In This Issue

Solon, the Athenian law-giver, didn't charge by the hour.

Did You Know?

Law firms once sent bills that stated a dollar amount plus this: "For services rendered." Businesses bristled and came to hope that the hourly fee would track lawyerly value. But consider:

• Paying by the hour rewards inefficiency, encourages a take-no-prisoners approach, and promotes delay in case resolution.
• Busy judges generally don't have time, information, or inclination to force economy on lawyers and parties.
• Making lawsuits costly discourages people from bringing them and may, especially in business litigation, hurt competition.

The worst effect consists in the fact that the hourly fee makes strong but small cases uneconomic. And so the median size of lawsuits grows ever larger. Increasingly, to achieve efficiencies, they take the form of aggregate litigation -- class actions, collective actions, and mass actions. And, as the stakes rise, procedural gambits trump the merits, defendants complain about "hydraulic pressure" to settle (see below right), trials become rarer (just below), courts toss jury verdicts, and tort reform (way down at the bottom) comes to the fore.

Lawyer-author Scott Turow denounces the billable hourbecause of its corrosive effect on the profession. His worry may seem quaint; we'll never go back to the days when firms muddled their way to profitability.

I rise not to condemn the hourly fee because it makes lawyers into business people but because it pushes civil justice out of reach for most ordinary people, companies and individuals alike.

The hourly fee may have represented progress decades ago, but no more. Its usefulness as a proxy for value has become a myth. We should retire it, and soon.

Warrior-goddess Athena sprang, in full armor, from her daddy Zeus's brow.

The Trials of Yesteryear

In Catch-22 (1961), a novel about the craziness of war, Joseph Heller's main character obsesses about Snowden, who dies on a bombing mission. Yossarian couldn't save Snowden because Snowden's shrapnel wounds disemboweled him. And the horror haunts Yossarian.

I found Heller's black humor irresistible. A captain by the name of Major Major, for example, received a one-rank promotion -- with hilarious results. But I have in mind a literary reference that Heller put in Yossarian's mouth: "Where are the Snowdens of yesteryear?" (Heller borrows the line from a 15th century French poet, Francois Villon, who asked "[w]here are the snows of yesteryear?")

I inquire: where did the trials of yesteryear go? My answers may shock you. So please take your heart medicine before reading on.

Hourly fees create litigators instead of trial lawyers. Litigators thrive on technicalities, a habit that serves them ill in court and makes them reluctant to go there.

The increasing median size of cases and complexity make the average trial riskier for both sides.

The rise of arbitration as trial substitute results partly from disrespect for jury verdicts. In Texas, for example, a 55 percent drop in trials coincided with an 81 percent increase in overturning verdicts.

So the hourly fee plus hostility to juries melted the snows/trials of yesteryear.

Hot Lunch

You don't see or hear much about tort reform any more. Unless you oppose it. Or if you think that tort reform should relate, um, to torts.

Let me say first that the folks who still seek reform of tort law have moved on. Now they want to shut down the "litigaton lottery" and end "jackpot justice". They have ceded the debate about "reform" to the againsters, who apparently enjoy whipping a dead horse.

I imagine that the change in terminology reflects most people's ambivalence about civil justice -- and good polling. Even SpongeBob Square Pants features a spurious personal injury lawsuit (by Plankton against Mr. Krabs) for a slip-and-fall in the Krusty Krab restaurant. (Episode 62). The piscatorial jury seems sympathetic to Plankton at first. But the episode ends in a defense verdict after Sponge Bob shows that Plankton cooked up the lawsuit to get the secret formula for Krabby Patties. The result renews faith in Bikini Bottom civil justice and in juries everywhere.

But tort reform goes way beyond torts. Now it seeks across-the-board changes to weaken contracts, antitrust and consumer protection laws, and intellectual property. It aims to limit rights to hire lawyers on a contingent fee basis, to pile on procedural barriers to trial on the merits, and to take more cases out of the hands of juries. If you don't believe me, go here and here and see for your own self.

The ancient Greeks created trial by jury, and their goddess Eunomia symbolized respect for law. Would she support tort reform today? Nosir.

Legal Mythology

The Temple of Poseidon at Cape Sounion, Greece. King Aegeus leapt to his death from the cliffs here after he spotted the boat of his son Theseus, who forgot to switch from black to white sails to signal his safe return from battling the Minotaur on Crete.

