Timing May Play a Part in Record Numbers of Big Verdicts Against Makers of Products

An interesting article published by Businessweek last month discusses what has become a growing trend in United States product liability law: a surge in big awards against companies accused of putting defective products in the marketplace. According to the article, ten of the 50 biggest jury verdicts last year came in product-defect cases, compared to five in 2009 and only one in 2008. In 2010, there were 15 jury verdicts of $25 million or more, versus seven in 2009.

We previously reported on two of these exceptionally large verdicts. The most recent of those was the $66 million verdict against exercise equipment manufacturer Cybex International, wherein a New York jury awarded the sum to a physical therapist who became paralyzed when an exercise machine fell on her at work. As we reported, the verdict, if allowed to stand, threatens to bankrupt the company. The company’s chief operating officer reportedly said of the suit that he has no idea what the company did wrong.

The second of those cases was that of the $500 million punitive damages award against Teva Pharmaceutical Industries, upon which we reported back in May as appearing to be a case of misplaced anger. There, a Nevada jury found that the company’s packaging of its anesthetic drug created a risk of contamination, thus leading to the plaintiff’s contracting of hepatitis.

So what’s the cause of these enormous, seemingly unwarranted verdicts? Legal experts consulted by Businessweek identify several factors: a stalled economy and recent flood of negative corporate news such as the BP oil spill, Toyota sudden-acceleration suits, and bank foreclosure practices. Some believe these issues have fueled public anger, and thus affected lawsuits across the country against other companies in unrelated cases. Defense attorneys consulted for the article note that it is now almost impossible to detect jurors’ prejudice and bias against corporate America, which today is “more subtle and not always conscious.”

Also quoted in the article is a comment by one of the team of attorneys who won the $500 million award against Teva. He reportedly attributes the rise in large product-defect awards to “cheap defendants and cheap insurance companies. . . . The defendants and the insurance companies are holding onto their money and they’re not settling the cases.” One can hope that his comment was taken out of context. Certainly, he doesn’t propose that company defendants and their insurers fork out huge sums of money to settle claims they believe have no merit? I don’t think this makes them “cheap.” A wise man once said that a jury trial, in spite of its shortcomings and pitfalls as discussed in the article, is one of the most distinguishing and greatest parts of the American judicial system. It sounds like there may be plenty of them this year.

Shoes Offering Easy "Workout" are New Class Action Targets

Mall walkers beware: Those “toning shoes” may not deliver on their promises of getting more exercise and burning more calories for each step walked. As least, that is the accusation raised by a series of proposed class-action lawsuits against makers of the fitness shoes, who have long touted the rounded-bottom shoes as a way of toning legs and getting in shape without ever stepping foot in a gym. The ramifications could be huge, as MSNBC reports that sales of toning shoes were expected to hit $1.5 billion in 2010, which is a 400 percent increase from sales in 2009.

ConsumerAffairs.com reports that the most recent shoemaker to face such claims is New Balance, which recently was sued by a Los Angeles consumer alleging that the shoe company’s advertisements were “false, misleading, and reasonably likely to deceive the public.” She, like the plaintiffs who came before her, seeks court approval for class action status. Before this most recent claim, Boston-based Reebok was hit with a similar suit in late 2010 involving its EasyTone brand. That lawsuit reportedly demands that Reebok conduct a “corrective advertising campaign” and reimburse consumers who bought the allegedly defective product. Many of the brands sell for prices in excess of $100. Finally, Skechers is dealing with a similar lawsuit for its alleged “false and misleading advertising campaign” with regard to its Shape-ups brand.

MSNBC further reports that plaintiffs in these suits may rely on a study commissioned at the University of Wisconsin at La Crosse by the American Council on Exercise (yes, there really is such a thing). Researchers compared people walking on treadmills wearing regular running shoes and various brands of toning shoes. They reportedly found from this study that “[t]here was not even a hint of something going on.” Shoemakers, however, have questioned the validity of this study and instead point to numerous other studies previously conducted which they point to as showing “overwhelming” evidence that these products work.

