Texans for Lawsuit Reform

John Cornyn Introduces Patent Lawsuit Reform Bill

manager — Thu, 23 May 2013 17:00:45 +0000

Teaser

A U.S. Senator from Texas has introduced legislation that they say would curb abusive patent litigation.

Publication and Date

KFYO, May 22, 2013

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By Cole Shooter

A U.S. Senator from Texas has introduced legislation that they say would curb abusive patent litigation.

U.S. Senator John Cornyn released the Patent Abuse Reduction Act Wednesday, saying that the measure “will modernize our patent litigation system and protect innovators unfairly targeted by trolls.”

Cornyn says that the bill would require plaintiffs to disclose the substance of their claim and reveal their identities when they file their lawsuit, bring fairness to the discovery process, and shift responsibility for the cost of litigation to the losing party.

“Patent litigation abuse saddles American innovators and job-creators, from start-ups to our nation’s largest employers, with expensive litigation,” Cornyn said. “It directs resources away from the research, development, wages, and growth this country so desperately needs.”

The Texas Association of Business has also voiced support for Cornyn’s reform bill.

TAB President and CEO Bill Hammond weighed in, saying “Adding transparency and this kind of financial responsibility will deter many of these people, who are simply looking to make a quick buck from filing this sort of frivolous litigation in the first place.”

Judge lets defense lawyers withdraw from Chevron fraud lawsuit

manager — Tue, 21 May 2013 20:17:12 +0000

Teaser

Several lawyers involved in bitter U.S. litigation that grew out of pollution claims brought by Ecuadorean villagers against oil company Chevron Corp can withdraw from the case, a federal judge ruled on Friday.

Publication and Date

Reuters, May 17, 2013

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By Jonathan Stempel

(Reuters) - Several lawyers involved in bitter U.S. litigation that grew out of pollution claims brought by Ecuadorean villagers against oil company Chevron Corp can withdraw from the case, a federal judge ruled on Friday.

John Keker, a partner at Keker & Van Nest in San Francisco, was granted permission to withdraw from defending attorney Steven Donziger, the lead lawyer who represents Ecuadorean villagers in a lawsuit filed by Chevron in 2011.

Chevron has contended that Donziger fabricated a lawsuit that accused the former Texaco of polluting an Ecuadorian rainforest.

U.S. District Judge Lewis Kaplan in Manhattan also allowed Craig Smyser and his firm, Smyser, Kaplan & Veselka, which represented the so-called Lago Agrio representatives who are also defendants in the 2011 case, to withdraw from their representation.

Chevron bought Texaco in 2001, and is also fighting a $19 billion damages award obtained by the Lago Agrio plaintiffs in an Ecuador court.

Keker and Smyser had argued that their respective clients each owed well over $1 million in legal fees and were unable to pay.

Judge Kaplan said these claims were unsubstantiated. But he permitted the lawyers to withdraw, not because their clients couldn't pay but rather because they wouldn't pay.

Though nonpayment is not an automatic reason to allow withdrawal, Kaplan said courts have often allowed it when clients "deliberately disregarded" their obligations to pay.

"The (Lago Agrio plaintiffs') aggressive litigation efforts before other courts permits an inference, which the court draws, that this is a case in which those who control whatever money is available to finance litigation efforts have decided not to pay these lawyers," Kaplan wrote. "Thus, this is more likely than not a case of deliberate disregard of financial obligations."

Kaplan also criticized lawyers on both sides for some of their litigation tactics, including a variety of motions and discovery requests that contributed to escalating legal fees.

"This is a high stakes lawsuit that conceivably may affect as much as $19 billion," he wrote. "It is expensive. That may or may not be a desirable situation, but it is the legal system we have. This has been compounded by the fact that counsel on both sides have been uncooperative with each other."

Chevron had said it would not object to Keker's and Smyser's withdrawals.

Keker and Donziger did not respond to requests for comment.

"We're sorry it came to this," Smyser said in an interview. "These are great clients, and we believe very much in their case."

