A Message from the Director
King of Torts
State Government Relations
for the State
Federal Government Relations
Trial-Lawyer Tax Break
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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 >>
to Howard Husock, Vice President for Policy Research
at the Manhattan Institute, interview Jim Copland on
Trial Lawyers Inc.: K Street
Lawyers' Lies and
the Lying Lawyers Who Tell Them, James Copland Townhall.com, 02-23-10
Trial Lawyers Still Love Specter, James Copland,
Lawyers: Democrats' Other Money Machine, James Copland,
Washington Examiner, February 10, 2010
the Plaintiffs Bar Bought the Senate, Wall Street
Journal, James Copland, 02-09-10
Why Liberals Are Lawyers' Puppets, The
Washington Times, 2-17-10
KOA's "The Mike Rosen Show"
Blog Talk Radio's "Take AIM"
Bill Cunningham Show"
with Vicki McKenna"
Talk Radio Network's "America's
WBAL's "C4 Show"
Radio Free Washington
WVON's "The Charles Butler
WBT's "The Tara Servatius
Fox News "Strategy Room"
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
Group Rates Trial Bar as Most Influential, The
Not Tort Reform?, Waterbury Republican American,
Litigation Lobby, Revealed, Shopfloor.com,
Bar Buys the Senate John Stossel, Fox Business,
Institute Probes Lobbying Efforts of Lawyers, John
O'Brien, Legal Newsline, 2-9-10
Criticizes Influence of Plaintiffs' Lawyers, David
Ingram, Blog of the Legal Times, 2-9-10
FEDERAL GOVERNMENT RELATIONS: ATTACKING ARBITRATION
Trial Lawyers, Inc.s Allies in Congress Are Trying to Scale Back Private
The Democrats in Washington cant seem to decide what they think about
arbitration. On the one hand, one of the top legislative priorities of the congressional
leadership and the White House is the Employee Free Choice Act (EFCA),
which calls for mandatory arbitration of all union disputes. So deep
is the EFCA-backers faith in arbitration that the law would even empower
government-appointed arbitrators to write labor contracts from scratch when
newly formed unions cannot agree to terms with managementin effect, to
dictate the terms of a labor contract without reference to any actual
underlying contract into which the parties freely entered.
On the other hand, congressional leaders are waging an all-out war to eliminate
all arbitration clauses in consumer and employment contracts. Such provisions
are standard in many industriesthey are indeed the only way that small
injuries can ever get compensated, given the expense of litigation that often
makes legal representation unavailable, because such cases offer plaintiffs
attorneys only paltry contingent fees. But arbitration and other forms of alternative
dispute resolution remove the middlemanthe trial lawyerwhich, to
the plaintiffs bars political patrons, makes such extralegal approaches
The Value of Arbitration
In contrast to the EFCAs heavy-handed provisions, standard employment
and consumer arbitration contracts operate against a backdrop of preexisting
contractual norms and rules of law. Professional arbitratorsusually senior
attorneys or retired judgesresolve claims without incurring the time and
expense of civil litigation, which takes, on average, more than two years
and can cost thousands of dollars.
THE ANTI-FEDERALIST CONGRESS
From the time of the New Deal onward, the Left has generally favored
a strong national regulatory regime, while conservatives have generally
fought its relentless expansion. It is therefore curious that the Democratic
majority in Congress should be considering bills permitting tort actions
to be brought under state law against the financial
and automobile industries, for exampleeven
if such state tort claims conflict with the federal regulatory regime.
State tort litigation can make a mess of the federal regulation of interstate
commerce. Consider the situation in health care, one of the most heavily
regulatedand litigatedindustries. In 2008, the U.S. Supreme
Court considered a case, originating in New York, in which a patient had
been injured by the bursting of a balloon catheter during surgery.
