Hypocrisy again. Addressing the nation just a few minutes ago, George Bush claimed this as a long held belief:

I believe that companies that make bad decisions should be allowed to go out of business.

He made this claim as part of an argument to modify his position on allowing failure, because some financial institutions are basically too big to go under. But contrary to his argument, this wasn’t a change at all. In fact, asserting it was a change seems more like a flat out falsehood.

You see, each time his administration stepped forward for tort “reform” over the years, it was to do exactly the opposite: To protect companies from their negligence or bad decisions. Artificial one-size-fits-all caps on damages, for example. Administrative agencies trying to preempt state tort law, as another example. Trying to curtail punitive damages for the worst of the worst, as a third.

Tonight’s speech, of course, will be analyzed by others regarding the financial crisis we are in, the amounts that should be allocated to rescue giant financial institutions, the powers that should be granted, etc. I doubt that few will dwell on this one sentence that jumped out at me while he spoke.

But Bush’s claim that he believes companies that make mistakes should be allowed to fail is just not true. He has protected them in the past. Today’s bail out proposal may be a deviation from his alleged political philosophy, but it doesn’t deviate from his past conduct. And at least one person noticed.

A small kerfuffle occurred over at the Volokh Conspiracy when contributor Paul Cassell fell for a hoax he was emailed about the “Stella Awards.” It was previously debunked nonsense dealing with fictional lawsuits and trying to use these phony anecdotes to argue for tort “reform.”

While the error was quickly corrected, it also raises a different point: If folks at the Volokh Conspiracy are concerned about tort “reform,” why don’t they cover it? This would be perfect material, because the libertarian-conservative minded writers most likely, if they thought about the issue, would disagree with the entire concept of government protectionism for groups of people that are negligent. Yet the ideas for this protectionism always seem to come from the political right.

This fundamental hypocrisy — conservatives that harp on ways to protect wrongdoers from their own misconduct — is something I have written on before. Any true conservative, I think, would be appalled at government efforts to grant arbitrary caps and protections to those that negligently cause injury. The theory conflicts not only with the issue of additional government intervention, but with the concept of personal responsibility for one’s conduct.

Previously at my site:

• Modern Day Tort “Reform” (4/16/08)
• How New York Caps Personal Injury Damages (1/23/07)

And at Overlawyered: Winnebago/Stella Award myths, pt. 4 (with yet more links)

I read the article in today’s New York Times, front page of Metro above the fold, about New York State Assembly Leader Sheldon Silver and his loans to a company that finances personal injury attorneys. I kept looking for the meat — that part where an impropriety occurs — but found nothing out of the ordinary. It appeared to be muckraking without the muck.

The article discusses his $50,000 in loans to Counsel Financial, one of several companies that make high risk, high interest loans to lawyers so that folks like me can fund our cases (Full disclosure: I’ve never used one of those companies). This is, after all, a business with a particularly brutal business model: The attorney funds cases for years on a contingency, any one of which can run to tens of thousands of dollars, with the prospect of getting paid back when the case concludes. If it is successful. Cash flow is a huge problem from the business perspective. Getting started in a personal injury practice is particularly difficult for a lawyer without means. A certain ruthlessness is needed for case selection, to make sure you don’t get stuck with bad cases. I’ve discussed this concept before: See, Medical Malpractice Economics.

The gist of the article is that Silver is not just the Assembly Speaker, but of counsel to Weitz & Luxenberg, a prominent New York firm whose principles are actively involved with Counsel Financial. But why would his investment in a firm that makes high risk loans be any more of a conflict of interest than his activities with the law firm itself?

Tort “reformers” such as Jim Copland at the Manhattan Institute (quoted in the article, commentary on it by Walter Olson at Point of Law), argue that his investment in the company encourages him to put the brakes on protectionist “reform” like damage caps on pain and suffering. After all, the bigger the business for the funding company, the more likely he is to have a profitable investment instead of a loss.