Randy Mastro, Chevron's lawyer, said: "It's no surprise these lawyers would want to get off this sinking ship. No responsible party would want to be associated with the scheme that has been perpetrated here."

Julio Gomez, a lawyer who has represented the Lago Agrio representatives in other litigation, said he plans to represent them in the case before Kaplan.

The case is Chevron Corp v. Donziger, U.S. District Court, Southern District of New York, No. 11-00691.

For Chevron Corp: Randy Mastro of Gibson, Dunn & Crutcher.

3 Strategies for Reducing Class Action Costs

manager — Tue, 21 May 2013 20:15:37 +0000

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Publication and Date

Law.com, May 20, 2013

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By Catherine Dunn

In-house counsel tackled an increased number of class-action lawsuits last year, but managed to tamp down legal spend by an average of $100,000 per matter, according to the 2013 Carlton Fields Class Action Survey.

The second annual survey polled 368 legal executives from 342 companies with median annual revenues of $3.8 billion. About half of the respondents said they deal with class action lawsuits. Among those who do handle class actions, they saw their load increase from an average of 4.4 class actions in 2011 to 5.1 class actions in 2012. Accordingly, their overall spending on class actions increased by $300,000 on average, from $2.91 million to $3.19 million.

Yet, at the same time, legal departments achieved a 13.6 percent reduction in costs per suit, from $776,500 in 2011 to $671,100 in 2012. In last year's survey, respondents said they were aiming for a 17 percent reduction in class action spend for 2012.

"Per class action, they're spending less—and that is exactly in line with what they said they were hoping to do when we surveyed them last year," says Chris Coutroulis, who chairs the firm's litigation council.

So how did legal departments get proactive on their class action spend? Three key strategies can make a big difference on cost control:

1. USE ALTERNATIVE FEE ARRANGEMENTS

"Nearly one-third of companies rely on these arrangements, a 35 percent increase from 2011," according to the survey. Fixed fees were the most popular form of alternative fee arrangement (AFA), the preference of 63 percent of the companies that use AFAs.

In-house counsel appear to favor AFAs for a certain category of case: "Only 15 percent of all class action spending takes place under an [AFA], indicating that AFAs tend to be used on smaller, more routine class actions than on more complex or high risk matters," the report finds.

2. CHANGE HOW MATTERS ARE STAFFED

Legal departments devoted more in-house hours to class action matters—from six hours per suit per week in 2011, to 10 hours per suit per week in 2012. "Corporate counsel are relying more heavily on internal resources in an effort to drive value, reduce risk, and adopt an increasingly pragmatic approach," the report says.

Law departments also consolidated the number of outside firms they use to handle class action suits—from 4.6 firms on average in 2011, to three firms on average in 2012.

3. CONDUCT EARLY, RIGOROUS CASE ASSESSMENTS

In this year's survey, one third of companies said they evaluated suits and calculated their potential financial exposure, compared to 23.7 percent last year. The exercise allows legal departments to better manage a case and strategize an objective from the outset, explains Coutroulis, which ends up saving them substantial sums down the line.

"Companies that employ this strategy end up spending 38 percent less per class action and 42 percent less on outside counsel than companies that do not conduct a rigorous assessment," the report says.

New York: Letter: Lawsuit lending a form of legal loan sharking

manager — Mon, 20 May 2013 13:41:12 +0000

Teaser

Your May 2 editorial got it right when you called certain check-cashing operations "legal loan sharks." But there is another form of loan sharking that is legal in New York: lawsuit lending.

Publication and Date

Times Union, May 17, 2013

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Your May 2 editorial got it right when you called certain check-cashing operations "legal loan sharks." But there is another form of loan sharking that is legal in New York: lawsuit lending. Proponents call such loans "non-recourse third party litigation financing." Disguising loans as investments, lenders charge more than 100 percent interest.

