Blog: Commentary
FCPA Guidance Needed to Help Businesses Comply
Today, the U.S. Chamber Institute for Legal Reform and a broad-based business coalition sent a letter to the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) regarding forthcoming guidance on enforcement under the Foreign Corrupt Practices Act (FCPA).
The letter details many areas of ambiguity that we ask the Administration to address through a meaningful and efficient process in order to provide much needed clarity and certainty for businesses making a good faith effort to comply with the statute. The DOJ’s forthcoming guidance is an important first step towards providing a foundation for lasting legislative improvements to the statute, and we are hopeful that DOJ accepts the recommendations included in the letter.
Contingency Fees Agreements, Lawsuit Lending and Enforcement of Foreign Judgments Among Top Lawsuits Trends for 2012
The trial bar is always looking for new ways to sue – and new ways to fund potentially lucrative lawsuits. We asked four key practitioners to identify the trends in litigation which should be of concern to the business community in 2012. Their answers – shown in this video – include the use of contingency fee counsel by state attorneys general, the rise of third-party litigation financing, the expansion of liability through novel theories, the application of the Alien Tort Statute (which is headed for the Supreme Court), and litigation over the commonality standard in class action cases.
John Beisner starts with a discussion on broader use of contingency fee arrangements between state attorneys general and private lawyers, pointing out that AGs have started handing penalties cases (what he calls ‘quasi-criminal’) over to contingency fee counsel. The outside lawyers are trying to impose penalties, as opposed to trying to recover money lost by the state, which raises major due process concerns. Beisner isn’t the only one uncomfortable with the relationship between AGs and the plaintiffs bar: Katherine Adams asks if the contracts awarded to donors are legitimate or are they influenced by the political process?
Adams goes on to say that plaintiffs’ lawyers are advancing numerous novel theories of liability that try to bring multiple defendants into cases even when they did not have any direct connection to the alleged injury. The trial bar’s attempts to broaden the scope of liability through asbestos conspiracy and public nuisance have so far been unsuccessful, but that won’t stop them from trying again.
Thurbert Baker focuses on the hazards that come with 3rd party lending for lawsuits, where a large investor, such as a hedge fund, purchases a stake in a class action. The practice prolongs litigation and drives up the costs.
A court case that was decided by the U.S. Supreme Court last year could revolutionize the way class actions are litigated according to Lisa Blatt. In June, the court dismissed a potentially huge class action against Wal-Mart, writing that the plaintiffs had too little in common to form a single class. In the future, courts will ask if the commonality standard has been met before moving the case forward. Another case of interest to the business community is scheduled to go before the Supreme Court in 2012. Kiobel vs. Royal Dutch Petroleum will decide whether companies can be held liable for human rights violations committed by governments overseas under the Alien Tort Statute, a 200-year-old law that has traditionally been applied to individuals, not companies.
The business community should be aware of these emerging trends. Counteracting these troubling developments is critical to keeping time and resources focused on creating jobs instead of fending off dubious suits.
Why underfunded courts hurt all Americans
In 2009, the chief justice of New Hampshire's Supreme Court felt compelled to take an extreme step to keep the state's wider court system running. The poor funding situation for New Hampshire's judiciary had grown so dire that then-Chief Justice John Broderick Jr. reluctantly suspended civil jury trials for 12 months. In the short term, undermining a cornerstone of the American legal process provided necessary savings, but it also threatened timely and reliable access to justice for individuals and businesses.
This scene may soon be mirrored across the country as budgets for courts — a coequal branch of government — wither to distressing lows. Last year, 42 states cut much-needed funding for their judiciaries.
The staggering toll of inadequately funded courts threatens the ability of people to file for divorce, seek custody of a child or save a home from foreclosure. It is also an emergent burden on our economy as the judiciary has experienced growing caseloads amid those declining budgets.
The crisis of court underfunding ultimately touches every person, every business and every community in our country. Two years ago, a municipal court in Ohio announced that no new cases could be filed unless the litigants brought their own paper for court filings. The court has since received additional funding to pay for paper, but closes on Fridays to save money.
In North Carolina, litigants could not exchange documents in a court there because copying services had been eliminated. The local bar association held a supply drive to remedy this situation. Right now, more than $350 million in cuts to California's judicial budget for 2011 could bring years of delays for civil trials.
Inadequate funding across our nation this year has resulted in 23 states reducing hours of operation and 34 states laying off court staff. The resulting shuffle of court dates, postponed hearings, and last-minute scheduling means that answering the question of whether a contract is enforceable or a debt collectible is increasingly unclear.
Commerce thrives on certainty. So when states financially starve their judiciaries, they inadvertently create environments toxic to economic growth. Enterprise requires that open and available courts be accessible to resolve disputes from construction contracts to supply matters.
