As my two-week guest blogging stint is now over, I want to thank Gordon for inviting me and hope that readers found some of this stuff interesting. If you did, I invite you to continue reading over at my regular blog, the Chinese Law Prof Blog. My final post here will be on an interesting aspect of Chinese tort law: the absence of a direct tie between lost income and tort damages for wrongful death.

If you tortiously injure someone in China, the damages are as you might expect: medical expenses, lost income due to missed working time, and maybe even something for emotional distress. (Article 119, General Principles of Civil Law.) Thus, given identical injuries and identical fault, you pay more for punching a doctor than for punching a taxi driver. (I mention these only as examples of high-income and low-income professions, and mean no disrespect to taxi drivers.)

If you go a bit further and end up killing the person, however, in which case they will (if young) have a lot of missed working time, the calculation of damages changes completely. Lost income drops entirely out of the picture, and there is no attempt even to estimate it. Instead, the law switches to an attempt at a need-based standard. The tortfeasor is to pay medical expenses, funeral expenses, "necessary living expenses of the deceased dependents," and "compensation for the victim's death."

These last two terms were specifically defined in an interpretation issued in 2003 by the Supreme People's Court (which has the power to interpret and clarify laws by general rulemaking). "Necessary living expenses" are "calculated on the basis of the average consumption expenditure of those living in the city where the court is located, or the average cost of living for rural residents where the court is located, as the case may be." Clearly, this calculation takes no account of the actual lost income of the decedent; instead, it tries to estimate what the dependents will need to survive at a relatively decent standard of living until they can fend for themselves. Thus, compensation is not apparently paid to adults who have the capacity to work; it is paid only to minors on the basis of the number of years until the minor turns 18, and to other adults unable to work and with no other source of income on the basis of 20 years.

"Compensation for the victim’s death" is, according to the interpretation, "calculated on the basis of 20 times the previous year's average net income of urban residents in the city where the court is located, or the average net income of rural residents where the court is located." As with "necessary living expenses," the actual lost income of the decedent has nothing to do with the amount awarded under the Interpretation.

This system has been criticized in China on the grounds that it discriminates against rural residents by valuing their lives more cheaply than that of urbanites; all lives, say the critics, should be valued equally. To be sure, China does indeed have official discrimination against rural residents; they are explicitly intended to be underrepresented in the National People's Congress, for example. But the problem with this rule is not that it values lives unequally; it is that it values lost income equally: at zero for everyone. Thus, the compensation for lost income is the same (nothing) for wrongful death where the victim is a doctor and where the victim is a taxi driver.

I have heard it argued that this is due to cultural differences: that Chinese (and some civil law jurisdictions) simply view it as wrong to give different amounts of compensation for death. But this misses the point: giving equal compensation for the death itself - in which case there is an argument for treating all lives equally - does not preclude also giving compensation for lost income. And civilian lawyers I have questioned assure me that killing a doctor in their countries does cost more than killing a taxi driver.

Thus, far from being too inegalitarian, the rule in China can be seen as too egalitarian: the dependents of the deceased Shanghai doctor get exactly what the dependents of the deceased Shanghai taxi driver get, even though they have been deprived of much more money. And of course, you get equally inappropriate results when the dependents of urbanites with small earning capacity get more than the dependents of wealthy rural entrepreneurs, for example.

A recent case brought out the importance of location, as well as some of the ambiguities associated with it. A migrant worker living in Beijing was killed in a traffic accident, and because of his rural domicile registration (something that's not easy to change, even though geographical mobility itself has increased greatly in the last several years), the award to his family included only 70,000 yuan (about $9,764) as compensation for death. They appealed, asserting that he should be treated as an urbanite because he was actually living and working in Beijing. The higher court agreed, awarding 170,000 yuan ($23,713), in addition to enhanced amounts under other heads. The case was welcomed by many as an example of "same life, same price," but of course it was just an application of the existing rule, not a negation of it. It showed a willingness to be flexible about which standard to use, but it didn't suggest that the rural-urban distinction was in any way illegitimate.

Although it's not my place to give advice to China's legislators, it seems to me that this problem could be solved relatively easily by allowing courts to include an estimate of lost income in damages for wrongful death - just as they now do in damages for injuries short of death - while separately stipulating another amount to be paid as compensation for the loss of life per se, just to make it clear that the former amount is not compensating for the lost life, and thus carries no offensive implications in being different for different people.

For the time being, though, the moral of this story is: don't pull your punches.

