Newsflash: Gasoline is Flammable

We recently shared with you the unfortunate news that lawsuits burned down another company – Blitz USA was forced to close its doors on July 31st after 46 years of business.  The gas can maker was ultimately sued into bankruptcy, after numerous lawsuits from misuse of their product bled the company dry.  Since we shared this story, there has been alternating disputes from both sides of the argument.  Opinion pieces from both the trial lawyers who sued the company and Darren McKinney of the American Tort Reform Association (ATRA) were displayed side by side last week in the Wall Street Journal.

The lawyers assert that Blitz produced a faulty product, missing important safety elements, stating “A strong and effective civil justice system provides accountability when dangerous products harm consumers. Look no further than Blitz for proof that this is needed.”

ATRA advocate Darren McKinney spoke to the larger issue, “Surely those who are genuinely injured by actual negligence or recklessness of another must have access to our courts for fair and prompt recompense. But allowing gas-can makers to be sued out of business because a few people handled gasoline imprudently is to willfully burn down America’s economic house.”

Just this week, the now former CEO of Blitz USA, Rocky Flick, spoke out in his own WSJ opinion piece, setting the record straight. “The authors state accidents happened because our gas cans were defective. In fact, accidents happened because gasoline is flammable.”

The fact is that reasonable limitations on liability could have saved Blitz. And while Blitz is certainly not the first American company to be bankrupted by lawsuits, it just may be the wakeup call we all need – the canary in the coal mine, if you will. The rising cost of lawsuits cannot continue unabated without serious consequences. Litigation makes America companies less competitive, drives up prices to consumers, are costs our communities jobs. The growing sentiment that everybody deserves monetary compensation for any wrong, regardless of common sense factors – for example, that handling gasoline is inherently dangerous – will only perpetuate a  culture where those with lawyers benefit at the expense of society on the whole.  Should we lock the doors to the courts? Of course not – but a little common sense could go a long way.

Lawsuits Burn Down Another Company

By: Michael Seinberg

On December 28, 2005 a man named David Calder inserted the nozzle of a $3.99 gas can into his wood stove in an effort to perk up his fire, a move he later admitted was “stupid”.  Calder, who should have been nominated for a Darwin Award, was also not much of a reader as the container itself had “KEEP AWAY FROM FLAMES, PILOT LIGHTS, STOVES, HEATERS, ELECTRIC MOTORS, AND OTHER SOURCES OF IGNITION.” impressed into the plastic.

The result of Calder’s self-professed idiocy severely burned him and killed his two-year-old daughter. But rather than being charged criminally, Calder filed suit against the maker of the gas can, Blitz USA for not creating a can that was stupidity proof and he WON $4 million in the suit. The judge in the case refused to throw the case out and refused to let Blitz argue the “state of the art” product liability defense or argue that it complied with government regulations for the manufacture of gas cans.

This sadly was the final straw for Blitz. The largest maker of gas cans in the US liquidated under bankruptcy proceedings and closed its Oklahoma factory, costing 117 more American jobs. At one point, Blitz made some 75% of the gas cans sold in the US, so now we’ll have to get our cans from someplace like China where the concept of product liability simply doesn’t exist. I’d like to see what happens to a trial lawyer who goes after a Chinese company when their shoddy product blows up.

But make no mistake here. This suit was the breaking-point that destroyed Blitz, but it was one of a long line of such suits. “This is a sad day in the 46-year history of Blitz and for our 117 employees,” said Blitz USA president and CEO Rocky Flick in a statement. “We appreciate the support of our employees and their families in our efforts to reorganize and develop a viable business plan. Unfortunately, we were not able to address the costs of the increased litigation associated with our fuel containment products.”

The company says it has been saddled by high costs from litigation “characterized by individuals using gas to start or accelerate a fire,” according to a release. In other words, idiots killed the company.

Greedy trial lawyers and uneducated juries have once again worked hand in claw to enrich the lawyers to the detriment of everyone else from customers to workers. If this isn’t a clarion call for tort reform I can’t imagine what is.

