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Friday, April 04, 2003
Sometimes The Good Guys Win

T.C. Mits has the story about a local school board that was attacked from the right for playing the Star Spangled Banner at a public school. Yes, attacked by Rush and company for playing the National Anthem.

Please click through and read the whole sordid tale. It has a very happy ending.

Update: Try this link instead (although you may have to scroll). The other link looks as if T.C. uses Blogger (which he does not, only fools like us use Blogger).

Thursday, April 03, 2003
Joliet George

Many commentators have tried to explain the Presidency of George W. Bush by comparing him to historical or fictional characters. Those on the right have compared Bush to Winston Churchill, Ronald Reagan, William McKinley and Andrew Jackson.

On the left, Paul Krugman has suggested that Mr. Bush’s Iraq policy was like Captain’s Queeg’s search for the missing strawberries. On the News Hour recently, Mark Shields compared Mr. Bush to Captain Ahab of Moby Dick.

We do not find such comparisons to be particularly illuminating. Depending on the particular characteristics chosen, Mr. Bush shares traits with many, many people. On the other hand, perhaps the right has properly characterized Mr. Bush. After all, Mr. Bush runs up deficits like Reagan, has all the diplomatic skill of Jackson, and may yet share the political fate of Churchill.

Comparing George W. Bush to other political or literary characters is not particularly helpful but it is fun. In that spirit, we suggest that George W. Bush is like Joliet Jake, the Blues Brother played by John Belushi. A script of the Blues Brothers movie may be found here.

Now at first blush, George W, Bush with his Andover, Yale, Harvard education and his meteoric rise to the most powerful position in the world may bear little resemblance the hardscrabble, convicted felon, blues musician, Joliet Jake. Consider, however, the similarities between the two:

* Both George W. Bush and Joliet Jake had religious epiphanies. Bush dedicated himself to Christ on a walk along the beach with Billy Graham. Jake saw the light during a service conducted by James Brown.

* USA Today reports that "Bush believes he was called by God to lead the nation at this time, says Commerce Secretary Don Evans, a close friend who talks with Bush every day." Joliet Jake was on a mission from God to save the Penguin.

* Both George and Jake focused exclusively on their mission to the exclusion of potentially more serious threats. Some have argued that Bush’s focus on the removal of Saddam has led him to ignore greater threats posed by North Korea and Al Qaeda. Joliet Jake ignored the threat of an ex girlfriend with a rocket launcher.

* Both sought to have their friends join in the mission and if the friends did not agree to do so, both threatened punishment. Mr. Bush said that if Mexico did not support the U.N. Resolution, “there will be a certain sense of discipline.” When Jake wanted Mr. Fabulous to give up his high paying job to join the band, Jake threatened to visit Mr. Fabulous’ high class restaurant with his brother to harass the diners.

* Both are willing to harm long-term relationships in pursuit of their mission. Jake broke up the marriage between Matt “Guitar” Murphy and Aretha Franklin. George seems unconcerned if the 50 year old NATO alliance is shattered.

* Whenever Jeb Bush visits the White House for dinner, he orders dry white toast while George has four fried chickens and a Coke. (OK, we made that last one up.)

The next time Andrew Sullivan or Karl Rove tells you that George W. Bush is Churchill or Teddy Roosevelt or Andrew Jackson, just remember that he is really Joliet George.

Wednesday, April 02, 2003
On Supporting The Troops

Politics is mostly about disagreements. There seems near universal sentiment, however, that whatever one thinks of the decision to go to war in Iraq, we should support our troops. That sentiment, with which we wholeheartedly agree, has manifested itself with programs to send email, music, food and other items to soldiers as well as the great idea reported by Charles Kuffner to provide “foster care” for the pets of our servicemen.

Other public policy proposals to support the troops have overwhelming support across the political spectrum. A provision to extend the time for Reservists called to duty to make payments on student loans passed the House by a 421-1 margin.

A provision to allow reservists to keep health insurance provided by their private employers (with the government picking up the tab) seems to have no opposition and also seems like a very good idea.

