B'KLYN JUDGE PROBED. ALLEGEDLY GAVE CAMPAIGN BUCKS TO POLS
BY NANCIE L. KATZ DAILY NEWS STAFF WRITER
Wednesday, March 22th 2006, 7:20AM
ANOTHER BROOKLYN judge may be in trouble.
Surrogate's Court Judge Frank Seddio is under investigation for allegedly violating rules barring judges from giving campaign money to political candidates or charities, the Daily News has learned.
The state's Commission on Judicial Conduct is probing allegations, first reported on The News' editorial page, that the former state assemblyman gave more than half of $55,090 in unspent campaign money to party pals and to a political club whose backing he needed to get on the bench.
He gave the rest to religious groups, a volunteer ambulance corps, a youth anti-drug group and other organizations in his home base of Canarsie.
Under the state rules, Seddio was supposed to return all funds to the donors to avoid any appearance of impropriety.
Seddio, a Democrat, made it to the bench after Brooklyn received a second Surrogate's Court judgeship as part of a deal between Gov. Pataki and the Legislature.
He joins Margarita Lopez Torres on the Surrogate's Court bench.
She succeeded Michael Feinberg, who was booted by the state's highest court after an exposé by The News revealed he routinely awarded excessive fees to a pal he appointed.
Seddio could face public censure if found guilty of the ethical infractions.
He did not return calls yesterday.
Wednesday, March 22, 2006
Wednesday, March 1, 2006
BESIDES SPIN TO THE PRESS ABOUT HOW YOUR TRYING TO CLEAN UP JUDGESHIPS IN BROOKLYN WHAT HAS THE BLUE RIBBON COMMITTEE DONE FIDLER SINCE IT WAS PUT TOGETHER 2 YEARS AGO
Blue ribbon committee on judgeship screeningsBy Thomas Tracy, Courier Life Publications, March 1, 2006
While politics may never be fully extricated from the Kings County Democratic Party? judicial candidate screening process, it can be made more independent, members of a special Blue Ribbon Panel learned Wednesday.
?s politics a natural part of the judicial selection process? Yes. Should it be? I say hell yes!?City Councilman Lew Fidler told members of a Blue Ribbon Advisory Panel given the charge of changing how judicial candidates for the Democratic party are selected for endorsement. ?e are not only selecting the people who are the most qualified for the job here. There is an ideology involvedŠan inherent philosophy that the candidates we back have to support.?
Despite his beliefs, Fidler said that the Kings County Democratic Party has ?ost credibility with the public?in light of a string of headline-grabbing reports of unethical and criminal activities conducted by party-backed judges.
?till, politics is inherent in the process,?said Fidler, recommending that politics should not have a capital P in the screening process ?the first step in a judicial candidate? run, where a panel determines if he or she is qualified to receive the party? support.
The judicial selection committee was created a few years ago after widespread rumors arose that judgeships were being bought and sold by Democratic Party heads.
Currently, Democratic District Leaders are able to choose members who will be on the judicial selection committee, which is responsible for determining if a candidate is ?egally qualified?to run.
The committee either votes to approve or reject a candidate based on the person? record, knowledge of the law and a host of other factors. The names of those approved are then given to the party to endorse.
Critics charge that the judicial selection committee is the first and only line of defense against the placement of incompetent or corrupt judges on the bench. Since the borough is overwhelmingly Democratic, the candidates endorsed by the party are usually elected.
Fidler, a Democratic District Leader for the 41st Assembly District, said that if the Blue Ribbon Panel wanted to answer the public? cry to make the selection process more open and inclusive, then the panel should ?ake a step forward?and make sure that the district leaders have ?o political input in the screening panel.?
Roughly ten speakers shared their opinions with the Blue Ribbon Advisory Panel during an open forum at St. Francis College on Remsen Street Wednesday evening. Speakers included Fidler, attorney Paul Wooten, retired judge Lorraine Miller and Joanne Simon, the female Democratic District Leader for the 52nd Assembly District in Park Slope.
The panel, co-chaired by St. Francis College President Frank Machiarolla and
Assemblyman Joe Lentol, is currently wrestling over a number of recommendations they believe will improve the party? judicial screening committee, including adding non-lawyers to the committee, term limits for those who are on the panel and the length and breadth of the appeals process, where judicial candidates determined not qualified can have their case revisited.
Attorney Martin Edelman, chair of the party? judicial screening committee since 2003, said that the committee selects candidates based on their record as well as for having an innate sense of fairness and a good demeanor when dealing with colleagues.
That being said, under his watch the committee decided to reject two sitting judges preparing their re-election campaigns, who thought that appearing before the committee was simply a formality.
That? where the appeals process became a sticky subject and politics raised its ugly head, Edelman explained.
?uddenly we?e getting all of these calls from other judges and lawyers that argued in front of these judges,?Edelman said. ?he party didn? support our findings.?Bowing to the pressure, selection committee members ?eversed their decision?upon appeal.
Edelman said that he has no problem with the Blue Ribbon Advisory Panel making recommendations to change the current committee.
?e could always do better,?Edelman said. ?The Blue Ribbon Advisory Panel] is to reform judgeships in a borough that has suffered some terrible scandals. To do it right, they have to have both commitment and integrity.?
Blue ribbon committee on judgeship screeningsBy Thomas Tracy, Courier Life Publications, March 1, 2006
While politics may never be fully extricated from the Kings County Democratic Party? judicial candidate screening process, it can be made more independent, members of a special Blue Ribbon Panel learned Wednesday.
?s politics a natural part of the judicial selection process? Yes. Should it be? I say hell yes!?City Councilman Lew Fidler told members of a Blue Ribbon Advisory Panel given the charge of changing how judicial candidates for the Democratic party are selected for endorsement. ?e are not only selecting the people who are the most qualified for the job here. There is an ideology involvedŠan inherent philosophy that the candidates we back have to support.?
Despite his beliefs, Fidler said that the Kings County Democratic Party has ?ost credibility with the public?in light of a string of headline-grabbing reports of unethical and criminal activities conducted by party-backed judges.
?till, politics is inherent in the process,?said Fidler, recommending that politics should not have a capital P in the screening process ?the first step in a judicial candidate? run, where a panel determines if he or she is qualified to receive the party? support.
The judicial selection committee was created a few years ago after widespread rumors arose that judgeships were being bought and sold by Democratic Party heads.
