SEC and 'No-Admit' Settlements

• 

• OPINION
• May 21, 2013, 6:56 p.m. ET

Why the SEC Needs 'No-Admit' Settlements

The Wall Street regulator would be weaker without them.

By RUSSELL G. RYAN

Last week, in a letter to the heads of the Securities and Exchange Commission, the Department of Justice and the Federal Reserve, Sen. Elizabeth Warren (D., Mass.) criticized the SEC practice of settling its civil litigation without requiring the defendant to admit wrongdoing. She said this practice reduces the Wall Street regulator's leverage and forces it "to settle on terms that are much more favorable to the wrongdoer."

Ms. Warren's criticism has long been shared by others on Capitol Hill and elsewhere who believe "no-admit" settlements let defendants off without sufficient accountability, obscure the public record, and deprive private plaintiffs the ability to piggyback on admissions to win monetary damage awards.

Several federal judges have also challenged the SEC practice. In one prominent case in 2011, Judge Jed Rakoff of the district court in Manhattan took the rare step of refusing to sign off on a $285 million settlement between the SEC and Citigroup, calling it "pocket change" for the bank. That refusal has been appealed, and a decision is expected soon.

The SEC and defense lawyers counter that no-admit settlements allow the agency to secure prompt and certain sanctions that are comparable to what regulators could reasonably attain through costly litigation—litigation that the SEC might actually lose. They contend that even without admissions, SEC settlements typically involve greater transparency and accountability than civil settlements by other federal agencies, some of which not only don't require an admission but actually allow the settling party to explicitly deny wrongdoing.

Largely overlooked by both sides, however, are two unintended consequences likely to flow from court-mandated admissions of wrongdoing in SEC cases.

First, as in other facets of life, when government policy makes something more difficult and costly, rational people seek alternatives to avoid the increased burden and expense. In the realm of SEC law enforcement, the most obvious alternative would be to settle more cases through the SEC administrative process, which requires no oversight by the courts.

Yet administrative sanctions and consequences have historically been viewed as less severe than federal court judgments. For that reason, defense lawyers often bargain with the SEC to avoid federal court by having their clients' cases resolved administratively. Because administrative settlements involve no judicial scrutiny, they invite the potential for reduced transparency and accountability when compared with settlements that require the imprimatur of an independent federal judge.

A second unintended consequence of mandatory admissions of wrongdoing would be weaker settlements overall. SEC settlements result from intense back-and-forth negotiations over many interrelated terms, with each side seeking the most advantageous result possible on the terms that matter most to them. Like any other negotiation, the parties eventually reach a delicate compromise at a point where each side is willing—just barely—to accept the overall deal.

Among many terms negotiated in an SEC settlement, the no-admit clause is one of the most important to the defense. A policy change requiring an admission of wrongdoing would, in essence, take this settlement term off the table. It would therefore force the SEC to compromise elsewhere in the bargain to maintain the fragile equilibrium that would have prevailed without the admission.

Simply put, given the critical importance of the no-admit clause to the defendant, it is naive to believe the SEC could bargain for the exact same charges, penalties and other sanctions plus a public admission of wrongdoing. Instead, to settle the same case the SEC would have to agree to either less serious charges, reduced financial penalties, shorter industry suspensions, or some combination of the foregoing.

The inevitable end result: Required admissions of wrongdoing but lighter overall sanctions in a less accountable venue—presumably not what critics of current SEC practice have in mind. Those clamoring for admissions of wrongdoing would therefore do well to remember the adage: Be careful what you wish for.

Mr. Ryan, a former assistant director of the SEC's Division of Enforcement, is a partner with the law firm King & Spalding.

A version of this article appeared May 22, 2013, on page A15 in the U.S. edition of The Wall Street Journal, with the headline: Why the SEC Needs 'No-Admit' Settlements.

Baby Products Antitrust Litigation

From: RDShatt@aol.com
To: mwb@blbglaw.com, steven@blbglaw.com, rkaplan@kaplanfox.com, ffox@kaplanfox.com, dkessler@ktmc.com, gcastaldo@ktmc.com, bkarp@paulweiss.com, dkramer@paulweiss.com, asoloway@paulweiss.com, jbernstein@labaton.com, rcs@cabaniss.com, pfruin@maynardcooper.com, blatham@bassberry.com, larry.polk@sutherland.com, kevinlogue@paulhastings.com, plinden@kmllp.com
Sent: 5/15/2013 5:39:29 A.M. Central Daylight Time
Subj: Suggestion of judicial notice of Baby Products Antitrust Litigation