Gov. Andrew Cuomo and Superintendent Benjamin Lawsky deserve praise for their stance against predatory lending. As long as lawsuit lending is legal, there are sharks in the water.

Tom Stebbins

Executive director

Lawsuit Reform Alliance of New York

California's litigious legal climate threatens development, observer says

manager — Fri, 10 May 2013 16:27:01 +0000

Teaser

When Kimberly Stone, president of the Civil Justice Association of California, describes her state’s deplorable legal climate, she points to private rights of action as a primary problem.

Publication and Date

Legal Newsline, May 10, 2013

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By AMANDA ROBERT

SACRAMENTO (Legal Newsline) – When Kimberly Stone, president of the Civil Justice Association of California, describes her state’s deplorable legal climate, she points to private rights of action as a primary problem.

Stone explains that California allows residents, whether or not they have been harmed, to sue for a number of technical violations. In many other states, lawsuits only arise after a governmental agency enforces the law or an individual sues over an injury.

“In California, it has been taken to the extreme,” she said. “We have dozens and dozens of laws where anyone can sue to enforce them. That’s what leads to lawyers behaving badly … And this is why those private rights of actions thrive. The lawyers make money.”

Stone and other legal reform advocates say these abusive and excessive lawsuits, particularly those involving the Americans with Disabilities Act (ADA), Proposition 65 and class actions, continue to wreak havoc on California. They say they not only harm the state’s already stagnant economy, but also threaten future job creation and business development.

The American Tort Reform Foundation ranked California as the No. 1 “judicial hellhole” in the nation in 2012. In its 11th annual report, the foundation points out that “the sheer number of atrociously abusive lawsuits filed all over the state would collectively make for the basis of a blockbuster Hollywood comedy were it not for their negative impact on the state’s economy and the mendacity that too often drives them.”

The foundation also predicts that “this nearly insolvent state, with businesses fleeing in droves and without a tax-dollar for court resources to waste on meritless litigation, will almost surely see well more than one million new lawsuits filed there again this year.”

From Stone’s perspective, politics in California play a leading role in excessive litigation. She argues that over the years, the plaintiffs’ bar contributed to and helped elect legislators who make it possible for lawyers to sue for many different reasons.

Tom Scott, the executive director of Citizens Against Lawsuit Abuse, agrees that decades of increasing regulations and laws provided more avenues for litigation. He points out that nearly 1.2 million civil lawsuits were filed in California last year – a statistic that shocks most people.

However, Scott also believes many political leaders fail to realize that certain laws will ultimately lead to excessive lawsuits. He offers the Unruh Civil Rights Act, which prohibits discrimination based on sex, race, color, religion, ancestry, national origin, disability, medical condition, marital status or sexual orientation, as one example.

Scott explains that the California law expands on the federal ADA, creating a private right of action that allows any individual to sue a business that may not be in compliance.

“In 1990, when President Bush signed the ADA into law, I don’t think he thought, this is going to be a vehicle for thousands upon thousands of lawsuits,” Scott said. “But in our state with the Unruh Act … it really takes the federal ADA to a whole different level.”

Scott offers abusive Proposition 65 lawsuits as another example. California created the law to protect residents from chemicals known to cause cancer, birth defects and reproductive harm. It requires businesses to warn consumers if their products or environments could expose them to these chemicals. It also allows consumers to sue businesses for up to $2,500 for each day they fail to post warning signs.

“The intent of that initiative was great,” Scott said. “When it was passed, there were only 40 chemicals on the list of chemicals people should be aware of. Now there are around 850. Every time a new chemical is listed, it creates litigation.”

According to CALA, Proposition 65 has resulted in more than 16,000 lawsuits and more than $500 million in settlements.

In addition to ADA and Proposition 65 lawsuits, Stone pinpoints class action lawsuits as part of the problem. She sees lawyers sue dozens of companies each month on behalf of consumers who never voiced concerns over their products. In recent years, consumers were pulled into class action lawsuits after buying Dannon yogurt that failed to improve their digestion or frozen pizza that failed to improve their overall health.