Currently, Democratic District Leaders are able to choose members who will be on the judicial selection committee, which is responsible for determining if a candidate is ?egally qualified?to run.
The committee either votes to approve or reject a candidate based on the person? record, knowledge of the law and a host of other factors. The names of those approved are then given to the party to endorse.
Critics charge that the judicial selection committee is the first and only line of defense against the placement of incompetent or corrupt judges on the bench. Since the borough is overwhelmingly Democratic, the candidates endorsed by the party are usually elected.
Fidler, a Democratic District Leader for the 41st Assembly District, said that if the Blue Ribbon Panel wanted to answer the public? cry to make the selection process more open and inclusive, then the panel should ?ake a step forward?and make sure that the district leaders have ?o political input in the screening panel.?
Roughly ten speakers shared their opinions with the Blue Ribbon Advisory Panel during an open forum at St. Francis College on Remsen Street Wednesday evening. Speakers included Fidler, attorney Paul Wooten, retired judge Lorraine Miller and Joanne Simon, the female Democratic District Leader for the 52nd Assembly District in Park Slope.
The panel, co-chaired by St. Francis College President Frank Machiarolla and
Assemblyman Joe Lentol, is currently wrestling over a number of recommendations they believe will improve the party? judicial screening committee, including adding non-lawyers to the committee, term limits for those who are on the panel and the length and breadth of the appeals process, where judicial candidates determined not qualified can have their case revisited.
Attorney Martin Edelman, chair of the party? judicial screening committee since 2003, said that the committee selects candidates based on their record as well as for having an innate sense of fairness and a good demeanor when dealing with colleagues.
That being said, under his watch the committee decided to reject two sitting judges preparing their re-election campaigns, who thought that appearing before the committee was simply a formality.
That? where the appeals process became a sticky subject and politics raised its ugly head, Edelman explained.
?uddenly we?e getting all of these calls from other judges and lawyers that argued in front of these judges,?Edelman said. ?he party didn? support our findings.?Bowing to the pressure, selection committee members ?eversed their decision?upon appeal.
Edelman said that he has no problem with the Blue Ribbon Advisory Panel making recommendations to change the current committee.
?e could always do better,?Edelman said. ?The Blue Ribbon Advisory Panel] is to reform judgeships in a borough that has suffered some terrible scandals. To do it right, they have to have both commitment and integrity.?
Monday, February 13, 2006
Cost of a Judgeship?
February 13th, 2006
The Daily News focuses on the dealings of Frank Seddio, a new surrogate judge thanks to Democratic Party bosses. After the state created a new Surrogate Court seat in Brooklyn, Seddio won the endorsement of Democratic Party leaders for the post. And the paper’s editorial said, it may not be due to Seddio’s legal prowess: “Campaign filings indicate he doled out far more money to the machine in his quest for elevation to the bench than previously reported.” The paper found he gave out at least $32,000, including $22,500 to the Thomas Jefferson Democratic Club, $5,000 to the judicial campaign of Larry Knipel, $2,000 to the judicial campaign of Richard Velasquez and $2,000 to Councilmember Lew Fidler, also a district leader.
Seddio did, however, join with his fellow surrogate, Margarita Lopez Torres, who won election as a reformer, to fire Louis Rosenthal, counsel to the court’s public administrator. The state Court of Appeals last June removed Surrogate Michael Feinberg from the bench for improperly awarding Rosenthal nearly millions of dollars in fees, but Rosenthal had managed to hang on to his job until earlier this month.
In case this all sounds fairly arcane, It Takes a Blogger reminds us why it matters: “The Surrogate Court is the cash cow of the local political machines. Political bosses and their cronies have amassed fortunes from the fees for court work assigned by that court.”
The Daily News focuses on the dealings of Frank Seddio, a new surrogate judge thanks to Democratic Party bosses. After the state created a new Surrogate Court seat in Brooklyn, Seddio won the endorsement of Democratic Party leaders for the post. And the paper’s editorial said, it may not be due to Seddio’s legal prowess: “Campaign filings indicate he doled out far more money to the machine in his quest for elevation to the bench than previously reported.” The paper found he gave out at least $32,000, including $22,500 to the Thomas Jefferson Democratic Club, $5,000 to the judicial campaign of Larry Knipel, $2,000 to the judicial campaign of Richard Velasquez and $2,000 to Councilmember Lew Fidler, also a district leader.
Seddio did, however, join with his fellow surrogate, Margarita Lopez Torres, who won election as a reformer, to fire Louis Rosenthal, counsel to the court’s public administrator. The state Court of Appeals last June removed Surrogate Michael Feinberg from the bench for improperly awarding Rosenthal nearly millions of dollars in fees, but Rosenthal had managed to hang on to his job until earlier this month.
In case this all sounds fairly arcane, It Takes a Blogger reminds us why it matters: “The Surrogate Court is the cash cow of the local political machines. Political bosses and their cronies have amassed fortunes from the fees for court work assigned by that court.”
Sunday, February 12, 2006
Seddio Illegally while running for Surrogate Judge Contributes $2000 to Fidler and $10,000 to the Thomas Jefferson Club
Seddio's money trail
The evidence mounts that former Assemblyman Frank Seddio committed wholesale violations of judicial ethics rules when he began throwing money around as the Brooklyn Democratic Party was deciding whether to tap him for a surrogate's judgeship.
Campaign filings indicate he doled out far more money to the machine in his quest for elevation to the bench than previously reported.
The party bosses shoehorned Seddio into a judgeship created in a back-room deal in June by the Legislature and Gov. Pataki. According to judicial ethics rules, Seddio was barred from political activity, including campaign donations, once he was a candidate for the bench. Exactly when that happened is unclear, but on Aug. 10 Crain's New York Business magazine reported "word is spreading" that Seddio "would happily become the nominee." Shortly thereafter, he was generously using his money to win the support of fellow Dems.
Records show Seddio gave $250 to Councilwoman Sara Gonzalez on Aug. 17; $250 to Councilman James Gennaro on Aug. 19; $5,000 and $7,500 to the Thomas Jefferson Democratic Club on Aug. 22 and Sept. 1; $5,000 to the judicial campaign of Larry Knipel on Sept. 1; $2,000 to the judicial campaign of Richard Velasquez on Sept. 2 and $2,000 to Councilman Lew Fidler, also a district leader, on Sept. 6.
