GlobalTort

Success for a Litigation Funding Firm - Burford Capital

Kirk Hartley — Thu, 29 Jul 2010 06:49:40 -0600

Burford Capital, a litigation funding business, is back in the news, with success. Here is an AmLaw Daily article by Andrew Longstreth regarding the firm's apparent 40% share of a $ 110 million verdict. Here is Burford's latest press release with general data on it's overall portfolio results since it went public last fall on the AIM market. The company's shares trade as BUR.

Note that the successes of the client and Burford are in part a function of being embraced by Wall Street law firms in general, and by a lawyer who often represents the insurance industry. Thus, a major New York law firm, Simpson Thacher, was the law firm that introduced its client to Burford. Second, the AmLaw article attributes the introduction to one of Simpson Thacher 's senior partners, Barry Ostrager. Mr. Ostrager is very well known as a lead lawyer for the insurance industry. According to the website at the firm:

"Mr. Ostrager has been prominently involved in supervising the firm's major insurance and reinsurance practices in both its New York and Los Angeles offices. He has been lead trial counsel in more than a dozen major insurance coverage cases, including Shell Oil Co. v. Winterthur Swiss Insurance Company, a multi-billion dollar environmental insurance coverage dispute in which the jury returned a verdict for the insurers after a sixteen-month trial."

Rethinking Standard Answers in Science - It's Not Just the Dose; Timing Sometimes Matters More Than Dose; A New Example from Lupus

Kirk Hartley — Tue, 27 Jul 2010 06:44:05 -0600

For years, scientists involved in "toxic tort" cases focused mainly on the dose, and less so on the timing and volume of particular doses. Accordingly, toxic tort lawyers focused in the same places with respect to "exposure" to alleged toxins.However, the focus on overall dose can be misleading. Indeed, today, more and more science focuses on the timing of the dose, and the volume of a particular dose.

Consider, for example, DES given to pregnant mothers. The lesson learned from DES is that the adverse consequences of DES use were significantly worse when the drug was taken during the first trimester, as illustrated by this study of "DES sons."

The same principle also applies to some medical treatments. Thus,ScienceDaily today brings an example from the treatment of lupus. For years, the standard of care was to provide intravenous steroids, followed by monthly high doses. Now, however, cellular level research is suggesting that the standard of care may we ll be wrong. Instead, the better treatment may be more frequent, high doses when the disease first appears.

Why ? Apparently the higher, earlier doses do a better job of killing the cells causing the disease symptoms. Thus, the article explains:

"They found that pulse doses of intravenous steroids kill off the cells -- called plasmacytoid dendritic cells -- producing interferon alpha, a protein that promotes this inflammation. Oral corticosteroids given at much lower doses did not have this effect.

"Now we have the biological rationale for why pulsing is often more effective than standard therapy," said Dr. Tracey Wright, assistant professor of pediatrics at UT Southwestern and another study co-author."

Conclusion? Both lawyers and scientists need to remember to test old assumptions and beliefs.

Bankruptcy Courts Seem to Be The World's Biggest Litigation Funders, But Fail to Apply Free Market Rules to Reduce Expenses

Kirk Hartley — Mon, 26 Jul 2010 07:57:41 -0600

A couple of observations on the Lehman bankruyptcy fees now that the case is back in the news as total professional fees approach $ 850 million, and Weil's fees edge just over $ 200 million. The fees rankle many because lawyers are being paid stunning hourly rates, such as over $ 1,000 for partners, and over $ 500 for young lawyers. Those numbers make no sense when much of it is for work that's nothing more or less than complex commercial litigation that could be done by many of the thousands of really good commercial litigation lawyers in the United States.

One observation is that the issues here are not new; the scale is simply bigger. Because this is not a new issue, critical thoughts and ideas are out there, and have been for some time. Indeed, expert ideas and commentary readily available from Professor Lynn LoPucki and others. Consider, for example, the following information stated on Professor LoPucki’s website page at UCLA Law:

“LoPucki has engaged in empirical research on large public company bankruptcies for the past twenty-five years and has been quoted in several hundred news articles on the topic in just the past five. His Bankruptcy Research Database http://lopucki.law.ucla.edu provides data for much, if not most, empirical work on the topic. LoPucki’s book, Courting Failure: How Competition for Big Cases Is Corrupting the Bankruptcy Courts (University of Michigan Press 2005) shocked the bankruptcy world with empirical evidence regarding the effects of forum shopping and court competition. The debate over those allegations has dominated recent scholarship in the field. LoPucki and his frequent coauthor, Joseph W. Doherty, are currently working on another book, Controlling Professional Fees in Corporate Bankruptcies, under contract with Oxford University Press.” (emphasis added).

Some defend the fees by saying the leaders of the estate are adding value, often by bringing lawsuits to recover money. What that really means is that the Lehman bankruptcy estate is the world's biggest litigation funder for litigation from one entity, and the US bankruptcy court system is the world’s biggest collection of litigation funders.. Unfortunately, the US Trustee's office and the judges apparently lack the resources or desire needed to manage the fees paid to bring lawsuits. So, in place, there is a bankruptcy cartel in which a few judges and lawyers take most of the big cases and work. That's possibly the least free market approach one could devise, except that it is at best problematic to see courts competing for cases.

So, why not bring free market principles into play for doing the litigation? District judges overseeing class action cases innovated competitive bidding and selecting among competing legal representatives, as described here, and here, back in 2006. The Federalist Society was pushing the concept back in 2002. Also see this paper on awards to class representatives.

Bankruptcy courts can and should at least be demanding competitive bids for doing litigation, and perhaps even to represent the estate. Yes, some will argue that the debtor should get its choice of counsel, but ask: why? The business went badly enough that it cannot operate with government court help. What reason is there to think the current owners and managers will make a good choice on counsel?