There are three arguments about “supporting the troops” that we fail to comprehend. First, the argument is made that opposition to the policies that led to the war in Iraq is a failure to support the troops and that such failure will result in decreased morale of the troops.

Senator John McCain made that argument when he remarked that:
Look, it's not possible to only support the troops and not their mission.

Rep. Tom Delay, the number two Republican in the House has also made that argument. The Washington Times reports Delay as saying about certain Democrats:
They start every comment with 'I certainly support the troops,' and then go denigrate why they're there. That's not supporting the troops, because you are telling that soldier directly he's risking his life for something that's wrong, and that has consequences. It has consequences in morale; it has consequences in soldiers second-guessing orders; it has consequences in soldiers questioning themselves as to what their commitment is.

We doubt the validity of that argument for two reasons. First, can anyone show a single instance of a soldier in Iraq doing something inappropriate or failing to something required because of a statement of Tom Daschle or Charlie Rangle?

We suspect that more soldiers in Iraq would guess that Charlie Rangle plays second base for the Cubs than could accurately recount his statements on the war.

The proponents of that argument also denigrate the intelligence of our troops. A central strategy of the administration in pursuing the war has been to convince the Iraqi people that even as we invade their country and bomb their cities, we are opposed to their leadership but bear no ill will to the Iraqi people.

If we think that the Iraqi people can distinguish our efforts against Saddam from ill will towards the people of Iraq while the bombs are dropping the bullets flying, why do we think that our soldiers cannot distinguish between support for the administration’s policy and support for the troops?

The second argument we do not understand is that criticism of the Rumsfeld war plan somehow harms the war effort. The New York Times reports on a press conference by General Richard B Myers in which Myers:
reserved his harshest judgments for members of the uniformed officer corps — whether on the battlefield in Iraq, at forward headquarters throughout the region or back home at the Pentagon — whose dissent he said seriously undermined the war effort.

Does that mean that the officer corp does not suport the troops? The dissent of which Myers speaks is criticism of the Rumsfeld war plan. That criticism is based on the notion that Rumsfeld decided to go to war without sufficient men and material to do the job right.

We are in no position to judge whether or not the criticism is valid. If it is valid, then an argument could be made that the war planners did not support the troops. Sending a message to the troops that their safety and success is less important than some combination of neo-con theory, bureaucratic infighting and budgetary stinginess certainly might hurt morale and/or recruitment in the long run. We doubt that it would have much effect in this war which, bad plan or not, is unlikely to last for more than a few months.

Walter Cronkite agrees that such disputes are unlikely to harm troop morale. On Larry King, Cronkite addressed the issue of morale loss as a result of war plan criticism:
And at any rate it seems to me that we do need to know how well our troops are being led, how good the plan seems to be, whether we are carrying it out successfully or not. That is important information for the American people and we're entitled to it.

There is an aspect of it, however, Larry, which I -- which I dislike and I worry about a bit. We talk -- they talk about this criticism affecting the morale of the troops. Well, it's not going to affect the morale of the troops. I've been with the troops all through World War II and Vietnam.

And I know troops in war and they're going to grumble and grouse about the way the war is being run all of the time. That's part of the game. That's what kind of keeps you going. You kind of grumble about it and that's part of being a G.I. out there.

We suspect that the ordinary soldier on the ground, to the extent that they are paying attention to the debate, simply views the dispute as a matter between the brass and that they will receive orders in due time.

Once again, can anyone point to any specific action or lack of action taken by any soldier that is attributable to criticism of the war plan?

This is likely to be a relatively short war. We think that the morale of the troops was established before the conflict started and that statements or actions occurring now are unlikely to have any significant effect on the morale or the war.

The long run consequences of some administration policies are more uncertain. As noted above, if the Defense Department and the Brass did risk the lives of soldiers by implementing a bad war plan, that is likely to have long term negative effects on recruitment and morale.

Similarly, some proposals of the administration would seem to have the potential to affect the long-term morale and recruitment efforts of the military services.

