Oklahoma Supreme Court Strikes Down Retroactive Mandatory Arbitration Clause

In BILBREY v. CINGULAR WIRELESS, L.L.C., 2007 OK 54:

The issue before this Court is whether a named plaintiff in a class action lawsuit must be dismissed when that plaintiff subsequently signs a consumer form-contract containing a mandatory arbitration clause that includes a class action waiver. We find the clause unenforceable.

...

¶14 Consumers signing such adhesion contracts are susceptible to unpleasant surprises prepared for the protection of the corporation, not the consumer. The law has begun to take a more active role in the protection of the consumer against abuses. That consumers have not read or do not understand the implications of contract provisions has been implicitly recognized in our insurance case law by the use of the phrase "hidden in policy provisions." Max True Plastering Co., 1996 OK 28, ¶ 2, 912 P.2d at 863. As a result, new rules in such adhesion contracts have been applied to protect the "reasonable expectations" of the parties. Max True Plastering Co., 1996 OK 28, ¶ 6, 912 P.2d at 864.

¶15 The question we must answer is whether the clause in the May 23, 2001, contract that asserts the parties "agree" to arbitrate any disputes arising from any prior agreement including those from predecessors in interest, is enforceable. The question is not whether the arbitration clause in the May 23, 2001, contract is valid as it relates to that specific contract, but whether it controls the previous Southwestern Bell Mobile Systems contract, which is the contract at the center of this class action.

...

¶20 Cingular cites Barnes v. Helfenbein, 1976 OK 33, 548 P.2d 1014, which provides the test for unconscionability.

"The basic test of unconscionability of a contract is whether under the circumstances existing at the time of making of the contract, and in light of the general commercial background and commercial need of a particular case, clauses are so one-sided as to oppress or unfairly surprise one of the parties. Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties, together with contractual terms which are unreasonably favorable to the other party."

Barnes, 1976 OK 33, at ¶ 23, 548 P.2d at 1020.

...

¶22 Despite Cingular's argument, it defies reason to conclude that Bilbrey intended to halt a class action suit filed February 15, 2001, in exchange for a free cell phone on May 23, 2001. He even continued to pursue the case for another ten months at which time Cingular finally discovered the arbitration clause. Clearly, Bilbrey did not know the implications of the May 23, 2001, contract, and Cingular's agents, the attorneys in this lawsuit, did not realize he had signed it. It is equally clear that both Bilbrey and Cingular's agents were surprised by Bilbrey's signing a contract that could potentially result in the dismissal of a class action lawsuit that was currently being actively prosecuted by Bilbrey and vigorously defended by Cingular.

¶23 Such an effect is one-sided and unreasonably favorable to Cingular. The cases cited by Cingular that give effect to retrospective clauses in arbitration agreements are not on point.7 We accordingly find the retroactive clause in the arbitration agreement unconscionable as it relates to a presently active lawsuit that would be dismissed if this clause were given effect.

Hat Tip: Elaine Dowling at Consumer Law Updates

Defending Lawyers ...

In a somewhat surprising turn, CNN Money and Business 2.0 magazine are defending lawyers (no joke). From the article:

(Business 2.0 Magazine) -- Decades after Tylenol bottles were tampered with and Ford Pintos exploded, you'd think that product-safety panics would be nearing extinction.

No such luck. Consider just the past few months: Pet food laced with poison killed more than a dozen dogs and cats. Toothpaste shipped from China to Latin America turned out to be tainted with a potentially fatal thickening agent. And the FDA issued yet another recall for defective defibrillators, bringing the total number of heart devices that need to be replaced to nearly 200,000.

Here's another frighteningly persistent trend: The drumbeat for weakening the ability of people to seek redress in court by curtailing product-liability suits continues unabated.

A recent study by the nonprofit Pacific Research Institute estimated that the cost of tort law in the United States had reached $865 billion, equivalent to an 8 percent tax on consumption or a 13 percent tax on wages. But much of that analysis leans on faulty logic, and while most of my friends in business consider lawyers at best a necessary nuisance, for the most part, they're dead wrong.

...

Tort-reform advocates love to rail against the skyrocketing costs of litigation and multimillion-dollar damage awards, yet one definitive study from Rand showed no increase in the percentage of tort cases won by plaintiffs and no statistically significant increase in the median award paid by businesses. Comparisons with other countries can also be misleading because they have more stringent regulatory regimes.

True, regulatory agencies cost billions, and so does our legal system. But I would argue it's a pretty good deal -- simply a necessary cost of running an economy in which people rely on the promises and products of strangers.

The alternative is precisely what we see in the case of the pet-food mess: agencies and companies sending people to inspect factories and raw materials more carefully, and increased testing of products coming into the country.

