Friday, December 25, 2009
Merry Christmas and Happy Holidays
Merry Christmas and Happy Holidays from the South Carolina Products Liability Law Blog. I am currently enjoying the holidays with family in Starkville, Mississippi. I hope you have a Merry Christmas, and best of luck in 2010.
Tuesday, December 22, 2009
New Products Liability Decision: Economic Loss Rule
In yesterday's advance sheets, the South Carolina Supreme Court issued its decision in Sapp v. Ford Motor Co. The opinion can be found at page 86 at this link. This case is significant because it clarifies the economic loss rule in the products liability context and overrules a prior decision of the South Carolina Supreme Court.
FACTUAL BACKGROUND: Plaintiff-Appellant ("Sapp") purchased a 2000 Ford F-150 truck for $5,000 in 2004. The truck had 190,000 miles on it and was purchased "as is." In 2005, the cruise control on the truck stopped working, and the vehicle caught fire when Sapp parked it. The fire did not injure Sapp or damage any property other than the vehicle itself. The cost to repair the vehicle was $7,000.
PROCEDURE: Sapp filed suite against Ford alleging causes of action for negligence, strict liability, breach of warranty, and fraud/misrepresentation. He alleged that Ford knew of a design defect in the cruise control switch that would short circuit and cause a fire in the engine compartment. The circuit court granted summary judgment as to all causes of action and found that the economic loss rule precluded the tort claims. Sapp appealed.
ISSUES: Sapp argued on appeal that the circuit court erred in granting summary judgment.
DISPOSITION: The South Carolina Supreme Court agreed with the circuit court and affirmed dismissal. It also overruled its prior decision in Colleton Preparatory Academy, Inc. v. Hoover Universal, Inc., 379 S.C. 181, 666 S.E.2d 247 (2008).
RULES AND OPINION: The key language that summarizes the court's holding is as follows:
The court agreed with federal court decisions that the economic loss rule precludes a negligence action against a manufacturer where duties are created solely by contract and where the product only injured itself or where the damages were contemplated by the parties' contract.
Justice Beatty concurred in the decision but discussed the inconsistent treatment of the doctrine and suggested that the use of varying analytical frameworks does not provide the bench and bar with guidance in its application. He suggested that the Court should should pronounce a list of areas to which public policy prohibits the application of the economic loss doctrine and forego any legal analysis.
This post is subject to the DISCLAIMER & TERMS OF USE of this website.
FACTUAL BACKGROUND: Plaintiff-Appellant ("Sapp") purchased a 2000 Ford F-150 truck for $5,000 in 2004. The truck had 190,000 miles on it and was purchased "as is." In 2005, the cruise control on the truck stopped working, and the vehicle caught fire when Sapp parked it. The fire did not injure Sapp or damage any property other than the vehicle itself. The cost to repair the vehicle was $7,000.
PROCEDURE: Sapp filed suite against Ford alleging causes of action for negligence, strict liability, breach of warranty, and fraud/misrepresentation. He alleged that Ford knew of a design defect in the cruise control switch that would short circuit and cause a fire in the engine compartment. The circuit court granted summary judgment as to all causes of action and found that the economic loss rule precluded the tort claims. Sapp appealed.
ISSUES: Sapp argued on appeal that the circuit court erred in granting summary judgment.
DISPOSITION: The South Carolina Supreme Court agreed with the circuit court and affirmed dismissal. It also overruled its prior decision in Colleton Preparatory Academy, Inc. v. Hoover Universal, Inc., 379 S.C. 181, 666 S.E.2d 247 (2008).
RULES AND OPINION: The key language that summarizes the court's holding is as follows:
The purpose of the economic loss rule is to define the line between recovery in tort and recovery in contract. Contract law seeks to protect the expectancy interests of the parties. Tort law, on the other hand, seeks to protect safety interests and is rooted in the concept of protecting society as a whole from physical harm to person or property. In the context of products liability law, when a defective product only damages itself, the only concrete and measurable damages are the diminution in the value of the product, cost of repair, and consequential damages resulting from the product's failure. Stated differently, the consumer has only suffered an economic loss. The consumer has purchased an inferior product, his expectations have not been met, and he has lost the benefit of the bargain. In this instance, however, the risk of product failure has already been allocated pursuant to the terms of the agreement between the parties. On the other hand, the parties have not bargained for the situation in which a defective product creates an unreasonable risk of harm and causes personal injury or property damage. Accordingly, where a product damages only itself, tort law provides no remedy and the action lies in contract; but when personal injury or other property damage occurs, a tort remedy may be appropriate.
The court reviewed its prior decisions in Kennedy v. Columbia Lumber & Mfg. Co., 299 S.C. 335, 341, 384 S.E.2d 730, 734 (1989) and Colleton Preparatory Academy, Inc. v. Hoover Universal Inc., 379 S.C. 181, 666 S.E.2d 247 (2008). The court reiterated that its holding in Kennedy only applies in the residential home context. (In Kennedy, the court held that a homebuyer could recover in tort against a developer or builder where the builder violates an applicable building code, deviates from industry standards, or constructs a home that he knows or should have known will pose a serious risk of physical home). The court explained that the reason for the exception in Kennedy was related to the the mechanics and context of home purchasing, which make it different from the purchase of other manufactured goods.
Significantly, the court overruled its decision in Colleton Prep to the extent that it expanded the Kennedy's exception beyond the residential builder context. The court also stated that -- like the dissent in Colleton Prep -- it was cautious in permitting negligence actions where there is neither personal injury nor property damage.
Imposing liability merely for the creation of risk when there are no actual damages drastically changes the fundamental elements of a tort action, makes any amount of damages entirely speculative, and holds the manufacturer as an insurer against all possible risk of harm.