The administration proposes to “cut education funding for many children of military families. “

The Nation reports on the Republican attempts to cut expenditures for veteran’s health care:
The Republican majority on the House Budget Committee has just rammed through a resolution that would cut $844 million from veterans' medical care for next year…

Over the next ten years, the Republican changes would cut $24.7 billion -- billions with a "b" -- for veterans' medical care, disability compensation and other benefits. In other words: at the very moment men and women in the armed forces are being sent into military action, the Republicans back home are cutting their current and future benefits -- including payments to their families, should they be killed in action.

Matthew Yglesias (who provided the link above) also reports on proposals for cuts in funding for homeless veterans.

We think that in the long run, sending our soldiers into battle without adequate force at their disposal (if that is what happened), as well as cutting healthcare and education benefits for servicemen and veterans will have a much larger negative effect on morale than a few articles in the New York Times or a few speeches by politicians.

Does that mean that the Republican Party does not support the troops?

Tuesday, April 01, 2003
Another Loss for Bush

President Bush’s domestic agenda took another hit when Senate Republicans gave up on the President’s proposal to provide government funding to religious groups to provide social services.

The Washington Post reports:
The leading Senate Republican champion of President Bush's initiative to help religious charities agreed yesterday to drop its most controversial provisions in hopes of winning swift approval of tax incentives to encourage charitable contributions.

The new plan leaves virtually nothing of Bush's original plan to expand government funding of religious charities but increases chances of a break in the two-year deadlock that held up passage of more general legislation aimed at helping charities of all kinds.

Senator Rick Santorum of Pennsylvania, President Bush’s point man on his faith-based initiatives, announced that he was giving up on the idea of providing government funding to religious organization to provide social services. Santorum’s new proposal simply provides certain tax incentives for charitable giving.
Opponents of the administration's initiative hailed Santorum's announcement as a victory. "It's a huge break in the battle over this," said Joe Conn, spokesman for Americans United for Separation of Church and State, a Washington advocacy group. "Frankly, they blinked," he added.

A Senate Republican aide acknowledged that Santorum "would have liked to have done more in the legislation" but added, "we'll take what we can get."

What they got was almost nothing. The defeat of the President’s faith based Initiative proposal is the fifth significant legislative defeat for the President since the Republican Party retook the Senate in the 2002 elections. Since that time, in addition to losing the faith based initative proposal:
1) President Bush was unable to garner sufficient strength to overcome a Democratic filibuster of the nomination of Miguel Estrada to the United States Circuit Court of Appeals for the D.C Circuit;

2) A core component of the President’s energy policy, oil drilling in Alaska's ANWAR preserve, failed when eight Republican Senators broke ranks and voted with the Democrats;

3) The Senate reduced the President’s $726 billion tax cut by one-half when a bipartisan group of moderate Senators made common cause with Democrats to oppose the President. That defeat may well kill any chance for President Bush’s proposal to eliminate the tax on dividend income; and

4) Senate Republicans have acknowledged that they do not have the votes to enact the President’s proposal to cap non-economic damages in medical malpractice cases to $250,000. Senate Republicans have tried to work out a compromise with a higher cap. The sole Democrat supporting the compromise, Diane Feinstein of California, recently withdrew her support for the compromise.

Ever since the Republicans lost the run off election for the Louisiana Senate seat, the President’s political mojo seems to be AWOL. The President can’t bribe, bully or persuade Cameroon, Mexico or Guinea to support his war in Iraq. Turkey refuses to be bought. He cannot get a Court of Appeals nomination through the Senate. His domestic agenda of huge tax cuts for the investor class, oil drilling in Alaska, government money for the religious right and tort reform are all dead or on life support.

The only potential political salvation for the President is the prospect for a successful war. The New York Times reports a “conservative political strategist” as saying:
I don't understand what is floating his ship except patriotism and terrorism concerns. If the tide turns, there's nothing else that keeps his boat afloat. There's a sort of feeling out there of, `Where is this thing going?' We were all happy to follow President Bush into this, but we're now starting to look up at the hillside and wondering who's up there."

The sounds you hear are the screams of Karl Rove as he tears out what remains of his hair.

