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Our Next Attorney General?

Thursday, February 21, 2008

TED FRANK revisits one of John Edwards's most famous—and most misunderstood—cases.

John Edwards featureJohn Edwards has dropped out of the race for the Democratic presidential nomination, but he still has a chance to play kingmaker with an endorsement of either Hillary Clinton or Barack Obama. Multiple reports claim that the Illinois senator has promised Edwards the job of attorney general in a future Obama administration. This means that Edwards’s legal record deserves more scrutiny than it has heretofore received.

Edwards defended his trial-lawyer past on the campaign trail. The mother of one of his clients, Valerie Lakey, has spoken on his behalf, and in his 2003 book, Four Trials, Edwards uses Lakey’s case as a supposed example of bringing a callous, recalcitrant company to justice for the terrible injuries suffered by a little girl. Throughout the 2004 presidential campaign, when he eventually served as John Kerry’s running mate, Edwards made much of his $25 million victory in the Lakey trial; he even mentioned it during his debate with Vice President Cheney. The media ate up the story of Edwards’s dramatic (if improperly prejudicial) closing argument that invoked the death of his own son. The Lakey case seemed to inoculate him against criticism of his pre-Senate career as a plaintiff attorney.

It shouldn’t have, for the facts of this case tell a different story—that of a blameless company attacked, solely because of its deep pockets, for the negligence of others. The Lakey case is really about the collusion of trial lawyers and judges to make lawless, plaintiff-friendly rulings.

In 1993, Valerie Lakey was literally disemboweled when she sat on a wading pool drain that was open to suction. The conventional wisdom is that her horrific injuries came because the drain cover, manufactured by Sta-Rite, was defectively designed. Yet according to newspaper coverage of the case, and even the account in Edwards’s own book, this is not true. The young girl was injured because, just minutes before the accident, other children playing at the municipal wading pool in Medfield, North Carolina, pulled the cover off the drain. County procedures to screw down the cover in the children’s wading pool were not followed—even though the drain cover was screwed down in the adult pool, and even though the wading pool drain cover had been screwed down in the past.

 

The Clinton administration’s Consumer Product Safety Commission (CPSC) said there was no defect: according to government spokesman Ken Giles, the accident did not have “anything to do with product design—it’s an issue of maintenance, an issue of a missing cover and the child sitting down on it.” Years before the accident, both the National Spa and Pool Institute and the CPSC had issued a list of precautions for pool owners and managers, telling them that covers must be checked daily to determine if they are in good repair and to make sure they cannot be removed without tools. Meanwhile, the powerful circulation pump that destroyed Lakey’s insides—which was not manufactured by Sta-Rite—didn’t have a readily accessible emergency shut-off switch.

 
The $25 million verdict against Sta-Rite had nothing to do with justice and everything to do with the personal enrichment of trial lawyers such as John Edwards.

Edwards sued the municipality, the county, and the pump manufacturer, eventually settling for a total of $5.9 million ($5.4 million of that from local taxpayers). This guaranteed him a hefty profit, and enabled him to focus on the manufacturer of the drain cover. With the other defendants out of the picture, Edwards could design a story for the jury that made it seem like Sta-Rite was the only one to blame—for not doing more to protect the pool drain from vandalism, and for not giving the municipality adequate warning of the dangers that such vandalism posed.

 

Sta-Rite had been sued in the past after other children had been injured on open pool drains; but the company had always been able to settle for nuisance sums. So when Sta-Rite made Edwards a $1.25 million offer in the Valerie Lakey case and he rejected it, the company went to trial. After all, four focus groups set up by the defense to see mock trials decided that Sta-Rite had acted reasonably. 

 

The Lakey jury wasn’t allowed to make that decision: Wake County Superior Court Judge Robert Farmer erroneously told the jury that Sta-Rite had acted unreasonably as a matter of law, and that it was required to find that Sta-Rite had breached its duty to warn. The judge apparently overreacted to a dispute over document production. Earlier in the case, during discovery, Edwards asked Sta-Rite to provide documents relating to the specific model of the pool cover. Then, one week before the trial, he modified his request to include documents relating to all suction accidents. Sta-Rite provided the newly requested documents, which contained information about other lawsuits—relating mostly to a different model of drain cover used on hot tubs and manufactured by a company that Sta-Rite had purchased in 1984.

 

Now Edwards accused Sta-Rite of having deliberately hidden the documents that he had never asked for. It’s a standard trial-lawyer litigation tactic to manufacture a controversy over a party’s compliance with document production requirements. Persuading the judge that there has been a devious “cover-up” can save one the trouble of having to persuade a jury. (A similar end-around led to the $1.57 billion verdict against Morgan Stanley that the Florida Supreme Court reversed last year.)

 

Sta-Rite now offered $17.5 million to settle; but Edwards recognized the possibility of a bigger verdict, and refused. He asked the jury for $42 million, and it came back with a $25 million verdict. A number of jurors said later that they could have gone either way, until the judge gave his instructions on the question of liability.

 

Sta-Rite would not have the chance to appeal those instructions to a higher court. After the initial verdict, and as the jury retired to contemplate punitive damages that could have bankrupted Sta-Rite, the company chose to settle rather than risk all of its investors’ money.

 

At trial, the Edwards team asked Sta-Rite’s chief engineer the misleading question, “Would you agree that the manufacturer of a product has an obligation to inform all of the users of its products of all the dangers that are known that are associated with the use of their product?” (Emphasis added.) Of course, the engineer answered no, as any engineer would have. For example, no engineer would put a warning about the obvious risk of drowning on swimming pool equipment. But Edwards happily characterized the engineer’s common-sense response as evidence of "chilling" corporate indifference meriting punitive damages.

 

Sta-Rite had already been putting warnings on its pool drain covers, and the 1993 case did nothing to change their product design or the warnings conveyed to buyers. The drain cover in the Lakey case was sold in February 1987 with a warning label; soon thereafter Sta-Rite began embossing the warnings on the cover. This safety innovation was used against them at trial, the argument being that they should have acted earlier. But no one could reasonably think that an additional warning to screw in the drain cover would have made an iota of difference. The cover already had holes for screws, county regulations already required the pool drain cover to be screwed down, the pool managers testified that they had done so several times in the year before Lakey’s accident—and Edwards had already recovered millions from the municipality for its failure to keep the cover screwed down.

 

Valerie Lakey suffered terrible injuries, and she was entitled to her compensation from the negligent parties in the case. But the $25 million verdict against Sta-Rite had nothing to do with justice and everything to do with the personal enrichment of trial lawyers such as John Edwards. He wasn’t the first trial lawyer to take millions from innocent defendants through sleazy legal tactics, though he may be the first to have the chutzpah to portray such tactics as virtuous grounds for a presidential nomination.

 

But if Edwards truly cares about the poverty issues that formed the centerpiece of his 2008 campaign, he might consider the effect that jackpot litigation has had on the sectors of American society that create wealth. And voters might want to consider what the consequences would be if their own Department of Justice engaged in Edwards-style scapegoating.

 

Ted Frank is a resident fellow at the American Enterprise Institute and director of the AEI Legal Center for the Public Interest.

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