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JoshLernerSecondPaper 5 - 17 May 2010 - Main.JoshLerner
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< | Peter, thank you for your comments. They've been very helpful. As you'll see I decided to take this paper in a related although different direction. I decided to focus on one particular litigation that illustrates some of the problems with one particular area of products liability class actions. This focus hopefully makes it easier for me to work things through in 1,000 words. I also think working with one particular case helps to provide evidence. I worked on a few products liability cases as a paralegal and purposefully chose to avoid mentioning any of them. I'm attaching (at some point today) several of the key case documents to this paper. | >
> | Peter, thank you for your comments. They've been very helpful. As you'll see I decided to take this paper in a related although different direction. I decided to focus on one particular litigation that illustrates some of the problems with one particular area of products liability class actions. This focus hopefully makes it easier for me to work things through in 1,000 words. I also think working with one particular case helps to provide evidence. I worked on a few products liability cases as a paralegal and purposefully chose to avoid mentioning any of them. I'm attaching several of the key case documents to this paper. | | | I still think I need to work through some of the material that surrounds the case description and perhaps devote less words to the case. I'm hoping to return to this in a few weeks. I understand the semester is over so don't feel obligated, but obviously your continued input is always appreciated.
| | | The Product | |
<
< | Airborne is a vitamin supplement that contains 1,000 mg of vitamin C along with smaller levels of other vitamins and herbs. At a Duane Reader on the Upper West Side it retails for a price of $0.80 per tablet, while a mere one aisle over a 1,000 mg vitamin C pill is sold for $0.13 per tablet. In short, Airborne is a rip-off. Airborne gets consumers to spend more than 6 times the retail price for the same product through a false advertising campaign in which they claimed to be a remedy for the common cold and jazzed up their packaging with some funky cartoons and a snazzy fizzing in water effect. By convincing consumers that they offered some unique and valuable product they were able to gross sales of over $300 million between the middle of 2005 and 2007 alone. | >
> | Airborne is a vitamin supplement that contains 1,000 mg of vitamin C along with smaller levels of other vitamins and herbs. At a Duane Reader on the Upper West Side it retails for a price of $0.80 per tablet, while a mere one aisle over a 1,000 mg vitamin C pill is sold for $0.13 per tablet. In short, Airborne is a rip-off. Airborne gets consumers to spend more than 6 times the retail price for the same product through a false advertising campaign in which they claimed to be a remedy for the common cold and jazzed up their packaging with some funky cartoons and a snazzy fizzing in water effect. By convincing consumers that they offered some unique and valuable product they were able to gross sales of over $300 million between the middle of 2005 and 2007 alone. | | |
The Settlements | |
<
< | When sales got large enough the public started to take notice and lawsuits were filed against Airborne and its creators. Airborne’s response was to settle and settle with everyone. First the class of plaintiffs who settled for $23.5 million, then the FTC for $0 (monetary provisions never came to fruition) and finally 33 state Attorney Generals for $7 million. All three settlements involved some form of injunctive relief, restricting future advertising. The restrictions have little impact as Airborne has already become well-known as a cold remedy. | >
> | When sales got large enough the public started to take notice and lawsuits were filed against Airborne and its creators. Airborne’s response was to settle and settle with everyone. First the class of plaintiffs who settled for $23.5 million, then the FTC for $0(monetary provisions never came to fruition) and finally 33 state Attorney Generals for $7 million. All three settlements involved some form of injunctive relief, restricting future advertising. The restrictions have little impact as Airborne has already become well-known as a cold remedy. | | | | |
<
< | The sales records were not released as part of the class settlement. Although the records were supplied they were ordered sealed by the court. Evaluating the adequacy of the $23.5 million settlement is difficult for the public when they don’t know how much could have been won at trail, but class counsel knew and that was enough for the court. Class counsel was paid nearly $3.5 million for their work on the case, with many attorneys billing out at more than $1,000/hour and up to $1,400/hour. | >
> | The sales records were not released as part of the class settlement. Although the records were supplied they were ordered sealed by the court. Evaluating the adequacy of the $23.5 million settlement is difficult for the public when they don’t know how much could have been won at trail, but class counsel knew and that was enough for the court. Class counsel was paid nearly $3.5 million for their work on the case with many attorneys billing out at more than $1,000/hour and up to $1,400/hour. | | | The settlement ended up paying out $14.9 million to supposed class members. In addition to those $14.9 million, the claims administrator also received $6.8 million in claims that were deemed physically impossible based on the claimed date of sale and/or claimed location of purchase. That raises a huge red flag that perhaps those submitting claims were in large part not actually class members (if $6.8 million in claims were obviously false, how many of the $14.9 million were also false but involved better guessers), but the court approved the settlement nonetheless. Currently counsel in the case are still debating proposals for giving the unpaid funds to various nonprofit organizations with some faint connection to vitamin supplements. | | | The system we have now seems to be caught in the middle. We aren’t completely telling buyers to beware by allowing false advertising, but at the same time aren’t providing serious remedies or doing anything to significantly impair companies. The Airborne litigation is an example of blatant false advertising that resulted in an insignificant punishment. If we’re going to regulate advertising of products we need to have a real impact.
