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How to Improve Legislation		How to Improve Litigation
1.    Impose term limits on each elected position and on the total number of years a person may serve at any level of government. 2.    Restrict the delegation of authority to agencies for making rules and interpreting laws. 3.    Remove some of the job protections civil servants are afforded. 4.    Change the incentives for government management. 5.    Redefine the role of government and legislation. These various recommendations all try to help us regain control of the legislative process. The goals are: (1) to make politicians and bureaucrats live with their work as others must; (2) make politicians and bureaucrats more responsive to citizens; and (3) bring more of the work of government into a more visible arena away from regulatory bodies and back into Congress. By doing so, we should be able to limit the growth of complicated laws.		1.    Limit class action suits to mass torts. 2.    Eliminate the use of contingent fees. 3.    Limit non-economic damages  for pain and suffering and punitive damages. 4.    Provide for court supervised award of attorney's fees in all forms of civil litigation. The various recommendations have in common limiting the excessive financial incentives for litigation. It is hoped that such changes would, because of economics, bring about what is really needed in the legal profession - greater circumspection about when and how to pursue litigation. The best protections against inappropriate litigation and tactics are a more professional attitude by lawyers so that they will stop viewing litigation merely as a means of earning more money and a willingness of judges to be more active in not accepting bad litigation and bad behavior. Changes 2, 3 and 4 would apply across the board, since there are abuses in both class actions and regular suits.

Improving Legislation

Term Limits. Term limits have been recommended by several commentators and have been tried in different ways. Politicians have even promised to limit their stays in Washington and statehouses. More often than not, these promises are broken. Apparently good reasons are always given. The excuses include being unfair to constituents by giving up power which can benefit them, the inappropriateness of leaving office just as experience and ability to function has matured and the loss of a strong voice for a specific position favored by constituents and not often heard in the government. There are ways to deal with any of these excuses.

If everyone is subject to the same term limits, then no one will be giving up power which can benefit constituents. There will be regular turnover in Congress and other legislative bodies which will keep individuals from gaining too much power. The time that a person can be in a legislature can be long enough to allow a person to gain and use experience. Term limits do not necessitate having an inexperienced person in office at all times. Losing a strong voice for a certain position is not necessarily bad, since there will always be others who come along with reasonable positions on issues. In fact, having a fresh approach to an issue or problem can be good.

There are many benefits to be gained from term limits. Legislators are more likely to be reasonable about the laws they pass if they have to live with the laws. One way to insure that people have to live with those laws is to limit the time they can stay in a protected legislative or elected position. Term limits bring in fresh faces with fresh approaches to problems. Term limits ensure getting someone out of office who does not live up to the expectations of those who elected the person. Term limits also encourage greater participation in the political process by having to have new candidates on a regular basis. Term limits minimize the constant campaigning and the related unwillingness to address tough issues when they need to be addressed since you cannot expect to spend much time in power anyway. With minimum constant campaigning, there is less incentive to pass laws and to seek allocations and expenditures just to satisfy constituents.

I suggest at the national level that there be three aspects to term limits. First, the total amount of time which can be spent in elected national offices in the aggregate should be limited to a total number of years, such as 16 years. If one spent eight years in the House of Representatives and then were elected to the Senate, that person could not be again be elected to national office. Second, each person elected to the House and each person elected to the Senate would serve one term of eight years. Third, one-fourth of the members of each of the House and the Senate would be elected each two years.  Together these proposals would provide for continued experience in each body, a regular turnover to have fresh new ideas and minimized concern over retention of power through continued election.

Limit Delegation of Authority. To some extent this suggestion is related to the suggestion that we change our view of the role of government. What is suggested is that we change the view of the role of the legislature. This suggestion will require both a change in the way the judiciary looks at the law and the approach taken by legislators. The judiciary can affect delegation of authority by going back to what used to be required, namely that any delegation of authority must have clear guidelines so that a regulatory agency is not just able to substitute its judgment for the judgment of the legislature. The Occupational Safety and Health Administration and the Federal Trade Commission are examples of agencies which are delegated essentially complete authority in certain fields. OSHA is charged with making work places safe. It has two guidelines. Promulgate rules which use best practices, or, if you disagree with supposed best practices, then promulgate rules you believe to be appropriate. The FTC is authorized to make rules regulating essentially any area of interstate commerce when the FTC believes that certain practices constitute unfair consumer practices. At one time the Courts would have ruled that these delegations of authority were vague and too ill-defined and would have found them to be unconstitutional. Now essentially any delegation is upheld. Thus, our legislatures no longer make laws, but merely establish general areas within which bureaucrats make laws.

