There is black and white in the tort law. A test of our legal and governmental institutions is whether a capacity exists to see the black and white and to act in a responsive manner. For a long time the nation's legal profession and its legislatures, regulatory agencies and criminal law apparatus have exhibited an abominable collective failure. This is properly reportable to the citizenry.
What is black and white in the tort law?
It is black and white that a civil society rightfully seeks mechanisms for compensating its members in certain situations when they suffer physical and economic harms.
It is black and white that the body politic also rightfully seeks to regulate the activities of its members to lessen harms they may do to one another and to achieve a deterrent effect by punishing those whose deliberate or negligent actions cause damage to others.
It is black and white that our society has at its disposal a variety of mechanisms for providing compensation to members who experience losses. These include private insurance arrangements, welfare programs, natural disaster relief, charities and a civil law liability system.
It is black and white that our body politic has an extensive governmental regulatory regime and a criminal law system that regulate the activities of society's members to lessen the damage they may do to one another and to punish in the name of deterrence those who deliberately or negligently cause harm.
It is black and white that no payments are "free," and all the payments come out of someone's pocket. The range of sources of the payments includes private insurance premiums, taxes paid to the government, gifts made to charities, and higher prices for goods and services so businesses can cover the liabilities that are imposed on them, or lower wages for employees of the businesses or reduced profits for their owners.
It is black and white that economic resources are scarce, not all losses can be fully compensated to the extent a caring society would wish, and society is confronted with an extraordinarily complex (and frequently heart wrenching) task of deciding who should get compensated how much for what losses and from what source of payment. Examples are innumerable. Soldiers are asked to give up their lives for their country or suffer grievous and lasting injuries and for whom the government must decide how much tax monies should be provided in the way of compensation. Yearly tens of thousands of mothers and fathers die of cancer and other diseases, leaving children deprived of needed financial resources and critical elements of a nurturing family environment; and society must decide what to do about the losses these families suffer. Fifty thousand people are killed annually on the nation’s highways, the extent and cost of disabling injuries can only be guessed at, and society must have ways to provide some remedial compensation. Other losses for which society can well wish to provide compensation result from natural disasters, other accidents, potentially beneficial medical procedures, physical and economic crimes, drug, alcohol and gambling addictions, extreme social and educational deprivation, mental illnesses, and environmental pollution. Society cannot come anywhere close to making everyone entirely whole for all their losses, and a caring society will want to be judicious in allocating the scarce resources that are available among all the potentially deserving recipients of compensatory payments.
Not as black and white, but still quite obvious, is that, when it comes to regulating the activities of society's members and meting out, in the name of deterrence, monetary fines and jail sentences as punishments, society thinks it would be wrong for government regulators and prosecutors to be paid according to how much in fines they collect or how much jail time they get people sentenced for. Also, regulatory fines do not go into private pockets but rather into the government’s coffers and are available for carrying out its regulatory activities.
That is the black and white.
What then are the failings of the legal profession and of legislatures, regulatory agencies and the criminal law system?
The failings are discernable in connection with a civil jury in Hale County, Alabama, awarding $500,000,000 in punitive damages to three plaintiffs who were lied to by Whirlpool Corporation to the effect that the plaintiffs would have to make payments for about three years for a satellite dish, which would total roughly $1000, where in fact the contract called for payments for about 4-1/2 years totalling about $1600, or, in other words the plaintiff was to be cheated out of $600.
There should be no doubt that the job of the legislature of Alabama, the state's regulatory agencies and its criminal law system includes endeavoring to protect Alabama citizens from Whirlpool lying to customers and cheating them out of $600.
Accordingly, one could conclude that, if it is needed for the state of Alabama to resort to a $500,000,000 punitive damage verdict against Whirlpool in order to protect Alabama citizens, there has been an abominable failure of the Alabama legislature, regulatory agencies and criminal law apparatus in doing their job of regulating Whirlpool's activities and imposing fines and jail sentences to deter Whirlpool from doing what it did. A $500,000,000 punitive damages verdict seems preposterous overkill. Before resorting to that, it would behoove the citizens of Alabama first to make a wholesale eviction from office of the incumbent legislature, regulatory agencies, and criminal law apparatus, and replace them with a new set of legislators, regulators, prosecutors and judges to see if the new group could do better in dealing with Whirlpool so that a $500,0000,000 punitive damage verdict can be foregone. Further, if new officials are not successful and it is concluded that such a penalty is ultimately needed, hopefully the new officials would have the sense to arrange for the penalty to be paid into the state's coffers and be available to support regulatory efforts generally for the benefit all Alabama citizens, instead of allowing the penalty to be poured into the pockets of three private plaintiffs and their attorneys.
The possibility needs to be recognized, however, that there has not been such an egregious job failure on the part of the legislature, regulators and criminal law system as is suggested above. Conceivably it is a sham argument that $500,000,000 punitive damage verdicts are needed as a result of failure by the legislature, regulatory agencies and criminal law apparatus in regulating the activities of society's members and meting out punishments for deterrent purposes. The argument may be a pretense to distract from something else that is going on with $500,000,000 punitive damage verdicts. The truth of the matter may be that the civil liability system has been shanghaied by a bunch of greedy lawyers who are running it for the purpose of enriching themselves, and $500,000,000 punitive damage verdicts are reflective only of how successful they have been in achieving their objective, and not at all reflective of a need society has as a result of any egregious and irremediable failure of the regulatory agencies and criminal law apparatus.
The problem is that, if this alternative explanation of things is correct, and the first suggested job failure is not so egregious as suggested, then the legislators, regulators, prosecutors, and judges are guilty of a second failure that would be equally deserving of condemnation. This second failure would be the failure to stand up and defend themselves, and say the truth of the matter, to wit, that the regulatory regime and criminal law apparatus are not so deficient, the argument that they are irremediably deficient to such a degree that $500,000,000 punitive damage verdicts are needed is a sham and subterfuge, a bunch of greedy lawyers has hijacked the civil law liability system for their own enrichment, and that system needs to be reclaimed by and for the people in order for it to serve properly society’s legitimate goals of judiciously providing compensation for losses that citizens suffer.
A further possibility here is that Alabama’s legislators, regulators, prosecutors and judges do not understand sufficiently what is black and white about tort law and may not know of the pretense argument being made by the lawyers who have hijacked the civil liability system. If there is a lack of understanding, a partial excuse would exist for those officials failing to stand up in their own defense and failing to tell the public the truth about what is really going on.
Such a partial excuse would, however, point to a final failing, and perhaps the worst failing, which would be that of the legal profession as a whole. That profession is best trained to know and understand what is black and white in the tort law, to examine whether significant deficiencies in the regulatory and criminal law systems exist, to evaluate whether any inadequacies are so substantial and irremediable that alternative means must be found to regulate and to mete out punishments, to decide whether $500,000,000 punitive damage verdicts are needed, and to reach conclusions about whether the civil liability system has been hijacked by greedy lawyers who are running it to enrich themselves and to the detriment of serving society's purposes. Surely the legal profession's obligations to society at large would include informing the legislatures, regulators, prosecutors and judges about such matters. This would be particularly so if those officials lack an adequate understanding of things, and thus are not able to state their own defense against the hijacking lawyers who would assert that $500,000,000 punitive damage verdicts are needed, and further are not able to find the way to seize back the hijacked civil liability system from those lawyers so that the system can serve the citizens the way it should. For the legal profession not to fulfill such an obligation would seem the worst failing of all those considered here.
There is black and white in the tort law. For a long time an abominable collective failure has occurred on the part of the legal profession and the legislatures, regulatory agencies and criminal law apparatus to recognize the black and white and to act responsively for the citizens they serve. One cannot be entirely optimistic that these parties will sort out anytime soon their respective failings. The legislature in Alabama may be in the process of taking a positive step. The citizens, in all events, should be informed of what is black and white and should know about the collective failure that has gone on for many years.
Saturday, November 24, 2007
ALABAMA SUPREME COURT ELECTIONS 1994
ALABAMA SUPREME COURT ELECTIONS 1994 - Part 1
By Robert Shattuck
We the citizens know usually we can only expect to be taken advantage of by the politicians and the special interests. The electorate periodically needs to find one of those infrequent election situations where we are given a good collective chance to kick back at this or that politician or special interest group that has been particularly egregious in doing a number on the rest of us. The tort liability issue in connection with the Alabama Supreme Court justice elections next month is such an opportunity.
In order to avoid dealing in vague references, I will define what a "special interest" is. A "special interest" is any group for whom the making of election campaign contributions is nothing other than a rational and calculated business decision, that weighs the expected economic benefit to be derived from the influence over legislative votes or other governmental action that can be obtained, against the amount of the contribution. If the former is greater than the latter, the contribution will be made; otherwise not. While the certainty and amount of the sought after benefit cannot be calculated with definiteness, the telltale sign of a special interest group is that the complete explanation for its making a campaign contribution is that the group has, to the best of its ability, concluded that the expected economic benefit is greater than the amount of the contribution, in other words, your textbook profit maximizing, capitalistic, business decision. This is properly devoid of altruistic considerations, such as whether good government that maximizes our collective social welfare is being promoted.
Do not get me wrong. I am a fervent believer in capitalism, free markets and Adam's Smith's invisible hand. I generally place myself in strenuous opposition to socialistic or communistic things.
There is, however, a contradiction between representative democratic government and capitalistic behavior, and there is a area where a smidgen of socialism needs to creep in, in order for democracy to work decently. The contradiction is, unfortunately, central, and not peripheral, to the better working of government for our common good.
Quite simply, to a great extent we have bad government that is extremely wasteful because we have created an environment in which the most influence goes to special interests whose political involvement is capitalistic and who make their campaign contributions and support their candidates based exclusively on their profit making business calculation that the expected economic benefit to be derived is greater than the amount of the contribution. The special interests are presumably successful in ultimately extracting economic benefits that are greater than the campaign contributions. If not, they would be dumb businessmen who should be, and eventually will be, removed from their jobs for losing money in the transaction, instead of making money for whosever economic interests they represent and who pay them to make money and not lose money.
On the other hand, we can make significant progress towards achieving good government by increasing the influence of citizens who involve themselves in the political process for reasons other than profit and loss business calculations and who bring a desire to see the totality of government work better for all the citizens and not solely a desire to profit themselves from a narrow area of governmental activity that happens to be susceptible to their exploitation. That kind of talk is, of course, exactly the smidgen or more of socialism that is referred to above, i.e., political involvement that seeks the larger good of all and that does not relentlessly and narrowly look after the interests of old, number one, which is the hallmark of capitalism and the selfish virtue in the palm of Adam Smith's invisible hand.
Unfortunately, as most everyone knows, human nature being what it is, the impulse of capitalism, because it is always looking out for number one, is strong, and the impulse of altruism and socialism is weak. In the political arena, the stronger impetus of capitalism decimates the pathetically weak, good government seeking citizens and the overall social weal whose cause they seek to advance.
This triumph of capitalism in our representative democracy produces the government bazaar that we have today in the United States. Essentially, a gigantic federal budget of a trillion or two dollars, plus untold amounts not showing up in the budget but affected by the government's actions. is perpetually up for grabs. And grab and grab we send our Senators and Representatives to Washington to do. The same thing takes place on a smaller scale in our fifty state governments. In reality, just about all of us are part of one special interest or another in the big grab, as much as some of us would rather have our presence felt as altruistic, good government seeking citizens. That socialistic bent, as indicated, gets trampled day after day amidst the profit maximizing, capitalistic special interest elephants plodding the turf in Washington and in our state capitals.
In the big grab at our government bazaar, it is not as if the entire amount of the government budget disappears into a black hole from which no citizens benefit. In our free for all lunge at the government's goodies, the citizens collectively get benefits that are of value to them, and all is not waste. The price that we pay, however, is that there is enormous waste in the form of pork and the like in the budget itself, and large inefficiencies in areas that are outside the budget but that are nonetheless affected by government action. Also, there can be great unfairness because some of the patrons at the government bazaar (one could say snorfers at the trough) are much more successful than others in how much they are able to chow down for themselves.
None of us with aspirations for man's better potential can be happy with the government bazaar we have created, and many of us rightfully react with disgust and revulsion, if not shame, at our political handiwork. We are sad and disappointed, or perhaps cynical, that individual citizens believe they can do little about the monstrosity we have created.
Election time is a time to behold the monstrosity, and an occasion to look deep into the disgust we feel; and it is an opportunity perhaps to cast cynicism aside, and a vote that singularly registers how nauseous we are. Election time is when a little effort should be given to looking for and hopefully finding a particularly hoggish snorfer at the government bazaar. Locate a grabber that has the potential to really stir the ire of hordes of citizens, by how crafty and brazen and, ultimately indecently out of bounds, the pig has been in royally milking a situation and doing a super number on the rest of the citizens.
I will, in connection with next month's Alabama Supreme Court elections, examine tort liability law and plaintiffs' lawyers in subsequent parts of this series.
ALABAMA SUPREME COURT ELECTIONS 1994 - Part 2
By Robert Shattuck
Imagine yourself and a number of other citizens sitting around a table as a lawmaking body. You are trying to decide what monetary payments should be made and how they should be made to persons or their families if and when the person dies or experiences bodily injury, or suffers mental or psychological trauma, or incurs financial or other economic losses.
In trying to determine the proper role for government and the law in this area, you and your fellow lawmakers first come to the conclusion that, no matter what ideas or system you come up with, if payments are going to be made when a person experiences physical or economic losses or harm, any payments to the person or his family, one way or the other, come out of someone's pocket. As an example, your lawmaking body considers the mechanism of private insurance for the making of payments to cover losses. With insurance, the many private parties who desire the insurance coverage pay premiums that create a pool of funds from which payments are made to cover losses. Payments deplete the pool of funds, which must be kept continually replenished from ongoing premiums for the pool. It is thus clear how, under private insurance, payments made to one person to compensate him for loss or damage come out of the pockets of other people.
If the government makes payments to compensate people for loss of life or for other harm and damage, the government uses the taxes it collects from all its citizens to make these payments. Accordingly, here, your imaginary lawmaking body is again confronted with the seemingly inescapable fact of life, namely, that if payments are going to be made to harmed individuals, those payments have to come out of someone's pocket. Moving along in your review, your group is also able to discern that, if a third party, such as a corporation, is called on to make a payment to a harmed person or his family, the payment again has to come out of someone else's pocket. It may be the pocket of the shareholders who own the corporation, or it may be the pocket of employees who are paid smaller wages and salaries in order to enable the corporation to make the payment. Alternatively, the pocket may be that of customers who are charged higher prices so that the corporation gets the money needed for the payment. The corporation could have insurance to cover the payment. In this case, however, your lawmaking body perceives that the payment still comes out of someone's pocket, including not only the shareholders, employees and customers of the corporation in question who bear the burden of paying the premiums for the insurance coverage, but also out of the pockets of shareholders, employees and customers of all the other corporations that also purchase the same insurance and pay the premiums that create the insurance pool from which payments are made.
In sum, your lawmaking body confirms to itself the adage that there is no free lunch and that, in any system you come up with to make payments to injured persons, the payments have to come from somewhere and out of someone else's pocket. Harsh as the reality of the "no free lunch" syndrome is, you and your fellow lawmakers swear that you will always keep it in mind no matter what governmental policy you decide on.
In proceeding forward on your policymaking mission, one of your group says that he is quite impressed by the attributes of private insurance arrangements. Private insurance, he argues, maximizes freedom of choice of individuals to decide what losses they want to insure against, and for how much, and what level of premiums they are willing to pay to be covered. If a person thinks his life is worth $10,000.000, well then, by God, let him buy that amount of life insurance, and more power to him if he makes enough money to pay the $50,000 or whatever a year premium it takes to buy that much insurance. This proponent of private insurance avers that, as we know, if a $10,000,000 death benefit is going to be paid, it has got to come out of someone's pocket. At least this guy (and others like him) are paying very substantial premiums into the pool of funds needed to make the payment. Leaving the matter to be handled through private insurance beats the hell out of some idea like having the government come up with the $10,000,000 death benefit from, say, an additional nickel ($.05) tax on each and every one of 200,000,000 citizens in the country (200,000,000 x $.05 = $10,000,000), or nicking the shareholders, employees and customers of the corporation where the guy happens to work for more substantial, but nonetheless manageable, amounts to cover the ten mill.
If people are worried about becoming disabled in an accident, the private insurance proponent says, let them buy disability insurance. Again, freedom of choice is maximized regarding how much disability insurance is obtained and how much one contributes of one's own funds to the pool that will be used to make the disability payments. No one is coerced into, say, paying taxes to the government in order to allow the government to make disability payments.
After not a great deal of discussion, your imaginary lawmaking body is quite impressed with the attributes of private insurance arrangements and concludes that they should play a very large role in the system you want to devise for your citizens for the making of payments to persons who experience losses and damages.
At this point, another member of your group vouches that private insurance arrangements alone will not do all that is needed or appropriate. In some circumstance, she says, a person cannot afford to or should not be expected to purchase private insurance for a loss or damage in question, and that fairness and justice in certain circumstances cry out for a payment to funded other than pursuant to private insurance arrangements. For example, if and when America has the military draft, and young men and women are required to enter into battle on behalf of our country with the certainty that some of them will lose their lives or be physically maimed for life or emotionally traumatized, surely they and their loved ones are entitled to more than the opportunity to purchase private insurance to cover the loss and damage.
Yes, the entirety of your imaginary lawmaking body quickly agrees that justice and fairness require more than private insurance arrangements. Further, if ever the value of a single human life is priceless, it is the life of a young person who has laid it down for his or her country in the line of military duty, and, as priceless as that life is, an effort needs to be made to place an inadequate value on the life and to determine an amount of compensation to be paid to the loved ones of the person who has made the ultimate sacrifice for his or her country. As discomforting as the exercise is, your imaginary lawmaking body, after debate, decides that the loved ones of any person lost in the line of military duty should be paid $1,000,000 out of the government's tax revenues (equal to a one half cent tax on each of 200,000,000 citizens of the country).
