How could a jury be so insensitive?  Certainly this jury is from one of those Judicial Hellholes!  This is exactly why we need tort reform ... runaway juries ... just like that McDonald's spilled coffee cup case. 

You would expect to hear those comments after reading the first headline.  But there's a clue in the subheadline that may cause you to pause for a moment and think that there just might be more than the first headline communicates.

You'd be right.  And you'd be one of those critical thinkers who realizes that the sound bite does a disservice to "the rest of the story," as Paul Harvey would have said.

So here's the set up of Bankhead v. ArvinMeritor.  Now I could spin these facts for you to put you in the mood for the ultimate outcome, but rather than do that, let's let the Court of Appeal tell you what the facts were as they saw it (omitting footnotes):

ArvinMeritor [...] manufactured brake shoes for installation on commercial trucks during the time frame involved in this case. The brake shoes were fitted with asbestos-containing linings [...].

By the 1960's, ArvinMeritor knew that workers exposed to asbestos dust were at risk of developing asbestos-related diseases. Indeed, in 1973 and again in 1975, it wrote letters to [...] manufacturers complaining about the presence of asbestos dust in the brake linings it was receiving from them. Nonetheless, ArvinMeritor did not place any warnings on its products until the early 1980's, and continued to market asbestos-containing brakes until its inventory of them was exhausted sometime in the early 1990's. Not until the fall of 1987 did ArvinMeritor include an express reference to cancer in the warnings on its products.

[Gordon] Bankhead was exposed to asbestos dust from brake linings during the 30 years he worked at automotive maintenance facilities, primarily as a "parts man," starting in 1965 and continuing through his retirement in 1999. As a result of this exposure, Bankhead contracted mesothelioma, a form of lung cancer, in 2009. Before his mesothelioma was diagnosed in January 2010, Bankhead experienced difficulty breathing, and underwent painful medical treatment to drain fluid from one of his lungs. After the diagnosis, Bankhead was told he only had 12 months to live, and as his disease progressed, the quality of his life decreased significantly. At trial, Bankhead's medical experts testified that his condition would become increasingly painful until his inevitable death.

 So there you have it.  In the 1960's the company knew that it was exposing its workers to asbestos fibers, but did not warn its employees of the danger until 1987.  The jury found ArvinMeritor liable for Gordon Bankhead's exposure to asbestos as the cause of his mesothelioma.  After the liability and damages portion of the trial was completed, the Court asked the jury about punitive damages.

Here's where it gets tricky.  ArvinMeritor submitted financial statements that showed the company had a negative net worth.  Despite that "upside down" financial statement, however, the jury awarded Gordon Bankhead $4.5 million in punitive damages.

How could that possibly be, you ask? 

Well, before you get your knickers in a twist, read on and then decide (the following directly quotes the Court of Appeals): 

A separate trial was held to determine the amount of punitive damages to be assessed against each defendant. By the time of that trial, all defendants except ArvinMeritor [...] had settled. At the punitive damages trial, respondents presented an expert witness, Robert Johnson, to testify about ArvinMeritor's financial condition. In evaluating ArvinMeritor's economic status, Johnson reviewed publicly available documents filed with the Securities and Exchange Commission, including ArvinMeritor's 2008, 2009, and 2010 annual 10-K reports; its adjusted 2009 10-K reports; a 2010 proxy statement sent to shareholders; and data regarding its market capitalization. These are "generally accepted financial documents used and relied upon by economists or experts in finance to evaluate a company."

Johnson testified that between 2006 and 2010, ArvinMeritor attained over $3 billion in sales revenue each year, and an average annual cash-flow profit of $111 million. [fn. omitted]  ArvinMeritor's lowest performing year during that period was 2009, but even in that year, it had $95 million in cash available to it. In 2010, ArvinMeritor's annual sales revenues reached $3.59 billion; its annual report indicated it had earned $211 million in cash-flow profit; and it reported to its shareholders that it had earned a $12 million net profit-a conservative figure, as Johnson explained, because companies seek to reduce their reported net income, using legally available deductions such as depreciation, in order to minimize their tax liability. At the end of 2010, ArvinMeritor had on hand some $343 million in cash and cash equivalents, and its outstanding stock had a total market value of almost $2 billion.

