business law case paper

2,465 words (not counting the title page, footnotes, or Works Cited)

Tort Reform Exposed: Liebeck v. McDonald’s Restaurants

Jon Dollfus Professor Emerson

Business Law February 29, 2017

Introduction

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On February 27, 1992, Stella Liebeck spilled her McDonald’s coffee on her lap while in her car, leaving her with third-degree burns. Mrs. Liebeck wanted to settle the incident with McDonald’s for less than $20,000, which merely reflected the cost of her medical expenses plus her loss of income from her time out of work.1 McDonald’s answered back with an offer of merely $800.2 Liebeck, offended by the offer, hired attorney Reed Morgan to handle the case. The outcome of the case was a settlement outside of court for an undisclosed amount of approximately $600,000.3 While this seems like a normal civil case, a trial where an individual or corporation seeks to collect money for some sort of damages done unto them, this trial actually became an international topic of discussion.4 Liebeck v. McDonald’s Restaurants became one of the most publicly misunderstood court cases in American history, which can be attributed to popular culture and the mainstream media, which was heavily influenced by funding from large corporations. My paper will focus on the concept of tort reform and how this infamous court case amongst a few others can be used to expose the fraudulence behind the greedy and unethical movement. In addition, throughout my report I will discuss how tort reform and the court cases surrounding this topic directly relate to our class and are featured in our textbooks written by Professor Emerson himself.

Facts of the Case

The public’s perception of the Liebeck v. McDonald’s Restaurants case and the reality of it vastly differ. The reason for this misunderstanding is not necessarily due to the ignorance of the public, but more so due to the biased news coverage that morphed the facts of the case in order to push a political agenda. Following are the details explaining what happened on February 27, 1992 in Albuquerque, New Mexico and the trial forthcoming from the incident. Christopher Tiano drove his 79-year-old grandmother, Stella Liebeck, to the McDonalds drive through in his 1989 Ford Probe to get a value meal and a cup of coffee.5 After paying and receiving the order, Christopher pulled over into a parking spot so that they may begin situating themselves to be able to eat and drink while driving. The Ford Probe did not have cup holders, so Stella placed the coffee cup between her legs to take the cap off so she could add cream and sugar.6 In doing this, the top popped off and the coffee subsequently spilled all over her thigh and groin area. Her sweatpants absorbed the burning which exacerbated the damage, resulting in third degree and skin thickness burns.7 The burns were so severe that when she arrived at the hospital the doctors were unsure that Mrs. Liebeck would survive. The burns required skin graphing and surgery, which drove the medical bills over $10,000.8 After the incident, Liebeck’s daughter, Judy Allen,

1 Hot Coffee. Dir. Susan Saladoff. HBO, 2011. Web. 8 Mar. 2017. 2 Cain, Kevin G. "And Now, The Rest Of The Story..." Journal of Consumer & Commercial Law

(n.d.): n. pag. Web. 9 Mar. 2017. 3 Hot Coffee. Dir. Susan Saladoff. HBO, 2011. 4 Emerson, Robert W., J.D. Law, Society and Business. United States: Faulkner LLC, 2005. Print. p. 45 5 Cain, Kevin G. "And Now, The Rest Of The Story..." 6 Scalded by Coffee, Then News Media. New York Times. Retro Report, 21 Oct. 2013. Web. 8

Mar. 2017. 7 Askalany, Anthony, JD, MBA, CPA, CGMA. "Product Liability: Stella Liebeck v. McDonald’s

Restaurants. Legal Analysis." LinkedIn. N.p., 24 May 2016. Web. 9 Mar. 2017.

8 Scalded by Coffee, Then News Media. New York Times.

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and her son in law, Charles Allen, wrote a letter to McDonalds asking for them to cover the bills that Medicare didn’t, and encouraged them to look into the functionality of their coffee machines with regard to their temperature output as well as the stability of the caps on their to-go cups.9 This seemingly fair request was answered with an offer of a mere $800.10 This was obviously not enough to compensate Mrs. Liebeck’s serious injuries so she decided to hire attorney Reed Morgan and sue McDonald’s Corporation for gross negligence. Gross negligence is defined as the “lack of even slight care, recklessness, or extreme failure to comply with one’s duty of care.”11

