Tuesday, August 19, 2008

The Fixx Plays, Loser Pays

Yesterday, I talked about the inescapable vise of progressive politics — but today let’s talk about the efforts to put a vise around quasi-progressive rock.

Yes, today is the pivotal day in legal history when witch-burning socialists in Massachusetts decide whether to punish the rock band the Fixx for being too cool.

All right, I’m slightly misrepresenting the details of the situation. Actually, they’re just having a meeting of the events licensing board in Newton, MA about whether to revise their noise rules to henceforth forbid things like the recent outdoor Fixx concert in celebration of the opening of the Hotel Indigo. The Fixx themselves have long since safely escaped the town (and after all, they did once do a cover of “These Boots Were Made for Walking,” oddly enough).

If Indigo ends up being fined or something (presumably not in a post facto fashion), and they organize a benefit concert to pay their legal bills, perhaps they should consider using that band I saw perform with a theremin a few weeks ago, Rebel Hotel. Get it, Rebel Hotel? You see how perfect that would be, since, like, the Indigo’s a Hotel, and they’re, like, rebels?


On a more broadly useful note, this seems as good a juncture as any to note that I’m strongly in favor of the U.S. adopting the principle (very common in the rest of the world, including Europe) of “loser pays” in legal battles — that is, you lose the case, you must make the other side truly whole by paying the victor’s court costs, not just the damages at issue. This would eliminate the all-too-powerful incentive to shut people down simply by targeting them with lawsuits that they know will be time-consuming and expensive even if they win. It also diminishes the incentive to “give it a shot” and bring likely-losing bogus cases. More important, restitution to the vindicated party is just basic justice.

The pros and cons of loser pays will be the topic of discussion this week on NewTalk.org, a civility-encouraging political-discourse project of libertarian lawyer Philip K. Howard, whose minions include my non-libertarian but nonetheless swell friend Jenny Foreit and whose book The Death of Common Sense nonetheless does wonders to angry up the blood against nonsensical laws.

Strangely, I encounter a lot of people (including a smart libertarian) whose immediate intuitive reaction to loser pays is that it will prevent the poor from bringing lawsuits.

Now, if the end result of loser pays is that you can in effect bring a meritorious case for free, I fail to see how this is (on balance) bad for the poor. Indeed, even those of us who are not poor might like the ability to bring lawsuits over various petty matters not currently worth hiring a lawyer for (say, having one’s computer deliberately misdiagnosed by a repair shop so they can charge you more, to take an example from my own experience, back when the villainous Computer Era store in the East 20s existed — and just days, alas, before its thuggish staff were exposed as con artists on the cover of New York magazine).

There’s little I can do — as I am reminded day after day on countless philosophical topics — to control how people will intuit or even make them see that they might have opted to intuit differently than they have. But I suspect this intuition that loser pays is bad for the poor is largely driven by a subconscious assumption (occurring most often in left-leaning people, interestingly) that the poor have a special interest in bringing bogus lawsuits.

After all, in a purely algebraic sense, the filter mechanism introduced by loser pays is not mainly to punish suits by the rich or the poor but simply to punish suits that lose. Why should we assume it is in the interest of the poor to see losing suits given a leg up? That’s a bit like the old condescending liberal assumption that cracking down on crime is bad news for the poor. Baloney — it’s first and foremost bad news for criminals.

Likewise, loser pays is mainly bad news for…losers, which is to say people bringing bad suits or (lest we forget the whole purpose of lawsuits) committing wrongs for which they should pay damages. Or to put it in terms the left can understand: Don’t you think there are companies out there committing wrongs that lovable little poor people might like to sue over but are currently afraid to because even if they have slam-dunk cases they’ll still have big legal bills to pay in the end? Or to put it as starkly as I can: Are you so worried about discouraging poor people with bad cases that you’re unwilling to encourage poor people with good cases?


jenny said...

my primary problem with loser pays is that some worthwhile cases aren’t clearly “good” (that is, having a clear winning side of the dispute). it seems to me that close cases would be less likely to be tried under the “loser pays” scenario.