But that conflict already exists with his activities as a personal injury lawyer. In fact, that conflict exists with every single legislator regardless of whether they are lawyers or have businesses, whether they have interests are in Apple, GE, or some private concern. Our legislators are part-time, and are permitted to have other jobs. So conflicts are bound to exist, but since the one the Times highlights is no different than any other I find it odd to see it highlighted in such a fashion.

Now I am sensitive to conflicts of interest. In fact, conflicts were the source of my April Fool’s Day hoax on whether Supreme Court justices should recuse themselves from a fantasy baseball case due to their involvement in a fantasy league. There clearly must be rules to deal with conflicts in legislatures. But in this case, we seem to be missing some actual muck that is needed to give a story such prominent placement.

A final note. The article first identifies Silver, at the outset of the article, as a trial lawyer:

Since early last year, Mr. Silver, himself a trial lawyer, made two separate loans to the company, Counsel Financial.

But then later on, the author concedes that he really doesn’t know what the heck Silver does:

And it is not known what he actually does at Weitz & Luxenberg.

“The speaker voluntarily limits his legal work to serve only individuals and personal injury cases and does not represent lobbyists or clients who have business before the state,” said his spokesman, Mr. Weiller.

He would not say whether the speaker ever appears in court to represent clients or describe his legal work in more detail.

That’s just shoddy reporting.

More:

• Legal finance firms mentioned in NY Times today (Legal Broadcasting Network)
• Is Public Service a Part-Time Job? (Gotham Gazette – The Wonkster)

The Journal News today publishes my op-ed on tort “reform.” This is a regional paper owned by Gannett that serves the commuter counties north of New York City.

The article is here: Want to cure high malpractice rates? Target bad doctors

A copy is here: Turkewitz-Tort-Reform.pdf and reprinted below:
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Re “Tort reform needed in New York state,” a July 23 letter by Cortes E. DeRussy of Bronxville that blamed the “trial-bar friendly state Legislature” for refusing to enact malpractice reforms needed to keep doctors from fleeing the state:

The DeRussy letter repeated a common myth in an argument for tort “reform,” claiming that one of the primary reasons for increased medical malpractice insurance was “unusually high judgments.” DeRussy couldn’t be more wrong. Last year doctors in the state were hit with a 14 percent increase in medical malpractice rates. The instinct among those who want to change the tort laws by granting some level of immunity or protection to the wrongdoers was to blame the lawyers or juries. A little protectionism called tort “reform” in the way of artificial caps on awards would surely cure this problem. Right? Except that medical malpractice verdicts had nothing to do with the increase in rates. Rather than make simple conclusory statements, let’s look at some actual facts:

New York Superintendent of Insurance Eric R. DiNallo, who sets the amount of rate increases, said last year that the 14 percent jump comes “after years of artificially low rate increases” and that “the rate increase comes after years of setting rates below what was needed.” The rates were raised in order to avert a possible “irreversible crisis.” Did doctors previously complain that their rates were too low?

New York had previously “appropriated” $691 million of medical malpractice insurance reserves from the Medical Malpractice Insurance Association to balance the state budget. This association had been established by the state to satisfy any deficiencies attributable to the premium levels for malpractice policies, and for reinsurance. That surplus would have been used (if not taken during the Pataki administration to balance the state budget) for maintaining the solvency of New York’s medical malpractice insurance carriers.

OK, so the problem was caused by lousy state policy under the Pataki administration by setting artificially low rates, while also swiping the doctors’ rainy day fund. Surely, the problem was also caused in part by increasing medical malpractice cases and payouts, right? Well, no. In fact a study has shown that the number of medical malpractice cases in New York has remained static, and the amount of payouts has kept pace with other health-care costs. When premiums go up, but the payouts are flat, you know you have a problem. But that is not problem that was created by those who were injured by negligence, nor by their counsel.

