February 2008 capitol observations

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February 2008
Senator Shelby Stays In Touch With Alabama Citizens
Senator Richard Shelby has done an excellent job of staying in touch with the people of our state. Utilizing a strategy that was first used successfully by the late Jim Allen when he was in the U.S. Senate, Senator Shelby makes stops in all 67 counties each year. Senator Allen did the same thing during his time in the Senate, using town hall meetings to carry out his pledge of keeping his ear to the ground in his home state. Some of you may recall that Senator Allen ran his first race against the “Washington” crowd. Senator Shelby, following the Allen lead, has actually perfected the town hall meeting concept. The senior senator from Alabama has already started his annual 67-stop statewide tour through the state for this year. He goes to places that lots of statewide politicians never seem to have the time to visit. On his tour local residents are able to talk with the senator and ask him unscripted questions.
I am told Senator Shelby has had about 1,400 of these town hall meetings since becoming a senator in 1986. He has been known to have five of the hour-long sessions in five different counties in one day. The Senator says these meetings are official business, not political events, and I believe him. In any event, what he does is most unusual and most important. It’s a great way to find out what real people are thinking. I have attended some of the meetings and each time was most impressed. Alabamians take time out of their day to show up and ask serious and informed questions about issues of local, national, or international significance. I have even seen folks challenge the Senator on specific votes and actually criticize him on occasion for failing to address problems that affect Alabama citizens. I will say, however, that those type confrontations have been few and far between. This man never lets tough questions bother him and he always gives straight answers. We are most fortunate to have Senator Richard Shelby, a very popular public official, representing our state in Washington.

A Good Year For Alabama
It certainly appears that Alabama has things headed in the right direction on most all fronts. This is especially true when it comes to the states efforts in industrial development. Without question, this past year was very good for Alabama on the economic development front. The announcement of more than $6 billion in new and expanded industries for the state during 2007 was great news. This set a record and the final numbers weren’t even in at press time. The total is expected to grow as state economic development officials continue to add up the year's growth figures.
According to data from the Alabama Development Office, there were 271 new projects or expansions across the state, creating 17,143 new jobs in 2007. It appears that 2008 will be another good year. The state is currently working with 76 prospects, including 44 that have the potential to create at least 100 jobs each. Together, those 44 prospects represent a potential 17,540 jobs for the state, according to ADO Director Neal Wade. The people of Alabama owe Neal, who has done a tremendous job in his role as Chief Recruiter, a great debt of gratitude. He is to be commended for his role in the state's historic recruiting year.
Neal says ADO has a global marketing strategy, with plans to aggressively promote Alabama's economic development scene in international and domestic markets. The plan includes targeting three key business sectors:

  • expanding the automotive industry, with suppliers and possibly another assembly plant;

  • targeting aerospace, aviation, and defense projects for sites across Alabama; and

  • building biotech and life sciences businesses, particularly in Birmingham and Huntsville.

To put things in perspective, the $6.1 billion in announced industrial investments in 2007 breaks the previous investment record of $4.7 billion set in 2005. The only other year the state topped the $4 billion mark was 1981, according to ADO records that date to 1947. The final number of jobs created is expected to be in the 25,000 range. While economic news nationwide hasn’t been good lately, the news for Alabama has been very good. The prospects for this year in Alabama appear to be excellent. At the time this was being written, there was a great deal of activity that could get 2008 off to a great start.

Source: ADO

There Is Still Work To Be Done In Our State
Even though Alabama is doing extremely well in almost all areas, there is still lots of work to be done. For example, we still need to work in areas of the state where poverty remains to be a major problem. Also, a recent report gave our state pretty bad marks on environmental issues. Alabama ranked poorly in a survey of “green” states by Forbes Magazine. Frankly, based on what we have learned in environmental litigation, I really wasn’t too surprised at how poorly our state has done in that area of concern. An editorial in the Birmingham News on January 1st tells the story very well. In fact, the state was pretty well taken to task for our failure to protect our natural resources and control the polluters.
Regardless of how our state ranks, and whether everybody agrees with the ranking or the editorial comments, I am convinced we must do a better job on the environmental front. Alabama must do a better job of protecting our natural resources and also protecting the people of Alabama when it comes to their health and safety. We can’t afford to do less than an excellent job in this important area of state government’s responsibility. If you agree, contact Governor Riley, Lt. Governor Folsom, Speaker Hammett, and Attorney General King, and let them know how you feel.

