Tort Reform Arguments from Unexpected Places

--By Sebastian

Hulk Hogan's case against Gawker has caused quite a bit of consternation.¹  The concerns seem to cover a few major topics: forum shopping², the media being chilled from conducting their normal business, the size of the award, the immense costs of defending a lawsuit, the danger of having rich third parties fund lawsuits. 

In case you haven't heard of the case, it is fairly simple.  Hulk Hogan was filmed having sex without his knowledge.  Gawker media published the video in full on the internet.  Hogan sued Gawker for various privacy torts.  He won a gigantic verdict against them.  After the verdict, Billionaire Thiel was revealed as having helped Hogan fund the lawsuit.  Thiel had a grudge against Gawker for outing him as gay. 

My initial response as a lawyer was: nothing about this seems particularly surprising.  Forum shopping is standard for class actions and privacy torts, companies are always complaining about how lawsuits chill their ability to act the way they want to (attend any meeting with doctors and mention malpractice suits), windfall awards are scary for everyone, everyone talks about how expensive lawsuits are to defend, and having rich third parties fund lawsuits is nothing new (I'm sure you've all heard of the ACLU, the Sierra Club, and the NRA). 

All of these problems are brought up repeatedly in tort reform discussions so I couldn't understand what was so special about this case.  After reading quite a few articles on the case (some of them almost apocalyptic in tone) I realized that there was some truth in their complaints, and I had just been convinced by tort reform arguments that most of those problems were unadressable.  However, many of these arguments were being advocated by people and institutions which had previously not been very receptive to tort reform arguments, so maybe it was time to revist them.

1. Forum shopping.  This actually wasn't a problem in this case, but it is indeed a big problem.  The problem is that most states have very long-arm statutes which allow those in the stream of commerce to be sued almost anywhere.  Those statutes were a progressive reform in response to the fact that far flung corporations could do harm in a venue without ever being present in that venue.  This caused people who were harmed to have to sue them in the forum where the corporations were incorporated, which could be a huge pain to someone on the other coast.  The modern view is that you should be suable where you are, or where you caused the harm.  That seems like a sensible rule to me.  It causes problems with media cases because the harm is everywhere they broadcast, and with class actions because it allows the plaintiffs' lawyers to choose essentially anywhere. 
2. Chilling.  We want to chill bad behavior like publishing secret sex tapes and pollution.  So that isn't what people mean by a chilling effect.  What they mean is that we don't want to limit legitimate behavior that comes close to things that can be sued over.  This case isn't a good case for that worry, because Gawker's actions are among the type of thing we clearly don't want to allow.  (This point has been well covered in the feminist analysis of revenge releases of private nude pics, or in peeping tom crimes).  The complaint among media corporations seems to be that they don't want to have to have their legal department go over every release.  That is true, but I'm unsympathetic in this case, because it is exactly the type of thing that is clearly out of bounds and that therefore you shouldn't even need legal review for. 
3. Giant windfall awards can seem scary.  But they aren't just scary for media companies, they are scary for everyone.  The obvious solution would be some sort of cap on non-economic damages.  That generally hasn't been considered a good solution for reasons that I have never fully grasped.  It may have to do with incentives for lawyers to take expensive to litigate cases with medium level direct damages.
4. Lawsuits are expensive to defend for everyone.  I have no idea how to deal with that well.  Loser pays partially fixes the problem in other countries, though it stacks the deck in favor of large corporations in all but the clearest of cases unless poor people can get financial backing from someone else in the fairly good but not slam dunk cases.
5. Rich third parties funding legitimate cases.  These seems like the least problematic of the things mentioned.  Rich third parties funding illegitimate cases is a different issue, but non pertinent to the Gawker case.  Third party funding is a huge part of how all sorts of big cases get dealt with.  If you don't allow it, you get rid of almost all of what we normally think of as public interest law.  Disclosure seems the key to keeping it from corrupting the system.  There don't seem to be disclosure requirements and I'm not at all sure why.  Unless there is some sort of good argument against disclosure that I haven't heard of, I'd be all for it. 

So after thinking it through, I was wrong.  The articles do point to serious problems in our legal system, just not special problems with media companies and not just affecting freedom of the press.  I've become so used to people dismissing tort reform that my "this is nothing different" response was correct, but it only showed that I have become used to the abysmal state of modern law. 

 

¹Felix Salmon

New York Times

Crooked Timber

Lawyers Guns & Money

 

²As far as I can tell, this case doesn't actually involve forum shopping.  Filing in the home county of plaintiff's residence is pretty much the definition of routine non-forum shopping.  Hulk Hogan appears to live in the filing forum, so absent other evidence I don't see forum shopping here. 

