Law And More

RI SC Ruling - 2nd Shoe Could Drop

For years Wall Street experts have been recommending that the Rhode Island lead paint defendants sue the state of Rhode Island for all the legal costs they incurred during the nine years of litigation.  Not too many took that suggestion seriously. 

Now everyone is - including the defendants Sherwin-Williams, NL Industries, and Millennium Holdings which won their appeal of the verdict with the RI Supreme Court.  That High Court over-ruled the jury verdict that the defendants contributed to a public nuisance and were responsible for abatement. Copy of RI SC opinion here Download statev.LeadIndustriesAssoc.,Inc..pdf

As John O'Brien reports in LEGAL NEWSLINE, the defendants are researching the issue of having those legal expenses reimbursed.  O'Brien quotes Jones Day attorney Chuck Moellenberg, who represents Sherwin-Williams in the lead paint litigation, as noting, "This litigation has gone on for a long time and, as the Supreme Court said today, it was unwarranted as a matter of law."  Moellenberg indicates that they will examine the right to recover the cost of litigation.  He concedes, though, that the defendants do not have the right to recover the cost of the losses in the stock price.

What entity would be responsible for the reimbursement?  At the May 15th oral arguments in front of the RI SC on the appeal, plaintiff attorney Neil Kelly, who is a RI Assistant Attorney General, was asked what did the contingency agreement with Motley Rice provide for if the state loses the suit.  Kelly replied that he believed that Motley Rice "assumed the risks of litigation."

What O'Brien does not bring up is what Wall Street experts have also recommended.  And that's for the defendants' shareholders to sue the state of RI for the hit to the value of their stock. I predict that class-action suits will come from that corner, in addition to the direct defendants' possible push for reimbursement of legal costs.

RI SC Ruling - Jones Day Chuck Moellenberg's Exclusive Statement to Lawandmore.com

In response to the Rhode Island Supreme Court's ruling to overturn the judgment against the lead paint defendants, attorney Chuck Moellenberg of Jones Day, who represents Sherwin-Williams, gives this exclusive statement to Lawandmore.com.

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Chuck Moellenberger of Jones Day:

"The Rhode Island Supreme Court's decision brings a fair and just end to many years of wasteful trials and tributions.  The plaintiff's bar has unfortunately been peddling a legally flawed theory to public officials around the country. 

"Their theory is wrong on the law and the facts.  Sherwin-Williams and other defendants acted responsibly when they made and sold lead pigments that the government, professional painters and consumers wanted as the best product on the market.

"The Supreme Court's decision should go a long way toward stopping this unwarranted litigation against former manufacturers of lead pigments last used decades ago in residential paint. The litigation is diverting the attention of public officials away from enforcing public programs aimed at neglectful landlords that are working and from cooperative efforts with the former manufacturers.  Blood lead levels in children continue to plunge dramatically across the nation, resulting in a public health success story in the words of public health officials."

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Here is a copy of the RI SC opinion Download statev.LeadIndustriesAssoc.,Inc..pdf

RI SC OVERTURNS LEAD PAINT JUDGMENT

In a unanimous opinion [4-0], the Rhode Island Supreme Court overturned the lead paint judgment against defendants Sherwin-Williams, NL Industries and Millennium Holdings.  In addition, it upheld the judgment in favor of Atlantic Richfield, vacated the contempt citations against RI Attorney General Patrick Lynch, and recognized the validity of contingency agreements between the AG and outside counsel.

It's the latter which leaves this kind of litigation still an issue.  Currently in the California SC is a request by the defendants in the Santa Clara lead paint public nuisance case to review the appeals court ruling to allow contingency is that case. 

Also pending is the statewide lead paint public nuisance case in Ohio.  The Wisconsin Supreme Court is going to hear oral arguments about a personal injury case similar to the one the defendants won in "Thomas."

Here is the RI SC 81-page opinion Download statev.LeadIndustriesAssoc.,Inc..pdf

Legal Systems of EU, UK, Far East Give Competitive Advantages, asserts attorney Joseph K. Hetrick of Dechert

We're coming to see how a nation's legal system helps shape its economic success.  Back in 2000, "The Mystery of Capital" by Hernando De Soto documented the link between laws recognizing and protecting private property and thriving forms of Western capitalism.  Since then, a UN report on developing nations confirmed De Soto's findings.

