south carolina chosen for justice o'connor's icivics project

S . C . D e f e n s e Tr i a l A t t o r n e y s ’ A s s o c i a t i o n Vo l u m e 3 8 N u m b e r 2 • S u m m e r, 2 0 1 0

DefenseLINETHE

South

Carolina

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for

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Project

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Malpractice? Really?Several times in the past 10 years, Sam Outten

(good friend, fine lawyer and SCDTAApast president) and I will have been talk-ing about SCDTAA stuff, usually during around of golf, when he'll stop in mid-sentence, change direction and theconversation will go something like this:

Sam: You know what?

David: No, but you're going to tell mearen't you?

Sam: Yes I am.

David: What, Sam?

Sam: If you are a defense lawyer in South Carolinaand you aren't involved in the SCDTAA, you arecommitting malpractice!

David: That's a bit strong, don't you think?

Sam: No it isn't.

David: Malpractice? Really?

Sam: Absolutely.

Over the years I've decided Sam is right. And I'mnot talking about just being a member of theSCDTAA, I'm talking about being involved in it. Wehave a lot of members who are knee deep involved inthe SCDTAA, but like any organization we havemany who aren't "involved" even though they aremembers. And I'm here to tell you that if you prac-tice defense law in South Carolina, there simply is noorganization better suited to help you professionally,personally and even socially from the day you beginthe practice of law to the day you retire and evenbeyond.

Just over a third of the way through 2010 theSCDTAA has put on a construction law seminar, acorporate counsel seminar, a judicial and legislativereception attended by several members of theSupreme Court and the Court of Appeals, numerouscircuit court judges and at least a couple dozenmembers of the Senate and House, a golf tournamentto raise money for our PAC and an advanced deposi-tion boot camp. By the time you read this we willhave held the 20th Annual Trial Academy for younglawyers in Charleston, during which we will have oursecond judicial reception of the year and a younglawyers reception, and the 43rd Mid-Year Meetingwith the South Carolina Claims Manager'sAssociation at the Grove Park Inn in Asheville will beright around the corner. In early September we will

have a deposition boot camp for younger lawyers inColumbia, and later that month another corporatecounsel seminar followed by a judicial reception inGreenville. Finally, we'll cap off the year with threegreat days at our Annual Meeting in Pinehurst, NorthCarolina, to which we will invite the federal courtjudges from South Carolina, the members of theSupreme Court and the Court of Appeals and allcircuit court judges. And if we think of anything elseto do between here and there we will try that too!

In 1990 my wife Barbara and I attended our firstjoint meeting in Asheville and were both immedi-ately hooked on the SCDTAA. Fortunately, my lawfirm in Florence at that time encouraged me tobecome more involved. In 1991 I attended the firstTrial Academy in Columbia. Not too long after that Imoved to my current firm in Greenville, Gallivan,White and Boyd, which also supported my involve-ment in the SCDTAA. I have immensely enjoyed theSCDTAA, not only because of how much it hashelped me in the profession to attend events likethose mentioned above, but even more so because ofthe relationships it has enabled me to develop overthe years. I won't talk much more about that nowbecause that will be a topic for later this year, but Iwill say it would be very difficult for me to count thenumber of lifelong friends I have made, both in andoutside South Carolina, because of the SCDTAA.

All of this is to say that if you are reading this letterand you aren't involved in the SCDTAA, come joinus. There is plenty of room for you to find somethingto do and plenty of room for new ideas. Most impor-tantly you will benefit on every level of your practice.If you need more information, go to our website,www.scdtaa.com, or call our Executive Director,Aimee Hiers, at (800) 445-8629. Will you commit"malpractice" if you don't? Maybe, maybe not. Justbe sure not to cancel your coverage.

President’s Messageby T. David Rheney

PRESIDENT’SMESSAGE

2

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As its editors this year, Alan and I recognizethat the DefenseLine can only be as good asour members make it through their contri-

butions of articles, case notes, and reports on issuesof interest to our practices. Thus, while we are verypleased to see the DefenseLine continue to improvein terms of the quality and quantity of its content, wegive all the credit to our members, especially thoseinvolved in our substantive law committees. Thesecommittees have been extremely active, and theircontributions to this issue make it what it is – apublication of which we can all be proud.

In this issue we have an entertaining glimpse ofwhat the SCDTAA was once like, authored by Mr.Ruth (hint: not the author's real name), and we havea number of timely articles regarding recent devel-

opments in the courts and the legisla-ture. We are all proud to see ourmembers holding key positions innational organizations like OurCourts, FDCC, IADC, DRI, and others.These are interesting times to be alawyer in South Carolina, and we areproud that so many of our membersare providing leadership in key areasthat affect us all. It is gratifying to seethis publication reflect the energy andexpertise of our organization. Thanksfor all that you are doing.

P.S. Special thanks to Lucie Cohenfor her assistance with this issue.

Letter From The Editorsby Alan Lazenby and John Kuppens

John Kuppens

Alan Lazenby

3

EDITORS’ PAGE

The SCDTAA is honored to lead the nationin support of United States SupremeCourt Justice Sandra Day O'Connor's

project, iCivics. South Carolina started as thenational pilot for the program that has now spreadto over forty states. The SCDTAA, along with theSouth Carolina Judicial Department, providedthe funds for the nation's first pilot programwhich was conducted at Gilbert Middle Schoolthis spring. iCivics is a web-based educationproject designed to reinvigorate civics teachingand learning by allowing students to play interac-tive computer games about the three branches ofgovernment, citizen and civic engagement, andorigins of our constitutional system of govern-ment. The online resource provides free lessonplans, interactive modules, and games designedspecifically for use in middle school classrooms.With these tools, iCivics is empowering the first

generation of “digital natives” to become knowl-edgeable civic participants and leaders. Thiswebsite is so popular among students that overhalf of the children exposed to the games atschool played them, unprompted, at home thesame afternoon. Teachers have commented thatthey have never seen middle school students soengaged for such a long period of time.

Through their work across the nation, two ofSCDTAA's Board Members, Catherine Templetonof Ogletree Deakins and Molly Craig of the HoodLaw Firm, were recently asked by JusticeO'Connor to become her National Coordinatorsfor iCivics. Catherine and Molly are traveling tovarious states to promote the program. Theyrecently visited a middle school in Harlem, NewYork and will accompany Justice O'Connor whenshe speaks to the Conference of Chief Justices inColorado this summer.

South Carolina Chosen as National Pilotfor Justice O'Connor's iCivics Project

Have news about changes in your firm, promotions, membershipsand organizations or community involvement?

Please send all firm news to [email protected] in word format.

To submit verdict reports: the form can be found on the SCDTAAwebsite and should be sent in word format to [email protected]

01-48.indd 3 6/17/10 1:58 PM

OFFICERSPRESIDENTT. David RheneyPost Office Box 10589Greenville, SC 29503(864) 241-7001 FAX (864) [email protected]

PRESIDENT ELECTGray T. Culbreath1330 Lady Street, Ste. 601Columbia, SC 29211(803) 255-0421 FAX (803) [email protected]

TREASURERMolly H. CraigP.O. Box 1508, 172 Meeting StreetCharleston, SC 29401(843) 577-4435 FAX (843) [email protected]

SECRETARYSterling G. DaviesP.O. Box 12519Columbia, SC 29211(803) 779-2300 FAX (803) [email protected]

IMMEDIATE PAST PRESIDENTJohn T. Lay, Jr.Post Office Box 2285Columbia, SC 29202(803) 254-4190 FAX (803) [email protected]

EXECUTIVE COMMITTEETerm Expires 2010Hugh W. BuyckA. Johnston CoxD. Jay Davis, Jr.E. Mitchell GriffithD. Alan LazenbyStephen C. MitchellCatherine B. Templeton

Term Expires 2011William G. BesleyWilliam S. BrownErin D. DeanRyan A. EarhartWendy J. KeeferJohn F. KuppensW. Edward LawsonCurtis L. Ott

Term Expires 2012David A. AndersonE. Glenn ElliottEric K. EnglebardtJoshua L. HowardAnthony W. LivotiGraham P. PowellW. McElhaney WhiteRonald K. Wray, II

PAST PRESIDENT COMMITTEE MEMBERWilliam S. Davies, Jr.

CORPORATE COUNSEL CHAIRPERSONDuncan S. McIntosh

DRI REPRESENTATIVEH. Michael Bowers

YOUNG LAWYERS PRESIDENTPaul D. Greene

EXECUTIVE DIRECTORAimee Hiers

EDITORSD. Alan LazenbyJohn F. Kuppens

S . C . D e f e n s e Tr i a l A t t o r n e y s ’ A s s o c i a t i o n Vo l u m e 3 8 N u m b e r 2 • S u m m e r, 2 0 1 0

P R E S I D E N T ’ S M E S S A G ET. David Rheney 2

L E T T E R F R O M T H E E D I T O R SD. Alan Lazenby and John F. Kuppens 3

F I R M A N N O U N C E M E N T S 5

M E M B E R S I N T H E N E W S 7

G E T I N V O L V E D I N Y L D 11T H E W A Y W E W E R ET. Ruth 12

2 0 1 0 J O I N T M E E T I N G 13

2 0 1 0 A N N U A L M E E T I N G 14

M O T O R V E H I C L E S U D D E N A C C E L E R A T I O N :T R I A L C O U R T A S G A T E K E E P E R O F E X P E R T E V I D E N C EMary A. Giorgi 15

T H E R E G U L A R T O R Y A V A L A N C H E F R O M W A S H I N G T O NLeigh Nason 17

F A I L I N G T O D I S T R I B U T E A D I V I D E N D A L O N E I SN O T A B R E A C H O F F I D U C I A R Y D U T Y Carmen H. Thomas 21

P U N I T I V E D A M A G E S I N S O U T H C A R O L I N AVirginia W. Williams 23

T I P S T O M I N I M I Z E M E D I C A R E S E C O N D A R Y P A Y E R R E P O R T I N G L I A B I L I T I E SEli Poliokoff 26

D R A K E F O R D V . T U O M E Y H E A L T H C A R E S Y S T E M , I N C .T H E U N I T E D S T A T E S ’ C A S E A G A I N S T A S C H O S P I T A LWill Thomas and Walt Cartin 27

C O U R T G R A N T S C E R T I N T R U C K I N G D E F A U L T C A S EC. Stuart Mauney 30

R O L L I N G O U T C S A 2 0 1 0Jim Bryan and Dennis Lynch 31

T W E E T I N G A N D F R I E N D I N G A N D F O L L O W I N G . . . O H M YRob Tyson 33

R E C E N T O R D E R S 35

C A S E N O T E S 42

V E R D I C T R E P O R T S 47

DefenseLINETHE

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Harry M. Lightsey III Joins MG&C to Lead the Firm’sBusiness Practice Group

The law firm of McAngus Goudelock & Courie ispleased to announce Harry M. Lightsey III, formerSoutheast president for AT&T, has joined MG&C asthe leader of the firm’s Business Practice Group.

Lightsey’s practice and team will focus on regula-tory, administrative, technology, business andcommercial counseling and litigation. He will alsowork with the firm’s governmental affairs business,MG&C Consulting, on state, local and federal legisla-tive lobbying, procurement and government rela-tions issues.

Lightsey received his undergraduate degree fromPrinceton University and his law degree from theUniversity of South Carolina School of Law. He hasalso served on the Princeton National AlumniExecutive Board and on the Board of Trustees of theCollege of Charleston. He was a founding boardmember of both City Year Columbia and EdVentureChildren’s Museum.

Haynsworth Sinkler Boyd Adds New Associate AttorneysWith the recent addition of the new associate

attorneys, Haynsworth Sinkler Boyd, P.A. now has141 lawyers in its combined six office locations.

Charleston, SC Office – Charleston native StaffordJ. (Mac) McQuillin III joined Haynsworth SinklerBoyd’s Charleston office as a litigator focusing ongeneral defense litigation, with a concentration inpremises liability, personal injury, products liability,and insurance coverage issues. McQuillin earned aJ.D., cum laude, from the University of SouthCarolina (USC) in 2009, and a B.A., magna cumlaude, in Political Science also from USC in 2005.Prior to joining the Firm, McQuillin clerked for SouthCarolina Governor Mark Sanford and South CarolinaSenator George E. (Chip) Campsen III.

Columbia, SC Office –A native of Hopkins, SC,Ashley V. Myers, practices in Haynsworth SinklerBoyd’s Columbia office. She focuses her practice onbankruptcy matters and creditors’ rights litigationand assists in the representation of lenders incommercial and consumer distressed debt actions.Myers received her J.D. from The University ofToledo College of Law in 2009, where she also servedas a recruiter following graduation. A Lettie PateScholar, Myers received a B.A. in psychology fromSpelman College in 2005.

S. Ross Shealy is a litigator in the Columbia officeof Haynsworth Sinkler Boyd. Shealy focuses hispractice on general civil litigation matters, including

defense of products liability, premises liability,professional negligence, insurance, and constructioncases. A native of Cayce, SC, Shealy received a B.S.in Economics from the United States Naval Academyin 1999. He received his J.D. magna cum laude, fromthe University of South Carolina in 2009. He earneda Master’s degree in Engineering Management fromOld Dominion University in 2003 and did graduatestudies at the University of South Carolina School ofthe Environment.

Kristian M. Cross Joins Collins & Lacy, P.C.Collins & Lacy, P.C. is pleased to announce that

Kristian M. Cross has joined the firm as an associatepracticing in workers’ compensation law.

A cum laude graduate of Clemson University,Kristian received her undergraduate degree inCommunication Studies. She went on to earn herJuris Doctor from the University of South Carolina.Prior to joining Collins & Lacy in 2010, Kristianworked as an attorney for a Columbia-based firmpracticing in the areas of business, commercial, andinsurance litigation.

McAngus Goudelock & Courie Welcomes Eric G. Fosmireto the Columbia Office

The law firm of McAngus Goudelock & Courie ispleased to announce that attorney Eric G. Fosmirehas joined the firm’s Columbia office. Mr. Fosmire’spractice includes construction defects, premisesliability and catastrophic losses. He graduated fromWofford College with a bachelor’s degree in historyand received his law degree from the University ofSouth Carolina School of Law. After law school, Mr.Fosmire served as a law clerk for the Honorable DonS. Rushing of South Carolina’s Sixth Judicial Circuitand as assistant solicitor for the Fifth CircuitSolicitor’s Office in Columbia.

Mr. Fosmire is a frequent author and speaker onconstruction-related issues, most recently writingthe South Carolina chapter of Toxic Mold Litigation,published by Lawyers & Judges Publishing Company,Inc. in 2009. He is a member of many legal associa-tions, including the Defense Research Institute,Council on Litigation Management and the SouthCarolina Defense Trial Attorneys’ Association.

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Firm Announcements MEMBERNEWS

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Nexsen Pruet Awards Diversity ScholarshipsNexsen Pruet is pleased to announce that the firm

has awarded law school scholarships to three minor-ity students from North and South Carolina:

Andrew Charles CooperUniversity of South Carolina School of Law

Kenny GardnerCharleston School of Law

Tiffany Rene JohnsonWake Forest University School of Law

The awards are made possible through the NexsenPruet Diversity Scholarship Program. Each year,

Nexsen Pruet awards scholarships to exceptionalminority law school students who are planning legalcareers in the Carolinas. In addition to the $3,000award, the students may be considered for summeremployment in one of the firm’s eight offices.

“Our commitment to diversity has far-reachingbenefits in the communities where we work andlive,” said John Sowards, chairman of the board ofNexsen Pruet. “But, we understand that a scholar-ship program alone can not fix all of the socioeco-nomic disparities that persist in our country.”

Students who attend North Carolina CentralUniversity School of Law, the University of NorthCarolina at Chapel Hill School of Law, Wake ForestUniversity School of Law, the University of SouthCarolina School of Law, and Charleston Law Schoolare eligible to apply for the yearly scholarships.

6

MEMBERNEWSCONT.

Great weather, great golf, and great support.That is the best way to sum up the firstever SCDTAA PAC Golf Classic. On April

22, 2010, 44 players converged on Spring ValleyCountry Club in Columbia to participate in thisinaugural event to raise money for the Association’spolitical action committee. Eleven teams competedin a Captain’s Choice tournament, with winners inthe low gross and low net categories. Players alsocompeted in hole-in-one contests that included anAudi convertible, as well as closest to the pins andlong drive. We received tremendous support fromnumerous firms that sponsored teams, drinkstations, holes, and other contests. We also bene-fited greatly from our tournament sponsor,Haynsworth Sinkler Boyd, P.A. Their generouscontribution in sponsoring the tournament helpedour fundraising efforts greatly. We thank all of our

sponsors who sponsored teams, holes,drink stations and other contests:Murphy & Grantland; Ellis Lawhorneand Sims; Turner, Padgett, Graham andLaney; Aiken Bridges; McAngusGoudelock & Courie; Law Office of TomDougall; Nexsen Pruett; Nelson MullinsRiley & Scarborough; Collins & Lacy;Richardson Plowden & Robinson;Young Clement & Rivers; McKay,Cauthen, Settana and Stubley; SEALtd.; Womble Carlyle Sandridge & Rice;Gallivan White and Boyd; Hood LawFirm; Maybank Law Firm; IKON OfficeSolutions; AW Roberts Court Reporting;Carolina Court Reporting; OgletreeDeakins; Fisher & Phillips; Elmore andWall; Garber Court Reporting;

SmartPhone Medic; MGC Consulting, LLC; SowellGray; SC Civil Justice Coalition; Watkins Services,Inc.; and Harwood Financial Services. We also wantto thank AW Roberts Court Reporting for donatingtee gifts for all our players. Congratulations toHaynsworth Sinkler Boyd for winning the low grosscategory and SEA, Ltd. for winning the low net divi-sion. Thanks to this generous support we raisednearly $18,000 for our political action committee.The money raised by this tournament will help theAssociation tremendously in giving our memberfirms a voice with our General Assembly. Thanksalso to Aimee Heirs for her assistance in supportingthis tournament, as well as the management andstaff at Spring Valley Country Club. We are lookingforward to another great event next year. If youmissed it this year, we hope you will join us then.

1st SCDTAA PAC Golf Classic a Great Success!

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Madden to Serve on Faculty of Family Law Trial InstituteTim Madden, a partner of Nelson Mullins Riley &

Scarborough LLP, will join a distinguished group offamily law litigators, judges, and financial andpsychological experts from across the country asfaculty on the Houston Family Law Trial Institute inMay at South Texas College of Law.

The prestigious institute offers a proven method ofinstruction for family law attorneys seeking toadvance their courtroom skills. The intense eight-day program ends with a trial in a Houston court-room. The experience is assessed as the equivalentof six or more years of courtroom experience.

Ogletree Deakins' Catherine Brawley Templeton NamedNational Coordinator of Supreme Court Justice O'Connor'sOur Courts Project

At the invitation of United States Supreme CourtJustice (Ret.) Sandra Day O'Connor, CatherineTempleton of Ogletree Deakins and Molly Craig ofthe Hood Law Firm have been named as the twoNational Coordinators of her Our Courts project.Our Courts is the vision of Justice O'Connor and is aweb-based education project designed to teachstudents civics and inspire them to be active partici-pants in our democracy. For more information, visitOurCourts.org.

McAngus Goudelock & Courie Attorneys Named in 2010S.C. Super Lawyers Magazine

The law firm of McAngus Goudelock & Courie,LLC is pleased to announce that attorneys RustyGoudelock, Erroll Anne Hodges, Amy Jenkins, andHugh McAngus have been named by South CarolinaSuper Lawyers magazine as some of the top attor-neys in South Carolina for 2010.

Goudelock, a founding partner of the firm,received his law degree from the University of SouthCarolina School of Law. He practices workers’compensation defense in the firm’s Columbia office.

Hodges received her law degree from theUniversity of South Carolina School of Law and prac-tices workers’ compensation defense in the firm’sGreenville office.

Jenkins received her law degree from theUniversity of Virginia School of Law. She leadsMG&C’s Employment Law Practice Group and is acertified specialist in labor and employment law aswell as a certified mediator. She practices out of thefirm’s Charleston office.

McAngus, a founding partner of the firm, receivedhis law degree from the University of South Carolina

School of Law. He is a certified mediator and prac-tices workers’ compensation defense from the firm’sColumbia office.

S.C. Super Lawyers List Includes 29 from Nelson MullinsTwenty-nine Nelson Mullins Riley & Scarborough

attorneys have been selected by their peers to the2010 list of South Carolina "Super Lawyers" in 13practice areas. In addition, three attorneys are iden-tified in the "Star Search" category on the publisher'sWeb site for a "high degree of peer recognition orprofessional competence."

Also, four Nelson Mullins attorneys were amongthe top 25 attorneys receiving the highest pointtotals in the nomination, research, and blue ribbonreview process. They are George Cauthen, DavidDukes, Sue Erwin Harper, and Marvin Quattlebaum.Mr. Cauthen and Mr. Quattlebaum also ranked in thetop 10.

Super Lawyers names South Carolina's toplawyers as chosen by their peers and through inde-pendent research. The list is based on a survey ofattorneys across the state who are asked to vote forthe best lawyers they had personally observed inaction.

Those based in Columbia and selected for theSuper Lawyers list are:

Stuart M. Andrews Jr., Health CareGeorge S. Bailey, Estate Planning & ProbateC. Mitchell Brown, AppellateGeorge B. Cauthen, Bankruptcy & Creditor/

Debtor RightsKaren Aldridge Crawford, Environmental

Litigation David E. Dukes, General LitigationDebbie W. Durban, Employment & LaborCarl B. Epps III, Business LitigationRobert W. Foster, Jr., Business LitigationJames C. Gray, Jr., Business LitigationSue Erwin Harper, Employment & LaborWilliam C. Hubbard, Business LitigationFrancis B.B. Knowlton, Bankruptcy & Creditor/

Debtor RightsJohn F. Kuppens, Personal Injury Defense:

ProductsSteven A. McKelvey, Business LitigationJohn T. Moore, Bankruptcy & Creditor/Debtor

Rights

7

Members in the News


MEMBERNEWSCONT.

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8

MEMBERNEWSCONT.

Stephen G. Morrison, Business LitigationEdward W. Mullins Jr., Business LitigationR. Bruce Shaw, Class Action/Mass TortsB. Rush Smith III, Class Action/Mass TortsDaniel J. Westbrook, Healthcare

In Greenville:William H. Foster, Employment & LaborTimothy E. Madden, Family LawA. Marvin Quattlebaum Jr., Business Litigation

In Charleston:Richard A. Farrier Jr., Business LitigationJohn C. Von Lehe Jr., Estate Planning and ProbateRobert W. Pearce Jr., Business/CorporateG. Mark Phillips, Personal Injury Defense:

Products

In Myrtle Beach:Thomas F. Moran, Business/CorporateThe three attorneys identified in the Star Search

category are Betsy Johnson Burn (Columbia),Bankruptcy and Creditor/Debtor Rights; Charles S.Verdin IV (Greenville), Estate Planning and Probateand Tax; and James F. McCrackin (Myrtle Beach),Estate Planning and Probate and Tax.

Nexsen Pruet Attorneys Named as South Carolina Super Lawyers

Nexsen Pruet attorneys have been named to the2010 list of South Carolina Super Lawyers®. Theattorneys practice in the firm’s Charleston,Columbia, Greenville and Myrtle Beach offices.