Pay For Performance

Jeffrey C. Barbakow is a very rich man. According to this USA Today Barbakow received more than $116 million in compensation last year. That figure does not include his new stock options that could bring in an additional $72 million. Even without the new options, Barbakow’s compensation works out to be about $22,875 per hour.

What did Mr. Barbakow do to earn his $116 million? He served as CEO of Tenet Healthcare. Tenet Healthcare is one of the largest 500 companies in the world. It ranks as the 136th largest company in the U.S.

Tenet Healthcare owns and operates hospitals. As one report has stated, Tenet is:
one of the largest hospital chains in the US. Tenet and its subsidiaries own or operate 115 acute care hospitals in 16 states, as well as one in Europe. The acute care hospitals serve as cornerstones to vast regional health care delivery networks. These regional networks include specialty hospitals, outpatient surgery centers, home health agencies, rehabilitation hospitals, psychiatric hospitals, HMOs, and long-term care.

Now, $116 million in compensation for one person in one year may be shocking on its face to some people. We are not shocked. Compensation in the business world should be related to performance. If Mr. Barbakow adds sufficient value to Tenet Healthcare and its shareholders, he deserves such compensation.

Since Mr. Barbakow received the highest compensation of any CEO in the country in 2002, we may presume that his performance as CEO is reflected in the stock price for Tenet Healthcare. That assumption, however, would be wrong.

As this is being written, Tenet Healthcare (THC) is trading at $16.59 per share. It 52 week high is above $52 per share. THC is currently trading at less than one third of its highest price in the last year. Mr. Barbakow received more than $116 million in compensation in year in which the stock price of the company he runs fell by more than two-thirds.

Stock prices are fickle. Perhaps Mr. Barbakow earned his hundred million by shoring up the financial condition of Tenet. Well, no. CBS Money Watch publishes the “Bottom 10.” The Bottom 10 is a list of companies rated by corporate credit analysts as being the most likely to suffer a downgrade of their debt or a default. Tenet Healthcare is in the Bottom 10.

Perhaps Mr. Barbakow earned his compensation by turning Tenet into a paragon of corporate integrity. That does not appear to be the case.

According to the Department of Justice:
One hundred thirty-nine hospitals currently or formerly operated by Tenet Healthcare Corporation will pay the United States and 22 states $17 million to settle allegations that the facilities overcharged federal health care programs in connection with laboratory services, the Justice Department announced today.

In addition, according to the Modesto Bee:
Tenet is also facing a federal probe into whether its aggressive pricing policies improperly triggered supplementary Medicare payments for care.

It has also been charged that doctors at a Tenet owned hospital were doing unnecessary heart surgery.

One report claims that:
federal agents raided offices at a Tenet hospital in San Diego on Thursday, seeking records related to possible violations of doctor-recruitment and relocation laws.

And that:
In a separate development, a group representing California senior citizens sued Tenet for alleged price gouging.

It has even been charged that Tenet, prior to its name change was:
holding some patients against their will in its psychiatric hospitals and treating them until insurance benefits ran out.

Mr. Barbakow was a member of the company’s Board of Directors when that allegation arose. Tenet settled lawsuits by the patients and some insurers.

The Department of Justice also reports that:
Tenet Healthcare Corporation subsidiary Lifemark Hospitals of Florida has paid the United States $29 million to settle allegations that Lifemark, Tenet and various affiliated and predecessor companies violated the False Claims Act in connection with false claims submitted to the Medicare Program.

It has also been alleged that Tenet cheated the California Worker’s Compensation system. Tenet has agreed to modify the way in which it bills for those services.

While Barbakow was CEO but before its name change, Tenet:
pleaded guilty to seven federal charges of paying kickbacks and bribes for referrals and was fined $382.7 million. A former executive also acknowledged paying doctors for referrals to psychiatric hospitals and then filing false Medicare claims to cover the payments.

It does not appear that corporate integrity is the key to understanding Mr. Barbakow’s compensation.