BY US MAIL
United States District Court
Southern District of New York
Daniel Patrick Moynihan United States Courthouse
500 Pearl Street
New York, NY 10007-1312

Clerk of the Court
United States District Court for the Western District of Tennessee
Clifford Davis/Odell Horton Federal Building
167 North Main Street, Room 242
Memphis, Tennessee 38103

IN RE BANK OF AMERICA CORP. Master File No. 09 MDL 2058 (PKC)
SECURITIES, DERIVATIVE, AND
EMPLOYEE RETIREMENT INCOME
SECURITY ACT (ERISA) LITIGATION
(Southern District of New York)

IN RE CITIGROUP SECURITIES Master File No. 07 MDL CIV 9901 (SHS)
LITIGATION (Southern District of New York)

In re Regions Morgan Keegan Closed-End Fund Litigation, No. 07-cv-02830 SHM dkv (Western District of Tennessee)

SUGGESTION OF JUDICIAL NOTICE OF BABY PRODUCTS ANTITRUST LITIGATION

To the Honorable United States District Court of the Southern District of New York:
To the Honorable United States District Court of the Western District of Tennessee:

I previously submitted an objection in the In re Regions Morgan Keegan Closed-End Fund Litigation in which I was a member of the plaintiff class and amicus curiae objections in the IN RE BANK OF AMERICA CORP.SECURITIES, DERIVATIVE, AND EMPLOYEE RETIREMENT INCOME SECURITY ACT (ERISA) LITIGATION and the IN RE CITIGROUP SECURITIES LITIGATION.

I urge the Honorable Courts to take judicial notice of the order issued in February of this year by the Third Circuit Court of Appeals, which vacated the district court's order approving the settlement in the Baby Products Antitrust Litigation. (The settlement website for this litigation is http://www.babyproductsantitrustsettlement.com/ and there is a link on the website to the Third Circuit's order.)

The Third Circuit said the following in its opinion in support of its order:

Most importantly, [the lower court] did not know the amount of compensation that will be distributed directly to the class. Removing attorneys’ fees and expenses, approximately $21,500,000 . . . of the settlement were designated for the class, but only around $3,000,000 of that amount actually will be distributed to class members, with the remainder going to cy pres recipients after expenses relating to the administration of the fund are paid.

* * * *

Though the claims period had concluded, counsel did not provide this information to the Court, preventing it from properly assessing whether the settlement was in the best interest of the class as a whole.

A gist of my objections in the instant cases is that there is an inadequate or faulty informational basis for evaluating what the settlements in the cases accomplish, and that the Honorable Courts are thereby prevented from properly assessing the settlements.

In particular, it has been submitted to the Honorable Courts that there is no information about the extent to which selling shareholders will walk away with windfall gains that correspond to losses suffered by purchasers of stock, and hence no information about the extent to which there is merely shifting around of losses so that purchasers who suffered greater losses get a portion of those losses shifted to purchasers who suffered lesser losses or shifted to shareholders or other innocent persons who neither gained nor had losses from stock purchases or sales. Also, while the plaintiffs seem to color the cases and the settlements as having deterrence value that should be relevant to approval of the settlements, there is a deficit of information or proof about whether there is any deterrence value.

The Honorable Courts should follow the lead of the Third Circuit Court of Appeals and not approve the settlements unless the informational deficiencies are remedied for the Honorable Courts.

I am sending a paper copy of this email by U.S. mail to the Honorable Courts. I am sending this email electronically (and not by U.S. mail) to the parties' counsel in the Citigroup case, the Bank of America case, and the Regions Morgan Keegan case per the above email addresses.

Respectfully submitted,
Robert Shattuck
3812 Spring Valley Circle
Birmingham, AL 25223
(205) 967-5586

Email to Student Bar Associations

[This is the form of an email I am sending to law school Student Bar Associations.]

Subj: State attorney general offices should expand and hire more lawyers

Dear _______,

I am a retired lawyer in Alabama. I am making advocacy to the Alabama Attorney General, to Alabama law school communities, and to Alabama lawmakers to the effect that certain class action and other "public" litigation that is pursued by plaintiffs' lawyers should instead be taken on by the attorney general's office, and that the attorney general's office should hire more lawyers (on a salaried basis) to handle the additional work.

I wish to extend this advocacy into other states besides Alabama.

For further information about the work I have been doing in Alabama, please go to this link (related to the Alabama Attorney General), this link (related to the University of Alabama and Cumberland law schools), and this link (related to my Alabama State Senator and Representative).

