I suggest the following simple ten ways to avoid malpractice in litigation: q PRODUCT LIABILITY October 2011 IN THIS ISSUE The authors offer practical advice for small manufacturers counsel in product liability litigation. Small Manufacturers Face Big Problems: When an Employee Wears Too Many Hats in Products Liability Litigation ABOUT THE AUTHORS Robert W. Trumble is the Vice President and a member of the Executive Committee with the law firm of McNeer, Highland, McMunn and Varner, L.C. As the managing director of the firm s Martinsburg, West Virginia office, Mr. Trumble s primary practice areas are insurance defense litigation and business law. In addition, Mr. Trumble serves as a Chapter 7 Panel Trustee for the United States Bankruptcy Court for the Northern District of West Virginia and is a Municipal Court Judge. He can be reached at rwtrumble@wvlawyers.com. Jonathan L. Wertman is an associate with McNeer, Highland, McMunn and Varner, L.C. Also operating out of the firm s Martinsburg office, his practice is focused primarily on insurance defense and general litigation. He can be reached at jwertman@wvlawyers.com. Jeffrey D. Van Volkenburg is an associate with McNeer, Highland, McMunn and Varner, L.C., who practices in the areas of insurance defense, insurance coverage and toxic torts, in the firm s Clarksburg, West Virginia headquarters. He can be reached at jdvanvolkenburg@wvlawyers.com. ABOUT THE COMMITTEE The Product Liability Committee serves all members who defend manufacturers, product sellers and product designers. Committee members publish newsletters and Journal articles and present educational seminars for the IADC membership at large and mini-seminars for the committee membership. Opportunities for networking and business referral are plentiful. With one listserv message post, members can obtain information on experts from the entire Committee membership. Learn more about the Committee at www.iadclaw.org. To contribute a newsletter article, contact: Mollie Benedict Vice Chair of Newsletters Tucker, Ellis & West, LLP (213) 430-3399 mollie.benedict@tuckerellis.com The serves a distinguished, invitation-only membership of corporate and insurance defense lawyers. The IADC dedicates itself to enhancing the development of skills, professionalism and camaraderie in the practice of law in order to serve and benefit the civil justice system, the legal profession, society and our members.
- 2 - If there is anything that I have learned from my years in the tech world, it s that companies don t get killed by the competition. They usually find creative ways to commit suicide. -Sridhar Vembu, CEO of Zoho, BusinessNewsDaily, August 2010. The world of products liability defense work has historically been geared towards the defense of large manufacturers, with large research and development staffs and a multitude of executives, with clearly defined roles within the company. In today s manufacturing environment, a practitioner must not only be prepared to provide services to the large multi-national manufacturer, but also the smaller manufacturer. While the challenges of representing large, multinational corporations are relatively wellknown, the challenges of representing smaller manufacturers can be more difficult to easily discern. With the proliferation of self-insured insurance policies that do not trigger coverage until a certain threshold is reached, the client may be looking to limit costs and expenses if the claim is minor. This can create a recipe that is fraught with peril. Due to their inherent limitations, many small manufacturers are required to utilize one individual to handle multiple responsibilities. It may be commonplace for one person to be an integral part of, and be involved in, multiple facets of the business s day-to-day operations. Often, the very person who organized the business may simultaneously act as its CEO, COO and CFO; or the President may be his or her sole employee, literally in charge of every aspect of the company. The small manufacturer, although perhaps needing more than just one person to handle the production and manufacturing, may nevertheless rely on just a handful of people to run the business side of the company. This means that officers and/or employees of the small manufacture may be required to wear many hats. These arrangements, borne of necessity, may often be favorable to a small business s economic plan. In the context of litigation, however, this can create several dangerous possibilities. It is not hard to imagine the following scenario: Employee A has worked for his company for almost twenty years and, during that time, has assumed more responsibility as he or she has become more familiar with the operations of the company. During this time period, Employee A has worked in multiple areas of the company including design and safety, testing and even work on pending litigation, wherein he or she examines pieces of equipment that are alleged to have malfunctioned. Because of his or her experience in a multitude of areas in the company, Employee A has often been utilized and designated as a Rule 30(b)(6) deponent and testified concerning a multitude of different areas. Because of Employee A s expertise, the company has also used him or her to examine equipment that has malfunctioned, thereby beginning the process of handling potential claims that may lead to formal litigation. Let s also presuppose that for minor claims, the company has designated our Employee A as an expert in litigation in an effort to limit expenses and because of his or her base of knowledge in the given area of manufacturing that is at issue in the litigation. If the company becomes involved in formal litigation, it is not difficult to imagine a scenario where plaintiffs counsel will want to depose the individual in charge of design or testing, in addition to the expert designated by the company. Under this set of facts, it is not difficult to imagine a plaintiff s attorney being able to tie up the company s expert testimony with the testimony offered by the