 

 

 

 

Comments

[wj]

On your #3, I would say that huge awards are sometimes critical. It depends on who the defendant is. An award which would bankrupt a small business can be more like a rounding error in the accounts of a big business -- meaning they will have no deterrent impact at all. Which means that, if you are going to have a restriction, it has to have some kind of proportionality built into it.

On your #4, loser pays indeed has a chilling effect. Maybe I can stretch my funds to prosecute a good, but non-slam-dunk case. But if I am going to be liable for the (quite possibly inflated) costs of the law firm defending a big company? Suddenly the risk/benefit analysis changes dramatically.

[Sebastian_H]

I agree. I don't think moving all out to loser pays would be a good idea. Though I am a proponent of SLAPP type laws which enforce loser pays for certain types of clear cases involving freedom of speech.

[Snarki, child of Loki]

I don't think tarts should be reformed. Unreformed is a lot more enjoyable.

[byomtov]

Here is a fanciful idea.

Instead of the loser paying the winner's fees the loser pays the winner the loser's fees.

Sounds odd, but it increases the risk to the party who tries to use overwhelming legal firepower, and it limits a legitimate plaintiff's risk. If the insurance company tries to dodge paying a legitimate claim it may find itself paying a lot more than expected.

Maybe this would work only in cases where there is a huge disparity in resources between the litigants, but I think it might make sense in some situations.

[wonkie]

.
"Chilling. We want to chill bad behavior like publishing secret sex tapes and pollution"

Do we want to chill reports of pollution? I don;t think so. I think we need reports of pollution--assuming the report is accurate. Is there something I am not understanding here?

[Sebastian_H]

It might have been clearer as "We want to chill bad behavior like: pollution or publishing secret sex tapes."

The idea being that if you do something wrong, someone sues you over it and you are incentivized to stop doing wrong, that isn't a bad thing.

[joel hanes]

Sebastian, I'm delighted to see an FP post from you.

[bobbyp]

Indeed, and interesting turn of events. But there is one constant: The sides are the same, those who use the tort system to defend established financial, political, or social power, and those who use it to actually have some to begin with.

Perhaps we need to consider a system that does not rely so much on finding a good attorney, and coming up with a huge pile of cash to pay them.

Fewer torts. More justice.

[wonkie]

Thanks for the clarification.

[sanbikinoraion]

I don't understand how $100m in damages is at all proportional to the damage caused. The result is to put Gawker out of business and that seems harsh considering what they actually did. If the intent is to put businesses out of business for flagrant breaches of the law, then there needs to be a better sliding scale of damages to put, for instance, Shall or Volkswagen out of business for their transgressions.

PS I always love the legal posts here.

[Sebastian_H]

The damages don't always have to be proportional, and in this case are likely to be reduced on appeal. The problem is that different states have different rules on appeals and apparently Florida requires the full amount of the award to be posted as bond to appeal. That seems like a ridiculous rule for bankruptcy inducing awards. Other states have sliding scales or reduced percentages above a certain cut off. I would think that a couple of million would be more than plenty for an appeal but I wouldn't mind hearing other opinions as I haven't dealt with appeals that large.

[Marty]

I am not sure how I feel about tort reform in general, I have always supported anything that would reduce abuse of the system.

For the Gawker case, I think bankruptcy is getting off easy. The editor/CEO and reporter should go to jail. That is mot freedom of the press, it is invasion of privacy. And yes, I would love to chill that kind of reporting.

[Countme-In]

"Hulk Hogan was filmed having sex without his knowledge."

He didn't know he was having sex? I kid.

What did he think he was doing, rubbing the other person's face off against the turnbuckle?

It's bad enough that every other moment in Hulk Hogan's life has been filmed WITH his knowledge .... and ours, unfortunately.

Gawker is just a further elaboration of our Hulk Hoganish low brow showbiz cultural "ethic".

I find it discomforting that Donald Trump has boned up on this story and the tort issue by reading about it in the National Enquirer.

A pox on all of their houses.

[DMC]

Tort reform as it's generally been advanced seem to this respondent to mostly be a way to deprive the little guy of any meaningful recourse to due process for the redress of non-criminal grievances,in short, immunizing corporate actors from suit by individuals. There's considerable effort by the corporate sector to tie individuals into binding arbitration as an end run around existing tort law. While the current system certainly has room for abuse, the notion of caps on awards for damages or punitive awards seems calculated to protect the opulent defendant at the expense of plaintiffs, opulent or no. We had a good discussion over at Ian Welch's little corner o' the web over the the Thiel/Hogan/Gawker case and it boiled down to "if you don't want to get sued, don't do bad things" like publish clandestine sex tapes of celebrities, even if you'll make money off it. Bad corporate citizens NEED to be sued out of existence, mostly because the Government refuses to revoke their corporate charters when they become to dangerous to live.

[Sniffnoy]

Gawker media published the video in full on the internet.