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Lawyers are often accused of botching the science, but if anything, it looks to me like the lawyers for Merck litigated their way around the science in Vioxx, the heart drug prescribed to 20 million Americans, and subsequently pulled from the market after further studies concluded that it increased the risk of heart attacks and strokes.  That led to 45,000 lawsuits.  But Merck just settled them all for the cheap price of $4.58 billion.  Merck appealed every case it lost.  It pushed the patient lawyers hard and made them look sleazy, identifying some plaintiffs who hadn't taken the drug when they got sick, had plenty of other health problems, and so on.  It won most of its trials, and sold the juries on the quality of the warnings that accompanied the drugs.  God knows how much it cost, but would you have bought Merck stock when the clinical study was released?  You should have.

EPA, on the other hand, wasn't going to let the science get in the way of its efforts to extend zero tolerance to Cryptosordium in drinking waters.  Perhaps mindful of the beating the agency took when it permitted minimal levels of arsenic to stay in reservoirs, in its latest national rule on water quality, EPA totally banned this other, little known toxin.  Some city water suppliers screamed that the rule wasn't based on the "best available science," as required by the statute.  But how is an appellate court supposed to figure that out?  The D C Circuit just assured itself that the agency had explained why it relied on the science it did use in developing the ban.

I don't claim to know the science any better than the lawyers involved with either dispute (indeed, I assure you that I know it worse).  But I think that perhaps the difficulties of these sorts of scientific inquiries don't undo the value of more traditional sorts of lawyering - like hard litigation or fully reasoned rulemaking.

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Yesterday, I blogged about the Overstock.com suit that has had some success in California state court.  This suit alleges that a short-seller and an "analytical reporting service" conspired to issue false reports to drive down the share price of Overstock.com and profit from the difference.  Gradient, the reporting service, kept a list of companies that suffered a 20% or more price decline after the issuance of its negative reports and used this list to recruit other customers who could request such reports.  The complaint alleges, among other things, libel.  As you may expect, the financial reporting on this case has centered around the free speech element.  If this case results in a judgment against the defendants, then how will bona fide stock analysts and financial reporters know where to draw the line between pointing out negative flags at publicly-held companies and libel?  (Mike McKee has two articles in The Recorder here and here.)

Bethany McLean, for example, dismissed the Overstock.com suit as "paranoid fantasy" in a November 2005 Fortune article.  Of course, McLean may be predisposed against lawsuits that name analysts and journalists who speak negatively about public companies.  Remember that McLean wrote a seminal article in Fortune (Is Enron Overpriced?) in March 2001 that is often cited as the article that began to unravel the Emperor's New Clothes (or New Financial Statements).  However, two things probably distinguish McLean's type of financial reporting from Gradient's.  The first, and most obvious, is that McLean had no direct interest in Enron's stock going down.  We know of no economic interest she held by way of owning or shorting Enron stock.  Therefore, it would be hard to show malice on the part of McLean for anything she said about Enron.  Furthermore, I would assume that McLean could back up her financial analysis.  In the Overstock.com case, the court went over many statements in the Gradient report that were simply false:  False facts about Overstock's business model and false conclusions that certain practices were not in accordance with GAAP.  Gradient's defense is that these were opinions.  However, the court made clear that merely saying "I am of the opinion that" before stating a verifiable fact or a verifiable conclusion is not an opinion.  If an analyst says that a business practice does not conform to GAAP, but that practice obviously does and is backed up by opinions from accountants and outside attorneys (no hoots here), then that is not merely an opinion.

Instead of rallying around the flag of free speech, I would think that reputable analysts and reporters would condemn this type of scheme.  (By the way, Gradient's reports were prepared by college graduates with no additional schooling or licensures; they were not CPAs or other licensed financial professionals.)  Gradient's reports make all analyst reports look suspect and biased.  In this age of "no analyst conflicts," there should be more policing of one's own.  (Again, legal documents in this case are collected here.)

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Over at TortsProfBlog, professors, students, and practitioners are opining on what should be taught in Torts -- interesting reading!  Start here.

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If only we could sue politicians this easily.  As Ted Frank at Overlawyered predicted, a class-action lawsuit has now been filed against the author and publisher of A Million Little Pieces under a consumer fraud cause of action.  Tip:  WSJ Blog.  As a buyer of the book, I guess I can wait for the notice so I can opt in or out for my $6 coupon for a new Random House book.  (That's my prediction, anyway.)