The Government needs to take more of a role in both preventing false advertising from the start and litigating once it has reached significant levels. Where the fault often occurs is that class action firms and government entities are afraid to take the case to trial. Unwilling to put the litigation expenses into the case and perhaps afraid they will actually win and bankrupt the company. While these excuses make sense for a private company, the government should be less hesitant to invest in litigation. Non-profit law firms that also involve themselves in the cases also need to have a mindset of actually preventing the false advertising instead of merely obtaining enough money to keep their nonprofit running.
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JoshLernerSecondPaper 4 - 16 May 2010 - Main.JoshLerner
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Josh, I have put my comments and questions throughout. I think there are two possible ways of going forward. 1. You write some responses to my comments and I do a rewrite based on that. 2. You do revise after reading my comments and I rewrite from there.
I will say as a preliminary matter that my knowledge of both product liability class actions and micro-economics is rudimentary at best, so a number of my comments are going to reflect an ignorance of the inner workings of the subject matter. If your essay is meant to be geared at a more sophisticated audience then some of the comments can probably be ignored on those grounds. If it was meant to be geared at someone of a less sophisticated level, you may take them as the questions that a layman might have when faced with your essay and address appropriately.
Products Liability Class Actions – Placing the Power in the Wrong Hands
-- By JoshLerner - 17 Apr 2010
Each class action is its own natural monopoly. The class action plaintiffs firms have banded together to create an additional barrier to entry in the larger market, which leads to harmful results for consumers. The current system has judicial regulation, which has proven largely ineffective and like other natural monopolies it would be better suited to legislative regulation or complete government control.
Not sure this is what a natural monopoly is. In order for it to reach monopoly status it requires a specific intervention of the government i.e. binding unwitting plantiffs to the outcome barring an opt out. Absent govt intervention a monopoly would not exist, so it is not a natural monopoly. I might be wrong, but to me it seems more like an artificial monopoly, like a patent. If that is the case, there may need to be some discussion as to whether the current system of class certification is really the problem in need of reform.
There already is judicial regulation as you have noted and note in more detail below. So what additional regulation would you like to see? What should the legislature do?
What would "complete government control" look like? Is there anything comparable to it in existence today?
Product Liability Class Actions are Natural Monopolies
Product liability class actions each operate as a natural monopoly. Instead of individuals each filing their own lawsuit they join together and reduce the average cost of litigation. There is a high initial cost to litigating a products liability claim, but virtually no cost in adding in additional parties, making one large suit the efficient outcome.
| >
> |
Peter, thank you for your comments. They've been very helpful. As you'll see I decided to take this paper in a related although different direction. I decided to focus on one particular litigation that illustrates some of the problems with one particular area of products liability class actions. This focus hopefully makes it easier for me to work things through in 1,000 words. I also think working with one particular case helps to provide evidence. I worked on a few products liability cases as a paralegal and purposefully chose to avoid mentioning any of them. I'm attaching (at some point today) several of the key case documents to this paper. | | | | |
<
< | It seems to me the primary reason there is almost no cost to adding more plaintiffs is because the court mandates participation not because, as generally in a natural monopoly, there are very high initial fixed costs and very low marginal costs. If the laywer had to actually market the service there quite possibly would be high marginal costs for each plaintiff (commercials, paperwork, investigation of individual claims).
We should turn the litigation process over to government regulation like we do with many natural monopolies. The water, electric and subway systems have all been subject to strict legislative regulation, negotiation or being run by the government. The products liability class action market should similarly be regulated or taken complete control over. If we allow natural monopolies to run unregulated they can charge excessive prices and prove sub-standard services, which is what many products liability class action firms do.
Again, I am not sure what types of regulation you have in mind or what a government take over would mean. | >
> | I still think I need to work through some of the material that surrounds the case description and perhaps devote less words to the case. I'm hoping to return to this in a few weeks. I understand the semester is over so don't feel obligated, but obviously your continued input is always appreciated. | | | | |
<
< | Two Barriers to Entry | >
> | False Advertising and the Airborne Litigation | | | | |
<
< | The first barrier is to a specific litigation. Once a case is filed and class counsel appointed by the judge that counsel then has control of the litigation. They are given a monopoly over that specific litigation (like being given a contract to supply water to a city).
A slight exception to note is that there may be multiple cases with the same claims in different courts (generally different state courts since federal claims can be transferred and consolidated). In these instances there is no competition for the approval of consumers, but rather a perverse incentive to participate in reverse auctions with product manufacturers and settle for cheap.
