Verdict Survey: Tankless Water Heaters in Dorchester County

The May 2013 issue of Verdict Search included a South Carolina products liability case tried in Dorchester County.  The details of the case are set forth below.

Capsule Summary:   On March 1, 2013, a Dorchester County jury returned a verdict in favor of the plaintiff for $750,000 in a case involving tankless water heaters purchased by the plaintiff plumbing company.  Plaintiff alleged the tankless water heaters it purchased failed once temperatures began to drop in the winter, causing water pipes in the homes in which they were installed to burst. 

 

Case Information: Amo, LLC v. Eccotemp Systems, LLC, Greenwave Hot Water Heaters, LLC/Eccotemp Systems, LLC v. Hurricane Construction, Inc., C/A No. 2010-CP-18-01920, Dorchester County Court of Common Pleas.

 

Date of Verdict:  March 1, 2013

 

Venue: Dorchester County Court of Common Pleas

 

Judge: The Honorable Michael G. Nettles

 

Factual Background:  In 2008, Plaintiff Amo, LLC (“Amo”) (a plumbing company) purchased 75 tankless water heaters and installed them in various homes.  Amo purchased the units from Eccotemp Systems, LLC (“Eccotemp”).  The water heaters were supposed to produce warm water on demand and conserve energy.  They were also allegedly 30 to 40 percent less expensive than the price of competitor products that were similar.  Amo paid $498 per unit.  In the winter of 2008, and as temperatures began to fall, the units Amo purchased began to fail and caused water pipes in the homes in which they were installed to burst. 

 

Allegations and Procedure: Amo sued Eccotemp and claimed Eccotemp manufactured and sold a defective product.  Amo alleged causes of action for breach of warranty, breach of contract, and violation of the South Carolina Unfair Trade Practices Act.  Amo also named the retailer that sold the water heaters, but the retailer was dismissed later by Plaintiff’s counsel.  Eccotemp then impleaded Hurricane Construction, Inc. (the homebuilder) for whom Amo installed the units, but Hurricane was dismissed from the case prior to trial.

 

At trial, Amo's counsel argued Eccotemp’s products included broken thermostats, which caused water pipes to freeze.  The thermostats also caused the units to malfunction and not heat water inside the units if temperatures dropped below 37 degrees fahrenheit.   There was testimony at trial that 70 percent of units sold to Amo by Eccotemp failed.  Eccotemp replaced 40 of the units, and 14 of them froze again.  Amo's counsel argued that several homeowners experienced as many as three Eccotemp water heater failures in their homes during the cold months.  When Amo replaced the Eccotemp units with a competitor’s units, those units did not fail.  Amo introduced evidence of a pattern of behavior by Eccotemp, including evidence that homeowners in several states had similar problems with the water heaters.

 

Eccotemp argued that the products' failure was not the result of a product defect.  Instead, it argued Amo's employees installed the units in the homes incorrectly.  Eccotemp also claimed the homeowners contributed to failure of the units and frozen water pipes by not allowing their pipes to drip during cold weather.

 

Experts: Amo's expert was Gary Roland, a plumber in Lexington, South Carolina.  Defendant’s expert was Michael Richmond, a plumber in Charleston, South Carolina. 

 

Alleged Damages:  Amo's counsel sought a recovery of $158,000, as well as attorney’s fees and costs.  Amo's counsel requested that the damages be trebled pursuant to the South Carolina Unfair Trade Practices Act.  Defendant’s counsel disputed these damages.

 

Result: The jury returned a Plaintiff’s verdict, in favor of Amo and determined the damages for breach of warranty, breach of contract, and unfair trade practices totaled $750,000.  The jury apportioned $125,000 to breach of warranty, $158,000 to breach of contract, and $474,000 to the unfair trade practices claim.