“The expense for the defendant company to fight the lawsuit is so great that they just settle,” Stone said. “They pay the attorney millions of dollars in attorneys’ fees, they give the class members some coupon so they buy more of their product, and that’s it. The only people who benefit are the lawyers.”

Despite outcry from legal reform advocates, Brian Kabateck, president of the Consumer Attorneys of California, suggests that data doesn’t support claims of lawsuit abuse. He cites the National Center for State Courts’ Court Statistics Project report, which shows personal-injury lawsuits in California decreased by 38 percent between 2001 and 2011.

“There is no litigation explosion in California,” Kabateck said. “Are there always lawsuits that are being filed that don’t have merit? Of course. It happens. There are always bad lawyers out there, and there are bad lawsuits. But I believe our justice system in California works, and I believe bad lawsuits get weeded out.”

He adds that the report also ranks California 28th in the number of civil lawsuits per capita, demonstrating that it fares better than states with the most filings of these lawsuits. He calls that a significant statistic, especially since 38 million people reside in the state.

“That’s more than the population of the entire country of Canada and more than the population of Australia, and almost more than the two of them combined,” he said. “It’s a big, giant state, and big, giant places sometimes have big problems. But this concept that somehow lawsuits and litigation are at the root of all evil in California is ridiculous.”

Scott remains unconvinced, contending that if California spends millions or even billions of dollars on litigation each year, it affects both current and future economic development.

“If businesses do not find California an appealing place to start, grow or relocate a business, they will go elsewhere, taking vital jobs, services and tax revenue with them,” he said.

Louisiana: Opinion: Throw Me Something, Mister!

manager — Thu, 09 May 2013 21:25:20 +0000

Teaser

Louisiana’s business climate is litigious, to say the least. Or to be blunt, our state is extremely sue-happy. Louisiana currently ranks 49th in the nation by a recent national study for having a litigious climate to conduct business.

Publication and Date

The Louisiana Record, May 3, 2013

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By DON BRIGGS

President, Louisiana Oil & Gas Association

How does this translate to our Louisiana companies? Specifically in the oil and gas industry, nearly 300 legacy lawsuits have been filed against oil and gas operators who have drilled in Louisiana, with some of the drilling activity dating back five and six decades ago. Over 2,500 defendants are listed in the cases.

Legacy lawsuits are lawsuits filed by a landowner claiming that oil and gas operations, often many years ago, allegedly caused his/her property to become polluted and contaminated. A recent LSU study on legacy lawsuits denotes that the suits have led to the loss of nearly 1,200 new wells and 30,000 jobs in Louisiana, translating to an astonishing $6.8 billion dollars in lost drilling investments.

South Louisiana land drilling activity is facing fluctuating record lows. According to many of the oil and gas operators, this low drilling activity is directly correlated to these frivolous legacy suits. One operator recently told me that he currently employs over 300 employees who operate drilling rigs, well servicing rigs and a manufacturing plant for both the upstream and downstream segments of the energy business. His company is now tied up in a legacy suit, dating back to the 60’s, which could end up costing his organization between 6-7 million dollars.

The end result for this company should the courts rule in the landowners favor: over 300 employees could be fired and a company founded in the 1940s could close down. (Important to note that the companies being sued for these alleged violations dating back to the 1930’s, were operating under the proper procedures and laws of the state for that time.)

If you think that oil and gas operators are the only industry being hit by this asinine legal climate, think again. Insured motorists in Louisiana have the highest premium rates in the country. Louisiana taxpayers pay an average of $1,000 per year more than other states. When asked why the rates are so high, a general manager for an agency with over 60 locations throughout Louisiana and Texas, was quoted as saying, “The litigious nature of people in the state make it difficult for insurance companies to keep costs low.”

Whether a judge, a legislator or a citizen, our view should not be “Throw Me Something, Mister!” When a company considers moving into a state to conduct business, no matter if they are oil and gas, insurance or even manufacturing, they are not willing to operate in a state with a litigious legal climate. Competition for our state’s economic development is now 100 yards across the state line. To say our state needs legal reform is the understatement of the year.

