GlobalTort : Commentary from lawyers and experts on mass torts, law, insurance and science

Jennnifer Wagner at the Genomics Law Report includes a great post focused on this week's oral argument at SCOTUS regarding DNA fingerprinting. Science keeps pushing the law. Set out below is one excerpt from the post - it goes to a key topic: how does law cope with the exponential pace of scientific change?

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UK prosecutors continue to use the nation's relatively new corporate manslaughter statute. Fields Fisher Waterhouse issued a paper summarizing the 2007 statute and the charges recently asserted against a UK mining company. The fact pattern they describe is as follows: 

"In September 2011 four men tragically died following a flash flood in a coal mineshaft in the Swansea Valley. The men became trapped and died, despite the efforts of police, firefighters and mines and caves rescue experts. The mine was owned by MNS, was known to flood frequently and regularly had to be pumped out to allow miners to enter the pit.

 

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A WSJ Law Blog summary covers this study from "innocence" projects. Exonerations are being tracked in an online registry:  exonerationregistry.org. The big picture questions and outcome? They are: 

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The story is here on the 6th Madoff employee to plead guilty to conspiracies related to covering up Ponzi scheme events. This employee - like others - is cooperating with prosecutors. One wonders when  outsiders will be indicted for aiding and abetting. 

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The Conglomerate includes an interesting post on Dodd-Frank, plus  SEC whistleblower statistic for the first seven weeks. The commentary is from a guest blogger, former insider lawyer, Marcia Narine, now working as a law professor. The theme of this specific post, she seconds the view that the current crisis has been wasted due to less than perfect reform. In other posts, she's taken on legal issues and practical realities related to conflict mineral legislation, and is to propose an affirmative defense to corporate criminal liability. Interesting commentary from someone with real world experiences worth sharing. 

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The UK has now seen its first criminal conviction of a corporation for homicide. CMS Cameron McKenna  provides the story in an article here at Mondaq. 

The defendant company, a small entity with only 8 employees, "was convicted of the offence of corporate manslaughter under the Corporate Manslaughter and Corporate Homicide Act 2007.  The conviction by jury follows a lengthy trial into the death of Alex Wright, a young geologist employed by the company, on 5 September 2008.  Mr Wright is believed to have died whilst investigating soil conditions in a deep trench, which collapsed and killed him."

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Like other EU countries, Spain is implementing a wider range of criminal sanctions for corporate misdeeds, including "environmental" crimes.  This NLJ article provides a broad overview.  For some deeper background, see this 2002  Maastricht summary of criminal law in Europe with respect  to environmental issues. Environmental justice also is a growing topic for legal education, as described here. The T.M.C. Asser  Institute includes this network focused on environmental law. Given the sometimes enormous consequences of pollution, it''s good to see more countries creating risk and sanctions for companies that fail to act responsibly.  

 

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Public government corruption surely is one of the most venal of all misdeeds.   A weekend NYT article by Elisabeth Malkin covered in brief an interesting story regarding an innovative  UN project to root out public corruption and organized crime in Guatemala through a prosecution partnership known as CiCig. The program is detailed in full at the CiCig website. In short, the CiCig program brings in "outsider"  laywers to partner with existing government agencies to investigate and prosecute corruption.

The following excerpt from the website provides an overview: 

"CICIG's mandate, as established in the Agreement, is comprised of three principal objectives:

• First, CICIG shall investigate the existence of illicit security forces and clandestine security organizations that commit crimes that affect the fundamental human rights of the citizens of Guatemala, and identify the illegal group structures (including links between State officials and organized crime), activities, modes of operation and sources of financing.
• Second, CICIG's professional personnel shall support the work of Guatemalan institutions, principally the Attorney General in his work to investigate and prosecute the individuals involved in the illegal groups. Additionally, CICIG will make recommendations to the Government for the adoption of new public policies mechanisms and procedures directed at the eradication of these groups and will strengthen the State's capacity to protect the basic human rights of its citizens.
• Third, the Commission shall provide technical assistance to Justice Sector institutions in order to leave the Public Prosecutors Office and National Civilian Police better equipped to fight organized crime even after the conclusion of CICIG's mandate.

