Personal Injury and Wrongful Death specialist Robert W. Kelley, a noted Florida-based trial lawyer, addressed the 2017 MENSA Annual Gathering in Ft. Lauderdale on the topic of his upcoming book The Memorandum. Speaking to a Standing Room Only ballroom, Bob Kelley and his co-presenter and legal partner John Uustal exposed companies whose products kill or seriously injury people – often knowingly, balancing the cost to pay families of victims vs the expense to repair a well known danger or defect.
Transcript of John Uustal and Bob Kelley’s MENSA Annual Gathering keynote:
There is now a corporate license to kill. So, this is the story of how the civil justice system became impotent over the last 10/15 years against the power of big corporations.
What we’re going to talk about is three different changes in the law. The effect has been massive on how corporations conduct business these days. And, it’s happened in three different areas.
Punitive damages going to go back to a 2003 U.S. Supreme Court case. There have been cases since then, especially in 2008. A mandatory arbitration case in 2011. And, campaign finance, especially the financing of electing judges, because for a lot of state courts, judges are elected.
So, if corporations can overwhelmingly finance one judge over another that has a massive effect on the law.
The three areas are – changes in punitive damages, mandatory arbitrations, and campaign finance. These changes come from the United States Supreme Court. They are not disputed or argued over politically and almost never in the news. Almost never covered at all. Even when those cases were covered, what happened over the next 5, 10, years in corporate board rooms is never covered.
And, that’s why I say this story is not well known.
It was a completely different world when I graduated law school in 1981 as far as our ability to have an impact on the corporate world and their conduct and the way they treated the public, their customers and consumers. It’s completely changed now.
And, as John said, what we want to talk about, today, are these decisions from the United States Supreme Court. I hope you will understand by the end of this talk, how your rights have been taken away, and the rights of these multi-national corporations have now been engrafted into the United States Constitution by the Supreme Court of the United States to give these entities, these monolithic entities, Constitutional rights at the same time that they’re taking away your Constitutional rights. So, that’s what we’re going to talk about today.
The first thing is “punitive damages.” We used to be able to control the conduct.
I say “we”, meaning the lawyers who would represent our clients and you, indirectly, to make cars safer, to make pharmaceutical products safer, to make food products safer. We used to be able to control their conduct through punitive damages because they wouldn’t want to be exposed to large damages. That has now changed. We can’t do that.
I’ve seen what these companies do. And, when I see what they do, sometimes, it takes my breath away. It really does. And, you may see it on the news every now and then, or in a movie, a fictional recharacterization of what happened. But, I know what happened because I’ve seen these.
These are my clients. These are my people. I’ve seen the documents. I’ve seen the smoking gun documents.
In the corporate world, well, let’s say in the human world, as John said, “If he were to go out and kill somebody, and he were to fire a real gun,” that’s where the phrase “smoking gun” came from. If you can find the person that’s holding the smoking gun, you got pretty good proof of who did the murder. But, that’s the way it is for real human beings.
But, with corporations, corporations are fictitious entities. They’re created on paper. They can’t go out and actually pull a trigger on a gun, but they do have smoking guns, and they’re usually in the form of internal company memorandums, internal secret company documents.
Summer vacation. Great family. Happy family.
So, as they were on their way back to the condo, they came to a tollbooth on the Virginia Turnpike, and they stopped to wait to pay to go through the tollbooth. And, all of a sudden, they felt a little bump from behind.
And, that’s all it was. Everybody, all the witnesses that saw this, the people in the car, everyone that was involved, said it was just a little bump, a little tap.
It felt like someone had thrown a softball and hit the back of the station wagon. And, then this happened:
0:09:07.3 (movie clip) There was a passerby who had a video camera.
Obviously, these days, there would probably be a hundred iPhone videos of this. And, this is just a short excerpt of the video that was taken there at the tollbooth.
Horrific, horrific accident, from a little bump from behind. So, how does something like that happen?
We did some investigation, and this is a picture of the back of the station wagon. And, what we saw was that that fuel tank, which is painted yellow, hangs down right below the bumper, right in the back of the vehicle, completely and totally unprotected.
Now, if you were to go on the showroom floor and buy this vehicle, of course, that would be spray painted black, and it would just blend in with the whole bottom of the vehicle, and you’d never notice it as you were walking around. And, you’d never think to ask about it.
