If you wanted to pick a single case to examine what can go wrong in an American civil lawsuit, may I suggest a recent suit against Johnson & Johnson.
Just about every ill in the U.S. civil legal system is present in this case: class action, forum shopping, contingency fees, and jury awards unconstrained either by scientific or economic reality.
In the latest of a series of lawsuits alleging that Johnson & Johnson failed to warn customers that its talcum powders could cause cancer, a Missouri jury ordered the company to pay $4.69 billion – $550 million in compensatory damages and the remaining $4.14 billion in punitive damages. The company’s shares tumbled 1.21 percent after the verdict, representing a year-to-date decline of 11 percent. Johnson & Johnson has said it will appeal, as it has already done in similar cases.
In a statement, the company wrote that it was “deeply disappointed in the verdict, which was the product of a fundamentally unfair process that allowed plaintiffs to present a group of 22 women, most of whom had no connection to Missouri, in a single case all alleging that they developed ovarian cancer.” It went on to say: “The result of the verdict, which awarded the exact same amounts to all plaintiffs irrespective of their individual facts, and differences in applicable law, reflects that the evidence in the case was simply overwhelmed by the prejudice of this type of proceeding.”
Overall, the company faces more than 9,000 plaintiffs in cases alleging links between talcum powder and cancer. These plaintiffs and their attorneys have strategically elected to sue the company in smaller groups. The claims center on the argument that talc is often found in deposits beside asbestos ore, and that asbestos sometimes appears in natural talc (though it has not been included in commercial products since the 1970s). Asbestos is a carcinogen, but Johnson & Johnson firmly denies its presence in the company’s baby powder. The U.S. Food and Drug Administration conducted a 2009 study that seemed to verify the company’s position, though plaintiffs say the FDA study was flawed.
Johnson & Johnson was able to overturn a ruling that awarded $417 million in damages, as well as a $72 million award, on previous appeals. The company has faced such suits since 2013. But the sheer size of the Missouri case has drawn more attention.
There are just two bright spots in this mess. One is the courage shown by Johnson & Johnson’s management and directors to stand up against what amounts to a legal shakedown. Their decision to fight all of these suits individually, rather than paying settlements that will simply establish a talcum-powder tort subindustry and take a product many people value off the market, is admirable.
The other bright spot is that, in the unlikely event that the Missouri appellate courts don’t either reverse the verdict or greatly reduce the damage award, a U.S. Supreme Court that is grounded in law and fact might accept an appeal and rein in this sort of trial bar craziness on due process or other constitutional grounds. One thing that will absolutely not happen is Johnson & Johnson, or any other company, paying nearly $4.7 billion to the families of 22 unfortunate women or any other similarly small group, now or ever.
The entire idea of juries, rather than judges, handing down punishment in the form of damages that amount to vast fines is ludicrous. The only other situation in which we ask juries to decide on punishment is in capital cases. There is no death penalty here – except in the sense that sufficiently outlandish penalties can cause the death of an enterprise. Lay juries are singularly unequipped to make such judgments, lacking any sort of context for how similar cases have been handled and any reasonable perspective from which to assess how a given level of punishment might affect the enterprise as a whole.
Even if civil punishment is warranted, why let that punishment revert to private parties in litigation (and of course their lawyers), rather than to the state? It’s supposed to be in the state’s interest, rather than that of the plaintiffs, that the punishment is imposed.
In the absence of direct and compelling evidence that a vendor suppressed information about the harmful nature of a product, or produced a product that is unreasonably dangerous for its intended users considering both the frequency and severity of harm, the mere fact that a product is legally manufactured, labeled and sold ought to prevent such cases from proceeding. This would be the exact opposite of the “strict liability” that plaintiffs’ lawyers have induced some courts to adopt to impose damages on defendants who could not have known their conduct would cause harm. Even absent such a strict “freedom from liability” standard, damages should merely make plaintiffs economically whole for their losses.
Of course ovarian cancer is horrible in all cases, and tragic in far too many. Of course human life can’t be valued strictly in dollar terms, although as a practical matter such calculations are made in all sorts of ways every day. Of course family members and other closely related parties also suffer from an individual’s avoidable death; of course such parties should be compensated when appropriate. And of course, lawyers need to be paid too, and contingency fees do permit access to the legal system for people who lack other means.
But if ever a civil judgment summarized everything that is wrong with America’s civil court system, it was this one. No amount of powder is going to smooth out this sort of rough justice.
Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book,
The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book
Looking Ahead: Life, Family, Wealth and Business After 55.
