Archive for the ‘Liability / Lawsuits / Insurance’ Category.

Victory Against Speech Suppressing Libel Suits

As someone currently being sued for libel by a deep-pocketed corporation who wants me to take down a product review they don't like, I am happy to see Mother Jones prevail in their libel case brought by Frank VanderSloot, a case pretty transparently brought to suppress speech Mr. VanderSloot didn't like.  The bad news is that Mother Jones ended up with a bunch of legal bills for which they cannot get reimbursed (the exact same situation I am likely to face when I inevitably win my case).

This is exactly why we need better state and Federal anti-SLAPP laws, though I have found from personal experience campaigning for them here in Arizona that it is easy to run up against bipartisan opposition.  I will say that as happy as I am about Mother Jones' victory, there is a teenie tiny bit of schadenfreude seeing them lament the lack of loser-pay rules, something they would oppose in most any other case but their own.

You Want to Know Why the Legal System is Broken?

I got a notice in my email that I was potentially a member of a class action against LinkedIn.  What is the case?

The Action challenges LinkedIn's use of a service called Add Connections to grow its member base. Add Connections allows LinkedIn members to import contacts from their external email accounts and email connection invitations to one or more of those contacts inviting them to connect on LinkedIn. If a connection invitation is not accepted within a certain period of time, up to two "reminder emails" are sent reminding the recipient that the connection invitation is pending. The Court found that members consented to importing their contacts and sending the connection invitation, but did not find that members consented to LinkedIn sending the two reminder emails [plaintiffs seem to have other grievances but this is the only one they say the court validated].

You have got to be kidding me.  How much time and money has been spent on this stupidity?

So I wanted to tell them to go screw themselves, and that this was not done in my name and I want nothing to do with it.  Of course there are simple web forms for joining the class and asking for payment, but to be excluded one has to follow a series of detailed instructions and send a snail mail.  Apparently if I do nothing I am part of this fraud whether I want to be or not.  I particularly like the last line of the opt-out instructions (FAQ #9)

This request must include the case number of the Action (Case No. 5:13-CV-04303-LHK), your name, address, email address, phone number and signature, and a statement that you wish to be excluded from the Settlement Class.  If the exclusion request does not include all of this information, or if it is sent to an address other than the above, or if it is not postmarked within the time specified, it will be invalid, and you will remain a member of the Settlement Class and be bound as a Class Member by the Settlement Agreement, if approved.  “Mass” or “class” opt-outs purporting to be made on behalf of multiple persons or classes of persons shall not be allowed.

So mass torts purporting to be made on behalf of a class of persons without even consulting them are A-OK, but mass opt-outs from the class are not allowed.

Postscript:  At first I thought the opt-out headache was the plaintiff's attorney trying to protect their fees, but their fees seem set.  In retrospect, my guess is the difficult opt-out comes from the defense, because opting out leaves one eligible to sue again and having settled this one, I am sure LinkedIn does not want a second class trying to take a second bite of the apple.

Followup #2:  Engadget's reaction to the case:  Oh look, free money!

And the sum is likely to be small, though LinkedIn promised to increase the total amount by $750,000 if individual payouts are less than $10. Still, money is money, so if you're willing to swear that the company spammed folks on your behalf, you can apply for compensation here.

I do not know this author's politics, but I can say from personal experience that the majority of the most breathtakingly amoral statements about money I have heard in real life (ie excluding cartoon lines written by Hollywood for business people) have come from Progressives.

California Legislature Is Just A Rent-Seeking Body for Litigation Attorneys

The vast majority of so-called consumer or employee protection laws in California appear to be written with one purpose in mind -- to create more rent-seeking opportunity for lawyers.  While more expensive to comply with than laws in any other state, most of these laws do little to actually make the life of consumers or employers easier.  Are consumers really better off for the myriad of carcinogen warnings one sees in California, or is it just white noise?  Are employees better off because they can sue over having to work through lunch?  In most cases, the answer is "no" or only trivially at best.

But what all these laws have in common is that they give attorneys incredible power to extract money from businesses via any number of extortion techniques.  For example, my company has never lost an employee lawsuit in California, but I have spent hundreds of thousands of dollars of my money to successfully defend such claims (no insurer will cover you for such employee suits without a deductible of at least $25-50 thousand per claim in CA).  How can anyone call this justice?

The only defense we have is to try to take claims to arbitration.  I have no problem paying a thousand dollars of back wages if we made a mistake, but I don't want to pay $50,000 in legal fees reaching that conclusion.  That is the point of arbitration, to pay off employee claims without the long hassle of litigation.  It offers the bonus of paying employees quickly, rather than forcing them to wait through years of legal procedures.

The only folks hurt by arbitration are the attorneys, and of course since they virtually control the California State Legislature, CA attorneys are urging their government lapdogs to ban arbitration of employment issues

When you take a job, should you be required to waive your right to have a future employment dispute adjudicated by the state labor commissioner or in civil court?

That has increasingly become the case for job applicants. Forty-three percent of companies nationwide now require employees to sign arbitration clauses precluding class-action suits, according to the Wall Street Journal. That’s an increase from 16 percent of companies in 2012. It’s paid off for businesses – employee class-action lawsuits have declined 5 percentage points since 2011, saving employers $136 million.