Having read the book with the benefit of hindsight, I'm kind of surprised that the book was that inspiring to anyone, including Oprah.  I can't imagine a true story in which a 23-year-old crack addict comes off looking so well.  From the moment James arrives at rehab, he always says the right thing, he's always right about everyone's character, he is caring to the most unsavory individuals at rehab, and he takes full responsibility for his actions.  He runs away from rehab to rescue his girlfriend, who has been kicked out four hours earlier, finds her at a crack house in about 10 minutes with his remarkable street savvy, and snatches her from the literal clutches of prostitution.  He brings her back to the rehab to the now-familiar strains of the rehab counselors:  You were right, James.  We were wrong.  Most importantly, he convinces the veteran counselors at the country's most successful rehab center that AA is junk and that he will conquer his ten year addiction through self-control and a pocket guide to Taoism.  The real plaintiff here should be Alcoholics Anonymous, for defamation.

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Being from Texas and having driven  around Texas last week, I am slightly more interested in the Texas (and Oklahoma and now New Mexico) fires than some people.  The loss is enormous:  hundreds of thousands of acres of land, over 250 homes burned, and four deaths.  Because I have been reading various accounts of these fires, I have been struck with the almost universal silence on the "human error" element of this story.  Fires are generally not confined to "acts of God" in the sense that they only strike out of the blue, like a hurricane or a tsunami.  Some fires may be caused by a chance event, such as a power line spark, but these fires that are happening were for the most part the result of some original act by a human.  Texas State Fire Marshal Paul Maldonado has said that he "believes most of these fires were the result of some human action."  However, in the news accounts, you have to dig fairly deep before any reporter is asking about or reporting information about human error.

For example, here are the NYT, Houston Chronicle, CNN, and ABC News accounts, none of which mention human error (as they did not yesterday).  The only references I could find to the human error in print were from the Guardian and the Austin-American Statesman.  I did hear on a local radio news program in Texas on December 27th that a fire that was being discussed was started by a child setting off a firecracker (the speaker was Traci Weaver of the Texas Forest Service) and I heard on NPR yesterday a local mayor (and volunteer firefighter) in Eastland County being pressed into saying that it looked like from the start point of the fire there that it was caused by someone throwing a cigarette out of a car along the highway.

I find it interesting that the media seems so uninterested in the cause of the fires.  The media focuses on the high winds, low humidity, drought conditions, and high temperatures, but these are factors that lead to the rapid spread of the fire and the difficulty of containing the fire, not the factors that caused these fires.  During Hurricane Katrina, questions were swirling in the media -- Why didn't people evacuate?  Why weren't they forced to evacuate?  Who decided to have inferior levees?  Who could have prevented this?  Why isn't anyone asking these questions about the Texas fires?

I heard Forestry spokesperson Weaver say (on Dec. 27th) that only half of the counties in Texas had imposed burn bans at that time.  Why isn't anyone asking whether these counties affected were under a burn ban?  And, if so, then who violated the burn ban?  What is the penalty for violating the burn ban?  Can one child (or the child's parents) be liable for 120 houses for setting off a firecracker during a burn ban?  If the affected counties weren't under a burn an, then why not?  Why isn't anyone asking these questions?

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At Prawfs, Ekow Yankow breaks in to ponder whether teaching Torts has made him overly sensitive to media that may encourage tort-like behavior (i.e., a squelched Gap ad).  Ekow's post reminded me of an extremely dangerous video game that could destroy my homelife, but also the various large objects that surround my home:  Katamari!

For those of you who have never played Katamari, I would encourage you not to do so.  However, if you must, be aware that this video game is extremely addictive.  The premise is so silly it's almost stupid, and you can imagine a group of young people in a room saying things like, "Hey, let's make up a game where you're just a giant ball of tape, rolling stuff up!"  "Yeah, and when your ball is big enough, it becomes a star!"  "And as the game progresses, your ball rolls up people!"  "And animals!"  "And cars!"  "And skyscrapers!"  Yeah.  That's the game.  You roll this ball around, picking up various objects until you achieve a certain sized ball.  Sounds stupid and boring, but it's actually really fun and really addictive.

And dangerous and tort-inducing!  Apparently one woman fell into a Katamari-state in her (real) car and tried to roll up a (real) mailbox.  My brother-in-law introduced us the game with this explanation:  "I bought this game after reading an article that said it was so addictive that a woman almost wrecked her car trying to roll up a mailbox."  I'm glad he didn't read an article on heroin.