Now, as globalization makes for a dog fight among competing economic powers, we in the U.S. are comparing our own legal system with those of the EU, UK and Far East.  Unfortunately, we have been discovering that our litigous approach to resolving disputes and remedying wrongs puts us at a global competitive disadvantage.

"What keeps General Counsels of U.S. companies up at night is litigation," asserts defense attorney Joseph K. Hetrick, partner with Dechert, headquartered in Philadelphia. Hetrick spends extensive time outside the U.S. counseling clients, lecturing, and studying global legal trends in law.  In September he will deliver a major address in the UK on federal pre-emption.  His special areas of litigation expertise include pharamaceutical and biotechnology.

Here Hetrick provides us with an exclusive interview on how different most of the rest of the world's approach to law is from that of the U.S.  Earlier, Hetrick gave this blog exclusive interviews on Central Europe as the new Silicon Valley and how to manage risk at the front-end in biotechnology. 

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Joseph K. Hetrick of Dechert on legal systems and global competitiveness:

JG: Can you give us the big picture on how the U.S. legal system is different from most of our competitors and the implications of that.

JH:  Essentially, there are three key differences.

One, is that the U.S. believes that the people are entitled to a risk-free life.  There should be zero exposure to risk.  That's now embedded in our national ethos.

But that wasn't always how it was.  It became a fixed idea when strict liability decisions were being made.

And, this is certainly not the way most other nations think.  Maybe other nations such as Europe had been through too many brutal wars and revolutions on their own land to ever embrace the idea that risk can be prevented from a life.  In Japany, if you state that zero risk is your goal, they would laugh out loud.

Therefore, in the U.S. - a nation which believes in litigation not regulation or codes - we are willing to see as individuals or in a class-action format for every risk that wasn't labeled as such and explicitly warned against.

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"In Japan, if you state that zero risk is your goal, they would laugh out loud," Joseph Hetrick

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That imposes layers and layers of new kinds of oversight on designers, developers, manufacturers, marketers and retailers.  Just think of pharmaceuticals.  Because U.S. courts have taken this as far as they can under the Constitution, we could soon witness whole industries just not engaging in any innovative risk-taking, not entering certain markets, and pulling out of others.

Clearly, the implication of that is that our competitors have the innovation advantage.  They also have free choice of markets.  For example, in Europe certain European companies sell medical devices that they wouldn't in the U.S. because of liability fears. 

But let me clarify something, Jane.  It's not that other nations are naive or believe all businesses do their ethical and legal best.  Not so.  In fact, most causes of action begin in those countries as criminal matters.  And in the Far East the owners of businesses found negligent or unethical lose face.  That can be much worse than losing money or even their whole business.  It's that other nations do not have the utopian goal of a risk-free or perfect-product society like the U.S. does.

JG:  Okay.  Now for the second difference.

JH:  The second difference is that other nations are more comfortable with fault than the U.S. is.  Actually, Europe is a negligence-based system.

JG:  Could you say that much of the rest of the world recognizes: Stuff happens.

JH: Yes.  If a worker in Holland is injured, there is no great shock.  As you say, stuff happens.  That worker will be taken care of in two ways.

One, most of the infrastructure of those societies contains government funded and administered services ranging from complete medical care to workers compensation. Therefore, the worker doesn't have to fight to have medical treatment, financial support when off the job, and longer-term rehab.

Two, that worker will appear before an administrative board operated by the government for anything else that isn't already being addressed by government policies and procedures in-place.  The situation is not blame-based, so is not adversarial. As I indicated in a previous interview, Europeans trust their government.  Trust itself makes for a form of competitive advantage.

In the U.S., if there is an injury, there will be a cause of action.  And that lawsuit, as filed, could allege multiple parties responsible, including the product designer, material vendor, manufacturer and marketing chain all the way to the retailer.

But, the liability status quo is changing some in other countries. Some.  Not a lot.  A consumer movement, for instance, is being introduced into Europe.  You can see the beginnings of that especially in Germany.  We could see some forms of class-action lawsuits there. 

