Imagine you are the head of a company that loses a multi-million dollar lawsuit. Then imagine the public outcry if you announced that you were going to raise your prices to pay off the lawsuit. Would the public get incensed? Would you lose business? Likely both. It’s even somewhat likely in this litigious climate in which we live that the decision to raise prices to payoff the lawsuit would spawn yet another lawsuit against you. Ah, but we are talking business, aren’t we?
Now imagine that you are a city government and a court finds out that you’ve ripped off hundreds of thousands of your city water customers by wildly overcharging them for installing new fire hydrants. Imagine that you’ve been ordered by the courts to rebate $22 million to those city water customers. And then imagine that you announce that the rebates will be paid for by taxing the city water at an even higher rate than before.
In other words, you, the city, will be expecting the water customers to pay for their own rebates by charging them higher rates to fund that same rebate. Yes, the same “customers” that have no competition for water and no choice but to pay through the nose will be paying themselves their own rebate.
Well, then welcome to Seattle where this is precisely the case. And also welcome to a perfect example of why government is legalized theft.
Now, let’s understand exactly what a court ordered rebate, or the loss of a lawsuit is supposed to be. A rebate is the idea of refunding money to a customer fraudulently charged. The loss of a lawsuit is supposed to be a punishment.
If you as a customer are told you are getting a “rebate” but are then told that your prices are going up to pay for the “rebate” then you simply are not getting a rebate. You are paying more in to get it right back in the form of a “rebate.” This is no rebate at all.
And worse, does anyone really expect that once this faux “rebate” is “paid for” by the higher rates that the city will then lower the water bills? Or isn’t it far more likely that the rates will stay artificially high forever more?
In the world in which real people live, a lawsuit is paid by profits. Prices aren’t wildly raised to pay for a punishment. Competition would preclude such a measure, in any case. If one company raises prices to pay off a lawsuit, it would lose business to competitors that have retained the lower prices. So, the loss of a lawsuit is suitable punishment by hurting the bottom line and teaching the company a lesson against doing whatever it was that caused the lawsuit in the first place. This is the ideal situation or the way it is supposed to work.
But not if you’re government. If you’re government and you get sued no lesson need be learned at all. You’ll just force the very people who you wronged to pay for your transgressions, further wronging them.
Government is pernicious in the most pure definition of the word.
(Image credit: mylegaladvance.com)
Moe Lane
Steve Maley
Dan McLaughlin
Neil Stevens
Daniel Horowitz
I guess I figure it's time people learned this lesson.
itrytobenice (Diary) Tuesday, February 17th at 8:12AM EST (link)Companies don’t pay for lawsuits and abuses of the legal system. People do. Stockholders and customers pay for potential and actual losses.
And you are wrong that competition precludes companies from passing it on. Yes, stockholders get screwed for some of it, but companies do increase their prices to cover the expenses and more than that, enormous sums of money are wasted on lawsuit prevention stupidity.
Proper grammar saves lives.
Let’s eat Grandma.
Let’s eat, Grandma.
Really?
evanm (Diary) Tuesday, February 17th at 8:51AM EST (link)Companies don’t pay for lawsuits and abuses of the legal system. People do. Stockholders and customers pay for potential and actual losses.
Supposing it wasn’t the stockholders who paid, but instead the “companies,” based on whatever definition you’re using for ‘company’. Remember that companies aren’t physical things; they’re just an interconnection of people and property. So where does the money come from? From assets? From people other than stockholders? Which people should pay when a company loses a suit, if not the stockholders?
And you are wrong that competition precludes companies from passing it on. Yes, stockholders get screwed for some of it, but companies do increase their prices to cover the expenses…
True. But if you’re the customer who buys a more expensive product, ceteris paribus, the price of which was raised to cover lawsuit costs, do you really have room to complain?
…enormous sums of money are wasted on lawsuit prevention stupidity.
“Wasted” is obviously relative. Do you contend that more money is wasted on lawsuit prevention than would be wasted in the lawsuits it prevents?
Mind you, I’m an attorney in a state with a stupid “case evaluation” scheme to prevent lawsuits.
One thing at a time.
itrytobenice (Diary) Tuesday, February 17th at 10:48PM EST (link)Remember that companies aren’t physical things; they’re just an interconnection of people and property.
No $h!t Sherlock. Glad you could figure that one out.
where does the money come from? From assets? From people other than stockholders? Which people should pay when a company loses a suit, if not the stockholders?
I didn’t say the shareholders shouldn’t pay for losses. But I think it is indisputable that many ignorant people think of companies as these nameless, faceless piggy banks full of money that should be taxed, regulated and penalized because this nameless, faceless beast has no relationship to any person or their 401K.
