• Lawyers’ business model
    July 31,2013
     

    In the fall of 1995, as a staff writer at Fortune magazine, I wrote a story about the mass litigation surrounding silicone breast implants. Plaintiffs’ lawyers had filed thousands of cases against Dow Corning, accusing it of selling a product — the silicone used in implants — that caused autoimmune diseases. Fearful that the litigation could put it out of business, Dow Corning filed for bankruptcy protection.

    The scientific evidence for the plaintiffs’ claims was slim. Nonetheless, Dow Corning felt it had no choice but to agree to a huge settlement, which it did in 1998. Subsequently, the Institute of Medicine concluded that, indeed, there was no scientific link between silicone breast implants and autoimmune disease. Not that that ever really mattered.

    We all have experiences that shape our view of the world, and this was one of mine. Until that story, I’d always taken the liberal view of plaintiffs’ lawyers as avenging angels, righting wrongs and helping wrest compensation for people who had been harmed by greedy corporations.

    But watching Dow Corning knuckle under caused me to look at major plaintiffs’ lawsuits with a more skeptical eye. Yes, there are certainly times when the court system provides the appropriate forum to address corporate wrongdoing. But just as often — more often, in my view — plaintiffs’ lawyers gin up cases because, well, that’s what they do. Like the corporations they sue, big-time plaintiffs’ lawyers have a business model. Theirs requires them constantly to seek out cases that can be blown up into giant mass torts, as they’re called, which can then be used to extract billions from companies.

    I’ve seen mass torts where the actual plaintiffs get coupons while the lawyers reap millions. Mass torts where the connection between the product and the harm is illusory. Mass torts built on fraud (silicosis). Complex litigation settled for billions even when the government implies that consumers are responsible (Toyota sudden acceleration). I’ve also seen cases where some victims hit the jackpot with a giant jury verdict and other victims come up empty. Or where a corporation really has done harm but pays off the lawyers instead of the victims. Over the years, I’ve thought: There’s got to be a better way.

    I know from the reaction to several of my recent columns that many readers think I’m misguided to be defending BP against the plaintiffs’ lawyers who sued the company in Louisiana. BP, after all, despoiled the Gulf of Mexico and harmed the people who live there. It had nearly $12 billion in profits last year, and more than $375 billion in revenue. It both deserves what it is getting and can afford to pay the price.

    But, to me, the question of whether BP can afford to pay is irrelevant. BP is the best example I’ve ever seen of a company that actually tried to find a better way. Immediately after the spill, it set up a claims process to get money into victims’ hands quickly, without having to file a lawsuit. Though that process had its critics, it worked. Of the $11 billion BP has paid out in claims, $6.3 billion was paid through that process.

    For the powerful Gulf Coast plaintiffs’ bar, however, this nonjudicial claims process was anathema. The idea that BP could come through the oil spill without having to face a giant plaintiffs’ lawsuit was potentially ruinous to their business model. So they sued. And BP, fearing the worst in a Louisiana courtroom before a judge who had once been a Louisiana plaintiffs’ lawyer himself, settled — a settlement that included a promise not to contest legal fees up to $600 million. The message is now clear: No matter how much money you are willing to pay victims, it will never be enough to keep you out of the courtroom. The lawyers are always going to insist on their “vig.”

    One of the things I find particularly offensive is that the settlement includes criteria that virtually ensure that businesses unharmed by the oil spill will get compensation. All over the Gulf, lawyers are advising clients to line up at the BP trough, and they are doing so.

    But how is this righting a wrong? Why is it appropriate to transfer money from BP shareholders to people who were basically bystanders and now have their hands out? When I posed this question to the plaintiffs’ lawyers who sued BP, I received a lengthy statement from one of the lead lawyers, Steven Herman, describing a formula that, he noted several times, BP had agreed to, and even encouraged. He said that the Oil Pollution Act of 1990 was aimed at helping people who have been harmed “indirectly.” What he didn’t say is that the more claimants getting BP’s money, the more money winds up with the lawyers themselves. Then again, he didn’t need to say that. It’s obvious.

    After all, there’s a business model at stake.



    Joe Nocera is a columnist for The New York Times.

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