If your Student Bar Association has an interest in being kept advised of my work and possibly involving itself in the same, please contact me.

Thank you.

Rob Shattuck
Birmingham, AL

[follow up email to ABA Law Student Division]
From: RDShatt@aol.com
To: abalsd@americanbar.org, jmcpherson@naag.org
Sent: 6/9/2013 8:58:36 A.M. Central Daylight Time
Subj: State attorney general offices should expand and hire more lawyers
As the National Association of Attorneys General knows, I am a gadfly with too much time on my hands, who does a lot of emailing and blogging. I wish to let the ABA Law Student Division know that I am disseminating this email to law school Student Bar Associations. If the ABA Law Student Division would like to take an interest in this, I would be pleased to discuss what I am doing with the ABA Law Student Division.
Thanks.
Rob Shattuck
Birmingham, AL

[also submitted to Debra Cassens White, ABA Journal author of

THESE TEN STATES HAVE THE WORST LAW-GRAD GLUT

Click here: Debra Cassens Weiss - Authors - ABA Journal]

Dear Ms. Weiss,

You might be interested in this email that I am sending to law school Student Bar Assoications: http://robertshattuck.blogspot.com/2013/05/email-to-student-bar-associations.html

Thank you.

Rob Shattuck
Birmingham, AL

Ted Frank's class action objection work

February 20, 2013, 1:59 PM ET
• 
  

Court Nixes $14 Million Lawyer-Fee Request

ByAshby Jones

When last we checked in with class-action lawyer Ted Frank, he was fresh off a significant win in a class-action lawsuit involving bluetooth headsets.

Mr. Frank (pictured), who makes a living objecting to class-action settlements he thinks are unfair, has struck big again.

The U.S. Court of Appeals for the Third Circuit on Tuesday nixed a $35 million class-action settlement reached between a class of plaintiffs and a handful of defendants, including Toys “R” Us and Babies “R” Us.

The plaintiffs had accused Toys “R” Us and Babies “R” Us of violating antitrust laws by coercing manufacturers to jack up their prices on a handful of high-end baby products.

In early 2011, the parties struck a settlement in which $14 million would go to the plaintiffs’ lawyers, and the remainder — about $21 million — would go to the class members.

Thing is, the class members, each of whom were entitled to receive a percentage of what they spent on the products whose prices had allegedly been inflated, only claimed about $3 million of the funds. Under the terms of the settlement, the remaining $18.5 million or so would go to a handful of organizations not involved in the litigation. Such arrangements, in which money is given to charities or other organizations in lieu of actual class-members, are called “cy pres” settlements.

Mr. Frank objected to the deal on behalf of a handful of class members, arguing that the attorneys’ fee was disproportionately large when compared to the class’s recovery.

On Tuesday, the Third Circuit voided the lower court’s approval of the agreement. The lower court, ruled the Third Circuit, did not know just how much was going to the class members when it made its determination. Therefore, wrote the Third Circuit, the lower court “did not have the factual basis necessary to determine whether the settlement was fair to the entire class.”

The court went on:

Most importantly, [the lower court] did not know the amount of compensation that will be distributed directly to the class. Removing attorneys’ fees and expenses, approximately $21,500,000  . . . of the settlement were designated for the class, but only around $3,000,000 of that amount actually will be distributed to class members, with the remainder going to cy pres recipients after expenses relating to the administration of the fund are paid.

Though the claims period had concluded, counsel did not provide this information to the Court, preventing it from properly assessing whether the settlement was in the best interest of the class as a whole.

The court sent the case back to the district court to reconsider its decision in light of these facts.

“It’s a good win,” Mr. Frank told Law Blog on Wednesday. “It was clear that the plaintiffs’ lawyers were going to be the big winners in this, and that there was no telling where the cy pres money was going to go.”

Gene Spector, the lawyer who argued the case at the Third Circuit on behalf of the class, did not immediately respond to a request seeking comment.

Mark Weyman, who argued the case on behalf of the defendants, did not immediately respond to a request seeking comment. A spokeswoman for Toys “R” Us did not immediately respond to a request seeking comment.

According to a recent American Lawyer story, Mr. Frank estimates he has lodged 42 objections in 39 cases and claims 23 wins, partial wins, or other settlement improvements.

For instance, last June, at Mr. Frank’s urging, the U.S. Court of Appeals for the Seventh Circuit in Chicago tossed a settlement in a class action against directors of Sears Holdings Corporation.

