Segal McCambridge Legal Blog

ABA Journal and Crain’s Cleveland Business report

Faced with a $4.2 million claim by a deceased name partner’s widow, a Florida-based asbestos law firm has filed for Chapter 11 bankruptcy seeking respite.

Kelley & Ferraro filed in Miami this week, as Lynn Kelley was pursuing a Cuyahoga County Court of Common Pleas case against the firm in Ohio concerning the amount she is allegedly owed by the firm after her husband’s death five years ago.

Although James Ferraro prevailed at trial on all counts and the firm prevailed on all counts but one, Kelley won a $4.2 million judgment on that one count.

A state appeals court has since ordered the firm to dissolve and ordered a new trial on damages, the article explains. Kelley’s lawyer contends she is actually entitled to $35 million, according to dissolution provisions of the law firm’s partnership agreement.

The timing of the bankruptcy filing was not coincidental as it was made on the same day civil proceedings brought by Lynn Kelley, widow of firm co-founder Michael Kelley, were to resume in Cuyahoga County Common Pleas Court. The bankruptcy filing automatically stayed the civil proceedings.

The legal feud between Ms. Kelley and Mr. Ferraro began in April 2006, four months after Michael Kelley died. Ms. Kelley alleged Mr. Ferraro was not following the company contract he signed with her late husband and claimed, among other things, that Mr. Ferraro had cut off her salary and refused to dissolve the firm and divide the assets as the contract required.

A jury found in favor of Mr. Ferraro on all counts and found in favor of Kelley & Ferraro on all counts but one, for which it awarded Ms. Kelley $4.2 million. Mr. Wuliger appealed the decision to a state appeals court, contending there were errors before, during and after the trial.

The Eighth Ohio District Court of Appeals ordered in June 2010 that the firm be dissolved, per the partnership agreement, and ordered a new trial held regarding the damages Ms. Kelley suffered, if any, as a result of Mr. Ferraro’s breach of contractual and fiduciary duties.

According to Mr. Wuliger, the contract requires 40% of the firm’s revenues to be paid to the Kelley estate. Ms. Kelley, he said, is owed well over $35 million and has received a couple hundred thousand dollars to date.

Kelley & Ferraro’s bankruptcy filing names Ms. Kelley and Mr. Ferraro as creditors, of whom there are an estimated 50 to 99. It estimated the firm’s assets and liabilities each at more than $1 million, up to $10 million. There should be funds available for distribution to unsecured creditors, the filing indicated.

Asbestos Law Firm Seeks Chapter 11 Shield from $4.2M, or Maybe $35M, Claim of Partner's Widow

Kelley & Ferraro LLP files for Chapter 11 bankruptcy protection

On January 21, 2011, in the case of Jodi McGookin, et al. v. Guidant Corporation, et al. the Indiana Court of Appeals held:

After their newborn daughter was diagnosed with a heart defect, was given a Guidant pacemaker, and tragically passed away at the age of fourteen months, the appellants filed a state law complaint against Guidant. Among other things, they argue that Guidant should have put specific warnings on the pacemaker labeling related to its implantation into pediatric patients. Because the label had been preapproved by the Food and Drug Administration, however, and Guidant was not required to include the additional warnings, the trial court held that any state law-based failure-to-warn claims were preempted by federal law. Finding that the trial court properly found the claims preempted, we affirm.

This decision is in keeping with two recurring themes in preemption cases involving medical devices: 1) that Riegel provides the preemption rules governing Class III medical devices; and 2) that "may" does not mean "must" when determining what constitutes a federal requirement under the MDA's express-preemption clause.

The opinion can be found here

From the Insurance Information Institute

The size of the top 10 jury awards rose for a third consecutive year in 2010, according to the latest report from Lawyers USA.

The 10 largest jury verdicts in 2010 totaled $1.6 billion, a slight increase of 4 percent from $1.5 billion in 2009. Between 2008 and 2009, the sum of the top 10 jury awards had increased by 12 percent after more than doubling between 2007 and 2008.

Lawyers USA observed that the average award for 2010 increased less than in 2009, rising to just under $157 million, from nearly $145 million the prior year.