Your Editor spent a couple of weeks this summer beating around Greece and Italy. The tour -- with "Gods and Heroes" in its name -- included lectures by a Yale dean and a Harvard Ph.D. Plus site tours in wonderful places like Athens, Mycenae, Epidaurus, Santorini, Rhodes, Lindos, the Palace at Knossos, Delphi, Taoromina, and Pompeii. What fun!

Talk of mythology of course dominated. How did the wine-dark Aegean Sea get its name? (The grieving -- blue, get it? -- Attican King Aegeus fatally plunged into it.) Who lived in the Strait of Messina? (Scylla and Charybdis) What made the oracle at Delphi talk jibberish? (Gas inhalation.) Why do I get to ask all the questions? (Because.)

Our odyssey provides the back-drop for this first-ever double issue of Barnett's Notes. Why? What possible interest might you have in my vacation?

Well, for one thing, it led me to skip an issue. But, more important, it slapped an epiphany upside my head -- that myths evolved from a process familiar to trial lawyers. People made stuff up. Out of whole cloth. Totally. I kid you not.

Take Theseus. The founder-king of Athens started out as a guy who basically did one thing. He slayed the Minotaur, a half-bull half-human monster who dwelt in the center of a maze at Knossos on Crete. (Don't ask about his parentage; you don't want to know.) But Athenians wanted a more impressive mythological representative. And so they embroidered on his history.

So much so that Theseus's life started paralleling that of Herakles, he of the legendary 12 labors. For example: Herakles descended from a man (Amphitryon) and a god (Zeus) but only one woman (Alkmene); likewise with Theseus (the blue-sea Aegeus and Poseidon both impregnated Aethra). Herakles killed the Nemean lion; Theseus destroyed the Crommyonian sow. Herakles captured the Cretan bull; Theseus caught the bull of Marathon. And so on.

The Romans did the same sort of thing but with less originality. They adopted Zeus as Jupiter, Hera as Juno, Poseidon as Neptune, and Aphrodite as Venus, to name a few. They also created some new deathless ones, such as two-face Janus, the god of doors and of beginnings and endings.

The tradition of making stuff up continues to this day. Judges tolerate it so long as it . . . well, it doesn't really have sharp edges. One person's mythology -- his junk science, say -- counts as another's verifiable truth -- her cutting-edge biological theory. Plus story-telling holds a high place in the tradition of courtroom persuasion.

Your Editor will not wade into the rip-tides of controversy. Nay. We love our clients on both sides of the versus far too much. But let us, you and I, explore a few current issues that deserve our attention: the hourly fee, hydraulic settlement pressure, vanishing trials, and tort reform. I will attempt to dispel myths that have grown up around them.

And I hope you enjoy the journey as much as I did mine.

Barry Barnett, Editor

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Hydraulic Pressure to Settle

Hydraulic pressure, escaping.

Just after the dawn of the 20th century, a dissenting Justice Oliver Wendell Holmes, Jr., famously said that "great cases, like hard cases, make bad law". He explained that a case's greatness will "exert a kind of hydraulic pressure which makes what previously was clear seem doubtful, and before which even well settled principles of law will bend." Northern Securities Co. v. United States, 193 U.S. 197, 364 (1904).

What Did Holmes Mean?

He meant, I suspect, that judges -- even his colleagues on the U.S. Supreme Court -- cannot isolate themselves from forces at work in the communities where they live. But, implying his own insensibility to public irrationality, Justice Holmes opined that the Sherman Act did not prohibit an agreement among several railroads not to compete with each other. The hue and cry, the great Holmes suggested, impelled one set of lesser mortals (government lawyers) to seek an injunction against the monopoly and another group (the 5-4 majority) to uphold a judgment granting it.

History disagreed with Holmes on the merits, but do let us ponder his analogy. The power of hydraulic pressure allows a small force at point A to exert a larger force at point B within a mechanical system. It thus pushes a big piston to raise the car rack so that a mechanic can fix the oil pan you busted when you drove too fast over a road hump. But in Northern Securities Holmes used "a kind of hydraulic pressure" as a figure for distortion of judgment.

Inordinate Pressure to Settle

Which brings us to the recent rash of lower court decisions that decry "hydraulic pressure" to settle class actions. The first reference, in 1995, may have warranted the name. In In re General Motors Corp. Pick-Up Truck Fuel Tank Product Liability Litig., 55 F.3d 768, 790 (3d Cir. 1995), Circuit Judge Becker noted the deleterious effect of a certifying a sprawling class action for settlement:

Cases could be filed without any expectation or intention of litigation, with the foreknowledge that the natural hydraulic pressure for settlement may in fact lead to a class settlement, especially given the incentive a defendant has to bind as many potential claimants as possible with an approved class settlement.