I am not really clear on what the purpose of this paragraph is. Admittedly everything I know about reverse auctions is from this website. If it is just to note that there could be simultaneous state court claims for the same defect I think it could be removed and the space better used to explicate your first prong since you currently only spend two sentences on that.
The second barrier is to entering the larger market of firms supplying products liability lawyer services. In large products liability cases many individual actions will be transferred and consolidated into one district as a Multi-district Litigation (MDL). Once consolidated, the firms each file lead counsel papers. The judge will then select a leadership structure.
Firms negotiate among themselves to decide who will be lead counsel or on an executive committee. Often times these negotiations even incorporate other pending cases (“I’ll support you for lead counsel in X if you support me for lead counsel in Y”). The products liability plaintiff’s bar is a group all too familiar with one another. | >
> | -- By JoshLerner - 17 Apr 2010 | | | | |
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< | If a new firm should try to enter they will generally be excluded by the other members unless they participate in the group’s pricing scheme and play by the group’s rules. When a judge is faced with 10 experienced law firms working together and one independent, inexperienced firm trying to become lead counsel on their own, the choice for the judge is easy. Through this procedure the plaintiff’s products liability bar has been able to create a cohesive group that by themselves handle virtually all of the large products liability cases in the United States. (a cite might be valuable here as in a few other places where there are fact based claims central to a given point) | >
> | When a company falsely advertises their products our current system is largely ineffective in levying any real punishment against the company. | | | | |
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If firms play by these rules can they then join and get cases? Or is it really irrellevant and it is just an old boys club?
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> | Although false advertising claims are anything but new, recently a large number of litigations have been filed that have followed or are on their way to following a pattern similar to the Airborne litigation. Lawsuits have been filed against everyone from multi-grain manufacturers for claiming to be heart healthy to suits against yogurt companies for claiming to be good for your digestive system. | | | | |
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< | Harmful Results | >
> | The questions we face are first, whether we care about the false advertising and second, if we do care, what can we do to better regulate. | | | | |
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< | The results of the current system are that class action law firms take advantage of their monopoly power and gouge the clients they are supposed to represent. Lawyers bill up to $1,000/hour and their fees are usually a portion of the settlement even if that number is many multiples of their lodestar. They frequently negotiate settlements that do little for their clients, but benefit the firms. (a cite might be good here too) | | | | |
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< | Going to trial is often against the interests of the class action firms who will spend thousands if not millions of dollars litigating. (I would think settling is in everyone's interests, clients included, assuming the settlement is good.)
They are often eager to settle as early as possible and will take settlements not in the best interest of their clients. This is supplying sub-standard services, like a water company providing dirty water because you have no alternative to turn to for your water supply once they have been selected as the city’s supplier. (Aren't judges already empowered to evaluate when this is happening?)
Of course there are firms that conduct themselves with altruistic goals and many non-profits organizations have taken up suits, but these remain the exception rather than the trend. | >
> | Airborne Litigation | | | | |
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< | (Note: opt-outs and objections of course exist, but imperfect information and lack of individual incentive lead to them rarely being used) | | | | |
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< | Judicial Regulation | | | | |
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< | The only check on the current system is that judge’s must approve class counsel and must approve all class settlements. The judicial branch is not appropriate for performing the regulation of a natural monopoly because it has conflicts of interest and it does not have sufficient power to appropriately regulate or assume control of the market. | >
> | The Product | | | | |
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< | What power are they missing. You have identified three major problems so far: Counsel accepting inadequate settlements, counsel over billing, and the selection of counsel favors established firms. It seems that judges are empowered to act on all of these issues with broad discretion. If that is the case then judicial power is not insufficiently strong, just insufficiently exercised. | >
> | Airborne is a vitamin supplement that contains 1,000 mg of vitamin C along with smaller levels of other vitamins and herbs. At a Duane Reader on the Upper West Side it retails for a price of $0.80 per tablet, while a mere one aisle over a 1,000 mg vitamin C pill is sold for $0.13 per tablet. In short, Airborne is a rip-off. Airborne gets consumers to spend more than 6 times the retail price for the same product through a false advertising campaign in which they claimed to be a remedy for the common cold and jazzed up their packaging with some funky cartoons and a snazzy fizzing in water effect. By convincing consumers that they offered some unique and valuable product they were able to gross sales of over $300 million between the middle of 2005 and 2007 alone. | | | | |
