Archive for January, 2011


Companies face bigger jury verdicts

(From Bloomberg) The stalled economy and a surfeit of negative corporate news, such as the BP Plc oil spill, sudden-acceleration suits against Toyota Corp. and bank foreclosure practices, has fueled public anger, affecting lawsuits against companies in unrelated cases across the country, legal experts said.

Ten of the 50 largest jury verdicts last year came in product-defect cases, compared with five in 2009 and one in 2008, according to data compiled by Bloomberg. There were 15 such verdicts of $25 million or more in 2010, compared with seven in 2009.

The largest jury verdict of the year of any kind was for $1.3 billion in a copyright-infringement action against SAP AG. That was also the largest copyright jury award in U.S. history, almost 10 times higher than the second-biggest, according to Bloomberg data.

The top product-defect verdict was for $505.1 million against Teva Pharmaceutical Industries Ltd., the Israeli drugmaker, and its U.S. distributor, in a Nevada case over a claim that packaging of its anesthetic propofol created a risk of contamination and led to the plaintiff’s hepatitis. Three of the top 10 were in smokers’ suits against tobacco companies, led by a $152 million award against Lorillard Tobacco Co. in Boston in December.

The total of the largest five product-liability verdicts was $1.1 billion, up from $620 million in 2009 and $408 million in 2008. The 77 percent growth from last year accelerated a trend from the previous year, when the biggest five product verdicts rose 52 percent from 2008.

There hasn’t been any radical change in product-liability law to cause this change.  Prejudice today “is more subtle and not always conscious,” he said. “It’s a blue-collar feeling that corporate America doesn’t really care, and that’s difficult to eliminate in voir dire,” the jury selection process.

Outcomes in cases still “in the pipeline” may reflect the recession’s impact, said Carl Tobias, a University of Richmond law professor in Virginia.

“What’s happened to the economy could well make people distrustful of big entities, particularly corporate ones,” Tobias said. “There may be a fair amount of exposure going forward.”

There may be another reason for the rise in large product- defect verdicts, said Will Kemp, a lawyer who was part of the team that won the $505 million jury verdict against Teva.

It’s “cheap defendants and cheap insurance companies,” Kemp said in an interview.

“The defendants and the insurance companies are holding onto their money and they’re not settling the cases,” he said. “When the recession started, everyone started to hold on to their money. They’re making people try more cases.”

Gene Egdorf, an attorney who won a $54 million product- defect verdict in January 2010 against Caterpillar Inc., the world’s largest maker of construction and mining equipment, agreed.

“It’s getting tougher and tougher to get cases settled,” Egdorf said. “The companies may be hoping for better results on appeal.”

Many of the verdicts of 2010 may be reversed or reduced on appeal, or in post-trial motions, as typically happens to the biggest jury verdicts in product-liability suits.



show me the assignment! Mass Supreme Court stops foreclosures.

The Massachusetts Supreme Court recently ruled against Wells Fargo and U.S. Barncorp in two foreclosure cases in which the loans were packaged into securities.  The Supreme Court upheld a decision to void two foreclosure sales because the owners of the loans could not establish that the loans had been assigned to them.  Both of the loans had been assembled into mortgage-backed securities sold to investors.

This is an example of “show me the paper” defense. Cases in California where homeowners have attempted to establish a defense that the party foreclosing on their home could not produce the original note have not been successful.

Individual loans often are sold to an investor, with the new owner’s name left blank in loan documents to limit paperwork hassles as the loan subsequently changes hands before being combined with other loans into mortgage-backed securities.

Justice Robert J. Cordy concluded in a concurring opinion that the two banks showed “utter carelessness” when they “documented the titles to their assets.”


Bankruptcies up in 2010.

Former NBA number 1 pick Derrick Coleman filed for bankruptcy in 2010.

The number of personal bankruptcies exceeded 1.5 million last year,  as unemployment rates and depressed home prices drove more households to seek court protection.

Personal bankruptcies ticked up 9% from 2009, the highest level since a revamp of the law took effect in 2005, and rose 25% in California.

