Source: http://news.lawreader.com/?m=201203
Timestamp: 2019-04-20 03:09:06+00:00

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OKLAHOMA CITY (Legal Newsline) – A year after the lawsuit financing industry tried to have its legislative agenda passed in nine states, a bill that would ban the practice is pending in the Oklahoma Senate.
Oklahoma Senate Bill 1780 would make it against the law for a company to make a loan to a plaintiff that would be paid back from settlement funds or a jury award. It would apply to any case pending in an Oklahoma state court or any federal court in the state.
The bill makes lawsuit financing a violation of the Consumer Protection Act.
Baker, a Democrat who was a state lawmaker before becoming AG and now works at McKenna Long & Aldridge, says a previous agreement between the industry and former New York Attorney General Eliot Spitzer did little to curtail abuses in the industry.
In lawsuit financing agreements, a plaintiff is given an amount usually between $500 and $5,000 with the promise of paying the company back with funds from a settlement or jury award. If the plaintiff loses, nothing is owed.
Critics say it encourages frivolous lawsuit and jeopardizes the integrity of the judicial system, while proponents say it helps plaintiffs handle everyday expenses in tough times.
“The interest rates are certainly first and foremost,” Baker said. “What we’re seeing in lawsuit lending, the lenders are coming in and charging exorbitant rates to those who take them up on their offer.
Eric Schuller, the director of government and community affairs at Oasis Legal Finance, said bills proposed last year would have addressed those concerns. The amount a consumer would have to pay back would be capped after three years in those bills, he said.
Schuller was in Oklahoma on Tuesday to fight the bill. He complained that Oasis didn’t know about the bill until it unanimously passed the Senate Judiciary Committee in late February, though he said it was premature to say if it would be grounds for a challenge to the bill if it passes.
Schuller said he agrees that there are some problems within the industry, starting with companies that intervene between the client and its attorney in litigation. He said the agreements are not loans because there is no guarantee of repayment.
The industry’s bill was introduced last year in Alabama, Arkansas, Indiana, Kentucky, Maryland, Nevada, New York and Tennessee.
Baker said even trial lawyers are concerned about the industry, pointing to a case in South Carolina when a plaintiff refused a settlement offer on the advice of the lender and proceeded to trial, only to lose.
The bill was authored by Republican Sen. Brian Crain, who did not return a message seeking comment.
Baker doesn’t see it that way. He says every state legislature should be taking a look at the industry, and that he’ll be talking on a number of panels on the issue in the next year.
“Obviously the industry would like to have a piece of legislation that authorizes their practice in a particular state,” Baker said. “In all of these states – and we’ll probably see more of this – it is very questionable whether or not they can actually engaged in that lending practice.
Baker spoke about the industry at the U.S. Chamber of Commerce Institute for Legal Reform Summit last year and passed out a white paper detailing the ILR’s concerns with the industry at a meeting of the American Bar Association.
INTERESTING BOOK: FIRST THING WE DO, LET’S DERUGLATE ALL THE LAWYERS.
, Not many Americans think of the legal profession as a monopoly, but it is. Abraham Lincoln, who practiced law for nearly twenty-five years, would likely not have been allowed to practice today. Without a law degree from an American Bar Association–sanctioned institution, a would-be lawyer is allowed to practice law in only a few states. ABA regulations also prevent even licensed lawyers who work for firms that are not owned and managed by lawyers from providing legal services. At the same time, a slate of government policies has increased the demand for lawyers’ services. Basic economics suggests that those entry barriers and restrictions combined with government-induced demand for lawyers will continue to drive the price of legal services even higher.
In First Thing We Do, Let’s Deregulate All the Lawyers, Clifford Winston, Robert Crandall, and Vikram Maheshri argue that these increased costs cannot be economically justified. They create significant social costs, hamper innovation, misallocate the nation’s labor resources, and create socially perverse incentives. In the end, attorneys support inefficient policies that preserve and enhance their own wealth, to the detriment of the general population.
We filed the second and most significant of our recent trade association cases last June, also here in the District, against the American Bar Association. We charged that its law school accreditation program was controlled by law school faculty, who were using the ABA’s power over accreditation to force law schools to inflate faculty salaries and benefits.
