Private Civil Litigation Research Articles

Investigating potential violations of law, responding to whistleblowers and mitigating associated ethical dilemmas

Financial companies and companies with a global footprint face increased regulatory risks and must respond appropriately when faced with suspected misconduct. A company’s response to suspected misconduct is crucial, because an inappropriate or insufficient response could expose the company, its directors and its management to regulatory enforcement actions, private civil litigation and reputational damage. Often, a company’s response includes conducting an investigation led either by management or by an independent committee of the board of directors. This paper discusses relevant considerations and general best practices for investigating suspected misconduct, including guidance for determining when a legal department should recommend that an independent committee of the board of directors conduct an independent investigation. This paper also discusses how to respond to whistleblowers and ethical issues that commonly arise in internal investigations.

Deciphering the Sunshine Act: Transparency Regulation and Financial Conflicts in Health Care.

The Physician Payments Sunshine Act ("Sunshine Act"), enacted to address financial conflicts in health care, is the first comprehensive federal legislation mandating public reporting of payments between drug companies, device manufacturers, and medicine. This article analyzes the Sunshine Act's uneven record, exploring how the law serves as an intriguing example of the uncertain case for transparency regulation in health care. The Sunshine Act's bumpy rollout demonstrates that commanding transparency through legislation can be arduous because of considerable implementation challenges. Capturing all the relevant information about financial relationships and reporting it with sufficient contextual and comparative data has proven disappointingly difficult. In addition, the law suffers from uncertainty and poor design as to the intended audience. Indeed, there is strong reason to believe that it will not significantly impact decision-making of primary recipients like patients. Yet the Sunshine Act nonetheless retains important and perhaps underappreciated value. From the almost four years of information generated, we have learned that industry-medicine financial ties vary significantly by physician specialty, and somewhat by physician gender. In many medical fields the distribution of top dollar payments tends to be heavily skewed to a few recipients, all of which have important implications for optimal management of financial conflicts and for health policy more generally. Accordingly, the Sunshine Act's greatest potential is not guiding decisions of individual patients or physicians, but its downstream effects. This Article traces how secondary audiences, such as regulators, watchdogs, and counsel are already starting to make productive use of Sunshine Act information. Public reporting has, for example, made more feasible linking industry payment information with Medicare reimbursement data. As a result, policymakers can more closely examine correlations between industry spending directed at individual physicians and their prescribing and referral decisions. Moreover, savvy counsel are recognizing that Sunshine Act information provides explosive evidence in private civil litigation and this Article explores the first wave of cases.

The Law and Economics of Litigation

This chapter examines the basic model of the law and economics of litigation. Because the Rules of Civil Procedure and the Economics of the Litigation/Settlement decision are covered in separate chapters of this volume, this chapter will focus on private civil litigation, in particular the litigation value of a lawsuit and the incentives generated for filing a suit. The chapter begins with the simple one-stage single plaintiff/single defendant investment model of litigation, and sets out the conditions for filing, default, settlement, and litigation. The analysis then examines the effects of litigation cost and fee‐shifting as well as the effects of percentage contingency fee arrangements within the standard one‐stage model.The model is then modified to take into account sequencing and option value. We show how litigation with multiple stages and the revelation of information alter the investment value of litigation, as well as the effects of litigation reform proposals such as fee‐shifting. Finally, the chapter discusses third party or external effects. We examine how these additional complications affect the outcome of litigation, the viability of a lawsuit and the predictions of the standard model of litigation.This chapter is not intended to be a comprehensive overview of economic analyses of litigation and civil procedure (See Cooter & Rubinfeld (1989), Kobayashi & Parker (2000), Spier (2007)). Rather, this aim of this chapter is to set out the basic mechanics of the law and economics of private civil litigation, and examine how a more robust examination of sequential decision‐making in litigation alters some of the basic predictions of the simple model.