The court agreed with federal court decisions that the economic loss rule precludes a negligence action against a manufacturer where duties are created solely by contract and where the product only injured itself or where the damages were contemplated by the parties' contract.
Justice Beatty concurred in the decision but discussed the inconsistent treatment of the doctrine and suggested that the use of varying analytical frameworks does not provide the bench and bar with guidance in its application. He suggested that the Court should should pronounce a list of areas to which public policy prohibits the application of the economic loss doctrine and forego any legal analysis.
This post is subject to the DISCLAIMER & TERMS OF USE of this website.
Friday, December 11, 2009
Products Liability Actions in 2009 and Request for Help
As 2009 closes out, I am going to try and prepare a capsule summary of significant 2009 decisions involving South Carolina products liability law. I ran a preliminary search this morning, and after weeding out the transfer orders and random cases that slipped through the search, I came up with 8 cases that appear to have focused on some aspect of products law, as follows:
Jackson v. Bermuda Sands, Inc., 383 S.C. 11, 677 S.E.2d 612 (Ct. App. 2009)
Duncan v. Ford Motor Co., 385 S.C. 119, 682 S.E.2d 877 (Ct. App. 2009)
Weston v. Kim's Dollar Store, 684 S.E.2d 769 (Ct. App. 2009)
Laffitte v. Bridgestone Corp., 381 S.C. 460, 674 S.E.2d 154 (S.C. 2009)
Solo v. Bausch & Lomb, Inc., 2009 WL 4287706 (Sept. 25, 2009 D.S.C.)
In re Bausch & Lomb, Inc. Contact Lens Solution Prods. Liab. Litig., 2009 WL 2750462 (Apr. 26, 2009 D.S.C.)
State v. Astra Zeneca Pharms. LP, 2009 WL 1227848 (May 5, 2009 D.S.C.)
Riggs v. Dupps Co., 2009 WL 1160934 (Apr. 28, 2009 D.S.C.)
As you can see from the hyperlinks, I have already briefed two of these cases in prior postings, and I dealt with the Jackson case in my series on "essentially the same condition."
If anyone has been involved with a case that has been decided in a published or slip opinion that I have missed above, please let me know in a comment and I will try to include it. I am focusing on the South Carolina Supreme Court, South Carolina Court of Appeals, District of South Carolina, and Fourth Circuit Court of Appeals cases that focus on South Carolina substantive law.
I will try to do some sort of capsule summary for all the cases, either this month or early in the new year, but just want to make sure I capture everything. Let me know if I have missed something.
Jackson v. Bermuda Sands, Inc., 383 S.C. 11, 677 S.E.2d 612 (Ct. App. 2009)
Duncan v. Ford Motor Co., 385 S.C. 119, 682 S.E.2d 877 (Ct. App. 2009)
Weston v. Kim's Dollar Store, 684 S.E.2d 769 (Ct. App. 2009)
Laffitte v. Bridgestone Corp., 381 S.C. 460, 674 S.E.2d 154 (S.C. 2009)
Solo v. Bausch & Lomb, Inc., 2009 WL 4287706 (Sept. 25, 2009 D.S.C.)
In re Bausch & Lomb, Inc. Contact Lens Solution Prods. Liab. Litig., 2009 WL 2750462 (Apr. 26, 2009 D.S.C.)
State v. Astra Zeneca Pharms. LP, 2009 WL 1227848 (May 5, 2009 D.S.C.)
Riggs v. Dupps Co., 2009 WL 1160934 (Apr. 28, 2009 D.S.C.)
As you can see from the hyperlinks, I have already briefed two of these cases in prior postings, and I dealt with the Jackson case in my series on "essentially the same condition."
If anyone has been involved with a case that has been decided in a published or slip opinion that I have missed above, please let me know in a comment and I will try to include it. I am focusing on the South Carolina Supreme Court, South Carolina Court of Appeals, District of South Carolina, and Fourth Circuit Court of Appeals cases that focus on South Carolina substantive law.
I will try to do some sort of capsule summary for all the cases, either this month or early in the new year, but just want to make sure I capture everything. Let me know if I have missed something.
Tuesday, November 17, 2009
SC Lawyer Article: "Essentially the Same Condition"
My article entitled "Products Liability Claims in South Carolina: What Exactly Does Essentially the Same Condition Mean?" has been published in the November edition of South Carolina Lawyer. You can find a copy of it here.
As you may recall, I did a series over the summer relating to this element of a South Carolina products liability claim (see parts I through V at this link). This article puts all of those posts together and provides more information. Check it out!
As you may recall, I did a series over the summer relating to this element of a South Carolina products liability claim (see parts I through V at this link). This article puts all of those posts together and provides more information. Check it out!
Monday, November 16, 2009
Case Brief: Taylor v. Nix
By Brian A. Comer
This case brief is of Taylor v. Nix, 307 S.C. 551, 416 S.E.2d 619 (1992). From a product liability standpoint, it is most significant for what it says about the admissibility of recall evidence, which it holds may be admissible to show that a defective condition existed at the time alleged by a plaintiff.
FACTUAL BACKGROUND: Plaintiffs Kathy and Glenn Taylor leased a Porsche from the defendants. 307 S.C. 553, 416 S.E.2d 620. They discovered multiple defects shortly after taking possession. Id. Ms. Taylor alleged headaches from fumes, that her child got a blister from touching the hot middle console in the front seat, and that her legs were reddened when she drove from their proximity to the console. Id. at 554, 416 S.E.2d at 620. They took the car to the dealer multiple times, and the dealer never did anything about the problems. Id. at 554-55, 316 S.E.2d at 620-21. Dealer representatives also treated them poorly (ignored their service requests, made off-color comments, and were generally not helpful). Id., 416 S.E.2d at 621.
