The United States finds itself in another political
Olympiad—and a remarkable, unpredictable one at that. More
than in past campaigns, the major parties' leading candidates
have targeted American corporations, regularly railing against the
supposedly outsized and pernicious power and influence of large
companies. The anti-corporate campaign rhetoric from both sides of
the proverbial aisle has been hot and heavy, with candidates taking
turns outbidding one another in appealing to anti-corporate
sentiments.
One can debate whether the candidates are tapping preexisting
reservoirs of animosity or building new ones—or both. But
that question is academic for American corporations trying to carry
on with their work of serving customers. Either way, the flying mud
hits them, and the dirt will make the coming years even more
difficult. In representing American corporations in courtrooms
around the country in a broad range of product-liability cases, we
have seen first-hand how anti-corporate sentiment has burned hotter
in recent years. Its growing heat will, as detailed below, present
major challenges in court—and those legal challenges will
raise costs and discourage risk-taking on a wide range of corporate
actions that juries of hostile citizens may be invited to
second-guess, such as issuing new products and introducing design
innovations.
The Hostility Is Real
The anti-corporate agenda that pervades stump speeches, print, and
social media is real and having real effects. For example, Gallup
polls show the lowest rate of satisfaction with the size and
influence of corporations in years—only 35 percent. This is
well below the peak levels of 50 percent or more measured shortly
after 9/11, when public trust in both government and big business
was much higher. And 53 percent of Americans say they want
corporations to have less influence in the country.
In questioning potential jurors in courtrooms around the country,
we have seen attitudes that appear to largely track the views
expressed by the major candidates and are consistent with these
polls. There is clear evidence of increasing distrust of large
corporations, hostility toward big business in general, and
contempt for alleged corporate misconduct. Indeed, the increasing
hostility toward corporations has already erupted in recent huge
jury verdicts against a variety of corporate defendants, often (but
not always) in traditional "tort belt" states (Texas,
Louisiana, and Florida).
These immense verdicts, and others like them, suggest that
corporate defendants face tougher jury pools than they did 10 or 20
years ago. That, in turn, will affect both the risk of adverse
verdicts and the size of damage awards in the event of an adverse
verdict.
The Plaintiffs' Bar Is Trying to
Capitalize
The plaintiffs' bar has been attempting to leverage the
anti-corporate mood across a broad front. This has already included
changes in jury selection, trial strategy, and types of claims
brought.
Jury Selection. In terms of jury selection, we
have seen increasing sophistication from the plaintiffs' bar in
their jury selection techniques and their use of jury consultants
to identify and seat anti-corporate jurors. Some highly successful
plaintiff's trial lawyers hire themselves out to pick juries
for other trial lawyers, or brag about proprietary
"algorithms" or other "scientific" methods of
picking juries. Our experience confirms the need for, and
advantages of, experienced and sophisticated jury consultants and
jury research in high-stakes trials, and the change in
plaintiffs' counsel's practices, together with the changing
popular opinion, make that all the more important now.
"Reptile Theory." A popular
plaintiffs' theory—the "reptile
theory"—posits that the best way to get large verdicts
from a jury is not by appealing to jurors' sympathy for the
individual plaintiff who is in the courtroom but by appealing to
the jury's anger, fear, and perceived need to protect society
from the dangers posed by the defendant's misconduct. These
tactics aim to trigger what the plaintiffs' bar terms
"lizard brain" instincts of survival and the need to
avoid and prevent danger, rather than altruism or a sense of
justice.
Notwithstanding the catchy name and the biology analogy, this
strategy has more to do with inflaming jurors' negative
predispositions and attitudes toward large companies—mirrored
in recent claims by the major candidates—and perceived
corporate misconduct than it does with any biological or
brain-related instincts. Particularly when permitted to introduce
broad-ranging evidence of corporate misconduct, plaintiffs'
attorneys who focus on the "bad acts" of the defendant
and the dangers such conduct poses to society often are more
successful than those who present the "traditional case"
focusing on the sympathetic and injured plaintiff.