$120 Million Dollars Awarded in Malpractice Suit

By: Michael Seinberg

A Bronx jury recently awarded about $120 million to a 45-year-old woman who suffered brain damage after being treated by three different NYC-area hospitals. The award, one of the largest ever issued for medical malpractice in the state, will likely be appealed by the city. Civil juries in the Bronx are notoriously plaintiff-friendly; As one personal injury lawyer told the Associated press, “If I’m a plaintiff, I rather be there than anyplace in the world.”

The case concerns Jacqueline Martin who received treatment during a one-month period in February 2004. She originally sought treatment for a seizure and was later diagnosed with a rare skin disorder that ultimately left her brain damaged. Prior to this she was a single mother of two earning about $40,000 per year as an insurance claims adjuster.

The jury awarded her $10 million in lost earnings, $5 million for past medical expenses (the full costs have been covered by Medicaid since the incident, to the tune of $583,000). The rest of the $105 million is for “pain and suffering,” highlighting the need for a rational limit on such awards in New York. The greatest problem with these awards is that a dollar value cannot precisely be determined – by definition, no amount of money will mitigate the suffering or undo the loss. With 90% of the award to be paid by city owned hospitals, taxpayers will be responsible for the majority of the verdict, while the already desperate healthcare system in the Bronx will take a huge hit.

The events that took place leading to Ms. Martin’s unfortunate condition were extremely tragic. Nobody would disagree that she is due compensation for her injuries and future suffering that she will endure. However, such and outsized awards do little, if anything to improve standards of medical care and prevent future errors. Instead, they drive up healthcare costs to consumers, which disproportionally impacts the poor and underserved who are least able to afford premium increases. Until New York institutes a cap on pain and suffering awards, malpractice premiums will keep rising, doctors will flee the state, public health will suffer, and taxpayers will continue to foot the bill.

The Counsel for the City’s Health and Hospitals Corporation noted that “the amount of this judgment is not consistent with the facts and the law.”  One thing is for sure, out-of-control judgments like this one increase medical costs for all of us.

Nuts to Nutella Says Judge

By: Michael Seinberg

Thanks to an angry California mom, breakfast just got a little healthier and some lawyers picked up a quick $550,000 in fees. It seems that Athena Hohenberg proposed a class action lawsuit last year after discovering that despite advertisements to the contrary, Nutella, a well-known hazelnut and chocolate spread was not a healthy and nutritious food. Wow! Shock! Next thing you know she’ll denounce Captain Crunch.

It would seem that a 2 tablespoon serving contains, among other things, 190 calories, 11 grams of fat, 21 grams of sugar, and only 1 gram of fiber and 3 grams of protein. Ms. Hohenberg made this shocking discovery by actually stopping and reading the label, which, amazingly, is on virtually every jar of Nutella sold in the US. Ferrero USA, Inc., of Somerset NJ, maker of the offending spread had no comment after being ordered to pay out $3.05 million as part of the settlement, $2.5 million of which will go to consumers that file a claim.

Any person not bright enough to read the label who bought the devil’s spread between August 1, 2008 and January 23, 2012 is entitled to $4 for each jar up to a maximum of $20 for five jars per household. God help the home that ate 5 jars! The company also agreed to change its marketing campaign, modify the label to show the fat and sugar on the front of the jar (for those too dumb to read the back), create new TV ads and change the company website. No word as to whether Ferrero execs will be forced to diet and wear a big red F (for fat) on their suits for one year.

You have to wonder why health conscious people would, for even one moment, think a chocolate spread was in any way healthy. But beyond the obvious, why would you sue the company when the nutritional information is clearly available, visible and even written in English? Finally, a jar costs anywhere from $3.28 to $12.00 (depending on size) so a $4 settlement is just enough to buy another jar, or maybe pay for Lipitor for a week.

The lawyers made out like bandits, and the public paid the court costs for a lawsuit that really didn’t do much good for anyone but the lawyers.

The hope is that next time Ms. Hohenberg goes shopping she brings her reading glasses and leaves her lawyer’s business card at home. Maybe she should just learn to blog.

