Mass Tort Litigation Blog

U.S. Homeowner Health Problems from Chinese Drywall

Article in the Wall Street Journal -- Homeowner Problems With Chinese-Made Drywall Spread, by Michael Corkery.  Here's an excerpt:

Complaints about foul-smelling Chinese-made drywall that first emerged in a few dozen homes in Florida in January have spread to hundreds of homes in several states, fueling controversy over the Chinese import.

Fearing that the construction material is making them sick, homeowners are moving out of their houses, filing lawsuits and demanding help from lawmakers. Two U.S. senators have proposed a temporary ban on certain Chinese drywall imports. A Chinese government agency is also investigating, according to a Chinese news report.

The actual health effects of the drywall, which is commonly used to construct interior walls, are still unknown. While homeowners attribute bloody noses, sinus problems and headaches to the drywall, the Florida health department said there is no evidence that gases being emitted from the construction material pose a serious health risk.

BGS

Second Wall Street Journal Editorial on Plaintiffs' Lawyers Hired for Contingency Fee by State of Pennsylvania

Following last week's editorial, the Wall Street Journal expanded its discussion in today's editorial.  Here's an excerpt:

Our editorial last week on the state lawsuit racket has created a stir in Pennsylvania, where Governor Ed Rendell has finally had to defend his "pay-to-play" relationship with Houston plaintiffs lawyer F. Kenneth Bailey. That's the good news. The rest of this underreported story is that Mr. Bailey has been running a nationwide "pay-to-sue" operation with Democratic state Attorneys General.

As we reported, Mr. Bailey made repeated donations to Mr. Rendell's 2006 re-election campaign in the months before his law firm was given a no-bid, contingency-fee contract to sue Janssen Pharmaceuticals on the state's behalf. Mr. Rendell told the Philadelphia Inquirer -- whose reporters have roused from their slumbers -- that "there wasn't the slightest bit of pay-to-play here." But the Governor was obliged to acknowledge that Mr. Bailey had approached the state about suing Janssen. Normally, the state Attorney General would handle such legal matters, but the AG rebuffed Mr. Bailey. Mr. Rendell's office then decided to hire the law firm that was also his major campaign donor. Smile if you think the two were related.

The episode speaks volumes about Mr. Rendell's political ethics, but more important is what it reveals about the plaintiffs bar's latest "business" model. Mr. Bailey's Janssen suit is part of a national pay-to-sue operation, as he and his Bailey, Perrin & Bailey law firm have taken their pre-packaged lawsuit to many states. Janssen's complaint asking the Pennsylvania Supreme Court to dismiss Bailey Perrin from the suit notes that the firm has "taken on numerous engagements similar to this action, including representation in the states of Louisiana, South Carolina, Arkansas, Mississippi and New Mexico."

BGS

Scholarship on Damage Caps

Catherine Sharkey (NYU) and Jonathan Klick (Penn) have posted an article entitled "What Drives the Passage of Damage Caps?" on SSRN.  The article is available here.  Here is the abstract:

A number of states have passed caps on non-economic and punitive damage awards in civil cases. The conventional wisdom is that the passage of these caps is driven by "out-of-control" jury awards that need to be reigned in. However, it could be the case that voters harboring anti-litigation, pro-tort reform sentiments are more likely to support the passage of caps even in the absence of an upsurge in awards. To examine the effect of jury awards on the passage of caps, we estimate semi-parametric hazard models of cap passage using data from the Jury Verdict Research Reporter.

ADL

Damage Compensation for Low Probability/High Damage Events

Richard Lempert (Michigan) has posted an article entitled Low Probability/High Consequence Events: Dilemmas for Damage Compensation on bepress.  Here is the abstract:

This article was prepared for a Clifford Symposium which challenged paper writers to imagine how our system of tort compensation might look in the year 2020. This paper responds to an aspect of the general challenge: to imagine a tort recovery system which would deal adequately with rare and catastrophic events. To get a handle on this problem, the paper looks closely at how the legal system compensated damages attendant on four recent events that might be considered “rare and catastrophic” – Three Mile Island, 9/11, Hurricane Katrina and the Exxon Valdez oil spill. In no case did the system of compensation meet all the desiderata of a well-functioning tort compensation scheme, but the two no-fault schemes which provided the bulk of the compensation to those injured in the Three Mile Island and 9/11 disasters seem to have done better than the “ordinary” tort system which provided the bulk of the individual compensation for the damages caused by Hurricane Katrina and the Exxon Valdez oil spill. The 9/11 compensation scheme may, however, have been sui generis since it appears to have reflected both a national coming together after an attack on the homeland and Congressional efforts to protect the airline industry, and the Price-Anderson compensation scheme, which worked well in Three Mile Island, might have failed utterly had the disaster been on the scale of Chernobyl. Ultimately, the article concludes, no imaginable compensation scheme is likely to adequately handle a large, unique and unexpected catastrophe, but some improvements in current law and practice are possible and ad hoc political solutions, as with 9/11, may help in some cases.

This raises the following question in my mind: Are large "unique" catastrophes really unique? That is, should as a matter of procedure or institutional design treat tort claims arising out of Katrina or 9/11 differently than the tort claims arising out of use of Zyprexia or Vioxx?  If so, why?  One explanation might be that we think of disasters as being blameless, while we do assign blame in the tort context, but arguably that isn't true with respect to 9/11 (terrorists) or Katrina (government ineptitude).  Although it is the case that those wrongdoers cannot be successfully hauled into court.

ADL

Does Litigation = Regulation?

A very intriguing analysis just posted on bepress calls into question whether litigation is a substitute for regulation.  See Eric Helland and Jonathan Klick, The Relation Between Regulation and Class Actions: Evidence from the Insurance Industry, available here. 

Here is the abstract:

Standard law and economics models imply that regulation and litigation serve as substitutes. We test this by looking at the incidence of insurance class actions as a function of measures of regulatory enforcement. We also look specifically at whether states with clear regulatory standards regarding the use of OEM parts experience less litigation over this issue. We find no evidence of substitution between regulation and litigation. We also examine the possibility that litigation is more frequent in states where regulators are more likely to be captured by industry interests, finding no support for this hypothesis either. Instead, litigation is more likely in states where similar litigation has been successful in the past, calling into question standard law and economics models in this area.

ADL