And have high medical malpractice insurance rates in downstate counties chased away physicians, as the fear-mongers suggest? Not even close. It seems that the number of doctors in New York jumped by 16 percent from 1995-’03, an increase greater than our growth in population. And The New York Times reported just last year that while there was a 6 percent growth in the number of doctors from 2001 to 2005, for a total of about 77,000 doctors, the way they are spread throughout the state is wildly uneven.

Perhaps the problem is an onslaught of frivolous litigation? Nope, not that either. A report in the New England Journal of Medicine disproves the myth of frivolous malpractice litigation. Here’s a suggestion for tort “reformers” like DeRussy, who wish to create artificial one-size-fits-all caps for the victims of negligence: Government clearly created this insurance problem, as DiNallo admits. We, therefore, need insurance reform. Trying to fix a government-created problem on the backs of the most badly injured New Yorkers is not only cruel, and not only lousy policy, but it also won’t work. For it wasn’t the victims who created the problem. (It’s worth noting, by the way, that New York already has caps on personal injury awards, including medical malpractice.*)

Now here is a reform that the doctors may want to entertain: With up to 98,000 people per year dying from medical errors according to the Institute of Medicine, and with 4 percent of the state’s doctors contributing to half of the malpractice suits and payments (according to a Public Citizen report) maybe, just maybe, a little more policing of the medical profession might be in order to weed out the bad apples?

A good way to start real reform would be to take the rainy day fund money back from the general fund where it had disappeared. That means, however, a responsible state government engaging in sound budgetary policy instead of shell games. Better policing of the few doctors who do most of the damage is the second avenue that the state must embark upon, and not just for the sake of insurance premiums but for the sake of future patients who may come under their care.

The writer, who lives in New Rochelle, is a Manhattan attorney and the author of the New York Personal Injury Law Blog.
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*Updated: As I sat in court this morning I read through the op-ed and saw that they made edits due to length. One in particular is noteworthy, since it may lead the reader to a wrong impression with respect to New York’s caps on personal injury cases:

As it appears in the paper:
(It’s worth noting, by the way, that New York already has caps on personal injury awards, including medical malpractice.)

As it was written and submitted:
It’s worth noting, by the way, that New York already has caps on personal injury awards, including medical malpractice. But they are not one-size-fits-all. First there are members of the community that sit as a jury. Then if the award is too high (or too low) the trial judge can order a new trial if s/he believes the award shocks the conscience of the court. Then there is a third level of review at the appellate level, where a verdict that is too high (or too low) can be thrown out if it deviates materially from what would be reasonable compensation. These standards are designed to fit the particulars of the case, and have proven to be ample safeguards since at least 1812. And that is how it should be.

Correction: In one portion of my piece I note that 4% of the doctors are responsible for 50% of the lawsuits. That should read 50% of the payouts. That doesn’t affect any of the discussion of Insurance Department errors, of course, or the fact that a small number of doctors are responsbile for a huge percent of the problem, but it is put here for accuracy. (Via Overlawyered, see comment 4.)

This first piece comes from Medical Economics, and was written by a Nevada physician that had been active in the tort “reform” movement there. He recounts the story of clear negligence — admitted by the pathologist that read the slides — and the jury verdict notwithstanding the evidence in favor of the doctor. The author and tort “reformer,” medical oncologist Arnold Wax, is appalled and now understands the ramifications of what he brought to his state. (h/t Kevin, M.D.) From the article:

It appeared that the case would be resolved quickly, considering that the defendant freely admitted his error. However, this turned out to be far from true.

…

As I’d expected, the jury found the original pathologist negligent. But, to my surprise, Mary wasn’t awarded any damages… The jurors reasoned that the pathologist had not acted maliciously, and that if he were found liable for a monetary award, he might leave the state. They were likely influenced by political ads that ran during the state’s tort reform ballot campaign, describing physicians who were leaving Nevada because of its malpractice crisis.

That article, which should be read in full, appeared today and just missed the Personal Injury Round-Up by Brooks Schuelke that appeared in my feed reader at the same time. As usual, Brooks brings all the news that’s fit to link.