The Malpractice Scandal

The Malpractice Scandal

The Malpractice Scandal

Few Marylanders have read the text of the malpractice bill that emerged from the General Assembly over Governor Ehrlich’s veto, but those who do will come to share Mark Twain’s belief that politicians are “the native American criminal class.” The bill in its final form is almost a parody of clueless, reckless, extravagant policymaking.

Among its provisions are the following:

Tort Reform

The only significant tort reform measure is a four-year moratorium on further increases in the cap on non-economic damages, which is frozen at $650,000 until December 31, 2008, at which time it will resume climbing at the rate of $15,000 per year. Without this change, the cap would have gradually risen to $710,000 by October 31, 2008. The cap on wrongful death damages is reduced from the present $975,000 to $812,500, an unimportant change, since most large verdicts for non-economic damages involve living claimants.

The other ‘tort reform’ changes are cosmetic: redundant offer of judgment and neutral expert rules duplicating existing court rules, provisions for mandatory rather than optional mediation, and a provision that nonspecific apologies by a physician are not admissible in evidence.

Added Reports

Hospitals are required to report to the medical disciplinary report all deaths and injuries not arising in the ordinary course of treatment and are required, on pain of nominal fines, to conduct investigations of such occurrences, and are required to report them, and all refusals to admit to privileges and other disciplinary actions to the medical disciplinary board. Reporting requirements are to be imposed also on courts. The Insurance Commissioner is likewise to receive highly detailed reports of each claim, and is to render annual reports of the effect of the tort reform provisions to the legislature. What purposes will be served by this vast flood of paper are not clear. The Insurance Commissioner’s reports will be easy to write: given the limited nature of the tort reforms, their demonstrable effects will be negligible. The medical disciplinary board likewise can consign most of the materials directed to it to the nearest wastebasket, since it cannot act against providers except on the basis of ‘clear and convincing evidence’, Health Occupations article, sec. 14-405(b). Most of the reports to the disciplinary board are redundant of those already required by section 14-413 of the Health Occupations article, but the redundant enactment allows the legislature and trial lawyers to pretend that the legislation addresses the real problem’: a limited number of scofflaw physicians’.

Unfortunately, this is not the case.

A study undertaken by the Medical and Chirugical Faculty of Maryland in 1971 revealed that of 381 claims over a ten-year period, 105 were accounted for by 46 physicians with more than one claim, or about 28% of all claims. If the 381 claims in that period were distributed randomly among the 3166 physicians, 20 would be expected to have two claims; in fact 36 did so; 1 would be expected to have 3 claims, whereas 7 did so; and none would be expected to have 4 claims, while 3 did so. The number of claims exceeding those that would result from random distribution was thus 62 ((2x (36-20)=32) + (3x(7-1)=18)+ (4×3=12)=62), or about 16% of all claims.

A later study undertaken in 1983 by Laura Morlock as part of a Johns Hopkins Study of the Health Claims Arbitration Process, Recent Malpractice Claims Experience of Health Care Providers in Maryland of 1006 defendants showed that 80 had been named in 2 claims. 13 in three claims, and 4 in four claims. Thus 215 claims, or about 11% were accounted for by 97 providers with multiple claims; even if the 1124 claims had been distributed randomly, some providers would have had two or more claims; the percentage of ‘preventable’ claims in this study was thus 6 to 7%.. The fact is that most doctors in high-risk specialties, competent or incompetent, experience claims (55% of Med Mutual’s emergency room physicians, 62% of its ob/gyn’s, and 70% of its general surgeons, see M. Knauss, Medical Malpractice: Is It Time for Tort Reform in Maryland (Germantown: Md. Public Policy Institute, 2005), 9).; the idea that ‘weeding out’ of doctors will cause the problem to disappear is a fiction fostered by the trial bar.

Insurance Regulations

A variety of new regulations are imposed on the legislature’s designated arch-villains: the malpractice insurers. They are forbidden to make exclusive appointments of agents, or to pay commissions of more than 5%. This is no service to companies seeking to enter the market. The Insurance Commissioner is required to publish a comparison guide to policies, even though at present there are only a handful of companies in the market. Insurers offering coverage of the cost of medical disciplinary proceedings are required to price and offer such coverage separately. Coverage may not be denied to emergency room physicians Insurers are required to offer specified high-deductible policies, the deductibles to be inapplicable to attorneys’ fees. Medical Mutual is subjected to an annual legislative audit, and its premium increases are limited to 7.5% if it receives assistance from the new rate stabilization fund; increases may be refused if its surplus is deemed ‘excessive’. A curious minimum price fixing provision bars insurers from reimbursing providers at rates less than those prevailing on November 1,2004.

