Failure™ Magazine

And Justice For All?

Debunking the myth of lawsuit abuse.

Written by Jason Zasky   Filed under Business

Stella sent a letter to McDonald’s, telling them that their coffee was too hot and to turn the temperature down, and also asking them to pay some of her medical bills. McDonald’s sent her a letter back and said, Sorry, you are out of luck. We are not going to change our coffee temperature and we’ll give you $700 to go away. Stella and her family members were longtime Republicans but she was so outraged that she consulted an attorney. She ended up suing and the case went to a mediator. The mediator suggested that McDonald’s settle the case for approximately $225,000, but McDonald’s refused and forced the case to go to trial.

[After-the-fact] interviews with the jurors show that the jury was very skeptical of the case from the very beginning. But the evidence showed that there were something like seven or eight hundred complaints that McDonald’s had received about coffee temperature, with witnesses from Shriners Burn Center testifying that McDonald’s coffee was being sold at a temperature hot enough to peel skin off bone in seven seconds or less. Jurors were shocked and awarded Liebeck actual damages—compensation for her losses, medical bills, and her daughter’s lost wages. The jury did dock Stella twenty percent, because she did, in fact, spill the coffee. Then they awarded $2.3 million in punitive damages to punish McDonald’s for its conduct—approximately two days worth of McDonalds’ profits from coffee sales.

What never got the headlines, of course, was that the judge reduced the award to approximately $400,000. The case was eventually settled for something less than that a few years later. So Stella did not get $3 million for spilling coffee on herself.

In researching your book did you encounter any evidence to support the notion that lawsuits drive up the cost of medical malpractice insurance?
No. In theory lawsuits could drive up the cost of insurance, but in medical malpractice the insurers don’t make their money off of premiums, they make it off of investments. They take the premiums and invest them in the bond and stock market. There’s not much evidence that medical malpractice rates went up because of an epidemic of lawsuits. The spike was caused by the collapse of Enron and WorldCom, because [insurance] companies lost money on stocks, like most of the rest of the country.

Do you think that lawsuit abuse is going to be a big issue in the 2008 campaign?
It could be if John Edwards is the nominee. There’s a whole industry devoted to attacking trial lawyers, and the Bush Administration tapped into that in the 2004 campaign. They believed John Edwards was a very strong candidate so they worked with tort reform groups to tar him as a former trial lawyer. I’m sure that will all kick into play if Edwards looks like he might become the Democratic nominee.

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