Saturday, July 02, 2005

Do You Wanna Know A Secret?

A case decided by the Maryland Court of Special Appeals on Thursday, Rite Aid Corp. v. Levy-Gray, addresses the question of whether the parties to litigation can, via the vehicle of a compromise settlement, flush a published opinion down memory hole. The Court denied the parties' request.

In the initial opinion in the case (here), the Court had addressed various questions concerning a pharmacist's liability for an alleged breach of an express warranty under Section 2-313 of the UCC. It upheld the customer's claim.

Subsequently, Rite Aid and the customer
[R]eached a conditional settlement for [the] lawsuit. The condition is that the lawsuit will be settled for a monetary payment made by Rite Aid to [the customer] if [the Court of Special Appeals] agrees to reverse its decision to report the opinion issued in [the] case.
In other words, Rite Aid would only settle if the case, precedentially speaking, became a never-was. Settlements of this sort highlight several issues.

First, they point up the asymetrical interests the parties have in product liability cases.

Rite Aid, for instance, fills numerous prescriptions every day. It thus faces potential loss many times its exposure in any particular case if an alleged error is "institutional." That is, if the alleged error results from some company-wide policy. That was the case here, since the theory of the alleged breach of warranty involved the computer printouts concerning the drug ingested by the plaintiff. Because Rite Aid provides such printouts with all prescriptions it fills, a successful prosecution of claims for defects or deficiencies in the printouts significantly raise its liability profile.

This leads companies, such as Rite Aid, to pour significant resources into the defense of litigation that challenge these institutional decisions. Of course, it can also cause companies in similar positions to invoke sort of a risk management theory to settle specific cases raising such issues for more money than their individual merits might otherwise mandate. In that way, the company avoids establishing a precedent that might apply to hundreds of thousands, if not millions, of transactions.

On the other hand, the individual plaintiff has a limited upside. After all, his or her damages are whatever they are and, generally speaking, the plaintiff's upside is not increased merely because the corporation's downside is large. Thus, there's no economic advantage to litigating a case merely to establish a broad policy principle. Of course, knowledge of the potential downside that a loss a defendant faces possibly will tend to discourage reasonable settlements based on the specific merits of a particular claim. Presumably, it also encourages cases that are marginal based on the expectation that large corporations will find it cost effective to settle even a case with limited merit rather than invite thousands of similar claims.

My personal view is that large corporations have a great advantage in dealing with the game theory issues presented in what might broadly be called "public policy cases." But that is an debate for another day. Here, I would like to focus on another question posed by the second opinion, namely what obligation do the courts have in maintaining silence about questions that would affect a large number of individuals in addition to the particular parties involved in a case.

The Court in Rite Aid refused to strike its previous opinion. In support of its decision, it quoted Polley v. Odom, 963 S.W.2d 917, 918 (Tex. App. 1998), as follows:
Because our opinion in this case addresses matters of public importance, our duty as a public tribunal constrains us to publish our decision.
The Court recognized not only the effect the asymetrical position of the parties could have on the outcome of any particular case, but it also noted how the asymetries could warp public policy. Thus, it quoted Benavides v. Jackson Nat'l Life Ins. Co., 820 F. Supp. 1284, 1289 (D. Colo. 1993), as follows:
The case law becomes what the party with the greatest resources wishes it to be. Economic prowess purchases more persuasive power than the marketplace of ideas and sound reasoning combined. Vacatur allows wealthy litigants to become, in effect, editors of their own treatises on the subjects which concern them. We have no kind words for such a practice. We can imagine few practices condoned by the judicial system that would have a less salutary effect on both the reality and the perception of its integrity.
I think that the policy underlying the Court's decision is sound. Large companies should not be allowed to bury their victims. But, of course, they do.

The growth in the number of contracts that demand that disputes be arbitrated rather than litigated effectively hides from public view alleged institutional wrongdoing. The policy of the courts, Maryland courts in particular, has been to encourage dispute resolution via arbitration. Arbitration has a lot to recommend it, namely the speed and cost effectiveness of the process. However, it also has its warts, not the least of which is that corporate defendants are at an advantage because they can direct cases to particular arbitration organizations. Thus, the arbitrators have an incentive not to rule harshly against their referral sources.

Just as importantly, an arbitrator's award, even if the finding is predicated on actions by the defendant that could affect large numbers of individuals who are in positions similar to that of the plaintiff, is not open to public view.

Finally, the opinion again raises the issue of why the Court of Special Appeals has a large class of opinions that are simply not widely available to public view via the Internet. The core policy underlying Rite Aid would seem to argue in favor of posting these opinions.

1 comment:

Anonymous said...

Some courts recently have withdrawn opinions, and many speculate that it was b/c the same result could have been reached w/o embarassing an AUSA that appears before them all the time. Anyway, makes it is business to find things like this, e.g. sealed tobacco testimony