Report Issued on "New Lawsuit Ecosystem"

The U.S. Chamber of Commerce Institute for Legal Reform has released a report examining the developing lawsuit “ecosystem” and areas of litigation of most concern to the business community. The report examines the trends and players in six key litigation areas, offers insights into new emerging liability threats, and explores the growing alliance between state attorneys general and the plaintiffs’ bar.  One key feature notes how alleged deceptive marketing claims against food and beverage makers are on the rise.  Readers will recall our many posts about the trend for plaintiffs to parse labels and bring putative class actions even when they were not injured by the product. The report is entitled "The New Lawsuit Ecosystem.”

The report delves into the areas of law where entrepreneurial plaintiffs’ lawyers have been prospecting for new liability: Class actions against food makers alleging misleading advertising;
Data privacy suits against businesses over allegations that they inadvertently violated released or misused customer information; Claims against brand-name drug manufacturers for injuries allegedly stemming solely from generic products they did not make or sell; Speculative theories of liability seeking to recover for risks of harm or “economic loss,” not actual injuries.

The report also looks at the increasingly troubling trend of state attorneys general turning over the keys to their offices and litigation powers to private plaintiffs’ lawyers. Plaintiffs’ lawyers often develop the legal theories, decide whom to target, and then “recruit” state attorneys general
to retain them on a contingency fee basis to bring the lawsuits. This process provides significant advantages to plaintiffs’ lawyers: it eliminates the need to represent individuals who were actually injured by a defendants’ product or conduct; avoids any contribution those individuals may have
made to their own injuries; reduces traditional defenses; heightens the plaintiffs’ lawyers’ subpoena power; and gives them the ability to seek fines, not just damages. State attorneys general have these powers because they are to be used sparingly, and only to advance appropriate public policies. They are not to be used to maximize personal profit, which is the goal
of private contingency fee lawyers who are often personal or political allies of the state attorneys general.

Very interesting read.


Among those contributing to the report were my colleagues Mark Behrens, Phil Goldberg, Victor E. Schwartz and Cary Silverman.

Tort Liability Annual Report Released by Think Tanks

The Pacific Research Institute (PRI), a free-market think tank based in San Francisco, and the Manufacturers Alliance/MAPI, a public policy and economic research organization based in Arlington, VA, announced last week the release of their 2010 U.S. Tort Liability Index, a measure of which states impose the highest and lowest tort costs and risks.

According to the report, Alaska, Hawaii, and North Carolina lead the pack with the best rankings, while New Jersey, New York and Florida bring up the rear. Again, the states with the worst performance had the highest monetary tort losses and tort litigation risks, meaning they had more costly and riskier business climates due to larger plaintiff awards, larger plaintiff settlements, more lawsuits, or some combination of the three.

Direct tort costs account for almost 2 percent of GDP in the United States, which is the highest in the world, not surprising to our readers. Such high costs cause businesses to divert revenue, that could hire workers, to fight lawsuits. But all our readers ultimately shoulder the burden through higher prices and insurance premiums, lower wages, restricted access to health care, less innovation, and higher taxes to pay for court costs.

The Best Tort climates, according to the report:

Alaska
Hawaii
North Carolina
South Dakota
North Dakota
Maine
Idaho
Virginia
Wisconsin
Iowa


The Worst climates, according to the report:

New Jersey
New York
Florida
Illinois
Pennsylvania
Missouri
Montana
Michigan
Connecticut
California
 

States were also ranked according to their tort rules and reforms to reduce lawsuit abuse and limit tort costs and risks, such as award caps, or venue reforms to stop “litigation tourism."  Oklahoma, Texas, Ohio, Colorado and Mississippi did well on the tort reform scale in this report. The states with the least favorable tort rules for defendants, according to the analysis, are Rhode Island, New York, Pennsylvania, Minnesota and Illinois. 

This report can also be contrasted with the Chamber of Commerce report ranking state liability systems, and the ATRA report of the "most unfair jurisdictions."

Seventh Circuit Issues Forum Non Conveniens Ruling

The Seventh Circuit has affirmed a district court's ruling which dismissed Taiwanese plaintiffs' claims against blood product manufacturers on statute of limitations and forum non conveniens grounds. Chang v. Baxter Healthcare Corp., 2010 WL 1136521 (7th Cir. 3/26/10).

Because my colleague Dave Walk was part of the winning defense team, just the facts here without alot of commentary. 

The case was filed originally in California by residents of Taiwan but transferred by the multidistrict panel to the district court in Illinois with the other suits in the clotting-factor mass tort for pretrial proceedings.  The main tort claim was that the defendants acquired blood from "high-risk" donors, processed it improperly in California where they manufactured clotting factors, and after discovering that the factors were contaminated by HIV nevertheless continued to distribute the product in foreign countries (while withdrawing them from distribution in the United States). Thus, plaintiffs in this case, or the hemophiliac decedents whom they represented, in fact resided, and obtained and injected the clotting factor, in a foreign country.