Having persevered through the foregoing somber exercise of ascribing a value to the most priceless of commodities, that of a human life, your lawmaking group pauses to ask of themselves whether, with the espousal of private insurance arrangements and government payments to cover things like harmed military personnel and victims of natural disasters, the group has completed its policymaking mission related to devising a system for the making of payments to persons experiencing loss and damage, and the government's role therein. One of your group mentions welfare programs and says that welfare programs could be viewed as a system for making payments to persons who have experienced losses and damages and have therefore fallen into a category that qualifies for government welfare payments. With the mention of the welfare system, your lawmaking body first does a quick check of its adopted governing principle that there is no "free lunch" in the arena of making payments to persons experiencing loss and harm. Alas, unfortunately, welfare payments have to be paid from taxes (or from government borrowings that have to be paid from taxes) and, like all the other payment arrangements your group has considered, came out of someone's pocket. Once again it is confirmed there is no "free lunch" here either.
Although by this time only mildly disappointed in not finding a "free lunch" elixir in the welfare system, your group acknowledges that the welfare system needs to be considered as part of society's overall scheme in providing payments to persons who experience loss and damage. Welfare being such a morass, mess and difficult problem, your group chooses not to dwell exceedingly long on the exact role that the government welfare system should play in providing a source of payments to persons who experience damage and loss, although clearly it potentially plays an extremely large role. The size of the role is arguably measured in hundreds of billions of dollars a year.
"O.K., are we done now?" pipes up one of the quieter members of your group, who is getting hungry.
"What, are you a dummy or something?" interjects another of your imaginary august body, who has been lying low in the discussion up to this point. She continues, clearly experiencing no pangs of hunger whatsoever. "Not everything is pure accident you know. There are tons of people in our beloved country who are mean, vicious, dishonest, negligent and worse, and who cause untold amounts of harm and damage to millions and tens of millions of our citizens. They must be made to pay! They must be deterred! They must be punished!"
The hungry, quiet imaginary lawmaker slumps into his seat, despairing of a meal anytime soon.
To be continued.
ALABAMA SUPREME COURT ELECTIONS 1994 - Part 3
By Robert Shattuck
Any good and just society of human beings wants to implement mechanisms and systems that, under appropriate circumstances, provide compensation or reimbursement to members of the society who experience physical or economic loss or damage in their lives. Also, such a society will seek to prevent such losses, harms and damages from occurring to begin with, by means of punishing persons who willfully or negligently cause them to happen. Punishment can conveniently dovetail with the first objective of compensation by making the perpetrator at least pay for the loss, harm or damage he causes. No one has any quarrel with the foregoing objectives of a society or with a society taking steps to implement mechanisms and systems that seek to advance such social goals.
As discussed in an earlier part of this series, a conscientious society will appreciate that there are no "free lunches" and, whenever you talk about compensation and payments to injured members of society, amounts that are paid to the injured party always come out of someone's pocket. That someone may be all the citizens who pay taxes to a government which might make the payment, or it might be the private parties who make insurance premium payments that create a pool of funds from which the payment in question is made. The someone else whose pockets can be gone into are a corporation's shareholders, employees and/or customers, who, by means of a less valuable ownership interest, or through reduced wages and salaries or higher prices charged for goods and services, become a funding source if a corporation is called on to make to an injured party.
In its repertoire of mechanisms and systems for providing compensation to members of the society who have suffered losses and harm, an intelligent society perceives the valuable and significant roles that private insurance arrangements and public welfare programs can and should play in the overall scheme for trying to achieve the social goals in question. In making compensation for damage and loss, it is sometimes becomes necessary for society to place a value on things that are priceless, such as human life. For example, society seemingly needs to decide how much the government should pay to the loved ones of a person who is drafted into the military and lays down his life in the line of duty to his country. Maybe society thinks $10,000 is appropriate, or $1,000,000, or $10,000,000. The citizens of the society, or their elected representatives, simply have to decide what they think is right and appropriate in these regards, and then levy the taxes needed to make the payments.
In terms of preventing or trying to prevent injury from occurring to begin with, society has at its disposal several tools. One is the tool of governmental regulation. This can extend to virtually any area of human activity whose regulation is thought needed to lessen the occurrence of harm and injury to members of society. A society also has the tool of the criminal law for throwing people in jail who deliberately do things that harm others. Further, society has its civil liability system under which persons who do things that harm others can be forced to pay for the loss or damage that occurs and who may be subjected to punitive damages as a special possible deterrent against the doing of things that society does not want done.
The tool of regulation entails a government agency spelling out permitted conduct and prohibited conduct on the part of the persons being regulated and the use of fines and other sanctions in order to try to obtain compliance with the regulations that have been promulgated. Three things are noteworthy in this arena. First, to curtail zealotry on the part of the regulators and to promote even handedness and objectivity in how the regulators pursue their mission, employees of the agency are not compensated on the basis of the dollar amount of fines they are able to collect from the regulated parties. Second, fines that are collected generally go into the government's coffers for use in carrying on its regulatory activities or for other government purposes and do not go to enrich any particular private persons. Third, the regulators are generally enjoined, in prescribing permitted and prohibited behaviors, to employ cost/benefit principles and to try to promulgate regulations compliance with which will overall have a greater benefit to society than the overall cost that is involved in complying with the regulations.
In the realm of the criminal law, it is worthy of similar note that prosecutors are not paid according to how many convictions they obtain or how many years they throw people in jail for. As in the area of governmental regulation, the reason for this is presumably a belief that too great a price would be paid in terms of fairness, justice and evenhandedness if we paid our government prosecutors according to their sentencing record for the year. In other words, even though there is a neutral judge in the courtroom, when it comes to punishing people, society is very skittish and thinks the prosecutor (like the regulator) has a duty to be evenhanded and it is intolerable to undermine that duty by providing any financial incentive to the prosecutor (or regulator) to seek higher levels, in preference to lower levels, of punishment.
Let us now turn to our tort liability system.
I start out by asking about the appropriateness of plaintiffs' lawyers receiving any compensation based on the amount of punitive damages awarded to their clients. The purpose of punitive damages is not to compensate for the plaintiff's loss or harm but rather to achieve the deterrent effect that is connoted by the term punishment. In order to deter you from doing such and such, we will throw you in jail, or make you pay a fine, or make you pay punitive damages, if you do such and such. As indicated above, society is very squeamish and sensitive about government regulators and government prosecutors getting carried away in their respective missions of punishing people for doing things that society says they must not do, and as result we adamantly decline to compensate government regulators and prosecutors on the basis of how much in fines they collect from regulated parties or based on how many convictions they obtain or how many years they get people thrown in jail for. This being so, I ask, what is special about plaintiffs' lawyers and the punitive damages that they seek to impose on the defendant solely for purposes of punishment and the deterrent effect of punishment? If justice, fairness and evenhandedness are at risk of overly zealous regulators and prosecutors if they are paid according to fines, convictions and years in jail obtained, who on earth could not think that justice, fairness and evenhandedness of punishment are not severely jeopardized in the hands of plaintiffs' lawyers lusting after million dollar and ten million dollar and hundred million dollar legal fees to be gained by swirling into hurricane force the untrammelled emotions of twelve jurors, oh so scientifically picked, to slap this particular huge and faceless corporation with untold millions of dollars of punitive damages?
I next ask another simple question. In the punitive damages arena, how and why are justice and society appropriately served by the plaintiff receiving a punitive damages award in lieu of the government and the citizens as a whole being the beneficiary of the award? Keep in mind that, by definition, the plaintiff's compensatory damages are supposed to cover the plaintiff for his loss and damage to the extent the law determines he is entitled to be so compensated, and punitive damages are intended solely to achieve the standard deterrent effect that punishment as a lesson to the defendant and to others is supposed to have. Keep also in mind that in other instances where financial punishments are imposed, such as in the levying of fines in the governmental agency regulatory arena, the fine is received by the government and available to benefit the citizens as a whole, such as being used to fund the government agency's enforcement activities against others and thereby further advance the reason for the fine to begin with, to wit, getting the regulated persons to do what society says they should do and not do what society says they should not do. Thus, a plaintiff, who has been compensated for his loss through compensatory damages, is simply not entitled to the windfall of punitive damages as well, instead of such punitive damages going to the government for the benefit of the citizens as a whole and used, in particular, in one or more ways directly to try to prevent in the future, by the defendant or others, the behavior in question that triggers the punitive damages to begin with.
Besides the foregoing practical observation that punitive damages, like fines levied by a regulatory agency, should be paid to the government and benefit the citizens as a whole by being used to combat future behavior like the behavior which is the subject of the punitive damages imposition, there are equally significant, but more abstract, considerations of what justice under the law is supposed to be about. Most of us sort of know that our tort law liability system has become a gigantic lottery. If you are lucky, your son dies in a fiery, side on crash of a GM pick up truck with fuel tanks mounted on the side, and not only can you collect two or three million dollars compensatory damages, but you can hit the super grand jackpot and collect $100,000,000 punitive damages. If you are unlucky, your beloved son has been drafted into the army, sent to Vietnam to fight for his country, and dies a horrible death in a horrible battle, and you collect, what, maybe nothing, maybe $10,000. Or maybe your daughter gets carjacked, raped, and killed, and no "deep pocket" anywhere or anyhow can be found, and you get nothing.
I know Americans love a lottery, and maybe that love is so deep that our citizens want our tort liability system also to be the lottery it is. If so, God help us in trying advance any cause of reasonable justice under our tort law or in any other realm where justice, which is inherently antithetical to random chance, must compete with having to appease a thirst for the thrill of a gamble and outcomes based on chance.
Up to this point, I have not had much good to say about our tort liability system. I will try to speak more favorably in the next part of this editorial.
ALABAMA SUPREME COURT ELECTIONS 1994 - Part 4
By Robert Shattuck
Our tort liability law has the dual purpose of compensating persons who have experienced loss and damage caused by other members of society and of punishing the defendant in order to try to achieve a deterrent effect by means of a lesson that either a person must not do what the defendant did or else the person will pay a price.
We can fervently wish that every loss or damage under the sun will be compensated for, and handsomely too. If your son goes into the army to serve his country and gets killed in Somalia, we can very fervently wish that you should be paid $10,000,000 to try to compensate you for that which is priceless and has been lost. If your mother gets cancer and dies at age 30, we would fervently wish that a trust fund of $5,000,000 could be set up for you to provide potential recompense to you in your upbringing for having lost that which is irreplaceable.
Alas, for every payment made to somebody, there needs to be somebody else who must come up with the amounts needed to make the payment and to put in a hard day's work to do so. We did not pay $10,000,000 to the family of each solder who was killed in Vietnam, and a tax bill levying an income surtax on wages and salaries in order to do so would not have gotten very far in Congress. At the same time, the country has fulfilled and continues to fulfill significant obligations, such as Veterans' Administration hospitals for survivors, regardless of our unwillingness to take it upon ourselves to make large payments to families of the dead. Similarly, our government, in its social security program, makes limited payments to help provide support to those who become disabled, possibly quadriplegic, but we generally do not think we can afford to set up trust funds that will cover any and all possible medical needs for the rest of the entire possible length of a person's life, including an inflation hedge. Our heart wishes we could, but our head tells us we cannot afford to do it. We try to make reasonable decisions to do what we think we can afford to do, but losses, harm and damage in life, alas, are too universal and too widespread (after all, everyone dies in the end) to allow for much extravagance if even significant generosity in reaching into our tax coffers to provide compensation.
As for getting people to do what society thinks they should do and not do what they should not do, we have criminal laws and we have governmental regulatory agencies. Our criminal law system has become pathetic. Far too few murderers, rapists, burglars, con men, environmental polluters, tax cheats and medicaid and medicaid fraud abusers are caught in their crimes, a seemingly infinitesimal number are sent to jail, and those who are imprisoned seem to be put away too slowly and get released too soon in order to teach them and others an effective lesson that crime does not pay. As a result, many in the country are near giving up on our criminal law system as a means to get people to do what they are supposed to do and not do what they are not supposed to do.
We also employ ever more massive and pervasive governmental regulation to try to get people to do what society thinks they should do, such as build safe products, have safe workplaces, not pollute the environment, adequately test new drugs and medical devices, and so on, and so on. Ongoing policy debate transpires year after year among legislative bodies, government regulators, the regulated parties, and affected citizens as to what is cost effective in terms of the costs involved to achieve various levels of safety or protection in the environment, in consumer products, and in the workplace. There are those who advocate, in certain circumstances, that very high levels of costs should be paid in order to achieve very small incremental
improvements in the level of safety or protection, say, against the presence of cancer causing agents in a pesticide (e.g., one part per one hundred million is not acceptable and it must be one part per billion). Creative ideas get proposed, such as allowing rights to pollute the air to be bought and sold in order to achieve the best cost/benefit results, and some are appalled by such a notion. Many consumers argue that the regulators are too lax, and industry frequently thinks the regulators go too far. There is always the risk of corruption of the regulators, and oversight is needed to make sure out and out bribery does not take place, as well as to address the more subtle problem of the "revolving door" between industry and the regulatory agencies. In short, governmental regulation is a massive, but far from perfect, attempted solution to society's age old quest of trying to get people to do what society wants them to do and not do what society does not want them to do.
If criminal law and governmental regulation together fall short in terms of getting people to do what society wants them to do, it is time to bring them front and center -- the plaintiffs' lawyers, be they the solution from heaven or the parasite from hell.
If, as stated, our tort liability law system has the dual objective of compensating those who are damaged and of punishing anyone with any money who has anything whatsoever to do with a harm that has been inflicted, that system has succeeded in the most royal of royal spades. If anyone, anywhere, anyhow, has experienced any loss or damage, physical, financial, psychological or emotional, and if there is anyone with any money anywhere in the vicinity who could be said to have anything whatsoever to do with the loss or harm, the plaintiffs' lawyers have created the most phenomenonally successful system imaginable for maximizing the amount of money the person experiencing the loss can recover and socking the defendant with staggering if not fatal financial penalties that get more and more incredible.
The only question is, what defense can be mounted of what has been done in the name of sanity and rationality. Or, in other words, is this any way to run a candy store?
The plaintiffs' lawyers would say to us, look, all your criminal laws and all your governmental regulation are not adequate to keep Exxon from perpetrating the Valdez oil spill or to keep the breast implant makers from perpetrating their wrongdoing. You need us, the plaintiffs's lawyers (and our juries and judges), to sock it to Exxon for $10,000,000,000 (that's ten billion dollars) and to the breast implant makers for $4,000,000,000 and to whatever other deep pocket malefactor for whatever ungodly sum we can whip the jury into an emotional frenzy to deliver up to the court. Never mind that it is coming out of the hides of shareholders (which may include many widows and orphans)(remember it's only a small amount on each), or out of the hides of employees through reduced salaries and wages (or perhaps loss of a job if their employer, such as a general aviation aircraft manufacturer, is put out of business by the astounding success of us the plaintiffs' lawyers in working our magic with juries), or out of the hides of customers through higher prices. Never mind that all those individually small amounts that we the plaintiffs' attorneys successfully extract as punishment from all those taxpayers, shareholders, employees and customers, add up to a staggering amount going to a plaintiff who, admittedly deserving of sympathy, has been compensated with compensatory damages, and such money is not going to the government to help beef up the enforcement of its environmental, employee safety and consumer safety laws. We the plaintiffs lawyers are the greatest consumer safety law enforcers and environmental protectors the universe has ever seen, and you need to compensate us accordingly. If you could hire a hundred government prosecutors or government regulators for $75,000 a year apiece ($7,500,000), you are getting nowhere near the deterrent effect we the plaintiffs lawyers achieve when we knock up those shareholders, employees and customers for $100,000,000 in punitive damages and receive our holy one third contingency fee of $33,000,000 for our efforts.
That's what the plaintiffs' lawyers are saying to us. Do you buy it?
First, the taxpayers, shareholders, employees and customers who are ultimately paying the blood money in small amounts are generally innocent. The "guilty" employees who can reasonably be said to have responsibility for what has happened, be they the president of the corporation, or a project supervisor, or a plant manager, are probably only marginally punished if at all. America is notorious for what corporate presidents are paid when their corporations do not perform well, and it is unlikely their treatment will be severe simply because a large punitive damages verdict is won against their company. A project supervisor or plant manager may or may not be fired and may or may not deserve to be fired and may or may not find another job, the nature of his culpability and the precise deterrent effect as to future behavior both likely being murky.
While precise deterrent effect of the tort liability system is murky, the general in terrorem effect is clear. Everyone is petrified of the plaintiffs' lawyers but, like schizophrenic rats in cage, no one has any comfort about what can be done to keep them at bay. The benefits or detriments of the behavioral responses that are engendered throughout the nooks and crannies of our commercial, governmental and personal activities undoubtedly range across the board. I would not doubt that Exxon, as a result of the Valdez litigation, has implemented some oil spill readiness procedures that are desirable. I would also not doubt that there are drugs and medical devices that would be of net benefit to society but that are being kept out of the market because of possible legal liability exposure. I am sure hospitals have instituted procedures that lessen the chances of mistakes being made. At the same time, we have all heard about defensive medicine procedures that are unwarranted except for warding off legal liabilities and that have contributed to the country's health care cost problem.
The foregoing list of behavioral responses can be expanded ad infinitum. In judging our tort law liability system that has such a large impact on people's behavior, a very major consideration needs to be an overall evaluation of how members of society respond in their behavior. To the extent individual responses are counterproductive, disadvantageous or detrimental to the overall social good, the system needs a very close and very critical examination.
