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October 30, 1996
When jets crash: How Boeing fights to limit liability

Boeing's 737 is at the center of a debate over safety. Today, a look at product-liability law and how the company has responded to lawsuits filed after 737s have crashed.
Workers at the Renton plant attach a tail to a 737-700, the first of a new series equipped with rudder limiters. Though the NTSB has recommended it, Boeing opposes the safety device for existing 737 models.
Jon Hamley did not expect much to come of his meeting at the Norfolk, Va., airport on a muggy day in July 1995.

He was wary of the man he was meeting: Keith Gerard, a senior partner from the Seattle law firm Perkins Coie, representing The Boeing Co. Hamley knew Gerard led a legal team that handled the millions and millions of dollars in lawsuits against Boeing that inevitably arose when one of its airplanes crashed.

Hamley, 29, was still grieving over the death of his wife 10 months earlier. Flight attendant Sarah Slocum-Hamley was among the five crew members and 127 passengers killed when a USAir Boeing 737-300 dived out of calm skies near Pittsburgh in September 1994.

Though wary, Hamley was curious, too. On the telephone, Gerard had said he wanted to talk about "making arrangements" for the families of the Flight 427 crew members, even though investigators still hadn't concluded what caused the Pittsburgh crash.

The implication that Boeing was ready to talk settlement surprised Hamley. Boeing, he knew, was still aggressively fighting claims in the similar crash of a United Airlines 737-200 in Colorado Springs four years before. So why would a Boeing attorney fly across the country to buy him dinner?

"He was very warm, very friendly," Hamley recalled. "He offered his condolences, said how sorry he was this happened. And the next thing he says is, 'Boeing had nothing to do with Sarah's death.' "

A complex product, an inherently risky business

Safely flying large groups of people six miles above the earth at nearly the speed of sound leaves little margin for error. That air travel has become so indispensable owes much to the careful design, manufacture and operation of reliable aircraft.

Statistically, jet travel has evolved into the safest way to travel, and Boeing has thrived as the world's dominant supplier of big, reliable jet airplanes. Boeing has built its reputation with airplanes that work well.

Yet the manufacturer of something as technically complex as a jet airliner, in an inherently risky business, also must be prepared for things to go wrong.

In a world where an Alabama jury recently ordered General Motors to pay $150 million to someone injured because of a poorly designed door latch, aggressive defense against product-liability claims is as fundamental to Boeing's business as research, manufacturing and marketing.

The potential costs to a manufacturer are enormous if its product is blamed for deaths and injuries: millions of dollars to victims and their families, many millions more if a product must be recalled and fixed, and the incalculable cost of a damaged reputation.
Overseeing two of the most extensive crash probes ever, NTSB investigators Tom Haueter, left, and Greg Phillips have been unable to establish whether the rudder caused 737 crashes in Pittsburgh and Colorado Springs. Boeing has aggressively contested any findings that would blame the 737's rudder-control system. Haueter and Phillips were photographed in the NTSB's Washington, D.C., lab.
The legal do's and don'ts

Boeing's approach to defending product-liability claims was first outlined in the mid-1960s by J. Paul Coie, patriarch of the Perkins Coie law firm. Passenger-jet travel was still just getting started; a product-damage claim of $1 million was considered outrageous.

On June 8, 1965, as Boeing was hustling to get its new 737 series to market, Coie recounted the state of product-liability law at a symposium co-sponsored by Boeing and the University of Washington at Seattle's Olympic Hotel.

Coie made these points:

• An airplane was "essentially a bundle of compromises, arrived at by exchanging expert views" about performance, while keeping safety considerations paramount.

• U.S. courts had assigned airplane manufacturers an "affirmative duty to make reasonable tests and inspections to discover latent hazards." The courts also had made manufacturers "liable for failure to warn users of its aircraft of known dangerous characteristics."

• Making improvements once an airplane was in service could come back to haunt manufacturers in court: Plaintiffs could point to changes as proof that an improvement was feasible and should have been done in the first place.

• On the other hand, courts tended to credit manufacturers for due care if it could be shown that a product "has been free from injury-producing effects in the past." In other words, the last thing a manufacturer wanted was a track record of problems, what the industry referred to as a "service history."

