Outlook – Lawsuits and lawyers like this? No place but Texas
A Texas personal injury lawyer has found a new and highly ingenious way to take a big byte out of the laptop computer industry: File a phantom class-action lawsuit for consumers over a problem they’ve never encountered.
Don’t laugh, especially if you’re in the market for a laptop computer. Copycat lawsuits have been filed against five other companies, and price increases may be just around the corner.
Wayne Reaud, who helped represent Texas in its lawsuit against Big Tobacco, managed to extract a $2.1 billion settlement from Toshiba Corp., after he filed a $9.5 billion lawsuit on behalf of 5 million consumers.
Toshiba, the world’s leading maker of laptop computers, decided to settle the lawsuit in October rather than take the risk of losing a bigger bundle in a Texas courtroom.
As a result, Reaud and a handful of lawyers at the Beaumont firm of Orgain, Bell & Tucker will divvy up $147.5 million in contingency fees.
Toshiba agreed to give cash rebates ranging from $210 to $443 to an estimated 1.8 million owners of Toshiba notebook computers bought since March 5, 1998, and to make discount coupons available to an additional 3.2 million owners.
The lawsuit was filed last March in federal court in Beaumont for two lead-plaintiffs who own Toshiba laptops – Ethan Shaw, a Beaumont lawyer, and Clive Moon, who lives in the Dallas suburb of Plano.
The men, who received $25,000 each from the settlement, claimed that the design flaw might, under extreme conditions, cause corruption or loss of data, when the laptops transferred data to a floppy disc.
Significantly, neither of the men claimed to actually have suffered any lost data or other damage as the result of the alleged flaw.
The genesis of the lawsuit was Wayne Reaud’s chance discovery that an IBM engineer in the 1980s found a logic flaw in the chip that controls the floppy drive in Toshiba’s laptop.
Japan’s NEC Corp., which makes the chip, said it has never received a single consumer complaint about the alleged defect.
Toshiba said none of its customers had ever complained until last March when Shaw and Moon marched into the Beaumont courtroom. The company also noted that it was never able to duplicate the loss of data attributed to the flaw during extensive laboratory tests.
Since the class-action lawsuit literally was much ado about nothing, why you may ask, didn’t Toshiba defend itself against this latest example of plaintiff piracy?
Toshiba’s president, Taizo Nishimuro, said his firm simply didn’t want to take a chance on the type of justice available in Texas courtrooms, where personal injury lawyers have been known to emotionally manipulate uneducated juries for huge damage awards.
If Toshiba had lost a jury trial, it could have cost the company more than $9.5 billion – enough to jeopardize its future.
Toshiba’s capitulation in what many legal observers regard as an easily defensible case was the legal equivalent of throwing blood-soaked meat into the waters of the Gulf of Mexico. The sharks moved in almost before the sound of the splash faded.
Scores of personal injury lawyers, including a number from Texas, immediately filed ‘copycat’ class-action lawsuits against five other laptop computer manufacturers that use or may have used the NEC floppy control chip.
If the most avaricious elements of the plaintiffs’ bar manage to bully other laptop manufacturers into submission as easily as they did Toshiba, computer prices are likely to skyrocket.
That would be great news for the Wayne Reauds of the world, but bad news for Joe and Jane Six-Pack who often have to work two jobs to send their kids to college.