JG: But, from what you say, the class-action litigation in Europe will never mutate into anything like ours which came up with the novel theory of public nuisance and applied it to a legal product like lead paint which hadn't been manufacturered for more than a quarter of a century.

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"Europeans trust their government.  Trust itself makes for a form of competitive advantage," Joseph Hedrick

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JH:  No, lead paint public nuisance litigation won't happen in Europe. 

JG:  The third difference.

JH:  In Europe, there are no special damages, Jane.  People go to court mostly for the principle of "justice" or for some moral cause, not primarily to seek a financial remedy.

That's why in the UK and Europe there is no discovery, no parade of expert witnesses, no jury and loser pays.  If there is need for expertise, the barrister has both parties agree on who that expert will be.

With loser pays, there is a powerful deterrent not to file causes of action with little merit.  In the UK, for instance, legal services just as here are expensive.  The losing party could wind up being responsible for millions in pounds for fees.

JG: So, outside the U.S. you probably won't find "Jackpot Justice."

JH: No.  Most nations are conservative about what law should be used for.  It should not be a tool to transfer wealth.  Of course, that conservative stance prevents business from being burdened with undue concern about going bankrupt in a lawsuit.  Business can attend to business.

Here too, though, there could be some change.  But not much.  The subprime crisis has also hit Europe.  There could be angry class-action suits there as a result of that.  But I don't anticipate the level of aggressiveness that is part of our approach to class-action suits.  You have to remember: Most suits in Europe begin as a criminal matter.

Jane, you have to realize that Europe is concerned, given all the wars there and the former Nazi menace, about maintaining a moral code.  We in the U.S. have no such collective memory.  So, our system is money-oriented.  We often read headlines in the U.S. of astounding jury verdicts of multi-millions awarded to plaintiffs.

As a result, here in the U.S. businesses play on the defense.  That can make their competitive offense rusty or non-existent.

JG:  Let's fast-forward to next January.  If the Democrats take the White House and the majority in both houses, will the U.S. shift to more regulation and less litigation - like its competitors?

JH:  No.  Americans believe in litigation.  Not regulation.  I don't see that changing for a long time, if ever. 

JG:  So, perhaps our focus should be on reforms within the legal system.  Maybe we should push to introduce loser pays in all civil litigation, eliminate contingency fees in suits brought by government entities as we have with the lead paint public nuisance lawsuits, allow expert testimony from parties both sides agree on, and work towards a less utopian mindset on risk.

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Joseph K. Hetrick, partner with Dechert, was selected among THE BEST LAWYERS IN AMERICA for product liability in the 2007 edition. 

He has headed or participated in defense teams for litigation involving Merck & Company, GlaxoSmithKline, West Pharmaceuticals, York International, Stryker, and Airgas.

In the fall he will be delivering a major address in the UK related to federal pre-emption.

You can reach Joseph K. Hetrick at Joseph.hetrick@dechert.com, 215-994-2250.

Not Happy with the result? Sue expert witnesses/law firm

It's becoming mainstream for plaintiffs and defendants unhappy with the results of litigation to sue their own expert witnesses.  Soon enough, I assume, clients not content with outcomes will sue their law firms.

Chemical and plastics corporation Celanese filed a malpractice lawsuit against its law firm Kaye Scholer which had represented the client from 2002 to 2006 in relation to price-fixing charges. Celanese contends that Kaye Scholer made mistakes during discovery that led to the $107 million settlement the company made.

Among the specific allegations is, reports Dan Slater in THE WALL STREET JOURNAL Law Blog, is that Kaye Scholer "negligently failed to produce hundreds of thousands of pages of documents to plaintiffs."

After the verdict for the state and against three of the lead paint defendants in Rhode Island, a number of lead paint watchers asked me if I thought that the three companies - Sherwin-Williams, NL Industries, Millennium Holdings - would sue the three law firms representing them.  One possible error - and it was one of judgement, not procedural - was the decision not to put on a case. 

I checked into this.  Attorneys informed me that the three law firms would probably not have made that decision unilaterally.  They most likely had to get sign-off from their clients' General Counsel.  Also, as even plaintiff attorneys told me, that decision couldn't have been the tipping point.  If there was a tipping point it was the instructions to the jurors.

