Valuing Litigation Risks - Remember Arbitrations - An Example from CITI and FINRA Arbitrations

A good question these days is how one should value a massive financial house,  such as CITI. One part of the answer lies in assessing its litigation industry risks from the various claims against it arising from alleged frauds and alleged breaches of other duties. One part of answering the litigation risk question is to monitor arbitrations, as well as litigation. That's not easy to do, but information can be obtained. One source is known as the Securities Arbitration Commentator, an informal reporter of FINRA issues on a paid subscription basis. 

As to impacts from arbitrations, consider, for example, this online Bloomberg article by Donal Griffin. The article details papers from a FINRA arbitration claim against CITI for $ 383 million. Set out below are some key excerpts from the article:

"Saudi businessman Ghazi Abbar, who claims in an affidavit he lost $383 million of his family’s fortune on investments with Citigroup Inc., was sold one of the transactions even though the bank questioned his ability to properly manage them, according to an internal memo.

The memo, an exhibit in arbitration proceedings with the Financial Industry Regulatory Authority, warned that Abbar didn’t have the risk-management capability of the large hedge funds that were typical clients of the bank’s “hybrid” desk, which in 2006 was trying to persuade him to move his family’s money into complex derivative securities.

Soured deals struck with wealthy clients are haunting Citigroup Chief Executive Officer Vikram Pandit. Finra awarded $54 million in April to customers of the New York-based bank’s municipal-bond hedge funds, and in February, Brazilian investor Bernardo Valentini sued the bank, claiming he lost more than $24 million on derivatives Citigroup told him had “no risk of loss.”

“The case is a setback in Pandit’s vision of delivering financial services with a higher sense of responsibility to customers,” said David Knutson, a credit analyst with Legal & General Investment Management in Chicago. “As each issue bubbles up, analysts or providers of capital to the firm have to say, ‘OK, what other tape bombs are lying in the dusty lines of Citi’s balance sheet?’”

 

 

 

Chapter 11 - Just Another Financial Management Tool - Will the Law Ever Catch Up ?

As described here  and here by DealBook, American Airlines  has now joined the parade of airlines taking their second (or third) cleansing bath in the waters of chapter 11.  Once upon a time, a chapter 11 filing was considered a stain on the image of a corporation and its executives. But today, with the rise of financial engineering, a chapter 11 filing is just another management tool, used frequently to obtain a "do over"  on contracts that prove inconvenient.   And,  bankruptcy courts  also are much used to trump or ignore state laws on tort and contract claims, and to manage litigation. One wonders if bankruptcy law and state law will ever catch up and change in order to intersect well with modern realities. 

 

Bravo - Class Action Seeks to Require Automatic Refunds When Service Providers Fail - Comcast is the Target

One of the frustrations of modern life is that service providers fail to provide automatic refunds or credits when they fail to provide service. Instead, bandits such as Comcast  provide refunds only if a customers spends their valuable time wading through layers of voice prompts or websites to submit a request for a refund. By that approach, entities such as Comcast:

1) externalize to customers the costs of Comcast's failure to plan for or provide actually working service, and 2) Comcast keeps money it has not earned because it knows that most customers will not take the time to demand a refund because the the transaction cost  of time is so high. 

This gaming of the process is a prime example of the negative aspects of financial engineering. That is, businesses and their lawyers look for and then engineer in structural impediments to having to pay the full cost of their failures. This same gaming of the system also illustrates the failure of regulation - if we had decent regulation of broadcast services for internet access or tv access, Comcast and other entities would long ago have been forced to end this unfair business practice. 

So, bravo to the filers of a recent class action seeking to require Comcast to issue automatic refunds to customers who lost service due to a storm. The complaint is here, with a hat tip to LAW360 for flagging the case. One hopes the complaint is successful, and that similar class actions follow on every outage. Maybe then Comcast and the power companies will finally invest in service lines that are made pretty much 100%  weather proof.

Investment in weather-proof service would spark howls because it will result in rate increases, but it seems far better to pay the costs now and avoid the future failures.  Moreover, with laborers and others needing work these days, now would be an ideal time for utilities and broadcasters to make the investment. Perhaps the utilities and Comcast could be "nudged" by rules which deprive them of favorable tax rates or TIFF deals if they fail to invest in weather-proof service. The financial engineers will do that math in a hurry.  But until we have effective nudges or required regulations, it's up to the plaintiff's class action bar, and I wish them great success.

