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Trial Lawyers Inc.


   Trial Lawyers Inc.: K Street
    A Report on the Litigation Lobby, 2010

 

Trial Lawyers Inc. K Street
A Message from the Director
Introduction
The King of Torts
The Law Expands
Public Relations
State Government Relations
Suing for the State
Justice for Sale

Federal Government Relations
Expanding Liability
Deputizing Trial Lawyers
Attacking Arbitration
The Anti-Federalist
    Congress

Toy Story
A Trial-Lawyer Tax Break

Conclusion
Appendix
Other Resources
Media
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ONLINE PRESENTATION:

Watch and listen to Jim Copland present his new report online and listen to special guests Senator Jeff Sessions, Rep. Lamar Smith, Victor Schwartz, and Edwin Meese give their remarks on the report.

PRESS RELEASE >>
PODCAST
Listen to Howard Husock, Vice President for Policy Research at the Manhattan Institute, interview Jim Copland on Trial Lawyers Inc.: K Street
OP-EDS
Lawyers' Lies and the Lying Lawyers Who Tell Them, James Copland Townhall.com, 02-23-10
Trial Lawyers Still Love Specter, James Copland, Pittsburgh-Post-Gazette, 02-15-10
Trial Lawyers: Democrats' Other Money Machine, James Copland, Washington Examiner, February 10, 2010
How the Plaintiffs Bar Bought the Senate, Wall Street Journal, James Copland, 02-09-10
EDITORIAL
Why Liberals Are Lawyers' Puppets, The Washington Times, 2-17-10
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IN THE PRESS
U.S. Sen. Richard Durbin (D-Trial Lawyers), The Madison St. Clair Record, 2-21-10
Plaintiffs Bar Buys the Senate, John Stossel, Fox Business, 2-9-10
Conservative Group Rates Trial Bar as Most Influential, The Hill, 2-10-10
Why Not Tort Reform?, Waterbury Republican American, 2-10-10
The Litigation Lobby, Revealed, Shopfloor.com, 2-10-10
Plaintiffs Bar Buys the Senate John Stossel, Fox Business, 2-9-10
Manhattan Institute Probes Lobbying Efforts of Lawyers, John O'Brien, Legal Newsline, 2-9-10
Report Criticizes Influence of Plaintiffs' Lawyers, David Ingram, Blog of the Legal Times, 2-9-10

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FEDERAL GOVERNMENT RELATIONS: EXPANDING LIABILITY

SUE YOU, SUE ME

Congress Is Working to Undo Limits on How, When, and Whom Lawyers Can Sue

 

Until recently, the main purpose of Trial Lawyers, Inc.’s involvement in federal politics was to block reform legislation that would deny it various lucrative lines of business. In 1995, for example, Bill Clinton, an ally of trial lawyers, vetoed the Private Securities Litigation Reform Act (PSLRA),[159] which was designed to stop class action “strike suits” against companies whenever their stock’s price sharply declined. But Congress overrode the veto,[160] and the new law has helped improve the securities litigation climate.[161]

 

When, in 1996, Congress tried to pass a product-liability law designed to curb frivolous suits by limiting punitive damages, it, too, met with a Clinton veto,[162] even though he had supported such legislation as governor of Arkansas.[163] This time, however, Congress lacked the votes to override.

 

Clinton’s successor, George W. Bush, was a president friendly to litigation reform: as governor of Texas, he had successfully steered comprehensive tort reform through the Texas Legislature.[164] But with one exception, he was unable to get traction against the lawyer lobby’s Washington power, which doomed his efforts to reform medical-malpractice law by imposing national caps on damages,[165] as it did his efforts to shift thousands of questionable, if not fraudulent, asbestos claims out of the courts and into an administrative system.[166] Bush’s one success was the Class Action Fairness Act of 2005 (CAFA),[167] which prevented plaintiffs’ lawyers from “shopping” large, national class actions to the most lawsuit-friendly jurisdictions in the country by allowing defendants to remove them to federal court.

