Daily Archives: May 18, 2005

Jury awards $850 million in punitives against Morgan Stanley

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morgan-l.gifIt’s a pretty good sign that a trial has just not gone well for the defendant when the defendant takes solace in the fact that the punitive damage award is “only” $850 million.
The same Florida state court jury that awarded Ronald Perelman $604.3 million in actual damages against Morgan Stanley earlier in the week awarded the Revlon, Inc. chairman $850 million against Morgan in punitive damages for defrauding the financier in connection with the 1998 sale of a large interest in Coleman, Inc. to Morgan’s client, Sunbeam Corp. Mr. Perelman had been seeking $1.8 in punies.
Thus, Morgan Stanley is facing a $1.454 billion jury verdict. If the trial court upholds the jury verdict, then Morgan is facing a difficult appeal, which will almost certainly revolve around the trial court judge’s pre-trial sanction order against Morgan Stanley that effectively prevented Morgan from defending itself during trial on the merits of Mr. Perelman’s fraud claims. Although that sanction order was harsh, most jurisdictions review such orders on an abuse of discretion standard. That is not an easy standard to overcome on appeal, even when the result is a $1.454 billion jury verdict.

What was that job description again?

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City of Houston logo.gifThe indictment and recent guilty plea of former City of Houston administrator Monica McGilbra on federal bribery charges has been ably covered by Kevin Whited over at blogHouston.net. But after reviewing this Department of Justice press release detailing Ms. McGilbra’s myriad illegal activities in Houston and her simultaneous involvement in related illegal activities that have led to a broad corruption case pending in the Northern District of Ohio (Cleveland), Professor Peter Henning, a criminal law expert at Wayne State University Law School, asks a common sense question that has not yet been answered by City of Houston officials:

“Did McGilbra and the others do any work in their spare time?”

Comment on NY Times business acumen

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nytimes_logo.gifFark has an interesting observation on the New York Times’ decision announced earlier this week to begin charging for some of its online content:

“New York Times responds to sagging subscription sales, brought on by the public’s access to countless free news sources online, by charging for their web content.”

Juror rebellion brewing in Enron Broadband case

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EBS4.jpgAs noted in this previous post, the Enron Broadband trial — after some early fireworks — has really turned into a snoozer. And, according to this Chronicle article, the jurors are close to open rebellion:

Initially, lawyers for both sides estimated the trial would take two months to complete. Prosecutors are in their fourth week of presenting their case and told ⁄.S. District Court Judge Vanessa Gilmore during a break in the trial Tuesday it would take them at least another seven to 10 days beyond their original estimate to finish.
“The government underestimated the length of the cross-examination,” Gilmore told the jury at the end of Tuesday’s proceedings.
Jaws of some jurors dropped while others became wide-eyed when she told them the trial would now not likely end until July 8, which is 12 weeks from its April 18 start.
Gilmore then spoke privately outside the courtroom with jurors before returning to address attorneys.
“The jury is going insane back there,” Gilmore said, pointing to a door that leads to the jury room. “They’re having a fit.”
Many of the jurors, she said, will miss out on summer vacations and will not be getting paid at their jobs for up to a month longer than expected.

I’m still not sure that the trial will last as long as Judge Gilmore told the jury yesterday because the defense case in such trials often does not take as long as predicted. However, the prosecution’s poor time-planning in putting on its case in chief is another potential blunder in a case that looked like a layup for the prosecution before trial. Although one never knows for sure which side the jurors are blaming for trial delays, my experience is that jurors tend to blame the side that is less entertaining in their questioning of witnesses. And unquestionably, at this stage of the Broadband trial, the prosecution’s presentation of its case has clearly been less lively than the defense’s cross-examination.
Consequently, stay tuned. If you can stay awake, that is.
Update: The defense counsel in the Broadband case proposed this morning that the defendants would create a fund from which anonymous payments could be made by the District Clerk to jurors. Although parties in long civil trials in Texas state courts will occasionally fund such anonymous payments to jurors to defray a part of the financial hardship of jury service, Judge Gilmore is researching whether such an arrangement is allowed in a federal criminal trial.