But, so the jury can see, and so you all can see, we painted the tank a bright yellow. Now you get the impression right away that says “Whoa. That doesn’t look very safe.”
So, we sent out written questions, notice interrogatories to these companies.
The question was simple. “Did you ever consider protecting this fuel tank? Did you ever consider putting a tub or a shield or something around it to protect it?” And, so, we went back and forth, back and forth for five or six hearings. They wouldn’t answer the question.
They would answer all these questions, but they would never say would they ever consider putting a shield around the fuel tank. They wouldn’t answer it.
And, finally, the judge said, “I’m going to strike your pleadings. I’m going to sanction you guys if you don’t answer the question.” These were long two to three page answers. But, they never answered, “Did they consider putting a shield around the fuel tank?”
Well, just as the judge was about to strike their pleadings, my brilliant, young associate, who’s now my law partner at my law firm, had taken off in an airplane and started flying around the country to speak to other lawyers that had been involved in other cases, other fire cases against General Motors, and other places, to see if we could find this information on our own.
And, sure enough, we found it in Alabama.
Oh, and at the very end, when the judge said, “I’m going to sanction you if you don’t give a direct answer, ‘Did you ever consider putting a shield around a fuel tank?’” They lied. They said, “No, we never considered it.”
At that point, I already knew because it was like a day earlier he had flown back in with the drawings, and I was just waiting to see if they would tell the truth or not. And, of course, they didn’t. They said, “No, we never considered it.” But, John had just flown in from Alabama where he had found the design drawing.
This is the actual design drawing for that vehicle for a plastic tub. It’s an encapsulated steel tank. Goes right around the tub to protect it from impact. So, yeah, they thought about it. And, yeah, they did design drawings for it. So, they obviously considered it. But, they didn’t put it on the shield, on the fuel tank. Why not?
Turns out, we found out, and this was later on down the road, that General Motors had done a value analysis, just like Ford had.
You’ve all heard of the Ford Pinto case where Ford had done a similar thing. “Friendly” General Motors had done the same exact thing. One of their engineers in the Advanced Design Department did a calculation where he determined how much it would cost the company to pay the claims for these people that would burn alive in these accidents.
“How many of them are we going to have on average per year? How much is it going to cost us for each family that we got to pay to settle the lawsuit?” And, he came up with a number, and they said, “Well, how much is it going to cost us to protect these cars so that these fires don’t happen?” The number happened to be $2.00.
They said, “This analysis indicates that to General Motors, it would be worth approximately $2.20 per new model auto to prevent a fuel-fed fire in all accidents.” As a lawyer you’re thinking, “Really?! $2.20?” But, if you multiply it across the product line, that adds up to a lot of money.
And the question is, “Well, how much are you going to have to pay in lawsuits versus how much it’s going to cost you to make these cars safe?”
So, we have this memo. So, you would think, “Well, that’s it. They’re guilty as charged? They’re obviously guilty. They had the drawings that they lied about.” Okay. So, you would think, “That’s the end of the story.” Right? You’ve got the memo. You got them. They did the analysis. But, no, what we found out was that this memo had come out about 15 years ago…
Actually, it was another hurried production in California, and General Motors’ lawyers accidentally gave it to a lawyer in California 15 years before our case.
And, so, once it came out, all these other lawyers across the country in Texas, Pennsylvania, New Hampshire, South Carolina, where people were burning alive in these cars, wanted to take Ivey’s deposition because of the memo. And, so, Ivey had to show up. Obviously, he had some information that was relevant to the cases.
But, he testified in every one of those cases, “I don’t know why I wrote it. I don’t remember. I just wrote it on my own. I know that. No one in management ever asked me to do this, and nobody ever saw it.” That’s what he testified for 15 years. And, so, those lawyers, like the lawyer in Virginia, couldn’t get it into evidence.
The judge would say, “What’s the relevance? Ivey did it on his own. General Motors didn’t even know about it. How can you hold it against the company?” And, so, for 15 years, in these cases where these children and families’ members burned alive in these cars, juries turned them away.
General Motors was not responsible because they never got to see this analysis. It was kept out of evidence.
But, we found that there might be another document out there that was related to that memo. So we came back, and we asked them to produce it. And, again, it was hearing after hearing where they wouldn’t produce it.