 

Miscellaneous:  The last demand in the case was $85,000.  The last offer was $42,500, which the write-up indicates was withdrawn.  After the verdict, Eccotemp filed a motion for a mistrial, which was denied.  Eccotemp filed a Notice of Appeal with the South Carolina Court of Appeals and also filed for United States Bankruptcy Chapter 11 bankruptcy protection.  The write-up indicates the information contained therein was provided by Plaintiff’s counsel, and none of the Defendants’ counsel responded to inquiries.

 

Thanks to the May 2013, Volume 12, Issue 5 of Verdict Search for this information.  I also frequently use their verdict search engine, www.verdictsearch.com.

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CLE for ACC-South Carolina Chapter was a Success

 

 

My firm is a proud sponsor of the Association of Corporate Counsel - South Carolina Chapter, and I am the firm's primary liaison for this group.  Last Friday, we conducted a three-hour continuing legal education seminar for the chapter, and I am happy to say that it went off without a hitch.

 

My partners Christian Stegmaier and Rebecca Halberg presented on ethics in mediation.  Joey McCue presented on unconscionability in contractual provisions and leveraged from his experience in the recent South Carolina Supreme Court case of Gladden v. Boykin.  Tom Bacon presented on management of workers compensation claims.  We also had Otis Rawl from the South Carolina Chamber of Commerce join us.  He was kind enough to provide an overview of South Carolina's current business climate and the most recent legislative session.

The picture above is of yours truly and was taken during my presentation: "How Did You Arrive at that Number?  Objective and Quantitative Methods for Case Management and Evaluation."  As I told our group, I had an experience in my first or second year of practice where a client asked me how I arrived at a certain settlement figure for a case.  When my answer failed to provide any real process, I could tell that my client was "less than impressed."  In other words, it was not apparent that I was adding any real "value" to the case.

Since that time, I have taken an interest in how to evaluate a case and how to use a process to arrive at exposure, settlement value, etc.  I finally had an opportunity to put it together in this presentation, and I enjoyed sharing it with our ACC attendees.  Recently, I heard a speaker say, "All trial is theater."  I think there is a lot of truth to that statement, so I arranged the presentation so as to approach case evaluation from the standpoint of a broadway play: the stars of the show, supporting case, directors, stage, etc.  The picture above profiles two very different plays: "Phantom of the Opera" (considered by many to be the standard of excellence in terms of theater) and "Moose Murders" (widely considered to be the standard of awfulness, as it was shut down after one performance).  As I told the crowd, is your case a "Phantom of the Opera," or is it a "Moose Murders"?  We then went into the variables that can assist with this determination.  It was a fun presentation to put together, and I may convert it to an article in the future.

Thanks to all of my colleagues and Otis Rawl for their diligence in putting together this CLE!



DRI Products Liability Conference De-Brief

I returned from the DRI Products Liability Conference on April 5th, and I am just now getting around to blogging about it.  This was my fourth conference, and my (and I believe DRI's) first at Gaylord National Resort (picture to the right) in National Harbor, Maryland. 

From a programming and speakers standpoint, the conference was fantastic.  The conference had an interactive mock trial component that allowed the audience to provide feedback during voir dire and closing argument demonstrations, and the case fact pattern was incorporated into numerous other presentations. 

I am proud to say that the Agricultural, Construction, Mining and Industrial Equipment ("ACMIE") Specialized Litigation Group ("SLG") breakout session went very well, and we got great feedback on the presentations from our attendees.  I am not sure if it is the breadth of our subject matter or the thoughtful speakers we have each year, but our SLG always has a heavy turnout of attendees.  This year was no exception.   We probably had 80 to 100 people.  I also attended the Consumer Products SLG to hear my friend and former colleague, Steve Morrison, speak.  As always, he did a fantastic job.

In terms of networking....a very different story for yours truly.  On the Monday prior to the conference, I got the "mother of all stomach bugs" and stayed out of work.  On Tuesday, I awoke feeling like I was on the mend, and I flew to the conference.  It only took about a day to realize I was not on the mend, and by Thursday I was crawling into my hotel bed.  So...in short, it did not make for a great social experience.  I managed to attend most of the CLE segments, and I was even able to catch up with some friends over a dinner or two.  But, I doubt I was good company.  Luckily, since the conference was on the east coast this year, my direct flight back had me home earlier than usual on Friday. 