 

With the Democratic Party currently controlling both Congress and the White House, the litigation industry is taking a somewhat different tack. No longer satisfied with fending off efforts to reform lawsuit abuse, the plaintiffs’ bar is now actively seeking to expand its business opportunities. One of the bills backed by Trial Lawyers, Inc.—the first passed by the new Congress—extends the time that plaintiffs have to file suit, allowing attorneys to dredge up long-dormant claims.[168] Other legislation would facilitate legal “fishing expeditions” by permitting claims to go forward that rested upon the shakiest of allegations.[169] Still other proposed acts of Congress would expand the universe of parties that plaintiffs can sue.[170] One of them would lift a prohibition against suing the government itself, at considerable cost to the taxpayer.[171]

 

Led by Ledbetter

Perhaps the clearest evidence of Congress’s new penchant for generating litigation is the transformation of Lilly Ledbetter, a former employee at a Goodyear Tire plant in Gadsden, Alabama,[172] into a Democratic symbol of victimization by corporations. Invited to speak on the second night of the 2008 Democratic National Convention, right before keynote speaker Mark Warner, the former governor of Virginia,[173] Ledbetter was the subject of a 2007 decision by a divided U.S. Supreme Court that denied her sex-discrimination claim against her former employer on the grounds that she had filed her complaint too late.[174] The Ledbetter decision prompted a media outcry—“Injustice 5, Justice 4” declared a New York Times editorial[175]—and then-candidate Barack Obama adopted Ledbetter’s cause as his own.[176]

 


DEPUTIZING TRIAL LAWYERS

Of the legislative gifts that Congress has bestowed on Trial Lawyers, Inc., one of the most bounteous is the right—inscribed in qui tam, or “whistle-blower” statutes—to police frauds allegedly committed against the federal government. After the False Claims Act (FCA),[206] enacted in 1863, was expanded in 1986,[207] it became big business for the plaintiffs’ bar. Since then, whistle-blower actions have produced more than $20 billion in claim payments.[208]

 

The qui tam provisions of the FCA permit private attorneys representing whistle-blowers to obtain damages, on the government’s behalf, of three times the amount of money lost in the alleged fraud. The whistle-blower and his attorney can collect up to 30 percent of these sums.[209] The resulting windfalls can total tens of millions of dollars.[210]

 

Because of the potential for abuse of such statutes, the courts have worked to limit their reach by insisting that the targets of fraud suits actually intended to defraud the government—as the U.S. Supreme Court did in its unanimous 2008 decision in Allison Engine Co. v. United States.[211] The Fraud Enforcement and Recovery Act of 2009,[212] signed into law in May 2009, overturns Allison Engine, even with respect to those cases that stem from conduct that occurred before the act’s passage. The new law dramatically expands the plaintiffs’ bar’s reach in qui tam suits by allowing lawyers to go after subcontractors to businesses that do government work, though they never worked directly for the government themselves or intended to commit fraud.[213] The bill’s sponsor, Senate Judiciary Committee chairman Patrick Leahy (D-Vt.), has received more than twice as much money from lawyers since 2005 as he has from any other industry, and those donations overwhelmingly come from the plaintiffs’ bar.[214] Two of Leahy’s top four donors are California plaintiffs’ firms—toxic-tort giant Girardi & Keese and personal-injury powerhouse Cotchett, Pitre & McCarthy—and he’s also received hefty sums from the American Association for Justice, the political action committee of the plaintiffs’ bar.[215]

 

An even more audacious power grab for Trial Lawyers, Inc.’s qui tam business was attempted by Rep. Lloyd Doggett (D-Tex.) during the markup of health-care reform legislation in the House. Doggett tried to insert language into the bill that would allow suits involving Medicare to be filed on behalf of the U.S. government, even when it objected. Fortunately, Republicans on the committee insisted on removing the provision.[216] Like Leahy, Doggett received campaign contributions from lawyers in this electoral cycle that were at least double those from any other industry, his largest donor being Nix, Patterson & Roach, the giant Texas asbestos-litigation firm.[217]

 

 