Timely access to courts is especially important to small business — the backbone of our economy. According to a survey of small-business owners, 71% said that they would delay hiring new employees if they were sued. And small businesses that are embroiled in litigation often cannot get vital loans from banks until the suit is concluded.
All of this translates into costly delays, which sap resources from companies and organizations that could be used to hire employees, fund research, expand a company or pay dividends to shareholders.
Ultimately, these delays undermine confidence in the historically reliable and efficient system of justice that has built our country into the world's best opportunity for economic growth and international investment.
Our courts are a necessary element in the inner workings of commerce. Just as we all have an interest in rebuilding our economy, we all have a stake in the health of our justice system. All Americans should insist on adequate funding of our courts, giving the judiciary the tools necessary to help our economy grow.
Lisa A. Rickard is president of the U.S. Chamber Institute for Legal Reform. Bill Robinson III is president of the American Bar Association.
This article first appeared in USA Today.
Most Ridiculous Lawsuit of 2011 Announced!
The U.S. has been the undisputed lawsuit capital of the world for some time. And while the courts play a central role in resolving disputes and maintaining a civil society, that function isn’t easy when they are packed with frivolous suits.
Ridiculous lawsuits clog up our legal system’s dwindling resources, taking time away from legitimate grievances to devote to the vindictive, the hypocritical, the irresponsible, and the outright absurd.
With that in mind, FacesOfLawsuitAbuse.org has compiled some of the most egregious examples of frivolous and abusive litigation from around the country and asked you to tell us which ones were the most ridiculous. These suits range from the comical and absurd to the disturbing, but they all underscore a real problem – lawsuits hurt businesses, families, and everyday Americans through lost time, money and job growth.
So which lawsuits are the doozies this past year? First, here's the lawsuit that you thought was the most ridiculous:
- Convict sues couple he kidnapped for not helping him evade police. A man who kidnapped a couple at knifepoint while he was running from the police is now suing the victims, claiming that they promised to hide him in exchange for an unspecified amount of money. The plaintiff, currently in jail, is seeking $235,000 for the alleged “breach of contract.”
And here’s the rest of the top ten as determined by you who voted at FacesOfLawsuitAbuse.org:
- Man suing for age discrimination says judge in his case is too old. A 60-year-old musician who is suing for age discrimination wants the judge removed from the case – because he’s too old. Ironically, the plaintiff says his fight against age-based discrimination is too important to leave in the hands of the 88-year-old judge.
- Young adults sue mother for sending cards without gifts and playing favorites. The plaintiffs, now 20 and 23, claimed the mother “sometimes didn’t include gifts in cards sent to her children; played favorites with her children . . . did not send care packages until his sixth semester away at college . . . changed her surname, thus ‘causing attention’ at her daughter’s school events; and refused to buy her a homecoming dress.”
- Obese man sues burger joint over tight squeeze in booths. A nearly-300 pound man is suing White Castle restaurants, saying that their booths are too tight to accommodate someone of his size. In fact, he’s so distraught by the booths that he hasn’t been to White Castle in months (instead, he sends his wife to pick up his burgers so he can eat them at home).
- Woman sues over movie trailer; says not enough driving in ‘Drive’. A Michigan woman who claims she was misled by the trailers for the movie ‘Drive’ is suing the distributors of the film. She says she was disappointed by the lack of driving in the film and was expecting something more similar to the ‘Fast and Furious’ films.
- Mom files suit against exclusive preschool over child’s college prospects. A New Yorker is suing a private preschool, saying the school’s curriculum has seriously hurt her 4-year-old’s chances of getting into an Ivy League college.
- Man sues bar for not disarming him before he started drinking (and fighting). A Pennsylvania man illegally brought a gun into a bar, then got injured in a drunken shootout with another patron, and now has sued the bar for not searching him for a weapon on his way in.
- Passenger’s lawsuit says cruise ship was too fast. An Indiana woman is suing Carnival Cruise Line, claiming she got sick because the boat was going too fast and was swaying from side to side.
- Woman disagrees with store over 80¢ refund, sues for $5m. A New York woman decided to make a $5 million federal case out of a disagreement over 80¢. Her suit says she used a $5-off coupon when she purchased a bevy of items for over $100. When she returned one of the items, the store pro-rated the refund to account for the discount.
- Mother sues Chuck E. Cheese – says games encourage gambling in children. A California woman has filed a lawsuit against Chuck E. Cheese on the grounds that their games are actually an illegal form of gambling and could get kids hooked. She is seeking at least $5 million; the restaurant says the games are legal and has asked a judge to dismiss the suit.
Thanks to everyone who took the time to vote. And while we can't predict everything 2012 has in store, it's a good bet there'll be more ridiculous lawsuits. So remember to visit FacesOfLawsuitAbuse.org monthly to vote for your favorite ridiculous lawsuits.