<
< | Judges are faced with the difficult task of both ruling on the appropriateness of settlements and making decisions that affect the value of the settlement. Imagine a judge throwing out a settlement as unfair to a class of consumers and the following week granting summary judgment in favor of the defendant product manufacturer. These decisions should be made independently by separate actors. Judges are also often too anxious to get large cumbersome MDLs off of their dockets and a settlement presents a great opportunity to do that. The conflicts created make judicial regulation inappropriate. | | | | |
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< | I am not sure judges being lazy (i.e. wanting to clear their dockets of complicated cases) is a true conflict of interest like owning stock in a company is a COI, its just judges being lazy. I don't know how giving it over to a different impartial abitrator would resolve this COI. | >
> | The Settlements | | | | |
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< | As to the point about separating judging the settlement and summary judgement motions: couldn't it just as easily be said that a single judge have a better perspective to recognize the ridiculousness of such a result? You could very well be correct that it would be better to separate these roles, but the reasoning for that does not come through here. I see either alternative being just as plausible. | >
> | When sales got large enough the public started to take notice and lawsuits were filed against Airborne and its creators. Airborne’s response was to settle and settle with everyone. First the class of plaintiffs who settled for $23.5 million, then the FTC for $0 (monetary provisions never came to fruition) and finally 33 state Attorney Generals for $7 million. All three settlements involved some form of injunctive relief, restricting future advertising. The restrictions have little impact as Airborne has already become well-known as a cold remedy. | | | | |
<
< | The judiciary also lacks the power to negotiate settlements on behalf of consumers or to litigate on their behalf. They can only approve or disapprove. While judges do have expansive authority in setting legal fees, they can’t take over control of litigation, seek out outside counsel or do anything substantive on the consumer’s behalf. The judiciary must be neutral in the litigation process and a pro-consumer bias is required for someone to appropriately represent their interests. | >
> | The sales records were not released as part of the class settlement. Although the records were supplied they were ordered sealed by the court. Evaluating the adequacy of the $23.5 million settlement is difficult for the public when they don’t know how much could have been won at trail, but class counsel knew and that was enough for the court. Class counsel was paid nearly $3.5 million for their work on the case, with many attorneys billing out at more than $1,000/hour and up to $1,400/hour. | | | | |
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< | This paragraph does establish that judges are not a good choice as plaintiff's council, but it doesn't indicate who would be other than the current plaintiff's bar who do have a pro-consumer bias and incentive to get bigger judgements for plaintiffs to a certain extent. This paragraph is pointing in the direction of a government run plaintiff's bar, but falls short of calling for that so it is hard to judge the reform being called for. | >
> | The settlement ended up paying out $14.9 million to supposed class members. In addition to those $14.9 million, the claims administrator also received $6.8 million in claims that were deemed physically impossible based on the claimed date of sale and/or claimed location of purchase. That raises a huge red flag that perhaps those submitting claims were in large part not actually class members (if $6.8 million in claims were obviously false, how many of the $14.9 million were also false but involved better guessers), but the court approved the settlement nonetheless. Currently counsel in the case are still debating proposals for giving the unpaid funds to various nonprofit organizations with some faint connection to vitamin supplements. | | | | |
>
> | The Airborne litigation is a case where false advertising created a company and the lawsuits against it did almost no damage and those who were deceived received almost no benefit. With more than $300 million in sales and the possibility of treble damages the recovery of $30 million (in the three lawsuits combined) seems like a small price for Airborne to pay for their cold remedy empire. | | | | |
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< | Conclusion | | | | |
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< | Products liability class actions require government regulation or ownership in order to prevent plaintiff’s class action law firms from taking advantage of their market powers to take advantage of consumers. | >
> | Do We Care? | | | | |
<
< |
This essay identifies that there is a serious problem with the way product liability class actions are handled in this country. However, it seems that in 1000 words it is very difficult to both establish what the major failings are and propose substantive solutions. I think it would be improved if there was more discussion of what actual reforms are necessary. Something as large scale as government ownership of products liability class action can't just be hinted at as a solution without any substantive discussion because it raises many, many more questions than it answers (even setting aside the political impossibility of such a proposal).
