More jury verdicts against big firms
By Margaret Cronin Fisk
Bloomberg News Service
NEW YORK — Company executives gauge their standing with the public partly from verdicts U.S. juries hand down in business litigation. In 2009, they weren't very popular.
The top five product-defect verdicts rose 52 percent in total value last year to $620 million as juror attitudes on companies soured amid the recession and rising unemployment, according to data compiled by Bloomberg. Among the biggest losers were Altria Group Inc. and Pfizer Inc.
"It's a reflection of the fact that Main Street is hurting," said plaintiffs' attorney Tobias Millrood, winner of a $34 million verdict against Pfizer. "In this climate, there's a strong identification with the little man. Now a keener eye is given to the actions of Big Business."
The largest product-liability verdict in 2009 was a $300 million award against Altria's Philip Morris unit in Florida state court. Five of the 50 biggest verdicts involved claims of defective goods, according to Bloomberg data. In 2008, just one such verdict — $265 million — made the list.
The largest verdict of any kind in 2009 was a $1.67 billion award to Johnson & Johnson's Centocor unit in June in a patent-infringement case against drugmaker Abbott Laboratories. It was the first billion-dollar jury award in more than two years and only the second since May 2005.
New York-based pharmaceutical company Pfizer lost verdicts of $78 million and $34 million last year in claims against its Wyeth unit over alleged breast cancer risks of its hormone-replacement drugs.
The $300 million loss in November by Richmond, Va.-based tobacco company Altria included the largest punitive damages verdict of 2009. Punitive damages in that case totaled $244 million while the plaintiff, a former smoker of Philip Morris products who developed cancer, was awarded $56 million for actual harm.
"Because of the mess with the banks, Bernie Madoff, people have less respect for companies," said Randy Barnhart, an Englewood, Colo., lawyer who won a $4.5 million verdict against Ford Motor Co. for a seat-belt defect. "The jurors were more willing to listen to our side."
Ford lost at least four defective-vehicle cases of $10 million or more, Bloomberg data show. The Dearborn, Mich.-based company is appealing two verdicts and has settled the others, said Marcey Evans, a Ford spokeswoman.
Notwithstanding the 2009 results, both plaintiffs and defendant companies are increasingly willing to take product liability cases to trial, said John Beisner, a lawyer who defends corporations in such suits.
"For plaintiffs, there's a perception that juries are more open to arguments about corporate behavior," said Beisner, a Washington-based lawyer. "On the defense side, it's the feeling that it's the right thing to do."
Victor Schwartz, an attorney who represents companies involved in product litigation, said some corporate defense lawyers aren't taking the negative attitudes into account as they question and pick jurors, a process called voir dire.
"Some jurors blame large corporations for loss of jobs or think they're uncaring," Schwartz said. Company lawyers "have to be more careful in voir dire in trying to ferret out attitudes toward big corporations."
Plaintiffs' lawyers say jurors are more receptive than previously to claims of corporate negligence or wrongdoing in the development of consumer products. They cite results of pretrial focus groups, mock trials and post-trial interviews.
Product-liability verdicts, while on the rise, didn't return to their peak in 2000, when 10 such verdicts were in the top 50. That year, there was a $145 billion award against the tobacco industry that was later reversed on appeal.
The increase in product-defect verdicts may also be driven by a U.S. Supreme Court decision in March, lawyers said. The high court held that federal regulatory approval of a medicine, and the publication of side-effect information on drug labels, didn't shield pharmaceutical companies from lawsuits alleging that patients and doctors weren't sufficiently warned of a drug's possible harm.
Within weeks, judges in federal and state courts in the U.S. allowed more than 250 lawsuits to move forward. They had been delayed while the court considered the issue in the case that was before it, Wyeth v. Levine.
"Even where there weren't formal stays, many plaintiffs' counsel didn't want to press for trial dates because they didn't want to waste their time" if their cases were barred, Beisner said. "We're going to see a substantial uptick in the number of cases filed" because of the Supreme Court ruling, he said.
Carl Tobias, a law professor at the University of Richmond in Virginia, said drug-related product liability suits, as well as smokers' lawsuits, may be a source of big verdicts this year.
The 2009 tobacco lawsuits stemmed from the largest jury verdict in U.S. history — the $145 billion punitive-damages award in 2000 against the industry in a class action filed on behalf of Florida smokers.
After that verdict was reversed and smokers were told they could not sue as a group, individual smokers were allowed to bring claims. Their trials started in 2009.
Eight of the 10 tobacco cases decided last year were won by plaintiffs, according to data by the Tobacco Products Liability Project. Thousands remain, with 40 set for trial in 2010.
Last year did reveal some bright spots for corporate defendants with a continued decline in the size of punitive-damage awards. Punitives, assessed in addition to compensatory damages, are meant to punish the company for bad conduct and serve as a warning to others. The 10 biggest punitive damages verdicts against corporations totaled less than $1 billion for the second straight year.
"Litigation is a little like the Pac-Man game," said Schwartz, a partner at Shook, Hardy & Bacon LLP in Washington and general counsel of the American Tort Reform Association. "The defense Pac-Men were eating the plaintiffs for a while, but now, as in the game, the characters change and the eaters start getting eaten."