In sum, there are plenty of reasons why some say it's well past time to end the bankruptcy court cartels created by a few firms and courts, with forum shopping as a big part of the equation. For more on the forum shopping and competition between courts, see Professor LoPucki’s book, Courting Failure: How Competition for Big Cases Is Corrupting the Bankruptcy Courts (University of Michigan Press 2005). Hopefully the new book on controlling fees will be out soon !!

Call for Papers; on a Great Topic: Vulnerability and the Corporation; Perhaps There are Lessons to Learned from Asbestos

Kirk Hartley — Sun, 25 Jul 2010 04:48:56 -0600

Today’s post highlights an upcoming academic conference as it relates to the use of asbestos in developing nations. Perhaps some of you have answers or thoughts to contribute to the conference.

As is illustrated by the work of investigative reporters referred to in this post from Friday, it is plain that that companies in so-called “developing nations” are repeating asbestos-related public health failures that previously occurred in the United States, Europe and Australia. Any compassionate, thinking person has to ask why the mistakes are being repeated, and what can be done to chart a different course.

Plainly, one part of the answer is that people need work. Over the years, I heard scores of former asbestos-workers acknowledge that they knew their were some hazards, but they went ahead and worked with asbestos despite knowing of “dangers.” Simply put, they needed the work to support their families. Much the same story no doubt will be told in future years in the many different languages of Russia, China and South America.

Consider also this prior post with the same kinds of statements from Russians working with mammoth tusks, and at risk from the tusks. They stayed with the work because it included extra pay for working with a hazard.

One would hope that that corporations and developing nations would do better than repeating past mistakes, but that does not appear to be happening. Accordingly, it was strangely coincidental to read this Conglomerate post that describes a relevant October 29 and 30 academic conference aimed at addressing some of those types of questions. The conference is at Emory University School of Law, and is titled: Vulnerability and the Corporation. The conference’s call for papers is here, with an August 15 deadline. The conference is sponsored by the Vulnerability and the Human Condition Initiative and The Feminism and Legal Theory Project.

One possible topic mentioned for conference papers is directly relevant to the subjects highlighted by the reports on asbestos use and/or working with dusty mammoth tusks. That topic is:

“Regulatory responses to the vulnerabilities produced by corporations including, in particular, questions of worker welfare, protection and environmental justice.”

The conference website page describes the conference as follows:

“Vulnerability, understood as a universal and constant part of the human condition, is an important paradigm within which to consider and evaluate the ways in which states respond (or fail to respond) to individual, structural and community catastrophes. This workshop will build on the notion of a responsive state and consider the relationship between corporate structures, vulnerability, and state responsiveness. In the first instance, we recognize that increasingly corporations—whether operating on a local, national or transnational basis—act in ways that can either exacerbate or alleviate human vulnerability. Corporations can cause or complicate the inherent vulnerability of their employees and their dependents, as well as exploit the ecology and vulnerability of our natural and created environments. How should the state respond to this powerful potential for benefit or harm that is lodged in a “private” institutional actor? In addition, corporations may themselves be conceptualized as vulnerable entities. The corporation itself has been recognized as a “person” under the US Constitution, entitled to legal rights and protections and as a holder of human rights under the European Convention on Human Rights. How does the concept of corporate personhood differ from that of the natural person in law and what are the implications of those differences for state responsiveness and regulatory policy?”

The conference website also provides a range of possible topics. The complete list is:

The identification as corporations as rights-bearers and the implications of the disembodiment of rights protection;

The transfer of power from the state to the corporation and implications for individuals as citizens/consumers/subjects/objects of state-like power;

The implications of the conceptualisation of corporations as legal persons with standing;

Regulatory responses to the vulnerabilities produced by corporations including, in particular, questions of worker welfare, protection and environmental justice;

State, regional and international responses to perceived corporate and market vulnerability and the vulnerabilities that may emerge from such responses;

Distinctions between human vulnerability and corporate vulnerability and implications of such distinctions for appropriate state responses;

The potential for the Corporate Social Responsibility and Business and Human Rights movements to enhance theories of appropriate state and corporate responses to vulnerability;

Connections and disconnections between experiences of vulnerability by and of the corporation between the Global North and the Global South.

Global Investigations and Publicity on Increasing Global Asbestos Use - An Amazing Online Compilation Created Through the Joint Efforts of the International Consortium of Investigative Journalists, The BBC, The Center for Public Integrity, and Many Others

Kirk Hartley — Fri, 23 Jul 2010 08:08:47 -0600

Today continues the look at sources of global information regarding the burgeoning industries using asbestos, and their connections to sovereign governments. Here's the story behind the story. The resources below are well worth a look and contemplation.

The Center for Public Integrity is the website host for a massive collection of information on the global asbestos trade, with a focus on Brazil, Canada, China, India, Mexico, Russia, and the United States. That extensive cache of information was created through joint efforts described below in this quote from the CPI website:

"In the fall of 2009, the International Consortium of Investigative Journalists began looking into the global trade in asbestos, a cancer-causing fiber banned or restricted in much of the industrialized world but aggressively marketed in developing countries. What evolved was a nine-month investigation of an international lobby, much of it coordinated from Canada, which promotes the use of asbestos in construction materials and other products.

ICIJ joined with reporters and producers with the BBC's International News Services to document the asbestos industry’s activities in Brazil, Canada, China, India, Mexico, Russia, and the United States. Our investigation concluded that the industry has spent nearly $100 million since the mid-1980s to keep asbestos in commerce. The team’s reporting reveals close relationships among the industry, governments and scientists, and cites predictions from health experts that new epidemics of asbestos-related disease will emerge in the coming decades. Some experts believe that by 2030, asbestos will have taken as many as 10 million lives around the world.

Dangers in the Dust: Inside the Global Asbestos Trade is based on extensive research in eight countries. The team relied on thousands of pages of documents, including court filings, scientific studies, and financial records, as well as on interviews with health officials, industry representatives, scientists, victims, lawyers, and activists."