My suggestions are: | >
> | Many Americans have the buyer beware attitude toward false advertising. We have consumers wasting millions of dollars on unnecessary products, everything from bottled water to high-priced perfume. Do we really care if people waste their money on Airborne as well? More than half those who objected to the Airborne settlement didn’t care, in fact they objected because they didn’t think there should be a lawsuit at all. | | | | |
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< | 1. Take another look at natural monopolies. I very easily could be wrong saying this is an artificial monopoly, but I think it is at least worth a look because it is certainly not a "traditional" natural monopoly. | >
> | Do we want money being funneled from hundreds of thousands of Americans into one company under false pretenses? When we’re dealing with a fake cold remedy we might be willing to let false advertising slide, but certainly we wouldn’t feel the same about $300 million being spent on a fake cancer remedy. | | | | |
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< | 2. If it is a natural monopoly think more about what the importance of that is and how much time you need to spend explaining it or how useful it is to detailing the problems and solutions. | >
> | It can be difficult to draw a line in terms of what products we allow to be sold to consumers. We would have trouble banning bottled water sales, but we should make sure that consumers are allowed to make informed decisions about the products they buy. Through false advertising consumers are denied the information to make those informed decisions. | | | | |
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< | 3. Spend more time on the proposed solutions. I don't think I could clearly explain what types of legislative regulations you have in mind right now. | | | | |
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< | 4. Consider whether or not you want to include government take over at all. It is interesting to discuss when coupled with the natural monopoly
analogy, but given all the questions it raises and its political improbability, it may be better left out. But at the very least it too needs more explanation. | >
> | What Can Be Done? | | | | |
<
< | 5. Cite more. I felt at time that there were claims that are very likely supported somewhere, but I was forced to take them at face value. | >
> | The system we have now seems to be caught in the middle. We aren’t completely telling buyers to beware by allowing false advertising, but at the same time aren’t providing serious remedies or doing anything to significantly impair companies. The Airborne litigation is an example of blatant false advertising that resulted in an insignificant punishment. If we’re going to regulate advertising of products we need to have a real impact. | | | | |
<
< | | >
> | The Government needs to take more of a role in both preventing false advertising from the start and litigating once it has reached significant levels. Where the fault often occurs is that class action firms and government entities are afraid to take the case to trial. Unwilling to put the litigation expenses into the case and perhaps afraid they will actually win and bankrupt the company. While these excuses make sense for a private company, the government should be less hesitant to invest in litigation. Non-profit law firms that also involve themselves in the cases also need to have a mindset of actually preventing the false advertising instead of merely obtaining enough money to keep their nonprofit running. | | | \ No newline at end of file |
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JoshLernerSecondPaper 3 - 26 Apr 2010 - Main.PeterCavanaugh
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Josh, I have put my comments and questions throughout. I think there are two possible ways of going forward. 1. You write some responses to my comments and I do a rewrite based on that. 2. You do revise after reading my comments and I rewrite from there.
I will say as a preliminary matter that my knowledge of both product liability class actions and micro-economics is rudimentary at best, so a number of my comments are going to reflect an ignorance of the inner workings of the subject matter. If your essay is meant to be geared at a more sophisticated audience then some of the comments can probably be ignored on those grounds. If it was meant to be geared at someone of a less sophisticated level, you may take them as the questions that a layman might have when faced with your essay and address appropriately.
| | | Products Liability Class Actions – Placing the Power in the Wrong Hands
-- By JoshLerner - 17 Apr 2010 | |
<
< | Each class action is its own natural monopoly. The class action plaintiffs firms have banned together to create an additional barrier to entry in the larger market and that leads to harmful results for consumers. The current system has judicial regulation, which has proven largely ineffective and like other natural monopolies it would be better suited to legislative regulation or complete government control. | >
> | Each class action is its own natural monopoly. The class action plaintiffs firms have banded together to create an additional barrier to entry in the larger market, which leads to harmful results for consumers. The current system has judicial regulation, which has proven largely ineffective and like other natural monopolies it would be better suited to legislative regulation or complete government control.
Not sure this is what a natural monopoly is. In order for it to reach monopoly status it requires a specific intervention of the government i.e. binding unwitting plantiffs to the outcome barring an opt out. Absent govt intervention a monopoly would not exist, so it is not a natural monopoly. I might be wrong, but to me it seems more like an artificial monopoly, like a patent. If that is the case, there may need to be some discussion as to whether the current system of class certification is really the problem in need of reform.
There already is judicial regulation as you have noted and note in more detail below. So what additional regulation would you like to see? What should the legislature do?
What would "complete government control" look like? Is there anything comparable to it in existence today?
| | | Product Liability Class Actions are Natural Monopolies
Product liability class actions each operate as a natural monopoly. Instead of individuals each filing their own lawsuit they join together and reduce the average cost of litigation. There is a high initial cost to litigating a products liability claim, but virtually no cost in adding in additional parties, making one large suit the efficient outcome.
| |
>
> |
It seems to me the primary reason there is almost no cost to adding more plaintiffs is because the court mandates participation not because, as generally in a natural monopoly, there are very high initial fixed costs and very low marginal costs. If the laywer had to actually market the service there quite possibly would be high marginal costs for each plaintiff (commercials, paperwork, investigation of individual claims).
| | | We should turn the litigation process over to government regulation like we do with many natural monopolies. The water, electric and subway systems have all been subject to strict legislative regulation, negotiation or being run by the government. The products liability class action market should similarly be regulated or taken complete control over. If we allow natural monopolies to run unregulated they can charge excessive prices and prove sub-standard services, which is what many products liability class action firms do. | |
>
> |
Again, I am not sure what types of regulation you have in mind or what a government take over would mean.
| | | Two Barriers to Entry
The first barrier is to a specific litigation. Once a case is filed and class counsel appointed by the judge that counsel then has control of the litigation. They are given a monopoly over that specific litigation (like being given a contract to supply water to a city). | |
<
< | A slight exception to note is that there may be multiple cases with the same claims in different courts (generally different state courts since federal claims can be transferred and consolidated). In these instances there is no competition to compete for the approval of consumers, but rather a perverse incentive to participate in reverse auctions with product manufacturers and settle for cheap. | >
> | A slight exception to note is that there may be multiple cases with the same claims in different courts (generally different state courts since federal claims can be transferred and consolidated). In these instances there is no competition for the approval of consumers, but rather a perverse incentive to participate in reverse auctions with product manufacturers and settle for cheap.