a second problem with loser pays is that it still leaves most of the power in the hands of the richer litigant. there are many ways in which a trial can be dragged out. so in the hypothetical situation where the poorer party has the “better” case, that party could still be forced to settle through procedural manipulations of the richer party, who can afford to let the case drag out. in essence, while “loser pays” may deter “the poor” from bringing bad cases, it would not necessarily deter wealthy parties from prosecuting – or defending – bad cases against less well-off adversaries.

then there’s the question of “loser pays” in the context of suits challenging laws or actions of governmental entities/individuals. if the loser is the governmental entity, where will the payment funds come from? the treasury? that seems unfair to me, as the taxpayer is now being made to pay for a suit taxpayers (generally) have won. and what of cases challenging laws, specifically – if the plaintiff is successful, would the “loser” be the specific individuals who created that law (the legislators who voted in favor of it, and the executive who signed off on it)? (perhaps some of the real lawyers – or law profs – reading your blog can weigh in; i have but the faintest memories of immunity issues from law school.)

also, what impact would loser pays have on the appellate process?

bah. i should be writing about administrative compensation for medical injuries this morning.

Todd Seavey said...

It’s not clear we should _want_ more “close cases” brought.

Loser pays doesn’t make poor people richer, but it makes them _less_ doomed to automatically pay legal bills than the current system, so holding the existence of rich-people’s-legal-teams against loser pays is like arguing against a neighborhood watch program by saying “Since there will still be crime, this improves nothing,” which is false.

The government should indeed make people whole when it damages them, which is one more reason to want a government that does _as little as possible_.

You lose on appeal, you pay on appeal.

Case closed.

dave said...

You’re making the assumption that all lawyers are equal, and that better lawyers aren’t more likely to win weak cases than worse lawyers. In fact, if you are anything of a capitalist, you’d believe that highly paid lawyers representing multi-billion dollar businesses are more skillful than their lower paid and less responsible counterparts.

I suppose the fear is that a corporation with 20 highly paid lawyers has a better chance of winning a case than an individual with a $20 an hour lawyer.

If Best Buy were to spend $10,000,000 on a team of lawyers to prove that the misdiagnosis was within the realm of the observations given, and they argued circles around the lawyer you hired, you’d be culpable for Best Buy’s legal bill.

Todd Seavey said...

And to put the legal bills point perhaps more clearly:

The rich can _already_ run up your legal bills, but now they can do so _without the fear of having to pay all your bills if they lose_.

The incentives in loser pays are all an improvement and step in the right direction. Residual problems are, by contrast, _ones that already exist in the current system_, so they can’t be an argument against the change.

Sort of like saying “There may be bribery in a system of small, limited government” is perfectly true, but unless you’re showing that there will be _more_ bribery than in the current, big-government system, that’s hardly an argument against small government _per se_.

If an imperfection exists to the same degree in two systems, it can hardly be an argument solely against system A (and it certainly can’t be an argument solely against A if it’s even more rampant in B, of course — unless we are just being very, very biased).

jenny said...

Loser pays doesn’t make poor people richer, but it makes them _less_ doomed to automatically pay legal bills than the current system

i’m not at all sure about this – i’d like to see data on the proportion of cases brought by “poor people” in which their attorneys are working on a contingency fee. legal bills are not automatic if they don’t win.

The government should indeed make people whole when it damages them

agreed, but where is “the government’s” purse? in the treasury? or in the pockets of the individuals making up “the government”?

You lose on appeal, you pay on appeal.

obviously. but what impact would loser pays have on willingness to appeal in the first place? and procedurally, what would be done – would the loser’s payment be suspended while the case is being appealed?

The incentives in loser pays are all an improvement and step in the right direction.

it seems to me that the incentives in loser pays are to reward better bluffers – and parties more willing to run up high legal bills. in a suit where the outcome is uncertain, one party may be intimidated into settling based on the possibility that the s/he will have to pay the other party’s escalating bills.

