Lawyers be a-ballin'?

Canadian lawyers protest legal aid de-funding in 2014
(Sally T. Buck via Flickr CC BY-NC-ND 2.0).
My wife was a legal services attorney after law school.
Her salary could not have paid both law school debt
and even a modest mortgage.

A student loan specialist giving advice on The Takeaway this morning said, "Don't live like a lawyer when you're a student, and you won't live like a student when you're a lawyer."

Betsy Mayotte, founder and president of The Institute of Student Loan Advisors, was repeating an aphorism, she said, as a caution against students borrowing more than they need for higher education. Don't count on any program for loan forgiveness, she warned; rather, assume that you'll have to pay back every dime.*

That's sound, conservative economic advice, especially for an America stretched thin on credit card debt and short on long-term savings. But for anything, I could not work out how the aphorism embodied the message.

What does it mean to "live like a lawyer"?

Mayotte had just cautioned students that they should take the time, however boring the task sounds, to read the whole of their promissory notes. The notes well explain what borrowers are in for, she advised, and "no one told me that" will not later be an excuse to default on debt.

Also good advice. But doesn't living like a lawyer mean being supremely attentive to the fine print and acting conservatively in anticipation of adverse circumstances?

In her informative and insightful book, How to Be Sort of Happy in Law School, Professor Kathryne M. Young related research that successful lawyers are more often natural pessimists, marking a contrast with the successful optimists who have the lead in the other professions, clergy and medicine. That's because a lawyer's job is to prepare for the worst, while clergy and doctors are busy instead coaxing their clients toward a joyful salvation of one kind or another.

Did the aphorism mean to be an optimist when a student, so you don't have to be a student when you're a pessimist?  What does that even mean?

You, dear reader, are no doubt quicker on the draw than I, so you've probably worked it out. It dawned on me an hour or so later:

Don't live like a baller when you're poor, or you'll be poor when you're supposed to be ballin'.

The problem is that "lawyer" doesn't mean rich to me. 

I'm a lawyer. Not rich. My wife's a lawyer. Also not rich. I checked.

The vast majority of my former students work in public service jobs, if they're in JD-required positions at all. And even the few in private practice: not rich. Okay, I can think of one. But I think he was rich already.

Don't get me wrong. We're not struggling. Two JDs put our household income in the 90-something percentiles, according to the DQYDJ calculator, with me in the 90s as an individual and my wife, who has a master's degree, as well as her law degree, in the 70s. 

But income is only one measure of wealth, and, I daresay, not the most important. We both went into serious debt to get those JDs. Our home is mortgaged. We had not paid off our graduate education by the time our only child went to university. And we could not afford to get her through four years without her going into debt, too. 

Neither of us started off loaded. We still buy our clothes at Goodwill and Savers. Habits die hard. I just threw away my wife's socks with holes in them while she was out of the house. She won't do it. But I think she deserves better.

When I left law practice in 1996, I was making $50k, which is about $95k adjusted for inflation. I left that for my first job in academics, where I made $35k—$15k less than the IT guy. "Supply and demand," the dean said.

Now I make more. But after advancing in academics for 25 years, I still make less than the average lawyer in the mid-Atlantic, where I practiced, and just a little more than the nationwide average starting salary for a first-year associate.

The takeaway is that I don't associate being a lawyer with being rich. And it's alarming if people are going to law school with that expectation, or if that's how the public sees lawyers. "Kill all the lawyers" was the suggestion of a butcher.

I just finished some physical therapy for an injured shoulder. The bill for that, to my insurer, was $355 per hour. I saw a podiatry specialist recently. That was billed at $122 for what I think was scheduled as a 15-minute appointment, though it took less than 10.  We'll call it $488 per hour.  I like both those providers, but neither is a superstar gracing the cover of Physicians Weekly.

A very gross number, but the average U.S. lawyer's billable hour now runs about $300. The lawyer has more investment in education than the physical therapist, if a bit less than the doctor. The lawyer is a bargain. Clergy is a better bargain, but that's their thing.