The Lilly Ledbetter Fair Pay Act, which reversed the Supreme Court’s decision, and made that reversal retroactive to the day before the decision was issued, became law in January 2009.[177] It was the first piece of legislation signed by the new president, who proclaimed that Ledbetter was “just a good hard worker who did her job . . . for nearly two decades before discovering that for years, she was paid less than her male colleagues for doing the very same work.”[178]

 

The president’s statement—like most media accounts of the case—is simply false. In fact, Ledbetter admitted in deposition testimony that “[d]ifferent people that I worked for along the way had always told me that my pay was extremely low” relative to the pay of other workers.[179] Ledbetter further noted that she had learned from a superior of a pay discrepancy in 1992, some six years before taking early retirement and filing her lawsuit;[180] and that she had learned the specific amount she was underpaid in 1995, three years before filing, at which time she complained that she “needed to earn an increase in pay . . . to get in line with where my peers were.”[181]

 

In determining that Ledbetter’s claim was filed outside the six-month statute of limitations specified by Title VII of the 1964 Civil Rights Act, the Supreme Court noted that Ledbetter had failed to argue that the statute of limitations should have started running only after she learned of her injury, an “equitable tolling” rule long recognized in other contexts by the Court.[182] The Court’s decision also emphasized that Ledbetter might have had a valid discrimination claim under another statute—the Equal Pay Act—that has a longer statute of limitations.[183] Thus, Ledbetter probably did have some legal recourse, notwithstanding her failure to sue earlier—and the fact that her former supervisor, a key witness in the case, had died while she delayed in pursuing her claim.[184]

 

Politicians under the sway of Trial Lawyers, Inc., however, were undeterred by these facts. The law enacted in Ledbetter’s name could have clarified the period in which a Title VII suit can be filed by stating that it would start only upon discovery of the alleged discrimination, a rule that would not have been in conflict with the Court’s actual decision. Instead, the first act of the 111th Congress gutted the statute of limitations in pay-discrimination claims entirely. It now effectively allows potential plaintiffs to wait years before suing, as paycheck after insufficient paycheck piles up, adding to the damages that can be claimed and forcing employers to maintain old employment records indefinitely.[185] Moreover, the new law dramatically expands the class of potential litigants in such suits by changing the long-standing rule that a claimant had to be an actual victim of discrimination; the new law states that anyone “affected by” the discrimination being alleged can sue.[186]

 

Going Fishing

In addition to extending the period in which employees may file pay-discrimination claims, the new Congress is considering legislation that would make it dramatically easier to file suits across the board. As noted earlier, the 1938 Federal Rules of Civil Procedure abolished traditional pleading requirements for filing a civil lawsuit and implemented a system of “notice” pleading whereby a litigant merely has to place a defendant “on notice” of being sued and of the factual and legal claims against him.[187] Notice pleading, combined with new, liberal discovery rules that enabled plaintiffs’ lawyers to demand essentially any document or file that might be remotely relevant to a lawsuit,[188] licensed “fishing expeditions” in federal courts: plaintiffs could file first, seek documents at defendants’ expense, and determine whether they actually had a case once the documents came in.[189]

 

In recent years, the Supreme Court has tried to place outer boundaries on these expeditions. In a 2007 case, Bell Atlantic v. Twombly,[190] plaintiffs’ lawyers filed a class action alleging that local telephone companies had conspired to restrain trade in violation of the antitrust laws. The Court determined that the plaintiffs’ allegations, even if true, could not sustain a valid claim because the plaintiffs did not allege “enough factual matter (taken as true) to suggest that an agreement was made” among the phone companies—a legal requirement for finding such an antitrust violation.[191]

 

The new Congress is considering legislation that would make it dramatically easier to file suits across the board.