Tim James To Run For Governor In 2010
It appears there will be another candidate for Governor in Alabama in 2010. Greenville businessman Tim James, who ran unsuccessfully in 2002, has said publicly that he will definitely run for Governor. I agree with Tim’s assessment that his timing was bad when he ran before. Polling data, according to Tim, give the former Auburn University running back a “very strong position to win the GOP nomination.” Actually, Tim is the first person to declare publicly his candidacy for the 2010 race for Governor and it will be interesting to see how well his trial balloon flies. There is one thing for certain – he will have lots of company if he does in fact run.

Serious Money Problems In Alabama
The Alabama Legislature is now in session and it’s obvious that money providers will have to be dealt with. Legislative budget hearings started last month, and the news generated was anything but good. Projections presented to legislators show they will have to cut back spending education. I am told the shortfall will be in excess of $500 million. The projections also show there will be about $300 million less for non-education state services, such as state troopers and prisons. A very bleak economic picture was painted by Joyce Bigbee, the director of the Legislative Fiscal Office. Joyce and state Finance Director Jim Main told the panel that the budget problems are the result of a slowdown in the economy. Revenues from income taxes and sales taxes, which go into the education budget, will be hit hard. The state will have to withdraw almost $406 million from a savings account to pay all of the bills for the current fiscal year, which ends on September 30th.
Making matters worse, it appears that the Alabama Medicaid Agency will need several hundred million dollars in additional funds in the next fiscal year if the agency is to continue providing medical services to low income Alabama residents. Medicaid Commissioner Carol Herrmann Steckel believes her agency will likely have to cut some services, including a program to provide over-the-counter cold medications for adults and a program providing artificial limbs. It’s my belief that the state needs to do as much as possible to provide medical care to the state's children, elderly and poor. We can’t afford to take a step back when it comes to meeting needs for those groups.
Interestingly, state agencies have asked for more than $400 million in budget increases, despite the fact that there will be less money in the General Fund next fiscal year. This didn’t sit well with Rep. John Knight, chairman of the House Government Appropriations Committee, who warned department heads to base their requests on actual needs. Knowing John as I do, the heads of each department had better pay attention to his warning. Now that the Legislature is in session, it will be interesting to see how they work out of the money problems facing the state. Remember, all of the pre-session projections came before we realized that our nation is facing the probability of a recession.
Source: Associated Press

Judge Sides With Exxon On Amount Of Damages
It looks like we are heading back to the Supreme Court in the State’s case against Exxon. The case was back before the trial judge on January 8th for a hearing on one disputed issue, that being how much ExxonMobil owed the state. We had hoped to bring the 9-year-long legal battle over natural gas royalties owed by the powerful oil giant to a conclusion. Just before the hearing, we learned that Exxon had finally agreed it owed $120.4 million in royalties and interest to the state. But, we contended that there was an additional amount due that would have brought the total to $142.8 million.
The argument at the hearing was whether the statutory penalty for not paying royalties under Alabama law should be applied for the period from 2002 to date. This issue has never been before an Alabama court to my knowledge and will be a case of first impression. Robert Cunningham and I appeared for the state at the hearing. We have recommended to Governor Riley and Attorney General Troy King that the remaining part of the case should be appealed to the Supreme Court because the state's highest court has never addressed how to compute the penalty in royalty disputes where there are also post-judgment interest payments due. Exxon now contends that the “penalty” is actually “interest,“ which is a total reversal of its previous positions on this issue. The company had been consistently labeling the penalty as a penalty and not interest. When it suited their latest position, that labeling quickly shifted from penalty to interest.
The $120.4 million approved by the trial court was based on figures computed at the end of the year. Additional interest for January will push the final payment by the oil company to about $122 million. That amount will have been paid to the state by the time this issue is received if things go as agreed upon by the parties. About $58 million of the total amount will be royalties that will go into a state trust fund, or savings account. The remainder will be considered interest and will go into the state general fund. As you know, the general fund finances non-education functions of government, including prisons, Medicaid, and state troopers. After the last ruling, Senator Roger Bedford (D-Russellville), who handles the general fund budget in the Senate, told the Associated Press:
The Supreme Court was wrong not to hold a company, which had $40 billion in profits last year, responsible for stealing royalties from the citizens of Alabama through their New York accounting gimmicks on royalty payments.
Although the Supreme Court’s refusal to recognize the state’s fraud claim against Exxon was a major disappointment, the state will at least receive payment of the royalties that Exxon failed to pay. Ironically, the bosses at Exxon, in internal company memos, had said while devising their scheme, that if the company was ever caught, it would simply pay back the amount it failed to pay to the state, plus 12% interest. It appears these men had things pretty well figured out way back then. In the opinion of many observers, this case will go down in judicial history as one of the biggest miscarriages of justice ever in our state. I would challenge anybody who disagrees to take a look at the Exxon documents and then decide whether Exxon committed a massive fraud on the people of Alabama and were able to get away with it.
Source: Associated Press

