Product liability and tort reform

“Woman Sues Over Finger in Chili”

“Perfume Company Ordered to Pay Millions”

“Restaurant Sued Over Scalding Coffee”

We’ve all seen these headlines and many others like them in the news lately. Sensational headlines, false and frivolous lawsuits against businesses and the prices consumers pay for products and services are combining to fuel local, state and national efforts toward tort reform.

Gov. Jeb Bush says that “lawsuit abuse is one of the greatest threats to Florida’s robust business climate.” He recently joined the Florida Justice Reform Institute in advocating for measures to “rein in lawsuit abuse and bring fairness, common sense and predictability to our civil justice system.”

Business owners throughout our state are paying high premiums for product liability insurance because they fear being hit with a large jury verdict that could send their business — and their family — into bankruptcy.

And Florida consumers are paying higher prices for all the goods and services we purchase everyday — from a fast-food hamburger to a new car — because of the cost of product liability and other lawsuits.

Of course, some lawsuits are legitimate and deserve to be compensated. Businesses do sometimes offer substandard products and services, and people are injured — physically and/or economically — and deserve to be compensated. But those honest victims are victimized by a court system that is clogged beyond its capacity by false and frivolous lawsuits.

It is in the best interest of consumers and business owners that our court system be able to weed out false and frivolous lawsuits to maintain the public’s trust in the justice system and guarantee access to the courts for real victims.

The recommendations by Gov. Bush and the Florida Justice Reform Institute cover changes across several areas.

Joint and several liability. Change the law that punishes a person or corporation based upon its ability to pay instead of its degree of fault.

Product liability. Eliminate liability for retailers who had nothing to do with the design or manufacture of a product.

Premises liability. Exclude property owners when a third party intentionally hurts someone on their property.

Vicarious liability. Follow the precedent set by several other states and adopt “negligent entrustment” as the law, instead of automatically making the owner of a vehicle liable when someone else drives it and gets in an accident.

Limiting class action lawsuits. The goal of class action lawsuits should be compensation for those hurt.

Asbestos litigation. Ensure that those truly impacted by exposure to asbestos are compensated in a timely manner. A study found that 65 percent of total dollars paid to plaintiffs in asbestos litigation have gone to people who are not ill.

Limit venue shopping. A reputation for awarding excessive judgments should not be the reason a case is heard in a particular court.

Abuse of Amendment 3. Last year, 64 percent of Floridians voted to limit lawyers’ fees and make sure damage awards get to injured patients and their families in medical malpractice cases.

Reversing ‘zone of risk’ decisions. Under these court rulings, law enforcement officers have been held civilly liable for accidents that occur while they are in pursuit of dangerous suspects.

All business owners — from the smallest mom-and-pop operations to the largest corporations — should learn about product liability and the efforts to reform our tort laws. Honest business people should not have fear that their life’s work will be gone in a flash because of a multimillion-dollar jury verdict in a frivolous case.

William R. Scherer Jr. is managing partner of Conrad & Scherer, which specializes in health care law and complex commercial litigation. Reach him at 954-462-5500 or www.conradscherer.com.

Protective measures

“The hiring of a lawyer is an important decision that should not be based solely upon advertisement. Before you decide, ask us to send you free information about our qualifications and experience.”

You see or hear that statement almost every day, whether you are cognizant of it or not, in television, newspaper or radio advertisements by law firms seeking your business.

It’s printed and broadcast so often that you might be tempted to ignore it, but don’t. It’s a very important statement that bar association rules require, and it is there for a very good purpose — to warn you that hiring a lawyer can have serious implications on your future and the future of your business.

Most, if not all, businesspeople will need an attorney at one time or another. You’re putting your future at risk if you set up a business without legal advice, especially if you have partners.

You may need help with collections or you could be sued by a vendor or customer. Maybe your business must comply with complex federal or state regulations. Ignorance of the law is never a defense in court, and a modest legal fee to the right attorney could literally save your business.

