Segway Takes $10 Million Hit Over Helmetless Rider

James Heselden, the owner of Segway, Inc., died back in 2010 after driving a Segway scooter off a cliff.   We imagine this news will one day be the foundation of a dramatic Segway urban legend.  For now, we assume this story has tipped the world that the Segway should be taken seriously despite its ridiculous exterior.  If the owner of the company can die while using his product, lay people better take caution.  Unfortunately, the apparent dangers of Segway operation wasn’t so well known back in 2009.

Recently, in Ezzo v. Segway, Inc., a Connecticut jury awarded $10 million to a plaintiff who fell and allegedly suffered a traumatic brain injury while operating the motorized scooter.  In September 2009, the plaintiff, a student at Southern Connecticut University, took part in a Segway obstacle course to raise money for the Special Olympics.  Segway employees brought two Segways to the university for the event and discovered that they had left helmets back at the office.  Rather than make a special trip back, Segway allegedly proceeded sans helmets.  During a blind-folded section of the course, the plaintiff lost his balance on the scooter and hit his head on the carpeted floor.  At trial, Segway argued the plaintiff fell because he blind-folded himself – not because he wasn’t wearing a helmet.  The reports are silent as to who was responsible for planning the blind-folded Segway run; however, the plaintiff was instructed to wear the blindfold by a campus police officer.    Segway has filed suit against the officer and the Special Olympics for indemnification.

For the record, neither Ezzo nor news of the Heselden’s unfortunate death offer any evidence that the product is defective.  Contrary to what you may hear from some of our more litigious friends, sometimes people are injured by perfectly safe products.  These accidents are the result of disrespect for the Segway.  Heselden died while riding the scooter along a narrow, uneven walkway littered by tree roots.  Ezzo was injured while driving blind-folded and helmetless.  The $10 million verdict is not evidence that something is fundamentally wrong with the Segway product.  Rather, as jury forewoman, Lorrie Hathway, indicated, “We felt the verdict was deserved.  The company instructed their employees to wear helmets, but did nothing to protect the students.” In other words, the verdict was about Segway’s alleged failure to protect its riders.

We recognize that at first glance the Segway may appear harmless.  Look again.  The Segway can reach a top speed of 12.5 miles per hour.  Twelve miles per hour might seem slow.  However, when you consider the average cyclist travels between 12-15 miles per hour, the Segway’s top speed gets a little more perspective.  How often do you see a cyclist on the road without a helmet?  Maybe, we should pay the Segway the same respect.

Volts. Chevy Volts.

Thanksgiving is just around the corner, and you know what that means: James Bond movies will be playing around the clock. On at least three different channels. All weekend long. For whatever reason, in America, nothing says “Thanksgiving” like British spies, beautiful women, and exotic, tropical locales. And I’m thankful for that.

For many reasons, my favorite Bond movie is Goldfinger. It has the best theme song. It has some of the most iconic scenes in cinematic history (e.g., the golden girl, the laser, the nuclear device that Bond defuses with 0:07 seconds remaining). It has Oddjob. It has Bond’s love interest, who my puritan editor Dedman is allowing me to refer to only as “P. Galore.” And, perhaps most important for the Kentucky Colonel in me, the movie takes place in Kentucky – Kentucky! – and involves horseracing. This movie was destined for greatness.

But that’s not why Goldfinger is the best. It’s the best because of the interaction between 007 and the villain, Auric Goldfinger. Without question, some of the best dialogue in the entire Bond movie franchise happens between Bond and Goldfinger, and it’s usually Goldfinger doing the talking. Which leads me to the jumping off point for this post. One of my favorite quotes, not just in Bond but probably in life, comes from Mr. Goldfinger himself: “They have a saying in Chicago. Once is happenstance. Twice is coincidence. The third time, it’s enemy action.”

It was 4am on April 14, 2011 in Barkhamsted, Connecticut. Homeowner Storm Connors was awakened by the sound of commotion in his garage. He went to investigate. That’s when Connors found his garage consumed in flames. Inside were two vehicles. One, a brand new lithium-ion battery powered Chevy Volt; the other, a Suzuki Samurai that Connors had converted to electric power. Both vehicles were charging their batteries at the time of the fire, and both were badly damaged. There was some initial speculation that the Volt’s battery caused the fire; but this was never confirmed. There are also reports that the same Volt caught on fire again four days later, this time, while it was not charging.

One fire? That’s happenstance.

