Thursday, August 21, 2003

2. McCoffee lawsuit stirs up a brew

Inevitably every water-cooler discussion on lawsuits, especially frivolous lawsuits, end up in a discussion, or joke, about the woman who was awarded a couple million dollars after spilling hot coffee on her lap. The lawsuit gained national attention, and for many, cast doubts about the quality of our legal system. Currently, businesses and the insurance industry use this case as an example for the need of liability limits. The problem is that many don't know the actual facts of the case, and that, in reality, the decision was a sound one.

McDonald's sells about $1.3 million dollars worth of coffee each day. For years McDonald's knew they had a problem with the way they prepared and sold their coffee. In truth, people who had burned themselves on McDonald's coffee had filed more than 700 claims between 1982-1992. However, based on consultants advice for optimal taste, McDonald's decided to keep their coffee at between 180 and 190 degrees Fahrenheit (by comparison, most restaurants keep their coffee at 135-140 degrees). In addition, McDonalds' own quality assurance manager testified that McDonald's knew that food substances served at over 140 degrees Fahrenheit were capable of producing third degree burns. With this information, McDonald's made no effort to lower holding temperatures or warn their customers.

Recalling the case, a 79 year-old woman named Stella Liebeck was burned when riding in the backseat of her grandson's car as she opened the lid of her coffee to add cream and sugar. She was not driving, nor was the car in motion. The coffee spilled and inflicted third degree burns on 6 percent of her body. She was hospitalized for eight days, undergoing a skin graft and debridement treatments. For this, she asked McDonald's for $20,000 to cover hospital expenses and eight days worth of her daughter's salary- who took the time off to care for her. McDonald's offered $800.

Lieback subsequently sued and won the case against McDonald's. Expert testimony from the trial stated that substances at 180 degrees or higher would cause third degree burns in two to seven seconds. She was awarded over 2.7 million dollars in punitive damages. She also received $160,000 in compensatory damages, after the jury reduced the damages by 20 percent because they found her at fault for spilling the coffee. On appeal, the judge lowered punitive damages to $480,000, for a total award of $640,000- a bit shy of the "couple million" or so that is usually quoted. The case finally came to an end when Lieback and McDonald's, unbeknownst to the public, entered into an undisclosed settlement agreement.

From the beginning we realize that McDonald's was fully aware that its coffee was capable of inflicting third degree burns on its customers. With this information they sought neither to lower the holding temperature nor provide a warning label. With the sale of approximately one billion cups of coffee per year, it doesn't take an intellect to realize that some of these people were going to spill their coffee. And that with each spill existed the possibility that someone would be burned. To prove it, they had 700 claims filed to that fact.

In a society that has become accustom to lawsuits engaging the smallest offense or accident, it's easy to assume that this case is about unaccountability. The argument of many is, of course, that it was her fault for spilling the coffee. However, statistics would indicate, that some customers were going to spill their coffee- especially when so many are purchased "on the go." The deplorable aspect of this case is that it appears that McDonald's selected risk management over customer safety. One might speculate that McDonald's found it more economical to pay the small settlements rather than risk losing "optimal taste", and hence market share.

When considering responsibility, it's important to remember that there are differences between corporate knowledge, corporate action and customer fault. There are also differences in the stories that we are told. Of this, Eldred Jones fittingly wrote, "Legends die hard in the popular mind, while facts tend to languish in books."

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