"The Top Ten Verdicts of 1999"
#1 Verdict of 1999
$4.9 Billion Against GM for Gas-Tank Explosion Live Defense Demonstration Backfires and Turns the Tide
PRACTICE LAWYERS WEEKLY USA
January 10, 2000
By Eric Berkman
Two lawyers from a small firm took on the world's largest automaker and came away with a staggering $4.9 billion verdict for six people severely burned when their 1979 Chevy Malibu was rear-ended by a drunk driver and exploded into flames. The impact caused the fuel tank to rupture and explode.
The verdict, which includes $4.8 billion in punitive damages, is the largest personal injury verdict in history. The trial judge subsequently reduced the punitive award to $1.09 billion.
GM continues to deny responsibility for the injuries and is appealing the case based on several evidentiary rulings.
"The plaintiffs were innocent victims of a drunk driver [who] barreled into them at a speed in excess of 70 miles per hour," says GM's lawyer Richard Shapiro.
Shortly after the 1993 crash, California Lawyers Brian Panish and Christine Spagnoli set out to prove that General Motors put profits over safety by leaving the fuel tank in a vulnerable spot directly in front of the rear bumper. They asserted that for a minimal cost GM could have moved the fuel tank to a safer spot over the rear axle.
GM argued that the crash - not a defective fuel system - caused the injuries.
Following several years of contentious discovery Panish and Spagnoli, partners in a 12-lawyer firm, broke GM's back with the help of an infamous 1973 memo written by a GM engineer.
The so-called "Ivey" memo contained an analysis that fuel tank-related facilities cost GM roughly $2.40 per car, while another GM study indicated that it would cost $8.59 per car to implement the safer "tank-over-axle" design. The lawyers contended that the two memos demonstrated that GM was willing to risk thousands of lives to save six bucks a car.
Although the Ivey memo had been circulating among plaintiffs' lawyers since 1984, GM managed to keep the potential bombshell out of all its fuel tank cases until 1998, when the plaintiffs' lawyers in another case obtained evidence linking the memo to GM's decision making.
Panish and Spagnoli were only the second team of lawyers ever to get the memo into evidence.
They had a second big break when GM lawyers brought the jury to a garage to view the results of a crash test they said proved the tank was safe and to the horror of the company's lawyers - the test car's gas tank leaked right before the jurors' eyes.
"At that moment I felt like someone was looking out for us and that the truth was coming out," says Panish, lead trial counsel in the case.
But getting to that point was far from easy. "It took everything we had to do it. It took three full-time investigators, numerous attorneys, expert witnesses and hundreds of thousands of dollars," says Panish. The plaintiffs filed suit in 1994 and the case went to trial, in June 1999. Panish and Spagnoli handled all of the case preparation and represented all four children at trial. During trial, they brought in Carl Douglas to represent the mother and Attorneys Mark and Jeff Robinson to represent her friend. Panish says that GM used an army of lawyers by comparison.
They had people from Snell Wilmer (100-plus lawyer firm in Phoenix), in-house people, new people showing up every day helping them prepare witnesses and work on the case," he says. 'They even rented suites of offices in downtown L.A. just for this case. So we needed a little help and it worked. We worked together as a team."
Feel the Pain
According to Panish, the key to obtaining huge verdicts lies in tying the punitive awards to company profiles.
This shifts the focus from what the plaintiffs and the lawyer stand to gain from the verdict to handing out a punishment severe enough to force the company to change its dangerous behavior.
Spagnoli says that she and Panish described GM's financial situation by showing how much the company rakes in on a daily basis and what it spends each year on advertising.
"That way the jury could focus on an amount to send a message that GM couldn't just write this off as a cost of doing business," says Spagnoli.
It is a strategy that has helped Panish win punitive damages in four of the last five cases he's tried.
"What I generally tell the jury is that here's where they really have a chance to make a difference," he says.
Panish usually starts by telling the jury that punitive damages are also known as "exemplary" damages and for good reason.
"They may be intended to punish, but they're also intended to make an example of someone and to reward those companies or defendants that engage in proper conduct," he explains. "If you allow someone who engages in reprehensible conduct to get away with it, you reward them and punish those who do the right thing."
He also explains to the jury that there should be no limit or cap imposed on punitive damages.
