Friday, December 12, 2014

When the Public Hates Its Own Champions

-- Posted by Neil H. Buchanan

In my Dorf on Law posts last Tuesday and Thursday, I described a fundamental conflict between two views of punitive damages in civil cases.  In one, drawn from a line of scholarship among economics-based legal thinkers, punitives can be used to bring justice to wrongdoers (especially companies who predictably injure some fraction of their customers, because reducing injuries fails a cost-benefit test) who otherwise would never be forced to pay the full measure of the damage that they inflict on society.  In the other, which is the world in which we actually live (for the most part), punitives exist only to punish wrongdoers who are especially depraved.

It is well understood that there are three prongs to society's approach to controlling harmful behaviors in the commercial realm.  First, there is direct regulation, carried out by executive agencies of state and local governments as well as at the federal level.  The Consumer Product Safety Commission is the most obvious example, I suppose, and there are state-level equivalents as well.  Second, the government can bring a civil case against a wrongdoer.  In addition to, say, the U.S. Department of Housing and Urban Development bringing suit against "slumlords," states uniformly have dedicated agencies to handle such cases, often through the office of their attorneys general.

Finally, there are private lawsuits.  As I described last week, this third prong is important because regulators and government litigators are chronically resource-constrained, and it is unrealistic to imagine that any government could monitor and pursue all legitimate claims against wrongdoers.  It is also important because there is often political pressure on regulators and attorneys general (especially when, as often happens, attorneys general are elected officials who harbor unhidden ambitions for higher office) not to pursue cases against politically important wrongdoers.

Indeed, as Professor Dorf pointed out in a comment on my Thursday post, the tradeoff between state action (of either type, i.e., direct regulation or public lawsuit) and private action can be seen in differences among the states.  In southern states, where state governments have typically been captured by business interests (see, e.g., Alabama's infamously under-taxed and powerful timber industry), the public's interests have been vindicated through private litigation.  So-called "runaway juries" appear actually to be people who have been convinced that they are the last chance to put a check on the power of the people who own their state's governments.  (This, of course, is why those powerful interests have poured money into state judicial elections for the past few decades.)

What I did not mention in my posts last week is that the private parties who actually bring the cases can face serious hostility.  It is one thing for an attorney general to decide whether to risk her political career by, for example, bringing suit against purveyors of fatty foods, but when a private individual does so, the public blowback can be substantial, especially in the era of social media.

Consider two recent examples.  Among its many recent public relations "challenges," the National Football League has seen several of its teams being sued by cheerleaders for various legal infractions.  For example, the team in Buffalo, the Bills, has long had a squad of young, attractive female dancers on the sidelines for games, known as the Buffalo Jills.  It turns out that the members of the Jills are expected to do a lot more than dance on the sidelines for sixteen games each year.  (In the Bills' case, there are no playoff games to worry about.)

Five now-former members of the Jills have filed suit against the Bills for gross violations of labor law.  Apparently, the Jills have been expected to subject themselves to being groped by wealthy men at private parties, they have been encouraged (but not exactly required) to undergo cosmetic surgery, and they have been paid nothing but tips.  (The "tips for flips" concept, described in the linked article, is especially unsavory.)  The effective hourly wage comes to significantly less than $1.

What I found especially notable about that article, however, is that the plaintiffs in the case are being harassed for bringing the case.  As the writer described it, in part "because her lawsuit has angered many in this Bills town, [the litigant] declined to give her surname or to use it in the lawsuit."  Remember, we are talking about the fans in a very blue-collar city, and a case about a very wealthy employer stiffing employees on wages.

This certainly suggests that sexism (and football fanaticism) trumps class solidarity.  But in any event, the bottom line is that five young women who were not paid for the services are left to go to court, because the government refuses either to regulate properly or to pursue obvious violations of the law in court.  In addition to the uncertainty and expense of bringing the suit, the plaintiffs also face public abuse for their actions.  And this is true, even though a successful suit on their part would end up benefiting many other people.

Another recent incident highlights further problems with the "let the people validate their own rights in court" approach to civil damages.  A small incident in Boston went viral recently, because it involved a Harvard Business School professor who -- in a fashion that can only be called assholish -- responded to being overcharged for a take-out meal by threatening legal action.  The reason that the case was easy to lampoon is that the customer had been overcharged by $4.  What's the big deal, right?

Reading the email exchange between the aggrieved customer and the restaurant manager, what struck me is that the customer (who has a law degree, as well as an economics Ph.D.) clearly understood that his action was an attempt not to get his own $4 back, but to prevent systematic over-charging by the restaurant.  It turns out that Massachusetts even has an automatic treble-damages statute in place for such instances (and example of the "rough justice" approach that I described in my post last Thursday).  In his emails, the customer repeatedly said that it was not enough for the restaurant to refund his $4 (or even his $12 after damages), because the point of the law was to make it unprofitable for a business to draw people in with low prices and then charge them higher prices.  It was not about one customer, but about all customers.

In what should have been viewed as a positive move, the customer had contacted the state authorities to try to get them to vindicate the public's interest in the matter.  But because of the reasons discussed above, he knew that they would exercise their prosecutorial discretion to ignore the case.  (Prosecutorial discretion is never controversial, is it?)

The writer of the linked article, who was clearly sympathetic to the restauranteur (compare the photos that the news site published of the customer and manager -- evil douche bag versus friendly, hard-working immigrant), inadvertently managed to add in the one element that was missing from the case: "If you didn’t pass the Massachusetts bar, but still feel as though you must do SOMETHING, then just gather all the receipts you’ve saved, along with all screenshots you took and saved of the website menu in case that dinner order ever ended up in court, find a lawyer whose fees aren’t likely to exceed the few dollars you’re seeking, and ... voila?"