The other areas of increase were the Southwestern states and the Southeast.  In Arizona, they rose nearly 24%.

Some experts think 2011 could see the beginning of a downtrend in bankruptcy filings as the economy improves and consumers borrow less. “Over the course of the year, I think bankruptcies will be going down,” said Robert Lawless, a University of Illinois law professor. “The reason for that is borrowing’s down…there’s less of a reason for people to take the legal step of filing for bankruptcy.”  The unemployment picture has not improved though in 2010 so although people may be borrowing less, they aren’t making more.

And it wasn’t Joe Six Pack that was filing for bankruptcy in 2010.  Consider:

  • Derrick Coleman (Former #1 pick of the NBA draft) filed chapter 7 bankruptcy in March 2010, saying he owed his creditors nearly $4.7 million. He listed assets of just $1 million.
  • Toni Braxton (R&B singer, who has sold over 40 million albums) filed chapter 7 bankruptcy in October 2010. This was her second filing, as she previously filed in 1998. She listed debts of between $10-$50 million and assets of between $1-$10 million. She stated she would like to keep her home, which she owes $1.6 million but is worth only $1.2 million. She wants to work out a modification.
  • Antoine Walker (Former NBA All-Star) filed chapter 7 bankruptcy in May 2010. Even though he made $110 million in his career, he listed his assets at only $4.3 million.
  • Mark Brunell (Former NFL Pro-Bowl quarterback) filed Chapter 11 bankruptcy in June 2010. He earned over $50 million during the past 10 years, but failed real estate investments forced him to file.
  • Dermontti Dawson (Former NFL Pro-Bowl offensive lineman) filed Chapter 7 bankruptcy in July 2010. He listed his assets at $1.42 million and his debts at $69.66 million.

See our website at




loan modification not working? Chapter 13 lien stripping may work.

Loan modifications take forever or may even get denied for unknown reasons. Meanwhile the credit card bills, medical bills and other obligations become overwhelming.  You have a second mortgage or home equity line in excess of the value of your home, and your home is underwater on your first mortgage.  A Chapter 13 bankruptcy may allow you eliminate or “strip” your second mortgage or home equity line of credit.

A lien strip allows a Chapter 13 debtor to use the Bankruptcy Court to transform a secured second mortgage or home equity line of credit into an unsecured debt, thereby eliminating a monthly payment and reducing total debt by a great amount.

I recently read a story about a family in Sacramento that bought their house for $250,000 3 years ago and now a similar house is selling for $80,000 in their neighborhood.  This isn’t an unfamiliar tale in during this economic downturn.  Therefore, say their home is worth $100,000.  Assume they have a first mortgage of $150,000 and a second for $50,000.   Their debts have become overwhelming and they explore the option of filing for bankruptcy.

In this case, the family could ask the bankruptcy judge to “strip away” the second mortgage debt since all of the value in the  home is encumbered by the first mortgage.  If the first lender were to foreclose, if bankruptcy was not filed, the second lender’s lien would be wiped out.  As such, the second lender is unsecured.  The Bankruptcy Code applies the same logic and allows a judge to strip the de facto unsecured lien.

Lien stripping only works when:

  • you are a debtor in a Chapter 13 case
  • the fair market value of your house is less than the balance due on your first mortgage

Now, if you’re the lender on the second mortgage or HELOC you’re going to vigorously oppose any such motion to make your lien unsecured.  The main tactic for the second lender would be to get a high valuation of the property.  So the debtor will have to, more than likely, pay for an appraisal of the property because no doubt the lender will come in with a high appraisal.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 35 other followers

The content found on the financialfreshstart Blog is not legal advice and is purely for informational purposes. The Zarcone Law Firm does not guarantee the accuracy, integrity or quality of submissions. The information provided by the bloggers on this site may not represent the opinions of the Zarcone Law Firm or its affiliates. The information contained herein is not a substitute for the advice of an attorney.

lawyer blogs

Avvo - Rate your Lawyer. Get Free Legal Advice.

Tweets from The Zarcone Law Firm