Dan Pero is the President of the American Justice Partnership and the author of the blog American Courthouse.
Part of his biography: "Dan served as Chief of Staff and Campaign Manager for former three-term Michigan Governor John Engler. The legal reform successes achieved in Michigan are widely viewed as the definitive model for legal reform at the state level."
I am an advocate of fairness in the civil justice system. Mr. Pero is an advocate of fairness in the civil justice system. But even in this textualist, dictionary driven environment, my definition of fairness and Dan's definition of the same word do not match. I have no problem seeing businesses do well. I would hope we all want a civil justice system where all parties, individuals and corporations are treated equally. Mr. Pero and his organization advocate and lobby for the codification and institutionalization of corporate advantage in the civil justice system. The AJP generally demonizes all private individuals seeking redress in the courts. However, a very special place on the AJP's enemies list is reserved for those who represent them.
On June 5, 2008, Mr. Pero wrote this entry on his blog:
A $1.6 Billion Earmark For Trial Lawyers
The Wall Street Journal lifts the rock on a $1.6 billion tax cut for trial lawyers slipped into a tax bill by House Ways and Means Committee Chairman Charlie Rangel with no public debate or hearings.
According to the Journal:
“The provision would allow plaintiffs’ lawyers to deduct the up-front expenses of pursuing contingency-fee lawsuits, even in cases where the lawyer is expecting to be reimbursed for these expenses.”
Enriching wealthy trial lawyers is bad enough, but the bill would also give lawyers new incentives to file class action suits because they’d be allowed to write off their expenses up front.
Tiger Joyce, President of the invaluable American Tort Reform Association, asks whether “instead of contemplating additional legislative plums for the litigation industry” Congress “might instead be investigating costly and potentially widespread misconduct within that system.”
If Barack Obama and John McCain are truly committed to ending earmarks for wealthy special interests,
here’s their chance to prove it.
This prompted the following response from me on June 7:
Then you would favor a system that would only allow corporations to deduct research and development expenses from the proceeds of the sale of the new product? The same with the costs of premlinary marketing, distribution and adverstising expenses? Seems to me that such a system would have a remarkably “chilling” effect on commerce, and the Chamber of Commerce would fight such a system tooth and nail.
But, apparently it is quite a different story when it comes to measures that codify and institutionalize unequal treatment to injured persons making claims.
By the way, prior to the new legislation, when did corporations and their law firms deduct the expensed of defending claims in court?
I am not a tax attorney, but I am always willing to learn. If my analysis is off base, let me know, and I will publish your response on my website, http://www.attorneybutler.net. Being set straight by you would be a lesson in humility that would help build my character.
Fortunately for me, I write about these issues as a hobby, and not as part of my job. I don’t need to demonize the opposition to fulfill the requirements of my job description.
I subscribe to your blog, and look forward to reading your most interesting opinions in the future.
Dan Pero replied on June 13:
Thanks for your comment. Like you, I’m always willing to be educated, but I think here our differences are a matter not of analysis, but prudent judgment about what is best for the common good of the American people.
The reason our tax code includes incentives for companies to invest in new products is that our federal government believes these products generate great social benefits, including new jobs, better wages, enhanced productivity, stronger economic growth and, ultimately, higher tax revenues for federal, state and local governments – revenues that finance everything from our national defense to Interstate highways to neighborhood schools. In fact, considerations like these were so important to the Founders that in the Constitution they specifically empowered Congress (Article I, Section Eight) to give patent and copyright incentives to “authors and inventors.” On the other hand, the Founders – many of whom were themselves members of the legal profession – knew its practitioners well and provided no subsidy system for lawyers. Here’s why.
Class action and other lawsuits are not “products” like inventions and publications. They are meant to be the last resort when all other forms of redress of torts and contract abuse, such as negotiation, arbitration, and compromise, have failed. Last resort lawsuits may sometimes be needed, but they should not be encouraged, much less subsidized by taxpayers. On the contrary, the up-front expenses that personal injury lawyers incur in bringing these lawsuits represent an important and valuable check against frivolous litigation. For good reason, most Americans think we already suffer from too much litigation, not too little.
Class actions and frivolous litigation are significant barriers to entrepreneurial activity, innovation, and economic growth. They impose huge costs on American consumers, a substantial share of which goes to clever lawyers who hardly lack for honest sources of income. Many of these kinds of lawsuits, quite frankly, are never intended to go to court, but to bully businesses and other “deep pockets” into agreeing to out-of-court settlements, with the cost passed on to their customers. This is not the type of activity American taxpayers ought to underwrite.
If our tax code has discouraged trial lawyers from bringing these cases, it’s certainly escaped my attention. Multi-million (and even multi-billion) dollar legal fees have become commonplace in today’s litigious environment and represent all the incentive lawyers need to keep the lawsuits coming.
My response was posted June 17:
Mr. Pero, thank you for your reply. I will certainly include it and your original entry on my website, http://www.attorneybutler.net, though not because you have persuaded me that my original comment was wrong.
If deduction of business expenses should only apply to enterprises that produce patentable or copyright-able products, as you indicate, then I assume you would then agree that no service related business should be allowed to deduct such expensses when incurred. Service industries create no products. Organizations like the American Justice Partnership create no product, for instance.
Is it your position that the Federal Government should discourage all service related businesses by denying them the privilege of deducting business expenses when they are incurred? They create no products, therefore their activities should not be encouraged by the favorable tax treatment of companies that manufacture products, by your analysis.
In fact, though, I really think you want all businesses, including service businesses, to be able to deduct business expenses when incurred. All service businesses, including corporate law firms and law firms defending tort suits and class actions. In fact, the only business you want singled out is that of lawyers defending those injured or defrauded by others. You agree with and actively lobby for the codification and institutionalization of such disparate treatment for accident and fraud victims.
Your comments regarding the the framers of our Constitiution is really so much pompous claptrap. (I hope you won’t find my language too colorful.) Your attempt to characterize the protection of corporate profits to the exclusion of private redress as one of the founding principles of our Republic I find insulting and dangerous.
I despair of conducting a rational dialog about civil justice with anyone who feels any private lawsuit is frivolous, and any class action is, virtually without exception, if not by definition, meritless. You feel that every “trial lawyer” (you mean plaintiff lawyer, not the noble fellows who defend corporations in the courtroom) is dishonest. I am not reading to much into your comments, I think.
I understand that restricting the individual’s access to a jury, either by legislation, or by preemptive strike from the bench, is a great way to control business costs, much like out-sourcing jobs to China or India. Reduced costs often means increased profits. Bully.
Mr. Pero, look objectively at the civil justice system, if you are able, though the source of your particular paycheck may not allow you. If you do, you may find that there is duplicity, dishonesty and hypocrisy in other places than at the counsel table closest to the jury box.
By the way, you may find this quote interesting. It is from a 2003 speech delivered by Thomas J. Leary, then a Commissioner of the Federal Trade Commission, whose nomination was unanimously approved by the Senate in 1999, and who was formerly Assistant General Counsel of General Motors:
“Our law enforcement efforts are supplemented by an extensive consumer education program, on the theory that a better informed public is the first line of defense against misrepresentation and fraud…Our efforts are further reinforced by an extensive array of private remedies, which include class actions. Class actions have an important role in compensating injured consumers and punishing or deterring wrongful conduct.”
Why don’t you give Mr. Leary a call and tell him he is a dishonest, greedy trial lawyer.
We’ll talk again, I think.
It would be nice if as many folks as possible subscribed to Mr. Pero's blog, and commented on his curious views.
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Posted by: Joannah | April 07, 2009 at 02:44 AM