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Trial
Lawyers Inc. Update No 7, December 2008
LOUISIANA
LITIGATORS:
While People Leave the Pelican State, Attorneys Thrive
The troubled state of Louisiana has lost 200,000 residents
in the years since Hurricane Katrina devastated New Orleans.[1]
But the state had been having a hard time attracting workers
and others, as well as holding on to those it had, even before
the hurricane struck. While the national trend in population
growth in the previous five years was 4.6 percent, Louisiana
grew by only 0.6 percent in that period (see graph).[2]
Even so, one segment of the population—trial lawyers—is
finding the state to be an excellent place to hang out and
do business. Long a lawsuit-friendly jurisdiction, Louisiana
has become a magnet for mass tort lawyers squeezed by comprehensive
tort reform in neighboring states such as Texas and Mississippi.
That plaintiffs' lawyers would find the Bayou State a good
place to sue is unsurprising. In a 2008 survey conducted by
Harris Interactive for the U.S. Chamber of Commerce Institute
for Legal Reform, corporate litigators ranked the fairness
of Louisiana's judicial system next-to-last among the fifty
states (see map).[3] The state ranked
among the bottom three in every category surveyed, and Louisiana
was deemed the worst state in the nation in its treatment
of scientific and technical evidence, its timeliness in granting
or denying summary judgment or dismissal, its discovery process,
and its judges' competence. Orleans Parish, encompassing the
city of New Orleans, has regularly been dubbed a "judicial
hellhole" by the American Tort Reform Association,[4]
and it was ranked the ninth-worst local jurisdiction in the
country.[5]
 Louisiana's
hospitability to litigation is an impediment to its economic
recovery: 64 percent of business leaders around the country
surveyed by Harris said that a state's litigation climate
would affect their decision on where to locate a business.[6]
If Louisiana's leaders want to resuscitate their state's fortunes,
then cleaning up its system of civil justice would be a good
place to start.
A UNIQUE LEGAL SYSTEM
Owing to its pre-1803 history as a French colony, Louisiana—alone
among the fifty states—has a French-derived "civil
law" tradition rather than a British-derived system of
"common law."[7] Consequently,
all causes of action in Louisiana are based in the Louisiana
Civil Code[8]; in theory, at least, Louisiana's
judges do not make law. Unfortunately, Louisiana's exceptionality
does not extend to European-style constraints on litigation,
such as "loser pays" fee-shifting rules and prohibitions
against contingent fees and class actions.
In contrast to judges in common-law states, who typically
show substantial deference to previous court decisions, Louisiana's
judges are supposed to work from a "direct interpretation"
of the code.[9] While such a legal approach
would seem to support legislative supremacy and judicial restraint,
open-ended or ambiguous statutes have invited a wider scope
of judicial interpretation and disregard for judicial predecessors'
rulings.
A NOVEL APPROACH TO DAMAGES
One example of how Louisiana's unique legal approach encourages
instability in the law is the state supreme court's move away
from long-standing limitations on damages recoverable in litigation,
even though the underlying statutory language has not changed.
