When a $158 million settlement is a “Victory”

On Thursday, January 19, mega-company Johnson & Johnson and the State of Texas reached a settlement for the bargain price of $158 million in a Medicaid fraud lawsuit.  The allegations?  That J&J committed Medicaid fraud by engaging in illegal marketing activities and providing kickbacks to boost sales of the anti-psychotic drug Risperdal, used primarily to treat schizophrenia and bipolar disorders.  The suit also alleged that J&J told doctors that the drug could be used to treat children, for which it did not have FDA approval.  Oops.

And why was $158 million a bargain?  Well, consider what has happened to the company in other states that have also sued J&J on similar theories.  In Louisiana, the Court ordered the company to pay $258 million; in South Carolina, the bill was a cool $327 million.

As reported by the Washington Post, then, $158 million doesn’t look so bad:

“For Johnson & Johnson, it’s a mighty easy result,” said Eric Gordon, a clinical professor at the University of Michigan’s Ross School of Business. “The legal team at Johnson & Johnson are doing high fives.”

Indeed.

“Objection, Form” v. “Object to the Form”

As lawyers, and more importantly, as bloggers, we here at Abnormal Use are huge nerds.  Accordingly, we sometimes lose sight of the forest for the trees and develop silly idiosyncrasies based on our interpretation of legal minutiae.  Today, we write of one such quirk: objections to the form of questions at depositions.

This writer attended Baylor Law School, an institution which focuses on practical education and teaches discovery and deposition techniques in a mandatory third year series of courses.  It was then that this writer learned of Texas Rule of Civil Procedure 199.5(e), which provides that objections to the form of a question must be made at depositions. All other objections are reserved. Form objections shall be made using the following statements:  ”Objection, leading” and “Objection, form.”  Note that the terms contemplated by the rules are in quotation marks.  In its own words, the rule itself provides:

Objections to questions during the oral deposition are limited to “Objection,leading” and “Objection, form.” Objections to testimony during the oral deposition are limited to “Objection, non-responsive.” These objections are waived if not stated as phrased during the oral deposition. All other objections need not be made or recorded during the oral deposition to be later raised with the court.

Practicing several years in Texas, this writer always made the objections as stated in the rule.  It would have been splendidly nerdy to argue to a trial court that an opposing party had waived an objection by not stating it as it was quoted directly in the rule (which the rule itself states expressly).  What hypertechnical procedural fun that would have produced! After all, the use of quotation marks suggests that the objection itself must be verbatim and not a paraphrase, and the rule provides that “objections are waived if not stated as phrased.”  However, the judicial scorn likely to be prompted by that argument always deterred this writer.

But here is the aforementioned  nerdy pet peeve.  Throughout our career, in whatever state, and in whatever jurisdiction, this writer has always said “Objection, form.”  Call it habit, call it nostalgia, call it blind adherence to an old rule, call it what you will.  Inevitably, though, when the transcript arrives back from the court reporting service, our objection is almost always transcribed as “Object to the form” which, of course, would have been (presumably) waived under the Texas rule.  Perhaps the court reporters simply have some type of button or macro on their systems which inserts a form objection on to the record irrespective of the precise manner in which the attorney articulated it.  That obviously would not work for longer detailed objections, but for basic form objections, maybe that is the reason.  However, we have always wondered why it is that our “Objection, form” never seems to survive the day of the deposition.

Hey, we told you it was a nerdy pet peeve.  You were warned.

Defense Verdict in Jamie Leigh Jones Case

Yesterday, a federal jury in Houston, Texas rejected Plaintiff Jamie Leigh Jones‘ claims against Halliburton subsidiary KBR that she was raped and fraudulently induced into entering into an employment contract with the company.  See Jones, et al, v. Halliburton Co.,  et al, 4:07-cv-02719 (S.D. Tex.). Jones sought damages against the company in the amount of $145 million, claiming that KBR created a hostile sexual work environment at her barracks in Iraq.

The Houston Chronicle reports:

Jurors in a federal courtroom on Friday rejected a former Conroe woman’s claims that she was drugged and raped by several Kellogg Brown & Root firefighters while working for the company in Iraq in 2005.