Charleston:Brad Waring - Business Litigation

Columbia:Gene Allen - Bankruptcy & Creditor/Debtor Rights

Greenville:Grant Burns - Employment & Labor

Myrtle Beach:Elbert Dorn - Personal Injury Defense: Products

Sam Mabry named to South Carolina Super Lawyers Top 25

H. Sam Mabry III, Shareholder of HaynsworthSinkler Boyd, P.A., has been named to the “Top 25”list of 2010 South Carolina Super Lawyers®. ThisTop 25 list represents the South Carolina lawyerswho received the highest point totals in the 2010South Carolina Super Lawyers nomination, research,and blue ribbon review process.

Mabry, based in the Firm’s Greenville office, isrecognized for his broad trial experience in complexlitigation and has been included in Super Lawyerssince the publication’s inception. He defends clientsin class actions, business, commercial and financialservices litigation, and product liability actions. Hehas practiced with Haynsworth Sinkler Boyd, P.A.,and its predecessors since 1983.

Kennedy and Bobertz ElectedCatherine H. Kennedy and Shannon F. Bobertz of

Turner Padget Graham & Laney, P.A. have beenelected to represent the Fifth Judicial Circuit in theSouth Carolina Bar House of Delegates for theupcoming term. Shannon will be serving her firstterm, while Cathy has served since 2002. The Houseof Delegates establishes policy for the Bar andincludes delegates from each judicial circuit.Meetings of the House of Delegates are held at leasttwice a year. The new term will begin July 1, 2010.

Cathy joined Turner Padget in 2009 as specialcounsel in Columbia, where she practices in theareas of estate planning, probate administration andlitigation.

Shannon joined the firm in 2004, after clerkingwith Justice Costa M. Pleicones on the SouthCarolina Supreme Court. Shannon practices in tortsand insurance and appellate law.

Bedenbaugh Graduates from Leadership South CarolinaJody Bedenbaugh, an associate of Nelson Mullins

Riley & Scarborough, graduated this spring fromLeadership South Carolina, one of the oldest andmost respected statewide leadership programs.

Each year, Leadership South Carolina selectsapproximately 50 gifted and highly motivated SouthCarolinians and provides them with an opportunityto advance their leadership qualities while broaden-ing their understanding of issues facing the state.

Mr. Bedenbaugh works in the Firm's Columbiaoffice and focuses his practice on banking, finance,and bankruptcy. He received his Juris Doctor, magnacum laude, from the University of South CarolinaSchool of Law in 2003 and his Bachelor of Science inBusiness Administration, cum laude, from the SouthCarolina Honors College in 1999.

Legal Media Group Names Nelson Mullins' Dukes One ofTop Five Product Defense Attorneys Worldwide

Legal Media Group has named Nelson Mullins Riley& Scarborough Managing Partner David Dukes asone of the world's top five product liability defenselawyers based on nominations received for its Best ofthe Best of 2010 Expert Guides.

Mr. Dukes was named for his product liability prac-tice, which focuses on pharmaceutical and medicaldevice litigation, business litigation, technology lawand litigation, and coordination of national litigation.

Blincow to Head IADC CommitteeJohn K. Blincow, Jr. has been appointed to chair

the International Association of Defense Counsel’sMedical Defense and Health Law Committee. IADCis an invitation-only professional association forcorporate and insurance defense lawyers around theworld. Members are dedicated to the highest stan-dards of professionalism, service, upholding the ruleof law and integrity of the court system.

The Medical Defense and Health Law Committee

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9

serves all members who represent physicians, hospi-tals, and other healthcare providers and entities inmedical malpractice actions, health law advisory andregulatory support such as in defense of Qui Tamactions, federal fraud and abuse claim evaluation anddefense, peer review/quality improvement counsel-ing, and licensure board appearances.

Haynsworth Sinkler Boyd Attorneys Named to SouthCarolina Super Lawyers

The law firm of Haynsworth Sinkler Boyd, P.A., ispleased to announce that 14 of its lawyers have beennamed to the 2010 edition of South Carolina SuperLawyers list, a leading attorney rating service forbusiness and consumers. Super Lawyers magazine ispublished in all 50 states and reaches more than 13million readers.

Haynsworth Sinkler Boyd’s attorneys and respec-tive practice areas include:

Charleston, SC Office:Stephen E. Darling - Personal Injury Defense:

ProductsCharles H. Gibbs, Jr. - Personal Injury Defense:

ProductsThomas C. Hildebrand, Jr. - Construction LitigationMarvin D. Infinger - Business LitigationJohn H. Tiller - Personal Injury Defense: Products

Columbia, SC Office:William C. Boyd - Business/CorporateThomas R. Gottshall - Environmental LitigationStephen F. McKinney - Business Litigation

Greenville, SC Office: Thomas H. Coker, Jr. - Construction/SuretyH. Sam Mabry III - Business LitigationW. Francis Marion, Jr. - Business LitigationMoffatt G. McDonald - Personal Injury Defense:

GeneralG. Dewey Oxner, Jr. - Personal Injury Defense:

Medical MalpracticeMatthew P. Utecht - Health Care

Turner Padget Attorneys Selected by Super LawyersEleven Turner Padget attorneys have been

included in the 2010 edition of Super Lawyers ofSouth Carolina. Super Lawyers is a listing ofoutstanding lawyers from more than 70 practiceareas who have attained a high degree of peer recog-nition and professional achievement. Super Lawyersmagazine names attorneys in each state whoreceived the highest point totals, as chosen by theirpeers and through the independent research of Law& Politics.

The attorneys included are:

Charleston Office: John S. Wilkerson, III, General Litigation

Columbia Office:Reginald W. Belcher, Employment & Labor

J. Kenneth Carter, Jr., Personal Injury Defense,Products

John E. Cuttino, Civil Litigation DefenseCatherine H. Kennedy, Estate Planning & ProbateCurtis L. Ott, Personal Injury Defense, ProductsSteven W. Ouzts, Personal Injury Defense,

ProductsThomas C. Salane, Insurance CoverageFranklin G. Shuler, Jr., Employment & Labor

Florence Office:Arthur E. Justice, Jr., Employment & Labor

Greenville Office:Eric K. Englebardt, General Litigation

Josey Receives Gold Compleat Lawyer AwardTurner Padget is proud to announce that J. René

Josey, a shareholder in our Florence office, has beenchosen as one of three recipients of the 2010 GoldCompleat Lawyer Award presented by the Universityof South Carolina School of Law. The awards wereestablished in 1992 by the University of SouthCarolina Law School Alumni Association to recog-nize alumni for outstanding civic and professionalaccomplishments. Each year the Alumni Associationrecognizes nine outstanding alumni at the AlumniAssociation Dinner. Nominees are chosen basedupon their significant contributions to the legalprofession and exemplification of the highest stan-dard of professional competence, ethics andintegrity. The Gold Compleat Lawyer Award isreserved for nominees who have practiced betweenfifteen and twenty-nine years. The awards werepresented at the banquet held April 15, 2010, at theColumbia Marriott.

After serving President Clinton as United StatesAttorney for the District of South Carolina from1996-2001, René began his practice with the firm inMarch of 2001. René has extensive trial experiencefocusing on trial and appellate litigation primarily inthe federal courts. His broad range of litigation expe-rience includes civil litigation, criminal prosecutionsand domestic litigation. In addition, Rene has train-ing and experience as a certified arbitrator and medi-ator.

S.C. Bar Installs Quattlebaum as President-ElectOn May 20, the S.C. Bar installed A. Marvin

Quattlebaum, Jr., managing partner in NelsonMullins Riley & Scarborough LLP's Greenville office,as the 2010-2011 president-elect of the S.C. Barduring the Bar's House of Delegates meeting. Mr.Quattlebaum will advance to president for the 2011-2012 term.

Mr. Quattlebaum, a member of Nelson Mullins'Management Group, practices in the areas of busi-ness litigation, product liability litigation, and othercomplex civil litigation and regularly appears in juris-

MEMBERNEWSCONT.


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dictions throughout the Southeast. He has served onthe South Carolina Bar Board of Governors,currently serves in the House of Delegates of theSouth Carolina Bar, and has recently been elected toserve as Secretary of the Board of Governors. He isalso a member of the Society of Justice and a LifeFellow of the South Carolina Bar.

In 2009, the University of South Carolina honoredMr. Quattlebaum with its distinguished CompleatLawyer award, which recognizes alumni foroutstanding civic and professional accomplishments.He is listed in The Best Lawyers in America, SouthCarolina Super Lawyers, and is a Fellow of theLitigation Counsel of America. He currently serveson the South Carolina Lottery Commission.

Buist Moore Smythe McGee Attorneys Included in SouthCarolina Super Lawyers 2010

The attorneys of Buist Moore Smythe McGee P.A.are pleased to announce that attorneys in the Firmhave been included in South Carolina Super Lawyers2010. Super Lawyers lists outstanding lawyers frommore than 70 practice areas who have attained ahigh degree of peer recognition and professionalachievement.

Those named were:Charles J. Baker, III, Construction LitigationWilliam C. Cleveland, III, Business LitigationC. Allen Gibson, Jr., Construction LitigationJames D. Myrick, General LitigationHenry B. Smythe, Jr., Business Litigation

10

MEMBERNEWSCONT.

Free Membership to State or Local DefenseOrganization (SLDO) Members

A defense lawyer who is a member of his or herSLDO qualifies for a free one-year membership inDRI. The defense lawyer must be a FIRST timemember of DRI.

Seminar Attendee Promotion A defense lawyer who has either attended a DRI

seminar or the DRI Annual Meeting qualifies for aone year, half-price membership in DRI. Thedefense lawyer must be a FIRST time member ofDRI.

Advocate Campaign: (a.k.a. “Member Get aMember”)

DRI members (except Officers and Boardmembers) who recruit new “full dues paying”members receive a $100 fully transferablediscount certificate for each such memberrecruited. Certificates can be used towards theDRI Annual Meeting and/or seminar registrationfees and DRI Products. Individual discount certifi-cates are valid for two years from the date of issue.There is no limit to the number of certificates anadvocate can accumulate. The advocate’s nameMUST appear on the “referred by” space providedon the application.

Young Lawyer Campaign Young Lawyers receive a certificate for FREE

attendance at a future DRI seminar or the AnnualMeeting. The certificate is good for as long as the

person is a member of the Young LawyersCommittee. The certificate is non-transferable,and the holder must surrender the certificate atthe time of pre-registration for the seminar ofhis/her choice.

Law Student Membership As a DRI law student member, you are afforded

many unique opportunities. Your annual member-ship fee of $20 provides you benefits such as: Theability to join up to four of DRI’s wide range ofsubstantive law and practice area committees; 12issues of For The Defense, the only nationalmonthly magazine for defense lawyers, and TheVoice, a weekly eNewsletter; Publishing opportu-nities in select DRI literary vehicles; Access toDRI’s Website complete with a searchablemembership database; Complimentary registra-tion to attend all DRI seminars, including DRI’sAnnual Meeting.

Senior Membership Continue to enjoy all the benefits of DRI

Membership for just $50 per year! In order toqualify, individuals must be 65 years of age orolder, meet general membership criteria and havemaintained membership in DRI as an "IndividualMember" for at least 10 consecutive years.

JOIN DRI TODAY!Membership Applications can be accessed on

www.dri.org

DRI Membership Incentives

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11

MEMBERNEWSCONT.

As a young lawyer fresh out of law school, itdid not take me long to become keenlyaware I knew nothing about how to be a

lawyer. While internal mentoring and hands-on expe-rience are great training tools, I needed somethingbigger that would give me a more expansive take onhow to practice in South Carolina. Enter, theSCDTAA. I was told by the powers that be that thiswas THE group to show me how to be a defenselawyer. I was offered the opportunity to get involvedin my first year of practice, and I took it because Iknew the SCDTAA was a wonderful tool to developprofessionally. And by “develop professionally,” Imean “go to cool meetings and play lots of golf ingreat places like Asheville, Pinehurst, and AmeliaIsland.” Since attending my first meeting inAsheville, however, I’ve learned that the SCDTAA ismuch more than exotic locales and golf tourna-ments. It is, simply put, the best professionalresource for young lawyers in the entire state.

As much as your firm wants to send you and everyother associate to Pinehurst each year, it’s probablynot going to happen. Fortunately, the opportunitiesfor young lawyers extend well beyond the meetings.Each year the SCDTAA offers fantastic CLEprograms for young lawyers. This year, for example,we are hosting two programs on effective depositiontaking: a “boot camp” and an advanced depositionsession. In addition, our annual Trial Academycontinues, offering young lawyers the chance tolearn trial techniques from accomplished practition-ers and to try a case live, without a net, in front of areal judge and jury.

In addition to CLEs, there are numerous opportu-nities for service and writing. Each year, the younglawyers division organizes the silent auction for theAsheville meeting. The proceeds of the auction go toa great charity—this year it’s the Our Courtsprogram (www.ourcourts.org) organized by JusticeSandra Day O’Connor to foster civic and legal educa-tion in grade schools—and the YLD can always usevolunteers to make calls and solicit gifts. We alsorecruit volunteers to serve as jurors and witnesses forthe Trial Academy, another great opportunity to getinvolved. Also, our newly revamped substantive lawcommittees are always in need of help writing,researching and presenting topics in their respectivefields. These committees are a perfect way not onlyto get to know others in the same area of law, but alsoto develop expertise and share it with the legalcommunity. Presenting a substantive law committeetopic is also a great way to get to one of the meetings.

Get involved in the SCDTAA. Talk to the partnersin your firm to find out who in your firm is active. Goto the website (www.scdtaa.com), login and getinvolved in the discussions on the blog andmembers-only message board. Email the chairs ofthe substantive law committee in which you’re inter-ested and tell them you want to help—you will not beturned away. If all else fails, give me a call and I’ll behappy to get you plugged in. If you’re reading thisarticle, it means you are already a member. I encour-age you to take the next step, get your money’sworth, and explore all that you can get out of, andgive to, the SCDTAA.

ADR COMMITTEE REPORTC. Stuart Mauney and Phillip A. Kilgore

The ADR Committee, chaired by Phillip A. Kilgore of Ogletree, Deakins, Nash, Smoak & Stewart, and C.Stuart Mauney of Gallivan, White & Boyd, P.A., was formed to provide a forum for SCDTAA members whoare mediators and arbitrators to exchange information in the field of alternative dispute resolution. TheCommittee contributes content to the continuing education portions of the joint and annual meetings, tothis publication, and to the SCDTAA website. The overall goal is to increase the level of professionalism ofour members in the field of alternative dispute resolution.

The Committee conducted a breakout session at the Annual Meeting on November 6, 2009. Jack Griffethof Collins & Lacy and Stuart Mauney moderated a discussion of recent changes to the ADR rules and sugges-tions for conducting a successful mediation. The breakout session was well attended by the judiciary,defense practitioners, and attorneys who currently serve as mediators.

The Committee will conduct a breakout session at the Joint Meeting on July 23, 2010. Eric Englebardtof Turner, Padget, Graham & Laney will present a program, “A Neutral’s Nifty Negotiating Nuggets.” TheCommittee will also provide a brief summary of recent ADR developments at the Joint Meeting on July 24.

The Committee is also working on establishing a list of SCDTAA members who are also mediatorsand arbitrators to encourage the membership to retain those individuals for mediations and arbitrations. Ifyou are interested in having your name included on the SCDTAA list of mediators and arbitrators, pleasecontact Stuart Mauney or Phillip Kilgore.

Get Involved in YLDby Paul D. Greene

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MEMBERNEWSCONT.

During the latter years of the 1970’s, our orga-nization was quite different from “the waywe are!” In the Annual Report of 1977 for

the then South Carolina Defense Attorneys’Association, our By-Laws defined our purpose to be,among other goals, to “…bring together…lawyers ofSouth Carolina who devote a substantial amount oftheir professional time … handling litigatedcases…primarily for the defense…” The Presidentfor 1977 was Jack Barwick. There had only beeneight prior presidents. The other two officers wereMark Buyck (President-Elect) and Bruce Shaw(Secretary-Treasurer). In the picture of the officers,Bruce Shaw looks like he is almost 13 years old andwears one of the first pair of glasses with tintedlenses, Bobby Hood looks like his sons looked threeyears ago, and Dewey Oxner is actually thin! GeorgeHarmon was our Executive Director and had helpedrevive The Defense Line in its return to publication.

In his outgoing President’s Letter, Jack mentionedthat we had grown to 260 lawyers (46 new lawyershad been added during the year) and that we hopedto recruit some more before the Annual Meeting inSavannah. Fifty-six members had joined around fiftyclaims managers at the Tenth Annual DefenseConference (what we now call the Joint Meeting) inMyrtle Beach. The group was looking forward to anew venue for the meeting which was moving to TheGrove Park in Asheville, North Carolina in 1978.

Bruce Shaw’s Treasurers’ Report listed a balance(or savings) of $10,403. Income had been $20,842and Disbursements totaled $8,886. Those with math-ematical backgrounds may question this math as Idid, but that is in the report. We would need thebalance for the Savannah Annual Meeting, whichcost a whole lot of 1977 dollars!

Ed Mullins reported on the past legislative sessionstating that nothing of import passed except theremoval of tort immunity against hospitals inmalpractice cases. It also provided a cap of $1,000 inthose cases. The Statute of Limitations was short-ened to 2 years for malpractice cases against doctorswith the statute starting to run against minors at age8. The tremendous cost of liability premiums waskeeping the plaintiffs’ bar at bay and they had littlepower to support or pass legislation. In the Workers’Compensation area, permanent-partial disability wasallowed for occupational diseases with a subsequentreduction in the average weekly wage. Medical

board’s findings were made less binding on theCommission.

The Annual Report included an article by a bril-liant young defense lawyer titled “ASBESTOSIS –PRIZE DEFENSE ASSIGNMENT OR NIGHTMARE?”Quoting from the opening sentences of the article“Within the past year a growing number of ourmembers have become entangled in a series of caseskindly referred to as the Asbestos Cases. These casesappear to be the crest of the wave of products liabil-ity litigation which is presently overwhelming ourcourt system.” At the time of publication, almost fiftyasbestos cases had been filed in South Carolina. Thepreparation time that initially seemed like a boon toa defense lawyer was in danger of demanding somuch time that it might disadvantageously impactthe remainder of the lawyer’s normal book of busi-ness. Within that first year of these cases, a numberof novel practices had appeared such as consolida-tion of numerous cases, state and federal, for discov-ery purposes; the formation of a joint defense groupknown as the Asbestos Cases Defense Counsel(ACDC); the noticing of depositions for use in SouthCarolina and other states; and some of the earliestvideotaping of depositions. An unusual motion wasdiscovered by a perusal of Black’s Law Dictionary,and Motions in Limine were becoming popular. “Thedefense attorneys (involved) definitely agree[d] thatit is a case of taking the good with the bad” becauseof the [billable] time involved.”

The Report ended with a roster of all memberslisted by city. Those familiar with our presentmembership might find it interesting that we hadindividual members in Aiken (2), Beaufort (3),Bishopville (2), Camden (1), Dillon (1), Easley (1)Greenwood (3), Hartsville (2), Newberry (1), Walhala(1) and Walterboro (2).

Some things have not changed in all those years.One of the featured speakers at the Tenth AnnualDefense Conference spoke on “OvercomingResistance to Change,” there was a cocktail partywith heavy hors d’oeuvres the first night, and EdMullins was pushing The Defense Research Institute,“your association’s answer to the American TrialLawyers’ Association (ATLA).” Dewey Oxner was thestate DRI chairman with Bobby Hood, Jack Barwickand Elford Morgan as area chairmen. Annualmembership in that organization was $50.

And that was “the way we were…1977.”

The Way We Wereby T. Ruth

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SEMINARNEWS

Please mark your calendarsand plan to join us at thebeautiful Grove Park Inn in

Asheville July 22-24, 2010, for the43rd Joint Meeting of the SouthCarolina Defense Trial Attorneys'Association and the ClaimsManagers' Association of SouthCarolina. The GPI is always awonderful place to spend a fewsummer days with your family aswell as old and new friends, and thisyear will be no different.

Catherine Templeton, JohnstonCox and Ed Lawson have puttogether an outstanding program,including interesting and informa-tive continuing education topicsand fun events for the entire family.On Thursday we will have ourtraditional welcome reception andsilent auction. Young Lawyers President PaulGreene and his committee are hard at work gather-ing up items for the silent auction. This year'sproceeds will be donated to Our Courts.org, awonderful new civics program founded by UnitedStates Supreme Court Justice Sandra Day O'Connorand supported by the SCDTAA. I am sure the moreyou hear of Our Courts you will agree that it is aworthy cause for us to support. So be prepared to bidearly and often!

The educational program kicks off Friday morningwith well-known attorney Roger Dodd ofJacksonville, Florida speaking on every defenselawyer's and claims manager's favorite part of trial--cross examination. And given the title of his lecture,"Eviscerating the Other Side," this promises to be agreat start to the meeting. David Kibler, Rick Lamarand Rick Adair will follow Roger with words ofwisdom from clients to lawyers, and that will befollowed by excellent litigation and workers'compensation breakout sessions.

Representative Jenny Horne and Merl Code havegraciously agreed to be our ethics speakers onFriday. Jenny will speak on "Falls from Grace" andMerl will speak on "Positive Corporate Relations andDiversity." In between John T. Lay, Bre Walker andBarry Reynolds will discuss the pitfalls of bad witnesspreparation. We'll have another workers' compensa-

tion breakout that morning, and will close out themeeting with a presentation on fire explosion andinvestigation by Randy Watson of SEA, Ltd, ourPlatinum Sponsor this year.

There is plenty of "play" lined up to go along withall the "work" this year. On Friday afternoon atten-dees will have lots of options, including golf, whitewater rafting, a sporting clays outing, a NantahalaGorge zip line canopy tour (a first for our meeting) ora wine tasting. The only problem is which one topick. In addition, on Friday morning we are offeringa spouse's tour (another first for our meeting) ofshopping in Asheville. Or, if complete relaxation iswhat you need, there is always the incredible GPISpa.

I mentioned above that Asheville is a great place tospend a few days with family and friends. Weencourage you to bring your children along with you.We will have a professionally equipped children'sprogram on Friday evening so you or your spousewon't have to rush back from the Bluegrass andBluejeans Barbeque that night, and of course GPI canhelp with the children any other time while you arein Asheville.

Please be sure to make your room, spa and dinnerreservations as soon as possible by either calling GPIat (800) 438-5800 or by visiting the website atwww.groveparkinn.com.

2010 Joint MeetingAsheville, NC

July 22-24by T. David Rheney

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14

SEMINARNEWSCONT.

The Second Annual SCDTAA CorporateCounsel Seminar was held in Columbia onApril 21, 2010, and was a tremendous

success. The Corporate Counsel Seminar isdesigned specifically for in-house counsel withinSouth Carolina and is presented to corporate coun-sel at no charge. We are pleased to note that regis-tration and attendance almost doubled from lastyear. Attendees came from many parts of the state,including Rock Hill, Aiken, Greenville, as well asColumbia.

The program included presentations on recentchanges and developments in employment law byWilliam H. "Bill" Foster and on important issuesfrom the current South Carolina legislative session,including tort reform, by Eric Englebart. Theprogram was headlined by a panel discussionpresenting the candidates for South CarolinaAttorney General. All of the announced candidateswere invited and three were able to participate,

Leighton Lord, Alan Wilson, and Robert Bolchoz.The attendees and the candidates engaged in anactive exchange of ideas and information.

