Litigation Threat To A Start-Up Business

We all know the story.... A poor, struggling little multi-billion dollar company like Scotts is creating popular consumer products, when all of the suddent an unexpected lawsuit - let's say a customer eats Miracle Gro, gets an upset tummy, and claims there should have been a warning label that it wouldn't make people larger - gets a sixteen trillion dollar jury verdict and puts them out of business. Sure, the story is pure fiction, but that's what the "tort reform" propagandists wish us to believe. But let's interject some reality....

The other day I was browsing through Inc.com's "30 under 30" series, and read a profile of an interesting company - what Inc.com deems The Coolest Little Start-Up in America:

If you've browsed in the garden section of your local Home Depot or Wal-Mart recently, you may have seen a new plant food somewhere north of the begonias and south of the perlite. It comes in a yellow and green shrink-wrapped bottle with a familiar shape and the kind of spray top you might find on, say, Windex. It may well be the world's first commercial product made entirely from garbage. The plant food itself is a so-called vermicompost tea, a brew made from the castings (that is, the poop) of red worms that have feasted on various types of organic waste. The containers are reused soda bottles. The spray tops are the unwanted extras that have been dumped by manufacturers of other spray-on products. Even the boxes that the plant food is shipped in are garbage: They're the misprinted rejects of major companies.

But the most striking fact about TerraCycle is the age of its co-founder and CEO, Tom Szaky (pronounced zack-y). He is now 24. A Hungarian by birth and a Canadian by upbringing, he was 19 years old and in his freshman year at Princeton University when he launched the company with one of his classmates, Jon Beyer. At the time, they were simply trying to win a business plan competition. They came in fourth--out of the money--but they couldn't shake the idea that you could build a business selling garbage. And now, five years later, they have done just that. In 2005, TerraCycle had $461,000 in sales, mostly in Canada, where the product was carried by Home Depot and Wal-Mart as well as other chains. With the decision by both retailers to roll it out in their U.S. stores this year, the company's 2006 sales are expected to top $2.5 million.

So it caught my attention when I spotted a Marketplace story about the same company:

Terracycle claims its organic plant food is "as good or better than the leading chemical fertilizer." Tough talk for a little guy when it's obvious the company means it's better than Miracle Gro.

* * *

[Scotts is] suing to see Terracycle's plant food performance study. But Terracycle's refusing for now.*

Scotts isn't leaving it at that. It's also claiming consumers might confuse Terracycle with Miracle-Gro because of the way it's packaged.

As the story indicates, Scotts appears under the impression that it should have the exclusive right to use green and yellow packaging for gardening products - really, there's no confusing the two products - or perhaps it's just that they know how litigation costs can affect a small business:

Hemphill says big companies often use this kind of lawsuit to protect their brands and market share. That's not just bad news for the up-and-comers, its bad news for consumers too, as it can stifle competition, he says.

CEO Tom Szaky says he had to spend 30 percent of his earnings in legal fees this month — and if he's slapped with another lawsuit, it could drive him out of business

Let's see if tort reform propagandists like ATRA and the U.S. Chamber of Commerce Institute for Legal Reform step in to hold a fund raiser to help with Terracycle's legal fees....

Are you holding your breath?
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* I hope Terracycle is able to substantiate that claim.

Tort Reformers Focusing On The... Big Problems?

According to a letter from Sherman Joyce, President of the "American Tort Reform Association",

Our efforts to reform the tort system address the greatest abuses, such as allowing lawsuits that do not require proof of actual injury or loss, denying the right of defendants to appeal judgments against them, and permitting pseudo-experts to peddle "junk" science in courtrooms.

The "greatest abuses".... Okay, I'll bite.

• In what percentage of cases do tort plaintiffs proceed and prevail in cases "that do not require proof of actual injury or loss"? Here they are referencing cases which involve, for example, toxic exposure, where the victim may require medical monitoring and have legitimate fear of developing an illness. Their problem with medical monitoring, in their own words, does not appear to be its present implementation, but a hypothetical future where "Widespread acceptance of medical monitoring would expose all businesses to unprecedented liability and costs." The good old dependable "slippery slope" fallacy.