PROCEDURE: Plaintiffs sued the lessor and manufacturer for breach of warranty, strict liability and violation of the Regulation of Manufacturers, Distributors and Dealers Act (the "Act"). 307 S.C. at 553, 416 S.E.2d at 620. A jury found that the defendants maliciously violated the Act and returned a verdict of $16,100 in actual damages and three times the actual damages (the maximum under the Act). Id. at 555, 416 S.E.2d at 621.
ISSUES: Defendants appealed multiple issues relating to the Act, the award of attorneys' fees, and admissibility of certain pieces of evidence. 307 S.C. at 553, 416 S.E.2d at 620.
DISPOSITION: The South Carolina Supreme Court affirmed the trial court decision. 307 S.C. at 558, 416 S.E.2d at 623.
RULES AND OPINION: The Act adequately provides notice of what conduct is prohibited under it, and it is not unconstitutionally vague. 307 S.C. at 555, 416 S.E.2d at 621. Though the trial court's charge as to the definition of "arbitrary" under the Act was erroneous, it was not prejudicial and the defendants were not harmed because of it. Id. at 555-56, 416 S.E.2d at 621. With regard to damages under the Act, the trial court charged that the jury should assess actual damages under the breach of warrranty and strict liability claims and then determine only if the defendants' conduct violated the statute. Id. at 556, 416 S.E.2d at 622. This was erroneous. Id. The jury should have been charged to determine what damage arose from the defendants' conduct which constituted a violation of the Act. Id. Even so, the defendants were not prejudiced because any actual damages suffered by the Plaintiffs resulted from the defendants' acts, which violated the Act. Id. There was also sufficient evidence to find "malice" by the defendants under the Act so as to justify treble damages. Id. at 556-57, 416 S.E.2d at 622.
Defendants also challenged the awarding of attorneys' fees by saying that the portion related to the non-statutory actions (breach of warranty and strict liability) should have been excluded from consideration. 307 S.C. at 557, 416 S.E.2d at 622. Though the appellate court agreed, the defendants' presentation to the lower court of what would have constituted reasonable fees was not adequate. Id. The party asserting the right to attorneys fees has to provide an itemized affidavit of their fees which they believe are related to the statutory claim. Id. The party opposing the fees has the burden of showing which of the fees are clearly unrelated. Id.
With regard to evidentiary issues, Ms. Taylor's notes itemizing malfunctions of the car were prepared prior to taking it for service, making them admissible as a witness's past recollection. 3-7 S.C. 557, 416 S.E.2d at 622. The court held that subsequent remedial measures, though inadmissible to show negligence, may be admissible for other purposes, such as showing that the defective condition existed at the time alleged. Id. at 558, 416 S.E.2d at 623. Therefore, the subsequent recall of the car due to overheating of the catalytic converter was admissible for this purpose. Id.
This post is subject to the DISCLAIMER & TERMS OF USE of this website.
This case brief is of Taylor v. Nix, 307 S.C. 551, 416 S.E.2d 619 (1992). From a product liability standpoint, it is most significant for what it says about the admissibility of recall evidence, which it holds may be admissible to show that a defective condition existed at the time alleged by a plaintiff.
FACTUAL BACKGROUND: Plaintiffs Kathy and Glenn Taylor leased a Porsche from the defendants. 307 S.C. 553, 416 S.E.2d 620. They discovered multiple defects shortly after taking possession. Id. Ms. Taylor alleged headaches from fumes, that her child got a blister from touching the hot middle console in the front seat, and that her legs were reddened when she drove from their proximity to the console. Id. at 554, 416 S.E.2d at 620. They took the car to the dealer multiple times, and the dealer never did anything about the problems. Id. at 554-55, 316 S.E.2d at 620-21. Dealer representatives also treated them poorly (ignored their service requests, made off-color comments, and were generally not helpful). Id., 416 S.E.2d at 621.
PROCEDURE: Plaintiffs sued the lessor and manufacturer for breach of warranty, strict liability and violation of the Regulation of Manufacturers, Distributors and Dealers Act (the "Act"). 307 S.C. at 553, 416 S.E.2d at 620. A jury found that the defendants maliciously violated the Act and returned a verdict of $16,100 in actual damages and three times the actual damages (the maximum under the Act). Id. at 555, 416 S.E.2d at 621.
ISSUES: Defendants appealed multiple issues relating to the Act, the award of attorneys' fees, and admissibility of certain pieces of evidence. 307 S.C. at 553, 416 S.E.2d at 620.
DISPOSITION: The South Carolina Supreme Court affirmed the trial court decision. 307 S.C. at 558, 416 S.E.2d at 623.
RULES AND OPINION: The Act adequately provides notice of what conduct is prohibited under it, and it is not unconstitutionally vague. 307 S.C. at 555, 416 S.E.2d at 621. Though the trial court's charge as to the definition of "arbitrary" under the Act was erroneous, it was not prejudicial and the defendants were not harmed because of it. Id. at 555-56, 416 S.E.2d at 621. With regard to damages under the Act, the trial court charged that the jury should assess actual damages under the breach of warrranty and strict liability claims and then determine only if the defendants' conduct violated the statute. Id. at 556, 416 S.E.2d at 622. This was erroneous. Id. The jury should have been charged to determine what damage arose from the defendants' conduct which constituted a violation of the Act. Id. Even so, the defendants were not prejudiced because any actual damages suffered by the Plaintiffs resulted from the defendants' acts, which violated the Act. Id. There was also sufficient evidence to find "malice" by the defendants under the Act so as to justify treble damages. Id. at 556-57, 416 S.E.2d at 622.
Defendants also challenged the awarding of attorneys' fees by saying that the portion related to the non-statutory actions (breach of warranty and strict liability) should have been excluded from consideration. 307 S.C. at 557, 416 S.E.2d at 622. Though the appellate court agreed, the defendants' presentation to the lower court of what would have constituted reasonable fees was not adequate. Id. The party asserting the right to attorneys fees has to provide an itemized affidavit of their fees which they believe are related to the statutory claim. Id. The party opposing the fees has the burden of showing which of the fees are clearly unrelated. Id.
