Continuing the Discussion with Mr. Frank

His comments in blue, my response in red.

1. The jury was instructed incorrectly. The case should've been thrown out before it got to the jury. Again, I refer you to McMahon v. Bunn-O-Matic, where the court got it right. I'd link to it, but your site doesn't permit hyperlinks in comments.

I'd like to allow hyperlinks in comments, but I don't have the time or energy to deal with people hawking "male enhancement" products. 

How did you determine the jury was instructed incorrectly?  I ask because when I had access to Westlaw and Lexis, neither the jury instructions nor the transcripts were available.  If you have either of these, I'd appreciate the opportunity to take a look at them.

The comprehensive Wall Street Journal article on the subject also showed that the jury misunderstood the evidence: a McDonald's expert used the technical term "statistically insignificant", which has a specific mathematical meaning that he was using correctly, and the jury thought that McDonald's was calling the injury insignificant.

From my readings about the case, I found that the jury understood the meaning of "statistically insignificant."  Instead, it appears that the jury was inflamed that McDonald's didn't show any concern or remorse over the fact that no matter how "statistically insignificant" the occurence of injuries was, over 700 people were still injured by the product.

As best I can tell, the plaintiff's lawyer made at least one (and probably more) argument(s) that shouldn't have been allowed to have been made because they were irrelevant to the question of liability.

Of course, that's a flaw in our entire justice system: Lawyers make mistakes, opposing counsel doesn't always catch them, and even when opposing counsel does, judges don't always make correct rulings.  I can't imagine that there will ever be a way to eliminate error from trials.  Isn't that why we have appellate courts?

2. My answer (addressing solely product liability) doesn't distinguish between foreign and US manufacturers. If a US corporation is large enough, it's on the same footing as a foreign manufacturer, because a certain portion of its sales are international. The tort burden falls heaviest on small businesses. Small businesses have to pay a risk premium because they can't diversify their liability risk and self-insure as many large corporations do; moreover, a small business that sells mainly to US consumers will be at a disadvantage to one that can subsidize its US tort costs by foreign sales.

Saying that tort reform will protect small businesses implies one of the following:

1: Tort reform will lower insurance premiums.  I believe that insurers won't voluntarily lower premiums by a meaningful amount.  And I won't bore you with the standard quotes from insurers about why tort reform hasn't and won't lower rates.

2: It's important to make sure small businesses don't close because of lawsuits.  Small businesses fail every day.  Why is it more of a tragedy if one fails because of a lawsuit than if it fails because it isn't competitive?  Either way, people are out of work. 

Also, you state that small businesses are at a disadvantage compared to those that can subsidize their U.S. tort costs with foreign sales.  Almost all businesses that can do so aren't small businesses, so what you've really said is that small businesses are at a disadvantage to large foreign businesses.  That's true, and that has nothing to do with tort law.

Of course, to the extent the tort system raises labor costs in the US (and it clearly does that), that hurts American competitiveness. That has additional effects at the margins that I didn't address.

Lot's of things raise labor costs in the U.S.  Minimum-wage laws, for example.  But we passed those because we determined that the benefit to workers offset the loss of profits.  So while our tort system undoubtedly raises labor costs by some extent, the benefit to injured persons outweighs the loss of profits. 

3. I know you're not a trial lawyer; but you're buying ATLA's message hook, line, and sinker without giving fair consideration to the tort reform position. Not that I blame you: when I was ten, I was reading Consumer Reports cover to cover, held my Marvin Zindler autograph close to my heart, and grew up admiring Ralph Nader. We're inclined to root for plaintiffs, because we like the underdog storyline: from Spartacus, David & Goliath, and Star Wars to Grisham novels, A Civil Action, and Erin Brockovich. (The last two, however, featured bogus environmental claims, not that you'd learn that from the movies.)

Actually, when I was a kid, I was a conservative Republican that religiously listened to Rush Limbaugh and hated liberals with a passion.  I slowly moved left because I hated hypocrisy even more than tree-huggers.  And tort reform is full of hypocrisy: When a corporate defendant is hit with punitive damages, it's "an egregious injustice" based upon a lawsuit that was "wholly without merit."  But if that defendant becomes a plaintiff and is awarded punitive damages, "justice prevailed."

I'd shut go666.com down tomorrow if the ATRA just came out and admitted that their members, by and large, simply want to be able to conduct business the way they see fit, and not be held accountable if their conduct injures or kills.  I get really irritated when corporations pretend claim they want to protect consumers from greedy trial lawyers by limiting contingent fees.

If you scour the right places on the Internet, you can probably find posts I made twelve years ago when I was in law school defending the current tort system. It wasn't until I actually started working on products liability and class action cases that I learned first-hand how little the organized plaintiff's bar has to do with consumer safety or protection in the real world.

