The Wages of Fraud

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We’re not sure how often federal Chief Judges invite plaintiffs’ attorneys to sue individual defense lawyers for committing fraud upon several courts, but we’re guessing that if it were more often, the temptation to deliberately obfuscate discovery would be less compelling. And we definitely wouldn’t see lawsuits like the one Scottsdale attorney David L. Kurtz filed against Goodyear Tire and Rubber Company; its Arizona counsel, Graeme Hancock, and his firm, Fennemore Craig; lawyer Basil Musnuff, and his former Akron law firm, Roetzel & Andress; and Goodyear’s Associate General CounselDeborah Okey.

Kurtz, a products liability attorney for 30 years, who spent the first two-thirds of his career on the defense side says, “This is the worst corporate conduct that I’ve seen. I’ve never seen lawyers act this way. It breaks the system.”

The seven-count, 153-page lawsuit, filed in Arizona State Superior Court, seeks punitive damages via a jury trial for five years of delay and deception in a product liability action involving the G159, a tire Goodyear developed for the urban delivery vehicle market, but sold to the recreational vehicle market, even though it was wholly unsuited for that use. In June 2003, the Haeger family became one of the many victims of this mismatch. Leroy Haeger was at the wheel of his Spartan Gulf Stream Coach on Interstate 25 in New Mexico, when the right front tire failed. The Gulf Stream veered to the right and then rolled over, seriously injuring Leroy and Donna Haeger, along with their passengers, Barry and Suzanne Haeger.

In 2005, the Haegers, represented by Kurtz, filed suit alleging that the Haeger’s G159 was defective, prone to tread separations caused by excessive and prolonged heat build-up during highway use. The Haeger suit was one of dozens of G159 death and injury actions against Goodyear. Like many a plaintiff’s lawyer before him, Kurtz ran up against the high and wide stone wall Goodyear’s legal team was adept at building during discovery while they aimed for a settlement. Kurtz asked Goodyear for all the G159 testing, including “road tests, wheel tests, high speed testing, and durability tests,” but Goodyear only produced National Highway Traffic Safety Administration compliance tests. Seven months later, Good Year disclosed the high-speed tests, while assuring Kurtz and the court that no other test data could be found. In 2010, like many a lawyer before him, Kurtz settled Haeger.

Then, in June 2010, a Pasco County, Florida jury awarded the Schalmo family $5.6 million after finding that the G159 was a defective tire for motorhome use. .At trial, Schalmo’s attorneys, Christopher Roberts and Hugh Smith, presented Goodyear documents, which included internal heat and speed testing and failure rate data showing that Goodyear knew the G159 was improperly approved for 75 mph continuous highway use.

This news aroused Kurtz’s suspicions that the tiremaker had not disclosed all of its tests in Haeger. On May 31, 2011 Kurtz filed a motion alleging discovery fraud. On November 8, 2012, after an assiduous review of Goodyear’s misbehavior in Haeger, as well as other G159 cases, Judge Roslyn O. Silver, Chief Judge of the United States District Court for the District of Arizona, issued a brutal sanctions order, finding that Goodyear and its legal team had defrauded the court, and allowed expert witnesses to falsely testify. (See Pattern of Fraud Brings Down Goodyear) Concluding that the case would have settled much earlier if all of the tests had been disclosed, she awarded the plaintiffs all of the attorneys’ fees and costs they incurred after Goodyear served its supplemental responses in November 2006, “the first definitive proof that Goodyear was not going to cooperate in the litigation process,” Judge Silver wrote. Hancock was ordered to pay 20 percent of the total sanctions, with Musnuff and Goodyear jointly responsible for the remaining 80 percent. And to make sure that Goodyear was not tempted to go this route again, she ordered Goodyear to file a copy of her Order in any G159 case initiated after November 2012.

Goodyear appealed the disclosure portion of Silver’s order to the U.S. Court of Appeals’ Ninth Circuit, based in San Francisco, where the appeal is currently pending. Meanwhile, Kurtz submitted a bill for $2,884,057 in December 2012; the briefing phase completed in January, and is awaiting the court’s approval. Hancock and Musnuff’s initial attempts to appeal the monetary sanctions were dismissed by the appellate court because there is no final award yet in the lower court.

