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Wednesday, April 22, 2015

Texas Supreme Court: Corporate Trade Secrets Valued Over Consumer Safety?


Texas Supreme Court looks at curbing lawyers' right to share secrets

By SUE AMBROSE  @sgoetinck 
Staff Writer
Published: 18 April 2015 11:27 PM
Updated: 21 April 2015 03:47 PM

General Motors CEO Mary Barra swore under oath to Congress that her embattled company would change and focus on the safety of its customers.
“Today’s GM,” she said, “will do the right thing.”
The promise, made a little more than a year ago, came after company officials admitted they failed to correct faulty ignition switches now linked to more than 80 deaths.
As Barra spoke, GM was asking the Texas Supreme Court to undo a decades-old legal decision that many attorneys say helps hold big companies accountable for unsafe products. That ruling allows attorneys to share company secrets with other lawyers who have similar cases.
In the David vs. Goliath legal battles against big corporations, the ruling has given more punch to attorneys pitted against the GMs of the world. Sharing information allows lawyers to cut costs and compare notes. Undoing the ruling could make suing more difficult.
“It’s about access to justice,” said Jim Wren, a law professor at Baylor Law School in Waco. “Anything that significantly increases the cost for attorneys makes it harder for consumers to find attorneys who are willing to take their case.”
GM says the fight is about protecting trade secrets from leaks to competitors.
The company’s lawyers declined to be interviewed. But when responding to written questions, the company said, “GM considers trade secrets valuable company assets that require, given competitive sensitivity, robust protection from disclosure.”
Others say the fight is about making it harder for regular folks to challenge companies in court. Lawyers cite last year’s revelation that GM quietly settled lawsuits related to lethal defects in ignition switches as an example of the ways companies will try to protect themselves. That scandal landed company CEO Barra in the hot seat before Congress.
The ability to share company information with other attorneys who have similar cases can strengthen cases and counteract corporate malfeasance, lawyers say. And in the case before the Supreme Court, no one disputes that the materials GM was concerned about were trade secrets.
But, “this is not about the right of a legitimate business to protect a trade secret,” said Tyler attorney Randy Roberts. “It’s about corporations using the cover of trade secrets to hide important consumer safety information. I hope the Texas Supreme Court sees the distinction and comes down on behalf of consumers.”
GM’s fight over the right to share — with the Supreme Court of Texas deciding the winner — had the potential to rewrite rules that govern lawsuits against big companies. But a month before the high court was to hear GM’s case, after The Dallas Morning News began asking questions, the lawsuit that set up the issue was settled, leaving the court nothing to rule on.
Legal experts say the issue will be back. Since 2004, the Supreme Court has agreed to consider at least three cases in which companies were unhappy with how judges were following the court’s earlier decision on sharing between attorneys. Each time, the companies and those who sued them resolved their disagreements before the high court could make a decision.
“The fact that the Texas Supreme Court has shown interest in these cases several times indicates the court would like to revisit the rule,” said Austin attorney Lisa Hobbs, representing the Bolaños family. Companies “like GM know this and this will encourage them to take the issue back up if it comes up in their cases. Right now they know they have a friendly court.”
GM’s journey to the Supreme Court started with an accident nearly five years ago on a two-lane road in a remote stretch of South Texas.
On a warm Sunday night in May 2010, Elias Bolaños and a co-worker were southbound on State Highway 16 to Zapata, where Bolaños lived, after a long day of work for an energy company.
Bolaños, 52, was in the right front passenger seat of the 2006 Chevrolet Silverado pickup, wearing his seatbelt. Traveling at 80 mph, the driver dozed off and lost control. The pickup rolled several times before it slid and stopped, wheels up.
The cab’s roof caved in so far that it was level with the hood. The driver and the witness later told authorities that they could hear Bolaños moaning from the flattened truck. A volunteer firefighter told The News Bolaños was so compressed that his chin was pushed against his chest.
An autopsy found Bolaños had no other life-threatening injuries and concluded he suffocated.
In 2012, Bolaños’ wife, Martha, son Elias Jr. and daughter Edlin sued GM and others, alleging the pickup wasn’t sturdy enough to protect those inside. Unlike in most four-door vehicles, the truck’s front and rear doors were designed to open facing each other. Without a pillar between the two doors, at that spot only the door frames support the roof.
All denied wrongdoing. The seller of a rack behind the truck’s rear window settled. The case against the employer is pending.
In the lawsuit against GM, the Bolaños family’s attorneys asked the automaker to turn over details related to the truck’s design.
