The Rule of Lawyers: How the New Litigation Elite Threatens America's Rule of Lawby Walter K. Olson
Big-ticket litigation is a way of life in this country. But something new is afoot--something typified by the $246 billion tobacco settlement, and by courtroom assaults that have followed against industries ranging from HMOs to gunmakers, from lead paint manufacturers to "factory farms." Each massive class-action suit seeks to invent new law, to ban or tax or
Big-ticket litigation is a way of life in this country. But something new is afoot--something typified by the $246 billion tobacco settlement, and by courtroom assaults that have followed against industries ranging from HMOs to gunmakers, from lead paint manufacturers to "factory farms." Each massive class-action suit seeks to invent new law, to ban or tax or regulate something that elected lawmakers had chosen to leave alone. And each time the new process works as intended, the new litigation elite reaps billions in fees--which they invest in fresh rounds of suits, as well as political contributions.
The Rule of Lawyers asks: Who picks these lawyers, and who can fire them? Who protects the public's interest when settlements are negotiated behind closed doors? Where are our elected lawmakers in all this? The answers may determine whether we slip from the rule of law to the rule of lawyers.
“A truly gripping read about tort lawyers...a brilliant expose of the way courts are being overwhelmed by mass tort actions.” Robert Lenzner, Forbes.com
“Walter Olson lays out an entertaining, but disturbing chronicle of class-action abuses.” David A. Price, The Wall Street Journal
“With a marvelous combination of irony, insight and outrage, Olson covers the whole range of opportunistic litigation over tobacco, asbestos, breast-implants, autos and guns....Olson even proposes sensible ways of reforming the jury system that might actually make a difference.” Gene Epstein, Barron's
“Even lawyers, however, will find [The Rule of Lawyers] a tasty snack.” Peter Schuck, The New York Law Journal
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The Rule of Lawyers
How the New Litigation Elite Threatens America's Rule of Law
By Walter K. Olson
St. Martin's PressCopyright © 2004 Walter K. Olson
All rights reserved.
The Joy of Tobacco Fees
It is generally acknowledged that American politics offers few power bases more attractive than that of a state attorney general. Running on a separate statewide ballot line of their own, most attorneys general cannot be fired by their state's governor, a contrast with the subservience of the U.S. attorney general to the president at the federal level. Since their work is considered to be akin to that of prosecutors, however, they operate with a fair degree of independence from legislators as well. Attorneys general are seldom defeated for reelection — few politically active people are eager to pick fights with their state's chief law-enforcement officer — and many go on to higher office, the National Association of Attorneys General (NAAG) often nicknamed the National Association of Aspiring Governors. "Among former attorneys general who have made their mark in Washington," notes Martha Derthick of the University of Virginia, "are John Ashcroft, Bruce Babbitt, Jeff Bingaman, Bill Clinton, John Danforth, Dennis DeConcini, Thomas Eagleton, Slade Gorton, Jacob Javits, Jim Jeffords, Joseph Lieberman, Walter Mondale, Elliot Richardson, Warren Rudman, William Saxbe, David Souter, and Robert Stafford." The most famous of these, Clinton, liked to tell people the best government job he'd ever held had been his elected post as attorney general of Arkansas.
While most of the really dark side of law enforcement — the murder cases and bombings and kidnappings — falls to the responsibility of other levels of government, attorneys general have an inbox of a more broadly discretionary nature. They can and do launch investigations and crusades on whatever issues captivate the press at any given moment, be it child neglect, utility rates, elderly persons' access to the Internet, you name it. This broad enforcement discretion seems to lead naturally to such episodes as 1999's "Santa settlement." In Kansas, for example — to pick a state more or less at random — news editors were sent a May 25, 1999, press release from the state capital of Topeka headlined: "Attorney General Reaches Settlement with Toy Companies." "AG Carla J. Stovall announced today that her Consumer Protection Division has reached settlements with Toys-R-Us, Mattel Inc. and Little Tikes Co. totaling $473,098 in cash and toys." The settlement, which resolved charges made under the antitrust laws that toy companies had withheld inventory from discount warehouse stores, "will provide thousands of less fortunate Kansas children with toys for the next three holiday seasons." Santa had come early.