Traditionally, the state lumped together as "general damages"
non-pecuniary injuries such as "pain and suffering."[10]
While loss of enjoyment of life can legitimately be thought
to be an aspect of "general damages," recently
Louisiana's courts have begun allowing various elements of general
damages to be set as separate elements in a jury charge. In
2006, the state supreme court for the first time embraced a
separate jury charge for a new variety of damages[11]—"hedonic"
damages, or "loss of enjoyment of life"—developed
conceptually by economists in the 1980s.[12]
The dissenting justices were undoubtedly correct that allowing
a separate charge for these losses—in addition to "pain
and suffering," which includes mental suffering—creates
the risk that jurors will mistakenly count the same harms
twice.[13] The state supreme court's
decision not only departed from its traditional interpretation
of the civil code but also separated it from the overwhelming
majority of other states that have considered the issue.[14]
MASS TORT MASTER
Louisiana's lawyers have long been led by an intriguing
cast of characters, from the late "King of Torts,"
Melvin Belli, and "the General," Wendell Gauthier,
who sued the manufacturers of everything from tobacco
to breast implants, to the flamboyant Michael St. Martin,
whose nickname, "Alligator Mick," stems from
his penchant for hunting reptiles.[15]
Today the king of the Louisiana plaintiffs' bar is Russ
Herman, a jazz aficionado and a fan and sometime impersonator
of Harry Potter.[16]
 Herman
practices law in New Orleans with his son in the firm
founded by his father and uncle. He has served as president
of the Louisiana Trial Lawyers Association and the Association
of Trial Lawyers of America.[17]
A leader in the multibillion-dollar litigation against
the tobacco industry on behalf of the states, in 2004
Herman scored a $591 million jury verdict against American
Tobacco Company.[18] Last year,
Lawyers USA named Herman its 2007 Lawyer of the
Year for his role in leading negotiations that culminated
in a $4.85 billion settlement between Merck, the pharmaceutical
company, and plaintiffs alleging injuries that resulted
from their taking its prescription painkiller Vioxx.[19]
Herman's organizing skills, honed while he served in
similar leadership roles in earlier mass tort litigation,
proved essential in the Vioxx cases. He quipped: "It
was like each lawyer had a greased football and was
running like a wild monkey."[20]
But whether the deal was in the best interests of the
lawyers' clients is debatable. The Manhattan Institute's
Marie Gryphon has criticized the Vioxx settlement as
structured to pay out settlement cash to
objectively weak claims while "sell[ing] out the
interests of those clients who actually have viable
claims."[21] While those "sold
out" clients may have little recourse, Herman's
deal does well by his fellow litigators, who received
some $1.5 billion in fees.[22]
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A HOTBED OF NEW LEGAL THEORIES
Louisiana's courts have permitted other novel theories of
injury in recent years. Take the $591 million jury verdict
levied against tobacco companies in 2004 in Scott v. American
Tobacco.[23] The class action in
Scott did not seek damages for individuals actually
harmed by smoking; in the event, it won funding of a "smoking
cessation" program on behalf of class members.[24]
The 1998 $200 billion-plus Master Settlement Agreement with
the tobacco companies was supposed to pay for such programs,[25]
but the trial court actually forbade the defendants to present
evidence of the master agreement's expenditures for the same
purpose.[26] On appeal, the smoking-cessation
efforts funded by the jury were "limited" to such
programs as "reimbursement of medications" (including
nicotine gum), "telephone quit lines," and "intensive
cessation programs."[27] These restrictions
reduced overall damages to "only" $279 million[28]—a
sum that still results in a mighty hefty paycheck for Trial
Lawyers, Inc.
PROFESSIONAL PLAINTIFFS
Louisiana's public-employee pension funds are notorious
for spurring class action suits against high-growth
companies when their share price drops. While ostensibly
intended to ferret out fraud, these cases often lack
any evidence of real wrongdoing and represent merely
a tax on doing business.
An empirical study shows that securities class actions'
settlement values are unrelated to the merits of the
underlying cases.[29] Moreover,
shareholders in securities suits are generally as likely
to be a defendant as they are to be a plaintiff, inasmuch
as the proceeds of such claims are merely transfers
from one class of a company's shareholder to another.
Some critics have described these cases as "legal
extortion"[30]; a Florida
judge compared some securities class action lawyers
to " 'squeegee boys' who . . . run up to a stopped
car, splash soapy water on its perfectly clean windshield
and expect payment for the uninvited service of wiping
it off."[31]
Public-employee pension funds' involvement in securities
class action litigation stems from a congressional effort
to clean up these lawsuits, the 1995 Private Securities
Litigation Reform Act.[32] Because
Congress found that class action lawyers were controlling
securities litigation with little client oversight—understandably,
since small shareholders have little incentive to monitor
their attorneys on behalf of their fellow class members—the
reform legislation called for the designation of "lead
plaintiffs" in securities suits. These would be
those plaintiffs "most capable of adequately representing
the interests of class members," which the legislation
presumed to be those having the "largest financial
interest."[33] What congressional
reformers failed to anticipate was that securities class
action attorneys would arrange to designate public-employee
pension funds, which have large stock holdings and boards
composed of public officials and union appointees whose
motives go beyond their fiduciary duties.