I am not really clear on what the purpose of this paragraph is. Admittedly everything I know about reverse auctions is from this website. If it is just to note that there could be simultaneous state court claims for the same defect I think it could be removed and the space better used to explicate your first prong since you currently only spend two sentences on that.
| | | | |
<
< | The second barrier is to entering the larger market of firms supplying products liability lawyer services. In large products liability cases many individual actions will be transferred and consolidated into one district as an MDL. Once consolidated the first procedure is for firms to each file lead counsel papers. The judge will then select a leadership structure. | >
> | The second barrier is to entering the larger market of firms supplying products liability lawyer services. In large products liability cases many individual actions will be transferred and consolidated into one district as a Multi-district Litigation (MDL). Once consolidated, the firms each file lead counsel papers. The judge will then select a leadership structure. | | | Firms negotiate among themselves to decide who will be lead counsel or on an executive committee. Often times these negotiations even incorporate other pending cases (“I’ll support you for lead counsel in X if you support me for lead counsel in Y”). The products liability plaintiff’s bar is a group all too familiar with one another. | |
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< | If a new firm should try to enter they will generally be excluded by the other members unless they participate in the group’s pricing scheme and play by the group’s rules. When a judge is faced with 10 experienced law firms working together and one independent, inexperienced firm trying to become lead counsel on their own, the choice for the judge is easy. Through this procedure the plaintiff’s products liability bar has been able to create a cohesive group that by themselves handle virtually all of the large products liability cases in the United States. | >
> | If a new firm should try to enter they will generally be excluded by the other members unless they participate in the group’s pricing scheme and play by the group’s rules. When a judge is faced with 10 experienced law firms working together and one independent, inexperienced firm trying to become lead counsel on their own, the choice for the judge is easy. Through this procedure the plaintiff’s products liability bar has been able to create a cohesive group that by themselves handle virtually all of the large products liability cases in the United States. (a cite might be valuable here as in a few other places where there are fact based claims central to a given point) | | | | |
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If firms play by these rules can they then join and get cases? Or is it really irrellevant and it is just an old boys club?
| | | Harmful Results | |
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< | The results of the current system are that class action law firms take advantage of their monopoly power and gouge the clients they are supposed to represent. Lawyers bill up to $1,000/hour and their fees are usually a portion of the settlement even if that number is many multiples of their lodestar. They frequently negotiate settlements that do little for their clients, but benefit the firms. | >
> | The results of the current system are that class action law firms take advantage of their monopoly power and gouge the clients they are supposed to represent. Lawyers bill up to $1,000/hour and their fees are usually a portion of the settlement even if that number is many multiples of their lodestar. They frequently negotiate settlements that do little for their clients, but benefit the firms. (a cite might be good here too) | | | | |
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< | Going to trial is often against the interests of the class action firms who will spend thousands if not millions of dollars litigating. They are often eager to settle as early as possible and will take settlements not in the best interest of their clients. This is supplying sub-standard services, like a water company providing dirty water because you have no alternative to turn to for your water supply once they have been selected as the city’s supplier. Of course there are firms that conduct themselves with altruistic goals and many non-profits organizations have taken up suits, but these remain the exception rather than the trend. | >
> | Going to trial is often against the interests of the class action firms who will spend thousands if not millions of dollars litigating. (I would think settling is in everyone's interests, clients included, assuming the settlement is good.)
They are often eager to settle as early as possible and will take settlements not in the best interest of their clients. This is supplying sub-standard services, like a water company providing dirty water because you have no alternative to turn to for your water supply once they have been selected as the city’s supplier. (Aren't judges already empowered to evaluate when this is happening?)