In May 2009, the Supreme Court considered another case, Iqbal v. Ashcroft,[192] in which a Pakistani Muslim detained after the September 11, 2001, terrorist attacks alleged that he had been mistreated while in custody. Iqbal’s lawsuit targeted various federal officials, including the attorney general of the United States and the director of the Federal Bureau of Investigation. The Court determined that Iqbal’s complaint was insufficient to support a claim under Twombly, since the legal standard required proof of intentional discrimination by the individuals named, who would have had to be driven by animus toward the plaintiff, and Iqbal alleged no facts that would permit even an inference of discriminatory intent.[193]

 

Needless to say, Twombly and Iqbal, though cases of limited applicability, sent shock waves through the plaintiffs’ bar by threatening to imperil lawyers’ strategy of launching fishing expeditions. To “fix” this problem, Pennsylvania Democrat Arlen Specter—whose son Shanin is a major Philadelphia plaintiffs’ lawyer and a vocal public critic of tort reform[194]—introduced a bill, the Notice Pleading Restoration Act of 2009,[195] which would overturn the Supreme Court’s decisions in Twombly and Iqbal. Even critics of those decisions, however, have noted that Specter’s poorly drafted bill would likely interfere with statutory pleading requirements well beyond the scope of the Court’s recent decisions.[196]

 

Security-Suit Schemes

Senator Specter has not limited himself to protecting Trial Lawyers, Inc.’s fishing license; he has also been working hard to ensure that plaintiffs’ lawyers can cast their lines in new waters. Notwithstanding stricter rules imposed on securities suits by the 1995 PSLRA[197] and the “kickback” conspiracy convictions that put the two most prominent securities class action attorneys, Mel Weiss and Bill Lerach, in federal prison,[198] recent financial crises—the bursting of the dot-com bubble, the subprime-mortgage debacle, and the subsequent collapse of major financial institutions—have left ample opportunity for the securities litigation industry to thrive).

 

In 2008, however, the Supreme Court decided not to extend the judicially created “right to sue” over alleged securities fraud to plaintiffs suing third parties.[199] In that case, Stoneridge v. Scientific Atlanta, the Court considered a class action filed by the stockholders of a cable company that had inflated its books. However, their suit was not against the cable company itself but rather its vendors. The Court noted there was no evidence that Congress intended to authorize private securities litigation against third parties under an “aiding and abetting liability” theory and that doing so would “expose a new class of defendants” to litigation risks, raise “the costs of doing business,” deter “[o]verseas firms . . . from doing business here,” “raise the cost of being a publicly traded company under our law,” and “shift securities offerings away from domestic capital markets.”[200]

 

Indeed, securities class actions do little more than arbitrarily shift dollars from one group of shareholders to another. In such suits, one group of shareholders, which bought or sold shares in a given time period, sues the company whose shares they own. Unfortunately, suing the company means essentially suing all the other shareholders. Generally speaking, then, small, diversified shareholders, who are about as likely to be holders as buyers of any given security, particularly if they are invested in pension or mutual funds, are also as likely to be defendants as plaintiffs in such litigation.[201] In addition to failing to compensate the victims of a successfully executed fraud, securities class actions are ineffective at deterring fraud, since research shows that securities class actions’ settlement values are unrelated to the merits of the underlying cases.[202] Securities lawsuits, therefore, serve mainly to enrich the plaintiffs’ bar by extracting massive settlements from companies experiencing stock-price turbulence.[203]

 

Nevertheless, last summer Senator Specter introduced the Liability for Aiding and Abetting Securities Violations Act of 2009,[204] which would overturn Stoneridge and create an explicit, open-ended private right of action against anyone who provided “substantial assistance” to anyone else guilty of violating “any rule or regulation” under any of the vast number of securities laws.[205] Specter’s bill would go far beyond the narrow facts of the Stoneridge case to create a whole new class of securities class action defendants—and a whole new spectrum of legal shakedown opportunities for Trial Lawyers, Inc.