ArvinMeritor's chief executive officer, who also served as its board chair and corporate president, earned over $7.6 million in 2010, and stood to receive between $19.9 million and $26.9 million upon leaving the company. Johnson explained that a company's willingness and ability to pay sums of this magnitude to its chief executive is an indicator of financial strength. Given all of these facts, Johnson opined that ArvinMeritor is financially sound.

Johnson acknowledged that ArvinMeritor reported that as of 2010, it had a negative net worth of $1.023 billion. He opined, however, that this number, taken on its own, did not "reflect the full context of ArvinMeritor's financial condition and ability to pay." Johnson explained that net worth is only one of "a number of different tools that we use to assess a company's financial health, wealth and condition," and opined that "net worth is probably one of the least reliable financial metrics or statistics you can use," because there are "a number of financial or accounting transactions" in which a company can engage to lower its net worth, while remaining profitable. Johnson testified that net worth "is not a measure of a company's financial condition totally or their ability to pay," because "even within the guidelines of the generally accepted accounting principles . . . net worth is something that can be pretty easily manipulated." As an example, Johnson noted that a company can reduce its net worth simply by repurchasing shares of its stock.

Johnson explained that because net worth can be unreliable, banks look instead to a company's cash flow and profits, which are the most reliable indicators of its ability to repay debt, in determining whether to lend money to it. For this reason, companies with a negative net worth are still able to borrow money. Indeed, ArvinMeritor itself borrowed a total of $245 million in 2010, and still had $539 million available on its line of credit as of September 30 of that year.

Don't believe it?  Judge for yourself with ArvinMeritor's financial statements.  ArvinMeritor still exists as Meritor, and was a spinoff of Rockwell. 

Now that you've read why the jury awarded what it did, does the headline accurately tell the rest of the story? 

Hmmmm.

Guess you'll have to keep a cynical eye on those headllines.

Human trafficking is "modern-day slavery." And if you think it isn't happening near you, think again. The United Nations estimates nearly 2.4 million people may be the victims of this crime.  Please join me and my fellow Lawyer2Lawyer co-host and attorney, Bob Ambrogi, as we take a legal look at this troubling issue with Professor Bridgette Carr from the University of Michigan Law School, Attorney Ann Johnson from Houston, Texas and Mary C. Ellison, Director of Policy for Polaris Project.

Click on the link below and give a listen!

Members of Congress and their staffers who travel at the expense of private organizations must follow a long list of legal restrictions and requirements.  However, there is a little known exemption that allows the same federal employees to travel with virtually no accountability and very little transparency.  Please join me and my fellow Lawyer2Lawyer co-host and attorney, Bob Ambrogi, as we welome ProPublica.org reporter Justin Elliott and Washington University Law Professor Kathleen Clark to examine the ethics, legalities and secrecy of these Congressional trips abroad.

From the Obama Administration's decision on female contraception coverage, to the Congressional hearing on women's health featuring an all-male panel of witnesses, to the Rush Limbaugh/Sandra Fluke firestorm, legislation targeting women's health is causing quite the political controversy across the country. Please join me as I welcome Attorney Shari Rendall, Director of Legislation and Public Policy for Concerned Women for America and Attorney Gretchen Borchelt, Senior Counsel for Health and Reproductive Rights for the National Women's Law Center, to discuss current legislation aimed at women's issues, reaction from women's groups and the present state of women's rights.

The world's tiger population has declined by 97%. The African elephant population has been cut in half. 33% of open-ocean sharks are now threatened with extinction. These and other alarming statistics have created worldwide legal action to save the Earth's endangered species. Please join me as I  explore laws and initiatives designed to save threatened species with attorney and WildAid board member, David Kracke of Nichols and Associates in Portland, Oregon.

The United States Environmental Protection Agency just lost a battle that it has been fighting with the Sierra Club since 2004.  As you know, the USEPA sets the standards for air quality around the country.  Since the air pollution is particularly bad in California, and especially in the San Joaquin Valley, the Sierra Club filed a challenge to the USEPA's approval of certain air quality standards for the Valley in 2010.

While the Sierra Club argued that the approval had a number of problems - including the fact that the standards were impossible to comply with - the Ninth Circuit relied on just one of those problems to overturn the USEPA's approval. 

The Court said that the USEPA could not rely on data from 2004 in 2010 when approving the standards in California's State Implementation Plan.  That's right - a six-year gap in data.