"That would just allow the business to stick punitive damages into their cost-benefit calculations," he says. "They could just throw in the maximum amount they can lose and puts profits over safety all over again." But he also admonished the jury that their job was not to put the company out of business, but to give it some real food for thought.
"It's just like if you have an employee who's not doing the right thing," he says. "You don't necessarily want to fire them, but you do want to discipline them."
So Panish asked the jury to dock GM two weeks' pay - like they might do with an insubordinate employee - to make it hurt a bit. This two-week pay came to $4.8 billion.
"Just hitting them with, say, $500 million would have been less than 1 percent of their net worth, which is no big deal," he says. "But two weeks' pay would be enough to get the attention of GM's high executives who would see it, go out and try to figure what happened."
Panish adds that the only difference between his arguments in this case and his other punitive cases was the size of the company.
A day before the verdict was reduced, the plaintiffs offered to cut $4.5 billion from the award if GM would recall the Malibu and other cars with the same fuel tank design.
"Our client said, "We don't want this money for ourselves because that's what the compensatory damages are for," says Spagnoli. 'They also said they GM to use the money for something positive."
GM rejected the offer but since the reduction Panish has made a similar offer to return $700 million of the $1.09 billion punitive award. "They still maintain there's nothing wrong with the car," he says.
Meanwhile, the plaintiffs have pledged to donate half of their punitives to the State of California for programs benefiting burn victims.
Explosive Crash
On Christmas Eve, 1993 plaintiff Patricia Anderson was driving home from church in Los Angeles with her four children and 10 Tigner, a family friend. As she slowed for a red light, a car slammed into her from behind, puncturing her gas tank and causing her 1979 Chevy Malibu to burst into flames.
Bystanders immediately smashed the front windshield with a shopping card and pulled Anderson and Tigner from the burning car. They suffered severe burns the their face and body.
It took considerably longer to get the children out the back seat and their injuries were more severe. Three of the children - 1 year old Ty-Shon, 7 year old Kionna and 8 year old Kiontra suffered third degree burns to various parts of their bodies.
Alisha, 6, suffered the most severe injuries. Her ears were burned down to the cartilage and her face and body were left permanently disfigured, laced with ridges of ropy scar tissue. She also lost all the fingers on her right hand and has undergone 70 surgeries since the accident.
The driver of the other car, Daniel Moreno, had a blood alcohol level of .20, twice the legal limit, and was later convicted of felony drunk driving. At the time of impact, he was traveling 49 mph according to the plaintiffs, and 68 mph according to the defense.
Defense Case
The defense case centered on two primary arguments - that the blame for the victims' injuries should be placed on the drunk driver who caused the accident and that speed, rather than faulty design, was the reason the gas tank ruptured.
Shapiro told Lawyers Weekly USA that the company is appealing based on a number of evidentiary rulings made by trial judge Ernest Williams. For example, says Shapiro, Williams excluded as irrelevant:
- Testimony on the Malibu's safety record.
- A mid-1970's fuel tank location study which allegedly demonstrated that GM engineers concluded the rear location was a safe place to put the tank.
- Evidence of the blood alcohol level of the driver who rear-ended the Malibu.
According to Shapiro, this evidence would have supported the company's argument of a high-speed crash because an impaired driver would be slower to hit brakes.
"There were so many errors committed by the judge that he literally prevented us from putting on a defense," says Shapiro. "We're confident the verdict will be overturned, aside from just the amount which is outrageous and unprecedented."
Survivable Impact
It was clear from the start that the defense would argue that the drunk driver was responsible for the plaintiffs' horrific injuries. But when Panish read the police reports he quickly identified a gaping hold in that argument; the plaintiffs suffered no major injuries beyond the burns. Therefore, they could have walked away from the accident if the gas tank hadn't exploded.
"It was clearly a survivable impact case," says Panish.
To prove this theory, the plaintiffs' lawyers knew they would have to demonstrate that:
- The fuel system on the Malibu was unsafe;
- GM knew it was unsafe;
- GM had the technology to build a safer fuel system; and
- GM had a profit motive for not installing the safer system.
One of the key elements of GM's case was the speed of the drunk driver. GM argued that he was going 68 mph and that no fuel tank could withstand an impact of that magnitude. The plaintiffs countered with expert testimony which placed the speed at 49 mph.