Does that mean that OMM won't hold corpreform against me when it's time for me to look for a summer associate job?  :)

4. Because there isn't "loser pays" and because damages are, for the most part, untrammelled, the incentive is for lawyers to manufacture long-shot cases and force big corporations to play Russian roulette. Last June, Overlawyered covered a car company that won at least ten consecutive cases alleging a particular kind of defect, but the n-th time, the same theory found a judge that excluded evidence of safety and a jury that was willing to ignore the fault of the drivers involved and awarded over $300 million. The plaintiffs' bar can make a very comfortable living rolling the dice like that, but that doesn't provide equitable compensation to injured people (ten-plus plaintiffs get nothing, one speeder gets a windfall, all after giving up years of their lives to the stress of litigation), and is a wealth transfer from consumers and workers and pensioners to "rent-seeking" lawyers who aren't adding any social value, because there's nothing the corporations can do to prevent liability in these cases other than stop selling cars.

I laughed out loud at your extension of "rent-seeking" to lawyers.  It has much more flair than "greedy."  I like it.

I agree with you that it's unfair for 9 victims to get nothing, but the 10th to get a windfall.  But that's the way the system works: One jury may find for the plaintiff, while another jury would have found for the defendant in the same case.  In that respect, every case is a roll of the dice.  It seems the only way to eliminate the unpredictability of juries is to eliminate the jury system - something I think we're both opposed to. 

Are you familiar with the lawnmower manufacturer Toro?  They aggressively settle their cases.  They've found that most injured people want their bills paid, and a few dollars in their pocket.  So Toro dispatches adjusters that have authority to settle cases for (I believe) $50k on the spot.  By making reasonable settlement offers as soon as an injured party contacts them, Toro has virtually eliminated litigation over their products.  Those people that do go to trial generally lose.  Toro figured it out: Most injured plaintiffs aren't greedy.  There's a good article about them I can track down for you if you haven't seen it.

Read overlawyered. Read pointoflaw. My co-authors make them well-written and often entertaining sites, and I just try to keep up with them. What is it that we're saying that's so incorrect?

You're right - the sites are well-witten, and often entertaining.  I find myself in agreement with them on many issues.  But here are a couple I disagree with:

1: Damage caps.  You can't put a fixed price on human life.  I understand that juries are often called on to do that, but those decisions must be made on a case-by-case basis.  Capping damages, especially at a ridiculously low figure of $250k, devalues human life.

2: Caps on attorney fees. I'm not sure what your hourly rate is, but I am sure you'd vociferously object to any law that tried to cap it.  If you get to charge your clients whatever you want, so should plaintiff's lawyers. 

3: Tort reform as a way to lower costs or insurance premiums.  Sorry, I don't believe that businesses will automatically lower prices or premiums if their tort costs go down.  Instead, I'm confident that they'd pocket whatever savings tort reform enacted. 

Comments

[Ted]

1. Q. How did you determine the jury was instructed incorrectly?

A. Because the jury was instructed at all. Again, read Bunn-O-Matic. It's not worth discussing this further until you can tell me why you disagree with the court's ruling in that case. And I have yet to meet someone who can explain why the Bunn-O-Matic case isn't dispositive of the Liebeck lawsuit.

2. "700 people were injured by the product" [in ten years]

A. McDonald's isn't liable unless their product is unreasonably dangerous. If the number of injuries from the product is statistically insignificant, it's not unreasonably dangerous. That's the end of the story. Noting this fact is a reason to throw out the case, not to impose punitive damages.

In the last ten years, over FOUR HUNDRED THOUSAND people were KILLED by automobiles. Not injured. Killed. Are automobiles inherently unreasonably dangerous?

In the last ten years, about one hundred children have been KILLED by five-gallon buckets. Not just injured. Killed. Are five-gallon buckets unreasonably dangerous?

The point is that 700 burns--the vast majority of which were minor--is not that many. It's not a reason for a company to change its behavior when the attribute that is causing the injury--the heat of the coffee--is precisely the attribute that makes the coffee commercially desireable. People don't have to buy hot coffee. (I don't. I don't like hot beverages.) There's orange juice, there's diet soda, there's water, there are all sorts of other items to quaff. It's not like McDonald's is adding a tasteless, odorless chemical that burns seventy people a year; the coffee burns because coffee is hot. If a McDonald's employee spills the coffee on someone, they should be liable for that. If a McDonald's coffee spills and burns because the cup breaks, that's McDonald's fault, and they should pay. If a McDonald's customer spills coffee on herself, however, it's her fault, not McDonald's, no matter how badly she's burned.

If McDonald's coffee is unreasonably dangerous because 70 people a year out of over a billion suffered some sort of burn from it (heck, I burn myself at restaurants or cooking two or three times a year), then EVERYTHING is unreasonably dangerous, and the concept is meaningless. No reasonable jury, correctly instructed on the concept of "unreasonably dangerous" can find McDonald's coffee unreasonably dangerous: so the case shouldn't even go to the jury.

