PHILADELPHIA (Legal Newsline) - The American Law Institute (ALI) is as powerful as any society with a membership of 3,000 of the nation’s leading lawyers could be. And since its founding in 1923, the Philadelphia-based group of judges and academic and practicing lawyers has been as obscure as a group with so much power would want to be.

Now ALI’s typical under-the-radar style of doing business is changing due to an internal fight over the direction of its Restatements: distillations of years of case law under general areas of the law (employment law is an example) to arrive at the principles of law, the Black Letter Law, that judges use as guidance in presiding over future cases. The fight has spilled over into the larger legal community.

ALI, business and insurance lawyers say, has in some instances abandoned its reliance on common law, so much so that a series of proposed Restatements read more like “Principles Projects” – separate documents published by ALI that reflect an aspirational view of the law. They have less influence over jurists than the group's Restatements.

The Restatements, if approved, would throw the law out of balance by encouraging even more litigation, and ultimately and needlessly, increasing the cost of doing business, and costs for consumers, critics say.

Kim V. Marrkand, of the Boston firm of Mintz Levin and one of the country’s leading legal experts on insurance law, says that she has no doubt that the drift from anchoring the Restatements on case law is due to an undue amount of influence the plaintiffs bar has in the process.

She points to a proposed Restatement of the Law covering liability insurance, which in 2014 was converted from a Principles Project. It was pulled from a final vote at ALI’s annual meeting in May after a firestorm of criticism from business and insurance defense attorneys.

“I’ll use a legal term to describe it: 'wacko,'” Marrkand said. “It’s still a Principles Project. It’s just masquerading as a Restatement.”

ALI’s Director and NYU Law Professor, Ricky Revesz, has a different take on the project, “It is predominately case law,” and calls criticism of ALI’s direction entirely unfounded.

“The agenda is the same as it’s always been,” Revesz said, “to get the law right through robust exchange of ideas. To say that’s not what we’re about is demonstrably wrong.’

He added that if anything ALI’s 64-member Council, which has a powerful influence over the Restatement process, is weighted towards the defense side of the law. 

Between those two views – but closer to Marrkand -- is prominent defense attorney Victor Schwartz, partner with Shook Hardy & Bacon and 45-year ALI member. Schwartz said he doesn’t believe that the plaintiffs bar has captured ALI but that the proposed Restatement on insurance and others, including one covering consumer contracts, read more like someone’s view of how the law should read and not a distillation of common law.

“ALI’s mission is to take years of diversified opinions and give coherence to the law,” Schwartz said. “So a Restatement should be just that, a Restatement and not a statement of what someone wants the law to be.”

A lot more rides on the outcome of the debate over the direction of ALI than acclaim for which legal mind wins the joust. Take the proposed Restatement on Liability Insurance.

Laura Foggin, a partner in Crowell & Moring's Washington, DC, office, said, “Many insurers are concerned that the changes advocated in the Restatement are tilted too dramatically against insurers such that the Restatement as a whole –if adopted by the courts --could have an unintended effect on insurers and the insurance system.”

She cited the wording in the “plain meaning” rule in the document.

“It creates new penalties for alleged breach of duties, and subjects insurers to broad extracontractual duties," she said.

Citing another section of the proposed Restatement, counsel for Eli Lilly and Company, ConocoPhillips and other multi-state corporations, in a letter to ALI in May wrote that the Restatement includes an unprecedented endorsement of one-way attorney fee shifting that departs from the traditional “American Rule” that each party is responsible for its own attorneys fees.

“The project, in multiple contexts, recommends that an insurer that loses a dispute with a policyholder would have to pay that policyholder’s legal fees, but if the insurer prevailed, it would have to pay its own attorneys fees,” the letter stated.

The lead Reporter (author) on the project, University of Pennsylvania law professor Tom Baker, insists that it does reflect common law, hence its conversion three years ago from a Principles Project.

After the delay on the final vote, Baker said in a Penn Law Q&A that he would go on a year-long “listening tour” to consider changes to the Restatement.

“We’re going to take the input we get at the meeting and from the various motions and from the comments we receive from people outside the ALI,” Baker said, “and we’ll probably make some changes to further clarify and improve the law. If we make any changes that are substantive — not just clarifying — the Restatement will go back to the council in January to consider those changes.”

Revesz said that is precisely the kind of exchange that continues to guide the process at ALI.

“We don’t have Reporters sitting in corners coming up with what they think the law should be,” he said. “All perspectives have a say in the process, a robust process.”

On consumer contracts, Schwartz and others charge that the language in the Restatement is derived not from common law but state consumer protection acts.

And another proposed Restatement on torts, Schwartz said, could open the door for more lawsuits in Workers’ Compensation cases.

“Some states allow employees to sue employers when an intentional tort is involved regardless of the workers’ compensation tort shield,” he said. “It (the proposed Restatement) dramatically broadens what constitutes a battery, which is an intentional tort. ”

In sum, Revesz says that ALI has often been innovative in its Restatements to the benefit of not just the law, but society as a whole. He points to ALI’s 1992 Restatement on the Law of Trusts that adopted the Uniform Prudent Investor Act.

“It created a lot of wealth in this country by allowing fiduciaries to broaden their investments,” he said.

For his part, Schwartz is concerned about not only the Restatements but the direction of ALI.

“ALI has been a tremendous help over the years not just to the courts, but to lawyers in their research. I look to Restatements all the time. But if the Restatements stop reflecting common law, they and ALI will lose credibility.”

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