On the Record Transcript: Tort Reform Attorney Questions History Making Hepatitus C Verdict in One of Nation’s “Judicial Hell Holes”

A Clark County District Court jury last Friday ordered Teva Pharmaceutical Industries and Baxter Healthcare Services to pay a combined $500 million in punitive damages to a Nevada man who contracted Hepatitis C during an outbreak two years ago.

The jury award was the largest in Nevada history.

In a statement issued shortly after the jury reached its decision, Teva said it planned to contest the verdict.  A spokesman for Baxter later confirmed the company will also most likely appeal.

The following is a transcript from a moderated conference call and discussion of the case with Victor Schwartz, a partner with the law firm Shook, Hardy & Bacon and General Counsel for the American Tort Reform Association, and members of the Nevada media.

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Moderator:  This is Elizabeth Crum, Nevada News Bureau, the moderator and coordinator of this call.  Thanks very much for joining us.  We’ve got seven or eight journalist from around the state on the line [names journalists and organizations].

Victor Schwartz:  Okay, great!

Moderator:  [Explains conference call listening mode and format of call]  Victor, I know you’ve read some background on the case and that tort reform is one of your specialties.  Do you want to make an opening statement or give us some initial perspective on this?

Victor:  Well, first let me say that I have no interest in this case; I don’t represent the plaintiff or the defendant.  I do have an interest in liability law– buy the Casebook; I think it may be used in Nevada, which is: Prosser, Wade and Schwartz, Cases and Materials on Torts.  As you suggested, I have been involved in tort reform, but in this case, I’m just looking at it from the facts, and basically, there are only three ways to find a product defective, and that’s the first question I have about this case.

A product is defective if it’s mis-manufactured. For example, you buy a bottle of soda and there’s a frog in it. That’s been mis-manufactured, and this product was not mis-manufactured.

The second way a product is defective is: if it’s defective in design.  The classic case was the Ford Pinto, which had a gasoline tank too close to the rear seat, no firewall between the two, people were injured when there were low-impact collisions, and the plaintiff showed there was an alternative way to make the product.  There is no alternative way to make a 50-liter dispenser of a drug.

And the third way is failure to warn, but here the product said on it, “to only use for one patient”.  I can’t see how a warning could be more clear, “ONE PATIENT ONLY”.  So before we even get to the punitive damage issue, I am troubled, having studied product liability law for almost 40 years, as to whether this product is defective or not.  So I begin with that.

Moderator:  That’s very interesting and thank you for opening with that, because this subject was actually going to be the focus of my opening question…whether this verdict was even legally valid based on product liability.  Anything else you want to throw out as a starter or should we go straight to questions?

Victor:  No, I think that’s where to begin.  I don’t want to jump to—  it’s almost like this is a criminal case and they will say, “Mr. Schwartz, do you think the sentence was to long?” and I’m saying, “I don’t know whether the man is guilty!”  So I’m beginning there.

Moderator:  Okay, very good.  We’ll start off with Steve Kanigher from the Las Vegas Sun.  Go ahead Steve.

Reporter:  Yeah, Mr. Schwartz I wanted to ask you: Teva Pharmaceutical and Baxter are the companies that were named who have to pay out this punitive damages award if they lose on appeal.  If they lose on appeal, what impact do you think this is going to have specifically on Nevada health care consumers in terms of cost?  Can you go into some kind of detail as to what impact this could have on health care cost in Nevada if this punitive damage phase is allowed to stand up?

Victor:  That’s very difficult to answer without a lot of speculation.  I think that the cost of doctor services is not going to be affected by that award.  I don’t think that would be affected.  I do think people who sell medical devices would be “chilled” about selling them in the state if they can be liable, because rogue medical [inaudible] in the state misused their product.  So it could affect product availability for people in Nevada and that, in effect, can affect healthcare.

When you think about it, whether it’s a pacemaker, a bone replacement, artificial hip – think about any medical product you’ve ever heard of – if you put that in the hands of a rogue doctor or a rogue clinic, it could be misused.  So if I were a medical device company, I would be cautious about what products I sold in the state, and that can affect healthcare.  So it can go to the availability in Nevada of certain medical devices, and people would have to go to other states to get them.

Moderator:  Okay, very good.  Steve do you want to follow up or should I come back around to you?

Reporter:  I can wait, that’s fine.

Modertator:  Okay.  Lets see—so Jim with KKOH, you’ve got the option to ask a question if you wish?

Reporter:  How much is a single dose of this anesthetic, and if it’s a single dose product, why’s it in such a big bottle?

