Litigation Over an Early Compact Fluorescent Lamp

In 1988 the Faegre & Benson law firm of Minneapolis was retained to defend the Phillips Lighting Company [1] in a civil lawsuit brought in U.S. District Court for the District of Minnesota, and I was assigned as the lead attorney for the case.[2]

The plaintiff was Ibac Industries, Inc. of Princeton, Minnesota, a small town about 50 miles north of Minneapolis. It had been working at manufacturing a plastic cover for an early Compact Fluorescent Lamp (CFL) designed by Phillips.[3]

The complaint asserted claims for alleged breach of a joint venture agreement; violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), which if successful entitled the plaintiff to treble the amount of actual damages plus attorneys’ fees; fraud; negligent misrepresentation; and four other theories. I do not recall what the alleged damages were except that they were significant.

Before trial on behalf of Phillips I successfully moved to dismiss the RICO and joint venture claims for failure to state a claim on which relief could be granted and for summary judgment on another claim. I also was successful in resisting the plaintiff’s motion for leave to amend the complaint to add a claim for punitive damages.

As a result, we went to trial in December 1989 on the fraud, negligent misrepresentation and three other claims. At the end of the evidence, the court granted Philips’ motion for directed verdict on the three other claims, leaving only two for the jury to decide.

The jury returned a special verdict for Phillips on the fraud claim. Thus, the only remaining claim for resolution by the jury’s special verdict was negligent misrepresentation.

Under the Minnesota common law of negligent misrepresentation, at the time, as I recall, a person who, through his or her profession, business, or employment, or in any transaction in which he or she has a pecuniary interest, fails to exercise reasonable care or competence in obtaining or communicating information and thereby supplies false information while guiding others in their business transactions, is liable for any pecuniary loss caused by the claimant’s justifiable reliance on the information. However, such a claim is subject to the comparative fault doctrine, whereby the plaintiff can recover only the percentage of fault attributable to the defendant, and if the plaintiff’s fault exceeds the defendant’s, the plaintiff can recover nothing.

To prevail on a negligent misrepresentation claim under Minnesota law at the time, as I recall, a plaintiff must establish that: (1) the defendant owed the plaintiff a duty of care; (2) the defendant supplied false information to the plaintiff; (3) the plaintiff justifiably relied upon the information; and (4) the defendant failed to exercise reasonable care in communicating the information; and (5) damages.

Even though, as I recall, Phillips contested all of these elements, the jury’s special verdict found such negligent misrepresentation and assigned slightly greater responsibility to Phillips (something like 60%) than to Ibac (something like 40%). This was good news for Phillips in that Ibac’s recovery of its damages would be reduced by the percentage of responsibility assigned to Ibac. This was bad news for Phillips, on the other hand, in that Ibac was not shut out from recovering anything. At the time I was disappointed after coming so close to “zeroing out” the plaintiff.

The trail was bifurcated between liability and damages, and after the above jury determinations on liability and before a trial before the same jury on damages, there was a settlement in January 1990 with Phillips paying Ibac a sum of money, the amount of which I do not recall.

The bifurcation of the trial provides insights about the life of the litigator/trial lawyer and being subject to the demands or whims of the court.

As I recall, U.S. Senior District Court Judge Edward J. Devitt, the presiding judge,[4] called a pretrial conference in early December 1989 and much to my surprise and consternation and without any prior notice, set the trial to commence just before Christmas, only a few weeks away. Perhaps this was the Judge’s stratagem to try to force a settlement because of all the difficulties this short notice would present to the parties and their attorneys.

Unfortunately my wife and I already had paid for a vacation to Costa Rica for later that month. When I objected to this date for the trial on that basis and on the difficulties of having my client’s witnesses come from Boston on short notice during the holiday season, Judge Devitt accommodated me by bifurcating the trial between liability and damages and only conducting the liability trial before I was scheduled to go on vacation.

While I was in Costa Rica, I received news from my law firm that the plaintiff was increasing its alleged damages. This forced me to leave Costa Rica early when I was not feeling well. I well remember leaving La Selva Research Station in the rain forest where we were staying to catch a local bus on a country road for a long ride to the capital city of San Jose. When the bus came over the mountain, I saw the widespread lights of the city looking as large as Los Angeles. That really impressed upon me the lure of cities across the world to people living in the countryside.

The opposing counsel for Ibac was Mark N. Stageberg, an able, very experienced civil trial lawyer. He discusses this very case, I assume based on recollection, in his memoir, Win Some Lose Some: The Trials and Tribulations of a Trail Lawyer (pp. 94-96). [5]

I have no disagreements with what Stageberg said about this case, except for the following:

• First, he did not mention his losses on the previously mentioned pretrial motions that significantly reduced the potential of his case.
• Second, he says his client had “developed and sold a new prototype fluorescent lightbulb to . . . Phillips.” According to my firm recollection, that is absolutely erroneous because the bulb, to my recollection, was designed by Phillips, especially its crucial electronics parts, and Ibac was only retained to manufacture the plastic cover according to Phillips’ specifications
• Third, I do not recall Stageberg’s account of the so-called “smoking gun” document from Phillips’ files, and I certainly do not believe that this document or any other evidence proved that the Phillips’ witnesses were lying, as Stageberg claims. Indeed, the jury’s rejection of the fraud claim undercuts Stageberg’s interpretation or recollection of this point.
• Fourth, contrary to what Stageberg said, the jury did not determine that Phillips had “breached its contract and had committed fraudulent misrepresentations” with Ibac. As previously stated, the breach of contract claim was dismissed on motion or on directed verdict, and the jury determined that there was no fraudulent misrepresentation.
• Fifth, we will never know that would have happened if Ibac had started the whole process with a more reasonable demand.

Nevertheless, I have to admit that after all of the skirmishing, his client walked away with a substantial settlement amount (minus attorneys’ contingent fee).

I also note that Stageberg expressed his consternation in another case when he was subjected to a trial court’s unexpectedly setting a trial date that interfered with his plans to do other things. (Win Some Lose Some at 189-192).

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[1] Phillips was part of Koninklijke Philips N.V. (Royal Philips, commonly known as Philips), a Dutch diversified technology company headquartered in Amstrerdam and one of the largest companies in the world.

[2] This post is based upon my personal recollection and on my December 1989 and 1990 descriptions of the status of this case in my annual reports to the partner in charge of my group at Faegre & Benson, which I am confident accurately reflected what had happened in the case. I do not have any documents from the case. I am confident that Faegre’s files for a 24-year-old closed case were destroyed a long time ago under regular document-retention guidelines. Finally the court’s files for the case (# 3:88cv-00482-EJD) have been sent to storage in a remote federal facility.

[3] In 1980 Phillips introduced its model SL, which was a screw-in lamp with integral magnetic ballast. The lamp used a folded T4 tube, stable tri-color phosphors, and a mercury amalgam. This was the first successful screw-in replacement for an incandescent lamp. All of this, as I recall, was before any involvement of Ibac with respect to the plastic cover.

[4] In 1989 Judge Devitt at age 78 was a very eminent federal jurist. He had served as one of Minnesota’s federal District Judges, 1954-1958, as its Chief Judge, 1959-1981, and as one of its Senior Judges since 1982. He continued in that capacity until his death in 1992. Before his federal judicial career, he served one term in the U.S. House of Representatives.

[5] I plan to write a general review of the memoir after I finish reading it.