Future Asbestos Claiming Evidence Now Online on the BBC with Respect to Asbestos Use in India, China and Russia

Kirk Hartley — Thu, 22 Jul 2010 10:23:17 -0600

Information popping up lately on the BBC and elsewhere indicates that evidence is being gathered today for tomorrow’s claims against the non-US entities that are increasing involved in using asbestos. One example is this July 21 BBC article and video presentation regarding asbestos use in Russia. Preceding days included features on asbestos use in China, and in India.

In general, the pictures and videos show that assertions about “safe use” practices for asbestos are in general assertions of myths and theories that have virtually nothing to do with reality. Some parts of these news stories no doubt will be end up as evidence for future claims against the entities and governments involved in the short-sighted decisions to ignore the realities of the specific risks involved in asbestos use. It is true that the white, serpentine types of chrysotile fibers are much, much less toxic than the amphibole blue (crocidolite) and brown (amosite) fibers. However, many (but not all) chrysotile deposits include tremolite asbestos fibers that are essentially amphibole fibers. Therefore, the mined chrysotile fibers also include some small amount of tremolite fibers. Accordingly, it's not accurate or enough to argue simply that it's safe to use the white fibers.

Spanish Trial Court Enters Judgment for Plaintiffs in a Lawsuit Regarding "Neighborhood Exposure" to Asbestos from a Factory

Kirk Hartley — Tue, 20 Jul 2010 07:28:24 -0600

Spain. As readers may recall, its Supreme Court last year approved the use of contingent fees, as described in this prior post. More recently, asbestos litigation took a new turn in Spain through last week’s judgment in favor of persons living in relatively close proximity to an asbestos-cement factory that used and spewed out asbestos fibers. According to this brief news article, “Spanish construction materials firm Uralita was ordered to pay 3.9 million euros (4.9 million dollars) to 45 people who for decades lived near its factory in a Barcelona suburb, for "damage to the lungs, leading in some cases to death", according to the ruling obtained by AFP Wednesday.” Thus, Spanish law now includes a recovery for a so-called “neighborhood exposure.”

More specifics on the proceedings are kindly provided by Albert Azagra, a Spanish lawyer and law school teacher with a long-standing interest in asbestos litigation. Set out below is the informative abstract for an article he’s writing on the judgment; the abstract includes a link to the opinion. The full article is expected to be published shortly in InDret. The abstract states:

“Recent developments mark a turning point in Spanish asbestos litigation. Aggregate litigation, non-occupational exposure, and pleural plaques are posing challenges familiar to lawyers and

scholars from other jurisdictions.

The Judgment of the 46th Trial Court of Madrid, July 5th 2010 (J. Javier Sánchez-Beltrán) is the latest example. A manufacturer of asbestos-cement products was found liable for injuring neighbors of a factory located in the province of Barcelona. The relevance of the judgment among reported decisions on asbestos litigation is, at least, six-fold: (i) environmentally-exposed victims are awarded damages for the first time; (ii) domestic exposure is considered to trigger liability for the second time; (iii) the award ranks among the highest so far: 3.918.594,64 €; (iv) the interests of as many as forty-seven neighbors -or their relatives- were at stake; (v) most of the neighbors were asymptomatic or suffered only minor injuries; (vi) the judgment was delivered by a civil court applying a three-year statute of limitation and combining negligence and strict liability criteria, while labor courts deciding on occupational exposure cases generally apply a one-year statute of limitation and a negligence rule.

This article comments on the judgment and analyzes practical and theoretical problems that may arise both from aggregate litigation and pleural plaques litigation. It also points out some likely consequences of having environmentally-exposed victims as plaintiffs in an increasing number of cases.”

Dole Banana Worker Cases Illustrate the Conflicts Between "Good" Plaintiffs and "Bad" Plaintiffs

Kirk Hartley — Sat, 17 Jul 2010 12:06:58 -0600

Here is an article reporting on Los Angeles Superior Court Judge Victoria Chaney ruling on the contentious issues regarding a jury verdict involving six people who claimed to have suffered personal injuries from having worked at a Dole banana plantation in Nicaragua. Judge Chaney overturned a jury verdict, and said she would issue a written opinion soon. The opinion probably will make for interesting reading.

The Dole situation illustrates the ways in which merits issues for "good" plaintiffs can be corrupted by the actions of "bad" plaintiffs. The ongoing saga also illustrates the amount of spin that is endemic to major mass tort cases, and why detailed coverage and questions would help readers make better judgments. For example, in prior chapters in this saga, Dole sued a filmmaker in Europe for defamation, but then dismissed the lawsuit after complaints by consumers and others.

The lawsuits arise from a situation that Dole created by using overseas a pesticide that was the subject of great concern in the US, and indeed was later banned in the US before Dole stopped using it in Nicarauga. Dole defends use of the pesticide on the grounds that doing so was still "legal" in Nicaragua. Decisions that are "legal" may still constitute bad decisions that may result in liability for negligent or willful conduct, and so Dole appears to be hardly an innocent. The following excerpts from a prior post link to an August 19, 2009 Wall Street Journal article by Steve Stecklow that provides an overview of why the issues exist at all. The facts reported by the WSJ do not paint a pretty picture of Dole, to say the least. But, a current reader about the "bad" plaintiffs might never know of those realities because the current article does not revisit the general factual setting. As per the WSJ:

" DBCP, short for dibromochloropropane, was widely used around the world in the 1960s and 1970s to control microscopic worms called nematodes that attack roots and destroy crops. "The first year after we used" the pesticide, "the bananas were huge," says Isaias Paz, who worked for years as a foreman on a Dole-operated banana plantation outside Chinandega.
In 1977, California health officials discovered that workers at a DBCP manufacturing plant there had become sterile. Another manufacturer, Dow Chemical Co., one of Dole's suppliers for Central America, stopped production and announced a recall.