To bring things back under control so that the laws passed and enacted have some real meaning, legislators need to take their jobs more seriously. They need to make sure that each law has the basic requirements for what people are to do. They also need to limit the amount of rule-making which can be done by any regulatory agency. If the laws that are passed are clear, then there does not need to be as much rule making by regulatory authorities.

Limiting Civil Servant Protection. It is often stated that Washington is run by career bureaucrats, not politicians. Even when a new administration is installed or elected based upon preferences for the positions propounded during a campaign, it is very difficult for the administration to have any significant effect upon policy. To do so takes a long time. There are several matters that contribute to this delay - getting nominees for different positions screened by government authorities and then approved by the Senate, processing amendments to regulations and the entrenched nature of career civil servants at levels below those appointed by a new President.

The first aspect can be addressed by streamlining the screening process and by the Senate honoring its constitutional responsibility to advise and consent to appointments, not to control them. The second aspect can be addressed to some extent by having less complicated laws requiring fewer regulations and, thus, allowing for more rapid processing of the few regulations which are needed. The third aspect needs to be addressed by having fewer protections for civil servants.

We should not remove all civil service protections. It is not appropriate to have all government employees subject to replacement at the whim of each administration as in the old government spoils system. However, there must at least be more freedom for terminating employees for insubordination by refusing to follow shifts in policy appropriate to a new administration and for terminating employees who do not adequately perform their duties.

Changing Incentives. Government incentives generally produce waste. Two practices in particular are of concern. Job classifications and pay grades depend to a great extent upon span of control or supervision. Thus, having more people working for you will likely enhance your pay. This approach encourages waste by encouraging employing more people to do work, whether they are needed or not.

Budget allocations are generally spent whether they are needed or not. An agency budget may include allocations for personnel and related needs for a full year. Often positions thus funded are not filled for a whole year resulting in a surplus. If the surplus is not spent, then it will often be assumed that the amount was not needed. Therefore, in order to maintain funding levels, there is always an incentive to spend all allocated funds, even if not needed. This incentive results in much waste.

Redefining the Role of Government. Government's role should be viewed as limited, rather than expansive. There are two basic aspects to redefining the role of government. First, the primary focus of government should be on doing those things essential for society which cannot be done by individuals. The basic functions would be protection from foreign enemies, essential regulation of international and interstate commerce, providing homeland safety and security and ensuring respect of the proper judgments and laws of the various states by other states.

Second, when government action is appropriate, the action should be limited to that which is essential. If much of what can be done in an area of government can be done privately, either through direct private individual action or by private charitable efforts, or can be done through local or state governments, then the Federal government need not be involved. Similarly, local and state governments should not act when something can reasonably be done by individuals or private charities.

Government action has many negative effects. A government mandate generally provides for only one choice, whereas private actions permit many choices. Government intervention encourages dependence and discourages innovation and self-reliance. Government mediation of matters, whether by legislation or in courts, discourages reasonable interaction by private individuals to solve their own problems. By redefining the role and expectations of government to be more limited, we revitalize our personal lives and our society.

Improving Litigation

Class Action Suits. Class action suits were originally used for common disaster situations, such as an airplane crash or something similar. Over the years the use of such suits has been expanded to other areas of litigation, such as products liability and securities fraud. Class action litigation is not a perfect of means of dealing with any sort of tort. However, the use in a common disaster makes some sense.

Tort litigation involves showing that someone did something wrong which injured another person. The amount of damages sustained by the person injured may vary depending upon the financial circumstances of the injured individual, usually with regards to time lost from work and earning potential, and the physical circumstances of the individual injured. In a common disaster such as the wreck of an airplane, the question of liability will become clear once negligence, such as in maintenance of the plane, is proved. There can then be separate hearings on the amount of damages due to different circumstances of each injured individual. The same is not true for products liability suits and securities fraud suits.