As provided in the Agreement, CICIG has the legal ability to support the Public Prosecutors Office in criminal prosecutions, and participate as complementary prosecutor (querellante adhesivo) in the prosecutorial process, in conformity with the Code of Criminal Procedure. The Commission also has legal standing to make administrative complaints against public officials, in particular when officials have committed acts with the purpose to obstruct the fulfillment of CICIG's mandate, and can act as an interested third party in disciplinary procedures initiated against such officials."

 

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This AmLaw article by Alison Frankel details Boeis Schiller & Flexner  joining the fray in tort claims arising from Chiquit'as admitted payments to a terrorist group. The article includes a link to the undelrying complaint. It alleges a series of illegal payments, Chiquita's guilty plea, and  claims that the payments  resulted in deaths and injuries to clients. Set out below are the key introductory allegations from the complaint:

                                                                  INTRODUCTION

1. For a period of more than six years, Defendant Chiquita Brands International, Inc.
(“Chiquita”) knowingly and intentionally made over one hundred payments totaling more than
$1.7 million to the United Self-Defense Groups of Colombia (Autodefensorias Unidas de
Colombia or “AUC”), a violent terrorist organization. Chiquita’s payments were used by the
AUC to finance a widespread and systematic campaign of massacres, extra-judicial killings,
torture, murders, forced disappearances, forced displacements, and other violent acts against
civilians in the regions of Colombia where Plaintiffs or their deceased family members lived and worked.

2. In 2001, the United States government designated the AUC as both a Foreign
Terrorist Organization and a Specifically-Designated Global Terrorist. Consequently, it is a
crime for any person or entity to provide material support or engage in unauthorized transactions with the AUC. By making payments to the AUC, Chiquita regularly, repeatedly and knowingly Case 0:10-cv-60573-XXXX Document 1 Entered on FLSD Docket 04/14/2010
engaged in criminal conduct that violated federal law and provided practical assistance and
material support to a terrorist organization.

3. In 2007, the United States Department of Justice (“DOJ”) charged Chiquita with
Engaging in Transactions with a Specially-Designated Global Terrorist, in violation of 50 U.S.C.
§ 1705(b) and 31 C.F.R 594.204. After being charged, Chiquita admitted that its payments to the AUC were unlawful and pled guilty to the offense. In conformity with its plea agreement,
Chiquita was convicted of a felony, agreed to a criminal fine of $25 million, and was placed on
corporate probation for a period of five years.

4. The Plaintiffs are family members of individuals who were killed by the AUC or
are individuals who were themselves seriously injured by the AUC as a result of Chiquita’s
support for the AUC and its operations. The Plaintiffs now seek compensatory and punitive
damages arising from Chiquita’s unlawful financing of terrorism and its violations of
international law under the Alien Tort Claims Act, 28 U.S.C. § 1350, the Torture Victims
Protection Act, 28 U.S.C. § 1350 note, and Ohio law.

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If you think Toyota is having a bad year, think about Eternit entities and its executives (not all are Eternit entities are presently related).   The long arm of criminal law continues to reach out and touch Eternit entities.  In Italy, trial goes forward in a week on thousands of criminal charges arising from deaths and injuries at former asbestos cement manufacturing plants in Italy. Some of the hearings are being shown on Italian television. Go here to see the accounts from a victim-oriented website. Meanwhile, similar issues are ongoing in Pakistan. The full article on Dadex Eternit Pakistan  is here.

So, what do you think ?  Should executives, officers and directors worry about "toxins,"  risks and possibilities even before epidemiology "proves" the harms with double blind studies ?  

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From the WSJ, word of an upcoming  criminal fraud trial in Italy against investment bankers selling derivatives to municipalities.

Some points to consider. The Italian system allows one trial to include both criminal charges and civil claims.  And, Italian law is explicit that criminal sanctions may be lessened if restitution is paid to victims. Also, the trials often proceed in phases and relattively slowly, as shown by the Eternit trial in Italy arising from conditions at asbestos-cement manufacturing plants, and thousands of resulting injuries and hundreds of deaths.  So, one might well bet on the bankers starting trial, followed by a summer time civil settlement  and plea agreements. 

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MILAN—A Milan judge ordered UBS AG, J.P. Morgan Chase & Co., Deutsche Bank AG and Depfa Bank PLC, now a unit of Hypo Real Estate AG, to stand trial for the alleged fraudulent sale of €1.68 billion ($2.31 billion) in derivatives.

