A Corporate Counsel Imperative - More And Better Paid Judges

Friday, February 1, 2008 - 01:00

Editor's Note: Many general counsel and their CEOs are not aware of the total costs of litigation because typically defense costs are expensed annually by the legal department while liability costs are expensed by the business unit at the time a payment is made to the plaintiff. Based on information available to it, eLawForum estimates that in 2006 for all Fortune 500 companies the total cost of litigation ($210B) was equivalent to approximately one-third of their after tax profit ($610B). See page 27.

eLawForum on the basis of an analysis of 20,000 cases found that only 1.8% of the cases brought against Fortune 500 companies actually proceeded to final judgment with 97% being resolved before trial and 1.2% being settled during trial.

DRI is marshalling its membership of 22,500 defense counsel as well as that of other national and local defense counsel organizations and LCJ in support of judicial independence and its current President, John Martin, will be putting great emphasis on this issue during his term in office. The DRI Task Force Report on Judicial Independence "Without Fear of Favor" (see link to the Report in the version of this article at www.metrocorpcounsel.com) suggests needed reforms which would be supportive of judicial independence, including addressing such issues as poorly funded courts.

Editor: Jim, please mention your experience in the courts.

Leader : We litigate primarily in the New York metropolitan area in both the federal and state courts. I think your readers would be very interested in knowing that current New York State Supreme Court judges, the trial level judges, currently earn $136,000 a year and have not had a raise since 1999, and that New York ranks 49th out of 50 states in terms of judicial salaries adjusted for cost of living in this area - an appalling record.

Editor: Taysen, Are you concerned about the abysmal salaries of many state court judges?

Van Itallie: Governor Corzine just signed legislation increasing judicial salaries for state court judges in New Jersey which is terrific, but it also highlights the crying need for action on the federal level and in states like New York. The issue of judicial salaries is vital to all lawyers, but especially for corporate counsel. Many major corporations are very substantial users of the court system. As a consequence the corporate community has a tremendous stake in the quality and the independence of the judiciary. People talk about judges lacking a natural constituency to support issues like salary. However, the corporate community should take on that role and stand up for paying judges appropriately in order to have the kind of even-handed, expeditious, neutral, high-quality justice that we all want.

Editor: What people have observed is that fewer judges are coming from the private sector. More are coming from the public sector who have been prosecutors and public defenders, regulatory attorneys and so forth. Taysen, what is your reaction?

Van Italie : That is one of the points that Chief Justice Roberts made last year. Not that former prosecutors and public defenders are not extremely capable and highly qualified judges, but the real issue is bringing to the judiciary a diverse background and population that you can draw upon. An equally significant issue which Justice Roberts referred to is that some lawyers regard judgeships as a way-station to a career in the private sector which could be seen as influencing their independence and neutrality. But there is really no option other than returning to the private sector for some judges, given the fact that judicial salaries have not even kept pace with increases in the cost of living, coupled with the need to pay college tuition, etc. We need judicial salary levels that will attract extremely high quality lawyers from diverse sectors of the community to become judges as the capstones of their careers.

Editor: I would like to explore with you the concern that overcrowded dockets have prevented state courts judges from giving due consideration to business cases and from playing an effective role as gatekeepers. How big a role in this does the lack of clerks and other resources in state courts play?

Leader : Certainly there is a dichotomy between the resources that are available to the federal court in New York and those that are available to the state courts. The state trial courts don't have access to the same kinds of resources, whether it be personnel or technology. The state appellate courts have more in terms of resources. On the plus side, New York made a wonderful improvement about a decade ago in creating the Commercial Division, where diligent, motivated, competent judges were designated to handle complex commercial pieces of litigation.

Van Itallie: The lack of resources in many state courts is of great concern. If the handling of documents in a state court system is not digitized or the judges lack clerks, an immense burden is placed on the judges. They are forced to work with difficult-to-manage paper files, rather than electronic files, and are often without administrative support in processing cases and researching opinions - this is a challenge!

Editor: Let's discuss some important areas where state courts have by reason of clogged dockets not played their gatekeeper role? How has this affected the treatment of motions for summary judgment?

Leader : It is hard to make generalizations. While we as outside lawyers may have a small docket of active cases and devote ourselves to months of preparing a summary judgment motion which may represent a foot high stack of papers, we must be mindful that the court has a large case docket and a limited amount of time to review the motion searching for issues of material fact. It is only natural for an overworked judge to turn all those issues over to a jury for trial, then correct the mistakes after the jury does its work. The cost, risk, uncertainty and time are all magnified significantly if the court cannot effectively limit issues or respond to summary judgment motions.