Six years outdated, and yet the USEPA still approved the 2004 SIP in 2010.  Read that last sentence again.  The USEPA was six years behind in reviewing data supplied to it, and refused to consider more current data in reaching its decision.

The USEPA failed to explain why it would not consider the new data, and the Ninth Circuit consequently held that refusal as "arbitrary and capricious," and ordered the USEPA to do it over again, and this time, consider new, relevant data.

I've had cases against the USEPA before, and this tactic is quite common.  They don't do their homework, and when challenged about it, retort back that they have the statutory/regulatory right to rely on old, out-of-date data.  Finally, thanks to the Sierra Club, the USEPA has been called on its tactics and hopefully, we'll see the last of this bureaucratic nonsense. 

If you run a business, you know all about the California State Board of Equalization.  It's a euphemestically named government organization that is our equivalent of the IRS.  You know, those folks who collect taxes.

Proposition 13 was enacted by California voters in an attempt to keep property taxes down.  The SBE's mission, it seems, is to figure out ways to increase tax revenue to the state.  One of the ways the SBE tried to do that was to avoid the annual decrease in the value of fixtures (those things that are attached to real property, like machines bolted to the floor and the like).

You see, each year, fixtures depreciate, which means less taxes are due because the value of those fixtures have declined.  Worn out.  Not as useful as the year before.  Requires more maintenance.

You get the idea.

Well, so did the SBE, and they saw tax revenues slip away.  Until some bright bulb in the SBE got the idea to reclassify fixtures as real property.  We all know that real property increases in value over time - at least that was the theory that fueled the sub-prime mortgage crisis, but that's a whole 'nother story for another day.

In the SBE's test-dummy attempt to pull this switcheroo, the SBE applied this theory to the petroleum industry first before attempting to apply it to every other industry in California.  If you think about that plan, it wasn't the smartest.  The petroleum industry has cash flow, and lots of it - especially since we keeep buying gas for our cards and trucks.  So when the petroleum industry caught wind of this plan, it tasked its association, the Western States Petroleum Association, to file a legal challenge.

The WSPA did just that, citing to the agoe-old division between the valuation of fixtures and the valuation of real property, and the attendant accounting methodologies used to appraise those two items. Accountants depreciate fixtures, but not real estate.

Prop 13 was designed to limit taxes, not increase them, and the Court saw right through the SBE's plan, telling the government to keep the distinction between fixtures and real property, never the twain to meet.

Your fixtures are once again safe from the evil overlord of taxes. 

Whew!

Since 2010, there has been great debate over the controversial ruling commonly called Citizens United.  Most recently, the Montana Supreme Court challenged the decision while Senator McCain called it "one of the worst decisions I have ever seen." Please join me as I welcome Attorney Joseph M. Birkenstock, former chief counsel of the Democratic National Committee and Bradley A. Smith, Chairman and Co-Founder of the Center for Competitive Politics and former Commissioner on the Federal Election Commission, for an in-depth discussion on the impact of the ruling during an election year and its influence on the upcoming Presidential election.

You may say it would be better to have a judge in your pocket, but then, so does everyone else.  I'm talking about a level playing field, with a lawyer in your pocket.  You know, the kind you can ask any question to when you have a legal problem, and get a solid answer that will avoid you having to breach a contract, make a mistake that actually would be a crime or anything else that would land you in a courtroom.

Why not?  You can get a doctor in your pocket with Web MD, so why not all professions, especially law?

Diagnosing a medical condition can be a difficult proposition.  So can diagnosing a legal problem.  But for those problems that have not yet landed you in court, good legal advice can steer you away from that eventuality. 

If you think about it, you do have a lawyer in your pocket.  It's your cell phone.  When you're facing a difficult legal problem, do what my clients do.  Pick up the phone and call your laywer.  We're happy to answer your questions, and even happier when our advice avoids landing you in court.

For those who call their lawyers and get good advice, you're lucky.  Many others who don't call end up calling when a legal disaster hits, and then it's too late.  At that point, you need the other part of what I do - litigation.  It's time consuming and can be very costly.

Good legal advice before the problem hits is worth its weight in gold, especially since you will never experience the inside of a courtroom.  Pay your lawyer a visit and avoid hiring me.  Otherwise, I'm glad to take your call.