All shoe companies stand behind their products and have said they will vigorously defend their toning-shoe brands. It is yet to be seen whether any skepticism raised by these lawsuits will curb consumers’ appetites for the easy workout shoe.

Drugmaker’s Decision to Halt Production of Drug Threatens U.S. Death Penalty System

Not too long ago, The Wall Street Journal Law Blog reported that drugmaker Hospira, Inc., based in Lake Forest, Illinois, will permanently cease production of sodium thiopental, an anesthetic that is a key component for the lethal injection drug combinations used in capital punishment. Although states can use a different anesthetic in place of sodium thiopental, such a switch likely would have to be approved by courts and potentially state legislatures.

According to an article in The New York Times, Hospira had planned to resume production of the drug this winter at its plant in Italy, as it does not have any domestic facilities capable of producing the anesthetic. The Italian parliament, however, issued an order prohibiting exportation of the drug if it might be used to perform lethal injections. Hospira issued a statement on January 21, 2011, in which it noted the difficulty of “control[ling] the product all the way to the ultimate end user” to ensure it was not used for capital punishment. Given the issues surrounding the product and the challenges associated with bringing the drug back to the market, Hospira decided to “exit the market.”

Last year, a temporary halt in production delayed scheduled executions in California and Oklahoma. As a result of the shortage, pentobarbital, a drug used to euthanize animals, was reportedly approved for use in capital punishment in Oklahoma when the state sought court clearance to use the drug as a substitute. The New York Times reports that the process of approval in many states may take much longer than that provided for in Oklahoma. Specifically, it quotes the executive director of the Death Penalty Information Center, who notes that many states will require formal proposes, public comment, and challenges in court, which is a process that can take months to complete. It is expected, in light of Hospira’s recent statement, that most states will now follow Oklahoma’s lead in seeking similar approvals of the substitute drug.

The news of Hospira’s decision has reignited debates online about the merits of capital punishment. (See here and here, for example). Hospira’s announcement most certainly will cause states throughout the country to scramble for approval of a new drug combination.

Study Linking Childhood Vaccines with Autism a "Fraud"

By now, we’ve all heard The Associated Press report that the 1998 study conducted by British doctor Andrew Wakefield, from which he concluded from his study of 12 children that a link existed between the MMR (mumps, measles, rubella) vaccine and autism, has now been renounced and regarded as “a fraud” by Britain’s preeminent medical journal. The British Medical Journal (BMJ) condemned Wakefield’s work, claiming that he intentionally altered data to produce false results. The original publisher of Wakefield’s study, The Lancet, retracted the article last year, following which the British General Medical Council stripped Wakefield of his license to practice medicine.

As we previously reported here, the U.S. Supreme Court heard arguments recently in a case that likely will have significant implications for hundreds of pending lawsuits against vaccine makers, the vast majority of which allege a causal link between childhood vaccines and autism. The BMJ’s recent denunciation of Wakefield’s study certainly should play a significant role, too, in the disposition of these pending suits. According to a recent report in The Chronicle Herald, past investigations into Wakefield’s study revealed that his study received funding from lawyers who were suing vaccine manufacturers and that Wakefield, who had developed an alternative to the MMR shot, stood to gain financially if the leading vaccine was dropped from use.

Unfortunately, Wakefield’s bogus study has already caused some significant damage. In spite of the fact that numerous, more expansive studies found no causative link between childhood vaccines and autism, hundreds of thousands of parents–mostly in the U.K. and U.S.–have forgone vaccinations for their children. Not surprisingly, this has led to significant outbreaks of various preventable diseases, most notably those of measles and whooping cough. In 2010, California broke a 55-year-old record for the number of reported cases of whooping cough. We here in South Carolina also have seen a significant rise in the number of cases of whooping cough in recent months.

Although the recent exposure of Wakefield’s fraud brings good news to the scientific community, it seems as though the damage has been done. Though fraudulent, Wakefield’s study certainly was successful in raising long-lasting skepticism over vaccines.