Of course there are firms that conduct themselves with altruistic goals and many non-profits organizations have taken up suits, but these remain the exception rather than the trend. | | | (Note: opt-outs and objections of course exist, but imperfect information and lack of individual incentive lead to them rarely being used) | | | The only check on the current system is that judge’s must approve class counsel and must approve all class settlements. The judicial branch is not appropriate for performing the regulation of a natural monopoly because it has conflicts of interest and it does not have sufficient power to appropriately regulate or assume control of the market. | |
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> | What power are they missing. You have identified three major problems so far: Counsel accepting inadequate settlements, counsel over billing, and the selection of counsel favors established firms. It seems that judges are empowered to act on all of these issues with broad discretion. If that is the case then judicial power is not insufficiently strong, just insufficiently exercised. | | | Judges are faced with the difficult task of both ruling on the appropriateness of settlements and making decisions that affect the value of the settlement. Imagine a judge throwing out a settlement as unfair to a class of consumers and the following week granting summary judgment in favor of the defendant product manufacturer. These decisions should be made independently by separate actors. Judges are also often too anxious to get large cumbersome MDLs off of their dockets and a settlement presents a great opportunity to do that. The conflicts created make judicial regulation inappropriate. | |
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> | I am not sure judges being lazy (i.e. wanting to clear their dockets of complicated cases) is a true conflict of interest like owning stock in a company is a COI, its just judges being lazy. I don't know how giving it over to a different impartial abitrator would resolve this COI.
As to the point about separating judging the settlement and summary judgement motions: couldn't it just as easily be said that a single judge have a better perspective to recognize the ridiculousness of such a result? You could very well be correct that it would be better to separate these roles, but the reasoning for that does not come through here. I see either alternative being just as plausible. | | | The judiciary also lacks the power to negotiate settlements on behalf of consumers or to litigate on their behalf. They can only approve or disapprove. While judges do have expansive authority in setting legal fees, they can’t take over control of litigation, seek out outside counsel or do anything substantive on the consumer’s behalf. The judiciary must be neutral in the litigation process and a pro-consumer bias is required for someone to appropriately represent their interests. | |
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> | This paragraph does establish that judges are not a good choice as plaintiff's council, but it doesn't indicate who would be other than the current plaintiff's bar who do have a pro-consumer bias and incentive to get bigger judgements for plaintiffs to a certain extent. This paragraph is pointing in the direction of a government run plaintiff's bar, but falls short of calling for that so it is hard to judge the reform being called for. | | | Conclusion
Products liability class actions require government regulation or ownership in order to prevent plaintiff’s class action law firms from taking advantage of their market powers to take advantage of consumers.
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This essay identifies that there is a serious problem with the way product liability class actions are handled in this country. However, it seems that in 1000 words it is very difficult to both establish what the major failings are and propose substantive solutions. I think it would be improved if there was more discussion of what actual reforms are necessary. Something as large scale as government ownership of products liability class action can't just be hinted at as a solution without any substantive discussion because it raises many, many more questions than it answers (even setting aside the political impossibility of such a proposal).
My suggestions are:
1. Take another look at natural monopolies. I very easily could be wrong saying this is an artificial monopoly, but I think it is at least worth a look because it is certainly not a "traditional" natural monopoly.
2. If it is a natural monopoly think more about what the importance of that is and how much time you need to spend explaining it or how useful it is to detailing the problems and solutions.
3. Spend more time on the proposed solutions. I don't think I could clearly explain what types of legislative regulations you have in mind right now.
4. Consider whether or not you want to include government take over at all. It is interesting to discuss when coupled with the natural monopoly
analogy, but given all the questions it raises and its political improbability, it may be better left out. But at the very least it too needs more explanation.
5. Cite more. I felt at time that there were claims that are very likely supported somewhere, but I was forced to take them at face value.
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JoshLernerSecondPaper 2 - 17 Apr 2010 - Main.JoshLerner
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> | Products Liability Class Actions – Placing the Power in the Wrong Hands | | | -- By JoshLerner - 17 Apr 2010 | |
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> | Each class action is its own natural monopoly. The class action plaintiffs firms have banned together to create an additional barrier to entry in the larger market and that leads to harmful results for consumers. The current system has judicial regulation, which has proven largely ineffective and like other natural monopolies it would be better suited to legislative regulation or complete government control.
Product Liability Class Actions are Natural Monopolies
Product liability class actions each operate as a natural monopoly. Instead of individuals each filing their own lawsuit they join together and reduce the average cost of litigation. There is a high initial cost to litigating a products liability claim, but virtually no cost in adding in additional parties, making one large suit the efficient outcome.