Chevron CEO ordered to testify in fraud case against Ecuadoreans

manager — Thu, 09 May 2013 14:25:21 +0000

Teaser

A judge on Tuesday ruled that Chevron Corp's chief executive must testify in the U.S. oil company's fraud case against Ecuadoreans seeking to collect on a $19 billion judgment against Chevron related to rainforest pollution.

Publication and Date

Reuters, May 7, 2013

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By Braden Reddall

(Reuters) - A judge on Tuesday ruled that Chevron Corp's chief executive must testify in the U.S. oil company's fraud case against Ecuadoreans seeking to collect on a $19 billion judgment against Chevron related to rainforest pollution.

John Watson, who became CEO of Chevron in 2010 and had helped integrate Texaco after Chevron's 2001 purchase of the company gave it ownership of the long-running Ecuador case, could give his deposition before an end-of-May deadline for evidence-gathering ahead of the October fraud trial in New York, a spokesman for the Ecuadoreans said.

"To be sure, the rancorous history of this litigation lends credibility to Chevron's concern that the deposition has been noticed for purposes of harassment," James Francis, a magistrate judge in federal court in Manhattan, wrote in his ruling. "On the other hand, there is little doubt that Mr. Watson has relevant knowledge."

Beyond his monitoring of the litigation in the three years since he became CEO, Watson's experience leading the integration of Chevron-Texaco likely gave him personal knowledge of the issues underlying the Ecuador trial, Francis wrote.

"This is far from a trivial case," he added. "Enough is at stake to justify the deposition of an apex witness like Mr. Watson."

Chevron said in a statement that it "will of course comply with all orders of the court as it participates in the discovery process that continues to expose the plaintiffs' lawyers' fraud."

The Ecuadorean plaintiffs won the $19 billion-dollar judgment in their own country in 2011, after having first brought the case in New York court in 1993 before it moved to South America about a decade later. The environmental damage was supposedly caused by Texaco when it operated in Ecuador from 1964 to 1992.

Chevron says the Ecuador ruling is based on tainted evidence and therefore unenforceable. The Ecuadoreans have yet to collect on the award and are trying to enforce the judgment in countries where Chevron operates. Their action in Canada was halted by a judge there last week.

Francis also ruled that depositions could be taken from Edward Scott, general counsel of Chevron's global upstream and gas group, and Kroll Inc, an investigative and risk management company that Chevron retained in connection with the various related litigations.

The case is Chevron Corp v. Donziger et al, U.S. District Court, Southern District of New York, No. 11-00691.

Missouri: The need for tort reform

manager — Thu, 09 May 2013 13:40:52 +0000

Teaser

Back in 2005, the General Assembly passed legislation capping medical malpractice awards. Before this, medical malpractice awards for “noneconomic damages,” such as “pain and suffering,” were capped at $579,000. The 2005 law lowered it to $350,000. The move was done to control the rising rates of medical malpractice insurance, which were driving up healthcare costs, and to reduce lawsuits, which were getting out-of-hand.

Publication and Date

Daily Journal, May 8, 2013

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By Wayne Wallingford, State Senator

The legislation worked. Medical malpractice insurance rates leveled out and have remained stable. The number of lawsuits dropped, victims continued to receive compensation for their personal injury and doctors stayed in Missouri. For the most part, the whole topic became a settled issue. Until last year.

Last July, in the case of Watts v. Cox Medical Centers, the state Supreme Court ruled in a 4-3 decision that the state’s cap on jury awards for noneconomic damages in medical malpractice cases was unconstitutional, effectively removing the limit. We’ve now returned to the pre-cap days, with all the same problems just waiting to pop back up.

