WSJ: Specter of Unlimited Liability, Sen has a couple of favors for the tort bar …mentions Scruggs

Arlen Specter became a Democrat this year, but there’s one party we’re confident the Pennsylvania Senator will never abandon—the trial bar. He’s recently introduced legislation to repeal two important Supreme Court business rulings in order to create a new lawsuit bonanza.

In Stoneridge v. Scientific Atlanta, five Justices ruled in 2008 that companies can’t be sued merely for doing business with another firm that commits fraud. This followed the 1994 precedent in Central Bank of Denver v. First Interstate Bank of Denver, in which the Justices limited liability claims against alleged “aiders and abettors.” Both decisions undermine “scheme liability” suits, which are the kind of elastic legal claim that gives U.S. civil justice a bad name.

Enter Mr. Specter and Rhode Island’s Jack Reed, who say the decisions deny fraud victims their day in court. Their bill would amend the 1934 Securities Exchange Act specifically to authorize a private right of action for aiding-and-abetting liability. The two Supreme Court rulings interpreted the law narrowly to apply only to primary offenders, who can still be sued by genuine—and even not-so-genuine—victims of fraud.

o show what a loyal tort-lobby servant he is, Mr. Specter has also introduced a bill to let attorneys claim an up-front tax deduction on expenses they incur while building contingency fee cases. Amazing but true: Mr. Specter wants to give a tax cut to sustain the likes of Mel Weiss or Dickie Scruggs in the yachts to which they have become accustomed while they await jackpot jury verdicts. Even Democrats are too embarrassed by this giveaway (estimated cost: $1.6 billion) to pass it as a stand-alone bill, so tort lobbyist Linda Lipsen recently said “we have to tuck it into something” else, such as another “tax vehicle.”

Wall Street Journal
8/10/9