Anyone who hoped that commercial litigation might help law firms weather the recession was surely disappointed last year.
That’s judging by the recoveries Nat­ional Law Journal affiliate VerdictSearch counted among its Top 100 Verdicts of 2009. Commercial verdicts, including breach-of-contract recoveries, fell from $1.4 billion in 2008 to $421 million last year. Fraud recoveries plummeted by nearly 70% to $561.3 million. Intellectual property litigation saw an increase — from $2.2 billion to $2.6 billion. But that picture was distorted by a single massive recovery: Centocor Ortho Biotech Inc.’s $1.67 billion verdict against Abbott Laboratories in the Eastern District of Texas. Absent that result, patent judgments would have declined significantly.
In fact, absent the Centocor verdict, overall recoveries would have declined from the 2008 level of $8.93 billion to $7.3 billion. Counting Centocor, the bottom line managed to increase by 1%, to $8.98 billion.
What happened, according to law firm litigation department heads interviewed by the NLJ, was that corporate clients worked to control costs by waiting to file suits. They likely will continue do so through the first half of 2010, said Peter Haveles Jr., co-chairman of Kaye Scholer’s complex commercial litigation department. “Part of it is deferring activity and not necessarily commencing a lawsuit if you can sue now or a year from now,” he said.
A bright spot for plaintiffs’ attorneys was personal injury causes of action. Medical malpractice awards jumped from $321 million to $509.2 million; motor vehicle verdicts hit $738.9 million (up from $470 million); and products liability jumped to $1.1 billion from $458 million the year before.
VerdictSearch’s list is included as an insert in this edition of the NLJ. The list derives from jury verdicts reported to VerdictSearch by attorneys, found on court dockets or reported by other ALM Media LLC publications. The list does not account for post-verdict adjustments or the outcome of appeals.
Centocor’s recovery was roughly twice the size of last year’s second-largest verdict — $812.8 million in a Racketeer Influenced and Corrupt Practices Act case in the District of South Carolina, General Holdings Inc. v. Cathcart. [See "Credibility was at issue in 2009's largest verdict, Page 22.] In 2008, the largest verdict returned was $606.7 million for breach of contract. The largest recovery in 2007 was $1.5 billion in an intellectual property dispute.
Reviewing the landscape, Steven Yerrid of The Yerrid Law Firm in Tampa, Fla., concurred with Haveles’ assessment. “In tough economic times, people are going to look at the efficiency of taking a case through the full cycle of litigation,” he said. That was true in all types of personal injury cases, from products liability to wrongful death, yet plaintiffs can still win an “enormous result,” he said. Yerrid’s $330.5 million motor vehicle verdict in Estate of Hagman v. Marcone in Hernando County, Fla., Circuit Court ranked No. 6 on the VerdictSearch list.
A number of clients reached out directly to parties that were threatening to sue them for patent infringement or sought low-cost lawyers to handle such threats, despite the risk of attracting more lawsuits, said Kathi Lutton, the Redwood City, Calif.-based global head of litigation at Fish & Richardson. “They were figuring, ‘We just need to figure out a way to get out of it early and cheaply,’ ” Lutton said. “ What we got internally from in-house counsel is that a lot of decisions were driven by the accounting department.”
Disputes that did mature into lawsuits were likely to result in big-ticket verdicts when a consumer product infringed, said Paul Hayes, an intellectual property partner at Boston’s Mintz, Levin, Cohn, Ferris, Glovsky and Popeo.
Hayes’ $388 million verdict for Uniloc U.S.A. Inc. in a District of Rhode Island case against Microsoft Corp. was last year’s No. 3 verdict.
Although plaintiff-friendly venues like the Eastern District of Texas have traditionally churned out eye-popping intellectual property verdicts, Hayes said that Microsoft’s high sales and profits from using the infringing products drove his recovery skyward. The case involved Uniloc’s patent on an anti-piracy software registration system.
