the plaintiffs' lawyers compensation structure has resulted in undermining the inculcation of ethical conduct by employees of corporations (see Does the Law Undermine Business Ethics? ). Consider also the destruction of shareholder value in Citigroup that was in the news last week. Citigroup shareholders who are angry at Citigroup executives for having compensation structures that led them to expose the shareholders to inappropriate risk in order to get underwriting business and thereby justify management paying themselves exhorbitant compensation should consider how something similar took place related to Citigroup's involvement with Enron earlier in the decade, and how the plaintiffs' lawyers, fueled by their compensation structure, complicitly enabled Citigroup's management and piled on to inflict even more damage on the hapless Citigroup shareholders. See Enron's smartest guys, crooks, victims and other saps.

With the Obama administration coming to Washingon, there is concern that the lawyers are going to be better positioned to promote their exploitive ways for enriching themselves at the expense of the rest of the society. With much repair work needed for the economy, and with the change in the national administration, now is more important than ever to bolster publicity and scrutiny of how the plaintiffs lawyers exploit the existing legal system to enrich themselves by imposing wasteful costs on the rest of the society and the need to lessen the economic drag of these costs that will hinder the country in repairing its economy and regaining the jobs and personal income that all of the citizens want.

Further, judges are the immediate overseers of the legal system. Just as other government regulators are under scrutiny for how well they performed in their oversight of activities that contributed to the current crisis, so judges ought to be scrutinized for how they have performed in overseeing the legal system and the costs that have been imposed on society. Primary attention should be given to the compensation structure of plaintiffs' lawyers and the deleterious effects of that. If those compensation structures were changed, and the amount of wasteful litigation lessened, the benefits would include savings of defense lawyers fees. Also judges could be more hard nosed about the fees they allow in bankruptcy cases, which would provide aid in rehabilitating and recycling business assets during the period of economic repair.

Robert Shattuck
3812 Spring Valley Circle
Birmingham, AL 35223
(205) 967-5586

American Legislative Exchange Council

The American Legislative Exhange Council is a nonpartisan individual membership organization of state legislators which favors federalism and conservative public policy solutions.

Its website states that its mission is...

...to advance the Jeffersonian principles of free markets, limited government, federalism, and individual liberty, through a nonpartisan public-private partnership of America's state legislators, members of the private sector, the federal government, and general public.

...to promote these principles by developing policies that ensure the powers of government are derived from, and assigned to, first the People, then the States, and finally, the Federal Government.

...to enlist state legislators from all parties and members of the private sector who share ALEC's mission.

...to conduct a policy making program that unites members of the public and private sectors in a dynamic partnership to support research, policy development, and dissemination activities.

...to prepare the next generation of political leadership through educational programs that promote the principles of Jeffersonian democracy, which are necessary for a free society.

ALEC has a Civil Justice Task Force and the website says its members are at the forefront of the efforts to restore fairness and predictability to the civil justice system. The Task Force has worked diligently to promote systematic fairness in the courts through bills to discourage frivolous lawsuits, to fairly balance judicial and legislative authority, to treat defendants in a consistent manner, and to install transparency and accountability in the trial system. Since the inception of its Disorder in the Court project in 1999, ALEC members have introduced more than 400 bills based on ALEC's legal reform model legislation. The Civil Justice Task Force’s work has resulted in numerous policy publications, state-level issue briefings, expert witness testimony and educational workshops during ALEC meetings.

Cintas Institute for Business Ethics at Xavier

Email sent to director of CIBEX

From: RDShatt
To: fiorelli@xavier.edu
Sent: 1/31/2009 1:13:11 P.M. Central Standard Time
Subj: CIBEX Advisory Board : Does the Law Undermine Business Ethics?

Dear Professor Fiorelli,

I have sent you several emails over the past two years to which I have not received any reply.

I would be interested in communicating with CIBEX Advisory Board members.

The gist of the communication I would like to send them is as follows:


Dear ________,

I contend that our country's civil liability system undermines business ethics. I have elaborated this contention at length in this article: Does the Law Undermine Business Ethics?