New Agency

A new People’s Counsel is established in the Attorney General’s office, to contest increases in malpractice and homeowners’ insurance rates exceeding 10%. Since the Insurance Commissioner is supposed to protect the interests of policyholders, the rationale for this duplicative agency is simply that a Republican governor appoints the Insurance Commissioner while a Democratic Attorney General will appoint the People’s Counsel. It is true that a People’s Counsel separate from commission staff exists at the Public Service Commission. This, however, provides no precedent. The P.S.C. People’s Counsel is a gubernatorial appointee, and his office was felt to be necessary because of conflicts in the interests of residential and commercial ratepayers; no conflicts among policyholders exist in the malpractice setting justifying a separate People’s Counsel to protect the interests of the unsophisticated residential ratepayer.

Indeed, nothing could have been further from the legislature’s mind than the protection of simpleminded homeowners. There have been limited complaints about 10% + increases in homeowners’ insurance premiums. The jurisdiction of the new People’s Counsel is extended to homeowners’ policies largely to provide a predicate for assessing the costs of the new office to homeowners as well as medical malpractice policyholders. Thus, at the behest of compact lobbies of doctors and lawyers, the cost of aggrandizing the Attorney General’s office is largely transferred to Maryland homeowners. Not one line about this particular piece of banditry has appeared in the public press.

New Tax

In addition to the new assessment on homeowners’ and malpractice policies, a new 2% tax is imposed on managed care policies, previously exempt in the interest of encouraging greater use of managed care organizations to control medical inflation. The effect of the tax is to throw this policy in the discard by reducing the competitive attractiveness of managed care organizations, while taxing their policyholders, who tend to be less prosperous than the purchasers of conventional indemnity policies. The proceeds of this new tax, some $80 million, are to be divided in the first year roughly one-half to a Rate Stabilization Fund and one-half to increase medicaid reimbursements to doctors. Not less than $15 million of the Rate Stabilization subsidy is to be used for the benefit of four classes of doctors: ob/gyns, neurosurgeons, orthopedic surgeons, and emergency room physicians, thus potentially setting various classes of providers at each other’s throats. The Rate Stabilization Fund subsidy is to fall to $33 million in the second year, $26 million in the third year, $19 million in the fourth year, and zero in the fifth year, at which time the moratorium on pain and suffering cap increases will expire, and the status quo ante of insurance crisis will be restored. Only two changes will differentiate the situation in the fifth year from the situation now: a) the doctors will be receiving $80 million in added medicaid reimbursements to help them pay higher premiums, which in turn will be used to pay higher verdicts and attorneys’ fees and b)the constantly ascending pain and suffering cap will inflate from a level of $650,000 rather than $710,000. There is to be sure a third and vital difference: this condition will not obtain during the terms of office of the present members of the General Assembly, a principle vulgarly referred to as NIMTOO (Not In My Term Of Office). Hopefully a new and improved contingent of legislators will in the meantime arrive to erase this outrage from the statute books.

The Road Not Taken

It cannot be claimed that the new law is entirely evil in its effects. The increase in medicaid reimbursement rates is long overdue and defensible on a basis that has nothing to do with malpractice insurance rates. It may increase the willingness of physicians to accept medicaid patients, and over the long term may even save medicaid money by reducing the pressure on hospital emergency rooms, whose costs are higher than those of outpatient treatment.

As a ‘solution’ of malpractice insurance problems, the bill is a poultice, not a cure. While most of the blame for it rests with the General Assembly, its ‘leaders’, and the trial lawyers, the medical profession and Governor are not blameless, the first because it urged creation of a Stabilization Fund on the false premise that this was the only way to immediately curb insurance rates, and the second because he was naive enough to accept this contention. A fund was thought to be the only possible ‘quick fix’.

A famous economist, Ronald Coase, won a Nobel Prize for pointing out that many problems dealt with by creation of new government programs could as well be addressed by revision of liability rules. The malpractice problem is a clear and obvious example. Insurance rates are the product not only of present experience but future expectations. Reserve setting is not an exact science. Expectations about the future feed almost immediately into the present. The deficit reduction, and expectations of future deficit reduction resulting from new taxes and budget cuts in 1992-94 are credited with setting off an ensuing economic boom. Sufficiently significant ‘tort reform’ would have had a comparable effect on malpractice rates.

The needed changes are two in number. The first is well understood: damages must be limited to actual, rather than hypothetical damages by eliminating duplicative recoveries, accounting for the effects of taxation, and allowing for recovery only of future medical costs actually incurred, not nightmare projections of them.

The second is a change in the standard of care to require ‘clear and convincing evidence’ of negligence in malpractice cases. Emergency physicians, who have no contractual relationship with a patient, have an especially convincing case here; the legislature has already accorded similar treatment to ‘good samaritan’ doctors rendering roadside care. Obstreticians have an equally good case By reason of the Court of Appeals decision in Pisselli v. 75th Street Medical, 371 Md.188 (2002), one of the more extraordinary feats of judicial activism in recent years, they now are potentially subject to suit as much as 23 years after the event, and present law effectively places on them the burden of showing what the standard of care was two decades earlier. If suits for birth defects are to be allowed long after the event, the law should insist that they be clearly proven, not merely that the jury be given its choice between the opinions of paid experts.