Perhaps then, Mr. Barbakow was rewarded for running great hospitals. Or perhaps not. According to this report, from November 2002 through January of 2003, the Joint Commission on Accreditation of Healthcare Organizations made unannounced visits to 19 Tenet owned hospitals. Those visits resulted in 102 negative citations.

Given that under Mr. Barbakow’s leadership, Tenet Healthcare has lost 2/3 of its share value, is in the “Bottom 10” with regard to debt downgrade or default, has been ridden with scandal over its billing practices and medical ethics and has 102 negative citations, what explains the $116 million of compensation?

Mr. Barbakow seems to have earned his money the new fashioned way. He used a number of inappropriate billing and other practices to drive the stock price to temporary highs, exercised 3,000,000 soon to expire options, pocked $111 million in gain and stood by to watch the scandals emerge and the stock drop like a rock. As a reward, the company gave him additional stock options. If he can repeat his performance and once again temporarily drive the stock price to a high level, the new options could net him an additional $72 million.

In the world of CEO compensation, pay for performance takes on a whole new meaning.

Monday, March 31, 2003
More Tort Reform and the Damages Cap

In this post, we noted that medical malpractice premiums for Doctors were about 3% of revenue. On average, Doctors pay less for malpractice coverage than rent on their offices.

In comments, PLA reader GP took issue with our post. GP raised two issues that need to be addressed. The first issue involves Doctors leaving practice because of high malpractice premiums. As GP wrote:
If you live in Las Vegas and you can't find an OB because they've all left town, will you wave these stats around when you are in labor in a crowded ER? If you have a severe head injury, will your economic figures be of any comfort to your family when the ER physician tells them they need to fly you somewhere else because the last neurosurgeon moved away a month ago?

GP is correct that a bunch of statistics will be cold comfort if one cannot find an Emergency Room Doctor when one is needed. He (or she) is also correct that Nevada is experiencing difficulty finding general surgeons to man the ERs.

Via, the Bloviator, we noted this article in the Las Vegas Review Journal.
Desert Springs Hospital has not had general surgeons available to care for emergency room patients this week and doctors who operate at the facility say it's a blow to the quality of health care in the Las Vegas Valley.

Hospital administrators said Monday the facility still had enough general surgeons to operate normally, but Tuesday in a written statement acknowledged that the hospital lacks surgeons to provide immediate care to emergency room patients.

An emergency room schedule from the hospital also indicates that there have been no general surgeons on call since Sunday. No surgeons are scheduled to be on call for the remainder of this month and all of April, according to the hospital's schedule…

Currently, the emergency department at Desert Springs is closed to patients with broken bones because the hospital lost nearly all of its orthopedic surgeons in January.

We agree with GP that the Nevada situation is terrible and needs to be addressed. The problem with GP’s argument, however, is that Nevada has already passed tort reform capping non-economic damages.

Last summer, Nevada passed a tort reform measure. That law:
Places a $350,000 cap on noneconomic damages in medical malpractice cases, creates a shorter statute of limitations and establishes a standard that holds physicians liable only for the damages for which they are responsible.

The law also puts a $50,000 limit on damages for hospitals and physicians who treat trauma patients, creates a medical error reporting system, requires more training for judges handling medical malpractice cases and holds lawyers responsible for costs of frivolous lawsuits.

If a cap of $50,000 on damages against doctors treating trauma patients still leaves Nevada hospitals without general surgeons to staff the Emergency Rooms, why does anyone think that the President’s proposed cap of $250,000 will solve the problem?

Our post also noted that some specialties such as obstetricians paid higher premiums for malpractice coverage. That may make sense in that a mistake by an OB can cause permanent damage to a newborn resulting in very expensive life long disability. On average, we noted, OB/GNYs nationwide pay 6.7% of their revenue for coverage.

GP took exception to that statistic as well:
although OB-GYN's nationwide may have a malpractice % of revenue rate of 6.7%, in Florida, even if they are pulling in a million dollars a year, their % of revenue rate is 20%.

Many media reports note that in South Florida, OBs are charged $200,000 for malpractice coverage. The problem with that argument is that Florida has already enacted tort reform for injuries caused by negligence in the birth process.