Still the heart of its strategy

Coie's outline still appears to form the heart of Boeing's corporate strategy for dealing with the aftermath of an airplane crash, or even with criticism of its products:

• It robustly defends against any complaint of defects in its airplanes, thus keeping them from acquiring a "service history."

• After an accident it plays a large role in investigating and suggesting what could have caused the accident, and in evaluating safety recommendations.

In the U.S. the investigating agency is the National Transportation Safety Board. It determines what caused airplane crashes and it may make safety recommendations to the Federal Aviation Administration. The FAA makes a final decision about such recommendations, usually consulting the affected parties. Boeing and other airplane builders tend to question or contest such recommendations.

• Boeing responds carefully to legal claims from victims. Some claims are quickly settled, others contested. Either way, one consideration is whether a judge or jury might pin blame for a crash on a Boeing airplane, and thus open the door to other lawsuits.

In one famous example, after a Japan Air Lines crash killed 520 people aboard a 747 in 1985, Boeing accepted responsibility, saying it had performed a faulty repair on the airplane a few years earlier. Attorneys for some passengers had hoped to force a trial on whether the blame actually lay with design of a hydraulic system that Boeing later modified.

In the 1991 crash of Flight 585 in Colorado Springs, Boeing acknowledged nothing and began what has become a long, involved legal defense of its product, the 737.

Things changed after the Pittsburgh crash in 1994, which placed the 737 rudder system under renewed scrutiny. When Keith Gerard flew across the country to discuss settlements with families of USAir crew members, it was apparent Boeing had decided it needed a different legal approach.
  The research:
This series of articles examining technical, regulatory and legal issues associated with the 737 rudder problem is the result of two years of research involving thousands of pages of federal records, airline reports, Boeing documents, legal briefs filed in accident cases, and interviews with dozens of industry sources.

Boeing and officials of the National Transportation Safety Board have declined to answer questions from The Times about issues raised by the 737 rudder-control problems. At times over the past two years, however, individuals from Boeing and the safety board have talked about aspects of the issues raised here; their remarks have been excerpted in these stories.

Blaming the weather in Colorado crash

The aftermath of the Colorado Springs crash appeared to demonstrate the Coie product-defense principles in action.

Working with federal investigators, Boeing proposed a weather explanation for the crash that ultimately kept the NTSB from settling on the other chief possibility: that an errant, last-minute movement of the 737 rudder sent the plane into fatal dive as it was close to landing.

The Colorado Springs crash (and later the Pittsburgh crash) bore flight characteristics of a phenomenon known as a "rudder hardover." Yet investigators looking for corroborating evidence could not find a single proven incident of a rudder hardover occurring on a 737 flight in the more than 20 years the jets had been flying.

Meanwhile in the courtroom, Gerard and Boeing lawyers fended off wrongful-death lawsuits that hinged on finding Boeing liable because of a defect in the 737.

The cases that most concerned the Boeing lawyers involved claims filed on behalf of the families of pilots and flight attendants.

The insurance and legal systems create an important distinction between lawsuits filed by the families of passengers and lawsuits filed by families of airplane crew members.

The question of what caused an airplane crash —pilot error, weather, malfunctioning or defective equipment —generally does not arise in passengers' cases. Once a passenger boards a jetliner, liability is assumed on the part of the airline and manufacturer. Settling passenger claims focuses not on what caused death or injury, but on the amount of damages to be paid. The airline and aircraft maker, with their insurers, then negotiate how to split the overall cost.

Crew cases work differently. Worker-compensation rules prevent families from suing an airline (the employer) for death or injuries that occur on the job. Crew members are assumed to knowingly perform risky work. The only place crew families can turn for legal settlement is to the manufacturer of the airplane. Their wrongful-death claims depend on proving that a malfunctioning or defective airplane was to blame.

Because the stakes are high on both sides, such cases make for aggressive plaintiffs and aggressive defenders.

Boeing in no hurry to settle

In the aviation community, Gerard —Harvard-trained and mentored by J. Paul Coie himself —has established Boeing as a formidable, no-holds-barred defender of crew claims.

"Keith is a very, very bright guy," said Dick Krutch, a Seattle aviation plaintiff attorney who has spent a career dueling Gerard. "He's competent, he's tough, he strives to keep his client's money in his client's pocket."