We received great praise from the attendees onthe seminar and many thanked the SCDTAA forpresenting the program. All new attendees receiveda complimentary one year membership to theSCDTAA. It is our hope that continuation andgrowth of this event will encourage more in-houseand corporate counsel to join our organization. Inthis regard, several of the in-house counsels inattendance have expressed an interest in becomingactive in the SCDTAA. Additionally, some of the in-house counsel joined us at the legislative/judicialreception at the Oyster Bar which followed theCorporate Counsel Seminar. We look forward tonext year's Corporate Counsel Seminar and contin-uing our efforts to strengthen our membershipthrough participation of in-house counsel.

Corporate Counsel Seminar is a Hitby William S. Brown, Duncan McIntosh, and Kurt M. Rozelsky

The SCDTAA greatly looks forward to its 43rdAnnual Meeting in picturesque Pinehurst,North Carolina, during November 11-14,

2010. On the CLE side, the agenda includes AndrewUrich who is the Peterbaugh Professor of Ethics andLegal Studies at the Spears School of Business atOklahoma State University. Professor Urich is adynamic and entertaining speaker who will share hiswisdom regarding effective communication andethics. Additionally, John Kuppens will moderate apanel of lawyers and federal judges to discusschanges to Rules 26 and 56 of the Federal Rules ofCivil Procedure that become effective this December.Joined with a state court judges panel and the popu-

lar substan-tive lawbreak-outs,our agendapromisestimely,informativeand inter-esting CLEcredit.

For our social activities, Pinehurst in the fallprovides the perfect venue. Besides its reputation asa world-class golf resort, Pinehurst will offer ourmembers, guests and invited judges the chance tohunt quail, tour historic Pinehurst following after-noon tea, quench the need for speed at 130 mph in aNASCAR vehicle or experience the excitement of awind tunnel. Chef demonstrations, wine tastings, a"Taste of North Carolina" dinner and our formalbanquet with great food (and better dancing) roundout the culinary experience.

Entertaining speakers, relaxed camaraderie,enjoyable activities, and great food all in a beautifulsetting. What more could you want?

2010 Annual MeetingNovember 11-14, 2010 • Pinehurst, NC

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On March 15, 2010, the South CarolinaSupreme Court reversed an $18 millionjury verdict against the Ford Motor

Company, finding that the trial court erred in admit-ting the testimony of two of the plaintiffs’ expertsand admitting evidence of prior sudden accelerationaccidents. Watson v. Ford Motor Co., No. 26786, ---S.E.2d ---, 2010 WL 916109 (S.C. Mar. 15, 2010).This decision is instructive on the duties of the trialcourt as a gatekeeper of the admission of evidenceand vividly illustrates how plaintiffs may not simplyrest on the mere fact that an accident happened tohold a defendant liable.

A. BackgroundThe case involved the sudden acceleration of a

vehicle -- a timely topic with the current influx ofrecalls of Toyota vehicles. On December 11, 1999,Sonya L. Watson was driving her 1995 Ford Explorerwith Patricia Carter and two other passengers in thevehicle when she lost control, veered off the inter-state, and rolled over four times. Carter did notsurvive the accident and Watson was rendered aquadriplegic. Watson and Carter filed a productsliability action against Ford, claiming that the acci-dent occurred because the cruise control systemwas defective, and that their injuries were enhancedbecause the seat belts were defective.

At trial in Greenville County, the plaintiffspresented and the trial court allowed three types ofevidence that became the subject of Ford’s appeal.First, the plaintiffs presented testimony of Dr.Antony Anderson, an electrical engineer from theUnited Kingdom. He opined that electromagneticinterference (“EMI”) took hold of the vehicle’s cruisecontrol system, causing it to suddenly accelerate.Dr. Anderson further testified that Ford could haveprevented the accident through an alternativedesign. Second, the plaintiffs presented the testi-mony of Bill Williams, a purported automotiveindustry veteran, as an expert on cruise controldiagnosis. Finally, the plaintiffs offered evidence ofsimilar accidents involving sudden acceleration inFord Explorers.

The jury determined that Ford was liable to theplaintiffs on their claim that the Explorer’s cruisecontrol was defective and awarded Watson $15million in compensatory damages and Carter’sEstate $3 million in compensatory damages.Thereafter, Ford appealed, asserting the trial courterred in “. . . qualifying Bill Williams as an expert incruise control systems[,] allowing Dr. Anderson’stestimony regarding EMI and alternative feasibledesign[, and] allowing evidence of other incidents ofsudden acceleration in Explorers.” Watson, 2010WL 916109, at *2.

On those grounds, the South Carolina SupremeCourt heard Ford’s appeal. In an opinion authoredby Chief Justice Jean Toal, the Supreme Courtagreed with Ford, finding that the trial courtcommitted prejudicial error in allowing evidence attrial that did not meet the threshold admissibilityrequirements in South Carolina. South Carolina hasnot adopted the Daubert test and instead follows itsown test set forth in State v. Council, 515 S.E.2d508, 518 (S.C. 1999) and its progeny. Under thattest, South Carolina courts have generally beenfairly liberal in qualifying experts to testify at trial,and motions to exclude brought under State v.Council are not often granted.

B. Trial Court Gatekeeper FindingsAs a preliminary matter, the Watson court set

forth the three findings that all trial courts mustmake in South Carolina before a jury may considerexpert testimony: (1) the subject matter is beyondthe ordinary knowledge of the jury, (2) the experthas the requisite knowledge and skill to qualify as anexpert in the particular subject matter, and (3) thesubstance of the testimony is reliable. See State v.Douglas, 671 S.E.2d 606 (S.C. 2009); Gooding v. St.Francis Xavier Hosp., 487 S.E.2d 596, 598 (S.C.1997); Council, 515 S.E.2d at 518.


Motor Vehicle Sudden Acceleration: Trial Court as Gatekeeper

of Expert Evidence(Watson v. Ford Motor Co., No. 26786, --- S.E.2d ---,

2010 WL 916109 (S.C. Mar. 15, 2010))by Mary A. Giorgi

15

FEATUREARTICLE

01-48.indd 15 6/17/10 1:58 PM

16

C. South Carolina Supreme CourtFindings

The Court first found that there was “no evidenceto support the trial court’s qualification of [Bill]Williams as a expert in cruise control systems”because Williams had no professional experienceworking on cruise control systems prior to litigation,had not conducted any comparison of the Explorer’scruise control system to any other system, and hadnot taught or published papers on cruise controlsystems. Watson, 2010 WL 916109, at *4.

Next, the Court found that the “trial court erred inadmitting Dr. Anderson’s testimony as to both analternative feasible design and his EMI theory.” Id.at *6. In so doing, the Court stated that Dr.Anderson was not qualified to testify on that subjectmatter because “[h]e had no experience in the auto-mobile industry, never studied a cruise controlsystem, and never designed any component of acruise control system.” Id. Further, the Courtfound his testimony unreliable because he providedno support for his conclusion that an alternativedesign would have cured the alleged defect. Withrespect to Dr. Anderson’s EMI theory, the Courtrejected his testimony because his theory had notbeen peer reviewed, his theory had not been tested,and Dr. Anderson stated he could not replicate thealleged EMI or tell where it originated or what partsit affected. Id.

Finally, the Court found that the plaintiffs hadfailed to show that the incidents of sudden accelera-tion presented were similar to the incident at issue:the Explorers were made in different years and weredifferent models. Further, the Court found that theplaintiffs failed to “show a similarity of causationbetween the malfunction in this case and themalfunction in the other incidents.” Id. at *8.

Since the only evidence that the plaintiffspresented to prove that the Explorer was defectivewas Dr. Anderson’s testimony, the Court ruled thatthe trial court committed prejudicial error by admit-ting his testimony. Further, the Court found ithighly prejudicial that the plaintiffs were allowed topresent evidence of other incidents when they hadnot established a factual foundation to showsubstantial similarity. As a result, the Court reversedthe jury’s verdict against Ford.

D. Concurrence by Justice PleiconesJustice Costa M. Pleicones concurred in the result

only, agreeing with many of the points made by the

majority but suggesting that he would have reachedthe same result by a different route. Specifically, hedisagreed “with the majority’s analysis of the expertwitness issue involving Dr. Anderson, or its analysisof the admissibility of the evidence of other acceler-ation incidents.” Id. at *9. Interestingly, JusticePleicones disagreed with the majority’s delineationof the trial judge’s gatekeeper role and stated that itwas their framework that was incorrect when theexpert testimony was scientific. He stated that theproper gatekeeper role is provided in State v.Council as follows:

1. Is the underlying science reliable?2. Is the expert witness qualified ?3. Would the evidence assist the trier of fact to

understand the evidence or to determine afact in issue?

Id.

Contrary to the findings of the majority, JusticePleicones found that Dr. Anderson was qualified asan expert on the subject and that the underlyingscience involving the impact of EMI was reliable. Id.The basis upon which he found that the trial courterred in admitting Dr. Anderson’s testimony wasthat it would not assist a jury as a result of Dr.Anderson’s failure to support his opinions.

On the issue of the majority’s determination onadmissibility of the evidence of other accelerationincidents, Justice Pleicones stated that he did notsee an issue with the fact that the “other incidents”involved Explorers manufactured in different yearsor were different models. Id. at * 10. He, on theother hand, found this evidence inadmissiblebecause the causal link between those accelerationsand the one in Watson hinged on Dr. Anderson’s EMItheory, which should not have been admitted. Id.

E. ConclusionWhile both the majority and Justice Pleicones,

concurring, came to the same result, the variation intheir analyses was quite different. Perhaps thisdiscrepancy shows that our courts may not be firmon the test to be employed when scientific evidenceis at issue? While the varying analyses may notmake a difference in all cases, it could have someeffect. Thus, practitioners should be mindful of theanalyses on the issue of admissibility of expertevidence in Council, as well as the majority andconcurrence in Watson, making certain all bases arecovered.

ARTICLECONT.

WWW.SCDTAA.COM

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The federal government has served noticethat it will soon be launching an avalanche ofnew regulatory and enforcement actions

from Washington which will place enormous newburdens on employers. Worse, several of the newregulatory strategies will mandate that employersdemonstrate and document their compliance withemployment laws and regulations to all employees,which then can lead to federal enforcement actions,private lawsuits, or union organizing.

DOL’S “PLAN/PREVENT/PROTECT”STRATEGY

One example is the U.S. Department of Labor’s“Plan/Prevent/Protect” strategy, which is a cross-department regulatory and enforcement initiative.The new regulatory approach was announced as partof the Department’s Spring 2010 Regulatory Agenda.As stated in the announcement: “The Department’sgoal is to foster a new calculus that strengthensprotections for workers and results in significantlyincreased compliance.”

The new regulatory strategy mandates that allemployers prepare, implement, and share withemployees a series of comprehensive complianceprograms for wage-hour, safety and health, affirma-tive action, and pensions. In place of what theDepartment terms the traditional “catch me if youcan” enforcement philosophy, where federal agentsinspect workplaces either randomly or throughcomplaints, the new “Plan/Prevent/Protect” strategywill place the onus on employers for, in effect, certi-fying their own compliance. As the Labor Departmentstates in its Spring 2010 Regulatory Agenda: “Withonly a few thousand inspectors, the Department ischarged with protecting 140 million workers in some9 million workplaces. Unfortunately, in our currentsystem, Labor Department enforcement personnelmust intervene to assure compliance in too manycases. It is a “catch me if you can” system. . . . Weare going to replace “catch me if you can” with“Plan/Prevent/Protect.”

The new strategy will cover the laws and regula-tions of the Labor Department’s Wage and HourDivision (WHD), Office of Federal ContractCompliance Programs (OFCCP), OccupationalSafety and Health Administration (OSHA), MineSafety and Health Administration (MSHA), andEmployee Benefits Security Administration (EBSA).

Thus, not only will employers have to comply withthe laws and regulations, as currently is the require-ment, but they must also audit their own compli-ance, involve employees in the development ofcompliance plans, and provide the results of theaudits to employees so that the employees can moni-tor implementation of the compliance plans.

While each of the five Divisions listed above willdevelop its own regulations or other mandates underthe “Plan/Prevent/Protect” enforcement strategy, theDepartment has identified the following generalcomponents required of employers:

• “Plan”: The Department will propose a require-ment that employers and other regulated entitiescreate a plan for identifying and remediating risks oflegal violations and other risks to workers — forexample, a plan to search their workplaces for safetyhazards that might injure or kill workers. Theemployer or other regulated entity would providetheir employees with opportunities to participate inthe creation of the plans. In addition, the planswould be made available to workers so they can fullyunderstand them and help to monitor their imple-mentation.

• “Prevent”: The Department will propose arequirement that employers and other regulatedentities thoroughly and completely implement theplan in a manner that prevents legal violations. Theplan cannot be a mere paper process. The employeror other regulated entity cannot draft a plan and thenput it on a shelf. The plan must be fully implementedfor the employer to comply with the“Plan/Prevent/Protect” compliance strategy.

• “Protect”: The Department will propose arequirement that the employer or other regulatedentity ensures that the plan’s objectives are met on aregular basis. Just any plan will not do. The planmust actually protect workers from violations oftheir workplace rights.

As stated by the Department in its Spring 2010Regulatory Agenda: “Employers and other regulatedentities who fail to take these steps to addresscomprehensively the risks, hazards, and inequitiesin their workplaces will be considered out of compli-ance with the law and, depending upon the agencyand the substantive law it is enforcing, subject toremedial action.”

The Regulatory Avalanche from Washington

by Leigh Nason

FEATUREARTICLE


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SPECIFIC PROGRAM REQUIREMENTSUNDER ”PLAN/PREVENT/PROTECT”

Wage and Hour: The Wage and Hour Division(WHD) has announced a “Public ClassificationAnalysis” which will begin with the publication of aNotice of Proposed Rulemaking, planned for August2010, to increase employers’ recordkeeping obliga-tions under the Fair Labor Standards Act (FLSA). Ata minimum, the WHD has suggested that the newrecordkeeping rule will include:

• “A requirement that employers provide workerswith information about their employment,including how their pay is calculated.”

• “A requirement that employers that seek toexclude workers from the FLSA’s coverageperform a classification analysis, disclose thatanalysis to the employees, and retain that analy-sis for WHD enforcement personnel who mightrequest it.”

OSHA: Added to its existing Safety and HealthProgram Management Guidelines, OSHA is planningto propose adopting a new Injury, Illness, andPrevention Program (or I2P2) that likely will requireemployers to develop an injury and illness preven-tion program that includes a proactive and continu-ous process to address safety and health hazards.

Stakeholder meetings regarding I2P2 are alreadyscheduled for June 3 in East Brunswick, NJ; June 10in Dallas, TX; and June 29 in Washington, DC.

OSHA has identified the following components ofI2P2:

• Management duties (including items such asestablishing a policy, setting goals, planning andallocating resources, and assigning and commu-nicating roles and responsibilities).

• Employee participation (including items such asinvolving employees in establishing, maintain-ing, and evaluating the program; employeeaccess to safety and health information; and theemployee’s role in incident investigations).

• Hazard identification and assessment (includingitems such as what hazards must be identified,information gathering, workplace inspections,incident investigations, hazards associated withchanges in the workplace, emergency hazards,hazard assessment and prioritization, andhazard identification tools).

• Hazard prevention and control (including itemssuch as what hazards must be controlled, hazardcontrol priorities, and the effectiveness of thecontrols).

• Education and training (including items such ascontent of training, relationship to otherOSHA training requirements, and peri-odic training).

• Program evaluation and improvement(including items such as monitoringperformance, correcting program defi-ciencies, and improving programperformance).

Employers’ voluntary participation indeveloping safety and health programswould become mandatory underOSHA’s forced compliance with the newI2P2. The program, in turn, could avoidthe necessity for OSHA to engage informal rulemaking or the lengthypromulgation of new safety and healthstandards, such as the failed OSHAergonomics standard that Congressrejected under the CongressionalReview Act. Instead, OSHA hasrequired a new column for work-relatedmusculoskeletal disorders (MSDs) onthe OSHA 300 Log (reports of accidentsand illnesses), which could be used forself-enforcement under I2P2.MSHA: Reacting strongly to recentmine disasters, the Labor Department’sMSHA has announced in the Spring2010 Regulatory Agenda, as part of its“Plan/Prevent/Protect” strategy, thefollowing regulatory initiatives:

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• Pattern of Violation Regulation Review: “MSHAwill review its existing Pattern of Violations regu-lation. The goal will be to assure that mine oper-ators …with large numbers of serious andsubstantial violations of the Mine Act and itsimplementing regulations will be subjected tosignificantly enhanced enforcement activities.The regulation will simplify and improve consis-tency in the procedures and criteria for placingmine operators into the pattern of violationsprogram. For example, MSHA is consideringhow it could use the pattern of violations processto require operators to implement effectivecomprehensive safety and managementprograms aimed at fixing problems before theyoccur. MSHA is also considering simplifying theprocedures for applying the pattern criteria sothat operators would be required to more quicklyand effectively address systemic hazards andallow MSHA the flexibility to investigate differentkinds of patterns.”

• Safety and Health Management Programs forMines: “MSHA currently requires developmentand approval of plans for control of specifichazards. For coal mines, the Mine Act requiresunique mine plans for ventilation, roof control,dust control, and other mining issues in additionto mandatory and specific mine operator inspec-tions designed to identify and correct hazards.MSHA will work on regulations to improve theeffectiveness of these existing plans, but MSHAwill also publish a Request for Information (RFI)about the possible imposition of a new require-ment of a comprehensive health and safetymanagement program for all mines. The RFI willsolicit information in the areas of managementcommitment and employee involvement; worksite analysis; hazard prevention controls; safetyand health training; pre-shift inspection; viola-tions of any mandatory safety or health stan-dards and correction of those that are identified;and, program evaluation.”

OFCCP: In a recent web chat, OFCCP DirectorPatricia Shiu pointed out that “[i]t’s a new day at theOFCCP” and advised employers to “be proactive” inassessing possible discrimination issues in hiring,promotions, terminations, and compensation. Shiuwarned that employers must “develop a culturewhere equal opportunity and diversity is valued.”

OFCCP already requires covered contractors andsubcontractors to develop written affirmative actionprograms (AAPs) which may be audited by theagency. To further support its mission of affirmativeaction and equal employment opportunity (and now,presumably, “diversity”), however, OFCCP hasestablished the following goals:

• Continued focus on pay equity, likely focusing onindividual pay differences rather than histori-cally unsuccessful attempts to find systemicproblems.

• Increased scrutiny of hiring decisions throughboth disparate treatment and disparate impactanalyses, focusing on low-wage and entry-leveljobs.

• Targeting recidivism of contractors entering intoconciliation agreements, including greaterscrutiny of progress reports and possible consid-eration of follow-up onsite reviews.

• Revamping and updating construction contrac-tor regulations and increasing compliancereviews for these employers.

• Emphasizing outreach to and recruitment ofveterans and individuals with disabilities.

• Developing a more robust statistical model totarget alleged violators and determine whichcontractors to audit.

In addition, as part of the “Plan/Prevent/Protect”strategy, OFCCP has announced plans for a Notice ofProposed Rulemaking (NPRM) requiring that federaland federally-assisted contractors take steps to prop-erly classify “independent contractors” similar to theinitiative being developed by the Wage and HourDivision.

EBSA: In addition to the previously announcedemphasis by the IRS and the Labor Department’sWage Hour Division calling for stepped-up enforce-ment of independent contractor classification, theDepartment’s Spring 2010 Regulatory Agenda callsfor the following initiative as part of its“Plan/Prevent/Protect” strategy:

“The Employee Benefits Security Administration(EBSA) will work with the WHD to ensure thatemployee benefit plan issues are addressed in settle-ments with employers regarding misclassification ofemployees as independent contractors. WHD willrequire settling employers to review their benefitplans, resolve the benefit rights of misclassifiedemployees, and report related violations of planprovisions and ERISA to EBSA.” This is on top of theDepartment’s joint initiative with the IRS, as part ofworkplace investigations, to identify employees whoare misclassified as “independent contractors.”

OTHER REGULATORY INITIATIVESThe Labor Department’s “Plan/Prevent/Protect”

strategy is merely the “tip of the iceberg.”Throughout the government, and inside Congress,there has been a major emphasis on promotingunion-only Project Labor Agreements (PLA) infederal construction projects, especially forconstruction of nuclear power plants and so-called“green jobs.” For example, the Final Rule imple-menting Executive Order 13502, which “encour-ages” the use of PLAs, was published in the FederalRegister on April 13 and became effective on May 13.

Another rule, implementing Executive Order13495 (“Non-displacement of Qualified Workers

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under the Service Contract Act”), was published onMarch 18, with the deadline for filing publiccomments on May 18. The Executive Order requirescontractors under the Service Contract Act to offerunion employees of a contractor they displace theright of first refusal for continued employment.

Also, a rule implementing Executive Order 13497(“Non-reimbursement of Labor Relations Costs”)was proposed on April 14, with the deadline for filingpublic comments on June 14. The Executive Orderprohibits contractors from seeking reimbursement ofcosts for communicating with employees during aunion organizing campaign.

Another rule implementing Executive Order13496 (“Notice of Employee Rights under LaborLaws”) is pending final review at the White HouseOffice of Management and Budget (OMB) followingthe end of the public comment period. TheExecutive Order, which was written by newly recess-appointed NLRB Member Craig Becker while he wasemployed by the SEIU, requires contractors to post aworkplace notice of employee rights to organize andbargain collectively, and engage in other concertedactivities. The proposed notice was heavily biased infavor of unions in its interpretation of the NationalLabor Relations Act.

“High Road” Government ContractingThe business community should carefully monitor

development of a new federal regulation beingconsidered within Vice President Biden’s MiddleClass Task Force. The “High Road” GovernmentContracting proposal, which is expected to bereleased as an Executive Order, will mandate thecontractors pay a “living wage” (undefined), alongwith health insurance, retirement benefits, and sickleave. It also is expected to take into account acontractor’s compliance record with labor andemployment laws in determining a preference for theaward of federal contracts. Finally, it is also antici-pated that an additional requirement to receive acontracting “preference” will be an employer’s“neutrality” in union organizing campaigns.

Equal Employment OpportunityCommission (EEOC)

The EEOC is finalizing several long-outstandingregulations. It has completed action on a final ruleimplementing the Genetic InformationNondiscrimination Act (GINA), and is finalizing arule to implement the equal employment provisionsof the Americans with Disabilities Act (ADA)Amendments Act. EEOC also has initiated rulemak-ing on the definition of “Reasonable Factors OtherThan Age” under the Age Discrimination inEmployment Act of 1967.

Newly sworn-in EEOC Chair Jacqueline A. Berrientestified on May 6 before the Senate HELPCommittee in support of the “Protecting Older

Workers Against Discrimination Act” (S. 1756),which would supersede the Supreme Court’s 2009decision in Gross v. FBL Financial Services. TheSupreme Court in Gross held that “mixed-motives”claims are not cognizable under the AgeDiscrimination in Employment Act of 1967 (ADEA),and that older workers cannot prevail on a claim ofage discrimination unless they prove that age was the“but for” cause of the employment practice at issue.Speaking for the EEOC, Chair Berrien stated thatlegislation is needed to restore and bolster the basicprotections that applied to ADEA claims pre-Gross.

National Labor Relations Board Next?Now that the NLRB has a full majority of former

union lawyers, it is widely expected that many of theBoard’s precedents in recent years will be reversedthrough decision-making. However, it is also widelyexpected that the Board will engage in rulemaking tomake it easier for unions to organize and attain firstcontracts.

Since the new majority has been seated, the firsttwo areas in which the Board has invited amicuscuriae briefs involve “compound interest” and elec-tronic posting of Board orders. The former willdetermine whether the Board compounds interest onback pay awards on a daily, weekly, quarterly, orannual basis. Of course, compounding interest couldgreatly increase financial pressures on employers tosettle unfair labor practice complaints.