Victor:  I don’t know the price of the single dose, and the larger bottles, I believe, are often used in hospitals with one patient.  I’ve been in hospitals at times where I’ve probably had that drug administered, and it’s one patient over a period of time, but I don’t know the price of the product.  I’m sorry.  As I mentioned, I don’t represent Baxter and I don’t represent Teva.  I think it’s pronounced Teva, I’m not even sure.  So I wouldn’t know the price of the products.

Moderator:  Jim, from what I read — and I’m not a subject expert here at all, but I did do a little bit of research on this yesterday — and from what I read, the gist of it is that it’s manufactured that way because “a single dose” would vary from patient-to-patient, from procedure-to-procedure.  It’s intended to be a product which is flexible enough to be used in any number of cases, but is intended to be used only for a single patient regardless of whether the bottle is actually used up or not when it is administered.

Victor:  One of the things here—I wasn’t asked this, but having looked at hundreds of products in my life, sometimes warnings get very complex.  If you just looked at the ordinary step ladder, if you go to Home Depot and look at an ordinary step ladder, you’ll see warnings down the side, on the top, say, so, half fictitiously, one man is reading “War and Peace” and the other is reading instructions on a step ladder, and the guy could read “War and Peace” faster [laughs].

This was a simple warning: “One patient use only”.  It’s not a complex warning, and it’s easily understood by people.  And if you’re going to hold a company liable when a clear unequivocal warning is violated, the consequences of…for product manufacturers or for consumers in terms of availability of products is not a good consequence.  That’s what struck me about this case.  I’ve never seen a case where you had an unequivocal warning about one specific risk, somebody doesn’t follow it, and then there is liability.  That’s very odd.  I just had never seen it before.  Again, that’s before we get to…

Reporter:  Isn’t this then just a case of people going where the money is, rather than after the real culprits, which I guess would be the clinic?

Victor:  That’s a very good point.  This idea of finding the person with the most money and then use a stretched theory to reach them permeates our law.  I mean, often, when there is a drunk driver, people will sue the automobile company because the drunk driver doesn’t have adequate insurance and here you had the clinic, maybe didn’t have a lot of insurance, it was closed, my understanding is.

So imaginative plaintiff’s lawyers try to think of some way, some theory, by which they can reach a manufacturer; and then they need a judge who will let the case go to the jury, and once they get to that jury, they hope that the empathy for the victim will transcend everything, and then they will try to use a “send a message” kind of conclusion, a “send a message” type-rhetoric, and if that’s permitted — ordinary folks that are just off the streets there can feel a tremendous empathy for somebody who’s seriously hurt — and finding the big pocket is not unusual.

There was a case before the Supreme Court where that happened, where there was malpractice committed.  This was not—and there were complex warnings in that case, they were very complex and they sued the manufacturer; they never would have sued it if thee medical provider in that case, had adequate insurance.

Moderator:  Okay. Great question, Jim, thank you!  Bill Moyer, you got anything?  …  Is Bill still with us?

Reporter:  Yeah.  No, I don’t.

Moderator:  No? Okay.  Brian Haynes, Las Vegas Review Journal.

Reporter:  Yeah.  Hi Mr. Schwartz.

Victor:  Hi, how are you?

Reporter:  Good!  You mentioned the warning and I saw myself, there was a clear warning that said, “single patient use” on the bottle.

Victor:  Right!

Reporter:  A key-point that the plaintiffs made was they kept using “foreseeable misuse”; they used that term in talking to me, and in court.  The way I understood it was, basically, their case was built upon this history of previous outbreaks that may or may not have been connected to Propothal, but then the company even acknowledged that there were multiple dosing going on when it went to the FDA to make the smaller vials.  Talk about foreseeable misuse — why do you think that shouldn’t be applicable here?  Is it a theory that has holes in it?  Is it a legitimate theory or what?

Victor:  That’s a really good question, and I want to stop a moment and think; that’s what I used to teach my students to do when I taught law [laughs].  There is a foreseeable misuse doctrine, but that comes about where you know or have reason to know that there’s extremely high risk of misuse and there is a way to guard against it.

So you make a product that’s a jack for an automobile, and you say, “Do not use with hands on your car”.  Well you almost know anybody who uses a jack with an automobile may put his or her hands under the car, even though you’ve warned against it, but there’s a high probability of that.