This isn't correct. They published two minutes of the video, which was 30 minutes wrong. Undeniably scummy, but let's get our facts straight.

[Sniffnoy]

Ugh. "Long". 30 minutes long. Well, I suppose "30 minutes wrong" isn't exactly incorrect, given the circumstances of its filming!

[CharlesWT]

Recent revelations that Silicon Valley entrepreneur Peter Thiel has been quietly underwriting lawsuits against digital muckraking platform Gawker have doused new fuel on a simmering conflict between technologists and journalists. But this current dustup is about a lot more than the bad blood between these two behemoths. It's about creative destruction in news media and the friction of dealing with a world in which many of the remaining information-gatekeepers are being disrupted.
[...]
New Media Versus Silicon Valley: The disrupters have become the disrupted in only a few short years.

[Hartmut]

One option would be to put caps on what the victim (in the widest sense) gets while turning the rest of the insane amounts needed to punish the big bad guys over to a neutral beneficial entity. That would remove the incentives for both ambulance chasers (and their non-lawyer equivalents) and the state* for profit-oriented suing.

*like a police force financing itself from fees thus incentivizing them to impose as many and as high fees as possible.

[CJColucci]

How about a bit of market competition? Tort awards generally have some or all of these components: (1) lost income; (2) past and future medical expenses; (3) pain and suffering; and (4) punitive damages. Why not set up an alternative no-fault system where you get one and two, there's a defined schedule for three, and no four. You can choose to go into the system, foregoing a bonanza but being sure of getting compensation. Sure, there will be experts squabbling about the amount of lost income or estimates of future medical expenses, but the system is pretty good at handling that. Would significant numbers of injured plaintiffs prefer a sure, modest recovery to a gamble on a bonanza?

[wj]

Would significant numbers of injured plaintiffs prefer a sure, modest recovery to a gamble on a bonanza?

Kind of depends on how well the Trial Lawyers do at advertising their approach vs the alternative. "No charge until you win" can be attractive to someone who doesn't think thru the fact that the loss of 1) and 2) is, in effect, a charge -- even if the lawyer isn't the one collecting.

Considering how many people buy lottery tickets (which I view as basically a tax on ignorance of statistics), I expect a relatively large number would gamble.

[MckinneyTexas]

CJC, how would you handle a plaintiff's contributory fault?

[MckinneyTexas]

Tort reform is the result of a heavily and unfairly tilted playing field back in the 80's. TX leads the nation in tort reform, but not in a good way. The early changes fixing venue at the site of loss and modifying joint and several liability were useful and fair. Current med mal and land owner limits on liability much less so. The Gawker case is an aberration and reflects disgust w invasions of privacy and the arrogance of the media.

The system these days is, on balance, not that bad. Loser pays has a ton of unintended consequences. It makes some sense in commercial litigation, much less so in personal injury and consumer claims.

[CJColucci]

CJC, how would you handle a plaintiff's contributory fault?

Different states have different rules about that, so it is hard to come up with a comprehensive answer.I envision a system where plaintiffs trade away the gamble for huge money for a sure thing modest recovery -- like worker's comp or no-fault auto accident cases. Prove a few elementary facts -- you fell off the scaffold while working for A on B's construction project, you were hit by C's car, D was the surgeon and things went wrong -- and you get pure economic compensation plus a predictable schedule for pain and suffering -- loss of leg gets you $X, and so on. I don't know how many litigants would take this deal, but I would make it an available option and find out.

[CSC]

As a long time reader of the Gawker related sites Deadspin and Kotaku and even longer reader of this blog, I must remind you that Hulk Hogan sued Gawker not because of the sex on the tape but because his comments revealed him to be a huge bigot and cost him several job opportunities. The real news was the racism.

[DMC]

I think that was the basis for the suit, the loss of future income as a direct result of the release of the tape. Maybe it was the racism, maybe it was the blatant adultery, maybe it was something else. But none of it would have been subject to public comment without the release of the tape. You have to demonstrate DAMAGE in a case of tort and in this case, Hogan's lawyers were successful in proving such damages to the court.

[Countme-In]

Maybe Hulk is Vice Presidential material for the Trump Adminikillveryonewhoisnothimastration.

At the very least, Secretary of the Ill-Heatlh and No Welfare for Niggers, Fags, and Towelheads Bureau.

I guess Gary Busey is now relegated to Secretary of the Department Of Procuring F*ckable Secretaries.

[Countme-In]

Well, that's nice, but unless the government and the human Americans in it she wants to murder, confiscates her weapons, and her two-year-old's weapons, and gay and straight Muslims' weapons, and all of your weapons, those not held in an armory with a sleepy, slow-moving bureaucrat demanding permission in triplicate to remove your weapons to take care of your hunting needs, then suck on this:

http://talkingpointsmemo.com/livewire/michele-fiore-loses-nevada-congressional-race