Assemblyman Roger Hernández, D-West Covina, believes mandatory employee arbitration agreements provide California businesses with an unfair advantage in employee disputes. He authored Assembly Bill 465, which would make it illegal to require such agreements as a condition of employment.

The bill passed the Senate Labor and Industrial Relations Committee along party lines on June 10 after a debate over the pros and cons of arbitration.

It is telling that even the supporters cannot point to any study or evidence that employees do worse with their claims in arbitration vs. in the court system.   The only real claim they make is this one, which is hilarious:

“The harm from these kinds of agreements goes beyond the impact on the individual worker. Obviously, no workers should be required to give up such core protections when it’s not knowing or voluntary. But beyond that, this takes away the ability to the state labor commissioner to even know what is happening in these work sites. These arbitration agreements are private, they are individual.

“They do not provide a forum for the state labor commissioner or anyone else to know what is happening and try to find a more systemic solution or to say, ‘Wow, there’s a lot of violation coming out of this one site or employer. Maybe we should consider a more efficient enforcement plan than just each individual worker having to take their claim separately to an arbitrator.’

This is stupid.  First, there is nothing in an arbitration agreement that prevents an employee from reporting his or her issue to the state labor commissioner.  Second, if this really were an issue, a simple reporting requirement of the basic facts of arbitration cases to the state labor commissioner would suffice to solve the problem.

Here is how you should think about this proposed law:  Attorneys are the taxi cartels, and arbitration is Uber.  And the incumbents want their competitor banned.

A few years ago I had a woman file a discrimination case against me, saying her supervisor discriminated against her.  This person did not even attempt to lay out a factual basis for the claim, just said essentially she was dissed.  What made the case a total joke is that the person who was her supervisor was her sister (no more making exceptions to nepotism rules after that one).  The claim went nowhere, but it still cost be $20,000 to make go away.  And the real kicker was the employee's attorney.  This person came to me (actually my attorney) and he said he would drop the case with no payment to the plaintiff if we agreed to give him $X thousand dollars personally.  Basically, the attorney said that if he got paid, but his client did not, he would be satisfied and get her to drop the suit.  This is the racket attorneys have created for themselves in California.

Update on Applied Underwriter Issues

After my article last week identifying costly aspects of Applied Underwriters' workers compensation insurance policies that are unusual, hard to predict, and totally undisclosed in the market/sales process, I have gotten a lot of feedback.

The first, of course, was from the lawyers at Applied Underwriters who have threatened me with a libel suit unless I take down my comments.  While my blog article wills stay up, Applied Underwriters have apparently managed to get Yelp to hide my reviews in the secret purgatory they maintain for reviews that displease corporate lawyers.

More recently, I have had calls from not one but two different attorneys who are representing Applied Underwriter customers.  The one this morning was especially evocative -- he had years of experience as an attorney and litigating over contracts like this but thought he was crazy because he could not figure out the math on the Applied Underwriters statements until he read my post.  I had had the exact same issue, almost in tears because I could not figure it out, until an industry insider explained to me that the numbers don't add up.  After pages of step by step calculations, there is one step where they simply pull a number out of the air, essentially rendering irrelevant all the calculations that went before.  I will respect their client confidentiality but say that the issues involved were very parallel to those I discussed in my article.

Feel free to contact me if you need help or are considering a policy with Applied Underwriters and I will lend you what knowledge I have.

Yelp's Way of Caving to Corporate Pressure and Hiding Reviews While Saying They Didn't Delete Anything

Update:  This post may be unfair, as discussed here.  I am not fully convinced, though.

A few days ago I posted a negative review of Applied Underwriters, and linked to this post on my blog for much more detail.  Yelp promptly pulled the review, saying I violated their terms of service by linking to a commercial web site.  I thought that bizarre, since my blog has absolutely nothing commercial about it.   But it made more sense when I received a letter from Applied Underwriters demanding that I take down my negative Yelp review or they would sue me for libel.  I don't know for sure what happened, but I suspect that Applied Underwriters sent Yelp a similar demand and they used the link in the review as an excuse to delete it and avoid legal entanglements.

So I posted an updated review with more detail and no link.  Now, Yelp is hiding the review, along with most of the other negative reviews, behind a nearly invisible link at the bottom that says "other reviews that are not currently recommended".  Scroll down to the bottom of this page and you may see it if you have a keen eye.  It is not even clear it is a link, but if you click on it, you get all the bad reviews Yelp is hiding.

Let's dismiss all the reasons why Yelp might say they do this.  One is clarity, to reduce clutter.  But go to your favorite restaurant Yelp page.  Likely you will not see this link / hidden review phenomenon.  You will see pages and pages of reviews, far more than they would have to show if they just displayed all the reviews for Applied Underwriters.

So there must be another reason.  They say in their note there is a quality algorithm.  Anyone who has read a lot of Yelp reviews will know that if this is so, their quality algorithm is not working very hard.   They have a number of reviews that they "recommend" that are nothing more than a rant like "I will never use these guys again" while my unrecommended review includes paragraphs of detail about the service.  They say it is based on your review volume as well, but I have more Yelp review volume than several of the others who seem to pass the screen.