Fidler and the other district leaders designated Seddio the party's candidate on Sept. 15. Thereafter, as disclosed here last week, Seddio gave a total of $10,000 more to the Jefferson Club, the Assembly campaign of longtime aide Alan Maisel and state Sen. Carl Kruger.
All told, from what's been discoverable, Seddio doled out $32,000 in well-placed donations, not that far off from the perhaps mythical $50,000 that judgeships are commonly believed to cost in Brooklyn. More than ever, this is a case for District Attorney Charles Hynes and the state Commission on Judicial Conduct. 2/12/06 Daily News Editorial
The evidence mounts that former Assemblyman Frank Seddio committed wholesale violations of judicial ethics rules when he began throwing money around as the Brooklyn Democratic Party was deciding whether to tap him for a surrogate's judgeship.
Campaign filings indicate he doled out far more money to the machine in his quest for elevation to the bench than previously reported.
The party bosses shoehorned Seddio into a judgeship created in a back-room deal in June by the Legislature and Gov. Pataki. According to judicial ethics rules, Seddio was barred from political activity, including campaign donations, once he was a candidate for the bench. Exactly when that happened is unclear, but on Aug. 10 Crain's New York Business magazine reported "word is spreading" that Seddio "would happily become the nominee." Shortly thereafter, he was generously using his money to win the support of fellow Dems.
Records show Seddio gave $250 to Councilwoman Sara Gonzalez on Aug. 17; $250 to Councilman James Gennaro on Aug. 19; $5,000 and $7,500 to the Thomas Jefferson Democratic Club on Aug. 22 and Sept. 1; $5,000 to the judicial campaign of Larry Knipel on Sept. 1; $2,000 to the judicial campaign of Richard Velasquez on Sept. 2 and $2,000 to Councilman Lew Fidler, also a district leader, on Sept. 6.
Fidler and the other district leaders designated Seddio the party's candidate on Sept. 15. Thereafter, as disclosed here last week, Seddio gave a total of $10,000 more to the Jefferson Club, the Assembly campaign of longtime aide Alan Maisel and state Sen. Carl Kruger.
All told, from what's been discoverable, Seddio doled out $32,000 in well-placed donations, not that far off from the perhaps mythical $50,000 that judgeships are commonly believed to cost in Brooklyn. More than ever, this is a case for District Attorney Charles Hynes and the state Commission on Judicial Conduct. 2/12/06 Daily News Editorial
Tuesday, January 31, 2006
Ratner and the Jefferson Club
Mind BenderMay. 31st, 2006, 6:30 am Tags: Real EstateBrooklynBruce BenderForest City Ratner CompaniesMike Nelson
We had been wondering why so many politicos from the deep south of Brooklyn had endorsed Forest City Ratner's Atlantic Yards project. State Senators Carl Kruger and Martin Golden and City Council Members Lew Fidler and Mike Nelson all wrote letters of support last summer to the M.T.A.
We wondered, are these guys all for it because their constituents are going to get some of the jobs targeted to "the community" that the arena complex is supposed to help? Or do they just happen to have a lot of Nets fans living there?
Then we hit upon a map for the 59th Assembly district, which is governed by the Thomas Jefferson Club, the Democratic clubhouse whence Bruce Bender sprang. Bender worked for Ed Koch, Peter Vallone and now Forest City Ratner, as the executive vice president for community and government affairs. He does all the outreach to politicos from, among other places, the deep south of Brooklyn.
The 59th A.D. includes Canarsie, Mill Basin, Bergen Beach and Flatlands--exactly the neighborhoods that Messers. Kruger, Golden, Fidler and Nelson represent. Bender is, in other words, quite the homeboy
-Matthew Schuerman
We had been wondering why so many politicos from the deep south of Brooklyn had endorsed Forest City Ratner's Atlantic Yards project. State Senators Carl Kruger and Martin Golden and City Council Members Lew Fidler and Mike Nelson all wrote letters of support last summer to the M.T.A.
We wondered, are these guys all for it because their constituents are going to get some of the jobs targeted to "the community" that the arena complex is supposed to help? Or do they just happen to have a lot of Nets fans living there?
Then we hit upon a map for the 59th Assembly district, which is governed by the Thomas Jefferson Club, the Democratic clubhouse whence Bruce Bender sprang. Bender worked for Ed Koch, Peter Vallone and now Forest City Ratner, as the executive vice president for community and government affairs. He does all the outreach to politicos from, among other places, the deep south of Brooklyn.
The 59th A.D. includes Canarsie, Mill Basin, Bergen Beach and Flatlands--exactly the neighborhoods that Messers. Kruger, Golden, Fidler and Nelson represent. Bender is, in other words, quite the homeboy
-Matthew Schuerman
Monday, April 18, 2005
Fidler's LawCash
A New York Decision That May Imperil Plaintiffs' Ability to Finance Their Lawsuits:
Why It Should Be Repudiated, Or Limited to Its Facts
By ANTHONY J. SEBOK
anthony.sebok@brooklaw.edu
----
Monday, Apr. 18, 2005
A New York state court ruling reported in the New York Law Journal on April 1 seems, at first glance, to challenge the legal status of outside litigation financing in New York. Such financing allows plaintiffs to fund their expenses - from medical care, to expert testimony, and the like - without wholly relying on their contingency lawyers' coffers to do so.
The decision, Echeverria v. Lindner, casually suggested that New York courts should view investments in lawsuits as loans, which would therefore be regulated by New York's usury statutes. (The usury statutes prohibit the charging of excessive interest.)
In this column, I will explore why Echeverria is a troubling decision. I will argue that it ought to either be repudiated by other New York judges, or be limited to its very special facts.
The Basic Facts of Echeverria, and the Issue on Which the Judge Focused
On September 1, 2000, Juan Vicente Echeverria was working as a day laborer on a construction site in Long Island when he fell off of an elevated platform . His injuries were so serious that he eventually required back surgery.
Echeverria sued under New York's Labor Law § 240. That law holds contractors and property owners strictly liable if a safety measure designed to protect a worker from an "elevation-related hazard" turns out to be inadequate, fails, and causes an injury.
On June 4, 2003, Echeverria was able to obtain a default judgment against two defendants, and on August 2, 2004 Echeverria was able to obtain default judgments against three more defendants. On October 27, 2004, just before trial, Echeverria settled with the remaining defendants.