On Tuesday, the Senate spent more than eight hours debating House Bill 112, which would re-establish the caps on medical malpractice jury awards for non-economic damages. This is, without a doubt, one of the more difficult issues facing the Legislature. It’s also one of the most important. At stake is the quality and cost of medical care for Missouri citizens.

Sound policy balances the interests of both sides of an issue. Lawmakers are often in the position of playing Goldilocks, seeking policy that’s not too hot, not too cold, but just right. If the law is skewed in favor of either side, the consequences can be devastating for the state.

No one denies that victims of medical malpractice are entitled to equitable remuneration. If a surgeon leaves a scalpel inside you, you deserve compensation. However, if juries are given carte blanche to hand out huge awards, often out of some mistaken attempt at “justice” instead of what’s actually fair, the health care industry will be hard-hit. Malpractice insurance premiums will skyrocket, and with them, health care costs. Doctors will move to states that favor sensible malpractice caps. These outcomes benefit no one, least of all the people of Missouri.

The duty before lawmakers now is to tip the scale back to the middle, to find the balance. As we saw Tuesday night, this is not an easy task. The legislation ultimately stalled and was laid aside for future debate. We will continue working towards a compromise on this issue.

The Senate gave final approval on Monday to legislation that would modify how prevailing wage amounts are calculated. As I’ve spoken about prevailing wage before, the system has been in need of reform for quite some time. The way the wage is figured is seriously flawed, resulting in wage amounts that are anything but representative of an area, especially in rural counties. These inflated rates, often based on collective bargaining agreements from metro areas, hamper many communities from starting county projects.

House Bill 34 makes a number of changes to the prevailing wage system to make it more reflective of what contractors actually earn in an area. Under the measure, the wage in third and fourth class counties would be figured using the most common wage, not the average, which often resulted in inflated rates. If there are no reports available for a particular year, the formula will take into account reports from the previous six years. If those are unavailable, the most recent reported wage in an adjoining county will be used. Only if all those options fail will the rate be based on collective bargaining agreements.

There are still issues to address. The current definition of “construction” under the prevailing wage is so vague and broad, just about any occupation could fall into the category. Also, we need to find a way to encourage employers to submit more wage surveys. This is probably the single biggest factor in the current system’s failings. However, House Bill 34 is a solid first step in fixing our prevailing wage. The bill now goes back to the House for consideration.

I always appreciate hearing your comments, opinions, and concerns. Please feel free to contact me in Jefferson City at (573) 751-2459. You may write me at Wayne Wallingford, Missouri Senate, State Capitol, Jefferson City, MO 65101, or email at wayne.wallingford@senate.mo.gov orwww.senate.mo.gov/wallingford.

JPMorgan to get names of confidential witnesses in class action

manager — Thu, 09 May 2013 12:00:00 +0000

Teaser

JPMorgan Chase & Co has won a court order requiring plaintiffs' lawyers pursuing a securities fraud lawsuit against it to disclose the identities of witnesses sourced anonymously in the complaint.

Publication and Date

Reuters, May 9, 2013

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By Nate Raymond

NEW YORK (Reuters) - JPMorgan Chase & Co has won a court order requiring plaintiffs' lawyers pursuing a securities fraud lawsuit against it to disclose the identities of witnesses sourced anonymously in the complaint.

The order on Tuesday by U.S. Magistrate Judge James Francis in Manhattan added to the growing list of cases in which judges have allowed defendants to probe unnamed "confidential witnesses" used to support investor class action claims.

Filed in 2009, the lawsuit against the bank is one of a series of lawsuits by investors in mortgage-backed securities that went sour during the housing meltdown and 2008 financial crisis. Robbins Geller Rudman & Dowd represents the lead plaintiffs, while Sidley Austin is defending JPMorgan.

Neither Arthur Leahy of Robbins Geller nor a spokeswoman for JPMorgan responded to requests for comment.

Tuesday's order came a week after U.S. District Judge Colleen McMahon ordered the disclosure of the names of nine witnesses cited in a securities fraud lawsuit against Aeropostale Inc.