Nonetheless, special thanks to Anne Talcott and James Weatherholtz, this year's Chair and Vice-Chair for the conference, who did an outstanding job.  I liked the site, and even though I was a bit out of sorts with my stomach funk, I thought conference was fantastic.  I am looking forward to next year's conference, and I have taken over the reins of the ACMIE SLG as the Chair, with Mike McWilliams serving as my Vice-Chair.  Special thanks to J.K. Leonard for serving as our Chair for the last two years.  J.K. was always on top of things, so I have some big shoes to fill.  If you have any interest in getting involved in our SLG, please let me know.

New Captain of the Ship

I wanted to briefly depart from my usual discussion of products liability and speaking/writing/CLE engagements to congratulate my friend and partner, Mike Pitts, on becoming Collins & Lacy's new Managing Partner.  Mike is in our Greenville office, and he practices primarily in labor and employment law.  He has an outstanding practice, and I think he will be a great Managing Partner.  I look forward to working with Mike and seeing his leadership as we continue to grow our firm.  Congratulations Mike! 

New SC Products Liability Decision: Courtney v. Nissan Motor Co., Ltd

Yesterday, the South Carolina Court of Appeals issued a new products liability decision, Courtney v. Nissan Motor Co., Ltd., Opinion Number 5106.  There were some real procedural issues in this case at the trial court level that prompted appeals by both the plaintiff and Nissan.

FACTUAL BACKGROUND: Minor plaintiff ("Plaintiff") was riding in the backseat of a 2000 Nissan Xterra.  As Plaintiff's father made a left turn, the automobile was struck by an oncoming vehicle on the right side.  Upon impact, a part of the automobile's frame punctured the fuel tank, resulting in a fire that injured Plaintiff and her mother.

PROCEDURE:  Plaintiff filed suit against Nissan alleging strict liability, negligence, and breach of warranty based on a design defect theory.  The case was tried over nine days.  At the conclusion of evidence, the court denied Nissan's request to charge the jury on the necessity of proving feasible alternative design as an element of Plaintiff's case.  The parties and the trial court agreed to submit seven special interrogatories to the jury, but the interrogatory concerning proof of feasible alternative design was to be shown to the jury after any verdict for damages.  Nissan objected and requested that this interrogatory be submitted with the others.  The trial court denied the request.   

The trial court did not differentiate between the consumer expectations test and risk utility test during its general charge to the jury on what Plaintiff had to prove in a design defect case.  Although it later charge the jury on both tests, it omitted that Plaintiff had to prove a feasible design alternative pursuant to the risk-utility test.  Prior to sending the jury to deliberate, the trial court told the jury it would be answering one additional interrogatory after the verdict was returned that was "irrelevant" to the deliberations.

The jury rendered a verdict against Nissan for $2,375,000.  The court then posed the seventh interrogatory to the jury (i.e., whether Plaintiff had proved a feasible alternative design that would have prevented the injury).  The jury responded, "no." 

Nissan filed a post-trial motion for judgment notwithstanding the verdict ("JNOV"), or in the alternative, for a new trial.  Plaintiff filed a post-trial motion requesting the court disregard the jury's response to the seventh interrogatory.  Initially, the trial court denied both parties' motions.  However, three days later, the South Carolina Supreme Court issued its decision in Branham v. Ford Motor Co., 390 S.C. 203, 701 S.E.2d 5 (2010) in which it held that the risk-utility test was the exclusive test in a design defect case and required proof of feasible alternative design.  The trial court had a second hearing, and it denied Nissan's JNOV motion but granted the motion for a new trial.  Recognizing Branham, the trial court issued an order in which it concluded its decision not to charge the jury on proof of a feasible alternative design was reversible error and required the grant of a new trial.