With regard to evidentiary issues, Ms. Taylor's notes itemizing malfunctions of the car were prepared prior to taking it for service, making them admissible as a witness's past recollection. 3-7 S.C. 557, 416 S.E.2d at 622. The court held that subsequent remedial measures, though inadmissible to show negligence, may be admissible for other purposes, such as showing that the defective condition existed at the time alleged. Id. at 558, 416 S.E.2d at 623. Therefore, the subsequent recall of the car due to overheating of the catalytic converter was admissible for this purpose. Id.
This post is subject to the DISCLAIMER & TERMS OF USE of this website.
Monday, October 26, 2009
More on Eli Lilly Pharmaceutical Settlement
The State Newspaper included more details about the settlement between South Carolina and drug manufacturer Eli Lilly with regard to allegations of off-label marketing for the drug Zyprexa. The settlement was $45 million, which was the largest dollar amount any state has won from Eli Lilly, per the article cut and pasted below.
S.C., Lilly reach $45 million settlement
Drug company's payout sets record for state
By GINA SMITH - gnsmith@thestate.com
South Carolina reached a record $45 million settlement Friday with drug maker Eli Lilly over the marketing of an anti-psychotic drug, Zyprexa.
State lawmakers will have the final say on how 84 percent - or nearly $38 million of the money - is spent. The rest goes to the attorneys who represented the state and to the state attorney general's office.
The settlement is the second largest in state's history, behind only the 1998 multibillion-dollar Tobacco Master Settlement Agreement, according to the attorney's general's office.
It's also the largest dollar amount any state has won from Eli Lilly. Connecticut is second with its $30 million settlement.
"This is a victory for South Carolina's taxpayers who were forced to bear the financial costs of Eli Lilly's unlawful conduct," Attorney General Henry McMaster said Friday.
Eli Lilly spokeswoman Marni Lemons said Friday it's time to move on.
"We think that putting the issue behind us is not only in the best of interest of Eli Lilly, but also the patients and physicians who count on Zyprexa as a life-saving drug every day," Lemons said.
South Carolina and 44 other states have brought some action against the Indianapolis-based drug maker, claiming it falsely marketed Zyprexa, a drug approved for the treatment of schizophrenia and bipolar disorder only.
In the lawsuit, South Carolina sought to recover the millions of dollars Medicaid and the state health plan paid for the drug and to treat side effects caused by off-label use of the drug. The suit alleges nearly 64,000 S.C. patients were affected from 1996 to 2007.
South Carolina and other states successfully argued Eli Lilly:
- Did not properly warn of the drug's side effects, including heart problems, diabetes, hyperglycemia and an increased risk of death in patients with dementia
- Pushed doctors to prescribe the drug to treat other illnesses, including depression, attention deficit disorder and dementia
While 84 percent of South Carolina's settlement could go to reimburse the state's Medicaid and state health plan, state lawmakers have the final say.
POLITICAL COMPLICATIONS?
Under a unique retention agreement McMaster's office drafted in 2004, 15 percent, or nearly $7 million, will go to three attorneys hired by McMaster's office to represent South Carolina in the case. The attorneys' fees are the smallest in the nation, McMaster's office said.
And 1 percent, or about $647,000, will go to the attorney general's office.
Under the agreement, outside attorneys hired to do work for McMaster's office are paid between 4 percent and 23 percent of a judgment/settlement. The larger the award/settlement, the less the attorneys receive.
Then, attorneys must give 10 percent of their pay back to the attorney general's office.
"Ours is considered a model ... agreement," McMaster said, noting bills have been introduced in both the state Senate and House to require future S.C. attorneys general and solicitors to adopt the same agreement.
"We did copious research to come up with the best agreement based on what other states do," McMaster said. "It keeps complete control of the litigation with the (attorney general), who can relieve his (appointed attorneys) for any reason or no reason at all. It protects the interest of the state."
But the arrangement smells fishy to Darren McKinney of the American Tort Reform Association, a Washington D.C.-based nonprofit.
McMaster, who is running for governor, accepted campaign contributions from two of the attorneys he hired to help work on the Zyprexa case.
After being criticized by rival campaigns, McMaster returned the donations.
"If you're signing on with your buddies who agree to give you 10 percent off the top plus campaign contributions, that stinks on its face," McKinney said. "That's not in the public interest."
McMaster's office has said the appointment of the attorneys was based on their expertise with other drug cases - not friendships or promises of campaign contributions.
SEPARATION OF POWER?
Under the agreement, the attorney general's office will receive about $647,000 of the settlement.
Eli Lilly's attorneys unsuccessfully argued in court papers that only the General Assembly and the state Budget and Control Board can allocate state funds.
Attorney Dick Harpootlian, a key adviser to a rival gubernatorial candidate, said McMaster's agreement is not illegal, but is problematic.
"You want your prosecutors, your attorney general making decisions on what's best for the state of South Carolina, not what's best for their budget," Harpootlian said. "There's, in appearance, a constitutional problem with this. It almost puts a bounty on these cases. It puts him at a conflict of interest."
But McMaster's office points to various state laws that allow the office to keep the funds. McMaster said he would put the money into his general fund to be used to "prosecute more bad guys."
Reach Smith at (803) 771-8658.
This post is subject to the DISCLAIMER & TERMS OF USE of this website.
S.C., Lilly reach $45 million settlement
Drug company's payout sets record for state
By GINA SMITH - gnsmith@thestate.com
South Carolina reached a record $45 million settlement Friday with drug maker Eli Lilly over the marketing of an anti-psychotic drug, Zyprexa.