VT - The Virtual Corporation's DE

This summer Vermont Governor Jim Douglas will probably be signing a bill that will provide a new kind of legal framework for virtual corporations such as Wikipedia.  This could make VT as wealthy from taxes and fees from virtual corporations as Delaware has become from those [$700 million annually] from brick-and-mortar businesses.

According to Max Chafkin in the July 2008 edition of INC., if Douglas does sign the bill it will be possible for the first time for "any private company to register in Vermont without opening a physical office, holding an in-person meeting, or filing a single sheet of paper."  All of that is required by other states for even corporations that operate totally online. 

The expected fee for registering in VT would max at $275 and state income taxes would only apply to income generated in the state itself.  It doesn't get better than that.  And the virtual company's bylaws could be put into software instead of writing.

Entwistle "just couldn't get it clear" in his head - Is this insanity/mentally-defective defense or going for mistrial

The riveting trial of British Neil Entwistle, who is accused of murdering his wife and infant, seems to be either heading for some kind of insanity/mentally defective acquittal or a mistrial.  The trial is taking place in Woburn, MA.

After finding his wife and daughter murdered, Entwistle did not call police.  He said that he should have done so but "just couldn't get it into his head," the AP reports.  Instead he flew to England.  The jury heard a two-hour interview the defendant had from England with a state trooper. In it, he said that he had "not done the right thing" by flying to England without calling the police.

Earlier his attorney had made an issue of the judge's not authorizing the state to pay for jury consulting services for the defendant.  This could figure in a mistrial or appeal in a state like MA because it's liberal about funding whatever services defendants need but can't themselves afford.

This could be one of the criminal cases that somewhere along the way Alan Dershowitz will parachute in and help out the defendant.

"Central Europe Is New Silicon Valley," Reports attorney Joseph K. Hetrick of Dechert

In the past six months, every time I contact an attorney, defense and plaintiff, for background information or an interview, I find out they're in Europe.  Why, I wondered.  To get the story, I invited defense attorney Joseph K. Hetrick, partner at Dechert and an expert in the pharmaceutical industry, to talk to us.

He graciously accepted and the mystery was quickly solved. "Europe, especially Central Europe, is the new Silicon Valley," Hetrick reported.  So, it's no surprise that law firms and lawyers are going there to counsel, learn, and be intellectually stimulated.  Regarding the latter, the European and U.S. legal systems differ in interesting ways.

Last January, this blog interviewed Hetrick on biotechnology. Here you can read that post titled "Biotech: EXPECT Lawsuits, Government Investigations."  It was and continues to a high-traffic spot.

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Exclusive interview with Joseph K. Hetrick, partner at Dechert, on the changing European legal scene, on the record:

JG: It seems that if it's Tuesday, lawyers such as yourself are in Belgium - or Holland or Switzerland.

JG: Jane, Central Europe is where the U.S. was 10 or 20 years ago.  There has been a coming together of very smart kids in their 20s, involved with biotech startups.  Their "managers" are usually project directors at the ripe old age of 30. 

These breakthrough researchers want and need "protection" for their intellectual property, cradle to grave.  That extends from what kind of patent to apply for - we know a narrow one is better than a broad one - to structuring strategic alliances.  The goal is to manage the risk associated with this genetic engineering technology. And, yes, it can be managed. 

I explain much of what we at Dechert do in our seminars titled "Lessons Learned from Big Pharma: Minimizing Risk at Each Stage of a Therapeutic Product's Life Cycle."  Also I provide guidance from my hands-on experience.  Here you can get an introduction to that first line of defense for a biotech startup.

JG:  What must be challenging, interesting, difficult is that the legal system in Europe and the one here in the U.S. differ in significant ways.

JH:  Yes and no, that is, about the differences. Yes, our patent systems are different.  Here in the U.S. it's First-to-Discover or sometimes called First-to-Invent.  In Europe it's First-to-File.  Yes, also in the mindset of the legal system.  Right now, the system in Europe exists to give people access to justice.  It's more a matter of principle rather than seeking out big payouts.  

No, the two systems are not that far apart, at least not anymore, on the focus on consumer rights.  You might say that Europe is where the U.S. was on this in the 1970s. "Importing" a consumer-rights movement into Europe, I see, as a sign of progress. 

