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Juries make business pay in 2010

Product-defect awards rise sharply

Cybex International Inc., a fitness equipment maker, lost a $66 million jury verdict in New York last month to an assistant physical therapist who was paralyzed when an exercise machine fell on her at work.

For Cybex, whose chief executive officer said he has no idea what the company did wrong, timing may have played a role. The state court jury’s Dec. 7 decision in Buffalo illustrates the most prominent trend in court verdicts in 2010: a surge in awards against companies accused of putting defective products on the market.

The stalled economy and negative corporate news, such as the BP oil spill, sudden-acceleration lawsuits against Toyota and bank foreclosure practices, have fueled public anger, affecting lawsuits against companies in unrelated cases across the country, legal experts said.

“Jurors are more willing to believe that there was corporate wrongdoing that was intentional,” said Ophelia Camina, a lawyer in Dallas who won a $246 million verdict last year in a breach-of-warranty and fraud case against JDA Software Group.

“It’s easier to get people angry when they’re already brooding.”

The Cybex verdict sent its shares down 37 percent. The accident was unprecedented and not the result of a faulty product, the Medford, Mass., company said.

Cybex said it plans to appeal. “We’ve never had something like this,” Chief Executive Officer Arthur W. Hicks Jr. said in an interview. “What we did wrong, I have no idea.”

Ten of the 50 largest jury verdicts last year came in product-defect cases, compared with five in 2009 and one in 2008, according to data compiled by Bloomberg. There were 15 verdicts of $25 million or more in 2010, compared with seven in 2009.

The largest jury verdict of the year of any kind was for $1.3 billion in a copyright-infringement action against SAP.

The top product-defect verdict was for $505.1 million against Teva Pharmaceutical Industries, the Israeli drugmaker, and its U.S. distributor, in a Nevada case over a claim that packaging of its anesthetic propofol created a risk of contamination and led to the plaintiff’s hepatitis. Three of the top 10 were in smokers’ suits against tobacco companies.

The total of the largest five product-liability verdicts was $1.1 billion, up from $620 million in 2009 and $408 million in 2008. That represents a 77 percent increase from 2009 to 2010.

“There hasn’t been any radical change in product-liability law to cause this,” said Victor Schwartz, a Washington attorney and litigation expert who represents companies.

“It’s more atmospheric than legal.”