First-Ever Wrongful Death Settlement Involving Chewing Tobacco Reached

The Associated Press is reporting that Altria Group, Inc., the maker of smokeless tobacco products Skoal and Copenhagen, reached an agreement with a plaintiff in December that is believed to be the first-ever wrongful death settlement involving chewing tobacco. Estate of Bobby Hill v. U.S. Smokeless Tobacco Co., FST-CV-05-4003788 (Connecticut Superior Court). The Big Tobacco manufacturer paid $5 million the family of the North Carolina man, who died of mouth cancer at age 42.

Attorney Antonio Ponvert III, who reportedly represented the decedent’s family, had some powerful ammunition in the form of “incredibly damning documents” to use in his battle against the tobacco maker. According to him, his case was bolstered by some previously undisclosed letters from the 1980s that the company sent to minors, thanking them for their business and sending them free samples. In once instance, he said, the company even sent a child a can opener to aid him in opening the chewing tobacco containers.

While this sort of information and the thought of a multi-million dollar pre-suit settlement may convince many plaintiffs’ attorneys to sign up some clients, an Altria spokesman has reportedly issued a statement to assuage such desires. According to the spokesman, “[the company has] no intention of settling cases such as this in the future.” In fact, there were several circumstances at issue here that made this particular claim unique.

First, Altria acquired the named defendant, U.S. Smokeless Tobacco Co., last year, and reportedly was perhaps honoring an agreement that that company had made with the plaintiff prior to the acquisition. Second, it also is possible that Altria simply wanted to resolve all legal issues remaining from its acquisition. Third, the plaintiff was not a drinker or user of cigarettes, which are risk factors tobacco companies often point out to as possibly having caused the cancer. Finally, the plaintiff was a relatively young, married father of two who died in a particularly painful and gruesome manner. The plaintiff had undergone multiple surgeries to remove his tongue.

This is certainly an interesting first-of-its-kind. It remains to be seen whether this is truly a unique event, or simply the first of a new strategy for Big Tobacco product liability matters.

Major Verdict Threatens to Bankrupt Maker of Exercise Equipment

A New York jury on December 8 awarded a 30-year old plaintiff $66 million in her suit against the maker of an exercise machine that fell on her, rendering her a quadriplegic. Barnhard v. Cybex International, Inc., No. 2368/2005 (Supreme Court, Erie County, New York). The plaintiff filed suit against Cybex International, which is a leading manufacturer of exercise equipment, and against her employer at the time, Amherst Orthopedic Physical Therapy. As reported by CNBC, the jury apportioned 75 percent of liability to Cybex, 20 percent to Amherst Orthopedic, and 5 percent to the plaintiff. Cybrex had only $4 million in insurance coverage.

At the time of her injury in 2004, the plaintiff was working as a physical therapist in Buffalo, New York. She reportedly was performing shoulder stretches and had one hand placed on top of a leg extension machine. As she stretched back with her shoulder and arm, the 500-pound machine fell on her, breaking two vertebrae and compressing her spinal cord.

The plaintiff alleged in her suit that Cybex sold a defectively designed, unstable product, and that it failed to provide adequate warnings and instructions in that it issued conflicting instructions regarding the machine’s installation and anchoring requirements. The jury also reportedly concluded that Cybex failed to provide notice or warning of the tip-over hazard after having received notice of other injuries on similar Cybex machines.

Cybex plans to appeal the recent verdict, which the Boston Herald reports will, if it stands, likely bankrupt the small company. It cites to a recent report of an analyst who concluded that Cybex’s earnings would not cover its operating expenses and the estimated $45 million it would need to borrow to cover the judgment. Cybex Chairman and CEO reportedly said of the outcome: “We strongly believe that Cybex was not negligent and was in no way responsible for this tragic accident. We will vigorously pursue all avenues to attain a reversal of this verdict.” Shares of the company’s stock plummeted 37 percent after its announcement of the verdict.