Currently, for instance, there are no cross-border agreements about defective products.  Say you purchased a toaster in Belgium.  Back at home in Holland, the toaster didn't work, then exploded in your hand, injuring you.  You have no way to legally address this.  You can't get your money back.  You can't seek a remedy for your injury.

That will change.  There is now coming into-place legal tools for consumers to use to obtain justice about these consumer matters.  The lion's share of the focus in on the products they actually use, ranging from toys to cosmetics.

One tool being imported, but carefully and it seems wisely, is the class-action lawsuit. Europeans are trying to select the best of the American style of massive tort actions but preventing the excesses.  They have seen how those class-action asbestos suits enriched the plaintiff lawyers and delivered small pickings to the victims. 

JG:  I guess they have also heard about how class-action lawsuits can mutate into pretzel forms of litigation such as the lead paint public nuisance lawsuit.  My hunch is that they want to steer clear of this American inventiveness in law.

JH:  Nations like France have been structuring their version of the American class-action lawsuit to reduce the potential for greed and increase the potential for delivering what they view as "justice."

JG:  Do you anticipate that the reform of the class-action lawsuit taking place in Europe as they adapt the model will have an impact on the U.S. legal system?

JH:  Not really.  Jane, you have to understand that in Europe personal injury is viewed as something to bring to the government and expect the government to resolve fairly.  In Europe, unlike the U.S., there is trust in government.  Therefore, there is no call for the aggressiveness of our legal approach.

JG:  Our approach is adversarial, right?  Two parties battle it out via private counsel?

JH:  Essentially yes.  But there is hope here that it will change.  However, the catalyst for that won't come from Europe.  The economic reality is the transaction costs associated with every phase of litigation are enormous.  With the new rules of e-discovery, for example, that process alone could cost the defendant about $100 million. The request for documents could tie up the defendant's key people full-time. 

Then come the costs at each other phase of the litigation.  Such an expense could kill off some of America's most innovative industries.  Take for instance, pharmaceutical.  Given the litigious climate in the U.S., that industry could stop taking the expensive-in-itself risk of new drug development.  Instead it could simply keep milking cash cows. 

Such potential economic disaster has been driving our government, be it agencies like the FDA or bodies such as Congress, to take the kind of action that prevents more litigation.  They are introducing and implementing regulations which clean up the problems without going to court.

JG: That's encouraging.  Do you see a seismic shift in the U.S. to trusting government?

JH:  No.  That distrust was manifested with a lot of tea getting dumped into Boston Harbor and I just don't anticipate it's going to end. 

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Joseph K. Hedrick was selected among THE BEST LAWYERS IN AMERICA for product liability litigation in the 2007 edition.  As a partner at Dechert, he's a member of the mass torts and product liability group. 

He was part of his firm's national defense team representing GlaxoSmithKline in the Baycol litigation and took a lead role in the Paxil litigation in New Jersey and Pennsylvania.  In addition, he plays a key role in the Vioxx litigation for Merck & Co. and has served as trial counsel for clients such as West Pharmaceutical, York International Corporation, Stryker Corporation, and Airgas Inc.

He can be contacted at Joseph.hetrick@dechert.com, 215-994-2250.

Lead Paint Litigation coulda been a contender - What went wrong

Lead paint had the potential to be a massive mass tort.  But it never did get off the ground.  In fact, conservative writer William Tucker says just that in the April edition of THE AMERICAN SPECTATOR.  Tucker's take is that the cause of lead paint hazards lacks "the pizzazz or practicality" of other recent "trial bar crusades." 

I have a hunch there's more to the story of why lead paint litigation coulda been a contender but never made it big.  Had the Rhode Island public nuisance trial not turned out to be so legally complex, it's unlikely it would have made its way into the trial hall of fame.

So, what went wrong with lead paint?

Well, the public nuisance litigation was difficult, perhaps even impossible, to understand.  The jurors in RI trial II didn't understand it. Lawyers who write about it do it in windy fashion because I sense they don't have their arms around it. In fact, it is suitably ambiguous that a writer like myself can knock out an ironic e-book on the subject. [Here is a complimentary copy Download publicnuisancevoodoo.pdf] 

That adds up to a tough sell by the plaintiff bar to states and cities. Sure, some such as the state of Ohio and a number of cities there [all tossed it except Columbus] but more were wary.  This sure wasn't the clear-cut matter of tobacco.  Perhaps the success of the tobacco Master Settlement made the plaintiff bar overconfident and they put a dog on the market.

