Quote of the Day - There was a time when a fool and his money were soon parted, but now it happens to everybody.
Lawyer 2 Lawyer Internet Radio Discusses Legal Funding
Legal funding barely existed just a few short years ago and now is perhaps the fastest emerging financial trend in the legal business community. On this week's Lawyer 2 Lawyer, my fellow Law.com blogger and co-host Robert Ambrogi and I explore what's new in the industry of legal funding, talk to a plaintiff attorney about what goes into a case with the assistance of legal funding and discuss the ethics and the statues/regulations that apply to legal funding.
Lawyer 2 Lawyer welcomes Gary Chodes, founder and CEO of Oasis Legal Finance, Robert Hawley, Deputy Executive Director of the State Bar of California and Ron Kramer, Plaintiff Attorney out of Utah, to tell us a little more about the Legal Funding Industry. Please join us!
Happy Birthday, May It Please The Court
Perhaps sometimes a precocious child, perhaps other times throwing a tantrum, and perhaps, but more hopefully, somewhat informative.
MIPTC turns four today.
Fifth Circuit's Guess Denies Katrina Victims' Insurance Claims Pending Louisiana Supreme Court Review
Three judges on Fifth Circuit sitting in New Orleans guessed at how the Louisiana Supreme Court would decided a dispute between homeowners and their insurance companies, and sided with the carriers. The dispute centered on the language in the policy that purportedly excluded coverage for flood waters and hurricane damage.
Guessed? Oh, you caught that part.
Let me explain. While MIPTC isn't admitted to practice before either the Fifth Circuit or the Louisiana state courts, the process in federal court is for the most part the same across the country, as it is here in California. When the federal court gets a case that requires interpretation of state law, the court looks to state court decisions to render a ruling.
According to the Fifth Circuit opinion in this case, Louisiana has yet to rule on the precise issue in the series of cases involving homeowners, their carriers and the policy language relating to floods, however. Here, the homeowners claim the policies were ambiguous and the insurance companies claim they excluded coverage (see footnote below).
When there's no law on point, the federal courts can do one of two things: they can certify the question and send it to the state supreme court for a ruling or they can guess how the state supreme court would rule, and then rule on their own anyway.
Here, they guessed. It's technically called an Erie guess, after the case by the same name from the United States Supreme Court, Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). The Court of Appeal puts itself in the shoes of the state supreme court, and then guesses how it would rule. It's hard to do, most likely because they're not state court judges; they're federal judges who have lifetime appointments.
In Louisiana, the seven state Supreme Court justices are elected. For a judge, sometimes that difference creates more of an allegiance to the people who elect you - as opposed to the person who appointed you. Sometimes not.
Even so, before the Fifth Circuit Court of Appeal heard the case, the federal trial judge made an Erie guess and ruled for the homeowners, declaring the policy language ambiguous because the carriers didn't distinguish between floods resulting from man-made negligence (read: the Army Corps of Engineers levees) and Acts of God. The appellate court judges reversed, and held that the policies weren't ambiguous, denying the homeowners' claims.
Lawyers for the homeowners have brought cases in the state court system, and expect to take the matter up to the Louisiana Supreme Court.
We'll yet get to see how well the appellate judges guessed. Stay tuned.
While I may overexaggerate, the insurers argue their flood exclusions are unambiguous, and their policies cover only falling whales and flying boxcars. But as I say, I may have the latter aspect of their position wrong.
Lawyer 2 Lawyer Internet Radio Talks About Climate Change
The environment has taken center stage in the media, politics, throughout our households and how we live. On this week's Lawyer 2 Lawyer, we will discuss recent legislation developments, the presence of global warming awareness and the operation of carbon credit trading dynamics.
Please join me and my fellow Law.com blogger and co-host, Robert Ambrogi as we welcome David J. Hayes, the Global Chair of the Environment, Land & Resources Department at Latham & Watkins and Michael J. Walsh, Executive Vice President of Chicago Climate Exchange. Don't miss out on our discussion of these important issues!