Passenger lawsuits in the Colorado Springs crash followed the usual pattern. Eighteen of 20 claims were settled by United and Boeing within two years of the crash.

But a protracted legal fight was under way with the families of the crew members: Capt. Harold Green, First Officer Patricia Eidson and flight attendants Monica Smiley, Anita Lucero and Lisa Church. They were joined in their claims by families of two passengers, Michael Kavanagh, an Irish computer-company executive, and Andy Bodnar, a Canadian from Toronto.

As international travelers, Kavanagh and Bodnar fell under a treaty which limits an airline's liability in crashes to $75,000 per person. The only way to get more was to join the crew families in pursuing product-liability damages from Boeing.

Boeing's lawyers were in no hurry to settle. Company engineers had pushed the case for a freak wind as causing the accident, and NTSB investigators were baffled. The NTSB couldn't decide between a rudder malfunction or Boeing's wind-rotor theory as the cause of the crash.

That left Gerard with a stronger case to argue at trial, if the crew-family claims came to that. In the meantime, there were other ways to strengthen Boeing's legal position. One goal was to get the crew-family suits moved to federal court from various state courts where they were filed. Corporate lawyers consider federal court a more neutral forum, less likely to be swayed by state interests, and federal judges to be more sophisticated in cases involving complicated business issues.

The Kavanagh's attorney, had filed a wrongful-death claim in Illinois state court in Chicago, United Airlines' home town. Gerard tried unsuccessfully a number of times to get it moved to federal court.

Taking it to federal court

Then, on the eve of the second anniversary of the crash, with a time limit about to expire for adding any new parties to the suit, Gerard filed a complaint in Chicago. Naming the two Colorado Springs air-traffic controllers on duty when the crash occurred, the complaint alleged they had negligently guided the plane into a wind rotor.

The next day the U.S. Attorney's Office announced that the federal government —the air-traffic controllers' employer —was substituting itself for them, and moving the case into federal court.

"It was pure Gerard and it was really brilliant," said Sterns, a longtime aviation plaintiff lawyer.

The plaintiffs spent the next year getting the federal government out of the case, ultimately accepting a nominal settlement from the government to refocus the suit on Boeing. The case remained in federal court.

In late summer of 1994, Gerard successfully argued that since the Kavanagh case was in federal court, it made sense to consolidate all the claims and send them to a federal judge in Denver.

The change created at least another year of pretrial paperwork and delay in the new court. It also steered the cases to one of the few states that cap damages in civil suits. Since federal courts usually apply state-court standards, if Boeing eventually lost at trial, there was a good chance no plaintiff would get more than the Colorado limit of $250,000.

Next spring will be the sixth anniversary of the Colorado crash. Boeing has made no settlement offer to the families of the crew or of the two international passengers. Attorneys for the families have deposed Boeing engineers and officials as they seek evidence to build a case that the 737 was known to have a faulty rudder.

"We still don't have a trial date," Dennis Lods, another attorney representing Kavanagh, said recently, "and we still don't know when we'll get one."

'First it's  'My dog didn't bite you...'

Even a much smaller case, far from the headlines, can provoke Boeing's legal tenacity if manufacturing liability is at issue.

In the late 1980s, Lance Schaeffer, a San Diego attorney, represented a USAir pilot, Richard O'Harren, in what became a knock-down, drag-out legal battle with Gerard and Boeing.

Boeing ultimately paid O'Harren $317,000 in compensatory damages and legal fees, after a six-year fight, for injuries O'Harren suffered when he was sprayed in the face by a windshield rain repellent called RainBoe.

Invented by Boeing in the mid-'60s, RainBoe became standard equipment on jetliners. It was usually stored in a canister inside the cabin, within arm's reach of the pilot. Sometimes the canister leaked.

Boeing to this day contends RainBoe is nontoxic, though 95 percent of it is a solvent, Freon 113, which has been blamed in at least 12 deaths in industrial settings.

At a 1990 trial, Schaeffer produced substantial evidence that Freon 113 attacks the human central nervous system, causing disorientation, motor-skills impairment and sudden heart attack. Schaeffer also established that there was a pattern of RainBoe canisters leaking.

