Resolving cases before legal expenses pile up certainly isn’t a novel corporate strategy. But over the past decade, few companies have pushed settlements for product liability claims as aggressively and systematically as Toro. The $1.5 billion business uses a slick, highly choreographed approach that includes nonthreatening paralegals, experienced settlement counsel, and mediators familiar with Toro’s preference for early case resolution. The program has been in place since 1991, and Toro says it will have saved $100 million in litigation costs by mid-2005.
“Toro is the pioneer of the aggressive settlement strategy,” says Taysen Van Itallie, an associate general counsel at Johnson & Johnson. Five years ago, J&J began incorporating Toro’s “settlement-first” methods into its own litigation approach, in an effort to save legal costs.
Toro has cut the cost of handling each claim it receives by some $80,000, from $115,000 to only $35,000 ?a figure that includes lawyers’ fees, verdicts, and payouts ?according to “product integrity manager” Andrew Byers. The head of Toro’s settlement program, Byers boasts that his company hasn’t “set foot in a courtroom” on a product liability claim since 1994.
Toro’s program has a few loyal followers. J&J, E.I. du Pont de Nemours and Company, Georgia-Pacific Corporation, and General Electric Company have adopted settlement-friendly litigation programs, that are, in part, based on the Toro model. According to Elpidio “P.D.” Villarreal, GE’s counsel of litigation and litigation policy, “A company that’s still pushing everything to trial is suffering from a serious lack of imagination. Litigation heads stuck in that mind-set should be ashamed of themselves.”
But given that Toro’s program has been around long enough to show significant cost savings, why haven’t more companies, especially Toro’s competitors, adopted a mass settlement strategy? Toro’s rivals refuse to disclose similar per-case statistics, which makes it difficult to compare the company’s program with more litigious approaches. But lawyers at other equipment manufacturers offer a variety of reasons, some logistical, others more philosophical, as to why they haven’t adopted Toro’s approach. They say that, as a practical matter, such a strategy wouldn’t work because most of their cases involve many defendants with complex fact patterns. For instance, when Cummins, Inc., a Columbus, Indiana ?based engine manufacturer, gets sued over an alleged malfunction, “we often see a whole slew of codefendants and a whole bunch of finger-pointing,” says Marya Rose, the company’s general counsel. “You can’t just run out and settle.”
Other chief legal officers simply don’t want to be seen as an easy mark for plaintiffs and their lawyers ?and insist on backing up their products, whatever the cost. “If you make products that you feel are well made and safe, your instinct is to stand behind them when others attack them,” says James Buda, the general counsel at Peoria, Illinois ?based Caterpillar Inc.
Toro’s Byers scoffs at the idea that an aggressive settlement policy creates a “soft target” for enterprising plaintiffs lawyers. He says that from 1986 to 1991, the five years prior to the start of its settlement approach, Toro received 640 injury-related claims. From 1991 to 1996 and from 1996 to 2001, that number actually declined, to 536 and 404, respectively. “Look, you can stand on principle all you want, but we’ve saved millions handling claims this way,” says Byers.
Still, some observers worry about the ethical implications of meeting with victims before they have lawyers, especially in the aftermath of a disfiguring accident. “I can’t imagine that the plaintiffs are truly getting what they deserve,” says Laura Nader, a professor of law and anthropology at the University of California, Berkeley.
Nader, who has written scholarly articles on the unfairness that can result when parties settle disputes, says, “The [Toro] plaintiffs are giving up one of their most fundamental rights ?the right to our court system.” But Stephen Gillers, a legal ethics expert at New York University School of Law, retorts, “These plaintiffs are free to walk away at any time; they’re not getting [coerced] into anything.”