All of which leads me to believe that this is Yelp's purgatory where they hide reviews based on corporate pressure.  They have gotten a lot of cr*p publicly about deleting bad reviews from sponsors and from corporations that pressure them to do so.   They have a zillion self-righteous FAQ's asserting that they don't delete anything.   So imagine Applied Underwriters sends Yelp loads of threats to take down each negative review that comes up.  What do they do?  They put them in the not-recommended purgatory.  They can claim that they haven't deleted anything, but absolutely no one will ever likely see the review.  And they don't count any longer to the company's review count, so for all intents and purposes they are gone.

All of this is a guess, because it is absolutely impossible to contact Yelp about these issues.  No phone numbers.  The ones in general directories for San Francisco don't work for them.  You can't email or chat or contact their customer support in any way.  For a company in the transparency business, they avoid it like the plague.

But do you want to know what makes me doubly sure of my analysis?  Because there is no way to up-rate any of the "not recommended" reviews.  I would have thought the whole up-rating system was how they sorted reviews to present the most relevent at the top, but you can't do that with the ones they have put in purgatory.  Why?  Because these reviews are being put in purgatory not for some customer benefit but to protect corporations able to put pressure on Yelp.  Yelp doesn't want them uprated.  They are supposed to disappear.    If I had time, I would compare the number of "not recommended" reviews for corporations with powerful legal staffs like Applied Underwriters to the number for Joe's local business  (AU has 17 recommended reviews but a 28 full reviews that have been "disappeared" as unrecommended).

Applied Underwriters Is Threatening Me With Lawsuits If I Don't Remove Negative Reviews About Them

About a week or so ago I wrote a long and detailed post (with frequent updates as I discovered new information) about my extreme dissatisfaction with my workers compensation insurance from Applied Underwriters, a Warren Buffet-owned insurance company.  I also wrote a shorter, parallel review on Yelp** (where Applied Underwriters already has an abysmal rating).  For reasons I will guess at in the next post, Yelp keeps marking my post as "not recommended" despite the fact that it is one of the few that is not just a rant of the sort "this company sux" but actually has real details.  There is a tiny almost invisible link at the bottom to see other reviews not recommended.

Yesterday, I received a letter from Applied Underwriters (Letter here (pdf)) demanding that I take down the Yelp review and my blog post or else they will sue me for libel.  Based on my understanding of libel law, the content of my posts (which are all legally protected opinion), and recent court cases, Applied Underwriters has essentially no chance of ever winning such a suit.  But my guess is that this is not their intention.  I presume they are hoping that the fear of legal action, and the expense of legal defense, will cause me to stop my perfectly valid public criticism of their product.

I am seeking legal advice from a well-known First Amendment attorney, so Applied Underwriters will get my final response after I have had advice of counsel.  But here are a few thoughts:

You can read the attorney's letter in full if you are a fan of such things, but if you read sites like Popehat much, you can pretty much predict what you will see.

The gist of their complaint, from the only paragraph of mine quoted in the letter, seems to be the word "scam".  By the text of their letter, they seem to believe that "scam" is libelous because their company is well-rated financially and that they provide reasonable claims service.  I concede both these facts.  However, I called it a "scam" because there is a big undisclosed cost to their product that was never mentioned in the sales process, and that could only be recognized by its omission in the contract I signed -- that there is nothing in the contract committing them to any time-frame under which to return deposits and excess premiums I have paid, which may well amount to hundreds of thousands of dollars.  This fact about the contract is confirmed by their customer service staff, who have said further that the typical time-frame to return such over-collections and deposits is 3-7 years after the contract ends, or at least 6-10 years after the first of the deposits was made.

If I had gotten any descriptions of their service terms wrong, I would have been happy to correct them.  Hell, given that apparently Applied Underwriters will hold over $200,000 of my money for as many as ten years before they maybe return it to me, I am hoping I somehow have misunderstood.  Unfortunately, their staff is pretty adamant that I understand these terms perfectly, and you will see that the letter sent by the attorneys does not attempt to refute any of the specific issues that drive my negative review.  And of course none of this was ever disclosed in the sales process.  The company attorneys point to the fact that I read the agreement and signed that I understood, but in fact this issue is only in the agreement by its omission.  In its 10 pages of arcane boilerplate, the agreement never includes any clause giving them any legal obligation to return your deposits and excess premiums in an defined timeframe.  It is that omission that I missed.   Would you have caught it?  Is this a substantial enough issue that you would expect disclosure in the sales process?

So is this a "scam"?  I believe that this issue is costly enough, and hard enough to detect, and far enough outside of expected business practices to be called such.  You may have your own opinion, but ask yourself -- When you enter into, say, a lease and have to put down a security deposit, is it your reasonable expectation that the landlord has the right in your lease to keep your deposit for 3-7 years (or more) after you move out?  Oh, and by the way, how might your evaluation of something as a "scam" be affected by the knowledge that the company is threatening to sue anyone who writes a negative review?

Anyway, I take responsibility for my own failure as a consumer here.  But in a free society it is perfectly reasonable to communicate issues one has with a product or service to help others avoid similar mistakes.  Which is what I have done.


**  I have problems with Yelp as well.  What is linked is not my original review.  My original review linked to my blog post.  Yelp took it down.  I will tell that saga in a future post.

