Category: Law
What goes around, comes around
The FBI is investigating Jefferson County in southwestern Mississippi, a poor area with fewer than 10,000 residents. Apparently the county is known for its very high tort settlments. For instance, when the makers of fen-phen were sued, the five plaintiffs from that county received $150 million. The 800 other fen-phen cases received a total of about $400 million.
One source notes:
Since 1995, lawyers say, Mississippi juries have returned at least 19 verdicts of $9 million or more, including 5 that exceeded $100 million each, although plaintiffs sometimes settle for less as the appeal process proceeds. Lawyers seek clients through aggressive advertising.
Mississippi state now has limited suit rewards by law, but there remain many cases filed before the relevant deadline for this limitation. One settlement recipient remarked that juries “awarded these people this money because they felt as if they were going to get a cut off of it.”
The above link offers this jaw-dropping fact:
Jefferson, with 9,740 residents, is a small county, but litigation there is a big business. An affidavit filed in June by a researcher in one case, who combed the files of the Circuit Court, said that more than 21,000 people were plaintiffs in Jefferson County from 1995 to 2000.
The possible corruption runs deep:
Bankston Drug Store, the only pharmacy in Jefferson County, has been named in hundreds of suits since the fen-phen settlements as a way for mass claims to be filed in the county.
Hilda Bankston, the pharmacy’s former owner, was subpoenaed earlier this year by the same grand jury that indicted…the others.
Bankston was asked to turn over, along with customers’ personal and prescription histories, customer and pharmacy records “that appear to be false or not produced by your company.”
Something is rotten in the state of Denmark, as they say.
The Politician and the Mechanic Conspire to Rip Me Off
Virginia requires yearly “safety” inspections of automobiles. Yesterday, it was my turn – it cost me $15 bucks and an hour of my time. What a pain. Merrell, Poitras and Sutter (MPS) (summary here, reference below) estimate that nationally inspection programs cost in excess of a billion dollars a year (I think this is a serious underestimate – see below). What do we get for our time and effort? Not much. MPS find that mandatory inspections do not reduce highway fatalities or injuries. Not surprising really since there are already good incentives to maintain one’s car and accidents are most often caused by factors, primarily driver behaviour, that are not inspected. (By the way, yes there is an externality but if self-interest alone causes you to replace a broken headlight then on the margin the externality is irrelevant – economists often forget this point.)
MPS arrive at the billion plus figure by summing inspection fees and travel time. But the major cost of the inspection system, in my opinion, is unnecessary repairs. Mechanics have an incentive to indicate a car needs repairs and it is difficult to know when they are speaking the truth. This problem is bad enough when you have brought your car to the mechanic voluntarily – at least then you know the car has a problem. But the potential for opportunistic behaviour is worse when you are required to take your car in for inspection and if you don’t follow the mechanic’s advice you fail. The mechanics know they have you over a barrel and act accordingly.
The citation for the MPS study is Merrell, D. Poitras, M and Daniel Sutter. 1999. The Effectiveness of Vehicle Safety Inspections: An Analysis Using Panel Data,” Southern Economic Journal, Volume 65, pp.571-583.
John Lott and gun control
I stopped following the John Lott controversies a long time ago. If you don’t already know, he is the economist who wrote More Guns, Less Crime. Glenn Reynolds offers a comprehensive update on the latest back and forth, with links, including to John’s defense of his work.
Sue me, sue you blues
Now it is my turn to be outraged. Co-blogger Alex was upset yesterday by a class action lawsuit against his tiremaker, $19 million for the lawyers, nothing for the relevant set of plaintiffs (who weren’t even injured, should that make you feel better or worse about the whole thing? Worse, I say.)
Today I received a notice of a class action suit concerning Western Union, and of a proposed settlement. I frequently send money to my Mexican painter friends, usually using Western Union.
Why the class action suit?
…the Defendants [made] misrepresentations about or otherwise failing to disclose to customers the fact that they received a more favorable exchange rate for converting U.S. dollars to foreign currency and foreign currency to U.S. dollars than they provided to their customers.
Imagine that, a middleman buying and selling at different prices! It feels like something out of Atlas Shrugged.
Tortured Justice
I am angry. The lawyers will get $19 million, the plaintiffs have no damages and I have been involved in an abuse of justice. I received notice yesterday that I was a plaintiff in a class action lawsuit against Bridgestone/Firestone that is about to be settled. I was never injured by Firestone but that’s ok because injured people have their own lawsuit the one I am involved in is for people who were not injured. The lawsuit reads “Plaintiff Does Not Seek To Represent And This Litigation Does Not Involve Any Person Who Alleges That He or She Suffered Any Personal Injury or Property Damage Because Of A Failure Of One Of The Tires” (capitalization in original.) Bear in mind that Firestone has already replaced all four of my tires with a competitor’s brand for free and similarly for many of the other plaintiffs.
The settlement is simple, Firestone agrees to sell and advertise tires (as part of a safety awareness program). The plaintiffs get nothing except for the named plaintiff who gets $2500. The lawyers? “Plaintiff intends to seek, and Firestone will not object to, an award of $19 million for all fees, costs and and expenses…” Plantiff’s attorney Zona Jones says “The outcome is one that we believe is extremely positive.” Yeah, right.
Cases like this should be thrown out by judges. But that is not going to happen because the case was brought in Texas where judges are selected by partisan elections. My research (summary here) shows that awards against out-of-state defendants are much higher in states that select their judges using partisan elections compared to other states. I have little doubt that the plaintiff’s lawyers (or their firm) are big contributors to Judge Donald Floyd’s reelection campaign (this is neither illegal nor uncommon in Texas).
I do not blame Firestone for settling, they comment that they have done so only “to avoid further expense, burden, distraction, and inconvenience of litigation.” But I am outraged that against my will I have been made a party to extortion and am saddened that Firestone believes, probably correctly, that they risk more than 19 million dollars by letting this trashy lawsuit go to court.