Merger rumblings in the Medical Center

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St. Luke's logo.jpgThe Texas Medical Center has already been rocked over the past year by the split between longtime partners Baylor Medical School and The Methodist Hospital, but today’s Chronicle article by Todd Ackerman adds a new level of uncertainty for the heart of Houston’s medical community:

St. Luke’s Episcopal Hospital is weighing offers that would align it with either Memorial Hermann Hospital or a consortium of Texas Children’s and The Methodist hospitals. . . St. Luke’s would merge with Memorial Hermann under the first scenario.
Texas Children’s and Methodist would purchase the hospital under the second.
Those options ? and a third that St. Luke’s continue to go it alone ? are before the St. Luke’s board of directors now, . . .
A decision should come within a few months.

Never a dull moment in the Medical Center, eh? Mr. Ackerman reports that the negotiations are the product of a developing consensus within the Medical Center that more collaboration is needed between the various institutions.
Nevertheless, the proposed collaborations are ambitious and complicated, to say the least. Inasmuch as St. Luke’s is the new teaching hospital of Baylor Medical School and Memorial Hermann is the longtime teaching hospital for the University of Texas Health Science Center, any St. Luke’s-Hermann merger would have the added complication of providing resources for two medical schools.
Similarly, an acquisition of St. Luke’s by Methodist would be akin to annulling the acrimonious divorce between Methodist and Baylor.
So, stay tuned. The pressures of providing quality health care services in this era of strained health care finance makes for some very interesting bedfellows.

BP admits liability in Texas City blast

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BPlogo.gifIn an interesting public relations and legal strategy, BP PLC admitted liability for its negligence in connection with the March 23rd explosion at its Texas City facility that killed 15 contract workers and injured more than 170 others. Here is the Houston Chronicle’s exhaustive coverage of the explosion, and here is the BP report and notes from its press briefing that were published on BP’s website.
In a detailed preliminary report on the blast, BP concluded that its employees committed “surprising and deeply disturbing” mistakes that led to the blast. The accident was only the latest in a series of serious safety and compliance lapses in BP’s North American operations. Not only do the report’s findings suggest that BP expects regulators to assess fines once their own investigations are complete, but they essentially turn the wrongful death and personal injury lawsuits resulting from the blast into a trial on the amount of damages that BP will have to pay. This Wall Street Journal ($) article quoted John Eddie Williams Jr., one of Houston’s best personal injury trial lawyers, as saying the following:

“My client’s husband trusted BP with his life, and now she’s supposed to trust that BP will fully compensate her for his death?”

BP’s report blames its supervisors and employees for making a series of operational errors and oversight lapses that caused the blast at the isomerization unit of the refinery. The explosion occurred during a start-up procedure after the unit had been taken off-line for routine maintenance when operators overfilled and overheated a processing tower at the unit that housed hydrocarbon liquid and vapor. The liquid and vapor mix was overpressurized and flooded into an adjacent stack before escaping into the atmosphere around the unit. The vapor cloud was then ignited by a still-unknown source.
“The failure of [the isomerization unit’s] managers to provide appropriate leadership and the failure of hourly workers to follow written procedures are among the root causes of this incident,” BP admitted in it’s press statement. BP is taking disciplinary action against an unspecified number of employees responsible for running the isomerization unit on the day before and the day of the blast, and has already replaced the plant’s manager. BP has also began a wide-ranging review of plant procedures.
Although its effectiveness is still uncertain at this point, BP’s strategy in quickly investigating the explosion and in admitting liability may be the best way to put the negative publicity from the blast behind it. BP realizes that the regulatory fines and damages it will have to pay on wrongful death and personal injury claims arising from the blast will be substantial, but even those amounts will be only a small fraction of BP’s net worth. The greater risk for the company is that prolonged publicity and uncertainty from the investigations would negatively affect the company’s stock price. Yesterday’s admission may be BP’s way of trying to minimize that risk.