Why isn't the saying, "Don't live like a doctor when you're a student, and you won't live like a student when you're a doctor"?

Well, of course, not everyone in healthcare is rich, either.  My wife had an ER visit and hospital stay, no procedures, last summer that was billed at about $13,000 for two days. At the same time, one of my nieces and one of my brothers work as nurses in hospitals; neither of them is making bank. Where's the money going?

I don't know what the right graduate school investment is to get rich. I didn't make it. Maybe whatever gets you to be a healthcare CEO. Be the owner of the hospital, not a provider in it.

Law and medicine can open the door to opportunity, to improve your lot if you're not living comfortably. I'm not knocking that. But no one should go into educational debt without a plan at least to do better than status quo. And plans should be based on realistic expectations.

The aphorism doesn't fit. Worse, it's dangerously misleading. We've got a problem in America with access to education and upward socioeconomic mobility. Simplifying the narrative to suggest that a professional degree will necessarily afford return on investment is not part of the solution.

* I've been reading about the challenges against the Biden student loan forgiveness order. You can follow the legal story at Reason. I'd love to see the plan go through; my daughter would benefit. I'm sorry to say, though, I think the challengers are right: the President exceeded his authority. The unfortunate political outcome, I predict, is that the Administration will be blamed for breaking a promise, and the Supreme Court will be blamed for enforcing the law, both thereby suffering unwarranted further damage to already embattled credibility. Meanwhile, Congress, which in fact held the key to untie the President's hands, but can't ween itself off addiction to money, and especially Democrats, who passed on a real opportunity to make a difference for access to education and socioeconomic opportunity, will escape accountability.

With regard to the title of this post, you can read more about the circumfix a-/-ing at Wiktionary. Read more about "the habitual be" at Slate.

I've been away from the blog for a while owing to an exhausting, if variably rewarding and challenging December and January. I'm back in the saddle now and look forward to catching up on some matters I'm eager to share. Thank you for your patience, and stay tuned!

Money can't redeem life, but don't think it doesn't help tort survivors

When my 1L Torts class studies wrongful death, I take the occasion to challenge the notion that money, based on quantified loss, is necessarily the best way to effect a liability award (cf. Prof. Andrew McClurg's gut-wrenching and classic Dead Sorrow).  Matthew R. Stevens, '21, posted the following on the class discussion board, and I think it makes a worthwhile complementary observation about tort awards in our age of debt and financial fragility.  Reprinted with permission.

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Some Thoughts on Wrongful Death Damages

by Matthew Stevens – Friday, January 25, 2019

Professor Peltz-Steele discussed the idea of money damages in wrongful death actions, and their ability to make up for what was lost. He challenged whether they really made that pain any better, and whether a $1,000,000 award helps any more than a $500,000 award. I just wanted to share my thoughts on a possible argument that the monetary damages could help make up for what is lost.

The loss of a family member is surely nothing short of a nightmare. The impending depression, stress, and various other negative emotions can impact someone’s life in irrepressible ways. No earthly remedy could ever truly provide perfect relief for such a loss. I think it could be argued, however, that money is well suited to lessen the impact of the loss.

According to a Case Western study [reported here by CNBC], increased income can actually cause a “reduction in negative emotions” (CNBC, para. 6). Furthermore, the study also found that higher incomes could “reduce the incidence of serious mental illness” (CNBC, para. 6). It is important to note that the study is dealing with annual incomes, and not large lump sums of cash. The study also notes that the increase in happiness shows diminished returns as you reach upwards of $160,000 a year (CNBC, fig. 2). I think this can be reconciled by looking at the damages award as a lump-sum salary. For example, if a father at the age of 40 received a wrongful death damages award of $1,000,000, you could divide that award by the remainder years before retirement (25) to create a net increase in annual income of $40,000. That increased “income” could statistically reduce his negative emotions, and reduce the chances of serious mental illness. An award of $500,000 would surely help, but over time it would not have as big of an effect, only creating an extra $20,000 in annual income. This of course is not a fix-all, but it is certainly a start to fix the unfixable.