Two other weighty considerations suggest that a ‘clear and convincing evidence’ standard is appropriate in all medical malpractice cases. The first is that such a standard would conform the standard for civil actions to that for medical discipline, rendering the disciplinary body less justified in overlooking adverse verdicts in civil actions. The second is that doctors have enormous reputational interests at stake in malpractice cases. In cases involving ordinary businessmen, Maryland case law recognizes that “personal reputations should not be subject to the stigma of fraud save upon clear and convincing evidence.” Loyola Federal Savings and Loan Assn. v. Trenchcraft, 17 Md. App.646 (1973); First Union National Bank v. Steele Software Systems, 154 Md. App. 97 (2003), cert. denied 380 Md. 619 (2004). A similar standard, facilitating the grant of summary judgment, see Residential Warranty v. Bancroft, 126 Md. App. 294 (1999), should protect physicians who have invested decades in the acquisition of skills and reputation.

Judicial Activism: A Three-Ring Circus

Until recent years, Maryland was spared seriously abusive behavior by judges on its trial courts, state and federal. If its judges were not always as alert as they might have been in enforcing guarantees of personal liberty in criminal trials, they understood the limits of the judicial function as being confined to the adjudication of ‘cases and controversies’ after hearing from the parties in interest, not to the enactment of new laws, let alone the collection of new taxes, the budgeting of public funds, and the administration of public programs.

In recent years, a few judges have thrown caution to the winds, and have presided over proceedings yielding vague and insupportable political exhortations and demands on the public fisc, and accompanied by escalating procedural irregularities, some of them verging on the corrupt.

The first of these proceedings is the school financing litigation in Baltimore City, in which private plaintiffs, aided by the A.C.L.U., seek enforcement and elaboration of state constitutional language relating to a “thorough and efficient”system of public schools. This case represents a third attempt to circumvent legislative control of school appropriations. The first attempt, invoking the federal equal protection clause, was rebuffed by the federal district court in Parker v. Mandel, 344 F.Supp. 1068 (D.Md..1970)(Harvey, J.). The second attempt, invoking the state constitutional clause now again invoked, was rejected by the Court of Appeals in Hornbeck v. Somerset, 295 Md. 597 (1983)(Murphy, C.J.). The latest effort, designed to have the courts determine what is “adequate” provision for education, has now lasted for nearly ten years.

The distinguishing feature of this litigation is that it has no real defendant, and thus presents nothing that can be described as a ‘case or controversy’. When the case was filed against the Baltimore School Board, Montgomery County, which had successfully defended the Parker and Somerset cases, sought leave to intervene. Remarkably enough, this request was denied by the trial judge, whose judgment was affirmed by a 4 to 3 decision of the Court of Appeals, over the vehement dissent of Judges Rodowsky, Raker, and Eldridge, in Montgomery County v. Bradford, 345 Md. 175 (1997). The City defendants had no incentive to resist an effort to provide them with greater public funds, while the State Superintendent of Schools found in the case a heaven-sent opportunity to expand the authority of her bureaucracy. A consent judgment reciting, without benefit of findings or reasoning, the existence of a constitutional violation, was then entered, the judgment further providing for joint gubernatorial-mayoral appointment of a new school board, whose members as a practical matter are vetted by the State Superintendent. The legislature then fell into line, enacting the legislation contemplated by the ‘consent decree’ and providing for large new appropriations for the Baltimore City schools; in the course of these festivities, the A.C.L.U.,State, City and judicial participants neglected to clearly fix responsibility for audits of the new public funds, with predictable results.

Later judicial saber-rattling about asserted ‘inadequacy’ of funds was thought to have been vitiated by legislative enactment of the Thornton plan, which predictably victimized Montgomery County, the excluded non-litigant. When it was found that the new shower of money produced limited improvement, the trial judge, at the urging of the A.C.L.U. convened a new round of hearings, from which the real parties in interest were again excluded. These proceedings were unusual in that the state court hearing took place in the federal courthouse, with a federal judge and special master also on the bench. Large sheaves of statistics were also presented to the court, largely without contest, and the joy of the participants was further enhanced by a series of entertaining performances by William H. Murphy, Esq., representing an advocacy group known as ACORN. This entity, represented by a defeated Baltimore Mayoral candidate, was accorded standing in a proceeding from which the elected County Executive and school board of an adversely affected county was excluded. The only jarring note in the proceedings was provided by the State Superintendent, who was undecided as to whether to seize the occasion to seek yet more power. Predictably enough, the proceeding concluded with a vague exhortation to the State to provide yet more billions, which some of the more naive legislators may think has the force of a legal judgment.