Led by Gerard, Boeing's defense team disputed that RainBoe was toxic, denied the company was aware of any instances of it leaking and tried to portray O'Harren as a malingerer, court documents show. The case swung in O'Harren's favor when the company finally produced reports, years after Schaeffer first requested them, indicating one airline had reported 55 RainBoe leak incidents in a five-year period. There was a service history of problems, after all.

"It was a classic strategic retreat applied in the extreme," Schaeffer said. "First it's 'My dog didn't bite you,' then 'My dog wasn't there,' then 'I don't own a dog.' You buy time and point your finger anywhere you can to keep the heat off."

Making it costly for plaintiffs

In high-stakes product-liability cases, corporations defending against claims always hold the ultimate trump card. At any time, for some number of dollars, the company can settle and make the plaintiffs and their antagonistic lawyers go away.

But Gerard built his reputation by keeping a tight fist on settlements and using delaying strategies to make it very difficult and expensive for plaintiffs to take Boeing to court.

"If you look past the tactics of settling a case, and step back and ask what constitutes a win in a major battle in the war, the answer is you look to destroy the plaintiff firm," said an experienced product-liability attorney who is not involved in the 737 cases. "You bleed them of their funds, you eliminate them as future players, you destroy them in the European tradition: You spike their heads at the city gates. It's standard strategy."

As the summer of 1994 came to a close, Gerard's strategies had kept the Colorado Springs cases far away from a jury trial. Then came the disastrous nose dive of USAir Fight 427 in Pittsburgh.

A complication: no wind in Pittsburgh

For all the striking similarities between the Colorado Springs and Pittsburgh crashes, there was one big difference, the weather: windy in Colorado, dead calm in Pittsburgh.

In the Colorado lawsuits, Boeing attorneys could anticipate making a strong case for a weather-caused accident, if necessary.

But the tranquil skies over Pittsburgh left investigators with little upon which to base an act-of-God explanation.

Because the Pittsburgh crash, like the Colorado crash, showed characteristics of a rudder hardover, investigative focus on the rudder system became intense.

The NTSB wanted to avoid reaching another inconclusive dead-end like the Colorado Springs investigation. There was also more public pressure on investigators this time, with many more people killed in a crash close to East Coast media centers. Magazines and TV shows hammered on the similarities between Pittsburgh and Colorado Springs.

In the summer of 1995, 10 months after the crash, Gerard arranged to meet in person with Chris Germano, widow of Capt. Peter Germano, in New Jersey; with Glenda Emmett, widow of First Officer Chuck Emmett, in Texas; and with Jon Hamley, in Norfolk. He came to talk settlement.

"With the NTSB investigation over in (United Flight) 585, it may be they (Boeing) felt less threatened in Colorado Springs and felt they must remove the present risk in Pittsburgh," said Paul Hedlund, an aviation plaintiff lawyer from San Diego who represents several families of USAir Flight 427 passengers.

If the 737 rudder came to be blamed in Pittsburgh, Boeing, and not USAir, would bear the brunt of, by one estimate, $400 million that probably will be paid to the families of the 127 dead passengers. It could take another $20 million or more to settle with the crew families.

In dollar-and-cents terms, it would make sense for Boeing to settle damage claims sooner, while the cause of the crash was undetermined, rather than later, when it could face greater expenses if the airplane were blamed.

Settling also would make the plaintiffs' attorneys go away, so they wouldn't be fishing for evidence of rudder problems in the Pittsburgh crash. Such evidence could be useful to plaintiffs' lawyers in Colorado Springs, who needed to bolster their claim that a flaw in the airplane, not a freak wind, caused the United jet to crash in 1991.

Recall would be hugely costly

Beyond the lawsuits and their costs, Pittsburgh entailed risk of a massive jetliner recall if Boeing eventually were ordered to make major rudder-system changes, as NTSB investigator Greg Phillips had begun advocating inside his agency within a few months of the crash.

The cost of changes —the NTSB has now recommended 14 design, operational and maintenance improvements for the 737 —could reach hundreds of millions of dollars for parts and labor in a fleet of more than 2,700 aircraft. Millions more in airline revenue could be lost while the jets were taken out of service.