The Dependent Origins of Independent Agencies: The Interstate Commerce Commission and the Rise of Modern Campaign Finance and Capture

Independent regulatory agencies are some of the most powerful institutions in the United States, and we think of them today as designed to be insulated from political control. This Article shows that their origins were the opposite: this model first emerged in the late nineteenth century because it offered more political control.The modern executive’s design of unitary presidential control over most offices, along side “independent” regulatory agencies, took shape in the winter of 1886-1887. Congress repealed the Tenure of Office Act, giving the President the unchecked power to dismiss principal officers, and ending the Senate’s power to protect those officers. Shortly afterward, Congress created the Interstate Commerce Commission, the first model for the modern independent agency. These two statutes are a basic foundation for the modern executive branch: the unitary executive’s power over most offices, alongside independence regulatory commissions that are sometimes called a “fourth branch of government.”This structural change was triggered by a sudden and significant transformation in American campaign finance. In the nineteenth century, parties relied on “assessments,” officeholders paying a percentage of their salary as a kickback to their party. Due to the federal prohibition of patronage “assessments” in 1876 and 1883, the parties were forced to adopt our more recognizable modern system of large special interest campaign contributions. The Senate had less incentive to fight for its power over federal offices and assessment money, and it suddenly needed to increase its access to railroad money. The Interstate Commerce Commission was the Senate’s means of attracting that money. The existing scholarship on the Interstate Commerce Commission generally contends that Congress was “shifting responsibility,” decreasing its own power so that it could punt difficult issues and delegate them to a new commission. To the contrary, this Article shows that the Senate and the President were seizing power, not punting away thorny questions. The ICC was a rejection of a far more independent enforcement model (private civil litigation in federal or state courts) towards a model of shared political accountability model (a commission nominated by the President and confirmed by the Senate for six-year terms. This story shows how sudden changes in campaign finance triggered dramatic changes in constitutional design, and set the foundation for the modern executive branch.

SEC changes course: some companies must now admit wrongdoing

Purpose – To educate the audience about a significant change in SEC enforcement policy Design/methodology/approach – Research was performed of SEC officials' recent public statements about the change in enforcement policy. Findings – The SEC has increased enforcement activity in recent years, and the commission will begin insisting on admissions of wrongdoing in future settlement negotiations. Practical implications – Private litigants will seize on any admissions exacted by the SEC from corporate defendants. This could result in huge damage awards in private civil litigation. Originality/value – Explanation of the SEC's recent change in enforcement policy, specifically, how the SEC will demand certain corporate defendants admit to wrongdoing as part of any settlement with the commission.

Private Civil Litigation Involving Collateralized Debt Obligations

The credit and liquidity crisis has badly affected the performance of collateralized debt obligations (CDOs) and structured investment vehicles (SIVs). Dislocations in these products have led to the filing of many lawsuits in the United States and in other countries. This article examines some basic themes of litigation in the U.S. brought by stakeholders in these transactions. In general, these cases either involve claims against other stakeholders in disputes over the application of collections and liquidation proceeds following an event of default, or allegations of fraud, misrepresentation, and other tortuous conduct against underwriters and other gatekeepers, including rating agencies, arising from the structuring and marketing of transactions. The welter of litigation involving CDOs and SIVs has exposed structural weaknesses as well as ambiguities and other traps in the complex contracts and disclosures governing these products. That litigation has challenged some of the basic legal framework on which transactions were based and highlighted the limits of liability arising from these types of products. The lasting legacy of these lawsuits may be a record of case law that fundamentally affects the way in which securitized investment vehicles will be structured and conceived in the future. <b>TOPICS:</b>CLOs, CDOs, and other structured credit, legal and regulatory issues for structured finance, legal/regulatory/public policy

On the Desirability of Appellate Courts

In this paper we analyze the necessity of an appeals process in private-civil litigation from the point of view of potential litigants. Our main concern is the question of whether the existence of an appeals system is to the benefit of potential litigants or if they would be better off in a system in which appeals are not possible. Our main observation is that it is unnecessary to enable appeals in all civil litigation. Indeed, a judicial system with a built-in appeals process is in many cases less desirable for the parties involved.

The Hidden History of the Iraq War

We do not ordinarily publish extensive notes to articles, but because of their importance we have included footnotes to this Review of the Month by Edward Greer, who has a private civil litigation practice in Brookline, Mass., and is the author of Big Steel: Black Politics and Corporate Power in Gary, Indiana (Monthly Review, 1979). He acknowledges the help of his editorial assistant, Stephen E. Slaner. - The EditorsThis article can also be found at the Monthly Review website, where most recent articles are published in full.Click here to purchase a PDF version of this article at the Monthly Review website.