The damages issue was left to the judge. Judge Ira B. Warshawsky decided, after some misgivings, to award Echeverria $2.1 million in damages. Echeverria had suffered considerable medical expenses, loss of earnings, and pain and suffering as a result of his fall. In addition, the judge noted, Echeverria also had had to pay a company named Lawcash $14,806.
What was this for? On November 25, 2003, Lawcash handed Echeverria a check for $25,000. In its contract with Echeverria, Lawcash described the $25,000 as an investment in Echeverria's suit.
Under the contract's terms, if Echeverria was successful in his litigation, Lawcash would get all or some of its money back (depending on how much Echeverria himself was able to obtain), as well as a significant additional payment. If Echeverria lost his suit or recovered nothing, Lawcash would receive nothing, losing its $25,000 "investment."
Judge Warshawsky noted that Lawcash received almost $39,000 in return for its "investment" of $25,000, for a "profit" of almost $14,000 in less than a year. He was clearly bothered by what he saw as a more than 50% rate of interest. And he wondered if the contract that opened up the possibility of an interest rate this high was illegal.
This was an odd issue for the judge to focus on, because Lawcash was not a party to the proceeding, and had already been paid.
Had Echeverria sued Lawcash to try to void the agreement, it would have been logical for this issue to be raised. But it was not logical in the proceeding to determine how much the defendants would pay Echeverria to compensate him for his losses.
So why did the judge raise the issue of the legality of the Lawcash contract? Maybe he was trying to send a message about the whole outside litigation financing business.
Was This Rate of Interest Illegal? Some Possible Bases for Thinking So
First, Judge Warshawsky explored the possibility that the contract between Echeverria and Lawcash was invalid because it was champertous.
I have examined the strange history of the rule against champerty in the United States in a number of earlier columns - including this one. The rule basically tries to limit the "stirring up" of litigation by officious intermeddlers (or lawyers) by prohibiting individuals from purchasing another person's lawsuit.
But it turns out that New York has a very limited rule against champerty - one that does not view an investment in a suit that has already been filed as problematic. After all, absent very unusual circumstances, an investment by a third party after a plaintiff has sued cannot be the cause of the lawsuit. Such investments might enable a suit go forward but they don't usually "stir it up"; thus, in New York's view, they aren't champertous.
What about the idea that the agreement interfered with Echeverria's ability to make independent decisions about whether and when to settle? An Ohio court had so held, with regard to all agreements regarding outside litigation financing, in 2003 in Rancman v. Interim Settlement Funding Corp. - a decision that I criticized in an earlier column.
But Judge Warshawsky did not echo the Ohio court's reasoning. Indeed, he noted that litigation financing might actual actually help plaintiffs in retaining their independence, by giving them the leeway to resist the temptation to settle too cheaply. And that dynamic certainly may have been true in the case of Echeverria himself - an illegal alien working in a blue-collar job, who very probably had little savings.
Was the Agreement a Contract for a Usurious Loan?
Judge Warshawsky next took up the question of whether the Lawcash agreement was void because it was a usurious loan.
New York, like most other states, has criminal and civil laws against usury. New York's law generally prohibits loans charging interest higher than 16%.
Judge Warshawsky held that the agreement between Lawcash and Echeverria was a loan agreement. And he noted that it explicitly provided for a return of at 3.85% per month if Echeverria succeeded in his suit. Thus, he concluded that it was usurious. Judge Warshawsky held that Lawcash should have received no more than $4,000 in addition to the return of its initial $25,000 investment.
But why did Judge Warshawsky view this as a loan agreement in the first place - rather than an investment agreement (which would then fall outside the usury law)?
The judge deemed Echeverria's claim a "sure thing" because he was suing under a statute that imposes strict liability. (Strict liability is not dependent on a showing of negligence; it follows directly from a showing of causation and harm.)
Why Judge Warshawsky Was Wrong to See The Lawcash Agreement as a Loan
There are a number of reasons to be skeptical of Judge Warshawsky's argument.
First, the idea of any lawsuit being a sure thing is a little silly. Until a judgment has been collected many things can go wrong.
Second, this lawsuit was far from a "sure thing" in 2003, when Lawcash invested in the case. At that point, two defendants out of a set of seven or eight had defaulted (that is, failed to appear in court). Thus, no one could know if they had any assets, or if they did, how difficult it would be to reach them. Moreover, Echeverria's illegal alien status might reasonably have seen as complicating his ability to win and collect a judgment. What if he were to be deported before the case could proceed?
Third, strict liability is not absolute liability. The plaintiff has to still prove that the accident was caused by the absence or failure of a required safety measure that failed to give the proper protection.
So the plaintiff was to prove more than merely that he suffered an "elevation-related" injury while in the employ of the defendant or on its property. This proof could have gone wrong - or been rebutted by defendants - in any number of ways.
If scaffolding cases were truly open and shut, why would defendants ever go to trial with them? Yet they do. And Judge Warshawsky, as a trial judge, must know that.
The Problematic Implications of Judge Warshawsky's Ruling
In the end, Judge Warshawsky's ruling is not only ill-reasoned, it is so vague as to be useless. That is why I believe other courts should shy away from following it.
Judge Warshawsky cannot really be saying that all civil cases based on strict liability are "sure things." They plainly are not. So he must be saying, instead, that judges should decide, case by case, whether a given case was a sure thing - and if it was, strike down any agreement with an entity such as Lawcash.
This is recipe for disaster. Judges' assessment of cases will be inevitably affected by twenty-twenty hindsight, when the question is really what the case looked like when Lawcash entered into its agreement with the plaintiff. And the end result will be that the firms that provide litigation support will charge more for their services, out of fear that they will not know whether any given agreement will be deemed usurious or not.
Some firms may limit their activities or leave the market. Plaintiffs will inevitably be hurt; some may not be able to get their litigation financed at all.
Imagine if this had happened to Echeverria. He
got his back operation only a few months after Lawcash invested in his suit. What if Lawcash had not invested? Would he still have received decent medical care, and gotten a $2 million judgment?
Judge Warshawsky never offered facts to suggest that Echeverria was made worse off as a result of the deal he struck with Lawcash. If anything, the facts suggests Lawcash's money was important in Echeverria's litigation success.