Dole, which began using the pesticide in Nicaragua in 1973, had a contract to purchase DBCP for another two years. It threatened Dow with breach of contract for stopping deliveries, stating there was no evidence that plantation workers who apply DBCP had been rendered sterile, according to records in a lawsuit later filed by Dow against a Dole unit in Michigan circuit court. In 1978, Dow agreed to sell Dole some of its remaining stocks only after the fruit company agreed to hold Dow harmless from any injury claims.

In 1979, the U.S. Environmental Protection Agency banned DBCP in the U.S. for nearly all uses, including bananas, stating that "farm workers, pesticide applicators and the public at large...run varying degrees of risk of cancer, gene and chromosomal damage" and male infertility. Dole stopped using the pesticide in Nicaragua in 1980, according to Scott A. Edelman, a Dole attorney. The company's "use of the remaining stocks" of DBCP from 1978 to 1980 "was legal," he says."

Looks Inside the Litigation Industry Through Documents Coillected in Discovery - Tobacco Industry Documents and Some Scruggs Documents Collected and Posted On-line

Kirk Hartley — Fri, 16 Jul 2010 07:53:45 -0600

The litigation industry is full of spin and efforts to create headlines that influence outcomes. Many of the stories make it to press without much context or detail. So, it's interesting to see the inside documents behind the headlines. To that end:

This link is to about 4 million collected on-line documents regarding the tobacco industry.

This link is to an Overlawyered blog post that includes links to some of the documents related to Dickie Scruggs' conviction.

Continental/CNA - The Latest Insurer to Seek to Limit Risks for Paying Defense and Indemnity Expenses for Asbestos Litigation and Other Third-Party Claims

Kirk Hartley — Thu, 15 Jul 2010 06:57:04 -0600

The insurance industry continues to create new structures to complicate and limit the risks of paying defense or indemnity for third party tort claims. Thus, set out below is the text of this on-line press release from Continental/CNA this morning. The bottom line is that Continental/CNA is seeking to transfer the financial risk of its asbestos and environmental insurance obligations. The transferee will be Warren Buffet/Berkshire's National Indemnity Company.

The transfer is to be accomplished through a new reinsurance contract that is said to be subject to a top end cap at $ 4 billion. If the transaction is concluded, Berkshire will then have an even more massive share of the asbestos litigation risk.

Berkshire previously took on similar but more massive risk for London insurance vehicle Equitas (today is known as Resolute) in a $ 7 billion deal, as is described here in general and here in some detail. Much of Berkshire's insurance risk acquisition took place after Buffet/Berkshire bought Johns-Manville through a deal announced back in 2000.

Is this deal "good" or "bad." ? Many answers are possible, depending on one's perspective. The bottom line, however, is that the risk transfer deals are happening frequently, and most regulators, insureds and tort claimants are doing very little to scrutinize the deals in any material way. One might argue there are parallels to the failure of regulation for markets for CDOs and derivatives. Why ? Among other things, the deals are complex, and the results may not be fully felt for many years. Then again, the results may come to roost sooner, depending on what happens in the litigation industry.

One should consider Warren Buffet's 2005 statements on why he loves insurance and how key it is to the Berkshire empire. The bottom line is that insurers love to take in premiums (money), and make more profits if they do not pay claims, or pay very slowly. Thus, as quoted in this Insurance Journal article, Mr. Buffet said:

___________________________________________________________________________________________________________

CNA Enters into Agreement to Transfer Its Asbestos and Environmental Pollution Liabilities to National Indemnity Company

CHICAGO, Jul 15, 2010 (BUSINESS WIRE) --

CNA Financial Corporation (NYSE: CNA) announced today that its principal operating subsidiary, Continental Casualty Company, together with several of its other insurance subsidiaries, have entered into an agreement with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc., under which the CNA companies' legacy asbestos and environmental pollution liabilities will be transferred to NICO. Under the terms of the transaction, effective January 1, 2010 the CNA companies will cede approximately $1.6 billion of net asbestos and environmental pollution liabilities to NICO under a retroactive reinsurance agreement with an aggregate limit of $4 billion. The aggregate reinsurance limit will also cover credit risk on existing third party reinsurance related to these liabilities.

The CNA companies will pay to NICO a reinsurance premium of $2 billion and also transfer to NICO the right to collect billed third party reinsurance receivables with a net book value of approximately $200 million.

To secure its obligations, NICO will deposit $2.2 billion in a collateral trust for the benefit of the CNA companies. In addition, Berkshire Hathaway Inc. has guaranteed the payment obligations of NICO up to the full aggregate reinsurance limit as well as certain of NICO's performance obligations under the trust agreement.

NICO will assume responsibility for claims handling and collection from third party reinsurers related to the CNA companies' asbestos and environmental pollution claims.

"We believe this transaction is consistent with our focus on financial stability and delivering improved levels of operating consistency as we effectively eliminate a significant source of uncertainty from these legacy liabilities" said Thomas F. Motamed, Chairman and Chief Executive Officer of CNA Financial Corporation. "This transaction will allow us to sharpen our focus even further on the execution of strategies to improve and grow our on-going core businesses."

The closing of this transaction is subject to the receipt of required regulatory approvals and the satisfaction of other closing conditions. The closing is expected to occur in the third quarter of 2010 at which time CNA expects to recognize an after-tax loss of approximately $375 million.

Serving businesses and professionals since 1897, CNA is the country's seventh largest commercial insurance writer and the 13^th largest property and casualty company. CNA's insurance products include standard commercial lines, specialty lines, surety, marine and other property and casualty coverages. CNA's services include risk management, information services, underwriting, risk control and claims administration. For more information, please visit CNA at www.cna.com. CNA is a registered trademark of CNA Financial Corporation.