As laid out in the fraud lawsuit and in Judge Silver’s sanctions order, Goodyear’s defense of the G159 rested entirely on keeping plaintiffs away from a series of tests Goodyear conducted in the 1990s showing that the tire would be prone to fail during prolonged highway use. Goodyear had marketed the G159 to the RV industry in the 1990s and early2000s – even though the tire design not a good fit for RVs that typically travel at greater than 65- mph speeds for extended periods.  Nonetheless, in 1998, after speed limits increased nationwide, Goodyear bumped the speed rating of the G159 to 75 miles per hour. In 1999, after four crashes involving two fatalities, Fleetwood recalled 3,400 Class A motorhomes due to inadequate tire load capacity and replaced the G159s with Michelin tires. In  2002, Goodyear issued a Product Service Bulletin  announcing that the Monaco Coach Corporation would be offering replacement tires to owners of 1999, 2000 and 2001 Windsor model Class-A motor homes equipped with G159 tires. The problems were blamed on inadequate load margin and customer misuse; Goodyear assured the public that the tires are safe for all uses. By 2006, Goodyear phased out the G159 in favor of the G670 tire which had had been developed for recreational vehicles. The G159 has never been recalled.

Goodyear has defended or is defending about 40 other death and injury and an estimated 20 property-damage tread separation cases involving G159s on Class A motor homes. 

The ragged edge of the troika’s strategy really began to unravel on October 2011, after the court ordered Goodyear to produce heat rise durability tests it had performed on the tire in 1996. As part of that proceeding Goodyear’s expert Richard Olsen filed a declaration stating that Goodyear had disclosed and produced crown durability tests, bead durability tests and DOT endurance tests. Unfortunately, Goodyear had been claiming that no such test data existed. Oops!

Goodyear tried to claw that one back with a Notice of Correction. Too late.

After a flurry of supplemental briefs, Judge Silver asked for more filings with unequivocal answers to, among other things, why Goodyear had produced heat rise tests in another G159 case, but not Haeger; whether they should have produced those tests in Haeger and who was responsible for not producing the heat rise tests. On the eve of an evidentiary hearing, Silver issued a stern warning to Goodyear about its commitment to “seemingly untenable positions” and its attempts to “justify the unjustifiable” and capped it with a rhetorical flourish from Othello:

“The approach taken by Goodyear and its counsel risks grave harm to their reputations. Shakespeare famously identified the folly of such actions: Good name in man and woman, dear my lord, is the immediate jewel of their souls. Who steals my purse steals trash; tis something, nothing; Twas mine, tis his, and has been slave to thousands. But he that filches from me my good name robs me of that which not enriches him and makes me poor indeed.”

Then came the hearing itself, in which Musnuff and Hancock testified, untruthfully, Kurtz’s lawsuit alleges, without raising any objections about communications that otherwise would have been privileged. Silver wound up ruling that Goodyear’s behavior in other litigation and regarding other G159 tests were relevant. Judge Silver ordered Goodyear to produce, among other things, all written and electronic communications, including attachments, relating to requests for test data, proposed and final discovery responses from all the G159 cases since January 1, 2000.

Ouchy. A whole lot more came pouring out of Goodyear – none of it good. Kurtz alleges a well-coordinated conspiracy among the principals to conceal the existence of those tests not just in the Haeger case, but in two other Arizona-based G-159 cases, and to conceal an expert deposition conceding that G159 was prone to tread separations if it experienced prolonged temperatures in excess of 200º. 

“The deceptions saved Goodyear untold millions of dollars, while they lied for years to the victims of G159 tread separations, unjustifiably blaming tire failures on the innocent motorhome drivers causing them even further damage. By fraud and deception, Goodyear was able to secretly settle cases for a small fraction of the just compensation victims were entitled to and would have received if the truth were disclosed.”

That was then. This is now. Silver’s world-class thumping also suggested that professional consequences would follow. But if they have, it will be some time before the public will learn of them. For the moment, the fight has moved to the Ninth Circuit, when Goodyear, and Hancock and his firm, Fennemore Craig have filed everything under seal. The latter’s mediation form, however, states that Silver’s sanctions order was submitted to the State Bar of Arizona, and notes:

“This matter is not appropriate for mediation. The district court’s order threatens profound non-monetary effects on the sanctioned parties and, among other issues, threatens harm to professional careers and reputations that cannot be addressed or remedied by a mediated settlement.”

Geez, if Goodyear had put as much energy and effort into developing a tire that was appropriate for motorhome use as their team of lawyers put into hiding that fact that the G159 was not, we think it might have been cheaper for the company. It certainly would have been for Hancock, and Musnuff, whose personal wallets and reputations are on the line.

As for the Haegers, they still struggle with “non-monetary” consequences, too. Leroy died of cancer in 2009, still blamed by Goodyear for the crash. Donna Haeger turned 80 years old. Suzanne Haeger still struggles with partial use of one arm, a permanent injury from the crash, says Kurtz. And the never-recalled G159, he adds: “is a ticking time bomb.”