State lawmakers will have the final say on how 84 percent - or nearly $38 million of the money - is spent. The rest goes to the attorneys who represented the state and to the state attorney general's office.
The settlement is the second largest in state's history, behind only the 1998 multibillion-dollar Tobacco Master Settlement Agreement, according to the attorney's general's office.
It's also the largest dollar amount any state has won from Eli Lilly. Connecticut is second with its $30 million settlement.
"This is a victory for South Carolina's taxpayers who were forced to bear the financial costs of Eli Lilly's unlawful conduct," Attorney General Henry McMaster said Friday.
Eli Lilly spokeswoman Marni Lemons said Friday it's time to move on.
"We think that putting the issue behind us is not only in the best of interest of Eli Lilly, but also the patients and physicians who count on Zyprexa as a life-saving drug every day," Lemons said.
South Carolina and 44 other states have brought some action against the Indianapolis-based drug maker, claiming it falsely marketed Zyprexa, a drug approved for the treatment of schizophrenia and bipolar disorder only.
In the lawsuit, South Carolina sought to recover the millions of dollars Medicaid and the state health plan paid for the drug and to treat side effects caused by off-label use of the drug. The suit alleges nearly 64,000 S.C. patients were affected from 1996 to 2007.
South Carolina and other states successfully argued Eli Lilly:
- Did not properly warn of the drug's side effects, including heart problems, diabetes, hyperglycemia and an increased risk of death in patients with dementia
- Pushed doctors to prescribe the drug to treat other illnesses, including depression, attention deficit disorder and dementia
While 84 percent of South Carolina's settlement could go to reimburse the state's Medicaid and state health plan, state lawmakers have the final say.
POLITICAL COMPLICATIONS?
Under a unique retention agreement McMaster's office drafted in 2004, 15 percent, or nearly $7 million, will go to three attorneys hired by McMaster's office to represent South Carolina in the case. The attorneys' fees are the smallest in the nation, McMaster's office said.
And 1 percent, or about $647,000, will go to the attorney general's office.
Under the agreement, outside attorneys hired to do work for McMaster's office are paid between 4 percent and 23 percent of a judgment/settlement. The larger the award/settlement, the less the attorneys receive.
Then, attorneys must give 10 percent of their pay back to the attorney general's office.
"Ours is considered a model ... agreement," McMaster said, noting bills have been introduced in both the state Senate and House to require future S.C. attorneys general and solicitors to adopt the same agreement.
"We did copious research to come up with the best agreement based on what other states do," McMaster said. "It keeps complete control of the litigation with the (attorney general), who can relieve his (appointed attorneys) for any reason or no reason at all. It protects the interest of the state."
But the arrangement smells fishy to Darren McKinney of the American Tort Reform Association, a Washington D.C.-based nonprofit.
McMaster, who is running for governor, accepted campaign contributions from two of the attorneys he hired to help work on the Zyprexa case.
After being criticized by rival campaigns, McMaster returned the donations.
"If you're signing on with your buddies who agree to give you 10 percent off the top plus campaign contributions, that stinks on its face," McKinney said. "That's not in the public interest."
McMaster's office has said the appointment of the attorneys was based on their expertise with other drug cases - not friendships or promises of campaign contributions.
SEPARATION OF POWER?
Under the agreement, the attorney general's office will receive about $647,000 of the settlement.
Eli Lilly's attorneys unsuccessfully argued in court papers that only the General Assembly and the state Budget and Control Board can allocate state funds.
Attorney Dick Harpootlian, a key adviser to a rival gubernatorial candidate, said McMaster's agreement is not illegal, but is problematic.
"You want your prosecutors, your attorney general making decisions on what's best for the state of South Carolina, not what's best for their budget," Harpootlian said. "There's, in appearance, a constitutional problem with this. It almost puts a bounty on these cases. It puts him at a conflict of interest."
But McMaster's office points to various state laws that allow the office to keep the funds. McMaster said he would put the money into his general fund to be used to "prosecute more bad guys."
Reach Smith at (803) 771-8658.
This post is subject to the DISCLAIMER & TERMS OF USE of this website.
Monday, October 12, 2009
Case Brief: Duncan v. Ford Motor Company
By Brian A. Comer
At long last, here is the case brief for Ford v. Duncan. Sorry for the delay (and length...there is a lot to this case). I will circle back around and drop in citations once the case is published. In the meantime, you can find it here.
FACTUAL BACKGROUND: A fire, originating under the hood of Plaintiffs' 2000 Ford Expedition, destroyed Plaintiffs' home on March 1, 2005. Evidence was presented at trial that Ford had recalled two lines of vehicles because of under-hood fires (one in 1999, and one in 2005). Ford attributed the under-hood fires to a certain failure of the speed control deactivation switch (the "switch"), which was manufactured by Texas Instruments ("TI") and installed by Ford. One month after the 1999 recall, a group of scientists employed by Ford produced an internal document that analyzed causes of the fires and proposed solutions. Ford acknowledged in the report that it did not completely understand the cause of the fires, but the report identified a failure in the switch as a potential cause. Ford did not implement any of the report's proposed solutions and did not address the switch failure during the 1999 recall.
At trial, Ford's expert, Mark Hoffman, testified that Ford did not incorporate the proposed solutions because it determined the switch failure and subsequent fires were caused by manufacturing problems at TI. Mr. Hoffman testified that Ford ensured that TI resolved its manufacturing issues, and it replaced any switches that deviated from its specifications. Plaintiffs' expert Jeff Morrill testified that (1) the switch in Plaintiffs' vehicle was the same type of switch that was in the line of vehicles recalled in 1999, (2) the fire was caused by the same failure in the switch as the one that caused the failure in the 1999 recall, and (3) Ford knew of the switch failure before manufacturing Plaintiffs' vehicle, as evidenced by the 1999 recall and the internal report. Plaintiffs' then called their engineering expert Kendrick Richardson, who testified that Ford breached the engineering standard of care. Plaintiffs also offered a report by economist Oliver Wood relating to Ford's net worth and ability to pay a punitive damages award.
