Recently, I have been thinking about trial lawyers and economic value. Most people I believe don’t like lawyers. Although, if people don’t like shouldn’t they really hate law professors since they breed future lawyers? The major thing I have been thinking about is if trial lawyers really have any economic value. My own belief is that yes they do some function. Companies and people do cheat people. Companies deserve to pay for their mistakes I think the big question is how much and is the plaintiff at any fault. What is really interesting is that judges and jurors usually determine the verdict. However, judges are elected and can be republican or democratic. Judges to be shouldn’t have political affiliation since they are suppose to rule based off the law and facts. Trial lawyers can greatly influence the decision of the jury with anecdotes, stories, and pictures to convey the hurt and loss of their party. Trial lawyers are just doing their jobs. However, isn’t it a little bizarre that a jury can make a decision to award $x million to one party and they don’t suffer any consequences if they make the wrong decision?
The marketplace usually rewards people for innovation, entrepreneurism, and ideas. The court system seems to be more of a redistribution of wealth. What if a judge told a jury, “If your verdict turns out to be incorrect you will owe one year of your salary to the state”? Juries might spend more time thinking about their decision if they had something at stake. Currently, members of a jury really have no skin in the game which can lead them to suboptimal decisions than if they had to make decisions with something at stake. Trial lawyers have something at stake. Trial lawyers want to win to boost their egos, win the verdict, and convince themselves that they are doing something beneficial for society. Speaking of money some trial lawyers make lots of money. We can’t label them as greedy since they are helping the average harmed person. John Edwards is worth around $55 million. He made a lot of money claiming that women having a Caesarean delivery were more likely to give birth to infants with problems. However, time showed that in fact having a Caesarean delivery did not increase problems with infants but there was some other factor causing the birth defects. John Edwards got to keep his money though. I am no legal expert but it would only seem fair for him to pay back the money he won.
A few trial lawyers have become billionaires. In 1984, Pennzoil was trying to buy Getty Oil. Pennzoil made an offer and Getty Oil made a binding agreement to accept. However, Texaco came in and tried to bid for Getty. Joe Jamail defended Pennzoil and won a $10.5 billion verdict. The firm got around 1/3 of this ($3 billion roughly) and Jamail’s take was around $335 million. If you consider Jamail never took the LSAT, failed torts in law school, and barely passed the bar exam (he had to get a 75 and got a 76). In Forbes 400 list Jamail is worth $1.5 billion. I would argue that no one was really harmed with Texaco making a bid for Getty Oil. I agree that contracts have a role and Texaco can’t bid when two parties already have an agreement. However, I don’t think it’s worth $10.5 billion plus all the time and resources Pennzoil and Texaco had to spend preparing and endure during the trial.
Another lawyer that has made a name for himself is Mark Lanier. A graduate of Texas Tech law school Lanier won a verdict for $118 million for asbestos, $253 million for the Vioxx case, and $56 million against Caterpillar for a driver that was crippled. Clearly, Lanier is good at what he does. Lanier has extraordinary presentation skills and use to preach at his church while still in high school. For Lanier’s first case he called up already famous lawyer John O’Quinn who told taught him the O’Quinn system. The O’Quinn system was working over 100 hours per week (taking Saturday’s off). For the Vioxx case Lanier made a 253 PowerPoint slide. Lanier hosts an annual Christmas party that is as big as Texas. Usually Lanier and his wife host the party at their 24,000 sq foot estate in Houston with around 8,000 of their closest “friends”, with carnival rides, climbing walls, large moonwalks. Not only do they have games and enough food to go around but he has entertainment like Miley Cyrus, Dolly Parton, and Barry Manilow. The Lanier’s have been putting on this party since 1993 and it usually runs over a half million dollars per year. Clearly, Lanier is very good at what he does but also through litigation has raised the cost for the rest of consumers. Companies don’t want to go to court and have to pay out money. For this very reason companies have to have corporate counsels just in case of a lawsuit. Also companies usually buy insurance to limit their liability. This is money that could otherwise be spent on production, capital projects, or increasing efficiency.
No doubt that it can pay to be a trial lawyer. I also don’t doubt that these lawyers are extremely hard working and motivated. Although, I would agree that trial lawyers serve some purpose I think they are often overused. I am all for people, companies, and individuals paying for their mistakes but we can’t think that this doesn’t have a cost. Economics shows us that there are always unintended consequences even when it comes to trial lawyers.
The marketplace usually rewards people for innovation, entrepreneurism, and ideas. The court system seems to be more of a redistribution of wealth. What if a judge told a jury, “If your verdict turns out to be incorrect you will owe one year of your salary to the state”? Juries might spend more time thinking about their decision if they had something at stake. Currently, members of a jury really have no skin in the game which can lead them to suboptimal decisions than if they had to make decisions with something at stake. Trial lawyers have something at stake. Trial lawyers want to win to boost their egos, win the verdict, and convince themselves that they are doing something beneficial for society. Speaking of money some trial lawyers make lots of money. We can’t label them as greedy since they are helping the average harmed person. John Edwards is worth around $55 million. He made a lot of money claiming that women having a Caesarean delivery were more likely to give birth to infants with problems. However, time showed that in fact having a Caesarean delivery did not increase problems with infants but there was some other factor causing the birth defects. John Edwards got to keep his money though. I am no legal expert but it would only seem fair for him to pay back the money he won.