FORWARD-LOOKING STATEMENT

This press release may include statements which relate to anticipated future events (forward-looking statements) rather than actual present conditions or historical events. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and generally include words such as "believes", "expects", "intends", "anticipates", "estimates", and similar expressions. Forward-looking statements, by their nature, are subject to a variety of inherent risks and uncertainties that could cause actual results to differ materially from the results projected. Many of these risks and uncertainties cannot be controlled by CNA and include the satisfaction of the conditions to closing, including receipt of regulatory approvals, whether the contemplated transaction will close, whether the other parties to the contemplated transaction will fully perform their obligations to CNA, the uncertainty in estimating loss reserves for asbestos and environmental pollution claims and the possible continued exposure of CNA to liabilities for asbestos and environmental pollution claims. For a detailed description of other risks and uncertainties affecting CNA, please refer to CNA's filings with the Securities and Exchange Commission, available at www.cna.com.

Any forward-looking statements made in this press release are made by CNA as of the date of this press release. Further, CNA does not have any obligation to update or revise any forward-looking statement contained in this press release, even if CNA's expectations or any related events, conditions or circumstances change.

SOURCE: CNA Financial Corporation

CNA Financial Corporation
MEDIA CONTACT: Katrina Parker, 312-822-5167

"The Power of Float

The source of our insurance funds is "float," which is money that doesn't belong to us but that we temporarily hold. Most of our float arises because (1) premiums are paid upfront though the service we provide - insurance protection - is delivered over a period that usually covers a year and; (2) loss events that occur today do not always result in our immediately paying claims, because it sometimes takes many years for losses to be reported (asbestos losses would be an example), negotiated and settled. The $20 million of float that came with our 1967 purchase (National Indemnity- NICO) has now increased - both by way of internal growth and acquisitions - to $46.1 billion.

Float is wonderful - if it doesn't come at a high price. Its cost is determined by underwriting results, meaning how the expenses and losses we will ultimately pay compare with the premiums we have received. When an underwriting profit is achieved - as has been the case at Berkshire in about half of the 38 years we have been in the insurance business - float is better than free. In such years, we are actually paid for holding other people's money. For most insurers, however, life has been far more difficult: In aggregate, the property-casualty industry almost invariably operates at an underwriting loss. When that loss is large, float becomes expensive, sometimes devastatingly so."

NICO's Strategy: Pricing Discipline

When we purchased the company NICO - a specialist in commercial auto and general liability insurance - it did not appear to have any attributes that would overcome the industry's chronic troubles. It was not well-known, had no informational advantage (the company has never had an actuary), was not a low-cost operator, and sold through general agents, a method many people thought outdated.

Nevertheless, for almost all of the past 38 years, NICO has been a star performer. Indeed, had we not made this acquisition, Berkshire would be lucky to be worth half of what it is today.

What we've had going for us is a managerial mindset that most insurers find impossible to replicate.

Influencing Legal Developments Outside the US - When Is It OK to Seek to Influence the Development of Non US Legal Systems ?

Kirk Hartley — Wed, 14 Jul 2010 08:46:20 -0600

Perspective certainly matters when it comes to influencing the development of legal systems around the globe.

On one side, consider some of the arguments from "big oil." Thus, In its blog and other writings attacking tort litigation and justice in Ecuador, Exxon Mobile has complained bitterly about efforts by plaintiff's lawyers to influence how tort law developed in that country. Is that a legitimate complaint?

Some would say no. Why? All around us are efforts to influence how law develops in other countries and in the US. Consider, for example, today's NLJ article about "big business" testimony asking Congress to try to influence what China does with its nascent antitrust law. Thus, the article states:

"But, they said, the U.S. government should act to influence how Chinese agencies implement the law. They suggested creating a high-level task force of U.S. antitrust officials and trying to help train Chinese regulators who are new to antitrust law. They also emphasized transparency, so that U.S. companies know why Chinese officials made their decisions."

One has to wonder what the record would show if plaintiff's lawyers were allowed to take full discovery on all of ExxonMobile's efforts to influence the development of laws around the world.

The Beat Goes on for Chapter 11 Asbestos Cases - Circor Leslie Controls Seeks the the Cleansing Treatment

Kirk Hartley — Mon, 12 Jul 2010 08:00:22 -0600

Another day, and another company makes strategic use of chapter 11 to cleanse itself of tort claims, with these claims arising from asbestos litigation. Today's company ? Circor's Leslie Controls, a past maker of pumps used on Navy ships. The WSJ article is here, and the company's press release is here. Unlike the last two filings, this one is a prepack.

Once upon a time, law professors taught law students that tort law was a subject controlled by the states under the genius of the dual federal/state system. One certainly hopes they've amended their lectures to review and explain the federal bankruptcy court takeover of a significant portion of tort claiming.

New Opinion Relating to Litigation Funding, Joint-Interest and Legal Privilege

Kirk Hartley — Thu, 08 Jul 2010 08:15:45 -0600

This AmLaw article by Andrew Longstreth addresses a new opinion on privilege in the context of case with litigation-funding in place. The article is well worth reading for background, but seems to me a bit gloomier than is warranted as to the impact for litigation funding. The article also is amusing for the addition of a later comment offered by the US Chamber of Commerce, which is NOT a fan of litigation-funding.

