12.07.2006

Tort reform, Texas style

Class action lawyer Bill Lerach has been the scourge of small companies for years. When a stock drops, Lerach rounds up shareholders to file suit against the company. Companies often settle these nuisance lawsuits to avoid long and expensive legal hassles. Generally, the lawyers get rich and the "plaintiffs" get a pittance.

Until now. Federal Judge Melinda Harmon (Bush 41 - Texas) is making Lerach pay the defendants' legal costs in a meritless lawsuit ($):
One reason the tort bar files so many frivolous lawsuits is that there have been very few penalties for its legal abuses. So congratulations are due to a Texas judge who last week ordered class-action kingpin Bill Lerach to pay up for his latest wretched excess.

Federal Judge Melinda Harmon's good deed came at the end of a high-profile suit against Alliance Capital. She dismissed the case in summary fashion and invoked a little-used legal rule that requires the Lerach firm to pay Alliance's legal fees. While the plaintiffs might have had cause for filing the suit, the judge said, by the end of discovery it was clear "the continuance of the claim against Alliance was at that point without merit" and so the Lerach firm must pay for dragging Alliance past that point.

"Loser pays" is standard practice in Britain. It helps discourage frivolous lawsuits. We should use it more often here.

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