Letter of the Law: January 2011

IN THIS ISSUE:

Delayed Discovery Rules

3 Easy Steps to Manage the Risk of Products Liability

Top 10 Reasons to Settle

Delayed Discovery Rules

By: Brendan J. Coughlin

There is a very funny line in an old Woody Allen movie in which a deposed South American tyrant is brought before a revolutionary tribunal. The strongman is asked how he pleads to accusations of his prior criminal exploitation and subjugation of the peasantry. After the laundry list of these acts is read to him at length, his equivocal response is simply, "Guilty ... with an excuse."

In a way, that is how delayed discovery rules tend to operate under California law. Generally, each type of civil action, be it based upon property, contractual, or personal rights, has a specific statute of limitations relating to it. The statute of limitations can also be called a limitation of action, because it states how much time a plaintiff has to bring a civil lawsuit based upon a particular claimed harm or injury. However, exceptions to these strict rules are sometimes made where there is a reasonable "delayed discovery" of the harm and/or its cause.

Most of California's statutes of limitation are contained in Code of Civil Procedure, Section 312, et seq. As one might imagine, the statute is a large one, since there seem to be so many types of claims that may be brought in civil litigation between parties.

For example, delayed discovery can be an important issue in a claim for personal injuries caused by exposure to hazardous materials or toxic substances. This might be an allegation of injury caused by mold or other unhealthy materials in a home or business structure. This particular claim is addressed in Code of Civil Procedure Section 340.8. And as one might expect, the issue of "discoverability" becomes as important as the time of discovery. In other words, a question of fact in the case can arise as to when a reasonable person would have been put on inquiry notice that injury was caused by the wrongful act of another. Otherwise, the case could be dismissed by the Court if it was filed too late.

Obviously, delayed discovery can be an issue in other types of personal injury claims, such as those involving medical negligence, minors, and some claims against governmental entities. But delayed discovery can also play into property and business claims.

Code of Civil Procedure Section 337.15 is often regarded as the be-all, and more importantly, the end-all, of construction defect litigation. This is because the statute provides a general limitation of ten (10) years for actions brought to recover damages relating to construction of real property and improvements to real property. There are in fact other important limitations and exceptions relating to construction claims. But subsection (2)(f) plainly states that the section shall not apply to actions based on willful misconduct or fraudulent concealment. Again we see a possible exception to a statute of limitation based upon delayed discovery.

Indeed, Code of Civil Procedure Section 338 states that the three (3) year limitation for an action based upon fraud or mistake is not deemed to have accrued until the discovery by the aggrieved party, of the facts constituting the fraud or mistake.

The oft-expressed proviso that these are general rules and comments, that each case is different, and that parties should speak to an attorney regarding their own specific situation, is nowhere as true as with statutes of limitation and exceptions. The attorneys at Kring & Chung are experienced with the in's and out's of delayed discovery issues, and can assist with your questions in both responding to, and enforcing, limitations of actions. The outcome of each situation will often depend upon the very specific facts relating to the harm, the discovery of the injury, the discoverability of the injury, and the discoverability of the identity of the responsible party. These issues can be especially important at the outset of a case, when pleading the correct causes of action, and affirmative defenses, can determine the ultimate adjudication of a delayed discovery concern.

Brendan J. Coughlin is an Associate with Kring & Chung, LLP's Irvine, CA office. He can be contacted at (949) 261-7700 or at bcoughlin@kringandchung.com.

3 Easy Steps to Manage the Risk of Products Liability

By: Laura C. Hess

Every manufacturer must plan for a product liability lawsuit. A product liability case can result in tangible losses, such as lost sales, lost market share, and legal costs; and intangible losses, such as lost reputation, and lost productivity from employees dealing with the lawsuit rather than daily operations.

Here are three easy ways that you can plan ahead to manage the risk of a product liability lawsuit:

Step 1: Designate the person who will be the "face of the company" in a crisis.

One person should be designated as the face of the company for all purposes in handling a products claim, even before a lawsuit is filed. This person is the only corporate spokesperson who deals with the media and the claimant. Other employees' involvement can undermine a crisis management situation.

If it is a clear liability situation, the designated representative should quickly express regret and take responsibility on behalf of the corporation. He or she should also express the company's recommitment to safety and how the company intends to do so. Keep in mind that juries tend to award punitive damages when they perceive a corporation as unsympathetic to a person's injury, or "sweeping things under the rug" rather than responding proactively. When the litigation comes, a properly handled message will cause the event to be viewed as an unfortunate but understandable mistake rather than a forum for public outrage.

Step 2: Send a consistent and accurate message.

Frequent and accurate communications with the claimant, media, customers, and governmental agencies are essential. Reporting should be candid and presented in a positive way, focusing on the proactive measures being taken. This lays a good foundation for the defense of the inevitable lawsuit. It shows that the company is "on the case." Never speculate about what could have happened, but rather fully disclose all facts that are known at the time. Provide regular and thorough updates as information becomes available. Stay focused on the message and talking points previously developed. Avoid attempts by others to draw the company into a version of events it did not develop.

Manufacturers usually know what kinds of liability cases they may likely face at some point, even before they occur. You can develop messaging in response to those events before they happen.

The legal course of a products liability case is fairly predictable. A manufacturer can plan for it in advance. Executive level management should have a clear understanding of legal issues, such as development of effective product warnings and when the company must initiate a product recall. This will help them make appropriate choices for preventing a crisis and responding when a crisis occurs. The lawyers at Kring & Chung, LLP can brief you on the relevant products liability law affecting your company.

Step 3: Get early legal analysis of likely types of products cases.

Laura C. Hess is a Partner with Kring & Chung, LLP's Irvine, CA office. She can be contacted at (949) 261-7700 or lhess@kringandchung.com.

Top 10 Reasons to Settle

By: Judge Thomas Thrasher (Ret.)

1. Prevent adverse publicity

2. Clients avoid emotional trauma

3. Uncertainty of jury verdict

4. Cannot depend on witness availability or testimony

5. Loss of time involved in the preparation and in the trial itself

6. Substantial cost involved

7. Settlement is final, no appeal

8. Avoid risk of adverse judgment

9. Money is paid now

10. Only way to control the outcome of the case is for the parties to settle themselves instead of letting 12 jurors do it for them

"As a peacemaker the lawyer has a superior opportunity of being a good man." - Abraham Lincoln, Notes for a Law Lecture, July 1, 1850

Hon. Thomas Thrasher (Ret.) is a mediator and arbitrator with JAMS in Orange, California.

Attorney Advertising. This client newsletter is a periodical publication of Kring & Chung, LLP and should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult a lawyer concerning your own situation and any specific legal questions you may have. Any tax information or written tax advice contained herein (including any attachments) is not intended to be and cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer.

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