Wednesday, November 10, 2004

Excessive Litigation

The last of the five major concerns to be covered from "My Mandates" is excessive litigation.

The law is the fundamental strength of this country. In theory, it doesn't matter if you are an auto mechanic from Peoria or a corporate executive in Philadelphia... the laws are blind to personal circumstance. Of course, the ability to pay for legal counsel differs among our population... but the law is, technically, neutral.

Why then the great concern about excessive litigation? The U.S. government has had formal hearings to discuss the impact of perceived excessive litigation. Everything from fishing to education to medical malpractice to nearly anything and everything.

Nevertheless, "nothing is ever as simple as it first seems." Professor Deborah L. Rhode is the Ernest W. McFarland Professor of Law and Director of the Stanford Center on Ethics at Stanford University.

The real problems with the litigation system, Rhode suggested, involve its expense, inefficiency and the inconsistency of results. Few victims file successful claims, those with the most serious injuries receive too little and, all too often, lawyers are overcompensated. Citing class action cases, where class members’ injuries are often minimal yet settlements are expedient, Rhode noted that, “the real parties in interest are the lawyers.”
Roughly translated, that means "it's not the lawsuits, it's the suits filled with lawyers."

In Henry VI, Shakespeare wrote, "The first thing we do, let's kill all the lawyers." As pointed out by many,
The accolade is spoken by Dick the Butcher, a follower of anarchist Jack Cade, whom Shakespeare depicts as "the head of an army of rabble and a demagogue pandering to the ignorant," who sought to overthrow the government. Shakespeare's acknowledgment that the first thing any potential tyrant must do to eliminate freedom is to "kill all the lawyers" is, indeed, a classic and well-deserved compliment to our distinguished profession.
Is excessive litigation a problem? It appears the answer is both "yes" and "no". It is not a problem in the sense that legitimate litigation redresses wrongs. What appears to be excessive is the incentive to sue on the part of some lawyers. Contingency fees have become the center of focus for those who believe that certain lawyers thrive on filing individual and class-action suits designed to exploit the propensity of some juries to award "damages" for unsubstantiated "injuries". Vice-presidential candidate John Edwards was often accused of that very strategy during the course of the recent election campaign.

Yet, the American Bar Association vigorously defends continginency fees and argues that it is a needed and noble practice where the lawyer assumes the expense risk for a client who is unable to afford the cost of litigation... in return for a share of the award, if any... and limiting or eliminating such fees would actually do more harm than good.

The ABA doesn't represent the thinking of all legal experts;
Jeffrey O'Connell cowrote an article in the March 15 National Law Journal arguing for a proposal that would limit excessive contingency fees, saying "The proposal would create an incentive for settlement offers that would net claimants what they would receive under the current system, or even more, while saving defense litigation costs. Some critics charge that the proposed rule will create situations that benefit everyone except the lawyers. Just so: The reform is designed to benefit injured parties and American consumers."
The strength of our nation is that we are a nation of laws. The weakness that many perceive is that we are not a nation of ethical behavior... which is, perhaps, why we perceive that legal behavior is not always the most desirable behavior.

Our nation needs lawyers and courts to protect its citizens from the unethical behavior of other citizens, corporations, and the government itself. What may be needed is enforcement of laws that protect other citizens, corporations and the government itself from unethical behavior (not necssarily as defined by the ABA) of some of its citizens... which may include lawyers who target certain industries or professions, not because of inferior products or services, but because they can and because it rewards them well.
Side note: I have one son who is an engineering consultant for a firm that evaluates products involved in lawsuits to determine if injury is caused by faulty product design, insufficient instructions for use, or poor warning labels... or faulty product users. I have another son who plans to become a lawyer. They are both highly ethical people. Our society needs both for its protection.

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There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
It was beautiful and simple, as truly great swindles are.
- O. Henry
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Tracking Interest Rates

Tracking Interest Rates


SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)