Under Florida law, non-economic damages are already capped at $100,000 in any instance in which, during birth, an infant sustains a brain or spinal cord injury caused by oxygen deprivation or mechanical injury and the infant is rendered permanently and substantially mentally or physically impaired.

If a damages cap would reduce the medical malpractice premiums for OBs in Florida, they would not now be paying $200,000 premiums.

The President’s proposal will not keep Doctors from leaving Emergency Rooms. It will not lower malpractice premiums for OBs. Exactly what is the purpose of his proposal?

Tort Reform Stalls In Senate

President Bush’s proposal to limit non-economic damages in medical malpractice suits to $250,000 appears stalled in the Senate. Republicans simply do not have the 60 votes needed to pass the measure over a filibuster. Only one Democrat, Senator Diane Feinstein of California supports a damage cap and the Doctors appear unwilling to compromise.

The New York Times reports as follows:
The lone Senate Democrat who publicly supports caps on jury awards in medical malpractice suits says that, for now at least, she is withdrawing her name from the legislation, a move that could deal a serious blow to a central element of President Bush's domestic agenda.

The Democrat, Senator Dianne Feinstein of California, has been working with Republican leaders, including Senator Bill Frist of Tennessee, the majority leader, on a measure to limit jury awards for pain and suffering in malpractice suits to $500,000, twice the amount approved this month by the House.

The Feinstein bill is a compromise intended to win Democratic support, which is crucial in the closely divided Senate, where 60 votes are needed to prevent a filibuster. But the $500,000 cap is drawing complaints from the American Medical Association, which lobbied heavily for the House bill and is strongly opposed by the association's affiliate in California. So Mrs. Feinstein said she intended to hold her bill "in abeyance."

"There is no way that I am going to introduce legislation that is going to be fought by my own doctors, who I am trying to help," she said in an interview on Tuesday.

Doctors have argued that a $500,000 cap on non-economic damages will not be effective in lowering malpractice premiums:
But, citing a recent study that concluded that a $500,000 cap would not be effective at reducing liability premiums, Dr. Palmisano left little doubt that the association had concerns about the cap.

"We're keeping an open mind," he said, "but we do not want to give support if it turns out to be something that will not do any good. We don't want a bill that is a bill in name only."

The Feinstein proposal limits non-economic damages to $500,000 in typical cases but also includes:
what she calls a "catastrophic exemption," for cases involving severe disfigurement, severe physical disability or death. In those suits, jury awards for pain and suffering would be limited to $2 million or $50,000 times the number of years the victim could be expected to live, whichever was greater.

We think the difficulty is that the President’s proposal is simply not designed to have the effect that the Doctors seek. That is, a cap on economic damages, whether set at $250,000 or $500,000 and whether or not a “catastrophic exemption” is included will not result in significantly lower malpractice premiums.

The driving forces behind the increase in malpractice premiums are 1) reduced investment income for insurance companies; 2) increased medical costs which drive the tort awards to a far greater extent than non-economic damages; and 3) the prevalence of injury caused by medical negligence of a very small number of doctors.

If a $500,000 cap on non-economic damages will not lower premiums, as the Doctors seem to accept, why do they think that a cap of $250,000 will do the trick?

Let us assume that a hypothetical insurance company insures 200,000 doctors who committed 100,000 instances of medial negligence. According the a USA Today report on a Harvard study, only one in eight instances of medical negligence result in a claim being made. The insurance company would have 12,500 claims made against the Doctors it covers.

USA Today also reports that 61% of all claims made are dropped or dismissed before trial without any payment. The proposed cap, whether set at $250,000 or $500,000, would have no effect on those claims. Thus, the insurance company would have 4,785 claims remaining to defend.

Another 32% of the original claims are settled for an average of $300,000. That settlement figure includes medical expenses and lost wages that would not be covered by the President’s proposed cap. The cap would therefore have very little or no impact on those cases. From the original 100,000 instances of medical negligence, the insurance company would be left with 785 claims that were not dismissed or settled.