But GM had conditions: The Bolañoses’ attorneys would have to return the materials when the case ended. And they couldn’t share the design data with other attorneys.
The company argued that the information was proprietary and valuable. “GM has spent millions of dollars and invested thousands of hours so they can develop this,” GM attorney Daniela Gonzales Aldape said at a court hearing. Even most GM employees don’t have access to the detailed electronic blueprint, she said. “That’s how highly guarded this information is.”
But the Bolañoses’ attorneys said they should have the right to share that material, citing a 1987 Texas Supreme Court ruling.
With the two sides unable to agree, the issue would eventually end up back before the Supreme Court. The court would have the opportunity to undo the ruling made almost 30 years earlier. That case also involved GM.
In 1985, San Antonio judge David Peeples was presiding over a lawsuit by a man burned in a rear-end collision of a 1982 GM Buick. The lawsuit alleged the fuel system was poorly designed.
David Perry, the man’s attorney, said in an interview that while preparing for the trial, GM “produced a lot of documents that we thought were going to be important” for a lot of other cases.
After Peeples forbade the sharing of the documents, the Supreme Court ruled in 1987 that he had “abused his discretion.” The court noted the benefits of sharing information:
If lawyers can compare notes, this can force companies who are sued to be honest and give the same information to every lawyer who asks. When lawyers share, attorneys don’t have to prove over and over, in similar cases, that they deserve the same information that other lawyers have already received. The courts are more efficient.
The Supreme Court also said it’s possible to protect trade secrets while allowing them to be shared. A trial court could restrict sharing to attorneys with similar cases and forbid releasing trade secrets to business competitors.
The decision set the standard for such sharing in Texas. It is also often cited by other courts across the country when they weigh whether to allow attorneys to share company information obtained during the course of a lawsuit.
That 1987 ruling set “a very important precedent,” said Dustin Benham, a law professor at Texas Tech University School of Law in Lubbock. “Those who oppose sharing would love to undo it because it would have nationwide implications.”
When GM went back to the Supreme Court over sharing in the Bolaños case, the company’s argument hinged on the notion that the electronic blueprints are trade secrets and thus proprietary. GM argued that sharing in the age of the Internet has made the danger of spreading proprietary business information bigger than ever.
“Modern technology allows for the anonymous, immediate, global and irretrievable sharing of data,” GM wrote in a brief to the Texas Supreme Court. When the court allowed sharing in 1987, the court “did not contemplate a situation where trade secrets could be irreversibly disclosed with the click of a mouse.”
Asked to cite examples in which a trade secret had leaked during a lawsuit where lawyers had been granted the right to share the trade secret with other lawyers, GM offered The News six examples. The News again asked, specifically, whether the leaks occurred because lawyers had exercised their right to share the trade secrets with other lawyers. GM told The News to do its own research.
The News obtained court opinions, original documents and other summaries of the cases. None matched the scenario GM told the court it was concerned about.
The Bolañoses’ attorneys did not question GM’s assertion that the computer data represented trade secrets. But engineers say the computer blueprint of the pickup model isn’t as secret as GM claims. For example, automakers and parts manufacturers can reverse engineer a competitor’s vehicle by taking it apart and inspecting it.
Although it’s not cheap, it is possible for a competitor to create the type of computer blueprint GM wanted to protect. And in the Bolaños case, the Chevrolet Silverado model had already been out of production for five years when the suit was filed.
“If the competitors had wanted it, they would have already created” a blueprint, said Keith Friedman, a vehicle safety engineer and expert witness with offices in Austin and California.
A GM employee even hedged the issue in a sworn affidavit filed early in the case. The data “may” contain information “which cannot be obtained by reverse engineering,” she said.
The News asked GM about that choice of words. GM responded that their data “typically” contain that type of information.
GM also argued that another Supreme Court ruling needed to be considered. In 1998, the court ruled that a tire company didn’t have to turn over a secret rubber formula because the opposing lawyers hadn’t shown they needed it to prove their case.
GM reasoned that if the Supreme Court said then that lawyers should only get information they needed to prove their case, they should not be able to share that information with other lawyers to prove other cases.