Plaintiff's counsel - Jeffrey S. Morneau - is online here.

 

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How Things Really Work In Delaware Chancery Court - Insights from the Inside - The Delaware Chancery's Unusual Relationship with Academia

Courts work in different ways, and lawyers need to know the actual workings of courts where they are lawyering. That rule applies even more powerfully for specialized courts, such as the Delaware Chancery Court. The Conglomerate blog has been running a series of posts as tribute to Chancellor Chandler. This post provides some special insights into the practices at the court. One key link and quote is excerpted below; note especially the underlined text, 

 

"David Marcus from the Deal Magazine has a terrific interview with Chancellor Chandler upon his stepping down from the Chancery.  I found this exchange to be reflective of the chancellor's views on legal scholarship:

[Q:] It was clear in reading the [Airgas] opinion that you had thought very deeply about that question, but except for your decision in Unitrin, you hadn't had the chance to write about it until Airgas.

I got the views of all of my colleagues on the court on both the pill question, which was Airgas II, and on the bylaw question, which was Airgas I. They were very helpful to me in writing it and getting it out in a timely way. If the question is, "Would I have written this as long or in the same way?" probably not, because back when I wrote Unitrin in the mid-1990s, there hadn't been as much ink spilled by academics. You saw a lot of academic references in the opinion, and that probably resulted in a slightly different approach to how to write it, because I was writing it for the parties but also acknowledging the views of various academics on this question from professor [Lucian] Bebchuk to others. (emphasis added by GlobalTort). 

Has Claiming Peaked for the James Hardie Asbestos Compensation Fund ?

The saga goes forward for Australia's James Hardie, and its effort to manage asbestos claiming through a compensation fund. On one hand, the company and former officers remain subject to a cloud cast by charges of securities law violations associated with the disclosures related to the creation and funding of the compensation trust. On the other hand, the company is now seeing some signs that claiming to the fund may have peaked in 2008. On the latter, a new Australian press story is here. The company's press release is here.  This page of its website compiles many of the documents relevant to the compensation fund. 

MF Global's $ 600 Million Fiasco - The Latest Example of the Intersections Between Bankruptcy and Mass Claiming - See Dealbook for Specifics

The MF Global fiasco has left $ 600 million missing, and 38,000 customer accounts being scrutinized as to what happened. Tort and contract claims will follow, and/or are pending, subject to the bankruptcy stay of all litigation. What to do?

Once again, as is true for many mass claims, chapter 11 is the primary vehicle being used to cope with the problems. Investigation is happening, findings will be announced, and the guilty will be pilloried in the media, and perhaps even punished. But, those steps matter less to the people who've lost money - maybe all or much of their asset base for some people. So, it is imperative that efficient and lawful intersections are built between the claiming processes that exist in our federal and state court systems, regulatory systems, and insurance claiming.  And, consider also that there no doubt are non-U.S. claimants.  So, international intersections also are needed. 

Today, however, intersections have not been built between claiming systems.  As a result, bankruptcy courts are making ad hoc decisions, and much time and money are being wasted. It is well past time for intersections to have been built by  federal rules  committees, ALI, The National Conference of State Courts, and other policy-making groups.  

When intersections are built, the policy-makers need to understand the many disasters that have occurred in the ad hoc decision-making commonly known as asbestos bankruptcies. The governing statutory term, section 524(g) has proved to be deeply flawed. The problems are exacerbated by a material lack of meaningful transparency into the facts and outcomes arising from claims submitted to court-created trusts and funds. 

For specifics on the MF Global fiasco and the bankruptcy-court proceedings, the best source seems to be  the NYT's DealBook. The posts (here and here) include explanations and links to bankruptcy court filings. 

 

New Lawsuit Filed to Block State Law Limits on Practicing Law in the US

Advocacy groups continue to attack barriers to multi-state law practices in the US. I'm sympathetic. Last year I almost applied for admission to practice in Florida. The requirements are absurd, and plainly are anti-competitive rules aimed at discouraging lawyers from practicing in Florida. The requirements also include personal intrusions, such as demanding my fingerprints.

Its' hard to imagine how bar examiners justify giving first  year lawyer quizzes (bar examinations) to accomplished lawyers. How on earth is it relevant if I know the rules on doing a will or a trust in Florida - that's why some of us are estate planning lawyers and some of us think about mass torts. 