In securities class actions, confidential witnesses typically are former employees of the defendant company. To sufficiently allege fraud in lawsuits, plaintiffs' lawyers often hire private investigators to find former employees and get information about a company's operations that they can use to bolster complaints.

But defendants have increasingly pushed back and sought the names of these anonymous witnesses. Some once confidential witnesses have later disputed saying what the plaintiffs have attributed to them.

In the JPMorgan case, U.S. District Judge John Koeltl in March 2011 partially denied the bank's motion to dismiss the lawsuit, allowing the case to move forward.

Earlier this year, the judge expanded the potential liability JPMorgan faces. He held that the lead plaintiffs - Laborers Pension Trust Fund for Northern California and Construction Laborers Pension Trust for Southern California - have standing to pursue claims on behalf of investors in mortgage-backed certificates they did not own but that stemmed from the same offering.

The lawsuit is now on track to move toward the next stage when the plaintiffs move for class certification.

CONFIDENTIAL ID'S PRIVILEGED?

Likely in anticipation of that motion, JPMorgan's lawyers at Sidley Austin sought the names of confidential witnesses cited in 15 paragraphs of the complaint.

Robbins Geller objected, contending the witnesses' identities were protected as attorney work product. They also contended they already fulfilled any duty to disclose the names by providing a list of 44 individuals who may have relevant information and that included the confidential witnesses.

Francis, in siding with JPMorgan, said that while some judges in New York have disagreed to some extent about whether confidential informants' identities are privileged, the majority view has been the names can be disclosed.

"Furthermore, leaving the defendants to contact all 44 individuals to identify the confidential informants would be costly and time-consuming where the lead plaintiffs can easily provide the same information," he said.

The judge said that to the extent any of the confidential witnesses have concerns about possible retaliation in a current or future job, Robbins Geller could within two weeks address the court to determine whether maintaining anonymity was justified.

The law firm's use of confidential witnesses has come under scrutiny before.

In another of its cases, the 7th U.S. Circuit Court of Appeals in March upheld the dismissal of a securities class action against Boeing Co in which a key confidential witness disputed saying almost everything the complaint attributed to him.

The appellate court sent the Boeing case back to a Chicago judge to decide if Robbins Geller should be sanctioned. Eric Isaacson, a Robbins Geller partner who argued the appeal, did not respond to a request for comment Wednesday.

The case is Fort Worth Employees' Retirement Fund v. JPMorgan Chase & Co, U.S. District Court, Southern District of New York, No. 09-03701.

For the lead plaintiffs: Arthur Leahy, Jonah Goldstein, Scott Saham, Susan Taylor, Thomas Egler, Samuel Rudman and David Rosenfeld of Robbins Geller Rudman & Dowd.

For JPMorgan: Robert Pietrzak, Andrew Stern and Dorothy Spenner of Sidley Austin.

Why The Shale Miracle Has Happened In Texas

manager — Mon, 06 May 2013 20:42:38 +0000

Teaser

On his Carpe Diem blog on April 29, economist Mark J. Perry called the rapid increase in Texas oil output over the last few years “one of the most remarkable energy success stories in US history."

Publication and Date

Forbes, May 1, 2013

Body

David Blackmon

On his Carpe Diem blog on April 29, economist Mark J. Perry called the rapid increase in Texas oil output over the last few years “one of the most remarkable energy success stories in US history”.

He’s right. The rapidity with which oil and gas operators have ramped up development of huge oil-containing Texas shale formations, such as the Eagle Ford Shale in South Texas and the Wolfcamp/Wolfberry play in the Permian Basin, has been truly astonishing. Just three years ago, Texas statewide oil production had bottomed out at just more than 1.1 million barrels a day after a 25 year decline from the boom times of the early 1980s. By February of this year, that daily output had more than doubled, to 2.295 million barrels a day. “Astonishing” may not be a strong enough word, but I’m out of adjectives here.