There was also potential cost to Boeing's reputation. The 737 is the backbone of fleets at United, Southwest, America West, Delta, Continental, USAir and many foreign carriers. Damaged public confidence in the 737 would be an advantage to Boeing competitors.

Families hear vague overtures of settlement

Jon Hamley understood much of this by the time he drove to meet Keith Gerard at the Norfolk airport.

In the months since his wife had been killed, Hamley had become an angry, self-styled expert in 737 rudder problems. He had amassed a mountain of documents. He talked endlessly to lawyers and aviation experts. Using the deference allowed victims' families, he communicated regularly with Tom Haueter, the NTSB investigator heading the Pittsburgh investigation. He became distracted to the point of losing his job as a credit analyst.

He had come to believe Boeing was trying to obscure defects in the 737 rudder.

"I felt the people in Colorado Springs died in vain," he said. "I felt if Boeing, the NTSB and the FAA did their jobs after (Flight) 585, Sarah and the 131 other people on Flight 427 would never have died."

After he met Gerard at the airport gate in Norfolk, Hamley remembers, they strolled to a restaurant inside the terminal. Gerard learned through polite conversation how long Jon and Sarah Hamley had been married, what Jon did for a living and that Jon was in therapy. They talked briefly about the other crew members' families.

Hamley asked Gerard why Boeing, if it was ready to talk about a settlement in Pittsburgh, was fighting crew-family claims in the Colorado case. Gerard responded that the two crashes had nothing to do with each other and represented completely separate issues.

The subject of money was broached. Hamley says Gerard warned him that crew families would not get as large a settlement as some of the passengers reportedly were getting because risk was an inherent element of their jobs.

He said Hamley probably "wouldn't like him" after hearing Boeing's settlement offer. Hamley recalls Gerard saying that Boeing wanted to settle with all of the crew families at the same time.

"He said, 'If we settle, we're going to settle with everybody, but if we fight one were going to fight everybody,' " Hamley remembered.

No agreement with widow

Chris Germano, Capt. Germano's widow, said Gerard made a similarly vague settlement overture to her in her living room in Moorestown, N.J.

"He said that certainly if Boeing was responsible for this, they would be the first to admit it and take responsibility for it," Germano said. "He just felt that in this case, they had absolutely, positively done nothing wrong."

She said Gerard made it clear any cash Boeing paid to her could not be connected in any way with Capt. Germano's death. To date, Chris Germano has reached no settlement with Boeing.

Plaintiffs see a cover-up

In the past year talk of settlement has been replaced by more acrimonious volleys from lawyers representing plaintiffs.

Last spring, with the safety board moving slowly on the Pittsburgh crash, two attorneys with Colorado Springs claims began seeking evidence from the Pittsburgh crash investigation that might help their own cases. They were Art Wolk, representing the Canadian family, and Lods, one of the Irish family's lawyers.

Lods and Wolk requested copies of all reports of disrupted 737 flights received by Boeing from mid-1995 on, as well as results of testing of rudder parts recovered in Pittsburgh. In response, Boeing lawyers produced a letter to Boeing from the NTSB general counsel instructing the company to withhold all documents related to the Pittsburgh investigation as long as the safety board's probe was active.

"It was just the most unbelievable attempt at cover-up I'd ever seen as a product-liability lawyer," Lods said. "The NTSB and Boeing had mutual motives to avoid more disclosure about what they'd done and not done ... so they agreed not to produce any more information."

Lods argued that the NTSB instructions violated rules separating the executive branch from the judicial branch of government. He later received some documents from Boeing, but none, he said, related to the Pittsburgh crash.

Meanwhile, Jon Hamley hired Wolk as his attorney. In August they filed an unusual suit in U.S. District Court in Philadelphia.

The suit accuses Boeing and its rudder-parts suppliers of violating the federal Racketeer Influenced and Corrupt Organizations (RICO) Act by using the U.S. mail to deceive the NTSB and FAA about rudder defects in the 737.

Boeing is not required to respond to the suit until late November.

"My argument," Wolk said, "is if Boeing hadn't corrupted the FAA and NTSB investigation and had been honest and forthright after Colorado Springs, then Flight 427 would have never happened. We're really focusing the inquiry on how Boeing corrupted the NTSB and FAA as much as the cause of the crash."

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