It's Impossible to Make This Stuff Up

Yes, people write that sort of headline all the time.  But in this case, I know.  In my novel BMOC, I pondered for quite a while trying to make up outrageously lame torts that ignored the true guilty parties and instead targeted deep pockets only tangentially connected to the harm or loss.  But nothing I made up, which I thought to be over the top, beats this one from reality.  Via Walter Olson, of course:

Prison inmate orders attack on guard at guard’s home in Bishopville, South Carolina. Surviving guard Robert Johnson and wife “did not, however, sue the typical defendants – i.e., the shooter or any prison inmate or employee. Rather, the Johnsons sued several cellular phone service providers and owners of cell phone towers.

Why?  Because they have the most money of anyone involved.  Of course, that is not the logic in the legal briefs.  Apparently, gasp, the criminals made use of cell phones to plan the crime and for some odd reason the cell phone companies were not monitoring every second of every single call on their networks and failed to prevent the crime.


Setting Terrible Legal Precedents Just To Hammer on People We Don't Like

First, we got FCC title II regulation of the Internet because a lot of people hate Comcast and saw net neutering as the perfect way to stick it to Comcast.  Now, we get a terrible copyright precedent because people don't like Pharrell Williams and Robin Thicke.

The Internet appeared to rejoice that Pharrell Williams and Robin Thicke lost their lawsuit to the estate of Marvin Gaye over alleged copyright infringements in their mega hit song "Blurred Lines." It's not that the notoriously copyright-unfriendly Internet culture found religion on intellectual property privileges but that the Internet doesn't seem to like Robin Thicke. Fair enough. But as a number of commentators have noted, it's a silly reason to support such an awful ruling. And that ruling is awful even if you believe in relatively expansive intellectual property rights because it wasn't based on any copyright Marvin Gaye's estate owns on paper....

As the author notes, are we going to soon have competing claims (and lawsuits) claiming origination of the four chord progression?

My Emotional Support Alpaca

This is a great article about the fraudulent practices people pursue to try to take advantage of rules about service animals that help people with true disabilities to bring their pets with them everywhere.  This kind of crap strikes me as being in the same category as folks who used to hire disabled kids to go to Disneyworld with them so they could skip the lines (a practice, by the way, that led to Disney giving fewer special privileges to handicapped kids because of the abuse).

I will say from personal experience that the pressure on service businesses to succumb to this sort of service animal fraud is immense, especially in places like California where the financial penalties for even tiny well-meaning infractions of bewildering ADA rules are substantial.  My employees once felt they had to allow a woman to bring her horse (!) into the park because she had letters like the ones in this article saying she required the horse for emotional support.

This week I was at a conference where a featured speaker was an executive of the Forest Service named Joe Meade who happens to be blind.  I say "happens to" because Joe is one of the best, and best-loved, executives in that organization and what makes him great has little or nothing to do with his disability.  But I watched him work his way through a hotel with his service dog -- a casino hotel I got lost in about 4 times and I could read the signs -- and the skills that dog had are simply amazing.  Service dogs like that get deference from service businesses for a reason.  It infuriates me that people are trying to counterfeit that kind of credential so they don't have to pay an extra airplane fare for their cat.  And the only way they get away with it is because of our screwed up tort system that leaves service businesses at the mercy of even the most outrageous claims.  Because we businesses have given up on, particularly in places like California, ever getting real justice.

hattip:  Overlawyered.

Thanks Popehat, for Throwing Cold Water on My Outrage

I read this in my feed today, and was all ready to vent some outrage at how we business owners were screwed over by the tort system

The owner of the Aurora movie theater that was the site of a deadly 2012 attack could have reasonably enough foreseen the danger of such an attack to be held liable for it, a federal judge ruled Friday.

Noting "the grim history of mass shootings and mass killings that have occurred in more recent times," U.S. District Court Judge R. Brooke Jackson ruled that Cinemark — owner of the Century Aurora 16 theater — could have predicted that movie patrons might be targeted for an attack. Jackson's ruling allows 20 lawsuits filed by survivors of the attack or relatives of those killed to proceed toward trial.

"Although theaters had theretofore been spared a mass shooting incident, the patrons of a movie theater are, perhaps even more than students in a school or shoppers in a mall, 'sitting ducks,' " Jackson wrote.

The about 6 spots down in my feed reader I found this from Ken White at Popehat:

The court said:

None of these facts, even when taken together, compels the conclusion that Cinemark knew or should have known of the danger that the patrons of Auditorium 9 faced. I reiterate that this Court is in no way holding as a matter of law that Cinemark should have known of the danger of someone entering one of its theaters through the back door and randomly shooting innocent patrons. I hold only that a court cannot grant summary judgment on what is normally a question of fact under Colorado law unless the facts so overwhelmingly and inarguably point in Cinemark’s favor that it cannot be said that a reasonable jury could possibly side with the plaintiffs on that question. I am not convinced. Plaintiffs have come forward with enough – and it does not have to be more than just enough – to show that there is a genuine dispute of material fact. A genuine fact dispute must be resolved by the trier of fact, not by a court’s granting summary judgment. Whether the jury will resolve this issue in the plaintiffs’ favor is a different matter entirely.

