On March 5, 2009 the Natchez Democrat reported that Natchez Regional Medical Center will file suit against its former management company, Quorum Health Resources. The story is here.

The suit will allege that Quorum mismanaged NRMC. Quorum managed NRMC from 1992-2008 under a contract that was to run through 2009. According to the article, Quorum is suing NRMC for $260,000 in management fees in a separate action. I was unable to locate Quorum’s suit on pacer. According to Quorum’s website, the company manages six hospitals in Mississippi, including Hancock Medical Center in Bay St. Louis.

In its March 7, 2009 print edition, the Clarion-Ledger editorializes about the 60% decline in premium costs for medical malpractice insurance for physicians since the passage of tort reform legislation. I was not able to find the editorial on-line in order to link it.

The Ledger points out that the plaintiff’s bar wrongly predicted that malpractice premiums would not decline following tort reform. While this is a true statement, the Ledger is wrong to give all the credit to legislative tort reform. I believe that there were at least two other factors that had a significant impact on malpractice premiums.

First, a court-imposed change in multi-plaintiff joinder laws. In the late 1990’s and early 2000’s, physicians were being named as defendants in pharmaceutical and other mass tort cases filed in Mississippi. In many instances, the physicians were not really target defendants and were sued in an effort to prevent out of state corporations from removing the cases from state court to federal court. But the physicians’ insurance carriers had to hire lawyers to defend the cases. And since the nature of multi-party mass tort cases makes them more expensive to defend, medical insurers had to spend a ton of money on defense costs in cases that the doctors should not have even been in.

At some point–and I do not remember the exact year–joinder laws were changed so that each plaintiff had to file and litigate his case individually. Once that happened, out-of-state mass tort lawyers largely left the state and the number of filed cases in which doctors were “venue” defendants decreased significantly.

The second factor not identified by the Ledger was the perception by some in the plaintiff’s bar that the Mississippi Supreme Court would not affirm a plaintiff’s verdict in a medical malpractice case. This had a chilling affect on the number of malpractice cases filed. It should be noted that in recent months the Supreme Court has affirmed at least two medical malpractice verdicts.

If the Ledger was correct that tort reform was the sole reason that doctors’ insurance premiums declined, then wouldn’t all liability premiums be lower? My personal experience with insurance premiums is that my malpractice premiums have gone up and my personal general liability coverage has not decreased.

Hopefully, the sea-change in the litigation climate will settle down physicians and decrease the open hostility by some doctors towards the plaintiff’s bar.

On Friday the Clarion-Ledger reported that Hinds County Circuit Court Judge Swan Yerger stayed Eaton Corp. v. Frisby Aerospace pending a determination of whether former Eaton lawyer Ed Peters improperly influenced Judge DeLaughter when he had the case. Eaton is the plaintiff and alleges that former Eaton employees stole $1 billion in trade secrets and gave them to Frisby. If there is a bigger case pending in Hinds County I do not know what it is.

Frisby is represented by Jackson attorney Allen Perry. According to the Ledger:

Perry argued Wednesday that Frisby has been put through “a lot of stuff because of what Peters and DeLaughter did to us.”

“We know there was improper communications and he has admitted that fact,” Perry said in court. “We have been done wrong and we are asking for justice.”

Eaton attorney Reuben Anderson countered that Eaton is the real victim as the victim of the trade secrets theft.

My initial reaction upon reading the article and Perry’s quotes was that Frisby is full of it and the case should not be stayed. Upon further analysis, I changed my mind and agree with Judge Yerger’s decision. It is prudent for Judge Yerger to stay the case until more of the Peters-DeLaughter facts are known. But unless more allegations surface that are directly related to this case, Frisby is probably going to have to defend the case on the merits. Otherwise, Judge Yerger probably would have already dismissed the case.

There is more litigation involving Coast lawyer and businessman Stephen Colson. I previously wrote about the financial scandal involving Colson. On Friday there was a federal court removal of an interpleader action involving Colson that was originally filed in Harrison County Circuit Court. The interpleader Complaint alleges that in February, Wachovia Bank froze over fifty bank accounts belonging to Colson or related entities and deposited the funds–over $1.5 million–into the Court.

The Defendants in the case include Colson, Colson’s businesses, Fidelity National Financial, Fidelity National Title Group, Lawyers Title Insurance Corporation and John Does 1-50. The Doe Defendants will allow Wachovia to add other parties who claim an interest in the funds. It would not be surprising to see parties with claims against Colson or his businesses intervene into the lawsuit.