The next time you want to complain about "frivolous" lawsuits, picture doing business in a world where promises can't be relied on and you can only deal with people and organizations you already know well. There are undoubtedly abuses and problems in our current system, but the cost of punishing malfeasance is a necessary and small price to pay for running a modern economy.

***Update***

Check out this link on "Tort Reform" in Oklahoma:

Tort terminators, not ‘reformers’. From a Letter to the Editor of the Edmond Sun:

EDMOND — As professors of torts and civil procedure, we disagree with the views of our colleague, Andrew Spiropoulos. We applaud the governor and the attorney general for the veto of the so-called “tort reform” bill.

We say “so-called” because this bill was neither confined to torts nor did it envision “reform.” It sought the curtailment or outright elimination of remedies for injured and wronged people and businesses. We prefer to call advocates of this bill tort “terminators,” not tort “reformers.”

...

[T]he bill itself — provides no evidence that Oklahoma’s civil justice system is in a state of crisis that would justify the draconian measures proposed. As one example, the bill would have all but eliminated class actions in Oklahoma. Is there a problem with class actions here? Not at all.

In Oklahoma County, about six cases a year — out of thousands — are filed as class actions. Only one class action filed in Oklahoma County in the past five years has awarded fees to plaintiffs’ counsel.

Most of the remaining cases were dismissed.

Our courts are well-equipped to weed out unmeritorious lawsuits with the tools they already have. Yet the “tort terminators” continue to try to “fix” a system that is not broken — slandering the plaintiffs’ bar in the process.

We eschew [Professor] Spiropoulos’ use of the term “bottom feeders” to refer to members of the plaintiffs’ bar. We take pride in plaintiffs’ attorneys’ efforts to provide access to courts and to obtain compensation for ordinary residents for harms caused by negligent doctors, shady businesses and other wrongdoers. Space limitations prevent a detailed response to the bill’s many other questionable provisions.

The bill’s elimination of joint and several liability could leave an innocent injured person without full compensation, while shielding a wrongdoing defendant from paying for an injury he helped to cause.

The bill also would have restricted prejudgment interest, which Spiropoulos claims violates the principle of “innocent until proven guilty.” Besides misapplying a criminal, not civil, law principle, the claim is false. Prejudgment interest is never paid unless and until the defendant is found liable by a judge or a jury.

Spiropolous talks about “doing justice.” We believe justice lies in a legal system that compensates people for the wrongs done to them. Where is the “justice” in a “reform” that leaves those people with nothing?

Professors Patricia Hatamyar and Carla Spivack are on the faculty at Oklahoma City University School of Law.


In fairness, here is a link to the article the two law professors were responding to: Lawyers not ready for reform.

No Free Lunch

Today I got a letter inviting me to an Internet Income Training (aka Internet Marketing Training, aka Internet Marketing Conference) seminar to be held on three dates in Oklahoma City. You can see a virtually identical copy of the letter here. There was a little insert in the envelope signed by a "C. R. Sanderson." I did a Google search for "C. R. Sanderson Internet Income Training" and this page came up first. This "C. R. Sanderson" (aka Clint Sanderson, aka C. Rex Sanderson) apparently has quite a history.

The other letter is signed by a "C. Kevin Oliver."

RipOffReport.com has a link that leads you to believe they have checked him out and found him to be legit. But really now, why all the name changes? Why so many bad reports?

The Better Business Bureau has an alert about the company here.

An article in the Billings Gazette says this:

Scams du jour

Despite being on the national Do Not Call list, a retired couple living in Shepherd is receiving a rash of telephone calls recently that sound like scams.

The caller claims to represent a law office and says he has an "important message" and they should call immediately. The couple isn't biting.

Also, one reader who received a flier for seminars in Billings thinks the offer of making big money by working part time on your home computer sounded too good to be true.

The flier promises two free meals and business organizer if she and a guest would sit through a 1 1/2 hour presentation Monday and Tuesday in Billings by Internet Marketing Conference. Internet Marketing's Vice President Clint Sanderson apparently uses other company names such as iMergent Inc, StoresOnline Inc., and iNetSeminars.

The sales literature contains testimonies from purported clients claiming they make more than $50,000 a month using this method.

So, the reader hopped on the Internet and found media articles saying that Sanderson has been involved in at least two lawsuits. The state of Utah alleged violations of federal securities laws and the Texas attorney general filed an injunction to stop SOL from misrepresenting the amount of income that can be made using SOL Web sites.

Here is what the Texas Attorney General Website says:

iMergent / Storesonline.com (August 2005)

Utah-based business opportunity marketer iMergent, doing business as Storesonline.com (SOL) sold website packages that included storefront websites, store building software, credit card processing licenses and coaching assistance. Formerly known as Galaxy Mall Inc., SOL claimed its software and services would enable consumers to create successful websites and sell their own products or services online at a large profit. SOL’s products were marketed through hotel seminars and training sessions held in cities across Texas. The total price could top $4,000.