The Wrong Way to Reform Litigation Financing
It may be the case that the litigation financing industry needs to be regulated in ways that insure that firms like Lawcash do not take advantage of a poor and vulnerable laborer like Echeverria. But rulings like this are the wrong approach.
The theoretical concerns that the judge might have about litigation support have not yet been supported by evidence. Furthermore, the solution offered by the judge--to apply a cap of 16% return to those cases that are determined after the fact to be "sure things"--would make it more difficult than ever for litigants to get help.
Why It Should Be Repudiated, Or Limited to Its Facts
By ANTHONY J. SEBOK
anthony.sebok@brooklaw.edu
----
Monday, Apr. 18, 2005
A New York state court ruling reported in the New York Law Journal on April 1 seems, at first glance, to challenge the legal status of outside litigation financing in New York. Such financing allows plaintiffs to fund their expenses - from medical care, to expert testimony, and the like - without wholly relying on their contingency lawyers' coffers to do so.
The decision, Echeverria v. Lindner, casually suggested that New York courts should view investments in lawsuits as loans, which would therefore be regulated by New York's usury statutes. (The usury statutes prohibit the charging of excessive interest.)
In this column, I will explore why Echeverria is a troubling decision. I will argue that it ought to either be repudiated by other New York judges, or be limited to its very special facts.
The Basic Facts of Echeverria, and the Issue on Which the Judge Focused
On September 1, 2000, Juan Vicente Echeverria was working as a day laborer on a construction site in Long Island when he fell off of an elevated platform . His injuries were so serious that he eventually required back surgery.
Echeverria sued under New York's Labor Law § 240. That law holds contractors and property owners strictly liable if a safety measure designed to protect a worker from an "elevation-related hazard" turns out to be inadequate, fails, and causes an injury.
On June 4, 2003, Echeverria was able to obtain a default judgment against two defendants, and on August 2, 2004 Echeverria was able to obtain default judgments against three more defendants. On October 27, 2004, just before trial, Echeverria settled with the remaining defendants.
The damages issue was left to the judge. Judge Ira B. Warshawsky decided, after some misgivings, to award Echeverria $2.1 million in damages. Echeverria had suffered considerable medical expenses, loss of earnings, and pain and suffering as a result of his fall. In addition, the judge noted, Echeverria also had had to pay a company named Lawcash $14,806.
What was this for? On November 25, 2003, Lawcash handed Echeverria a check for $25,000. In its contract with Echeverria, Lawcash described the $25,000 as an investment in Echeverria's suit.
Under the contract's terms, if Echeverria was successful in his litigation, Lawcash would get all or some of its money back (depending on how much Echeverria himself was able to obtain), as well as a significant additional payment. If Echeverria lost his suit or recovered nothing, Lawcash would receive nothing, losing its $25,000 "investment."
Judge Warshawsky noted that Lawcash received almost $39,000 in return for its "investment" of $25,000, for a "profit" of almost $14,000 in less than a year. He was clearly bothered by what he saw as a more than 50% rate of interest. And he wondered if the contract that opened up the possibility of an interest rate this high was illegal.
This was an odd issue for the judge to focus on, because Lawcash was not a party to the proceeding, and had already been paid.
Had Echeverria sued Lawcash to try to void the agreement, it would have been logical for this issue to be raised. But it was not logical in the proceeding to determine how much the defendants would pay Echeverria to compensate him for his losses.
So why did the judge raise the issue of the legality of the Lawcash contract? Maybe he was trying to send a message about the whole outside litigation financing business.
Was This Rate of Interest Illegal? Some Possible Bases for Thinking So
First, Judge Warshawsky explored the possibility that the contract between Echeverria and Lawcash was invalid because it was champertous.
I have examined the strange history of the rule against champerty in the United States in a number of earlier columns - including this one. The rule basically tries to limit the "stirring up" of litigation by officious intermeddlers (or lawyers) by prohibiting individuals from purchasing another person's lawsuit.
But it turns out that New York has a very limited rule against champerty - one that does not view an investment in a suit that has already been filed as problematic. After all, absent very unusual circumstances, an investment by a third party after a plaintiff has sued cannot be the cause of the lawsuit. Such investments might enable a suit go forward but they don't usually "stir it up"; thus, in New York's view, they aren't champertous.
What about the idea that the agreement interfered with Echeverria's ability to make independent decisions about whether and when to settle? An Ohio court had so held, with regard to all agreements regarding outside litigation financing, in 2003 in Rancman v. Interim Settlement Funding Corp. - a decision that I criticized in an earlier column.
But Judge Warshawsky did not echo the Ohio court's reasoning. Indeed, he noted that litigation financing might actual actually help plaintiffs in retaining their independence, by giving them the leeway to resist the temptation to settle too cheaply. And that dynamic certainly may have been true in the case of Echeverria himself - an illegal alien working in a blue-collar job, who very probably had little savings.
Was the Agreement a Contract for a Usurious Loan?
Judge Warshawsky next took up the question of whether the Lawcash agreement was void because it was a usurious loan.
New York, like most other states, has criminal and civil laws against usury. New York's law generally prohibits loans charging interest higher than 16%.
Judge Warshawsky held that the agreement between Lawcash and Echeverria was a loan agreement. And he noted that it explicitly provided for a return of at 3.85% per month if Echeverria succeeded in his suit. Thus, he concluded that it was usurious. Judge Warshawsky held that Lawcash should have received no more than $4,000 in addition to the return of its initial $25,000 investment.
But why did Judge Warshawsky view this as a loan agreement in the first place - rather than an investment agreement (which would then fall outside the usury law)?
The judge deemed Echeverria's claim a "sure thing" because he was suing under a statute that imposes strict liability. (Strict liability is not dependent on a showing of negligence; it follows directly from a showing of causation and harm.)
Why Judge Warshawsky Was Wrong to See The Lawcash Agreement as a Loan
There are a number of reasons to be skeptical of Judge Warshawsky's argument.
First, the idea of any lawsuit being a sure thing is a little silly. Until a judgment has been collected many things can go wrong.
Second, this lawsuit was far from a "sure thing" in 2003, when Lawcash invested in the case. At that point, two defendants out of a set of seven or eight had defaulted (that is, failed to appear in court). Thus, no one could know if they had any assets, or if they did, how difficult it would be to reach them. Moreover, Echeverria's illegal alien status might reasonably have seen as complicating his ability to win and collect a judgment. What if he were to be deported before the case could proceed?