New Governmental Regulations Seek to Improve Vehicle Safety

Recently, the federal government proposed new rules aimed at improving rear visibility standards for vehicles. The requirements, which the Transportation Department intends to take effect by the 2014 model year, were created to address concerns about drivers unintentionally backing over children. The Associated Press reports that most car makers will comply by installing rear-mounted video cameras and in-vehicles displays, which the governments estimates will add approximately $200 to the cost of each new vehicle.

According to data kept by the National Highway Traffic Safety Administration, every year, nearly 300 people are killed and 18,000 are injured because of backovers. Nearly half of the deaths involve children under the age of five and in approximately 70 percent of the cases, it is a family member who is responsible for the death.

KidsAndCars.org, whose website entry regarding the recent regulations calls this the biggest announcement since seatbelts and airbags, is a Kansas-based nonprofit organization that has pushed for these changes for years. Founder and president Janette Fennell reportedly said, “No one would buy a car if you couldn’t see 20-30 feet feet going forward, but we all have been buying vehicles where we can’t see 20-30 feet going backwards.” As the photo above illustrates, studies have shown that the bigger the vehicle, the bigger the blind spot. Sedans have an average blind spot of 12 feet, minivans have an average blind spot of 13 feet, SUVs have an average of blind spot of 14 feet, and pickup trucks have double that number, with a blind spot of approximately 30 feet. The shorter the driver, the bigger the blind spot.

The current changes reportedly have been in the works for a number of years, with President Bush’s 2005 signing of the Safe, Accountable, Flexible, Efficient Transportation Equity Act, and Congress’s 2008 setting in motion of safety upgrades dealing specifically with backover accidents. Look for this safety upgrade during your next new car purchase.

Lawsuit Alleging False Advertising and Misrepresented Prices Comes Week Before Black Friday

Think you’re outsmarting the system by avoiding the hoards of Christmas shoppers and choosing instead to order gifts this year online? Perhaps not always the case, according to a complaint recently filed by seven northern California district attorneys against online retail giant Overstock.com, which is headquartered in Salt Lake City. Just as Christmas shopping reaches its peak, the discount retailer has been forced to defend its advertising and pricing practices, both of which have come under fire in the wake of allegations raised by the lawsuit.

According to the 33-page complaint, filed on November 17 in California’s Alameda County, Overstock has for several years “routinely and systematically made untrue and misleading comparative advertising claims about the prices of its products.” The suit alleges that Overstock used misleading measures to inflate its comparative prices and thus artificially increase the discounts that it claimed to be offering consumers. According to the suit, these misleading statements accompanied virtually every product listing on the Overstock site. Essentially, the complaint alleges that instead of comparing its prices with other merchants’ prices as claimed, Overstock often would make up “list prices” and “compare at” prices based on arbitrary markups over its costs for the products. The complaint seeks $15 in restitution and penalties.

As reported by ConsumerAffairs.com, the complaint cites by way of example one buyer’s purchase of a patio set that Overstock advertised as having a “list price” of $999. The website offered the set for a seemingly huge discount at $449. The buyer who purchased the set, however, found a WalMart sticker on the set listing the sale price as $247, about $200 less than Overstock’s sale price. Vice president and general counsel for Overstock reportedly explained that this particular instance was simply the result of a misunderstanding between Overstock and its vendor. He said that Overstock strives to be as accurate as possible with its pricing because customers can easily check prices that are available elsewhere.

Overstock’s official statement regarding the lawsuit fires back, explaining that it had been in discussions over a period of several years with the California representatives who ultimately filed suit, and that Overstock had been under the impression that “great progress” had been made toward resolution. It thus “profoundly regret[ed]” that these officials chose to file a lawsuit “at what appears to us to be a strategically-timed moment” — i.e. about one week before “Black Friday” and “Cyber Monday.”

It certainly does seem suspicious, if Overstock’s representations are true, that California officials decided after years of discussions, to file suit on the eve of the height of Christmas shopping. Time will tell if media coverage of the suit is enough to turn shoppers away from Overstock this season.