• LAW JOURNAL
• April 14, 2013, 9:05 p.m. ET

Dispute Arises Over Cost of Temp-Help Lawyers

Citigroup Case Focuses on Markup for Contract Lawyers in Class-Action Suits

By JENNIFER SMITH

Attorneys for a group of plaintiffs who sued Citigroup Inc. want to bill their clients as much as $550 an hour for contract lawyers who sifted through reams of documents in the case.

The problem, according to one legal gadfly, is that the plaintiffs' firm probably paid no more than $60 to $75 an hour for the help.

Ted Frank, a litigator who often objects to class-action settlements, is taking issue with the nearly $100-million cut plaintiffs' attorneys are seeking of a proposed settlement between Citigroup and investors who claim the bank hid the extent of its exposure to toxic mortgage debt. Mr. Frank says the requested share—16.5% of the $590 million settlement—is based in part on bloated billing for thousands of hours of mostly routine legal work, and would be a windfall that rewards the lawyers at the expense of their clients.

T.J. Kirkpatrick for The Wall Street Journal

Litigator Ted Frank is contesting a proposed Citigroup settlement.

The dispute is putting a spotlight on the practice of marking up the price of temporary legal help in class-action suits, sometimes by extraordinary margins. And it raises questions about methods used to calculate how big a share of the winnings should go to plaintiffs' firms, which pay for legal costs up front, taking on risk in hopes of a big payday later.

Law firms increasingly rely on armies of contract attorneys to review the massive amounts of material generated during the discovery phase of litigation. Firms might hire lawyers directly, paying them $25 to $40 an hour, or through staffing agencies that bill $50 to $80 an hour for their services, depending on an attorney's qualifications and the complexity of the assignment.

Such arrangements can save the firms a lot of money, but the savings aren't always passed on to the client. Markups are permissible as long as the total fee remains "reasonable" and the contract lawyers' work is charged to the client as a fee for legal services (not as an expense), according to a 2000 nonbinding ethics opinion issued by the American Bar Association, which cited similar opinions by bar groups in Virginia, Colorado and the District of Columbia.

A law firm might charge a client more because the firm is professionally liable for the contract lawyer's work, or because it provided the temps with office space or computers, said Stephen Gillers, a law professor and legal-ethics expert at New York University School of Law. "All of that justifies a markup," he said. "The question is how much."

Kirby McInerney LLP, the New York firm representing the lead plaintiff in the Citigroup case, said its fee request is fair given the risks it assumed by taking on the case.

"The fact that the billing rates of contract attorneys are in excess of what the law firm pays them is not unusual or untoward," said Ira Press, a partner at Kirby McInerney. "That's to cover overhead and have a profit built in."

The average contract lawyer rate it cites—about $465 an hour—reflects the going price in the New York legal market for lawyers with similar expertise, the firm said. Much of the work done by Kirby McInerney's contract lawyers required an understanding of sophisticated financial structures and concepts, it said in court filings. All told, the contract attorneys worked more than 61,000 hours on the Citigroup case.

But Mr. Frank and others say that much of the work contract lawyers perform in such cases requires no special expertise, and that plaintiffs' firms use their labor to artificially inflate legal fees. "We have not heard from a single paying client in the New York area who pays $500 an hour for contract attorneys," Mr. Frank, a Citigroup shareholder, said at a hearing on the fee request last week in Manhattan federal court before Judge Sidney H. Stein.

Mr. Frank's efforts in the Citigroup case are funded by a nonprofit group he founded called the Center for Class Action Fairness. A handful of other parties have also filed objections to the settlement on other grounds; a ruling on the settlement is expected in coming weeks.

In big securities cases like the Citigroup matter, judges often evaluate plaintiffs' law-firm fee requests by stacking that amount up against a calculus known as a lodestar: the number of hours the lawyers worked on the case, times the reasonable hourly rate for each of the lawyers, with a further multiplier whose size depends on how much risk the firm incurred by taking on the case.

How much Kirby McInerney paid its temp lawyers isn't the point, Judge Stein said at last week's hearing. "The issue," he said, "is what a reasonable client would pay."

To support its fee request, Kirby McInerney has cited more than a dozen large securities class actions where judges approved settlements where the average rates for contract lawyers weren't much lower than those for firm associates, according to court filings. For instance, the average hourly fee for contract lawyers in the Enron Corp. case settled in 2008 was $305.83, compared with $349.90 for the average associate.