The interpleader Complaint identifies all the bank accounts and their balances. The action states that in late 2008, many of the accounts were suffering overdrafts that Colson promised to rectify, but didn’t. The Complaint states that Wachovia investigated and discovered “unusual” transfers between the accounts in order to cover overdrafts. An interpleader action requires Colson and others with a claim to the funds to fight over the money in Court. The case has been assigned to federal district court judge Sul Ozerden.

The interpleader action is an ominous development for Colson. First, his companies’ bank accounts were emptied and frozen, presumably shutting down operations. Second, Wachovia is required by law to report certain suspicious activities to the government. There is background information on suspicious activity reports (SAR) here, here, and here. Banks get in big trouble for not reporting suspicious activities. There is little doubt that Wachovia alerted the government about this unusual activity and that an investigation is underway. The investigation could lead to criminal charges against Colson. Finally, getting out of line with a client’s money is a cardinal sin for lawyers. If Colson was improperly moving client funds from trust accounts to personal or business accounts, then the Mississippi Bar will impose severe penalties even if Colson escapes criminal prosecution.

The Sun-Herald is reporting a financial scandal and lawsuit involving prominent Biloxi attorney Stephen Colson. Basically, there is a whole lot of money missing and the allegations are that Colson and his title company stole it. The Sun-Herald story focuses on a couple whose check from Colson’s title company to pay off their house bounced. According to their attorney Andy Alfonso of Ocean Springs:

This is going to rock the Coast, as far as being a huge public catastrophe.”

The only lawsuit on file is not on behalf of the couple that is the subject of the newspaper article. If you want to read the Complaint of the only lawsuit on file so far, here is the PDF. Gulfport attorney Joe Sam Owen is defending Colson. Sheryl Bey with Baker Donelson in Jackson filed the lawsuit.

Colson is a Gulfport native who attended high school at St. Stanislaus in By St. Louis and college and law school at LSU. He has been active in the LSU alumni association and is well known on the Coast. For Colson’s sake, I hope that the allegations are not true. A lawyer stealing client funds usually means automatic disbarment. It would aslo be another black eye for the legal profession in Mississippi.

United States Magistrate Judge John Roper entered an Order yesterday allowing Adams Homes to intervene into the Stephen Colson / Wachovia Bank interpleader action. The motion was unopposed and the order was a standard order prepared by Adams’ counsel. Adams will now be able to make its claim for over $600,000 of the $1.5 million deposited into the Court by Wachovia.

On Monday Adams Homes filed a motion to intervene into the Wachovia v. Colson interpleader action. Here is Adams’ proposed answer and counterclaim that it will file if the court grants the motion to intervene. Adams claims Colson’s companies owe Adams $623,898.21 in unpaid proceeds, earnest money deposits, withheld closing items, and unpaid interest. Adams is represented by Les Smith of Page, Mannino in Biloxi. Smith is a product of the famed University of Mississippi School of Law class of 1993, which included standouts such as former MSU safety Bo ‘Recap’ Russell, and Michael Morton.

Lawyers Title Insurance Corp. previously sued Colson and his companies for $10 million. The Adams claim brings the total known filed claims against Colson to $10.6 million, with Wachovia putting up only $1.5 million to satisfy those claims. It sure sounds like there is some money that is missing.

On Tuesday the Mississippi Court of Appeals affirmed a $350,000 jury verdict in APAC v. Johnson. The verdict was from the Circuit Court of Washington County. The facts were that an APAC truck hit a power line, causing a pole to fall on plaintiff’s vehicle. The plaintiff had to be removed from the vehicle with the jaws of life and suffered C6 and C7 fractures. The plaintiff’s medicals were $12,621.34. APAC admitted liability.

APAC’s numerous appellate issues included whether the trial court should have allowed treating physicians to testify as fact witnesses and whether the verdict was excessive. A unanimous court of appeals affirmed the verdict.

Regarding the amount of the verdict, the Court stated that the jury has “broad leeway” when it comes to a damages award. The Court did not find bias, passion or prejudice due to the evidence that the plaintiff had a fractured vertebrae, ongoing pain and limitation of her former activities.