The banks are accused of having earned about €100 million in "illicit profits" from irregularities in the sale of derivatives linked to a bond issue by the City of Milan, conducted between 2005 and 2007.

"It is the first time in the world that banks have to stand trial for the sale of derivatives to municipalities," Alfredo Robledo, the prosecutor bringing the case against the banks, said in a telephone interview.

Judge Simone Luerti has ordered the banks and 13 individuals—11 current bank employees and two former city employees—to stand trial, according to a person familiar with the case. Hearings start May 6.

In April 2009, assets valued at more than €476 million were seized by Italian tax police from the banks as part of an investigation that lasted more than two years.

In separate statements, the banks denied any wrongdoing and said they would defend themselves. "We are...confident that the strength of our legal position will be demonstrated through the judicial process," J.P. Morgan said. "The J.P. Morgan employees involved in the transactions acted with the highest degree of professionalism and entirely appropriately."

UBS said it didn't commit any fraud. "No illicit profit was earned by the banks, since the intermediation costs applied were fully legitimate and were not hidden from the City," it said.

Deutsche Bank said it was confident its employees involved in the transactions acted with integrity. A spokeswoman for Depfa, which was acquired by Hypo Real Estate in October 2007, said the bank was convinced it hadn't violated any law or regulation.

—Sabrina Cohen in Milan contributed to this article.

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In Italy, criminal prosecutions are fairly often used for situations that likely would not be treated  as criminal law issues in the US.  For example, here is a brief post  from Brian Leiter that links to an NYT article regarding criminal convictions suffered in Italy by three Google executives. The convictions arose from invasion of priviacy issues aring from a videoe posted online. Accoridng to the NYT article,

One can debate whether the uses of criminal law are or are not good policy. Judging by the article exceprts below, however, one can infer that complaints fron police attract especially quick attention at Google.

"A spokesman for Google, Bill Echikson, called the ruling “astonishing” and said the company would appeal. In its blog, Google added that the ruling “attacks the very principles of freedom on which the Internet is built.”

Prosecutors said Google waited to remove the video until after complaints to the police by Vivi Down, an Italian group representing people with Down syndrome, whose name was mentioned by the boys in the video.

Google said it removed the video within two hours of receiving a formal complaint from the Italian police, two months after the video was first posted.

The boys, all minors, were not charged by prosecutors, but were sentenced by a different judge to community service. Prosecutors named the Google executives because Italian law holds corporate executives responsible for a company’s actions."

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Trial is now underway in Italy on combined civil and criminal charges regarding senior corporate officials of Eternit allegedly having recklessly disregarded health risks related to asbestos. The charges and claims involve injuries or premature deaths suffered by about 2.200 employees or former employees. Eternit entities manufactured a range of asbestos-cement products.
A BBC article is here. Swiss articles are here and here.



For prior posts on the topic, look to the left to the topic line for "Eternit."

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Milk intentionally altered with melamine sickened around 300,000 thousand children in China The aftermath includes civil suits in China and criminal convictions.

The NYT reported yesterday that civil trial is underway against one of the producers and the retailer. Earlier this year, about 20 involved persons were convicted of criminal charges. Two of them were executed, as reported here. The primary seller went into bankruptcy and was sold at auction, as reported here. Ultimately a compensation fund was set up by the government.

As pointed out by the NYT, more details and news stories are available from an English language paper, China Daily. Some recent stories are here, and here.

A China Daily reporter, Cui Xiaohuo provided the following account of the first hearing:

"A lawsuit filed by a family that was a victim of the melamine-tainted milk scandal saw its day in court on Friday - the first trial for the families suing the milk company since the incident broke out more than one year ago.

Several courts nationwide have previously accepted compensation cases from parents of sickened children who were not satisfied with the government-led compensation, but no court has ever held a public hearing against the company until Friday.

Ma Xuexin, father of a 20-month-old boy from Henan province, requested compensation totaling 55,184 yuan ($8,080) from collapsed dairy maker Sanlu Group in Hebei province and a Beijing-based supermarket, where he bought the Sanlu-brand infant formula milk powder before the scandal went public last year.