In other words, the court did not find that the shooting was foreseeable. The court found that if a jury believed the plaintiffs' experts and evidence, the jury could conceivably find that the shooting was foreseeable.

Wow, thanks for jamming a stick in to the spokes of my accelerating rage bicycle.  Ken seems to be making an implicit argument here for carefully understanding the facts first before haring off in a fever of righteousness over an inaccurate and perhaps purposefully inflammatory headline.  Boy, I don't think he understands the Internet at all.

PS-  I must agree with one of Ken's commenters -- while this may be absolutely correct as a matter of law, there is something wrong with a legal system that is going to subject Cinemark to a jury decision on whether the actions of a madman, perpetrating a crime that was by all measures unprecedented, were "foreseeable".  There has got to be some safe harbor against being responsible for bad outcomes that occur in the general vicinity of someone with deep pockets.  Juries strike me as a terrible vehicle for making this kind of determination.  Their decision is more likely to be made based on how sympathetic the plaintiff is and how rich and faceless the defendant corporation is, and not whether it is really justice to hammer a movie theater for not being prepared for crazed shooters.

Punitive Damages and Double Jeopardy

A Florida jury awarded the widow of a deceased smoker $23 Billion in punitive damages against RJ Reynolds.

Here is what confuses me -- the $23 billion is obviously not the damages to the woman and her family directly (that was a separate much lower figure) but is somehow calculated as a penalty for RJ Reynolds pursuing bad practices with everyone.  This has to be a penalty for harm to many people, perhaps to all of RJ Reynolds customers.  So what happens when there is a second suit?  Can another person get yet another $23 billion, forcing RJ Reynolds to essentially pay twice for the same bad practices?  Or if a million other ex-customers sued, could RJ Reynolds be forced to pay $23 quadrillion in total? Or should past punitive damages for the same actions be deducted from future awards, saying something like "RJ Reynolds should be penalized $23 billion but that was already paid out to someone else so the net in this suit is zero."

I have no problem suing for actual harm and have opposed limits on regular damage awards -- who can say in advance what the actual damages might have been?  Damage caps tend to be a poor substitute for cleaning up the real problems, which include junk science, no penalty for frivolous suits, and presumption of guilt against deep-pocketed defendants.  But I have never, ever understood punitive damages.

Update:  Jacob Sullum has some related thoughts

Although the main purpose of tort litigation is supposed to be making victims whole, so-called punitive damages explicitly aim to punish wrongdoers. That is usually the function of the criminal justice system, which therefore provides additional protections for defendants, including a higher standard of proof, stricter evidence rules, and penalties prescribed by statute. Attorneys seeking punitive damages do not have to contend with any of those safeguards.

The very concept of punitive damages is oxymoronic, since actual damages (a.k.a. compensatory damages) are a measure of the harm caused by a tort. Punitive damages, by contrast, express a jury's outrage at the defendant's conduct and may be completely unmoored from the injury suffered by the plaintiff (who nevertheless gets the money). In this case, the punitive damages are about 1,400 times the actual damages, which the jury put at $16 million. That huge mutiple seems to violate Florida law, which caps the ratio of punitive to compensatory damages at three or four unless "the defendant had a specific intent to harm the claimant"—a description that clearly does not apply to a tobacco company with millions of customers, even if it prevented them from making informed decisions by hiding the dangers posed by its products.

Patent Trolling: It's Not Just For Software

Via Walter Olson:

“Hundreds of home builders in the Pacific Northwest have been put on notice that if they use a dehumidifier to dry rain-damaged projects, they are infringing on a patent recently issued to a father and son who claim they invented the process.”

I wonder if I can patent "the reduction in grass height using a sharpened, spinning blade" and drive all of my competitors out of business?

Wow, Who Would Have Predicted This?

Diana Wang accepted a job.  The terms of that employment were very clear up front -- like most interns, she would be paid in skills and experience and resume fodder rather than money.  The employer provided exactly the promised terms.  So Diana Wang sued her employer.  Now she is having trouble finding anyone to hire her.  Wow, that is sure unexpected.   Maybe she could go work for Obama's OFA, except (lol) they don't pay their interns either.

Courts Have Become the Temple of Junk Science

If the Left is really as passionate as they say they are about taking on people and institutions who are anti-science, then they should be dedicating themselves to rethinking the current tort system.  Toyota may be facing $5 billion in settlements due to a defect that government reports and independent studies say is not there.

And recall NHTSA's performance during the furor almost four years ago over alleged runaway Toyotas. Its then-overseer, Transportation Secretary Ray LaHood, happily participated in congressional hearings designed to flog for the benefit of trial lawyers the idea of a hidden bug in Toyota's electronic throttle control.

When the agency much more quietly came out with a report a year later debunking the idea of an electronic defect, notice how little good it did Toyota. The car maker still found it necessary to cough up $1.2 billion to satisfy owners who claimed their cars lost value in the media frenzy over a non-defect. Toyota has also seen the tide turning against it lately as it resists a deluge of accident claims.

At first, opposing lawyers were hesitant to emphasize an invisible defect that government research suggested didn't exist. That was a tactical error on their part. In an Oklahoma trial last month involving an 82-year-old woman driver, jurors awarded $3 million in compensatory damages and were ready to assign punitive damages in a complaint focused on a hypothetical bug when Toyota abruptly settled on undisclosed terms.