The latter – electronic posting – could be a precur-sor to other uses of e-mail and the internet in mattersinvolving labor relations, such as union organizingand even electronic ballots for union representationelections. At present, the issue is limited to whetheremployers may be required to post Board orders inunfair labor practice decisions on the employer’selectronic equipment, and whether unions should berequired to do the same on their websites when theunion loses an unfair labor practice decision.

CONCLUSIONWhat unions, plaintiffs’ trial lawyers, and others

are unable to achieve through Congress, especiallyfollowing the November mid-term elections, they willseek to achieve through federal agencies by rule-making and new enforcement programs. Businessmust be engaged in the rulemaking process, chal-lenging new regulations in court, as well as preparingfor what will be the continuing avalanche of anti-business rules and regulations coming fromWashington.

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Adetailed opinion from the Richland CountyBusiness Court is a useful resource forcorporate breach of fiduciary duty and

derivative cases. In Covan v. Blue Cross & BlueShield of South Carolina, Judge Michelle Childsdismissed plaintiff shareholders' first amended classaction complaint against Blue Cross and Blue Shieldof South Carolina ("Blue Cross") and members of theBlue Cross Board of Directors in which plaintiffssought an order compelling distribution of a dividendfrom excess surplus, an accounting, imposition of aconstructive trust over the excess surplus, and otherequitable remedies. Order 2010-01-08-02, C.A. No.2008-CP-40-5294 (Rich. Cty. Ct. Comm. Pleas Jan. 8,2010) (Business Court). This article addresses severalinteresting points raised by the opinion, including thecourt's determination that the claim was exclusivelyderivative, the "requirement" of pre-complaintdemand for a derivative suit, the distinction betweenstrict versus lenient pleading requirements fordemand futility, and other notable issues.

By way of background, when judges issue decisionson Rule 12 motions to dismiss or Rule 56 motions forsummary judgment for cases in the South CarolinaBusiness Court Pilot Program, written opinions arerequired. See Business Court Pilot ProgramAdministrative Order 2009-09-07-01 (S.C. Sept. 7,2009). This opinion is one of seven issued inBusiness Court cases since the pilot program beganin October 2007. See Business Court Pilot Program,S.C. Judicial Department (last visited May 23, 2010),http://www.sccourts.org/busCourt/index.cfm InCovan, Howard Boyd, Luanne Lambert Runge, andMichael Pope represented defendants, and J. PrestonStrom, Mario Pacella, and John P. Freeman repre-sented plaintiffs.

Plaintiffs alleged direct claims for breach of fidu-ciary duty and oppression and unfair prejudice andderivative claims for breach of fiduciary duty and tocompel declaration of dividends. Covan, Order2010-01-08-02, at *3. The court decided to allowonly a claim for breach of fiduciary duty becauseplaintiffs alleged a single wrong and sought a singlerecovery from a single course of conduct: failure todeclare a dividend from the capital surplus. Id. at *3-4. As with several other key issues in the decision,the court relied on a Delaware case in which theplaintiff raised similar arguments. See id. at *3(citing Baron v. Allied Artists Pictures Corp., 337A.2d 653 (Del. Ch. 1975)).

The court then decided that this claim for breachof fiduciary duty could only be brought derivatively.Id. at *4. The court pointed out that some rareclaims can be either direct or derivative, but a claimfor breach of fiduciary duty for failure to declare adividend may only be pursued derivatively underRule 23(b)(1), SCRCP. Id.

In analyzing the requirements for derivative suits,the court articulated the distinction between thestrict pleading required for a plaintiff to showdemand would have been futile versus a court'slenient decision of whether to excuse demand. Id. at*6. Plaintiffs argued against the interpretation inCarolina First Corp. v. Whittle, 343 S.C. 176, 539S.E.2d 402 (Ct. App. 2000), of two seeminglyconflicting opinions, Grant v. Gosnell, 266 S.C. 372,376, 223 S.E.2d 413, 415 (1976), and DeHaas v.Empire Petroleum Co., 435 F.2d 1223 (10th Cir.1970). However, as the court in Covan recognized,Carolina First already resolved the confusion byexplaining that, without a doubt, the requirement ofpleading sufficient facts to show futility is strict.Covan, 2010-01-08-02, at *6. However, once a courtdetermines that sufficient facts are pled to establishfutility, the court may exercise its discretion andexcuse demand, a "lenient" decision. Id. Plaintiffsfailed to allege futility with particularity, and thecourt ultimately decided that demand was notexcused. Id. at *9.

In several instances, the court relied on cases fromother jurisdictions in considering the demandrequirement. Id. For example, the court consideredDelaware, Minnesota, and Third Circuit Court ofAppeals cases to articulate the Rule 23 demandrequirements. Id. at *6-7. In addition, the courtrelied on cases from the U.S. Supreme Court, theSecond Circuit Court of Appeals, the CaliforniaCourt of Appeals, and the District of Minnesota todecide that demand must be made before thecomplaint. Id. at *7. Thus, based on persuasiveauthority, plaintiffs' argument—that the directors'failure to declare a dividend in response to the firstcomplaint established futility of demand—failed. Id.

Plaintiffs also creatively sought to use the judicialdissolution provision to compel declaration of thedividend. Id. at *9. The court faced an initial hurdlein defendants' argument that Blue Cross's status asan insurance company meant that plaintiffs could

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Failing to Distribute a Dividend Alone Is not

a Breach of Fiduciary Dutyby Carmen H. Thomas


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not seek dissolution under the BusinessCorporations Act provision allowing dissolution. Id.The court found that it could not hear an action forjudicial dissolution of an insurance companybecause that claim was the sole jurisdiction of theInsurance Commission. Id. at *9. However, thecourt decided that plaintiffs were not required toseek judicial dissolution in order to proceed with theother equitable remedies allowed by the corporatedissolution statute. Id. at *10. To claim those reme-dies, plaintiffs must establish a ground for dissolutionunder S.C. Code Ann. § 33-14-300. Id.

Next, the court briefly addressed defendants' argu-ment that the corporate dissolution provisions inS.C. Code Ann. §§ 33-14-300 and -310 apply only toclosely held corporations; the court decided thesesections apply to corporations generally, and are notlimited to closely held corporations. Id. In determin-ing whether plaintiffs established a ground for disso-lution based on conduct that was unfairly prejudicial,the court then went on to distinguish the analysis ofKiriakides v. Atlas Food Systems & Services, Inc.,343 S.C. 587, 603, 541 S.E.2d 257, 266 (2001),because it involved a closely held corporation. Id. at*11. The court again relied on several opinions fromother jurisdictions—Montana, Oregon, Delaware, andNorth Carolina—to determine that plaintiffs did notallege sufficient facts to establish a ground for disso-lution under section 33-14-300.

Plaintiffs also asserted a claim for breach of thedirectors' fiduciary duties under S.C. Code Ann. § 33-

8-300. Covan, 2010-01-08-02, at *13. Although thecourt had given the Plaintiffs an opportunity toreplead the claim from their original Complaint,plaintiffs again failed to allege sufficient facts. Id. Thegeneral conclusion that the Board should declare adividend from excess surplus was not enough:

Plaintiffs make no allegation as to what specificallythe Board did not consider in making decisionsregarding the financial condition of Blue Cross, whatinformation it should have but did not when makingthis decision, or ultimate facts to support the allega-tion that the Board did not have all relevant infor-mation in making the decision.

Id. at *14. The court relied on Churella v. PioneerState Mutual Insurance Co., 671 N.W.2d 125 (Mich.App. 2003), in analogy to the facts of Covan anddecided that the facts as pleaded by plaintiffs did notovercome the business judgment rule. Covan, 2010-01-08-02, at *14.

The written opinions in South Carolina's BusinessCourt are intended to develop the case law for busi-ness issues, and the Covan v. Blue Cross opinioneffectively contributes to this goal by analyzingnumerous issues in a detailed opinion. The courtrelied extensively on case law based on similar factsand developed in other jurisdictions that createsuseful comparisons to the facts before it in SouthCarolina. Covan and the other Business Court opin-ions should be a resource for any lawyer handling abusiness issue for her clients.

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In December of 2008, the South CarolinaSupreme Court issued an order establishingthe Lawyer Mentoring Second Pilot Program.

The program is mandatory for all new lawyers inSouth Carolina admitted between March 1, 2009and December 31, 2010.

The program pairs new lawyers with more expe-rienced lawyers to help with the transition fromthe academic world to the practice of law. In itsdesign, the program is meant to help new lawyerslearn the practical aspects of the profession,develop professional relationships within the legalcommunity, and develop practical skills to besuccessful in the profession.

The mentor does not undertake to represent thenew lawyer’s clients or assume any responsibilityfor the quality of the work of the new lawyer. Theexpectation of the program is to help the newlawyer learn the practical aspects of the legalprofession.

The Supreme Court Commission on ContinuingLegal Education and Specialization (Commission)administers the mentoring program. While thenew lawyer has the ability to ask a qualifying

lawyer to serve as his or her mentor, theCommission has become aware that many newlawyers do not have mentors. Donette Welch,Assistant Director for the Commission, has beendesignated as the Mentoring Coordinator and isavailable to answer questions about the programand provide you with information needed to applyto be a mentor. She is also available to assist inmaking the arrangements establishing the mentorrelationship with the new lawyer. She can becontacted at (803) 799-5578 or by email at [email protected].

The need for mentors is critical, and throughyour participation in the mentoring program, youwill be providing a great service to the Court, thelegal community and the public. Not only will alawyer’s participation as a mentor serve as a mech-anism to improve the quality of our profession butit will also automatically qualify the mentoringlawyer to receive four (4) hours of CLE credit toinclude two (2) hours of legal ethics, once thementoring period is complete.

Thank you in advance for your consideration ofthis exciting project.

Lawyer Mentoring Second Pilot Program

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Punitive Damages in South Carolina

by Virginia W. Williams

South Carolina’s courts and legislature mayseem at times like two bulls in a china cabi-net – robustly charging the law, bound to butt

heads and bound to break something in the tussle.Recently, the debate has been directed at the law ofpunitive damages in South Carolina. This article willexamine the current state of punitive damages law inSouth Carolina and the potential changes beingproposed by our legislature. As can be expected,their positions don’t match up.

The Basics of Punitive Damages Lawin South Carolina

In South Carolina, punitive damages are intendedto “deter the wrongdoer and others from committinglike offenses in the future.” Laird v. Nationwide Ins.Co., 243 S.C. 388, 396, 134 S.E.2d 206, 210 (1964).Punitive damages are only permissible when a defen-dant’s conduct is so shocking and offensive thatpunishment is justified. McGee v. Bruce Hosp. Sys.,344 S.C. 466, 545 S.E.2d 286 (2001), Clark v.Cantrell, 339 S.C. 369, 529 S.E.2d 528 (2000),Laird, 243 S.C. at 396, 134 S.E.2d at 210. Stateddifferently, they are allowed when a defendant hasacted in a “reckless, willful, or wanton” manner.” SeeClark, 339 S.C. at 379, 529 S.E.2d at 534. One actswillfully or with reckless indifference to the rights ofothers when she acts in disregard of a high andexcessive degree of danger about which she knows orwhich would be apparent to a reasonable person inher condition. Camp v. Components, Inc., 285 S.C.443, 330 S.E.2d 315 (Ct. App. 1985), Carter v. R.L.Jordan Oil Co., 301 S.C. 84, 86, 390 S.E.2d 367, 368(Ct. App. 1990). Mere gross negligence is not enoughto trigger punitive damages. Rogers v. FlorencePrinting Co., 233 S.C. 567, 106 S.E.2d 258, 263(1958); see also Longshore v. Saber Security Servs.,Inc., 365 S.C. 554, 619 S.E.2d 5 (Ct. App. 2005). Aninnocent mistake or error of judgment does notconstitute the type of misconduct that will support anaward of punitive damages. Helena Chem. Co. v.Allianz Underwriters Ins. Co., 357 S.C. 631, 645, 594S.E.2d 455, 462 (2004). Furthermore, there must bea present consciousness of wrongdoing to justify theassessment of punitive damages against the wrong-doer. Martin v. Martin, 262 S.C. 168, 203 S.E.2d 385(1974). Also, there must be no reasonable ground forthe defendant’s conduct to sustain a punitive damagesaward. Crossley v. State Farm Mut. Auto. Ins. Co.,

307 S.C. 354, 360, 415 S.E.2d 393, 397 & n.2 (1992);see also Poston v. Nat. Fidelity Life Ins. Co., 303 S.C.182, 188, 399 S.E.2d 770, 773 (1990).

The Mitchell GuidepostsRecently, South Carolina’s Supreme Court made a

significant decision, affecting the direction of puni-tive damages law. In Mitchell v. Fortis InsuranceCo., the insured, Mitchell, purchased insurancecoverage a year before he was diagnosed with HIV.385 S.C. 570, 686 S.E.2d 176 (2009). However, hisinsurer denied him coverage based on a clerical errorthat his diagnosis was prior to applying for insurance,which would have amounted to a misrepresentationon his application and grounds for denial. Id. at 579,686 S.E.2d at 181. The insurer was later availed tothe clerical error, but continued to deny him cover-age. Id. Mitchell filed an action seeking actual andpunitive damages. Id. at 580, 686 S.E.2d at 181. Thejury awarded $150,000 in compensatory damages forthe bad faith rescission of health insurance claimand $15 million in punitive damages. Id. at 582, 686S.E.2d at 182. (disregarding other jury awards basedon Mitchell’s election of remedies). The trial courtdenied the insurer’s post-trial motion to vacate orremit the punitive damages award. Id. Upon certifi-cation to the Supreme Court, the insurer asked theCourt to consider whether the punitive damagesaward was excessive, violating the insurer’s constitu-tional right of due process and whether the jury’sverdict was a result of passion, caprice, or prejudice.Id. The Court affirmed the jury’s compensatorydamages award and reduced the punitive damagesaward pursuant to a 10:1 ratio. Id.

Aside from the overall holding, the Court madesome notable preliminary findings. First, it changedthe standard of review for the constitutionality of apunitive damages award. Id. at 582-83, 686 S.E.2d at182-83. South Carolina courts have typically appliedan abuse of discretion standard. Id. at 582, 686S.E.2d at 182 (referencing Gamble v. Stevenson, 305S.C. 104, 112, 406 S.E.2d 350, 355 (1991); Hundleyv. Rite Aid of South Carolina, Inc., 339 S.C. 285,314, 529 S.E.2d 45, 61 (Ct. App. 2000)). However,recent federal case law has held that a de novo stan-dard of review is appropriate when a district courtaddresses the constitutionality of a punitive damages

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award. Id. (referencing Cooper Indus., Inc. v.Leatherman Tool Group, Inc., 532 U.S. 424 (2001)).Cooper was based on the concept that a due processanalysis is highly contextual in nature and cannot beseparated from the specific facts in which the stan-dards are being assessed. Id. at 583, 686 S.E.2d at183 (referencing Cooper, 532 U.S. at 436). “The dueprocess criteria acquire content only through appli-cation, and independent review is therefore neces-sary if appellate courts are to maintain control of,and clarify, the legal principles.” Id. (citing Cooper,532 U.S. at 436). Furthermore, de novo review tendsto “unify precedent and stabilize the law.” Id. (citingCooper).

Next, the Court considered the criteria for evaluat-ing a due process award post-judgment, holding thatthe Gamble factors were only relevant to givesubstance to the Gore guideposts. Mitchell, 385 S.C.at 586-89, 686 S.E.2d at 185-86. Gore, a UnitedStates Supreme Court decision, directs the courts toconsider “(1) the degree of reprehensibility of thedefendant’s conduct; (2) the disparity between theactual and potential harm suffered by the plaintiffand the punitive damages award; and (3) the differ-ence between the punitive damages awarded by thejury and the civil penalties authorized or imposed incomparable cases.” Id. at 586, 686 S.E.2d at 184.South Carolina also developed the Gamble factors inconducting a post-judgment due process review ofany punitive damages award: “(1) the defendant’sdegree of culpability; (2) the duration of the conduct;(3) the defendant’s awareness or concealment; (4)the existence of similar past conduct; (5) the likeli-hood the award will deter the defendant or othersfrom like conduct; (6) whether the award is reason-ably related to the harm likely to result from suchconduct; (7) the defendant’s ability to pay; and (8)any other factors deemed appropriate.” Id. at 587,686 S.E.2d at 185 (citing Gamble, 305 S.C. at 111-12, 406 S.E.2d at 354). In the past, South Carolinacourts required trial courts to consider both sets offactors, but now “considerations of judicial economyweigh in favor of a less burdensome and duplicativeanalysis.” Id. Thus, the test in South Carolina forconducting a post-judgment review of punitivedamages awards is that of Gore: (1) the degree ofreprehensibility of the defendant’s conduct, (2) thedisparity between the actual or potential harmsuffered by the plaintiff and the amount of the puni-tive damages award, and (3) the difference betweenthe punitive damages awarded by the jury and thecivil penalties authorized or imposed in comparablecases. Id. at 587-89, 686 S.E.2d at 185-86. Gamble isrelevant in post-judgment due process analysis onlywhere it adds substance to the Gore guideposts. Id.at 587, 686 S.E.2d at 185.

Lastly, the Court adopted another federal stan-dard. South Carolina had applied the ratio guidepostto only compare the punitive damages award to theactual damages award; but in Mitchell the Court

found that the ratio could be punitive damages incomparison to “potential harm” damages. Mitchell,385 S.C. at 590-91, 686 S.E.2d at 187 (referencingTXO Production Corp. v. Alliance Resources Corp,509 U.S. 443 (1993)). The United States SupremeCourt held in TXO Production Corp. that “it isappropriate to consider the magnitude of the poten-tial harm that the defendant’s conduct would havecaused to its intended victim if the wrongful plan hadsucceeded, as well as the possible harm to othervictims that might have resulted if similar futurebehavior were not deterred.” 509 U.S. at 443.Mitchell applied TXO to its facts: “although the Courtdid not designate a monetary value to the potentialharm suffered by [Mitchell], it found that even themost conservative approximations…each fallingwithin a single-digit ratio…did not ‘jar one’s consti-tutional sensibilities.’” Mitchell, 385 S.C. at 591, 686S.E.2d at 187 (quoting TXO Production Corp., 509U.S. at 462). Based on the potential harm figure, theratio of punitive damages to compensatory damageswas 13.9 to 1. Id. at 592, 686 S.E.2d at 187. Thecourt held under the third Gore guidepost that thisratio exceeds due process and reduced the punitiveaward to $10 million, resulting in a ratio of 9.2 to 1.Id. at 594, 686 S.E.2d at 188.

In our view, the conduct in this case was repre-hensible enough to merit an award towards the outerlimits of the single-digit ratio. Fortis willfully disre-garded Mitchell’s health and safety, and the jury sofound in assessing this punitive damages award. Inassessing this remittitur, we place great emphasisupon that consideration…a $10 million award willadequately vindicate the twin purposes of punish-ment and deterrence that support the imposition ofpunitive damages.

Id. at 593-94, 686 S.E.2d at 188.In summary, Mitchell has changed the direction of

South Carolina’s punitive damages law in three ways:(1) a de novo standard is applied on post-judgmentreview of a punitive damages award, giving the appel-late court discretionary review of facts developed attrial; (2) the Gamble factors have decreased in impor-tance and the focus is back to the three basic guide-posts of Gore; and (3) the Gore ratio is not only actualdamages to punitive damages but can now be poten-tial damages to punitive damages, creating the possi-bility of higher damages. Also, effectively, we nowhave the Mitchell guideposts: (1) the degree of repre-hensibility of the defendant’s misconduct, (2) thedisparity between the actual and potential harmsuffered by the plaintiff and the amount of punitivedamages award, and (3) the difference between thepunitive damages awarded by the jury and the civilpenalties authorized or imposed in comparable cases.See e.g. Austin v. Stokes-Craven Holding Corp., 2010WL 760410 (S.C. Mar. 8, 2010) (referencing Mitchell,385 S.C. at 587-88, 686 S.E.2d at 185-86). The degreeof reprehensibility is determined by looking at (1)whether the injury was physical or economic, (2)

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there was an indifference or reckless disregard for thehealth or the safety of others, (3) the target of theconduct was financially vulnerable, (4) the conductwas repeated or an isolated event; and (5) the injurywas the result of intentional conduct rather than anaccident. Id. (referencing Mitchell, 385 S.C. at 587,686 S.E.2d at 185).

Potential Changes to PunitiveDamages Law – Tort Reform 2010

This year’s General Assembly session has beenmarked by comprehensive tort reform legislation.The move was sparked by South Carolina’sCommerce Secretary Joe Taylor, and the debatestarted in the House on February 10, 2009, trulygetting its wings in February of this year. H.B. 3489,118th Leg. (S.C. March 3, 2010). By March 9, 2010 ithad passed the House with 89 yeas and 10 nays. H.J.77, 118th Leg. (S.C. 2010). The Senate has now beensitting on the bill for over a month. See H.B. 3489,118th Leg. A similar bill was introduced in the Senatealso in early 2009 and then referred to Committee onJudiciary, then to subcommittee where it began 2010.S.B. 350, 118th Leg. (S.C. Jan. 29, 2009). Althoughthe versions of the bills have changed and are sure toundergo more changes, the provisions affect punitivedamages awards generally in the same ways. Theyboth propose the following: to limit noneconomicdamages and punitive damages in all personal injuryactions; reduce the liability of sellers and manufac-turers for their products if such products comply withgovernment standards; reduce the potential liabilityin tort cases based on violation of building codes;reduce liability of a seller or manufacturer when theproduct only damages itself; limit the ability to piercethe corporate veil of a corporation; and allow non-useof a seat belt to be admissible as evidence of compar-ative negligence or failure to mitigate damages. SeeH.B. 3489 (title), S.B. 350 (title).

Specifically, the House Bill limits an award of puni-tive damages to “three times the amount of the plain-tiff’s compensatory damages award or three hundredfifty thousand dollars, whichever is greater.” H.B.3489 (proposed §15-32-530)(A)). This cap does notapply when the fact finder determines the defendantpursued an intentional course of conduct that heknew or should have known would cause injury; thedefendant pleads guilty or is convicted of a felonyarising out of the same conduct complained of; orwhen the fact finder determines that the defendant’salleged conduct happened while the defendant wasunder the influence of alcohol, drugs, or othersubstance to the degree that the defendant’s judg-ment was substantially impaired. Id. (proposed § 15-32-530(B)). Also, the House Bill provides that at therequest of a defendant, a trial of issues including theallegation of punitive damages must be conducted ina bifurcated manner before the same jury. Id.(proposed § 15-32-520(A)). In the phase two of thebifurcated trial, presuming the evidence merits this

phase, the jury is to consider all, but not only, thefollowing factors: degree of defendant’s culpability,severity of the harm caused, plaintiff’s own contribu-tion to the harm, duration of the conduct, defen-dant’s awareness of the conduct, concealment by thedefendant of the conduct, existence of similar pastconduct, profitability of the defendant’s conduct,defendant’s ability to pay, the award as deterrence offuture conduct by defendant and others, otherawards for similar conduct, criminal penaltiesalready imposed, and the amount of civil finesalready assessed against the defendant for similarconduct. Id. (proposed § 15-32-520(E)). The SenateBill reflects similar provisions. S.B. 350 (limitingeven further a punitive damages award against asmall business employer and products regulated bythe Federal Food, Drug, and Cosmetic Act, amongother minor differences).