Here the numbers are there, but they go over many, many years, there from all around the world, and what’s the corrective?  Is the corrective not to sell the product at all?  We know there are legitimate uses for a device of this size, and to have one jury decide in an individual case with a lot of sympathy for the plaintiff that the product shouldn’t be sold isn’t a good result.  How is the company to monitor all of this?

I mean I’ve seen on products in a—if you go into a toy store, it will say, “For children under five, for children under seven.” A parent buys it and gives it to a child under five; we know that happens. But are we going to hold the toy company liable because the parent gives a product that says, “Do not give to child under four” — the product — and the child is injured?  Here what I think permeates everything, apart from the rules of law, which would dictate,  is that this product was not defective.

It’s common sense, and where do you go with this type of liability and extreme stretch of foreseeable misuse?  After something happens, almost anything can be foreseeable, but the probability of wrong-doing here is very low; the cure is not to sell the product at all.  We know there’s a legitimate use for the product, and I will share with you the analogy of the toy situation, which is a very common sense thing that we see everyday, and we do know that parents sometimes give young children a toy that they shouldn’t give them and the toy manufacturers know that.  There’s no liability.

Moderator:   Thank you. Moving along, Sean, I don’t know if you wanted to ask a question or not, but I’ll give you the opportunity if you wish–  Sean Whaley?

Reporter: Yeah, actually I just had one question, and that is: Is the FDA, you believe, somehow complicit in this whole situation in that there’s such a regulatory burden to set-up a dosage level?  I was thinking in terms of your reference to the child and the toy, sometimes companies do a voluntary recall; they say, “Well we don’t have to, but yeah, we understand there are problems; we’re going to take this product back and make it safe.”  I’m wondering if that’s something that the drug company could have done, but if their regulator prohibited or extremely regulated by the FDA– I mean, maybe that wasn’t even an option for them.  I don’t know.

Victor:   I’ve tried to look a little bit into the FDA.  This is an improved product.  I don’t know that anybody has gone to the FDA and made a case to pull the product off the market as occurred with Vioxx, for example, when there were alleged deaths from Vioxx.

We can’t find anything where any consumer group or other group concerned with patient safety went to the FDA and said that this product should be removed, nothing, nada.  When there are products that have a danger, the FDA is accessible and groups do go in and suggest a product be removed.  We can’t find anything on that here and believe me, if there were, the plaintiffs’ lawyers would have averted to it in court — and I wasn’t there; if they did avert to that, that the FDA had been petitioned for removal and didn’t act, that would be a relevant fact, but I don’t know that that existed in this situation.  I don’t think it did, and I don’t know that the plaintiffs’ lawyers, you were in court, made the FDA the villain here, sometimes they do, but I don’t know that they did it here.

I should say, by the way, and you can probably tell from when I’m speaking, although I do defense work now:  I was a plaintiff’s lawyer for 14-years, I won a punitive damage award against a television company that made televisions that caught fire, and I was very glad that I won that case.  So I’m hopefully able to see this from more than one perspective.

My biggest problem in all of this is I wasn’t in the court house, but I look at the facts and the facts just don’t suggest that the product was defective.  The punitive damage award can be looked at in sort of two different, in many ways, but here’s two: one is that it is so high; it is so disproportional to the compensatory damages.  That you had a jury that was infuriated, you had a jury that was angry; $500-million, that’s a lot of money for one individual; where the actual damages with pain and suffering were about $5-million, that’s a huge ratio.

As those of you who know, the Supreme Court has suggested more than once that the highest ratio between compensatory and punitive damages was something like 9-to-1 and then they said 4-to-1, but nothing like this.  So the jury was infuriated, they were really mad.  Now that could be read to say that they company did some horrible things, but I’ve gone through as well as I’m able, that the product was not defective, but the jury can get angry at companies even if it didn’t make a defective product.

There are ways to trigger juror anger and that high award suggests that the jury was so enraged that they may not have carefully looked at the facts.  That’s the other side of it.  Sometimes you get a jury award that’s very, very high and they say “Whoa”, but that means that the jury’s sense of emotion has taken over their ability to look very carefully at the facts or listen carefully to the judge’s instructions.  Something– I don’t know here is what the hudge did and how he/she acted.  I don’t know what they did—was this in Clark County?  The case?

Moderator:  Yes.

Victor:  A couple of years ago, not last year, but in 2008, the American Tort Reform Association named Clark County one of only seven “Judicial Hell Holes” in the whole United States.  When you look at the size of this country, fly over it, as I have often done, it’s a pretty big place and to name 1-of-7 counties, Clark County– isn’t so good.