The 30-year-old also requested that the medical costs for his son, until he reaches adulthood, be covered by the 1.1 billion yuan State-run compensation fund, of which 900 million was paid by Sanlu Group last December.

"Since my son was born last March, he has suffered from a stone in his left kidney after consuming hundreds of packages of Sanlu-brand infant formula milk powder," Ma said in the hearing.

The two defendants, the bankrupted Sanlu Group and the Longhua supermarket in the Shunyi district, both said they should not be held responsible for the plaintiff's requests because the central government has already set up the fund for victim families.

"There is no official document from the hospitals showing the direct link between melamine-tainted milk powder and the child's kidney problem," said Zhou Xiaolong, a lawyer with the Jimin Law Firm from Hebei province, where Sanlu Group was formerly located.

The hearing came just three days after two criminals were executed by injection in Hebei for their roles in producing and selling toxic milk, which killed six children and made more than 300,000 sick nationwide.

There was not a flurry of media attention at the hearing on Friday. Only representatives from the plaintiff and the defendants were sitting in the small No 9 courtroom at the Shunyi district court, about 30 km northeast of downtown Beijing.

"Being the first case held by a Chinese court, more such cases may have a chance to be heard in the near future," said Xu Zhiyong, a Beijing-based law scholar.

The hearing lasted just two hours without a verdict. The judge, Zhang Nan, said that both sides need to bring more evidence when the trial continues on Dec 9.

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Here is a different example of how mass tort litigation ends up becoming a media story. In this instance, the media consists of the latest story on Toyota's battles regarding alleged destruction of internal documents in order to avoid the information becoming evidence in rollover cases.

The short version is that after suing Toyota for wrongful discharge, a former inside lawyer has turned over to a federal judge four boxes of documents that are said to support his claim that documents were wrongfully destroyed by Toyota. The judge has ordered the documents to be secured, scanned and coded, and will give Toyota a chance to claim privilege regarding the documents. No doubt plaintiff's lawyers will then assert the crime-fraud exception applies to any otherwise privileged documents. The judge's ruling presumably will be widely reported.

How would you like to be the General Counsel dealing with this situation ? What would you want to know and then what would you decide to do when no one will give you the answers you need ? Much wisdom on the subject of crisis management has been spelled out before by business consultants. See, e.g,, Stop The Presses: The Crisis and Litigation PR Desk Reference. Written by Richard Levick and Larry Smith of Levick Strategic Communications, the book addresses crisis management in general, and its chapters 7 and 8 deal with strategies for dealing with blog stories and other issues that were more or less immaterial as little as 5 years ago. Also potentially relevant is its chapter 9 on the impacts of media related to prosecutorial activity.

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Talk about a global tort. While waiting to transport one of my daughters this evening, I spent a few minutes reading the guilty plea (thanks, NYT) by Sanford's CFO, James Davis. What raw fraud and greed. Hard to imagine why it was so hard for regulators to figure it out.

Reading the plea, it seemed to me plain that "Lawyer A" will be soon charged with being a central part of the fraud over at least the last two or three years of the scheme. So, I ran a quick Google search to see who might be lawyer A. The search turned up a late Friday AmLaw blog post that provides lots of reminders about past stories on Sanford, and reports in this post that an investor class action was filed late Friday afternoon against the Proskauer law firm and Thomas Sjoblom, saying he is "Lawyer A."

Not a good year for the legal profession.

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News articles here (best one), here and here are out with news from Italy that the criminal and civil trial for the Eternit asbestos defendants is to start December 10, 2009. The date was set after the trial court denied objections by the defendants, including objections to the location of the trial. The trial will not end quickly - Italian trials in some ways move slowly and include a variety of procedures not directly comparable to American trials.

The criminal and civil claims arise from something around 2,500 injuries and deaths alleged to arise from Italian manufacturing operations of the global Eternit businesses. For more background, a prior post here described the criminal and civil claims being pursued in Italy against former officers of Eternit, and includes links to background articles. There are myriad Eternit entities around the world, and they are not all part of one corporate family. However, most have some roots in manufacturing asbestos-cement products.

The claims and attendant publicity are noteworthy for a variety of reasons. One is that the US media now has company with other global media that devote articles, blogs and websites to "asbestos exposure" and "the dangers of asbestos. " To test the point, try Google searches on "eternit," "schmidheiny" (the last name of one of the defendants) or "amiante" (asbestos). Publicity and fear tend to lead to increased tort litigation.