The second proceeding of this character is the federal court special education litigation, the Vaughn G. litigation, now entering its twenty-first year (84 Civil 1911). The earlier stages of this litigation were described in Calvert News for Fall 2002 . Following this criticism, and even more vehement criticism by Kalman Hettleman, a former member of the Baltimore school board and former State Secretary of Human Resources in an Abell Foundation publication, and in a long article in the Baltimore Daily Record,, the City in late 2003 filed a Motion for Relief from the extraordinary detailed consent decree to which it had unwisely consented (Paper 1334), It was, for a time, supported by the State Superintendent (Paper 1339). The court, nothing daunted, directed the parties to discuss the potential significance of the order in the state court school financing case (Paper 1443), and directed the aforementioned joint hearing of the two cases. This eventuated in the usual love feast, in which the state and city joined hands in appeals for more money, only a relatively feeble and inconstant defense being mounted. Predictably, the court found in light of the system’s alleged fiscal crisis that its invaluable services continued to be needed. Oddly enough, its Post Hearing Memorandum (Paper 1460) is available neither on-line nor in the federal district court’s public file. The Special Master appointed by the court continues to churn out periodic reports documenting the City’s partial or complete compliance with more than 20 ‘measurable outcomes’ required by the consent decree, and continues to receive monthly fee awards ranging between $10,000 and $20,000 for services which she has no incentive to end. Nothing has been said during 21 years of litigation about the real cause of defects in the City’s special education program: the inability of the City to recruit teachers with special education skills due to the single salary schedule in its teachers’ union contract. Instead large sums are mandated to be wasted on extra-classroom personnel who track students, prepare plans for them, reprogram computers to record the plans, and otherwise engage in busywork unrelated to instruction.

The third proceeding of this character, the Baltimore City housing case, supervised by the same federal judge as the special education case, is a relative youngster, having been initiated only in 1995. (Thompson v. HUD, 95 CV 00309). This is also an A.C.L.U. project, in which the defendants were the Schmoke administration in Baltimore City and the federal department of Housing and Urban Development. The court began by denying a motion to dismiss by the federal defendants, invoking a rather astonishing proposition urged by the junior revisers of an otherwise distinguished legal treatise: “the court should be especially reluctant to dismiss on the basis of the pleadings where the asserted theory of liability is novel or extreme.” (Paper 277, 8/31/01).In its inception, this likewise had some of the attributes of a defendant-free case; in 1996 the parties including the Clinton administration HUD entered into a partial consent decree providing for the distribution of housing vouchers to beneficiaries who were required to use them in neighborhoods that were not more than 29% black. The partial decree had one seemingly redeeming feature; under it, the District Court’s jurisdiction to enforce it was to expire in seven years, on June 25,2003. The decree occasioned a considerable public outcry, both on the part of those who do not like racial classifications and on the part of persons of all races who had moved to the suburbs without federal subsidy and who did not appreciate others being given for free benefits which they had worked to achieve. Given the selection regulations giving preference to broken families, fear was expressed of the importation into the suburbs of welfare mothers and their frequently unemployed boyfriends.

The court conducted a ‘fairness hearing’, grandiloquently described by it as a ‘town meeting’ on this consent decree, directing the publication of notices in the Sun, the Afro-American, and “community newspapers serving low-income districts.” and giving mail notice to all African-American residents of low-cost housing in Baltimore City, the purportedly benefitted class. The Fairness Hearing, held on May 30, 1996 was carefully orchestrated, the court first hearing from the parties, then from class members, then from “speakers identified by the parties” including Carl Snowden, Parren Mitchell, Dale Balfour and Vincent Quayle, none of whom were members of the class, attorneys of record, or sworn witnesses. At this point, a few legally unrepresented protesters, also unsworn and without conventional indicia of standing, were given a few minutes to speak, followed by a Response by Parties. The grand finale on this judicially formulated agenda was the “Testimony of Expert Witness”, Kate Williams, “Visiting Professor in Applied Ethics, Loyola University, Chicago; former Executive Director of the Leadership Council for Metropolitan Open Communities.”

Apparently considering that this judicially orchestrated pep rally was not a sufficient usurpation of the political process, the court on January 29, 1988 (Paper 88), created a judicially-appointed Advisory Council of 24 members recommended by the Special Master it had appointed, former Delegate Anne Perkins (D.Baltimore City). The members of the council included Richard Berndt, Jay Brodie, , Mark Joseph, James Piper, Vincent Quayle, and Nicholas Schloeder. In addition, the Special Master was accorded authority to appoint “Community Committees”. The purpose of the Advisory Committee was said to be to gather “views of community and civic groups that have interest in the effect of the decree [and] advice about how to create one-to-one support for public housing participants and their neighbors.” Conspicuously absent from the Advisory Committee were any qualified housing economists or any persons who had expressed scepticism about the partial decree, who by this time included Congressman Robert Ehrlich and Senator Barbara Mikulski.

The decree was not a great success story. The persons resettled under it moved in disproportionate numbers to neighborhoods near Patterson Park and to portions of Columbia, causing social friction and neighborhood deterioration in both places. As a result of action by Senator Mikulski, the so-called ‘Moving to Opportunity’ program which had financed the vouchers was brought to an end. 42 U.S.C.A.sec. 1437, note.