Hobbs, Bolaños family’s attorney, argued that the 1998 ruling didn’t apply. When the Texas Supreme Court sided with the tire company, Hobbs noted, it didn’t say it was overturning the earlier ruling that allowed sharing. If it had intended to, it would have said so, she wrote.
Lawyers who take them on say the big companies aren’t really worried about the leaking of trade secrets. They say the companies are trying to make suing more difficult.
“It’s not about trade secrets, it’s about avoiding liability,” said Daniel DeFeo, a Missouri attorney who has tried cases in Texas. “All they’re trying to do is hamstring a plaintiff who has limited resources to not being able to sue on the same level. They’re just being bullies.”
GM disputed that notion, saying the “attorneys’ speculation is simply that — speculation,” the company wrote to The News.
Lawyers who have sued automakers over alleged defects say they need vehicle design data to expose when a company could have made a vehicle safer.
“Once an attorney like myself has their … engineering files, we can simulate the actual crash conditions with and without an alternative design and prove the case,” said Dallas attorney Lee Brown.
Jaime Gonzalez Jr., the attorney for the Bolaños family from the beginning of the case, told The News that without the ability to share that kind of information “then the only thing we can do is simply take it on faith that General Motors has truly produced everything that they were ordered to produce.”
After the Bolaños case was originally filed, GM did give the computer blueprint to the family’s attorneys. When the Supreme Court became involved, a temporary order was issued forbidding any sharing with other attorneys. As part of the settlement, the Bolañoses’ attorneys agreed to return the materials.
The 1987 ruling that allowed lawyers to share was made at a time when the state’s Supreme Court was dominated by Democrats.
Because the court is now dominated by conservative Republicans, many lawyers think the time remains ripe for another push to limit sharing.
“They’re taking it up to a Supreme Court that’s got a track record for protecting corporations and giving them what they ask for,” said Houston attorney Erin Copeland.
If the court gets a similar case again, lawyers see several options:
The court could completely deny a company’s request to restrict sharing, and reaffirm the 30-year-old ruling. Legal experts say this is the least likely outcome.
The court could instruct judges to decide the issue on a case-by-case basis, giving them guidelines for deciding whether trade secrets can be shared.
The court could now say it’s wrong for judges to ever allow attorneys to share trade secrets.
Restricting sharing would make pursuing lawsuits more costly “because each lawyer has to go through the process, essentially reinventing the wheel each time,” said Wren, the Baylor law professor. Attorneys could be more reluctant to sue.
Lawyers predict companies would also try to designate more types of information as secret.
“You’re going to shift the battle to whether or not something is trade secret,” said Hobbs, the Bolaños attorney. Those suing will have to spend more time and money fighting those claims.
As the Supreme Court was to hear the GM case, it had gained national attention from groups that represent the interests of companies who are frequent targets of product liability lawsuits.
Two national groups that represent some of the biggest companies in the world — including makers of automobiles, oil, tobacco, tires and pharmaceuticals — voiced their support for GM’s point of view.
The Product Liability Advisory Council and the Alliance of Automobile Manufacturers both wrote lengthy legal arguments and sent them to the court. Wallace Jefferson, former chief justice of the Texas Supreme Court, authored the brief for the automobile manufacturers.
The Texas Association of Defense Counsel — a group of lawyers who defend their clients against lawsuits — also supported GM.
Merely having the issue pending in front of the high court has affected other lawsuits.
Other car companies have also been seeking court orders to prevent lawyers from sharing certain information with other lawyers. Attorneys who take on big companies sometimes agree to such arrangements despite the 1987 precedent because “Texas is not the place where you want that issue to go to the Supreme Court,” said Chip Martens, a Corpus Christi attorney.
Houston attorney Jeffrey Raizner said that while the GM case was pending, an insurance company tried to use it to get its way in a Dallas courtroom.
Raizner was suing the company, and it didn’t want him to be able to share guidelines on how insurance claims were handled. The insurance company said the guidelines were trade secrets.
“Let me ask you something,” Dallas Judge Ken Molberg said at a hearing. “It is very, very common that information is shared in other cases and even cases like this in other jurisdictions. Why is this any different?”
Attorney Charles Frazier, who works for the same firm as Jefferson, told the judge about the GM case. If Molberg approved the sharing of the insurance guidelines, a higher court might eventually overturn the judge’s decision.
Molberg allowed Raizner more time to investigate why the guidelines wouldn’t qualify as trade secrets. But he also issued a temporary court order forbidding Raizner from sharing them. The case is ongoing.

