HONEY, I GOT "DE-EQUITIZED"

Mayer, Brown, Rowe & Maw, one of those huge, silk stocking law firms that only hires the best and brightest[which is presumably why I never got an interview] "de-equitized" 45 partners in earlyMarch. In English, they fired them. The firm released a press release saying the victims were "fine lawyers who have made significant contributions to the firm". The release went on to note that even with strong revenues in 2006[profits per partner over $1 million dollars] the firm had to restructure.

Times, they are a- changin. When I got out of law school 20 years ago, landing at a place like Mayer Brown meant you were set. Do your work, keep your head down, make partner, join a country club, become a Republican, retire with a fat portfolio and summer home. Not any more. More and more of the bigger firms are cutting partners loose without a second thought. So, it appears I was right in not making Law Review after all.

STATE FARM AND ALLSTATE GETTING RICHER

In a follow-up to a recent post, I saw some interesting news about State Farm and Allstate. Despite all the rhetoric and Chamber of Commerce driven nonsense about lawsuit abuse, seems that State Farm and Allstate are doing just fine. State Farm reported that its profits jumped 65% in 2006. Profits were down the previous year because of large payouts resulting from Katrina claims. That certainly makes sense. The part of the article that did catch my eye were the details, as reported by Crain's Chicago Business, about the auto insurance profits. State Farm paid out $1.25 billion in dividends to auto-policy holders. Some of those profits are an result of the DELAY, DENY AND DEFEND tact State Farm has taken when it comes to defending auto claims. [See the February 27, 2007 post]. The formula is pretty easy to follow: 1) use a scorched earth policy in defending ALL auto claims; 2) exhaust legitimate claimants so they eventually just give up and; 3) reduce payouts and increase profits.

Allstate, another practicioner of DELAY, DEFEND AND DENY also reported that 2006 profits nearly tripled, to $5 billion dollars.

CATHOLIC CHURCH HIDES BEHIND BANKRUPTCY LAWS

According to a February 28, 2007 story in the Chicago Sun-Times, the Roman Catholic Diocese of San Diego planned to file for bankruptcy in order to delay going to trial in more than 140 cases involving allegations of sexual abuse. According to Bishop Robert Bron, the decision was made to go forward with a bankruptcy because any damages awarded might "...deplete Diocesan and insurance resources leaving nothing for other victims." According to attorneys for the Diocese, the plan was to file for Bankruptcy in the late evening hours, just before the very first trial got underway. That filing would then halt any legal proceedings.

Attorneys for the abuse victims, however, interpreted the move differently. They feel the bankruptcy filing was simply a tactic to keep potentiallly embarassing information from seeing the light of day in a courtroom

I have to side with counsel for the plaintiffs here. The church has known the number and types of claims it faced for years. Why didn't they file for Bankruptcy protection long ago if they were so worried about other victims? The more likely scenario is much simpler - the Church figured that it could resolve the cases and keep the scandalous allegations from becoming public. When the settlements didn't go through, the Church had to file Bankruptcy. The very last thing the Church wants is to have a jury hearing evidence about how priests repeatedly abused children, and the Church simply looked the other way. The Catholic Church has always been good at passing judgment on society. It appears however, the Church will go to extraordinary lengths to avoid society passing judgment upon it.

DENY, DELAY, DEFEND

CNN recently aired a great story that detailed the strategy two major American insurance companies have adopted in responding to certain automobile collision cases. The strategy is known as DENY, DELAY AND DEFEND. According to the article[and a piece that aired on 360 with Anderson Cooper], major insurance companies, led by State Farm["Like a Good Neighbor"] and Allstate[the "Good Hands People"] have utilized a take it or leave it approach when dealing with car crash cases where the injuries are soft tissue[i.e. not broken bones]. As a result of their tactics, insurance company profits have soared. The insurance companies however, have tried to keep all this a secret - for understandable reasons. If the general public knew the company profits were soaring, they might want a break in the premiums they pay. And the insurance companies don't have any interest in reducing premiums. In fact, premiums continue to rise, according to the story.

In an affadavit filed in a New Mexico case where Allstate is being sued, one of the company's former lawyers was blunt about Allstate's strategy. The idea, he said, was to make fighting the company "...so expensive and time consuming that lawyers would start refusing to help clients."