The jury also rejected Jamie Leigh Jones’ claims that the former Halliburton subsidiary committed fraud by “inducing her to enter into an employment contract.”

By answering “no” to those two questions, the jurors rendered the other 12 questions in the jury charge moot, bringing an end to the month-long trial of Jones’ lawsuit.

We mention this verdict today because the Jones lawsuit was prominently featured in Susan Saladoff’s recent documentary, Hot Coffee, which we reviewed previously here. Specifically, the film chronicled Jones’ inability to have her claims heard by a jury due a mandatory arbitration clause in her employment contract (although we here at Abnormal Use did not explore the Jones case in our review because our interest in the film was prompted primarily by its discussion of the Stella Liebeck McDonald’s hot coffee case).  In 2009, the Fifth Circuit ruled that Jones did have the right to have her case heard by a jury. See Jones v. Halliburton Co., 583 F.3d 228 (2009).

Mark Cuban’s Motion for Summary Judgment (And What It Means)

By now, you have all seen the infamous motion for summary judgment filed by Mark Cuban in the law suit brought by a company alleging that Cuban had mismanaged the Dallas Maverick basketball franchise.  The four page motion – which can be found here – is brief and amusing, as it uses imagery in the body of the motion to suggest that the claims against Cuban are baseless. (Apparently, because of its novelty, some law professors are already teaching the motion in class.). On its second page, the motion includes a large photograph – which takes up nearly half the page – of Cuban and the Mavericks celebrating their recent national championship win.

Cuban’s motion reminds us of a post we did late last year encouraging the use of such tactics.

Back then, in a post on modernization of judicial opinions, we noted that attorneys haven’t traditionally included images in motions and wrote as follows:

[T]his is a product of tradition, and attorneys – as authors of briefs which are predominantly prose – are equally at fault. While it is customary to attach photographs as exhibits to memorandum in support of motions, rarely does the attorney actually embed the photograph into the image itself. (This is changing for the better, though.). Thus, the Court, or the reader of the brief, is required to flip from the particular page being read back to the exhibit index and then back to the argument again. It seems that in 2010 this is unnecessary in both written submissions to the Court as well as in the resulting opinions themselves.

These days, with so much information on the Internet, with so many visual learners, with so many maps, photographs, schematics, images, and so many other types of non-prose information, we believe that embedding images into one’s motions is a growing trend and may in fact help and simplify issues.  In a products case in which the product at issue is relatively obscure, a photograph accompanied by a brief description can speak volumes more than a lengthy technical treatise.  If location is an issue in the case, then a photograph of a scene might be appropriate, provided that the photograph is, of course, favorable to your argument.  If the distance between two sites is at issue, then a Google map screen capture can be input into the motion itself to showcase the distance at issue. There are many, many options.

We as lawyers use words by trade, but often we use far too many of them.  The readers of our motions and briefs have much to do and many other items to review.  We suspect that they, most of all, would appreciate efforts to simplify the briefing process.  After all, a picture is worth a thousand words.

Just ask Mark Cuban.

Disclaiming Physician Patient Relationship Leads to Fraudulent Joinder in Texas

The plaintiffs’ bar rallies around the cry that they are the only ones fighting for justice. Evil insurance companies further victimize already injured parties, blah, blah, blah. It’s unfortunate that so many plaintiffs’ lawyers seem unwilling or incapable of acknowledging that their lawsuits are involuntary transactions and legal strategies are, for the most part, economic choices.

Take for example, McCall v. Genentech, No. 3:10-CV-1747-B, 2011 WL 111440 (N.D. Tex. Jan. 12, 2011). In that suit, the Plaintiff claimed she was injured by the prescription drug Raptiva. In attempting to treat her psoriasis, she purportedly took the drug and then spent 25 days in a hospital and experienced continuing injuries. She filed a lawsuit in Texas state court naming Genentech (not Initech) and XOMA, who aided in the manufacture of Raptiva, as well as her physician, who prescribed the drug (who happened to be a clinical researcher of Raptiva), and two entities for which her physician worked. The latter three defendants were non-manufacturing defendants who just happened to be nondiverse from the Plaintiff. Accordingly, the defendants removed the suit to federal court, alleging improper joinder, and the Plaintiff predictably responded with her own motion to remand the case back to state court.