The opinion is an appeal from a ruling by a magistrate judge, so of course review was limited and deferential. The district court opinion is here. I've not yet obtained the prior ruling, but will add it when possible. The key exceprts on privilege are as follows, and indicate that Judge Farnan sees the law as open to development in this area:

"Judge Stark noted that the state of the law regarding common interest is unsettled and that this case presented a close question. (Tr. at 65:24 66:3.) He then conducted a survey of cases demonstrating the differing views within the Third Circuit on "how common the supposed common interests have to be," and noted the apparent trend favoring Facebook's position. (Tr. at 66:4-68:5; 69:15-18.) Although Leader summarily contends that the Order was clearly erroneous because documents were exchanged after a common interest was created, Leader has made no argument, and the Court has no basis on which to conclude, that Judge Stark misapplied the relevant law. Moreover, Judge Stark took into consideration that Leader had the burden of establishing the exisstence of the privilege, and the numerous policy considerations, including the need for litigation financing companies and the truth-seeking function of litigation. (Tr. at 69:19-70:16.) Additionally, Judge Stark looked to ethical guidelines from both Pennsylvania and New Jersey suggesting that privilege may be waived in a situation such as this. (Tr. at 70:17-71:22.) Aside from disagreeing with the outcome, Leader has failed to argue that there are any specific deficiencies or flaws in the ruling. In light of the thorough and well-reasoned analysis conducted by Judge Stark, the Court cannot conclude that the March 12, 2010 Order was clearly erroneous."

Scientists (and Someday, Jurors) Now Able to Watch Some Forms of Life Develop from Moment One - Imagine the Future Uses

Kirk Hartley — Wed, 07 Jul 2010 09:23:08 -0600

Wow ! This article from the Howard Hughes Institute explains - and shows images from - new microscopes that can watch and record the evolution of life as cells begin dividing at moment one. This technology did not exist two years ago, but now it exists and works well. Go here to see video of the process, and video generated from the process.

According to the article, this technology will soon be commercially available. Imagine the uses. One might be to compare the evolution of creatures with and without genetic damage. Who will need epidemiology if cause and effect can be osberved and recorded ?

Here are key excerpts:

"Using the new set-up, Keller’s team captured zebrafish development for 58 hours, generating a microscopy data set that comprises one million high-resolution images, as well as early development of a fly embryo. Reconstructing cell positions in the live fly recording by automated computer algorithms allowed the scientist to create a Digital Fly Embryo. It will be easy to implement the technique in other developing animals, he says, because the striped patterns can be adjusted during the experiments to get the maximum amount of information from the changing embryo.

Keller says that the technology will be commercially available soon, making it possible to get a systems-level understanding of how cells are behaving and interacting with each other and forming the various different tissues and organs in an organism. Multiple levels of molecular biology, such as genes and proteins, can be examined in real time in the context of the entire developing embryo."

Innovative Legal Partnering to Prosecute Public Corruption in Guatemala

Kirk Hartley — Tue, 06 Jul 2010 06:34:11 -0600

Public government corruption surely is one of the most venal of all misdeeds. A weekend NYT article by Elisabeth Malkin covered in brief an interesting story regarding an innovative UN project to root out public corruption and organized crime in Guatemala through a prosecution partnership known as CiCig. The program is detailed in full at the CiCig website. In short, the CiCig program brings in "outsider" laywers to partner with existing government agencies to investigate and prosecute corruption.

The following excerpt from the website provides an overview:

"CICIG's mandate, as established in the Agreement, is comprised of three principal objectives:

First, CICIG shall investigate the existence of illicit security forces and clandestine security organizations that commit crimes that affect the fundamental human rights of the citizens of Guatemala, and identify the illegal group structures (including links between State officials and organized crime), activities, modes of operation and sources of financing.
Second, CICIG's professional personnel shall support the work of Guatemalan institutions, principally the Attorney General in his work to investigate and prosecute the individuals involved in the illegal groups. Additionally, CICIG will make recommendations to the Government for the adoption of new public policies mechanisms and procedures directed at the eradication of these groups and will strengthen the State's capacity to protect the basic human rights of its citizens.
Third, the Commission shall provide technical assistance to Justice Sector institutions in order to leave the Public Prosecutors Office and National Civilian Police better equipped to fight organized crime even after the conclusion of CICIG's mandate.

As provided in the Agreement, CICIG has the legal ability to support the Public Prosecutors Office in criminal prosecutions, and participate as complementary prosecutor (querellante adhesivo) in the prosecutorial process, in conformity with the Code of Criminal Procedure. The Commission also has legal standing to make administrative complaints against public officials, in particular when officials have committed acts with the purpose to obstruct the fulfillment of CICIG's mandate, and can act as an interested third party in disciplinary procedures initiated against such officials."

Second Hand Smoke Confirmed to Cause Genetic Changes in the Fetus

Kirk Hartley — Sat, 03 Jul 2010 05:35:25 -0600

Here's some information that has implications for the roles of futures representatives for class action. The subject in general is multigeneration effects of carcinogens. The context in this instance is tobacco. This summary from ScienceDaily brings word that another study confirms that second hand tobacco smoke exposure for a pregant woman causes genetic mutations in the fetus. So, more phyical harm caused by tobacco, and it effects more than one generation.

The key paragragh states:

"In the current study, Dr. Grant confirmed smoke-induced mutation in another gene called glycophorin A, or GPA, that is representative of oncogenes -- genes that transform normal cells into cancer cells and cause solid tumors. The GPA mutation was the same level and type in newborns of mothers who were active smokers and of non-smoking mothers exposed to tobacco smoke. Likewise, the mutations were discernable in newborns of women who had stopped smoking during their pregnancies, but who did not actively avoid secondhand smoke."

CERCLA Protects the Contribution Claim Rights of Allegedly Responsible Co-Defendants; Bankruptcy Courts Should Follow The Same Rule in Mass Tort Situations

Kirk Hartley — Mon, 28 Jun 2010 06:52:26 -0600

A new article by Russel Prugh from Marten Law caught my eye because it explained that the federal circuit courts are now embracing a rule that permissive ointervention rules and CERCLA protect the contribution claim rights of allegedly responsible co-defendants. These ruliings stand in contrast to some asbestos bankrutpcy rulings that fail to protect the rights of co-defendants. The article focuses on a recent opinion, United States v. Aerojet General Corp., No. 08-55996, --- F.3d ---, 2010 WL 2179169 (9th Cir. June 02, 2010).