PROCEDURE: Plaintiffs brought suit against Defendant Ford. The jury returned a verdict in Plaintiffs' favor, awarding them $620,759.79 in actual damages, reduced to $589,721.80 in proportion to Plaintiffs' comparative fault, and $3 million in punitive damages. Ford appealed the verdict.
ISSUES: Ford's arguments on appeal related to the trial court's admission of certain evidence and the jury's award of punitive damages.
RULES AND OPINION: With regard to Ford's evidentiary arguments, the South Carolina Court of Appeals found as follows:
(1) Plaintiffs' expert Jeff Morrill testified within his area of expertise (i.e., the cause and origin of the fire), and he never offered any design opinions. Morrill's testimony about the switch failure was not that it was defectively designed, but that it was the cause of the fire. Furthermore, he relied on the internal report to provide this opinion, and therefore he could testify about it (despite not having firsthand knowledge of the report, and despite not having worked at Ford).
(2) The trial court did not abuse its discretion by allowing Plaintiffs' expert Kendrick Richardson to respond to the hypothetical question of whether Ford breached its engineering standard of care, based on Morrill's conclusions. As stated before, Morrill was qualified to offer his testimony. Plaintiffs' posing of this question to Richardson at trial was not misleading--even though it omitted the manufacturing problems at TI--because it was based on Morrill's testimony and the internal report, neither of which referred to manufacturing issues at TI.
(3) The trial court did not err in preventing Ford from asking Morrill and Richardson who manufactured the switch and why Ford decided to recall the line of vehicles in 1999. "A manufacturer who incorporates into his product a component made by another has a responsibility to test and inspect such components, and his negligent failure to properly perform such duty renders him liable for injuries proximately caused as a consequence." (citing Nelson v. Coleman Co., 249 S.C. 652, 657, 155 S.E.2d 917, 920 (1967)). Because Ford incorporated the switch manufactured by TI, it was legally responsible for it in the event that it failed and caused damage. For this reason, the fact that TI made the switch was irrelevant. In addition, Ford produced no evidence that its 1999 recall was prompted by manufacturing problems at TI. Even if the trial court committed error in precluding this line of questioning, Ford was not prejudiced.
(4) The trial court did not abuse its discretion by allowing the 1999 recall into evidence. The evidence indicated that the under-hood fires that prompted the 1999 recall of the other line of Ford vehicles were substantially similar to the under-hood fires in the Plaintiffs' Expedition. (Citing Whaley v. CSX Transp., Inc. 362 S.C. 356, 483, 609 S.E.2d 286, 300 (2005) (noting other incidents must be substantially similar to be relevant and admissible in a products liability action)).
(5) The court did not find error with regard to submission of Plaintiff Anna Duncan's claim for emotional distress to the jury in the absence of expert testimony. The jury verdict of $620,759.79 was less than the evidence of actual damages presented at trial (exclusive of the claim for emotional distress), and therefore the verdict should not be disturbed on appeal. (Citing Burns v. Universal Health Servs., Inc., 361 S.C. 221, 232, 603 S.E.2d 605, 611 (Ct. App. 2004)).
(6) The trial court did not abuse its discretion by excluding Jack Threadgill's appraisal of Plaintiffs' home from evidence. Ford sought to introduce the document to show the value Threadgill assigned to Plaintiff's home, and the business records exception does not allow subjective opinions within documents to be introduced into evidence. (Citing S.C. R. Evid. 803(6)). Threadgill's appraisal was a subjective opinion.
With regard to Ford's punitive damages arguments, the South Carolina Court of Appeals found as follows:
(1) The court upheld that clear and convincing evidence concerning Ford's conduct supported the jury's award of punitive damages. As stated by the court:
(2) The court did not believe that the evidence or the arguments in the case required that the trial court charge the jury "not to consider conduct occurring outside of South Carolina or harm to non-parties when decideing whether to award punitive damages." The Due Process Clause requires this charge only when there is a risk that a jury may award punitives for conduct occurring outside the state for harm to non-parties. The recalls introduced into evidence by the plaintiffs were introduced for notice and to show that a prior recall was due to the same type of failure. Plaintiffs introduced evidence to show the reprehensible nature of Ford's conduct, and not to show the number of vehicles recalled or the number of under-hood fires.
(3) The court disagreed that Oliver Wood's expert testimony about Ford's general wealth and ability to pay a punitive damages award was inadmissible. The court cited to prior authority in which testimony beyond a defendant's mere net worth was allowed to establish the defendant's ability to pay a punitive damages award. The court also stated that Dr. Wood's testimony allowed the jury to follow the court's instructions and "punish the defendant but not effect bankruptcy."
(4) The court reviewed the procedural and substantive constitutional limitations on the award of punitive damages as set forth in BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 562 (1996). With regard to reprehensibility of conduct, the court noted that the damage was economic (destruction of the house), as opposed to physical, which weighed in Ford's favor. However, in spite of this, the court found that Ford's conduct was reprehensible because:
At long last, here is the case brief for Ford v. Duncan. Sorry for the delay (and length...there is a lot to this case). I will circle back around and drop in citations once the case is published. In the meantime, you can find it here.
FACTUAL BACKGROUND: A fire, originating under the hood of Plaintiffs' 2000 Ford Expedition, destroyed Plaintiffs' home on March 1, 2005. Evidence was presented at trial that Ford had recalled two lines of vehicles because of under-hood fires (one in 1999, and one in 2005). Ford attributed the under-hood fires to a certain failure of the speed control deactivation switch (the "switch"), which was manufactured by Texas Instruments ("TI") and installed by Ford. One month after the 1999 recall, a group of scientists employed by Ford produced an internal document that analyzed causes of the fires and proposed solutions. Ford acknowledged in the report that it did not completely understand the cause of the fires, but the report identified a failure in the switch as a potential cause. Ford did not implement any of the report's proposed solutions and did not address the switch failure during the 1999 recall.