Of course, the defense can and should defend corporate conduct
where good evidence is available and, in general, focus on
countering a plaintiff's counsel's arguments. But simply
defending each particular challenged act by the defendant or
spending too much time attempting to humanize the company can play
into the hands of a plaintiff's attorney using
"reptile" strategies. As the defense spends more and more
time responding to the plaintiff's attacks, the jury spends
more and more time thinking about the defendant. Instead, and
because jurors tend to think about what the plaintiff could have
done (if anything) to avoid the injury, an "asymmetric"
defense strategy can be more effective—focusing on the
individual plaintiff's conduct, knowledge, and awareness of
danger.This "reptile theory" exacerbates what we have
seen for years in various courtrooms; namely, that the plaintiff
and defense approaches to a case often are proverbial "ships
passing in the night." Each side seeks to make the other one
the central focus of the trial, with the plaintiff focusing on
supposed corporate "bad acts" and the defense focusing on
the decisions the plaintiff made and the risks he or she knowingly
encountered. In the current anti-corporate environment,
plaintiffs' counsel's efforts to shift the focus away from
their clients' decisions, actions, and inactions, and onto the
defendant corporations are to be expected, and creative ways to
counter this shift are all the more important.
Economic Loss Lawsuits. Plaintiffs' counsel
not only have adapted in their jury selection and trial
presentation methods but also have modified their long-standing
efforts to combine plaintiffs into a single case—a situation
where, for plaintiffs' counsel, bigger often really is better.
Class and multiplaintiff actions, of course, are not new. But some
avenues have, over time, been foreclosed in that, for example, it
now is more difficult to bring securities class actions in many
jurisdictions, and courts almost everywhere have rejected efforts
to aggregate personal injury claims.
As these other avenues increasingly have been foreclosed,
plaintiffs have begun bringing product-related lawsuits
based—not on alleged personal injuries—but on claimed
economic losses. These cases typically are based on state consumer
protection or deceptive trade practice statutes, breach of
warranty, or state disclosure statutes like California's
Proposition 65. They assert that one or more advertising or
labeling claims for a product were somehow false or misleading,
sometimes relying on federal regulatory labeling requirements. The
multiple "natural/no-additive" class actions filed
against a number of manufacturers are a recent example of this
phenomenon.
The alleged economic losses often are presented as a "loss of
benefit" or "loss of value" where the product
supposedly does not perform as advertised, or involve claims that
the purchase price was an inflated "premium price" that
would not have been paid but for violations of the consumer fraud
statute or breach of warranty. Successful claims of this type can
present astronomical damage claims as plaintiffs simply multiply a
per-unit "loss" or "premium" across the
relevant sales for a product.
State consumer protection and deceptive trade practice
statutes—or breach of warranty claims—are in many
respects tailor-made for this purpose. These statutes may have no
"individual reliance" or actual injury requirement, and
thus these claims present fewer individual issues that would
prevent aggregated treatment through class actions or other efforts
to consolidate claims. Using these plaintiff-friendly statutes,
plaintiffs' counsel scour manufacturers' claims for their
products so as to identify anything that is even arguably
misleading, often using federal or state regulatory actions as a
guide or, according to plaintiffs' counsel, "proof"
that the claims are false or misleading. Moreover, the state
statutes often permit trebling and recovery of attorneys' fees
for successful plaintiffs. This is consistent with plaintiffs'
"reptile strategy," which places all the focus on the
corporation's conduct and the harm to society while diminishing
any attention to an individual plaintiff.
Once cases get to trial, plaintiffs' counsel have been pushing
the limits of the evidence rules so as to allow
"storyteller" experts, in the guise of expert testimony,
to become their advocates from the witness stand. Yet these efforts
have had mixed success, as more states are adopting stricter
scrutiny of the reliability of expert testimony by moving to the
federal Daubert "gatekeeper" standards (e.g.,
Florida, Wisconsin) or simply applying existing state law more
exactingly. Regardless, the rise of economic-loss litigation is
likely to continue.
Criminalizing Corporate Product Liability
But the plaintiffs' bar is not alone in seeking to exploit
public disaffection with American corporations. Federal and state
prosecutors—the latter often elected, and the former also not
always immune to political ambition and public sentiment—have
opened what amounts to a second front in defending product-related
claims. Today, prosecutors increasingly turn product issues that
previously were resolved through administrative and civil
proceedings into criminal investigations and prosecutions. These
criminalization efforts were first seen outside the United States
where, for example, an airline was convicted of manslaughter in
France in 2010 in connection with a crash resulting from debris
from one of its planes causing another jet to crash in 2000 (a
conviction later overturned on appeal).