The accreditation program run by the ABA’s Section of Legal Education — 90 percent of whose members were law school faculty — involved extensive requirements, enforced by on-site inspections, probationary periods, and periodic renewals. The individuals who served on the Section’s Accreditation Committee had been there for many years, and their activities had for a long time largely escaped supervision by the ABA’s Board of Governors and House of Delegates.
Among other things, the ABA committee required that the law school’s faculty salaries — the price of teaching talent — be “comparable” with those of other ABA-accredited schools, and required each accredited school to submit detailed salary information in order to verify compliance with this requirement.
In practice, we charged, the ABA committee further manipulated this price-fixing requirement by permitting the faculty of the law school under review to select their own “peer group” of other law schools to compare salaries with. Not surprisingly, the faculty often chose higher-ranked schools or schools located in higher-cost areas for the peer group, which inflated the salary levels. We found a number of instances in which law schools were placed on probation for having an “inadequate” salary structure.
ABA accreditation is virtually essential to the success of a law school. The bar admission rules in over 40 States require graduation from an ABA-accredited law school as a condition for taking the bar exam.
The ABA committee further flexed its muscle by prohibiting an accredited law school from accepting transfer credits from unaccredited law schools, or from accepting graduates of unaccredited law schools into its graduate programs — even if the other school was accredited by the State.
That case has also been resolved by a consent decree, which is still being reviewed by the court. Under the decree, the ABA committee cannot impose any comparative requirement, or collect any comparative data, regarding law school faculty compensation. Nor can the ABA committee prohibit schools from accepting credits or graduates from State-accredited law schools.
The decree also requires a number of reforms to the structure of the Accreditation Committee and the Legal Education Section to ensure that law school faculty no longer dominate, and that accreditation-related activities are subject to effective outside supervision.
Finally, the decree requires that a Special Commission, which had already been established by the ABA, advise the court on the appropriate use of several other accreditation requirements that we looked at. These are requirements that can serve legitimate educational purposes, but that we found had also been used at times to feather the nests of law school faculty. These requirements relate, for example, to faculty teaching-hour limitations, student-faculty ratios, faculty sabbaticals and other leaves of absence, and quality of law school facilities.
On Feb. 23 I posted about Goodin v. White, 342 S.W.3d 282 (Ky. App. 2011), the first Kentucky appellate decision dealing with Mary Carter settlement agreements (http://civilprocedure.dbllaw.com/2012/02/nonsettling-defendants-should-beware/). After running the post I received additional information, including the fact that the agreement in Goodin did have the characteristic of a Mary Carter agreement that it rewarded the settling defendant on a dollar-for-dollar basis with a set-off (via indemnity) for damages imposed against the nonsettling defendant.
Also, I learned that the plaintiff in Goodin filed an amended complaint against the third-party defendant, making that party a defendant as well. I believe the opinion properly upheld the admissibility of the occurrence of a Mary Carter settlement agreement and correctly found that such a settlement may be admissible to show bias or for impeachment.
However, an indemnity agreement between the plaintiff and a defendant taking part in a jury trial would arguably give the settling defendant a hidden interest (and greater than usual bias) against the nonsettling defendant that distorts the normal adversarial process. This is one of the reasons why some jurisdictions have banned secret Mary Carter agreements, and why others hold them admissible. On the other hand, one could argue that attempting to educate the jury about the terms of such an indemnity agreement might cause confusion, and that admission of the fact of the settlement agreement itself is sufficient to let the nonsettling defendant argue to the jury that the settling parties are in league. Also, under the particular circumstances of the Goodin case, there was already antagonism evident between the nonsettling defendant and the settling third-party defendant — the filing of the third-party complaint itself.
The bottom line on Goodin v. White? The court and all parties should be advised of the existence of a Mary Carter agreement; and such an agreement should be admissible to show bias or to impeach prior testimony. I would have preferred if the opinion had added that individual terms of the agreement that would distort the normal adversarial process or that cause a de facto misalignment of the parties should be admissible to the jury as well, subject to the trial court’s discretion.