State Of Alabama Settles Claims With Two Drug Companies
The State of Alabama will receive almost $7 million from a settlement reached with two drug manufacturers that were defendants in a lawsuit the state filed against more than 70 pharmaceutical manufacturers. The lawsuit, filed at the direction of Attorney General Troy King in 2005, alleges the drug companies fraudulently inflated their reported prices for prescription drugs, which caused the Alabama Medicaid Agency to overpay pharmacists and doctors. In announcing the settlements, the Attorney General reported that the state has settled the claims against Takeda Pharmaceuticals North America Inc. and Dey, LP. Under the agreement, Dey will pay the state $4.75 million and Takeda will pay $2 million. The money from the settlement will go into the state's General Fund budget. The General Fund provides money for most non-education state services, including Medicaid, and is very short on available funds at present to meet needs.
The state's claims against Takeda involved the diabetes drug Actos. Its claim against Dey involved a number of drugs prescribed primarily for pulmonary diseases and asthma, such as albuterol sulfate and ipratropium bromide. Relating to the settlement, Attorney General King observed: “These settlements are a significant step towards protecting Alabama's poorest citizens and the scarce resources they depend on to provide for prescription drugs.”
Our firm and Hand Arendall of Mobile are handling the lawsuit for the state. We will now pursue the lawsuit against the remaining pharmaceutical companies which are still in the case. Our first AWP trial is scheduled to start in Montgomery on the 11th of this month against one company, AstraZeneca Pharmaceuticals LP. A second trial involving Novartis Pharmaceuticals Corporation and SmithKline Beecham Corp. will be tried starting on April 7th. Judge Charles Price, who is the trial judge, ordered mediation in these cases. We met, but no settlement was reached and we will go to trial. It’s our belief that we need to try the first case and let a jury hear the evidence.