The battling experts testified for five days.
"This is a critical point because GM admitted that the tank shouldn't have leaked if the speed was less than 50," says Spagnoli.
Spagnoli argued that the absence of major injuries, only two broken legs among six victims, supported their argument that the drunk driver was going less than 50 mph.
"We just couldn't see how eight people in two cars, all not seat belted, walk away from a 70 miles per hour crash," says Spagnoli. "It just slaps you in the face. How could this happen?"
The jury decided the issue in favor of the plaintiffs.
Meanwhile, Panish and Spagnoli set out to prove that the Malibu's fuel system was defective even at speeds below 50 miles per hour.
This is where the years of document discovery paid off.
According to Spagnoli, GM had been unwilling to turn anything over without a protective order, which typically took months.
"Then they'd give you so much it was like looking for needles in haystacks," she says. "Or you'd get crash test photos that were illegible Xeroxes. So then we'd ask for stuff we could actually read. And they'd continually give it to you in little pieces. Or you'd get waves of stuff never knowing if you had it at all."
Panish adds that he spent "thousands of hours" traveling between L.A. and Detroit, where they pored through boxes upon boxes of documents and microfiche in the offices of GM's local counsel.
"I'd sit there 8-10 hours a day with people watching me like a hawk," he says. "And we had to make motions to compel for almost everything. The judge even had to appoint a retired judge to act as a referee who we had to pay - to rule on these motions. It all took an unbelievable amount of time." They hit pay dirt when they unearthed results from GM crash tests conducted between 1978 and 1981. These test revealed that in approximately 45 tests at less than 50 mph, the Chevy Malibu fuel system encountered 14 leaks and 5 "incipient" leaks after GM certified its crashworthiness to the government. An incipient leak is a near-miss that occurs when a hold forms in the tank or when a car part comes in close contact with the tank.
Panish says that these test results showed the jury that the fuel system was defective and that GM knew it especially when coupled with testimony from GM engineer William Cichowski, who said that since 1968 every GM "!-body" sedan except the 1979 Malibu was designed with the fuel tank further forward than in previous models.
Cichowski admitted on the stand that GM was doing this to improve crashworthiness - proof that GM knew that the Malibu's system was unsafe, says Panish.
But the most dramatic moment came outside the courtroom. GM had consultants conduct a special crash test in 1998 during the pretrial stage to show that the Malibu's fuel system could withstand a 50 mile per hour crash test.
When GM lawyers took jurors to see the crash test results, they were shocked to find the tank leaking.
As part of Cichowski's testimony a year later, the jury and the judge went to GM's garage to look at the test car.
"They lifted it up and there were these reddish-orange drops coming from the tank," says Spagnoli, referring to the solvent used instead of gas during crash tests. "The jurors noticed and one of them [asked] for the tank to be taken out. They could only see the underside, which was basically clean, so they wanted to look at the whole tank, but GM refused."
Cichowski denied that the tank had actually leaked during the test, insisting that the solvent must have appeared as a result of the car's handling after the test. So Spagnoli presented him with pictures of the car that the plaintiffs' accident reconstructionist took right after the crash test. These pictures showed that the underside of the tank was streaked with solvent. "This was the last slam of the door on their claim that the tank didn't leak," says Spagnoli. "Cichowski seemed like he was caught totally unaware and wasn't prepared for what we had and after the trial, the jurors were very critical of this crash test."
Shapiro, however, contends that the tank never leaked, either during the test or at the jury view.
"During the test there was slight leakage from the gas cap, but it was less than the one ounce per minute permitted under safety standards," he says. "And at the jury view, it was transmission fluid that the jury say, not solvent from the gas tank."
Furthermore, he contended that the refusal to honor the juror's question to remove the gas tank was a mutual decision by both sides. Neither wanted to drag out an already lengthy trial, he said.
Spagnoli, however, insists the decision was entirely up to the defense.
Lowered Standards
Even with strong evidence that the Malibu fuel system was defective, the plaintiffs couldn't win without showing that GM could have done something to remedy the situation.
They did this by analyzing GM internal memos, meeting minutes and test results dating back as far as the 1950's.