On February 22, 2005, the OAG filed suit in Bexar County District Court against iMergent Inc. and its officers, Brandon Lewis and Donald Danks. The lawsuit came in response to consumer complaints that the software did not work and that the company charged for technical support it had advertised as being free.

Lawsuit Press Release

On August 11, 2005, the Attorney General obtained an Agreed Temporary Injunction that bars SOL from engaging in these illegal acts. Negotiations are continuing on attorney fees, notice to consumers and restitution for consumers who file complaints.

Based on the letter I received, it looks like they have changed the name to StoresOnlinePro.com.

Besides the lawsuit from the Texas AG's office, there is another private law firm that apparently has filed a class action lawsuit against the company.

This enterprise has expanded to almost every other English-speaking country: Canada, England, Australia and New Zealand.

Based on the information gleaned from the internet, consumers and small-business owners who wish to have a web presence should be extremely careful about doing business with any of these entities. The vast majority of the information obtained (especially from the government entities) have resulted in negative feedback or reports about the company or companies.

Supreme Courts Rules EPA Has Right to Regulate Air Quality

In a story in the New York Times entitled Court Rebukes Administration in Global Warming Case, the Supreme Court, in a 5-4 decision, found that states have standing to challenge the EPA's failure to protect the environment.

WASHINGTON (AP) -- The Supreme Court ordered the federal government on Monday to take a fresh look at regulating carbon dioxide emissions from cars, a rebuke to Bush administration policy on global warming.

In a 5-4 decision, the court said the Clean Air Act gives the Environmental Protection Agency the authority to regulate the emissions of carbon dioxide and other greenhouse gases from cars.

Greenhouse gases are air pollutants under the landmark environmental law, Justice John Paul Stevens said in his majority opinion.

...

The court had three questions before it.

--Do states have the right to sue the EPA to challenge its decision?

--Does the Clean Air Act give EPA the authority to regulate tailpipe emissions of greenhouse gases?

--Does EPA have the discretion not to regulate those emissions?

The court said yes to the first two questions. On the third, it ordered EPA to re-evaluate its contention it has the discretion not to regulate tailpipe emissions. The court said the agency has so far provided a "laundry list" of reasons that include foreign policy considerations.

The majority said the agency must tie its rationale more closely to the Clean Air Act.

"EPA has offered no reasoned explanation for its refusal to decide whether greenhouse gases cause or contribute to climate change," Stevens said. He was joined by his liberal colleagues, Justices Stephen Breyer, Ruth Bader Ginsburg and David Souter, and the court's swing voter, Justice Anthony Kennedy.

When the Supreme Court's majority says that your policy has no "rational explanation," that's a pretty strongly worded rebuke. Let me explain:

There are three basic levels of constitutional scrutiny. The highest scrutiny is reserved for "fundamental rights" cases such as those involving freedom of speech and press, religious freedom, etc. This level is called the "Strict Scrutiny Test" or SST for short.

The second level of scrutiny, called "Intermediate Scrutiny," is reserved for rights that are deemed "important" as opposed to "fundamental." This often involves sex discrimination cases.

The lowest level of test, and the one which the government is supposed to be able to pass the easiest is the "Rational Basis Test" or RBT for short. The Rational Basis Test is usually applied to taxing and spending priorities of the government. The government merely has to show that its taxing, spending or regulating policy merely has some rational relation to a legitimate government interest.

What the Supreme Court appears to be saying is that the Bush Administration wasn't even able to show that its failure to regulate the quality of air had some rational basis to it.

That's bad.

Prosecutor: Bush Appointees Interfered With Tobacco Case

From the Washington Post:

The leader of the Justice Department team that prosecuted a landmark lawsuit against tobacco companies said yesterday that Bush administration political appointees repeatedly ordered her to take steps that weakened the government's racketeering case.

Sharon Y. Eubanks said Bush loyalists in Attorney General Alberto R. Gonzales's office began micromanaging the team's strategy in the final weeks of the 2005 trial, to the detriment of the government's claim that the industry had conspired to lie to U.S. smokers.

She said a supervisor demanded that she and her trial team drop recommendations that tobacco executives be removed from their corporate positions as a possible penalty. He and two others instructed her to tell key witnesses to change their testimony. And they ordered Eubanks to read verbatim a closing argument they had rewritten for her, she said.

Hat Tip to Joshua Micah Marshall.

Click on the title for the full story.

Video Report on Magazine Sales

Click the title for the report.

This relates to the post on the New Debt Bondage I did about two weeks ago.