Those 785 claims would proceed to trial. The Doctors win four out of five trials. Thus, the cap would come into play for only 157 cases out of an original 100,000 instances of medical negligence. The average award in the trial won by the plaintiff is $500,000. That figure includes economic and non-economic damages. If the entire award was for non-ecomomic damages (which clearly is not the case) the difference between a cap a $250,000 cap and a $500,000 cap would be about $4 million for each 100,000 instances of medical negligence. That would result in a savings of about $40 per instance of medical negligence and a savings of about $20 per Doctor.

The Doctors acknowledge that a $500,000 cap would not lower premiums. It is hard to see how a $250,000 would do much better.

We think that the Feinstein compromise with a $500,000 cap plus the “catastrophic exemption” is fairly reasonable. It is, however, a solution in search of a problem. Neither the President’s proposal nor the Feinstein compromise will reduce medical malpractice premiums. If that is your goal, you must address the factors that cause premiums to rise. A cap on non-economic damages simply does not address the causes of premium increases.

IOLTA Accounts Upheld

We previously wrote concerning the efforts of the Richard Mellon Scaife funded Washington Legal Foundation to cut off funds for legal representation for poor folks by attacking the constitutionality of IOLTA programs in the states.

We learn from Sam Heldman and Wampum that the Supreme Court, in a 5-4 decision, has rejected to efforts of the Washington Legal Foundation to cut off funding for indigent defense. Mary Beth of Wampum correctly anticipates that we would have some thoughts on the decision.

For background information on the case, please see our previous posts here and here.

The majority opinion, written by Justice Stevens and joined by Justices Ginsberg, Souter, Breyer and O’Connor may be found here. The dissent by Justice Scalia, joined by Justices Rehnquist, Thomas and Kennedy may be found here.

We agree with Sam Heldman who wrote:
The decision makes me happy in various ways: (1) I think it's right as a matter of constitutional law; (2) I like the consequences of the result (that a right-wing group was thwarted in its attempt to destroy the funding for legal services for poor people); (3) my prediction of affirmance was correct; (4) it might make smartalecky Judge Kozinski, of the Ninth Circuit, more cautious in the future about claiming that everyone who disagrees with him is "ignoring" Supreme Court precedent.

We note, however, that we were not as sanguine as Sam with regard to the Supreme Court's decision.

Nick Kessler also has a very good analysis of the decision.

The Scalia dissent attempts to paint a dark and distressing picture of the majority decision:
Perhaps we are witnessing today the emergence of a whole new concept in Compensation Clause jurisprudence: the Robin Hood Taking, in which the government’s extraction of wealth from those who own it is so cleverly achieved, and the object of the government’s larcenous beneficence is so highly favored by the courts (taking from the rich to give to indigent defendants) that the normal rules of the Constitution protecting private property are suspended. One must hope that that is the case. For to extend to the entire run of Compensation Clause cases the rationale supporting today’s judgment–what the government hath given, the government may freely take away–would be disastrous.

We think that position is way overblown. In a typical “takings case, ” there are two issues. First, did the government take private property and second, what constitutes “just compensation?”

The Fifth Amendment’s Takings clause states:
Nor shall private property be taken for public use, without just compensation.

Please note that that provision authorizes the government to take any private property it wishes for a public purpose. It limits the government’s power to take private property for a public purpose only by the requirement that just compensation be paid.

Scalia analyzes the IOLTA case by first noting that the regulation involves two steps. In the first step, Washington requires that lawyers place client funds in an IOLTA account, if, but only if, such funds would not generate any net interest to the client if placed in a non-IOLTA account. Secondly, once interest is earned in the IOLTA account, Washington takes the interest and uses it to fund indigent defense.

Scalia’s Robin Hood rhetoric is based solely on the second step. For Scalia, once interest is generated, that interest belongs to the client and the amount of that interest is the measure of “just compensation.”

In making that argument, Scalia ignores the first part of the regulation. In the absence of the IOLTA program, the client’s money could not generate any net interest.

In essence, Scalia believes that the time to decide whether a compensable taking has occurred is once the interests is earned without regard to the means used to earn the interest. Scalia believes that the role of IOLTA in creating that interest should be ignored.