In Louisiana's pension funds, Trial Lawyers, Inc. found
its most accommodating and enthusiastic plaintiffs;
indeed, three Louisiana pension funds are among the
five most active lead plaintiffs nationally (see box);
the Teachers' Retirement System of Louisiana is first.[34]
In denying the teachers' fund's efforts to head a class
action before his court, an Ohio judge in 2004 chastised
it for being a "professional plaintiff." The
judge remarked that the fund was already leading eight
other cases and had wastefully chosen four separate
plaintiffs' firms to handle the Ohio case.[35]
Two other Louisiana funds worked quickly with their
trial lawyers to file class actions after the recent
financial collapse: on October 1, 2008, the Louisiana
Sheriffs' Pension and Relief Fund and the Louisiana
Municipal Employees' Retirement System filed lawsuits
in New York against Citigroup and JP Morgan Chase.[36]
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Tobacco is not the only traditional lawsuit business for
which Louisiana lawyers have developed new theories of liability;
even as asbestos lawsuits continue to fill the state's court
dockets, creative lawyers have begun to file new lawsuits
that allege loss of hearing in many of the very same clients.[37]
Big asbestos firms such as Texas's Baron & Budd have begun
running ads in newspapers like The Advocate looking
for hearing-loss clients.[38] As George
Bezet, a lawyer defending against several such suits that
have been filed en masse in southern Louisiana, concedes:
"It's logical that [noisy] plants … would be a natural
place to start looking for people who might have hearing loss."[39]
While workers exposed to asbestos would not know during the
period of exposure either that they had been exposed or that
the exposure was harmful, workers exposed to deafening sound
should be able to anticipate the risk to their hearing. But
this key distinction between these two kinds of harms hasn't
stopped lawyers from filing claims embracing this new theory
for hundreds of clients this year.[40]
Louisiana lawyers have also developed a growth business out
of suing for damages alleged to be caused by mold growing
in buildings—an inevitable consequence of the Pelican
State's humid climate. In 2004, New Orleans's large Plaza
Tower building offered $4.25 million to settle claims by hundreds
of state office workers alleging various health ailments that
lawyers attributed to mold.[41] In May
2008, a New Orleans judge ruled that the state was liable
for worker injuries in that building; the total tab for the
taxpayers could run as high as $35 million.[42]
Such litigation, which blames respiratory ailments on the
black mold species stachybotrys chartarum, has proliferated,
notwithstanding the paucity of data supporting the claims.
The U.S. Centers for Disease Control acknowledge that "a
causal link between the presence of the toxic mold and these
conditions has not been proven." [43]
A FLOOD OF LAWSUITS
Perhaps the most prominent litigation in Louisiana over the
last few years has stemmed from injuries caused by Hurricane
Katrina. The devastation from the hurricane was not only real
but vast, and lawsuits stemming from the tragedy were to be
expected. Trial Lawyers, Inc.'s response was almost immediate:
in October 2005, the New Orleans class action firm Bruno &
Bruno posted signs on utility poles looking for plaintiffs.[44]
While some of the resulting claims against insurance companies
were valid, many turned out to be inflated. For instance,
in the first federal Katrina case to go to trial in Louisiana,
the plaintiffs withdrew their claims (and gave up any right
to refile them) before the case went to jury after evidence
at trial suggested that damages to cover living expenses that
the plaintiffs were seeking had already been paid by the insurer.[45]
Many of the post-Katrina lawsuits involved challenges to
insurance companies' denial of flood-coverage claims submitted
by policyholders who had earlier expressly declined flood
coverage. Adjudicating each claim has required a fact-specific
inquiry as to the extent to which damages were caused by flooding
as opposed to wind and rain, which were typically covered
by the homeowners' policies. Forcing insurers to pay out on
policies that did not cover flood damage would not only be
unfair to them (as well as to those individuals who had expressly
paid for flood coverage); it would destabilize the overall
Louisiana insurance market and impair individuals' ability
to get insurance in the future. For example, when neighboring
Mississippi threatened to force insurance companies to pay
for damage not covered by contracts, some insurers ceased
to write new policies in the state.[46]
In April 2008, the Louisiana Supreme Court unanimously held
that homeowners lacking flood insurance whose homes were destroyed
by post-Katrina flooding could not collect from insurers.[47]
Thousands of lawsuits stemming from Katrina remain unsettled,
and more lawsuits have been filed in the wake of subsequent
hurricanes such as Gustav.[48] However,
the Louisiana Supreme Court's decision to resist political
pressure and enforce clear contractual language is a very
positive development for the rule of law.
