Californians are prone to slapping businesses with frivolous lawsuits; business interests argue; and when they're on juries, Californians punish businesses with outrageous financial awards. The threats and costs of litigation are a big reason California's business climate is so bad, business advocates say.
"At every turn, California chooses bad lawsuits instead of good jobs," contends the website of California Citizens Against Lawsuit Abuse, which pushes legislation to limit the right to sue.
But data compiled by the National Law Journal – and highlighted by the Consumer Attorneys of California, which fights restrictions on lawsuits – shows a different dynamic was in play in California courts last year.
The biggest verdicts in California in 2011, including a $2.32 billion award made by a jury in Los Angeles, came in lawsuits in which one big corporation sued another, the data shows.
That trend undercuts the complaint that abuse of the legal system is creating a poor business climate here, argued J.G. Preston, spokesman for the lawyers group.
"The big money in California lawsuits isn't going to people suing businesses, or even people suing other individuals," he wrote in a summary of the California verdicts. "It's going to businesses suing other businesses, typically in intellectual property or breach of contract suits."
The top three California verdicts involved complex business disputes in which hundreds of millions in profits were at stake.
In the biggest verdict, St. Jude Medical Inc., which manufactures pacemakers, sued a Chinese medical manufacturer called Nervicon, claiming massive theft of trade secrets. According to the MedCity News website, lawyers for St. Jude contended that a former engineer at Pacesetter Inc., a St. Jude subsidiary in Sylmar, stole confidential information and used it to set up the rival company in his homeland.
St. Jude had spent thousands of dollars to help the former engineer immigrate to the U.S. from China and get a green card, the jury in Los Angeles County Superior Court was told. The jury awarded $2.32 billion in damages, but the foreman doubted the Chinese company would pay, according to the legal website Law360. "Good luck collecting," the foreman reportedly told St. Jude lawyers.
The second-biggest verdict involved an anti-trust lawsuit filed in San Mateo County Superior Court by Asahi Kasei Pharma Corp., a Japanese concern, against Actelion Ltd., a biopharmaceuticals company based in Switzerland.
Asahi wanted to market a new drug for treatment of heart disease and contracted with CoTherix, a biomed concern in South San Francisco, to commercialize the medicine in the U.S., court records show.
Then Actelion acquired CoTherix. After that, Asahi sued, claiming that the Swiss firm bought the U.S. company to shut down development of the Japanese company's drug. The Swiss firm also was marketing a heart drug and worried it would lose market share to the Japanese drug, according to court records. A jury awarded $550 million to the Japanese firm, but the judge later reduced the award by about $70 million.
The third-biggest verdict involved a lawsuit filed in federal court in San Diego by Minnesota-based Medtronic Inc., a manufacturer of medical devices. Medtronic accused a San Diego company, NuVasive Inc., of infringing on its patents for devices used in spinal implant surgery. The jury awarded Medtronic $101.2 million, but reduced the award by $660,000, finding that Medtronic had also infringed on a NuVasive patent, Bloomberg News reported.
In the top five verdicts in California, only one involved a personal injury lawsuit – the bane of tort reformers.
In that case, a Sacramento jury hit Ford Motor Co. with $73 million in damages for a freeway crash that killed two members of the Fair Oaks Presbyterian Church and injured two more. As The Sacramento Bee reported, plaintiffs' lawyers contended that the parishioners' Ford Econoline van crashed because it was equipped with a defective type of Goodyear tires. Two years before the crash, Goodyear told Ford about the tire defects, but Ford chose not to order a recall, lawyers claimed, because the company had just finished a $2 billion tire recall involving Ford Explorers. Ford argued that the two men died because they weren't wearing seat belts.
California Citizens Against Lawsuit Abuse is concerned about verdicts of all size, regional director Maryann Marino said in an e-mail.
"Outsized verdicts hurt consumers and businesses," she wrote. "However, it doesn't take a runaway jury verdict to force a small business to close. A $10,000 verdict can be just as damaging to a small business as a multimillion-dollar verdict is to a large corporation."
Story courtesy of our media partners at California Watch (A Project of the Center for Investigative Reporting)