The New Debt Bondage

A new story in the New York Times brings light to the exploitation of young workers in magazine subscription sales.

In interviews over seven months, more than 50 current and former members from almost as many crews painted a similar picture of life on the road.

With striking uniformity, they told of violence, drug use, indebtedness and cheating of customers during their cross-country travels, often in unsafe vehicles and with drivers who lacked proper licenses.

Hat Tip to Josh Marshall of Talking Points Memo who says that it is a "a mix of Fight Club, Urban Cowboy and pretty much any other dark, sex, violence and drug drenched movie or cultural phenomenon you can think of."

From the story:

In Collinsville, Ill., Daniel Burrus scrolled through digital photographs of bloodied faces as he described how, on a crew he helped manage for several years, men who missed their sales quota were forced to fight each other.

In Flagstaff, Ariz., Isaac James sat with his wife and newborn daughter as he told how he and others on his mag crew — as they are typically called — stole checkbooks, jewelry, medicine-cabinet drugs and even shoes from customers’ homes.

When I first started practicing law, I received a call from a distressed father whose son was severely injured in an auto accident from an unsafe van crash in Oklahoma. Here is one from 1999. I don't think it is the same one as the one I got called about, but the facts are very similar. The one I was called about would have been in 1995 or 1996 (I think), which is when I first started practicing.

I remember when I investigated the corporation that was involved, I found that the owners (I am pretty sure it was the same ones in the story from 1999) were creating a new corporation almost every week -- or at least month -- to hide who the real owners were. There were corporations within corporations and addresses were changed frequently. I didn't have the capital to handle such a complex case, so I didn't get the chance to work on it. But I am glad some attention is being brought to the problem now.

This is just a small part of the big picture of what is wrong with our business values today.

New Supreme Court Case Limits Punitive Damages

WASHINGTON - The Supreme Court threw out a $79.5 million award that a jury had ordered a cigarette maker to pay to a smoker's widow, a ruling that could bode well for other businesses seeking stricter limits on big-dollar verdicts.

The 5-4 decision Tuesday was a victory for Altria Group Inc.'s Philip Morris USA, which contested an Oregon Supreme Court decision upholding the jury's verdict.

Yet the decision did not address a key argument made by Philip Morris and its supporters across a wide range of businesses - that the size of the award was unconstitutionally large. They had hoped the court would limit the amount that can be awarded in punitive damage cases.

Instead, Justice Stephen Breyer wrote in his majority opinion that the award to Mayola Williams could not stand because a jury may punish a defendant only for the harm done to the person who is suing, not to others whose cases were not before it.

"To permit punishment for injuring a nonparty victim would add a near standardless dimension to the punitive damages question," Breyer said.

What concerns me about this principle is that in the financial torts area, it is possible for a business to "overcharge" for it's services or product and then make out like bandits after paying the damages that are limited to the actual plaintiffs. For example: credit card company charges customers an $85 annual fee when they only should be charging $30.

Most people never notice the charge and pay it -- not knowing that they have been overcharged.

Others notice and call to complain, but the $85 charge puts them over their credit limit and they are charged an overlimit fee of $49. When they don't pay, they are charged a $49 late fee. When they cancel the card, the fees run their balance up to thousands of dollars. Credit card company sues customer. By the time the case goes to an overcrowded small claims court, the judge is not even the slightest bit interested in the defendant customer's complaint of how they were overcharged. Credit card company gets a judgment for the entire amount and collects.

Of those that complain, some will make the minimum payment, but the $85 charge doesn't get corrected for several months "due to computer glitches." In the meantime, the credit card company makes money in interest "on the float." That is, by the time the error gets corrected, they have been able to collect 18-30% APR interest (with an APY -- annual percentage yield -- even greater than that) on the $85 for several months which, in the aggregate, amounts to millions of dollars.

Of those that complain and pay their bill in full, the credit card company makes money "on the float" because they have had the use of the aggregate $85 from all those customers and invest it in short term securities and they have the use of $55 (the overcharged $85 - $30 legitimately owed) of the customer's money to invest in the market or short-term securities. The use of the money nets millions of dollars in interest gained from the use of that money.

Assume for the sake of argument that a lawsuit ensues. If damages are limited to actual plaintiffs, how can the credit card company be discouraged from repeating the practice?

If you think this example is just a fantasy, see this. The Supreme Court needs to recognize that if you put too many limits on punitive damages, you get abuses that are profitable from the other direction.

I think the Supreme Court may have forgotten the old principle in the law: no one should be allowed to benefit from his own tortious or criminal conduct. That is why punitive damages could be assessed at the level they were. Oftentimes, plaintiffs are able to show that the defendant has profited off of the suffering they have inflicted on others. Limiting punitive damages in this regard can lead to perverse results where tortfeasors (or even criminals) can learn to benefit from their wrongful acts.