I am trying to get the attention of academics and other professionals in the ethics
field concerning my article.

I believe there is an obstacle that my contention contains a thrust towards making changes in the civil liability system and that is simply beyond the ken of
professionals in the business ethics field.

As a business ethics professional, do you have any comments?

Thank you very much.
Would you be in a position to provide me email addresses for any of the CIBEX Advisory Board members (who are listed below), or to forward this email to them directly?

Thank you.

Sincerely,
Robert Shattuck




Jeff CooperSVP & Chief Compliance OfficerITT Educational Services, Inc.
Denise Kuprionis, Esq.VP Corporate Secretary/Director of Legal Affairs The E.W. Scripss Company
Jocile Ehrlich President Better Business Bureau
John KuzmanJr. Chief Compliance Officer and Assistant General Counsel AK Steel
Robin Everhart Vice President Corporate Compliance Cintas Corporation
Tim Lutz Vice President Internal Audit and CCO Convergys Corporation
Paul FiorelliDirectorCintas Institute for Business Ethics at Xavier Xavier University
Michael Moser Vice President and CCO Western & Southern Financial Group
Michael Flowers Vice President & Corporate Counsel The Midland Company
Laura RandallCoordinatorCintas Institute for Business Ethics at Xavier Xavier University
Sandy Hughes Global Privacy, Compliance and Ethics Executive The Procter & Gamble Company
Vanessa Vargas-Land, Esq. VP, Chief Compliance Officer Chiquita Brands International, Inc.
Julie Janson Vice President, Corporate Secretary Chief Ethics and Compliance Officer Duke Energy Corpoartion
Tom Wiles Managing Director Corporate Compliance Duke Energy Corporation
Don Koenig Vice President Corporate Responsibility Catholic Healtcare Partners

Association of Professional Responsibility Lawyers

Form of email sent to APRL Board members and officers

From: RDShatt
To: _______________
Sent: 1/31/2009 _______P.M. Central Standard Time
Subj: To APRL Board and officers: Does the Law Undermine Business Ethics?


Dear Mr. _________,

I contend that our country's civil liability system undermines business ethics. I have elaborated this contention at length in this article: Does the Law Undermine Business Ethics?

Do you, as a lawyer who has taken a special interest in ethics, have any comments about my contention?

Thank you very much.

Sincerely,
Robert Shattuck

Association for Practical and Professional Ethics

Form of email sent to APPE Executive Committee

From: RDShatt
To:
Sent: 1/31/2009 ______ A.M. Central Standard Time
Subj: APPE Executive Committee: Does the Law Undermine Business Ethics?



Dear Professor ____________,

I contend that our country's civil liability system undermines business ethics. I have elaborated this contention at length in this article: Does the Law Undermine Business Ethics?

I am trying to get the attention of academics and other professionals in the ethics field concerning my article.

I believe there is an obstacle that my contention contains a thrust towards making changes in the civil liability system and that is simply beyond the ken of professionals in the business ethics field.

As an academic or other business ethics professional, do you have any comments?

Thank you very much.

Sincerely,
Robert Shattuck

Email to Professor Geoffrey Miller

From: RDShatt
To: geoffrey.miller@nyu.edu
Sent: 1/30/2009 6:18:52 P.M. Central Standard Time
Subj: Papadakis v. Northwestern Mutual Life

Dear Professor Miller,

I was a non-professional objector in the above case. I have strong anti-plaintiffs' lawyers views that I have expounded in this blog. My particular objection in the above case (which includes as Exhibits other class action objections I have made) is appended below.

I have read your affidavit.

I am writing to inquire what single book or single article you would refer me to as being the best statement of the case in defense of plaintiffs' lawyers and that is responsive to the various arguments made against plaintiffs lawyers, such as by Walter Olson and Philip Howard, and by myself.

Thank you.

Sincerely,
Robert Shattuck

Monday, February 2, 2009

Papadakis v. Northwestern Mutual Life

Objections of Robert & ______ Shattuck in Papadakis v.The Northwestern Mutual Life Insurance Company.