Why does this subject matter ? Because in some but not all mass torts, there are many potentially responsible parties that caused an indivisible harm. Think BP oil rig. Think asbestos litigation. Upon scrutiny of any real depth, it seems pretty obvious that there is no valid logic to respecting contribution claim rights in some mass tort settings, but not in bankruptcy court. Simply put, there cannot be a sound public policy that says that people who screw up a business through bad judgments should be protected from paying for physical injuries and property damage they caused through their bad judgments. Indeed, one can pretty easily argue that tort claimants and co-defendant are both involuntary creditors who should recevie more protection than do voluntary creditors.

The entire article and opinion should be read. But, for now, here are two key excerpts (text of footnotes omitted) to whet the appetite. Note especially the second quoted paragraph, and consider an analogy to the fairness of chapter 11 "pre-packs" in which the asbestos persoanl injury creditors and the debtor already have cut a deal. The key quotes are:

The Ninth Circuit panel rejected the reasoning of the Aerojet district court and a 2004 Ninth Circuit district court ruling, once thought to be in line with the majority view, holding that the contribution right was insufficient to permit intervention under CERCLA.[27] These decisions focused on two broad themes: (1) the contribution right under CERCLA was a “contingent” or “speculative” interest that would not support intervention;[28] and (2) intervention for non-settling parties was inappropriate under CERCLA Section 113(i) because CERCLA’s legislative history and underlying policies supported denying intervention.[29]

***

The Ninth Circuit also briefly addressed whether CERCLA’s notice and comment procedure for consent decrees provides non-settling PRPs with a means to adequately protect their interests.[36] The court rejected this proposition, noting that once the settling parties and the government have agreed, their interests “are essentially aligned and are adverse to those of non-settling PRPs who oppose entry of the decree.”[37] Indeed, the court explained it would be “unrealistic” to believe that the government would “abandon or substantially modify” the proposed consent decree in response to the non-settling PRPs comments “at this late stage of the process.”[38]

Some Success: Other Observers Are Now Looking at the Big Picture Beyond Asbestos as Illustrated by Legal Media Coverage and Quotes Regarding Last Week's Asbestos Bankruptcy Conference

Kirk Hartley — Sat, 26 Jun 2010 09:45:55 -0600

It's great to see and feel a message starting to get through, as illustrated by legal media coverage of last week's Perrin asbestos bankruptcy conference. For some time now, I've been trying to communicate the message that the asbestos chapter 11 cases are important because they are setting precedents that will be applied to other mass tort situations, and that the issues ultimately are global in scope. To work further towards that end, I was delighted to accept Lynnsey Perrin's invitation to co-chair last week's conference with John Cooney. John is an excellent and thoughtful plaintiff's personal injury lawyer here in Chicago, and we've known each other since the mid-1980s.

To try to spread the message, this prior post included my conference handbook cover letter message to attendees. To reiterate a key point from the letter:

These chapter 11 cases, however, matter for more than just asbestos claiming. Indeed, the highly unusual world of asbestos is only part of the larger scene in which chapter 11 is becoming or is being considered as the way to resolve mass tort claims and other product liability claims. The current hot issue is whether the BP oil rig fiasco will be resolved using chapter 11. In addition, chapter 11 procedures and trusts or funds are in place or contemplated for breast implant claims, silica claims, claims arising from sexual abuse by Catholic priests, and Chinese drywall claims. Consider also the Chrysler and GM chapter 11 cases, and their impacts on non-asbestos tort claimants. Note also the Tronox reorganization arising out of massive environmental risks. Note further the Third Circuit’s recent sua sponte grant of rehearing en banc in the GIT/Narco case that has previously caused 19 state Attorneys General to file an amicus brief regarding disposition of insurance-related rights and the scope of chapter 11 injunctions.

The message is getting out, as indicated by the current online issue of the Madison-St. Clair Record. The newest online issues includes an article by a legal reporter, Aricka Flowers, who attended the conference. The article's slant indicates the message is getting out that asbestos chapter 11 cases are indeed precedents for more global mass tort issues, with an example being the sudden and powerful oil rig fiasco that will probably cost BP more than the $ 20 billion fund created to date. The article also includes some great quotes from some of the judges who kindly took the time to attend and offer their insightful comments. To further spread the message, the full text of the article also is set out below:

Asbestos bankruptcy conference highlights Chapter 11

CHICAGO - An asbestos litigation expert said rules being developed in asbestos Chapter 11 cases are serving as precedent for resolution of other mass torts.

Asbestos defense attorney Kirk Hartley of Childress Duffy Goldblatt, Ltd. in Chicago co-chaired an asbestos bankruptcy conference earlier this week that featured discussions on how bankruptcies are affecting asbestos and tort litigation as a whole.

"The conference served as an opportunity for co-defendants in asbestos litigation to start learning about and paying attention to the Chapter 11 cases," Hartley said.

"Some are starting to realize that the more sophisticated entities are using Chapter 11 strategically to exit the tort system regardless of whether they are actually insolvent. The impacts are profound for both plaintiffs and co-defendants."

Plaintiff's attorney John Cooney of Cooney & Conway in Chicago co-chaired the conference with Hartley.

In light of recent Chapter 11 filings of asbestos targets Bondex International and Garlock Sealing Technologies, the conference covered the timely issue of how corporations are using Chapter 11 to seek refuge from lawsuits.

One particular session, "The Continued Impact of the General Motors and Chrysler Bankruptcies: Upcoming Issues on Estimation, Liability and the Effect on Co-Defendants," discussed the Chapter 11 filings of the major automobile manufacturers and how they impact pending and future lawsuits, sparking heated debate on the issue of transparency in bankruptcy trusts.

The session's moderator, Richard Ames of California-based Carroll, Burdick & McDonough, stated that the trusts make it much more difficult - and sometimes prohibit - attorneys from getting access to documents related to claims that have already been paid.