Judges rarely question the market rates in such applications because they "don't want to open Pandora's box," said Lester Brickman, an expert on class-action litigation and professor at Yeshiva University's Benjamin N. Cardozo School of Law.

To be sure, plaintiffs' firms aren't the only lawyers who make a profit off contract lawyers. Defense firms also use them for document review and other tasks, and they too may charge clients more than what they paid for those services, according to two litigators at major U.S. law firms who said arrangements vary depending on the client, the firm and the case.

But in other instances firms pass on contract-lawyer costs directly to clients as an expense. Some big corporations and financial institutions even cut their own deals with staffing agencies, and direct firms to use those providers exclusively.

For example, in the Citigroup case the bank hired its own contract lawyers, according to Citigroup's lawyer, Brad Karp of Paul, Weiss, Rifkind, Wharton & Garrison LLP. "I believe the cost was $25 to $35 an hour," Mr. Karp told Judge Stein at the hearing. "But Citigroup is a large vendor and has enormous market power."

Big law-firm clients also typically negotiate such costs at the front end of a case. That doesn't always happen with class actions, where agreements with lawyers who take such cases on a contingency basis might have looser parameters.

"A corporation whose law firm hires contract lawyers can protect itself, it's quite sophisticated," said Mr. Gillers of NYU. "This is an after-the-fact claim that the plaintiffs' firms make in their application to the court…The question is, who's watching the lawyers."

Write to Jennifer Smith at jennifer.smith@wsj.com

A version of this article appeared April 15, 2013, on page B5 in the U.S. edition of The Wall Street Journal, with the headline: In Dispute: The Price of Help.

U. of Ala., Cumberland law schools

From: RDShatt@aol.com
To: krandall@law.ua.edu
Sent: 4/27/2013 6:49:05 A.M. Central Daylight Time
Subj: Fwd: My work's relevance to the Law School
Dear Dean Randall,
I have not had a response from you to the below email.
I wish to purvey to the Law School community some of the things that are set out in my email. I would like to have your reaction first, but, if that will not be forthcoming, I will need to proceed without the benefit of your views. Kindly let me hear from you about this.
Thank you.
Rob Shattuck
Birmingham

From: RDShatt@aol.com
To: krandall@law.ua.edu
Sent: 3/22/2013 12:00:35 P.M. Central Daylight Time
Subj: My work's relevance to the Law School
Dear Dean Randall,
I wish to utilize the filing of my shareholder objection in the Regions Morgan Keegan closed end funds litigation to review a couple significant matters that have been implicated in my work and that should be of interest to the Law School.
I. The oversupply of lawyers
The legal profession is confronted with a problem, possibly becoming a structural problem, of an oversupply of law students and young lawyers, and of the established members in the profession battling to keep up their positions and incomes.
At the same time, the wealth seems greater than ever at the top end of the scale.
My efforts have focused on plaintiffs' lawyers and class action lawsuits. The original purpose of the judicial branch was to adjudicate disputes between private parties, with the consequences being confined to those private parties. This original purpose has been greatly exceeded, and class action lawsuits partake of a much greater "public" character, having significant economic consequences for disparate "real parties in interest", including employees, customers, and shareholders, and having the effect of virtual legislation or regulation that governs many other actors I, and others, contend there is inadequate accountability and oversight in this "public" litigation, and society is being poorly served on balance. I especially have argued that a faux deterrence justification has been asserted and accepted by the courts.
All of this is driven by exorbitant legal fees being approved by the courts, for which it is contended commensurate value is not being received.
I believe a corrective to the foregoing would be an expansion of state attorneys general offices to supplant plaintiffs' lawyers in taking on this "public" litigation. State attorneys general would be more accountable to the public, and a lot of young lawyers could be hired on a salaried basis if the exorbitant fees in these class action lawsuits were redirected. See this entry in my blog.
This idea should be of interest to the Law School in confronting the problem of an oversupply of young lawyers and law students.
II. Rethinking corporate law and governance
There has been much complaint about culpable officers and employees not being held accountable for corporate wrongdoing. This flows over to the question of the efficacy of entity level liability versus officer and employee liability for deterring corporate wrongdoing. I have spent a lot of time on this issue the past couple of years. See this Statement of project.
If it is believed that there should be greater individual accountability of culpable officers and employees, there are significant questions about how feasible that is, which in turn calls for rethinking of corporate law and governance.
That should be of interest to some professors at the Law School, including yourself.
III. The Law School's role
If my efforts are meritorious from a public interest perspective, I think there are meaningful questions about what role the Law School should play, such as being a forum for debate, and encouraging professors to formulate their own views on the issues and communicating the same in a public way, including to lawmakers and judges.
I am telling the Alabama Securities Commission and the Retirement Systems of Alabama that they should be crying "bloody murder" about what is going on in some of these securities class action lawsuits. See this blog entry. It would be helpful if one or more Alabama law professors had an interest to speak up and say yea or nay.(in a measured way).
Just some thoughts for you, Dean Randall.
Thanks.
Sincerely,
Rob Shattuck
Birmingham