It wasn’t on the List in the past year, but probably if this verdict is sustained, it could be again.  A “Judicial Hell Hole” is: where a judge does not look objectively at the facts; where a judge does not apply the rules of law the same way to both parties.  I wasn’t at this trial, so I don’t know what happened.

I only know that the verdict was—the first thing that struck me was this product is not defective.  Maybe people didn’t like what the company did, but the FDA can be petitioned by anybody.  I can go across the street and petition the FDA myself if I think there’s a medical device that’s improper.  Shiley Heart Valve was one; Dalkon Shield was another.  These were defective products; there was something wrong with them.  The Dalkon Shield and it’s ordinary use, which was an IUV for birth control, caused thousands of women to get pelvic inflammatory disease.  It was defective.

The Shiley Heart Valve sometimes didn’t work right with somebody’s heart almost exploding.  It was a defective product.  That’s a defective product.  The car that explodes is a defective product.  A lawnmower that causes a blade to fly in your face in ordinary use, that’s defective.  This is not, as far as I can see, a defective product.  There was nothing wrong with the product.

Moderator:   Right, that is interesting, I actually had the same question and was going to do a little more research today on it, just to review what the judge’s instructions were, and why the judge—if we take what you’ve said, Victor, at face-value and go with the theory that perhaps there was no product liability here to begin with–it seems to me the judge would have some duty, and I’m not a legal expert, but to kind of put the brakes on it at that time?  I don’t know enough about the legalities to know what would have to happen for the judge to come to do that, but obviously the judge let the verdict stand, and I guess we assume at this point that everything will go to an appeal.

We’ve got a couple more minutes, so lets start back at the top real quick and just see if there are any follow-ups.  Steve Kanigher with the Las Vegas Sun, you got anything else?

Reporter: Yeah, Mr. Schwartz, I got another quick question for you.  Nevada is one of a growing number of states that has instituted caps on medical malpractice liability.

Victor:  Yes.

Reporter:  And the question I have regarding that is whether these caps might partly responsible for maybe driving trial attorneys into going even more after deep pockets? Another words, the argument that, well, we really can’t get a lot out of the doctors or their insurance companies, so let’s go after whoever we can that has deeper pockets?  So can you explain or address the correlation between states like Nevada that have caps on medical malpractice liability and then maybe the desire of trial attorneys because of that, to want to even more go after the deeper pockets.

Victor:   Could you mention your name again, Sir?

Reporter:  Steve Kanigher, a reporter with the Las Vegas Sun.

Victor: All right.  Mr. Kanigher, if I were—remember I used to be a professor, so would you forgive me for this one?

Reporter:   No problem.

Victor:  You get the “Victor Award.”  THAT IS A TERRIFIC QUESTION!  I raised this many, many years ago.  We had a Vice President named Quayle, I don’t know if anybody ever remembers him.  He had trouble spelling.  [Laughter] You remember this guy?

Reporter:  I’ve interviewed Mr. Quayle.

Victor:   Anyway, he set-up a task force on liability and they came back with caps on damages for doctors and doctors only.  I liked Dan Quayle; I knew him and he wasn’t stupid; that was sort of a media portrayal, but the fact is, that if you cap doctors, there is a natural consequence of that liability going somewhere else and it becomes a kind of orphan-share of liability.

In fact, with some cases it’s even more dramatic.  The doctor is sued and the drug company gets sued; the jury comes back with a verdict, lets say of $5-million in pain and suffering awards.  The doctor is capped and the drug company isn’t, and the drug company ends up picking up the doctor’s share believe it or not, the way it works.

So there is sometimes a consequence of exactly what you said.  I don’t have data on it.  I cannot prove it, but this is a point I’ve made again and again.  When they started talk down here in Congress about capping doctors in Obamacare, I was concerned that if they capped doctors only, that orphan-share would squiggle somewhere else or it would augment the suits brought against product manufacturers.

So it’s just a subjective thing, Sir, but you’ve hit something that people who study this subject a long, long time have seen and a lot of other people have not seen.  I really value that question and I haven’t been able, particularly with the media, to make that point.  So I think that’s an excellent observation.

Moderator:  Very Interesting.  Thank you.

[Moderator asks reporters one by one if they have other questions; all decline]

Victor:  This is really a privilege for me.  I’ve never had a privilege like this, to speak to journalist from throughout a state.  I visited there many times, not just Las Vegas.  People have been very gracious, and I regard this as a very, very good opportunity.

[Call is closed out with Thank Yous all around]

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  • Melody

    This is not a tort reform attorney, they are a defense firm, plain and simple.