- 3 - head of testing and design... which is the same person. A simple question is likely all it would take: How can you testify as an unbiased expert when you are also the individual that is the head of testing and design, and thereby potentially at fault if there is something wrong with the product? Simply stated, plaintiff s counsel has just been able to label your company s most valuable employee as the Judge, Jury and Executioner for the injured plaintiff. When this is taken in conjunction with the likelihood of a competent plaintiff s attorney finding old deposition transcripts of Employee A acting as the Rule 30(b)(6) deponent, you have run the risk of turning a potentially small claim into a much larger one and opening your client to potential punitive exposure based upon inconsistencies that will inevitably be located. By virtue of a company using one individual to act in several different capacities, the company may also become subject to broad and sweeping discovery, which would ordinarily be prohibited. For example, under the new revisions to Rule 26 of the Federal Rules of Civil Procedure, which prohibit disclosure of certain information exchanged between client and expert or attorney and expert, would it be possible for plaintiff s counsel to discover information from Employee A in his role as a 30(b)(6) deponent? Would Employee A, acting as an expert, be forced to divulge information regarding his or her previous investigations of the company s product s defects? When it came time to testify as the corporate representative, is Employee A permitted to testify that the company had no knowledge of the potential defects of the product at issue? Whether or not it would ultimately be admissible at trial, evidence of prior accidents and previous litigation may become open to discovery, thereby hampering the company s defense and bargaining position. What might otherwise have reasonably been withheld as work product prepared in anticipation of litigation would likely become subject to disclosure, as Employee A s knowledge of those facts and personal involvement in the investigation could not be withheld once he or she was disclosed as the expert and designated as the company s 30(b)(6) corporate representative. Finally, the overlap of our exemplary employee s duties could give the appearance of bias at trial, which would dilute his or her credibility as an expert and a witness, in general. For the very reason that defense counsel often seeks the assistance of a disinterested physician to perform an independent medical examination, it is welladvised to look outside of the office to find an expert to testify on a company s behalf. Although an independent expert who tests the allegedly defective product is always subject to cross-examination, his or her ability to diffuse and differentiate other claims can be much more effective without the baggage of being the company s safety director, claims investigator, designated expert and 30(b)(6) representative, for example. Frankly, regardless of how competent Employee A may be, or how accurate his or her expert opinions are, his or her testimony will always be challenged and perceived as less credible due to his or her integral involvement with the company and the product. The issue then becomes: what can defense counsel do to minimize these types of situations when representing the smaller manufacturer? Similar to all types of litigation, if you are working with a new client, an early case assessment and evaluation of the company is critical to setting up the defense best able to insulate your client from the types of problems previously described. Find out the litigation history of the client. Find out what individuals have historically been subject to
- 4 - deposition in other litigation and what roles they filled within the context of past litigation. Find out what the company s claims- handling process has been like in the past and what records the company has in its possession. Finally, determine who the likely deponents are from your client s company. Specifically, what individuals may be involved in the design or manufacture of the specific product at issue? What you are doing is creating a road-map of the litigation, which will require you to think like a plaintiff s attorney to determine what information is needed to prove plaintiff s case. Once that information has been finalized, you can begin to formulate your defense. While the cost of outside experts can be prohibitive, the danger of trying to save money in litigation may end in disaster and affect your client, not only in the pending litigation, but also in subsequent claims and cases that they are forced to defend. This long-range thinking and planning can be difficult for a client to rationalize when looking at its short-term bottom line, but if the message and dangers are effectively conveyed to your client, they should be happy to eliminate future headaches. While the above hypothetical represents just one example, the lesson for small manufacturers is clear. Beware of utilizing the same employee to wear multiple hats in products liability litigation. The temptation to do so, given its economic benefits and logical advantages, must be balanced against the danger it poses to small manufacturers subject to products liability claims. In doing so, small manufacturers can undoubtedly increase their chances of success in litigation, limit their liability and continue to be innovative producers in a challenging marketplace. With challenges from business competitors always on the horizon, manufacturers need to make sure that they do not have internal procedures which could be fatal to long term success.
- 5 - PAST COMMITTEE NEWSLETTERS Visit the Committee s newsletter archive online at www.iadclaw.org to read other articles published by the Committee. Prior articles include: SEPTEMBER 2011 An Ounce of Prevention Michael D. Crim and Jeffrey D. Van Volkenburg AUGUST 2011 Put Up Your Dukes: Using Recent Supreme Court Decision to Defend against Class Actions in a Products Case Christopher B. Parkerson JULY 2011 Tennessee Legislature Update: Tennessee Civil Justice Act of 2011 Lela M. Hollabaugh MAY 2011 What s in a Name? Possibly, Strict Liability as an Apparent Manufacturer Erin K. Higgins APRIL 2011 Supreme Court to Readdress Stream of Commerce Theory of Personal Jurisdiction Jonathan A. Berkelhammer APRIL 2011 Special Edition! To the Woman Sitting at Counsel Table I Want to Hear from You Marie Chafe and Stephanie Rippee MARCH 2011 Using Product Models to Define Substantially Similar for Purposes of Discovery Lee H. Ayres and Sarah E. Smith FEBRUARY 2011 The CPSC s Consumer Database Officially Launches in March 2011: Are Your Clients Ready? Leta E. Gorman and Lisa Grimm JANUARY 2011 Canada s New Consumer Product Legislation: A Shield or a Sword? Peter J. Pliszka and Richard D. Butler DECEMBER 2010 Did We Settle this Case or Not? Don t Risk Letting the Court Decide Stephanie M. Rippee