ISSUES: Nissan appealed denial of its post-trial motion for judgment notwithstanding the verdict based on Plaintiff's failure to prove feasible alternative design.  Plaintiff also appealed the circuit court's decision to grant a new trial.  Plaintiff also claimed the circuit court erred in denying her motion to invalidate a special interrogatory in which the jury found Plaintiff failed to prove a feasible alternative design in her case against Nissan.

DISPOSITION: Affirmed by the South Carolina Court of Appeals.

RULES AND OPINION: The appellate court first addressed whether Branham applied retroactively to the instant case.  It reviewed Branham's facts and law and concluded that the South Carolina Supreme Court intended for Branham to have retroactive application.   Branham recognized no new right or cause of action; it only affirmed that the risk-utility test would be the exclusive test for design defect cases.  

Next, the appellate court held that the jury's post-verdict finding that Plaintiff failed to prove feasible alternative design did not entitled Nissan to JNOV.  Nissan pointed out evidence in the record that Plaintiff agreed to craft the special interrogatory specifically to address feasible alternative design issues.  Although the appellate court agreed, it cited to Erickson v. Jones St. Publishers, LLC, 368 S.C. 444, 480, 629 S.E. 2d 653, 672 (2006) for the principle that it is improper to submit factual issues to the jury in the form of non-binding "advisory interrogatories."  Accordingly, the appellate court found that the trial court's denial of the JNOV motion indicated neither the parties nor the trial court intended for the answer to the interrogatory to be dispositive on the issue of liability.  It also pointed out portions of the record to support that Plaintiff did not intend for the seventh interrogatory to impact liability. 

With regard to Plaintiff's cross appeal that the trial court erred in granting a new trial because the consumer expectations test was permissible at the time of decision, the appellate court pointed out it had already addressed this argument (i.e., Branham's retroactive application).  The appellate court also re-reviewed portions of Branham to highlight that the both the majority and dissent agreed that the risk-utility test was the proper test in a design defect case, and the appellate court did not believe the the majority or dissent expressly condoned use of the consumer expectations test at the time of the instant trial. 

Finally, Plaintiff argued that because the trial court charged on both the consumer expectations and risk-utility test, and the jury did not specify which theory it applied to determine liability, then the "two-issue rule" and the law of the case doctrine required reinstatement of the jury's verdict.  The appellate court disagreed that these doctrines applied.  Furthermore, Branham's holding made clear that the jury's verdict could not be supported by the consumer expectations test.  Although Nissan did not challenge the trial court's decision to incorporate the consumer expectations test into its jury charge, Branham had not been decided at the time and Nissan would not have had grounds to object.  Therefore, Nissan's failure to object did not require reinstatement.  The trial court's failure to properly instruct the jury was prejudicial to Nissan and required a new trial.

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DRI: One More Week

I hope to see some readers at next week's DRI Products Liability Conference in National Harbor, Maryland.  The conference kicks off Tuesday evening with a networking reception and ends Friday afternoon.  I have previously blogged about this year's conference (here for all the details).  I am looking forward to making the trip, as this will be my fourth conference. 

As I have previously discussed in prior blog posts, I am Vice-Chair of the Agricultural, Construction, Mining and Industrial Equipment ("ACMIE") Specialized Litigation Group.  We will have our breakout session next Wednesday afternoon, and we will have three outstanding presentations.  Kurt Meaders (Sedgwick LLP) and Jaime Myers (Caterpillar Inc.) will present a program entitled "Shifting Gears on the Opposition's Experts--Deposition, Daubert, and Trial."  Emily Muceus (Deere & Company) and Robert Walker (Gallagher Walker Bianco & Plastaras) will present a program entitled "From the Trenches: Trial Strategies in High Exposure, Bad Venue ACMIE Cases."  Finally, we will do our annual "Top 10" ACMIE cases, which will be presented by Christopher Robinson (Frost Brown Todd, LLC).  Our program is planned for April 3, 2013 from 3:30 to 5:30 p.m., so please consider it if you attend the conference. 