3. Q. Why is it more of a tragedy if one fails because of a lawsuit than if it fails because it isn't competitive?

A. Neither is a tragedy. But in the first instance, society is poorer than it could have been if the lawsuit, as so many are, is inefficient. (There are other companies who sorely deserve to have been driven out of business by efficient lawsuits.) In the second instance, society is better off because the resources being used for the uncompetitive business are devoted elsewhere.

Too, it's not just "because of a lawsuit." It's because of the threat of a lawsuit; it's because of the innovations we don't see because the tort system deters them by making them riskier.

4. Q. So while our tort system undoubtedly raises labor costs by some extent, the benefit to injured persons outweighs the loss of profits.

A. That's a falsifiable claim. Is the benefit to injured persons from the tort system really better than, say, replacing medical malpractice lawsuits with social insurance for birth injuries? (Certainly, lawsuits over cerebral palsy have only made medical care worse, not better, by forcing doctors into millions of unnecessary caesareans with little medical utility.) What are these benefits? Lawyers will only take a cerebral palsy case if the baby is likely to survive into adulthood so they can claim millions in pain-and-suffering damages; if the infant dies early, the doctor is just as guilty (or, more likely, innocent, since 99% of cerebral palsy cases occur independent of medical decisions) of malpractice, the family is just as tragically affected, but there's no recovery.

It's certainly not safer medicine: medical malpractice verdicts have been found to be essentially random, with very little relationship to whether the doctor committed malpractice, so there's little deterrent effect. It's certainly not safer cars: many innovations have occurred in spite of lawsuits, not because of them. It's certainly not better drugs: as FDA General Counsel Daniel Troy points out, the Type-II errors caused by litigation have resulted in numerous beneficial drugs being withdrawn from the market. It's certainly not better corporate governance: companies get sued in response to any stock drop, regardless of whether there was wrongdoing.

So what exactly is the benefit of refusing to implement the straightforward reform of loser pays?

Again: it's balancing costs and benefits.

5. Q. You can't put a fixed price on human life.

A. Sure you can. You, Justinian, do it all the time. Do you drive 70, or do you drive 55, or do you stay off of the highway entirely? Did you spend a little extra to buy a car with side air bags? Do you spend a little extra to fly, instead of drive, a long distance? Did you pay a little extra to live in a neighborhood where you'd be less likely to be murdered? Do you use your cell phone in the car?

Every day, you're making implicit economic decisions that reveal that an X% chance of death is worth more than or less than Y dollars to you. Every day, the government (and the voters that chose that government) is making the same calculus in deciding between the wealth and health of its people. We could save 10,000 lives a year by a national 30 mph speed limit, but society clearly agrees that those lives wouldn't be worth the cost--as demonstrated by the celebration when the 55 mph speed limit was lifted.

You'd agree that we should not tax the citizenry to spend a trillion dollars to save one life, right? Fifty billion, right? Probably not even fifty million--I'd be surprised if your own set of life choices showed a revealed preference that a life was worth more than seven digits.

In any event, you misrepresent the caps. No one is proposing to cap total damages at $250,000.

6. Q. Caps on attorney fees.

A. Hey, we agree. I don't believe in caps on attorney fees at the federal level, either. I'd rather see more competition, and some sort of mechanism for Dutch auctions. But this is where loser pays would come in handy.

7. Q. I'm confident that [insurers] pocket whatever savings tort reform enacted.

A. This reflects a fundamental misunderstanding of economic principles. At any rate, it's simply not true. Premiums are directly related to loss rates. As you should know from pointoflaw.com, nationwide in 2003, medical malpractice insurers faced $1.375 in defense costs, judgments, and settlements for every $1.00 in premiums they collected. Reforms in Texas reduced malpractice insurance rates there 17% off the bat. Premiums are high because the tort system is ridiculously expensive and inefficient.

8. I'm aware of Toro's program. I'm working on an article about it, the gist of which I won't discuss yet. But even if I'm wrong, and Toro is adopting the appropriate approach, they're in a relatively favorable situation where their products are responsible for a low number of relatively uncontroversial and relatively minor discrete injuries from discrete incidents. It doesn't work in the case of asbestos, or drug interactions, or complex torts.

9. I used "rent-seeking" for a reason; I honestly don't think lawyers are being greedy. They're taking advantage of a system that gives them the incentive to bring the lawsuits I'm complaining about. I don't want to kill all the lawyers, or shackle them, or force them to sit through forty hours of mandatory self-criticism and reeducation. I just want to change the incentives so lawyers don't have a reason to bring socially harmful lawsuits. It's all very Holmesian "Path of the Law" to me.