In another closely-watched trial set to begin in California in March, an 83-year-old female driver (who has since died from unrelated causes) testified in a deposition that she stepped on the brake instead of the gas. The judge has already ruled that if the jury decides to believe her testimony, it is entitled to infer the existence of a defect that nobody can find.

These cases, out of some 300 pending, were chosen for a reason. Study after study, including one last year by the University of North Carolina Highway Safety Research Center, finds that elderly female drivers are inordinately prone to "pedal misapplication." If Toyota can't prevail in these cases, the company might be wise to run up the white flag and seek a global settlement that some estimate at upwards of $5 billion—quite a sum for a non-defect.

KlearGear Sucks

I don't have a lot to add about this story.  A company called KlearGear trying to fine customers for writing a bad review about it (based on some BS prior restraint on criticism buried in their terms and conditions) and then hounding the customers' credit rating through debt collection agencies.  But I am all for the Streisand effect bringing karmic retribution to such folks, so here is my contribution to Google.

By the way, I found their current header warning to be odd:


Anyone ever heard of a "business hour" before?  Since most customers would not really freak at a 48 hour or 2-day order processing time, anyone want to bet that this means 6 business days (6x8 hours) or over a week, but is meant to fool folks into thinking only two days?  I would ask them directly but there is no way to send them an email without registering first as a customer.  Since by registering, I apparently cede my ability to ever criticize them, I won't be able to write them for clarification.

Our business gets mostly positive reviews, but we get bad ones from time to time.  Every bad review is both a pain in the butt (as they hang around forever on the Internet) but also an opportunity for me to learn and identify problems in the business.  On a couple of occasions I have identified personnel problems through online reviews that let me fix a real problem before something much worse happened.

Update:  The bottom of their home page says "As seen on ABC's Good Morning America".  Yup.  LOL


Fargo, But with Lawyers and Porn

This is a little dated, but Ken White has a mega-update on the Prenda Law case he has been following.

The ins and outs of this case are complicated beyond belief (likely purposefully by the key players in a bid to obfuscate what they were doing), but the basic facts appear to point to this:  Prenda and a series of related entities were buying copyrights to porn, uploading electronic versions of these videos to known pirating sites, and then suing folks who downloaded the files  (knowing that most folks, embarrassed that they downloaded "Chubby Nurses in Heat" or whatever, will fold and pay a settlement rather than get in a public legal fight).  One reason for the complexity and obfuscation is that the porn companies (AF holdings and many other shells) have to pretend on the one hand that they didn't upload the files themselves in a "honeypot" operation, and on the other hand that they have no relation to Prenda Law.  By the way, the scheme apparently brought in about $2 million in 2012 alone of which at least two thirds, and likely more, ended up in the pockets of the key principles.

What makes the case so fun to read about is the just idiotic antics and evasions by the key players, the hapless lawyers, the "dog ate my homework" excuses in front of senior Federal judges, etc.   All this combined with an arrogance among the principles that could be a case study in the Wikipedia entry on Dunning-Kruger effect.   The bad guys remind me of nothing so much as the William Macy character in Fargo.   This, for example, is a hilarious article with examples of one principle after another offering absurd testimony to various Courts.

Since the post above, Ken has an update here.

The Problem with Job Discrimination Legislation

Congress is considering adding gays and lesbians to the list of protected groups covered by the EEOC.  As former chairman of a group that tried to get gay marriage legalized in Arizona (at least until we were shot down by gay rights groups that did not want libertarians or Republicans  helping to lead the effort), I hope I don't have to prove that I have no problem with differences in sexual orientation.  But I have a big problem with Federal employment discrimination law.

If you are unfamiliar with how it works, this is perhaps how you THINK it works:  An employee, who has been mistreated in a company based on clear prejudice for his or her race / gender / sexual orientation, etc. has tried to bring the problem to management's attention.  With no success via internal grievance processes, the employee turns finally to the government for help.

Ha!  If this were how it worked, I would have no problem with the law.  In reality, this is how it works:  Suddenly, as owner of the company, one finds a lawsuit or EEOC complain in his lap, generally with absolutely no warning.  In the few cases we have seen in our company, the employee never told anyone in the company about the alleged harassment, never gave me or management a chance to fix it, despite very clear policies in our employee's manuals that we don't tolerate such behavior and outlining methods for getting help.  There is nothing in EEO law that requires an employee to try to get the problem fixed via internal processes.

As a result, our company can be financially liable for allowing a discriminatory situation to exist that we could not have known about, because it happened in a one-on-one conversations and the alleged victim never reported it.

What I want is a reasonable chance to fix problems, get rid of bad supervisors, etc.  A reasonable anti-discrimination law would say that companies have to have a grievance process with such and such specifications, and that no one may sue until they have exhausted the grievance process or when there is no conforming grievance process.  If I don't fix the problem and give the employee a safe work environment, then a suit is appropriate.  The difference between this reasonable goal and the system we actually have is lawyers.  Lawyers do not want the problem to be fixed.  Lawyers want the problem to be as bad as possible and completely hidden from management so there is no chance it can be fixed before they can file a lucrative lawsuit.