The remaining parts of the proposed bill do notdirectly address punitive damages but their effect isto reduce the chance for a punitive damages award.Reducing overall potential liability right off the bat(i.e. the provisions regarding compliance withgovernment standards and damage only to productitself) arguably lessens a defendant’s culpability andthus lessens his exposure to punitive damages whichare based on punishing a defendant for his culpableacts. Likewise, requiring that there be a judgmentagainst a corporation before being able to pierce thecorporate veil reduces the chance of more exposureto more punitive damages based on the reckless, will-ful, or wanton conduct by particular corporate indi-viduals. Lastly, permitting evidence that an injuredparty failed to use a seat belt in an action based on amotor vehicle accident would reduce a defendant’spotential exposure to liability in general and wouldhave a filtering affect on the extent of a punitivedamages award.

The Mitchell Case Versus Tort ReformA major difference between the Mitchell case and

the 2010 Tort Reform is the opposite treatment ofthe Gamble factors. Mitchell diminished their prece-dential value while the proposed legislation putsthem right back at the forefront. Whether or not theGamble factors are applied is important to whatevidence a court will allow on punitive damages. Forexample, the Gamble factors include the defendant’sability to pay. This suggests that a plaintiff needs toshow a defendant’s available sources of money, notjust their net worth, which often includes insurancecoverage. Referencing insurance before a jury is a bigno-no, and, given they are typically not well receivedby the general public such reference could greatlyprejudice a defendant. In this sense the Tort Reformdisadvantages a defendant where Mitchell favors adefendant.

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As noted in the Spring 2010 issue of DefenseLine,Section 111 of the Medicare, Medicaid and SCHIPExtension Act ("Section 111") requires defendants toreport to the federal government certain settlementswith Medicare beneficiaries. This article suggestsways to mitigate potential liabilities associated withSection 111 reporting.

Section 111 ReportingNon-compliance with the Section 111 reporting

obligations can result in $1,000 per day, per claimpenalties, regardless of the amount of settlement.Penalties can result from a variety of mistakes, suchas a failure to timely register for the reportingprogram; confusion over whether the defendant orits insurer has the reporting obligation; an incorrectdetermination that a plaintiff was not a Medicarebeneficiary or that a specific settlement arrangementwas not reportable; or due to another entity's delay(for instance, a reporting vendor). Additionally,penalties could arise due to inaccurate reportedinformation.

To reduce the likelihood of reporting mishaps,settling defendants and their insurers should identifywhich entity is legally responsible for reporting (theResponsible Reporting Entity, or "RRE"). As noted inthe prior article, the RRE designation depends on thesettlement amount and insurance arrangement.Insureds and insurers should also identify whichentity will administer the reporting (RREs cancontract with other parties to oversee their Section111 submissions). The RRE remains responsible forreporting penalties regardless of such arrangements;accordingly, vendor contracts should allocateresponsibility for reporting penalties.

Entities that have a reasonable expectation ofreporting should register by September 30, 2010 toallow for the required calendar quarter of testingbefore reporting begins in the first quarter of 2011.The agency that administers Medicare and runs theSection 111 program (the Centers for Medicare andMedicaid Services, "CMS") has indicated that a goodfaith effort to comply with the registration, testingand reporting deadlines is a defense against a penaltyassessment. However, CMS has suggested that littlesympathy will be accorded to entities that ignore thedeadlines or fail to make alternate arrangements.

Most importantly, RREs should integrate thereporting requirements into the claims evaluation

and resolution process. CMS has provided an officialform for use in obtaining Social Security andMedicare identification numbers, without whichRREs cannot report. Discovery can also elicit certaininformation for reporting. Defendants may want towork with plaintiff's counsel to identify reportableinformation through fact sheets or other writtenagreements. Ultimately, the defendant/insurer isresponsible for the content and timing of the report.

Plaintiff's counsel have incentive to cooperate withefforts to report accurate information. Section 111reports include diagnosis codes that identify theinjury or illness underlying the settlement. CMS willuse the reported code (with other information) toconnect the settlement to prior medical expensesmade on behalf of the beneficiary (if any). If notaccurately reported, CMS's recovery demand mayinadvertently include past expenses that are unre-lated to the injury covered in the settlement – thushampering both parties' efforts to close out the case.

Section 111 Data Use Agreement As discussed in the prior article, RREs must

complete a Data Use Agreement ("DUA") when regis-tering for the Section 111 program. The DUAimposes data security obligations and requires theRRE to protect the confidentiality of data and estab-lish safeguards against unauthorized use and disclo-sure of information exchanged with CMS. Since theDUA alludes to "civil and criminal penalties fornoncompliance contained in applicable Federallaws," RREs should revise information security poli-cies and procedures to incorporate the DUA'srequirements. The DUA holds RREs responsible forthe acts of third party vendors; accordingly, RREsshould ensure that vendor contracts address theDUA’s requirements and penalties.

Medicare Secondary Payer ProgramThe Medicare Secondary Payer ("MSP") program is

a voluminous combination of statutory provisions,federal regulations and private contractor guidelines.A thorough review of the MSP program is beyond thescope of the article. However, Section 111 reportingand the MSP program are intertwined processes.Section 111 reporting identifies settlements for theMedicare Secondary Payer Recovery Contractor’s

Tips to Minimize Medicare SecondaryPayer Reporting Liabilities

by Eli Poliakoff

Continued on middle of page 34

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IntroductionOver the past few years, the federal government

has increased significantly its fraud and abuseenforcement efforts. The government’s crusade todiscover, prosecute, and eliminate “fraud, waste, andabuse” in the Medicare program has been continu-ally touted in its endeavors to implement healthcarereform. According to the U.S. Department of Justice,in 2009 alone the government added $2.5 billion tothe Medicare Trust Fund as a result of the govern-ment’s investigation and prosecution of healthcarerelated fraud and abuse. A South Carolina hospital,Tuomey Healthcare System (“Tuomey”), recentlyfelt the full impact of the government’s fraud andabuse enforcement efforts when United States prose-cutors convinced a South Carolina jury that thehospital had violated a Medicare law governing finan-cial relationships between physicians and Medicareproviders. The United States’ victory may have beenpyrrhic because the jury concluded that the hospitaldid not violate the federal False Claims Act (“FCA”),and therefore Tuomey did not have to pay millions ofdollars in fines and treble damages associated withthe FCA. For the time being, Tuomey has avoidedany monetary penalties associated with the jury’sverdict. Even so, the United States’ efforts have likelyresulted in significant legal bills and the inevitabledisruption and frustration caused by the govern-ment’s investigation and prosecution of the case.

Background Tuomey Healthcare System (“Tuomey”) in

Sumter, South Carolina, is the only acute care hospi-tal in Sumter County. In 2001, a local urology groupsought a certificate of need for the construction of anambulatory surgery center (“ASC”). According tothe government, the ASC represented the first signif-icant competition for outpatient procedures thatTuomey had faced in its history. Tuomey estimatedthat it would lose a significant amount of money ifcertain specialists performed their outpatient proce-dures at the ASC, rather than at Tuomey. Inresponse, Tuomey sought to develop employmentrelationships with many of the specialists in thecommunity.

Although there were differences from contract tocontract, the contractual arrangements had severalcommon factors: (1) the contracts were part-time,encompassing only outpatient procedures; (2) the

contracts were exclusive, preventing the physiciansfrom performing outpatient procedures at any facil-ity other than Tuomey; (3) the contracts were for aninitial term of ten years, with a three-year non-compete post termination; and (4) the contractsprovided full-time benefits to the part-time employedphysicians, including the full payment of all medicalmalpractice premiums. Additionally, all thecontracts contained the same basic cash compensa-tion formula.

Under the contracts, cash compensation had threecomponents: (1) base salary, (2) productivity bonus,and (3) incentive bonus. The “base salary” compo-nent was set using a scaled calculation based on theprevious year’s collections of personally performedservice fees. The “productivity bonus” was 80% ofthe physicians’ yearly collections for personallyperformed services. The “incentive bonus” wasbased on the physicians’ meeting certain qualitativefactors such as patient satisfaction, reduced waittimes, and relationships with hospital employees. Ifa physician met the applicable criteria, then theincentive bonus could be up to 7% of the productiv-ity bonus.

The Qui Tam and the Government’s Intervention

Dr. Michael Drakeford, an orthopedic surgeon andthe “relator”1 in this case, was offered a part-timeemployment contract by Tuomey. While conductinga pre-employment contract review, Dr. Drakeford’slawyer raised numerous issues regarding compliancewith federal law; most pertinently, he raised ques-tions about whether the contracts offered to hisclient complied with the Stark law. Ultimately,Tuomey and Dr. Drakeford could not agree uponwhether the contracts were legal. Despite the prob-lems Dr. Drakeford’s attorney noted with thecontracts, 19 Sumter area physicians ultimatelyentered into part-time contractual relationships withTuomey.

Dr. Drakeford filed the qui tam action under seal in2005. In 2007, the United States formally joined theaction by filing an amended complaint. TheGovernment alleged (1) Tuomey violated the Starklaw, and (2) by submitting claims to Medicare forservices performed by physicians whose contracts

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Drakeford v. Tuomey HealthcareSystem, Inc.: The United States’ Case

Against a South Carolina Hospitalby Will Thomas and Walt Cartin

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violated the Stark law, Tuomey violated the FCA.Alternatively, the government made a number ofcommon law claims, including payment undermistake of fact, unjust enrichment, and constructivetrust and accounting.

The LawThe Stark law, sometimes referred to as the self-

referral law, prohibits a physician from referringpatients (for certain designated services) to amedical facility with whom he or she has a “financialrelationship.” See 42 U.S.C. § 1395nn et. seq. Thelaw also prohibits the medical facility from billing theMedicare program for the physician’s provision ofthese services. The law contains a number of excep-tions that can shield a provider from liability. Theexceptions pertinent to this case depended uponTuomey showing that the physicians’ compensation(1) did not vary with or take into account the volumeand value of referrals, (2) was fair market value forservices rendered under the contract, and (3) wascommercially reasonable, even without taking intoaccount any referral revenues the physicians couldgenerate for Tuomey.

The FCA, a statute which dates back to the CivilWar, imposes liability upon a person who knowinglypresents, or causes to be presented, a claim forpayment to the United States government that theperson “knows” is false or fraudulent. See 31 U.S.C.§ 3729 et. seq. Knowledge can be shown in threeways: actual knowledge, reckless disregard, and will-ful blindness. The government, relying upon theprohibition for billing Medicare for servicesperformed in violation of the Stark law, argued thatTuomey knowingly submitted false claims toMedicare. The government valued these “falseclaims” at approximately $45 million. Pursuant tothe FCA, the government asked for treble damagesand civil monetary penalties. The FCA imposes civilmonetary penalties in the amount of$5,000–$10,000 per false claim. In this case, thegovernment alleged that there were nearly 26,000individual false claims.

The Government Attempts to Make its Case

United States District Court Judge Matthew J.Perry presided over the trial. The trial began in earlyMarch 2010 and consumed the bulk of the month.The government’s case-in-chief itself lasted overeight days.

Because Tuomey employed the physicians, therewas not much of a question that a “financial rela-tionship” existed. Thus, the government turned itsattention to attempting to show that Tuomey did notmeet an applicable Stark law exception. In buildingits argument that Tuomey did not meet an exception,the government elicited testimony from a healthcareconsultant who had conducted a fair market valua-tion of the compensation paid to the 19 physicians.

Tuomey’s healthcare consultant testified that some-time in 2004 she had, at the request of Tuomey’slawyers, calculated the “net present value” of thenon-compete agreements under each contract. Thegovernment contended that this “net present value”analysis was an attempt to value the referrals thatTuomey would receive by employing the physi-cians—or, alternatively, to value the referrals itwould lose if they performed the bulk of their outpa-tient procedures at the ASC. The healthcare consul-tant also testified that she had not conducted a“commercial reasonableness” analysis, anotherelement of an exception claimed by Tuomey.

The government’s expert witness testified that thecompensation Tuomey paid to the physicians did notmeet the definition of “fair market value,” nor did itmeet the definition of “commercial reasonableness.”The expert concluded that some physicians’ cashcompensation alone was not fair market value and,for others, the benefits they received were not fairmarket value. Addressing commercial reasonable-ness, the government’s expert concluded that payingthe physicians far more than they collected for theirpersonally performed services was not commerciallyreasonable. The expert testified that Tuomey’s signif-icant historical losses on the employmentcontracts—an average of $1.5 million per year—demonstrated that the arrangements were notcommercially reasonable unless the value of referralswere taken into account. On cross-examination, theexpert admitted that some hospitals never makemoney on certain employed physicians (e.g., emer-gency room doctors). Whether this reality wascommercially reasonable, she opined, depended onthe facts and circumstances of the particular situation.

Although the Stark law is a strict liability statute, agreat deal of the government’s case focused on tryingto establish that Tuomey “knew” the part-timecontracts violated the Stark law to prove the essen-tial scienter element of its FCA claim. The govern-ment attempted to establish the knowledge elementthrough two main avenues: live testimony fromseveral Tuomey advisors and tape recordings ofmeetings held by Tuomey officers and its Board ofTrustees.

Dr. Drakeford’s lawyer testified that his initialreview of the contracts raised some troubling issues.The lawyer testified that he communicated theseconcerns, both orally and in writing, to Tuomey’slawyers. He testified that he and Tuomey eventuallyreached an “impasse” regarding compliance with theMedicare laws. To break this impasse, his clients andTuomey jointly retained Mr. Kevin McAnaney, formerChief of the Office of Inspector General’s IndustryGuidance Branch and Washington D.C. based attor-ney, to provide a substantive review of the proposedcontracts. Mr. Smith testified that Mr. McAnaneyraised numerous “red-flags” with the model. TheGovernment presented documents and testimony toshow that after Tuomey received his adverse opin-ion, Tuomey unilaterally terminated his representa-

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tion and instructed him not to set forth his opinionsin writing. Judge Perry did not allow Mr. McAnaneyto testify about the representation, a ruling which isnow part of the basis for the government’s pendingmotion for a new trial.

Mr. Richard Kusserow, a former Inspector Generalof the Department of Health and Human Services,testified that he had reviewed the proposed part-timeemployment contracts on behalf of Tuomey. In aneleven-page letter, he outlined a “devil’s advocate”view of the contracts, citing numerous perceivedcompliance problems. Significantly, although Mr.Kusserow was not asked to provide a Stark law analy-sis, he thought that the arrangements presentedsubstantial Stark compliance issues and, therefore,included a Stark law discussion in his analysis. Mr.Kusserow testified that he sent this eleven-page letterdirectly to Tuomey’s lawyer.

In addition to live testimony, the jury heardseveral hours worth of tape recordings. These taperecordings revealed frank discussions betweenTuomey’s officers, lawyers, trustees, and some of thephysicians whose contracts were at issue in thiscase. In closing arguments, the government arguedthat these tapes proved Tuomey’s agents knew thecontracts posed a serious risk under the Stark law.Replaying portions of several tapes for the jury, thegovernment highlighted certain comments made byTuomey’s lawyers and officers. The governmentinterpreted these comments as showing that Tuomeyknew the contracts were illegal.

Tuomey’s defense consisted of live testimony fromtwo witnesses: another healthcare consultant whohad given Tuomey an opinion on fair market value in2004–2005 (this consultant has supervisory author-ity over the consultant called as a witness in thegovernment’s case-in-chief), and its own expertwitness. Although Tuomey had raised the defense ofreliance on the advice of counsel, Tuomey chose notto have its lawyers testify. Instead, it relied upon thetape recordings played in the government’s case asevidence establishing its reliance on the advice ofcounsel defense.

After a relatively short direct examination ofTuomey’s healthcare consultant, the governmentconducted nearly a three hour cross-examination.The government attempted to undermine the credi-bility of Tuomey’s consultant, questioning his exper-tise and valuation methodology. Ultimately,Tuomey’s consultant admitted that the “losses” asso-ciated with the physician contracts were really“costs” because Tuomey would make money on thephysicians from other sources, including facility fees.In closing argument, the government argued that thisconsultant’s testimony proved that the arrangementswere not commercially reasonable without takinginto account the value of referrals, as facility feespaid by Medicare were undeniably value flowing fromreferrals.

Tuomey’s expert worked to show that the govern-ment’s expert had taken a myopic view of the

contracts, failing to consider the environment inwhich Tuomey operated. He testified that Tuomeyserved a rural community with an adverse payor mix(i.e., relatively few privately insured patients and adisproportionate amount of patients whose health-care is paid for by government programs). Tuomey’sexpert testified that when he analyzed the physi-cians’ “whole practices,” the physicians’ compensa-tion met the standard for fair market value. Theexpert’s “whole practice” approach required him toanalyze all of the physicians’ work (inpatient, outpa-tient, and in-office), as well as compensation paidfrom all sources, including payment for services notperformed under the part-time contracts. Thegovernment criticized this approach as taking intoaccount criteria that are impermissible under thedefinition of “fair market value.”

The VerdictUltimately, the jury concluded that Tuomey

violated the Stark law, but had not violated the FCA.Thus, the jury awarded the government no damages.The government is continuing to pursue damagesunder its common law claims and will present theseclaims to the Court in early June. Moreover, thegovernment has moved for a new trial, mainly basedon the exclusion of key testimony relating to its FCAclaim. Thus, even though Tuomey initially escapedimposition of the crushing damages and penaltiesrequested by the government, it could still suffer stiffpenalties or be forced to pay damages based upon thegovernment’s common law claims.

Based on the rarity of fraud and abuse cases goingto trial (the vast majority of cases settle), this casehas sparked considerable interest in the healthcarelaw community. Both Medicare providers and theirlawyers should closely watch this case as it headstowards inevitable appeal. Many of the legal argu-ments asserted by Tuomey’s trial attorneys will poseinteresting questions for the Fourth Circuit. TheFourth Circuit’s conclusions on these issues couldhave lasting impact on the way healthcare lawyersadvise their clients in an increasingly hostileenforcement environment.

Footnote1 The FCA allows private citizens to file complaints

alleging FCA violations. These suits are called “qui tam”actions and the citizens filing the complaints are called“relators.” The United States may choose to join theaction or it may allow the relator to proceed on his or herown, albeit with some government oversight. A relator canrecover anywhere from 15%–25% of the qui tam proceedsif the relator’s action results in a victory at trial or a settle-ment.

* Since submission of this article to The DefenseLine, Judge Perry awarded the government $44.8million on its common law claims, along with pre-judgment interest, and ordered a new trial on theFalse Claims Act cause of action on the basis that theCourt improperly excluded crucial evidence.

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The South Carolina Supreme Court recentlygranted defense counsel’s petition for writ ofcertiorari in a case, previously ruled upon in

November of 2008 by the Court of Appeals, McClurgv. Deaton, 380 S.C. 563, 671 S.E.2d 87 (Ct. App.2008). The case has garnered significant attentionwithin the trucking industry and among defensecounsel across the state. The SCDTAA assisted indefense counsel’s efforts to have the case reviewed bythe Supreme Court with its submission of an amicuscuriae brief in support of the defendant’s petition forwrit of certiorari. In August of 2002, Plaintiff wasriding as a passenger in a car when it collided with atruck owned by New Prime and driven by HarrellWayne Deaton. Zurich, as insurer of New Prime,received a letter of representation from Plaintiff’scounsel shortly thereafter and subsequently enteredinto settlement negotiations with Plaintiff, wherebyher counsel presented a demand to settle the claimin full in exchange for payment of $170,000. WhileZurich was in the process of reviewing Plaintiff’ssubmitted medical records, Plaintiff’s counsel sentZurich a letter in which he stated that if the demandwas not met within the week, he would file suit andsend Zurich a courtesy copy of the complaint.Thereafter, Plaintiff’s counsel sent Zurich anotherletter indicating his intent to file suit and enclosing acopy of a draft complaint in which New Prime wasthe only named defendant. Zurich and Plaintiff’scounsel were actively negotiating settlement whenPlaintiff’s counsel filed a summons and complaintnaming only Deaton, who was no longer employed byNew Prime, as the only defendant.

Plaintiff’s counsel did not send a courtesy copy ofthe pleadings to Zurich and, notably, actively contin-ued his settlement negotiations with Zurich withoutdisclosing that he already had filed suit. Zurich andNew Prime did not learn that suit had been filed untilthey received a letter from Plaintiff’s counsel enclos-ing an order of default judgment that had beenentered against Deaton in the amount of $800,000.

The South Carolina Court of Appeals held thatDeaton and New Prime, which had intervened in thesuit, met the surprise or excusable neglect require-ments of SCRCP 60(b)(1) and, given the “seriousconcerns” the court had with regard to Plaintiff’scounsel’s actions, “quite possibly” satisfied themisrepresentation and misconduct envisioned by

Rule 60(b)(3). However, the court affirmed thedefault judgment on the basis that New Prime hadfailed to raise a meritorious defense, an elementrequired by South Carolina law for setting aside adefault judgment.

In a spirited dissenting opinion, Chief Judge Hearnsaid that there was sufficient evidence of a meritori-ous defense relating to the amount of damages andthat it was argued and ruled upon at the circuit courtlevel and was thus properly before the appellatecourt for consideration. In addition, she joined themajority’s “serious concern with the conduct of theMcClurgs’ counsel in the manner in which hepursued this case.” Judge Hearn further noted thatPlaintiff’s counsel’s actions compromised the “highethical standards attaching to the practice of law”and violated the maxim that a lawyer’s word is hisbond. Based on the evidence of a meritoriousdefense on damages, and “counsel’s actions incontinuing to uphold the appearance of settlementnegotiations while simultaneously pursuing a defaultjudgment without notice to Zurich,” Judge Hearnfound that New Prime’s motion to set aside thedefault judgment should have been granted.

There has been significant interest in this casethroughout the industry, as evidenced by the factthat several organizations have submittedcompelling amicus curiae briefs in support of NewPrime’s petition for writ of certiorari. In addition tothe SCDTAA, other contributing organizationsinclude the American Law Firm Association, SouthCarolina Trucking Association, American TruckingAssociation, Inc., and Trucking Industry DefenseAssociation. These organizations have argued thatthe appellate court ruling, as it stands, encouragesjudicial inefficiency and duplicative proceedings,invites manipulation of the legal process and of therules for service of process, denies motor carriers theright to defend cases on the merits, and ignores theequitable nature of the procedural rules.

Stay tuned for the South Carolina Supreme Court’sdecision on a case of interest to the trucking indus-try and the defense bar.

Court Grants Cert in TruckingDefault Case

by C. Stuart Mauney

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The Federal Motor Carrier SafetyAdministration (FMSCA) has the “primarymission” of preventing “commercial motor

vehicle-related fatalities and injuries.” See A.P.Walsh and D.B. Hall, “Current and Emerging Issuesto the Motor Carrier Industry,” TransportationLawyers Association 2010 Conference, quotinghttp://csa2010.fmcsa.dot.gov. The Federal MotorCarrier Safety Regulations (FMCSR), promulgated bythe FMSCA, establish important minimum standardsfor motor carriers in key areas, including driver qual-ifications, safety, inspections, repair, maintenance,maximum hours of service for driver, drug and alco-hol testing, and a motor carrier and driver’s record-keeping obligations. See A.P. Walsh and D.B. Hall;see also 49 C.F.R. § 350.101 et seq. These regula-tions are typically at the core of truck wreck litiga-tion. Plaintiffs will introduce violations of a FMCSRminimum standard “to establish or support acommon law claim for negligence or wantonness, ornegligent or wanton entrustment, training, supervi-sion, or retention as to a motor carrier.” Conversely,driver and motor carrier defendants “rely upon theircompliance with FMCSR requirements to disputeallegations of liability and wrongdoing.” See A.P.Walsh and D.B. Hall.