“I can’t see [patent] verdicts going down,” Hayes said. “I think, frankly, they’re justified. If you steal the apple, you pay X. If you steal the bushel, you pay Y. If you abscond with the orchard, so be it. Most jurors get that.”
Companies conserved cash last year by postponing commercial cases when the statute of limitations allowed a delay, said Steve Fennell a partner and litigator at Washington’s Steptoe & Johnson LLP.
“We didn’t get the overall explosion of companies’ suing each other to increase cash” in this recession, Fennell said.
Even case filings about financial instruments blamed for the financial meltdown in autumn 2008 were lighter than Fennell expected.
“There were some cases, but not anywhere near [the number] dictated by the crisis,” Fennell said.
Now, nearly 1 1/2 years after Lehman Brothers’ Sept. 15, 2008, bankruptcy filing, Fennell expects an upswing in lender liability cases against companies that crafted exotic debt instruments. These cases could include claims for breach of contract and fraud. Potential plaintiffs “may decide that, in the process of creating instruments, people failed to use due diligence and other people may have committed fraud,” he said.
Haveles expects lawsuits stemming from commercial loan defaults to present a principal area of commercial litigation this year. “You’ll see the lenders suing the borrowers and the guarantors to enforce their loans and recapture the property,” Haveles said. “That’s not going to change until you see an improvement in real estate values and a lending market where people can refinance and deal with loans coming due.”
Securities class actions were down, but the recent modest pickup in corporate transactions is spawning more shareholder suits, said David Kotler, a Princeton, N.J.-based partner in Dechert’s white-collar and securities litigation groups.
Any merger or transaction that causes a change in control of a company can trigger a federal or state action for breach of fiduciary duty, he said. Even smaller deals valued at less than $15 million are attracting lawsuits.
“The plaintiffs’ bar believes they have the leverage [because] the companies and the boards have entered into a transaction they want to close,” Kotler said. “I have every reason to think it’s going to continue as the pace of transactions continues to pick up.”
BIG PHARMA’S ‘DISCONNECT’
Beyond commercial law, pharmaceutical products liability and wage-and-hour cases burned up the dockets last year and are gaining steam this year.
The plaintiffs’ bar’s success with pharmaceutical products liability cases last year “has occurred without distinction between jurisdiction, venue or jury pools,” said Tobi Millrood of Conshohocken, Pa.-based Pogust Braslow & Millrood.
Millrood won a $34.3 million verdict in Kendall v. Wyeth Pharmaceuticals Inc. in the Court of Common Pleas of Philadelphia County, Pa.; it ranked No. 51 on the VerdictSearch list. The outcome was “a real reflection of the disconnect Big Pharma has with Main Street,” he said.
The jury ruled that Wyeth, which was purchased by Pfizer Inc. during the trial, failed to warn about cancer risks related to the hormone replacement drugs Premarin, Provera and Prempro.
Strong pharmaceutical cases are going to trial now because pharmaceutical companies have been offering low settlements, Millrood said.
“I’ve really never seen such a strong bond between juries and plaintiffs,” Millrood said. “They really, really are understanding how the corporate disregard for safety and corporate intent to put profits over safety can leave modest, hard-working people in ruin.”
In the employment law area, plaintiffs’ lawyers are picking up new wage-and-hour cases when potential clients ask about suing for wrongful termination, said Robert Pattison, managing partner of the San Francisco office of Jackson Lewis.
“The astute plaintiffs’ lawyer will start asking, ‘How did you get paid and what kind of hours did you work?’ ” Pattison said. “ Even if it’s not really a viable wrongful termination or discrimination case, compliance with wage-and-hour laws has been a really tough thing for employers.”
Wage-and-hour class actions are sweeping across the country, Pattison said. They tend to involve inadequate meal and rest breaks, tip pooling and whether employees are classified as exempt or nonexempt, which determines whether they receive overtime pay, he said. “It’s almost like they’re working their way through the labor code,” Patti­son said. “That’s been an active part of employment litigation.”
Sheri Qualters can be contacted at firstname.lastname@example.org.