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Saturday, August 12, 2006

Talmudic Simplicity and the Law

The last post about the surface simplicity and underlying complexity of Article 9 reminded me of one of my last forays as a litigator before my first mid-life crisis in which I came to terms with how much I despised litigation and bolted into the corporate group.  Some say it was because I somehow managed to lose two cases it was seemingly impossible to lose (the latter was one in which I somehow managed to lose a stipulated motion, but that's a story for another time). 

In 1989, my partner Don Young and I tried a tremendously interesting case in the federal district court in Detroit.  We represented an outfit known as the Michigan Property & Casualty Guaranty Association.  This was a creature of state insurance regulation, and existed to deal with the effects of insurer insolvency (akin to but not exactly like what the FDIC would do if a bank went belly up).  In short, if there were an insurance company insolvency, the staff of this little association would estimate the claims that needed to be paid, and the solvent insurance companies would be assessed pro-rata by how much insurance premium they wrote in Michigan.

One of the neat twists of the statute was something called the "net worth" exception.  If you were an insured with a worthless policy, but your net worth exceeded an amount determined by a statutory formula, you had to bear the loss yourself, and were not entitled to reimbursement from the association.  The Association denied coverage for a large supermarket chain in the Detroit area (known as Farmer Jack's), and got sued in federal court on the grounds that the net worth provision violated the equal protection clause of the 14th Amendment.

To find out what happened, continue below the fold.

As any first year constitutional law student knows, this is a case that never should have gone to trial, and that is the point of Talmudic simplicity.  In socio-economic legislation, not invoking a discrete and insular class under footnote 14 of the Carolene Products case (yes, Bill Cohen, I still remember it!), the test is whether the legislature had any conceivable rational basis, whether or not articulated, for the disparate treatment under the statute.  Nevertheless, the court denied our motion for summary judgment (which as I recall made the point that the Michigan legislature could have concluded (a) that wealthy insureds could bear the loss, or (b) that wealthy insureds would have known to assess carefully the credit rating and financial wherewithal of their insurers).  We proceeded to a six day trial in which the plaintiffs put on experts to say the statute was irrational because net worth didn't have anything to do with anything, and we rebutted with our own experts, figuring that, given the standard, all we had to do to win was not try the case in Esperanto.

I may have been the first lawyer ever to begin a closing argument with the Talmudic story of those great rival rabbis of the early Common Era, Hillel and  Shammai, and the skeptic.  As the story goes, the skeptic first went to the irascible Shammai, and asked "can you teach me the Law while I stand on one foot?"  Shammai, consistent with his personality, applied one foot to the skeptic's tuchas, and booted him out the door.  So the skeptic went to the wise and gentle Hillel, and asked the same question.  Hillel responded, "Of course.   All of the law is simply this:  what is hateful to you, do not do unto another.  All the rest is commentary.  Now go and study."

The point was to say to the judge: it's very simple; it's all in the standard of review, and I need not say anything more about the evidence for the statute to be upheld (I did say more, but it would have been a gutsy thing to sit down right then).

To come back to the theme from the beginning, you cannot lose a rational basis case like this.  But I did.  I wondered later if I lost her in the story of Hillel and Shammai, but, no, she just didn't understand the standard of review.   To find out how it all came out in the end, see Borman's, Inc. v. Mich. Prop. & Cas. Guar. Ass'n, 925 F.2d 160 (6th Cir. 1991).

Posted by Jeff Lipshaw on August 12, 2006 at 07:51 PM in Constitutional thoughts, Lipshaw | Permalink


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Thanks for your response - I read the opinions, and like you said the appellate court didn't waste many words reversing. It's funny that you can have a winning case, argued and briefed correctly, and still lose. A drag to explain to the client, I would imagine. But that's life, eh?

Posted by: Guest | Aug 13, 2006 11:27:46 AM

The first lesson of litigation is "sometimes crazy sh-- happens in litigation." There's no such thing as a can't lose case. I've won cases I should have lost, even when the law seemed to point the other way. I've lost cases where the record simply couldn't support an adverse result. You shrug your shoulders and move on to the next phase of the case.

Posted by: anon | Aug 12, 2006 10:53:00 PM

My first goal in oral advocacy was to make sure the court understood my point, believing that understanding was fundamental to persuasion. Sometimes you can feel very clearly that the judge understood what you said, but you lose because you deserve to lose on the merits. That approach imposes on the advocate the burden of having a position worthy of being understood.

Sometimes you think the judge understands and he or she doesn't. I thought Judge Hackett understood the argument (it's been seventeen years, but I don't recall that she asked many questions), but when she issued the opinion, notwithstanding briefs and argument, she went straight to the question whether the statute made any sense, not whether her review was limited to rational basis. The fact that we had a six day trial did not bode well to begin with.

Allusions or analogies can be a mixed bag; I usually tried them out on a few people before using them in a big argument to make sure the point did not get lost in the allusion. I don't think that was the problem here.

The punch line is that the 6th Circuit DID understand the standard, and reversed her in a very brief opinion.

Posted by: Jeff Lipshaw | Aug 12, 2006 10:46:51 PM

So do you think you actually did something wrong there? Do you have any way of knowing?

Posted by: Guest | Aug 12, 2006 10:31:00 PM

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