In keeping with its “mission” of motor-vehiclesafety and accident prevention, the FMCSA also hasprograms in place to monitor and evaluate a motorcarrier’s regulatory compliance and safety perfor-mance – and “intervene” where necessary to, e.g.,correct safety problems and levy fines for non-compliance. As part of their punitive damages caseagainst a defendant motor carrier, Plaintiffs oftenattempt to introduce a carrier’s record of non-compliance and poor safety performance to establisha pattern of wanton neglect – and broadly paint thecarrier as a “rogue company.” Beginning in late2010, the FMSCA is planning to rollout itsComprehensive Safety Analysis 2010 (CSA 2010).CSA 2010 will introduce significant changes to howthe FMSCA monitors and evaluates motor carriercompliance and safety performance, and to how andwhat degree the FMSCA intervenes to investigate,rate, and penalize motor carriers for non-compli-ance. Motor carriers and trucking defense attorneysneed to be aware of these changes, as they willundoubtedly create a new regulatory environment ofmore aggressive and comprehensive investigationinto safety violations and intervention by the FMCSA

– and may provide additional ammunition toPlaintiffs attempting to portray the motor carrierdefendant as a rogue company. This note summa-rizes and outlines CSA 2010’s key changes fromFMCSA’s current method of safety/compliance analy-sis and intervention/investigation.

In 2008, the FMCSA began field testing CSA 2010;it is currently being field tested in nine states –Colorado, Delaware, Georgia, Kansas, Maryland,Minnesota, Missouri, Montana, and New Jersey – andis scheduled to be rolled out nationwide by the endof 2010. According to the FMCSA, implementationof CSA 2010 is the result of a “rate of crash reduc-tion” that has “slowed,” prompting the FMCSA “totake a fresh look at how the agency evaluates thesafety of motor carriers and drivers and to exploreways to improve its safety monitoring, evaluation,and intervention processes.” http://csa2010.fmcsa.dot.gov. The FMCSA has identified “limitations” inits current compliance review program and itsprogram for measuring a carrier’s safety performance(called SafeStat), with regard to “both how safety ismeasured and how unsafe behaviors, once identified,are corrected.” Id.

SafeStat vs. CSA 2010.In terms of how the FMSCA performs its evalua-

tion, CSA 2010 will be significantly broader in scopethan its predecessor program SafeStat.

Safestat is organized around four categories, orSafety Evaluation Areas (SEAs): Accident, Driver,Vehicle, and Safety Management. CSA 2010,however, is organized around the following sevenspecific Behavior Analysis Safety ImprovementCategories (BASICs), which are used to measure andscore a carrier for safety and compliance:

• Unsafe Driving (e.g., traffic violations, recklessdriving, improper lane changes);

• Fatigued Driving (hours of service violations,crash reports);

• Driver Fitness (CDL violation, medical reason forcrash, use of unqualified drivers, etc.);

• Controlled Substances/Alcohol (e.g., driverimpairment or intoxication, positive test results);

• Vehicle Maintenance (e.g., mechanical defects,violations concerning maintenance records);

• Cargo-Related (e.g., load securement, Hazmat

31

Rolling Out CSA 2010: The New Motor Carrier Safety Compliance

and It’s Impact on Trucking Litigationby Jim Bryan and Dennis Lynch


ARTICLE

01-48.indd 31 6/17/10 1:58 PM

handling, spilled/dropped cargo);• Crash Indicator (histories or patterns of high

crash involvement).SafeStat identifies motor carriers for compliance

review by focusing on out-of-service and movingviolations. CSA 2010, however, first identifies safetyproblems for determining who to investigate andwhere/how the investigation should be focused.Further, CSA 2010 focuses on on-road safety perfor-mance using every safety-based roadside inspectionviolation.

While the identification process and compliancereview under SafeStat does not affect a motorcarrier’s safety rating, the new process under CSA2010 can be used to propose an adverse safety fitnessdetermination based on a motor carrier’s current on-road safety performance.

Further, unlike SafeStat, as part of its evaluationCSA 2010 weighs violations in relation to crash risk.Finally, where as under SafeStat only motor carriersare measured/rated for violations, CSA 2010 usestwo safety measurement systems – one for the motorcarrier and one for the individual driver (althoughthe driver would still not be assessed by FMCSA forviolations).

Compliance Review vs. CSA 2010.In terms of how the FMSCA intervenes to imple-

ment corrective action, CSA 2010 also marks asignificant departure from the current compliancereview (CR) process. Client carriers targeted forinvestigation/intervention will need to be advised onthe new scope, types, and phases of interventionimplemented under CSA 2010.

The current CR program is a one-size fits-all inves-tigation – i.e., the extent or scope of safety deficien-cies do not have an impact on the extent or scope ofthe FMSCA’s investigation of a motor carrier. UnderCSA 2010, however, the FMSCA’s choices of inter-ventions can be shaped in response to the size,nature, severity, and/or extent of the safety deficien-cies. There is some mutual benefit, as such“tailored” investigations are less resource-intensivefor the FMSCA and less time consuming for motorcarriers. This “tailored” approach, however, will alsolikely mean that more motor carriers are contactedby the FMSCA than under the current CR program.

The focus of the current CR is on broad compli-ance; current CR investigations are focused ondiscovering acute/critical violations in existence –with major safety violations leading to fines.Moreover, the focus of the investigation and inter-vention is on the carrier. Under CSA 2010, the focusis on improving any and all behaviors that aredeemed to be connected to crash risk and isexpanded to include investigation of drivers.

How are carriers “identified” for interventionunder CSA 2010? Carriers will be measured/scoredusing the BASICs categories (discussed above) as

criteria. The measurement results will be used toidentify carriers for CSA 2010 interventions.Carriers will have access to their BASICs scores, “aswell as the inspection reports and violations thatwent into those results.” http://csa2010.fmcsa.dot.gov.) It will be important for carriers to monitorthis data, as they can challenge their score andunderlying reports and violations for accuracythrough FMCSA’s DataQs system:

https://dataqs.fmcsa.dot.gov/login.asp.

Types of Investigation andIntervention under CSA 2010.

As more fully described at http://csa2010.fmcsa.dot.gov, in contrast to CR, CSA 2010 offers a varietyof levels of investigation and intervention asmeasured responses to specific BASICs deficiencies.Depending on the number/severity of the deficien-cies, an investigation can range from a “warningletter” regarding the deficiency (with “identified”carriers also being subject to targeted roadsideinspections), to offsite review of a carrier’s records,to on-site investigations focusing on the reporteddeficiency – or to a comprehensive on-site investiga-tion in cases of 3 or more BASICs deficiencies. WhatFMCSA calls “Follow-on” corrective interventionscan take the form of a self-imposed safety plan tocorrect the problem (which the carrier would enterinto in cooperation with the FMCSA); to formalnotices for violations, a challenge to which wouldrequire the carrier to submit evidence refuting theasserted violation. The new intervention processalso allows for formal “Settlement Agreements”between the carrier and the FMCSA, which, e.g.,might set forth the parties’ compromise in settlementof a notice of violation or claim and enforcementproceedings.

Proposed New Rules for Safety Fitness Determination.

Plaintiffs in truck wreck cases will almost invari-ably seek discovery of a defendant motor carrier’sfitness-rating history in an attempt to introduce andestablish a pattern of wanton safety neglect (or – asPlaintiff “safety experts” might phrase it in discoveryand at trial – a “poor safety culture” within thecompany). Although still in the rule-making phase,the proposed new rules for Safety Fitness determina-tion will potentially mean significant changes to howmotor carriers are rated for safety fitness.

Currently, in rating a motor carrier’s safety fitness,the FMCSA only uses vehicle out-of-service viola-tions found during roadside inspections andacute/critical violations detected during compliancereview; an adverse rating of a carrier generally willonly issue where multiple deficiencies are found.Under the proposed new rules, the FMCSA can use

32

ARTICLECONT.

Continued on page 34

01-48.indd 32 6/17/10 1:58 PM

33

The Law Firm Management Committee seeksto provide meaningful input to law firmsacross South Carolina. In today’s society,

law firms have been challenged with a variety ofissues, ranging from personnel issues to technology.This article addresses potential issues raised by afirm’s or a firm’s employees’ use of social media.

Have you ever walked down the hall and seen yourfellow employees on Facebook? What aboutLinkedIn or some other form of social media?Obviously, in today’s world, not only are our fellowworkers participating in social media, but also ourclients, friends, and opposing counsel are communi-cating via alternative media modes. Has your firmthought about the implications of an employeespending too much time on one of these social mediasites? What about the potential for an employee todiscuss confidential information via Facebook? Ifthe firm has not, then the time is ripe to think aboutimplementing a policy or guidelines concerningsocial media.

As we all know, with today’s technology, any andall things written on the Web can be traced back tothe writer very easily. Given that, our firms shouldeducate by providing information on the perils of theInternet. Furthermore, the line between our worklife and personal life seems to be more blurred today.Given the code of ethics with which lawyers mustcomply, there must be an attempt to distinguishthese two lives such that a potential breach of anethics rule is minimized.

As a firm considers a social media policy, thesefollowing items should be analyzed. First and fore-most is to include language in the policy not to postany confidential or proprietary information concern-ing the law firm or its clients. Also, the policy shouldprohibit any statements or materials that are defam-atory, mean-spirited, detrimental to the firm, orinappropriate. Given the potential to copy othersources of information, the policy should state thatany post referencing an online site should include alink to the original story or post. Also, the policyshould warn a lawyer or employee about over-promoting his or her self. Recommendations ortestimonials should not be allowed because theycould potentially violate the ethics rules.Furthermore, this policy should prohibit lawyers oremployees from appearing to offer legal advice.

Addressing related concerns, the law firm shouldinclude a provision stating that the Internet is notnecessarily anonymous nor does it allow an author to“take back” the material he just posted. A policyshould be clear about setting parameters; however, itshould be flexible such that one can make decisionsabout whether certain uses of social media staybetween the two goal posts.

Since confidentiality is paramount in an attor-ney/client relationship, it is essential for firms toeducate attorneys and employees about the pitfalls of

releasing confidential or proprietary information.Since Tweeting, updating one’s status or writing onone’s wall has become so commonplace, there is thepotential for someone unintentionally to write ordisclose confidential information. Clearly, this posespotential hazards for the law firm. Further, the infor-mality and casual nature of Facebook and Twittershould raise a red flag. Since it is easy for us to thinkof these posts as only going to a few friends oracquaintances, we lose sight of the high ethical stan-dards by which we must abide. As you can see, a lawfirm should think about implementing policies topotentially prevent these mishaps. Having a policywill ensure that your firm comprehends the potentialrisks of social media. For additional information,interestingly enough, the Web, along with law firmconsultants have a wealth of information concerningthese policies.

Tweeting and Friending and Following… Oh, My!

(and Other Scary Things on the World Wide Web)by Rob Tyson

ARTICLE

01-48.indd 33 6/17/10 1:58 PM

("MSPRC") review. If applicable, the MSPRC willassert the “Medicare lien” on the settlementproceeds.

In general, Medicare will first seek to recover itsexpenses from the beneficiary/plaintiff. Under MSPregulations, if the beneficiary does not reimburse thegovernment within 60 days of settlement, thegovernment can recoup its payments from any entitythat funded the settlement (for example, defendantsor insurers) or received the settlement. The lattercategory most commonly includes beneficiaries andplaintiff's counsel, but might include defense counselif settlement funds are conveyed to counsel fordisbursement.

If the government does not have to file a recoverylawsuit, the settling defendant may be liable for thelesser of the lien amount or the settlement (both of

which can be further reduced to reflect the plaintiff’scosts of procuring the settlement). However, if thegovernment files a recovery lawsuit, the primarypayer is liable for double the amount of the lien –regardless of the amount of the settlement.

While the MSP regulations suggest that a settlingdefendant's liability may accrue as soon as 60 daysafter settlement, MSPRC procedures for identifyingthe reimbursable amount can take several months.Under the latest MSPRC guidelines, it is unlikely thata defendant's liability would accrue sooner thanapproximately 150 days after settlement.

Interested parties should follow recent legislationintroduced in Congress (the Medicare SecondaryPayer Enhancement Act, H.R. 4796) that wouldsignificantly revise the MSP recovery process.

34

all safety-based violations found during roadsideinspections to formulate a carrier’s safety rating (aswell as continuing to use violations found in investi-gations); and, significantly, an adverse rating canissue based on only one deficient area. Currently,the three rating labels are Unsatisfactory,Conditional, and Satisfactory. The three newproposed labels – Unfit, Marginal, and Continue toOperate – especially the two more adverse of thethree ratings, are arguably terms loaded with evenmore negative connotations for a fact finder. Also ofnote, while a carrier’s fitness ratings are currentlyupdated only when a compliance review isconducted, under the proposed rules a fitness ratingwill be updated monthly. While it is currently notanticipated that the new fitness determination andrating rules will be promulgated with the roll-out ofCSA 2010, carriers and practitioners need to beaware that changes, whether in the current proposedform or as further modified in the rule-makingprocess, are likely on the horizon.

Conclusion.In sum, CSA 2010 provides for a much more

expansive program in monitoring carrier complianceand safety. The wide-ranging investigation and inter-vention processes under the CSA 2010 will requiremore on-line monitoring by carriers of their BASICsscores, underlying reporting, and data – and truckingdefense attorneys likely will have a correspondingincreased role in evaluating and responding togovernmental assertions of regulatory violations andclaims. Moreover, BASICs data, the underlyingreporting, and documentation of investigations/inter-ventions will no doubt provide new areas of discov-ery and potential fodder for plaintiffs in truckingcases. It will be important for trucking defense prac-titioners to gain an early understanding of thechanges wrought by CSA 2010, so as to best adviseclients with regard to compliance and the new land-scape of investigation/intervention – as well as tobest anticipate the role CSA 2010 will undoubtedlyplay in truck wreck litigation.

ARTICLECONT. FROM

PG. 32

Punitive Damages in South Carolinacont.

On the flip side, Mitchell seems to favor a plaintiffas well. For example, in Mitchell, potential damagesare now a possible multiplier in fixing a punitivedamages award, meaning a great deal more moneycan be awarded. In contrast, the Tort Reform threat-ens to top a punitive damages award off at a cap,rendering the multiplier and ratio guidepost mootpoints. The proposed legislation also reduces theoverall liability a defendant can be exposed too,which means less compensatory damages and conse-quently a lesser punitive damages award if the issueis even reached at all. Yet, the Tort Reform is not allnegative for a plaintiff. It does bring back the Gamblefactors making it easier for a plaintiff to introduceevidence in support of a punitive damages award.

Also, Mitchell adds an additional obstacle between aplaintiff and a punitive damages award by changingthe post-judgment review to the de novo standardinstead of just abuse of discretion.

ConclusionIn short, our courts and legislature are introducing

significant change to the law of punitive damages inSouth Carolina. We will know by the end of thisyear’s Session which side will have its way – theMitchell Court or the 2010 Tort Reform. As it standsnow, the Tort Reform will determine the fate of theGamble factors, the multiplier, and the overall abil-ity to recover larger punitive damages awards, but itwill not affect Mitchell’s de novo standard. Whateverthe change, neither the plaintiffs nor defendants willbe spared.

ARTICLECONT. FROM

PG. 25

ARTICLECONT. FROM

PG. 26

01-48.indd 34 6/17/10 1:58 PM

Following on the heels of the South CarolinaSupreme Court’s ruling in Watson v. FordMotor Co., Op. No. 26786 (March 15, 2010),

Judge James Williams has issued an order grantingsummary judgment to a medical device manufac-turer after finding the plaintiffs’ experts’ testimonywas inadmissible under Rule 702, SCRE. The orderin the case of Graves v. CAS Medical Systems, Inc.,C/A/ No. 2008-CP-38-826, which was venued inOrangeburg County, also addresses the issue of otherproduct complaints that had not been shown to berelevant as well as the issue of contradictory expertaffidavits.

BackgroundThis case involved the death of an infant while on

a home breathing/heart-rate monitor. CAS manufac-tures the AMI Plus infant breathing and heart ratemonitor for home use. The monitor is operated bysoftware written for the monitor when it was devel-oped in the mid-1990’s. The monitor includes botha primary and a back-up audible alarm designed tosound when the infant’s breathing or heart rate goesout of pre-set bounds. The alarm is quite loud. Themonitor also contains a logging function that, amongother things, registers abnormal breathing and heartrate patterns and, through use of a microphone, indi-cates whether the monitor heard the alarm when itshould have sounded.

The deceased child, India Graves was a prematuretriplet. After nearly two months in the PalmettoRichland Memorial Hospital neonatal intensive careunit, India and her two sisters came home on CASmonitors. After being at home for about two monthswith no significant problems, India declined and diedover the period of about one hour, during the earlyhours of the morning. A post mortem diagnosedSIDS, which is a diagnosis of exclusion, meaning noother cause of death could be found. India did havemany of the risks for SIDS death, among themprematurity, multiple birth, minority, and recentupper airway infection.

In their suit based on strict liability, breach ofwarranty, and negligence, India’s parents alleged thatthe monitor failed to audibly alarm as it should haveas India declined. The monitor log reflected India’sdecline by showing graphs of her decreasing heartand breathing rates. The monitor log also registeredthat the microphone had heard the alarm soundevery time it should have sounded and only when itshould have sounded.

Plaintiffs retained three technical experts and onemedical expert for the case. Plaintiffs’ softwareexperts were Dr. Walter Daugherity, a computerscience instructor, and Dr. William Lively, acomputer science professor, both at Texas A&MUniversity. Plaintiffs also offered as an expert FrankPainter, who is a biomedical engineer. Plaintiffsretained as a causation expert Dr. Donna Wilkins, anIndiana neonatologist.

Exclusion of Plaintiffs’ Technical Experts

At deposition, Daugherity and Lively opined thatthe software in the monitor was so poorly written asto constitute a defect. They conceded, however, thatthe poor structure of the code was not the defect thatcaused the monitor to malfunction. To find thatdefect, they said they would have to find the line orlines of code that had been miswritten. This theyhad not done. To excuse this they asserted that thepoor structure of the code made it essentially impos-sible to test for the defect. Plaintiffs’ case of defectwas a construct that could not be disproved becausethere was no specific alleged defect to disprove. Inaddition to not finding a defect that caused the moni-tor to fail, Daugherity and Lively were unable tomake the monitor malfunction. At deposition, theexperts were unaware of and thus could not explainthe log entries showing that the sound of the alarmhad been detected by the monitor’s internal micro-phone. Despite all of this, they concluded that themonitor could malfunction because of the “defec-

35

Recent Orders


RECENTORDERS

Trial Court Follows Watson v. Ford Motor Co.in Granting Summary Judgment

by Clarke W. DuBose

01-48.indd 35 6/17/10 1:58 PM

tive” code and the fact that there had been othercomplaints of alarm failures. They concluded thealarm failed in India Graves’ case for these reasonsand because the Graves said it did.

CAS moved for summary judgment on the basisthat plaintiffs had not identified the defect thatcaused the injury and moved to disqualify thecomputer expert opinions as unreliable. Plaintiffscountered with affidavits from the technical expertsthat offered new opinions. CAS then moved to strikethese affidavits.

The court relied on Watson v. Ford Motor Co.,State v. White, 382 S.C. 265, 676 S.E.2d 684 (2009),State v. Council, 335 S.C. 1, 515 S.E.2d 508 (1999),and Jackson v. Bermuda Sands, Inc., 383 S.C. 11,677 S.E.2d 612 (Ct. App. 2009), in rejecting thecomputer experts’ opinions as unreliable under Rule702, SCRE. The opinions failed all of the State v.Council tests of reliability. The court noted that theexperts failed to show authoritative support for theirclaim that the software could not be tested and thatthey failed to show that their methodology for deter-mining a software defect, essentially analyzing anec-dotal evidence and a making superficial code review,had any validity. The court also noted the lack ofquality control in opinions that failed to take theentire record into account. The court found that theopinions, having not been confirmed by testing, weremerely unproven hypotheses. The court also basedits ruling on the fact that the experts, by relying onthe plaintiffs’ allegations of failure, started with theassumption of a failure rather than determiningwhether, and if so, how a failure could occur. Thecourt further found, based on Watson v. Ford MotorCo., that these experts’ reliance on other alleged soft-ware complaints, in the form of Medical DeviceReports to the FDA, was improper where the validityor reliability of the complaints had not been shown.

The role of plaintiffs’ biomedical expert, FrankPainter, was to say that the software was likely defec-tive based on the MDRs and because the Graves saidthat the monitor failed to alarm. Judge Williamsruled that Painter’s opinion too was unprovenhypothesis. His reliance on the MDRs without ashowing of substantial similarity or reliability did notmeet muster under Watson v. Ford Motor Co. andJamison v. Morris, 385 S.C. 215, 684 S.E.2d 168(2009). The court also rejected his methodology onthe same basis that it rejected the methodology ofthe computer experts.

Exclusion of Plaintiffs’ Medical ExpertCAS moved to exclude plaintiffs’ expert medical

opinion as both unqualified and unreliable. Plaintiffsneeded to prove not only that the monitor was defec-tive, they had to prove proximate cause, that Indiawould have survived had the monitor alarmed,assuming the parent responded to the alarm.Plaintiffs’ proximate cause expert, Dr. DonnaWilkins, testified at deposition that India had been

revived from prior episodes when stimulated solikely would have responded favorably on this occa-sion. The court found that Dr. Wilkins was not qual-ified since she admitted in deposition that she wasnot an expert in SIDS and had done no study orconsultation in the area before coming to her opin-ion. The court also excluded her opinions as unreli-able based on the State v. Council factors, since Dr.Wilkins was able to offer no medical research orpersonal professional experience in support of heropinions. In fact, there is no medical evidence thatan infant will more likely than not recover from aSIDS event with timely intervention. Moreover, themedical evidence was that India had not experiencedprior episodes of slow heart rate or breathing, so thatthe factual underpinning for Dr. Wilkins’ opinion wasalso erroneous.

The Court struck the computer experts’ subse-quent affidavits

Cothran v. Brown, 357 S.C. 210, 592 S.E.2d 629(2004), provides this state’s test for whether an affi-davit offered to defeat summary judgment may bestricken by the court. Cothran came into play herewhen, faced with the argument that Daugherity andLively’s opinions were insufficient because they hadfailed to identify the defect that caused the injury,plaintiffs filed affidavits from these two experts offer-ing new opinions. The new opinions contradictedthe original opinions in several instances. Mostimportantly, they claimed the causative defect was instructure of the code rather than in a miswritten lineof code. Where before the experts said they couldnot comment on the reliability of the log, in his affi-davit, Daugherity stated that the log was almostcertainly unreliable. The experts offered no excusefor their changes in direction, instead claiming theywere further explaining their deposition opinions.The court applied Cothran v. Brown to exclude thenew opinions, thus leaving plaintiffs with the experts’insufficient opinions given at deposition.

Summary JudgmentThe court granted summary judgment based on

the absence of evidence of the defect that caused theinjury and the absence of evidence of proximatecause.

Denial of Rule 59 MotionThe court also denied plaintiffs’ motion to alter or

amend under SCRCP 59. That motion primarilyargued that the case could be proved by circumstan-tial evidence based on the Restatement (Third) ofTorts. The court’s order pointed out that theRestatement (Third) has not been adopted in SouthCarolina, that proof of a defect by circumstantialevidence is inconsistent with existing South Carolinalaw, and that several of the facts plaintiffs relied onfor their circumstantial evidence case wereunproven or inadmissible.