Another point is that it is increasingly easy for claimant's group to disseminate information that may damage corporate reputation in general and reduce the overall enterprise value. Consider, for example, this website that provides a basic account of the Eternit proceedings and seeks to heap shame on Eternit. Considered in the light of the events of the past year, and this type of an event, one can readily grasp why the SEC has made statements to the media and proposed new rules (go here) regarding public disclosure of the board's role in risk management and the overall corporate risk management strategy.

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Are anti-bribery statutes actually trade sanctions that discourage investment, and should such statues be modifed? For more on that topic, see this post at Conglomerate and its link to a scholarly article on the topic.

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The NYT article is here.

The prosecution never should have happened - it will be fascinating to watch its dissection.

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The article is here.

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Reading the trial judge's opinion makes it plain he did not believe the Hardie Directors when they made denials or professed a lack of memory. For summaries of key aspects of the evidence and the ruling, go here or here.

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The James Hardie opinion/judgment is available here. The link also was added to the prior post containing links to the charges and a helpful summary of the outcomes.

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The New York Times ran a Saturday article detailing growing evidence of government misconduct in the criminal prosecution of WR Grace officials. Unlike most of the ongoing superficial stories about the trial, this article includes links to the judge's opinion excluding evidence proferred by the government, plus a brief from teh Grace side that details government misconduct. The article also includes references to the students and professors following the trial through a reasonably helpful blog.

The bottom line? As is so often the case when speaking about asbestos, the opponents of industry seek to ignore scientific lines drawn for many years between types of asbestos and how asbestos is defined. The science and lines deserve respect because, at the end of the day, good decisions have to be based on science.

Please do not take me as seeking to excuse everything done by industry or insurers. I certainly agree that officers of Johns-Mansville and some other companies took inexcusable actions. Some of their insurers also have much dirty laundry.

That said, distinctions between among asbestos fiber types are very real and their "toxicities" are different by orders of magnitude. For example, crocidolite fibers are usually viewed as 5oox more potent that chrysotile fibers in terms of causing mesothelioma.


Caveat/Disclaimer: In the mid-to-late 1990s, I was part of ateam of lawyers who represented W.R. Grace in asbestos litigation. My personal opinion is that the prosecution always has been a travesty because it ignored the facts and science regarding the Libby, Montana zonolite mining facility purchased by Grace after the facility had been in operation for many years.

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Press reports indicate that a judgment is due out later today regarding the Australian "SEC"s criminal prosecution of directors of James Hardie regarding disclosures with respect to its asbestos-laibilities and the private trust it created to seek to resolve personal injury claims.

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A Swiss media article describes significant media and partisan attention focused on the first day of trial in an asbestos-related criminal prosecution of former owners and managers of Eternit businesses that for decades were global manufacturers of asbestos-cement board, among many asbestos products. Hundreds of people are said to have gathered for the first day of the prosecution that involves allegedly knowing or reckless industrial hygiene decisions said to have resulted in premature deaths and injuries to over 2,500 manufacturing plant employees and local residents. The alleged misdeeds of Eternit have been widely chronicled over the years while this prosecution effort was ongoing. Informative articles are available here and here , and an article I wrote back in 2004 provides some context for EU businesses facing asbestso litigation's expansion into Europe.

Prosecutions of this sort raise a wide-range of issues. From the American perspective, perhaps the most striking aspect is that Italian law expressly allows trial that combine criminal and civil claims, thus giving the defendants significant risks that would not exist in a civil trial in the US. Italian law also allows the judge to reduce sentences to some degree if compensation is paid to victims. This trial will not end quickly - Italian criminal trials move slowly and include a variety of procedures not directly comparable to American criminal trials.

What's the likley outcome? My assumption/prediction is that this trial ultimately will result in Eternit entities and the individual defendants offering to plead guilty subject to a proviso limiting their sentences in return for creation of a significant private fund/trust that will pay money to claimants and that will make some payments to Italian government agencies such as INAIL to offset payments that have paid medical expenses for victims. I strongly suspect the deal will not be as cushy for the defendants as was the tobacco deal cut in the United States.