Perhaps the suit was originally filed in state court, rather than federal, because there is no mandatory scheduling order, no early disclosure of experts (meaning less upfront costs in expert reports), and all those things that can make litigation expensive. However, the Plaintiff has a problem because Texas has a limitation on damages as well as some mandatory expert disclosures in medical malpractice actions that make litigating in state court a lot like litigating in federal court. Since the plaintiff’s attorney’s job is (apparently) to maximize the return on an investment, the Plaintiff’s lawyer decided to disclaim any causes of action based on the physician-patient relationship in the original state court petition. Thus, the Plaintiff could still hope to squeeze some settlement value out of the case without costly expert discovery.

The strategy failed. By disclaiming the physician-patient relationship, the Plaintiff had no relationship on which to base a cause of action against the non-manufacturing defendants because a clinical researcher owes no duty to the public. Without viable causes of action against those defendants, the Plaintiff lost on the motion to remand and remained in federal court.

We’re glad that the federal rules monetize “justice” in the way that they do. Plaintiffs and their lawyers should bear some meaningful cost of the litigation up front as a means of speeding the litigation towards its end. There’s nothing wrong with trying to level the playing field as far as fees and costs go, as there should be economic pressures on both sides to resolve cases. Shouldn’t all sides be able to say that the Plaintiff’s case should be resolved quickly so that she can move forward with her life? Too many times, cases languish because there is no pressure to move the case forward. Whatever the case, it’s always nice for defense counsel to prevail because an opponent cannot or did not properly strategize.

Manufacturer Remains On the Hook in EIFS Litigation in Texas

Since the 1990s, EIFS litigation has been a thorn in the side of the construction and insurance industries. Improper installation of EIFS (Exterior Insulation and Finishing System), sometimes called “synthetic stucco,” on homes across the United States resulted in a tremendous amount of litigation. Class action suits and individual litigation have been plentiful, with defendants often pointing the finger at each other as they ferret out responsibility for who must pay for the damages.

The Texas Supreme Court recently weighed in on some of these issues in Fresh Coat, Inc. v. K-2, Inc., —S.W.3d —-, No. 08-0592, 2010 WL 3277130 (Tex. August 20, 2010). The Court addressed the duty of a synthetic stucco manufacturer to indemnify a contractor that installed the stucco against claims of more than 90 homeowners who sued for structural damage, termite problems, and mold. The defendants settled the litigation with the homeowners, and the case proceeded to trial on the various claims that the defendants brought against each other. The jury awarded judgment to the contractor, Fresh Coat, for all damages requested against the manufacturer, K-2, Inc., which included indemnification for settlements that Fresh Coat made to the homeowners and to the homebuilder. The intermediate court of appeals in Beaumont affirmed the decision, with the exception of the amounts that Fresh Coat paid to the homebuilder. Both K-2, Inc. and Fresh Coat appealed.

In its appeal, K-2 urged the Supreme Court to rule that Fresh Coat, as a contractor for the installation of the synthetic stucco, did not qualify as a “seller” and that EIFS is not a “product,” such that K-2 would not have indemnity obligations arising under Chapter 82 of the Texas Civil Practices and Remedies Code. K-2 claimed that products placed into the stream of commerce and integrated into a house are transformed into real property and no longer retain their status as “products.” The Court disagreed, holding that a product is something distributed or otherwise placed, for any commercial purpose, into the stream of commerce for use or consumption. Here, EIFS was a synthetic stucco system made of component parts manufactured by K-2, that it was placed into the stream of commerce, and it was used in construction of homes.

K-2 further argued that Fresh Coat, as a contractor that obtained and installed EIFS, was not a seller. If Fresh Coat could be characterized as a service provider only, K-2 would not have a statutory requirement to indemnify. The Supreme Court held that Chapter 82′s definition of “seller” neither excludes a seller who is also a service provider nor requires the seller to sell only the product. The Court commented that its approach was consistent with the Third Restatement of Torts, which recognizes that a product seller may also provide services. As Fresh Coat provided the EIFS system and the services to install it, Fresh Coat qualified as a seller.