Forbes: Restoring Sanity To the U.S. Tort System

An opinion editorial was recently featured in Forbes written by Cybex International’s President and COO, Arthur Hicks Jr.  This editorial titled: Restoring Sanity To the U.S. Tort Systemhighlights the major obstacles faced by companies in the U.S. to stay afloat with the extensive regulations and trial lawyers hungry to hit the “lawsuit lottery”.

An excerpt:

Much less discussed, however, are the billions of dollars of costs foisted on U.S. businesses by excessive – and in many cases, frivolous – litigation. Unless you’re a trial lawyer, most people know about the absurdity of our tort system. We’ve all seen the ads on TV for class action lawsuits, read about the woman who sued McDonald’s because her coffee was too hot. We’re also aware how medical malpractice lawsuits drive up healthcare costs for everyone.

And while we cringe at these examples of lawyers run amok, we rarely appreciate just how devastating their actions are to U.S. businesses. Simply put, frivolous lawsuits and excessive rewards are putting America’s economic recovery in danger.”

Hicks is no stranger to tort litigation, Cybex International recently settled a case with a Western New York woman for $19.5 million- down from a monumental $66 million, which would have been the largest settlement in western New York history.  In this case, the woman was using a piece of equipment incorrectly and sustained severe injuries.  The court ruled that this misuse was “foreseeable” and the liability fell on the manufacturer.

Arthur Hicks Jr. hits the nail on the head – frivolous litigation hurts consumers, taxpayers, and businesses and makes America less competitive in an increasingly global economy. Just how big is the impact? One recent study found that reforming New York’s civil justice system could create over 200,000 jobs. Who knew a little common sense could go so far?

Bloomberg News: When Merger Suits Enrich Only Lawyers

An article in Bloomberg News highlights a growing issue with merger lawsuits in Delaware fattening the pockets of  plaintiffs’ attorneys while leaving their clients empty handed.

“A shareholder lawyer told a Delaware judge at a midsummer court hearing two years ago that his team deserved $700,000 for work on a lawsuit in which his clients received nothing”.

This is  not a one-time event.

“Of 57 such investor class actions settled or otherwise concluded there in 2010 and 2011, 40 — or 70 percent — made money for plaintiffs’ lawyers but not clients, according to data compiled by Bloomberg News…None of the 10 cases that New York-based Faruqi & Faruqi helped to settle during the two years produced cash for clients, according to court records. Legal fees in those 10 cases totaled $6 million, split among plaintiffs’ firms. 

Overall, lawyers won $32.4 million for themselves in the 40 cases that generated no money for clients”.

Read More from Bloomberg

Many of the plaintiffs’ firms in these cases are New York based and clearly well versed in how to manipulate the system in their favor.  This practice was seen last August in the unfortunate story of the cancer-stricken Ground Zero worker who received a check for zero dollars from his $10,000 settlement after various lawyer fees were subtracted.  There was even a recent case in which a New York malpractice attorney was arrested for literally stealing his clients $70,000 settlement.

We are fighting to stop these unfair and deceptive practices in New York, find out how you can join the fight!

Cybex Reaches $19.5m Settlement in Product Liability Case

By: Tom Stebbins, Executive Director

Last week, premium exercise equipment manufacturer Cybex International agreed to pay $19.5m to a Cheektowaga woman, who was injured by a piece of Cybex equipment when she improperly used a leg machine to stretch her shoulder in October 2004. The settlement was reduced from the $66m originally awarded in the case, considered by many to be a record in Western New York personal injury cases.  The settlement is also down from the $44m awarded by the appellate division in November 2011.  But even the $44m was expected by many analysts to bankrupt Cybex, which had $4m in liability insurance.

While the reduced settlement may allow Cybex to continue to operate and let its workers keep their jobs, the fact remains that it took the very real prospect of bankrupting another American manufacturer to bring the settlement down.  And the cost of this lawsuit extends far beyond Cybex.   Looking at this lawsuit, American manufacturers will likely see the need to add more insurance, adding to the cost of their products and increasing the price to consumers.

Similarly, innovation will be stifled as manufacturers consider liability before quality.  Even though the plaintiff in this case did not use the equipment for its intended purpose, the court ruled that the manufacturer was liable for the injury since using the equipment for stretching was “foreseeable.”  Of course, now manufacturers must consider every foreseeable misuse as they design products, rather than focus on improving the experience of the intended use.

