Companies Can Make Outlandish Legal Arguments, Too

, The Litigation Daily


Summary Judgment is American Lawyer senior writer Susan Beck's regular opinion column for the Litigation Daily.

Last month, the U.S. Chamber of Commerce's Institute for Legal Reform came out with its annual list of the 10 most ridiculous lawsuits of the year. It included litigation by a group of Idaho inmates who claimed beer companies didn't warn them of the dangers of alcohol, and a suit by a New Jersey man who complained that Subway's footlong sandwiches were only 11 inches.

"Whether cringe-worthy or laugh-out-loud ridiculous, ask yourself: 'Is this really what we want our legal system to look like?'" Institute president Lisa Rickard said in a press release.

Look, anybody can file a lawsuit. We all know that lots of ridiculous claims get filed, and most of them get tossed. So I don't see what this list proves. Still, I do think Rickard poses a good question: "'Is this really what we want our legal system to look like?" Except I wouldn't point to inmate grumblings and fast food suits. I would turn the spotlight back on corporate America and highlight some of the abusive or ridiculous claims made by big companies and wealthy individuals as they attempt to evade responsibility for their actions.

Here's my list of five outlandish legal arguments and strategies pursued by the rich and powerful in 2013:

1. Standard & Poor's "puffery" defense: Last year the Department of Justice finally showed a little backbone and sued S&P for $5 billion for allegedly issuing inflated ratings on investment products that were laden with subprime dreck. The credit rating agency tried to wiggle out of the suit by claiming that its assertions about the integrity of its ratings process were mere "puffery" and weren't meant to be taken seriously. ("Sure, we said our process is objective and free of conflicts, but you knew we were just kidding, right?") Fortunately, Santa Ana U.S. District Judge David Carter rejected this defense in July and denounced it as "deeply and unavoidably troubling."

2. Big Tobacco's assault on Engle: For roughly seven years, the tobacco companies have tried to eviscerate the Florida Supreme Court's 2006 Engle ruling, in which the court devised a compromise to bring some sanity to tobacco litigation. The court threw out a $145 billion jury verdict against tobacco companies and decertified a class of smokers. But, in the interests of fairness and judicial economy, it created a framework for the state's smokers to seek damages without having to litigate every issue from scratch in every case. Individual plaintiffs can rely on certain common findings, such as the fact that smoking causes disease. The tobacco companies have repeatedly cried that this Engle approach denies them due process, prolonging the litigation while plaintiffs die. And while courts have slapped down the constitutional objection again and again, the tobacco companies stubbornly persist. The Florida Supreme Court rejected the due process argument in March, as did the U.S. Court of Appeals for the Eleventh Circuit in September in a different case. Twice the defendants have tried to get the U.S. Supreme Court to rescue them, and twice the high court has denied cert, most recently in October.

3. MGA/Mattel: If two big companies decide to fight to the death in a litigation cage match, why should anyone else care? Because they're monopolizing public court resources that could be better spent on resolving other people's legal problems. The nine-year-old Bratz doll trade secret/copyright infringement saga is too complex and mind-numbing to recount here, and it's still not over. After winning $137 million in attorney fees from Mattel Inc. in the final stages of a federal case, MGA Entertainment last month announced that it will start all over by suing Mattel in state court. Perhaps if there were some hugely important issue at stake, then this death march of case might offer some social value. But we're talking about the rights to a kooky-looking plastic doll.

4. JPMorgan's Madoff litigation: When investor trustee Irving Picard sued JPMorgan Chase & Co. back in 2010 for allegedly facilitating Madoff's fraud and turning a blind eye to signs he was running a Ponzi scheme, the bank denounced his claims as "utterly implausible" and "utterly baseless and demonstrably false." Now, after having settled similar criminal and civil claims by the government for $2 billion this month, JPMorgan's earlier indignation looks foolis —if not downright deceitful.

5. Wealthy tax cheats: When some rich people got caught trying to evade taxes by hiding money in Swiss bank accounts, they turned around and tried to bring a class action against their bank, UBS AG, for failing to inform them that they had to report their accounts to U.S. tax authorities. Judge Richard Posner of the U.S. Court of Appeals for the Seventh Circuit gave the plaintiffs a tongue lashing for this brazen move. "[The bank] has no duty to treat [the plaintiffs] like children or illiterates, and thus remind them that they have to pay taxes on the income on their deposits," he wrote.

The list of last year's examples could go on much longer. And unfortunately, you can bet it will continue to grow in 2014.

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