Allstate's Good Hands' Boxing Gloves

From the Sun Herald:

Allstate's use of McKinsey also has led to litigation and even a book by Santa Fe, N.M., attorney David Berardinelli, called "From Good Hands to Boxing Gloves." Berardinelli told Lexington (Ky.) Herald-Leader reporter Brandon Ortiz in July 2006 that Allstate forced policyholders to accept 65 cents on the dollar as payment or face protracted litigation.

The Allstate-McKinsey connection made its way into Money magazine on Feb. 13 after an investigative report on CNN about Allstate's treatment of policyholders.

Tales of policyholder mistreatment by insurance companies occasionally make headlines, then fade. But the pattern hasn't changed, Marr said. In shaping up their claims operations with the help of consultants, insurers have learned that outcome-oriented investigations improve the bottom line.

He represents 70 Oklahomans whose homes were subjected to the most severe category of tornado, an F5, on May 3, 1999.

No matter what the catastrophe, he said in one interview, "the objective is the same: You go find an expert that's bought and paid for and you go get them to give you a report that justifies denial of the claim. Period.

"They represented that these engineers came up here to do an objective and fair assessment of these homes. And they got quite the opposite. Not one report agrees with the policyholder on the nature and extent of the damage. They all sided with State Farm."

A jury found in May that State Farm "intentionally and with malice breached its duty to deal fairly and act in good faith" with policyholders through the use of Haag Engineering Co. and independent adjusting firm E.A. Renfroe.

The same companies worked for State Farm after Katrina. Haag and Renfroe deny any bias, but State Farm did suspend its business with Haag after the Oklahoma verdict.

That was too late for Coast policyholders. One of the same Haag employees who testified for State Farm during the Oklahoma trial, damage and failure consultant Timothy P. Marshall, completed a Hurricane Katrina Damage Survey about a month after the storm.

Paul Krugman on the United Health Lawsuit

Is the health insurance business a racket? Yes, literally — or so say two New York hospitals, which have filed a racketeering lawsuit against UnitedHealth Group and several of its affiliates.

I don’t know how the case will turn out. But whatever happens in court, the lawsuit illustrates perfectly the dysfunctional nature of our health insurance system, a system in which resources that could have been used to pay for medical care are instead wasted in a zero-sum struggle over who ends up with the bill.

...

So it’s an arms race between insurers, who deploy software and manpower trying to find claims they can reject, and doctors and hospitals, who deploy their own forces in an effort to outsmart or challenge the insurers. And the cost of this arms race ends up being borne by the public, in the form of higher health care prices and higher insurance premiums.

...

Like denial management, however, marketing and underwriting cost a lot of money. McKinsey & Company, the consulting firm, recently released an important report dissecting the reasons America spends so much more on health care than other wealthy nations. One major factor is that we spend $98 billion a year in excess administrative costs, with more than half of the total accounted for by marketing and underwriting — costs that don’t exist in single-payer systems.

And this is just part of the story. McKinsey’s estimate of excess administrative costs counts only the costs of insurers. It doesn’t, as the report concedes, include other “important consequences of the multipayor system,” like the extra costs imposed on providers. The sums doctors pay to denial management specialists are just one example.

...

Krugman concludes:

But the larger problem isn’t the behavior of any individual company. It’s the ugly incentives provided by a system in which giving care is punished, while denying it is rewarded.

United Health Group Sued for Racketeering

United Health Group, its United HealthCare and Oxford subsidiaries and several United and Oxford executives, including former United CEO William Maguire, are accused of violating the U.S. Racketeer Influenced and Corrupt Organizations Act in a law suit filed Tuesday in the U.S. District Court, Eastern District of New York, by Jamaica Hospital Medical Center and Flushing Hospital Medical Center.

The hospitals, in their RICO suit, accuse United Health Group and United HealthCare and other subsidiaries of implementing a “rogue business plan” on a “national level” that, for more than three years, “has contributed to UHG’s profits, which, in turn, have been utilized in attempts to justify outlandish compensation to Maguire and to enhance the value of illegally backdated options for UHG stock” which were given to Maguire, other UHG senior executives and to managers of its business units.

...

The suit also accuses UHG and Oxford of fraud, breach of contract and unjust enrichment. “The defendants’ fraudulent business plan relied on their size to overwhelm the New York State Department of Health and numerous other regulatory agencies across the United States, using the claimed ‘complexity’ of their computer systems to excuse and camouflage the purpose of their repeated violations of law, while at the same time committing thousands of ‘little frauds’ against their members, health care consumers and their service providers,” said Michael Brown, attorney for Jamaica Hospital and Flushing Hospital.