Moreover, on the other side of the coin, issues with money statistically causes large amounts of stress. An APA survey in 2014 found that “72 percent of Americans reported feeling stressed about money at least some of the time during the past month” (APA, para. 3). Furthermore, 22% experienced “extreme stress” over money in the past month (APA, para. 3). The study goes even further to explain the types of issues stressing over money creates, including avoiding medical care, and being a major conflict in relationships (APA, para. 5). So then perhaps the increased monetary awards for wrongful death actions could effectively reduce stress in the claimant’s life. With a large influx of cash, it is arguable that a lot of money-induced stress would be taken out of the picture and increasing the claimant’s quality of life.

This of course was a quick look into the idea of monetary damages and their possible ability to remedy the loss of a loved one. I would like to reiterate that I don’t believe money can ever replace the loss of a loved one, but I’m simply saying there is an argument that money helps reduce the net loss of quality of life for the claimant. It does appear that the theory holds some weight, but with its issues: one major issue being the diminishing returns on happiness when income reaches a certain threshold. Perhaps this could be integrated into the analysis more, but I wanted to keep a small scope for the analysis.

The Mystery of the Student Loan Fraud, or Of In Pari Delicto, Respondeat Superior, et Cetera

A still mysterious financial fraud perpetrated on students of Merrimack College resulted in a high court ruling last week on agency law with important implications for tort liability and the equitable doctrine of in pari delicto.

Students at Merrimack College Orientation in 2015.
By Merrimack College (CC BY-NC-ND 2.0)

Merrimack is located in North Andover, Massachusetts (where the recent gas explosions occurred).  Merrimack is a small liberal arts college founded in the Roman Catholic tradition after World War II especially to serve returning vets.  Despite the depressed market in higher education, Merrimack this fall reported a record-size freshman class and plans to join Division I athletics.

In 2014, Merrimack financial aid director Christine Mordach pleaded guilty to federal criminal fraud charges, and in 2015, she was sentenced to a year’s imprisonment and ordered to pay $1.5 million in restitution.  She had been accused of perpetrating a scheme that replaced college scholarship awards with federal loan money on the college books.  The scheme came to light when a new accounting system started to inform students of federal Perkins debts they did not know they had.

Why Mordach did what she did is the mystery.  The scheme shored up the college’s bottom line through lean times, because money paid out of college coffers in grants was replaced with borrowed dollars that students would be on the hook to pay back.  But there was no evidence that Mordach was ordered to execute the scheme.  To the contrary, she seems to have taken steps to conceal it, which she did so well that Merrimack auditor KPMG gave the college a clean bill of health while the fraud was ongoing.

That brings us to the instant civil case.  Merrimack seeks to recover against KPMG on a range of theories, including breach of contract, professional malpractice, and negligent misrepresentation, for KPMG’s failure to detect the fraud.  KPMG won dismissal in the superior court upon the doctrine of in pari delicto.  Literally Latin for “in equal fault,” in pari delicto translates as the clean hands doctrine of equity.  In tort, the doctrine prevents a tortfeasor from recovering against a co-tortfeasor or innocent party—such as a bank robber who blames a co-conspirator for his bullet wound, or the burned arsonist who would blame firefighters for too slow a rescue.  Merrimack appealed the dismissal to the Massachusetts Supreme Judicial Court (SJC).

Being a doctrine in equity, rather than a rule, in pari delicto calls for a fact-sensitive application, operating as a function of the parties’ relative moral blameworthiness.  Thus in a 1985 case discussed in the instant opinion, the U.S. Supreme Court allowed would-be beneficiaries of insider trading to sue their tipsters for losses resulting from misinformation, even if both plaintiffs and defendants were wrongdoers.  The plaintiffs’ trading upon a failure to disclose was not “substantially equal” in moral culpability to the tipsters’ illegal insider disclosures, the Court decided, and public policy favored holding the tipsters to civil account.