From: RDShatt@aol.com
To: jlcarrol@samford.edu
Sent: 4/27/2013 6:50:36 A.M. Central Daylight Time
Subj: Fwd: My work's relevance to the Law School
Dear Dean Carroll,
I have not had a response from you to the below email.
I wish to purvey to the Law School community some of the things that are set out in my email. I would like to have your reaction first, but, if that will not be forthcoming, I will need to proceed without the benefit of your views. Kindly let me hear from you about this.
Thank you.
Rob Shattuck

From: RDShatt@aol.com
To: jlcarrol@samford.edu
Sent: 3/22/2013 5:47:41 P.M. Central Daylight Time
Subj: My work's relevance to the Law School
Dear Dean Carroll,
I wish to utilize the filing of my shareholder objection in the Regions Morgan Keegan closed end funds litigation to review a couple of significant matters that have been implicated in my work and that should be of interest to the Law School.
I. The oversupply of lawyers
The legal profession is confronted with a problem, possibly becoming a structural problem, of an oversupply of law students and young lawyers, and of the established members in the profession battling to keep up their positions and incomes.
At the same time, the wealth seems greater than ever at the top end of the scale.
My efforts have focused on plaintiffs' lawyers and class action lawsuits. The original purpose of the judicial branch was to adjudicate disputes between private parties, with the consequences being confined to those private parties. This original purpose has been greatly exceeded, and class action lawsuits partake of a much greater "public" character, having significant economic consequences for disparate "real parties in interest", including employees, customers, and shareholders, and having the effect of virtual legislation or regulation that governs many other actors. I, and others, contend there is inadequate accountability and oversight in this "public" litigation, and society is being poorly served on balance. I especially have argued that a faux deterrence justification has been asserted and accepted by the courts.
All of this is driven by exorbitant legal fees being approved by the courts, for which it is contended commensurate value is not being received.
I believe a corrective to the foregoing would be an expansion of state attorneys general offices to supplant plaintiffs' lawyers in taking on this "public" litigation. State attorneys general would be more accountable to the public, and a lot of young lawyers could be hired on a salaried basis if the exorbitant fees in these class action lawsuits were redirected. See this entry in my blog.
This idea should be of interest to the Law School in confronting the problem of an oversupply of young lawyers and law students.
II. Rethinking corporate law and governance
There has been much complaint about culpable officers and employees not being held accountable for corporate wrongdoing. This flows over to the question of the efficacy of entity level liability versus officer and employee liability for deterring corporate wrongdoing. I have spent a lot of time on this issue the past couple of years. See this Statement of project.
If it is believed that there should be greater individual accountability of culpable officers and employees, there are significant questions about how feasible that is, which in turn calls for rethinking of corporate law and governance.
That should be of interest to some professors at the Law School.
III. The Law School's role
If my efforts are meritorious from a public interest perspective, I think there are meaningful questions about what role the Law School should play, such as being a forum for debate, and encouraging professors to formulate their own views on the issues and communicating the same in a public way, including to lawmakers and judges.
I am telling the Alabama Securities Commission and the Retirement Systems of Alabama that they should be crying "bloody murder" about what is going on in some of these securities class action lawsuits. See this blog entry. It would be helpful if one or more Cumberland law professors had an interest to speak up and say yea or nay.(in a measured way).
Just some thoughts for you, Dean Carroll.
Thanks.
Sincerely,
Rob Shattuck

Alabama State Sen. Blackwell; Rep. Carns

From: RDShatt@aol.com
To: sb@sladeblackwell.com, jwcarns@yahoo.com
Sent: 5/2/2013 7:52:38 A.M. Central Daylight Time
Subj: Fwd: The economy, plaintiffs' lawyers, and the Attorney General's office
Dear Senator Blackwell and Representative Carns,
I am a constituent of yours. I believe that certain class action and other "public" litigation that is pursued by plaintiffs' lawyers should instead be taken on by the state attorney general's office. I have written General Strange about this, per the below email. I hope you will read the email, and, if you are persuaded by what I say, you will employ your legislative offices to advance the objectives of my advocacy.
Thank you.
Sincerely,
Rob Shattuck
3812 Spring Valley Circle
Mountain Brook, AL 35223