AN UNCERTAIN FUTURE
In addition to maintaining the rule of law in Katrina-related
litigation, the Louisiana Supreme Court deserves praise for
its decision in 2007 to reverse an activist lower-court decision
that would have overturned the state's long-standing cap on
damages in medical-malpractice cases.[49]
While Louisiana's litigation climate is heavily pro-plaintiff,
medical-malpractice insurance rates there remain lower than
they are in much of the rest of the nation,[50]
largely because of the cap, which was enacted in 1975.
Last summer, the legislature took another important step
forward when it passed a law designed to improve Louisiana
courts' ability to handle expert witnesses.[51]
The new law, which takes effect on January 1, 2009, requires
judges to hold pretrial hearings on the admissibility of expert
testimony at least thirty days before a trial. This procedure
should help remove "junk science" from the state's
courtrooms.
Still, trial lawyers in Louisiana have been busy in their
own behalf. Their allies in the legislature introduced a bill
this year that would have exempted some damages from the state's
medical-malpractice cap, thus driving up insurance premiums
for doctors.[52] Another bill threatened
to double the length of time that a plaintiff would have to
file a suit, increasing litigation risks to all businesses.[53]
Rather than opening up the state to still more litigation,
Louisiana should go further in reducing fraud in its courts,
particularly in the area of asbestos and silica litigation.
Some 10,000 claims against dozens of defendants are pending
there,[54] yet 90 percent or more of
plaintiffs have not actually been injured.[55]
Louisiana's legislature considered a bill in 2008 that would
have given priority to the claims of the genuinely ill as
well as improved transparency in the processing of claims
by bankruptcy trusts set up to handle asbestos claims.[56]
Passing such legislation is important to Louisiana's future.
As the state rebuilds itself, it must avoid the man-made disaster
of lawsuit abuse and its impact on the economy. The state
remains in many respects a lawyer's paradise, but the supreme
court's handling of Katrina cases and the legislature's passage
of evidentiary reforms may indicate a realization by the state's
leadership that the rebuilding process requires restraining
Trial Lawyers, Inc.
HIS LEGACY LIVES ON
 With
a political history filled with pandering populists
like governors Huey Long and Edwin Edwards and U.S.
Rep. William Jefferson, Louisiana unsurprisingly features
politicians who have allied themselves with Trial Lawyers,
Inc.[57] One such politician is
former state attorney general Charles Foti, whose failure
to be reelected in 2007, or even to secure a spot in
the runoff, did not dissuade him from filing a lawsuit
that same November against insurance companies that
he alleged engaged in price-fixing in the wake of Hurricane
Katrina.[58] Then, on January 14,
2008—his last day in office—Foti sued the
world's largest biotechnology company for mounting another
alleged pricing scheme.[59] Not
only were the merits of the cases dubious, but so was
their handling: the four private law firms he hired
to work with the state on the case had contributed thousands
of dollars to his failed campaign.[60]
Foti's successor, James "Buddy" Caldwell,
dropped the biotechnology case but continued to press
the claim against the insurers. Caldwell is a longtime
friend of Louisiana super-lawyer Russ Herman (see box,)[61]
who is one of the lawyers Foti picked to work with the
state on the lawsuit. Since leaving office, Foti has
taken a job at Kahn Gauthier Swick, a Louisiana firm
specializing in class action litigation.[62]
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Notes
- See U.S. Census Bureau, Annual Population Estimates
2000-2007, available at http://www.census.gov/popest/states/NST-ann-est.html.
- See id.