Bedbug Infestations on the Rise, Lawsuits Follow

Bedbugs are quickly becoming a national epidemic. Indiscriminate in their selection of venue, the bugs are popping up everywhere, from luxury hotel suites in Manhattan to hospital beds in Tennessee and college dorm rooms in Pennsylvania and North Carolina. Not surprisingly, a significant number of lawsuits have followed. The most recent of these is a high-profile suit filed by a Michigan couple against New York’s famed Waldorf-Astoria hotel, which illustrates that the alleged damages in these cases can be extraordinary.

The New York Daily News reports that the Michigan couple were both Allstate Insurance Company employees who had won a three-night stay at the luxury hotel for being top company performers. They allegedly awoke after their first night in the hotel covered in bites and with blood on their sheets. The two complained and were given a new room. However, not only was their trip ruined, according to their recent lawsuit, but bedbugs got into the couple’s luggage and were taken back to their Michigan home, where they infested their house and bit the couple and their 12-year-old daughter. The family allege that they had to move out of their home for six weeks, spend thousands of dollars for extermination and clean-up, and that they were feared and ostracised by neighbors such that they endured “emotional havoc.”

Although this recent suit likely raises a negligence cause of action, product liability suits involving bedbugs seem inevitable. When a customer unknowingly purchases a product infested with bedbugs, he or she arguably could raise breach of warranty and/or strict liability claims against the seller. Retail sellers already have seen some exposure to such claims. The National Pest Management Association reports that retail giants Abercrombie & Fitch, Hollister, and Victoria’s Secret have all seen some bedbug infestation in stores. It recommends that shoppers inspect items for unusual stains or for signs of the bugs’ “sticky white eggs” (gross). As the Michigan couple’s lawsuit demonstrates, alleged damages from these claims can be extensive when buyers unknowingly take the products into their homes and cause further infestation.

In 2008, a New Jersey couple was awarded $49,000 after they sued J.C. Penney, alleging that the bedroom furniture they purchased from the retailer was infested with bedbugs. The likelihood of these claims going all the way to a jury is reportedly rare, however, as many business owners prefer to settle claims quickly and out of court. Such claims, even if unfounded, can cost a business a fortune in lawsuits and in loss of business. As the national epidemic continues, so too will lawsuits.

Abnormal Interviews: Law Professor Stephen Spitz

Today, Abnormal Use continues its series, “Abnormal Interviews,” in which this site will conduct brief interviews with law professors, practitioners, and other commentators in the field. For the latest installment, we turn to law professor Stephen A. Spitz of the Charleston School of Law in Charleston, South Carolina. The interview is as follows:

1. In your article, “SUEM, Spitz’s Ultimate Equitable Maxim: In Equity, Good Guys Should Win and Bad Guys Should Lose,” you identify nine equitable principles utilized by South Carolina courts. Which of those maxims stand out in your mind as an especially important consideration for courts?

Maxims can be divided into two broad categories. The first category are those maxims that suggest guidance for courts in the absence of a clear legal answer. (For example, the maxim that equity will not suffer a wrong to be without some remedy, suggests to a Court that any real wrong should be addressed). A second category of maxims directs the Court to look closely at the litigant’s conduct. (For example, equitable relief is denied to those with “unclean hands.”) Together, these two general categories suggest that equitable principles and equitable conduct are relevant to judgments in many types of cases.

2. What is the most significant opinion (South Carolina or otherwise) to come out in the past several years that called for equitable intervention? Why?

Although I can’t necessarily reduce an answer to a single opinion, I have briefly discussed three recent cases that suggest that sometimes equity can play a meaningful role in many different areas of the law.

(1) In Matrix Fin. Servs. Corp. v. Frazer, — S.C. —, –S.E.2d–, 2010 WL 3219472 (2010), the South Carolina Supreme Court wrote a very important decision about a mortgagee’s unclean hands, concerning its engaging in the unauthorized practice of law, that has been widely discussed around the State. There was a dissenting opinion and another opinion concurring in result.