Key Supreme Court Cases of Interest to Business
What do Obamacare, preemption, and environmental regulation have in common? All are addressed in Supreme Court cases the business community should be keeping an eye on, according to former U.S. Solicitor General Paul Clement. In the accompanying video, Clement, now a partner at Bancroft PLLC, briefly summarizes the key cases of interest to business. Clement took part in a panel discussion on that topic at our 12th Annual Legal Reform Summit – video of the full panel discussion is available here.
Judge Reassignment in Madison County the Right Move, But More Must Be Done
Madison County Circuit Judge Barbara Crowder has been removed from administering the court’s asbestos docket a week after her campaign committee received $30,000 in contributions from asbestos plaintiffs’ lawyers whose firms had received “trial slots” on the court’s 2013 docket.
For at least a decade, the Madison County Asbestos docket calendar has assigned case slots to plaintiffs’ lawyers without actual court cases, creating a type of asbestos lawsuit futures market of immense value to those plaintiffs’ firms who have been assigned court slots.
It is this compromised system that is the root of the cash-for-trials scandal which caused Judge Crowder’s reassignment.
When Judge Crowder inherited the Madison County asbestos docket last year, many were hopeful that she would clean up this warped system. That didn’t happen.
We applaud Chief Judge Ann Callis and the unanimous opinion of her circuit court judges in reassigning this docket.
However, we call on the court to fix the fundamental flaw of Madison County’s asbestos docket calendar system that in effect puts court time up for sale.
Why Lawsuit Lending is a Problem
At our 12th Annual Legal Reform Summit on October 26th, we pulled aside Thurbert Baker, the former attorney general of Georgia and a partner at McKenna Long & Aldridge, and asked him to briefly explain why lawsuit lending is a problem. See the accompanying video for his response.
DOJ's Intention to Clarify Foreign Corrupt Practices Act Enforcement is Encouraging
We are encouraged by Assistant Attorney General Lanny Breuer’s announcement yesterday that the Justice Department intends to issue detailed new guidance on the Foreign Corrupt Practices Act’s criminal and civil enforcement provisions.
Yesterday's announcement is a welcome acknowledgement of what we in the business community have long said – DOJ’s current FCPA enforcement practices need clarification and modernization.
We believe that strong guidance from the DOJ could be the foundation for lasting legislative improvements to the statute.
Never-ending Asbestos Quagmire
It began on Dec. 10, 1966, at a courthouse in Beaumont, Texas. Attorney Ward Stephenson filed a lawsuit, on behalf of a client suffering from asbestosis, against 11 manufacturers of products containing asbestos. Though a jury ruled for the defendants in this first case, Stephenson tried again with a different client, and in 1973 a jury awarded Stephenson's plaintiff $79,436.24 in damages.
Thus began the largest and most expensive mass tort litigation in history. During the next 40 years, hundreds of thousands of asbestos exposure lawsuits were filed against businesses, large and small, in nearly every state. By 2002, more than $79 billion in damages had been paid out to an estimated 730,000 claimants. The cost of this litigation contributed to the bankruptcies of nearly one hundred companies, employing tens of thousands of workers.
For decades, experts have predicted that the flood of asbestos claims would eventually decrease. After all, the use of asbestos declined rapidly beginning in the 1970s, a development that would presumably lead to a decrease in cases of mesothelioma, asbestosis and other asbestos-related diseases.
Yet asbestos litigation costs show no signs of decreasing. In fact, they appear to be increasing.
Earlier this summer, three of America's largest insurance companies announced increases in asbestos claims against companies they insure. One of those companies, The Hartford Financial Services Group Inc., said it would have to increase its asbestos reserves by $290 million as a result. Add that to a number of record-setting verdicts and the massive volume of asbestos-related advertising from plaintiffs' lawyers, and it's clear that the asbestos litigation problem is as severe as ever.
There are a number of reasons for the continued asbestos litigation crisis. Forum-shopping remains a significant problem, as plaintiffs' lawyers seek to bring asbestos cases in courts with a long history of favoring plaintiffs and issuing large verdicts. This issue was spotlighted by two record-setting jury awards from earlier this year, one in Mississippi for $322 million and another in Illinois for $90 million. Both of these massive awards went to single plaintiffs.
In addition, many of these large cases are brought under increasingly novel theories of liability. In some jurisdictions, businesses are being sued for "civil conspiracy" by plaintiffs who can't prove any asbestos exposure directly attributable to the defendant businesses. Other lawsuits target companies whose products had asbestos added to them by third parties after their original manufacture.
Another persistent problem is fraudulent diagnoses of asbestos-related diseases by doctors with ties to the plaintiffs' bar. In the previous decade, high-profile court cases and congressional hearings exposed a group of doctors who issued a massive number of false diagnoses for asbestos-related diseases. Many of these practitioners have since left the asbestos arena, but a new group of doctors is emerging to take their place.