The patient alleged that Medtronic, the devices manufacturer, was
at fault. The facts of the case, however, told a different tale: the catheters
labelingas required by the U.S. Food and Drug Administration (FDA)indicated
that it should not be used in calcified arteries and that
it was designed to withstand only eight atmospheres of rated
burst pressure. As the Court noted, however,
Riegels doctor failed to heed these warnings.
The artery into which the doctor inserted the catheter was heavily
calcified, yet he attempted to force a full ten atmospheres of pressure
Fortunately, Congress included express language in 1976 statutory amendments
that forbade the states from setting standards for medical devices beyond
those required by the FDA. On that basis, the
Court made the commonsense ruling that Riegels lawsuit against the
manufacturer was barred. Unfortunately, the
express preemption language that governs medical devices does not apply
to all FDA-regulated products. Indeed, such clauses are rare within the
federal code, much of which was written before the litigation explosion
of the last five decades.
Perhaps unsurprisingly, the lawyer-dominated Congress is working to eliminate
the statutory provision that barred Riegels product-liability claim.
Worse, the bill in question, the Medical Device Safety Act of 2009,
would permit suits to proceed that stem from injuries that originated
long before the laws effective date, if otherwise valid under state
Thus, arbitration has served as a major avenue for providing justice to small
claimants. In 2002, the American Arbitration Association handled more than 200,000
claimsa figure corresponding to roughly 80 percent of all federal civil
cases. In 2006, the National Arbitration Forum handled
214,000 arbitrations dealing solely with debt collection.
Although you wouldnt know it from the criticisms issue from the trial
bar and its allies, these private arbitration systems are not tilted in businesss
favor. A November 2009 study released by the Searle Center on Law, Regulation,
and Economic Growth at Northwestern University School of Law examined comprehensive
data sets of consumer arbitrations and found that after controlling for variations
in case characteristics, consumers were more likely to prevail in arbitration
than in court and that there was no statistical difference in the amount
they were awarded as a percentage of the amount sought.
Senator Al Frankens first legislative success was an amendment
expanding civil liability.
Americans in general realize the value of arbitration. When asked whether they
would choose litigation or arbitration if they could choose the method
of resolving any serious dispute between themselves and a company,
82 percent of those surveyed said that they would opt for arbitration.
And 71 percent said that they opposed Congresss remov[ing] arbitration
agreements from contracts consumers sign with companies.
Unfortunately, such consumer sentiment may not be sufficient to hold back Congresss
assault on contract, which is propelled by the lobbying clout of Trial Lawyers,
Before he was a senator, Al Franken (D-Minn.) entertained the public as a writer
and performer on the sketch comedy show Saturday Night Live. Perhaps
its fitting, then, that Frankens first legislative success,
an amendment supported by Trial Lawyers, Inc., became
the premise of comedians jokes and spoof websites.
October 1, Senator Franken took to the Senate floor to relate the sad plight
of Jamie Leigh Jones, who claimed that she was harassed, drugged, and gang-raped
four days after arriving in Iraq to work for Kellogg Brown & Root (KBR).
Jones initially filed an arbitration complaint, then sought to sue her employer
in court. KBR tried to consolidate the complaint before the arbitration panel,
which Jones opposed. After three years of legal wrangling, the Fifth U.S. Circuit
Court of Appeals held the arbitration clause unenforceable in Joness case
because her claimed injury was not related to her employment, and
the court gave Jones the go-ahead to proceed with her civil claim.
Franken said on the floor of the Senate that three years was simply too
long for a rape victim to wait, just to have her day in court.
He therefore proposed an amendment to an appropriations bill for the Defense
Department that would, he said, extend much of the Fifth Circuits
reasoning to government contractors who continually subject workers to these
so-called mandatory arbitration clauses. But it would do so, he said reassuringly,
only by narrowly target[ing] the most egregious violations.
When thirty Republican senators voted against Frankens amendment, they
became fodder for comic ridicule. The Daily Shows Jon Stewart exclaimed,
on the air, I understand were a divided country, some disagreements
on health care. How is anyone against this?