We think that the time to analyze the case is at the time that the client gives the money to the lawyer. At that time, the client has the property right of earning interest on the money. By requiring the money to go into the IOLTA account, the government has taken away that property right. Thus a “taking” for a public purpose occurs.

Once a “taking” occurs, just compensation must be determined. Just compensation is measured by the fair market value of what the client has lost. In the case of IOLTA accounts, the client has lost the right to have his or her money placed in an interest bearing account and to retain any net interest.

The measure of “just compensation”, therefore, is the fair market value of the right to place the money in an interest bearing account for the benefit of the client. Since Washington prohibits lawyers from placing client money in the IOLTA account if the fair market value of the right to put money into a private account is greater than zero, it is apparent that the fair market value of the property right lost by the client is zero.

Scalia’s rhetoric is overblown and the majority opinion is correct.

Bayer Wins Baycol Trial

We have written about the suit against Bayer over the heart medication Baycol. Our previous posts are here and here.

The first Baycol suit recently went to trial in Corpus Christi, Texas. Charles Kuffner provides a link to this Houston Chronicle story that reports as follows:
A jury today cleared Bayer Corp. of liability in a $560 million lawsuit that accused the drug giant of ignoring reports that linked the cholesterol-lowering drug Baycol to over 100 deaths.

The jury of nine men and three women deliberated the nine-question charge for 2 1/2 days before returning their unanimous verdict.
Plaintiff Hollis Haltom, 82, suffered the muscle-wasting disease rhabdomyolysis within weeks of taking doctor's office samples of the drug as a cheaper alternative to Lipitor.

That is very good news for Bayer as it is facing thousands of similar claims. Bayer stock rose almost 40% on the news. Despite the victory, Bayer seems committed to attempting to settle many other Baycol cases:
About 500 cases are currently on the table, Beck said, and company had no plans to change its strategy of compensating out of court and would not now attempt to "drive harder bargains."

He said Bayer's attempts to compensate Haltom were rejected by Watts, who insisted any settlement deal included about 1,400 other plaintiffs.

Attorneys for Haltom sought $568 million in the suit, $500 million of which as punitive damages.

"We hope that some plaintiffs' lawyers will take notice of the verdict and be more amenable to negotiating these agreements," Beck said.

We have two thoughts on the victory for Bayer. First, if it is true that the plaintiff’s lawyer refused to settle his client’s case unless Bayer also agreed to settle with 1,400 clients represented by the same firm, we find that position outrageous.

A lawyer’s duty is to one specific client at a time. The lawyer has an ethical obligation to promote the interests of that one specific client. The attempt to use the leverage of a trial in one case to settle a number of other cases is to place the interests of the lawyer above those of the client. Placing the interests of the lawyer above those of the client is inconsistent with the very nature of the attorney-client relationship.

We do not know if the offer made to Mr. Haltom should have been accepted as we do not know the details of the offer and as we are in no position to evaluate the possible outcomes at trial. We do know, however, that consideration of the interests of the lawyer and other clients have no place in deciding whether or not to accept the offer.

Our second thought concerns tort reform. Underlying the argument for tort reform is the assumption that juries cannot be trusted to make good decisions. The Baycol case belies that assumption

Hollis Haltom was an 82 year old man. He developed a devastating kidney condition that was admittedly caused by Bayer’s drug. The defendant was a huge multi-national company. The case was tried in a very plaintiff friendly jurisdiction.

Many tort reformers believe that juries hand out huge awards based on sympathy for the plaintiff without regard for the fault of the defendant. The Corpus Christi case had all of the elements that are generally felt to contribute to such an outcome. It had a very sympathetic plaintiff, a rich corporate defendant, and a devastating injury.

Nonetheless, the jury did its job, found no fault on the part of the defendant and returned a defense verdict.

In our experience, juries do a very good job of finding the truth, following the law and arriving at a just result. Those who believe that the jury-based tort system is a lottery should take a hard look at the Baycol case in Corpus Christi.