Like it or not, I think it is fairly clear and certain that the policy and decisionmaking process that is embodied in the plaintiffs' lawyers, twelve jurors and a judge in a courtroom, multiplied thousands of times over, is seriously deficient. For example, it is my understanding that the general aviation aircraft manufacturing business has been largely put out of business by the plaintiffs' lawyers. Maybe it should be and maybe it should not be, but I have no confidence that the right policy has been implemented in that regard through tort liability litigation, in which that policy question is out of bounds for debate by the parties. I think Congress should investigate and decide the matter, rather than the plaintiffs' lawyers, and their juries and judges. If Congress, after reviewing the pluses and minuses, decides the industry should not be closed down, in so doing Congress implicitly has concluded that the tort law liability system has imposed liabilities that should not have been imposed and Congress would then need to change the law concerning when liability will attach to the industry.
On a more global basis, because so much significance is attached in tort liability to what a corporation knew and when did it knew it, perhaps Congress needs to establish a mammoth repository of corporate information into which corporations could deposit all their studies and other information about products which government regulators could sift through to determine the known risks presented by a product. If, under appropriate administrative procedures, a product is concluded to present undue risks, its manufacture might be prohibited. If the regulators conclude that the benefits of the product outweigh the risks, and/or if the manufacturer makes disclosure of the risks to customers in a manner approved by the regulators, then no liability will attach if the risks in question come to fruition and, as a result, a loss or an injury occurs. I generally have immense antipathy to government regulation, but the foregoing suggestion seems to me far preferable to shareholders, employees and customers being responsible for $10,000,000 in compensatory damages and $100,000,000 in punitive damages because thirty years ago a member of a research team wrote a memorandum discussing a product risk and the corporation concluded the desirability and benefit of the product outweighed the risk.
I also think, if the behavior of a corporation or governmental entity is sufficiently wrongful as to warrant imposing a huge punitive damage award that is paid by largely innocent taxpayers, or shareholders, employees and customers of a corporation, we owe to those taxpayers, shareholders, employees and customers the obligation to target punishment against the persons who are the more responsible parties. If a plant manager knowingly allows his plant to violate environmental laws, and if this is serious enough to sock the innocent shareholders, other employees and customers of the corporation with a $100,000,000 punitive damages award, then surely it is serious enough to make sure you throw the plant manager in jail for a year or five years or something. I have previously suggested criminal law system is pathetically ineffective, and the plaintiffs lawyers may tell me I am naive if I think throwing plant managers in jail will stop him or other plant managers from allowing the environmental laws to be violated at their plants. The plaintiffs' lawyers may similarly contend that the only way Exxon will institute needed oil spill procedures is to stick them with ten billion dollars of punitives in the Valdez litigation. I will limit my response to saying that we should let Congress and our state legislatures debate and decide whether throwing plant managers (and company presidents where warranted) is a more cost effective deterrent or whether plaintiffs' lawyers running around getting $100,000,000 punitive damage awards (with $67,000,000 going in the plaintiff's pocket and $33,000,000 in the lawyer's) is more cost effective, or whether the government should get the $100,000,000 as a fine and spend it on its compliance activities.
ALABAMA SUPREME COURT ELECTIONS 1994 - Part 5
By Robert Shattuck
We the citizens know usually we can only expect to be taken advantage of by the politicians and the special interests. The electorate needs to find one of those infrequent election situations where we are given a good collective chance to kick back at this or that politician or special interest that has been particularly egregious in doing a number on us. The tort liability issue in the Alabama Supreme Court justice elections next month is such an opportunity.
It is a great life for the plaintiffs' lawyers. Americans love a lottery, and in our tort liability law system we have gotten a humdinger. Say my child gets kidnapped by a vicious, sadistic child molester, hauled off to the woods, tortured and killed. There is a small probability that the perpetrator will be caught, brought to justice, and be thrown in prison for a long time or executed, but assume no governmental parole officer goofed, there is no one is sight I can sue, and that is the end of the story. In this case I have pulled a losing ticket in the lottery. Now, if I was lucky, I might have had a son who was driving a GM pickup with fuel tanks on the side and who got into a side on accident while drunk, in which the fuel tanks ignited and my son died in a horrible fiery death. In this case, I can hit the jackpot and collect a $50,000,000 punitive damages award against GM for putting the fuel tanks on the side of the truck.
Life is great for the plaintiffs' lawyers because they get to play the maestro of the lottery in ferreting out the "deep pockets" who are around, and collect 33% of the lottery winnings as a reward for their shakedown prowess. (Possibly the 33% compares favorably with the percentage a state that operates a numbers lottery withholds from the lottery ticket receipts before making the payout to the winner, but at least the takeout to the state can be used for the benefit of all citizens.) It's especially great because everyone is forced to buy tickets in the lottery. The prices for the involuntary participation in the lottery may be in the form of higher taxes if a woebegone municipality gets hit with a judgment, say, because an off duty policeman starts using his pistol in the wrong circumstances. Customers of a corporation can be forced to play through higher prices for goods and services that business must charge to cover liability insurance premiums or the legal judgments themselves if a business self insures. If plaintiffs' lawyers successfully hit a business for large punitive damages in, say, a sex discrimination lawsuit, perhaps other employees get to pay for their legal lottery tickets through reductions in pay that are needed to come up with funds to pay the plaintiff or plaintiffs and their attorneys. When you operating a gambling game, nothing is better than having a universe full of involuntary players.
Life is also fun for the plaintiffs lawyers in stoking juries to an emotional fever pitch to uncork a beaut of a damage award without any debate of what the consequences are of their jury verdict, combined with thousands of similar jury verdicts, year in and year out. The minds of the jurors can remain pure and need not be troubled by, hey, if big legal judgment after big legal judgment is piled up against general aviation aircraft manufacturers, maybe they will go out of business and a lot of decent people will lose their jobs. It would be no fun to talk jurors into a whopper of a punitive damages award and having to think about something like that.
And for God's sakes, keep Congress and state legislatures from meddling with the system. We don't want those guys asking why punitive damages should be a windfall to the plaintiff, instead going of to the government for product safety or work safety regulation activities, or why government regulators and government prosecuting attorneys are not paid according to the amount of fines they succeed in collecting or according to the number of years they can throw people in jail for, but plaintiffs attorneys are paid according to how much punitive damages they can hit a defendant for. We don't want legislators considering whether or not better criminal law enforcement or better government regulation is a preferable solution in trying to get corporations to conduct themselves the way society wants them to, as compared to the unpredictable in terrorem effect of the plaintiffs, attorneys and their gigantic, justice as a lottery game. We don't want legislative debate about whether or not the general aviation aircraft manufacturing business should be closed down.
In our government of the grab by the special interests (in which almost all citizens partake in one form or the other, regardless of the enormous waste and possible unfairness that some grabbers are better than others), it is to be expected that the plaintiffs' attorneys will be as formidable as any other special interest in exploiting and protecting their domain. We the citizens know and understand that they are only doing what every other special interest does.
But fair is fair. If a special interest cannot keep their legislators dumb and happy and instead have pushed too hard and too far that even their lawmaking friends cannot stomach the disgust they feel with the snorfing that has gone on at the trough, it is time for the special interest to back off. In such a case, the special interest is engaged in risky behavior if it decides to execute a snazzy "end around" to avoid a legislative body having acted against the group. An "end around" may get the citizens very, very irate.
Alabama's plaintiffs attorneys have recently taken overreaching to new heights. In 1987, our woeful, benighted, if not besotted, Alabama legislature actually took it into its hands and said enough is enough. Alabama's lawmakers concluded a stop sign was needed against an insane, out of control, tort liability law system of justice as a gigantic lottery, in which all citizens are forced to buy their lottery tickets, in order that Alabama plaintiffs attorneys may year in and year out rake in tens and hundreds of millions of dollars of attorneys fees. All had become too disgusting for our legislators to stomach, as nice as those plaintiffs' attorneys are to them. In an insane fit of rationality, our Alabama legislature passed a law that imposed a limitation on punitive damages.
Do you know what the plaintiffs' attorneys then did? Yup, got the Alabama Supreme Court do declare the limitation as unconstitutional, violation of the right to trial by jury or something. Just last year that was. See Henderson v. Alabama Power Company, 627 So. 2d 878 (Ala. 1993).
I mean fair is fair. If something is so rotten and so disgusting that the Alabama legislature passes a law against it, it is really rotten and disgusting, and its proponents should accept how rotten and disgusting they have been and plain back off. But not the Alabama plaintiffs' attorneys.
I know it's rare for we the citizens to be presented with much of an opportunity to really give politicians or a special interest group the real kick in the behind they deserve. But we have one in next month's Alabama Supreme Court justice elections. Give yourself a treat. Find out candidates lined up where in 1993 and lines up where now on the tort liability law issue and limitations on punitive damages, and let the plaintiffs' attorneys and their supreme court justices know that they have overreached just one too many times, that you have really gotten fed up and you are not going to take it anymore, and watch how you cast your ballot on election day in those supreme court justice elections.
Thank you for your immense patience and interest if you have stayed tuned through this multi-part editorial, and may you be rewarded for the same on election day next month.
By Robert Shattuck
We the citizens know usually we can only expect to be taken advantage of by the politicians and the special interests. The electorate periodically needs to find one of those infrequent election situations where we are given a good collective chance to kick back at this or that politician or special interest group that has been particularly egregious in doing a number on the rest of us. The tort liability issue in connection with the Alabama Supreme Court justice elections next month is such an opportunity.
In order to avoid dealing in vague references, I will define what a "special interest" is. A "special interest" is any group for whom the making of election campaign contributions is nothing other than a rational and calculated business decision, that weighs the expected economic benefit to be derived from the influence over legislative votes or other governmental action that can be obtained, against the amount of the contribution. If the former is greater than the latter, the contribution will be made; otherwise not. While the certainty and amount of the sought after benefit cannot be calculated with definiteness, the telltale sign of a special interest group is that the complete explanation for its making a campaign contribution is that the group has, to the best of its ability, concluded that the expected economic benefit is greater than the amount of the contribution, in other words, your textbook profit maximizing, capitalistic, business decision. This is properly devoid of altruistic considerations, such as whether good government that maximizes our collective social welfare is being promoted.
Do not get me wrong. I am a fervent believer in capitalism, free markets and Adam's Smith's invisible hand. I generally place myself in strenuous opposition to socialistic or communistic things.
There is, however, a contradiction between representative democratic government and capitalistic behavior, and there is a area where a smidgen of socialism needs to creep in, in order for democracy to work decently. The contradiction is, unfortunately, central, and not peripheral, to the better working of government for our common good.
Quite simply, to a great extent we have bad government that is extremely wasteful because we have created an environment in which the most influence goes to special interests whose political involvement is capitalistic and who make their campaign contributions and support their candidates based exclusively on their profit making business calculation that the expected economic benefit to be derived is greater than the amount of the contribution. The special interests are presumably successful in ultimately extracting economic benefits that are greater than the campaign contributions. If not, they would be dumb businessmen who should be, and eventually will be, removed from their jobs for losing money in the transaction, instead of making money for whosever economic interests they represent and who pay them to make money and not lose money.
On the other hand, we can make significant progress towards achieving good government by increasing the influence of citizens who involve themselves in the political process for reasons other than profit and loss business calculations and who bring a desire to see the totality of government work better for all the citizens and not solely a desire to profit themselves from a narrow area of governmental activity that happens to be susceptible to their exploitation. That kind of talk is, of course, exactly the smidgen or more of socialism that is referred to above, i.e., political involvement that seeks the larger good of all and that does not relentlessly and narrowly look after the interests of old, number one, which is the hallmark of capitalism and the selfish virtue in the palm of Adam Smith's invisible hand.
Unfortunately, as most everyone knows, human nature being what it is, the impulse of capitalism, because it is always looking out for number one, is strong, and the impulse of altruism and socialism is weak. In the political arena, the stronger impetus of capitalism decimates the pathetically weak, good government seeking citizens and the overall social weal whose cause they seek to advance.
This triumph of capitalism in our representative democracy produces the government bazaar that we have today in the United States. Essentially, a gigantic federal budget of a trillion or two dollars, plus untold amounts not showing up in the budget but affected by the government's actions. is perpetually up for grabs. And grab and grab we send our Senators and Representatives to Washington to do. The same thing takes place on a smaller scale in our fifty state governments. In reality, just about all of us are part of one special interest or another in the big grab, as much as some of us would rather have our presence felt as altruistic, good government seeking citizens. That socialistic bent, as indicated, gets trampled day after day amidst the profit maximizing, capitalistic special interest elephants plodding the turf in Washington and in our state capitals.
In the big grab at our government bazaar, it is not as if the entire amount of the government budget disappears into a black hole from which no citizens benefit. In our free for all lunge at the government's goodies, the citizens collectively get benefits that are of value to them, and all is not waste. The price that we pay, however, is that there is enormous waste in the form of pork and the like in the budget itself, and large inefficiencies in areas that are outside the budget but that are nonetheless affected by government action. Also, there can be great unfairness because some of the patrons at the government bazaar (one could say snorfers at the trough) are much more successful than others in how much they are able to chow down for themselves.
None of us with aspirations for man's better potential can be happy with the government bazaar we have created, and many of us rightfully react with disgust and revulsion, if not shame, at our political handiwork. We are sad and disappointed, or perhaps cynical, that individual citizens believe they can do little about the monstrosity we have created.
Election time is a time to behold the monstrosity, and an occasion to look deep into the disgust we feel; and it is an opportunity perhaps to cast cynicism aside, and a vote that singularly registers how nauseous we are. Election time is when a little effort should be given to looking for and hopefully finding a particularly hoggish snorfer at the government bazaar. Locate a grabber that has the potential to really stir the ire of hordes of citizens, by how crafty and brazen and, ultimately indecently out of bounds, the pig has been in royally milking a situation and doing a super number on the rest of the citizens.
I will, in connection with next month's Alabama Supreme Court elections, examine tort liability law and plaintiffs' lawyers in subsequent parts of this series.
ALABAMA SUPREME COURT ELECTIONS 1994 - Part 2
By Robert Shattuck
Imagine yourself and a number of other citizens sitting around a table as a lawmaking body. You are trying to decide what monetary payments should be made and how they should be made to persons or their families if and when the person dies or experiences bodily injury, or suffers mental or psychological trauma, or incurs financial or other economic losses.
In trying to determine the proper role for government and the law in this area, you and your fellow lawmakers first come to the conclusion that, no matter what ideas or system you come up with, if payments are going to be made when a person experiences physical or economic losses or harm, any payments to the person or his family, one way or the other, come out of someone's pocket. As an example, your lawmaking body considers the mechanism of private insurance for the making of payments to cover losses. With insurance, the many private parties who desire the insurance coverage pay premiums that create a pool of funds from which payments are made to cover losses. Payments deplete the pool of funds, which must be kept continually replenished from ongoing premiums for the pool. It is thus clear how, under private insurance, payments made to one person to compensate him for loss or damage come out of the pockets of other people.
If the government makes payments to compensate people for loss of life or for other harm and damage, the government uses the taxes it collects from all its citizens to make these payments. Accordingly, here, your imaginary lawmaking body is again confronted with the seemingly inescapable fact of life, namely, that if payments are going to be made to harmed individuals, those payments have to come out of someone's pocket. Moving along in your review, your group is also able to discern that, if a third party, such as a corporation, is called on to make a payment to a harmed person or his family, the payment again has to come out of someone else's pocket. It may be the pocket of the shareholders who own the corporation, or it may be the pocket of employees who are paid smaller wages and salaries in order to enable the corporation to make the payment. Alternatively, the pocket may be that of customers who are charged higher prices so that the corporation gets the money needed for the payment. The corporation could have insurance to cover the payment. In this case, however, your lawmaking body perceives that the payment still comes out of someone's pocket, including not only the shareholders, employees and customers of the corporation in question who bear the burden of paying the premiums for the insurance coverage, but also out of the pockets of shareholders, employees and customers of all the other corporations that also purchase the same insurance and pay the premiums that create the insurance pool from which payments are made.
In sum, your lawmaking body confirms to itself the adage that there is no free lunch and that, in any system you come up with to make payments to injured persons, the payments have to come from somewhere and out of someone else's pocket. Harsh as the reality of the "no free lunch" syndrome is, you and your fellow lawmakers swear that you will always keep it in mind no matter what governmental policy you decide on.
In proceeding forward on your policymaking mission, one of your group says that he is quite impressed by the attributes of private insurance arrangements. Private insurance, he argues, maximizes freedom of choice of individuals to decide what losses they want to insure against, and for how much, and what level of premiums they are willing to pay to be covered. If a person thinks his life is worth $10,000.000, well then, by God, let him buy that amount of life insurance, and more power to him if he makes enough money to pay the $50,000 or whatever a year premium it takes to buy that much insurance. This proponent of private insurance avers that, as we know, if a $10,000,000 death benefit is going to be paid, it has got to come out of someone's pocket. At least this guy (and others like him) are paying very substantial premiums into the pool of funds needed to make the payment. Leaving the matter to be handled through private insurance beats the hell out of some idea like having the government come up with the $10,000,000 death benefit from, say, an additional nickel ($.05) tax on each and every one of 200,000,000 citizens in the country (200,000,000 x $.05 = $10,000,000), or nicking the shareholders, employees and customers of the corporation where the guy happens to work for more substantial, but nonetheless manageable, amounts to cover the ten mill.
If people are worried about becoming disabled in an accident, the private insurance proponent says, let them buy disability insurance. Again, freedom of choice is maximized regarding how much disability insurance is obtained and how much one contributes of one's own funds to the pool that will be used to make the disability payments. No one is coerced into, say, paying taxes to the government in order to allow the government to make disability payments.