- See U.S. Chamber of Commerce, Institute for Legal
Reform, Lawsuit Climate 2008, available at http://www.instituteforlegalreform.com/states/lawsuitclimate2008/pdf/LawsuitClimateReport.pdf.
- See American Tort Reform Foundation, Judicial
Hellholes 2004, 2003, 2002, available at http://www.atra.org/reports/hellholes/.
- See U.S. Chamber of Commerce, supra note
3.
- See id.
- See Daniel Engber, Louisiana's Napoleon Complex,
SLATE.COM, Sept. 12, 2005, at http://www.slate.com/id/2126126/.
- See generally LA. CIV. CODE (2008).
- Engstrom, supra note 7.
- Boswell v. Roy O. Martin Lumber Company, Inc., 363 So.2d
506 (La.1978) (affirming a general damages award which included
damages for mental pain and anguish over the loss of timber
on plaintiff's land).
- See McGee v. A C and S, Inc., 933 So.2d 770, 780
(La. 2006).
- See Victor E. Schwartz and Cary Silverman, Hedonic
Damages: The Rapidly Bubbling Cauldron, 69 BROOKLYN
L. REV. 1037, 1040-1041 (2004).
- See 933 So.2d at 783 (Victory, J., dissenting)
(attributing to the majority's ruling "the inequitable
outcome of the injured party securing a 'double recovery'
for a single element of harm"), 785 (Weimar, J., dissenting)
("In the terms of a jury verdict that makes specific
awards for pain and suffering and loss of enjoyment
of life, the injured party is potentially compensated for
the same deprivation twice.").
- See id. at 781, n.2 (Victory, J., dissenting)
(collecting cases).
- See Matt Labash, Lawyers, Guns, and Money,
WKLY. STD., Feb. 1, 1999, at 25.
- See Emily DeSanctis, Top Lawyers-The First
Post—Katrina List, N. ORLEANS MAG., Oct. 25, 2006,
available at http://www.neworleansmagazine.com/a/news/top-lawyers-the-first-post-katrina-list-1480.html.
- See Firm Bio at http://www.hhkc.com/Attorneys/apg_a9_Russ_M_Herman.aspx.
- See Scott, 949 So.2d at 1272.
- See Firm Bio, supra note 3.
- See Andrew Longstreth, $4.85 Billion Vioxx
Settlement Validates Merck's Courthouse Strategy, AM.
LAWYER, Nov. 12, 2007, available at http://www.law.com/.
- See Marie Gryphon, Unjust Deserters, CITYJOURNAL.COM,
Jan. 28, 2008, at http://www.city-journal.org/2008/eon0128mg.html.
- See Kirstin Maguire, Vioxx Judge Caps Plaintiffs
Fees, AM. L. LITIG. DAILY, Aug. 29, 1008, at
http://amlawdaily.typepad.com/amlawdaily/2008/08/the-am-law-l-20.html.
- See Scott v. Amer. Tobacco Co., 949 So.2d 1266,
1272 (La. App. 4th Cir. 2007), writ denied 973 So.2d 740
(La. 2008), cert. denied 128 S.Ct. 2908 (2008).
- See id. at 1271.
- See Master Settlement Agreement at II(f)(4) (establishing
Foundation to, inter alia, develop "effective cessation
programs"), available at http://ag.ca.gov/tobacco/pdf/1msa.pdf.
- See American Tort Reform Foundation, 2004, supra
note 4, at 27.
- 949 So.2d at 1287.
- See id.
- See 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).
- H. Rep. 104-50, Part I (1995), available at http://thomas.loc.gov/bss/d104/d104laws.html.
- Judge Compares Milberg Weiss Case to the Squeegee
Man, NEW YORK LAW., Apr. 18, 2002, available at http://www.nylawyer.com/news/02/04/041802e.html.
- Private Securities Litigation Reform Act, Pub. L. No.
104-67, 109 Stat. 737 (1995).
- See id. at § 27(a)(3)(B)(iii)(I)(bb).
- See Laura E. Simmons and Ellen M. Ryan, Securities
Class Action Settlements: 2006 Review and Analysis,
CORNERSTONE RESEARCH 11 fig. 10 (2006).