I worry in particular about how this will play out with a new gay/lesbian discrimination law.  We have employed a number of gay couples over the years, and never had any particular internal issue  (I had to defend one couple in Florida from a set of customers who thought that it was inherently dangerous to employ gay people around children camping, but I did so gladly).  But I know I have employees who have religious beliefs different form my own such that they think gay people are damned, evil, whatever.  So now what do I do when I have one of these religious folks in conflict with an employee who is gay?  If I don't separate them, I am going to get sued by the gay person for a hostile work environment.  If I move the gay person, I will get sued for gay discrimination.  If I move or fire the religious person, I will get sued for religious discrimination.

I am happy to work hard to build a respectful, safe work environment, but such laws put me as a business owner in no-win situations.  And the lawyers who craft this stuff consider this a feature, not a bug.  Heads I sue you, tails I sue you.

Race and Modern America

One organization does not ask applicants about race and hires through a race-blind process.  The other organization hires teams of "race raters" to guess applicants' race from their name and picture.  Guess which one is suing the other for being racist.

Citizen's Initiatives Dealt A Significant Blow

Since I am part of a group working to pass a ballot initiative in Arizona to allow same sex marriage in this state, I was obviously pleased with the decision to strike down DOMA yesterday.

However, the decision not to rule based on lack of standing on the Prop 8 suit creates a real mess above and beyond any implications for same-sex marriage.

Proposition 8, a California initiative to ban same-sex marriage that likely would not pass today, was introduced and passed five years ago because the authors of the initiative knew it was a step legislators would never take but that they thought (correctly at the time) that the voters would support.  In fact, in a nutshell, this is exactly what the initiative process was meant to achieve.  If citizens think the legislative process is broken on a particular issue (e.g. taxes, where legislators have entirely different incentives vis a vis raising taxes than do taxpayers), they can do an end-run.  In a sense, this is exactly what we are doing in Arizona with our Equal Marriage initiative, though of course with the opposite desired end result from Prop 8.  But just as in that case, we do not have high hopes of the current legislator passing such a Constitutional Amendment, so we are doing it through citizens initiative.

The problem in the Prop 8 case was that when the law was challenged in court, neither the governor nor the legislature was willing to defend it in court (remember, that it was passed over their opposition).  Given the very nature of ballot propositions and the reasons for them discussed above, this is likely a common occurrence.  But the Supreme Court refused to rule on the case because, as I understand their argument, only the administrative or legislative branch of the state government has standing to bring the appeal (ie defend the original law that was overturned by a local Federal court).

This is a really bad precedent.  It means that any initiative passed by citizens that is opposed by the current state government is enormously vulnerable to attack in courts.  If the government officials are the only ones who have standing, and they refuse to defend the law, then it will lose in court almost by summary judgement.

There has got to be some process where courts can grant citizens groups who filed and passed such initiatives standing to defend it in court.  Certainly there could be some judicial process for this, almost like the process for certifying a class and its official representative in a class action suit.  Without this, citizens initiatives are going to lose a lot of their power.

Update:  Scott Shackford at Reason writes

So should we be worried? Could the reverse – voters approve gay marriage recognition only to have the state refuse to back it – happen? What if the voters approved term limits for state legislators and they just ignored it?

The majority decision was not unsympathetic to the argument (incidentally, it’s interesting to see how polite these arguments are when you end up with such an unusual combination of justices on each side) but firm in that: 1) Getting a ballot initiative passed does not make you an agent of the state with standing; and 2) If you aren’t an agent of the state who is expected to defend the law, then you have to have proof of a personal harm and the proponents do not. Arguably, if the situation were reversed (the state refusing to defend an initiative recognizing gay marriage), it’s easy to see how they could allow standing and the outcry that would cause. A person denied a marriage license from a same-sex ballot initiative may be able to prove harms from discriminatory policies and earn standing.

I had not thought of it that way, but it is interesting that the Court could not find any demonstrated harm to straight petitioners from the legality of same-sex marriage.  I suppose that is a good sign.

Congrats to Overlawyered, as it Moves to Cato

The Overlawyered blog is one of the blogs I read every day, and is one of the grand old blogs of the Internet, dating back to when AOL was relevant, was still paying for Superbowl ads, and I was still using Netscape to browse.

The move to Cato is described here.

On The Looming Death of American Football

Death by tort lawyer in 3...2...1

A Colorado jury has awarded $11.5 million in a lawsuit originally brought against helmet maker Riddell and several high school administrators and football coaches over brain injuries suffered by a teenager in 2008.” While the jury rejected the plaintiff’s claim of design defect, it accepted the theory that the helmet maker should have done more to warn of concussions.

If the helmet makers are getting nailed, wait until every high school and college in the country is sued, not to mention the massive suit looming against the NFL.  Expect to see a debate soon, beginning in state legislatures, over tort protection for football.  Texas, for example, has several of the country's tort hellholes but if Friday night high school football is threatened, you can bet that the legislature will be moved to action.