After not a great deal of discussion, your imaginary lawmaking body is quite impressed with the attributes of private insurance arrangements and concludes that they should play a very large role in the system you want to devise for your citizens for the making of payments to persons who experience losses and damages.
At this point, another member of your group vouches that private insurance arrangements alone will not do all that is needed or appropriate. In some circumstance, she says, a person cannot afford to or should not be expected to purchase private insurance for a loss or damage in question, and that fairness and justice in certain circumstances cry out for a payment to funded other than pursuant to private insurance arrangements. For example, if and when America has the military draft, and young men and women are required to enter into battle on behalf of our country with the certainty that some of them will lose their lives or be physically maimed for life or emotionally traumatized, surely they and their loved ones are entitled to more than the opportunity to purchase private insurance to cover the loss and damage.
Yes, the entirety of your imaginary lawmaking body quickly agrees that justice and fairness require more than private insurance arrangements. Further, if ever the value of a single human life is priceless, it is the life of a young person who has laid it down for his or her country in the line of military duty, and, as priceless as that life is, an effort needs to be made to place an inadequate value on the life and to determine an amount of compensation to be paid to the loved ones of the person who has made the ultimate sacrifice for his or her country. As discomforting as the exercise is, your imaginary lawmaking body, after debate, decides that the loved ones of any person lost in the line of military duty should be paid $1,000,000 out of the government's tax revenues (equal to a one half cent tax on each of 200,000,000 citizens of the country).
Having persevered through the foregoing somber exercise of ascribing a value to the most priceless of commodities, that of a human life, your lawmaking group pauses to ask of themselves whether, with the espousal of private insurance arrangements and government payments to cover things like harmed military personnel and victims of natural disasters, the group has completed its policymaking mission related to devising a system for the making of payments to persons experiencing loss and damage, and the government's role therein. One of your group mentions welfare programs and says that welfare programs could be viewed as a system for making payments to persons who have experienced losses and damages and have therefore fallen into a category that qualifies for government welfare payments. With the mention of the welfare system, your lawmaking body first does a quick check of its adopted governing principle that there is no "free lunch" in the arena of making payments to persons experiencing loss and harm. Alas, unfortunately, welfare payments have to be paid from taxes (or from government borrowings that have to be paid from taxes) and, like all the other payment arrangements your group has considered, came out of someone's pocket. Once again it is confirmed there is no "free lunch" here either.
Although by this time only mildly disappointed in not finding a "free lunch" elixir in the welfare system, your group acknowledges that the welfare system needs to be considered as part of society's overall scheme in providing payments to persons who experience loss and damage. Welfare being such a morass, mess and difficult problem, your group chooses not to dwell exceedingly long on the exact role that the government welfare system should play in providing a source of payments to persons who experience damage and loss, although clearly it potentially plays an extremely large role. The size of the role is arguably measured in hundreds of billions of dollars a year.
"O.K., are we done now?" pipes up one of the quieter members of your group, who is getting hungry.
"What, are you a dummy or something?" interjects another of your imaginary august body, who has been lying low in the discussion up to this point. She continues, clearly experiencing no pangs of hunger whatsoever. "Not everything is pure accident you know. There are tons of people in our beloved country who are mean, vicious, dishonest, negligent and worse, and who cause untold amounts of harm and damage to millions and tens of millions of our citizens. They must be made to pay! They must be deterred! They must be punished!"
The hungry, quiet imaginary lawmaker slumps into his seat, despairing of a meal anytime soon.
To be continued.
ALABAMA SUPREME COURT ELECTIONS 1994 - Part 3
By Robert Shattuck
Any good and just society of human beings wants to implement mechanisms and systems that, under appropriate circumstances, provide compensation or reimbursement to members of the society who experience physical or economic loss or damage in their lives. Also, such a society will seek to prevent such losses, harms and damages from occurring to begin with, by means of punishing persons who willfully or negligently cause them to happen. Punishment can conveniently dovetail with the first objective of compensation by making the perpetrator at least pay for the loss, harm or damage he causes. No one has any quarrel with the foregoing objectives of a society or with a society taking steps to implement mechanisms and systems that seek to advance such social goals.
As discussed in an earlier part of this series, a conscientious society will appreciate that there are no "free lunches" and, whenever you talk about compensation and payments to injured members of society, amounts that are paid to the injured party always come out of someone's pocket. That someone may be all the citizens who pay taxes to a government which might make the payment, or it might be the private parties who make insurance premium payments that create a pool of funds from which the payment in question is made. The someone else whose pockets can be gone into are a corporation's shareholders, employees and/or customers, who, by means of a less valuable ownership interest, or through reduced wages and salaries or higher prices charged for goods and services, become a funding source if a corporation is called on to make to an injured party.
In its repertoire of mechanisms and systems for providing compensation to members of the society who have suffered losses and harm, an intelligent society perceives the valuable and significant roles that private insurance arrangements and public welfare programs can and should play in the overall scheme for trying to achieve the social goals in question. In making compensation for damage and loss, it is sometimes becomes necessary for society to place a value on things that are priceless, such as human life. For example, society seemingly needs to decide how much the government should pay to the loved ones of a person who is drafted into the military and lays down his life in the line of duty to his country. Maybe society thinks $10,000 is appropriate, or $1,000,000, or $10,000,000. The citizens of the society, or their elected representatives, simply have to decide what they think is right and appropriate in these regards, and then levy the taxes needed to make the payments.
In terms of preventing or trying to prevent injury from occurring to begin with, society has at its disposal several tools. One is the tool of governmental regulation. This can extend to virtually any area of human activity whose regulation is thought needed to lessen the occurrence of harm and injury to members of society. A society also has the tool of the criminal law for throwing people in jail who deliberately do things that harm others. Further, society has its civil liability system under which persons who do things that harm others can be forced to pay for the loss or damage that occurs and who may be subjected to punitive damages as a special possible deterrent against the doing of things that society does not want done.
The tool of regulation entails a government agency spelling out permitted conduct and prohibited conduct on the part of the persons being regulated and the use of fines and other sanctions in order to try to obtain compliance with the regulations that have been promulgated. Three things are noteworthy in this arena. First, to curtail zealotry on the part of the regulators and to promote even handedness and objectivity in how the regulators pursue their mission, employees of the agency are not compensated on the basis of the dollar amount of fines they are able to collect from the regulated parties. Second, fines that are collected generally go into the government's coffers for use in carrying on its regulatory activities or for other government purposes and do not go to enrich any particular private persons. Third, the regulators are generally enjoined, in prescribing permitted and prohibited behaviors, to employ cost/benefit principles and to try to promulgate regulations compliance with which will overall have a greater benefit to society than the overall cost that is involved in complying with the regulations.
In the realm of the criminal law, it is worthy of similar note that prosecutors are not paid according to how many convictions they obtain or how many years they throw people in jail for. As in the area of governmental regulation, the reason for this is presumably a belief that too great a price would be paid in terms of fairness, justice and evenhandedness if we paid our government prosecutors according to their sentencing record for the year. In other words, even though there is a neutral judge in the courtroom, when it comes to punishing people, society is very skittish and thinks the prosecutor (like the regulator) has a duty to be evenhanded and it is intolerable to undermine that duty by providing any financial incentive to the prosecutor (or regulator) to seek higher levels, in preference to lower levels, of punishment.
Let us now turn to our tort liability system.
I start out by asking about the appropriateness of plaintiffs' lawyers receiving any compensation based on the amount of punitive damages awarded to their clients. The purpose of punitive damages is not to compensate for the plaintiff's loss or harm but rather to achieve the deterrent effect that is connoted by the term punishment. In order to deter you from doing such and such, we will throw you in jail, or make you pay a fine, or make you pay punitive damages, if you do such and such. As indicated above, society is very squeamish and sensitive about government regulators and government prosecutors getting carried away in their respective missions of punishing people for doing things that society says they must not do, and as result we adamantly decline to compensate government regulators and prosecutors on the basis of how much in fines they collect from regulated parties or based on how many convictions they obtain or how many years they get people thrown in jail for. This being so, I ask, what is special about plaintiffs' lawyers and the punitive damages that they seek to impose on the defendant solely for purposes of punishment and the deterrent effect of punishment? If justice, fairness and evenhandedness are at risk of overly zealous regulators and prosecutors if they are paid according to fines, convictions and years in jail obtained, who on earth could not think that justice, fairness and evenhandedness of punishment are not severely jeopardized in the hands of plaintiffs' lawyers lusting after million dollar and ten million dollar and hundred million dollar legal fees to be gained by swirling into hurricane force the untrammelled emotions of twelve jurors, oh so scientifically picked, to slap this particular huge and faceless corporation with untold millions of dollars of punitive damages?
I next ask another simple question. In the punitive damages arena, how and why are justice and society appropriately served by the plaintiff receiving a punitive damages award in lieu of the government and the citizens as a whole being the beneficiary of the award? Keep in mind that, by definition, the plaintiff's compensatory damages are supposed to cover the plaintiff for his loss and damage to the extent the law determines he is entitled to be so compensated, and punitive damages are intended solely to achieve the standard deterrent effect that punishment as a lesson to the defendant and to others is supposed to have. Keep also in mind that in other instances where financial punishments are imposed, such as in the levying of fines in the governmental agency regulatory arena, the fine is received by the government and available to benefit the citizens as a whole, such as being used to fund the government agency's enforcement activities against others and thereby further advance the reason for the fine to begin with, to wit, getting the regulated persons to do what society says they should do and not do what society says they should not do. Thus, a plaintiff, who has been compensated for his loss through compensatory damages, is simply not entitled to the windfall of punitive damages as well, instead of such punitive damages going to the government for the benefit of the citizens as a whole and used, in particular, in one or more ways directly to try to prevent in the future, by the defendant or others, the behavior in question that triggers the punitive damages to begin with.
Besides the foregoing practical observation that punitive damages, like fines levied by a regulatory agency, should be paid to the government and benefit the citizens as a whole by being used to combat future behavior like the behavior which is the subject of the punitive damages imposition, there are equally significant, but more abstract, considerations of what justice under the law is supposed to be about. Most of us sort of know that our tort law liability system has become a gigantic lottery. If you are lucky, your son dies in a fiery, side on crash of a GM pick up truck with fuel tanks mounted on the side, and not only can you collect two or three million dollars compensatory damages, but you can hit the super grand jackpot and collect $100,000,000 punitive damages. If you are unlucky, your beloved son has been drafted into the army, sent to Vietnam to fight for his country, and dies a horrible death in a horrible battle, and you collect, what, maybe nothing, maybe $10,000. Or maybe your daughter gets carjacked, raped, and killed, and no "deep pocket" anywhere or anyhow can be found, and you get nothing.
I know Americans love a lottery, and maybe that love is so deep that our citizens want our tort liability system also to be the lottery it is. If so, God help us in trying advance any cause of reasonable justice under our tort law or in any other realm where justice, which is inherently antithetical to random chance, must compete with having to appease a thirst for the thrill of a gamble and outcomes based on chance.
Up to this point, I have not had much good to say about our tort liability system. I will try to speak more favorably in the next part of this editorial.
ALABAMA SUPREME COURT ELECTIONS 1994 - Part 4
By Robert Shattuck
Our tort liability law has the dual purpose of compensating persons who have experienced loss and damage caused by other members of society and of punishing the defendant in order to try to achieve a deterrent effect by means of a lesson that either a person must not do what the defendant did or else the person will pay a price.
We can fervently wish that every loss or damage under the sun will be compensated for, and handsomely too. If your son goes into the army to serve his country and gets killed in Somalia, we can very fervently wish that you should be paid $10,000,000 to try to compensate you for that which is priceless and has been lost. If your mother gets cancer and dies at age 30, we would fervently wish that a trust fund of $5,000,000 could be set up for you to provide potential recompense to you in your upbringing for having lost that which is irreplaceable.
Alas, for every payment made to somebody, there needs to be somebody else who must come up with the amounts needed to make the payment and to put in a hard day's work to do so. We did not pay $10,000,000 to the family of each solder who was killed in Vietnam, and a tax bill levying an income surtax on wages and salaries in order to do so would not have gotten very far in Congress. At the same time, the country has fulfilled and continues to fulfill significant obligations, such as Veterans' Administration hospitals for survivors, regardless of our unwillingness to take it upon ourselves to make large payments to families of the dead. Similarly, our government, in its social security program, makes limited payments to help provide support to those who become disabled, possibly quadriplegic, but we generally do not think we can afford to set up trust funds that will cover any and all possible medical needs for the rest of the entire possible length of a person's life, including an inflation hedge. Our heart wishes we could, but our head tells us we cannot afford to do it. We try to make reasonable decisions to do what we think we can afford to do, but losses, harm and damage in life, alas, are too universal and too widespread (after all, everyone dies in the end) to allow for much extravagance if even significant generosity in reaching into our tax coffers to provide compensation.
As for getting people to do what society thinks they should do and not do what they should not do, we have criminal laws and we have governmental regulatory agencies. Our criminal law system has become pathetic. Far too few murderers, rapists, burglars, con men, environmental polluters, tax cheats and medicaid and medicaid fraud abusers are caught in their crimes, a seemingly infinitesimal number are sent to jail, and those who are imprisoned seem to be put away too slowly and get released too soon in order to teach them and others an effective lesson that crime does not pay. As a result, many in the country are near giving up on our criminal law system as a means to get people to do what they are supposed to do and not do what they are not supposed to do.
We also employ ever more massive and pervasive governmental regulation to try to get people to do what society thinks they should do, such as build safe products, have safe workplaces, not pollute the environment, adequately test new drugs and medical devices, and so on, and so on. Ongoing policy debate transpires year after year among legislative bodies, government regulators, the regulated parties, and affected citizens as to what is cost effective in terms of the costs involved to achieve various levels of safety or protection in the environment, in consumer products, and in the workplace. There are those who advocate, in certain circumstances, that very high levels of costs should be paid in order to achieve very small incremental
improvements in the level of safety or protection, say, against the presence of cancer causing agents in a pesticide (e.g., one part per one hundred million is not acceptable and it must be one part per billion). Creative ideas get proposed, such as allowing rights to pollute the air to be bought and sold in order to achieve the best cost/benefit results, and some are appalled by such a notion. Many consumers argue that the regulators are too lax, and industry frequently thinks the regulators go too far. There is always the risk of corruption of the regulators, and oversight is needed to make sure out and out bribery does not take place, as well as to address the more subtle problem of the "revolving door" between industry and the regulatory agencies. In short, governmental regulation is a massive, but far from perfect, attempted solution to society's age old quest of trying to get people to do what society wants them to do and not do what society does not want them to do.
If criminal law and governmental regulation together fall short in terms of getting people to do what society wants them to do, it is time to bring them front and center -- the plaintiffs' lawyers, be they the solution from heaven or the parasite from hell.
If, as stated, our tort liability law system has the dual objective of compensating those who are damaged and of punishing anyone with any money who has anything whatsoever to do with a harm that has been inflicted, that system has succeeded in the most royal of royal spades. If anyone, anywhere, anyhow, has experienced any loss or damage, physical, financial, psychological or emotional, and if there is anyone with any money anywhere in the vicinity who could be said to have anything whatsoever to do with the loss or harm, the plaintiffs' lawyers have created the most phenomenonally successful system imaginable for maximizing the amount of money the person experiencing the loss can recover and socking the defendant with staggering if not fatal financial penalties that get more and more incredible.
The only question is, what defense can be mounted of what has been done in the name of sanity and rationality. Or, in other words, is this any way to run a candy store?
The plaintiffs' lawyers would say to us, look, all your criminal laws and all your governmental regulation are not adequate to keep Exxon from perpetrating the Valdez oil spill or to keep the breast implant makers from perpetrating their wrongdoing. You need us, the plaintiffs's lawyers (and our juries and judges), to sock it to Exxon for $10,000,000,000 (that's ten billion dollars) and to the breast implant makers for $4,000,000,000 and to whatever other deep pocket malefactor for whatever ungodly sum we can whip the jury into an emotional frenzy to deliver up to the court. Never mind that it is coming out of the hides of shareholders (which may include many widows and orphans)(remember it's only a small amount on each), or out of the hides of employees through reduced salaries and wages (or perhaps loss of a job if their employer, such as a general aviation aircraft manufacturer, is put out of business by the astounding success of us the plaintiffs' lawyers in working our magic with juries), or out of the hides of customers through higher prices. Never mind that all those individually small amounts that we the plaintiffs' attorneys successfully extract as punishment from all those taxpayers, shareholders, employees and customers, add up to a staggering amount going to a plaintiff who, admittedly deserving of sympathy, has been compensated with compensatory damages, and such money is not going to the government to help beef up the enforcement of its environmental, employee safety and consumer safety laws. We the plaintiffs lawyers are the greatest consumer safety law enforcers and environmental protectors the universe has ever seen, and you need to compensate us accordingly. If you could hire a hundred government prosecutors or government regulators for $75,000 a year apiece ($7,500,000), you are getting nowhere near the deterrent effect we the plaintiffs lawyers achieve when we knock up those shareholders, employees and customers for $100,000,000 in punitive damages and receive our holy one third contingency fee of $33,000,000 for our efforts.
That's what the plaintiffs' lawyers are saying to us. Do you buy it?
First, the taxpayers, shareholders, employees and customers who are ultimately paying the blood money in small amounts are generally innocent. The "guilty" employees who can reasonably be said to have responsibility for what has happened, be they the president of the corporation, or a project supervisor, or a plant manager, are probably only marginally punished if at all. America is notorious for what corporate presidents are paid when their corporations do not perform well, and it is unlikely their treatment will be severe simply because a large punitive damages verdict is won against their company. A project supervisor or plant manager may or may not be fired and may or may not deserve to be fired and may or may not find another job, the nature of his culpability and the precise deterrent effect as to future behavior both likely being murky.