While the top award was significantly higher in 2010 — $505 million versus $370 million — there was then a sharp drop to the second-ranked award at $208.8 million and the third-ranked award at $152 million.

In contrast, 2009 saw three awards in the $300 million range.

Still, we note that you have to go back to 2005 to find a verdict in excess of $500 million.

In the year's top verdict — a products liability case — a Nevada jury ordered Teva Pharmaceuticals and Baxter Healthcare to pay $500 million in punitive damages in addition to $5.1 million in compensatory damages to a man who developed Hepatitis C several weeks after undergoing a routine colonoscopy where he was anesthetized with propofol.

Another takeaway: three tobacco awards made this year's top 10.

Lawyers USA compiles the Top 10 Jury Verdicts each year applying certain ground rules. Verdicts must be to an individual plaintiff, defined as a single person, family or small group of individuals injured in a single incident who had their claims tried in one case before the same jury.

The list does not include business-against-business suits, class actions or consolidated suits. Cases must have been defended and default verdicts and suits against incarcerated individuals are not included.

The Lawyers USA Top Ten for 2010 is below

10. Tobacco plaintiff wins $80 million verdict: After eight straight defense verdicts in the individual tobacco litigation in Florida, the daughter of a smoker who died of lung cancer won a resounding $80 million verdict in November, including $72 million in punitive damages.

9. Jury delivers $82.5 million verdict in gas plant blast case: A Texas jury has handed down a verdict of more than $82 million against two natural gas plant companies after a worker in a rebuilt and refurbished plant was killed in an explosion.

8. $89 million in airplane crash case: In April of last year, a Pennsylvania jury handed down an $89 million verdict against the manufacturer of an airplane carburetor after a crash killed four people and severely injured a fifth.

7. Fla. jury awards $90.8 million to smoker's widow: In April, a Florida jury awarded $90.8 million to the wife of a longtime smoker who died of lung cancer.

6. Law firm slammed with $103 million verdict for working against client: In October, a Mississippi jury hit the world's largest law firm with a $103 million verdict in a suit alleging legal malpractice, breach of fiduciary duties, conspiracy and interfering with business relationships.

5. Jury awards $124.5 million in passenger van crash: A Texas jury found a bus company and driver liable for $124.5 million to seven passengers injured or killed while riding in a van in a state where it was not licensed to operate.

4. Small firm lawyers win $132.5M in Ford rollover retrial: The third time was a charm for small-firm lawyers who won $132.5 million against Ford for a rollover accident that killed 22-year-old New York Mets prospect Brian Cole.

3. $152 million for estate of woman given free cigarettes as a child: A Massachusetts jury awarded $152 million to the son of a deceased woman who received free cigarettes as a child from representatives of tobacco company Lorillard.

2. Worker's wife awarded $208.8 million for asbestos-laced laundry: In April of 2010, 68-year-old Rhoda Evans won $208.8 million for the mesothelioma caused by asbestos contamination that her husband brought home from his job. The jury awarded $8.8 million in compensatory damages and $200 million in punitive damages. The compensatory award was split 70/30 between the pipe maker and the employer, but the pipe maker alone was held responsible the entire punitive award.

1. Small firm wins $505.1 million verdict: Arguing that oversized vials of a drug were "weapons of mass infection" that led to an outbreak of Hepatitis C at outpatient surgical centers, Las Vegas plaintiffs' attorney Robert Eglet convinced a jury that the manufacturer and its distributor should be punished with $500 million in punitive damages, in addition to $5.1 million in compensatory damages.

The Insurance Information Institute article can be found here

The Lawyers USA report can be found here

A January 18, 2010 entry from The Wall Street Journal Law Blog

“… ten of the 50 largest jury verdicts last year came in product-defect cases, compared with five in 2009 and one in 2008. There were 15 such verdicts of $25 million or more in 2010, compared with seven in 2009.”

"Jurors are more willing to believe that there was corporate wrongdoing that was intentional," said Ophelia Camina, a lawyer at Susman Godfrey in Dallas who won a $246 million verdict last year in a breach-of-warranty and fraud case against JDA Software Group. "It's easier to get people angry when they're already brooding."