Around the country that very same day, press releases were going out to newsrooms crediting other states' attorneys general with the same vaguely Lone Rangerish accomplishment of having successfully challenged several well-known national businesses. "Thousands of needy Tennessee children" would benefit, said a press release from that state's attorney general. Attorneys general from Ohio, California, Oregon, and many other states used almost identical language. As a reader would learn if diligent enough to make it down to paragraph five of Stovall's release, the toy affair was, in fact, a joint action of forty-four states' attorneys general, coordinated through NAAG. In the national settlement, the defendants agreed to provide $12.8 million to the state governments (earmarked for children's programs, which seemed much fairer than if it had just been used to reduce Mom and Dad's taxes or something); $1.8 million to the various state offices of attorneys general to compensate them for their enforcement efforts; $335,000 for NAAG itself; and, best of all, the big toy giveaway, a face value of tens of millions of dollars' worth of toys from the companies' inventory to be distributed to poor kids at Christmas.
As an exercise in the transmutation of the raw material of legal muscle into the end product of favorable publicity for the wielder of the muscle, the "Santa settlement" was pretty much perfect. The merits of the suit were at best murky: The toy companies' sin had been to let warehouse discounters carry only "multipack" toy sets of the sort that might appeal to thrifty larger families, while declining to supply the stores with their full line of individual toys. No one knew which, if any, toy-buying families might have suffered because of this practice or whether a judge would, in the end, have found it illegal under antitrust laws. But no toy company executive in his right mind wanted to face the cost of being taken to court in such a suit, the resulting bad press, or the risk of going to trial against forty-four states. For the attorneys general, the resulting settlement offered not only the chance for an initial flurry of favorable publicity — complete with generic press releases they could make look local for their state — but photo opportunities for many holiday seasons to come of their beaming presence amid needy kids being handed toys. At the same time, their office would get a welcome slug of cash to assist with its staffing and budgeting needs — deliciously, the defendants could actually be made to pay for the privilege of having been investigated and sued, which actually turned the offices of attorneys general into a sort of profit center within state government, meaning that they wouldn't be so much at the mercy of some cranky appropriations chairman in their state legislature. To be sure, toy companies might raise prices on buyers in general to cover the cost of such a giveaway, but that was hardly the fault of the attorneys general.
And so it went in the happy life of an attorney general: the large book of ongoing enforcement business that they could acquire just by signing up with the NAAG group actions; the stream of self-congratulatory press releases that would result; the occasional well-chosen intervention into a local controversy by threatening to sue, for example, the owners of a sports franchise or notable business that was making noises about moving out of state; the chance to function as a sort of freestanding law firm within state government's ever-needy bureaucracy. Best of all was the selfsatisfaction about the way they were improving the moral tone of government. Other officials engaged in grubby wheeler-dealing with interest groups, but attorneys general were "watchdogs," whose role was to keep everyone else honest.
Even amid the iridescent moral luster of an NAAG convention — attorneys general, like peacocks, achieve their greatest splendor when massed — ambitious young Mike Moore of Mississippi, who led the crusade against tobacco companies, stood out for his star quality. In 1994, People magazine had picked him as one of its "25 most intriguing people of the year"; later he was to play himself in the 1999 Warner Bros. production, The Insider. To begin with, Mike Moore had mastered the Jimmy-Stewart-meets-Cotton-Mather blend of down-home ordinariness and fierce indignation that characterizes attorney general-speak. Moore compared tobacco companies to heroin dealers and said going after them was "just the right thing to do, pure and simple." The papers often remarked on what they called his choirboy image; according to Michael Orey's admiring 1999 book, Assuming the Risk: The Mavericks, the Lawyers, and the Whistle-Blowers Who Beat Big Tobacco, Moore had originally enrolled in law school "to help people" and "to make a difference."