Van Itallie : The summary judgment process is one which should allow courts to make pronouncements about the applicable law in such a way that genuine guidance can be provided on a host of important subjects. When these issues are not clarified by judges through summary judgment, but rather are delegated to juries to decide, there is an enormous cost to the system by perpetuating uncertainty. Judges who fail to use the summary judgment vehicle due to overwork or overburdened dockets, allow theories of liability to remain defuse and undefined, which in turn causes people to react in their personal lives and their businesses in ways that are extremely inefficient.

Editor: How have crowded dockets affected the application of rules like Daubert designed to exclude the testimony of unqualified expert witnesses?

Van Itallie: We think the gatekeeper role is a vital issue not only in the case of medical products companies, but in general, in terms of providing for a system that gives both the participants and observers confidence that the results are appropriate and equitable. You really need a methodology that allows for an appropriate assessment of the scientific proof that is going to be relied upon. I agree there is a tendency on the part of overworked judges to delegate expert matters to the jury. We are committed to improving scientific evidence standards in the state courts. It is critical that the rules mandate a hearing in advance of the trial that allows for a preliminary exploration of the bonafides of the scientific proof to be admitted. The states that have adopted the most effective scientific evidence rules have incorporated that procedural requirement. I think you are right that the pressures on the courts combined with their entitlement to delegate an issue to the jury leads to outcomes that are sub-optimal. We think it is critical that expert evidence rules mandate hearings in advance of trials so that the quality of the proof that is going to be submitted is examined as a matter of law.

Editor: What effect do clogged dockets have on e-discovery?

Leader : E-discovery is more complicated than regular discovery. We find in litigation very often that the litigants are more interested in looking for failures in e-discovery production rather than the production of documents themselves. The advantage that the federal courts have is that they have a fantastic magistrate system - judges and magistrate judges who can back each other up and specialize in this area. State court judges don't have that luxury, and so I think the state courts are behind in dealing with e-discovery. Van Itallie : E-discovery is a very demanding issue for corporations that are major data producers, requiring sophisticated analysis by judges and decision makers. The presumption from the paper world of document production that if you didn't produce the document, you probably did so deliberately just does not translate to the e-discovery world. Securing and producing all the various electronic documents that exist out there is a complex task that puts enormous additional demands and expense on corporate defendants.Furthermore, it has created a whole new set of demands on judges to understand the technology - to understand the positions that are being articulated about that technology, which often requires the testimony or affidavits of experts.

Editor: Do you think the addition of more judges would permit judges to be more effective in their gatekeeper roles?

Van Itallie: This has been a significant issue in certain federal districts as well as in various state court systems. Yes, not having enough judges and not equipping them with resources to expeditiously manage their caseloads puts judges in a position where they cannot act as effective gatekeepers.

Editor: Do you feel the DRI effort is worthwhile?

Leader : Yes, it is very important to encourage both outside lawyers and inside lawyers to work together for these kinds of reforms. We are at a stage where we need to raise people's consciousnesses about these issues in our courts. It's a sad state of affairs that, for example, there are two lawsuits pending in New York State brought by judges who felt compelled to commence lawsuits to obtain higher pay.

Van Itallie: With respect to civil justice reform issues, my company has for a number of years been very involved with the Civil Justice Reform Group, DRI, Lawyers for Civil Justice, The American Tort Reform Association and the U.S. Chamber's Institute for Legal Reform. I really do believe that it is the fundamental responsibility of corporate counsel in particular to get engaged in civil justice reform issues, which are vital to preserving and enhancing the delivery of high-quality, neutral and fair justice. And I do think that the corporate community has a particular responsibility because their clients bear the additional costs and adverse outcomes resulting from unbalanced procedural and substantive rules, clogged calendars and an underpaid and understaffed judiciary. Because we engage outside counsel, and spend the money to manage litigation across the country, we have in many respects the greatest interest in preserving and enhancing the system by which justice is provided. Many in-house counsel have recognized this, have taken it to heart and are thoroughly engaged. But we are continually making efforts to broaden the number of in-house lawyers who are actively involved in this endeavor. The corporate counsel bar has a unique responsibility that is different and greater and more free of conflicts, I would argue, than other participants in the system.

Please email the interviewees at jleader@leaderberkon.com or tvanita@corus.jnj.com with questions about this interview.