"The old form of bias was when a juror may have had a personal interest in the case or a bias for a plaintiff or against a particular defendant," Victor E. Schwartz,the general counsel of the American Tort Reform Association and a Shook Hardy & Bacon partner said.

Prejudice today "is more subtle and not always conscious," he said. "It's a blue-collar feeling that corporate America doesn't really care, and that's difficult to eliminate in voir dire," the jury selection process.

The entire blog post can be found at “2010: The Year of the Angry, Company-Suing Plaintiff“

Whether a foreign corporation is subject to general personal jurisdiction, on causes of action not arising out of or related to any contacts between it and the forum state, merely because other entities distribute in the forum state products placed in the stream of commerce by the defendant? (in other words, is a foreign company subject to suit in the United States solely because another entity sells that foreign company's products in the United States?)

That is the issue before SCOTUS in the Goodyear Dunlop Tires Operations, S.A., et al., Petitioners v. Edgar D. Brown, et ux., Co-Administrators of the Estate of Julian David Brown, et al. matter. The SCOTUS docket entry can be found here

As summarized by Forbes.com On the Docket:

The lawsuit centers on an allegedly defective tire manufactured in Turkey and involved in an auto accident in France. None of the events giving rise to the accident occurred in the United States, and none of the defendants—three tire manufacturers operating in Luxembourg, Turkey, and France—are citizens or residents of the United States. These tire manufacturers took no affirmative action to cause their tires to be distributed in North America, and the type of tire involved in the accident is not distributed in the United States. Yet, despite the absence of any meaningful connection between the three foreign tire companies and the United States, plaintiffs sought to hale each of them into a North Carolina state court.

The case raises important issues about the continued viability of the Supreme Court's longstanding protections against the exercise of personal jurisdiction by U.S. courts over foreign corporations.

The entire Forbes.com On The Docket article can be found here

From Fox Business

A recent report from the Institutional Risk Analyst (IRA) notes that a large numbers of asbestos cases are still driving the number of lawsuits against the industrial companies on the list. It notes Ford (F: 18.70, 0.00, 0.00%), Bridgestone, Goodyear Tire (GT: 12.03, 0.00, 0.00%), General Electric (GE: 18.59, 0.00, 0.00%) and General Motors (GM: 38.02, 0.00, 0.00%). Nearly 100% of the lawsuits Goodyear battled in 2009 and 2008 came from asbestos claims.

Total Federal Litigation
Company                        2010    2009     2008     2007
General Electric             9,359   12,356 20,498 3,887
Goodyear                        4,989   14,393 13,330 2,661
Bank of America            3,285     2,569 1,196 775
Wells Fargo                    3,092     2,428 1,413 969
Toyota Motor                1,873         154 185 158
Wal-Mart                       1,672      1,765 1,452 1,538
JPMorgan                      1,150      1,149 471 275
General Motors               299      1,817 2,524 2,331
Morgan Stanley               261         405 273 236
Goldman Sachs                180         115 105 79
US Bancorp                         59          74 19 25

Source: Public Access to Court Electronic Records (PACER)

The article can be found here

The New York Times has an interesting article entitled Lawsuit Loans Add New Risk for the Injured

The Center for Public Integrity participated in the review of this issue. The report can be found here

A few highlights from these stories:

“The business of lending to plaintiffs arose over the last decade, part of a trend in which banks, hedge funds and private investors are putting money into other people's lawsuits. But the industry, which now lends plaintiffs more than $100 million a year, remains unregulated in most states, free to ignore laws that protect people who borrow from most other kinds of lenders.

Unrestrained by laws that cap interest rates, the rates charged by lawsuit lenders often exceed 100 percent a year, according to a review by The New York Times and the Center for Public Integrity. Furthermore, companies are not required to provide clear and complete pricing information — and the details they do give are often misleading.”