Attorney General Attacks Attorneys On Both Sides Of Prop 65 Settlement
New California Attorney General Edmund G. Brown signed this May 11, 2007 letter to the plaintiff's law firm of Hirst Chanler questioning that firm's process of collecting attorneys fees as part of Proposition 65 settlements. Here's the AG's opening paragraph, just to give you a taste of what follows: "We are writing to express our concern about the manner in which you and your clients have pursued Proposition 65 matters concerning lead in the surface coatings of glassware and ceramicware. It needs to change. While these matters generally invohe lead exposures that exceed Proposition 65 standards, and which need to be corrected, your manner of pursuing them does not appear to be in the public interest."
One recent settlement of some interest to the AG was the San Francisco case of Brimer v. The Boelter Companies filed by Hirst Chanler. That case involved lead and cadmium allegedly present in ceramic glassware. In his letter, the AG questioned the fees earned by Chanler.
AG Brown and Supervising Deputy Attorney General Ed Weil wrote, "According to that report (and our records), the [settlement] program generated total payments of over $9 million, including $5.3 million in attorney fees to your firm and penalty payments of over $2.8 million ($700,000 of which is given to plaintiffs by statute)."
Let's see how the AG broke down those fees.
The AG continued, "This equals over $26,000 in fees per defendant, which assuming all time was attorney time at $400 per hour, would equal over 65 hours of attorney time per company. This, as we understand it, is for companies that did not contest liability, but instead sought to resolve the matter immediately."
Chanler largely disagreed, and was quick to respond with this 27-page, June 6, 2007 letter in defense of his fees, in part noting that some of the fee identified by the AG went to another law firm. Chanler compares his work to that of others to justify his fees: "Between 2000 and 2005, for every $1.00 of civil penalties generated, our clients collected $2.85 in fees and costs on average. Between 2000 and 2005, for every $1.00 of civil penalties generated, all other private enforcers collected $14.49 in fees and costs on average."
Equally noted by the AG was the manner defense counsel collected its fees from businesses it defended. Again, the AG wrote: "[according to] Morrison & Foerster, [defense] counsel, as of November 3, 2006, 205 companies had opted in to the Boelter settlement under the auspices of that firm's representation. This generated $1.018 million in fees for the administering defense counsel, who concluded that this amount exceeded the reasonable fee for the services by over $350,000, and donated that amount to various charitable activities."
Wow. An attorney who donated an excessive fee to charity. Why not just give it back to the businesses that paid it or the consumers who had to pay these extra costs to the businesses? Or simply not charge that much in the first place?
But the AG didn't stop at pointing out defense counsel's "charity." His words pointed at both sides, here speaking to Hirst Chanler: "Our primary concern at this point is the manner in which your clients have collected significant sums of money from businesses that have little or no liability for past violations, and an amount of attorney fees that appears to exceed a reasonable amount."
Chanler's letter defended his actions and claimed overall success in prosecuting Prop 65 actions, and to some degree poked back at the AG for not objecting earlier, "It is only now, 18 months after the court approved the agreement and well after your office had an opportunity to review and object to the terms of the agreement, that your office is raising questions about the fairness of the agreement. In light of the unquestioned success of the Boelter cases, we see little purpose in questioning them at this late date."
But it's clear to this writer what's going on here. Someone other than the Court of Appeal is starting to pay attention to the bounty hunters on both sides of this equation, and protect California's businesses and consumers, which is really what Proposition 65 is all about - not perhaps disproportionate fees collected by attorneys on both sides of the fence.
It's about time, in my opinion.
In Response To CAFA, Federal Class Actions Plummet; State Class Actions See Slight Uptick
Perhaps it's not a trend yet, but all indicators point to a shift in filing class action lawsuits from federal courts to state courts. First, we've seen a sharp drop in federal class action filings, largely in response to the Class Action Fairness Act, which makes it harder to mount a federal class action suit. According to Stanford's records, federal securities class actions peaked in 2001 with nearly 500 such actions filed. With more than half of 2007 now in the books, we've seen only 66 such filings so far. The downturn in securities class action lawsuits are of little comfort, however. Companies must now satisfy stringent SOx requirements.
Companies are just marching to the beat of a different drummer. In fact, I'm not sure most companies would consider the trade away from Plaintiff's lawyers to the SEC's enforcement a welcome change.
Even so, the insurance companies have noticed the downward drop in class action filings, but complain because even though the number of class action lawsuits overall has decreased, settlements have spiked upward. That variance makes sense, however. Since Congress has made it harder (but not impossible) to file class action suits, those that are filed receive more attention from Plaintiff's attorneys, who knowing the increased expectations to survive defense challenges, bring better cases rather than more cases.