While precise deterrent effect of the tort liability system is murky, the general in terrorem effect is clear. Everyone is petrified of the plaintiffs' lawyers but, like schizophrenic rats in cage, no one has any comfort about what can be done to keep them at bay. The benefits or detriments of the behavioral responses that are engendered throughout the nooks and crannies of our commercial, governmental and personal activities undoubtedly range across the board. I would not doubt that Exxon, as a result of the Valdez litigation, has implemented some oil spill readiness procedures that are desirable. I would also not doubt that there are drugs and medical devices that would be of net benefit to society but that are being kept out of the market because of possible legal liability exposure. I am sure hospitals have instituted procedures that lessen the chances of mistakes being made. At the same time, we have all heard about defensive medicine procedures that are unwarranted except for warding off legal liabilities and that have contributed to the country's health care cost problem.
The foregoing list of behavioral responses can be expanded ad infinitum. In judging our tort law liability system that has such a large impact on people's behavior, a very major consideration needs to be an overall evaluation of how members of society respond in their behavior. To the extent individual responses are counterproductive, disadvantageous or detrimental to the overall social good, the system needs a very close and very critical examination.
Like it or not, I think it is fairly clear and certain that the policy and decisionmaking process that is embodied in the plaintiffs' lawyers, twelve jurors and a judge in a courtroom, multiplied thousands of times over, is seriously deficient. For example, it is my understanding that the general aviation aircraft manufacturing business has been largely put out of business by the plaintiffs' lawyers. Maybe it should be and maybe it should not be, but I have no confidence that the right policy has been implemented in that regard through tort liability litigation, in which that policy question is out of bounds for debate by the parties. I think Congress should investigate and decide the matter, rather than the plaintiffs' lawyers, and their juries and judges. If Congress, after reviewing the pluses and minuses, decides the industry should not be closed down, in so doing Congress implicitly has concluded that the tort law liability system has imposed liabilities that should not have been imposed and Congress would then need to change the law concerning when liability will attach to the industry.
On a more global basis, because so much significance is attached in tort liability to what a corporation knew and when did it knew it, perhaps Congress needs to establish a mammoth repository of corporate information into which corporations could deposit all their studies and other information about products which government regulators could sift through to determine the known risks presented by a product. If, under appropriate administrative procedures, a product is concluded to present undue risks, its manufacture might be prohibited. If the regulators conclude that the benefits of the product outweigh the risks, and/or if the manufacturer makes disclosure of the risks to customers in a manner approved by the regulators, then no liability will attach if the risks in question come to fruition and, as a result, a loss or an injury occurs. I generally have immense antipathy to government regulation, but the foregoing suggestion seems to me far preferable to shareholders, employees and customers being responsible for $10,000,000 in compensatory damages and $100,000,000 in punitive damages because thirty years ago a member of a research team wrote a memorandum discussing a product risk and the corporation concluded the desirability and benefit of the product outweighed the risk.
I also think, if the behavior of a corporation or governmental entity is sufficiently wrongful as to warrant imposing a huge punitive damage award that is paid by largely innocent taxpayers, or shareholders, employees and customers of a corporation, we owe to those taxpayers, shareholders, employees and customers the obligation to target punishment against the persons who are the more responsible parties. If a plant manager knowingly allows his plant to violate environmental laws, and if this is serious enough to sock the innocent shareholders, other employees and customers of the corporation with a $100,000,000 punitive damages award, then surely it is serious enough to make sure you throw the plant manager in jail for a year or five years or something. I have previously suggested criminal law system is pathetically ineffective, and the plaintiffs lawyers may tell me I am naive if I think throwing plant managers in jail will stop him or other plant managers from allowing the environmental laws to be violated at their plants. The plaintiffs' lawyers may similarly contend that the only way Exxon will institute needed oil spill procedures is to stick them with ten billion dollars of punitives in the Valdez litigation. I will limit my response to saying that we should let Congress and our state legislatures debate and decide whether throwing plant managers (and company presidents where warranted) is a more cost effective deterrent or whether plaintiffs' lawyers running around getting $100,000,000 punitive damage awards (with $67,000,000 going in the plaintiff's pocket and $33,000,000 in the lawyer's) is more cost effective, or whether the government should get the $100,000,000 as a fine and spend it on its compliance activities.
ALABAMA SUPREME COURT ELECTIONS 1994 - Part 5
By Robert Shattuck
We the citizens know usually we can only expect to be taken advantage of by the politicians and the special interests. The electorate needs to find one of those infrequent election situations where we are given a good collective chance to kick back at this or that politician or special interest that has been particularly egregious in doing a number on us. The tort liability issue in the Alabama Supreme Court justice elections next month is such an opportunity.
It is a great life for the plaintiffs' lawyers. Americans love a lottery, and in our tort liability law system we have gotten a humdinger. Say my child gets kidnapped by a vicious, sadistic child molester, hauled off to the woods, tortured and killed. There is a small probability that the perpetrator will be caught, brought to justice, and be thrown in prison for a long time or executed, but assume no governmental parole officer goofed, there is no one is sight I can sue, and that is the end of the story. In this case I have pulled a losing ticket in the lottery. Now, if I was lucky, I might have had a son who was driving a GM pickup with fuel tanks on the side and who got into a side on accident while drunk, in which the fuel tanks ignited and my son died in a horrible fiery death. In this case, I can hit the jackpot and collect a $50,000,000 punitive damages award against GM for putting the fuel tanks on the side of the truck.
Life is great for the plaintiffs' lawyers because they get to play the maestro of the lottery in ferreting out the "deep pockets" who are around, and collect 33% of the lottery winnings as a reward for their shakedown prowess. (Possibly the 33% compares favorably with the percentage a state that operates a numbers lottery withholds from the lottery ticket receipts before making the payout to the winner, but at least the takeout to the state can be used for the benefit of all citizens.) It's especially great because everyone is forced to buy tickets in the lottery. The prices for the involuntary participation in the lottery may be in the form of higher taxes if a woebegone municipality gets hit with a judgment, say, because an off duty policeman starts using his pistol in the wrong circumstances. Customers of a corporation can be forced to play through higher prices for goods and services that business must charge to cover liability insurance premiums or the legal judgments themselves if a business self insures. If plaintiffs' lawyers successfully hit a business for large punitive damages in, say, a sex discrimination lawsuit, perhaps other employees get to pay for their legal lottery tickets through reductions in pay that are needed to come up with funds to pay the plaintiff or plaintiffs and their attorneys. When you operating a gambling game, nothing is better than having a universe full of involuntary players.
Life is also fun for the plaintiffs lawyers in stoking juries to an emotional fever pitch to uncork a beaut of a damage award without any debate of what the consequences are of their jury verdict, combined with thousands of similar jury verdicts, year in and year out. The minds of the jurors can remain pure and need not be troubled by, hey, if big legal judgment after big legal judgment is piled up against general aviation aircraft manufacturers, maybe they will go out of business and a lot of decent people will lose their jobs. It would be no fun to talk jurors into a whopper of a punitive damages award and having to think about something like that.
And for God's sakes, keep Congress and state legislatures from meddling with the system. We don't want those guys asking why punitive damages should be a windfall to the plaintiff, instead going of to the government for product safety or work safety regulation activities, or why government regulators and government prosecuting attorneys are not paid according to the amount of fines they succeed in collecting or according to the number of years they can throw people in jail for, but plaintiffs attorneys are paid according to how much punitive damages they can hit a defendant for. We don't want legislators considering whether or not better criminal law enforcement or better government regulation is a preferable solution in trying to get corporations to conduct themselves the way society wants them to, as compared to the unpredictable in terrorem effect of the plaintiffs, attorneys and their gigantic, justice as a lottery game. We don't want legislative debate about whether or not the general aviation aircraft manufacturing business should be closed down.
In our government of the grab by the special interests (in which almost all citizens partake in one form or the other, regardless of the enormous waste and possible unfairness that some grabbers are better than others), it is to be expected that the plaintiffs' attorneys will be as formidable as any other special interest in exploiting and protecting their domain. We the citizens know and understand that they are only doing what every other special interest does.
But fair is fair. If a special interest cannot keep their legislators dumb and happy and instead have pushed too hard and too far that even their lawmaking friends cannot stomach the disgust they feel with the snorfing that has gone on at the trough, it is time for the special interest to back off. In such a case, the special interest is engaged in risky behavior if it decides to execute a snazzy "end around" to avoid a legislative body having acted against the group. An "end around" may get the citizens very, very irate.
Alabama's plaintiffs attorneys have recently taken overreaching to new heights. In 1987, our woeful, benighted, if not besotted, Alabama legislature actually took it into its hands and said enough is enough. Alabama's lawmakers concluded a stop sign was needed against an insane, out of control, tort liability law system of justice as a gigantic lottery, in which all citizens are forced to buy their lottery tickets, in order that Alabama plaintiffs attorneys may year in and year out rake in tens and hundreds of millions of dollars of attorneys fees. All had become too disgusting for our legislators to stomach, as nice as those plaintiffs' attorneys are to them. In an insane fit of rationality, our Alabama legislature passed a law that imposed a limitation on punitive damages.
Do you know what the plaintiffs' attorneys then did? Yup, got the Alabama Supreme Court do declare the limitation as unconstitutional, violation of the right to trial by jury or something. Just last year that was. See Henderson v. Alabama Power Company, 627 So. 2d 878 (Ala. 1993).
I mean fair is fair. If something is so rotten and so disgusting that the Alabama legislature passes a law against it, it is really rotten and disgusting, and its proponents should accept how rotten and disgusting they have been and plain back off. But not the Alabama plaintiffs' attorneys.
I know it's rare for we the citizens to be presented with much of an opportunity to really give politicians or a special interest group the real kick in the behind they deserve. But we have one in next month's Alabama Supreme Court justice elections. Give yourself a treat. Find out candidates lined up where in 1993 and lines up where now on the tort liability law issue and limitations on punitive damages, and let the plaintiffs' attorneys and their supreme court justices know that they have overreached just one too many times, that you have really gotten fed up and you are not going to take it anymore, and watch how you cast your ballot on election day in those supreme court justice elections.
Thank you for your immense patience and interest if you have stayed tuned through this multi-part editorial, and may you be rewarded for the same on election day next month.
November 2007- Tyco class action
Just this month I tried to get the following published as an op/ed piece in The Wall Street Journal and other newspapers:
Tyco: On Snookering Clients Out Of $460 Million
So the plaintiffs’ lawyers in the Tyco class action litigation are putting in for $460,000,000 of attorneys fees for their handiwork in shepherding that case through the legal system.
A little thought and analysis will reveal that the end result is wildly disparate treatment of four groups of innocent Tyco shareholders. One group (not represented by the lawyers) is running off with a windfall, that windfall was at the loss and expense of other Tyco shareholders, and the plaintiffs lawyers are achieving a shuffling around of the losses among such other shareholders, decreasing the loss of some of them (maybe even turning it into a gain), and augmenting the losses of others of them. For this work the plaintiffs lawyers want $460,000,000 from the shareholders for whom the lawyers shuffled around the losses (which aggregate losses are increased by said $460 million).
Let’s elaborate:
The gist of the class action lawsuit is that Tyco, some of its officers and directors, its accountants and other defendants allegedly did nefarious things that resulted in the price of Tyco stock being artificially inflated during the period from December 13, 1999 to June 6, 2002 (the “Artificially Inflated Period”). That allegedly caused losses to shareholders who bought Tyco stock during the Artificially Inflated Period. To compensate them, under the settlement agreement, Tyco will pay into the settlement fund $2,975,000,000, and Price Waterhouse will pay $225,000,000. The total settlement fund is then to be distributed to shareholders who bought Tyco stock during the Artificially Inflated Period in proportion to the respective amounts of losses they suffered. For this purpose the settlement agreement sets forth a day by day schedule of the amount by which Tyco stock is deemed to have been artificially inflated as of each day in the Artificially Inflated Period. A shareholder’s loss is basically the amount, according to the schedule, by which the Tyco stock was inflated as of the date on which the stockholder purchased his Tyco stock.
Well, OK.
So what does that result in for Tyco shareholders who have been affected by the allegedly nefarious things that were done?
First let’s take shareholders who bought their stock before December 13, 1999 and sold it during the period from December 13, 1999 through June 6, 2002. They are in luck and have reaped a windfall by obtaining the benefit of a stock sale price that was artificially inflated, and they do not have to return a dime of it to anyone. How much in total is that windfall? It is very likely that no one in the courtroom knows at this time, since it is dependent on identifying beneficial owners in billions of dollars of “street name” transactions during the Artificially Inflated Period. That information is only now being collected through claim forms that shareholders who are claiming losses must submit before December 28, 2007. (The “lucky” shareholders themselves will not be submitting any such information.) In the absence of definite information, it would not be unreasonable to speculate that the total amount of the windfall gain is at least $2,975,000,000, and it could be a lot, lot more, maybe $10,000,000,000, that has been dropped on the plates of the lucky stockholders who purchased their stock before December 13, 1999, sold it an artificially inflated price between December 13, 1999 and June 6, 2002, and who don’t have to return a dime of it to anyone. (It should be noted that this “lucky” group of Tyco shareholders should also be considered to include Tyco shareholders who bought stock during the Artificially Inflated Period at one inflated price and sold it during the Artificially Inflated Period at a higher artificially inflated price.)
The very large windfall that the lucky Tyco stockholders have received and get to keep, whatever the total amount of that is, came out of the pockets of the hapless investors who purchased their Tyco stock between December 13, 1999 and June 6, 2002 at artificially inflated prices. (and who did not get in the “lucky” group by selling it during the Artificially Inflated Period at a higher inflated price than the inflated price they purchased it for).. What happens with the unlucky Tyco stockholders?.
The unlucky shareholders need to be differentiated between those who sold before June 6, 2002 and those who sold after June 6, 2002 (or never sold at all.) Further, consideration needs to given to shareholders who purchased before December 13, 1999 and held their stock the entire time and also stockholders who purchased after June 6, 2002 (the acquisitions in both cases being presumably at non-inflated prices).
Well, Tyco is having to pay $2,975,000,000 into the settlement fund. This payment is coming out of the pockets of all of Tyco’s current shareholders. The portion that comes from shareholders who purchased their Tyco stock between December 13, 1999 and June 6, 2002 and continued to hold their Tyco shares will be paid into the settlement fund, and they will receive in the settlement their calculated share of the fund. That share could be less than or could be greater than their share of the $2,975,000,000 that Tyco pays into the fund, or in other words they may have a net loss or a net gain from the settlement. Further, the individual net gains (or net losses) for each shareholder in this group are not going to be proportionate across the group, but no one in courtroom would be able to know anything definite about this at the current time, and no one may ever bother to find out about it.
Shareholders who bought after December 13, 1999 and sold prior to June 26, 2002 will not contribute anything into the settlement fund, but will receive an amount from the settlement fund and will gain from the settlement.
Finally, shareholders who purchased before December 13, 1999 and who continued to hold their shares, as well as shareholders who purchased after June 6, 2002, and who thus experienced no loss due to the artificially inflated stock price during the Artificially Inflated Period, will receive nothing from the settlement fund but will make a contribution to the settlement fund and hence experience a loss from the settlement.
Wow, there you have it. Four groups of Tyco shareholders who are innocent of any wrongdoing, and four disparate treatments that has not a wit of rationality to it, namely a very lucky group of shareholders who get a huge windfall, a second group who may have a net gain or a net loss from the settlement, a third group that will have a gain from the settlement, and a fourth group that will only suffer an unjustified loss from the settlement.
And further wow: For their participation in shepherding through the legal system the foregoing irrational outcome for the four groups of innocent Tyco shareholders, the plaintiffs lawyers are requesting to be subtracted from the settlement fund $460,000,000 in attorney’s fees for themselves. There is the further cost coming out of the pockets of current Tyco shareholders the legal fees that Tyco has to pay to its attorneys for having represented Tyco. These hundreds of millions of dollars of attorneys fees in no way affect the lucky group of Tyco shareholders who received and get to keep the their multibillion dollar windfall, but the fees may tip a potential net gain into a net loss for the second group of shareholders, they reduce the compensation the third group receives for their losses, and they increase the unjustified loss of the fourth group of shareholders.
Now that is world class client snookering. No two ways about it.
Robert Shattuck
[my address and telephone number]
Tyco: On Snookering Clients Out Of $460 Million
So the plaintiffs’ lawyers in the Tyco class action litigation are putting in for $460,000,000 of attorneys fees for their handiwork in shepherding that case through the legal system.
A little thought and analysis will reveal that the end result is wildly disparate treatment of four groups of innocent Tyco shareholders. One group (not represented by the lawyers) is running off with a windfall, that windfall was at the loss and expense of other Tyco shareholders, and the plaintiffs lawyers are achieving a shuffling around of the losses among such other shareholders, decreasing the loss of some of them (maybe even turning it into a gain), and augmenting the losses of others of them. For this work the plaintiffs lawyers want $460,000,000 from the shareholders for whom the lawyers shuffled around the losses (which aggregate losses are increased by said $460 million).
Let’s elaborate:
The gist of the class action lawsuit is that Tyco, some of its officers and directors, its accountants and other defendants allegedly did nefarious things that resulted in the price of Tyco stock being artificially inflated during the period from December 13, 1999 to June 6, 2002 (the “Artificially Inflated Period”). That allegedly caused losses to shareholders who bought Tyco stock during the Artificially Inflated Period. To compensate them, under the settlement agreement, Tyco will pay into the settlement fund $2,975,000,000, and Price Waterhouse will pay $225,000,000. The total settlement fund is then to be distributed to shareholders who bought Tyco stock during the Artificially Inflated Period in proportion to the respective amounts of losses they suffered. For this purpose the settlement agreement sets forth a day by day schedule of the amount by which Tyco stock is deemed to have been artificially inflated as of each day in the Artificially Inflated Period. A shareholder’s loss is basically the amount, according to the schedule, by which the Tyco stock was inflated as of the date on which the stockholder purchased his Tyco stock.