…

“Larry Long, debilitated by a stroke while using the pain medicine Vioxx, was facing eviction from his Georgia home in 2008. He could not wait for the impending settlement of a class-action lawsuit against the drug's maker, so he borrowed $9,150 from Oasis Legal Finance, pledging to repay the Illinois company from his winnings.

By the time Long received an initial settlement payment of $27,000, just 18 months later, he owed Oasis almost the entire sum: $23,588.

Ernesto Kho had pressing needs of his own. Medical bills had piled up after he was injured in a 2004 car accident. So he borrowed $10,500 from Cambridge Management Group, another company that lends money to plaintiffs in personal-injury lawsuits. Two years later, Kho, a New Jersey resident, got a $75,000 settlement — and a bill from Cambridge for $35,939.
…
There was little risk in lending money to Larry Long. The drug's maker, Merck, already had agreed to settle the Vioxx class action. The projected payouts were relatively easy to calculate: Long's lawyer estimated that he would eventually get a total of about $80,000.

Oasis still imposed its standard pricing: 50 percent of the loan amount if repayment was made within six months, with regular increases thereafter.

Long and his wife resented the high cost, but they had run through their savings. Long was legally blind and needed regular dialysis. His wife, Deborah, had left work to care for him. They borrowed $3,000 in February 2008, $3,000 in March and $3,150 in July.

"We were having a crisis, and they knew we were having a crisis," Long said. "They take advantage of people that are in need."

Oasis made loans on similar terms to 43 Vioxx plaintiffs, totaling about $224,000.

Orran L. Brown, the Virginia lawyer appointed to disburse the settlement, described the cost of the loans as "unconscionable."

"There was very little risk of nonrecovery, but they were charging full freight," he said.

But Gary Chodes, the company's chief executive, said the performance of the Vioxx loans showed why Oasis must charge high rates. Eight of the 43 borrowers failed to qualify for the settlement, he said, and an additional seven did not win enough to pay the full amount that they owed.

The company waived its claim against the Longs after the couple complained to the federal judge overseeing the Vioxx case. Chodes said that Oasis acted out of compassion for the couple's personal difficulties, but that the company had done nothing wrong. The Longs asked for money and Oasis clearly explained its terms, Chodes said. He provided copies of documents on which Long had recorded his thanks for the loans.”

Draft legislation was introduced on January 10th, 2011 in the Indiana Senate which would require courts to award attorney’s fees to a prevailing party in any civil action.

Senate Bill 324 bill currently has four (4) co-authors (Senators Banks, Delph, Kruse and Walker) and has been referred to the Committee on Judiciary.

Ed. Note: If the goal of the legislation is to deter “frivolous” lawsuits, Indiana would likely be better served by doing something via statute in terms of adding a Twombly/Iqbal initial pleading requirement and revising or eliminating the Jarboe summary judgment standard.

The draft Indiana legislation can be view here

Of note, Texas is apparently considering similar legislation. An article about “loser pays” (the “Holy Grail” of Tort Reform can be found here)

From Legal Newsline

A Philadelphia judge says the current system of recovery for plaintiffs with asbestos claims can help them recover more than a jury determines they deserve.

Common Pleas Judge Stephen Levin expressed that viewpoint in a Dec. 22 opinion that reduced the amount a jury ordered Honeywell International pay to the family of a deceased brake mechanic. The $492,000 verdict was reduced by nearly $150,000 to reflect settlements the plaintiffs made with asbestos bankruptcy trusts.

Several dozen companies named in asbestos lawsuits have gone bankrupt, and trusts have been established to pay out asbestos claims.

According to Levin, it is possible for plaintiffs to recover from trusts without defendants in their civil lawsuits ever knowing.

“This has led to the potential of double recovery, as there has only been haphazard reporting, if at all by plaintiffs of funds received from bankruptcy trusts, despite recoveries also received at trial,” Levin wrote.

In Philadelphia’s Complex Litigation Center, asbestos trials contain two phases. The first asks the jury to determine the amount of damages the plaintiff is owed, and the second determines if the defendant is liable for those damages.

Levin wrote that bankrupt companies may not be placed on the verdict sheet, like settling defendants are. Bankruptcy trusts have more than $30 billion in assets.