A video posted on the website of MSNBCs Rachel Maddow went viral, the
Democratic Senatorial Campaign Committee went on the attack,
and the Republican senators were mocked on a spoof Internet site, www.republicansforrape.org.
The problem with the comedic and political reaction is that Frankens
amendment was not, as he claimed, narrowly targeted. Rather,
Frankens legislation makes any arbitration clause in the employment
contracts of any defense contractor inapplicable to any claim under
Title VII of the Civil Rights Act of 1964 or any tort related to
or arising out of an intentional infliction of emotional distress
or negligent hiring, supervision, or retention.
In essence, Frankens amendment prevents every defense contractor from
contracting with its employees to choose private arbitrators over the civil
courts to resolve virtually any kind of employment disputea far broader
provision than Frankens invocation of the gruesome allegations in Joness
case would suggest. But given the public caricature of Frankens amendment,
it is unsurprising that it made it into the final law.
On October 12, 2009, lawyers at the class action firm Coughlin Stoia
Geller Rudman & Robbins reached a settlement with toy maker Mattel
and its Fisher-Price subsidiary resolving a suit over the 2007 recall
of 967,000 toys, manufactured in China, that may have contained lead-based
paint. The lawyers stand to pocket a hefty $12.9
million in feeslikely to be a high percentage
of the total settlement valuebut the litigation
overall is hard to condemn: a major manufacturer distributed products
that contained a dangerous substance banned under U.S. law.
the righteous concern about Mattels potentially dangerous products,
the congressional response to the public panic over the lead-containing
toysthe Consumer Product Safety Improvement Act (CPSIA),
signed into law on August 14, 2008is a regulatory nightmare and
litigation time bomb that threatens to place virtually every producer
of items for children on the wrong side of the law. Hawked by lawyer-allied
consumer groups like the Public Interest Research Group,
and pushed by House Speaker Nancy Pelosi (D-Cal.), the bill was drafted
in the House under the watchful eye of Energy and Commerce Committee Chairman
Henry Waxman (D-Cal.), a longtime ally of trial lawyers whose second-largest
campaign donor over the last twenty years has been the plaintiffs
bars political action committee, now known as the American Association
for Justice. That same lawyer PAC once employed
as a registered lobbyist David Strickland, who developed the CPSIA in
the Senate, where he served as counsel to the Commerce Committee.
(Strickland now oversees American automobile regulation as the head of
the National Highway Transportation Safety Administration.)
With such a cast of characters drafting the bill, it is unsurprising
that the CPSIA goes beyond the lead-paint concerns that provoked the health
scare. Anne Northup, a commissioner of the federal Consumer Product Safety
Commission (CPSC), observes that the law reaches products that do
not create a lead hazard for children and that such ordinary
items as zippers, buttons, belts, the hinge on a childs dresserand
even that bicycle from Santa Clausare outlawed,
making any manufacturer or retailer of such products subject to a lawsuit
premised on an alleged violation of the statutes provisions.
To make things easy for the lawyers, the statute authorizes an open website
for reporting violationswhich attorneys will doubtless use both
to identify claims and establish purported wrongdoing.
Also waiting in the wings are suits by pioneering, politically ambitious
state attorneys general (see box, page 13), who are authorized to enforce
the law alongside the CPSC. As reported in Crains
Chicago Business, suits arising from the CPSIA are among the most
likely successors to the litigation industrys long-standing
asbestos-lawsuit profit center.
The CPSIAs costs are not conjecturalthe CPSC estimates that
the law cost toy manufacturers $2 billion in the eight months following
its enactmentand they will grow exponentially
once all of the statutes testing requirements come into effect.
Economies of scale permit large manufacturers like Mattel to meet the
CPSIAs onerous testing and labeling requirements, but the prohibitive
cost of complying with these rules has prompted small manufacturers and
retailers of toys to shut their doors. Although
the CPSIA has generated many a public outcry, Congress has predictably
resisted holding hearings to learn about the grievances of those affected.
