October 28, 2010
Monday's Guest Blogger: Jay Feinman
Feinman is a well-known expert on contract law, tort law, insurance law, and legal education. His many publications include Delay, Deny, Defend: Why Insurance Companies Don’t Pay Claims and What You Can Do About It (Portfolio/Penguin 2010); Un-Making Law: The Conservative Campaign to Roll Back the Common Law (Beacon Press, 2004; paperback 2005); Law 101: Everything You Need to Know About the American Legal System (Oxford University Press, 2000; 2nd ed. 2006; 3rd ed. 2010) (also published in English edition in China and in translation in Spanish, Arabic, Japanese, Dari, Pashtu, Urdu, and Bulgarian); 1001 Legal Words You Need to Know (Oxford University Press, 2003; paperback 2005) (also published in Chinese-English edition); Professional Liability to Third Parties (American Bar Association, 2000; 2nd ed. 2007); Economic Negligence (Little, Brown, 1995); and more than fifty scholarly articles. His scholarly work has been widely cited in the academic literature and by courts, including the United States Supreme Court.
Among his professional activities, Feinman is an elected member of The American Law Institute and a member of the Board of Legal Scholars of the Academy of Trial Advocacy. He has served as Chair of the Association of American Law Schools Section on Contracts and Section on Teaching Methods. At Rutgers, he has served as Associate Dean and Acting Dean of the law school. He is a member of the New Jersey bar.
Feinman has received every teaching prize awarded at Rutgers, including the Lindback Foundation Award for Distinguished Teaching (2005), the Warren I. Susman Award for Excellence in Teaching (2004), and the Provost’s Award for Teaching Excellence (1999).
Feinman received his B.A. degree summa cum laude from American University and his J.D. degree cum laude from the University of Chicago, where he was a member of the Order of the Coif and Comment Editor of the University of Chicago Law Review.
October 26, 2010
Swett on Establishing Reasonable Contingency Fees
Jeffrey Swett (Student/Tennessee) has posted his note to SSRN. Entitled Determining a Reasonable Percentage in Establishing a Contingency Fee: A New Tool to Remedy an Old Problem, the abstract provides:
The indiscriminate use of contingency fee contracts providing for a one-third fee paid contingent upon either damages awarded to and received by the plaintiff or settlement amounts paid to the plaintiff is an important issue. This article first describes what is wrong with the one-third model, the response of the legal system to unreasonable contingency fees, and the mixed beliefs on obtaining a reasonable contingency fee percentage. The article then uses mathematics and law to construct a computerized, mathematical model that can be used to calculate a contingency fee tailored to each client’s case. The author uses statistical analysis to estimate the pertinent factors to determine a contingency fee: projected hours, hourly wage, projected costs fronted, risk multiplier, and projected recovery. Before concluding, the article assesses the benefits and drawbacks of this new mathematical model.
"The Torts Scholarship of Richard Epstein"
The current issue of the Journal of Tort Law is now available. The issue is a tribute to the torts scholarship of Richard Epstein. With an introduction by editors Jules Coleman and John Goldberg, the issue features articles by Joshua Getzler, Jill Horwitz, and Benjamin Zipursky, and a comment by David Owen, as well as a reply by Professor Epstein that revisits and restates the hugely influential account of tort law that he has developed since the publication of his landmark 1973 article, A Theory of Strict Liability.
Thanks to John Goldberg for the info.
October 25, 2010
Paul Steven Miller
The New York Times reports that law professor and disability rights advocate Paul Steven Miller passed away at home last Tuesday. The obituary there does a better job than I can at describing his many accomplishments, both within and outside the academy.
Professor Miller started teaching at the University of Washington at the same time I started teaching, as I recall, and we met at a new law teacher's seminar put on by AALS, I think. We exchanged e-mails periodically talking about teaching Torts -- he was an innovative teacher, developing extensive wikis for his classes, among other things -- and about life as a law professor. While he was certainly best-known for his work in the arena of disability law, he was an enthusiastic Torts prof and utterly dedicated to his teaching. I was pleased when he took a position with the Obama administration, and even happier when he returned to teaching. Getting a drink with Paul was something I looked forward to every year at AALS.