The court addressed first the claims that were dismissed as untimely. The critical issue so far as these dismissals on the merits were concerned, said the court, was choice of law. When a diversity case is transferred by the multidistrict litigation panel, the law applied is that of the jurisdiction from which the case was transferred, in this case California. The California statutes of limitations don't begin to run until the plaintiff discovers, or should in the exercise of reasonable diligence have discovered, that he has a claim against the defendant.  But this discovery rule, even if applicable, would not save the plaintiffs' tort claims from dismissal for untimeliness. Plaintiffs argued that they didn't have enough information on which to base a suit until a New York Times article about the contamination of clotting factors with HIV was published on May 22, 2003, and therefore that their suit, filed in 2004, was timely.  But as the district court found, the plaintiffs had a reasonable basis to suspect that they had a cause of action more than five years before the article appeared, when their counsel actually had begun negotiations with two of the defendants to settle negligence claims arising from the alleged contamination of the defendants' clotting factors with HIV. (These negotiations culminated in the settlement in 1998 on which the plaintiffs' breach of contract claim was based.)

The plaintiffs argued that the limitations period should have been tolled by defendants' “fraudulent concealment” because when entering into the settlement agreement they claimed that they had done nothing wrong and that they were offering financial aid purely as a humanitarian gesture. The plaintiffs were mistaken in this. Denial of liability when negotiating a settlement agreement is the norm; it is not evidence of fraudulent concealment of anything.

The district court was also correct in ruling in the alternative that a California court would apply the Taiwanese 10-year statute of repose, because the plaintiffs' tort claims arose under Taiwanese law. The hemophiliacs whom the plaintiffs represented were infected in the 1980s, more than a decade before these suits were brought. If the plaintiffs' tort claims arose in Taiwan, California law makes the Taiwanese statute of repose applicable to those claims. The reason is California's “borrowing” statute, which is sensibly designed to discourage forum shopping, would bar the action in California if it would have been barred in Taiwan. The plaintiffs tried to argue that their claims arose in California, not Taiwan, because it was in California that the defendants allegedly failed to process their clotting factors in a way that would prevent contamination by HIV. But generally there is no tort without an injury. That is the rule in California.  And the injury alleged occurred in Taiwan.

Turning to the claims that the district court dismissed not as untimely but on the basis, rather, of forum non conveniens, the court noted that the contract was negotiated and signed in Taiwan.  The key language at issue, the so-called scale-up clause, was ambiguous.  Evidence beyond the language of the settlement agreement would be necessary to "disambiguate the clause," said the court, and it seemed that most of the persons who are in a position to give such evidence live in Taiwan, including the plaintiffs' Taiwanese counsel who negotiated the settlement, a Taiwanese patient representative, members of the Taiwanese department of health, defendants' Taiwanese outside counsel, and an employee of defendants in Taiwan.

Taiwanese law makes it difficult to gather evidence for use in a trial in a foreign country because Taiwan is not a party to the Convention on the Taking of Evidence Abroad in Civil or Commercial Matters; the alternative method of obtaining evidence in a foreign country, sending a letter rogatory to the foreign court, seemed to not be a very satisfactory means of obtaining evidence.  So this important factor pointed to Taiwan. The only circumstance that would favor holding the trial in California rather than in Taiwan would be the greater convenience for the defendants, since they are American companies. But as they didn't want the case to be tried in California, or indeed anywhere else in the United States, really there was nothing in favor of the American forum, said the court. When application of the doctrine of forum non conveniens would send the plaintiffs to their home court, the presumption in favor of giving plaintiffs their choice of court is little more than a tie breaker.  But, said the panel, "there is no tie here."

 

Chamber Releases State Liability Systems Ranking Study

The Institute for Legal Reform of the U.S. Chamber of Commerce has released its 2010 State Liability Systems Ranking Study.  The study was conducted for the U.S. Chamber to explore how reasonable and balanced the states’ tort liability systems are perceived to be by U.S. business. Participants in the survey were comprised of a sample of 1,500 in-house general counsel, senior litigators or attorneys, and other senior executives who indicated they are knowledgeable about litigation matters at companies with at least $100 million in annual revenues.

The 2010 ranking builds on seven previous surveys in which all 50 states were ranked by those familiar with the litigation environment in that state.  The State Liability Systems Ranking Study basically aims to quantify how corporate attorneys view the state systems.  Overall, more than two in five (44%) senior attorneys view the fairness and reasonableness of state court liability systems in America as excellent or pretty good, up slightly from the last survey in 2008 (41%).  A majority
(56%) view the systems as only fair or poor. Two-thirds (67%) report that the litigation environment in a state is likely to impact important business decisions at their companies, for instance, where to locate or do business, an increase from 63% in 2008 and 57% in 2007.

Respondents were asked to give jurisdictions a grade (A, B, C, D or F) in each of the following areas:

  • Having and enforcing meaningful venue requirements;
  • Overall treatment of tort and contract litigation;
  • Treatment of class action suits and mass consolidation suits;
  • Damages;
  • Timeliness of summary judgment or dismissal;
  • Discovery;
  • Scientific and technical evidence;
  • Judges’ impartiality;
  • Judges’ competence; and
  • Juries’ fairness.

These elements were then combined to create an overall ranking.

The worst jurisdiction in the survey was Chicago/Cook County, Illinois,  followed by Los Angeles,
California, the state of California in general, the state of  Texas in general, and Madison County, Illinois.  Your humble logger's home turf of Philadelphia was ranked 13th worst.

The best? Survey says:

1. Delaware
2. North Dakota
3. Utah
4. Nebraska
5. Iowa