But those efforts now are being seen in the United States. Indeed,
follow-on criminal investigations and charges now are a fairly
standard feature of any highly publicized corporate product issue
where government regulations allegedly were violated.
Likewise, claims by the federal government (or individuals claiming
to act on its behalf) under the False Claims Act, often in
conjunction with criminal charges, have become a common feature in
any product-related problem that directly or indirectly relates to
sales to or payments by governmental entities or to alleged
violations of federal regulations. Such claims have been bolstered
in recent years with aggressive theories of both liability and
damages. Pharmaceutical manufacturers have paid very substantial
amounts to settle False Claims Act cases and related criminal
charges relating to their prescription drug marketing and promotion
practices. In any industry where products are directly or
indirectly sold to the federal government or are subject to a
federal regulatory scheme, False Claims Act claims now are standard
fare when product-related problems arise.
Dividing and Conquering Corporate Management
Further, prosecutors increasingly have focused on bringing criminal
charges against individual corporate employees, particularly
high-ranking executives and attorneys. Some of these efforts have
been unsuccessful, but prosecutors have had many successes,
including the convictions of senior executives of major
corporations for violating mine safety regulations, food safety
regulations, and FDA drug labeling requirements.
This broader government effort to pursue criminal charges against
individual employees is reflected in and encouraged by a September
2015 memorandum by U.S. Deputy Attorney General Sally Quillian
Yates. There, the Department of Justice announced the following
steps: (i) corporations must provide all relevant facts relating to
individuals to qualify for cooperation credit; (ii) investigations
will focus on individuals from the outset; (iii) government
criminal and civil attorneys are to routinely communicate with each
other; (iv) the DOJ generally will not release individuals when
resolving a corporation's liability; and (v) before resolving
claims against a corporation, government attorneys should have a
"clear plan to resolve related individual issues." These
steps expressly are designed to pressure prosecutors into charging
individual employees, as well as to pressure corporations to turn
on their own employees by developing and presenting evidence of
individual wrongdoing in exchange for more lenient treatment for
the corporation. The steps outlined in the Yates Memo very well may
hinder efforts to resolve claims against corporations and make
defending against supposed corporation criminal wrongdoing even
more difficult.
Lawsuits of the Future
Looking down the product-liability road, we anticipate increasing
use of a tactic plaintiffs' attorneys have used to avoid limits
on aggregating personal injury claims—the "no safe level
of exposure" claim coupled with a request for medical
monitoring as a remedy. By asserting that there is "no safe
level of exposure" to a substance known to be dangerous at
higher levels of exposure, plaintiffs build a class from large
numbers of persons exhibiting no symptoms or injury and, as a
remedy, seek to have the defendant pay for medical monitoring of
the uninjured class to find and treat their injuries when they
occur.
Medical monitoring claims have received a mixed reaction in state
courts, as some states have permitted them to go forward (e.g.,
Arizona, California, Florida, Maryland, Massachusetts, Missouri,
Pennsylvania, Utah, and West Virginia), while the United States
Supreme Court in a Federal Employers Liability Act case and other
states have not (e.g., Alabama, Kentucky, Michigan, Mississippi,
Nevada, New York, and Oregon). Medical monitoring claims, however,
are potentially powerful tools that provide plaintiffs' counsel
with a ready ability to place substantial sums at risk because they
allow aggregating claims, are subject to few limits on the number
of claimants, and provide little opportunity for the defendant to
shift the focus to the plaintiffs and their choices.
Another approach that may be on the horizon is further use of
"addiction" claims to counter and offset consumers'
responsibility for their choices to use or consume products with
well-known risks. For example, food companies have been threatened
with actions—ones roughly modeled on actions filed against
cigarette manufacturers—where plaintiffs assert that they are
"addicted" to food ingredients—primarily
sugar—and thus, the plaintiffs are not responsible for the
health consequences of consuming them in excess, such as obesity
and diabetes. These actions, which have been threatened for a
number of years and have yet to catch on, purportedly will focus on
compulsive eaters' "addiction" to highly caloric
foods as seen in their inability to stop eating them and changes
seen in their brain scans. In any such actions, food companies'
efforts to make their products more appealing to consumers,
particularly if those efforts involve adding sugar, will, no doubt,
be used as evidence of the companies' furthering the
plaintiffs' "addictions."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.