Todd Seavey said...

On the contrary, if you have a winning case, you _aren’t_ bluffing (and again, right now even a big company that _knows it’s wrong_ can frighten you with usually-unrecoupable legal bills).

Again, loser pays rewards merit and punishes error, and there’s something awry if we react to that by asking for stats on how it will affect different income levels in the first place, isn’t there?

If someone says “people are less likely to skip out on the bill at restaurants these days,” I hope our reaction wouldn’t be to say, “Well, let me check the demographics on check-skippers before I tell you whether that’s good news.” But then, I’m no leftist or egalitarian — and we all know where egalitarianism leads (thanks to moviemakers like Thor Halvorssen and Elizabeth Koch):


Todd Seavey said...

Oh, and I would of course be _delighted_ if individual members of the fictional entity called “government” were held liable for their actions, but I assume that if even modest reforms like spending cuts, deregulation, and loser pays are too much to ask for, the odds of me living to see a world where government agents have to pay for all the costs they impose are slim.

You will keep me dreaming of a better world, though.

jenny said...

If someone says “people are less likely to skip out on the bill at restaurants these days,” I hope our reaction wouldn’t be to say, “Well, let me check the demographics on check-skippers before I tell you whether that’s good news.”

no, but a reaction to ask, “what’s the incidence of people skipping out on bills at restaurants in the first place?” is a good thing – especially if you’re using the assertion that “people are less likely to skip out on the bill at restaurants” as support for some sort of restaurant-based rule reform.

Jacob T. Levy said...

I don’t have any strong objection to “loser pays”- but think in expected value terms.

If I’m a relatively poor plaintiff suing a relatively rich defendant in a case that has an 85% chance of success, for a million dollars:

1) If I have a contingency-fee lawyer and loser doesn’t pay, I bring the suit.

2) If I have a non-contingency-fee lawyer and loser doesn’t pay, I almost certainly bring the sit, because I’ll have hired a lawyer whose expected total fees are less than $850,000.

3) If loser pays, though, there’s a 15% chance of incurring costs that are under the other party’s control and that can rise arbitrarily high– probably bankrupt-the-plaintiff level high. If the defendant is willing and able to spend $6 million in defense fees (and it may well be willing to do so if it gets sued frequently enough) then the 15% chance of having to pay those fees is greater than the 85% chance of winning. If there’s diminishing marginal value of money– to the person with $100,000 it’s a lot more important to avoid falling to 0 than it is to rise to $200,000– then the break-even point will be appropriately lower.

Even highly meritorious cases aren’t 100% guaranteed. And the small-percentage chance of paying legal fees that the other side can strategically allow to rise acts as a deterrent to even very meritorious claims brought by plaintiffs who are less able to take the hit.

Contrary to what you say, a rich defendant *can’t* now spend the plaintiff into the ground in the same way– if the plaintiff’s attorney isn’t working on contingency, then the plaintiff simply sets a budget constraint.

Loser pays has some merit– but it’s hardly perfect, and if what you’re really agitated about is tort law judgments, then it’s a weird tool and one that risks all kinds of unintended consequences for contract law, property law, family law, etc. (Tort is not the backbone of the legal system, and you shouldn’t put that cart before the important horses.) Better to focus on tort law reform directly– including reforms of choice of jurisdiction and of civil juries.

(Jenny asked about various suits against the government including suits about unconstitutionality. It’s natural enough to say that loser pays governs suits at law not at equity– if there’s no money changing hands anyway, then no money changes hands to pay the other side’s lawyers.)

Todd Seavey said...

Well, OK, but if you’re talking about contingency fees, you could also bring in considerations like loser-pays-world having lots of contingency fee lawyers who advertise on the basis of actually paying out money for the other side’s court costs if they lose (and thus have meta-legal insurance, etc.).

You’d still skew things more in the direction of people seeking litigation _when they think they can win_ instead of simply when the activity of litigating works to their advantage, which is what you want.