The plaintiffs' and defendants' lawyers would get fat fees, and the defendants would buy peace cheap. The pressure to certify -- on the parties and the trial court -- may have distorted judgment about the propriety of certification, with the potential that absent plaintiffs would get short shrift.

Later use of "hydraulic pressure" stands Judge Becker's concerns on their head. These instances don't focus on judgment-distorting pressure to certify but on pressure to settle, inferring that certification impels defendants to pay big money to resolve unmeritorious claims. E.g., Hevesi v. Citigroup, Inc., 366 F.3d 70, 81 (2d Cir. 2004) (granting Rule 23(f) petition in part because, due to settlement pressure, "it is hard to conceive of many cases that are less likely than the instant case to yield an appealable final judgment"); De Asencio v. Tyson Foods, Inc., 342 F.3d 301, 311 (3d Cir. 2003) ("The aggregation of claims, particularly as class actions, profoundly affects the substantive rights of the parties to the litigation.") (emphasis added); In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124, 148 (2d Cir. 2001) ("Even a defendant who is innocent and holy may rationally choose to pay a few hundred million dollars in settlement of a class action rather than 'run the risk of ruinous liability.'") (quoting Fed. R. Civ. P. 23 advisory committee's note); Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 164 (3d Cir. 2001) (citing "inordinate or hydraulic pressure on defendants to settle, avoiding the risk, however small, of potentially ruinous liability" as factor favoring interlocutory review).

The slope has proved slippery. In Regents of the Univ. of Calif. v. Credit Suisse First Boston (USA) Inc., 482 F.3d 372, 379 (5th Cir. 2007), the majority cited "particularly acute" pressure to settle as justification for Rule 23(f) review. But the court went on to reverse certification because it rejected the merits of the class claims. The majority even cited its concern about "opening the floodgates for nearly unlimited and frequently unpredictable liability" as support for its ruling that the claims couldn't survive legal scrutiny. Id . at 393. "Pressure to settle" thus merged with an explicit weighing of the merits.

Observations

I have two observations on this perhaps inevitable consequence of allowing practically limitless interlocutory review of class certification decisions. The first concerns the absence of proof that settlement pressure encourages wrong certifications, either generally or in particular cases. One would expect, in fact, that the very size of a case would promote greater care in district courts' rulings under Rule 23. See Regents, 482 F.3d at 380 (noting the district court's "best of intentions" and "hurculean effort").

The second thought also comes from lack of evidence. Courts appear to indulge an irrebuttable presumption that pressure to settle produces unjust outcomes. On what basis do they do that? As far as I can tell, they take it as an article of faith. They don't cite studies. They don't even offer examples. Do defendants actually misjudge the risk of class actions? Do they truly overpay? Count me skeptical.

The strongest cases get the most urgent cries of hydraulic pressure. One can hardly blame the defendants, but judges needn't accept their complaints at face value. The focus should stay on evaluating the likelihood of error by the district court. A settlement class may increase the danger of a mistake. But mere bigness normally doesn't -- and it usually has the opposite effect.

Justice Holmes, in his very first dissent, sassed his Northern Securities colleagues by implying that they let public opinion bend their judgment. He was wrong; they were right. And, in the spirit of humility, which becomes us all, let us settle or try cases on their merits. Let us allow doubt about settlement pressure in weak cases. Cost of defense, perhaps. Maybe a tiny bit more for the low but conceivable possibility of losing not only at trial but also on post-trial motions and appeal. But please don't pay more than that, friends, for bad cases. You'll have only believing in a myth to blame.

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Roundup

A scintillating, clickable selection from the pages of Blawgletter.

• Katrina Koverage? Fifth Circuit Says No. Again. Twice.
  
• Daisy Duke, Captain Kirk Broke Lanham Act in HDTV Ads, Second Circuit Rules.
  
• Comcast Cable Class Defeats Post-Twombly Motion.
  
• Yellow Peril.
  
• Truth Handling.
  
• Voir Dire and Tort Reform.
  
• Third Circuit Plumbs Mysteries of Loss Causation.
  
• Blawg Review #118.
  
• Quote of the Day: Stinking Badges.
  
• Supreme Court's 2006 Term for Bidness Law.

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