The next day, on April 30, Kate Galbraith, writing in the Texas Tribune online newspaper, detailed what that rapid rise in oil production means to the Texas state treasury. Quoting James Lebas, a highly regarded fiscal consultant in Austin, the story relates that the oil and gas industry paid approximately $12 billion in Texas taxes during 2012, “up from $9.25 billion in 2011 and $7.4 billion in 2010.”

“It would be unambiguously positive for the state fiscal situation and local [economies], if oil production continues to rise,” LeBas said. “For most of my lifetime, it has been falling.”

“Unambiguously positive” is a great way to describe the effect the current oil boom is having on the Texas economy, and it is why the state’s economy has significantly outperformed the national economy in recent years. One important thing to understand is that economists will tell you that every dollar of capital invested by the oil and gas industry in Texas has a multiplier effect of an additional $3 to $4 in associated economic activity. When the oil industry is booming, every hotel is full, every café is crowded, clothing stores can’t keep enough socks, underwear and khakis on the shelves, and local supermarkets tend to run out of milk and eggs before each day is through.

So while Mr. Lebas quotes tax dollars associated directly with the oil and gas activity, it’s important to understand that the state has collected billions more dollars from associated economic activity in recent years. Thus, when the Texas legislature convened in January of this year, it faced the happy situation of having a budget surplus of $8 to $10 billion to work with over the next biennium. This compared to a revenue shortfall of around $25 billion the legislature had to deal with during its 2011 session. That’s a big difference in just a few years, and it has helped make this session one of the least partisan sessions in recent memory in Texas.

The other happy situation the legislature found upon convening was the fact that it would have about $12 billion additional dollars to work with in the state’s Rainy Day fund, which happens to be almost entirely funded by – guess what? – the state’s oil and gas severance taxes. Portions of this huge balance in the Rainy Day fund are currently being targeted by various pieces of proposed legislation to fund the state’s Water Plan, help counties with high levels of oil and gas activity to repair county roads, and to add additional money to the state’s public education system.

This is all happening in Texas for a variety of reasons, among them being: a) Texas is fortunate to have a variety of world-class oil and gas reservoirs beneath its surface; b) Texans are by and large used to having the oil and gas industry active in their communities and understand the benefits it provides; and c) the Texas state government works very hard to maintain a healthy legal and regulatory environment in which to do business.

Items b) and c) above are the factors that differentiate Texas from states like New York and California. Those two states also have world class oil and natural gas resources beneath their collective feet, but seem to be almost constitutionally incapable of taking advantage of them. The policymakers in these states really have very little understanding of the benefits of a healthy oil and gas industry – or really any industry, for that matter – and that makes them more vulnerable to falling prey to the phony arguments and fake “studies” put out by anti-fracking activists.

In Texas, policymakers are educated enough about the industry to identify nonsense as nonsense pretty much as soon as they see it. In New York, you have a Governor who appears to have adopted the anti-fracking movement’s transparent and interminable “study and delay” tactics as his official mantra for putting off any decision to develop that state’s rich shale natural gas reserves until after he leaves office. In California, Governor Jerry Brown appears ready to approve development of the enormous Monterrey oil shale – which some are projecting may turn out to be the largest oil resource ever discovered in North America – but is having a hard time overcoming a recalcitrant legislature filled with reactionary members like Assemblywoman Holly Mitchell, D-Los Angeles, who filed a bill on April 29 that would impose a moratorium on hydraulic fracturing until more “studies” can be conducted.

In other words, Ms. Mitchell most likely filed a bill that had been handed to her by one of the myriad anti-fracking activist groups that specialize in creating fear and uncertainty among policymakers who know little about the subject at hand. That’s how it works, all over the country.

Meanwhile, while all this “study and delay” is going on, California and New York continue to lose businesses in droves, many of which relocate to Texas, whose booming economy runs circles around their own. There’s no mystery how and why this is happening. The only mystery is why timid policymakers in California and New York can’t grasp the clear reasons why their own state economies continue to lag so far behind.

God Bless Texas.