Skip to main content

Bad Cases Make Bad Law

The August issue of The Federal Lawyer ran a piece by Spencer Garrett Scharff on streamlining mass tort litigation, a happy event that will only be accomplished, Scharff seems to think, when LEXECON is overturned.

Personally, I suspect it would be better to distinguished LEXECON away and render it prudentially harmless than to overturn it outright. If the decision made bad law it was because it was a "bad case," an unrepresentative fact pattern.

For non-initiates, Lexecon was a defamation case that arose out of a mass tort, the infamous Savings-and-Loan industry collapse of the 1980s. The plaintiff, Lexecon, was a defendants' consultant firm, which came into many cases on the opposite side of the famous plaintiffs' attorneys Milberg Weiss.

A typical Milberg Weiss case in those days -- the heyday of Bill Lerach, pictured above -- might start with these facts: the CEO of XYZ Industries made certain statements on January 15th. Those statements were false, and presented an excessively optimistic view of the value of XYZ stock. The stock price rose thereafter. On June 15th, the truth contradictory to the CEO statements became widely known. From June through October, the stock lost the value it had gained early in the year.  Thus, Milberg Weiss would bring a lawsuit on behalf of the class of people who had bought stock when it was at its peak, relying (implicitly) on the word of the CEO. The measure of damages would be the loss they had suffered when the truth became known.

Lexecon would enter such cases on the other side, the side of the CEO, the company, and various co-defendants. It was a consultancy, not a law firm, but it would typically work with the defense attorneys to make a factual case that there were other reasons for the stock movements involved, that the CEOs puffing had nothing to do with them, Thus, no actual injury and no recovery.

Unsurprisingly, bad blood developed between Lexecon and Milberg Weiss. The blood was especially bad in the matter of those S&Ls, where Lexecon worked with lawyers representing Lincoln Savings Bank, the infamous bank run by Charles Keating, befriended by the "Keating Five." At any rate: Milberg Weiss principals apparently crossed some lines in their attacks on  Lexecon and a principal thereof, leading to the (ultimately successful) defamation suit by the former.

But first there was the procedural issue to be resolved: was the defamation suit to be bundled into the multi-district litigation about the S&L industry collapse? The intuitively appealing position is that it should not have been: it was a very different sort of case. That position prevailed, but only at the expense of a precedent that now, as noted above, limits the amount of streamlining that can be done for mass torts in general.

My own conclusion: see the headline again.  


Popular posts from this blog

A Story About Coleridge

This is a quote from a memoir by Dorothy Wordsworth, reflecting on a trip she took with two famous poets, her brother, William Wordsworth, and their similarly gifted companion, Samuel Taylor Coleridge.

We sat upon a bench, placed for the sake of one of these views, whence we looked down upon the waterfall, and over the open country ... A lady and gentleman, more expeditious tourists than ourselves, came to the spot; they left us at the seat, and we found them again at another station above the Falls. Coleridge, who is always good-natured enough to enter into conversation with anybody whom he meets in his way, began to talk with the gentleman, who observed that it was a majestic waterfall. Coleridge was delighted with the accuracy of the epithet, particularly as he had been settling in his own mind the precise meaning of the words grand, majestic, sublime, etc., and had discussed the subject with William at some length the day before. “Yes, sir,” says Coleridge, “it is a majestic wate…

Cancer Breakthrough

Hopeful news in recent days about an old and dear desideratum: a cure for cancer. Or at least for a cancer, and a nasty one at that.

The news comes about because investors in GlaxoSmithKline are greedy for profits, and has already inspired a bit of deregulation to boot. 

The FDA has paved the road for a speedy review of a new BCMA drug for multiple myeloma, essentially cancer of the bone marrow. This means that the US govt has removed some of the hurdles that would otherwise (by decision of the same govt) face a company trying to proceed with these trials expeditiously. 

This has been done because the Phase I clinical trial results have been very promising. The report I've seen indicates that details of these results will be shared with the world on Dec. 11 at the annual meeting of the American Society of Hematology. 

The European Medicines Agency has also given priority treatment to the drug in question. 

GSK's website identifies the drug at issue as "GSK2857916," althou…

Hume's Cutlery

David Hume is renowned for two pieces of cutlery, the guillotine and the fork.

Hume's guillotine is the sharp cut he makes between "is" statements and "ought" statements, to make the point that the former never ground the latter.

His "fork" is the division between what later came to be called "analytic" and "synthetic" statements, with the ominous observation that any books containing statements that cannot be assigned to one or the other prong should be burnt.

Actually, I should acknowledge that there is some dispute as to how well or poorly the dichotomy Hume outlines really maps onto the analytic/synthetic dichotomy. Some writers maintain that Hume meant something quite different and has been hijacked. Personally, I've never seen the alleged difference however hard they've worked to point it out to me.

The guillotine makes for a more dramatic graphic than a mere fork, hence the bit of clip art above.

I'm curious whe…