The Attorney General of the State of New York, in a recent “consent decree,” concluded that United Health Care of New York had committed both “fraudulent business practices” and “deceptive business practices” in providing inaccurate information about the network status of approximately 141 participating providers. These acts either improperly shift to the health insurer’s members financial obligations properly belonging to the insurer or to deprive service providers of payment for services properly rendered.

***Update***

Here is the story of United Health fining doctors for allowing patients to go to other lab facilities other than LabCorp.

Hat Tip to nyceve of DailyKos. You can see more about this story with commentary and discussion wherein she discusses Murder by Spreadsheet.

Insurance Companies Have Upper Hand in Lawsuits

A few days ago, Anderson Cooper in his 360° blog covered the tactics of insurance companies when presented with claims.

Put yourself in the driver's seat of this accident. You are heading down the street when a truck comes out of nowhere and slams into the right side of your car. The damage to the vehicle is obvious: dents across the passenger door.

You are hurt too, thought it's not obvious how much: a slight cut above your eye, an ache in the neck.

Your doctor says your spine was injured, you have soft muscle tears, and the pain in your neck mostly likely is whiplash.

It's going to need therapy, she says, and some time off work to heal. And in the end it's going to cost you $15,000 in medical payments and another $10,000 in lost wages, because you took so much time off work.

But when you send the $25,000 bill to the insurance company of the person who hit you, the insurance company says it's only going to pay you $15,000. You can take it or leave it.

What do you do?

That's what producer Kathleen Johnston and I have been investigating for the last 18 months -- accidents most of us don't pay attention to, the fender-benders we pass by without even slowing down. In part, we looked at how Allstate handled the claim of one woman, Roxanne Martinez. Her car was hit in Santa Fe, New Mexico. Her medical bills and lost wages added up to $25,000.

Allstate offered $15,000 to settle. Roxanne Martinez didn't know what to do.

CNN had a parallel report on hardball insurance tactics in what we in the law practice call "low impact" auto accident cases.

Oklahoma County has one of the very lowest average jury awards anywhere in the country. I can't find the report on the internet, but I have seen it. Insurance companies have the upper hand in any litigation, for the following reasons:

1. The plaintiff has the burden of proof to prove first, liability; then, assuming he has proved liability, damages. This is especially difficult in "he said-she said" traffic light cases, where there are usually no witnesses (because people rarely stop).

2. The Rules of Evidence prohibit mentioning that a defendant has insurance at all (to prevent unfair prejudice).

3. Even when you show clear liability the jury may decide that you didn't really get hurt. Juries will often react like the ones in the CNN story referenced above:

Taylor was not as fortunate when her case went to trial.

The Indiana nurse was rear-ended by a State Farm employee driving a State Farm car. Damage to her car was minimal but she suffered herniated disc and muscle tears.

Taylor racked up medical bills and lost wages amounting to about $15,000. The company offered her $2,000.

"I was just very insulted," she said.

She sued, but three years later a jury came back with a judgment for her of only $1,500.

The jury didn't believe she could be hurt in an accident in which the vehicle had barely a dent.

Three jurors told CNN photos of the two cars involved in the accident -- enlarged and prominently displayed by the defense -- played a huge role in their decision.

And one said they assumed Taylor had already been compensated by the insurance company and was just trying to get more money.

It is not unusual in these kind of cases for a jury to think just like this. Many times, we will try to use mediation before going to trial, but my experience has not been that fruitful.


4. Even if you get hit cleanly in the rear, the defendant will often simply claim that you pulled in front of him and slammed on the brakes. (I saw this defense in a high-impact rear-ender case where the defendant was driving a dump truck full of sand. The case, as far as I know, is still pending. It has been in litigation for several years.)

5. The long period of time that it takes to get to a jury trial often lends itself to the delay tactics talked about in the Anderson Cooper blog entry. Oftentimes, the plaintiff, when poor, gets sued by the medical providers for the medical bills. The stress of having to deal with collection calls, lawsuits, loss of job due to the collection calls at work and other stresses pressure individual plaintiffs to settle for less than what they probably deserve.

There is good and bad on both sides, but right now in our history, insurance companies have the upper hand in the public square. They have managed to convince the majority of the public that virtually every lawsuit is just a scam. From the CNN report referenced above:

The cases, CNN found, illustrate a carefully developed strategy to make the victims look like they are trying to defraud the insurers.

But documents CNN obtained indicate profit, not fraud, is the reason companies decided to play hardball in small accidents.

For Allstate and State Farm, according to documents obtained by CNN, the strategy was developed in the mid-1990s with the assistance of consulting giant McKinsey & Co.

Looking for a way to boost profits, McKinsey focused on soft-tissue injuries incurred in minor crashes.

While the McKinsey documents -- numbered in the thousands -- are under seal in courts around the country, CNN saw several of them during a court hearing in Lexington, Kentucky.