Viewed in hindsight, the milestones of Moore's early career are not free from irony. As a young DA, he made his name in his hometown of Pascagoula by nailing the county's political boss in a public contracting scandal. Although Moore was never able to prove classic hard-core corruption — suitcases full of money, or that sort of thing — he did show that vendors doing business with the county felt expected to perform favors for local officials. Since officials weren't keeping contractors at proper arms' length, it stood to reason that they weren't negotiating the contracts in the hard-nosed way that would secure full benefits from such contracts for the city and its taxpayers. A jury agreed, gave Moore the convictions he was seeking, and his political career was off with a bang. Soon he was elected to the statewide position of attorney general, with more than a little help from his fellow Pascagoulan and law school acquaintance Dickie Scruggs, the successful injury lawyer. Scruggs had not only given generously to Moore's campaign but had flown him to campaign appearances around the state in his four-seater plane.
There was nothing especially uncommon, as it happened, about an attorney general like Moore having close relations with an ambitious plaintiff's lawyer like Scruggs. Attorneys general served, within state government, as leading voices on matters of law and litigation, making them important persons for a powerful lawyer to cultivate. Many attorneys general had practiced as plaintiff's lawyers themselves before taking office or gone to bat for those lawyers' interests in state legislatures; California's Bill Lockyer, for example, fit both descriptions before winning his state's attorney generalship, having been the longtime head of the state senate's judiciary panel and himself a practicing attorney. Beyond that, it often happened that both AGs and private trial lawyers sued the same defendants over the same alleged sins, which might give them occasion to piggyback on each others' efforts by sharing information, coordinating publicity efforts, or even jointly negotiating an eventual settlement of public and private claims at once. In the toy antitrust affair, for instance, the attorneys general pursued the "Santa settlement" in coordination with private class-action lawyers suing the same toy companies, who got $3.25 million in fees for their participation.
There was in particular one little project that Scruggs had in mind for Moore to pursue when he took office. Building owners around the country had lately been spending substantial amounts of money to remove old insulation and other asbestos-laden products from existing buildings, and lawyers had been helping them file suit against makers of the original asbestos-containing materials, asking the courts to order them to help reimburse the removal costs. The state of Mississippi was spending money to remove asbestos from old buildings and might recover substantial sums if it filed a suit like this. And such litigation would be so big and complicated that it really should be entrusted to an expert rather than to the lawyers in Moore's own office, shouldn't it? What was needed was a law firm with acknowledged expertise in asbestos litigation, one like, well, his own (Dickie Scruggs's) firm.
For many legal ethicists, alarm bells would have begun to go off at this point. The American Bar Association (ABA) had joined with many other professional groups in deploring the practice known as "pay-to-play," in which elected officials farm out public legal work to law firms that have donated to their campaigns. In fact, pay-to-play was not so different from the I'll-scratch-your-back-you-scratch-mine public contracting abuses Moore had made his crusading reputation helping to root out back in Pascagoula. And there was a further, vital angle to Scruggs's asbestos proposal. Pay-to-play abuses usually came up in the hiring of lawyers who worked on such matters as bond issues, and who charged hourly fees for their work. But Scruggs wanted to handle the rip-out claims on contingency — the state would pay nothing unless he won, and in return he would take a share of its eventual recovery. Most countries flatly ban lawyers from accepting share-of-recovery contingency fees even from private clients; they believe lawyers will be over-tempted to play hardball to win their cases if doing so will make them personally rich, nor do they want to let clients develop a sense of having nothing directly at risk if they press a questionable case. The United States had long justified its departure from other countries' practices on this issue on the grounds that otherwise some poorer clients might be unable to obtain a lawyer at all. But no one was seriously claiming that no lawyer could be found to handle the asbestos case for the state of Mississippi on an hourly fee basis.
