YOUR COMPANY NEEDS TO TESTIFY AT DEPOSITION/TRIAL:

NOW WHAT?

One of the certainties of business is that at some point, someone, is going to bring a legal action against your company.  The federal courts and virtually all state courts allow for the deposition of corporate representatives.  Federal Rule of Civil Procedure that governs this process is 30(b) 6. As such, corporate reps are often referred to as 30 (b) 6 witnesses. You may have already served in this capacity, but the lessons addressed below have been a pitfall for one or more of RRS’ clients’ testimony, and are not merely theoretical examples of problems that can arise.

Who Should Be The Corporate Representative?

In most cases, the company can choose its corporate representative.  Although the plaintiff may require that a particular individual testify, they usually instead serve a corporate subpoena, which permits the company to select the person who will testify.

The deposition request generally includes a list of subject matters to be covered.  This allows the company to identify the proper persons to testify.  The representative should either have first-hand knowledge for each topic, or must learn about them.

The company is permitted to use separate representatives for each topic.  If there is a topic regarding sales, the person to testify on this issue may be the sales manager.  If another topic is, for example, quality control, the company might designate the production manager or an engineer.

At trial, you may decide to use one well-spoken individual to testify on all matters.  But for a deposition, which will become a cold, black-and-white transcript, you may want to have several people testify in their areas of specialty.  Before trial, the company designated corporate representative will have an opportunity to review the others depositions to familiarize him or her with all prior testimony in the case.

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So, You Have A Case In Canada, Eh?

Litigation in Canada is different.  Some politicians tout its “Loser Pays” philosophy.  But, Canada’s theoretical advantages as a litigation forum are undermined by practical realities.  In the end, there are advantages and disadvantages but, without a doubt, it is “different.”

Loser Pays – Sort Of

Canada has long had a system of “Loser Pays,” much touted by tort reform activists.  Indeed, this system has been successfully used by Risk Retention Services in two cases, one in which a gymnastics supply company recovered $50,000 from the plaintiff, and the other time successfully convincing the plaintiff to dismiss his case rather than face the possibility of paying the defendant’s  attorney fees.  These experiences are, however, far from the norm.

First off, the amounts of attorney fees that are ordered to be paid are up to the discretion of the trial court.  It is not unusual for the trial court to order that the defendant pay virtually all of the plaintiff’s attorney fees, but only a modest portion of defense fees when a defendant prevails.  There are mechanisms for maximizing the potential recovery, but since the Canadian system, in practice, is far less adversarial than in the United States (addressed below), these methods are rarely employed.

Even where the court does order the plaintiff to pay fees, this is not a real victory, for it is a rare claimant indeed who has any money to pay for such a judgment.  Thus, while you get a court order requiring the plaintiff to pay, it often is a judgment proof order.  These realities are explained to claimants by their attorneys, so unless the claimant has assets (including a home) the threat of pursuing costs is not always taken seriously.

The rarity of such a claim can be seen in our two cases (two different provinces), and was argued at mediation.  The mediators in both cases had never before heard of a defendant actually holding out for attorney fees.

In the gymnastics case, the plaintiff, after much cajoling, agreed with the mediator’s recommendation that she dismiss her claim.  The equipment company we represented refused to allow the case to be dismissed without the payment of most of the attorney fees.  This tactic worked because the claimant, a daughter of a parliamentary MP, had assets.

Normally, however, the “Loser Pays” system merely increases the cost of settlement.  The plaintiff almost never pays and does not take such a threat seriously.  But the plaintiff attorney, from the outset, adds his fees to the top of the settlement demand (so a case that should settle for $100,000, would settle for $100,000 plus attorney fees).

Initial offers are thus unreasonably high, and even in mediation, the mediator will never try to discount the fees.  Thus, the system is really a “defendant pays” attorney fees.  Not surprisingly, this actually promotes litigation, rather than limits it.  The attorney has nothing to lose by taking the case (most cases settle), and the recovery to the plaintiff is maximized, because attorney fees are routinely added to any settlement.