You should consult a general business attorney as you are planning your business. If you don’t have friends with successful businesses, then cold call a few business owners and ask them if they have an attorney they would recommend. If you want to utilize advertisements or the Yellow Pages, call and ask for information on the firm and names of references. Then call those references and see how happy they are.

A good general business attorney will help make sure your business is set up correctly, including (in consultation with your accountant) what kind of business it should be — a corporation, limited liability partnership or some other entity. This lawyer can also be invaluable in advising you on any federal, state or local laws or regulations you must comply with to operate. These can vary from one side of the street to the other, and involve everything from licenses and permits to the sign over your door.

After you are up and running, your attorney can act as a sort of general counsel. He or she will be familiar with you and your business and if you run into an unusual problem or issue, will help you find a qualified legal specialist to handle it.

There are far too many laws on the books for one lawyer to be able to handle all of your potential problems. That’s why attorneys specialize in certain areas. There are attorneys who specialize in commercial litigation and others who never step into a courtroom.

The person who does a great job closing on your home may have no idea how to defend you from a disgruntled customer. And if you should ever be audited by the IRS, that opens up a whole new world that most general practice attorneys are not equipped to handle.

Another important matter in selecting an attorney is the fee agreement. Always sign a fee agreement before commencing any legal work to avoid costly and unpleasant disagreements later. Know what you are paying and what you will get.

Be aware that many fee agreements prohibit you from suing for malpractice and instead compel arbitration. Realize that the lowest hourly fee may not mean the lowest final bill.

Lawyers shouldn’t fix their own roofs, set their own broken arms or build their own swimming pools — not if they want it done right. And roofers, doctors and pool-builders should not try to do their own legal work. You have invested blood, sweat and tears into building a business.

The best way to protect that investment is to take the time and do the research to find an attorney who suits your individual needs. It can be one of the most important business decisions you will ever make.

William R. Scherer Jr. is managing partner of Conrad & Scherer, which specializes in health care law and complex commercial litigation. Reach him at (954) 462-5500 or www.conradscherer.com.

Directors and officers face liability

After a lifetime of hard work and dedication, it is an honor to be selected as a member of the board of directors or as an officer of a major corporation. But with that prestige comes a great deal of responsibility and, now more than ever, great personal financial risk.

In recent months, two high-profile corporate fraud cases highlighted that risk and should serve as a bright neon warning sign to all current and prospective board members and officers.

Ten former directors of WorldCom agreed to personally pay $18 million to settle a lawsuit by stockholders in the failed telecom company. (This settlement was later thrown out by a judge, opening the door for even greater liability for the directors after a jury trial.) At Enron, 18 former directors agreed to pay $13 million to settle stockholder claims arising from the well-publicized demise of the energy giant.

Those two cases of corporate malfeasance resulted in several criminal indictments of corporate officers and spawned several lawsuits by angry investors and other interested parties. But they are only the tip of an ever-growing iceberg of criminal and civil actions by government agencies and shareholders against companies suspected of using false information to inflate profits and share prices.

Although these two settlement agreements attracted a great deal of attention in the financial media, most company directors contacted said the cases would not prevent them from continuing with their board service or from accepting seats on other boards. For the most part, their lack of concern was based on their confidence in the honesty and integrity of their fellow board members and their companies’ management.

We would all like to believe that the companies we are associated with would never engage in the financial machinations that brought down WorldCom and Enron. But prospective board members or officers must realize that they are potentially putting all of their own assets at risk and should take aggressive action to eliminate or reduce that danger as much as legally possible.

Director and officer (D&O) insurance is the main line of defense against potentially ruinous jury awards and legal settlements. Although your personal funds may still be at risk — the Securities and Exchange Commission is seeking settlements that specify money come from personal funds rather than insurance — a good D&O insurance policy can provide important protection for an innocent director and officer from honest mistakes and even fraud committed by others.