The Texas Supreme Court also ruled that the manufacturer’s statutory obligation to indemnify covers a settlement payment made by the contractor to the homebuilder, even where the contractor was independently obligated by contract to indemnify the homebuilder. The only exception under Civil Practices and Remedies Code Section 82.002(a)) to a manufacturer’s duty to indemnify sellers for losses arising out of a products liability action is for losses caused by the seller’s negligence, intentional conduct or other act or omission for which the seller would be independently liable. Because Fresh Coat made itself independently liable by contract, K-2 contended that it should not have to indemnify it. The Court held none of the statutory exceptions applied, leaving the manufacturer to bear the full loss.

Texas Products Liability Case Intertwined with Common Law Marriage Issue

When does a products liability action become inextricably intertwined with family law? Apparently, when the case is brought in Texas. In Crenshaw v. Kennedy Wire Rope & Sling Co., — S.W.3d —, 2010 WL 2601662 (Tex. App. – San Antonio 2010, no pet. h.), the court of appeals was confronted with issues relating to the alleged defectiveness of a wire rope sling as well as the elements of common law marriage in Texas.

That wrongful death case centered around the death of a floorhand who was killed while “moving two casing bails with the use of a braided wire rope sling.” The Defendants were Newco Manufacturing Company, the maker of a component hook, and Kennedy Wire Rope & Sling Company, the manufacturer of the integrated sling itself. Although the action was initially brought by the floorhand’s parents (who later settled), the appeal centered around the claims of the intervenor-common law wife of the floorhand, against whom a take nothing judgment was entered because the jury found that they had never been married. Thus, the jury never reached any of the liability issues in the case. However, the two defendants cross-appealed, contending the trial court erred in refusing to grant their motions for directed verdict, both on the issue of common law marriage as well as the underlying products liability claims.

After a lengthy analysis, the court ultimately concluded that the trial court’s jury instruction on common law marriage was flawed. Accordingly, it turned to the products liability issues.

In its appeal, Newco argued that “the evidence conclusively established that its component hook did not fail, and that it was not in any way involved in the design of the integrated wire rope sling.” Agreeing, the court of appeals rejected the common law wife’s reliance on the testimony of a Newco manager and the Plaintiff’s petroleum engineering expert. Although the common law wife had argued that the Newco manager had essentially admitted the hook was defective, the court noted that the manager’s testimony indicated only that the manager believed that the “whole assembled product” was dangerous, and only then under certain conditions, when there was slack in the line. As for the testimony of the retained expert, the court noted that he had conceded that the Newco hook had in no way broken or failed and that his belief was that slack in the line caused the accident, not the hook. Accordingly, the court of appeals found that Newco was entitled to summary judgment on the stated liability grounds.

Kennedy Wire was not so lucky. In rejecting its cross appeal, the court found that “reasonable minds could differ” on the application of Texas’s five risk-utility factors (which, as the court noted, “are used to determine whether the defective design of a product rendered it unreasonably dangerous”). In so doing, the court explained:

The evidence established that the particular design of the braided wire rope sling with a Newco hook was chosen by Kennedy. Before recommending the “improved” sling product to H & P, Kennedy made the decision to use braided wire rope, rather than single wire rope, and then chose the Newco number 3 choker hook for assembly with the braided rope, knowing it did not have a safety latch. Ryles testified that not only does Newco sell a similar hook with a safety latch, although only for use with single wire rope, but a competitor, Crosby, also sells a hook with a safety latch that can be used with braided wire rope. In addition, Ryles testified that the sling should have incorporated a hook with a safety latch in order for the whole product to be as safe as possible for lifting overhead loads-in case slack got in the line. McClay testified that the hook without a safety latch was “inappropriate for that particular job;” specifically, McClay stated that, although the hook itself was not defective and did not fail, the sling design incorporating a hook without a safety latch allowed the load to come unhooked when slack got in the line, causing the accident. In addition, there is evidence that Kennedy had the ability to make the integrated sling product safer for lifting overhead loads without impairing its usefulness or significantly increasing costs. Further, the testimony of Hubler and Garland Kennedy shows that Kennedy was well aware of H & P’s prior problems with chain slings that broke or failed and its need for a safer sling for use on it rigs, and yet recommended a sling that incorporated a hook without a safety latch. Hubler testified he would have liked to know about the option of using a hook with a safety latch, and that the additional cost would not have been an issue. Kennedy testified that incorporating a choker hook with a safety latch was feasible and would not have reduced the sling’s utility.