“(T)he total recovery available to many plaintiffs exceeds the damage amount set by the jury during Phase I asbestos trials,” he wrote.

“Here, the releases allow Honeywell, which was found liable at trial, to pursue contribution, but the trust releases stipulate that the plaintiffs hold the trusts harmless and indemnify them from liability.”

Levin wrote that it would be a waste of time and resources for Honeywell to seek contribution from the trusts for an entire verdict because it would require the plaintiffs to return the trusts’ funds so they could be given to Honeywell.

So Levin reduced the jury award.

“Moreover, such a procedure could further delay compensation for the plaintiffs,” he wrote.

Plaintiffs attorneys wrote that no evidence was presented at trial as to asbestos exposure caused by the bankrupt companies.

“Plaintiffs cannot now come before this court and argue that there was no evidence of exposure to asbestos from said manufacturers’ products presented at trial in order to effect a double recovery,” he wrote. “Plaintiffs applied to the bankruptcy trusts based on the fundamental contention that they were liable for Plaintiffs’ decedent’s mesothelioma.”

Bankruptcy law prevents the introduction of evidence against bankrupt manufacturers in civil trials.

So-called “double-dipping” from civil lawsuits and bankruptcy trusts has been a hot topic. In West Virginia last year, a judge’s case management order ensured defendants receive proper credit when plaintiffs are paid by trusts.

The order was a product of negotiations related to legislation. That legislation was reintroduced this week for West Virginia’s new session.

The article can be found here

Selected portions from the Rand.org article Vaccine Myths Could Cost Lives: They Don’t Give You Autism, and They’ll Hardly Ever Make You Sick

Suspicion of vaccines is a serious problem. Last year, even when awareness of the H1N1 flu pandemic was widespread, fully 20% of American adults said they would not get vaccinated—even if some people in their communities were sick or dying. Over the course of the 2009 H1N1 pandemic, more than half of all health care workers declined vaccinations, although they could inadvertently pass flu to medically vulnerable patients.

America can’t afford a repeat of that intransigence. This year, H1N1 flu has already killed 24 people in Britain, according to health officials there. Some 300 others are hospitalized.

Americans of all ages should take heed; children and young adults are particularly at risk, and complacency is dangerous for everyone.

In any community, most people must get vaccinated to stop a disease in its tracks. Vaccination gives the immune system an “advance look” at germs able to hurt or kill, thus boosting the body’s natural ability to fight back. So when a large number of people get vaccinated, they create a human fire wall that can slow or stop the spread of infection. Holes in the fire wall let an infectious disease spread fast. And that could be unfortunate the next time America has to face an outbreak of pandemic flu, or something worse.

Although the 2009 H1N1 flu vaccine was safe and effective, 70 million doses sat unused. People who got H1N1 shots in 2009 tended to be the same folks who get a seasonal flu shot every year, and annual users were four times more likely than irregular or nonusers to be vaccinated.

Why did the rest decline vaccinations? We know only a few reasons. For example, every major study has shown no link between vaccines and autism. In fact, one of the biggest pieces of evidence behind this supposed link was just definitively debunked as outright fraud. Yet that myth persists.

Second, we know for scientific fact very few people can get sick from vaccines themselves. Yet that myth also shows up too often in public surveys.

Perhaps there are other reasons for the reluctance to get vaccinated. Currently, 95% of research funding on vaccines goes for cutting-edge lab science. That’s money well spent. But the best vaccine can’t work if the public won’t accept it. We need more research on why people resist vaccines and how to counteract that.

Remember that before vaccines were developed, Americans could expect whooping cough to kill 8,000 children prior to their first birthday; measles to sicken 4 million children annually and kill 3,000; diphtheria to kill 15,000 teenagers a year, and German measles to cause 20,000 babies to be born deaf, blind or mentally disabled. Polio stalked every American neighborhood.

Today’s parents can assume their children will grow up safe from these diseases—only because of vaccines. Immunization remains the best and first line of defense against serious infectious illness. This year’s seasonal flu shot incorporates vaccine for H1N1. It’s safe, and it’s vitally important to get it.