In late 2001, the attorneys securing the decree petitioned for fees, and were awarded $1,085,492.71 from the local defendants, the unfortunate City of Baltimore and its Housing Authority, and $411,105.25 from the federal defendants. The spirit of self-righteousness displayed by the court communicated itself to the Magistrate reviewing the fee applications:

“Domestic conditions of our own making, if unredressed, can pose threats to shared values of this country. How can huge numbers of public housing recipients [sic]…be expected perpetually to ignore what they know is unfair and illegal?” The Magistrate conceded that “those who have to pay attorneys’ fees are not the ones that caused the problems…the Local Defendants share the same goals as the plaintiffs…The success achieved by the partial consent decree…the benefits that will inure to the City of Baltimore will, without question, be worth the cost, including the attorney’s fee award.” Although the time entries of plaintiff’s counsel “often are vague or cryptic”, only cosmetic reductions were made in the fees petitioned for. The plaintiffs were said to be prevailing parties in spite of the partial and limited nature of the decree, and their A.C.L.U. staff attorneys were awarded fees at rates of up to $250 per hour, the A.C.L.U. fees alone amounting to $1,019,104.98, in addition to $425,525.34 (at higher rates) for the Washington office of Jenner and Block and $51,977.64 for Brown, Goldstein, and Levy. (Paper 319,3/4/02).

The federal defendants, whose initial motion for judgment on the pleadings had been rejected, then sought to avoid trial on the larger part of the case by filing a motion to dismiss on statute of limitations grounds. This was rejected by the Court on August 14, 2003 (Paper 461),. In reaching this conclusion, the court relied on the incontestable fact that until the early 60s racial discrimination was practiced in the siting of housing projects. It went through great and unconvincing contortions to demonstrate that a six-year statute of limitations did not apply. Although there was no segregation within the six-year period, the court, by analogy to school segregation cases, found the defendants derelict in failing within the six year period to take measures to desegregate. The difficulty with this reasoning is that the Supreme Court in Basemore v. Friday, 478 U.S. 385 (1986) found only a limited such duty, fulfilled by freedom of choice plans, with respect to noncompulsory federal programs. Undaunted, the District Judge proclaimed:

“Of course, there is no law that requires people to reside in public housing. Nonetheless the fundamental need for shelter combined with laws limiting where one can find shelter and child protective laws which require shelter for minors if one wishes to maintain custody of one’s children make access to livable housing compulsory as a practical matter. For the economically disadvantaged, applying for public housing is very likely to be the only method of attaining liveable shelter”

The fact that several hundred thousand blacks had successfully migrated to the suburbs without judicial aid, that the federal subsidised housing programs were minuscule by comparison; that there is still a large private rental housing market in Baltimore; that only a small fraction of those applying for federal assistance reached the head of the queue; and that the federal selection standards were perverse in the extreme, according preference to unwed mothers and recovering drug addicts and alcoholics, made no difference. (Paper 461, 8/14/03).

In late 2003, the Court’s seven-year jurisdiction under the partial consent decree having expired by its own terms, the federal defendants moved for summary judgment. They urged that even if the District Court’s jurisdiction had expired, any surviving portions of the decree could still be enforced by appealing administrative action to the Court of Appeals under the Administrative Procedure Act or by suit in the Court of Claims. The District Court then found sufficient ground to modify the time-limit portion of the decree, even though “HUD may well not have been primarily or at all ‘at fault’ with regard to much of the defendants’ noncompliance”. It is a “regrettable fact that some of HUD’s decree compliance will necessarily take place after June of 2003, even if caused by local defendant’s failure.” Paper 576, see also Paper 621) HUD promptly appealed this decision,; its appeal was argued before Judges Michael, Traxler and Williams of the Fourth Circuit on December 2, 2004.

Notwithstanding the pendency of this appeal, a seventeen-day bench trial on the balance of the case was held before the District Court in the summer of 2004. The City Defendants at this point were in high dudgeon about the persistence of the case, which at several points had seriously interfered with their efforts to secure federal funds to demolish or construct public housing. After testimony from a series of witnesses including Walter Sondheim, Esq. and former Mayor Schmoke, the District Judge absolved the City of any discriminatory purpose within the limitations period, though declaring that plaintiffs were justified in including it in their complaint in order to get at their real target, HUD. Overlooked was the fact that HUD had earlier been kept in a portion of the case because of the City’s asserted noncompliance with the partial decree.

On January 6, 2005, the court rendered an oral opinion, while announcing that it was filing a 325 page written opinion holding HUD in the case because of its alleged failure to embrace “metropolitan solutions”. No transcript of either appeared in the Court’s public file as of January 18, or on the District Court’s electronic document facility. The opinion, available to the Calvert Institute through the courtesy of one of plaintiffs’ counsel, is a curious document. The first 137 pages of it, absolving the City from liability, is a careful and intellectually honest dissection of the legal claims, although it inaccurately credits the lawsuit for the demolition of high-rise public housing in Baltimore (pg.8). The principal act relied upon by the plaintiffs to show discriminatory intent, the erection of a fence around the Hollander Ridge project, had earlier been relied upon to hold the City Defendants in the ten-year case, the court declaring that it established a “ghetto”. In the final event, the court found that the fence was erected on the recommendation of a federal law enforcement agency to address the problem of “outsiders entering the Hollander Ridge development to commit crimes thereon…On …’check days’ the high-rise area was, in effect, an open air drug and sex market.” (Pg.67) After noting that Hollander Ridge had since been demolished, the court conceded that “Had Baltimore City not been blocked by Plaintiffs and their counsel from utilizing funds made available by HUD to build needed elderly public housing on Hollander Ridge, the fence would, today, be an amenity for a gated community serving a predominantly African-American group of senior citizens.” (Pg.75). The court upheld an ordinance giving the City Council the final say over siting of projects: “Demographic change has rendered the 1950 Ordinance racially benign.” (Pg.101).