In a products liability situation, there may be many factors which impact the damage. A product may be improperly installed. There may have been damage after installation or before installation. The product might be used in an application which is inappropriate. In short, the amount of damages are not the only questions, but also liability to begin with.

For a person to recover in a securities fraud case, there must be fraud or gross negligence with respect to a misstatement of a fact or the failure to disclose a material fact, and the person must have relied upon the misstatement or would have relied upon the information had it been disclosed. With mass markets and mass information, there is a significant problem in dealing with large cases of fraud, such as Enron. For this purpose a fraud-on-the market theory has been developed. However, even in these cases, a class action may not be the best way to handle the case because of other possible intervening causes which lead to damage or the lack of reliance by an individual investor. One big problem is to determine who was injured because of the fraud. Another problem is determining the degree of injury.

The main problem in using class action litigation for other then common disasters is that the factors will vary too much from person to person to make one settlement reasonable for all persons. Thus, when there are class action awards in such cases, there remain substantial individual trials which must be held. The persons in such individual trials frequently have the amount which may be recovered limited and will not get attorney's since those have already been awarded to the class action attorneys.

Contingent Fees. Contingent fees are justified on the basis that they allow a person to obtain the services of a lawyer when the person might not otherwise be able to afford a lawyer. Supposedly the lawyer will get a fee only when the client gets a recovery, and the amount of the fee will be dependent upon the amount of the recovery, thus ensuring that the amount of the fee will be in proportion to what the client gets.

In reality contingent fees have led to substantial distortions. In order to increase recoveries and, thus, fees, lawyers have come up with increasingly ingenious bases for asserting damages. The earliest such basis was pain and suffering. There is no way to measure pain and suffering that a person feels. Thus, providing damages for pain and suffering has been a means for the juries to award what they want, often to be sure that the person gets real damages covered plus attorney's fees. Awards for pain and suffering have been substantial in many cases, thus providing for substantial attorney's fees and adding to the gambling nature of the litigation lottery.

Another impact of contingent fees is to encourage quick settlements, often times without much work and possibly without the appropriate damages for the client, just so that the attorney can get a substantial fee without much work. I am aware of some firms which often will suggest that the client get another attorney if the case appears to be headed to court. Going to court frequently requires substantially more work without much more reward and holds the possibility of losing, thus denying the attorney a fee. I have also known of some attorneys who would be willing to make specious claims for a client or file essentially frivolous suits and then offer to make a quick relatively cheap settlement in order to get a fee without any real work.

In short, contingent fees occasionally serve their purpose, but have served more to distort the nature of litigation and to drive up costs to the benefit of attorneys without substantial benefit to clients and often to the detriment of those of us who pay for products affected by such recoveries.

Non-economic damages. There are two types of non-economic damages which need to be addressed, damages for pain adn suffering and punitive damages.

As noted above, damages for pain and suffering have come into the law primarily to allow for larger recoveries and to provide for and to cover the costs of ever larger attorney's fees. Awarding damages for pain and suffering in fact violates one of the key elements of damages, namely that they should be reasonably determinable and not speculative. Damages for pain and suffering are always purely speculative. With respect to other categories of damages, it is possible to make reasonable determinations of the true or potential amount of damages.

Medical costs are easy. A person has usually incurred medical expenses by the time trial is held. If there will be on going treatments or extended care, the nature of the treatments or care and the likely costs can all be reasonably projected based upon current information and treatment or care patterns. Repair or replacement costs are also easily determined based upon actual bills or testimony from experts. Loss of income can be easily determined based upon actual time lost from work and, in the case of a permanent injury, projected future compensation given the person's age, life expectancy, occupation and educational level. Then we throw in the wild card of damages for pain and suffering. Recovery for this purpose should be limited.

Limiting such damages is entirely appropriate given what we have now learned through studies of jury awards. Juries tend to give relatively similar awards when there are reasonable guidelines, such as for lost income or for medical expenses, including future medical expenses. However, when there are no guidelines, then jury awards have no consistency. The only guideline for pain and suffering is to ask a jury to imagine the amount of pain which a person has endured and then to award an amount deemed appropriate to compensate for such pain.

