March 2008

From the editors of Wolters Kluwer Law & Business, this update describes important developments from CCH products liability and safety publications.

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Products Liability

$34.5 M Common Fund Set in Defibrillator Settlement
The work of plaintiffs' attorneys that resulted in a $240 million settlement of over 8,500 lawsuits against a manufacturer of implantable defibrillators and pacemakers supported a common fund for attorney fees in the amount of $34.5 million. The court, which was assigned to oversee the consolidation of the lawsuits into multi-district litigation, determined that $10 million of the settlement funds would be set aside for common costs. The plaintiffs' steering committee (PSC) requested that approximately $45 million more be set aside for attorneys' fees. Although the PSC argued that a $45 million attorney fee fund was appropriate because it represented less than the traditional 25 percent flat percentage commonly awarded in common fund cases, the court rejected the use of a flat percentage because such a calculation would be arbitrary and would not consider the varying circumstances of each case. Instead, the court determined that a $34.5 million award was the proper amount based on a analysis of 12 various factors. In its analysis, the court noted the considerable time and labor expended in conducting over 150 depositions and 5 bellwether trials. Although the cases reached a settlement after only 2 years from when they were commenced and after only 18 months of litigation, the court determined that the speed in reaching a reasonable conclusion should not be used to diminish the amount of the attorneys' fees. The court found that a $34.5 million common fund (representing 15 percent of the settlement amount) was justified. In an effort to limit the total amount of attorney fees in any individual case, the court capped contingency fees in all cases in the MDL at 20 percent, limiting the total attorney fees in each case to 33.67 percent. (In re: Guidant Implantable Defibrillators Prods. Liab. Litig., D. Minn.; CCH Products Liability Reporter, March 26, 2008, ¶17,938 (ip access user)).

Arkansas’ Limit on Damages Evidence Ruled Unconstitutional
An Arkansas statute limiting the evidence an injured plaintiff can present to establish damages was ruled unconstitutional by the U.S. District Court for the Western District of Arkansas. A consumer who was injured by an allegedly defective motor vehicle argued that the Arkansas Civil Justice Reform Act of 2003 (Ark. Code Ann. §16-55-212(b)), which limits evidence to costs actually paid by or on behalf of the plaintiff, violated the Arkansas constitution. The consumer argued that the statute, which attempted to reverse the traditional collateral source rule, violated the separation of powers between the state's legislative and judicial branches because a 2001 constitutional amendment expressly granted the state's supreme court the power over rules of evidence and because the constitution contained an express limit of legislative power over recovery by injured individuals. In agreeing with the consumer, the court found that Amendment 80's provision that the “Supreme Court shall prescribe the rules of pleading, practice and procedure for all courts … “ established the court's power over the rules of evidence. In finding that the statute violated the separation of powers, the court noted that the statute and the collateral source rule that it attempted to reverse are both rules of evidence that would fall under the power of the state's supreme court. The court rejected the manufacturer's assertion that the state legislature possessed the power to pass the statute based on previous statutory changes to rules of evidence because all of the manufacturer's cited examples were enacted prior to the constitution's amendment in 2001. In addition, the court determined that the combination of the state supreme court's earlier acceptance of the collateral source rule and the constitution's limitation of the legislature power over recovery for personal injuries outside of the state's workers' compensation system persuaded it that the statute violated the state constitution. (Burns v. Ford Motor Co., W.D. Ark.; CCH Products Liability Reporter, March 12, 2008, ¶17,934 (ip access user)).

Father of Drowning Victim Not Entitled to Emotional Distress Award
The father of a young woman who drowned after inhaling carbon monoxide fumes while she was hanging onto the swimmers' platform at the rear of a motorboat was not entitled to damages for emotional distress, according to the Washington Supreme Court. The father brought failure-to-warn and negligent infliction of emotional distress claims against the boat's manufacturer. The father's emotional distress claim was based on his viewing of the search for his daughter and the recovery of her body by divers. Although the trial court dismissed the father's emotional distress claim because he was not present during the death or suffering of his daughter, the state's supreme court determined that emotional distress claims can be based on an individual's arrival at the scene of an accident shortly after the event. The court, however, clarified that the rule's use of the phrase “shortly thereafter” did not include the father's viewing of the search and recovery of his daughter's body because his arrival at the lake did not cause him to witness the continuation of “an especially horrendous event.” The court noted that the father did not view his daughter's death or suffering, and only viewed the recovery of her body from a distance—i.e., 100 yards. The court reasoned that while the father was likely under extreme stress when arriving at the lake, his experience was not comparable to the type of events for which emotional distress damages are traditionally awarded. (Colbert v. Moomba Sports, Inc., Wash. S.Ct.; CCH Products Liability Reporter, March 12, 2008, ¶17,935 (ip access user)).

Product Safety

CPSC Overhaul Bill Clears Senate; White House Voices Concerns
Legislation passed by the Senate would provide the Consumer Product Safety Commission (CPSC) with new resources and authority, while requiring mandatory testing on children’s products and banning lead in children’s toys. The bill, S.2663, the Consumer Product Safety Commission Reform Act, passed by a 79 to 13 vote, and must now be reconciled with a version passed by the House of Representatives. The White House has expressed concern with some provisions of the bill, as has the National Association of Manufacturers. S.2663 would ban lead from all children’s products, and would require third party certification. The bill would also set mandatory toy safety standards promulgated by ASTM International, an international standard-setting organization, and would require that toys be certified to these standards. Other provisions of the bill would require manufacturers to label children’s products with tracking information, and would make it unlawful for retailers to sell a recalled product. The civil fine penalty cap would be increased under the bill to $20 million from $1.8 million, and criminal penalties would be increased to 5 years in jail for those who knowingly violate product safety laws. Whistleblower protections, meanwhile, would be provided for employees of manufacturers. The White House said it has “serious concerns” with several provisions in the bill, which it says “threaten to burden American consumers and industry in unproductive ways, and may actually harm a well-functioning product safety system.” One area where the administration has strong opposition is the enforcement of CPSC safety standards by State attorneys general. “This is likely to lead to a confusing patchwork of safety standards that will make it impossible to enforce uniform, national policies,” according to the administration. (CCH Consumer Product Safety Guide, Report No. 910, March 17, 2008)