It also conceded that following its partial decree “The Patterson Park neighborhood’s character was changed by speculators from home ownership to primarily rental. ‘The speculators were buying properties and renting them to section 8 households because the Public Housing Authority was not doing a good job of determining rent reasonableness. Thus an owner could charge a higher rent to a Section 8 family than he might otherwise receive in the market.’” (pg.316) In addition, the court becomingly noted that siting public housing in more expensive neighborhoods in pursuit of desegregation goals may “mean that fewer needy people receive adequate housing” (pg.108) and that “The principles of the Brown decisions do not require a Korematsu-style housing policy, whereby public housing tenants are coerced into certain developments so that the supposed ‘greater good’ might be served. In this narrow respect, there may well be some distinction between the primary education and housing equal protection cases…” (Pp.109-10). In a footnote (pg.108,n.95) the court even acknowledges that “segregation is not universally defined in terms of demographics alone, but perhaps also in terms of socio-economics and culture.” Regrettably, this insight is not pursued much further.

While in the first half of its opinion, dismissing the City from the case, the court gives the impression, as a result of the City’s massive, though belated, defense, of having been mugged by reality, in the second half of the opinion holding HUD in the case, it returns to its old ways. The same evidence held to show the City’s innocence is regurgitated to show HUD’s guilt, not of overt discrimination, but of failure to do more to direct housing aid recipients beyond city lines. Both the plaintiffs and the court are silent, however, as to what HUD might have done. The court notes that HUD has largely abandoned building new projects because of the problems associated with them, though it implicitly faults HUD for not building hard units in the suburbs. The fact is, however, that the suburbs do not have housing authorities eager to build new projects, nor are private developers eager to run the gauntlet of community resistance. The court concedes that 56% of the recipients of housing vouchers choose to use them in the City; it ascribes this phenomenon to the region’s assertedly ‘tight’ housing market, rendering it impossible for voucher-holders to find housing in the suburbs. This analysis, however, does not wash. Suburban landlords, and those who might be landlords, do not turn away voucher-holders because there is no housing or because they do not like money. They do so because of the peculiar pathologies perceived as being associated with voucher recipients, because of the manner of their selection. So long as the selection standards are perverse, rewarding separation, divorce, and unwed motherhood, penalizing intact families, and treating recovering alcoholics and drug addicts as ‘handicapped’, all the decrees in the world visited upon HUD officials are not going to change the situation.

130 years have passed since the Victorian housing reformer Octavia Hill observed that “you cannot deal with the people and their houses separately…transplant them tomorrow to healthy and commodious houses and they would pollute and destroy them.” Quoted in E. Bell, Octavia Hill (London: Constable, 1942),251, see G. Liebmann, Six Lost Leaders: Prophets of Civil Society (Lanham, Md.: Lexington Books,2001), ch.2. An American historian of welfare has pertinently asked “Can an apartment in a mammoth public housing project assist the multiproblem family as much as a supply of trained social workers?” R. Lubove, The Progressives and The Slums (Pittsburgh: U.of Pittsburgh, 1963), 252, 255. The suburbs are no longer resistant to the migration of racial minorities, as the opinion notes, 15% of their population is now black. But in resisting the importation of public housing beneficiaries, none have been more vociferous than recent black migrants. Their insights are deserving of more respect from this well-intentioned judge.

Subsequently, the court announced that Special Master Perkins and former Maryland Attorney General Stephen Sachs would head an ‘implementation committee’, which would enlist the cooperation of surrounding jurisdictions, none of whom were parties to the case or had an opportunity to resist its claims. The court made threatening noises implying that further measures would be taken if cooperation was not forthcoming, and scheduled a multi-day hearing in July 2005 on “further relief”. Between the special education case and the housing case, more than a month of trial time has been consumed in the last year in a court with a seriously large docket of criminal cases in which ordinary private litigants find it difficult or impossible to secure a prompt civil trial.

