How to Not be The Last Man Standing

1. How to Not be The Last Man Standing In a Products Liability Lawsuit

2. Presenters • Nick Brown, CEO, Global Aerospace, London, England • Co-lead underwriter of the Aircraft Builders Council, (ABC) in London, England • Gary Fitzpatrick, Partner, Fitzpatrick & Hunt, Collier, Pagano, Aubert, LLC • Lead Counsel, Aircraft Builders Council (ABC) • Rick Roberts, Ensign-Bickford Ind. • RIMS Board of Directors • President, Board of Trustees of the ABC

3. Today’s Objectives • Discussion of a case study on products liability • Fiction but based on real cases • Dramatization and then analysis of what went wrong • Lessons learned to make sure your company is not caught short when sued for products liability • Don’t want to be the “Last Man Standing” • May or may not want to be the second to last as well

4. flying you to the hidden Pelagosia PELAGOSTOS ISLANDS, Oceania

5. DETROIT, Michigan DETROIT, Michigan

6. DALLAS, Texas

7. CHICAGO, Illinois

8. HYDRAULICS, INC. CLEVELAND, Ohio

9. LOS ANGELES, California

10. Fritz & Smith LLP NEW YORK, New York

11. Supersonic SYNDICATE 7534 LONDON, United Kingdom

13. Scenario • Breaking News – Plane crash in Pelegostos Islands –all 74 on Board are killed • Bigjet 500 operated by Air Gostocrashed in a lagoon and is a total loss • Passengers • 68 Passengers • 3 from Singapore, one with an address in Texas • 1 from Australia • 4 French tourists • 6 crew members (all from Pelegostos Islands)

14. Preliminary Facts • At first - the cause of the accident is unclear • Witnesses report having seen the pilot and co-pilot drinking in a bar near the airport the night before the flight • The Pelegostan Air Safety Board takes control of the investigation

15. The First Year After the Accident • Law suit has been filed in Texas Court • 72 decedents name the following in the lawsuit: • BigJet • Unthreaded • Dated • Zeta • Aerovideo • The lawsuit alleges unspecified aircraft design issues and product failure • BigJet files an FNC motion – DENIED!!

16. Litigation Process • Plaintiffs race to the court house • Wide net used to get to even smallest component manufacturer(s)

17. United Airlines Sioux City Accident Litigation • Defendants • United Airlines • McDonnell Douglas • General Electric • Alcoa • Titanium Metals, Inc. • Reactive Metals, Inc.

18. Litigation Process • Plaintiffs race to the court house • Wide net used to get to even smallest component manufacturer(s) • Litigation holds • Electronic discovery responsibilities • Complete product history from original design through service history • Relevant contracts – customers, OEM, vendors, suppliers, hull claim

19. Two Years Post Accident • Pelegostan Air Safety Board report is inconclusive – broadly exonerates the pilots and airline and points to possible malfunction of the aircraft • NTSB report refutes evidence of malfunction and concludes probable cause was incapacity of pilots due to alcohol consumption • Fritz & Smith are coordinating efforts with other defendants

20. Accident Investigation • Daily contact/briefings with Company’s investigation team on scene • Inspections/testing of company parts/protocols/reports • Interviews of company personnel (w/ counsel) • Warnings, Service bulletins, customer letters • Review of draft accident & group reports • Liability issues/exposures and defenses are now more defined

21. Taking Stock • BigJet is considered the prime defendant • Unthreaded is incensed as there is no evidence their part failed in any way • Supersonic claims manager suggests that a formal defense sharing agreement should be reached with BigJetearly in the process

22. Contact with Other Parties • Early dialogue/communication among counsel and insurers • Operate in a small world these days • Contacts/communication from Plaintiffs’ counsel • Gathering early intelligence on theories • Possible early settlements by airline operator • Include other parties/manufacturers on Releases • Possible early funding/sharing agreements discussions

23. What is a Joint Defense Agreement? • Parties can exchange confidential information • In furtherance of common defense or interest • Preserve privileges already attached to such information • Can include shared work product, legal memoranda and investigation

24. Three Years Post Accident • Significant discovery has been done on BigJet • Limited discovery on Unthreaded • No FORMAL JOINT DEFENSE AGREEMENT in place yet • Fritz & Smith thinks Unthreaded should be ready to try the case due to weakness of plaintiff’s case on them • INFORMAL verbal agreement with BigJetthat Unthreaded can have access to BigJet’s expert witnesses • Fritz & Smith files summary judgment to dismiss Unthreaded

25. 3.5 Years Post Accident • Mediation occurs • F&S and Unthreaded counsel attend • Supersonicdoes not send anyone • Plaintiff demand is $25,000,000 from all defendants • Aerovideo & Zeta have been dismissed (no payment) • Dated has settled for $100,000 and is out of the claim • BigJet offers $3,000,000 – REJECTED • Mediator – Unthreaded can get out for $1,000,000 • Fritz & Smith and Unthreaded in response demand to be released without payment like Aerovideo/Zeta - REJECTED

26. Later or Final Stages • Are the JDA’s still holding together? • Settlement Discussions • Jointly through agreed funding/sharing agreement or separate discussions • Mediations • Gaps can be finally bridged at this point

27. Assessing Trial Prospects • Remaining line up of parties/defendants • Focus groups/mock jury presentations • Realistic assessment of liability • Damages and exposures • Judge, jury pool and applicable law • Prior settlements and set-offs • Realistic assessment of total trial costs

28. Four Years Post Accident • Mediation Ongoing • Supersonic again does not send anyone • Unthreaded’s Summary Judgment –DENIED in the interim • Fritz & Smith suggests putting up a joint offer with Unthreaded putting up $500,000 • BigJet makes its own offer of $10,000,000 and settles. • BigJet is now out of the claim • Unthreaded’s offer of $500,000 – REJECTED • Unthreaded Has Become: The Last Man Standing

29. Post Mediation • Plaintiff’s make final offer to Unthreaded • $10,000,000 demand • This is rejected by Fritz & Smith and in-house counsel • Supersonic is only informed in a report from Fritz & Smith after the event

30. Trial • Trial is in Texas • Court rules NTSB report inadmissible • Unthreaded can’t use “drunk pilot” defense • BigJet does not make expert witnesses available to Unthreaded • Court applies Texas law for damages • Jury Finds Unthreaded liable

31. The Award • Unthreaded loses jury verdict $260,000,000

32. Claims Prevention/Risk Mitigation • Product Liability Seminars • Product Integrity Committees • Accident Investigation Procedures • Have a “Go Team” Prepared in Advance • Record Retention Policies – Follow Them • Electronic Discovery Responsibilities • Product Tracking Procedures • “Duty to Warn” • Contract Reviews – customers, vendors & suppliers – for warranties and indemnities

33. In Summary • Work as a team with your counsel and insurer • Ensure effective communication • Never underestimate the potential risk even if you believe you are not liable • Know the warning signs and don’t ignore them • Pursue cooperation with other insureds

34. In Summary • Work as a team with your counsel and insurer • Ensure effective communication • Never underestimate the potential risk even if you believe you are not liable • Know the warning signs and don’t ignore them • Pursue cooperation with other insureds