We found that the judge, just like the fuel tank tub, said, “If you don’t answer it, produce the document, one way or the other, either you got it, or you don’t. I’m striking your pleadings. I’m going to sanction you.” Under hurried circumstances, they had the documents delivered, and that was the result. We saw the truth about his 15 years of testimony across the United States.
This trial lasted for six months right here in Hollywood, Florida. And, in the middle of the trial, Judge Franza knew what was at stake.
And, so, we got them. What did we learn? These are excerpts from the document. It said that this was done. This is an attorney who interviewed Ivey about it. And, this document said that Ivey characterized the nature of his analysis submitted to Mutty who was his supervisor, who was in charge of Oldsmobile, who was in charge of the station wagon that was the one that burned in this case.
But, his analysis was submitted to them and others to assist them in trying to figure out how much they could spend on fuel systems. He agreed that they did not like the sound of the study, and he admitted that they were very cautious with distribution of the copies due to the nature of the subject matter.
The lawyer concluded at the end of this memo, he said,
“Obviously, Ivey is not an individual whom we would ever, in any conceivable situation, want to be identified to the plaintiffs in a post-collision fuel-fed fire case. And, the documents he generated are undoubtedly some of the potentially most horrible and most damaging were they ever to be produced.” So, I mean, he was right. And, so, that’s why they fought tooth and nail to keep all this stuff secret.
This is what corporations do. They are getting Constitutional rights, and yours are being taken away
Today I’m trying to show you this is what they do. You would never believe that people would actually do this, but they do.
I’ve seen it in automotive cases. I’ve seen it in pharmaceutical cases. I’ve seen it in tobacco cases.
Companies are putting your lives, your children’s lives, on the balance sheet. They do it. It’s not made up nor is it pretend. John is going to talk about what’s happening with your right to a jury trial.
This can’t happen anymore. This case and others made them change the design of those vehicles.
SUV’s don’t roll over just because you steer them in a certain way on the highway anymore.
There was litigation for two decades done. Some people call it the “rollover wars.” The short version of that is, SUV’s were insanely lucrative vehicles. And, there was a rush to market once the first ones started selling so well. Companies would take a pickup truck like the Ford Ranger, slap a roof on it, put some seats in the back, and sell them at crazy markups for cheap vehicles.
And, they were making so much money, it didn’t matter that they were paying a lot in lawsuits.
It doesn’t happen anymore.
So, how did the law change how vehicles were designed?
Car designs have changed because of lawsuits.
In this Nissan rollover case, a former Nissan employee told us that there is a document inside Nissan that analyzed how lawsuits changed the design of vehicles.
We wanted that, obviously. We requested it. They said it didn’t exist.
That is almost always the end of the story. You go into court. You say, “Judge…” The judge says, “What do you want me to do?”
What can he do? They said it doesn’t exist.
Well, in this case, that happened.
It was Judge Jeffrey Streitfeld. He was relatively tough. A lot of lawyers were afraid of him. They sent a young lawyer there, which was a mistake. He was going to say, “It doesn’t exist.”
They didn’t know I was going to say, “I know it exists. A Nissan employee told me after a deposition.”
That young lawyer didn’t know how to respond to it. The judge pressed him. He was afraid of the judge. And, he said, “That document isn’t authentic.” That kind of admits that a document exists. As soon as Judge Streitfeld heard it, he started cross-examining that lawyer who got more and more flustered until he took out a folder and started looking at something.
The judge said, “Is that the document?” He said, “Yes.” The judge took it from him. We were in chambers at a table. He took it from him and gave it to me and said, “I’m ordering it produced.”
You don’t understand how crazy that is. The normal course of it would have been that they deny it, and that’s the end.
Even if we find out that it exists and the judge orders it produced, then, there’s an appellate court that many times steps in and says, “No, it’s a trade secret,” or some privilege or something else. And, then, even if it’s ordered produced, they offer $50 million, and that document never sees the light of day.
But, he just handed it to me, and that young lawyer, he didn’t go back to his office and tell anyone. We know that because when we got to trial, we put it in evidence and the Nissan trial lawyers were shocked that we had it.
Nissan did an analysis of all the other car companies and found out that, just like them, there’s three reasons why car designs are changed in regard to safety – a large number of lawsuits about a given part, cost of defense now increases…
It’s all about the math. What costs more? Fixing a defect or paying the victims? The cost of defense, if there’s so many lawsuits, and that’s what happened in the rollover, can be high enough that they have to change the design.