Settlement Of A Wrongful Death Action For Death Of Infant
Our firm recently settled a wrongful death case against Continental Tire and Ford Motor Co. The lawsuit arose out of the death of an 8-month old girl in a vehicle rollover. The infant was killed when the car seat in which she was buckled was ejected from a Ford F-150 four-door pickup truck when the left rear door latch self-actuated and the door flew open. We learned a great deal about Ford’s handling of door handle-latch assembly defects during pretrial discovery in the case.
Our clients were heading back home to North Carolina from a family vacation in Mexico when the right rear Continental tire detreaded, causing the vehicle to go out of control and roll over in the median on I-65 North. During the rollover, the left rear door latch on the F-150 super crew cab self-actuated and flew open. This open door created additional room for the child safety seat to work its way loose from the vehicle’s seatbelt system. The car seat, with the baby still in it, was ejected, resulting in the infant’s death.
Our firm reached a partial settlement with Continental Tire during mediation, but elected to go to trial against Ford. During the trial, which started in an Alabama state court on January 14th, we proved that Ford knew an occupant was 20 times more likely to be ejected if a door came open. It was also established that Ford knew an occupant who is ejected is 40 times more likely to die. Although learning of Ford’s knowledge on this subject didn’t come as a surprise, we were shocked to learn that it had an extremely dangerous door handle-latch system. We set out to prove what Ford knew, when they knew it, and what they did about it. We learned during discovery that this dangerous condition actually exists in all F-150’s, Ford Expeditions, and Lincoln Navigators for the model years 1997-2001.
Door handle-latch systems on all passenger cars and light trucks are required to meet a federal standard known as FMVSS 206. This standard, which requires door handles to withstand inertial forces of 30g’s, was designed to prevent handles from unlatching the door during an accident and causing the door to fly open. A Ford engineer published a peer-reviewed paper three years before our vehicle was manufactured, stating that the 30g governmental requirement and Ford’s own internal requirements were grossly inadequate. The published paper in the SAE Journal stated that in foreseeable crashes, door handles would experience G-forces ten times greater than the 30g standard. The engineer had learned a great deal about the door latch problems in dealing with a defect in Ford Taurus door handles in the early 1990’s.
It was established during 2 ½ days of trial that Ford had never conducted any specific crash tests in order to determine how its latching systems performed in side impact accidents. It was also established that in the last 30 years, Ford had not conducted one single rollover test in order to determine how the safety features on any of its vehicles performed in a rollover crash.
During discovery we learned that doors were flying open on F-150’s, Expeditions, and Navigators during government-required testing for fuel systems and seatbelts. Ford looked into these door openings and discovered the handles on 1997-2001 model years for all three vehicles wouldn’t pass the minimum federal requirement under FMVSS 206 of 30g’s. Ford’s internal documents referred to these handles as being “defective.” In short order, Ford began plans for a recall involving over 1.6 million F-series pickup trucks at a cost to the company of some $70 million. Days before the recall was to be announced the very same engineer who wrote the 1997 SAE paper “discovered” a different way to determine whether the minimum federal standard was met. Using a procedure that Ford had never used before, and has never used since, this engineer determined that the minimum standard could be met even with reduced spring tension. The alternative method used by this employee actually was not a new discovery, but dated back to a 1967 General Motors letter to the National Highway Traffic Safety Administration (NHTSA). As a result, even though Ford engineers had recommended it, no recall was issued and Ford “stood down” from the anticipated recall on March 30, 2000.
Ford then adopted a safety modification for the F-150, Navigator, and Expedition. The fix was to attach a counter-mass (weight) to the handle-latch assembly that opposes the inertial forces generated in a crash or impact. The variable cost of the fix was approximately 57 cents according to Ford documents. Interestingly, the counter-mass fix was the same one that Ford used in 1993 and 1994 to remedy a problem Ford was having with the doors on the Taurus unlatching and flying open in crash tests. Incidentally, the same engineer who wrote the SAE paper fixed the Taurus problem.
Despite the known safety concerns, Ford did not implement the fix in the F-150 involved in this recent case, nor did Ford delay the release of the 2001 Ford F-150 to implement the counter-mass safety fix. Ford documents indicate that Ford even considered retrofitting the 1997-2000 F-series, Expeditions, and Navigator vehicles that were in the field by adding the safety enhanced counter-mass. But, the retrofit never came about. One of the reasons given for not retrofitting the vehicles was the Expedition and Navigator had 100 percent autolock, which precludes inertial opening of outside door handles. Ford failed to acknowledge that autolock was not on all F-150’s. In fact, the vehicle involved in our case was manufactured without an autolock system.
One of the most disturbing things we learned during pretrial discovery was that three years before this F-150 was made, Ford knew the 30g standard was grossly inadequate – Ford knew that the handle spring tension in the 1997-2001 model year vehicles failed to pass the minimum federal standard. Yet, Ford has allowed these vehicles to remain on the road with their unsuspecting customers driving them. Many of these vehicles are still being driven by persons who will never know of the defect unless the vehicle is involved in a highway crash. To this day, Ford has never notified owners that their vehicles have a defective handle-latch assembly. Neither has Ford notified NHTSA of the defect.
During the discovery phase of this case, we obtained information that there are more than 50 lawsuits involving these defective door latches. We also learned from a Ford internal document that the company, instead of a recall, elected to go into “damage control.” Of course, “damage control” means settling lawsuits that involve serious and disabling injuries.
It was our pleasure to represent the family in this case. The mother and father and their two surviving children, who are now 13 and 11 respectively, were emotionally devastated by the loss of little Ashley, which is certainly understandable. Unfortunately, because of Ford’s decision not to fix these defective handles, this will surely happen to other families. There are millions of the F-150s, Expeditions, and Navigators described above that have defective door handle-latch assemblies and the owners don’t even know it. This is inexcusable and NHTSA should be actively involved in dealing with this matter. In fact, we are writing NHTSA and requiring a full investigation of this defect. Graham Esdale, Greg Allen, and I handled this case. Graham did an outstanding job in his pretrial discovery efforts. The amounts of both settlements are confidential.