The trial occurred between August 8-17 of 1994, and the 12-person jury arrived at the conclusion that the incident was 20% Liebeck’s fault and 80% McDonald’s fault. This is an example of a product liability case in which the legal liability is shouldered by the seller of the good to consumers, users and bystanders for injuries sustained through the distribution of the product.12 As a consequence of the jury’s perception of the situation, Mrs. Liebeck was awarded $160,000 in compensatory damages and $2.7 million in punitive damages.13 Compensatory damages are rewards given to fix the reasonable damages done to the plaintiff.14 Punitive damages are damages covered in tort cases used to additionally punish the defendant for their negligent actions.15 The extraordinarily high punitive damages represented the jury’s way of getting McDonald’s attention, penalizing them for two days of coffee sales because of their negligence. In the end, the judge reduced punitive damages from $2.7 million to $480,000 but did agree that McDonalds had engaged in reckless behavior.16 Stella Liebeck was more than satisfied with this outcome as she initially only requested $20,000 to cover the medical bills and the foregone salary of her daughter. She was ready to move on with her life. Stella Liebeck passed away in 2004 at the age of 91.17 Little did she know that as a consequence of this case, her name would be attributed to the woman who spilled her coffee on herself and asked for a million dollars in return.

Impact of Case and Tort Reform Debunked - Opinion The publicity of the case resulting in the introduction of a new standard coffee serving temperature that is 10 degrees lower, but that wasn’t the lasting impact of the Liebeck v. McDonald’s Corporation.18 Years after the case, there was a political push for what politicians and corporations alike called “tort reform.” A tort is a private wrong against a person or his/her property.19 Most torts stem from an intentional or negligent action. State tort reform, as mentioned in Professor Emerson’s Barron’s text book, often proposed for states to “require

9 Simmons, Andy. "Remember the Hot Coffee Lawsuit? What Really Happened." Reader's Digest 2011: n. pag. Web. 9 Mar. 2017.

10 Hot Coffee. Dir. Susan Saladoff. HBO, 2011. 11 Emerson, Robert W., J.D. Business Law. Sixth Edition ed. New York: Barron's Educational Series, 2015. Print. p. 698 12 Emerson, Robert W., J.D. Business Law. p. 737 13 Askalany, Anthony, JD, MBA, CPA, CGMA. 14 Emerson, Robert W., J.D. Law, Society and Business. p. 287 15 Emerson, Robert W., J.D. Business Law. p. 739 16 Hot Coffee. Dir. Susan Saladoff. HBO, 2011. 17 Scalded by Coffee, Then News Media. New York Times. 18 Scalded by Coffee, Then News Media. New York Times. 19 Emerson, Robert W., J.D. Business Law. p. 759

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arbitration; limit pain and suffering rewards, set shorter statute of limitations periods, cap contingency fees; and excuse wholesalers and retailers from liabilities if they didn’t cause the defect.”20 It refers to a movement to allot more power to corporations to instate more defenses against the victims of torts. Using their massive funding, big corporations were able to manipulate the media as well as put forward favorable politicians to help make their tort reform liable. It comes as no surprise that the case of Stella Liebeck was used as the poster child of this movement.21 After a simple google search or solely observing Mrs. Liebeck’s severe burn marks, it’s evident that most citizens would have asked for the same compensation that she did, if not more.

The media is where most people learn about the news, due to the convenience of this medium of information. The problem was that the media was being extraordinarily biased. I don’t blame people for being incorrectly skewed to believe Stella Liebeck was a greedy old woman trying to take advantage of a rich corporation. It is a sad world that we live in that we must fact check the very news on our television. Hardly any news is distributed unbiasedly, which is quite annoying and backwards. We live in a world where money buys influence. It buys television air time, billboards, political campaigns, etc. In the political movement for “tort reform”, the media managed to turn Stella Liebeck, as well as the function of a jury system in the United States, into the punchline of a joke. Somehow, they were able to shed somewhat of a positive light on McDonald’s from what should have been negative publicity. They lied, exaggerated and displayed only facts that were in their favor.22 The worst part was that they shoved it in your face. Billboards all over the country had catchy sayings calling Liebeck v. McDonald’s Restaurants “Lawsuit Lottery” and “Jackpot Justice”.23 They skewed many facts, alleging Stella was driving and fiddling with her coffee when she was actually parked and in the passenger seat.24 The media never showed pictures of her burns. Pouring coffee on yourself and suing for millions became a popular comedic topic on insanely popular shows like Seinfeld and The Tonight Show.25 Weird Al Yankovic, a historically satirical band, even wrote a song about the case. Corporations joined together and formed organizations like the American Tort Reform Association and Citizens Against Lawsuit Abuse.26 They funded public advertising as well as political campaigns through these “AstroTurf” organizations all the while fooling the public into believing the funding was coming from citizen-run organizations. While lawsuit abuse was alive and well in the American judicial system, the Liebeck v. McDonald’s case was unfairly chosen as the posterchild of the movement. In addition, the changes that the corporations were looking for would impact any victims of torts, even those that were justly suing corporations. The tort reform that the corporations were attempting to make included caps on damages, limits on the topics able to be brought to court, and mandatory arbitration. These types of tort reform will be discussed in more depth using other notable cases below.