An Assault on Contract
Senator Frankens amendment is but one of the litigation industrys
attacks on private arbitration. Other such bills being pushed in Congress by
Trial Lawyers, Inc. include:
- The Fairness in Nursing Home Arbitration Act (H.R. 1237, S. 512)
would make unenforceable all arbitration clauses regulating disputes between
nursing homes and their boarder-patients.
- The Mortgage Reform and Anti-Predatory Lending Act (H.R. 1728), which
passed in the House of Representatives, would make unenforceable arbitration
clauses in any mortgage loan or home-equity line of credit.
- The Payday Loan Reform Act (H.R. 1214) would present challenges to
arbitration clauses in payday loans,
and the Taxpayer Abuse Prevention Act (S. 585) would prohibit arbitration
clauses in loans given in anticipation of tax refunds.
- The Consumer Fairness Act (H.R. 991) would make consumer-arbitration
contracts unenforceable, while the Arbitration
Fairness Act (H.R. 1020, S. 931) would go even further and make unenforceable
arbitration clauses in all employer, franchise, and consumer contracts.
Each of these pieces of legislation would reduce consumer choice, increase
costs, and deny compensation to many truly injured individuals. But they would
all help the bottom line of Trial Lawyers, Inc.
A TRIAL-LAWYER TAX BREAK
One way that Trial Lawyers, Inc. is exploiting its congressional influence
is by seeking an old-fashioned tax break. A group of legislators led by
Republican-turned-Democrat Arlen Specterthe favorite senator
of the trial lawyershas introduced
a bill giving the plaintiffs bar a $1.6 billion cut in its taxes.
the traditional common law, maintenance and champerty
were crimes (and torts). Generally speaking, it was illegal for anyone,
including an attorney, to maintain, support, or promote anothers
litigation (maintenance), whether or not an agreement existed to pay the
supporter a portion of a lawsuits proceeds (champerty), should there
be any. On its face, the personal-injury bars
financing structurethe contingent fee, the share of
the proceeds that a winning client pays his attorney, who has fronted
the cost of the litigationruns afoul of the historical understanding
of champerty. Therefore, expenses in contingent-fee cases have been treated
by courts not as support of litigation per se but rather as loans to clients,
to be repaid upon a winning lawsuits resolution.
The IRS has thus forbidden plaintiffs lawyers working on the basis
of contingent-fee arrangements to deduct, for tax purposes, litigation
costs as expenses when they are incurred. Rather, such expenses
are treated as loans, to be expensed as losses only in the
event that the loan is uncollectible after a losing case has
been closed (or, alternatively, to be deducted from the sum of taxable
proceeds following profitable verdicts or settlements).
Specters bill would change the IRS rule and allow all litigation
costs to be expensed immediately, even though other kinds of loans generally
are not. This tax break would encourage lawyers to file both a greater
number of cases and weaker cases, and the federal government [would],
for all intents and purposes, share in the cost and risk of bringing the
initial litigation. Under current and certainly potential future tax laws,
this could be as much as [forty percent] of the cost of bringing litigation.
Unsurprisingly, the trial bars advocates in Congress would prefer
to avoid an up-or-down vote on the legislation on its own. Thus, lawyer-lobbyists
have worked to tuck it into something
elsefor example, a 2008 bill that extended (but did not change)
various research-and-development and energy tax credits.
section | next section>>
218. H.R. 1409, 111th Cong. (2009).
219. See id. at § 3.
220. See, e.g., Lynn Langton & Thomas H. Cohen, Civil Bench and Jury
Trials in State Courts, 2005 8 (Bureau of Justice Statistics, 2008) (finding
in jury trials an average of 26 months from filing to disposition).
221. See Deborah R. Hensler, Our Courts, Ourselves: How the Alternative
Dispute Resolution System Is Reshaping Our Legal System, 108 Penn St. L.