A few trial lawyers have become billionaires. In 1984, Pennzoil was trying to buy Getty Oil. Pennzoil made an offer and Getty Oil made a binding agreement to accept. However, Texaco came in and tried to bid for Getty. Joe Jamail defended Pennzoil and won a $10.5 billion verdict. The firm got around 1/3 of this ($3 billion roughly) and Jamail’s take was around $335 million. If you consider Jamail never took the LSAT, failed torts in law school, and barely passed the bar exam (he had to get a 75 and got a 76). In Forbes 400 list Jamail is worth $1.5 billion. I would argue that no one was really harmed with Texaco making a bid for Getty Oil. I agree that contracts have a role and Texaco can’t bid when two parties already have an agreement. However, I don’t think it’s worth $10.5 billion plus all the time and resources Pennzoil and Texaco had to spend preparing and endure during the trial.
Another lawyer that has made a name for himself is Mark Lanier. A graduate of Texas Tech law school Lanier won a verdict for $118 million for asbestos, $253 million for the Vioxx case, and $56 million against Caterpillar for a driver that was crippled. Clearly, Lanier is good at what he does. Lanier has extraordinary presentation skills and use to preach at his church while still in high school. For Lanier’s first case he called up already famous lawyer John O’Quinn who told taught him the O’Quinn system. The O’Quinn system was working over 100 hours per week (taking Saturday’s off). For the Vioxx case Lanier made a 253 PowerPoint slide. Lanier hosts an annual Christmas party that is as big as Texas. Usually Lanier and his wife host the party at their 24,000 sq foot estate in Houston with around 8,000 of their closest “friends”, with carnival rides, climbing walls, large moonwalks. Not only do they have games and enough food to go around but he has entertainment like Miley Cyrus, Dolly Parton, and Barry Manilow. The Lanier’s have been putting on this party since 1993 and it usually runs over a half million dollars per year. Clearly, Lanier is very good at what he does but also through litigation has raised the cost for the rest of consumers. Companies don’t want to go to court and have to pay out money. For this very reason companies have to have corporate counsels just in case of a lawsuit. Also companies usually buy insurance to limit their liability. This is money that could otherwise be spent on production, capital projects, or increasing efficiency.
No doubt that it can pay to be a trial lawyer. I also don’t doubt that these lawyers are extremely hard working and motivated. Although, I would agree that trial lawyers serve some purpose I think they are often overused. I am all for people, companies, and individuals paying for their mistakes but we can’t think that this doesn’t have a cost. Economics shows us that there are always unintended consequences even when it comes to trial lawyers.
Respectfully, I think your conclusion is off the mark a bit. If anything, trial lawyers are underused. You conclusion that there is a cost to all this litigation is correct. However, your analysis made no mention of the cost to people who do not have the benefit of a great trial lawyer. Many injured individuals never get a proper trial. A tort is simply defined as a wrong. In America our constitution codified the right to a jury trial for civil claims in the seventh amendment. The penzoil case and cases like it, are to so rare that rare is not even the correct word. In the case of the vioxx or caterpillar case you cited in the Mark Lanier section, people were injured or killed by these products. There are over 1 million serious motor vehicle accidents a year, 200,000 acts of medical negligence, and anywhere from 20-100 major product recalls a year. Only 4,000 plaintiff's lawyers exist that have ever taken a trial to verdict for 1 million dollars or more. Not to mention that the Seventh amendment has been eroded by mediation and mandatory arbitration clauses. "This is money that could otherwise be spent on production, capital projects, or increasing efficiency". I think if the money was spent on increasing efficiency, safety, better training, we wouldn't need lawyers at all. But when these large corporations or insurance companies allocate resources, in many cases (believe it or not) it is actually more profitable for them to just simply deal with litigation then to make safer products. For example, even a year after numerous reports and studies linked Vioxx to heart attacks Merck still netted 5 billion dollars profit from Vioxx alone. The game is rigged against the consumer/patient and the UNDERUSED trial lawyers are the only real thing standing in their way from utter domination.
ReplyDeleteThomas thanks for the comment. I forgot I wrote this years ago! Most people who have a legit case will have access to a trial lawyer (these lawyers want the attention and press about their case). If companies commit a wrong they should pay for it no question. However, my issue is that a good lawyer can get a jury to think a certain way that may alter the cash flows of many companies or people. The jury pays no price for the wrong decision. I would be in favor of more trial lawyers in order to increase the quality and reduce the costs. Companies are not fools though. They don't want the bad press which often reduces their company value more than the legal costs in some cases. Vioxx is a drug that did have some serious side effects. Although, even though is it horrible that people died there probably are many people who benefited from it. I would be all in favor of screening to determine to see who would benefit and who might be in serious trouble by taking the drug. I honestly don't believe drug companies think. Drug companies can only make money in the long run if they provide products that help people. Drugs do have trade-offs the question is what trade offs are people willing to take for the benefits. However, why didn't anyone sue the FDA who approved the drug? I would much rather be in favor of an FDA that spends more time on safety on less time on whether a drug is effective. People can decide if what they are taking is working.
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