To end the rant and get to the news, the latest lawsuit is in California. The complaint is here on the website of the advocacy group. The group describes itself as follows:

 

"The NAAMJP is a public benefit corporation founded by attorneys for the benefit of attorneys seeking to obtain bar admission in another State or U.S. District Court without taking another bar exam.   The ABA MJP Commission has concluded that one bar exam is more than enough almost 10 years ago.  We are actively petitioning for the equivalent of a driver’s license for lawyers.  We seek the same rights to interstate travel that lawyers in the EU and Canada already possess." 


 

 

What Value to Law Professor Amicus Briefs - Are There Too Many ?

Adam Liptak's NYT article provides views from two law professors on the burgeoning number of amicus briefs from law professors. The gist? Too many are being filed. 

9/11 Litigation - Where Next - 2d Circuit Panel Allows Claims and Certifies Cases for Appeal

The insurance industry routinely attacks plaintiff's lawyers for trying to win money for clients. But insurers are seldom shy about being a plaintiff to try to recover their own money, including for example seeking legislation to grease the skids for their claims. The zeal to recover money may pay off in the 9/11 litigation due to a recent 2d Circuit ruling on FSIA claims.  Last week, a panel of 2d Circuit judges explicitly disagreed with a sibling panel and allowed FSIA claims arising from 9/11. AmLaw Daily has the story here. The gist is as follows:

"In his 2008 opinion in the Saudi case, Judge Jacobs concluded that, because terrorism falls under its own exception to the FSIA, "claims based on terrorism must be brought under the terrorism exception, and not under any other FSIA exception," or else the "terrorism exception would be drained of all force." That holding forced the 9/11 plaintiffs into a dead end, since only countries on the government's list of state sponsors of terrorism can be sued under the terrorism exception, and Saudi Arabia isn't on the list.

In last Monday's per curiam decision, Second Circuit judges Amalya Kearse, Guido Calabresi, and Richard Wesley concluded that the 2008 panel's view was unsupported by the text, history, and purpose of the FSIA. "We recognize that this holding is inconsistent with that reached by a different panel of our court," the court wrote. "That panel, however, was presented with sparse and one-sided argument on this point in the context of a very large and complex case that focused on other aspects of the FSIA. This opinion has been circulated to the members of that panel as well as all active judges on the Court, and we received no objection to our issuing this opinion."

Armed with the Afghanistan ruling, Carter said Cozen O'Connor may ask to have the plaintiffs' suit against the dismissed Saudi entities reopened under Rule 60 of the Federal Rules of Civil Procedure, which permits the court to vacate a prior final judgment. And if that gambit doesn't work, the decision could still bolster Cozen's bid to bring a different group of Saudi or Saudi-affiliated defendants back into the case, Carter said. The Second Circuit recently certified for appeal the cases of 75 previously dismissed 9/11 defendants, including deep-pocketed charities and banks with apparent ties to the state. "It's not over yet," Carter told us."

The possibilities here are interesting, and somewhat tie the insurance industry to one of its  "arch-enemies," the Motley Rice plaintiff's firm which is famous for its work in tobacco cases and asbestos litigation. The tie arises because Motley Rice has for years been pressing claims by victims against various persons and overseas governments and organizations, as described here and here.  Insurance side efforts also were previously covered here and here

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A Disability Love Story - With Insights into Historic Failure to Cope with Dread Diseases

Dread diseases are complex and, often, horrible. Coping with dread diseases requires massive attention and perseverance. To date, the nations, ngos and corporations of the world have achieved only modest progress towards coping with the causes, effects, costs and horrors of dread diseases. 

This NYT story  by Jim Dwyer illustrates some of the horrors and a depressing example of a profound failure of institutional coping with dread diseases.  The story, however, also is a love story as it tells a small part of the powerful story of a determined and loving couple both afflicted with cerebral palsy. They are Edwin Morales and Noemi Rivera, and one has to marvel at all they've done and accomplished. Sadly, she recently died, prompting the story. 

The story of Edwin and Noemi includes a small part of the history of how poorly the U.S.  - like other nations - has dealt with long term disability and dread diseases. The story includes a "kidnapping" vignette which highlights a small part of the horror of a New York  "health care" facility known as Willowbrook. Ultimately, the horrors of the Willowbrook story were told by Bobby Kennedy and others - see this Wikipedia entry for an overview. The telling of the Willlowbrook story was part of the path to civil rights legislation.