Rev. 165, 167 n.11 (2003).
222. See Interim Report on Creditor Claims in Arbitration and in Court,
Searle Center on Law, Regulation, and Economic Growth at Northwestern Law 1
(2009), available at http://www.law.northwestern.edu/searlecenter/uploads/Creditor%20Claims%20Interim%20Report%2011%2019%2009%20FINAL2.pdf.
223. See id. at 27.
224. See Bill McInturff et al., Key Findings from a National Survey of
Likely Voters 7 (2008), http://www.instituteforlegalreform.com/component/ilr_issues/29/item/ADR.html
(follow View the survey results (PDF) hyperlink) (discussing 2007
survey of 800 registered voters).
225. See id. at 11.
226. See Sam Stein, Franken Gets His First Amendment Passed by Roll
Call Vote, Huffington P., Oct. 7, 2009, http://www.huffingtonpost.com/2009/10/07/franken-gets-first-amendm_n_312399.html.
227. See S. Amdt. 2588, 111th Sess. (2009).
228. See 155 Cong. Rec. S10028 (daily ed. Oct. 1, 2009) (statement of
Sen. Franken); see also Posting of Ted Frank to Overlawyered.com, http://overlawyered.com/2007/12/halliburton-gang-rape-and-fear-of-arbitration-the-jamie-leigh-jones-case/
(Dec. 12, 2007).
229. See Jones v. Halliburton Co. No. 08 20380, 2009 U.S. App. LEXIS
20543, at *19-20 (5th Cir. Sept. 15, 2009), available at http://www.ca5.uscourts.gov/opinions/pub/08/08-20380-CV0.wpd.pdf.
230. See 155 Cong. Rec. S10028.
231. See id.
232. See Alex Leo, Jon Stewart Takes on 30 Republicans Who Voted Against
Franken Rape Amendment, Huffington P., Oct. 15, 2009, http://www.huffingtonpost.com/2009/10/15/jon-stewart-takes-on-30-r_n_321985.html.
233. See Manu Raju, Dems Jam GOP with Al Franken Vote, Politico,
Nov. 12, 2009, available at http://www.politico.com/news/stories/1109/29439.html.
234. See S. Amdt. 2588, 111th Sess. (2009).
235. See Pub. L. No. 111-118, § 8116 (2009).
236. See H.R. 1237, 111th Cong. (2009); S. 512, 111th Cong. (2009).
237. See H.R. 1728, 111th Cong. (2009).
238. See H.R. 1214, 111th Cong. (2009).
239. See S. 585, 111th Cong. (2009).
240. See H.R. 991, 111th Cong. (2009). As of this writing, the consumer-arbitration
market is in serious jeopardy. In July 2009, Minnesota attorney general Lori
Swanson sued the National Arbitration Forum, alleging deceptive trade practices.
To settle the charges, the National Arbitration Forum, the largest provider
of these services, agreed to stop processing new consumer-arbitration claims.
The American Arbitration Association announced its own moratorium on hearing
most consumer-debt disputes.
241. See H.R. 1020, 111th Cong. (2009); S. 931, 111th Cong. (2009).
242. See Consumer Financial Protection Agency Act, H.R. 3126, 111th Cong.
243. See Right to Clean Vehicles Act, H.R. 609, 111th Cong. (2009).
244. See Riegel v. Medtronic, Inc., 128 S. Ct. 999 (2008).
245. Id. at 1005.
246. See id.
247. See id.
248. See Medical Device Amendments of 1976, 21 U.S.C. § 360k(a)
249. See 128 S. Ct. at 1008.
250. H.R. 1346, 111th Cong. (2009); S. 540, 111th Cong. (2009).
251. See Notice of Class Action and Proposed Settlement, In re Mattel,
Inc., Toy Lead Paint Products Liability Litigation, MDL No. 1897 (C.D. Cal.,
Oct. 23, 2009), available at https://www.mattelsettlement.com/Prod/Content/PDF/exC.pdf;
John Kell, Mattel Settles Suit Over Lead in China-Made Toy, Wall St.