Paul was 49 years old and is survived by his wife and two young daughters.
Guest Blogger James R. Hackney, Jr. on "Risk Management, Torts and Corporate Finance"
Today's guest blogger is James R. Hackney, Jr., Professor of Law and Faculty Director of Research at Northeastern University School of Law.
Risk Management, Torts and Corporate Finance
My guess it that I am one of the few American law professors who teach both torts and corporate finance. This coincidence has as much to say about my educational and professional background as it does the about the curriculum needs of my institution. At first blush, one might assume that the two fields could not be further apart. However, there is one very important unifying characteristic—both are concerned with risk management. Of course, torts scholarship and doctrine focus on how we should distribute the economic consequences of accident risks, and by extension what constitutes an ideal level of risk (and accidents). In corporate finance, risk is a central concept in theories dealing with diversification, asset valuation, the efficiency of markets, and the valuation of derivatives (options). The other commonality between corporate finance and torts is that they both rely on science (or the practical application of scientific techniques) in the effort to manage risk. Two recent events, the Gulf oil spill and the financial crisis, illustrate the conjunction between risk management and science in both the tort and corporate finance arenas. They also illustrate the dangers in placing too much belief in the science or methods of risk management.
The Gulf oil crisis was an environmental catastrophe of monumental proportions. One of the interesting features of the crisis is that it illustrated the failure of a major institution, British Petroleum (“BP”), to adequately account for the risks of its activities. It also highlighted that government regulators had obviously failed at the risk calculus as well. The science of cost/benefit analysis (Learned Hand) is appropriately called into question. Of course, this is a reoccurring theme—the actual catastrophic event causes us to either second guess our risk calculus or want to do away with risk calculus all together. Guido Calabresi aptly described this phenomenon in Tragic Choices.
Similar to our belief that cost/benefit analysis will adequately manage risks in the torts arena, there was a belief that the science of corporate finance could manage risks in the financial arena. The financial sector was allowed to produce a plethora of exotic financial products over the last few decades that were designed to manage or minimize risk. Collateralized debt obligations are bundles of risky assets (most notably, in relationship to the most recent crisis, real estate mortgages). The science of diversification, as articulated by the Nobel Prize winning economist Harry Markowitz, would suggest that holding this diverse bundle of assets would minimize the risk. (Of course, the science of diversification also includes the caveat that systematic risk, such as the wholesale collapse of the real estate market, cannot be diversified away.) In addition, players in the market, such as Goldman Sachs, further hedged their bets (or simply just bet) regarding real estate through the purchase of credit default swaps (CDSs). The CDS phenomenon is a perfect example of the strategy of hedging (via derivatives) in action. Just as the science of cost/benefit analysis failed us in avoiding the Gulf disaster, theories of diversification and hedging deployed in the praxis of finance failed us in the lead up to the financial crisis. This is nothing new. Asset bubbles have been a consistent phenomenon in recent decades, and indeed throughout human history.
A big part of the cultural malaise that we associate both with the Gulf disaster and the financial crisis (apart from the natural and economic consequences) is that once the events occurred and there was an obvious need to clean up the mess, the science and technologies that BP, Wall Street, and the government chose to deploy again seemed woefully inept. The repeated attempts by our most brilliant scientists and engineers to “cap” the spill to no avail seemed to deflate the nation. Our continued inability to stem the tide of foreclosures and unemployment continue to frustrate the body politic. The science of macroeconomic policy, even in the hands of an expert on the Great Depression, Federal Reserve Chairman Benjamin Bernanke, is obviously coming up short or not working quickly enough to satisfy our quick thirst for results. (Of course, in both the BP and economic crisis contexts any critique of the expertise deployed must be limited to those actually relied upon to render advice. As in most situations, there were those within the scientific community whose voices may not have been heeded.) It is difficult to measure the long-term effects the Gulf and financial crises will have on our society. My hunch is that it will make us a bit more skeptical regarding our capacity to manage risks and rely on private actors (as well as the government) to do so. It may also make us less sanguine with regard to the scope and application of science.
- James R. Hackney, Jr.
Professor of Law
Northeastern University School of Law