However, many directors and officers have never closely examined their D&O policies and may falsely believe they are immune from personal financial liability. The big corporate scandals of recent years, the ensuing crackdowns on corporate malfeasance and fraud by government regulators and prosecutors, and the threat of sky-high criminal fines and civil judgments have caused D&O insurance providers to place many restrictions on policies. Some have even attempted to rescind policies altogether.

Anyone serving as an officer or director, or considering taking such a position, should make certain a D&O policy is in place and get expert advice — even consider paying for an independent review — on the adequacy of their corporation’s D&O coverage.

Ensure that all information provided to the insurer is as accurate as possible. Outright misrepresentations and mistakes could give the insurer all the ammunition it needs to have a policy rescinded. That’s exactly what insurers attempted in the Tyco and HealthSouth cases and, although those efforts failed on narrow legal grounds, they have been successful in winning rescisions in several other large cases.

There are other important questions to ask yourself. Do you have adequate coverage based on the potential value of any claims? Is your coverage rescindable due to the acts or omissions of others? Do you have the right to select your own counsel? What happens in case of bankruptcy? What are the effects of a merger or acquisition?

In this era of heightened regulatory supervision and shareholder unrest, it is vital to protect yourself, no matter how honest and successful you believe your corporation to be.

William R. Scherer Jr. is managing partner of Conrad & Scherer, which specializes in health care law and complex commercial litigation. Reach him at (954) 462-5500 or www.conradscherer.com.

Vital reforms

Everyone needs to be concerned about the spiraling cost of the Medicaid program and its effects on the budgets of the state of Florida and the country. Every tax-paying business and individual is impacted by the rapidly rising costs of such an expensive government program.

Medicaid is the government program that pays for health care for the poor, serving mostly pregnant women, children, the frail elderly and the disabled whose incomes fall below a certain level. Florida’s Medicaid budget is $14 billion this year, and is predicted to rise to $17 billion next year. The program has grown by 88 percent since 1988 and is expected to account for 60 percent of the entire state budget by 2015.

In response to this impending budget crisis, Gov. Jeb Bush proposed a dramatic overhaul and restructuring of Medicaid. Businesses and individuals, whether they are health care-related or not, need to pay close attention to the upcoming debate and communicate their support of the governor’s efforts to restrain the growth of the program while improving health care and expanding health care choices for the more than 2 million Floridians who depend on Medicaid.

The governor’s plan is designed to empower Medicaid patients to have more control over their own health care. The plan would transform Medicaid from a system of direct government-regulated payments to health care providers for services into one that would pay HMOs, provider service networks and other managed-care networks to develop benefits plans for specific Medicaid recipients. The governor believes that allowing managed-care companies to compete for Medicaid patients will increase access to care and improve the quality of care while holding down costs.

Medicaid patients would be empowered by being able, for the first time, to choose among companies and benefits plans competing for their business. Counselors would be available to help patients choose a health care plan that best fits their needs.

Patients would also be able to opt out of selecting one of the Medicaid plans and use their state-paid premium to shop for plans on the open market.

Another innovation would allow patients to earn enhanced benefits through flexible spending accounts by making healthy lifestyle choices such as not smoking. The enhanced benefits would enable patients to purchase increased coverage for more services.

Many health care systems already have networks in place that could be adapted to the new Medicaid. The North Broward Hospital District, for example, has an integrated delivery network that provides a variety of medical services, such as discounted drug prices and experienced case managers.

Prior to the 2005 legislative session, the governor’s Medicaid proposals and alternatives proposed by others will be the subject of joint hearings around the state by the Florida Senate and House Select Committees on Medicaid Reform. Sen. Lisa Carlton (R-Sarasota) is chair of the Senate committee and Sen. Jeffery Atwater (R-Palm Beach) is vice chair. On the House committee, Rep. Joe Negron (R-Stuart) and Rep. Holly Benson (R-Pensacola) are co-chairs.