Another UST Case Settled In North Alabama
Our firm has recently settled a case involving an underground storage tank (UST) leak in Decatur, Alabama. In this case, we represented families who lived on property bordering a gasoline station known as Bud’s No. 1. The leak was discovered by the station owner, Petroleum Sales, Inc., in 1999. The station then hired Highland Technical Services, Inc. to clean up the leak and to stop it from spreading.
Our clients did not learn about the leak until 2004, approximately five years after it was discovered by the owner. It is likely that for these five years our clients were unaware of the hazard to which they were being exposed while living on land that was contaminated with petroleum. This is particularly troubling for our clients, Harry and Rebecca Terry, whose then-five-year-old daughter was diagnosed with leukemia in 2004. In fact, the Terry family may never have known about the leak at all had they not learned of the potential link between benzene (a constituent of petroleum) and leukemia. This prompted them to contact ADEM, which in turn led to their discovery of the leak.
Our firm filed a lawsuit against Petroleum Sales and Highland Technical Services. We alleged, among other things, that the defendants failed to take reasonable actions to prevent the UST from leaking and to prevent the leak from spreading after it had been discovered. Among other things, the defendants failed to install monitoring wells on our clients’ properties as part of the initial remediation plan. Although the Terry properties were adjacent to the service station, the defendants did not install monitoring wells on the properties until after our clients learned of the leak in 2004. Because of this, we will never know the full extent of the contamination on these properties. In addition, the Terrys will never know for certain what caused their daughter’s leukemia.
David Byrne and Alyce Robertson handled this case for our firm and did a very good job. The amount of the settlement is confidential. It’s troubling to have situations like this develop that potentially cause health and safety concerns along with reducing property values. In any event, we are pleased that our firm was able to help the Terry family.

UST Case Settled In Pike County
Our firm also settled a case regarding an underground storage tank (UST) leak in Pike County, Alabama. Our clients, the Pauls, are an extended family owning property in the Henderson Community near Troy. Their property was contaminated by petroleum that leaked from a UST owned by Jeter Oil Company. CDG Engineers, which was the other defendant in the case, was hired by Jeter Oil, the owner of the UST, to clean up the leak and prevent it from spreading to neighboring properties.
USTs are used to store petroleum and are commonly found at automobile service stations. Many older USTs are simply steel tanks without any lining and obviously are susceptible to rust and decay. Beginning in 1998, USTs in Alabama had to be upgraded with leak-proof protection or with anti-rust protection. Even with this requirement, USTs across the state continue to leak and, as a result, cause damage to surrounding landowners.
In this case, Mr. and Mrs. William Paul suffered the most damage from the leak. They actually had to evacuate their home of forty years because the gasoline vapors from the leak became so intense that the family’s safety was endangered. Although the Pauls evacuated their home in 2005, they have still not been able to return because the safety of living in that home cannot be established. We alleged in our suit that the defendants failed to take appropriate actions to prevent the UST from leaking and to stop the leak from spreading.
David Byrne and Alyce Robertson likewise handled this UST case for the firm. They were able to get a very good result for our clients in this settlement. The settlement amount in this case is confidential. UST cases are becoming more numerous. There are a great number of ­­­­undetected problems involving USTs that are potential hazards.

Settlement Of Electrocution Case
Our firm recently settled a case on behalf of the family of Ronnie Adams, who was a lineman working for Pike Electric Company. Ronnie, who was from Winterville, Georgia, died in Flomaton, Alabama on July 12, 2005. He is survived by his wife, Laura, and two children, Katelin and Corde. . In the aftermath of Hurricane Dennis, Ronnie and his crew were working in Flomaton, Alabama, repairing power lines for the Alabama Power Company. While Ronnie was working on the power lines, a person nearby attempted to wire a generator into the circuit breaker at his place of business. When the generator was started, the power from the generator backfed into the lines that Ronnie was repairing because the generator hook-up did not use a safety transfer switch. A safety transfer switch is designed to prevent generator backfeed.
The generator owner’s manual described the need for a transfer switch. Ronnie, who was unaware that the generator had been installed, was working the lines as being de-energized. As a result of the backfeed, Ronnie was electrocuted when the generator was started. This was a tragic case that should never have happened. Had a transfer switch been installed – as required – Ronnie Adams would not have been killed. The settlement was between the Adams family and the Alabama Power Company and the individual who installed the generator. The settlement terms in this wrongful death case are confidential. Greg Allen handled this case and did a very good job for the family.

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