We should turn the litigation process over to government regulation like we do with many natural monopolies. The water, electric and subway systems have all been subject to strict legislative regulation, negotiation or being run by the government. The products liability class action market should similarly be regulated or taken complete control over. If we allow natural monopolies to run unregulated they can charge excessive prices and prove sub-standard services, which is what many products liability class action firms do. | | | | |
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> | Two Barriers to Entry | | | | |
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> | The first barrier is to a specific litigation. Once a case is filed and class counsel appointed by the judge that counsel then has control of the litigation. They are given a monopoly over that specific litigation (like being given a contract to supply water to a city). | | | | |
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> | A slight exception to note is that there may be multiple cases with the same claims in different courts (generally different state courts since federal claims can be transferred and consolidated). In these instances there is no competition to compete for the approval of consumers, but rather a perverse incentive to participate in reverse auctions with product manufacturers and settle for cheap. | | | | |
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> | The second barrier is to entering the larger market of firms supplying products liability lawyer services. In large products liability cases many individual actions will be transferred and consolidated into one district as an MDL. Once consolidated the first procedure is for firms to each file lead counsel papers. The judge will then select a leadership structure. | | | | |
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> | Firms negotiate among themselves to decide who will be lead counsel or on an executive committee. Often times these negotiations even incorporate other pending cases (“I’ll support you for lead counsel in X if you support me for lead counsel in Y”). The products liability plaintiff’s bar is a group all too familiar with one another. | | | | |
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> | If a new firm should try to enter they will generally be excluded by the other members unless they participate in the group’s pricing scheme and play by the group’s rules. When a judge is faced with 10 experienced law firms working together and one independent, inexperienced firm trying to become lead counsel on their own, the choice for the judge is easy. Through this procedure the plaintiff’s products liability bar has been able to create a cohesive group that by themselves handle virtually all of the large products liability cases in the United States. | | | | |
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> | Harmful Results | | | | |
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> | The results of the current system are that class action law firms take advantage of their monopoly power and gouge the clients they are supposed to represent. Lawyers bill up to $1,000/hour and their fees are usually a portion of the settlement even if that number is many multiples of their lodestar. They frequently negotiate settlements that do little for their clients, but benefit the firms. | | | | |
>
> | Going to trial is often against the interests of the class action firms who will spend thousands if not millions of dollars litigating. They are often eager to settle as early as possible and will take settlements not in the best interest of their clients. This is supplying sub-standard services, like a water company providing dirty water because you have no alternative to turn to for your water supply once they have been selected as the city’s supplier. Of course there are firms that conduct themselves with altruistic goals and many non-profits organizations have taken up suits, but these remain the exception rather than the trend. | | | | |
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> | (Note: opt-outs and objections of course exist, but imperfect information and lack of individual incentive lead to them rarely being used) | | | | |
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> | Judicial Regulation | | | | |
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> | The only check on the current system is that judge’s must approve class counsel and must approve all class settlements. The judicial branch is not appropriate for performing the regulation of a natural monopoly because it has conflicts of interest and it does not have sufficient power to appropriately regulate or assume control of the market. | | | | |
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> | Judges are faced with the difficult task of both ruling on the appropriateness of settlements and making decisions that affect the value of the settlement. Imagine a judge throwing out a settlement as unfair to a class of consumers and the following week granting summary judgment in favor of the defendant product manufacturer. These decisions should be made independently by separate actors. Judges are also often too anxious to get large cumbersome MDLs off of their dockets and a settlement presents a great opportunity to do that. The conflicts created make judicial regulation inappropriate. | | | | |
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You are entitled to restrict access to your paper if you want to. But we all derive immense benefit from reading one another's work, and I hope you won't feel the need unless the subject matter is personal and its disclosure would be harmful or undesirable.
To restrict access to your paper simply delete the "#" on the next line: | >
> | The judiciary also lacks the power to negotiate settlements on behalf of consumers or to litigate on their behalf. They can only approve or disapprove. While judges do have expansive authority in setting legal fees, they can’t take over control of litigation, seek out outside counsel or do anything substantive on the consumer’s behalf. The judiciary must be neutral in the litigation process and a pro-consumer bias is required for someone to appropriately represent their interests. | | | | |
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> | Conclusion | | | | |
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< | Note: TWiki has strict formatting rules. Make sure you preserve the three spaces, asterisk, and extra space at the beginning of that line. If you wish to give access to any other users simply add them to the comma separated list | | | \ No newline at end of file | |
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> | Products liability class actions require government regulation or ownership in order to prevent plaintiff’s class action law firms from taking advantage of their market powers to take advantage of consumers. | | | \ No newline at end of file |
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JoshLernerSecondPaper 1 - 17 Apr 2010 - Main.JoshLerner
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It is strongly recommended that you include your outline in the body of your essay by using the outline as section titles. The headings below are there to remind you how section and subsection titles are formatted.
Paper Title
-- By JoshLerner - 17 Apr 2010
Section I
Subsection A
Subsub 1
Subsection B
Subsub 1
Subsub 2
Section II
Subsection A
Subsection B
You are entitled to restrict access to your paper if you want to. But we all derive immense benefit from reading one another's work, and I hope you won't feel the need unless the subject matter is personal and its disclosure would be harmful or undesirable.
To restrict access to your paper simply delete the "#" on the next line:
# * Set ALLOWTOPICVIEW = TWikiAdminGroup, JoshLerner
Note: TWiki has strict formatting rules. Make sure you preserve the three spaces, asterisk, and extra space at the beginning of that line. If you wish to give access to any other users simply add them to the comma separated list |
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