Less Work – More Money

In Canadian lawsuits, there are only pleadings (summons, petition, answers); and production of documents (not the documents others request, documents we want to use in the trial).  There are also “discoveries”, the Canadian word for “depositions”.

Discoveries in Canada are limited to parties, and the party gets to pick who will testify.  It is not unusual for the party to select an officer who knows nothing about the product or litigation.

When a witness does not know an answer, an “undertaking” is demanded.  This means that the party asking the question at the deposition requires that the party “undertake” to answer the question, or provide a document, that was not available at the deposition.

In practice, this means that very little information is provided at the discovery, and everything can be reviewed and answers drafted by the attorneys.  This is similar to interrogatories in the United States.

Meanwhile, absent a court order, there can be no depositions of witnesses including co-workers, family members or treating physicians. Experts, including physicians, provide bare-bones reports, and everything else is left to the imagination of the parties until trial.

Thus, there is truly far less work to be (or can be) done by the attorneys in Canada.  Meanwhile, it takes years for a case to get to trial, and virtually no trials are heard by juries.

In most cases, there is a right to a jury trial, but it is rarely employed unless the client demands it.

Still, litigation in Canada costs far more in Canada than the United States.  Experienced trial lawyers routinely charge $400-$600 per hour, and these attorneys use lowly associates (typically $250-450/hour) to work up the case.  There are letters between counsel, and numerous court status conferences (during which time nothing has been done).

The concept of bringing motions to compel is completely foreign, even when the limited discovery available is permitted.  Normally, the discoveries of the parties have to be completed within 1 year, but the parties almost never get around to completing these discoveries on time. Further, there are delays in obtaining medical examinations due to the Canadian medical system’s shortage of doctors.

Thus, while less work is performed, the litigation often costs more to perform. Perhaps it is the delays and costs of litigation, but in Canada, virtually all civil cases are resolved short of trial, usually at mediation.  This includes product liability cases that would normally be tried in the United States.

Typically, Canadian juries are more conservative and, remember, whether in settlement or verdict, the losing defendant must pay attorney fees.

In short, there are some advantages to the Canadian system.  You will be required to do far less work to prepare for discovery, and experts will never be deposed.  On the other hand, trial by ambush is always a difficult concept to get your hands around, and, even though far less work is performed, the attorney fees are routinely far higher than in most American jurisdictions.

The Canadian system has advantages, and disadvantages, but most of all, it is just – different.

COMING TO A COMPUTER NEAR YOU:

UNVERIFIED COMPLAINTS SOON AVAILABLE ONLINE

Congress has required the CPSC to create a publicly accessible, searchable, consumer product safety database.  It has taken some time, but the CPSC is now creating the database, and it will soon be online.

The importance, discussed at some length below, is that consumers can now enter information (true or not, documented or not) about safety concerns, that will be available to anyone with a computer and internet service.  Further, the responses to any such report will also be publicly available.  Thus, the response of a manufacturer or seller of any consumer product becomes even more important.  It is no longer a reply to a query, to be reviewed by the CPSC, but will be publicly available.

The database will include consumer reports of “harm”.  Harm is broadly defined, and includes injury, illness or death, or the risk of injury, illness or death.  .

The CPSC database will include all reports of harm along with the manufacturer’s comments and “any additional information the CPSC determines to be in the public’s interest.”

This, of course, puts the seller and manufacturer in a trick bag.  If you show that your design is not harmful, including the design drawings or test results (which may be proprietary or confidential), the CPSC may include this information if it is “in the public’s interest.”  But if you do not include such information, it will be difficult to show that your product is not “harmful.”

In theory, confidential information should be redacted by the CPSC (but you will be relying on the government to make such redactions).

The law provides that the CPSC will provide the consumer’s incident report to the manufacturer and then the manufacturer may submit comments in response, including whether any of the information is confidential or materially inaccurate.  The CPSC will

redact information that it agrees is confidential, and must notify the manufacturer if it disagrees.

The CPSC must publish the consumer’s “report of harm” within ten (10) days of transmitting it to the manufacturer.  In other words, from the time the CPSC mails it to you, it will be posting the report of incident for public review within ten days, regardless of whether or not you have responded, and regardless of what your response says.