From: RDShatt@aol.com
To: constitutentaffairs@ago.state.al.us
Sent: 4/29/2013 10:51:02 A.M. Central Daylight Time
Subj: The economy, plaintiffs' lawyers, and the Attorney General's office
Dear Mr. Loftin,
Besides the specific matter I contacted the AG's office about recently, I have been making advocacy that class action and other "public" litigation that is pursued by plaintiffs' lawyers should instead be taken on by state AG offices.
I had some particular communications in 2011 with the AG's office about this, which communications you may find here in my blog. I am resuming on the this, including by contacting my Alabama state Senator and state Representative, and further contacting law school deans, and I want to let General Strange know about that.
In Birmingham, we are currently being inundated by TV commercials trolling for a variety of medical injury claims to prosecute, and billboard advertising by plaintiffs' lawyers seems to have increased.
Lots of struggling continues in the economy.. That includes lawyers struggling, which could explain the increased advertising.
The question for our lawmakers and for government prosecutors and regulators (such as the Attorney General), and for all the non-lawyer citizens, is whether societal interests are being properly served by everything the plaintiffs' lawyers do. Proposals for medical malpractice reform seem to be on the table constantly, and the debilitated state of the economy and the problems of governmental debt and deficit may be heightening the attention currently. See this report: States Debating Innovative Approaches to Medical Malpractice Reform | HealthFlock.
I don't know exactly where General Strange stands on this. I hope he and Alabama lawmakers are on the side of societal interests and not on the side of plaintiffs' lawyers interests.
Thank you again.
Sincerely,
Rob Shattuck

Perjury in the courtroom

• 

• March 26, 2013, 7:10 PM ET

The Manhattan ‘Perjury Project’

ByJacob Gershman

Reuters

What do you know about lying?

It’s a question for Manhattan civil litigators and trial judges participating in a research project overseen by the city’s district attorney, Cyrus Vance Jr.

More than a thousand judges and lawyers have been asked to fill out a confidential online survey seeking their help in “assessing the prevalence, significance, and effect of perjury and false statements in the New York County civil justice system.”

The study was developed by the Manhattan district attorney’s office with a six-figure grant from the Alfred P. Sloan Foundation. The lead investigator for the project is Steven A. Cash, a Washington, D.C. attorney and security consultant.

There’s not a lot of hard data on how many people are lying under oath in civil litigation. Mr. Vance’s office says it expects to report the results in a report by the end of the year.

Matthew Lifflander, a commercial litigator and counsel to SNR Denton, wrote an op-ed in Tuesday’s Wall Street Journal about what he described as the “rampant” and costly problem of perjury in civil cases.

Prosecutors occasionally try to make an example out of celebrities, like Martha Stewart and Barry Bonds, but those cases are the rare exception. He writes:

Why are fraud and perjury so rampant? Because prosecutors are reluctant to devote limited resources to prosecutions, which most often arise in commercial cases. Lawyers in civil cases who bring likely perjury cases to a district attorney rarely make much headway.

Mr. Lifflander offers a few suggestions to shift incentives and deter lying, including by imposing a “small tax” on large personal-injury judgments that would pay for an “independent team” of perjury-fighting prosecutors.

• 

• OPINION
• March 25, 2013, 7:06 p.m. ET

Matthew Lifflander: The Economic Truth About Lying

How much money could be saved if perjurers feared being held accountable for their words?

By MATTHEW L. LIFFLANDER

Every day, in courtrooms across America, crimes are committed in front of judges and juries. The crime is perjury, intentionally giving false testimony under oath. It usually goes unpunished. The only time you hear about perjury or obstruction of justice being prosecuted, it seems, is when the government wants to nail a prominent person and doesn't have much else to work with. Just ask Martha Stewart or Scooter Libby or Barry Bonds.

Plenty has been written about police who lie under oath to convict criminals. Relatively little has been said about the commercial side of perjury and its cousins in dissembling, such as filing fraudulent Medicare claims. These crimes deprive victims of justice, at enormous cost to individuals, companies and taxpayers. Perjury in particular demeans the judicial system, but enforcement of laws against it is statistically de minimis.