Playing off Allstate's signature slogan, one document recommends the insurer put boxing gloves on its "good hands" for those who insist on going to court.

The strategy, according to former Allstate and State Farm employee Jim Mathis, relies on the three D's -- denying a claim, delaying settlement of the claim and defending against the claim in court.

"The profits are good, and as long as the community, the public allows this to occur, the insurance companies will get richer and people ... will not get a fair and reasonable settlement," Mathis said.

I remember talking with the named lawyer for a very successful and large insurance defense firm this last year. He admitted in private that the injury awards -- even in clear-cut cases -- was far too small. But, he said, the problem is that the juries just don't give out high-enough awards in Oklahoma. "Oklahoma is just too conservative of a state when it comes to personal injury awards."

One other thing, it is important to understand the legal distinction between your own insurance company -- which has a legal duty of good faith to you -- and an opposing insurance company, which does not have a duty of good faith to you. Your own insurance company must deal with you fairly. That doesn't mean they will, but you have more remedies in the law if they don't. The stories above don't make the distinction very well.

The answer is to somehow convince the public (the pool where juries come from) that even small impact auto accidents can lead to injuries, and that a plaintiff with any injury -- no matter how small -- is entitled to compensation from the tortfeasor.

Emailed False Analogy: Baseball and Taxes

I stumbled across a new blog recently called Debatable Politics. The stated purpose of this new blog is to break down political arguments into their basic components, linking them with political philosophies of the past.

Today, they posted an email that is going around the conservative circles alleging that "Democratic tax policy" (specifically, the Earned Income Tax Credit) is akin to the refund of tickets on a rained out baseball game:

50,000 people go to a baseball game, but the game was rained out. A refund was then due. The team was about to mail refunds when a group of Congressional Democrats stopped them and suggested that they send out the ticket refunds based on the Democrat National Committee's interpretation of fairness.

Originally the refunds were to be paid based on the price each person had paid for the tickets.

Unfortunately that meant most of the refund money would be going to the ticket holders that had purchased the most expensive tickets. This, according to the DNC, is considered totally unfair. A decision was then made to pay out the refunds in this manner:

People in the $10 seats will get back $15. After all, they have less money to spend on tickets to begin with. Call it an "Earned Income Ticket Credit." Persons "earn" it by having few skills, poor work habits, and low ambition, thus keeping them at entry-level wages.

People in the $25 seats will get back $25, because it "seems fair." People in the $50 seats will get back $1, because they already make a lot of money and don't need a refund. After all, if they can afford a $50 ticket, they must not be paying enough taxes.

People in the $75 luxury box seats will each have to pay an additional $25 because it's the "right thing to do."

People walking past the stadium that couldn't afford to buy a ticket for the game each will get a $10 refund, even though they didn't pay anything for the tickets.

They need the most help. Sometimes this is known as Affirmative Action.

And what about people who would have earned more to buy better tickets, but someone didn't pay them enough to buy those tickets -- even though they worked enough to afford them had they been paid like they should have been?

You can find even more here. And that is just one company!

Now, if the rich ticket holders got enough money to buy those expensive tickets because they cheated the $10 ticket holders out of their wages, it would only seem fair that those who would have been able to afford the more expensive seats should get a refund for what they could have afforded. It's a small price to pay if you consider that a baseball game is probably not the only thing they are not able to afford because they are not paid the wages the deserve.

That's not to mention the other ways in which the middle and lower classes are being exploited.

Click on the title for Debatable Politics' discussion of the topic.

Watch Out for the Fraud Hobgoblins this Halloween

In line with my previous post, here are some tips on how to avoid fraud. The link above goes to some of the more common frauds committed against unsuspecting consumers. These are the kinds of stories that make ideologies like Libertarianism and "free market Capitalism" so preposterous. And there are many forms of fraud and dishonesty that, in the law, do not rise to the level of criminal behavior. The only way to control such abuses is through a strong legal system that can enforce justice against such prevaricators. It is also why we need punitive damages to be available. We need to make sure that those who intentionally rip people off do not profit from their deception.

One of the hardest to detect is "affinity fraud." I have seen a lot of these in my lifetime that spread in the churches. My people are destroyed for lack of knowledge (Hosea 4:6).

We have bought from the brokers who have broken their oaths
And we're out on the streets with a lump in our throats

The kind of people who commit these kind of white collar crimes are usually very smart and they have become practiced liars. It takes a discerning mind to catch them and warn others of the traps they seek to spring on the gullible.

Shocking story about "Liar Loans" in San Francisco

Did I hear that right? 85%(!) of all loans in that area?

The realtors were pushing it because they made $10,000 on every sale. And the poor debtors are ultimately the ones who are going to pay the price, because falsely stating one's income on a mortgage application is a crime.