Their focal point was 1966, when the federal government first proposed a new safety standard requiring that fuel tanks be able to survive a 30 mph "fixed rear barrier" test, which is roughly equivalent to a car traveling 60 mph hitting a stationary car.
The National Highway Traffic Safety Administration solicited public comment on the proposed standard at the time and kept it all in a docket. The docket included four boxes of comments which Panish and Spagnoli sifted through. Amidst the mass of documents they found replies from GM saying the company couldn't possible meet the standard.
But the internal GM documents Panish uncovered during discovery tell a different story. For example, he obtained:
- A 1966 report by a GM safety engineer stating that the company could quickly meet the standard.
- A 1971 memo by GM engineer Jack Ridenour reporting that NHTSA's proposed standards could be met by placing the gas tank over the rear axle.
- A report from GM engineer Fred Aldrich, stating that crash test indicate that GM cars could meet the proposed standard.
- A 1971 internal proposal for tank-over-axle design.
- A 1959 GM patent on such a design claiming that it would position the tank "beyond the danger of damage".
Panish and Spagnoli introduced all this evidence at trial through the testimony of Paul Mutty, GM's chief fuel system designer.
"It all establishes that GM was saying one thing internally and telling the government another," says Panish. "They were telling the government it wasn't feasible to meet the standard. Yet at the same time, all their documents and tests showed they could."
The plaintiffs' team also delivered a bit of White House intrigue.
Panish and Spignoli obtained a deposition given in an earlier GM case by the late Nixon staffer John Ehrlichman. In the deposition, Ehrlichman described a secret 1971 Oval Office meeting between him, President Nixon and GM Chairman James Roche. During the meeting, Nixon and Roche allegedly discussed pending NHTSA safety standards. According to Ehrlichman, Roche expressed concern that the proposed standards would hamper GM's ability to compete with foreign automakers.
Ehrlichman testified that after meeting, Nixon promptly ordered him to speak with the Secretary of Transportation, John Volpe, about tabling all pending standards, including the 30 mph fixed rear barrier test. That standard was never adopted - instead the NHTSA adopted the more lenient 30 mph "moving barrier test," which approximates a car hitting stationary car at 42 mph.
Spagnoli adds that it was a huge battle getting this into evidence.
"But after a lot of arguments, we were allowed to read Ehrlichman's deposition into the record," she says.
Meanwhile GM called Douglas Toms, the head of NHTSA during the early 1970's in an attempt to set the record straight.
"He came in very determined to make it clear the he was a public servant who would never bend to any kind of pressure," Spagnoli recalls. "But on cross-examination, he revealed that he had back-door conversations with GM people where he basically told them they need not worry about a higher test speed. He told them this at a time when their safety review board was about to order a tank-over-axle design in 1973 in anticipation of a higher standard."
After that, GM tabled the design. Spagnoli says this all made a huge impression on the jury.
"They said after the trial that they were amazed how polite the process is for government safety standards," she says.
Shapiro, however, says the Ehrlichman testimony should never have been admitted.
"It's hearsay and it's unreliable [the plaintiffs] just tried to create this whole conspiracy with the Nixon administration,' he says. "But if you listen to the tapes [of the Nixon meeting] there was absolutely nothing about fuel systems. They were talking mostly about passive restraining systems like airbags and seat belts."
'Iveygate'
The single most important moment in the case occurred when the trial judge allowed the "Ivey" memo into evidence.
According to the plaintiffs, the 1973 memo was powerful evidence that GM conducted a cost-benefit analysis and decided that it was willing to risk human life than implement an $8 repair. In this memo, GM engineer Ed Ivey estimates that 500 fatalities occur each year from gas tank fires and calculated that it would cost $200,000 to settle each resulting case. With 41 million GM cars on the road at the time, Ivey estimated the litigation cost at $2.40 per car. The plaintiffs also showed the jury a second memo, written by a GM engineer in 1971, which said it would cost GM $8.59 per car to implement a tank-over-axle design. The plaintiffs then connected the two memos with a series of other documents including:
- A March 1973 directive that the cost benefit ration must be evaluated before GM released any components that exceed government standards;
- A June 6, 1973 memo assigning Ridenour to procure a summary of fire related lawsuits against GM and assigning Mutty to get a breakdown of the cost of the tank-over-axle design; and
- A document in Ivey's personnel file stating that his job duties were to analyze designs, prepare mathematical calculations and report the results.