J., Oct. 14, 2009; Louise Story, Lead Paint Prompts Mattel to Recall 967,000
Toys, N.Y. Times, Aug. 2, 2007.
252. See Stipulation of Class Action Settlement at 35, In re Mattel,
Inc., Toy Lead Paint Products Liability Litigation, MDL No. 1897 (C.D.
Cal., Oct. 23, 2009), available at https://www.mattelsettlement.com/Prod/Content/PDF/mattelstip.pdf.
253. The ratio of attorneys fees to actual settlement value depends on
the responses of class members. Mattels liability to claimants is $10.875
million or less from certain claimants; plus a sticker-price voucher for each
toy or valid proof of purchase returned; plus no more than $10 to each responding
individual who had already submitted a recalled toy for a voucher. Given the
number of toys affected (about 967,000), the relatively modest price of most
of the eligible toys (see Lead Paint Toy Settlement, List of Recalled Toys,
In re Mattel, Inc., Toy Lead Paint Products Liability Litigation, MDL No. 1897
(C.D. Cal., Oct. 23, 2009), available at https://www.mattelsettlement.com/Prod/Content/PDF/Catalog-ALL_TOYS.pdf),
and the probability that a high percentage of eligible class members will not
file for recovery, the lawyers take seems likely to be an inordinately
high proportion of the payments made to the class.
254. Consumer Product Safety Improvement Act of 2008, Pub. L. 110-314, 122 Stat.
255. See Walter Olson, A Destructive Toy Story Made in Washington,
Wall St. J., Sept. 13, 2009.
256. See Center for Responsive Politics, supra note 11,
(last visited Jan. 13, 2010).
257. See Posting of David Ingram to The BLT, http://legaltimes.typepad.com/blt/2009/12/senate-lawyer-chosen-to-lead-highway-safety-agency.html
(Dec. 7, 2009, 13:05 EST).
258. See Anne M. Northup, There Is No Joy in Toyland, Wall St.
J., Dec. 24, 2009.
259. See Pub. L. 110-314, § 212.
260. See id. at § 218.
261. See Steven R. Strahler, Asbestos and the Legal Black Hole,
Crains Chicago Bus., Sept. 28, 2009.
262. See Northup, supra note 258.
263. See id.
264. See Timothy P. Carney, Specters Voting Record, Wash.
Times, Nov. 11, 2004.
265. See S. 437, 111th Cong. (2009).
266. See Blacks Law Dictionary 231 (6th ed. 1994).
267. See, e.g., Silverton v. Commissioner, 36 T.C.M. (CCH) 817 (1977),
affd, 647 F.2d 172 (9th Cir. 1981).
268. See Priv. Ltr. Rul. 94-32-002 (Mar. 30, 1994) ([P]ayment by
one taxpayer of the obligation of another taxpayer is not considered an ordinary
and necessary expense for purposes of section 162(a).).
269. Victor E. Schwartz & Christopher E. Appel, Federal Government Bailout
for Trial Lawyers, Wash. Leg. Found. Leg. Opinion Ltr. 1 (May 22, 2009).
270. See Chris Rizo, Lobbyist: AAJ Looking To Quietly Pass Plaintiff
Lawyer Tax Break, Leg. Newsline, July 29, 2009, available at http://www.legalnewsline.com/spotlight/222204-lobbyist-aaj-looking-to-quietly-pass-plaintiff-lawyer-tax-break
(quoting Linda Lipsen, senior vice president of public affairs, American Association
271. See Posting of Carter Wood to PointofLaw.com, http://www.pointoflaw.com/archives/2008/06/tax-break-for-trial-lawyers-mo.php
(June 7, 2008, 15:15 EDT).