When a railroad tank car explosion forced 1,000 residents of the New Orleans neighbourhood of Gentilly to evacuate their homes for 36 hours in 1987, the incident attracted little attention outside Louisiana. After all, there were no deaths and the residents did not suffer any serious damage or injuries. But 10 years later, after a New Orleans jury awarded US$3.4 billion in punitive damages against five companies found to be at fault, the case, In re New Orleans Train Car Leakage Fire Litigation, No. 97-CC-2547, suddenly captured the eye of the legal community and national media, earning itself the nickname 'The Great New Orleans Train Robbery'.
At first glance, the inflated award appears little more than the result of an unbridled jury, providing ammunition for US tort reformers' campaigns to cap punitive damages and restrict class action lawsuits. On closer examination, the case illustrates an emerging trend in mass tort litigation to use class bias and racial prejudice to augment traditional tort theories.
The attorney representing the plaintiff class of over 8,000 Gentilly residents made transparent his pleas to juror sympathy. He argued to the all-black jury that the accident was the result of 'environmental racism'. The explosion occurred when a tank car leaking butadiene, a petroleum byproduct, ignited while sitting on a railway track. The resulting blast sent thick, dark smoke pouring into the adjacent poor, mostly black neighbourhood of Gentilly. According to the plaintiffs' attorney, the defendants exercised less care in maintaining the tank car than they would have if Gentilly had been a white, wealthier neighbourhood.
The plaintiffs' attorney also appealed to class biases, asking the jurors to teach the deep-pocketed corporate defendants a lesson. The apportionment of the damage award attests to the effectiveness of the argument. While assigning only 15% of the fault to CSX, the largest defendant in the case, the jury ordered the corporation to pay 75% of the punitive damages. CSX owned the track where the tank car had been parked, making the company's involvement in the accident peripheral. In fact, the National Transportation Safety Board investigated the incident and exonerated CSX.
By emphasizing the defendants' wealth to a New Orleans jury in a state court, the plaintiffs' attorney could be confident of having the desired effect. A recent study showed that juries in New Orleans on average return awards four to eight times larger than their suburban counterparts. Several legal experts have hypothesized that the discrepancy relates to differing degrees of affluence. In cities such as New Orleans, the median income level tends to be lower than in the surrounding suburbs, making it more likely that city juries will be worse off economically than suburban juries and more likely to punish rich defendants.
Before the state court certified the New Orleans case as a class action, a few individuals had already filed suit in a federal court, which draws from a jury pool including the more affluent suburban residents. Where the New Orleans jury awarded US$3.4 billion in punitive damages to the class and an average of US$100,000 in compensatory damages to those class members whose individual claims have already been tried, the federal jury awarded the non-class plaintiffs only US$1,000 each in compensatory damages, and the federal court disallowed any punitive damages.
While personalizing a case for jurors is not a new idea, the techniques used by plaintiffs' attorneys in mass tort cases are new. As in the New Orleans railway case, plaintiffs' attorneys have begun to import civil rights rhetoric into the mass tort arena. In another example, a predominantly black neighbourhood in Houston is suing Chevron Corporation for US$500 million, alleging that their neighbourhood sits on land once used as an oil pit and that the contamination was intentionally hidden from the developer who planned to build housing for blacks on the property.
In other cases, plaintiffs' attorneys have gone so far as to give the jurors a 'stake' in the litigation. For example, state attorneys general have initiated lawsuits throughout the US against the tobacco industry, seeking to recoup healthcare costs related to the treatment of cigarette-related illnesses. Plaintiffs' counsel have attempted to capitalize on the fact that, as taxpayers, jurors have an interest in the outcome of these cases. Similarly, in a recent lawsuit filed against the tobacco industry in the Marshall Islands, the relief sought in the complaint includes funding for "the construction and operation of modern state of the art health care hospital facilities" for the Islands. A more flagrant example is a Texas plaintiffs' lawyer, who advertises before trial that if he wins the case he will donate part of his earnings to the community.
With their eyes opened by the successes of the asbestos, breast implant and similar litigations, and with legislative reform diminishing opportunities in the securities field, plaintiffs' lawyers are turning increasingly to mass tort cases against American and foreign corporations. The cases are typically class actions with nominal plaintiffs financed by the lawyers who hope to recover their costs and substantial fees (usually 25%-33% of the recovery) from the winnings.
Finding sympathetic judges and juries in these cases is an essential part of the plaintiffs' strategy. Because the cases are usually class actions against companies doing business nationwide, the plaintiffs' lawyers are able to pick a forum favourable to their case. For this reason, the cases are not brought in the usual commercial litigation forums such as New York, Chicago and San Francisco, and almost never in the forum of the defendant. Rather, plaintiffs' lawyers increasingly file their cases in small towns, where large litigations have become a cottage industry and where the opportunity to enrich the community with present and future cases is not lost on the judge or the jury. During the litigation of a breast implant case in Beaumont, Texas (a small town notorious for its large verdicts), 50 lawyers took over the town's three main hotels. Everyone in town knew who the visitors were and why they were there.
Texarkana, a town of 63,000 on the border between Texas and Arkansas, experienced a similar invasion of lawyers for Texas' lawsuit against the tobacco industry. One newspaper article reported that the trial was expected to pour US$7 million into the Texarkana economy. The attorneys on both sides of the case leased office space, rented entire floors of hotels, hired caterers and reserved rental cars.
While these cases represent a trend, there are counter-currents. Louisiana enacted a tort-reform statute last year that would have precluded punitive damages had the law been in effect at the time of the accident in the New Orleans railway case. In addition, the Louisiana Supreme Court recently set aside the damages award (although not on the grounds of its excessiveness) on the technical grounds that no judgment for damages could be entered until each plaintiff's entitlement to compensatory damages had been determined. Resolution of the individual claims for compensatory damages will take time, and motions are pending to cut the punitive award altogether.
John Kerr and Megan Davis
Simpson Thacher & Bartlett, New York
© 2021 Euromoney Institutional Investor PLC. For help please see our FAQs.