Until recently, Kentucky courts interpreted the Kentucky long-arm statute as permitting jurisdiction to the full extent of federal due process, which meant that if federal due process permitted personal jurisdiction over a nonresident defendant, the long-arm statute did as well. The Supreme Court of Kentucky reversed course in 2011 and held that Kentucky courts may exercise personal jurisdiction over a nonresident only in the nine specific instances set out in the long-arm statute. Now, a Kentucky court must engage in a two-step process to determine if it may exercise personal jurisdiction over a nonresident defendant. First, the court must determine whether personal jurisdiction over the defendant will satisfy the requirements of any one of the nine specific categories set out in the long-arm statute, and second, the court must determine whether federal due process will permit the court to exercise personal jurisdiction.
Federal due process requires that a nonresident defendant have minimum contacts with the forum state “such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’” Thus, where there are no activities, ties, or contacts with Kentucky, courts within the state will not have personal jurisdiction over the nonresident.
Where a defendant comes into the state, his or her physical presence alone satisfies due process because it is one of the continuing traditions of the legal system that defines the due process standard of “traditional notions of fair play and substantial justice.” When the plaintiff cannot serve the nonresident defendant in the state, personal jurisdiction over the nonresident defendant falls into two categories: general personal jurisdiction and specific personal jurisdiction.
Courts exercise specific personal jurisdiction over a nonresident defendant in cases in which the claim arises from one or more acts of the defendant in the forum state. Courts may not exercise specific personal jurisdiction over a nonresident defendant unless the defendant has purposefully availed itself “of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” A “random, fortuitous, or attenuated contact” will not permit a Kentucky court to exercise specific personal jurisdiction under federal due process. Thus, for instance, a single eBay sale by a nonresident to a Kentucky resident will not allow a Kentucky court to exercise personal jurisdiction over the nonresident seller. Likewise, the Supreme Court of the United States has held that a foreign manufacturer is not subject to personal jurisdiction in a state simply because one of its machines makes its way into the state through the stream of commerce.
Under general personal jurisdiction, the defendant’s contacts with the forum state are so “continuous and systematic” that the state’s courts have jurisdiction over all claims whether the claims are related to the defendant’s contacts with the forum state or not. The threshold for establishing general jurisdiction is substantial, and thus the fact that a nonresident defendant maintains a website that continuously reaches Kentucky residents or advertises in national magazines to which Kentucky residents subscribe will not be enough to subject the defendant to general personal jurisdiction.
Note: The foregoing post includes commentary reprinted from the forthcoming 2012 supplement to Rules of Civil Procedure Annotated, 6th ed. (Vols. 6 & 7, Kentucky Practice Series), by David V. Kramer and Todd V. McMurtry, with permission of the authors and publisher.
Copyright (c) 2012Thomson Reuters. For more information about this publication please visit http://store.westlaw.com/rules-of-civil-procedure-annotated-6th-vols-6-7-kentucky/130503/11774808/productdetail.
 Cummings v. Pitman, 239 S.W.3d 77, 84-85 (Ky. 2007); Wilson v. Case, 85 S.W.3d 598, 592 (Ky. 2002).
 Hinners v. Robey, 336 S.W.3d 891, 895 (Ky. 2011); Caesars Riverboat Casino, LLC v. Beach, 336 S.W.3d 51, 56 (Ky. 2011).
 Goodyear Dunlop Tires Operations v. Brown, __ U.S. __, 131 S. Ct. 2846, 2853 (2011) (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)).
 See, e.g., Halderman v. Sanderson Forklifts Co., 818 S.W.2d 270, 274 (Ky. App. 1991).
 Burnham v. Superior Court of California, County of Marin, 495 U.S. 604 (1990); Perry v. Central Bank & Trust Co., 812 S.W.2d 166 (Ky. App. 1991).
 Goodyear Dunlop Tires Operations v. Brown, 131 S. Ct. 2846, 2854 (2011).
 Id. (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)).
 Hinners v. Robey, 336 S.W.3d 891, 901 (Ky. 2011).
 McIntyre Machinery v. Nicastro, __ U.S. __, 131 S. Ct. 2780 (2011).
 Goodyear Dunlop Tires Operations, 131 S. Ct. at 2854.
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