When the initial ruling came down, Cybex Chairman and CEO said the case was an example of “the tort system run amok.”  We couldn’t agree more.  And while this accident was tragic, if we continue to bring American companies to near bankruptcy with litigation, do not be surprised if there are not many American companies left.

Forbes: America’s Ongoing Tort Litigation Nightmare

“Tort litigation costs Americans more than $250 billion, that’s the equivalent to 2.2 percent of GDP and roughly $838 per person, according to Towers Watson.  This has real economic consequences. In healthcare alone, it’s estimated that tort reform could eliminate up 27 percent of medical costs. In other words, 27 cents of every healthcare dollar goes toward litigation. How does that help lower- and middle-class families struggling to make ends meet?

A case study on America’s tort crisis is playing out in New York.  In 2004, a young physical therapist was tragically paralyzed after she pulled a piece of exercise equipment on top of herself. The equipment, a Cybex leg extension machine, was not broken or faulty.  Rather, the machine tipped because the therapist wasn’t using it properly – she was standing on the side of the machine pulling backward in order to stretch. Nevertheless, she was awarded the largest personal-injury verdict in Western N.Y. history, a whopping $65 million.”

Read More from Forbes

Orange County Continues to Get Hammered with Lawsuits

The Times Herald recently featured an article about two cases filed by a domestic violence advocate who is suing local and state domestic violence organizations, and their leaders, claiming they defamed her.  Grace Perez of Newburgh contends she was defamed and that negative comments were made related to her ouster from the Violence Intervention Program. Her case is against Safe Homes of Orange County and its executive director, Kellyann Kostyal,and the New York State Coalition Against Domestic Violence and its CEO, Michelle McKeon, and board President Catherine Mazzotta.  The lawyer for the state coalition responded, ”We find that the complaint has no merit whatsoever.

Perez is seeking a total of $4 million in this case, $2 million in economic damages and $2 million for emotional distress.

Read the full article here.

This is not the first time this year that an Orange County service organization has been faced with a high dollar lawsuit.  In August of this year, Jean Pierre, the estranged boyfriend and father of one of the four children LaShanda Armstrong tragically drove into the Hudson River brought suit against both the City of Newburgh and Orange County Child Protective Services for $40 million each.

These large ticket lawsuits take money from the taxpayers of New York and strain the budgets of our municipalities.  A recent study by SUNY Albany revealed that some residents of New York counties pay over $600 per capita for claims and judgments.  Even if these cases are not won or the full judgment is not paid, defending the suits costs taxpayer dollars and strains the limited resources of our court system. New York needs lawsuit reform to eliminate meritless lawsuits that clog our courts and delay justice for those with legitimate claims. It’s time to return balance and common sense to our civil justice system!

The National Law Journal – Never-ending asbestos quagmire

By Lisa Rickard, president of the Institute for Legal Reform

“It began on Dec. 10, 1966, at a courthouse in Beaumont, Texas. Attorney Ward Stephenson filed a lawsuit, on behalf of a client suffering from asbestosis, against 11 manufacturers of products containing asbestos. Though a jury ruled for the defendants in this first case, Stephenson tried again with a different client, and in 1973 a jury awarded Stephenson’s plaintiff $79,436.24 in damages.

Thus began the largest and most expensive mass tort litigation in history. During the next 40 years, hundreds of thousands of asbestos exposure lawsuits were filed against businesses, large and small, in nearly every state. By 2002, more than $79 billion in damages had been paid out to an estimated 730,000 claimants. The cost of this litigation contributed to the bankruptcies of nearly one hundred companies, employing tens of thousands of workers.

For decades, experts have predicted that the flood of asbestos claims would eventually decrease. After all, the use of asbestos declined rapidly beginning in the 1970s, a development that would presumably lead to a decrease in cases of mesothelioma, asbestosis and other asbestos-related diseases.

Yet asbestos litigation costs show no signs of decreasing. In fact, they appear to be increasing.”

Read More from The National Law Journal