 

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159. Private Securities Litigation Reform Act, Pub. L. No. 104-67, 109 Stat. 737 (1995).
160. See Doug Abrahms, Veto Override Makes High-Tech Firms Happy, Wash. Times, Dec. 23, 1995, at A13.
161. See, e.g., Marilyn F. Johnson et al., Do the Merits Matter More? The Impact of the Private Securities Litigation Reform Act, 23 J.L. Econ. & Org. 627 (2002).
162. See Common Sense Product Liability Legal Reform Act of 1996, H.R. 956, 104th Cong. (1996) (vetoed May 2, 1996).
163. See Pamela Becker, Congress and States Take Action on Tort Reform, Mechanical Engineering, Apr. 1, 1995.
164. See, e.g., H.B. 668, 75th Legis., Gen. Sess. (1995) (codified as Tex. Bus. & Com. Code art. 17.42-.50 (2008)) (deceptive trade practices); H.B. 971, 75th Legis., Gen. Sess. (1995) (codified as Tex. Rev. Civ. Stat. art. 4590i) (medical malpractice and expert witness qualifications); S.B. 25, 75th Legis., Gen. Sess. (1995) (codified as Tex. Civ. Prac. & Rem. Code art. 41) (punitive damages); S.B. 28, 75th Legis., Gen. Sess. (1995) (codified as Tex. Civ. Prac. & Rem. Code art. 33, 95) (joint and several liability and premises liability); S.B. 32, 75th Legis., Gen. Sess. (1995) (codified as Tex. Civ. Prac. & Rem. Code art. 15 ) (venue).
165. Cf. Help Efficient, Accessible, Low-cost, Timely Healthcare Act, H.R. 534, 109th Cong. (2005).
166. Cf. Fairness in Asbestos Injury Resolution Act, S. 3274, 109th Cong. (2005).
167. S. 5, 109th Cong. (2005) (codified as 28 U.S.C. §§ 1332(d), 1453, 1711-1715 (2006)).
168. See Lilly Ledbetter Fair Pay Act of 2009, S. 181, 111th Cong. (2009) (enacted).
169. See Notice Pleading Restoration Act of 2009, S. 1504, 111th Cong. (2009).
170. See Liability for Aiding and Abetting Securities Violations Act of 2009, S. 1551, 111th Cong. (2009).
171. See Carmelo Rodriguez Military Medical Liability Act of 2009, H.R. 1478, 111th Cong. (2009).
172. Cf. Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007), superseded by statute, Lilly Ledbetter Fair Pay Act of 2009, Pub. L. No. 111-2,123 Stat. 5 (2009).
173. See Posting of Carter Wood to PointofLaw.com, http://www.pointoflaw.com/archives/2008/08/lilly-ledbetter.php (Aug. 26, 2008 10:32 EDT).
174. See 550 U.S. at 628-29.
175. Editorial, Injustice 5, Justice 4, N.Y. Times, May 31, 2007.
176. See Stephanie Mencimer, Lilly Ledbetter: Obama’s Newest Ad Star, Mother Jones, Sept. 23, 2008.
177. See Pub. L. No. 111-2, § 5 (“This Act, and the amendments made by this Act, take effect as if enacted on May 28, 2007 . . . .”).
178. Obama Signs “Lilly Ledbetter Fair Pay Act”, USA Today, Jan. 29, 2009, available at http://content.usatoday.com/communities/theoval/post/2009/01/62099146/1.
179. Joint Appendix at 233, Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007) (No. 05-1074), available at http://www.lawmemo.com/docs/us/ledbetter/appendix.pdf.
180. See id.
181. Id. at 231-32.
182. The Supreme Court first recognized the equitable tolling doctrine in Bailey v. Glover, 88 U.S. (21 Wall.) 342, 348 (1874).
183. See 550 U.S. at 639-40 & n.9 (“Ledbetter originally asserted an EPA claim, but that claim was dismissed by the District Court and is not before us. If Ledbetter had pursued her EPA claim, she would not face the Title VII obstacles that she now confronts.”).