Until quite recently the notion of letting lawyers represent government on a contingency-fee basis would have been seen as pernicious, absurd, or both. But as Scruggs was no doubt aware, times were changing fast. Many of America's legal authorities had begun to regard contingency fees — and the encouragement they gave to speculative litigation — not as a lesser evil that should be limited to the cases where it was necessary, but as something wholesome and beneficial in itself. The first experiments had already been noted by the end of the 1980s, with the state of Massachusetts hiring private lawyers on contingency for asbestos rip-out cases. If contingency fees for public lawyering could pass the smell test in the state that was home to Harvard Law School, why shouldn't they do so in Mississippi, too?
So it came to pass that one of the very first things the newly elected Moore did on taking office was to venture into a little public contracting of his own, hiring Scruggs to pursue the asbestos rip-out suits. The arrangement worked out to both sides' satisfaction — Scruggs took home a tidy $2.4 million share of the state's winnings — and proved to be just a demonstration project of sorts for an idea that Moore and Scruggs had been contemplating for a while, which would be almost unthinkably bigger and more audacious. It was aimed at the tobacco industry, and would demand that tobacco companies reimburse the state of Mississippi for money the state had spent treating the smoking-related illnesses of Medicaid patients. Moore described his brainchild as the "most important public health litigation ever in history": "It has the potential to save more lives than anything that's ever been done."
It had been known for centuries that the use of tobacco formed a habit difficult to break and hazardous to health, in fact often lethal to its users. In the 1950s and 1960s, a series of medical findings began to quantify these risks and confirm that they were, if anything, more serious than they had been assumed to be. Agitation by the U.S. Surgeon General's Office helped focus press and public attention on these findings and raised the question whether the government itself should do more to get people to quit smoking.
Any such effort would represent a decided turnabout in government policy, which had long made its peace with tobacco given the product's extreme usefulness as a source of tax revenue. Many advanced countries reserved cigarette manufacturing to the government itself as a state monopoly and revenue source, and in virtually all the rest of the world it was heavily taxed and its distribution closely supervised by public authorities. In the United States it was common for government at all levels to collectively pocket several times more revenue from cigarette sales than the tobacco companies themselves kept in bottom-line profits. In a sense, the state had installed itself as a senior partner in a tobacco-selling enterprise of which Brown & Williamson, R.J. Reynolds, and the rest were merely the publicly visible face. Like the governments of other countries, the federal government had also gone to considerable lengths to promote smoking within its military, the nicotine habit being useful in holding at bay the fear and monotony to which soldiers are subject. In World War I, General Pershing famously said that tobacco was as critical an item of materiel to be rushed to the front as food and ammunition, and never did per-capita cigarette production in America rise as fast as it did during World War II.
Why not just raise cigarette taxes, which would promise to discourage the smoking habit while (at least temporarily) bringing the government more revenue than ever? The conventional explanation was that tobacco companies were too powerful a lobby to let that happen, but this was almost surely too simple an explanation. To begin with, as legislators knew well, few taxes are more "regressive" than the tax on tobacco, the burdens of which fall disproportionately on the poorest consumers. Large tax hikes on a state-bystate basis would also tend to worsen the already thriving market in cigarette smuggling. The alternative best suited to curbing smuggling would be a uniform nationwide tax hike, but legislators from poorer and more rural states stoutly resisted such a hike, and no wonder: The sort of ten-or-twenty-dollar-a-carton price hike that big-city smokers might brush off as an annoyance could force a real reduction in the standard of living of residents of a state like Mississippi, where per-capita personal income stood at just $19,000.
Excerpted from The Rule of Lawyers by Walter K. Olson. Copyright © 2004 Walter K. Olson. Excerpted by permission of St. Martin's Press.
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Meet the Author
Walter K. Olson is the author of The Litigation Explosion (1991). A senior fellow at the Manhattan Institute, Olson has written on law and lawyers for the Wall Street Journal, the New York Times, City Journal, and others. He lives and works in Chappaqua, NY.
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