Another obstacle is that the problem is being effectively and cost-efficiently taken care of.  At the RI II, in fact, the dramatic and continuing reduction in new incidences of elevated levels of lead in the blood of children has been hailed a major public health success story.

A third constraining factor is that the population affected are primarily low-income children.  At RI II, Dr. Michael Shannon, an expert in lead treatment in Boston, discussed the This Old House syndrome.  An upper middle class family decides to restore a Victorian and soon enough the child has an elevated level of lead in the blood.  However, the typical victim is poor and inner city.  We saw such quick legal action and resolution in the lead paint toys and trinkets incidents because the typical victim had parents who could afford the pricey Thomas product line.

A fourth problem for the plaintiff bar is that the defendants, with the exception of Du Pont in RI, were determined not to settle.  That made this not the slam-dunk tobacco had been.  And Du Pont's "agreement" with the RI Attorney General didn't prevent law suits in other states and stirred up some nasty public relations.  When you have defendants which show no sign of caving, you tend to look for a better legal deal. Trying a case before a jury is exceedingly expensive.  As I said to a Wall Street type today, the plaintiff bar might have much better luck with GHG emissions. 

One more thing on that: The attorneys didn't turn on each other.  A prominent plaintiff attorney visiting from Manhattan came to RI II to observe Don Scott argue on behalf of NL Industries.  I was all big-eyed over the brilliance of the defense team.  "Wait 'till they turn on each other," he warned.  They didn't.  Maybe that's another lesson: Along with not settling, stay united, at least in court.

A Lawyer's Perspective on Global Food Poisoning - Bill Marler in London

Bill Marler of Marler Clark, which specializes in food-borne diseases, has been delivering a growing number of international presentations.  It's a time of global food supply chains and weak links in those chains are getting businesses and national trading partners in trouble.  Today, Marler was talking in London about this sprawling problem from a lawyer's perspective. [You can retrieve his PowerPoint Presentation embedded in his "Off to London" post on his blog.]

The two key issues the audience was interested in were:

• Why is there an increase in incidences of food-borne diseases
• What are the most effective approaches to prevent these from occurring.

Marler, ever the straight-shooter, answered: We don't know.  First he gave a history of this problem in the U.S., as it dates back to the infamous 1992 Jack-in-the-Box E-Coli outbreak.  Before that meat contamination epidemic ended in 1993, nearly 600 people, mostly children, were sickened in six states.  There were four deaths.  The cause was found to be knowingly under-cooking.  As a result of the class-action, individual and shareholder lawsuits, a Congressional investigation, and big settlements, that problem got fixed until recently.  Then all hell seemed to break loose again, not only in meat but also in produce.

Could this be happening because of:

• Industrialization of our food supply
• Technological advances in surveillance, and/or
• Bugs are bigger, stronger, faster?

Five major approaches have been advocated:

• Free market - as in the threat of losing market share and your contract with Wal-Mart

• Regulation - as in universal standards and strict enforcement

• Litigation - as in the threat of class-action, individual, and shareholder lawsuits, along with the bad publicity those bring.  Here Marler recommends strict liability in civil litigation.  The focus is on the product, not the conduct.  That means there is liability without regard to fault, putting pressure on manufacturers that could correct the problem in the first place.

• Criminalization - as in sending the miscreants to prison, and not only demanding they pay fines.  In food, just as in the securities industry, there would be the perp walk and shaming, along with the likely multi-year sentence. e.g. Bill Lerach.

• Morality - as in imposing global versions of the Golden Rule [This is the one taken least seriously].

Marler's other major international presentation had been in China. Businesses, both Chinese and non-Chinese, and government, Chinese and non-Chinese, wanted to know about the U.S. legal liability system.

For more information on this and other food-borne disease issues, readers can visit Marler's blog or google keywords.

Disclosure: On and off for two years I have doing digital editing for Marler Clark.