Another View: Corporate Cooperation Taken to New Lows
The Deferred Prosecution Agreement (DPA) entered into between KPMG and the U.S. Attorney's Office for the Southern District of New York on Aug. 29, 2005, is just the latest example of the federal government's perverting the notion of corporate cooperation, so that 'cooperation' means uttering only the words that the government authorizes. Corpora-tions are increasingly faced with the option of being put out of business or capitulating to the demands of overzealous prosecutors who possess seemingly unchecked powers. The ability of prosecutors to force corporations to accept a full complement of draconian provisions too frequently results in individual employees' being left behind to take the fall for the 'good' of the company. KPMG's acceptance of the terms of the DPA is a clear example of how these prosecutorial powers can strip individuals of their constitutional rights.
Case Notes
Highlights of the latest product liability cases from around the country.
CPSC Gets Aggressive About Failure to Report
In the last few years, the compliance staff of the U.S. Consumer Product Safety Commission has sought a number of significant civil penalties for failure to report or for late reporting. It is instructive to look at recent civil penalty cases to see what is important to the CPSC staff in assessing the appropriateness and level of penalties. First, however, let's examine the reporting requirements.
Does Your Client Owe a Duty to Protect the Public from the Misconduct of Third Parties?
The April 19, 1995 Oklahoma City bombing stunned the nation, not only because of the horrific nature of the act itself, but because no one thought that products as common as agricultural fertilizer and motor-racing fuel could be used to incinerate a federal building. Six years later, the 9/11 terrorist attacks again sent the nation into shock at the idea that a group of people would commit a suicide attack by taking control of four planes and crashing them into multiple buildings. These violent attacks are proof that common products are being used, and oftentimes manipulated, in an improper manner for improper uses. Consequently, the victims of such attacks are suing manufacturers and handlers of these common products for alleged negligence, even though a third party committed the act in question. If your client is a manufacturer or handler of a product, how can you help protect it from liability?
Putting Plaintiff to the Test: The Crashworthiness Doctrine
When faced with a 'crashworthiness case,' manufacturers in the automotive, trucking, or aircraft industries enjoy a distinct legal advantage over the plaintiff. Indeed, in the many jurisdictions where the crashworthiness doctrine is recognized, the plaintiff's burden of proof in such cases is dramatically higher than in the standard product liability action. In the automotive context, these cases are sometimes referred to as 'second collision' cases because the manufacturer's liability is based not upon the 'first collision' between the vehicles involved in the accident, but the 'second collision' comprised of the physical contact made between the plaintiff's body and the vehicle's interior.
Practice Tip: Failure-to-Warn in Toxic Product Cases ' Proceed with Caution
All product liability cases are difficult; however, a toxic product case (one which involves a substance that has caused injury during its use or application) poses more of a problem than most others. For example, some spray paints may contain toxic substances that are part of the product's composition. Therefore, the product does not have a manufacturing or design defect, but may require special warnings. The warnings on such products may be covered by the Federal Hazardous Substances Act ('FHSA'), which requires hazardous household products sold in interstate commerce to contain cautionary labeling. 15 USCA 1261. (A 'hazardous substance' is toxic, an irritant, or a strong sensitizer if the substance may cause substantial personal injury or illness as a result of any reasonably foreseeable use.)
FDA's New Labeling Rule Asserts Federal Pre-emption of State Product Liability Claims
On Jan. 18, 2006, the U.S. Food and Drug Administration ('FDA') issued a final rule to revise the required format of prescription drug labels so as to enable physicians to find the information they need more readily. New features include a section called 'Highlights' and a Table of Contents. According to the FDA's press release, this is the first time in 25 years that the labeling requirements have undergone a major revision.
How to Avoid Regulatory Sting
As this article is being written, Visa USA is set to announce newly updated information security guidelines that cover all merchants, member banks, service providers and software vendors (who build, for example, point-of-sale and e-commerce applications) ' and those who process, transmit, or store credit or payment card data. The standards will also be accepted and endorsed by MasterCard, Discover, Diners, JCB and American Express. The newly revised standards resolve differences in how the industry has been evaluating security compliance and in doing so, support on-going efforts for combating fraud, which Visa estimates has now dropped to a historic low of five cents on every one-hundred dollars of transaction volume. Fail to comply with the new standard and suffer a breach, and a member organization could be facing fines of up to $500,000 from Visa.
Internet Disclosures Can Cost Your Company
As the Internet opens pathways to doing business that could scarcely be imagined a decade ago, it also presents increasing dangers to public companies in the form of new liability risks. The instantaneous nature of the Internet can be both boon and bane to companies seeking to harness it to provide information to, and create goodwill with, shareholders. Not only can information be disseminated over the Net in a fraction of a second for worldwide viewing, but it has become a predominant source of investment news. Financial updates, product developments, information tidbits, even rumors ' all are now posted 24/7 on the Web for consumption by anyone, including investors who are poised to take advantage of the latest intelligence.
Electronic Discovery Year in Review: Where We've Been, Where We are Going
Last year was explosive for the electronic discovery industry. From enormous jury verdicts to proposed changes in the federal rules, the legal and business landscape for e-discovery has never been more in flux. While more e-discovery vendors have entered the market this year, mergers have also consolidated the industry like never before. Meanwhile, case law continues to grow to include not just the very well publicized sanctions cases, but also opinions that have honed in on some of the technical challenges of e-discovery.