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The loss of the much discussed Wyeth decision has made this a bad week for pharma. It may get worse. A March 4, 2009 NYT article addresses Justice Department plans to prosecute of doctors for taking kickbacks, and states the following:

"... But within a few months, officials plan to file civil and criminal charges against a number of surgeons who they say demanded profitable consulting agreements from device makers in exchange for using their products."

One hopes the "consulting agreements" did not involve surgeries that ended up as data points in medical studies, and instead were limited to instances in which doctor x chose to use device A instead of device B. But if the surgeries ended up as part of studies on medical devices, then product liability issues may get even tougher for the involved institutions, especially if there are whistleblowers involved. Let's hope that is not the case.

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For some time now, I've been writing about potential changes in product liability law due to rapid changes in communication and science. In a February, 2007 article for Corporate Counsel, I addressed various changes, including the widespread availability of scientific information and its impact on information-related tort claims. The article included my prediction that "sophisticated intermediary" types of defenses would change in light of all the available information. I'll pat myself on the back and note that I was right - in a drug case in 2007, the West Virginia Supreme Court cast aside the "learned intermediary defense due to the wide availability of information to consumers. See Johnson and Johnson v. Karl, 220 W.Va. 463, 647 S.E.2d 899 (2007). The Court there said many things, including the following:

"When the learned intermediary doctrine was developed, direct-to-consumer advertising of prescription drugs was utterly unknown . . . Since the 1997 proliferation of drug advertising, only four high courts have adopted the learned intermediary doctrine . . . None of those courts gave thorough consideration to the changes that have occurred in the prescription drug industry with respect to direct-to-consumer advertising. We however, find such changes to be a significant factor in deciding this issue . . "

So, with that as background, I particularly enjoyed reading an excellent new article by Sarah (Sally) Olson of Wildman regarding the Johnson case and other additional specific examples of the Internet's effect on tort claiming. The article is titled: Net's Impact on Strict Product Laibility Law. The effects she describes include increased numbers of public consumer complaints of defects, consumer input into design, whether a company needs to monitor blogs, whether a company run blog or website will produce its own liability if a company is not accurate in what it says publicly, and various other points. Ms. Olson's article is well worth reading in full and considering how it might apply in your context.

After that, think also about reading a 2008 book titled: Stop The Presses: The Crisis and Litigation PR Desk Reference. Written by Richard Levick and Larry Smith of Levick Strategic Communications, the book's chapters 7 and * deal with blog strategies and lots of other "crisis" issues that did not exist 5 years ago in any material way. Then I'd suggest reading their chapter 9 on the impacts of media as related to increased prosecutorial activity. That's a topic I've also covered in a more limited context in a 2006 Corporate Counsel article focused on "toxic torts" and criminal prosecutions.

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A significant topic for at least the next decade will be the interesection of criminal law, tort law and civil law (including the law on punitive damages). The issue is growing in prominence for many reasons, including new UK legislation on corporate manslaugher and U.S. Senate hearings held a couple of years ago on possible new criminal law legislation in the US for product liability claims. The topic will be covered here in more detail in future articles.

For now, however, a recent news article makes the general point as it describes the manslaughter indictment of a Connecticut area swimming pool contractor (that is, a seller of a service and a seller of component products) for a child's drowning death said to arise from failure to install a mandatory drain cover.

Is the indictment fair or "right?" Various people can and will argue a range of positions on that topic. One interesting and arguably well-informed view is set out in the the May 1, 2008 American Lawyer interview of Robert Bennett. Mr. Bennett, of Skadden Arps, was interviewed in connection with his autobiographical new book about his work as a white-collar defense lawyer, which included working for the Seante Ethics Commitee in prosecuting the Keating 5 and defending numerous cases for corporate America. Bennett expressed the view that indeed criminal law sanctions can and do change corporate behavior. He is quoted as having said:

R: You write that you are shocked by the rise in white-collar prosecutions. Why do you think it's happening? Are corporations more corrupt? Have prosecutors gotten bolder?

B: I don't think that companies have gotten more corrupt. I think it's more the approach taken by law enforcement. Years ago, when I was a federal prosecutor, a lot of these corporate issues were handled by regulatory agencies. Now, law enforcement is trying to reform how business is done. There is probably less corruption today because of the government's aggressive approach. [Corporate executives] know it's not just a matter of paying fines anymore.

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