Accordingly, the court of appeals remanded that portion of the case back to the trial court.

Another Plaintiffs’ Friendly Post?

To my dismay, I was recently described as having written a post from a “plaintiff’s perspective.” The comment shook me to the core, as I have been sleepless, listless, and suffering from a psychological malaise deeper than our national debt. I remember reciting proudly with my incoming class at new lawyer orientation, “The plaintiff’s case is never meritorious.” My entire existence has been devoted to ensuring that no stone goes unturned in the search for the truth, which inevitably leads to the defense verdict. To say I am deeply offended at any intimation that I lean to the other side is an understatement of seismic proportions. After all, what is the point of the billable hour, if not to justify my very existence.

See the indecency here, where Polson Enterprises, The Boating Information Company, complimented a previous post concerning a jury’s awarding $3.8 million to a teenager who was struck by a boat propeller when his friend backed over him in the water. I didn’t actually intend to suggest that boat propellers be redesigned to look something like an oscillating fan, which was essentially what Plaintiff’s counsel argued in that case, so perhaps I need to take a more definitive stand when I believe the Plaintiff’s argument is off base. And so while I pledge to do so in future posts, this is not one such topic. A plaintiff I actually could potentially support is one who takes on Miley Cyrus. Not so much because the tween “role model” allegedly gives lap dances in bars or always seems to be involved in some photo scandal, as those issues are outside the scope of this blog. This time, Miley is in the news for a recall of her jewelry line, which was sold exclusively at Wal-Mart stores, after test results showed the jewelry contained high levels of the toxic metal cadmium.

Although Wal-Mart initially continued to sell the jewelry, reportedly telling the Consumer Product Safety Commission that testing items already on store shelves would be too difficult, it eventually changed its approach, issuing a statement that it had pulled “the few products that did not” comply with its new testing regimen. Studies reportedly have shown that girls of the age of most Cyrus fans, ages 6 to 11, are at higher risk for absorbing more cadmium than other children or adults. In any event, the affected items have, at this point, been pulled from the shelves. Only time will tell if this causes future damage to the Miley Cyrus brand.

Big Verdict in Texas Boat Propeller Strike Case

In what was reportedly the first successful case against the boating industry brought by a person injured by a motor, and in a case that could have huge implications in the industry, a Texas federal jury this month awarded a teen Plaintiff $3.8 million in damages after the his leg was severed by a boat propeller. The case, heard by federal district court Judge Sam Sparks, was actually tried thrice, as the first two trials resulted in hung juries. Brochtrup v. Mercury Marine, C/A No. 1:07-CV-00643-SS, Western District of Texas, Austin Division (April 5, 2010). We here at Abnormal Use have previously reported on a watercraft warning case here.

The Plaintiff, then 18 years old, was boating with friends on Lake Austin in the summer of 2005. He had just returned to the boat from wakeboarding when the tow rope fell in the water. When the Plaintiff jumped back in the water at the rear of the boat to retrieve the line, his friend and 18-year-old driver put the boat in reverse. The boat’s propeller caught the top of the Plaintiff’s leg and twisted it around, causing extensive blood loss and eventual loss of his leg. See local news coverage of the accident here .

The Plaintiff filed suit against the parent company of Sea Ray Boats, alleging that the boat should have been equipped with safety devices, such as guards or covers, to prevent the plaintiff from becoming entangled or stuck. However, the U.S. marine industry reportedly has fought the idea installing prop guards on motors because no design has ever been proven safe or effective for maneuvering boats. The U.S. Coast Guard has agreed, and has consistently refused to order boat and engine builders to install prop guards.

Apparently, though, this Texas jury didn’t buy it. It found both the Plaintiff and the driver (who was not named a defendant) of the boat each to be 17% negligent, and the defendant 66% negligent and responsible for the injury. Its award of damages included $200,000 for past physical pain and anguish, $200,000 for future physical pain and mental anguish, and $100,000 for disfigurement.