Thus, while you have more than 10 days to respond, the public information (the incident report) will be posted regardless of whether you have responded.  If you have a strong response, therefore, it behooves you to act very quickly to put together an appropriate response so that it is legally appropriate, addresses the issues, and meets all requirements in time to be posted with the incident report.

In addition, all further responses and activity will also be available online, provided that the CPSC believes that it is “in the public interest.”

Previously, the CPSC file on any incident (often over 100 pages long in a simple matter even without a defect) would be available only through a freedom of information (FOIA) request.  When the CPSC received such a request, it would then send to the manufacturer a letter with the documents it proposed sending to the requester.  The manufacturer would have 20 days to respond as to whether the documents are confidential or should be withheld for any other reason.

Those days appear to be over.  It now appears that the information in the file will ALL be available to the public on a searchable internet database, unless the CPSC makes a determination at the time of receipt that the information is confidential or is otherwise privileged.

The Impact The practical impact of the on-line database is substantial, and the lessons seem to be as follows:

1. An appropriate response to an incident should address the concerns, but be mindful that any response could prompt further CPSC action.  Thus, consultation with professionals (including legal counsel familiar with CPSC laws, regulations, and practical realities) is essential.  However, at least a preliminary response should be drafted and sent to the CPSC so that it can be included with the Incident Report.  One fear of those who do not trust government is that the initial complaint will be timely posted, but that responses will be posted when the civil servants staffing the CPSC “get around to it.”  A fast response is intended to minimize this risk, so that the same government employee will save time and effort by posting both the initial report – and your response – at the same time.

2. When In Doubt – Mark Documents “CONFIDENTIAL.” Other than you r initial response (which will by its nature be general), any documents that include actual designs, sales figures, proposed modifications, or other information that you may consider Proprietary or Confidential, should be CLEARLY MARKED on EACH PAGE as being Proprietary and Confidential.

There are (theoretically) severe penalties on government employees who divulge confidential information.  It appears that those laws will apply despite the new publicly accessible database.

Thus, when in doubt, mark the document “Confidential and Proprietary.”  Think about it this way.  Your designation will require a government civil servant to consider the document as being Confidential and Proprietary.  Now, the employee might utilize his initiative and decide that the document was NOT confidential, and that the designation was inappropriate.  But, that same employee knows that, if his actions, taken of his own initiative, are wrong, and proprietary or protected confidential information is divulged, then he (or she) can, personally, be responsible for such action.  There is not only no governmental immunity; there are civil and criminal penalties for such action.

So, be proactive, and mark documents that you would not want the public to see, as being PROPRIETARY and CONFIDENTIAL.

3. Monitor The Site.  Once the site is up and running it is important that you monitor the site once you receive an incident.  You need to ensure that your initial response is timely included in the database, and that the information is accurate. 

In many ways, the CPSC can be like the IRS.  It is a government bureaucracy that can make your life miserable. But it is worse.  The public has no right to know about an IRS audit.  Without real vigilance, the CPSC database could easily become a source where complaints, whether accurate or not, are available to the public along with  your confidential information available, to be reviewed by those scum sucking bottom dwellers that we affectionately refer to as ambulance chasers.

RRS has experience addressing CPSC issues for clients and is available to help you monitor the CPSC database and respond to any information posted about your products or company.  If you are interested please give Paul a call.

ACTIVITY REPORT

Over the past quarter RRS closed 20 claims  including four lawsuits and 16 non-litigated claims.

Three of the lawsuits were dismissed with no payment, and the other was settled early in the litigation for $5,000.  The claimant had sustained injuries to his knees (two surgeries) and two separate disk fusions in the back.  The settlement was less than his physical therapy bill, and avoided attorney fees and expert costs.

Of the 16 claims that were closed, 18 were closed with no payment.  12 were closed without any payment, 3 were settled (without payment of money, but we did provide either a replacement ladder or a discounted ladder in exchange for a release), and one claim was settled – for $500.

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