But Joseph Rice, co-founder of the personal injury firm Motley Rice in Mt. Pleasant, S.C., shot back saying that defense attorneys would have to go through the regular discovery process if a company hadn't filed bankruptcy. He said defense attorneys could actually get access to information on old bankruptcy trust claims by going through the typical discovery process instead of expecting plaintiff's attorneys "to do all the work for them."

Rice challenged asbestos defense attorneys by saying that he has been trying to get defendants to create a national database of job sites that were involved in cases surrounding successful bankruptcy trust claims. He went on to say that if any of the defense attorneys agreed to do so, plaintiffs would be willing to pass on information regarding claims, which got a laugh, but no takers.

One of the most anticipated sessions of the conference was a judicial panel comprised of bankruptcy and state court judges from across the nation, including Madison County Circuit Judge Daniel Stack. Stack presides over one of the busiest asbestos dockets in the country.

Other speakers were Judge Judith Fitzgerald, U.S. Bankruptcy Court for the Western District of Pennsylvania; Judge James Murray Lynn, Philadelphia Court of Common Pleas; Judge William D. Maddux, Circuit Court of Cook County and Judge. Randall J. Newsome, U.S. Bankruptcy Court for the Northern District of California.

Newsome lamented the state of asbestos litigation, blaming what he sees as no change over the last 30 years on the fact that there is no interaction between bankruptcy and state court judges.

"It's really no surprise that I don't see a difference between now and 1979 because there is no system in place," Newsome said.

"No one has ever put a legislative system in place that would encourage or require us to have any interaction whatsoever in this particular area. I think it's a real sad state of affairs that as I listen to the program today it's all the same thing; nothing's changed. It is like Groundhog Day."

Hartley said the judicial panel offered a unique opportunity to look at asbestos litigation from the vantage point of key players that decide the fate of many cases.

"The conference was important as serving as the first occasion in which bankruptcy judges and state court asbestos judges have actually talked to each other about their respective legal rules and practices," he said.

During the discussion, Fitzgerald said there is a serious misconception about the way the bankruptcy process operates.

"We have a tendency to be frequently looked at by people and entities as an appellate court," she said.

"Of course, we are not that and there are several guidelines that prohibit the bankruptcy courts from acting as an appellate court. But, I do think there are many cases in which we are being looked at as a new opportunity or open window and that really isn't what the bankruptcy process is about for claimants."

The judges also discussed the amount of time it takes for a mesothelioma case to go to trial in their jurisdiction.

Stack said the cases went to trial faster than any other lawsuit type in Illinois. He went on to say that a suit can be expedited in Illinois if plaintiff's attorneys prove that their client is suffering from mesothelioma.

If the mesothelioma victim is deceased, the plaintiff's attorney can file an affidavit of hardship for the family and get the trial expedited.

"I don't think you can ordinarily get that in a medical malpractice or other type of case unless you show some sort of a circumstance," Stack said.

There was also debate about Congress' inability to pass legislation, like the Fairness in Asbestos Injury Resolution Act that would put additional controls on the bankruptcy trust system.

Newsome said there is a systematic problem if otherwise healthy companies have to file for bankruptcy solely due to asbestos litigation.

Conversely, he said it is also a bad situation if plaintiffs are not being compensated in a timely manner because of the inherent delays in the bankruptcy process. Because of this, he said there is a strong need for legislators to make policy changes and create a systematic solution to the problem.

During the conference, Hartley responded by saying that policymakers might be in a better position to make a move on legislation if there was more transparency with regard to the bankruptcy trusts.

Give Up on any Illusion That a Platinum AMEX Card Includes Helpful Customer Service

Kirk Hartley — Fri, 25 Jun 2010 14:50:31 -0600

For various reasons, I decided to try an American Express platinum card this year,. One reason was that the ads promised concrierge service, and so I thought the hefty fee would result in actually good customer service. Silly me. To date, it's been all hassle and no service.

Today's example ? I want to go back to good old fashioned mailed statements so that I can avoid the download and print ordeal created by passwords. So, I called to ask for that change to be made. After 8 minutes, the answer was: N no, we will not do that for you. Instead you have to go on line and make that change yourself." ( per supervisor Mindy (# 57362 - Ft. Lauderdale). And, that answer cane after their systems kept failing to pass along information (e.g card number) that the system demanded before I could reach a human being (and even then only after proceeding further into the bowels of myriad levels of voice mail prompts.)

In short, paying the price for an AMEX platinum card does not produce actual customer service.

Drugs - Mass Settlement Strategies - Why Is Glaxo Settling Paxil Cases ?

Kirk Hartley — Thu, 24 Jun 2010 06:45:35 -0600

AmLaw includes today an article by Andrew Longstreth regarding the settlement strategies used by Merck for Vioxx, and by Glaxo for Avandia and for Paxil. The article contrast the Vioxx strategy to the Glaxo strategy and offers some reasoning as as to why Glaxo apparently has chosen to settle hundreds of cases after just one trial (a plaintiff''s verdict). The case that went to trial involved claims the drug allegedly caused heart defects in babies. Paxil also is claimed to promote suicides in persons taking the drug.

In short, GSK appears to be settling most of the cases after the adverse trial result, a mediation, and extensive negotiations; go here for more specif cs. In the case that went to trial, plaintiff's counsel argued that GSK failed to act on information indicating the defects. The same article says that GSK countered with an argument based on statistically significant proof of a defect.

A few thoughts come to mind. One is that plaintiff's lawyers with potentially hundreds of cases to try seldom give up and go away after winning the first trial, unless the plaintiff's are paid well. Another is that science has by now pretty plainly established that changes in the chemistry of a mother also cause changes for the chemistry in a fetus, and that the changes can be profound, With today's science, effects of that sort can be perceived and proved without epidemiology based on statistics..