(2) Hooper v. Ebenezer Senior Servs. & Rehabilitation Ctr., 386 S.C. 108, 687 S.E.2d 29 (2009) is a decision where the South Carolina Supreme Court used the doctrine of equitable tolling to expand a statute of limitations in light of a corporation’s failure to properly list its registered agent for service with the Secretary of State. In this opinion, the Court discussed the equitable powers of a court to do fairness and to avoid grossly unfair results.

(3) A final illustration of an equity case is Horry County v. Ray, 382 S.C. 76, 674 S.E.2d 519 (Ct. App. 2009) where that Court of Appeals found the following equitable principle to be useful, “when one of two innocent parties must suffer a loss, it must fall on the party who, by incautious and misplaced confidence, has occasioned it or placed it in the power of a third party to perpetrate the fraud by which the loss has happened.”

3. What is the role of equity today in American courts?

Long ago, Aristotle defined equity as a correction of law where it is defective owing to its universality. Even today, I think that is a good definition as it highlights both the current and historical role of equity in modern American and English Courts.

4. What made you interested in starting your own blog, Equity is Swell?

It just hit me one day that I had all these student papers in my office from my equity class at the Charleston School of Law, and some of them were really excellent, truly creative papers on topics of genuine interest to South Carolina lawyers and judges. I decided if I put them on a blog that perhaps I could do a service to the students who wrote the papers as well as the bench and bar. Hence, the blog was started. Every time I teach Equity, I plan to add more student papers, power point presentations, and my syllabus in the hope that these materials may benefit judges, lawyers, and others.

5. If you could offer young lawyers beginning their careers one piece of advice, what would it be?

This sounds really silly and trite, but I keep a poem in my office that I often re-read. It contains, I personally believe, some real wisdom – for all lawyers and others, both young and old. It is only three paragraphs long, and I repeat it here:

“It Couldn’t Be Done”

By: Edgar A. Guest
Copyrighted 1921
By George Sully & Company

Somebody said that it couldn’t be done,
But he with a chuckle replied
That “maybe it couldn’t” but he would be one
Who wouldn’t say so till he’d tried.
So he buckled right in with the trace of a grin
On his face. If he worried, he hid it.
He started to sing as he tackled the thing
that couldn’t be done and he did it.

Somebody scoffed: “Oh, you’ll never do that”;
At least no one ever has done it;
But he took off his coat and he took off his hat,
And the first thing we knew he’d begun it.
With a lift of his chin and a bit of a grin,
Without any doubting or quiddit,
He starting to sign as he tackled the thing
That couldn’t be done, and he did it.

There are thousands to tell you it cannot be done,
There are thousands to prophesy failure;
There are thousands to point out to you one by one,
The dangers that wait to assail you.
But just buckle in with a bit of a grin,
Just take off your coat and go to it;
Just start to sign as you tackle the thing
That “cannot be done” and you’ll do it.

BIOGRAPHY: Stephen A. Spitz joined the Charleston School of Law faculty in 2004 as full professor. Prior to his time at the Charleston School of Law, Professor Spitz served on the faculty at the University of South Carolina School of Law for 26 years. Professor Spitz teaches courses in remedies, property, real estate transactions and environmental law, including a seminar on the federal Superfund law. Among his publications are a case book, Real Estate Transactions: Cases and Materials (written with previous Abnormal Use interviewee Michael J. Virzi), a practice pamphlet, “Searching Land Titles in South Carolina,” and an article in The South Carolina Law Review, “SUEM, Spitz’s Ultimate Equitable Maxim: In Equity, Good Guys Should Win and Bad Guys Should Lose.” He also has written chapters in books on South Carolina water and environmental laws. Professor Spitz recently launched his own blog, Equity is Swell, in which he publishes student papers and presentations in the hopes that they may benefit South Carolina judges and lawyers.