Set out below is Mr. Dwyer's brief telling of Edwin's parents "kidnapping" him to save him from Willowbrook:

"The youngest of eight, Edwin Morales was put around age 4 into Willowbrook, an infamous dungeon for the disabled on Staten Island. He almost never was moved from his bed. Older children were tied into chairs. By the time Senator Robert F. Kennedy visited in 1965 and publicly deplored the place, the Morales family had liberated Edwin.

 

“My parents kidnapped —” Ms. Laracuente began, then stopped to steal a quick glance around the funeral parlor. She continued in a whisper: “My mother had a friend with a van. We signed him out for a picnic on the grounds, and when we got there, pulled the van over, threw him in and never looked back. We were so scared the whole way.”

Mr. Morales’s problems fell under the broad description of cerebral palsy, which includes impairment to the nerves and muscles, and in his case, the withering of his right arm and both legs. It was during a long hospital stay for surgery that he met Noemi, who had similar conditions."

 

BBC Update on Asbestos Use in India

Here's an update on the BBC's "Toxic Trade" stories on use of asbestos in India. The story is by Matt Peacock. 

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Medical Device Maker Suing Plaintiff's Firms for False Advertising in Litigation Recruiting Materials

The litigation industry keeps evolving. Thus, LAW 360 reports here (subscription required) on litigation industry tactics being used by a medical device manufacturer. The company, Zimmer, is a defendant in various medical device cases. Zimmer is now expanding its tactic of suing plaintiff's firms for false advertising by claiming that the law firm ads and websites are not accurate.  One such complaint is here.

Set out below are excerpts from the LAW 360 article: 

"Zimmer has faced a wave of product liability litigation over NexGen, and in August, the U.S. Judicial Panel on Multidistrict Litigation centralized 28 suits claiming NexGen components prematurely loosened and caused pain and loss of movement.


However, Elk & Elk and other members of the plaintiffs bar have engaged in misleading tactics in order to secure clients for product liability litigation, the current suit argues.
In a TV ad, Elk & Elk asserted that the U.S. 
Food and Drug Administration had issued a recall of components for the NexGen knee replacement because it caused pain in the knees and joints and difficulty standing and walking, Zimmer says.

Elk & Elk is not only plaintiffs firm to make misleading statements about NexGen to win clients, either, according to Zimmer. In February, the device maker filed a suit over an Internet advertising campaign tied to NexGen from Michigan plaintiffs firms Kresch Oliver PLLC and Kresch Legal Services PLC.

That suit also challenged a television advertising campaign related to the knee system from Texas plaintiffs firm Pulaski & Middleman LLC and a letter-writing campaign from fellow Texas plaintiffs firm Weller Green Toups & Terrell LLP.

While Zimmer claims Elk & Elk’s description of an FDA recall are inaccurate, the device maker apparently did recall components of NexGen in September 2010. Zimmer issued a class II recall because a component of its knee replacement system loosened and necessitated additional surgery, according to an FDA notice.


Elk & Elk is represented by Michael Marrero of 
Ulmer & Berne LLP and Lyle Hardman of Hunt Suedhoff Kalamaros LLP.
Zimmer is represented by Gregory Lockhart and Victoria Nilles of 
Taft Stettinius & Hollister LLP."

Nixon Watergate Tapes Released

Former President Nixon's Watergate testimony was released today and is online here, among other places. The National Archive is here. The Nixon Library is here. 

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Judicial Salary Tracker for State Court Judges

From this story in the Chicago Daily Law Bulletin, here's a story of an easy new way to track state court judicial salaries in the US. The easy answer is found in this new service from the National Center for State Courts. The article includes the following excerpts:

     

"With a few clicks of the mouse, users of a new National Center for State Courts (NCSC) tool can learn exactly how much Illinois judges earn in comparison to their counterparts in other states.

The Judicial Salary Tracker, which has been available for about two weeks, utilizes interactive maps and charts to let users view judicial salaries in each state over the past decade and to make comparisons between states, even accounting for cost of living adjustments.

***

Putting aside the issue of judicial salaries, Hurley, the analyst with the NCSC, said his group will continue to improve its new tracker, as well as the other tools available on its website.

"This is Version 1," Hurley said. "There will definitely be a Version 2 and Version 3 down the line."

Hurley also said while he is not sure it is logistically possible, the NCSC would like to be able to compare salaries of judges with other professionals, like law school professors, at some point.