Third, strict liability is not absolute liability. The plaintiff has to still prove that the accident was caused by the absence or failure of a required safety measure that failed to give the proper protection.
So the plaintiff was to prove more than merely that he suffered an "elevation-related" injury while in the employ of the defendant or on its property. This proof could have gone wrong - or been rebutted by defendants - in any number of ways.
If scaffolding cases were truly open and shut, why would defendants ever go to trial with them? Yet they do. And Judge Warshawsky, as a trial judge, must know that.
The Problematic Implications of Judge Warshawsky's Ruling
In the end, Judge Warshawsky's ruling is not only ill-reasoned, it is so vague as to be useless. That is why I believe other courts should shy away from following it.
Judge Warshawsky cannot really be saying that all civil cases based on strict liability are "sure things." They plainly are not. So he must be saying, instead, that judges should decide, case by case, whether a given case was a sure thing - and if it was, strike down any agreement with an entity such as Lawcash.
This is recipe for disaster. Judges' assessment of cases will be inevitably affected by twenty-twenty hindsight, when the question is really what the case looked like when Lawcash entered into its agreement with the plaintiff. And the end result will be that the firms that provide litigation support will charge more for their services, out of fear that they will not know whether any given agreement will be deemed usurious or not.
Some firms may limit their activities or leave the market. Plaintiffs will inevitably be hurt; some may not be able to get their litigation financed at all.
Imagine if this had happened to Echeverria. He
got his back operation only a few months after Lawcash invested in his suit. What if Lawcash had not invested? Would he still have received decent medical care, and gotten a $2 million judgment?
Judge Warshawsky never offered facts to suggest that Echeverria was made worse off as a result of the deal he struck with Lawcash. If anything, the facts suggests Lawcash's money was important in Echeverria's litigation success.
The Wrong Way to Reform Litigation Financing
It may be the case that the litigation financing industry needs to be regulated in ways that insure that firms like Lawcash do not take advantage of a poor and vulnerable laborer like Echeverria. But rulings like this are the wrong approach.
The theoretical concerns that the judge might have about litigation support have not yet been supported by evidence. Furthermore, the solution offered by the judge--to apply a cap of 16% return to those cases that are determined after the fact to be "sure things"--would make it more difficult than ever for litigants to get help.
Fidler's LawCash
A New York Decision That May Imperil Plaintiffs' Ability to Finance Their Lawsuits:
Why It Should Be Repudiated, Or Limited to Its Facts
By ANTHONY J. SEBOK
anthony.sebok@brooklaw.edu
----
Monday, Apr. 18, 2005
A New York state court ruling reported in the New York Law Journal on April 1 seems, at first glance, to challenge the legal status of outside litigation financing in New York. Such financing allows plaintiffs to fund their expenses - from medical care, to expert testimony, and the like - without wholly relying on their contingency lawyers' coffers to do so.
The decision, Echeverria v. Lindner, casually suggested that New York courts should view investments in lawsuits as loans, which would therefore be regulated by New York's usury statutes. (The usury statutes prohibit the charging of excessive interest.)
In this column, I will explore why Echeverria is a troubling decision. I will argue that it ought to either be repudiated by other New York judges, or be limited to its very special facts.
The Basic Facts of Echeverria, and the Issue on Which the Judge Focused
On September 1, 2000, Juan Vicente Echeverria was working as a day laborer on a construction site in Long Island when he fell off of an elevated platform . His injuries were so serious that he eventually required back surgery.
Echeverria sued under New York's Labor Law § 240. That law holds contractors and property owners strictly liable if a safety measure designed to protect a worker from an "elevation-related hazard" turns out to be inadequate, fails, and causes an injury.
On June 4, 2003, Echeverria was able to obtain a default judgment against two defendants, and on August 2, 2004 Echeverria was able to obtain default judgments against three more defendants. On October 27, 2004, just before trial, Echeverria settled with the remaining defendants.
The damages issue was left to the judge. Judge Ira B. Warshawsky decided, after some misgivings, to award Echeverria $2.1 million in damages. Echeverria had suffered considerable medical expenses, loss of earnings, and pain and suffering as a result of his fall. In addition, the judge noted, Echeverria also had had to pay a company named Lawcash $14,806.
What was this for? On November 25, 2003, Lawcash handed Echeverria a check for $25,000. In its contract with Echeverria, Lawcash described the $25,000 as an investment in Echeverria's suit.
Under the contract's terms, if Echeverria was successful in his litigation, Lawcash would get all or some of its money back (depending on how much Echeverria himself was able to obtain), as well as a significant additional payment. If Echeverria lost his suit or recovered nothing, Lawcash would receive nothing, losing its $25,000 "investment."
Judge Warshawsky noted that Lawcash received almost $39,000 in return for its "investment" of $25,000, for a "profit" of almost $14,000 in less than a year. He was clearly bothered by what he saw as a more than 50% rate of interest. And he wondered if the contract that opened up the possibility of an interest rate this high was illegal.
This was an odd issue for the judge to focus on, because Lawcash was not a party to the proceeding, and had already been paid.
Had Echeverria sued Lawcash to try to void the agreement, it would have been logical for this issue to be raised. But it was not logical in the proceeding to determine how much the defendants would pay Echeverria to compensate him for his losses.
So why did the judge raise the issue of the legality of the Lawcash contract? Maybe he was trying to send a message about the whole outside litigation financing business.
Was This Rate of Interest Illegal? Some Possible Bases for Thinking So
First, Judge Warshawsky explored the possibility that the contract between Echeverria and Lawcash was invalid because it was champertous.
I have examined the strange history of the rule against champerty in the United States in a number of earlier columns - including this one. The rule basically tries to limit the "stirring up" of litigation by officious intermeddlers (or lawyers) by prohibiting individuals from purchasing another person's lawsuit.
But it turns out that New York has a very limited rule against champerty - one that does not view an investment in a suit that has already been filed as problematic. After all, absent very unusual circumstances, an investment by a third party after a plaintiff has sued cannot be the cause of the lawsuit. Such investments might enable a suit go forward but they don't usually "stir it up"; thus, in New York's view, they aren't champertous.