Well, OK.
So what does that result in for Tyco shareholders who have been affected by the allegedly nefarious things that were done?
First let’s take shareholders who bought their stock before December 13, 1999 and sold it during the period from December 13, 1999 through June 6, 2002. They are in luck and have reaped a windfall by obtaining the benefit of a stock sale price that was artificially inflated, and they do not have to return a dime of it to anyone. How much in total is that windfall? It is very likely that no one in the courtroom knows at this time, since it is dependent on identifying beneficial owners in billions of dollars of “street name” transactions during the Artificially Inflated Period. That information is only now being collected through claim forms that shareholders who are claiming losses must submit before December 28, 2007. (The “lucky” shareholders themselves will not be submitting any such information.) In the absence of definite information, it would not be unreasonable to speculate that the total amount of the windfall gain is at least $2,975,000,000, and it could be a lot, lot more, maybe $10,000,000,000, that has been dropped on the plates of the lucky stockholders who purchased their stock before December 13, 1999, sold it an artificially inflated price between December 13, 1999 and June 6, 2002, and who don’t have to return a dime of it to anyone. (It should be noted that this “lucky” group of Tyco shareholders should also be considered to include Tyco shareholders who bought stock during the Artificially Inflated Period at one inflated price and sold it during the Artificially Inflated Period at a higher artificially inflated price.)
The very large windfall that the lucky Tyco stockholders have received and get to keep, whatever the total amount of that is, came out of the pockets of the hapless investors who purchased their Tyco stock between December 13, 1999 and June 6, 2002 at artificially inflated prices. (and who did not get in the “lucky” group by selling it during the Artificially Inflated Period at a higher inflated price than the inflated price they purchased it for).. What happens with the unlucky Tyco stockholders?.
The unlucky shareholders need to be differentiated between those who sold before June 6, 2002 and those who sold after June 6, 2002 (or never sold at all.) Further, consideration needs to given to shareholders who purchased before December 13, 1999 and held their stock the entire time and also stockholders who purchased after June 6, 2002 (the acquisitions in both cases being presumably at non-inflated prices).
Well, Tyco is having to pay $2,975,000,000 into the settlement fund. This payment is coming out of the pockets of all of Tyco’s current shareholders. The portion that comes from shareholders who purchased their Tyco stock between December 13, 1999 and June 6, 2002 and continued to hold their Tyco shares will be paid into the settlement fund, and they will receive in the settlement their calculated share of the fund. That share could be less than or could be greater than their share of the $2,975,000,000 that Tyco pays into the fund, or in other words they may have a net loss or a net gain from the settlement. Further, the individual net gains (or net losses) for each shareholder in this group are not going to be proportionate across the group, but no one in courtroom would be able to know anything definite about this at the current time, and no one may ever bother to find out about it.
Shareholders who bought after December 13, 1999 and sold prior to June 26, 2002 will not contribute anything into the settlement fund, but will receive an amount from the settlement fund and will gain from the settlement.
Finally, shareholders who purchased before December 13, 1999 and who continued to hold their shares, as well as shareholders who purchased after June 6, 2002, and who thus experienced no loss due to the artificially inflated stock price during the Artificially Inflated Period, will receive nothing from the settlement fund but will make a contribution to the settlement fund and hence experience a loss from the settlement.
Wow, there you have it. Four groups of Tyco shareholders who are innocent of any wrongdoing, and four disparate treatments that has not a wit of rationality to it, namely a very lucky group of shareholders who get a huge windfall, a second group who may have a net gain or a net loss from the settlement, a third group that will have a gain from the settlement, and a fourth group that will only suffer an unjustified loss from the settlement.
And further wow: For their participation in shepherding through the legal system the foregoing irrational outcome for the four groups of innocent Tyco shareholders, the plaintiffs lawyers are requesting to be subtracted from the settlement fund $460,000,000 in attorney’s fees for themselves. There is the further cost coming out of the pockets of current Tyco shareholders the legal fees that Tyco has to pay to its attorneys for having represented Tyco. These hundreds of millions of dollars of attorneys fees in no way affect the lucky group of Tyco shareholders who received and get to keep the their multibillion dollar windfall, but the fees may tip a potential net gain into a net loss for the second group of shareholders, they reduce the compensation the third group receives for their losses, and they increase the unjustified loss of the fourth group of shareholders.
Now that is world class client snookering. No two ways about it.
Robert Shattuck
[my address and telephone number]
September 2007 credit card currency conversion case
September 10, 2007
BY CERTIFIED MAIL; RETURN RECEIPT REQUESTED
The Honorable William H. Pauley, III
United States District Court
Southern District of New York
United States Courthouse
500 Pearl Street
New York, New York 10007-1581
In re Currency Conversion Fee Litigation
http://www.ccfsettlement.com/
Dear Judge Pauley,
I received notice that I am a member of the class in this litigation
as a credit card holder who used his credit card in foreign
transactions between 1996 and 2006 and paid currency conversion fees
of 1% to 3% that allegedly were collusively imposed by credit card
companies and banks and hidden from credit card users such as myself.
I have opted out of participating in the $336,000,000 settlement fund
on general principles. I am writing this letter to take the
opportunity to state to you, as the judge in the litigation, what my
“general principles” are which have led me to opt out.
Information and commercial transactions in the American economy
Most adult Americans are participants in our country’s economy, both
on the commercial side of selling goods or services for recompense
and also on the consumer side of buying them for use personally or in
a business.
Frequently the seller of a product is much more knowledgeable than the
buyer about the product, the marketplace in which it is sold, and
other factors related to costs, price and quality affecting the
product. This superior knowledge can be and is frequently used
advantageously by sellers in conducting their business.
Perhaps in an ideal economy all buyers and sellers would have equal
knowledge and information about products and markets in which they
make purchases and sales.
For example, perhaps every hospital patient should be able to know
what the hospital’s costs are for each aspirin consumed by the
patient, what the patient is charged for each aspirin, what other
hospitals charge for aspirin for comparison purposes, how much each
doctor and nurse who participates in an operation is paid on an
hourly basis, how many doctors and nurses are present, the extent to
which all such doctors and nurses are “really” needed, and what other
hospitals charge for the same procedure, etc.
Similar things could be said about any product or service that is
bought and sold. Take the legal services provided by the plaintiffs’
lawyers in this litigation. They are claiming legal fees and other
expenses in excess of $90,000,000. Is there any place I can go to
look at their time records to find out who did what, and what took
how long to do, and whether it was all necessary work, in order to
justify such high amounts in legal fees? Or how about photocopying
charges? Can I find out the per page charges, and whether
alternative lower photocopying charges could have been availed of,
and whether all the photocopying was really necessary?
Buyer protections; big and small amounts
The disparity of knowledge and information between sellers and buyers
can exist in various contexts, and various things may aid in the
protection of buyers.
If I am a buyer and the amount involved is significant, and if there
is a competitive market place, say in the purchase of a car, I can
expend signifciant time and effort to get information in order to try
not to be taken advantage of in the making of my purchase, and, if I
am not satisfied with one prospective seller, I can try a different
seller.
If the amount involved is small, it may not be worth my while to
investigate and to do comparison shopping. The currency conversion
fee is a good example. I have looked at some of my old credit card
statements and agreements. On an older statement, I saw only the
conversion rate stated. In a more recent card agreement from 2002,
the 3% conversion fee is indicated. In a 2005 statement I see a
separately stated foreign transaction purchase finance charge of
$.74. When I have traveled abroad, I have noted the “spreads” on
conversion between US dollars and a foreign currency. Also, I have
spent time “comparison shopping” of foreign exchange shops to try to
find the best exchange rate available. I have at times made choices
among carrying cash abroad, using travelers checks and using my
credit card.
Where amounts are small for individual buyers, but there are many,
many buyes, and all their small amounts add up to a big amount, it
can be very good and beneficial if someone can represent the
interests of the buyers in a collective way. For example, if I am a
shareholder in a corporation, and the corporation gives its president
a $20,000,000 pay raise, and my share of the $20,000,000 is only five
dollars, it could be good and beneficial if, say, a pension fund that
owns lots of shares for the benefit of many individuals and whose
total share is, say, $2,000,000, to take steps to try to object to the
pay raise, including perhaps finding another president for the
company. This principle would extend to yourself, Your Honor, in
this litigation, and your determining for lthe benefit of the class
whether $90,000,000 in plaintiffs’ attorneys fees is an amount
reasonably required to obtain the needed legal services, or whether
other attorneys could have been gotten to perform the services in
question for much less. How good a job has been done in this case to
protect the interests of the class members who will each be paying a
very small amount but which small amounts add up to a very, very large
amount?
Legal protections; corporate wrongdoing
Particularly in situations where amounts involved are small, and a
single person does not have an incentive to spend time and effort
investigating and doing comparison shopping, my “general principles”
encompass that it is a proper role for our democratically elected
lawmakers to pass laws to try to provide protections to buyers.
These should be reasonable and fairly balanced laws of general
applicability that will take account that most of the citizenry
functions on both sides as sellers and buyers in the economy, and, if
as a buyer, we would like a certain protection, we need to be willing
to allow a similar protection in those situations where we are on the
selling side.
For example, if we think there should be available to patients the
information from hospitals described above, it may be similarly
appropriate to requires judges to keep records of how much time they
spend performing judicial functions during the year and to disclose
that to lawmakers and the public to better inform their decisions
about how much judges should be paid. Similarly, if a foreign
exchange shop has information that a different foreign exchange shop
has a better rate, it could be appropriate to consider a law that
requires the first shop to tell any prospective customer that there is
a better rate elsewhere. In other words, if you are only talking
about the other guy, it is easy enough to say the other guy needs to
disclose information, but, if the other guy is you, you may not be so
quick off the bat.
Also, under my “general principles,” there is a very significant role
for salaried state attorney generals to enforce consumer protection
laws. There is inherently a degree of discretion involved in the
enforcement of laws, and there needs to be a degree of accountability
to the public, including that it is to be kept in mind that the
public includes people in their capacities both as sellers and as
buyers. Also, there should further be mindfulness that penalties and
liabilities that are imposed may ultimately be borne by innocent
parties who have received no financial benefit. (For example, if a
corporation violated a consumer protection law and obtained a benefit,
a person who later purchases stock and becomes a shareholder may be
entirely innocent in the wrongdoing and have received no benefit, and
yet will be penalized if the corporation has to pay a financial
penalty after the person becomes a shareholder.) Further, under this
accountability, I think the citizenry desires that cost/benefit
principles be applied. State attorney generals have some
accountability to the citizenry, and that is important and good under
my “general principles.”
Further, under my “general principles,” by being salaried, state
attorney generals do not have an inappropriate personal financial
interest that biases them in how they try to enforce the consumer
protection laws. It would be wrong if their compensation was based
on the dollar amount of penalties they are able to get imposed,
because that would create a personal bias to seek the highest
possible penalties when lower penalties or liabilities are fairer and
more reasonable.
Further, under my “general principles,” if there is wrongdoing by a
corporation, that wrongdoing was conceived and implemented by one or
more individuals in the corporation, and it is important that our
society, for deterrent purposes, be assiduous in taking steps to
punish the culpable individuals in some way. In this litigation
$336,000,000 is being required to be paid for alleged wrongdoing. I
respectfully ask Your Honor, are you aware of a single officer or
employee of any of the defendants who has suffered any penalty or
other type of sanction as a result of their participation in
conceiving and implementing this alleged wrongdoing? If that has not
happened, I have very serious qualms about whether the prosecution and
outcome of this litigation is in fact and on balance serving societal
interests?
This litigation ill serves societal interests
I believe the prosecution and outcome of this litigation ill serves
societal interests under the “general principles” I have enunciated
above.
The plaintiffs’ lawyers are basically taking upon themselves the job
of enforcing consumer protection laws, but, unlike a state attorney
general, they have a financial incentive that biases them in favor of
a harsher or more onerous result than a salaried state attorney
general who does not have such a bias and who would more reasonably
and fairly consider both sides and the possible general applicability
to other situations of the same standards. The plaintiffs’ lawyers
have no mindfulness that innocent parties who obtained no benefit may
nonetheless get penalized.
A $316,000,000 settlement is being required to be paid for alleged
wrongdoing, and I suspect that not a single employee or officer of the
defendants has suffered or will suffer any penalty or other sanction
as a result of their participation in the alleged wrongdoing. What
lesson is learned from that? They got a good salary and benefits
while conceiving and implementing this alleged wrongdoing, and they
incur no sanctions, and so, why not, as they are laughing their way
to the bank, set off in conceiving and implementing some new
wrongdoing and get paid even more good corporate salaries and
benefits, and let further innocent saps bear the costs and penalties
if that new wrongdoing gets exposed..
This litigation complains about credit card companies and banks
allegedly taking advantage of a situation to skim, in very small
amounts from millions of credit card users, hundreds of millions of
dollars in currency conversion fees. So, then what happens? What
happens is that the plaintiffs’ attorneys are going to skim, in very
small amounts from the same millions of credit card users,
$90,000,000 in attorneys fees, and that is not to mention additional
tens of millions of dollars in attorneys fees to be skimmed by the
lawyers for the defendants from all the shareholders of the credit
card companies and banks they represent. That is truly delicious
irony.
You are, of course, the person in the best position to mitigate the
foregoing. While settlements can be a good thing, it is also
important for society and its citizens to know what is wrongdoing and
whether wrongdoing has taken place. If the law fails to do that,
society, including its judges, lawyers and citizens, can lose track
of guidance and standards about what is wrongdoing, and the result
can be mindless and arbitrary transfers and shifting of funds,
frequently between and among equally innocent parties who neither
provided nor otherwise received a benefit. I would think you, as a
judge, would find that very unpalatable. At a minimum, you could
call the attorneys before you and say, “OK, you are alleging this
wrongdoing has taken place. Is anything being done to hold
accountable the individuals who are responsible for it? If not, I am
dubious that society very seriously thinks there has been
wrongdoing.” Your Honor, did you ever do that in this case? Your
Honor, did that thought ever cross your mind even?
I have my opinion about the inefficiency and wastefulness of this
litigation and whether, for society to adequately address the matter
at hand, it is reasonably required that there be a collective
expenditure of $90,000,000 paid for attorney services for the
plaintiffs and similar tens of millions of dollars paid to attorneys
for the defendants? In your opinion, is that the best our society
can do, Your Honor?
As I have indicated, the skimming that is going on by the attorneys
here is at least as reprehensible as the skimming that the credit
card companies and banks are alleged to have perpetrated.
In short, Your Honor, I think you should be ashamed to put your stamp
of approval on these shenanigans.
Sincerely,
Robert Shattuck
[my address and telephone number]
BY CERTIFIED MAIL; RETURN RECEIPT REQUESTED
The Honorable William H. Pauley, III
United States District Court
Southern District of New York
United States Courthouse
500 Pearl Street
New York, New York 10007-1581
In re Currency Conversion Fee Litigation
http://www.ccfsettlement.com/
Dear Judge Pauley,
I received notice that I am a member of the class in this litigation
as a credit card holder who used his credit card in foreign
transactions between 1996 and 2006 and paid currency conversion fees
of 1% to 3% that allegedly were collusively imposed by credit card
companies and banks and hidden from credit card users such as myself.
I have opted out of participating in the $336,000,000 settlement fund
on general principles. I am writing this letter to take the
opportunity to state to you, as the judge in the litigation, what my
“general principles” are which have led me to opt out.
Information and commercial transactions in the American economy
Most adult Americans are participants in our country’s economy, both
on the commercial side of selling goods or services for recompense
and also on the consumer side of buying them for use personally or in
a business.
Frequently the seller of a product is much more knowledgeable than the
buyer about the product, the marketplace in which it is sold, and
other factors related to costs, price and quality affecting the
product. This superior knowledge can be and is frequently used
advantageously by sellers in conducting their business.
Perhaps in an ideal economy all buyers and sellers would have equal
knowledge and information about products and markets in which they
make purchases and sales.
For example, perhaps every hospital patient should be able to know
what the hospital’s costs are for each aspirin consumed by the
patient, what the patient is charged for each aspirin, what other
hospitals charge for aspirin for comparison purposes, how much each
doctor and nurse who participates in an operation is paid on an
hourly basis, how many doctors and nurses are present, the extent to
which all such doctors and nurses are “really” needed, and what other
hospitals charge for the same procedure, etc.
Similar things could be said about any product or service that is
bought and sold. Take the legal services provided by the plaintiffs’
lawyers in this litigation. They are claiming legal fees and other
expenses in excess of $90,000,000. Is there any place I can go to
look at their time records to find out who did what, and what took
how long to do, and whether it was all necessary work, in order to
justify such high amounts in legal fees? Or how about photocopying
charges? Can I find out the per page charges, and whether
alternative lower photocopying charges could have been availed of,
and whether all the photocopying was really necessary?
Buyer protections; big and small amounts
The disparity of knowledge and information between sellers and buyers
can exist in various contexts, and various things may aid in the
protection of buyers.
If I am a buyer and the amount involved is significant, and if there
is a competitive market place, say in the purchase of a car, I can
expend signifciant time and effort to get information in order to try
not to be taken advantage of in the making of my purchase, and, if I
am not satisfied with one prospective seller, I can try a different
seller.