Finally, fellow ACMIE member Mike McWilliams and I are hosting two "luncharounds" on April 3 and April 4.  Mike is hosting the April 3 lunch at McLoone's Pier House, and I am hosting the April 4 lunch at Pienza Restaurant.  Space is limited to ten people per lunch (first come first serve), so please email me at bcomer@collinsandlacy.com if you want to get your name of the list for either of these ACMIE luncharounds.

Hope to see you there!

Janssen Pharmaceutical Risperdal Appeal

South Carolina Lawyers Weekly ran an article last week concerning Janssen Pharmaceutica's appeal of a $327 million penalty handed down by Judge Robert Couch in 2011. I did extensive blogging about this case in March and June of 2011, and you can find those posts either by searching "Risperdal" in the search bar above or by clicking here (March 9, 2011), here (March 22, 2011), here (March 23, 2011), here (June 6, 2011), and here (June 7, 2011, which is a link to Judge Couch's Order concerning damages).

According to the article, Janssen's attorney argued before the South Carolina appellate court that Janssen did not mean to deceive anyone, and no one in the state was hurt.  The attorney representing South Carolina Attorney General Alan Wilson argued Janssen had a duty to update its labels when it learned of study results showing a possible link to weight gain and diabetes.  According to the article, the court is likely to issue its decision in several months.  A direct link to the article can be found here.  A cut and paste of the article is below.  Nice coverage by South Carolina Lawyers Weekly.

Drug maker asks court to overturn $327M penalty

By The Associated Press
Published: March 21, 2013
Time posted: 4:20 pm

COLUMBIA (AP) - South Carolina's high court should overturn a penalty of hundreds of millions of dollars over deceptive drug marketing in part because the manufacturer didn't mean to deceive anyone, and no one in the state was hurt, an attorney for a Johnson & Johnson subsidiary argued before justices on Thursday.

Mitch Brown represents Janssen Pharmaceutica Inc., a subsidiary of New Brunswick, N.J.-based Johnson & Johnson. The drug maker is challenging a Spartanburg County jury's 2011 decision that Janssen broke the law by writing to thousands of South Carolina doctors, downplaying the links between diabetes and its schizophrenia drug Risperdal, and by improperly claiming the drug was safer than competing medications, like Eli Lilly & Co.'s Zyprexa.

"The conduct hasn't caused one South Carolinian any harm," Brown told the state Supreme Court. "The state can't get any penalties without showing the element of willfulness. … There wasn't any evidence that any doctor was misled."

Janssen has been litigating throughout the country over its Risperdal marketing, announcing in August a $181 million settlement with 36 states and the District of Columbia. Janssen admitted no wrongdoing, and South Carolina was not part of that deal.

First launched in 1994, the blockbuster anti-psychotic drug Risperdal lost patent protection in 2008. Johnson & Johnson has said that Risperdal Consta, the long-acting version of the drug, generated $1.4 billion in sales last year.

After the South Carolina jury's decision, a state judge assessed a $327 million penalty against Janssen, the largest drug marketing award in state history and the largest penalty levied for violations of the South Carolina Unfair Trade Practices Act.

Circuit Judge Roger Couch assessed a $300 penalty per sample box of the drug that was distributed. He also assessed a $4,000 penalty per publication of the "Dear Doctor" letter, writing that Janssen knew Risperdal was associated with health problems but intentionally hid studies to that effect, instead telling doctors their drug led to lower incidence of diabetes and weight gain than a competing medicine.

Justice John Kittredge argued to Brown that, while the sample box labels in question had been approved by the U.S. Food and Drug Administration, the drug company should still bear some responsibility in ensuring that its products and marketing aren't also in violation of state laws.
"You're putting it on the back of the FDA to be the police of this," Kittredge said.

John Simmons, who made arguments on behalf of Attorney General Alan Wilson, called the circuit judge's opinion "thoughtful" and said Janssen should have updated its labels as soon as it learned of study results showing the drug's possible links to weight gain and diabetes.