What about the idea that the agreement interfered with Echeverria's ability to make independent decisions about whether and when to settle? An Ohio court had so held, with regard to all agreements regarding outside litigation financing, in 2003 in Rancman v. Interim Settlement Funding Corp. - a decision that I criticized in an earlier column.
But Judge Warshawsky did not echo the Ohio court's reasoning. Indeed, he noted that litigation financing might actual actually help plaintiffs in retaining their independence, by giving them the leeway to resist the temptation to settle too cheaply. And that dynamic certainly may have been true in the case of Echeverria himself - an illegal alien working in a blue-collar job, who very probably had little savings.
Was the Agreement a Contract for a Usurious Loan?
Judge Warshawsky next took up the question of whether the Lawcash agreement was void because it was a usurious loan.
New York, like most other states, has criminal and civil laws against usury. New York's law generally prohibits loans charging interest higher than 16%.
Judge Warshawsky held that the agreement between Lawcash and Echeverria was a loan agreement. And he noted that it explicitly provided for a return of at 3.85% per month if Echeverria succeeded in his suit. Thus, he concluded that it was usurious. Judge Warshawsky held that Lawcash should have received no more than $4,000 in addition to the return of its initial $25,000 investment.
But why did Judge Warshawsky view this as a loan agreement in the first place - rather than an investment agreement (which would then fall outside the usury law)?
The judge deemed Echeverria's claim a "sure thing" because he was suing under a statute that imposes strict liability. (Strict liability is not dependent on a showing of negligence; it follows directly from a showing of causation and harm.)
Why Judge Warshawsky Was Wrong to See The Lawcash Agreement as a Loan
There are a number of reasons to be skeptical of Judge Warshawsky's argument.
First, the idea of any lawsuit being a sure thing is a little silly. Until a judgment has been collected many things can go wrong.
Second, this lawsuit was far from a "sure thing" in 2003, when Lawcash invested in the case. At that point, two defendants out of a set of seven or eight had defaulted (that is, failed to appear in court). Thus, no one could know if they had any assets, or if they did, how difficult it would be to reach them. Moreover, Echeverria's illegal alien status might reasonably have seen as complicating his ability to win and collect a judgment. What if he were to be deported before the case could proceed?
Third, strict liability is not absolute liability. The plaintiff has to still prove that the accident was caused by the absence or failure of a required safety measure that failed to give the proper protection.
So the plaintiff was to prove more than merely that he suffered an "elevation-related" injury while in the employ of the defendant or on its property. This proof could have gone wrong - or been rebutted by defendants - in any number of ways.
If scaffolding cases were truly open and shut, why would defendants ever go to trial with them? Yet they do. And Judge Warshawsky, as a trial judge, must know that.
The Problematic Implications of Judge Warshawsky's Ruling
In the end, Judge Warshawsky's ruling is not only ill-reasoned, it is so vague as to be useless. That is why I believe other courts should shy away from following it.
Judge Warshawsky cannot really be saying that all civil cases based on strict liability are "sure things." They plainly are not. So he must be saying, instead, that judges should decide, case by case, whether a given case was a sure thing - and if it was, strike down any agreement with an entity such as Lawcash.
This is recipe for disaster. Judges' assessment of cases will be inevitably affected by twenty-twenty hindsight, when the question is really what the case looked like when Lawcash entered into its agreement with the plaintiff. And the end result will be that the firms that provide litigation support will charge more for their services, out of fear that they will not know whether any given agreement will be deemed usurious or not.
Some firms may limit their activities or leave the market. Plaintiffs will inevitably be hurt; some may not be able to get their litigation financed at all.
Imagine if this had happened to Echeverria. He
got his back operation only a few months after Lawcash invested in his suit. What if Lawcash had not invested? Would he still have received decent medical care, and gotten a $2 million judgment?
Judge Warshawsky never offered facts to suggest that Echeverria was made worse off as a result of the deal he struck with Lawcash. If anything, the facts suggests Lawcash's money was important in Echeverria's litigation success.
The Wrong Way to Reform Litigation Financing
It may be the case that the litigation financing industry needs to be regulated in ways that insure that firms like Lawcash do not take advantage of a poor and vulnerable laborer like Echeverria. But rulings like this are the wrong approach.
The theoretical concerns that the judge might have about litigation support have not yet been supported by evidence. Furthermore, the solution offered by the judge--to apply a cap of 16% return to those cases that are determined after the fact to be "sure things"--would make it more difficult than ever for litigants to get help.
Why It Should Be Repudiated, Or Limited to Its Facts
By ANTHONY J. SEBOK
anthony.sebok@brooklaw.edu
----
Monday, Apr. 18, 2005
A New York state court ruling reported in the New York Law Journal on April 1 seems, at first glance, to challenge the legal status of outside litigation financing in New York. Such financing allows plaintiffs to fund their expenses - from medical care, to expert testimony, and the like - without wholly relying on their contingency lawyers' coffers to do so.
The decision, Echeverria v. Lindner, casually suggested that New York courts should view investments in lawsuits as loans, which would therefore be regulated by New York's usury statutes. (The usury statutes prohibit the charging of excessive interest.)
In this column, I will explore why Echeverria is a troubling decision. I will argue that it ought to either be repudiated by other New York judges, or be limited to its very special facts.
The Basic Facts of Echeverria, and the Issue on Which the Judge Focused
On September 1, 2000, Juan Vicente Echeverria was working as a day laborer on a construction site in Long Island when he fell off of an elevated platform . His injuries were so serious that he eventually required back surgery.
Echeverria sued under New York's Labor Law § 240. That law holds contractors and property owners strictly liable if a safety measure designed to protect a worker from an "elevation-related hazard" turns out to be inadequate, fails, and causes an injury.
On June 4, 2003, Echeverria was able to obtain a default judgment against two defendants, and on August 2, 2004 Echeverria was able to obtain default judgments against three more defendants. On October 27, 2004, just before trial, Echeverria settled with the remaining defendants.
The damages issue was left to the judge. Judge Ira B. Warshawsky decided, after some misgivings, to award Echeverria $2.1 million in damages. Echeverria had suffered considerable medical expenses, loss of earnings, and pain and suffering as a result of his fall. In addition, the judge noted, Echeverria also had had to pay a company named Lawcash $14,806.