Two, it’s found defective by a jury, and the verdict was publicized. Without that, there’s no financial bottom line effect because the publicity can affect sales.
Or, three, there’s a high settlement cost for big verdicts. So, that’s why they change designs.
There’s more on that document that’s very interesting. But, anyway, now you know the math of how they decide whether to change designs. You know why people don’t burn alive from post-collision fuel-fed fires anymore, why sport utility vehicles don’t roll over just from the steering input on a flat-level, dry road.
That can’t happen anymore because of Supreme Court decisions starting in 2003.
So, I want you to imagine General Motors making a billion dollars in profit every month, a billion dollars in profit (not revenue) every month.
And, I want you to think about the testimony in the McGee case. The best fix for that problem cost $30. It cost them $200,000 on average per lawsuit. That adds up to $2.20 per car. That’s all it’s worth to them. Hopefully, our lawsuit changed that math. It did. Ours and others, and that’s why they fixed the problem.
It’s almost a billion dollars that they saved by not fixing that problem.
So, imagine a company that makes a billion dollars in profit a month, that saves a billion dollars by not fixing a defect even though hundreds of people are going to die. If each one of those people have a case, $2 million, $3 million, per death, compensatory damages like we talked about.
The Supreme Court is now saying, “The punitive damages are limited. It doesn’t matter how much money they make.” That’s why rich corporations have this license.
And, it doesn’t matter how much money they saved by the fraud or by not fixing the product, you have to base the punishment, the fine, the only punishment available, on how much the compensatory damages are. And, normally, it should be one to one.
So, if it’s a $2 million verdict for the family, another $2 million. That’s it. A hundred people, $200 million.
But, they saved a billion. Now, you can’t change the math. That’s the change in the law on punitive damages, and that’s why lawsuits aren’t going to change and make cars safer anymore.
The second area that we were going to talk about is mandatory arbitration.
Starting in 2011, there have been massive changes in the law in arbitration. But, this is how it used to work with financial fraud. Five years ago, the lawsuit concluded against banks, because of what banks would do…
Imagine someone who lives paycheck to paycheck. And, the biggest bill they have is rent at $1,000. And, they wait until the last minute to give that rent check because their direct deposit on their paycheck, or their paycheck they’re depositing it, and they’re hoping the money comes in before that rent check goes out.
But, it doesn’t. So, they bounce a check, one check. $40 fee.
All the major banks would take that check and move it up, hold all the last 10 checks, take that big check, and put it 10 checks earlier, so now they could charge $40 times 10. Imagine that. It’s just pure theft. And, all the major banks were doing it.
The courts stopped them. “No, you can’t do that,” in class action lawsuits against the banks. To the tune of billions of dollars they were stealing over many years. The courts stopped them. That can’t happen today.
In response to that, almost every major bank has put into their account agreements an arbitration clause.
You all have them, but now you can’t sue your bank. You have to go to an arbitrator.
Well, what’s so wrong with that? First of all, let me say, the law assumes this fiction, that in order to give this corporate rights, the big corporations to force you to arbitration, to give up the right that’s actually written in the United States Constitution which says, “You, as a person, we, the people in the Constitution, you have the right to go to a jury of your peers to have civil disputes decided.”
But, no, corporations now, according to these cases, have a greater right to force you to arbitration. The law assumes a fiction that you have a choice. You can’t get a cell phone if you wouldn’t sign an arbitration agreement. I tried to buy a car two years ago because car dealers, used car dealers, they love to take advantage of people. I couldn’t find a single dealer that would sell me a car. I said, “I’m here to buy. Just cross that out.” They wouldn’t do it. Not a single one.
So, you can’t get services in this country today if you’re not willing to sign an arbitration agreement. Well, what’s so bad about that? Consumers win 20% of the time on average. They get 12 cents on the dollar in arbitration. Corporations receive 98 cents on every dollar claimed and almost always win. Verizon, Time Warner, Sprint, with 200 million customers, over five years, so over a billion customer years, faced 75, only 75 arbitrations. Why?
You have to understand, they’re writing arbitration agreements.
They pick the arbitrators. So, you’re going to lose. Even worse, you can’t bring a class action. So, who’s going to spend $50,000, $100,000, to get $300 back in an arbitration context? And, you still need to hire a lawyer.