An emerging set of problems relates to the activities of the asbestos bankruptcy trusts established under § 524(g) of the bankruptcy code. These trusts, which have a total capitalization of more than $30 billion, were established by companies forced into bankruptcy because of their asbestos liabilities and are meant to compensate asbestos claimants while allowing the companies to address their liabilities.
Unfortunately, the trusts' opaque operations, controlled by the plaintiffs' lawyers who dominate their operating committees, have led many to question whether they have the internal controls necessary to prevent fraud and abuse. A recent study by the Government Accountability Office found that 65 percent of trusts have implemented procedures that block the information sharing necessary to prevent fraudulent claims. In addition, only three of the 11 trusts interviewed by GAO have audited their claims, and only one has submitted medical evidence for external review.
Lack of transparency by the trusts invites fraud in the asbestos compensation system. For instance, in a 2007 Ohio case, a claimant alleged in court that his mesothelioma was entirely caused by asbestos in cigarettes. Yet he simultaneously obtained hundreds of thousands of dollars in payments from the trusts by claiming that additional, noncigarette products caused his disease. Although this particular fraudulent conduct was discovered, similar fraud goes largely undetected because of the trusts' lack of transparency about claims.
Asbestos bankruptcy trust fraud victimizes legitimate claimants, as every improper payment by the trusts results in compensation withheld from those who truly deserve it. It also victimizes the job-creating businesses that are still subjected to litigation in the tort system. After all, most of the companies with the greatest responsibility for manufacturing asbestos-containing products have already filed for bankruptcy and addressed their liabilities through the bankruptcy trusts. With the biggest players essentially removed from the tort system, plaintiffs' lawyers are now targeting solvent businesses much more peripheral to the asbestos problem and alleging liability far in excess of those businesses' actual responsibility.
A good example concerns Bondex International, a midsize U.S. company manufacturing joint-compound and basement sealants. With less than 1 percent of the sealant market, it stopped using asbestos in its products in 1977 and paid out only $1.6 million in asbestos claims through the end of the 1990s. But after several of Bondex's larger competitors filed for bankruptcy, asbestos claims against Bondex began to skyrocket, rising 685 percent between 2001 and 2009. In 2010, the company was forced into bankruptcy.
Who are the winners from the current system? It's clearly the plaintiffs' lawyers, who profit from every asbestos claim brought through the courts and the trusts. The fact that the seven most expensive keywords for Google online ads all relate to asbestos (mesothelioma is number one at $84.02 per click) shows how lucrative the asbestos litigation business remains for the plaintiffs' bar.
It is long past time to reform this out-of-control system. Although there are a number of measures that would help, policymakers can begin by mandating greater claims transparency from the asbestos bankruptcy trusts. This sunshine will reduce the likelihood of fraud and abuse while ensuring that those who truly deserve compensation receive it. After 40 years of asbestos litigation, it is time to chart a new path that provides fairness to all stakeholders while allowing businesses to focus on job creation — not another 40 years of litigation.
This column first appeared in the National Law Journal.
Latino Small Business Owners Tell Their Stories of Lawsuit Abuse
Ramiro Arvizu and Jaime del Campo are the owners of La Casita Mexicana, a small restaurant in Bell, California that has become increasingly popular for its authentic Mexican dishes. Yet one day, Jaime and Ramiro were shocked to receive notice that they had been sued, along with dozens of neighboring businesses, by a plaintiff who has filed more than 500 lawsuits – including many against small Latino-owned businesses.
Roberto Guerrero found himself with a similar problem. The owner of Cumaica Coffee in San Francisco was also sued by a serial plaintiff. Several neighboring businesses were sued by the same plaintiff, and at least two were forced to close.
Unfortunately, these stories of lawsuit abuse are all too typical for small business owners, an increasing number of whom are Latino Americans. In fact, U.S. Census figures show that Latino Americans are creating small businesses at a rate three times higher than the rate for the non-Latino population.
To reach out to this growing community, ILR has created a new Spanish language version of its Faces of Lawsuit Abuse website (www.abusosdedemandas.org) and launched two new videos, in English and Spanish versions, that tell the stories of Jaime and Ramiro as well as Roberto. The new videos join the 22 existing Faces videos, which feature stories of individuals, small businesses and communities impacted by lawsuit abuse. We are also featuring the two videos in a month-long media campaign that will feature national television, radio and online advertising in both English and Spanish.
The new videos and the new website can be viewed through the following links:
Faces of Lawsuit Abuse: www.facesoflawsuitabuse.org
Abusos de Demandas: www.abusosdedemandas.org
Jaime & Ramiro’s story: In English, In Spanish
Roberto’s story: In English, In Spanish