184. See id. at 630-31 n.4 (“Ledbetter’s claims of sex discrimination turned principally on the misconduct of a single Goodyear supervisor, who, Ledbetter testified, retaliated against her when she rejected his sexual advances during the early 1980’s, and did so again in the mid-1990’s when he falsified deficiency reports about her work. . . . Yet, by the time of trial, this supervisor had died and therefore could not testify. A timely charge might have permitted his evidence to be weighed contemporaneously.”).
185. See 42 U.S.C. § 2000e–5(e)(3)(A) (2008).
186. See id.
187. See Fed. R. Civ. P. 8(a)(2).
188. See Fed. R. Civ. P. 26, 34.
189. See, e.g., United States v. AT&T Co., 461 F. Supp. 1314, 1341 (D.D.C. 1978) (“If the purposes of the Rules, and of pretrial discovery generally are to be effectuated, actual discovery must be expected to be somewhat of a ‘fishing expedition’ . . . .”).
190. 550 U.S. 544 (2007).
191. See id. at 553.
192. 129 S. Ct. 1937 (2009).
193. See id. at 1951.
194. See Larry Rulison, Lawyers, Malpractice and Money, Philadelphia Bus. J., June 11, 2004, available at http://philadelphia.bizjournals.com/philadelphia/stories/2004/06/14/story1.html.
195. S. 1504, 111th Cong. (2009).
196. See Michael C. Dorf, Should Congress Change the Standard for Dismissing a Federal Lawsuit?, Findlaw.Com, July 29, 2009, http://writ.news.findlaw.com/dorf/20090729.html.
197. See Pub. L. No. 104-67, 109 Stat. 737 (1995).
198. See Jonathan D. Glater, High-Profile Trial Lawyer Agrees to Guilty Plea, N.Y. Times, Mar. 21, 2008.
199. See Stoneridge Investment Partners v. Scientific-Atlanta, Inc., 552 U.S. 148 (2008).
200. Id. at 163-64.
201. See, e.g., Donald C. Langevoort, Capping Damages for Open-Market Securities Fraud, 38 Ariz. L. Rev. 639, 646–57 (1996) (“[B]uy and hold strategies make it somewhat more likely that [small, diversified investors] will be non-trading shareholders of an issuer defendant . . . than members of the plaintiff class who stand to gain from the settlement or judgment.”).
202. See, e.g., Janet Cooper Alexander, Do the Merits Matter? A Study of Settlements in Securities Class Actions, 43 Stan. L. Rev. 497 (1991) (concluding that settlement value in securities fraud cases is not a function of merit).
203. See, e.g., John C. Coffee, Jr., Memo to Congress: Reform and Its Perils, N.Y.L.J., Nov. 15, 2007, at 5 (asserting that transaction costs in securities litigation consume approximately 50 percent of recoveries).
204. S. 1551, 111th Cong. (2009).
205. See id. at § 2.
206. 31 U.S.C. § 3729–3733 (2008).
207. See False Claims Act Amendments of 1986, Pub. L. 99-562, 100 Stat. 3153 (1986).
208. See Bill Myers, Blowing Whistle Pays Off Big for Fortunate Few, Wash. Examiner, May 28, 2009.
209. See 31 U.S.C. § 3730 (d)(2).
210. See Myers, supra note 208.
211. 128 S. Ct. 2123 (2008), superseded by statute, Fraud Enforcement Recovery Act of 2009, Pub. L. 111-21, 123 Stat. 1617 (2009).
212. Pub. L. 111-21, 123 Stat. 1617.
213. See id. at §§ 4(b)(1)(B), 4(b)(2)(A)(ii).
214. See Center for Responsive Politics, http://www.opensecrets.org/politicians/summary.php?type=C&cid=N00009918&newMem=N&cycle=2010 (last visited Jan. 13, 2010).
215. See id. at http://www.opensecrets.org/politicians/contrib.php?cycle=2010&cid=N00009918&type=C&mem= (last visited Jan. 13, 2010).
216. See Walter Olson, Inside the Health Care Bill, Forbes.com, July 22, 2009, http://www.forbes.com/2009/07/22/medicare-republicans-reform-bill-opinions-contributors-walter-olson.html.
217. See Center for Responsive Politics, http://www.opensecrets.org/politicians/summary.php?cid=N00006023&cycle=2010 (last visited Jan. 13, 2010).

 

 

 


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