The decision has naturally drawn harsh criticism from the industry, which points out the common-sense factor at work here and the fact that all motors are “emblazoned” with pronounced warnings. It likens the facts on this case to the infamous McDonald’s hot coffee suit. This case, which Brunswick Corp has said it intends to appeal, may be one to watch, as it surely will have a profound effect on the boating industry.

No Jurisdiction for Seller of Milk Trailer, Texas Court Finds

Last week saw the release of a somewhat interesting personal jurisdiction case out of Texas. In that case, the seller of a milk truck was found not to have minimum contacts with the State of Texas, and thus, the district court did not have personal jurisdiction over it in the Plaintiff’s products liability action. See Mateer v. Cabool Lease, Inc., No. 2-09-297-CV, 2010 WL 1509691 (
Tex. App. – Fort Worth, April 15, 2010, no pet. h.) (not designated for publication).

The Plaintiff, a milk truck driver, suffered a severe hand injury after a 2006 valve accident while he was pumping milk into his trailer. Following his injury, he sued several entities, including Cabool Lease, Inc. (“Cabool“), the company that had sold the trailer at issue to Plaintiff’s employer, on the grounds that the trailer was defective. In response to the suit, Cabool filed a special appearance under Rule 120a of the Texas Rules of Civil Procedure in order to assert a personal jurisdiction challenge. The trial court sustained Cabool’s special appearance and the Fort Worth Court of Appeals, in an unpublished opinion authored by Justice Sue Walker, affirmed the trial court’s ruling and denied the Plaintiff’s interlocutory appeal.

The basic facts were not in dispute. In 1998, Plaintiff’s employer purchased the trailer at issue from Cabool, based in, of all places, Cabool, Missouri. The court noted that Cabool was a Missouri corporation with its principal place of business in Missouri. It did no business in Texas:

[Cabool] is not a corporate entity formed under the laws of Texas, and it does not maintain a registered agent for service in Texas. [Cabool] has no employees in Texas and does not regularly recruit Texas residents to work for [Cabool]; it does not maintain a place of business in Texas and does not have any offices or other facilities in Texas; it does not own any real or personal property in Texas; it does not maintain any bank accounts or post office boxes in Texas; it does not pay any taxes to any local or state taxing authorities in Texas; it does not market or ship any products to individuals or corporations in Texas; it does not operate a website in order to promote its business; it does not have a telephone number in Texas; it does not send sales or marketing brochures to people or corporations in Texas; it does not have company meetings in Texas; it does not purposefully advertise in or direct marketing efforts to Texas with an intent to solicit business from Texas; it does not advertise in any Texas newspapers; it has never before been involved in a lawsuit in Texas; and it has never had an occasion outside of this lawsuit to call anyone in Texas or receive phone calls from Texas.

Good jurisdictional facts for a defendant, those. Nevertheless, the Plaintiff argued that “ninety percent of [Cabool's] business ha[d] consisted of leasing and financing equipment such as milk trucks and milk trailers to entities affiliated with [Cabool], such as [Plaintiff's employer],” which, although also a foreign corporation, had significant Texas contacts. Further, Plaintiff pointed to evidence of a significant link between Cabool and his employer. For a number of years, Cabool leased to Plaintiff’s employer trucks and trailers for use in its facilities, including those in Texas, and Cabool continued to lease trailers to Plaintiff’s employer (who made up approximately 90 percent of Cabool’s customer base). Plaintiff also noted that Cabool’s president was also the president of Plaintiff’s employer, suggesting the closeness of the companies.

However, the appellate court found that “the trial court’s implied finding that [Cabool] had no contacts with Texas is supported by the special appearance evidence.” Although Plaintiff’s employer may have had contacts with Texas, it remained a third party, and the acts of a third party could not be attributed to Cabool, despite the fact that the two companies were closely associated. (The court specifically noted that there was no issue of piercing the corporate veil, and thus, Plaintiff’s employer’s contacts with Texas were not relevant to those of Cabool.). Accordingly, Plaintiff was left with no evidence of any contacts that Cabool had with Texas, ending the inquiry.