Our names, addresses and telephone numbers are Robert and ______ Shattuck, 3812 Spring Valley Circle, Birmingham, AL 35223, (205) 967-5586. We do not have an attorney. All or some of the policy numbers are: _______________________. Our objections are stated below. We do not intend to appear in the Final Settlement Hearing.

Statement of objections and reasons

In exercising its discretion as to approval of the settlement and attorney fees, the court is obligated under the law to be reasonable and not to approve something that has no reasonableness.

Reasonableness is properly determined with reference to a standard based on social utility and cost benefit principles. If there is little or no social utility of the litigation or if it has disutility, attorney fees that are approved should not greatly exceed the social utility. Social utility is not subject to hard and fast quantification, and a subjective evaluation and weighing of factors and considerations is unavoidable.

The basic question is what is the social utility of this litigation and how does that compare to the cost of the litigation in terms of legal fees of all the plaintiffs' and defense attorneys and the time burden on non-attorneys, such as defendant's employees, who are called on to participate in the litigation.

It is contended that this litigation has little or no social utility and, in fact, has a significant component of negative disutility.

First, this litigation does not promote an objective of the law to lessen corporate wrongdoing, and this litigation is in fact is counterproductive to that end and it undermines the fostering and inculcation of ethical business conduct. Extensive argumentation in support of this contention is set out in Exhibit A hereto, entitled "Does the Law Undermine Business Ethics?"

Further this litigation is very questionable in serving the social utility of "doing justice." The main reason it is questionable is that it is likely there has been insufficient attention paid to the extent to which this litigation is about making transfers of amounts by and among parties in interest who are not culpable of any wrongdoing. It is possible there has been wrongdoing by corporate employees or other individuals, and as a result some innocent parties have received a benefit from the wrongdoing and other innocent parties have had a loss or cost imposed on them. Whether or not there has been wrongdoing, the case should be considered as an unjust enrichment case, and nothing more. The facts and circumstances of all the persons who have been unjustly enriched and at whose expense they have been unjustly enriched are likely highly variable and somewhat indeterminate, and it is likely there has not been adequate investigation, or opportunity for argument, as to persons who are contended to have been unjustly enriched, the particular facts about whether or not he was unjustly enriched or, if he was unjustly enriched, about whether more is being taken from him in the litigation than the amount by which he was unjustly enriched.

The below objectors have been in the plaintiff class in several class action lawsuits in which there has been wrongdoing or alleged wrongdoing and in which the litigation resulted mainly in transfers by and among innocent parties in interest who were not culpable of any wrongdoing and in which little or no attention was paid to which of the innocent parties were unjustly enriched, the amount of their respective unjust enrichments, and whether there was any correlation between the amount required to be borne by an innocent party in interest and the amount by which the party was unjustly enriched. These class action lawsuits had no or negative social utility on balance and various objections were made to them. Because these objections are illustrative about the lack of social utility, and may serve as enlightenment about the lack of social utility of this litigation, these objections relative to these other class action lawsuits are appended below as Exhibit B (a credit card currency conversion fee class action lawsuit), Exhibit C (a Charter cable TV internal wire maintenance fee), Exhibit D (a Xerox securities class action), and Exhibit E (Middlesex County Retirement System) and also as Exhibit F an analysis of a Tyco securities class action for which there was not status as a member of the plaintiff class and as Exhibit G an analysis of certain Enron litigation for which there was not status as a member of the plaintiff class .

If the social utility of this litigation is to be evaluated and judged under the foregoing criteria of (i) does it tend to lessen or tend to promote corporate wrongdoing, and (ii) to what extent does it serve justice by having innocent parties in interest who have been unjustly enriched to pay over their unjust enrichment, it is probably the case that more factual development is needed as to clause (ii). Defendant's counsel would be an appropriate attorney to do that factual development.

Absent such further factual development showing that more plaintiffs' fees are warranted based on social utility, we contend that the social utility of this litigation does not warrant plaintiffs attorneys fees in excess of $1,000,000.

Robert Shattuck
_____ Shattuck