Segal McCambridge Legal Blog

In Wilson v. State Farm, a ruling made June 14, 2011 in the USDC, WD KY, the court found an insurer did not act in bad faith in its refusal to pay a settlement while Medicare as Secondary Payer issues remain unresolved.    In summary, a settlement agreement was reached, the defendant wanted to resolve Medicare liens before paying the plaintiff and plaintiff's counsel refused to cooperate and would not let State Farm talk to Medicare. Instead he "asked State Farm to deposit the full policy limits in an escrow account from which the Medicare lien would be paid. Plaintiff agreed “to hold State Farm . . . harmless from any claim by Medicare.” Medicare was not involved in nor bound by this agreement. As an alternative, State Farm suggested including Medicare as a payee on the settlement check. Plaintiff rejected this request. Finally, State Farm decided to await Medicare’s determination of the value of its lien and then issue separate checks to Medicare and Plaintiff."

Plaintiff filed an action claiming "to delay payment of the $50,000 more than thirty days merely to protect Defendant from later liability to Medicare" was bad faith. Plaintiff ad a separate count under a KY statute that would allow for 12 percent interest and reasonable attorneys fees where an insurer failed to settle a claim without reasonable foundation. While the bad faith action was pending, State Farm learned the lien amount and paid the plaintiff and Medicare.  

The court found that " to comply with federal law and to protect its own legitimate interest against overpayment is reasonable and certainly is not in bad faith. Defendant did not delay payment in order to pay less or harass Plaintiff. Motorists Mut. Ins. Co., 996 S.W.2d at 452-453 (stating that “there must be proof or evidence supporting a reasonable inference that the purpose of the delay was to extort a more favorable settlement or to deceive the insured with respect to the applicable coverage”). While it may serve Defendant’s self interest to comply with federal law, such action was not bad faith, especially when Plaintiff apparently refused to cooperate with Defendant’s attempts to pay the claim more quickly."

The court also found that the delay was based on a " ' reasonable  foundation' " when the delay in payment of the settlement was to seek "assurances concerning the amount and payment of the lien."

This is a great ruling for companies who are struggling with resolving Medicare issues on settled cases, working under threat of suit for sanctions.

For more information on the author of this post, click here.

From the Madison County Record

Crowder hears arguments on asbestos standing order

EDWARDSVILLE – Madison County Circuit Judge Barbara Crowder, heir to the biggest asbestos docket of any state court in the nation, must decide the future dimensions of her docket.

She heard a triple argument on March 25, among plaintiffs who would retain a calendar providing about 500 trial dates a year, defendants proposing 250 dates, and other defendants opposing both.

For the group favoring half as many dates, Robert Shultz of Heyl Royster attacked reservation of multiple dates for specific firms.

“This is all about the slots,” he said.

“You’ve got to be in the club in order to get a reservation,” he said.

“The more I live this life, the more I see what goes on, the more reasonable this is.”

Other defendants sent Jeff Hebrank of HeplerBroom to warn that Shultz’s calendar would increase defense costs and unpredictability.

Hebrank endorsed changes Crowder made since replacing asbestos judge Daniel Stack, who retired.

Hebrank agreed with Shultz that the calendar encourages lawyers to go out and market dockets.

Bill Kohlburn of John Simmons’s firm in East Alton argued for plaintiffs that if defendants have issues with where cases come from, they should file forum motions.

Kohlburn told Crowder adoption of a calendar was an administrative function.

He said it doesn’t create slots to be filled.

He said it allows plaintiffs to request trials in an orderly fashion.

Elizabeth Heller of Goldenberg Heller countered HeplerBroom’s proposal to base trial dates only on numbers of mesothelioma claims.

She said her firm filed 110 cases, and 58 were lung cancer.

She said her firm represents people in Madison County, writing wills and leases, and resolving commercial disputes.

She said when clients get cancer, they ask the firm to review their cases.

She said the firm represents more than 3,000 Madison County residents with non malignant asbestos disease.

J.R. Stever of Michael Bilbrey’s firm said, “Lung cancer is probably a majority of our business.”

Hebrank opened for the defense, saying it was essential that the number of cases decrease.

He said the average case takes 44 months to go to trial.

He said there is no need to expedite cases.

“Your honor has started to push some deadlines back,” Hebrank said.

He said all cancers but mesothelioma were questionably related to asbestos.

He said if local plaintiffs need a court date, there are plenty of docket spaces for them.

He called the plaintiff calendar a wish list.

“We have an expedited docket that frankly has been abused,” Hebrank said.

He said with new treatments and surgeries, mesothelioma victims live longer.

“We don’t need to set them in six months, or nine, or fifteen,” he said.

Shultz followed, for “a cross section of businesses that are sued frequently if not automatically, including some small local businesses.”

“It’s something I refer to as indiscriminate naming,” Shultz said.

He asked Crowder to dispel any impression that the system works.

He said a fellow from Texas came up three times.

“The first two times, he was told he needed to talk to the local firms,” Shultz said.

“That is the antithesis of justice.

“We are not dealing with a backlog by any means.

“In 2009, they couldn’t fill the dates we gave. This has become an aspirational goal.It results in a referral network.

“The plaintiff bar can’t tell us a deposition has been scheduled until two weeks before.

“There are too many cases. They are set too fast.”