It was early June in Wisconsin. Three weeks before, the National Highway Traffic Safety Administration had conducted safety tests on a Chevy Volt; specifically putting the Volt through the “pole” test (which simulates a 20mph side-impact) and the “rotisserie” test (which simulates the vehicle in a collision-related roll). The Volt passed with flying colors, earning a five-star rating, which is the highest rating that can be awarded. Three weeks later, apparently while sitting at a federal junkyard, the Volt caught fire. After investigation, it was determined that the failure to de-energize the battery, along with some other case-specific circumstances, most likely caused the fire in question.

Two fires? Mere coincidence.

It was two weeks ago at Lake Norman, North Carolina. A Volt was charging in a homeowner’s garage when a fire broke out . . . . I think you know where this is going.

And now there are the alarmists. “Three times!,” they yell. “Clearly this is enemy action! Chevy and / or the Volt has declared war on American garages. They are terrorists and must be stopped. At the very least, we must bring legal action against them, suing in every state we can for civil conspiracy, RICO, and of course, unfair trade practices. These three occasions of unfriendly fire establish a pattern of conduct that prove an evil intent toward the American people. General Motors is a scourge upon civilization!”

Alright, let’s all take a deep breath and find a quiet moment to thank God we’re not among the ranks of the products hypochondriacs.

So far, the investigation of these matters has been inconclusive. Neither GM nor the government has been able to reproduce the circumstances of the fire that occurred in June. And let it not be forgotten that the June fire happened three weeks after crash testing took place. In terms of an imminent threat to health and safety, this isn’t one. And as for the fires in April and November, the causes have yet to be determined. Although at this point, there’s no more reason to suspect that the fires originated with the electric vehicles than with faulty wiring in the walls of the garages.

But let’s say that the alarmists are right and that lithium-ion batteries caused each of the three fires at issue. To them I say, “So what?” There are somewhere around 8000 Volts on the road right now. Three malfunctions out of 8000 cars ain’t too shabby. I’ll play those odds.

Personally, I hope this is all part of a very clever marketing strategy. Sales of electric vehicles seem underwhelming, due in no small part I’m sure to the reputation that EVs have slightly more power than a spinning hamster wheel. Most folks would probably be shocked to learn that an electric vehicle has enough power to start a small fire, let alone the power to burn their own house down! It would open up a whole new male market. Forget Corvettes and Porches. If you want power, get a Volt. The ads practically write themselves. “Volt. If you don’t squeeze every ounce of performance out of your car in between charges, your car will self-destruct because you don’t deserve to drive it; the Volt will also take your house, your golf clubs, and any other vehicles you may own because you don’t deserve them either. Most drivers need not apply.”

If it were up to me, I would run the ad during this Thanksgiving’s Bond-a-thon. And I would be thankful for my royalty check from GM.

Connecticut Affirms the Malfunction Theory: Res Ipsa Creeps Into Products Litigation

After teaching the doctrine of res ipsa loquitur, my Torts professor immediately warned the class that the doctrine was not to be used as an answer on our final exam.  Why?  Well, according to the professor, answering a question with “the thing speaks for itself” is not a good way to get in the good graces with the faculty.  Nevertheless, plaintiffs may still invoke res ipsa to suggest negligent conduct without direct evidence of a specific wrongful act.  Of course, we here at Abnormal Use abhor res ipsa and its circumstantial implications.  Despite our concerns, though, the Supreme Court of Connecticut has reminded us of the doctrine’s long-lost cousin – the malfunction theory.  See Metropolitan Prop. & Cas. Ins. Co. v. Deere & Co., SC 18341 (Ct. August 16, 2011).

At issue in that case was a Connecticut family’s home destroyed by fire.  On the day of the fire, a resident of the home attempted to mow the lawn with a 5-year old John Deere lawn tractor but was unable to finish because the engine was “running roughly.”  The woman returned the mower to the garage and noticed a “different kind of smell.”  Ninety minutes later, the home caught fire.  A fire marshal investigation could not determine the cause or origin of the fire but identified the tractor as a “significant factor.”  In addition, an insurance investigator concluded that the tractor was the specific point of origin.  Neither the marshall nor the investigator disassembled the tractor.  Several months later, an expert examined the mower and ruled out all possible causes of origin within the tractor except for the electrical system, which was 70 percent destroyed.  The expert examined the remaining 30 percent and found no indication of side effects.  The family’s insurer settled the property damage claim and, through its subrogation rights, brought a products liability action against Deere.  The plaintiff alleged the tractor’s electrical system was in defective condition when it left Deere’s control and that this defect caused the fire.  The jury returned a verdict in favor of the plaintiff in the amount of $749,642.69.  Deere appealed, contending that there was insufficient evidence to support the verdict.