"Janssen had a duty … to put that in the warning section," Simmons said. "Janssen hid unfavorable clinical evidence."

The court will likely issue its decision in several months. Should they opt to reduce the award against Janssen, Brown asked justices to determine "a reasonable penalty amount" themselves and not leave that decision up to a lower court judge.

The company is also appealing an Arkansas judge's decision ordering Janssen to pay more than $1.2 billion in fines, as well as a $258 million verdict in Louisiana. Two cases against Janssen in Pennsylvania and West Virginia were eventually dismissed.
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Upcoming CLE for In-House Counsel

I am my firm's primary contact person for our relationship with the South Carolina Chapter of the Association of Corporate Counsel ("ACC-SC"), and we are planning an exciting continuing legal education ("CLE") seminar for this summer that I wanted to share with readers (especially if you are in-house and find your way to this site).  Planning this seminar has consumed a pretty good amount of my time, but I think it will be worthwhile.  I conferred with various members of the ACC-SC about topics of interest to them, "dos and don'ts," and how we can maximize the interest level of members.  (Make no mistake, I would love nothing more than to do a products-centric CLE, but the reality is that ACC-SC members covers a broad range of businesses, many of which are not involved with product manufacturing/distribution/sale). 

The result is that we have a CLE that should appeal to a broad range of practice areas and will be convenient for ACC-SC's members.  Unlike previous CLEs we have done for this group, we are going to do an in-person seminar in our Columbia office while simultaneously broadcasting the event live in our Greenville and Charleston offices. This will allow ACC-SC members to attend the event with little travel time, and it will enable them to ask questions of our attorneys in each location, in addition to networking with fellow ACC-SC members.  The CLE will run from 9:00 a.m. to 12:00 p.m. at the following locations:

• Columbia Collins & Lacy Office – 1330 Lady Street, Sixth Floor
• Greenville Collins & Lacy Office – 37 Villa Road, Suite 500
• Charleston Collins & Lacy Office – 200 Meeting Street, Suite 403

Our attorneys will present the following CLE topics:

• “Ethics and Professionalism in Mediating Your Case,” presented by Christian Stegmaier and Rebecca Halberg
• “How Did You Arrive at that Number?  Objective and Quantitative Methods for Case Management and Evaluation,” presented by Brian Comer (yours truly)
• “What’s Going on at the State House?  A Legislative Update from the 2013 Legislative Session,” presented by Jon Ozmint
• “I Liked It When I Signed It, But I Don’t Like It Now – It Must Be Unconscionable,” presented by Joey McCue
• “The Proactive Approach to Workers' Compensation Claims,” presented by Kristian Cross

I am excited about my piece of this seminar.  When I was fresh out of law school and beginning to practice, I recall speaking with a client about my evaluation of a case.  During the conversation, the client asked a fair question: "If we were to settle, what do you consider to be the settlement value, and how did you arrive at that number?"  I recall -- as a young(er) attorney -- not having a great answer: "Well, uh . . . I just thought about . . . uh . . . the injury, and you know this . . . uh . . . is a bad venue . . . and it just seems like a fair number."  The client was not very impressed, and it taught me a valuable lesson. 

Now, one of my guiding principles in my practice is "How am I adding value for this client?"  At the time of my client's question, I had no value-added methodology for evaluating a case.  However, since that time, I have developed various "tools" I use to evaluate cases based on research, quantitative analysis, and objective criteria.  Now, when I am posed with the same question, I can provide my client with a methodology that supports my evaluation and provides them with justification they can share internally with other decision-makers.  I have always wanted to put it together in a presentation, and this CLE affords me the opportunity.

So, if you practice in-house and want three hours of "meaty" CLE credit, I invite you to attend our CLE at one of our sites.  It is free to in-house counsel, but you must register to attend.  For more information and to RSVP, please contact Keely Yates at the ACC-SC Chapter office, 803-252-1087.