This all drove the point home that instead of spending another $8.59 to put the tank over the axle, GM said "Forget it, we'll fight the lawsuits," said Panish. But none of this would have been possible without getting the Ivey memo into evidence.
A GM lawyer first discovered the Ivey memo in 1981. At the time, the lawyer warned in a memo that the documents that Ivey generated "are undoubtedly some of the potentially most harmful and most damaging were they ever to be produced."
But when the document was first obtained by the plaintiffs' lawyers in 1984, they couldn't get it into evidence. Ivey gave deposition testimony in more than a dozen cases that he drafted the memo completely on his own and, to his knowledge, nobody else ever saw it. Without any evidence to contradict this, judges ruled that it was too damaging to admit.
"So plaintiffs' lawyers spent more than 10 years searching for evidence to explain why Ivey wrote the memo," says Spagnoli.
The plaintiffs' bar found the crucial link in the 1981 notes of GM lawyers who interviewed Ivey in anticipation that his memo would eventually have to be disclosed. Those notes were discovered by lawyers working on an earlier case against GM.
In the interview, Ivey stated that he wrote the memo "for Oldsmobile management" to "figure how much Olds could spend on fuel systems." He also said he probably distributed the memo to Mutty and five other managers.
Plaintiffs' lawyers knew about these notes for quite some time, but GM characterized them as "deposition summaries" and used the attorney-work privilege to avoid producing them. But in 1998, a judge in a Florida case ordered them released. In that case, the Ivey memo was admitted for the first time. The judge in Anderson followed suit.
"We truly owe a lot to the lawyers who'd gone ahead of use and uncovered a lot of stuff," says Spagnoli. "In this case, it puts things into perspective that the Ivey memo was no orphan phantom project without meaning at GM."
Despite the interview notes, Ivey stuck to his story. So did his boss, Mutty, won testified at trial that he couldn't have seen Ivey's memo because it was dated the last day of Ivey's assignment in his department.
So Panish quickly presented Mutty with Ivey's employment records indicating that his assignment didn't change for another month.
"It was almost humorous," says Spagnoli. "He's just gotten done saying he can't remember things that happened 20 years ago and here is making an off-the-cuff comment that Ivey wrote the memo on a Friday. He was a likable witness, but this made him look like he was rehearsed. The odd inconsistencies showed a selective memory for things that helped his position, and I don't think the jury believed him."
The plaintiffs' lawyers enhanced the power of the Ivey memo by introducing evidence that Ivey got a 22.5 percent raise in 1983, three days before the memo was first produced to plaintiffs' lawyers. In his previous 14 years at GM, Ivey's average pay raise was between 4 and 5 percent each year.
"This is at a time when there's a gas crisis, an oil embargo and a recession, and GM is laying off thousands of employees," says Panish. "So to me it looks like he got a big raise to get amnesia." He testifies 13 times between 1984 and 1999 that he doesn't remember why he prepared it and doesn't have any knowledge that it was distributed to anyone."
Shapiro, however, insists that the plaintiff never properly connected the Ivey memo to OM's decision on where to put the tank.
"The fact is, there's still absolutely no testimony from anybody that suggests that a design decision was ever based on the Ivey document," he says. Even Ron Elwell, the ex-GM engineer the plaintiffs brought in to testify against GM, couldn't link the memo to the decision-making, Shapiro adds.
"This guy makes his living at $400 an hour testifying against GM and his specialty is the fuel system," he says. "But even he couldn't point to a single decision ever made or influenced by the Ivey document."
Emotional Testimony
Testimonies from Anderson and her three oldest children sealed the compensatory damages award.
For example, the children each spoke of their deformities and how they were teased by classmates and stared at by adults.
"Alisha spoke movingly about waking up in the hospital and seeing that her hand had been amputated," says Panish. "And her sister Kiontra talked about seeing Alisha go through the painful whirlpool treatments where they'd scrape off her dead skin each day."
Anderson talked about being hospitalized for serious burns of her own, but checking herself out of the hospital the next day to visit two of her children in separate Los Angeles County hospitals.
"And she told of how she kept her house decorated for Christmas for five months until the children all came home to finally celebrate the holiday and the fact that they were all still alive," Panish recalls.