The Court agreed that the plaintiff’s evidence was insufficient to establish liability.  Significantly, the Court upheld the malfunction theory of products liability asserted by the plaintiff.  The malfunction theory permits a plaintiff to establish a prima facie products claim on the basis of circumstantial evidence when direct evidence is unavailable.  The Court held that a jury may rely on circumstantial evidence to infer that a product was defective at the time it left the manufacturer’s control if evidence reveals:

(1) the incident that caused the plaintiff’s harm was of a kind that ordinarily does not occur in the absence of a product defect, and

(2) any defect most likely existed at the time the product left the manufacturer’s or seller’s control and was not the result of other reasonably possible causes not attributable to the manufacturer or seller.

While we must give credit to the Court for considering the inconclusiveness of the expert testimony and the age of the mower in reversing the trial court, we must question the affirmation of the malfunction theory.  As much as we loathe res ipsa, at least that doctrine requires the defendant to have control of the damage-causing instrumentality.  With a liberal application of the malfunction theory, manufacturers could find themselves lifetime insurers of products long outside the grasp of their control.

We do not think requiring plaintiffs to present direct evidence of a product defect is unfair in proving a product defect claim.  It just seems logical.  Think a court should be persuaded by our argument that Titleist makes a defective driver every time we slice a drive into the woods?  Of course not, unless we let the thing speak for itself.

Will you please assume my liability?

Several weeks ago, the defendant in Altman v. Motion Water Sports, Inc., No. 3:07-cv-01383, 2010 WL 2747306 (D. Conn. July 12, 2010), asked the District of Connecticut to grant its motion for summary judgment finding that it, as a successor corporation, is not liable to plaintiff for his injuries from a defective product that it neither manufactured nor sold to plaintiff. The Court denied defendant’s motion, providing some insight into the law of Connecticut on successor liability.

Plaintiff, Russell Altman (“Altman”), purchased water skis from Earth and Winter Sports, Inc. (“EWS”) some time prior to March 28, 2003. On this date, EWS sold all of its assets to Motion Ocean Sports, Inc. (“MOS”). The purchase agreement between EWS and MOS expressly provided that MOS did not assume any liabilities of EOS. Further, there was no continuity of stock, stockholders, or directors. On the other hand, after the MOS purchased EWS’s assets, MOS continued to manufacture the same products, under the same names; took over the EWS factory; and hired approximately 50 of EWS’s former employees.

After the take-over, on July 21, 2004, Altman fell while water skiing and one of the skis failed to release from his foot. Altman alleged permanent physical injuries arguing that the ski was defective in several respects. Thereafter, Altman filed suit against MOS to recover for his injuries. In response, MOS moved for summary judgment on the ground that “under a general common law rule relating to corporations, a purchaser of the assets of a corporate business is not liable for the debts and liabilities of the previous owner of those assets.” Altman’s arguments in opposition to MOS’s motion included an argument that certain exceptions to the common law rule against asset-purchaser liability applied in this situation. See this opinion for all the other grounds Altman asserted in opposition of MOS’s motion.

The general rule is that “a corporation which purchases all the assets of another company does not become liable for the debts and liabilities of its predecessor unless (1) the purchase agreement expressly or impliedly so provides; (2) there was a merger or consolidation of the two firms; (3) the purchaser is a ‘mere continuation’ of the seller; or (4) the transaction was entered into fraudulently for the purpose of escaping liability.” Ricciardello v. J.W. Gant & Co., 717 F. Supp. 56 (D. Conn. 1989). Altman relied upon the third exception and argued that MOS was a mere continuation of EWS.

Within the “mere continuation” exception, the Court identified several different theories. The first is the so-called common law exception. Under this theory, the Court found that MOS was entitled to summary judgment because there was no transfer of corporate stock between the two companies and there was a total lack of continuity of shareholders and directors. Next, the Court stated that the continuity-of-enterprise theory applies where “the successor maintains the same business, with the same employees doing the same jobs, under the same supervisors, working conditions, and production processes, and produces the same products for the same customers.” The Court found that MOS did many of these things and that Altman was entitled to full discovery on this theory.

The final theory was the “product line” exception to the rule against successor liability. The Court noted that unlike the other two theories which were widely accepted in Connecticut, no Connecticut appellate court had considered the product-line theory. After considering the decisions of Superior Courts that have considered this theory, the Altman Court stated that since this theory was more consistent with the consumer-protection goals of the Connecticut Products Liability Act, he was entitled to invoke this exception and engage in full discovery on its applicability.

This case shows that there are not merely four exceptions to the rule against successor liability but theories within those exceptions that are being continually argued. If a corporation, such as MOS, takes over the assets of another corporation, it should be aware of these exceptions and ensure that their practices would not allow a plaintiff to successfully argue successor liability.