Which leads to a jury of 12 people who are definitely *not* my peers awarding obscene amounts of money for what should have been a dismissed case.
But if you’re the customer who buys a more expensive product, ceteris paribus, the price of which was raised to cover lawsuit costs, do you really have room to complain?
Problem is… all of us, every company and every person, are paying out expenses due to lawsuit abuse. Whether it is higher insurance premiums, settlements or just CYA expenses, you can’t buy anything from anyone whose expenses aren’t negatively affected by our jackpot justice system.
Do you contend that more money is wasted on lawsuit prevention than would be wasted in the lawsuits it prevents?
No, but it’s wasted anyway. If I throw away a hundred dollars to keep from throwing away a thousand dollars have I gained anything?
Mind you, I’m an attorney in a state with a stupid “case evaluation” scheme to prevent lawsuits.
Laws are written by lawyers. Of course they are stupid.
And you know what they say…the 99% of crooked, sneaky, lying, greasy lawyers give the 1% of good lawyers a bad name.
Proper grammar saves lives.
Let’s eat Grandma.
Let’s eat, Grandma.
I don't think either of use realized how much we agree on.
evanm (Diary) Thursday, February 19th at 1:56PM EST (link)No $h!t Sherlock. Glad you could figure that one out.
So I guess you came to this revelation sometime between when you posted that “Companies don’t pay for lawsuits and abuses of the legal system. People do…” and I posted my reply. I suppose my work is done on that point.
I didn’t say the shareholders shouldn’t pay for losses. But I think it is indisputable that many ignorant people think of companies as these nameless, faceless piggy banks full of money that should be taxed, regulated and penalized because this nameless, faceless beast has no relationship to any person or their 401K.
Except you did say: …this nameless, faceless beast has no relationship to any person or their 401K. It would be kind of odd if you thought that the stockholder should pay for damages despite that disconnect. The issue of tort reform is not who should have to pay, but whether anybody should pay a level of damages at all.
Problem is… all of us, every company and every person, are paying out expenses due to lawsuit abuse. Whether it is higher insurance premiums, settlements or just CYA expenses, you can’t buy anything from anyone whose expenses aren’t negatively affected by our jackpot justice system.
Exacty. Which is why “lawsuit prevention stupidity” makes a lot of sense.
No, but it’s wasted anyway. If I throw away a hundred dollars to keep from throwing away a thousand dollars have I gained anything?
Again, “spent” != “wasted.” If there was no better alternative for you to avoid throwing away a thousand dollars, then the hundred is a bargain. By your logic, spending $1 on a settlement, or dismissal, or whatever, to avoid a $1,000,000 verdict, would be wasting a dollar. But like I said, “wasted” is relative; unless there was a cheaper way, you cannot consider a cost a waste. I think we both agree that some of the suit-avoidance schemes in this country are needlessly complicated, but that doesn’t mean we rid ourselves of “lawsuit prevention stupidity” just because it has an associated cost. You would have noticed I agreed if you could have gotten past the word “attorney” in my last sentence. Instead, you gave this:
Laws are written by lawyers. Of course they are stupid.
And you know what they say…the 99% of crooked, sneaky, lying, greasy lawyers give the 1% of good lawyers a bad name.
You stay classy, bro.
I don't know if you have a reading comprehension problem
itrytobenice (Diary) Friday, February 20th at 7:21PM EST (link)or if you are just having trouble elucidating your arguments, but I tire of conversing with you.
Proper grammar saves lives.
Let’s eat Grandma.
Let’s eat, Grandma.
I think I'd join the Seattle "tea party"
Steph C (Diary) Tuesday, February 17th at 8:26AM EST (link)They’re protesting over the stimulus bill but seems to me that it’s not “just the stimulus bill” that’s the problem.
TVA talked about doing the same here in TN to defray the costs of the impending lawsuits over the coal ash spills (one here and one in AL) but the last news on that is they’re lowering their rates by 7% (IIRC) although not as low as the 20% they were raised a few months back. In addition to that, we get something called a fuel cost adjustment charge that never seems to change no matter how much the fuel prices change (gas/diesel prices are part of the price of other fuels, too, since it’s used as the primary transport fuel). If anything that goes up more than down.
This is happening all over the nation and the government looks at polls run by a biased media as their guideposts for governance. I hear more and more rumblings about the Revolution lately than I can recall hearing in the last decade in total. People tend to forget there was a lot of talk, talk, talk and more talk, talk, talk long before the violence started. One wonders how much more The People will take before talk is done and the violence starts.