Awards to an individual for punitive damages can be very appropriate in certain circumstances where actual and substantial malice can be proved. However, often punitive damages are nothing more than a means of getting a substantial amount of additional money to an injured person and, ultimately, the lawyer. In the McDonalds coffee case, there was nothing which could reasonably justify an award of $2,700,000 for punitive damages. While McDonalds coffee may have been hotter than most, and while the company may have refused to pay for the person's medical expenses believing it had done nothing wrong, the woman opened a cup of hot coffee over her lap in a moving vehicle. She was the one who really did something wrong. In the case involving a repainted BMW bought by a doctor in Alabama, the company essentially did the man a favor by repainting the car because of some acid rain damage while in shipment, an occurrence which could reasonably be expected. The cost of the paint job was roughly equivalent to the diminution in value of the car, thus providing no benefit to the company. An award of punitive damages of $4,000,000 (reduced by the Supreme Court of Alabama to $2,000,000) was totally unwarranted.

Punitive damages suffer from the same problem as pain and suffering, namely the guidelines are so fuzzy as to be nonexistent. A jury is to look at the financial condition of the person who is to be subjected to punitive damages, and is then to determine what punishment would be appropriate to discourage such action in the future. Punitive damages should be restricted to circumstances in which it is shown that there was actual malice directed toward the injured party, such as for defamation or various business torts.

Punitive damages and damages for pain and suffering should be subject to an overall limitation similar to what we have done in other areas to discourage particularly reprehensible actions, namely limit all such damages to twice the provable economic damages. Thus, in the case where the actual injury to the person for the car was roughly the cost of a paint job, the punitive damages would have been twice the cost of the paint job. For the woman injured with the McDonalds coffee, the award for pain and suffering and punitive damages together would have been limited to twice the medical costs and any lost income or wages.

Award Attorney's Fees. Attorney's fees, based upon hourly rates, should be able to be awarded at the discretion of the court in any type of litigation. Doing so would encourage people to bring only those claims which have some reasonable merit and would also encourage reasonable settlement or expeditious trial of of meritorious claims, rather than dragging out litigation.

The argument against awarding attorney's fees is that doing so will discourage a persons who cannot afford to pay an attorney from bringing an otherwise meritorious claim. This reason is specious and hypocritical. The people who make this claim in debates about legislation to provide for attorney's fees in all cases are the same people who write into consumer protection laws the right to be awarded attorney's fees. The reason that this right is written into consumer protection laws is because recoveries in individual consumer protection cases are normally so small that the award of attorney's fees is needed to allow any of these claims to be brought. It is only when we are dealing with recoveries of substantial contingent fees in often questionable, but large money, cases that these people argue against the award of attorney's fees.

As can be seen by looking at all four of the above recommendations, if enacted together, much of the financial incentive for huge cases with big attorney's fees will be removed, and litigation will be much more reasonable. Making these changes will be a benefit to society as a whole, though the changes will have a definite adverse effect upon the pocketbooks of plaintiffs' lawyers.

Class Actions. Class actions are used frequently for all different types of litigation from common disaster accidents to product liability cases and securities fraud cases. Originally class actions were developed as a means to deal with mass disasters having a common source of injury and liability, such as an airplane crash. In this sort of setting a class action makes some sense. The cause of the accident is the same in all instances. The question of negligence is the same in all instances, since normally none of the passengers on an airplane would have been negligent in a way that contributed to the accident The question of liability would be the same in all instances. The only difference would be the amount of damages, which could vary depending upon the circumstances of the injured individual. As tort damages are determined, a person who has a high paying job and has longer to go to retirement, but will no longer be able to work, will be entitled to more compensation than an older person with a low paying job and only a few more years to work. Individual damages would be relatively easy to prove and might be a small part of such a case.

Following are discussions of some of the problems with use of class action litigation in connection with products liability and securities laws. The true winners in these cases are highlighted, and some bizarre cases are described.