Other Stories Exposing the Negative Effects of Tort Reform

20 Emerson, Robert W., J.D. Business Law. p. 460 21 Hot Coffee. Dir. Susan Saladoff. HBO, 2011. 22 Scalded by Coffee, Then News Media. New York Times. 23 Hot Coffee. Dir. Susan Saladoff. HBO, 2011. 24 Scalded by Coffee, Then News Media. New York Times. 25 Cain, Kevin G. "And Now, The Rest Of The Story..." 26 Scalded by Coffee, Then News Media. New York Times.

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A few examples of cases that helped and continue to assist in refuting the validity of the tort reform movement are the stories of Colin Gourley, Jamie Lee Jones, and Oliver Diaz, all of which are discussed at length in the HBO documentary “Hot Coffee”. Colin Gourley was a child born with cerebral palsy because of medical malpractice during childbirth.27 His physician didn’t do a full checkup when his mother showed concern about his heartrate.28 In the doctor’s lack of fulfillment of her job, she missed a treatable issue that led Colin to develop cerebral palsy. Meanwhile, his twin brother was born healthy. After bringing this to court, the jury awarded Colin $5.6 million to cover his medical expenses for life. However, because of tort reform through caps on damages in Nebraska, his award was reduced to 20% of the initial closing price, which was far less than necessary for the amount of surgeries and everyday medical care that he required.29

The next example of tort reform negatively affecting innocent people came in the case of Jamie Lee Jones. Jamie Lee Jones was a 20-year-old newly hired employee of the contracting company KBR, a subsidiary of Halliburton. In order to become employed with KBR, and many other large companies, a pre-requisite included the signing of a contract which forced employees to undergo mandatory arbitration under the representation of in-house legal counsel.30 Mandatory arbitration occurs when a company requires individuals to agree to handle disputes with the company outside of the court room usually to avoid lawsuits or negative publicity.31 If Jones had not signed this contract, she would have been to be resigned to continue looking for a job, a conundrum many other employees face. She was placed in Iraq because she wanted to make a positive impact there. When she arrived, she found that she would be lodging with 400 men and no women. She immediately asked to be relocated but was basically told that she would get used to it.32 Just four days into her new job, she was drugged and brutally gang raped by coworkers, forcing her to get reconstructive surgery on her chest. She was then held prisoner in a shipping container with an armed guard after reporting the rape.33 In addition, KBR illegally tampered with the medical evidence tangent to the case.34 Even with the evidence stacked in Jones’ favor, she was still restricted from suing the company for knowingly sending her into a hostile work environment because of the mandatory arbitration clause in her employment contract with KBR. It took her four years of fighting to land her case to court, and even then, because much of the evidence was unlawfully destroyed, she lost.35 The tort reform movement to make mandatory arbitration fair use for fortune 500 companies in the United States was helping to limit lawsuit abuse by employees. However, in doing so, it also limited the rights available to victims like Jamie Lee Jones that deserved a fair trial for being wronged. Corporations were spending

27 Hot Coffee. Dir. Susan Saladoff. HBO, 2011. 28 Gourley, Lisa. ""Hot Coffee" Exposes How Hard Caps on Malpractice Awards Shift Burden to

Taxpayers." Interview by Amy Goodman. Democracynow.org. N.p., 25 Jan. 2011. Web. 09 Mar. 2017.

29 Gourley, Lisa. ""Hot Coffee" 30 Hot Coffee. Dir. Susan Saladoff. HBO, 2011. 31 Emerson, Robert W., J.D. Business Law. p. 656 32 Mencimer, Stephanie. "Why Jamie Leigh Jones Lost Her KBR Rape Case." Mother Jones

(2011): n. pag. 07 July 2011. Web. 09 Mar. 2017. 33 Mencimer, Stephanie. "Why Jamie Leigh Jones Lost Her KBR Rape Case." 34 Hot Coffee. Dir. Susan Saladoff. HBO, 2011. 35 Mencimer, Stephanie. "Why Jamie Leigh Jones Lost Her KBR Rape Case."

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millions of dollars funding political campaigns for judicial representatives that would vote in their favor regarding tort reform. While tort reform directly affected the cases of Colin Gourley and Jamie Lee Jones, Oliver Diaz’s career as a pro-citizen judge was unluckily stuck directly in the center of the movement.