Science, Risk, Decision Making and Happiness

A person with externally caused disease by definition has lost some or all happiness because of the disease. Tort law offers money as a partial offset to loss of happiness. Much tort law is based on judgments and guesses about human behavior, suffering and happiness, with many tort law rules being decades old, and some centuries old. 

Updated thinking may be starting to arrive, and may even involve science and tort law. That possibility seems more real when one considers the interesting dialogs, research  and books ongoing in the areas of risk, decision making and happiness. One such discussion is Peter Huang's lengthy and substantive post at the Conglomerate, the several books cited in it the post, and posts he put up past week at the Conglomerate. 

Imagine what tort law rules might become if we actually look carefully at rules and assumptions which are often taken for granted but seem dubious. For example, why do/should courts assume that warnings are read and understood? The assumption seems especially dubious today when we have warnings printed in tiny fonts in one language on generic package inserts that are so absurdly broad they lose all meaning. And, can we really say that a manufacturer is really fulfilling its personal responsibility when it uses generic, cheap inserts instead of tailored, useful means for communication ?

Consider also that society  is seeing increasing disintermediation as highly skilled professionals (e.g. really smart doctors; really good engineers) become less and less accessible due to adoption of cookie cutter processes that focus on eliminating or reducing the use of high value/high cost professionals.   Does the learned intermediary doctrine make sense when learned intermediaries are largely pushed out of their traditional roles as advisers ?

And, what about the problem of professional competence. Today, knowledge is growing so fast that doctors and other professionals are hard pressed to keep up. Should tort law continue to apply "local standards of care" or should there by a new rule requiring a local doctor and/or hospital to at least offer a recommendation to real experts. The standard of cancer care, for example, is far lower in a rural hospital than it is at MD Anderson, Memorial Sloan Kettering or Mayo.   Would you - presumably a smart professional - accept treatment at a low standard of care or do you demand the benefit of and access to the best possible care?

 

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Global Forum Shopping - Shipping Companies Seek Shelter in U.S. Chapter 11 Proceedings

U.S. bankruptcy  judges purport to wield vast power, such as issuing purportedly global stays of all litigation pending against a debtor. Some would say that due process is improperly tossed out the door in such proceedings, but others would argue to the contrary. The market place suggests that the broad orders are desired by debtors, as evidenced by this recent article from three lawyers at Holland and Knight.  The outcomes of cases in this sort may impact the extent to which the U.S does or does become a refuge for non-U.S. entities facing mass tort issues. 

 

Brad L. Berman- New York
Michael J. "Mike" Frevola- New York
Francesca Morris- New York

 

In recent months, U.S. bankruptcy filings – such as Omega Navigation (filed July 8 in Houston) and Marco Polo Seatrade (filed July 29 in New York) – have caught the attention of the worldwide shipping community. It is no surprise that some shipping companies have sought bankruptcy protection resulting from financial distress. Rather, the cause for surprise is that non-U.S. shipping companies have sought protection in U.S. bankruptcy courts. High-profile secured creditors in these cases have contested the exercise of the jurisdiction of U.S. bankruptcy courts on grounds that the debtor shipping companies lack sufficient assets in, and connections to, the United States.

The Epicurean Dealmaker Addresses Tort Reform

Click here to link the tort reform observations of The Epicurean Deal Maker, a/ka/ TED. 

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New Standing Decision in EU for Challenges to Regulatory Decisions on Product Ingredients

The EU follows the precautionary approach when regulating use of actually or potentially "toxic" substances used in products. Therefore, manufacturers, consumers and others have an interest in regulatory decisions. But, EU law apparently has been unclear on standing to challenge regulations, until a recent decision in a case known as Microban. The decision is explained - at length - in this post from Eutopia Law - a blog from Matrix Chambers. Also read this "about" page for some insight into the blog name and its overall significance.  

Hat tip to Opinio Juris for the link to Eutopia.