Products Liability. A products liability case is very different from a mass tort case. As an example, assume that a suit is brought for improperly made synthetic siding for houses. Different runs of the material may have different qualities so that one set may be inferior, but another may not be inferior. Another factor may be the use of the material in different environments. The material may be fine for some environments, but not others, or different runs of essentially the same product may be better in some environments that other runs. Another factor in a situation where the product might be satisfactory could be the installation. The product could also be affected by the length of time that it has been on the structure. All of these factors will affect the questions of negligence and causation and ultimately liability. Thus, the case is substantially different from a plane accident.

Settlements in products liability class actions are normally structured to deal with these differences. The settlement will usually provide for a pool of money to be made available for people who meet certain basic criteria, such as when the product was purchased and how long it has been in use. People meeting such criteria often then have a separate mini-trial to prove that there were no contributing factors which actually caused the damage and in some instances to prove that the product was actually from the group of products agreed to be defective and covered by the settlement. In this sort of situation, the aggrieved consumer normally must bear the costs of proving the right to share in the pot of money. Often the amount that can be gained from such a settlement on a per consumer basis is substantially less than the actual damages to the consumer, and the cost of the mini-trial may be prohibitive.

Securities Fraud. Securities fraud cases are also substantially different from mass tort cases. In a securities fraud case the factors are a deliberate or grossly negligent misstatement of or a failure to disclose a material fact with reasonable reliance upon what was stated or the lack of information which then caused damage to the buyer or seller of a security. Damage is the easy one to prove in such a case, since the person who traded the security has a loss on or has failed to maximize a potential gain on the purchase or sale of a security. If in fact there is important information that was either withheld or misstated, proof of that can also be easy. It may also be easy to prove the intentional or grossly-negligent nature of the actions of the parties sued. However, the big problem is how these factors apply to individual cases.

To protect against the differences, again settlements often involve setting aside a pot of money which people meeting certain minimum criteria can then try to reach. However, to reach the pot of money, a person has to prove three things: that the person actually knew about the false information; that the person relied upon the false information or would have relied upon the withheld information in making a decision; and that the person was damaged by having relied upon such false information. In short, the person has to go through almost a complete trial in order to be compensated.

The Winner is . . .. Given the above, who wins with the current use of class actions in products liability and securities fraud cases? The big winners are the immediate participants. The attorneys who actually prosecute a class action case make substantial amounts of money. In some bizarre cases, such as the tobacco litigation, the hourly rates are in the thousands of dollars. These fees are paid by the companies who settle the class action cases. Part of the settlement is always a determination of how much the attorneys will be paid.

The companies who settle the class action cases in which there is a real chance for liability are normally protected from any further liability. Thus, they buy protection frequently at a fraction of what the real liability might be if individual plaintiffs sued and recovered what they were due. Some companies who are the subject of specious claims are real losers, but they can usually buy peace at a relatively small price, except for the attorney's fees, which can then be passed on to consumers without much notice or, if not passed on, will have a relatively modest impact upon overall earnings and stock price.

The third set of winners are those persons who are chosen to be lead plaintiffs. These people usually get any compensation they are due when the case is settled without having to go through a mini-trial. Also, their legal fees are paid since their attorneys have been those who were chosen to represent the class and are compensated in the settlement.

Frequently the persons with legitimate claims who cannot recover much because of the nature of the settlement or will have too much expense making their cases are the real losers. In specious cases where the company is buying peace, the losers are the shareholders and consumers.  

Bizarre Cases. In one securities law case the settlement proposed to the Court provided absolutely nothing for the persons who were supposedly harmed, but substantial fees to the lawyers. When GTE and Bell Atlantic were preparing to merge to form Verizon, a suit was brought on behalf of GTE shareholders were claimed to be short changed. The settlement was to provide approximately $25,000,000 to the injured parties, seemingly a large sum, but only about 0.027% of the total value of the stock to be issued in the merger. In addition, the settlement was to provide more stock. The market would immediately correct for the issuance of the additional stock. Thus, the proposed settlement was essentially to provide the shareholders nothing. For this the attorneys were to get $5,000,000.