At trial, Ford's expert, Mark Hoffman, testified that Ford did not incorporate the proposed solutions because it determined the switch failure and subsequent fires were caused by manufacturing problems at TI. Mr. Hoffman testified that Ford ensured that TI resolved its manufacturing issues, and it replaced any switches that deviated from its specifications. Plaintiffs' expert Jeff Morrill testified that (1) the switch in Plaintiffs' vehicle was the same type of switch that was in the line of vehicles recalled in 1999, (2) the fire was caused by the same failure in the switch as the one that caused the failure in the 1999 recall, and (3) Ford knew of the switch failure before manufacturing Plaintiffs' vehicle, as evidenced by the 1999 recall and the internal report. Plaintiffs' then called their engineering expert Kendrick Richardson, who testified that Ford breached the engineering standard of care. Plaintiffs also offered a report by economist Oliver Wood relating to Ford's net worth and ability to pay a punitive damages award.
PROCEDURE: Plaintiffs brought suit against Defendant Ford. The jury returned a verdict in Plaintiffs' favor, awarding them $620,759.79 in actual damages, reduced to $589,721.80 in proportion to Plaintiffs' comparative fault, and $3 million in punitive damages. Ford appealed the verdict.
ISSUES: Ford's arguments on appeal related to the trial court's admission of certain evidence and the jury's award of punitive damages.
- With regard to the admission of evidence, Ford argued that the trial court (1) erred by allowing Plaintiffs' expert Jeff Morrill to present design opinions; (2) erred by allowing Plaintiffs to ask Plaintiffs' expert Kendrick Richardson whether Ford breached its engineering standard of care based on Mr. Morrill's conclusions; (3) erred by preventing Ford from asking Plaintiffs' experts, Morrill and Richards, who manufactured the switch and why Ford decided to recall the line of vehicles in 1999; (4) erred by admitting the 19999 recall of the line of vehicles into evidence; (5) erred by submitting Plaintiff Anna Duncan's claim for emotional distress to the jury in the absence of expert testimon; and (6) abused its discretion by not admitting Jack Threadgill's appraisal of the Plaintiffs home into evidence because it qualified as a business record.
- Ford contended that the jury's award of punitive damages should be reversed because (1) Ford's conduct did not rise to the level of reckless, willful, or wanton conduct, and (2) the trial court should have instructed the jury not to consider conduct occurring outside of South Carolina or harm to non-parties when deciding whether to award punitive damages, (3) the trial court should not have allowed economist Oliver Wood to testify because his testimony invited the jury to return an award of punitive damages against it based solely on its financial well-being, and (4) Ford's conduct satisfied the guideposts set forth in BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996).
RULES AND OPINION: With regard to Ford's evidentiary arguments, the South Carolina Court of Appeals found as follows:
(1) Plaintiffs' expert Jeff Morrill testified within his area of expertise (i.e., the cause and origin of the fire), and he never offered any design opinions. Morrill's testimony about the switch failure was not that it was defectively designed, but that it was the cause of the fire. Furthermore, he relied on the internal report to provide this opinion, and therefore he could testify about it (despite not having firsthand knowledge of the report, and despite not having worked at Ford).
(2) The trial court did not abuse its discretion by allowing Plaintiffs' expert Kendrick Richardson to respond to the hypothetical question of whether Ford breached its engineering standard of care, based on Morrill's conclusions. As stated before, Morrill was qualified to offer his testimony. Plaintiffs' posing of this question to Richardson at trial was not misleading--even though it omitted the manufacturing problems at TI--because it was based on Morrill's testimony and the internal report, neither of which referred to manufacturing issues at TI.
(3) The trial court did not err in preventing Ford from asking Morrill and Richardson who manufactured the switch and why Ford decided to recall the line of vehicles in 1999. "A manufacturer who incorporates into his product a component made by another has a responsibility to test and inspect such components, and his negligent failure to properly perform such duty renders him liable for injuries proximately caused as a consequence." (citing Nelson v. Coleman Co., 249 S.C. 652, 657, 155 S.E.2d 917, 920 (1967)). Because Ford incorporated the switch manufactured by TI, it was legally responsible for it in the event that it failed and caused damage. For this reason, the fact that TI made the switch was irrelevant. In addition, Ford produced no evidence that its 1999 recall was prompted by manufacturing problems at TI. Even if the trial court committed error in precluding this line of questioning, Ford was not prejudiced.
(4) The trial court did not abuse its discretion by allowing the 1999 recall into evidence. The evidence indicated that the under-hood fires that prompted the 1999 recall of the other line of Ford vehicles were substantially similar to the under-hood fires in the Plaintiffs' Expedition. (Citing Whaley v. CSX Transp., Inc. 362 S.C. 356, 483, 609 S.E.2d 286, 300 (2005) (noting other incidents must be substantially similar to be relevant and admissible in a products liability action)).
(5) The court did not find error with regard to submission of Plaintiff Anna Duncan's claim for emotional distress to the jury in the absence of expert testimony. The jury verdict of $620,759.79 was less than the evidence of actual damages presented at trial (exclusive of the claim for emotional distress), and therefore the verdict should not be disturbed on appeal. (Citing Burns v. Universal Health Servs., Inc., 361 S.C. 221, 232, 603 S.E.2d 605, 611 (Ct. App. 2004)).