Contrary to popular belief, the United States Chamber of commerce is not related to the U.S. Government. It is a membership organization of businesses and is the nation’s largest lobbying group for corporations.36 Oliver Diaz is a former justice of the Mississippi supreme court. He was by no means “pro-corporation” when running for his seat. The U.S. Chamber of Commerce knew this, and decided to contribute millions of dollars to his opponent, taking up almost all the airtime on television ads and billboards in Mississippi.37 Diaz was forced to take out a joint loan with his longtime friend, Paul Minor, offering collateral to fund his campaign. Even with the millions of dollars of funding on negative publicity and public shaming, Diaz won the 2000 election in a runoff.38 After his victory, he was indicted for bribery based on his campaign contributions that he had to disclose.39 In addition, the other candidate were funded by the U.S. Chamber of Commerce, which did not have to disclose the special interest groups funding the cause.40 It is also important to keep in mind that Oliver Diaz never voted on any of Paul Minor’s cases because they were such good friends and he knew that was illegal. He did nothing wrong, but the bogus case brought against Diaz managed to keep him off the bench for three full years.41 When he returned to stand for election again, he was unable to surmount the years of negative publicity amassed throughout the previous election and the horizon of the case against him, so he lost.42 These three stories serve as additional examples of the fraudulence behind the tort reform movement of the early 2000’s.

Conclusion It is important to note that Liebeck v. McDonald’s was the posterchild of the tort reform

movement, even though it should have been the poster child of the movement against tort reform. What began as an unfortunate event of an elderly woman spilling coffee on herself evolved into so much more. This infamous case was skewed in its delivery to the public because of the massive funding streams from large corporations. The stories of Colin Gourley, Jamie Lee Jones, and Oliver Diaz are prime examples of how tort reform gives too much power to corporations and leaves individuals bereft of basic rights. Tort reform, though presented in a bright light to the public, shields big corporations from shouldering the responsibility they have to protect their employees, consumers, and bystanders. Corporations should be held accountable for the safety of people who interact with their goods or services, and tort reform provides an umbrella of potentially unfair protections against this liability.

36 Hot Coffee. Dir. Susan Saladoff. HBO, 2011. 37 Hot Coffee. Dir. Susan Saladoff. HBO, 2011. 38 Diaz, Oliver, and Susan Saladoff. ""Hot Coffee" Documents Chamber of Commerce

Campaign to Unseat Judges Opposed to "Tort Reform"." Interview by Amy Goodman. Democracynow.org. N.p., 25 Jan. 2011. Web. 08 Mar. 2017.

39 Diaz, Oliver, and Susan Saladoff. ""Hot Coffee" 40 Diaz, Oliver, and Susan Saladoff. ""Hot Coffee" 41 Diaz, Oliver, and Susan Saladoff. ""Hot Coffee" 42 Hot Coffee. Dir. Susan Saladoff. HBO, 2011.

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Works Cited

Askalany, Anthony, JD, MBA, CPA, CGMA. "Product Liability: Stella Liebeck v. McDonald’s Restaurants. Legal Analysis." LinkedIn. N.p., 24 May 2016. Web. 9 Mar. 2017.

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Cain, Kevin G. "And Now, The Rest Of The Story..." Journal of Consumer & Commercial Law (n.d.): n. pag. Web. 9 Mar. 2017.

Diaz, Oliver, and Susan Saladoff. ""Hot Coffee" Documents Chamber of Commerce Campaign to Unseat Judges Opposed to "Tort Reform"." Interview by Amy Goodman. Democracynow.org. N.p., 25 Jan. 2011. Web. 08 Mar. 2017.

Emerson, Robert W., J.D. Business Law. Sixth Edition ed. New York: Barron's Educational Series, 2015. Print. Emerson, Robert W., J.D. Law, Society and Business. United States: Faulkner LLC, 2005. Print. Gourley, Lisa. ""Hot Coffee" Exposes How Hard Caps on Malpractice Awards Shift Burden to

Taxpayers." Interview by Amy Goodman. Democracynow.org. N.p., 25 Jan. 2011. Web. 09 Mar. 2017.

Hot Coffee. Dir. Susan Saladoff. HBO, 2011. Web. 8 Mar. 2017. Mencimer, Stephanie. "Why Jamie Leigh Jones Lost Her KBR Rape Case." Mother Jones

(2011): n. pag. 07 July 2011. Web. 09 Mar. 2017. Scalded by Coffee, Then News Media. New York Times. Retro Report, 21 Oct. 2013. Web. 8 Mar.

2017. Simmons, Andy. "Remember the Hot Coffee Lawsuit? What Really Happened." Reader's Digest

2011: n. pag. Web. 9 Mar. 2017. "Stella Liebeck v. McDonald's Corporation." World Heritage Encyclopedia Edition (2011): n.

pag. Web. 10 Mar. 2017.