New Book Explaining the Historical Legacy of the U.S. Nuremberg Military Tribunals (NMT)

Interesting new posts at Opinio Juris about a new book that sounds fascinating to read if there were more time in life. Here are excerpts describing the Nuremberg story as told by Kevin Jon Heller:

 

 

"Although the twelve U.S. Nuremberg trials judged seven times as many defendants as the International Military Tribunal (IMT) and addressed a broader spectrum of international criminal law issues, including the first genocide prosecutions and the establishment of important principles of medical ethics, they have wallowed in comparative historical obscurity. The absence of meaningful coverage is ironic given, as Kevin notes in his important new book, that chief prosecutor Telford Taylor predicted that many volumes would be written on them and that the government deliberately employed experienced civilian judges, rather than military officers, to ensure they would produce substantive written judgments. But until now, lawyers and scholars interested in these trials had very limited options. One could attempt to wade through the fifteen volume, 15,000+ page, “Green Series” providing “the official abridged records” of the trials. One could consult the summary reports of nine of the twelve trials available in the United Nations War Crime Commissions’ fifteen volume series “Law Reports of Trials of War Criminals” (which omit the Medical, Pohl, and Einsatzgruppen cases from formal coverage). Or one could refer to one of a very small number of books dealing wholly or in part with several individual trials as well as Telford Taylor’s parochial memoirs.

The major achievement of Kevin’s book is to provide what none of the other sources can — an overall discussion and scholarly analysis of the entire NMT process in a single reasonably well indexed volume. Among the book’s many valuable contributions are:

(1) Identifying the unique legal standing of the NMT, which were neither truly international courts, like the IMT, nor national tribunals. Instead, Kevin concludes, these were “inter-allied special tribunals” relying on the Allied Control Council’s sovereign legislative authority in the wake of the disintegration of the central German government, based on the concept ofdebellatio.

(2) Providing a concise history of the NMT process, including the development and evolution of the overall World War II war crimes trial program from the initial Allied decisions to conduct trials to the IMT and subsequent devolution of authority to national tribunals. Although I had a general familiarity with this subject, I still found much to be learned from this history, including particularly details about how both deliberate policy decisions and practical realities determined which cases and defendants were actually tried before these tribunals. Kevin provides useful details about the overall organization of the prosecution and tribunals, staffing, and budget issues.

(3) Describing the factual background of each case, including who the defendants and judges were, what offenses were charged, and the outcome including a helpful appendix identifying the charges and verdict/sentence for each individual accused.

(4) Critically assessing theNMT’s jurisprudence through close analysis of the written opinions produced in each of the cases. It is in this area that Kevin undoubtedly makes his greatest contribution. While some parts of the book could have been written by a competent historian, the sophisticated legal analysis constituting the heart of the book could only have been produced by a real expert on international criminal law.

(5) Documenting how the evolving geopolitical realities of the emerging Cold War resulted in both scaling down the overall scope of the trials and ultimately, to the early release of most defendants sentenced to long terms of imprisonment. Anyone who has seen the classic motion picture, Judgement at Nuremberg, a fictionalized account based loosely on the “Justice Trial,” is aware that these pressures existed, but Kevin documents exactly how they came to bear both directly and indirectly, including through the personal prejudices and fears of several individual judges rather than just via “outside” interventions as portrayed in the film.

(6) Assessing the overall legacy of the NMT, including specifically the influence that the judgments have had on modern international criminal law through critical analysis of citations to these trials by contemporary courts, including a specific (and highly critical) focus on the jurisprudence of the International Criminal Tribunal for the former Yugoslavia (ICTY)."

 

Elections of U.S. State Court Judges - The Money Trail Through the Litigation Industry

In the U.S., electing state court judges is now big business and involves big money from very partisan groups. Electing state court judges creates many issues, and is part of why state laws flip-flop in sometimes arbitrary fashion. An important new report on the funding has been published by a relatively non-partisan group with many member partners from all sides. Happily, the group also is making underlying data available in an Excel spreadsheet

The press release is online, and pasted below. Note the spending and the resulting lack of confidence from citizens: 

 

Interest Groups Dominate Spending in Judicial Elections, New Report Shows
Nearly 40 Percent of All Campaign Cash in 2009-10 Came From 10 Organizations

OCT. 27, 2011 - Non-candidate spending in state high court elections nearly doubled as a share of total costs in 2009-10, compared to the previous off-year election, a new report shows.

This spending fueled a flood of non-candidate TV advertising, making this the costliest non-presidential election cycle ever for TV spending in judicial elections. 

Among the report’s key findings:

  • Nearly one-third of all funds spent on state high court elections came from non-candidate groups ($11.5 million out of $38 million in 2009-10).  
  • Nearly 40 percent of all funds spent on state high court races came from just 10 groups, including national special interest groups and political parties.   
  • Though outside groups paid for only 40 percent of total ads, they were responsible for 3 in 4 attack ads.