- Editorial, Pension Fund Shenanigans, WALL ST.
J., Aug. 20, 2004, at A12.
- See Louisiana Sheriffs' Pension and Relief Fund
v. Citigroup, Inc., 08 Civ. 9522 (Nov. 5, 2008).
- See David Jacobs, Loud and Clear, 25 GREATER
BATON ROUGE BUS. RPT. 102 (July 15, 2008).
- See id.
- Id.
- See id.
- See Greg Thomas, Sick-Building Claims to Net
$4.25 Million, NEW ORLEANS TIMES-PICAYUNE, Mar. 30,
2004, Money at 1.
- See Greg Thomas, Faulty Tower?, GAMBIT
WKLY., May 20, 2008.
- Questions and Answers on Stachybotrys Chartarum and Other
Molds, CDC's Nat'l Center for Envtl. Health, available
at http://www.cdc.gov/nceh/airpollution/mold/stachy.htm.
- See Laura Parker, After Katrina, Courts Flooded
by Lawsuits, USA TODAY, Jan. 15, 2006, available
at http://usatoday.com/news/nation/2006-01-15-katrina-suits_x.htm.
- See Michael Kunzelman, Couple Drops Suit Against
Allstate Over Katrina Damage, AP, Feb. 16, 2007, available
at http://www.law.com/.
- See Ted Frank, Mississippi Fails to Learn from
History, THE AMERICAN, Feb. 16, 2007, available at
http://www.american.com/archive/2007/february-0207/mississippi-fails-to-learn-from-history.
- See Sher v. Lafayette Ins. Co., 988 So.2d 186
(La. 2008).
- See Chad Hemenway, Despite Katrina Rulings,
Attorneys Expected to Get Creative Following Recent Storms,
BESTWIRE, Sept. 15, 2008.
- See Louisiana Supreme Court Vacates Decision on State
Cap in Medical Malpractice Lawsuits, MEDICAL NEWS TODAY,
Feb. 13, 2007, at http://www.medicalnewstoday.com/articles/62779.php.
- See Alexander Tabarrok & Amanda Agan, Medical
Malpractice Awards, Insurance, and Negligence: Which Are
Related?, No. 10 CIV. JUSTICE RPT. 4 (Manhattan Inst.
Center for Legal Pol'y, May 2006), available at http://www.manhattan-institute.org/html/cjr_10.htm.
- See S.B. 308, 2008 Sess. (La. 2008).
- See H.B. 189, 2008 Sess. (La. 2008).
- See S.B. 186, 2008 Sess. (La. 2008).
- See Coalition for Common Sense, Facts: Asbestos
and Silica Reform, at http://www.coalitionforcommonsense.com/.
- See, e.g., Joseph N. Gitlin et al., Comparison
of "B" Readers' Interpretations of Chest Radiographs
for Asbestos Related Changes, 11 Acad. Radiol. 243 (2004).
- See H.B. 484, 2008 Sess. (La. 2008).
- In questioning the merits and legal staffing of the cases filed by the
outgoing state attorney general, to the extent continued by his successor,
the Manhattan Institute does not intend to imply official wrongdoing, only
to present its view that the legacy of lawsuit abuse, with which the Institute
strongly disagrees on policy grounds, unfortunately still continues in the
State of Louisiana.
- See Sean P. Carr, Judge Orders Louisiana Price-Fixing
Lawsuit to Stay in Federal Court, BESTWIRE, July 21,
2008.
- See Chris Rizo, Louisiana AG Drops Amgen Anti-trust
Lawsuit, LEGALNEWSLINE.COM, Apr. 10, 2008, at
http://www.legalnewsline.com/news/210727-louisiana-ag-drops-amgen-anti-trust-lawsuit.
- See Michael Kunzelman, La. Attorney General
Inherits "Curious" Cases from Predecessor,
AP, Fe. 28, 2008.
- See id.
- See id.
Center
for Legal Policy
Manhattan Institute for Policy Research
52 Vanderbilt Avenue
New York, NY 10017
(212) 599-7000
www.manhattan-institute.org
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Laura Eyi
Press Officer
Manhattan Institute
212-599-7000 |
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