36

RECENTORDERSCONT.

01-48.indd 36 6/17/10 1:58 PM

FACTSLiberty Mutual Fire Insurance Company and

Employer’s Insurance of Wausau (collectively“Liberty Mutual”) issued six CGL policies to J.T.Walker Industries, Inc. (“J.T. Walker”), the parentcompany of MI Windows and Doors, Inc. (“MIWindows”). Liberty Mutual filed a declaratory judg-ment action in the United States District Court forthe District of South Carolina, Charleston Division,seeking a declaration of the rights and obligations ofthe various parties with respect to the defense andsettlement of five underlying state court construc-tion defect lawsuits.

Liberty Mutual settled each of the five underlyingstate court lawsuits. However, MI Windows objectedto the settlements contending that Liberty Mutualshould have taken the cases to trial. MI Windowsargued that there were additional lawsuits pendingagainst it and that it expected additional lawsuits tobe filed due to the prevalence of construction defectlawsuits. The Defendants answered the complaintand MI Windows asserted a claim for breach ofcontract and bad faith against Liberty Mutual.

Liberty Mutual filed a motion for summary judg-ment arguing that it had the authority to control thesettlement decisions at its discretion because LibertyMutual had a duty and a right to control the defenseand settlement once MI Windows tendered theunderlying state court actions. Liberty Mutual alsoargued that it could not be required to defend eachunderlying lawsuit based on one of six CGL policiesbecause all of the policies subsequent to the policyapplicable to the time period where the injury in factoccurred were triggered by progressive damagesclaimed in the underlying suits pursuant to JoeHarden Builders, Inc. v. Aetna Casualty & SuretyCo., 486 S.E.2d 89 (S.C. 1997) and CenturyIndemnity Co. v. Golden Hills Builders, Inc., 561S.E.2d 355 (S.C. 2002). Further, Liberty Mutualargued that it could compel contribution from MIWindows’ successive insurers where the allegationsin the underlying state court cases alleged progres-sive damages occurring during subsequent policyperiods covered by subsequent insurers. LibertyMutual argued that it had the right to seek allocationof payments from those insurers pro rata based onthe time on risk.

MI Windows moved for partial summary judgmentarguing that if Liberty Mutual was permitted to allo-cate a portion of litigation costs to a subsequentinsurer, that MI Windows would only be responsiblefor a portion of its deductible. Finally, Liberty Mutualargued that it was entitled to summary judgment onMI Windows’ counterclaim for bad faith based on theabsence of any genuine issue of material fact and theapplicable statute of limitations.

ORDERSummary

After substantial briefing and oral argument onFebruary 3, 2010, the Honorable Margaret B.Seymour issued an order on March 30, 2010, grant-ing Liberty Mutual’s motion for summary judgmentas to its right to control the defense and settlementof the underlying lawsuits and Liberty’s right todefend the claim under multiple policies consistentwith Joe Harden. The court found that LibertyMutual had the right to seek allocation from subse-quent insurers. The court held in abeyance MIWindows’ motion for summary judgment as to allo-cation of its deductible and subsequently certifiedthe question to the South Carolina Supreme Court.The court denied Liberty Mutual’s motion forsummary judgment as to MI Windows’ counterclaimfor bad faith, finding that the claim was not barred bythe applicable statute of limitations and that therewas a genuine issue of material fact taking theevidence in the light most favorable to MI Windows.

Motions For Summary Judgment

(1) Failure to Settle Claim Against MI Windows InIts Sole Discretion Under The Policies

The court cited the familiar maxims that interpre-tation of an insurance policy is a legal issue and thatcontracts must be given their “plain, ordinary, andpopular meaning.” The court also cited Doe v. SouthCarolina Medical Malpractice Liability JointUnderwriting Association, 557 S.E.2d 670 (S.C.2001), a case where the South Carolina SupremeCourt found that an insurer unambiguously had theauthority to settle claims arising under its policybased on the language contained therein. Examiningthe Liberty Mutual policies, the Court noted that the

37


RECENTORDERSCONT.

Summary Judgment Granted to Insurer as to Its Rightto Control Defense and Settlement of Underlying

Construction Defect LawsuitLiberty Mut. Fire Ins. Co. v. J.T. Walker Indus., Inc.,

Civ. Action No. 2:08-2043-MBS (D.S.C.)

by Graham P. Powell

01-48.indd 37 6/17/10 1:58 PM

language in the policies at issue stated that “We may,at our discretion, investigate any ‘occurrence’ andsettle any claim or ‘suit’ that may result.” Additionalpolicy language also supported this proposition.

MI Windows argued that Special ServicingInstructions (“SSIs”) required that Liberty Mutualnot only discuss settlements with MI Windows, butmade the policies ambiguous as to whether LibertyMutual had sole discretion to settle tendered cases.The court found that the SSIs did not contradictLiberty Mutual’s settlement authority. Further, theSSI requirement that Liberty Mutual discuss anysettlement with MI Windows did not also require thatMI Windows approve any settlement.

(2) Whether A Single Insurance Policy MustCover Property Damage That SpansMultiple Policies

The Court agreed with Liberty Mutual that all ofthe policies that were triggered by a progressivedamage claim provided coverage and that MIWindows could not force Liberty Mutual to defend aclaim under a single policy. First, the court notedthat the Joe Harden opinion held that South Carolinaadopted a “modified continuous trigger” approachwhen an insurance policy contemplates coverage ofprogressive damages. Under this approach, thepolicy in effect at the time of the injury-in-fact coversensuing damages as well as policies in effect duringthe progressive damage period. The court found thatthe Liberty Mutual policies contemplated coverage ofprogressive damages resulting from an injury-in-factthat occurred during the applicable policy period andsubsequent policy periods. Therefore, the courtheld, the Liberty Mutual policy that was in effect atthe time of the injury-in-fact covered full settlementof each claim as did all other policies covering therisk during the progressive damages period.

(3) Whether Liberty Mutual Has The Right ToRequest Allocation Of Payments Made ToDefend And Settle Each Claim Against MIWindows From MI Windows’ Other Insurers

Again citing Joe Harden, the court found that themodified continuous trigger approach would allowfor allocation of risk among insurers with more thanone insurance policy in effect during the progressivedamage period. Therefore, the court found that caselaw established the right of Liberty Mutual to seekallocation of payments where MI Windows’ succes-sive insurance carriers had time on the risk. Notingthat the allegations of the underlying lawsuits deter-mine whether progressive damages occurred, thecourt found that Liberty Mutual had the right to seekallocation of payments from successive insurers.

(4) Defendants’ Motion For Partial SummaryJudgment

MI Windows argued that it was only responsible fora proportionate amount of its deductible if LibertyMutual was permitted to allocate its litigation costs toMI Windows’ subsequent insurers. Both parties

agreed that this was an unsettled area of SouthCarolina law and the court stated that it would certifythe question to the South Carolina Supreme Court. 1

(5) Liberty Mutual’s Motion For SummaryJudgment As To Bad Faith

The court’s order denied Liberty Mutual’s motionfor summary judgment as to MI Windows’ counter-claim for bad faith, finding that there was a genuineissue of material fact. Further, the court found thatthe bad faith claim was not barred pursuant to thestatute of limitations found at S.C. Code § 15-3-530. 2

CONCLUSIONFirst, it should be stressed that this order is not a

final decision. The order is provided for informationpurposes only.

Practitioners may find the order useful if prosecut-ing or defending a coverage action where the right orobligation of the insurer to settle an underlyingconstruction defect lawsuit is at issue. Further, prac-titioners in construction defect lawsuits may find theorder useful if faced with an argument by counsel,claims representative, or coverage counsel in thecontext of mediation or otherwise that acontractor/insured cannot meaningfully participate insettlement because of the unwillingness of the contrac-tor/insured to permit its insurer to settle the case.Further, the order may serve to highlight the impor-tance in the discovery process of obtaining CGLs frommultiple parties so that counsel may be prepared toaddress the policy language contained therein pertain-ing to the authority of insurers to settle a case.

Morgan S. Templeton and J. Mark Langdon serve ascounsel for Plaintiff Liberty Mutual, and William H.Morrison serves as counsel for Defendant MI Windows.

Footnotes1 By subsequent order dated May 5, 2010, the court

certified this question to the South Carolina SupremeCourt pursuant to SCACR 244.

2 Liberty Mutual subsequently filed a motion for inter-locutory appeal pursuant to 18 USC § 1292(b) requestingthat the Fourth Circuit address this novel issue underSouth Carolina law, i.e. whether MI Windows has the rightto assert a bad faith action against an insurer for decidingto settle a case pursuant to the settlement clause of apolicy.

38

RECENTORDERSCONT.

01-48.indd 38 6/17/10 1:58 PM

STATE OF SOUTH CAROLINACOUNTY OF CHARLESTONIN THE COURT OF COMMON PLEASNINTH JUDICIAL CIRCUIT

CASE NO. 2009-CP-10-4172ORDER GRANTINGMOTION TO COMPEL

Claudio Rafael Martinez, Individually and as thenext friend of his minor children, Franco Martinezand Bruno Martinez,

Plaintiffs,vs.South Carolina Electric & Gas Company and Lewis

Tree Service, Inc.,Defendant.

The parties appeared before this Court onDecember 3, 2009 on Defendant Lewis Tree Service,Inc.’s ("Defendant") motion to compel the Plaintiffsto respond to discovery regarding their use of certainSocial Networking Sites ("SNWs"). For the reasonsstated herein, the Court finds good cause exists forsuch an Order, and compels the Plaintiffs to respondin accordance with this Order.

FACTSPlaintiffs filed this personal injury action on July 6,

2009. According to the allegations in the AmendedComplaint, Plaintiff Franco Martinez was injuredwhen he received an electrical shock due to thenegligence of the Defendants. Plaintiffs claim Francosuffered "severe and debilitating injuries, includingbut not limited to" permanent burns and scars onvarious parts of his body, including his hands; perma-nent back injury resulting in the inability to laystraight on a bed, walk long distances, and exercise;neck and ankle pain, and frequent headaches. Inresponding to discovery, Plaintiffs add that Francosuffers from "extreme tiredness to his eyes afterextended periods of looking at books, the television,or a computer screen."

The Amended Complaint additionally alleges thatFranco’s brother, Plaintiff Bruno Martinez, witnessedthe accident and suffered "severe emotional distressmanifested by physical symptoms including, but notlimited to, separation anxiety, nightmares, andbehavioral problems requiring medical care andtreatment."

After initiation of the instant lawsuit, Defendantserved Plaintiffs with initial discovery requests,including Interrogatories and Requests forProduction. Included in the Interrogatories was thefollowing request:

List every "Social Networking Website" (SNW)utilized or accessed by the party for the past threeyears. For any SNW identified in response to this orany other interrogatory, provide the following infor-mation:

(a) name, physical address, and internet address ofthe SNW;

(b) name, address, social security number, anddate of birth of the SNW account subscriber,and if different, the individual financiallyresponsible for the SNW account;

(c) each and every user name, screen name, emailaddress, or alias affiliated with the SNWaccount; and

(d) password for accessing the SNW account.Plaintiffs refused to respond, objecting on the

grounds that "the requested information is irrelevantand not likely to lead to the discovery of admissibleevidence." Defendant subsequently withdrew therequest for Plaintiffs SNW passwords.

ANALYSISThe subject Interrogatory inquires into whether

the Plaintiffs maintain social networking accounts(such as Facebook or MySpace) and, if so, requeststheir usernames and email addresses. It is importantto note that the Plaintiffs have not objected to therequest on the basis of a privilege. Instead, theyclaim that their use of social networking sites is"irrelevant and not likely to lead to the discovery ofadmissible evidence." At the hearing, Plaintiffs raisedthe application of the Stored Communications Act("SCA"), 18 U.S.C. § 2701 et seq., as an additionalground for denial of the motion, suggesting that itprotected the Plaintiffs from having to respond to theInterrogatory. The Court concludes that therequested information is relevant and that the StoredCommunications Act has no bearing on the Plaintiffs’obligations to respond to Interrogatory No. 15.

RelevancyParties may obtain discovery regarding any matter,

not privileged, which is relevant to the subjectmatter involved in the pending action, whether it

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Plaintiffs Compelled to Respond to Discovery Regarding Their Use of Certain

Social Networking Websites


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relates to the claim or defense of the party seekingdiscovery or to the claim or defense of any otherparty, including the existence, description, nature,custody, condition and location of any books, docu-ments, or other tangible things and the identity andlocation of persons having knowledge of any discov-erable matter. Rule 26(b), SCRCP. "Parties mayobtain discovery regarding any matter, not privi-leged, which is relevant to the subject matterinvolved in the pending action." City of Columbia v.ACLU, 323 S.C. 384, 475 S.E.2d 747, 749 (1996)."In South Carolina the scope of discovery is verybroad and 'an objection on relevance grounds islikely to limit only the most excessive discoveryrequest.'" Samples v. Mitchell, 329 S.C. 105, 110,495 S.F.2d 213, 215 (Ct. App. 1997).

"Facebook usage depicts a snapshot of the user’srelationships and state of mind at the time of thecontent’s posting." Bass v. Miss Porter’s School,2009 U.S. Dist. LEXIS 99916 (D. Conn. Oct. 27,2009). Such social networking sites also allow usersto post and share a wide range of information regard-ing their activities, interests, and social situations aswell as photographs depicting their physical condi-tions. In most instances, these sites allow others togain a better understanding of the user. See AdvisoryCommittee on Standards of Judicial Conduct,Advisory Opinion No. 17-2009, October 2009("Allowing a Magistrate to be a member of a socialnetworking site allows the community to see how thejudge communicates and gives the community abetter understanding of the judge.")

In the case at bar, Plaintiffs claim they sufferedphysical and emotional injuries that continue to thepresent time. The Court finds inquiry into PlaintiffFranco’s involvement in social networking sites isrelevant to the issue of his alleged damages, includ-ing his claim of inability to sit in front of a computerfor long periods, his inability to fully use his hands,and his claims of emotional injuries. Inquiry intoPlaintiff Bruno’s involvement in social networkingsites is also relevant to the issue of his claims of"severe emotional distress" and "separation anxiety."The information and photographs the Plaintiffs shareon these sites will provide a relevant and accuratedepiction of the Plaintiffs’ states of mind, theiremotional and physical states, and the affect thesealleged injuries have on their everyday lives.Plaintiffs’ position regarding relevancy, if accepted,would allow Plaintiffs to be the sole arbiter of what isdeemed relevant. See Bass, supra ("relevance of thecontent of Plaintiff’s Facebook usage as to both liabil-ity and damages in this case is more in the eye of thebeholder than subject to strict legal demarcations,and production should not be limited to Plaintiff’sown determination of what may be 'reasonablycalculated to lead to the discovery of admissibleevidence.'"). Particularly in the context of anarrowly tailored request such as this, and in light ofthe relatively low bar set by Rule 26, Plaintiffs’ objec-tion based on relevance fails, Samples, supra.

Stored Communications ActAt the hearing, Plaintiffs’ counsel raised the appli-

cation of the Stored Communications Act ("SCA"),18 U.S.C. § 2701 et seq., as an additional ground fordenial of the motion, suggesting that it prohibiteddiscovery of the Plaintiffs’ social networking activi-ties. The Court finds this argument has no merit.

The Stored Communications Act prohibits a"person or entity providing an electronic communi-cation service to the public" from "knowinglydivulg[ing] to any person or entity the contents of acommunication while in electronic storage by thatservice." 18 U.S.C. § 2702(a)(1). The pertinentportion of the statute reads:

(a) Prohibitions.— Except as provided in subsec-tion (b) or (c)—

(1) a person or entity providing an electroniccommunication service to the public shall notknowingly divulge to any person or entity thecontents of a communication while in elec-tronic storage by that service; and

(2) a person or entity providing remote computingservice to the public shall not knowinglydivulge to any person or entity the contents ofany communication which is carried or main-tained on that service—

(A) on behalf of, and received by means ofelectronic transmission from (or createdby means of computer processing ofcommunications received by means ofelectronic transmission from), asubscriber or customer of such service;

(B) solely for the purpose of providing stor-age or computer processing services tosuch subscriber or customer, if theprovider is not authorized to access thecontents of any such communications forpurposes of providing any services otherthan storage or computer processing;

18 U.S.C. § 2702.The clear language of the statute indicates that it

applies only to service providers, rather than privateindividuals. Moreover, the statute prevents serviceproviders from disclosing communications and elec-tronically stored information. The statute containsno provisions prohibiting a party from responding todiscovery regarding the maintenance of socialnetworking sites or the specific account informationfor such sites. Interrogatory No. 15 seeks informa-tion which is certainly within the bounds of Rule 26and the Plaintiffs are obligated to respond.

Furthermore, in the course of supplemental brief-ing requested by the Court, Defendant indicated thatan affirmative response to the Interrogatory wouldnot end its line of inquiry. According to theDefendant, confirmation that the Plaintiffs maintainsocial networking accounts would result in theservice of targeted Requests for Production under

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Rule 34, SCRCP, requesting tangible and electroni-cally stored information from these accounts "whichis relevant to the claims and defenses in this matter(inclusive of evidence relating to the Plaintiffs’alleged ongoing injuries)." Since that time, Plaintiffs’counsel has confirmed that the Plaintiffs maintainsuch accounts. After careful consideration of theclaims in this case and the nature of the informationcontained on such social networking sites, the Courtfinds that certain information from the Plaintiffs’accounts is properly discoverable. Therefore, thePlaintiffs are ordered to produce documents contain-ing the following information from any Facebook orMySpace accounts, either in tangible or electronicform: (1) all Profile pages; (2) all Wall Postings,including status updates and comments from or tothe Plaintiff; (3) all photographs depicting thePlaintiffs, including all mobile uploads andphotographs in which the Plaintiffs are "tagged;" and(4) all information reflecting the "fan pages" andgroups in which Plaintiffs are members. Plaintiffs areordered to produce these documents/informationplaced or reflected on the site accounts for the timeperiod beginning on the day of the accident (May 26,2008) and continuing through the present.

The Court anticipates that the Plaintiffs may claimthey are not able to gather all such responsive mate-rial by simply logging into their accounts. Further,the Court recognizes that the SCA arguably preventsthe social networking sites from providing mostinformation from the Plaintiffs’ accounts viasubpoena. However, the SCA does permit the disclo-sure of otherwise protected communications if thesubscriber, or the author or the intended receiver ofsuch communications gives his consent. 18 U.S.C. §2702(b)(3); 18 U.S.C. § 2702(c)(3). As the languageof Rule 34 makes clear, and as the courts haveconfirmed, a request for production need not beconfined to documents or other items in a party’spossession, but instead may properly extend to itemsthat are in that party’s "control." Rule 34(a)(1),SCRCP. In interpreting the identical provision of theFederal Rule, the Sixth Circuit and other courts haveheld that documents are deemed to be within the"control" of a party if it "has the legal right to obtainthe documents on demand." In re Bankers TrustCo., 61 F.3d 465, 469 (6th Cir. 1995); MercyCatholic Medical Center v, Thompson, 380 F.3d 142,160 (3d Cir. 2004); Searock v. Stripling, 736 F.2d650, 653 (11th Cir. 1984).

The case of Flagg v. City of Detroit. et al., 252F.R.D. 346 (E.D. MI. 2008) is particularly instructivein this regard. In Flagg, the defendant city moved toprevent Plaintiff from discovering communicationsexchanged among certain city officials and employ-ees via city-issued text messaging devices. While thedefendant did not store copies of these communica-tions, the city’s non-party service provider, SkyTel,purportedly did have records of these communica-tions. The plaintiff filed a third-party subpoenadirected at SkyTel, which objected, claiming that the

SCA did not recognize an exception for civil subpoe-nas and barred Skytel from divulging the emails tothe plaintiff. The court addressed the issue bydirecting the plaintiff to instead submit a FRCP Rule34 request for production upon the defendant city,along with a form the city could execute granting itsconsent to disclosure under the SCA. Flagg, 252F.R.D. at 352. Rule 34(a) permits parties to requestthe production of documents and other items thatare "in the responding party’s possession, custody, orcontrol." Id. quoting Fed. R. Civ. P. 34(a). The courtreasoned that "if the City can block the disclosure ofSkyTel messages by withholding its consent, it surelyfollows that it can permit the disclosure of thesecommunications by granting its consent," and thatthis acknowledged power constituted the requisite"control." Flagg, 252 F.R.D. at 355.

As a result, in the event the Plaintiffs cannotproduce all material this Order requires them toproduce, Plaintiffs are instructed to execute aConsent Form, to be provided by the Defendant,granting the social networking sites permission todisclose the information to both the Plaintiffs and theDefendant. Defendant shall bear responsibility for allcosts associated with such a request to the socialnetworking sites.

For the reasons set forth herein, the Plaintiffs’ useof social networking sites, and certain informationcontained on those site accounts, is relevant to thesubject matter involved in the pending action.

IT IS HEREBY ORDERED, ADJUDGED ANDDECREED that, within 45 days of entry of this Order,the Plaintiffs shall:

(1) provide a full and complete response toInterrogatory No. 15, with the exception of the with-drawn inquiry into account passwords;

(2) produce documents containing the follow-ing information from any Facebook or MySpaceaccounts, either in tangible or electronic form: (a) allProfile pages; (b) all Wall Postings, including statusupdates and comments from or to the Plaintiff; (c) allphotographs depicting the Plaintiffs, including allmobile uploads and photographs in which thePlaintiffs are "tagged;" and (d) all information reflect-ing the "fan pages" and groups in which Plaintiffs aremembers. Such production shall include all docu-ments/information placed or reflected on the siteaccounts from the date of the accident through thepresent; and

(3) in the event the Plaintiffs cannot produce allmaterial this Order requires them to produce,Plaintiffs are instructed to execute a Consent Form,to be provided by the Defendant, granting the socialnetworking sites permission to disclose the informa-tion to both the Plaintiffs and the Defendant.

AND IT IS SO ORDERED!The Honorable Roger M. Young, Sr.Dated: February 9, 2010Charleston, South Carolina

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Case NotesSummaries prepared by John D. Hudson

Following are summaries prepared of selected South Carolina cases from February1, 2010 through May 11, 2010

Featured Case Note

Hoard v. Roper Hosp., Inc., Op. No. 26813(S.C. Sup. Ct. Filed May 3, 2010) (ShearouseAdv. Sh. No. 17, at 15)

Plaintiffs filed this medical malpractice claimagainst Defendants after an umbilical vein catheter(UVC) inserted into Plaintiff daughter’s (Daughter)right atrium allegedly caused her to go into cardiacarrest, resulting in brain damage and paralysis.Plaintiffs settled with all Defendants except the on-call radiologist (Radiologist). Plaintiffs alleged thathad Radiologist included in his report the fact thatthe UVC was “malpositioned,” Daughter may nothave suffered the cardiac arrest.

The trial court granted summary judgment forRadiologist on the basis that Plaintiffs failed to proveproximate causation between Radiologist’s allegednegligence and Daughter’s alleged injury. The courtof appeals reversed, holding that a genuine issue ofmaterial fact existed as to proximate cause. In soholding, the court of appeals concluded that a jurycould have chosen to disregard the testimony ofDaughter’s treating physician, who testified that hewas aware of the applicable standard of care for UVCplacement and that he made an intentional and inde-pendent decision not to move the UVC.