“The New Politics of Judicial Elections 2009-10,”  by the Justice at Stake Campaign, the Brennan Center for Justice at NYU School of Law, and the National Institute on Money in State Politics, is released as the presidential race is heating up -- with millions in hidden outside spending pouring in through Super PACs and other outside groups -- and shows that million-dollar judicial races are increasingly the norm across the country. The report is available atwww.newpoliticsreport.org.

”Too many judges owe their jobs to campaign money hidden from public view,” said Bert Brandenburg, executive director of Justice at Stake. “Americans expect courts to be fair and impartial. They don’t want campaign cash to influence courtroom decisions.”

“The rise in spending by non-candidate groups means that many judicial candidates have become bystanders in their own campaigns, watching the action from the sidelines,” said report co-author Adam Skaggs, of the Brennan Center for Justice. “We expect judges to be impartial and fair. Now with campaign laws weakening, citizens understandably worry that justice is for sale.” 

new poll released today underscored widespread public concern that special-interest money may be undermining the impartiality of elected courts. In a poll of 1,000 voters, 83 percent said that campaign contributions have a “great deal” or “some” influence on a judge’s decisions; 93 percent believe judges should not hear cases involving major financial supporters; and 84 percent believe that all contributions to a judicial candidate should be “quickly disclosed and posted to a web site.”

The New Politics reports have monitored soaring election spending and other threats to the impartiality of state courts since 2000, showing that spending on state high court elections has more than doubled, from $83.3 million in 1990-1999 to $206.9 million in 2000-2009.

The latest report noted that spending in retention elections for judges exploded in 2010, representing 12.7 percent of overall spending, compared to only 1 percent over the entire previous decade. In Iowa’s retention election, three state Supreme Court justices were swept out of office over the court’s same-sex marriage decision.  Due to Iowa’s disclosure laws, voters could track the nearly $1 million spent to unseat the justices, but this is not the case in many states. In Wisconsin’s 2011 Supreme Court race, for example, outside groups spent a record amount on TV ads. This surge in secret spending has fundamentally transformed state Supreme Court elections.

The report also concluded that the 2010 elections were followed by dual threats to state courts. These included a “ferocious” attack in legislatures around the country against reforms designed to protect courts from special interests, and a widespread fiscal crisis in many states. The attacks included challenges to merit selection systems, assaults on public financing of judicial elections, and an unprecedented number of legislative threats to impeach state judges.

“As the second decade of the twenty-first century begins, state judiciaries are caught in a vise, squeezed on one hand by interest groups waging an unrelenting war to impose partisan political agendas on the bench and on the other by devastating fiscal pressures,” the report said. 

                                                                                 # # #

The Justice at Stake Campaign is a nonpartisan, nonprofit campaign working to keep America’s courts fair and impartial. Justice at Stake and its 50-plus state and national partners educate the public, and work for reforms to keep politics and special interests out of the courtroom—so judges can protect our Constitution, our rights and the Rule of law. For more about Justice at Stake, go to www.justiceatstake.org, or www.gavelgrab.org.

The Brennan Center for Justice at New York University School of Law is a nonpartisan public policy and law institute that focuses on fundamental issues of democracy and justice. The Center works on issues including judicial independence, voting rights, campaign finance reform, racial justice in criminal law to Constitutional protection in the fight against terrorism. Part think tank, part public interest law firm, part advocacy group, the Brennan Center combines scholarship, legislative and legal advocacy, and communications to win meaningful, measurable change in the public sector. For more information, visitwww.brennancenter.org.

The National Institute on Money in State Politics collects, publishes, and analyzes data on campaign money in state elections. The database dates back to the 1990 election cycle for some states and is comprehensive for all 50 states since the 1999–2000 election cycle. The Institute has compiled a 50-state summary of state supreme court contribution data from 1989 through the present, as well as complete, detailed databases of campaign contributions for all state high-court judicial races beginning with the 2000 elections.

 

For More Information:

Contact:  Charles Hall, Justice at Stake, chall@justiceatstake.org, 202-588-9454;
Jeanine Plant-Chirlin, Brennan Center for Justice, 
jeanine.plant-chirlin@nyu.edu, 646-292-8322;
Erik Opsal, Brennan Center for Justice, 
erik.opsal@nyu.edu646-292-8356