Besides Sen. Atwater, members from Broward and Palm Beach counties include Sen. Walter “Skip” Campbell (D-Fort Lauderdale), Sen. Mandy Dawson (D-Fort Lauderdale), Sen. Ron Klein (D-Boca Raton) and Rep. Eleanor Sobel (D-Hollywood).

The Florida Chamber of Commerce commended the governor for addressing the Medicaid issue and added that “health care costs are growing at a rate that is making it extremely difficult for employers and individuals to find affordable options.”

The Medicaid program affects health care costs and access to quality care for everyone. All business leaders and individuals need to monitor this issue closely and tell their senators and representatives to support this important and necessary Medicaid reform initiative.

William R. Scherer Jr. is managing partner of Conrad & Scherer, which specializes in health care law and complex commercial litigation. Reach him at [email protected] or (954) 462-5500.

Buy dirt

Buy dirt.

It’s an interesting expression, one that my real estate partner shares with me, to the point of having a vanity plate on his car stating such. Recently, though, our discussion has been about changing his vanity plate to read “sold out.” That about sums up our South Florida land market — sold out.

Dirt is key to growth in any market, and South Florida has a more limited supply than most. These days, more and more property is being rezoned to accommodate alternate uses. Industrial land is being used for houses, apartments, office and retail. This “sold out” situation has necessitated the drive to move north. Interestingly, while Palm Beach County has experienced modest growth in the last three to five years as a result of the Dade and Broward infill, more notable is the vast growth of the St. Lucie and Fort Pierce markets.

The residential growth in these markets has been amazing, and what follows is the retail to support the people, the office space to work the people and the industrial space to house the goods for the people.

Understanding this, my team dedicated a great portion of last year inventorying the land parcels, big and small, in those markets, and sharing this information with major developers and institutions looking to develop and land bank there. These markets continue to grow, and we continue to update ourselves on that growth, but more important is the trend we see in Palm Beach County.

That market, while possibly being a bit stepped over, has become the more immediate developing market. We see the rezoning to alternate uses becoming prominent, and the availability of what we refer to as “ready to go” land sites — those with entitlements, zoning and infrastructure in place — becoming more rare and more expensive every day.

Still, Palm Beach is poised for growth, faster and more densely than that in St. Lucie and Fort Pierce. The dynamics are here, the people are here and the road systems have been expanding for years, and all of these areas continue to grow. Developers and investors are refocusing their efforts on Palm Beach County as a market that will develop faster than those more northern counties.

That said, many are still buying property in the “growth paths” in those markets and waiting for the development to catch up. Still, Palm Beach is undergoing a renaissance of activity, a growth in the amount of residential, office, distribution and speculative development that doesn’t seem to be slowing. Industry growth will continue in Palm Beach for the next 12 to 24 months.

Florida, particularly South Florida, continues to be a focus for companies as a hub for both international and national businesses. The ports and airports continue to expand, and the areas around those are filling in.

Dade and Broward have virtually no land left, and what is available is priced beyond what developers are willing to pay. The remaining parcels are almost exclusively for owner/users who just have to be there and are willing to pay the price. But moving north is a viable option, as population density decreases, traffic is more manageable and there remains land for speculative development.

Because of the traffic and density issues in Dade and Broward, companies can afford to relocate to Palm Beach because they can travel twice the distance north in the same amount of time they spend driving south. This problem will continue, even as Palm Beach develops to the extreme, adding even more credibility to the markets of St. Lucie and Fort Pierce.

In the not too distant future, South Florida will include all the way to the Fort Pierce market, opening up the southern hub to service north, even out of Florida into Georgia.

Buy dirt? Yes, we think so.

Richard F. Etner, Jr., SIOR, is senior director of Cushman and Wakefield in Fort Lauderdale and is part of a team that includes Chris Metzger, senior director, and Sky Grodon. Reach him at (954) 771-0800.