• In what percentage of cases are defendants denied "the right ... to appeal judgments against them"? The only reference I can find to this on ATRA's website is its suggestion that "billion-dollar verdicts are no longer uncommon" (er, they're not?) and that some defendants facing multi-billion dollar verdicts can't afford to post appeal bonds. This happened twenty or so years ago in Pennzoil v Texaco, and since in the high profile case of... of... of... Well, don't go looking for help on ATRA's site, because apparently they don't know of another example, either.


• In what percentage of cases are tort plaintiffs and defendants free to present the testimony of "pseudo-experts" who "peddle 'junk' science in courtrooms"? (Does this actually mean something other than "It's horrible that tort plaintiffs are permitted to present expert witnesses who differ in opinion from those who serve the defense"?) Funny... this crucial issue doesn't seem to merit mention on ATRA's "issues" page.

This is how they put their best foot forward? Well, I suppose if the mainstream media is willing to print their nonsense, it works for them.

A Flint Minute....

Okay... perhaps I'm beating a dead horse (or popping bubble wrap), but....

Leaving aside for the moment the fact that I didn't know that in "Chronicling the high cost of our legal system" Walter Olson had become a Canadian, I find his math to be interesting:

Federal Express drivers Edgar Rizkallah and Kamil Issa, both of Lebanese descent, say the nasty epithets from their manager went on for two years, which means the award works out to $15 million per epithet-year, $290,000 per slur-week, or $40,000 per imprecation-day.

Well, let's see... Michael Moore is being sued for $85 million over a ten second clip. That's $510 million per Flint minute, more than $30 billion per Flint hour, almost three quarters of a trillion dollars per Flint day, $268 trillion per Flint year.... All for the pain of having people think you're "from the same background as the people in Flint"?

Oh, I know.... It's different".

He's Going After Hillary?

Walter Olson is apparently so preoccupied with Hillary Clinton that the suit against Michael Moore somehow escaped his notice.

"But This Is Different"

The bloggers of Pajamaline (f'rinstance; f'rinstance) seem to be giddy over the fact that a Gulf War vet and his wife have sued Michael Moore over a clip from NBC News that was used in Fahrenheit 911:

Damon is asking for up to $75 million because of "loss of reputation, emotional distress, embarrassment, and personal humiliation."

In addition, his wife is suing for another $10 million because of the "mental distress and anguish suffered by her spouse."

Back in the days before he was going to sue anyone, Damon's objections were detailed in the Army Times.

In [the clip], Damon is seen sitting on a gurney just before going into surgery. The remains of his arms are swathed in heavy bandages, and he is describing phantom-limb sensation and the phantom crushing pain that doctors have relieved with a steady flow of anesthesia into each limb.

The original Oct. 31 interview with NBC Nightly News was about the anesthesia and the work being done at the hospital with other amputee soldiers. Damon and his anesthesiologists considered it a positive piece that showcased the hard work being done for wounded soldiers.

But, Damon notes, the 10-second clip in "Fahrenheit 9/11" is sandwiched into a segment of the movie that describes the supposed plight of hapless soldiers sent to Iraq, many of whom, Moore asserts, have joined the Army to escape poverty.

"For this guy to put me in a movie and say, 'Look at all these poor fellows,' it makes us look like we all came from the same background as the people in Flint, Michigan," Damon said.

Damon has appeared in two films denouncing Moore and Fahrenheit 9/11, but I guess people still think he's from Flint.

There seems to be no end of right-wing applause for the lawsuit, but I have yet to find even a single critical peep from the "tort reformers"... presumably because it's Michael Moore, which means "it's different". And as it's not a lawsuit against their corporate masters, so why would they care if he faces a lawsuit of dubious validity with an absurd demand for damages. But then, we haven't yet heard from Volokh's Dave Kopel. After all, he would be the first to tell us that just because you don't like the defendant, it doesn't mean that the plaintiff should be awarded millions of dollars. Right?

Update: Another Pajamaliner chimes in: "I have no idea if the case has any merit, but I do like the idea of Michael Moore being sued." How, um, conservative.