TIMELINE: Texas Supreme Court looks at curbing lawyers’ right to share secrets
For years, companies have been trying to keep attorneys from sharing their trade secrets with other attorneys handling similar cases. The Texas Supreme Court decided in favor of such sharing in the 1980s. The justices have since accepted cases that would have allowed the court to reverse that ruling, but each case was resolved before it could make a decision.
April 15, 1983: Manuel Garcia Sr., wife Debra and son Manuel Jr. and Richard Garza are riding in a 1982 GM Buick when the car is struck in the rear and bursts into flames. Only Manuel Garcia Sr. survives.
Jan. 21, 1985: Garcia sues GM in a San Antonio court, saying the Buick’s fuel system was defective and unreasonably dangerous.
Nov. 26, 1985: Judge David Peeples signs an order that prevents Garcia’s lawyers from sharing information they obtain from GM with other lawyers. Garcia’s lawyers later protest.
July 1987: The case ends up at the all-Democrat Texas Supreme Court, where the justices’ campaigns have been funded heavily by trial lawyers, who represent people in lawsuits against big companies. The court rules 8-1 that Peeples erred when he signed the order. The ruling said it is possible to allow lawyers to share information obtained from companies while still protecting trade secrets. The ruling set a precedent in Texas that lawyers for victims say makes filing lawsuits easier because lawyers can share strategy and cut costs.
November 1988: Three Republicans are elected to the Texas Supreme Court, marking the start of the court’s swing to the right. They are backed by corporate, medical and insurance interests. By 1999, all nine justices are Republican.
Dec. 2, 2004: The Supreme Court agrees to consider the first of three challenges to its 1987 ruling that allowed lawyers to share information obtained from companies. They accept similar cases in 2010 and 2012, but all three cases are resolved before the Supreme Court can rule.
May 16, 2010: Elias Bolaños Sr. dies on State Highway 16 near Zapata, Texas, after the GM Chevrolet Silverado pickup he is riding in rolls over, crushing the roof.
April 12, 2012: The Bolaños family sues GM, saying the truck’s design was defective and allowed the roof to cave in.
July 10, 2013: Over GM’s objections, a Zapata County judge allows the Bolañoses’ lawyers to share company information with lawyers who have similar cases. GM protests, and the case heads toward the Texas Supreme Court.
Aug. 22, 2014: The court schedules arguments in the case for Nov. 6, 2014.
Oct. 3: The Bolaños family settles with GM. The Supreme Court will not hear the case. Many believe a corporation defending itself in a lawsuit will bring the issue before the high court again soon.


SOURCE: Dallas Morning News research

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