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Everything is bigger in Texas, including the punitive damage awards. Even though the jury's $229 million award will undoubtedly be reduced, the result is a shot accross the bow of big pharma. The immediate result will be a Merck gold rush, but what are the long-term consequences for the pharmaceutical industry? The plaintiff says it's all about "sending a message," but Merck will need to see many more results before any message becomes clear. And if the message is the one the plaintiff wants to send, Merck will be out of business.

Steve Bainbridge expresses a sentiment that I have often shared, "There has to be a better way of running the tort railroad than this." The problem, of course, is in constructing that railroad. It all begins with a fundamental market failure (produced, at least in part, by the legal rules that structure this market). Consider Rebecca Eisenberg's article, The Problem of New Uses, 5 Yale J. Health Pol'y L. & Ethics 717 (2005):

Information about the effects of drugs has considerable social value as a resource for guiding doctors, patients, and insurers to make sound choices about which therapeutic products to use. But drug-developing firms capture only a fraction of this value. Drug companies make money by selling drugs, not by selling information about the effects of drugs. Information from clinical trials may enhance sales of drugs if it indicates that they are safe and effective, but it may also cause sales to plummet if it indicates that they are unsafe or ineffective. The social value of negative information about drugs is captured by consumers, payors, and sellers of substitute products rather than by the seller of the drug under study.

Thus, we have situations like Merck's problem with Vioxx. Big pharma essentially makes this calculation: we will sell drugs in the face of incomplete or negative information about their effects and fight to limit the consequences of any damage we cause on the back end. Yesterday, a Texas jury took matters into their own hands and decided to adjust the incentives. The problem here is not that Merck is being held accountable, but that it is being held accountable in such an ad hoc way. This was an attempt at a global solution in an isolated case. Unfortunately, I do not have a make-it-right proposal, but the shortcomings of the current system are pretty clear.

By the way, if you would like to see one reason why the plaintiff won and Merck lost, take a look at the video of the plaintiff's lawyer v. the video of Merck's lawyer. (Both on the W$J site.) If you were a juror, who looks like he is on the side of truth and justice?

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The NY Law Journal reports that a jury awarded a former investment banker at Dresdner Kleinwort Wasserstein $4.5 million over a bad LASIK surgery.  The plaintiff claimed that the super-busy LASIK surgeon, who performed ten other surgeries that day, failed to notice that he had an eye condition that made LASIK dangerous for him.  He now has blurred vision in his left eye and cannot continue his job as an i-banker (incredulity added by blogger).

Irony #1:  I wonder if this i-banker would recommend tightening up suitability rules for brokers now.

Irony #2:  A few weeks ago, readers were up in arms because the Wisconsin Supreme Court uncapped a $750k noneconomic damages award for a boy who will live life without the use of his arm.  (Economic damages were $403k).  One of the reasons why jurors grant noneconomic damages is to remedy shortcomings in how economic damages are calculated.  In determining economic damages, jurors have to decide how much is necessary for future medical expenses and how much income will be foregone by the injury.  For an i-banker with blurry vision who makes seven figures and says that he will have to give up his job (and go work for his dad's financial services firm), this number can be quite large.  For a newborn with no income, this number is, well, zero.

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Milwaukee, like the rest of the country, is having a heat wave.  This time last year, we had sweatshirts on to watch the Whitefish Bay Classic bike race, but today it was in the 90s.  Good time to go see a movie.  (However, in the middle of the movie, the electricity went out.  Too many window units running, I guess.)

I thought that I had closed the deal on going to see March of the Penguins, but my kids convinced me in the ticket line to see Charlie.  Although the movie is set in modern times, many parts of the movie are stubbornly anachronistic, and I'm sure that each updating or nonupdating was a conscious choice.  Factories seem pre-industrial; Veruca Salt's dad has a factory full of women who shell peanuts, for instance.  The chocolate factory has no health codes or safety standards.  Most interestingly, the movie seems to take place in a world without a Torts system, which fascinated me. 

In The Incredibles, the writers embraced the question of whether in out current Torts regime a superhero could go around saving people's lives and injuring them in the process.  In this movie, a gazillionaire invites five children into his factory, watches as they each contemplate a dangerous activity, gives them half-hearted warnings, and then stands idly by, giggling, as the children face painful and not quite reversible consequences.  I found it a little hard to believe that none of the parents didn't turn around to Mr. Wonka and threaten to sue him.  Hmmm.  Maybe I have a new exam question.

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