Over at Law.com there is a story about the 5th Circuit’s opinion in Citigroup v. Bacon that rules that manifest disregard of the law by arbitrators is not a grounds for vacating an arbitrator’s award. Or as they put it:

Abandon all hope, ye who seek to overturn an arbitration award, because the 5th U.S. Circuit Court of Appeals has ruled that manifest disregard of the law by arbitrators is no longer a ground for vacatur under the Federal Arbitration Act.

This is an issue where there is a split among the circuits and we need an opinion from the Supreme Court. I disagree with the following quote near the end of the article:

“I think at some point parties aren’t going to enter into a process if there is really no reasonable basis for ensuring that the case is going to be based upon the law,” Wade says. “There are broad policy reasons for favoring arbitration….

The person who issued this quote is a former Texas state judge who is now in private practice and plans to obtain work as an arbitrator. Arbitration is good for his business so he’s a big fan of it.

My big problem with arbitration is not that the arbitrators are unfair. The biggest problem is that the case must be big enough to justify the tremendous expense burden that arbitration imposes on the parties. This makes the so called policy reasons favoring arbitration a disingenuous farce. Arbitration is significantly more expensive than a court case because the parties have to pay the arbitrators and the arbitration forum for “administrating” the case. These are huge expenses. In addition, arbitration proceedings are not any more efficient or faster to resolve than a court case. In particular, federal court, with its mandatory scheduling orders, is usually faster and cheaper than arbitration.

Because of the high arbitration fees and expenses, genuine disputes that involve a small dollar claim cannot be effectively resolved in arbitration. It’s about impossible for a lawyer to take a case on a contingency where the amount of the dispute is less than $50,000 and there is a binding arbitration provision. Disputes like these are effectively resolved on a daily basis in Mississippi state courts because it costs around a hundred bucks to file a lawsuit and the parties do not pay the court to rule on the case.

But these are not the only problems with arbitration. Arbitration forums such as the American Arbitration Association (AAA) and National Arbitration Forum (NAF) are bad at administrating cases. It is not unusual for the parties’ attorneys to cut the forums out and administrate the cases themselves to save the headache of dealing with an incompetent forum. The NAF once told me that they were closing for the Summer. It ignored repeated requests from me for details on their Summer break.

My understanding of arbitration is that its origins are from construction litigation and other areas where technical expertise by the decision maker is arguably helpful in resolving cases. I can see that logic. But the practice of jamming arbitration agreements into all sorts of consumer agreements should be banned by Congress. Arbitration agreements in everything from nursing home admission agreements to loan contracts exist for one reason: to discourage lawsuits against against business interests and protect them from the jury system.

I believe that we are in the heyday of arbitration and do not believe that society will tolerate mandatory arbitration in consumer agreements for much longer. More decisions like Citgroup v. Bacon that leave the party that required arbitration complaining about its unfairness can only speed the elimination of mandatory arbitration. Ironically, a decision that supports arbitration could hasten its legislative elimination.

In its February 23, 2009 opinion section the Clarion-Ledger refers to a pending U.S. Supreme Court case out of West Virginia that involves whether an elected judge must recuse himself/ herself from cases involving one of the judge’s political contributors. Here is the editorial.

The case is straight out of John Grisham’s The Appeal. A defendant lost a $50 million verdict, appealed and contributed $3 million to a supreme court candidate while the appeal was pending. The candidate won, refused to recuse himself from the contributor’s case and voted to overturn the verdict. The Ledger states:

Mississippi’s current quagmire of judicial corruption cases – interposed against a decade of tort reform battles that have pitted big spending trial lawyers against bigger spending business and medical interests in judicial elections – will focus much attention on the high court decision in the West Virginia case.

Regardless if the contributions come from attorneys arguing cases before the judge or from business/medical interests whose assets are at risk in cases, concerns about impartial judges are real.

The Ledger lays all this out and then does not take a position on what should be done.

It will be a crying shame if the Supreme Court does not find a constitutional violation when judges decide cases involving large campaign contributors. In federal court non-elected judges recuse themselves from cases involving companies whose stock the judge owns. Similar rules should apply to state court cases when there is any concern of impartiality, such as large campaign contributions.

I would like to see two things in Mississippi to return the public faith in the judiciary and legal system:

1. an appointed judiciary system; and
2. rules prohibiting the hiring or association of an attorney on a case because of a perceived personal relationship between the attorney and the judge.

The first proposal would have to involve the legislature. But the second proposal could be imposed by the Mississippi Supreme Court by adding a rule to the Mississippi Rules of Professional Conduct.