The parties involved are going to have to be sorted out between those who intentionally lied on their loans and those that were duped.

Jury Finds Wal-Mart Guilty of Labor Law Violations

PHILADELPHIA - A state jury found Thursday that Wal-Mart broke Pennsylvania labor laws by forcing employees to work through rest breaks and off the clock, a decision plaintiffs' lawyers said would result in at least $62 million in damages.

The Bentonville, Ark.-based retail giant is facing a slew of similar suits around the country.

***Update***

Jury awards $78 million in damages in Wal-Mart labor violations case.


A similar lawsuit to this is being litigated here in Oklahoma. Considering the commonality of the type of violations being reported in the Pennsylvania case referenced in the header link, I feel pretty confident that it was the result of a policy of Wal-Mart's owners and upper management.

They will continue to deny it, and will probably appeal the final verdict, but I think this is just more evidence the zeitgeist of the country right now. There is just a type of malaise that has set out on the public. Enron, WorldCom and others essentially stealing worker's pensions and dumping obligations to pay for health care right when those workers need it most in Chapter 11 bankruptcies. This case of Wal-Mart abusing its workers. CEOs and upper management giving themselves lavish compensation awards while telling the workers that there is not enough available to fund their pensions. Their enablers in Congress who are being proven to be utterly corrupt. And the hypocrisy of the Republican party promising conservative Christians that they would cater to their desires -- only to have been exposed as cynically using them so that they could carry out the above abuses is apparently going to revealed in a soon-to-be-released book Tempting Faith: An Inside Story of Political Seduction by David Kuo .

After only two years of the Republicans controlling both houses of Congress and the White House, the tide of history seems to have changed. With gerrymandered congressional districts that seemed to have etched the Republican majority in stone and with more voting power having moved to give Republican strongholds of rural and religous voters more power, such a sea change would have been unthinkable even earlier this year. All of a sudden it seems like even the most fervent Republican base voters are coming to the realization that they have been had. Many of them are coming to the realization that they have been played for suckers. The conservative Christians are starting to realize the wisdom of Jesus saying "you cannot serve God and money."

No amount of change from the election will be enough. So much damage has been done already that I find it hard to believe that we can get a "reversion to the mean" in terms of Justice. But, at least it would be a start.

What to do about punitive damages?

Today on NPR there was a discussion of an upcoming Supreme Court case involving punitive damages (sometimes known as "exemplary damages" -- meaning "to make an example of"). Actually, there has been a lot of fear-mongering about it by conservative politicians, who proclaim that businesses cannot be profitable if punitive damages are not capped. They also point to the unfairness of only the one plaintiff in the case getting the financial windfall, when multiple parties are harmed by wrongful behavior.

Firstly, punitive damages may only be awarded to a prevailing Plaintiff if it can be shown that a Defendant acted intentionally, willfully or wantonly in harming the Plaintff. There are some such tortious actions which are also criminal, but not all. Whether or not such acts are criminal should not matter. Such acts should be punished for the good of society. There are some torts that are committed intentionally or with such reckless disregard for the health, safety or financial well-being of others in pursuit of profit that it is important to give juries the ability to "send a message" to similarly-minded persons. When such actions are discovered and proven in court, society (via juries) must be able to take action to curb such behavior. Punitive damages are the only viable solution.

It is also important to know that there are people out there who will "do the math" and count up the potential profit versus the potential risk of loss. If punitive damages are limited, there is a greater risk "bean counters" will calculate how to maximize profit -- even if it means that they harm others. Remember, first they have to be found out; second, someone has to file a lawsuit; third, it has to go to trial; fourth, the Plaintiff(s) have to prevail; fifth, there must be a finding that the harm done was sufficient to award punitive damages (usually by clear and convincing evidence); and sixth, the jury must award the punitive damages. Even after all that, an appellate court must uphold the award. In many cases, jury awards are reduced (as in the famous McDonald's spilled coffee case).

The question then is: how do we assess damages in such a way as to maximize the benefit to the harmed parties and to society? My idea is not to limit punitive damages. It is important to hold wrongdoers accountable; sometimes this can only be done with large damage awards.

I would agree that when it is shown that multiple parties are harmed, that all members of the class should receive some compensation (rather than only to the winner of the "race to the courthouse"). However, because part of the harm is also societal, then society should receive some of the benefit. As an example, there have been cases involving dumping of chemicals into drinking water by corporate entities. In such cases, the actual damages are bad enough (however, proving actual damages may only yield a small number), but the harm to society is incalculable. It is my suggestion that a part of punitive damage awards should be awarded to the state and federal government for court administration and indigent legal assistance. That way, both individuals and society are compensated for civil wrongs.