If the amount involved is small, it may not be worth my while to
investigate and to do comparison shopping. The currency conversion
fee is a good example. I have looked at some of my old credit card
statements and agreements. On an older statement, I saw only the
conversion rate stated. In a more recent card agreement from 2002,
the 3% conversion fee is indicated. In a 2005 statement I see a
separately stated foreign transaction purchase finance charge of
$.74. When I have traveled abroad, I have noted the “spreads” on
conversion between US dollars and a foreign currency. Also, I have
spent time “comparison shopping” of foreign exchange shops to try to
find the best exchange rate available. I have at times made choices
among carrying cash abroad, using travelers checks and using my
credit card.
Where amounts are small for individual buyers, but there are many,
many buyes, and all their small amounts add up to a big amount, it
can be very good and beneficial if someone can represent the
interests of the buyers in a collective way. For example, if I am a
shareholder in a corporation, and the corporation gives its president
a $20,000,000 pay raise, and my share of the $20,000,000 is only five
dollars, it could be good and beneficial if, say, a pension fund that
owns lots of shares for the benefit of many individuals and whose
total share is, say, $2,000,000, to take steps to try to object to the
pay raise, including perhaps finding another president for the
company. This principle would extend to yourself, Your Honor, in
this litigation, and your determining for lthe benefit of the class
whether $90,000,000 in plaintiffs’ attorneys fees is an amount
reasonably required to obtain the needed legal services, or whether
other attorneys could have been gotten to perform the services in
question for much less. How good a job has been done in this case to
protect the interests of the class members who will each be paying a
very small amount but which small amounts add up to a very, very large
amount?
Legal protections; corporate wrongdoing
Particularly in situations where amounts involved are small, and a
single person does not have an incentive to spend time and effort
investigating and doing comparison shopping, my “general principles”
encompass that it is a proper role for our democratically elected
lawmakers to pass laws to try to provide protections to buyers.
These should be reasonable and fairly balanced laws of general
applicability that will take account that most of the citizenry
functions on both sides as sellers and buyers in the economy, and, if
as a buyer, we would like a certain protection, we need to be willing
to allow a similar protection in those situations where we are on the
selling side.
For example, if we think there should be available to patients the
information from hospitals described above, it may be similarly
appropriate to requires judges to keep records of how much time they
spend performing judicial functions during the year and to disclose
that to lawmakers and the public to better inform their decisions
about how much judges should be paid. Similarly, if a foreign
exchange shop has information that a different foreign exchange shop
has a better rate, it could be appropriate to consider a law that
requires the first shop to tell any prospective customer that there is
a better rate elsewhere. In other words, if you are only talking
about the other guy, it is easy enough to say the other guy needs to
disclose information, but, if the other guy is you, you may not be so
quick off the bat.
Also, under my “general principles,” there is a very significant role
for salaried state attorney generals to enforce consumer protection
laws. There is inherently a degree of discretion involved in the
enforcement of laws, and there needs to be a degree of accountability
to the public, including that it is to be kept in mind that the
public includes people in their capacities both as sellers and as
buyers. Also, there should further be mindfulness that penalties and
liabilities that are imposed may ultimately be borne by innocent
parties who have received no financial benefit. (For example, if a
corporation violated a consumer protection law and obtained a benefit,
a person who later purchases stock and becomes a shareholder may be
entirely innocent in the wrongdoing and have received no benefit, and
yet will be penalized if the corporation has to pay a financial
penalty after the person becomes a shareholder.) Further, under this
accountability, I think the citizenry desires that cost/benefit
principles be applied. State attorney generals have some
accountability to the citizenry, and that is important and good under
my “general principles.”
Further, under my “general principles,” by being salaried, state
attorney generals do not have an inappropriate personal financial
interest that biases them in how they try to enforce the consumer
protection laws. It would be wrong if their compensation was based
on the dollar amount of penalties they are able to get imposed,
because that would create a personal bias to seek the highest
possible penalties when lower penalties or liabilities are fairer and
more reasonable.
Further, under my “general principles,” if there is wrongdoing by a
corporation, that wrongdoing was conceived and implemented by one or
more individuals in the corporation, and it is important that our
society, for deterrent purposes, be assiduous in taking steps to
punish the culpable individuals in some way. In this litigation
$336,000,000 is being required to be paid for alleged wrongdoing. I
respectfully ask Your Honor, are you aware of a single officer or
employee of any of the defendants who has suffered any penalty or
other type of sanction as a result of their participation in
conceiving and implementing this alleged wrongdoing? If that has not
happened, I have very serious qualms about whether the prosecution and
outcome of this litigation is in fact and on balance serving societal
interests?
This litigation ill serves societal interests
I believe the prosecution and outcome of this litigation ill serves
societal interests under the “general principles” I have enunciated
above.
The plaintiffs’ lawyers are basically taking upon themselves the job
of enforcing consumer protection laws, but, unlike a state attorney
general, they have a financial incentive that biases them in favor of
a harsher or more onerous result than a salaried state attorney
general who does not have such a bias and who would more reasonably
and fairly consider both sides and the possible general applicability
to other situations of the same standards. The plaintiffs’ lawyers
have no mindfulness that innocent parties who obtained no benefit may
nonetheless get penalized.
A $316,000,000 settlement is being required to be paid for alleged
wrongdoing, and I suspect that not a single employee or officer of the
defendants has suffered or will suffer any penalty or other sanction
as a result of their participation in the alleged wrongdoing. What
lesson is learned from that? They got a good salary and benefits
while conceiving and implementing this alleged wrongdoing, and they
incur no sanctions, and so, why not, as they are laughing their way
to the bank, set off in conceiving and implementing some new
wrongdoing and get paid even more good corporate salaries and
benefits, and let further innocent saps bear the costs and penalties
if that new wrongdoing gets exposed..
This litigation complains about credit card companies and banks
allegedly taking advantage of a situation to skim, in very small
amounts from millions of credit card users, hundreds of millions of
dollars in currency conversion fees. So, then what happens? What
happens is that the plaintiffs’ attorneys are going to skim, in very
small amounts from the same millions of credit card users,
$90,000,000 in attorneys fees, and that is not to mention additional
tens of millions of dollars in attorneys fees to be skimmed by the
lawyers for the defendants from all the shareholders of the credit
card companies and banks they represent. That is truly delicious
irony.
You are, of course, the person in the best position to mitigate the
foregoing. While settlements can be a good thing, it is also
important for society and its citizens to know what is wrongdoing and
whether wrongdoing has taken place. If the law fails to do that,
society, including its judges, lawyers and citizens, can lose track
of guidance and standards about what is wrongdoing, and the result
can be mindless and arbitrary transfers and shifting of funds,
frequently between and among equally innocent parties who neither
provided nor otherwise received a benefit. I would think you, as a
judge, would find that very unpalatable. At a minimum, you could
call the attorneys before you and say, “OK, you are alleging this
wrongdoing has taken place. Is anything being done to hold
accountable the individuals who are responsible for it? If not, I am
dubious that society very seriously thinks there has been
wrongdoing.” Your Honor, did you ever do that in this case? Your
Honor, did that thought ever cross your mind even?
I have my opinion about the inefficiency and wastefulness of this
litigation and whether, for society to adequately address the matter
at hand, it is reasonably required that there be a collective
expenditure of $90,000,000 paid for attorney services for the
plaintiffs and similar tens of millions of dollars paid to attorneys
for the defendants? In your opinion, is that the best our society
can do, Your Honor?
As I have indicated, the skimming that is going on by the attorneys
here is at least as reprehensible as the skimming that the credit
card companies and banks are alleged to have perpetrated.
In short, Your Honor, I think you should be ashamed to put your stamp
of approval on these shenanigans.
Sincerely,
Robert Shattuck
[my address and telephone number]
November 2004 objection to attorney fees.
I was a member of the plaintiff class in a class action lawsuit against Charter Communications in which the plaintiffs' attorneys wanted $8.5 million in fees. I tried to file an objection in November 2004. Here was the document I tried to file:
IN THE SUPERIOR COURT
OF ATHENS-CLARKE COUNTY
STATE OF GEORGIA
EMMA S. TOBAR ET AL,
Plaintiffs, Civil Action File No.SU02-CV-0659-G
v.
CHARTER COMMUNICATIONS
HOLDING COMPANY, LLC, et al,
Defendants
OBJECTION TO SETTLEMENT BY CLASS MEMBER ROBERT SHATTUCK AND REQUEST FOR WAIVER OF OCTOBER 28, 2004 MAILING DEADLINE
I object to the attorneys' fees and attorney costs in the proposed settlement. I request that the October 28, 2004 deadline for the postmark on the mailing of this objection be waived and that the Court consider this objection.
My full name is Robert D. Shattuck, Jr.. My current address and my billing address where I received Charter cable service is _______________________________.
I. The settlement
In this class action against the Charter cable television companies, the class plaintiffs allege that (I) Charter's wire maintenance fee (shown as $3.95 on my most recent monthly bill) was imposed on subscribers without their request or permission and that it was worthless or of lesser value than charged; and (ii) the rental fee for a converter box was imposed only when the boxes had no value and served no purpose. Under the settlement, depending on whether a class member is a present or former payer of the wire maintenance fee or a present or former renter of a converter box, a class member may receive for free one of a number of different possible benefits consisting of (a) one movie channel service for six months, (b) Charter High Speed Internet Service for six months, (c) lowest tier Digital Service for six months, (d) upgrade from Basic Service to Expanded Service for six months, (e) six Video on Demand movies, and (f) six pay per view movies. The settlement notice states that wire maintenance fee customers who believe that they did not voluntarily and affirmatively select this service, may notify Charter and terminate the wire maintenance fee service.
Under the settlement the plaintiffs' lawyers may apply to the Court for attorneys' fees and expenses, to be paid by Charter, and Charter has agreed to pay the same to the extent they do not exceed $8,500,000.
II. The attorney's fees are a perverse incentive that contributes to waste of judicial and other public resources and is counterproductive to important policy considerations
The amount of attorney fees and costs of $8,500,000, which are substantially based on the dollar amount that is at stake in this action, is excessive and a perverse incentive that contributes to and results in wasteful uses of judicial and public type resources and in judgments and settlements that fail to advance, and that in fact undermine, important social and economic policies of trying to lessen questionable, irksome and/or dishonest commercial practices and to provide meaningful compensation to deserving victims.
III. Further statement of reasons for objection
A. Questionable, irksome and/or dishonest commercial practices are very widespread
Charter's practices with respect to wire maintenance fees and converter boxes may have been questionable, irksome and/or dishonest.
In this real world we live in, there is no end or limit to questionable, irksome and/or dishonest commercial practices. Anywhere you turn, you are going to find them, and tens of millions of people are guilty of them. I could spend a day compiling a list and be just at the tip of the iceberg, but I will indicate the gamut by throwing out ten or fifteen examples.
How about this list: doctors who submit Medicaid claims for services not rendered; car repair shops that perform unneeded car repairs; lawyers who pad their time or run up time by throwing excessive legal manpower onto a case; accounting firms that charge their clients the full cost of airline tickets whereas the accounting firm has gotten a significant discount from the airlines; lawyers and accountants who charge a $.50 per page copying charge whereas Kinko's down the street charges $.15 per page; drug companies that nominally charge certain customers a higher price for a drug in order to be able to stick Medicare with the higher price, but then give a rebate to those customers; tree cutters who collect an upfront payment and then do not show up to cut the trees; plaintiffs' lawyers who make large campaign contributions to judges running for elected judgeships; politicians who do not think they are biased by electionx contributions and who think they are ethically superior to insurance brokers who receive "contingent commissions" from insurers and superior to stock analysts who are compensated based on investment banking business received by their employer from the company whose stock the stock analysts are analyzing and superior to doctors who speak at continuing medical education courses about drugs of drug companies that are paying the doctors significant honorariums; "phishers" who try to trick people by phony emails and web sites into revealing credit card numbers, bank information and Social Security numbers; spam emailers who exploit the anonymity of the Internet and burden it with billions of emails that impose millions of dollars of costs to businesses taken up by employee time dealing with spam; BMW automobile dealers that do a touch up paint job on a car and try to pass the car off as new.
I could spend a week expanding the above list to fill many pages. The point is that human nature is human nature and it is human nature to use its God given intelligence to connive and seek selfish advantage, and there are and are going to be for a long time into the future never ending questionable, irksome and/or dishonest commercial activities and practices that take place. Most of us are guilty at one time or another of engaging in such practices, and some more frequently than others, and just about all of us are victims hundreds or thousands of times over in our lives.
B. Trying to curtail questionable, irksome and/or dishonest commercial practices and to compensate victims
Society makes efforts and in various ways tries to alter human nature, to lessen and keep from increasing the quantum of questionable, irksome and/or dishonest commercial activities, and to provide meaningful remedies to deserving victims.
Portions of these efforts are outside of the law and government. Society, including through religious, educational and family institutions, tries to teach and inculcate in its members, ethical and moral standards of behavior. These are not totally successful judging by the questionable, irksome and/or dishonest commercial activities and practices that abound.
In the legal, governmental domain, society uses more coercive approaches. In such domain, there is a more "public" realm and a "private" realm.
The public realm includes the two parallel systems of the criminal law system and the governmental regulatory system that mete out penalties of jail sentences and fines to try to deter citizens from doing things that cause damage to other members of society and that also seek compensation on behalf of segments of the public who have been victims.
The private realm is that of private litigation where an injured private party sues another party alleged to have caused the injury.
In the public realm of the criminal law system and the regulatory apparatus, there are employed hundreds of thousands of police and other law enforcement agents, lawyers, prosecutors, investigators, scientists, researchers, accountants, legislators, judges and other administrative and clerical personnel. These workers first write the criminal laws and governmental regulations that intimately affect both personal freedoms and trillions of dollars of economic commerce. Ongoing policy debate transpires among democratically elected legislative bodies, government regulators, the regulated parties, and affected citizens as to what is cost effective in terms of the costs involved to achieve various levels of safety or protection in the environment, in consumer products, and in the workplace. There are those who advocate that very high levels of costs should be paid in order to achieve very small incremental improvements in the level of safety or protection. Creative ideas get proposed, such as allowing rights to pollute the air to be bought and sold in order to achieve the best cost/benefit results, and some people are appalled by such a notion. Many consumers argue that the regulators are too lax, and industry frequently thinks the regulators are too strict.
These employees also carry out the wide range of activities needed to enforce the law and regulations, including investigating whether violations may have occurred. conducting tribunals to make legal determinations as to whether violations have in fact occurred, and determining and administering sanctions.
A very salient point about criminal prosecutors and government regulators, who are entrusted with the responsibility of acting fairly and judiciously on behalf of the public in carrying out their public realm functions, is that they are not paid based on how much in fines they collect or how much jail time they get people sentenced for or on the magnitude of the dollar cost associated with the regulations they enact or the monetary transfers they obtain for victims or otherwise. The reason for this is that basing compensation in that fashion would have great potential for undermining the fairness and judiciousness with which society thinks criminal prosecutors and government regulators should carry out their public functions on behalf of all of society.
Class action lawsuits are more public than private in nature, by which "private" means where one party alone has a sufficient economic interest to bring the action, and "public" means where no one party alone has a sufficient economic interest to bring the action but, from a collective public perspective, the action is deserving to be brought. They partake of a public character in various ways that is reflected in the terminology "regulation by litigation."
The attorneys fees are in large part based on the magnitude of the dollar amount that is at stake and are very enormous when compared to the compensation of criminal prosecutors and government regulators.
The attorneys fee in this class action, and in many class action lawsuits, are excessive and a perverse incentive that is wasteful of judicial and other public type resources and that results in judgments and settlements that fail to advance, and that in fact undermine, important social and ecoomic policies of trying to lessen questionable, irksome and/or dishonest commercial practices and to provide meaningful compensation to deserving victims.
In fee driven class action cases such as this case, several important things are lost sight of. One is that of individual responsibility, and that, if you really want people to change their behavior and lessen the perpetration of questionable, irksome and/or dishonest commercial activity or practice individuals who design and/or knowlingly implement the same have to believe they will be personally punished and they personally will be made to pay. If, instead, you punish entities and make entities pay, you potentially will likely fail to punish the responsible individual and fail to make the responsible individual pay. To the extent that failure exists, all individual perpetrators and would be perpetrators of questionable, irksome and/or dishonest commercial practices will take note and very likely not be deterred about what he or she does or will do.
Related to the above aspect of seeking to punish entities and making entities pay is the result that frequently innocent individuals (such as employees, customers and stockholders) will bear the cost of the payment and they may be as innocent as the victims themselves. Attorney fee driven class action lawsuits lose sight of that, and the law as an instrument of justice loses respect in the eyes of society.
Fee driven class action lawsuits lose sight of cost/benefit principles, particularly related to whether the result achieved for amount of attorneys' fees that get paid is justifiable compared to other objectives and results that could be achieved with the amount.
C.The waste and counterproductively of the instant class action lawsuit
Let us apply the foregoing discussion to the instant litigation.
The officers and other employees at Charter who designed and knowingly implemented Charter's commercial practice of charging for the wire maintenance fees and converter box rentals in question were probably rewarded in their job positions at Charter for helping Charter get the additional revenues in question. It is doubtful these employees have been or will fired by Charter. These employees possibly will provide input into Charter's future pricing decisions to the effect that Charter will monitor how many customers terminate the $3.95 cable maintenance fee, and, if a lot do, then Charter will raise the regular cable charges accordingly. The employees may put their brains to work on other schemes to increase Charter's revenue. The next scheme they come up with may escape detection, and, if not, at least Charter's revenues will be increased in the short run, good salaries will have been continued to be received, and, just as in the instant case, the Charter employees in question will not be forced to pay anything, so in the case of detection of a future scheme, the employees will again escape scott free.
