Vested Interest - News and Notes - May 2004 Issue

Turnaround Doesn’t Boost CEO’s Pay

State Farm Insurance Cos. cut its CEO’s pay last year despite turning a profit for the first time in three years. Edward B. Rust Jr., CEO, received $1.76 million in salary and a bonus of $2.20 million in 2003. The total of $3.96 million was down 6 percent from $4.21 million in salary and bonus for 2002, according to a company filing with the Nebraska Department of Insurance. State Farm posted net income of $1.5 billion last year after a loss of $2.0 billion in 2002. A spokesman says that State Farm’s executive pay is based on an average performance over a three-year period. (Crain’s Chicago Business – April 15, 2004)

Opinion by Paul Brodeur in the Nation: Educating Senator Frist

"In the Senate, majority leader Bill Frist has said he will make it a ‘personal priority’ in the present session of Congress to deal with what he calls ‘the current asbestos litigation crisis.’ Frist intends to do this by persuading his colleagues to enact Orrin Hatch’s Fairness in Asbestos Injury Resolution Act, known as the FAIR Act to its advocates, and as the Frist/Hatch asbestos bailout bill to its detractors. In a speech before the Senate in November, Frist described the Johns-Manville Corporation and W.R. Grace & Company as ‘reputable companies’ that had been driven into bankruptcy because of asbestos litigation. What he apparently did not know was that Johns-Manville had not only been aware since the early 1930s that incurable asbestos lung disease was disabling and killing its own workers but also had instituted a corporate policy not to inform sick workers about X-ray findings showing that they had developed asbestos disease. In an infamous memorandum, the medical director of Johns-Manville described his company’s policy toward unimpaired workers with X-ray evidence of lung damage as follows: ‘The fibrosis of this disease is irreversible and permanent so that eventually compensation will be paid to each of these men. But as long as the man is not disabled it is felt that he should not be told of his condition so that he can live and work in peace and the Company can benefit by his many years of experience.’ Is it any wonder that when presented with such evidence from internal company documents, jurors in what Senator Frist calls ‘the flawed tort system’ began meting out punitive damages against Johns-Manville for outrageous and reckless misconduct?" (ATLA Law News Digest – April 22, 2004)

FDA Seeks Reports of Stent Problems

The Food and Drug Administration is actively seeking reports of possible problems with a stent that came on the market, saying it has heard of serious medical complications in some cases. But Dr. Daniel G. Schultz, director of the agency’s office of device evaluation, said in a telephone interview that it was too soon to say whether there was a problem with the stent and, if so, what was causing it and what advice to give doctors and patients. The FDA knows of 20 to 25 incidents, but the reports range from sketchy to highly detailed. Paul LaViolette, senior vice president at the company, said more than 70,000 of the stents had been used in the United States since the device went on sale in March. "We have to conclude, and I will say this with a lot of experience, that this product is performing extremely well," Mr. LaViolette said. But a few cardiologists reported in telephone interviews that they got into trouble after the stent, a small wire tube used to hold open arteries, was slipped into place. (ATLA Law News Digest – April 29, 2004)

Court Dismisses Challenges to Cigna’s Settlement

A federal appeals court dismissed challenges to a $540-million settlement between Cigna Corp. and thousands of doctors who claimed the health insurer systematically underpaid them. The bulk of the nation’s doctors, some 700,000, have signed on to a massive racketeering lawsuit against the managed-care industry, charging the insurers with breaching contract terms by shortchanging them on payments and curtailing necessary patient care. Philadelphia-based Cigna won approval for its settlement in February. But a small group of doctors disagreed with the settlement and attempted to derail the deal through the courts. Under the settlement, Cigna agreed to spend $400 million to improve its billing systems and pay about $70 million to doctors in addition to $55 million in attorneys’ fees. (ATLA Law News Digest – April 29, 2004)

Banker’s Column Sparks Call for Boycott

The Washington state association of trial lawyers is asking members to stop banking with Wells Fargo after its local CEO penned a guest column decrying "frivolous lawsuits" and the "greed of trial lawyers." John Rindlaub, Pacific Northwest CEO for the multistate bank, said the column represented the views of the Greater Seattle Chamber of Commerce, where he serves as chairman - not those of the bank. Both titles appeared on the column, which ran February 26 in the Seattle Post-Intelligencer. The column centered on the debate over liability or tort "reform," including the issue of medical malpractice cases. The Legislature was debating the issue at the time. A Wells Fargo spokesman, said: "We apologize if Mr. Rindlaub’s remarks were interpreted to be the words of Wells Fargo, because they were not." The president of the Washington State Trial Lawyers Association is behind the boycott of the bank. She has proposed that Wells Fargo take out an advertisement supporting a "fair and balanced tort system" and the benefits to society when those who engage in wrongful conduct are held accountable. Massong has called on trial lawyer association members to "find another financial institution" - one that shares "your commitment to the civil justice system." She has received "a stack of letters an inch thick" from lawyers who say they’re canceling business with Wells Fargo. (ATLA Law News Digest – April 29, 2004)

Ford Overruled Safety Team on Recall

Ford Motor Co. overruled recommendations from its safety engineers to recall as many as 4.1 million pickup trucks and sport-utility vehicles that were found to have substandard door latches, court documents indicated. A Ford safety engineering team determined in March 2000 that door latches on certain 1997 to 2000 light trucks did not meet federal safety standards. The trucks include the popular F-150, F-250, Expedition and Lincoln Navigator models, according to internal Ford memos made public as part of court cases. After the recommendations, Ford ordered immediate design changes for future vehicles. But the automaker decided against a recall, which could have cost as much as $527 million. The company determined instead that the latches could pass a rarely used alternative compliance test. (ATLA Law News Digest – May 6, 2004)

Pennsylvania Medical Society Admits: Can’t Back Up Claims of Doctor Exodus

The Pennsylvania Medical Society admits it made unsubstantiated claims in its campaign to scare citizens and lawmakers into believing that a medical malpractice crisis justifies changing the state constitution and curtailing the legal rights of injured patients. The medical society has insisted that malpractice insurance costs have driven as many as 1,700 doctors out of Pennsylvania. But on April 22, the chairman of the medical society finally acknowledged to state legislators that data shows the state has gained 800 doctors over the past two years, as reported by the Morning Call of Allentown. The press release reads: "...This admission is in accordance with one of the crucial findings by Public Citizen, which issued reports in 2003 and 2004 presenting statistics about medical malpractice in Pennsylvania. Public Citizen found that the number of physicians practicing in the state increased by 1,859 from 1994 to 2002. The most recent report also found that the annual number of medical malpractice payouts has declined and the number of large jury awards in malpractice cases has dropped sharply. ‘The doctors’ lobby wanted Pennsylvania to blame its malpractice insurance problems on injured patients and their lawsuits - and the medical society was willing to use no facts and false facts to make its argument,’ said Public Citizen’s Congress Watch." (ATLA Law News Digest – May 6, 2004)