Another problem in the tax fight is that even if you win the fight to block tax hikes you still pay for it on the back end with the rate changes of government owned businesses and FEES. Look at your bills, all of them; phone, cell phone, cable, satellite, electricity, water, etc and you’ll see all sorts of fees on there with no real explanation of why we have to pay them and each one of them has at least two different fees on it and most have 3 or more.
No matter how you look at it, government will enrich itself at the expense of the people.
“[I]f the public are bound to yield obedience to laws to which they cannot give their approbation, they are slaves to those who make such laws and enforce them.” –Candidus in the Boston Gazette, 1772
Hillbilly Politics
StephC, I saw a TVA spokesman on the news the other night-
janis (Diary) Saturday, February 21st at 1:08PM EST (link)he was asked about why the fuel cost adjustment stayed the same even though gas had gone down. He said that gas had gone down, but the price of coal had skyrocketed. Can’t see that changing, give the O Administration’s position on bankrupting the clean coal industry.
Well...
Steph C (Diary) Saturday, February 21st at 1:56PM EST (link)I’ll just have to see if that’s true or if it just sounded good enough to get the guy through the interview.
“[I]f the public are bound to yield obedience to laws to which they cannot give their approbation, they are slaves to those who make such laws and enforce them.” –Candidus in the Boston Gazette, 1772
Hillbilly Politics
Not surprisingly,
Steph C (Diary) Saturday, February 21st at 2:11PM EST (link)He lied.
They were up very high but now they’re back to near or below normal.
“[I]f the public are bound to yield obedience to laws to which they cannot give their approbation, they are slaves to those who make such laws and enforce them.” –Candidus in the Boston Gazette, 1772
Hillbilly Politics
Oh Steph! say it ain't so! A utility company spokesman LIED?
janis (Diary) Saturday, February 21st at 2:25PM EST (link)Next thing you’re going to tell me is that the feds have run out of unicorn coupons as well. On a related note, I decided to take the high road and pay for my own digital converter box instead of getting a government coupon. Nobody told me until it was too late that getting the converter box is just the opening salvo in a spending process. Next comes the antenna tryout–two increasingly more expensive indoor ones that did nothing, and now on to one even more expensive outdoor antenna. All in an attempt to be able to see “24″ by Monday night at 8:00. (Told the guy at Radio Shack that if the outdoor one didn’t do the job, my husband and I would be at their door by 7:55 Monday night with popcorn and beer. Little sales guy grinned thinking I was kidding– I wasn’t.)
Some months
Steph C (Diary) Saturday, February 21st at 3:05PM EST (link)That FCA constitutes neraly a third of my electric bill.
I tell ya… as far as that converter box is concerned… when that switchover happens… whenever that is… and my TVs go out, they can go in the trash or something. I hardly watch it now and I don’t trust them not to fiddle with things to where what little I do watch I wouldn’t be able to get anyway.
“[I]f the public are bound to yield obedience to laws to which they cannot give their approbation, they are slaves to those who make such laws and enforce them.” –Candidus in the Boston Gazette, 1772
Hillbilly Politics
Here's a quote on that subject
1SGinTN (Diary) Tuesday, February 17th at 9:49AM EST (link)“The State is the great predatory enemy of the human race, the State is, in its very being, the organization and regularization of predation, exploitation, and robbery.”
Murray Rothbard
The Constitution is the people’s method to control the State at the national level. State and local charters and constitutions should be the tools at the local level. The problem is, we tend to cede control of the methods and tools to the predators, exploiters, and robbers.
Tu Ne Cede Malis
-Virgil
Please don't interrupt me,
johnt Tuesday, February 17th at 11:13AM EST (link)I’m trying to focus on the greed of the private sector.
“a man’s admiration for absolute government is proportinate to the contempt he feels for those around him”. Tocqueville
Irony != Theft
Chris_B Wednesday, February 18th at 1:04AM EST (link)If the city of Seattle overcharges its customers, gets sued, then has to pay back its customers, how else is it going to do it? Aren’t the customers and the city the same thing? Should they charge Topeka exorbitant fees?
The problem in Seattle was that the money should have come from the city’s general fund – not its water fund. So they are going to have to find the money somewhere. It could come out of school and police funding. They could raise property taxes. They could cut other services. But, in the end, the people in Seattle are going to have to pay for this.
The approach the city council is taking is ironic, but it’s pretty dumb to say that they’re stealing from the citizens. The only people who benefit from this entire situation are, of course, lawyers (to the tune of about $4.2 million). The rest of the money is going to come out of the tax base and from budget cuts elsewhere.