If and when these employees look for another job, you gain be fairly sure that nothing untoward will appear on their resume from their involvement with the cable maintenance fee/converter box rental practices at Charter, and, in fact, their reputation may precede them and a prospective employer may very well say, "Yes, this Charter employee made a pretty good and clever effort to increase Charter's revenues, and maybe he or she can come up with something good to enhance our company's revenues. In the short run, that could get our company's stock price up and, if we should have worries that we have been too clever by half, we just sell the stock and stick any loss with a hapless purchaser of the stock. In the meantime we and this employee form Charter will draw good salaries for awhile."
That's the story for the Charter employees who thought up and implemented the wire maintenance/converter box scheme.
Who pays and who loses? I don't know how long I have been paying the wire maintenance fee. I know I don't like the monopoly position that cable television companies are sometimes in and that I don't like the periodic increases in the cable charges. I have not investigated the satellite TV alternative. I use DSL for my high speed Internet access. I might get a savings by combining Charter's Internet and cable TV service, but I hear more bad experiences with the cable Internet than I do about the DSL Internet connection. I will say that mentioning DSL means thinking about the very irritating line item charges in my landline and cell phone telephone bills, but I don't want to get started on that.
I doubt if I will bother claiming my benefit under the settlement agreement in question. I will probably get around to inquiring of Charter about terminating my $3.95 wire maintenance fee. I assume if too many people terminate that fee, Charter, in its pricing decisions, will find a way to recoup, and there is a good chance I will wind up paying one way or the other.
The "in kind"benefits under the settlement agreement will probably not cost Charter very much and may even increase Charter's revenues by customers who claim the benefits that are temporary and they decide they like the additional services and start paying for them on a regular basis.
That leaves the $8,500,000 in attorney's fees and costs that Charter is going to pay. That is cash out of Charter's pocket. Charter has its revenue goals and maybe it will find ways to recoup the $8,500,000 out of increased cable charges of which I will pay my share. Who knows?
In my private affairs, I need to look at my many utility bills and all the other commercial transaction documents that come my way and decide whether I am satisfied with the situation. As mentioned, I don't like a whole lot of line items on my telephone bills. If some of them are dishonest, I would like them stopped. But, in my view, the proper way for that to be done is through a properly functioning criminal law and/or regulatory apparatus by a criminal prosecutor or a regulator who is not being perversely influenced by excessive compensation by how much he or she is able to get out of the company making the charge. That would go a long way to convince me that what is being done is fair and appropriate. I have no confidence that what is being done in this class action if fair and appropriate and I think there is a good chance it is a significant waste of judicial resources and it fails to advance, and in fact undermines, desirable objectives.
IV. Summary
Per the foregoing discussion, I believe the $8,500,000 in attorneys fees being awarded in this case, and "my" share of them, are being wasted, are excessive and are a perverse incentive that is wasteful of judicial and other public type resources and that results in judgments and settlements, including this settlement, that fail to advance, and that in fact undermine, important social and economic policies of trying to lessen questionable, irksome and/or dishonest commercial practices and to provide meaningful compensation to deserving victims.
I request that the parties and the Court waive the October 28, 2004 postmark deadline for this objection. My tardiness should be excused by the fact that, as indicated above, my economic interest is not sufficient to warrant the pursuit of this action and I had more important things to do in my private capacity. In my capacity as an interested citizen, however, I consider very important to file this objection and believe the deadline should be waived. If the form of this objection and request, such as line spacing or font size, is deficient and needs to be changed or corrected for the benefit of the Court or counsel in order to be accepted as a pleading the case, I will make such correction and re-serve and re-file.
Dated: November 6, 2004 _____ _____________________
Robert D. Shattuck, Jr.
Tel. no. ______________
Email ____________
I mailed this objection to the court and served this objection on the five Counsel and the Charter counsel listed in the Notice of Pendency of Class Action, Proposed Settlement and Hearing at the addresses listed therein, by depositing a copy of same, postage paid, in the United States mail on November 6, 2004, with their respective names and addresses as shown in said Notice on said envelopes
__________________________
Robert D.Shattuck, Jr.
IN THE SUPERIOR COURT
OF ATHENS-CLARKE COUNTY
STATE OF GEORGIA
EMMA S. TOBAR ET AL,
Plaintiffs, Civil Action File No.SU02-CV-0659-G
v.
CHARTER COMMUNICATIONS
HOLDING COMPANY, LLC, et al,
Defendants
OBJECTION TO SETTLEMENT BY CLASS MEMBER ROBERT SHATTUCK AND REQUEST FOR WAIVER OF OCTOBER 28, 2004 MAILING DEADLINE
I object to the attorneys' fees and attorney costs in the proposed settlement. I request that the October 28, 2004 deadline for the postmark on the mailing of this objection be waived and that the Court consider this objection.
My full name is Robert D. Shattuck, Jr.. My current address and my billing address where I received Charter cable service is _______________________________.
I. The settlement
In this class action against the Charter cable television companies, the class plaintiffs allege that (I) Charter's wire maintenance fee (shown as $3.95 on my most recent monthly bill) was imposed on subscribers without their request or permission and that it was worthless or of lesser value than charged; and (ii) the rental fee for a converter box was imposed only when the boxes had no value and served no purpose. Under the settlement, depending on whether a class member is a present or former payer of the wire maintenance fee or a present or former renter of a converter box, a class member may receive for free one of a number of different possible benefits consisting of (a) one movie channel service for six months, (b) Charter High Speed Internet Service for six months, (c) lowest tier Digital Service for six months, (d) upgrade from Basic Service to Expanded Service for six months, (e) six Video on Demand movies, and (f) six pay per view movies. The settlement notice states that wire maintenance fee customers who believe that they did not voluntarily and affirmatively select this service, may notify Charter and terminate the wire maintenance fee service.
Under the settlement the plaintiffs' lawyers may apply to the Court for attorneys' fees and expenses, to be paid by Charter, and Charter has agreed to pay the same to the extent they do not exceed $8,500,000.
II. The attorney's fees are a perverse incentive that contributes to waste of judicial and other public resources and is counterproductive to important policy considerations
The amount of attorney fees and costs of $8,500,000, which are substantially based on the dollar amount that is at stake in this action, is excessive and a perverse incentive that contributes to and results in wasteful uses of judicial and public type resources and in judgments and settlements that fail to advance, and that in fact undermine, important social and economic policies of trying to lessen questionable, irksome and/or dishonest commercial practices and to provide meaningful compensation to deserving victims.
III. Further statement of reasons for objection
A. Questionable, irksome and/or dishonest commercial practices are very widespread
Charter's practices with respect to wire maintenance fees and converter boxes may have been questionable, irksome and/or dishonest.
In this real world we live in, there is no end or limit to questionable, irksome and/or dishonest commercial practices. Anywhere you turn, you are going to find them, and tens of millions of people are guilty of them. I could spend a day compiling a list and be just at the tip of the iceberg, but I will indicate the gamut by throwing out ten or fifteen examples.
How about this list: doctors who submit Medicaid claims for services not rendered; car repair shops that perform unneeded car repairs; lawyers who pad their time or run up time by throwing excessive legal manpower onto a case; accounting firms that charge their clients the full cost of airline tickets whereas the accounting firm has gotten a significant discount from the airlines; lawyers and accountants who charge a $.50 per page copying charge whereas Kinko's down the street charges $.15 per page; drug companies that nominally charge certain customers a higher price for a drug in order to be able to stick Medicare with the higher price, but then give a rebate to those customers; tree cutters who collect an upfront payment and then do not show up to cut the trees; plaintiffs' lawyers who make large campaign contributions to judges running for elected judgeships; politicians who do not think they are biased by electionx contributions and who think they are ethically superior to insurance brokers who receive "contingent commissions" from insurers and superior to stock analysts who are compensated based on investment banking business received by their employer from the company whose stock the stock analysts are analyzing and superior to doctors who speak at continuing medical education courses about drugs of drug companies that are paying the doctors significant honorariums; "phishers" who try to trick people by phony emails and web sites into revealing credit card numbers, bank information and Social Security numbers; spam emailers who exploit the anonymity of the Internet and burden it with billions of emails that impose millions of dollars of costs to businesses taken up by employee time dealing with spam; BMW automobile dealers that do a touch up paint job on a car and try to pass the car off as new.
I could spend a week expanding the above list to fill many pages. The point is that human nature is human nature and it is human nature to use its God given intelligence to connive and seek selfish advantage, and there are and are going to be for a long time into the future never ending questionable, irksome and/or dishonest commercial activities and practices that take place. Most of us are guilty at one time or another of engaging in such practices, and some more frequently than others, and just about all of us are victims hundreds or thousands of times over in our lives.
B. Trying to curtail questionable, irksome and/or dishonest commercial practices and to compensate victims
Society makes efforts and in various ways tries to alter human nature, to lessen and keep from increasing the quantum of questionable, irksome and/or dishonest commercial activities, and to provide meaningful remedies to deserving victims.
Portions of these efforts are outside of the law and government. Society, including through religious, educational and family institutions, tries to teach and inculcate in its members, ethical and moral standards of behavior. These are not totally successful judging by the questionable, irksome and/or dishonest commercial activities and practices that abound.
In the legal, governmental domain, society uses more coercive approaches. In such domain, there is a more "public" realm and a "private" realm.
The public realm includes the two parallel systems of the criminal law system and the governmental regulatory system that mete out penalties of jail sentences and fines to try to deter citizens from doing things that cause damage to other members of society and that also seek compensation on behalf of segments of the public who have been victims.
The private realm is that of private litigation where an injured private party sues another party alleged to have caused the injury.
In the public realm of the criminal law system and the regulatory apparatus, there are employed hundreds of thousands of police and other law enforcement agents, lawyers, prosecutors, investigators, scientists, researchers, accountants, legislators, judges and other administrative and clerical personnel. These workers first write the criminal laws and governmental regulations that intimately affect both personal freedoms and trillions of dollars of economic commerce. Ongoing policy debate transpires among democratically elected legislative bodies, government regulators, the regulated parties, and affected citizens as to what is cost effective in terms of the costs involved to achieve various levels of safety or protection in the environment, in consumer products, and in the workplace. There are those who advocate that very high levels of costs should be paid in order to achieve very small incremental improvements in the level of safety or protection. Creative ideas get proposed, such as allowing rights to pollute the air to be bought and sold in order to achieve the best cost/benefit results, and some people are appalled by such a notion. Many consumers argue that the regulators are too lax, and industry frequently thinks the regulators are too strict.
These employees also carry out the wide range of activities needed to enforce the law and regulations, including investigating whether violations may have occurred. conducting tribunals to make legal determinations as to whether violations have in fact occurred, and determining and administering sanctions.
A very salient point about criminal prosecutors and government regulators, who are entrusted with the responsibility of acting fairly and judiciously on behalf of the public in carrying out their public realm functions, is that they are not paid based on how much in fines they collect or how much jail time they get people sentenced for or on the magnitude of the dollar cost associated with the regulations they enact or the monetary transfers they obtain for victims or otherwise. The reason for this is that basing compensation in that fashion would have great potential for undermining the fairness and judiciousness with which society thinks criminal prosecutors and government regulators should carry out their public functions on behalf of all of society.
Class action lawsuits are more public than private in nature, by which "private" means where one party alone has a sufficient economic interest to bring the action, and "public" means where no one party alone has a sufficient economic interest to bring the action but, from a collective public perspective, the action is deserving to be brought. They partake of a public character in various ways that is reflected in the terminology "regulation by litigation."
The attorneys fees are in large part based on the magnitude of the dollar amount that is at stake and are very enormous when compared to the compensation of criminal prosecutors and government regulators.
The attorneys fee in this class action, and in many class action lawsuits, are excessive and a perverse incentive that is wasteful of judicial and other public type resources and that results in judgments and settlements that fail to advance, and that in fact undermine, important social and ecoomic policies of trying to lessen questionable, irksome and/or dishonest commercial practices and to provide meaningful compensation to deserving victims.
In fee driven class action cases such as this case, several important things are lost sight of. One is that of individual responsibility, and that, if you really want people to change their behavior and lessen the perpetration of questionable, irksome and/or dishonest commercial activity or practice individuals who design and/or knowlingly implement the same have to believe they will be personally punished and they personally will be made to pay. If, instead, you punish entities and make entities pay, you potentially will likely fail to punish the responsible individual and fail to make the responsible individual pay. To the extent that failure exists, all individual perpetrators and would be perpetrators of questionable, irksome and/or dishonest commercial practices will take note and very likely not be deterred about what he or she does or will do.
Related to the above aspect of seeking to punish entities and making entities pay is the result that frequently innocent individuals (such as employees, customers and stockholders) will bear the cost of the payment and they may be as innocent as the victims themselves. Attorney fee driven class action lawsuits lose sight of that, and the law as an instrument of justice loses respect in the eyes of society.
Fee driven class action lawsuits lose sight of cost/benefit principles, particularly related to whether the result achieved for amount of attorneys' fees that get paid is justifiable compared to other objectives and results that could be achieved with the amount.
C.The waste and counterproductively of the instant class action lawsuit
Let us apply the foregoing discussion to the instant litigation.
The officers and other employees at Charter who designed and knowingly implemented Charter's commercial practice of charging for the wire maintenance fees and converter box rentals in question were probably rewarded in their job positions at Charter for helping Charter get the additional revenues in question. It is doubtful these employees have been or will fired by Charter. These employees possibly will provide input into Charter's future pricing decisions to the effect that Charter will monitor how many customers terminate the $3.95 cable maintenance fee, and, if a lot do, then Charter will raise the regular cable charges accordingly. The employees may put their brains to work on other schemes to increase Charter's revenue. The next scheme they come up with may escape detection, and, if not, at least Charter's revenues will be increased in the short run, good salaries will have been continued to be received, and, just as in the instant case, the Charter employees in question will not be forced to pay anything, so in the case of detection of a future scheme, the employees will again escape scott free.
If and when these employees look for another job, you gain be fairly sure that nothing untoward will appear on their resume from their involvement with the cable maintenance fee/converter box rental practices at Charter, and, in fact, their reputation may precede them and a prospective employer may very well say, "Yes, this Charter employee made a pretty good and clever effort to increase Charter's revenues, and maybe he or she can come up with something good to enhance our company's revenues. In the short run, that could get our company's stock price up and, if we should have worries that we have been too clever by half, we just sell the stock and stick any loss with a hapless purchaser of the stock. In the meantime we and this employee form Charter will draw good salaries for awhile."
That's the story for the Charter employees who thought up and implemented the wire maintenance/converter box scheme.
Who pays and who loses? I don't know how long I have been paying the wire maintenance fee. I know I don't like the monopoly position that cable television companies are sometimes in and that I don't like the periodic increases in the cable charges. I have not investigated the satellite TV alternative. I use DSL for my high speed Internet access. I might get a savings by combining Charter's Internet and cable TV service, but I hear more bad experiences with the cable Internet than I do about the DSL Internet connection. I will say that mentioning DSL means thinking about the very irritating line item charges in my landline and cell phone telephone bills, but I don't want to get started on that.
I doubt if I will bother claiming my benefit under the settlement agreement in question. I will probably get around to inquiring of Charter about terminating my $3.95 wire maintenance fee. I assume if too many people terminate that fee, Charter, in its pricing decisions, will find a way to recoup, and there is a good chance I will wind up paying one way or the other.
The "in kind"benefits under the settlement agreement will probably not cost Charter very much and may even increase Charter's revenues by customers who claim the benefits that are temporary and they decide they like the additional services and start paying for them on a regular basis.
That leaves the $8,500,000 in attorney's fees and costs that Charter is going to pay. That is cash out of Charter's pocket. Charter has its revenue goals and maybe it will find ways to recoup the $8,500,000 out of increased cable charges of which I will pay my share. Who knows?
In my private affairs, I need to look at my many utility bills and all the other commercial transaction documents that come my way and decide whether I am satisfied with the situation. As mentioned, I don't like a whole lot of line items on my telephone bills. If some of them are dishonest, I would like them stopped. But, in my view, the proper way for that to be done is through a properly functioning criminal law and/or regulatory apparatus by a criminal prosecutor or a regulator who is not being perversely influenced by excessive compensation by how much he or she is able to get out of the company making the charge. That would go a long way to convince me that what is being done is fair and appropriate. I have no confidence that what is being done in this class action if fair and appropriate and I think there is a good chance it is a significant waste of judicial resources and it fails to advance, and in fact undermines, desirable objectives.
IV. Summary
Per the foregoing discussion, I believe the $8,500,000 in attorneys fees being awarded in this case, and "my" share of them, are being wasted, are excessive and are a perverse incentive that is wasteful of judicial and other public type resources and that results in judgments and settlements, including this settlement, that fail to advance, and that in fact undermine, important social and economic policies of trying to lessen questionable, irksome and/or dishonest commercial practices and to provide meaningful compensation to deserving victims.
I request that the parties and the Court waive the October 28, 2004 postmark deadline for this objection. My tardiness should be excused by the fact that, as indicated above, my economic interest is not sufficient to warrant the pursuit of this action and I had more important things to do in my private capacity. In my capacity as an interested citizen, however, I consider very important to file this objection and believe the deadline should be waived. If the form of this objection and request, such as line spacing or font size, is deficient and needs to be changed or corrected for the benefit of the Court or counsel in order to be accepted as a pleading the case, I will make such correction and re-serve and re-file.
Dated: November 6, 2004 _____ _____________________
Robert D. Shattuck, Jr.
Tel. no. ______________
Email ____________
I mailed this objection to the court and served this objection on the five Counsel and the Charter counsel listed in the Notice of Pendency of Class Action, Proposed Settlement and Hearing at the addresses listed therein, by depositing a copy of same, postage paid, in the United States mail on November 6, 2004, with their respective names and addresses as shown in said Notice on said envelopes
__________________________
Robert D.Shattuck, Jr.
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