According to the CNN article, both State Farm and Allstate hired a consulting firm, McKinsey & Co. to help them boost profits in the 1990's. McKinsey focused on the soft tissue cases as a way to increase company revenue. One of the McKinsey documents recommended that Allstate put boxing gloves on those famous "Good Hands" to send a not so subtle message to the claimants who insisted on going to court. Jim Mathis, a former employee of both State Farm and Allstate said the strategy was clear: Deny the claim; delay settlement and defend the case in court. According to Mathis, "...as long as the public allows this to occur, the insurance companies get richer and people... will not get a fair and reasonable settlement. Interestly, Allstate, when asked to comment on the story, sent an email that indicated it would not "...have any real opportuntity of being successful in getting you[CNN]to do a balanced report." I'm sure Allstate would be find a much more understanding venue on the Fox News Network, which is widely known for its fair and balanced reporting.

I won't dispute that some soft tissue cases are meritless and shouldn't tie up the courts. The claimants aren't really injured and are just looking for a quick buck. Those cases however represent only a small percentage of soft tissue cases. Some soft tissue cases have valid injuries and should be treated seriously by the insurance companies. In light of the overwhelming success the insurance companies have had with their scorched earth strategy however, it is unlikely that their approach will ever change. And the people who do have meritorious claims end up getting screwed.

BACK IN THE SADDLE

To paraphrase that eminent commentator James Anchower, it has been awhile since I blogged. My practice has gotten way busy and I wasn't organized enough to get everything done and post. In addition, I recently took up Google on its offer to embrace their new technology, which is supposed to make the whole blogging thing easier. We'll see.

By the way, if you don't know who Jim Anchower is, check out The Onion next time you get a chance.

LOUISIANA AHEAD OF THE CURVE

A Louisiana Appellate Court recently overturned the state's medical malpractice damages caps, because the cap fails to provide an "adequate remedy" for tort injuries. The ruling came out of a medical malpractice case that arose when a William Arrington died in a Louisiana emergency room. The family was paid $500,000 from the Louisiana Patient's Compensation Fund, the maximum they could receive under the cap law. The family appealed, seeking to have the damages limitation found unconstitutional. Judge Elizabeth A. Pickett, the author of the Appellate Court opinion, said the Malpractice Act restricted patients' rights in two important ways. First, patients under the Malpractice Act were required to appear before a review panel before moving forward with the case. Secondly, patients were limited to a $500,000 recovery. To quote Judge Pickett, "The balance has been weighed heavily in favor of health care providers, their insurers and the Patients' Compensation Fund by the two-thirds erosion in the 'dollar' from 1975 to date, which limits the value of the claim to one-third of its value in 1975, thereby violating the equal protection laws guaranteed by the Louisiana constitution." The Illinois Supreme Court will likely be facing the same issue in the very near future. Hopefully the Court will follow Louisiana's example.

CATCHING UP...

Haven't posted in quite some time because I was preparing for a rather unusual property damage trial scheduled to start in a couple of weeks. Thankfully it appears the case has settled. I have, however, been keeping my eye on developments in the legal community....

ANOTHER VIOXX VERDICT Vioxx took a BIG whack from a federal jury down in New Orleans back in September. After a month of trial, the jury took just 5 hours to determine that Vioxx maker Merck had knowingly misrepresented or failed to disclose a material fact to doctors who were treating Gerald Barnett, a former FBI agent. [The online article I saw didn't disclose the exact misrepresentation]. Barnett had been taking Vioxx for nearly three years prior to a 2002 heart attack. After his coronary, Barnett underwent a 5 way heart bypass. He continued taking the drug for two years after surgery, until it was pulled from the market. The jury found that Merck's misrepresentation was a legal cause of injury to Barnett. The jury awarded Barnett $50 million[that is not a misprint]in compensatory damages and $1 million in punitive damages. Merck, not suprisingly, is unhappy with the result and has vowed to appeal, claiming that Barnett was predisposed to heart problems, regardless of his decision to take the drug. So, as of late September, Merck has one win and one loss in federal jury trials involving Vioxx.