(6) The trial court did not abuse its discretion by excluding Jack Threadgill's appraisal of Plaintiffs' home from evidence. Ford sought to introduce the document to show the value Threadgill assigned to Plaintiff's home, and the business records exception does not allow subjective opinions within documents to be introduced into evidence. (Citing S.C. R. Evid. 803(6)). Threadgill's appraisal was a subjective opinion.
With regard to Ford's punitive damages arguments, the South Carolina Court of Appeals found as follows:
(1) The court upheld that clear and convincing evidence concerning Ford's conduct supported the jury's award of punitive damages. As stated by the court:
Under South Carolina law, punitive damages may be awarded to punish torfeasors who have acted in a "reckless, willful, or wanton" manner. The plaintiff must prove punitive damages by clear and convincing evidence. Clear and convincing evidence is: "that degree of proof which will produce in the mind of the trier of facts a firm belief as to the allegations sought to be established." The clear and convincing standard is the highest burden of proof known to civil law.(Citations omitted). Based on this standard, the court found that Ford knew that the switch it installed could fail and that the failures were causing fires before its manufacture of Plaintiffs' vehicle. Ford's knowledge and failure to make any changes to the switch rose to the level of reckless, willful, and wanton conduct.
(2) The court did not believe that the evidence or the arguments in the case required that the trial court charge the jury "not to consider conduct occurring outside of South Carolina or harm to non-parties when decideing whether to award punitive damages." The Due Process Clause requires this charge only when there is a risk that a jury may award punitives for conduct occurring outside the state for harm to non-parties. The recalls introduced into evidence by the plaintiffs were introduced for notice and to show that a prior recall was due to the same type of failure. Plaintiffs introduced evidence to show the reprehensible nature of Ford's conduct, and not to show the number of vehicles recalled or the number of under-hood fires.
(3) The court disagreed that Oliver Wood's expert testimony about Ford's general wealth and ability to pay a punitive damages award was inadmissible. The court cited to prior authority in which testimony beyond a defendant's mere net worth was allowed to establish the defendant's ability to pay a punitive damages award. The court also stated that Dr. Wood's testimony allowed the jury to follow the court's instructions and "punish the defendant but not effect bankruptcy."
(4) The court reviewed the procedural and substantive constitutional limitations on the award of punitive damages as set forth in BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 562 (1996). With regard to reprehensibility of conduct, the court noted that the damage was economic (destruction of the house), as opposed to physical, which weighed in Ford's favor. However, in spite of this, the court found that Ford's conduct was reprehensible because:
In short, Ford installed a switch into the [Plaintiffs'] Expedition that it knew could cause fires. This conduct clearly amounts to a reckless disregard for the health and safety of others. . . . While Ford's conduct did not rise to the level of intentional malice, trickery, or deceit, Ford's act of installing a switch in the [Plaintiffs'] Expedition that it knew could cause fires amounts to affirmative misconduct.
The court also found the award to be reasonable (with regard to Gore's second factor). The economic harm, combined with the threat of serious physical injury, made the punitive damages award that was 5.087 times the actual damages reasonable. Finally, in examining Gore's third factor regarding comparable civil fines, the court found that the jury's award of three million dollars in punitive damages was not unconstitutionally excessive.
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Thursday, October 8, 2009
Settlement in Pharmaceutical Case
The action brought by Attorney General Henry McMaster against drug manufacturer Eli Lilly has reportedly settled. The below appeared in today's issue of The State newspaper. This lawsuit related to alleged off-label promotion of the drug Zyprexa.
Settlement reportedly reached in Lilly case
Drug maker Eli Lilly & Co. has agreed to settle a lawsuit brought by state Attorney General Henry McMaster on behalf of South Carolina.
Sources close to the case say a settlement has been reached but the details, including how much money South Carolina will receive, are not yet available.
South Carolina sued Eli Lilly in 2007, alleging the company marketed its anti-psychotic medication, Zyprexa, for off-label purposes and failed to disclose side effects including weight gain.
The drug is only approved to treat schizophrenia and bipolar disorder.
South Carolina had hoped to recoup $200 million in its lawsuit that it said was wrongfully spent on Zyprexa prescriptions and millions of dollars more in fines.
The company has already agreed to pay more than $360 million to more than 30 states following a U.S. Justice Department investigation into its marketing practices.
The lawsuit has also brought some controversy to S.C. Attorney General Henry McMaster who is also seeking the Republican nomination in next year's gubernatorial race. McMaster accepted campaign donations from the two private attorneys he hired to represent South Carolina in the Lilly case.
McMaster has since returned nearly $33,000 in donations he has received during his time in office from attorneys he has hired to work on cases for the state.
- Gina Smith
This post is subject to the DISCLAIMER & TERMS OF USE of this website.
Settlement reportedly reached in Lilly case
Drug maker Eli Lilly & Co. has agreed to settle a lawsuit brought by state Attorney General Henry McMaster on behalf of South Carolina.
Sources close to the case say a settlement has been reached but the details, including how much money South Carolina will receive, are not yet available.
South Carolina sued Eli Lilly in 2007, alleging the company marketed its anti-psychotic medication, Zyprexa, for off-label purposes and failed to disclose side effects including weight gain.
The drug is only approved to treat schizophrenia and bipolar disorder.
South Carolina had hoped to recoup $200 million in its lawsuit that it said was wrongfully spent on Zyprexa prescriptions and millions of dollars more in fines.
The company has already agreed to pay more than $360 million to more than 30 states following a U.S. Justice Department investigation into its marketing practices.
The lawsuit has also brought some controversy to S.C. Attorney General Henry McMaster who is also seeking the Republican nomination in next year's gubernatorial race. McMaster accepted campaign donations from the two private attorneys he hired to represent South Carolina in the Lilly case.
McMaster has since returned nearly $33,000 in donations he has received during his time in office from attorneys he has hired to work on cases for the state.
- Gina Smith
This post is subject to the DISCLAIMER & TERMS OF USE of this website.
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