Although the supreme court acknowledged it iswithin the power of the jury to disregard uncontro-verted evidence such as the testimony of the treatingphysician, the court held that a party cannot createa genuine issue of material fact by speculating thatthe jury may choose to disbelieve a witness. Rule56(e) of the South Carolina Rules of Civil Procedurespecifically states that a party opposing a summaryjudgment motion “may not rest upon mere allega-tions or denials of his pleadings [but] must set forthspecific facts showing there is a genuine issue fortrial.” An adverse party cannot therefore seek toavoid summary judgment with mere conjecture orspeculative hypotheticals, but rather must comeforward with affirmative evidence indicating theexistence of a genuine issue of material fact. Thecourt reasoned that to hold otherwise would subvertthe purpose of summary judgment and effectivelyrender it obsolete. Consequently, the supreme courtreversed the court of appeals’ decision and reinstatedthe decision of the trial court.

Partain v. Upstate Auto. Group, 386 S.C.488, 689 S.E.2d 602 (2010)

Plaintiff sued automobile dealership alleging thedealership violated the South Carolina Unfair TradePractices Act (SCUPTA) by performing a “bait andswitch” when he purchased his vehicle. Plaintiffalleged this violation entitled him to treble damagesplus interest, costs and attorneys’ fees. Defendantargued that the entire matter was subject to arbitra-tion pursuant to an arbitration agreement signed byPlaintiff.

The supreme court held that although the factualallegations fell within the scope of the arbitrationagreement, Plaintiff’s “bait and switch” theoryconstituted “illegal and outrageous” acts which werenot in contemplation of the parties at the time theyentered into the arbitration agreement. Because thealleged “bait and switch” was unforeseeable in thegeneral course of business dealings, the parties couldnot have intended to submit this type of claim toarbitration and the agreement was therefore inap-plicable to Plaintiff’s claim.

Zurich Am. Ins. Co. v. Tolbert, Op. No.26798 (S.C. Sup. Ct. filed April 12, 2010)(Shearouse Adv. Sh. No. 14, at 34)

Defendant Tony Tolbert was injured in an automo-bile accident while driving his Honda Accord on apersonal errand. Defendant had declined underin-sured motorist coverage (UIM) on his Honda, but hadUIM coverage on a BMW he leased from hisemployer.

Plaintiff Zurich American Insurance Companyfiled this declaratory judgment action seeking adetermination that coverage from the BMW did notextend to the Honda Accord Defendant was operat-ing at the time of the accident based on the “DriveOther Car” endorsement to the policy. Defendantargued he should recover UIM benefits from Plaintiffunder the BMW policy because the Honda Accordconstituted a “temporary substitute” for the BMWdue to the fact that the BMW was “in need ofservice.” The trial court granted summary judgmentin favor of Plaintiff and the court of appeals reversed,finding a genuine issue of material fact as to whetherDefendant’s Honda Accord qualified as a “temporarysubstitute” for the BMW.

The South Carolina Underinsured Motoristendorsement extends coverage to “a temporary

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substitute for a covered ‘auto’ [provided t]he covered‘auto’ [is] out of service because of its breakdown,repair, servicing, ‘loss’ or destruction.” The supremecourt held that the covered “auto” need only be “outof service” due to one of the factors listed and did notrequire that the auto actually be completelydisabled. Thus, the supreme court agreed with thecourt of appeals’ conclusion that the affidavit submit-ted by Defendant stating that he had driven theHonda because the BMW needed service and an oilchange provided a scintilla of evidence that theHonda constituted a “temporary substitute” so as tosurvive Plaintiff’s motion for summary judgment.

Herron v. Century BMW, Op. No. 26805(S.C. Sup. Ct. filed April 19, 2010)(Shearouse Adv. Sh. No. 15, at 14)

Plaintiffs brought this class action suit allegingDefendants violated the South Carolina Regulation ofManufacturers, Distributors, and Dealers Act (Act)by charging illegal administrative fees. Defendantsought to compel arbitration pursuant to the arbitra-tion agreement entered into by the parties. Theterms of the agreement included a waiver byPlaintiffs of their right to bring or participate in anyclass action lawsuit.

The supreme court found that although the agree-ment was a contract of adhesion, it was not uncon-scionable so as to be unenforceable. Specifically, thecourt found that there was not an absence of mean-ingful choice due to the fact that the agreementappeared on a separate sheet and was clearly labeledas an arbitration agreement. Additionally, the courtfound that the terms of the contract were not oppres-sively one-sided because some terms benefited theconsumer over the dealership, such as the choice ofvenue and the dealerships obligation to pay certainfees.

Though the agreement as a whole was not uncon-scionable or unenforceable, the court found that theprovision prohibiting involvement in class actionlawsuits was unenforceable. The court noted thatthe Act expressly provided Plaintiffs with the right tobring class action lawsuits, and the Act also statedthat any portion of a contract subverting a provisionof the Act should be deemed void and unenforceableas against public policy.

Although unenforceable provisions wouldnormally be severable from the enforceable provi-sions of a contract, here, Defendants expresslywaived the invocation of severability at oral argu-ment. Thus, the supreme court held the issue ofseverability to be abandoned and consequentlyaffirmed the trial court’s denial of Defendants’motion to compel arbitration.

Nationwide Mut. Ins. Co. v. Rhoden, __ S.C.__, 691 S.E.2d 487 (Ct. App. 2010)

Defendant Rhoden held a policy with PlaintiffNationwide Mutual Insurance Company whichincluded underinsured motorist (UIM) coverage.Defendant and her two daughters were injured in anautomobile accident while in a vehicle owned andoperated by one of her daughters (Driver).Defendant’s policy listed herself and both daughtersas either insureds or resident relatives. Driver’s vehi-cle was also insured by Plaintiff, but her policy didnot include UIM coverage. Plaintiff filed this declara-tory judgment action seeking a determination thatthe UIM coverage under Defendant’s policy did notcover Defendant or her daughters because the acci-dent occurred in a vehicle belonging to Driver (i.e.one of Defendant’s daughters).

UIM coverage is generally regarded as personableand portable, but the supreme court has held thatpublic policy is not offended by limiting UIM porta-bility in situations where an insured is injured in avehicle she owns and insures under another policy.First addressing the portability of the UIM coverageas to Driver, the court of appeals held that becauseDriver was operating her own vehicle which wasseparately insured, public policy was not offended byexcluding Driver from UIM coverage. As toDefendant and her other daughter, the court ofappeals held that Defendant’s UIM coverage extendedto both. The court of appeals noted that thisinstance was the type for which UIM coverage wasintended. In particular, UIM coverage is designed toinsure individuals in situations where they wouldotherwise have no control over the amount of cover-age on a vehicle in which they are a passenger. Here,Defendant had no control over the provisions of theinsurance elected by Driver in covering the automo-bile involved in the accident, and therefore her UIMcoverage was held to extend to this incident.

Austin v. Stokes-Craven Holding Corp., __S.C. __, 691 S.E.2d 135 (2010)

Plaintiff purchased a used truck from Defendant.Plaintiff eventually began experiencing problemswith the truck and ultimately discovered the truckhad previously been involved in an accident in whichit sustained extensive damage. Plaintiff suedDefendant, and a jury returned a verdict in his favorfor actual and punitive damages on his claims fornegligence, fraud and constructive fraud. The juryalso found that Defendant violated the Dealer’s Actand Federal Odometer Act, but found that Defendantdid not violate the South Carolina Unfair TradePractices Act (SCUPTA). Both parties appealed.

On cross appeal, Defendant argued that the trialcourt erred in admitting testimony of two ofPlaintiff’s expert witnesses. As to the auto bodyrepair expert, Defendant argued that the witness was


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not qualified to opine as to potential safety issuesthat arose from the previous collision or as towhether it would be clear to anyone that the truckhad been repaired. The supreme court found thatthe statements made by the witness were not undulyprejudicial as his testimony was brief and he wassubjected to rigorous cross-examination byDefendant. As to the retail valuation expert, thecourt found that he was properly qualified as anexpert because he had extensive experience in theautomotive industry, including in the specific area ofvehicle appraisal. Additionally, the court noted hehad been qualified as an expert several other times.

The supreme court also disagreed with Defendant’scontention that Plaintiff had failed to properly provethat the fair market value of the truck was zero. Thecourt noted that in typical contract disputes, theitem contracted for is returned and damages are thensought. Here, however, Defendant repeatedly refusedto take back the truck in exchange for the purchaseprice, and the court reasoned that Plaintiff shouldtherefore not be prejudiced for still being in posses-sion of the truck. Additionally, the court found therewas sufficient evidence to support the finding thatthe truck had zero retail value given Plaintiff’s testi-mony that he would not have paid anything for it hadhe been aware of the previous damage it hadsustained. Additionally, Plaintiff’s retail valuationexpert also testified that that truck had zero retailvalue at the time of sale.

Defendant also alleged error in the finding that ithad violated the Federal Odometer Act. Thesupreme court agreed and held that Defendant didnot act with the requisite intent to defraud. A viola-tion of the Federal Odometer Act requires a specificshowing that Defendant intended to defraud as to themileage of the vehicle and cannot be satisfied bydemonstrating fraud generally. However, thesupreme court disagreed with Defendant’scontention that the jury’s finding for Plaintiff on theissue of common law fraud was inconsistent with itsfinding for Defendant as to the claim for violation ofthe SCUTPA. The supreme court noted that the levelof proof required to establish the two claims is differ-ent, such that the burden of proof on one claim (i.e.the SCUPTA claim) could be met without the burdenbeing met on the other one (i.e. fraud).

The supreme court also held that the jury’s awardof punitive damages was not excessive or unconsti-tutional. In determining the reasonableness of anaward for punitive damages, the court relied on thefollowing guideposts illuminated in the relativelyrecent decision of Mitchell v. Fortis Ins. Co., 385 S.C.570, 686 S.E.2d 176 (2009): (1) the reprehensibilityof the misconduct, (2) the disparity between thepunitive award and the actual damages, and (3) thedisparity between the civil remedies authorized insimilar instances and the punitive damages award.Addressing the first factor, the court noted thatalthough the harm was purely economic, the misrep-

resentations involved in selling this potentiallyunsafe automobile indicated a reckless disregard forthe health and safety of Plaintiff and the public. Asto the second and third guideposts, the court foundthat the ratios of the punitive damages award to boththe actual damages and other civil remedies were notgrossly excessive so as to violate the Due ProcessClause of the Fourteenth Amendment.

Plaintiff, on his appeal, argued that the trial courterred in requiring him to elect his remedy betweendamages for fraud, negligence, constructive fraud,and the violation of the Dealer’s Act. In particular,Plaintiff argued that in choosing to recover for fraud,he was denied the statutorily authorized attorneys’fees and costs. Although the notion of election ofremedies is designed to address circumstances suchas this where there is but one loss and several formsof recovery are available, the supreme courtobserved that a recovery for attorneys’ fees does notallow double recovery where Plaintiff has also recov-ered punitive damages. The court noted that statu-torily authorized attorneys’ fees are intended toallow private citizens to bring claims that wouldotherwise not be economically viable whereas puni-tive damages are meant to punish and deter miscon-duct. Thus, the supreme court held Plaintiff shouldbe allowed to recover the attorneys’ fees authorizedunder the Dealer’s Act in addition to the damagesawarded for fraud. Although recovery of fees shouldbe limited to the costs incurred pertaining to thestatutory claim, the court found that such delin-eation would be difficult and thus held that Plaintiffshould be awarded the entire amount of attorneys’fees requested.

Finally, the supreme court affirmed the trial court’sdenial of prejudgment interest on the basis thatPlaintiff, at the inception of his claim, could not withcertainty have determined the monetary amount ofdamages he had sustained.

Burnett v. Family Kingdom, Inc., __ S.C. __,691 S.E.2d 170 (Ct. App. 2010)

Plaintiff’s husband (Husband) was injured whiledriving a go-cart at Defendant’s amusement parkwhen other patrons of the park intentionally collidedwith his go-cart. Husband sued Defendant for negli-gence, and after the close of Plaintiff’s case, the trialcourt granted Defendant a directed verdict on thebasis that Plaintiff failed to establish that Defendantowed him a duty of care.

The court of appeals reversed, holding that theSouth Carolina Amusement Rides Safety Code (Act)created a statutorily imposed duty upon Defendant.The intention of the Act is to “guard against personalinjuries in the . . . use of amusement devices at . . .amusement parks to persons . . . attending . . .amusement parks.” S.C. Code Ann. § 41-18-20(A)(Supp. 2008). Thus, the court found the Act createdan affirmative legal duty in this type of circumstancewhere an individual “attending” the amusement park

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was injured while using an “amusement device.”The court of appeals also disagreed with

Defendant’s contentions that even if a duty existed,no breach of the duty occurred, proximate cause waslacking, and Husband’s negligence outweighed anypossible negligence on the part of Defendant. Thecourt, in summary fashion, held that the issues ofbreach, proximate cause, and comparative negli-gence were all questions for the jury in light of theexistence of a legal duty owed by Defendant.

Workers’ Compensation Case Notes

Summaries prepared by Brian G. O’Keefe and Andrew Luadzers

Pierre v. Seaside Farms, Inc., Op. No.26777 (S.C. Sup. Ct. filed February 16,2010) (Shearouse Adv. Sh. No. 7, at 93).

Claimant, a migrant farm worker from Haiti,injured his right ankle after a slip and fall on a wetsidewalk outside the employer’s housing facility.Claimant alleged he sustained an injury by accidentarising out of and in the course and scope of hisemployment. The Hearing Commissioner denied theclaim and held Claimant was under no requirementto live in the employer-provided housing pursuant tohis contract for employment and his work did notrequire he be on continuous call. In addition, he wasnot engaged in activities at the time of the injury thatwere calculated to further, either directly or indi-rectly, the business of his employer. Finally, the wetsidewalk was not different in character or designfrom other sidewalks, and the risk associated withslipping on the sidewalk was not one uniquely asso-ciated with his employment; rather, it was one hewould have been equally exposed to apart from hisemployment.

The Circuit Court held Claimant’s proposedcommon law theory of the “bunkhouse rule” was notapplicable, as it does not apply when the employee isnot required to reside in the employer-suppliedhousing. The “bunkhouse rule” applies when anemployee is required to live on the premises, eitherby his contract of employment or by the nature of hisemployment, and is continuously on call. However,if the employee has fixed hours outside of which heis not on call, compensation is awarded only if theinjury was a risk associated with the conditionsunder which claimant lived because of the require-ment of remaining on the premises.

In reversing and remanding the Circuit Courtruling, the Supreme Court recognized the novelapplication of the “bunkhouse rule” in SouthCarolina jurisprudence. The Court concluded theCommission’s findings that Claimant was notrequired to live on his employer’s premises and that

his presence did not further, either directly or indi-rectly, the interest of his employer were notsupported by substantial evidence. The recorddemonstrated Claimant was required, not bycontract, but by the nature of his employment, tolive on-site near the packing facility as there was noreasonable alternative and virtually all of the workersat Seaside Farms lived in the housing provided bytheir employer. The employer absorbed the expenseof housing the workers as the cost of doing business.Moreover, but for the fact that Claimant’s workessentially required him to live on his employer'spremises near the farm, he would not have beenexposed to the wet sidewalk that caused his injury.Although simply being on an employer’s premises,without more, does not automatically equate tocompensability of an injury, the circumstances ofClaimant’s accident establish the requisite workconnection and compel a finding that Claimant’sinjury arose out of and in the course of his employ-ment at Seaside Farms.

James v. Anne's Inc., 386 S.C. 326 (2010)(reh’g granted)

The Supreme Court held in a decision datedJanuary 25, 2010, that without an express legislativegrant, the Worker's Compensation Commission iswithout the legislative power to prorate a lump sumaward over Claimant’s life expectancy withoutconsent of both parties (Utica-Mohawk Mills v. Orr,277 S.C. 226 (1955), is often cited in orders alongwith statutory law when prorating lump sumpayments). The authority of the Commission isstatutorily derived; therefore, the Commissioncannot exceed the scope of the legislature’s grant ofauthority. Petition for Rehearing granted on April 8,2010 in an unpublished opinion.

State Accident Fund v. South CarolinaSecond Injury Fund, Op. No. 4684 (S.C. Ct.App. filed May 5, 2010) (Shearouse Adv. Sh.No. 18, at 53).

The State Accident Fund (Carrier) sought reim-bursement from the South Carolina Second InjuryFund (Fund) for monies the Carrier paid to theClaimant for a stroke he suffered during surgery fora work-related back injury. The Carrier initiallydenied the stroke as causally-related to the admittedback injury. During the period of denial, the Carrierentered into an agreement with the Fund, wherebythe Fund agreed to reimburse monies paid for theClaimant’s back surgery, and the agreement specifiedthe language “for the lumbar spine only.” Onemonth following the agreement, the singleCommissioner issued an Order finding the strokecausally-related to the Claimant’s back injury andthe Carrier paid benefits accordingly. Nearly twoyears later, the Carrier requested reimbursementfrom the Fund under the previous agreement for

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monies paid to the Claimant for the stroke ascausally-related to the Claimant’s back surgery. TheFund denied reimbursement monies as they werenot part of the original agreement entered into by theparties.

The Court of Appeals found the Carrier and theFund executed an agreement that clearly set forththe contours of their compromised settlement.Furthermore, despite having knowledge of theexpenses and ample opportunity to request theirinclusion, the Carrier failed to seek inclusion of thestroke expenses in the terms of the agreement.Furthermore, the Court of Appeals held that theterms of the agreement were clear and unequivocal,and an ambiguity originating not in the terms of theagreement, but in the Carrier’s observations of theFund’s behavior in other, unrelated matters is not alegal basis for declaring the agreement void. Lastly,the Court of Appeals held that the Carrier failed toprove all necessary elements of this claim for estop-pel.

Products Liability Case Notes

Summaries prepared by Brian Comer and Lucie H. Cohen

In re Bausch & Lomb, Inc. Contact LensSolution Prods. Liab. Litig., MDL No. 1785,2010 LEXIS 13786 (D.S.C. Feb. 17, 2010)(Norton, J.); In re Bausch & Lomb, Inc.Contact Lens Solution Prods. Liab. Litig.,MDL No. 1785, 2010 LEXIS 41404 (D.S.C.Apr. 26, 2010) (Norton, J.).

The district court granted summary judgment infavor of the defendant on all claims asserted by manyof the “non-Fusarium” plaintiffs (i.e., those plaintiffswho claim that Bausch & Lomb’s MoistureLoccaused eye infections by fungi other than the fungusFusarium). The non-Fusarium plaintiffs’ only

general causation expert had been previouslyexcluded because she did not identify, or evensuggest, a threshold level of microbes necessary tocause an onset of non-Fusarium infection, a levelthat was critical in the litigation, and her opinionsalso failed to satisfy any of Daubert’s core reliabilityfactors. With the exclusion of the plaintiffs’ generalcausation expert, the plaintiffs had no admissibleevidence to prove causation.

The plaintiffs argued that they could prove generalcausation through differential diagnoses. The courtexplained, however, that generally it is not appropri-ate to rely on a differential diagnosis to prove generalcausation; differential diagnosis may be permitted toprove specific causation, but such evidence satisfiesthe Daubert standard only if general causation hasalready been established. According to the court, topermit the non-Fusarium plaintiffs to rely on differ-ential diagnoses to establish general causation“would amount to allowing an impermissible end-runaround the general causation requirement.”

Brunson v. Louisiana-Pacific Corp., No.2:07-3186-PMD, 2010 LEXIS 10779 (D.S.C.Feb. 8, 2010) (Duffy, J.).

The plaintiffs sought class certification for theirbreach of express and implied warranties claims,alleging a defect in TrimBoard, an exterior buildingproduct, because it prematurely deteriorated. Thedistrict court had previously granted certification toplaintiffs with the same claims living in CharlestonCounty in Thomas v. Louisiana-Pacific Corp., 246F.R.D. 505 (D.S.C. 2007). The plaintiffs in Brunsonsought to certify a putative class comprised ofmembers who have the same claims as thosepresented in Thomas, but who live in certain SouthCarolina counties other than Charleston. Thedistrict court granted class certification, finding that,as with the Thomas plaintiffs, the Brunson plaintiffshad satisfied the class certification requirements ofFRCP 23(a) and (b)(3).

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CASENOTESCONT.

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Type of Action: Medical MalpracticeInjuries alleged: Permanent Movement Disorder

Name of Case: Trudy Murdaugh, as the appointed Guardian Ad

Litem of her sister, Gretta Terry, a mentally incapac-itated adult over the age of eighteen (18) v.Developmental and Behavioral Pediatrics, Doris M.Greenberg, M.D. and Bernice Terry

Court: Circuit Court – Hampton County

Case number: 07-CP-25-223

Tried before: Jury

Name of Judge: The Honorable Carmen T. Mullen

Amount:Mistrial-Settled for $60,000 per Plaintiff juror

Date of Verdict: Mistrial-March 17, 2010

Demand $950,000 prior to trial

Attorneys for defendant:Robert H. Hood, Robert H. Hood, Jr. Chilton G. Simmons Hood Law Firm, LLC, Charleston.

Description of the case, the evidence presented,the arguments made and/or other useful informa-tion:

The Plaintiff claimed medical malpractice against apediatrician who specializes in patients with behav-ioral and developmental problems. The physiciangave the patient, who has a genetic abnormality, aneuroleptic medication called Abilify, and Plaintiffalleged that the Abilify caused the patient to incur apermanent movement disorder. The case was triedfor a week and a half, with the Plaintiff asking for $10million in their closing argument. The jury deliber-ated for over 10 hours, over two days. When itbecame apparent that the jury would not reach aunanimous verdict, and after an Allen charge, anarrangement was reached whereby the defendantswould pay $60,000 for each juror in favor of theplaintiff. The jury was polled via an anonymousballot by the judge. Four of the jurors indicated ontheir ballots that they were in favor of the plaintiff.The case was settled and dismissed with prejudicebased on a payment of $240,000.

Type of Action Medical MalpracticeInjuries alleged: Development of CPM and neuro-

logical deficits

Name of Case:

Geoffrey Holt v. James C. Ravenel, M.D., Cary S.Hickman, M.D., and Theodore Gourdin, M.D.

Court: Circuit Court – Charleston County

Case number: 06-CP-10-4178,Charleston CP

Tried before: Jury

Name of Judge: The Honorable J. Michael Baxley

Amount Defense Verdict

Date of Verdict: April 27, 2010

Demand: $950,000 prior to trial

Attorneys for defendant: Robert H. Hood, Robert H. Hood, Jr. Elizabeth Ballentine Hood Law Firm, LLC, Charleston.

Description of the case, the evidence presented,the arguments made and/or other useful informa-tion:

The Plaintiff alleged medical malpractice againstseveral physicians who were consulted to treatPlaintiff after his arrival at the emergency room onFebruary 13, 2002. Plaintiff was suffering from alco-hol abuse, depression, confusion, seizure activity,and metabolic derangement, including acutehyponatremia and hypokalemia. Plaintiff’sextremely low sodium and potassium levels requiredcorrection but he then developed Central PontineMyelinolysis (“CPM”) and deterioration in neurolog-ical function. The Plaintiff contended theDefendants’ actions caused Plaintiff to develop CPMand rapid deterioration in neurological function andthat the CPM resulted in his neurological deficits,paralysis, and respiratory failure. The Defendantsargued they were treating two potentially lethalpresenting conditions, severely low sodium andpotassium levels, that their care was appropriate andthe development of CPM and neurological deficitswere not the result of any alleged negligence by theDefendants. Plaintiff presented a life care plan total-ing $4.6 million. Dr. Ravenel was dismissed on thefirst day of trial. The case was tried as to the remain-ing two physicians for a week and a day, and the juryreturned a defense verdict after deliberating for lessthan an hour.

Verdict Reports VERDICTREPORTS

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