In a products liability case for computer monitors based upon the actual diagonal viewing area of the monitor screens being less than the advertised size of the monitor, the persons included in the class would get either $9.00 refund or $13.00 credit on the purchase of a new monitor. For this fantastic benefit to the consumer the lawyers were to get $5,800,000.

Regular Suits. Not all of the abuses in the legal system involve class actions. The abuses involved in regular civil litigation include misrepresentation of information, engaging in different practices during the conduct of litigation which serve only to harass or prolong litigation, encouraging witnesses to shape their testimony, bringing suits which have essentially no chance of winning solely for the sake of trying to obtain an inappropriate end and awards of damages far out of line to the actual injury. The stakes are not as high in most instances and, thus, the cases do not usually merit the national attention showered upon major class actions. However, the abuses are just as real and have just as damaging an impact upon society and the costs of living and doing business.

Two cases which concern outrageous damages are the McDonalds coffee litigation and the Alabama BMW paint case. In the McDonalds coffee case, an elderly woman was burned when she opened a cup of coffee in her lap while in a car. The coffee spilled and burned her. She had originally sought to have McDonalds pay her medical expenses of approximately $2,000. When that request was refused, she sued and, among other things, was awarded $2,700,000 in punitive damages. In the BMW case, an automobile received some damage from acid rain while being brought across the Atlantic. The company repainted the car at a facility in Georgia, then sent it on to the dealer who sold the car to the person who had ordered the car. The car was sold as a new car, even though it had been repainted, which may have caused the car to be worth about 10% ($4,000) less than if it in fact had only the factory paint job. The difference in paint was not noticeable, except to an expert. In addition to awarding the supposed depreciation value of the vehicle, the jury awarded $4,000,000 in punitive damages, which was reduced to $2,000,000 by the Alabama Supreme Court.

My problem with both these cases is that they provide huge benefits to people who do not deserve them and fly in the face of common sense. While McDonalds coffee may in fact have been hotter than many, it would seem reasonable that a person would not open a cup of coffee in her lap in a moving vehicle without some understanding that it could spill and burn her. The actual negligence in the case was that of the woman who got burned, not that of McDonalds. In the case of the automobile, if a person orders a car which has a blemish, in all likelihood the person would just want the blemish fixed, unless the car was severely damaged or destroyed. However, in the neither case does the action of the company involved merit anything close to the damages awarded in the American game of litigation lottery.

I have had attorneys deliberately misstate information to judges in the course of trying a case. When brought to the attention of the judge and the opposing counsel, the opposing counsel would just ignore the mistake and go on as if nothing had happened. The judge often will not be concerned about the misstatement. Misstatement is often just an effort to gain an advantage with the hope that the opposing counsel will not catch the misstatement, and courts often will just accept such behavior as a normal part of litigation.

I have personal knowledge of cases where the parties bringing the litigation were told they had no chance of winning. Often these cases involve opposition to developments or commercial projects. The parties suing have usual had their chance to oppose the particular development and lost. However, instead accepting the outcome in the proper forum, they have sued to try to make the project too expensive in hopes that it would go away. Often the expenses in these cases are high to all parties, not just the developer. if the developer is willing to fight the matter, usually the developer will win, but at tremendous costs to all concern. Such is an absolute of abuse of the legal system and the political system.

Concerning shaping testimony, there was an editorial in The Wall Street Journal (October 7, 1997) concerning a memorandum from a law firm about how people should testify about certain aspects of making a claim for asbestos related illnesses and injury. In effect, people were being told what their testimony should be, whether such was actually the case. Talking to a witness about how the testimony might be viewed and the manner of stating a fact is very different from encouraging specific statements regardless of whether they are true.

I have also been involved in cases where pleadings have been filed for no purpose other than delay. They have no reasonable legal or factual basis, but are just meant to make a case more expensive or to put off the inevitable. Again, this is an absolute abuse of the legal process.

These abuses add unnecessary costs to our lives, even if we are not directly involved in any of the litigation. Money is wasted on unnecessary litigation which is an economic cost to society. Asbestos litigation has taken a terrible toll on many companies, even when the companies were not at fault. Improper litigation has added substantially to costs in areas, such as medical malpractice insurance, and has had an effect upon the availability and costs of services to all of us. Curbing these abuses is important to all of us.