Anne Arundel County Executive Janet Owens, asked to comment on the Court’s action, referred to it as “judicial activism at its most extreme.” Baltimore County Executive James Smith, a former judge, noted with some asperity: “It has taken ten years for the decision to come out. I need more than 10 hours to review it.”.. The full answer to their concerns is found in Rule 65(d) of the Federal Rules of Civil Procedure, the enactment of which was secured by labor unions as section 13 of the Clayton Antitrust Act to curb abuses of the injunction power by federal judges. It provides that “every order granting an injunction is binding only upon the parties to the action, their officers, agents, servants, employees and attorneys, and upon those persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise.”It was of this provision that Judge Learned Hand wrote:

[N]o court can make a decree which will bind anyone but a party; a court of equity is as much so limited as a court of law; it cannot lawfully enjoin the world at large, no matter how broadly it words its decree…It is not vested with sovereign powers to declare conduct unlawful; its jurisdiction is limited to those over whom it gets personal service, and who therefore can have their day in court…This is far from being a formal distinction; it goes deep into the powers of a court of equity…It is by ignoring such procedural limitations that the injunction of a court of equity may by slow steps be made to realize the worst fears of those who are jealous of its prerogative.” Alemite Mfg.Corp. v. Staff, 42 F.2d 832 (2d Cir.1930). See also Martin v. Wilks, 490 U.S. 755 (1989).

The County Executives would be wise to give the court and its delegates a wide berth. This is not to say that nothing should be done to facilitate greater availability of low-rent housing in the suburbs. Measures to foster the availability of such housing should, however, not be focused, as the federal programs focus, on disfunctional social groups and perverse incentives. The behavioral constraints contained in recent welfare reform legislation have not been extended to public housing; until they are, there is no reason to deplore the continuing shrinkage of a program that has consistently had malign and perverse effects. The least desirable tenants have traditionally been served by the process of ‘filtering’ in private housing markets. The Dallas decree said to have supplied the inspiration for the court’s recent efforts, see E. Siegel, Housing Vouchers and Hope, Baltimore Sun, January 31,2005, like the recent welfare reform legislation and unlike the federal housing legislation , engrafts behavioral restrictions in the form of work requirements on the statutory eligibility categories, an insight 20 years in the making but one nonetheless constituting judicial legislation. As the journalist Martin Mayer has pointed out, as originally conceived during the Roosevelt administration, public housing was designed to assist working, intact families prepared to dedicate a substantial portion of their income to improving their housing conditions; later legislation focusing its benefits on welfare recipients and defining recovering drug and alcohol abusers as ‘disabled’ persons has seriously distorted its purpose and caused its beneficiaries to be viewed with frequently justifiable dread by their potential neighbors.

The measures that County Executives can usefully consider include, first and foremost, liberalization of accessory apartment ordinances. It has repeatedly been demonstrated that allowing owner-occupiers to rent accessory apartments to persons acceptable to them poses no threat to established neighborhoods, while making available much-needed small unit housing at rents much lower than those resulting from new construction, public or private. See M. Gellen, Accessory Apartments in Single-Family Housing (Berkeley:U. of Cal.,1987); P. Hare, Creating an Accessory Apartment ( New York: Mc Graw,Hill, 1987); G. Liebmann, Suburban Housing: Two Modest Proposals, 24 Real Property, Probate and Trust Journal 1 (1990), reprinted in K. Young (ed.), 1991 Zoning and Planning Law Handbook (New York: Clark Boardman, 1991). In a period of diminishing household size, the existing single-family housing stock is the sleeping giant of the housing market. It is no accident that fostering duplex and accessory apartments has been a major component of housing policy in Germany and Japan, and that America’s most prosperous communities have led the way in liberalizing accessory apartment ordinances to make housing available for teachers, policemen, and other service personnel. Other available measures include the promotion of mixed-use development in existing commercial districts, including the town centres of older suburbs, and the re-zoning for multi-family and mixed development of land no longer needed for or used by industrial purposes. See W. Whyte, Cluster Development (New York: American Conservation Assn.,1964); Urban Law Institute, Mixed Use Development (Washington: Urban Law Institute, 1980).

Baltimore City for its part has neglected to adopt a useful measure available to it: a land readjustment law, which would allow present owners and developers to cooperatively redevelop city blocks without the delays and costs of urban renewal. See W. Doebele, Land Readjustment: A Different Approach to Financing Urbanization ( Lexington, Mass.: Lexington,1982); M. Shultz and F. Schmidman, The Potential Application of Land Readjustment in the United States, 22 Urban Lawyer 197 (1990); G. Liebmann, Land Readjustment for America: A Proposal for a Statute, 32 Urban Lawyer 1 (2000). The federal district court’s 325 page opinion, betraying throughout indifference to and ignorance of the available literature on housing law and economics, alludes to none of these measures; for it, virtue is found in the defiance and de-legitimization of market institutions, not in measures to allow them to operate more effectively.

The State School Construction Program: Rising from the Ashes

It has never been clear why the state needed a state school construction program. It was created during the Mandel administration. Its ostensible purpose was to renew and replace older schools, particularly those in Baltimore City, notwithstanding the falling enrollment in Baltimore City. In a few years, the state’s bonded debt doubled as a result of the program. Over time, only a small fraction of expenditures have inured to the benefit of Baltimore City, most being distributed on an essentially arbitrary basis to suburban and rural subdivisions. The first director of the program was indicted and sent to jail, in part a reflection of what happens when large pots of public funds are distributed on an essentially discretionary basis. By the end of the Hughes administration,, in reaction to these problems, the program had been allowed to shrink to a level of $22 million in the lowest year. It was perceived that relieving local subdivisions of school construction costs was an invitation to improvident zoning and was inconsistent with ‘smart growth’ objectives. This insight also informed environmentalist opposition to indiscriminate federal and state sewer construction subsidies.