On balance, you still want to encourage winners to go to court and discourage losers, with all other concerns (save to the extent one claims to be able to spot just outcomes in a way that somehow transcends/avoids going through the process itself) secondary, I’d say.

(And let us not be cowed into thinking that going to court is itself a positive or even break-even experience, absent loser pays — the fewer people with bad arguments eating up court time and expense, the better, all else being equal — not that Jacob says anything to contradict that, but I just know there are probably lawyers reading this some of whom are thinking, in effect, “Why not just go to court over everything all the time?”)

Finally, I’m all for competition between potential venues/systems in this area, though, if I can plead the David Friedman escape clause — and if the Democrats do not succeed in their terrifying current push to abolish private arbitration, which is right up there with fighting against school choice and encouraging felons to vote in the Sometimes They Really Are Just Knowingly Sinister and Eager to Protect Their Racket department.

jenny said...

on a completely unrelated note, pandora – which may soon go the way of the dodo due to the RIAA’s online royalty rates – just started to play stand or fall.

of course, one (todd?) might argue that the fixx are related to everything.

Jacob T. Levy said...

“Competition between venues” doesn’t mean anything determinate in tort, where the parties haven’t had a prior interaction in which they’ve agreed to jurisdictional rules. (Contract is very different.) One version of competition between venues is what the US has now– plaintiff’s choice forum-shopping, with the result that all kinds of bogus suits get brought before pliant ignorant juries in Mississippi, West Virginia, and southern Illinois. I presume that this is *not* what Todd favors– but it also doesn’t seem right to let the defendant always choose, or to mandate agreement (which amounts to a defendant’s veto on the suit going forward at all). Bad options all around.

Todd Seavey said...

Though you’ve seen me do the Fixx in karaoke, my Fixx channel on Pandora has not always yielded pleasing results — perhaps fittingly, my channel based on the band My Favorite seems to produce more consistent results (except for its occasional techno ruts). Girly, twee results.

My Magnapop and Epoxies channels also seem to work out well. Bowie, by contrast, keeps giving me stuff like 38 Special.

But if Pandora faces RIAA in court, perhaps they should simply appeal for understanding by asking, “Is this the value of our existence? Should we proclaim with such persistence?”

If we end up losing Pandora, online stations like DevilsNight, _and_ outdoor Fixx concerts in Newton, MA all in the same summer, though, I will be seriously bumming.

In similarly grim news, Fox (based on older, partial film rights to the property) is suing to prevent the release of Warner’s _Watchmen_ movie. Worst-case scenario, I’m sure they’d just get a cut of the money, but if they actually prevented or even seriously delayed the release, I think you might even see enough fan anger to lead to, say, boycotts of Alien and Star Wars releases. I know I’d be pissed.

Jacob T. Levy said...

“encouraging felons to vote”

Did I really just see a libertarian endorse felon-disenfranchisement laws? Remember: it’s the state that defines “felony,” and those convicted of violating the state’s laws are a natural constituency for opponents to those laws.

If you think either that states are likely to be hamfisted enough to create massive categories of unjust and destructive felony laws such as, oh, I don’t know, maybe drug laws; or that states are likely to be power-hungry enough to opportunistically manipulate the criminal code in order to disenfranchise potential opponents, then I can’t see how you can support felon disenfranchisement on libertarian premises. I understand the impulse to say “thieves and murderers have cast themselves out of civil society,” but that’s not the available category, and it will be state institutions that decide who should be moved into the disenfranchised category.

Todd Seavey said...

Generally speaking, the fewer voters, the better, especially anti-social ones, though I’m all for legalizing drugs specifically.

But my only point for current purposes is that when outfits like the _New York Times_ repeatedly proclaim re-enfranchising felons a fundamental element of democracy, you can rest assured they’ve done the math and discovered that felons are overwhelmingly Democrats (as indeed they are).

Likewise, I am not here debating (directly) the merits of school choice, but you can be assured teachers unions don’t oppose it due to their careful, considered conclusions that it will lower test scores. Just pointing out self-interested venality rather than bad policy for current purposes.