Thursday, February 12, 2009

APPE follow up

#1 Interchange with one professor:



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
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.

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.

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.

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.

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.

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 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.

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:

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.

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: 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: and, perhaps with some redundancy, here:

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

Robert Shattuck

[the professor to 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.--

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