Bitcoin Prediction: Death by Tort Lawyer

The Bitcoin price correction most of us expected seems to be occurring 

BTC crashy

So what is next for Bitcoin?  I predict death by lawyer.  In modern America, no one loses this much value this fast without calling an attorney, because such losses can't possibly be due to one's own poor decision-making (e.g. buying an illiquid currency after a 5x runup in its price), it must be due to GETTING HOSED.  I am not a securities attorney, but my guess is that someone will argue Bitcoin was not a currency but a digital commodity and that commodity trading laws were not followed.  Or something like that.  The CFTC, which left MF Global customers hang out to dry, will launch a simultaneous investigation to gain pub for themselves and support the civil suit.  Because it will be a much higher priority for this Administration to kill an incipient competitive currency than to go after a major Obama bundler.

Anyway, the main entertainment value will be to see if there is actually someone who can be sued, given the dispersed nature of the Bitcoin network.  But expect people to try.  I would even bet we see the suit in days -- "entrepreneurial" tort houses probably have already drafted the paperwork and gotten some schlub to buy 1 bitcoin so he can be lead plaintiff (preferably in a hand-picked jurisdiction) in the class action and are just waiting for the bubble to burst to file.

An Insane Theory of Product Liability

Via the WSJ today:

Can a drug company be held liable for damages caused by generic drugs it didn't produce? That's the expansive new theory of "innovator liability" on parade in Alabama, where a recent ruling by the state Supreme Court could do damage throughout the U.S. economy.

In Wyeth Inc. et al., v. Danny Weeks et al., Mr. Weeks says he suffered from side effects from taking the generic version of an acid-reflux drug called Reglan. He sued Wyeth for fraud and misrepresentation, though the company didn't make the drug he took and had exited the Reglan market in 2002, five years before he took it. The court ruled 8-1 that Wyeth could be held liable for injuries because the generic manufacturer couldn't change the warnings on the product it copied.

First, this is nuts -- being held liable for problems with a product you did not make, simply because you invented it years before.   Are we going to start suing the estate of Thomas Edison every time someone buys a bad lightbulb?

But second, note how helpless Wyeth is now.  Drug makers are used to insane law suits that drain all the profit from helping millions of people to pay off a few folks who had adverse side effects (this same process literally destroyed the vaccination business until the government gave them special liability protection).

But let's accept the court victory - perhaps the drug really has a problem that has been discovered.  If the maker was being sued, he could just pull the drug from the market (as has happened any number of times after adverse suits) either forever or until the FDA will approve new warning language.

But in this case, Wyeth can't do this.  The generic drug makers will keep on selling the product - after all, they are not getting sued, and Wyeth will keep paying.  Wyeth does not even have standing to try to get the FDA to change the warnings on the drug.  If Wyeth tries to buy out the generic maker and shut it down, and new seller will simply takes its place.    If this case stands, Wyeth can be steadily bled to death and there is nothing they can do to stop it.

Finally, I don't want to get away without a mention of just how broken the FDA drug regulation regime is.  The original Supreme Court decision that led to the generic maker being immune to suits really turned on the impossibility of getting the FDA to change even one word on a drug's warning label.

I Thought We Got Bizarre Workers Comp Claims at My Company

... but these are worse.  But for someone who runs a small business, not wildly surprising.  Employers who believe that abject carelessness and rule-breaking on the employee's part should result in no claim do not have sufficient experience with the system.  At this point, whatever its origins, workers comp is effectively no-fault bad outcomes insurance.  If a bad thing happens to the worker on the job, then it generally pays no matter what the fault or facts of the case.

Our problem tends to be that we get a whole heck of a lot of "injuries" in the 3-4 hours between when we fire someone and when they leave the property.

Via Overlawyered.

Is The NFL Doomed?

I think Megan McArdle is being naive about the tort system in this country when she writes

So Junior Seau's family is suing the NFL over head injuries, which lead to chronic brain damage, and possibly his suicide.


But this lawsuit strikes me as pretty out there.  Junior Seau can't possibly have been unaware that football caused head injuries.  Nor even that multiple concussions are probably bad for you.  Note how many people are still playing, even though we now know this all too well.

Really?  I know of cases where people have successfully sued for drownings that occurred within feet of a no swimming sign.  I could easily ask if there are really people unaware that water can cause drownings.   Any sense of individual responsibility has been stripped from the tort system, such that it has become a way for folks who had bad outcomes of some sort to cash in from deeper pockets, irrespective of any reasonable sense of justice.

The NFL knows this and is clearly running scared.  How do we know?  Just look at Saints coach Sean Payton, who just went back to work after a one year suspension, a historically really large penalty for a coach.  He was accused of tangential association with a bounty system players and coaches had in place for great plays that may also have been a bounty system for injuring opposing players.  The NFL knows this goes on all the time, but must now prepare for the day they are in court getting sued for having an unsafe work environment.  They do not want a case based on negligence to be made far worse by accusations that the league was actively promoting behavior that created injuries.  So they threw the book at him.  The other folks who were suspended threatened the NFL with suits for all sorts of due process errors, but the NFL didn't care.  They can survive a judgement on an unjustified suspension of one or two players.   They cannot survive a judgement on causing hundreds to have brain damage.

Quoting from Walter Olson, who spends most of his time studying the tort system in this country:

 if subjected to the same injury liability rules that American courts apply to other businesses, organized football is unlikely to survive.