On the other hand, we've seen a slight uptick in state court class action filings, at least in California, according to the Class Action Defense blog from mega-firm Jeffer Mangels, a point echoed on the Corporate Counsel blog. That latter post turns its focus to the supposed chilling effect of the indictment of partners from class-action superpower law firm Milberg Weiss. This indictment, however, is likely more of an attempt to "let's make an example" rather than cause Plaintiff's lawyers to stop filing class actions.
Indeed, the statistics available show continued filings, with the indictment bringing not much more than a hiccup instead of the expected breather. At most, Plaintiff lawyers have shifted their focus, and it hasn't even slowed down Milberg Weiss, who recently announced the filing of a nationwide class action lawsuit against pet food manufacturers.
Heck, even State attorney generals are getting in on the act.
It remains to be seen whether CAFA, the indictment of Milberg Weiss and the upswing in SEC enforcements will cause a substantial and sustained downturn in class action filings. According to the Rand Corporation, class actions were on a sharp increase in 2002, well before CAFA was enacted.
You can count on one thing, though. Class actions aren't going away. A strong defense is the best way to kill them off.
Mr. Bumble Will Have His Day In Court; Disabled Plaintiffs Cry Foul Over Dismissals
Self-styled Bounty Hunter Attorney Frustrated With Orange County Judges
One Orange County Superior Court judge has made it to the front page of this week's Courthouse News by dismissing disability discrimination suits as frivolous, despite representation by Morse Mehrban. See the article where the judge is accused of misquoting Mr. Bumble in dismissing these cases. Mr. Mehrban refers to himself as a bounty hunter.
In response, the two disabled plaintiffs, David Gunther and Karl Rountree, have filed suit against the California State Court system in Federal Court in Fresno. The allegations also include other Orange County Superior Court judges, the Honorable Greg Lewis, the Honorable John M. Watson, the Honorable Charles Margines, the Honorable Tam Nomoto Schumann and the Honorable Dennis S. Choate, and surprisingly an unnamed clerk of court from Orange County North Court Department N18 (see paragraph 47), who Mehrban threatened with an FBI investigation when she couldn't find his trial documents.
Judge Lewis and Chief Justice of the California Supreme Court (along with another Kern County judge) are defendants in the case. You can read Plaintiff's characterization of Judge Anderson's "Mr. Bumble" comment here in paragraph 39.
Despite Plaintiffs' claims that the California court system has stopped them from petitioning to protect their rights as disabled individuals, MIPTC bets the Honorable Margaret Anderson along with the other judges will be upheld on this case.
Orange County Courts Outsource Data Entry Of Traffic Tickets To Mexico
A local law enforcement listener called Los Angeles radio station KFI and revealed that the Orange County Courts outsource data entry of traffic tickets to Nogales, Mexico, prompting outraged citizens to call (mistakenly) the Orange County Board of Supervisors. The County Board has no authority over the Court system, which is a state-run entity. The shock jocks at the radio station advised listeners to call the Supervisors, apparently not completely understanding governmental organizational boundaries. They've now straightened out their confusion. In response, however, the Orange County, California Superior Court issued this press release, assuring the public that their private data was safe.
According to the press release, "Nogales employees must also be certified by the Sonoran State Police that they have passed a background search and do not have a criminal record. Before entering the segregated work location, employees must check all cell phones, purses, backpacks, and personal items including paper and pens, in a locker. Access to the production area is accessed by approved personnel only."
The Orange County Register, on the other hand, reported that Orange County Supervisor Chris Norby appeared on KFI and "denounced the court's hiring of the outsourcing company. '(DMV information) has to be kept as closely guarded as possible and outsourcing this kind of information outside the country is something this board would never support,' Norby said."
The Court's press release countered, and said it should all be moot sometime in the future: "The Court wants to ensure the public that private data is safe. The Court has taken the lead in facilitating electronic data projects that will, in the future, allow for direct transmission of ticket information from police officers to the Court without the need for a third party."
In the meantime, maybe you shouldn't speed in Orange County.
July 30, 2007 update: The Court has terminated the portion of the contract that allowed public data to be transferred to Mexico.