During the Glendening administration, the program was greatly expanded and restored to its previous role as a political slush fund. While the Glendening administration devoted a larger portion of the fund to repair of existing buildings, there was much new construction, and a striking disparity among subdivisions in where new construction was subsidized. During the last three years of the administration, an overwhelming portion of grants of $1 million or more went to Prince George’s and Montgomery Counties, and practically none to Baltimore and Anne Arundel Counties. An annual ceremony known as the beg-a-thon took place in which county executives were placed in the demeaning position of migrating to the State House and prostrating themselves before the Governor in quest of additional school construction funds, rather in the manner of supplicants at the court of the late Bey of Tunis. This procedure appears consistent neither with constitutional government, nor with good government, nor with sound land use planning. For good measure, the Glendening administration secured extension of ‘prevailing wage’ legislation to schools fifty percent or more of whose costs were borne by the state. This insured that labor costs on state-constructed schools are about 30% higher than on schools paid for by local governments.

The Democratic leadership is now sponsoring a bill, House Bill 1, which would close a supposed loophole in the state transfer tax and dedicate the proceeds to enlargement of the program. The Ehrlich administration, not to be outdone, seeks to use promised expansion of the program, and the promise of additional Thornton aid to Montgomery and Prince George’s Counties, as a lever to secure the legalization of slot machines. Both plans, by earmarking particular revenue sources for a contestable purpose, are inconsistent with sound budgeting and priority-setting and with the purpose of the state budget amendment to provide a unified fiscal plan. Both plans are inconsistent with sound land use policy, and with a sensible fiscal and political relationship between state and localities. Both pander to the state’s over-mighty public education establishment, which now pretends, after receiving great showers of Thornton funds, that the mediocrity of the state’s public school results is due to inadequate bricks and mortar. If new funds were dedicated to salary supplements for math and science teachers, rather than a further gift to the construction unions, there might be some excuse for these proposals. But what will be left unreformed at the end of the day are the three real causes of the decline of public schools: 1) union contracts forbidding salary supplements for teachers in shortage areas 2) certification requirements excluding qualified liberal arts graduates, career-changers and retirees from the teaching force and 3) a complete absence of local governance and support at the school-building level.

The Governor would do well to avoid walking into another trap like that following upon his embrace of an unnecessary fund to subsidize medical malpractice premiums. Slot revenues are not an end in themselves; there will still be a continued budget crisis if they are poured, as his proposal contemplates, down the nearest drainpipe. If a real need for added school construction funds exists, the appropriate course is to abolish the existing state program and allow the funds made available for it, together with a portion of slots revenues, to flow to local governments as a general purpose grant. This will end the ‘beg-a-thon, allow schools to be less expensively built, allow the need for new construction to be responsibly weighed against other public purposes including school salary structures, and curtail an automatic subsidy to sprawl and careless zoning.

Preliminary Announcement

National Drug Policy: Another Look

A panel discussion featuring

former Governor Gary E. Johnson (R. New Mexico) and former officials of national administrations involved in the formative stages of the ‘drug war’

Nearly forty years have passed since the 1968 federal drug legislation asserting plenary federal jurisdiction over the narcotics trade and greatly expanding federal enforcement efforts. Three recent developments warrant taking another look at national drug policy: 1) several states have reduced or eliminated the mandatory minimum sentences contained in the so-called ‘Rockefeller drug laws’, Maryland has adopted new diversion programs for minor drug offenses, and the federal sentencing guidelines have been rendered more flexible by decisions of the Supreme Court 2) a number of states, including Maryland, have reduced or eliminated penalties for medical use of marijuana, the Supreme Court has recently heard a challenge to the jurisdictional reach of the federal marijuana possession statute, and decriminalization measures have been urged by a umber of prominent figures, including Governor Johnson and former Baltimore Mayor Kurt Schmoke 3) new impetus has been given to proposals for greater use of school drug testing by a recent decision of the Supreme Court; developments in testing technology have rendered it cheaper and more efficacious; and there have been proposals for a new, non-criminal ‘demand side’ strategy for addressing problems of drug abuse.

At the Engineering Society of Baltimore, 11 West Mount Vernon Square, Baltimore, on Wednesday, April 13,2005, beginning at noon. A buffet luncheon will be served; registration fee of $35.00 includes admission, luncheon, and a copy of the published transcript, available separately for $10.00 including postage. Reservations and payments should be sent to Calvert Institute, 8 West Hamilton Street, Baltimore, Md. 21201, tel 410 752-5887; fax 410 539-3973, email info@ calvertinstitute.org.

Calvert Institute for Policy Research, Inc.

8 West Hamilton Street

Baltimore, Maryland 21201

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