“Half of our cases would go away” if H.R. 5500 becomes law, predicts Dan Fesler, CEO of 37-location, St. Paul, Minn.–based Lampert Yards, which Fesler says gets sued by customers “at least once a month,” primarily over product liability issues. This bill would also address what Royal Morse—president of Columbus, Ohio–based Dealers Lumber and co-chairman of the task force NLBMDA assembled to develop this legislation—refers to as “the idiocy of some of the lawsuits out there. We have got to stop punishing the innocent to the fullest extent of the law,” he quips.
Scope of the Problem In the winter of 2005, NLBMDA polled its membership and found that more than 1 in 4 respondents had been subjected to a product liability lawsuit within the previous five years, and two-thirds of those had been named in more than one legal action during that period. The association also points to a 2003 study by the U.S. Chamber Institute for Legal Reform, which found that building material suppliers typically shell out $17,000 in out-of-pocket tort liability costs for every $1 million in annual revenue.
“This is a huge problem with no easy answers,” says Fesler, who estimates that Lampert Yards, which generated $215 million in sales in 2005, spends between $250,000 and $500,000 a year in litigation costs. “We really don’t have any option but to defend ourselves by standing in front of the parties and saying that we did nothing wrong.”
Still, it’s hard to gauge just how pervasively building material dealers and distributors, as a class, are being sued for product liability. The most interesting anecdotes that several dealers offer as illustrations of egregious litigation are sometimes decades old. For example, Levine notes that Dealers Lumber was sued because the coating on slate roofing it arranged to be shipped to a customer directly from a manufacturer wore off. Morse says that legal action occurred in 1986 and cost him $20,000 to settle. An even more notorious, and now legendary, example happened 12 years ago in Salt Lake City, where the attorney of the owner of Stringham Lumber sued the dealer after the attorney’s son was injured breaking up rocks with a hammer the attorney had bought from that store. Tom Stringham, the dealer’s owner, says he resolved this case through his insurer, which turned to the hammer’s manufacturer for redress. “The worst thing was that I really loved that lawyer and had to get another one.”
There are at least 10 states—Iowa, Illinois, Georgia, Indiana, New Jersey, Delaware, North Dakota, Texas, Mississippi, and Michigan—that have passed laws that limit the extent to which sellers can be sued. “I’ve noticed that there’s a lot more tort reform going on at the state level, where it’s easier to do,” observes Elizabeth Martin, an attorney with the Tacoma, Wash.–based firm Gordon, Thomas, Honeywell, Malanca, Peterson & Daheim, which is handling Parker Lumber’s case. She says this is particularly true in Texas, Mississippi, and Ohio, which in the past had “pro plaintiff” reputations.
Ryan Gibson, litigation coordinator for Indianapolis-based Indiana Lumbermens Mutual Insurance Co., also notes that the dreaded “joint and several” liability—where a dealer that chooses not to settle could be on the hook for the entire reward to a plaintiff if, say, a manufacturer or contractor negotiates a settlement for a smaller amount—“is on its way out” as a legal remedy in state and federal courts around the country.
Expensive Ordeals All that being said, dealers seem to keep falling into what Baumgarten of Lee Lumber calls “a hole in the legal system.” And there are plenty of recent horror stories to justify dealers’ fears that this hole is getting deeper.
In 1997, employees of oil company Texaco sued Bridgeport, Ill.–based Brian Lumber, claiming they became ill from board products containing asbestos the company once bought from the dealer. The dealer’s owner, Sarah Brian, was able to prove otherwise by showing the judge copies of every invoice her company had written going back to the 1940s, a forensics effort that cost her $3,000. That case, though, had an afterlife, when in 2003 a woman in California sued the dealer, claiming her father, who worked in a Texaco plant, had brought asbestos dust—and illness—into their house. That suit cost Brian $8,000 to get out from under. Brian believes H.R. 5500 “would eliminate 75 percent of these frivolous suits.”
Over the past few years, Lampert Yards has been involved in several product liability suits, all of them costly. An elderly woman claimed that condensation from $30,000 worth of windows that Lamperts supplied and installed with outside contractors caused her 1,000 houseplants to die. Fesler claims that this customer didn’t have any ventilation in her home. Nevertheless, it took Lamperts two years to resolve this case, where it wound up giving back her money in full.
In another case, Lamperts was found liable and paid $10,000 to a man who was injured on scaffolding that didn’t have safety supports, supports he declined to purchase when he ordered the product from the dealer. “He told us he already had them; he lied, essentially,” says Fesler. The customer claimed that Lamperts should have been more forceful in demanding that he purchase the supports.