The worst thing about this is, the United States Constitution specifically says in black and white in easy to read language that anyone can understand that a human being, a citizen of this country, has the right to trial by jury in a civil dispute. And, yet, it’s gone, with the fiction, because these corporate rights, somewhere in the Constitution that I can’t find, it says that you can only award punitive damages with a single digit multiplier of the compensatory.
That takes precedence. And, it’s not in there. You can’t find it, if it’s been read in there.
The right of corporations to have arbitration agreements, it’s not in there, but, somehow, it’s been read in there, and not only read in there but superior to your right as a person to have a jury trial.
So, campaign finance just talks… Listen, if corporations get to pour money in and elect the judges who make decisions on their cases, which is specifically happening, the Mississippi example, obviously, that affects what happens in those cases.
Let me start with the future looks bleak to me. I don’t see how any of this is going to be reversed.
Initially, deeply divided courts – five to four decisions, granted these new corporate rights. But, now, just in 2017, recently, it was seven to one. So, it’s gone from a deeply divided court to almost unanimous.
So, I’m very pessimistic that courts can solve this.
However, I would point out Thurgood Marshall from the 1930’s, obviously, faced a bleak situation, and he used to say he believed in the civil justice system. And, it took decades, but there was a change. “There’s only one good way to handle that bunch,” he’d say, “Take them to court.” And, so, that’s what me and Bob are going to continue to do. But, I don’t think this can be changed in the court in the end.
Just like the Civil Rights Movement, it’s got to be changed, because people think differently about this.
There’s a well-funded propaganda effort, and I’m using that word specifically, well-funded, intentional propaganda effort by big companies, because there’s massive amounts of money at stake, to make people confused, fraudulent cases, which is a real problem.
But, what does it have to do with someone who’s harmed by the intentional wrongdoing of a company? To confuse ridiculous lawsuits.
To use them to discredit punitive damages, which are only for intentional or egregious wrongdoing, not fraudulent or ridiculous lawsuits.
And, the ambulance chaser advertising, which I hate, is when they show the billboards with the people like, “I got money” with a smile, I’ll tell you, not one of my clients was ever happy at the end of the lawsuit no matter how much money they got. I can’t stand those people smiling. But, the civil justice system is the only thing standing between us and the corporations doing whatever they want.
So, let me end with a quick story.
There is a lawyer who was formerly a law clerk in our law firm. She knows more than most people about what we’re talking about. And, she was driving on highway 595 West, and an alligator, believe it or not, ran out. She hit the alligator, and the car flipped. She told me it flipped about six times going at highway speeds. It’s a very serious crash.
And, at the end of that story, she said, “That car saved my life.”
I was thinking, because I served in those rollover wars.
Part of the rollover litigation was whether the roofs used to crush. And, again, the engineering, there was no reason for that. They just had to make them a little stronger. When the roofs crush, someone gets paralyzed or dies. That roof didn’t crush in her car, and I knew, I saw how the designs changed.
I saw the time it took. I saw why it changed. And, so, what I wanted to say to her was, “Yeah, the car saved your life, but lawyers, judges, juries, and righteous lawsuits saved your life.”
The civil justice system saved her life, or at least stopped her from being paralyzed. And, until people understand that, this is never going to change. It’s not going to be changed in the court room.
Audience Member: What can we do?
That’s a really good question. I think, my opinion is, it’s going to take a Constitutional Amendment, another Constitutional Amendment to the United States Constitution, to limit money, the corporate money that can go into political races because I think, as long as they have unfettered access to our politicians and, therefore, the judges, that you’re going to have a hard time changing the law and bringing it back to a fair balance between everyday people and these multi-national corporations.
To amend the United States Constitution is a huge undertaking. And, you’ve probably seen those entities out there trying to get it going right now.
But, I think that’s a very important place to start, and we need a leader in this country that really wants to give the rights back to the people. And, so far, we haven’t seen that in any of our recent Presidents – any of them, Democrat or Republican.
And, I would add, too, you could start with, in your own mind, not confusing the real problems we have with the civil justice system with other things that let big companies get away with intentionally hurting people.
Those are two different issues.
And, when you hear people confuse them, because you’ll hear it all the time, there’s a discussion about frivolous lawsuits that turns into a discussion about caps, somehow, on righteous lawsuits. Keep that in mind. Understand the distinction. And, talk about it with people.