In other words, the problem is not just that a private individual has to bring such a case, but that no private individual has reason to do so.  Can you say "class action"?   But rather than bring a class action, with all of the problems that such a course of action would entail, this customer engaged in a time-consuming effort that would certainly not put him in the black.  (He did eventually up the ante, by asking for a refund for half of the price of the meal.)  And his stated reason for doing so was to do his part to make sure that the public law preventing systematic overcharging would be enforced.

Again, this guy seems like a dick.  But the question is, can anyone describe the "ideal plaintiff" in this kind of case, or the perfect fact pattern?  Let us imagine that the guy was not Harvard-affiliated, so that the anti-elitism charge would not stick.  Further imagine that the tone in his emails was unfailingly polite.  Even so, in the end, he would be ridiculed for not gladly accepting the $4 refund.  Indeed, a lot of people would fault him for even making a big deal about such a small amount.

The point is that it can actually be very difficult to find a case that someone would be willing to pursue, and that they would be willing to continue to pursue even in the face of public hostility, such that the public's legal interests are protected.  Yes, in this case we are talking about a small restaurant, but on the facts given, it had mischarged customers for months, in an amount that must have totaled tens of thousands of dollars, if not more.  The plot of "Superman 3" involved stealing the fractions of pennies from bank accounts, adding up to millions.  What would the public reaction be to a person who angrily sued the bank to recover his $0.0043 (times 3)?

All of which brings us back to the need for punitive damages.  If, as in the Boston restaurant case, the optics are going to look bad in many cases, then the cases that can be pursued and won need to carry with them extra sanctions.  Otherwise, we end up with situations like those faced by the Buffalo Jills, who face public ridicule for pressing their rights in court, against an entity that can escape liability by hiding behind the public's misplaced outrage.


David Ricardo said...

Kudos to Mr. Buchanan for accomplishing something most of the world thought was impossible, that is, actually making the Harvard Professor in the $4.00 restaurant overcharge case not seem like the biggest dick on the Harvard faculty. Although to be fair to the gentleman he is surely still ranked in the top five. And the competition for the top spots is fierce indeed.

But there is another contribution the Harvard Prof made that Mr. Buchanan has not noted. Those of us who have had extensive interaction with Harvard faculty have never been able to convince our colleagues, friends and family of just how arrogant and obnoxious these people are, and now we have a real live illustration of the point we have tried to make for years. Since the story broke a number of these acquaintances have written to say “Okay, now we see what you were talking about all these years”. Vindication at last!

But the kudos must be tempered because of Mr. Buchanan’s comment on the Buffalo Bills and their playoff record.

“It turns out that the members of the Jills are expected to do a lot more than dance on the sidelines for sixteen games each year. (In the Bills' case, there are no playoff games to worry about.)”

As a long time resident of Buffalo I must point out that should the Bills beat the Packers, the Raiders and the Patriots in Foxboro they may well make the playoffs, although the last time the Bills beat the Patriots in New England was during the Coolidge administration. And it should be noted that Buffalo is the only team to be in four straight Super Bowls, and the only team to lose four straight Super Bowls. The exploits of O. J. Simpson in a Bills uniform are not diminished by the fact that he may have brutally murdered two people or that he is currently serving a long jail sentence for various criminal activities, none of which it must be pointed out resulted in Mr. Simpson killing anyone.

Before he went to Congress and developed economic policy which devastated the economy Jack Kemp was a Buffalo quarterback. And the team has extorted only hundreds of millions from Erie County and New York State to build and improve its stadium and subsidize team operations when it could have extorted the taxpayers to a billion dollars or more. Buffalo plays in an open air stadium and the one sure bet in professional sports is that if the Bills are hosting Miami in December the Bills will win regardless of the team records.

Yes, the Bills may have exploited and denigrated and humiliated its cheerleaders, but hey, this is the NFL where such behavior is SOP.

egarber said...

Your brief mention of social media is interesting.

It is certainly true that our internet-everywhere world can lead to intimidation when individuals go up against powerful interests. However, I think there is probably more momentum in the other direction, given the explosion of on-line product review outlets. I guess it started with EBay’s rating system, but the model now exists generally through Yelp and others.

All that available feedback – in the form of product reviews, restaurant experience, service stories, etc. – is a catalyst for efficient** capitalism, because it creates information where it was once hidden or obscured. As such, to me this mechanism is powerful enough to almost be another regulatory plank on par with the others you mention. It’s one thing for a company to tap dance around customer issues; it’s quite another to not have customers in the first place because of poor reputation.

**threw that word in there to mess with Neil. :)

Anonymous said...

"but on the facts given, it had mischarged customers for months, in an amount that must have totaled tens of thousands of dollars, if not more."

Wait, wait, wait. I don't understand that to be a "fact;" I understood that to be an unsupported allegation. AFAIK the only fact agreed to by both parties was that the price data on the website had been wrong for months--however there was no evidence that anyone other than the dear professor had relied on those prices. So it's not even clear there would have been a class larger than one.

There is one small restaurant near where I live that hasn't updated its on-line website in years. Most intelligent people if they really care about the price either confirm it on the phone or on the menu when they walk in. I'm sorry but in my view this is a case of a person who is /pretending/ they are a champion of the people as an excuse to be a dick--they are not a real champion of the people.

Unknown said...

Buffalo plays in an open air stadium and the one sure bet in professional sports is that if the Bills are hosting Miami in December the Bills will win regardless of the team records.