KPMG Boston (Google Maps Aug. 2017)

KPMG argues more than just Merrimack’s benefit derived from a favorable financial picture.  KPMG argued successfully in the superior court that Mordach’s actions must be imputed strictly to Merrimack upon the tort-and-agency doctrine of respondeat superior, because Mordach was an employee of Merrimack and acted within the scope of her employment.  So if intentional fraud is imputed to Merrimack, then in pari delicto precludes recovery against KPMG for the diminished culpability state of mere negligence.

On the one hand, the SJC reasoned, look at the problem from the perspective of Merrimack students:  Were they to have sued Merrimack—not actually necessary, as the college spent $6 million to square its affairs with students—there is little doubt that Mordach’s intentional tort would have imputed strictly, even to an otherwise innocent Merrimack, through respondeat superior.  From where the student sits, the fraud was perpetrated by Merrimack’s financial aid office: Mordach and college, one and the same.  Merrimack might have sought indemnity from employee Mordach, but that’s always true in respondeat superior cases (notwithstanding employment contract).

On the other hand, the SJC reasoned, look at the problem from the perspective of Merrimack College:  Strict liability through the action of respondeat superior imputes liability irrespective of fault and certainly says nothing about moral blameworthiness.  Merrimack as liable to students is never adjudicated as bearing fault.  From a moral standpoint, Merrimack is at worst guilty of neglect, or failure to act, such as by negligent supervision of its financial-aid director.  So notwithstanding strict legal liability, Merrimack’s negligence would implicate moral blameworthiness of a magnitude less than what the college alleges of KPMG.

When co-tortfeasors both commit an intentional tort, in pari delicto precludes liability of one to the other.  But that’s not necessarily so when merely negligent co-tortfeasors A and B unwittingly combine efforts to cause loss to C, incidentally causing loss also to B.  In the subsequent action B v. A, the old contributory negligence rule, as a complete defense, would have effectuated the clean-hands doctrine.  But contemporary tort law commits negligent co-tortfeasors to comparative-fault analysis.  In a modified-comparative-fault jurisdiction such as Massachusetts, B may recover from A if A bore more fault than B, and B’s recovery is reduced in proportion to B’s own share of fault. 

The SJC decided that moral blameworthiness, not legal liability exposure, must be the guiding principle for an equitable doctrine.  Merrimack might be on the hook hypothetically for respondeat superior liability, and even negligent supervision.  But neither of those rules suggests moral blameworthiness greater than KPMG’s.  The case might be different if Mordach has been a senior executive of Merrimack; she was not.  And there is no evidence that Merrimack knew what Mordach was up to, much less directed her actions.

So in the absence of an intentional tortfeasor between Merrimack and KPMG, in pari delicto does not apply.  If Merrimack’s negligence contributed to its own losses, that will come out in the comparative-fault wash.  That conclusion is bolstered by a comparative-fault-like mechanism in Massachusetts statute that applies specifically to client-versus-auditor malpractice claims.  Accordingly, the SJC reversed and remanded.

Chief Justice Gants at UMass Law (2016)

The SJC received amicus briefs from the American Institute of Certified Public Accountants, the Massachusetts Academy of Trial Attorneys (MATA), and the Chelsea Housing Authority.  For the MATA, attorney Jeffrey Nolan argued, like in the U.S. Supreme Court insider trading case, that liability exposure is needed to hold KPMG accountable, especially in a market dominated by the Big Four accounting firms.  The housing authority also backed Merrimack, attorney Susan Whalen recounting her client’s victimization by internal misconduct that went undetected by accountants.  She asserted that in pari delicto has “the perverse result of de facto immunity for gross levels of negligence” by auditors (Law360, subscription required).

All of that is not to say that KPMG will be held liable.  Besides fault yet to be proved, the SJC affirmed the superior court’s leave for KPMG to amend its answer, adding a defense of release.  Ut victoriam tyranne?

The case is Merrimack College v. KPMG LLP, No. SJC-12434 (Mass. Sept. 27, 2018).  The opinion was authored by Chief Justice Ralph D. Gants, a graduate of Harvard undergrad and law, one-time AUSA, and 2016 recipient of an honorary law degree from UMass Law School.