The result: People lie in legal matters with seeming impunity. Courthouse dishonesty is nothing new—"Perjury, The National Sin" was published in London in 1689. Yet in that book the unnamed author deplored widespread violations of an oath to God. In the modern era, the matter merits serious attention because of the economic impact of dissembling under oath and in sworn statements. Millions, if not billions, of dollars could be saved if people worried more about being punished for public prevarication. It would cost relatively little to instill such fear.

The immediate victims of the crime are other litigants, but the economic consequences of successful false testimony and other kinds of misrepresentation are passed on to the public directly by adding to the cost of goods and services. Liability insurance premiums include the significant expense of settlements, judgments and defense costs for litigation decided on the basis of fraud and deception. According to the 2008 report of the "Coalition Against Insurance Fraud," nationwide insurance fraud of all kinds amounts to $80 billion a year, including $6.8 billion (or 18%) of bogus auto insurance claims for bodily injury and property damage combined.

Health care is another liar magnet. The U.S. Attorney in Manhattan revealed in October 2011 an investigation into Long Island Railroad workers' fraudulent disability claims adding up to millions of dollars. As of January, 32 people had been indicted, with 16 guilty pleas involving perjury, health-care fraud and obstruction of justice.

Chad Crowe

An FBI report on financial crimes for the 2010-11 fiscal year calculated that fraudulent billing to health-care payers, Medicare, Medicaid and private health insurers is between 2% and 10% of total health-care expenditures. The conservatively estimated total of the rip-off: $2.4 trillion (14% of GDP). Types of fraud the FBI investigates include billing for services not rendered, "upcoding" reimbursable services, performing unnecessary services, adding tests to generate high fees, kickbacks and pharmaceutical drug diversion. These resulted in 736 federal convictions of health-care fraud, $1.2 billion in restitution, $1 billion in fines and over $1 billion in civil settlements. Given the scale of the total deceit, those amounts are relatively minor.

Taxpayers are burdened by excessive municipal tort claims, a significant portion of which are based on fraud. In 2011, New York City paid $550 million in personal-injury and property-damage tort settlements and judgments to claimants—about $70 per resident. City lawyers have previously said that up to 10% of the claims against the city involve fraud or misrepresentation.

Multiply New York City's personal-injury claims expenses by any number of other American cities and it becomes clear that American taxpayers are spending billions on fraudulent claims.

For several years, I have made a habit of asking personal-injury trial lawyers about their actual experience with perjury or fraudulent documents in litigation. The consistent answer: At least 25% of cases, though some insist that the perjury and fraud rate goes as high as 50%.

Just a few of the most common examples include: fakers caught by videotaped surveillance; plaintiffs claiming medical problems attributable to the accident until the defendant discovers medical records showing the same injury had been treated long before the accident; a defendant tells a story under oath that differs from the one he told the investigating officers at the accident scene; an eyewitness is shown to have been elsewhere when the accident occurred.

Why are fraud and perjury so rampant? Because prosecutors are reluctant to devote limited resources to prosecutions, which most often arise in commercial cases. Lawyers in civil cases who bring likely perjury cases to a district attorney rarely make much headway. Prosecuting criminals whose transgressions are more dramatic is understandably more appealing.

Maybe if prosecutors across the country were made aware of the problem's extent, and the economic costs involved, they would be more inclined to take action. To that end, investigations on the state or congressional level into the harmful economic effects of perjury would help draw attention to the matter. The Manhattan district attorney is currently studying the extent of the problem, with a report expected later this year.

Here are some practical steps to rein in the perjuring plague:

• Create a fund specifically for the prosecution of perjurers and other public liars by imposing a small tax on large personal-injury judgments. The money would be used to form an independent team of prosecutors, both on the federal and state level, whose sole mission is to provide a resource to go after those who lie under oath at trial or when making claims.

• Establish a new statutory civil tort for those damaged during litigation by deliberate fraudulent documents or intended false testimony under oath, allowing victims to recover actual and punitive damages and legal fees.

• To avoid having to launch criminal investigations, authorize civil trial judges to punish through fines or sanctions those proven to have perjured themselves in a civil case, and encourage judges to use their authority to adjust the size of judgments when perjury is established.

Surely many other strategies could be developed to combat perjury and the filing of fraudulent claims. The first step toward finding a solution is taking an honest look at the nation's problem with telling the truth.

— Mr. Lifflander, a lawyer, is counsel to SNR Denton and author of "The Impeachment of Governor Sulzer" (SUNY Press, 2012).

A version of this article appeared March 26, 2013, on page A13 in the U.S. edition of The Wall Street Journal, with the headline: The Economic Truth About Lying.