He said on Monday morning of trial week, defendants don’t know which plaintiff among 19 will go to trial.

“We understand why plaintiffs want it that way, but is that fair?” Shultz said.

“You have to prepare for all nineteen.”

He said there are about 2,900 mesothelioma diagnoses in the nation and about 140 in Illinois each year.

He said there were 506 mesothelioma cases filed in Madison County last year.

“It’s because there are so many trial dates available,” he said.

He flashed a chart showing asbestos suits outnumber all other suits together in Madison County.

“It tells you the cases are coming in from somewhere,” he said.

“Let’s cast aside this relic of the past.”

Ray Fournie of Armstrong Teasdale said expediting to six months might be okay for one case but not for 19.

He said defendants pay to expedite expert reports and find out they don’t need them.

He said wise use of defense costs allows more indemnity amounts to resolve claims without trial.

Kohlburn, for plaintiffs, said there are mechanisms to deal with issues Shultz raised.

“This is not a slot,” he said. “This is not a reservation.

“This is not the property of any plaintiff’s firm anywhere.”

Crowder said she would get an order out as soon as she could.

She said she wasn’t an apologist for the past or an advocate of it.

The entire article is here

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

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)

The American Tort Reform Association (ATRA) has released its “JUDICIAL HELLHOLES 2010/2011″ report. This is ATRA’s ninth annual report and it focuses primarily on six areas of the country that have “developed reputations for uneven justice.”
The six areas singled out by ATRA are:
#1 PHILADELPHIA, PENNSYLVANIA
#2 CALIFORNIA, PARTICULARLY LOS ANGELES AND HUMBOLDT COUNTIES
# 3 WEST VIRGINIA
# 4 SOUTH FLORIDA
# 5 COOK COUNTY, ILLINOIS
# 6 CLARK COUNTY, NEVADA

WATCH LIST
MADISON COUNTY, ILLINOIS
ATLANTIC COUNTY, NEW JERSEY
ST. LANDRY PARISH, LOUISIANA
DISTRICT OF COLUMBIA
NEW YORK CITY AND ALBANY, NEW YORK
ST. CLAIR COUNTY, ILLINOIS

The full report can be found online here

From Overlawyered.com

The civil litigation death penalty

There's an old legal joke that goes: "If you're weak on the facts, pound the law. If you're weak on the law, pound the facts. If you're weak on both the facts and the law, pound the table."

Except the entrepreneurial trial bar has found an intermediate step: instead of pounding the table, pound the discovery requests. Persuade a judge that a discovery snafu was really a deliberate attempt at a cover-up, and get sanctions that prohibit the other side from defending itself. Because plaintiffs rarely have discovery obligations that are more than an infinitesmal fraction of a defendant's discovery obligations, this can be a profitable strategy.

The strategy is not new—I saw it myself first-hand in the 1990s defending GM, and wrote a piece about a trial where John Edwards successfully used a variant. But as discovery gets more and more complex due to emails, voicemails, and instant-messaging, it becomes easier for the discovery snafu to happen, and it becomes harder for judges to distinguish between good-faith mistakes and bad-faith withholding of documents. You may recall a famous example in Florida where Morgan Stanley was precluded from introducing evidence about a transaction involving Sunbeam before the appellate court threw out the entire case.

A recent example of this sort of gamesmanship is going on now in Florida where a group of lawyers representing Ecuadorian shrimp farmers came up with a brand new implausible theory of their case—now alleging that runoff from a formulation of a Benlate fungicide that stopped being used in 1991 is what caused their damages in the mid-to-late 1990s, all so they can claim to a judge that DuPont's failure to produce documents about this marginally relevant formulation (which was effectively identical to the other formulations, except it included two inert ingredients) deserved sanctions. And sure enough, the court ordered a civil death penalty: all of DuPont's defenses have been stricken, even though there is no scientific evidence that fungicide runoff caused the virus that killed many Ecuadorian shrimp. (Aquamar S.A. v. DuPont, Case No. 97-020375 (Broward County, Fla.))

A similar case involving Goodyear and a civil death penalty sanction that resulted in a $30 million verdict is pending in the Nevada Supreme Court

Another excellent post on the topic of the civil litigation sanction situation is The Emerging Business Threat Of Civil "Death Penalty" Sanctions

Credit to the ABAJournal

The U.S. Supreme Court has left intact a federal appeals court decision narrowing work product protections for lawyer materials.

SCOTUS declined cert today in the case of Textron v. United States. For more information see SCOTUSblog.

The refusal lets stand a ruling that allows the Internal Revenue Service to access documents that considered how much money the defense contractor Textron Inc. should set aside for possible tax liabilities.

The ruling by the en banc 1st U.S. Circuit Court of Appeals based in Boston had said the documents weren't protected by the work-product doctrine because they weren't prepared specifically for use in litigation. The court also found the documents had lost their attorney-client privilege because they were shown to outside accountants.

Frederick Krebs, president of the Association of Corporate Counsel, had said at the time of the 1st Circuit ruling that it “eviscerates the work-product doctrine."

There is a split in the federal circuits on whether the work-product privilege applies to documents that are prepared both in the ordinary course of business and in anticipation of litigation.

UPDATE
Cory Andrews has an article in Forbes that has more on this case here