Posted by Larry M. Elkin, CPA, CFP®
photo by Mike Mozart
If you wanted to pick a single case to examine what can go wrong in an American civil lawsuit, may I suggest a recent suit against Johnson & Johnson.
Just about every ill in the U.S. civil legal system is present in this case: class action, forum shopping, contingency fees, and jury awards unconstrained either by scientific or economic reality.
In the latest of a series of lawsuits alleging that Johnson & Johnson failed to warn customers that its talcum powders could cause cancer, a Missouri jury ordered the company to pay $4.69 billion – $550 million in compensatory damages and the remaining $4.14 billion in punitive damages. The company’s shares tumbled 1.21 percent after the verdict, representing a year-to-date decline of 11 percent. Johnson & Johnson has said it will appeal, as it has already done in similar cases.
In a statement, the company wrote that it was “deeply disappointed in the verdict, which was the product of a fundamentally unfair process that allowed plaintiffs to present a group of 22 women, most of whom had no connection to Missouri, in a single case all alleging that they developed ovarian cancer.” It went on to say: “The result of the verdict, which awarded the exact same amounts to all plaintiffs irrespective of their individual facts, and differences in applicable law, reflects that the evidence in the case was simply overwhelmed by the prejudice of this type of proceeding.”
Overall, the company faces more than 9,000 plaintiffs in cases alleging links between talcum powder and cancer. These plaintiffs and their attorneys have strategically elected to sue the company in smaller groups. The claims center on the argument that talc is often found in deposits beside asbestos ore, and that asbestos sometimes appears in natural talc (though it has not been included in commercial products since the 1970s). Asbestos is a carcinogen, but Johnson & Johnson firmly denies its presence in the company’s baby powder. The U.S. Food and Drug Administration conducted a 2009 study that seemed to verify the company’s position, though plaintiffs say the FDA study was flawed.
Johnson & Johnson was able to overturn a ruling that awarded $417 million in damages, as well as a $72 million award, on previous appeals. The company has faced such suits since 2013. But the sheer size of the Missouri case has drawn more attention.
There are just two bright spots in this mess. One is the courage shown by Johnson & Johnson’s management and directors to stand up against what amounts to a legal shakedown. Their decision to fight all of these suits individually, rather than paying settlements that will simply establish a talcum-powder tort subindustry and take a product many people value off the market, is admirable.
The other bright spot is that, in the unlikely event that the Missouri appellate courts don’t either reverse the verdict or greatly reduce the damage award, a U.S. Supreme Court that is grounded in law and fact might accept an appeal and rein in this sort of trial bar craziness on due process or other constitutional grounds. One thing that will absolutely not happen is Johnson & Johnson, or any other company, paying nearly $4.7 billion to the families of 22 unfortunate women or any other similarly small group, now or ever.
The entire idea of juries, rather than judges, handing down punishment in the form of damages that amount to vast fines is ludicrous. The only other situation in which we ask juries to decide on punishment is in capital cases. There is no death penalty here – except in the sense that sufficiently outlandish penalties can cause the death of an enterprise. Lay juries are singularly unequipped to make such judgments, lacking any sort of context for how similar cases have been handled and any reasonable perspective from which to assess how a given level of punishment might affect the enterprise as a whole.
Even if civil punishment is warranted, why let that punishment revert to private parties in litigation (and of course their lawyers), rather than to the state? It’s supposed to be in the state’s interest, rather than that of the plaintiffs, that the punishment is imposed.
In the absence of direct and compelling evidence that a vendor suppressed information about the harmful nature of a product, or produced a product that is unreasonably dangerous for its intended users considering both the frequency and severity of harm, the mere fact that a product is legally manufactured, labeled and sold ought to prevent such cases from proceeding. This would be the exact opposite of the “strict liability” that plaintiffs’ lawyers have induced some courts to adopt to impose damages on defendants who could not have known their conduct would cause harm. Even absent such a strict “freedom from liability” standard, damages should merely make plaintiffs economically whole for their losses.
Of course ovarian cancer is horrible in all cases, and tragic in far too many. Of course human life can’t be valued strictly in dollar terms, although as a practical matter such calculations are made in all sorts of ways every day. Of course family members and other closely related parties also suffer from an individual’s avoidable death; of course such parties should be compensated when appropriate. And of course, lawyers need to be paid too, and contingency fees do permit access to the legal system for people who lack other means.
But if ever a civil judgment summarized everything that is wrong with America’s civil court system, it was this one. No amount of powder is going to smooth out this sort of rough justice.
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