The price to fight

15 April 2008

In 2004, during a speech he gave in Boston, MA, Maurice “Hank” Greenberg, the now former chairman and CEO of American International Group Inc. (AIG) was quoted as saying, “It's almost like fighting the war on terrorists. I call the plaintiff's bar terrorists.”

In this now infamous remark, Greenberg was referring to the plaintiff bar association's opposition to tort reform. In his widely criticized statement he likened the insurance industry's efforts to stop the lawsuit abuse that can be brought about by class action lawsuits to the government's war on terror. And although his statement was harsh and, undeniably, offensive to the plaintiff's bar, the point he made is one that cannot be ignored.

Frivolous lawsuits and frivolous litigation in the construction industry force insurance rates to soar higher and higher.

But what is frivolous litigation? What are these lawsuits that clog the court system for months and sometimes years?

Lawyer Daniel Evan puts it like this. “When a judge calls an argument ‘ridiculous’ or ‘frivolous,’ it is absolutely the worst thing the judge could say. It means that the person arguing the position has absolutely no idea of what he is doing, and has completely wasted everyone's time. It doesn't mean that the case wasn't well argued, or that judge simply decided for the other side, it means that there was no other side. The argument was absolutely, positively, incompetent. The judge is not telling you that you were ‘wrong.’ The judge is telling you that you are out of your mind.”

So why wouldn't a crane owner who finds himself on the business end of a frivolous lawsuit do everything he can to get himself out of it? The answer is simple: It's expensive.

The shotgun approach to litigation taken by hungry plaintiff lawyers, who see on-the-job injuries as tickets to fame and fortune, can cripple small business owners. It's a problem that forced medical malpractice insurance rates to soar, car insurance rates to fly, and liability insurance in construction to hover a few layers above reasonable. Due to the sheer enormity of a crane, as well as the bold letters on the boom that announce to the world who owns it, companies that make picks for a living face a greater exposure to these kinds of suits. Plaintiff lawyers sue anyone and everyone in hopes that something will stick. And sometimes, because the cost to defend a lawsuit will far outweigh the cost of paying to get out of it, business owners make the decision to pay and walk. And it's far from fair.

Over the years, though, the courts have looked at frivolous lawsuits and made some moves to make them less appealing to money hungry attorneys. An example of a court's treatment of frivolous arguments is found in the case of Crain v. Commissioner, from the United States Court of Appeals for the Fifth Circuit:

Glenn Crain appeals from the dismissal of his Tax Court petition challenging the constitutional authority of that body and defying the jurisdiction of the Internal Revenue Service to levy taxes on his income. Crain asserts that he “is not subject to the jurisdiction, taxation, nor regulation of the state,” that the “Internal Revenue Service, Incorporated” lacks authority to exercise the judicial power of the United States, that the Tax Court is unconstitutionally attempting to exercise Article III powers, and that jurisdiction over his person has never been affirmatively proven.

We perceive no need to refute these arguments with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit. The constitutionality of our income tax system - including the role played within that system by the Internal Revenue Service and the Tax Court - has long been established. We affirm the dismissal of Crain's spurious “petition” and the assessment of a penalty imposed by the Tax Court for instituting a frivolous proceeding. 26 U. S. C. §6673.

The government asks us to assess penalties against Crain for bringing this frivolous appeal, as is authorized by Fed. R. App. P. 38. In Parker v. C. I. R., 724 F. 2d 469, 472 (5th Cir. 1984), we sounded “a cautionary note to those who would persistently raise arguments against the income tax which have been put to rest for years. The full range of sanctions in Rule 38 hereafter shall be summoned in response to a totally frivolous appeal.”

We are sensitive to the need for the courts to remain open to all who seek in good faith to invoke the protection of law. An appeal that lacks merit is not always - or often - frivolous. However, we are not obliged to suffer in silence the filing of baseless, insupportable appeals presenting no colorable claims of error and designed only to delay, obstruct, or incapacitate the operations of the courts or any other governmental authority. Crain's present appeal is of this sort. It is a hodgepodge of unsupported assertions, irrelevant platitudes, and legalistic gibberish. The government should not have been put to the trouble of responding to such spurious arguments, nor this court to the trouble of “adjudicating” this meritless appeal.

Accordingly, we grant the government's request. The United States shall recover from appellant Crain twice its cost of this appeal. Additionally, we assess against Crain a damage award of $2,000 in favor of the appellee United States. [1]

This is what we face as an industry: people who are willing to bring unsupported claims of wrongdoing to a group that isn't always in a financial position to put up its dukes and fight. But we try and will continue to try - on both sides of the underwriting desk.

Hank Greenberg was controversial in a lot of ways but he called it like he saw it. The ongoing battle of industry versus lawyer rages on but as companies grow wiser with age, they begin to bolster their defenses with weapons like additional insured endorsements and enforceable contracts. In a way, it's David and Goliath all over again. But although the plaintiffs bar might be bigger, we've got more to lose.

So, fight we will.


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