What was this for? On November 25, 2003, Lawcash handed Echeverria a check for $25,000. In its contract with Echeverria, Lawcash described the $25,000 as an investment in Echeverria's suit.
Under the contract's terms, if Echeverria was successful in his litigation, Lawcash would get all or some of its money back (depending on how much Echeverria himself was able to obtain), as well as a significant additional payment. If Echeverria lost his suit or recovered nothing, Lawcash would receive nothing, losing its $25,000 "investment."
Judge Warshawsky noted that Lawcash received almost $39,000 in return for its "investment" of $25,000, for a "profit" of almost $14,000 in less than a year. He was clearly bothered by what he saw as a more than 50% rate of interest. And he wondered if the contract that opened up the possibility of an interest rate this high was illegal.
This was an odd issue for the judge to focus on, because Lawcash was not a party to the proceeding, and had already been paid.
Had Echeverria sued Lawcash to try to void the agreement, it would have been logical for this issue to be raised. But it was not logical in the proceeding to determine how much the defendants would pay Echeverria to compensate him for his losses.
So why did the judge raise the issue of the legality of the Lawcash contract? Maybe he was trying to send a message about the whole outside litigation financing business.
Was This Rate of Interest Illegal? Some Possible Bases for Thinking So
First, Judge Warshawsky explored the possibility that the contract between Echeverria and Lawcash was invalid because it was champertous.
I have examined the strange history of the rule against champerty in the United States in a number of earlier columns - including this one. The rule basically tries to limit the "stirring up" of litigation by officious intermeddlers (or lawyers) by prohibiting individuals from purchasing another person's lawsuit.
But it turns out that New York has a very limited rule against champerty - one that does not view an investment in a suit that has already been filed as problematic. After all, absent very unusual circumstances, an investment by a third party after a plaintiff has sued cannot be the cause of the lawsuit. Such investments might enable a suit go forward but they don't usually "stir it up"; thus, in New York's view, they aren't champertous.
What about the idea that the agreement interfered with Echeverria's ability to make independent decisions about whether and when to settle? An Ohio court had so held, with regard to all agreements regarding outside litigation financing, in 2003 in Rancman v. Interim Settlement Funding Corp. - a decision that I criticized in an earlier column.
But Judge Warshawsky did not echo the Ohio court's reasoning. Indeed, he noted that litigation financing might actual actually help plaintiffs in retaining their independence, by giving them the leeway to resist the temptation to settle too cheaply. And that dynamic certainly may have been true in the case of Echeverria himself - an illegal alien working in a blue-collar job, who very probably had little savings.
Was the Agreement a Contract for a Usurious Loan?
Judge Warshawsky next took up the question of whether the Lawcash agreement was void because it was a usurious loan.
New York, like most other states, has criminal and civil laws against usury. New York's law generally prohibits loans charging interest higher than 16%.
Judge Warshawsky held that the agreement between Lawcash and Echeverria was a loan agreement. And he noted that it explicitly provided for a return of at 3.85% per month if Echeverria succeeded in his suit. Thus, he concluded that it was usurious. Judge Warshawsky held that Lawcash should have received no more than $4,000 in addition to the return of its initial $25,000 investment.
But why did Judge Warshawsky view this as a loan agreement in the first place - rather than an investment agreement (which would then fall outside the usury law)?
The judge deemed Echeverria's claim a "sure thing" because he was suing under a statute that imposes strict liability. (Strict liability is not dependent on a showing of negligence; it follows directly from a showing of causation and harm.)
Why Judge Warshawsky Was Wrong to See The Lawcash Agreement as a Loan
There are a number of reasons to be skeptical of Judge Warshawsky's argument.
First, the idea of any lawsuit being a sure thing is a little silly. Until a judgment has been collected many things can go wrong.
Second, this lawsuit was far from a "sure thing" in 2003, when Lawcash invested in the case. At that point, two defendants out of a set of seven or eight had defaulted (that is, failed to appear in court). Thus, no one could know if they had any assets, or if they did, how difficult it would be to reach them. Moreover, Echeverria's illegal alien status might reasonably have seen as complicating his ability to win and collect a judgment. What if he were to be deported before the case could proceed?
Third, strict liability is not absolute liability. The plaintiff has to still prove that the accident was caused by the absence or failure of a required safety measure that failed to give the proper protection.
So the plaintiff was to prove more than merely that he suffered an "elevation-related" injury while in the employ of the defendant or on its property. This proof could have gone wrong - or been rebutted by defendants - in any number of ways.
If scaffolding cases were truly open and shut, why would defendants ever go to trial with them? Yet they do. And Judge Warshawsky, as a trial judge, must know that.
The Problematic Implications of Judge Warshawsky's Ruling
In the end, Judge Warshawsky's ruling is not only ill-reasoned, it is so vague as to be useless. That is why I believe other courts should shy away from following it.
Judge Warshawsky cannot really be saying that all civil cases based on strict liability are "sure things." They plainly are not. So he must be saying, instead, that judges should decide, case by case, whether a given case was a sure thing - and if it was, strike down any agreement with an entity such as Lawcash.
This is recipe for disaster. Judges' assessment of cases will be inevitably affected by twenty-twenty hindsight, when the question is really what the case looked like when Lawcash entered into its agreement with the plaintiff. And the end result will be that the firms that provide litigation support will charge more for their services, out of fear that they will not know whether any given agreement will be deemed usurious or not.
Some firms may limit their activities or leave the market. Plaintiffs will inevitably be hurt; some may not be able to get their litigation financed at all.
Imagine if this had happened to Echeverria. He
got his back operation only a few months after Lawcash invested in his suit. What if Lawcash had not invested? Would he still have received decent medical care, and gotten a $2 million judgment?
Judge Warshawsky never offered facts to suggest that Echeverria was made worse off as a result of the deal he struck with Lawcash. If anything, the facts suggests Lawcash's money was important in Echeverria's litigation success.
The Wrong Way to Reform Litigation Financing
It may be the case that the litigation financing industry needs to be regulated in ways that insure that firms like Lawcash do not take advantage of a poor and vulnerable laborer like Echeverria. But rulings like this are the wrong approach.
The theoretical concerns that the judge might have about litigation support have not yet been supported by evidence. Furthermore, the solution offered by the judge--to apply a cap of 16% return to those cases that are determined after the fact to be "sure things"--would make it more difficult than ever for litigants to get help.
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