February 12 , 2003

A lifetime ago, when I was flirting with going into the practice of law, I was told by an elderly Philadelphia lawyer that he was being paid to help develop civilization.  I had just written a paper on the role of law during the second century Roman Empire and believed I understood what he meant. 

Today, virtually everyone from the President to Georgia's governor, most business executives and the average citizen believes that some fixing is needed in the application of the law.  The problem is not as much on human liberties, although Illinois and its death penalty issues certainly suggest something is amiss, as on property. 

When I hear the head of a trial lawyers group talking about the victim versus the insurance companies, I know he has practiced too long and now believes his jury rhetoric.  When I hear that reducing the risks associated with mortgage pools by capping possible liabilities guts the protections of consumers, I see visions of greedy lawyers, not uncompensated victims. 

We now know that the greed of corporate managers can be restrained by the SEC.  Who restrains the greed of lawyers?  When will we see handcuffs on  those presenting suits that bankrupt companies that merely complied with government contract provisions?  When will we see lawyers in legislatures or the Congress recusing themselves from all consideration of tort awards?  We demand much more independence from Boards of Directors than we do from the Congress of the United States or the Georgia legislature. 

I apologize for being the Cassandra that no one wishes to hear.  However, the current trend in our tort system is undermining civilization almost as much as those earlier Roman legal institutions unleashed a golden age for that era. 

Insurance companies are intermediaries.  Any honest lawyer would ask the jury how much compensation we collectively should provide for the victim's loss and suffering.  Insurance companies develop risk pools and then pay out returns.  Insurance companies can grow by processing  more efficiently, creating better investment pools, temporarily beating the actuarial odds, and investing the pool between premium payments and collections.  However, a competitive insurance industry does not have wealth to disburse to the afflicted, unless it has received premiums from those fearing affliction. 

However, the lawyer paints the insurance company as a separate entity, hoping you will not notice the rise in your premiums the next time you pay for insurance.  Reinsurance companies now are suffering their equivalent of the perfect storm (unexpected claims, unanticipated risk, collapsing investment returns, and premiums that have grown until economic decisions are being changed , such as doctors ending their medical practice in some areas). 

The predatory lending bill in Georgia is addressing some serious abuses.  Some elderly have had homes refinanced several times as charlatans collect fees and undermine home equity for those no longer able to fully understand what they are doing.  Substandard credit sometimes carries high fees that are not adequately revealed to the lender.  Indeed, abuses in Georgia have been substantial in recent years. 

A compassionate government would jail these predators and try to restore what had been stolen from the afflicted.  Instead, we pass a law that allows damages to be collected not only from the predators but also from the lenders who buy credit pools that may include predator transactions.  Furthermore, we allow punitive damages against the lending pool. 

Of course, you can argue that if the lending pool did not acquire the predator's transactions, then predators would be sharply constrained.  That is true.  But some of these transactions are abusive not on their terms but because of their frequency.  In other words, innocent lenders using high standards still could not determine whether they have abusive transactions. 

The risk that these lending pools could face class action suits that could cost them great sums was too much for them to continue accumulating certain classes of Georgia mortgages.  That was not a bill to aid the consumer.  It was to find deep pockets to aid lawyers.  And there is too much of that going on in our legislatures. 

We already have heard of abuses based upon the concept that a victim must be made whole even if the only defendant capable of doing so was only minimally negligent.  Justice has scales.  It is as wrong to over punish as to under compensate.  Are we surprised that the legal profession comes down on the side of the victim, where they share in the reward, rather than the side of the abused defendant, where they do not?

I have nothing wrong with using the courts to punish wrong doers.  However, if the victim is society, as punitive damages suggest, then the returns should go to society.  The victim should be restored but anything more should go to the state. 

Also, the lawyer should be compensated on whatever terms can be negotiated with the victim on that part of the case.  However, all lawyers should expense hours (which should be a small fraction of the original case) on the punitive award.  The court then should pay hours only for those expenses independent of the size of the award. 

Finally, I'm tired of receiving those dollars off coupons from a class action suit and discover that the lawyers are getting paid millions of dollars for their efforts.  Let them have coupons too. 

I really apologize to all those Philadelphia lawyers who thought they were building civilization.  But the loudest apologies should come from those greedy lawyers who think of their possible awards even before they determine the harm their efforts before the court or in the legislatures are doing to our system. 



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