04/11/2021
WHY A CUP OF COFFEE COSTING $2.7 MILLION DOLLARS MAKES PERFECT SENSE.
On February 27, 1992, 79-year old Stella Liebeck went with her grandson to a McDonald’s in Albuquerque, New Mexico. Stella ordered a 49-cent cup of coffee from the drive through window. After getting the coffee, Stella’s grandson Chris parked his Ford Probe so that Stella could dress her coffee with cream and sugar. Stella placed the coffee between her legs to remove the lid. She spilled the coffee on her lap. The coffee saturated her cotton sweatpants, trapping the heat against her skin. Stella was rushed to the hospital. She suffered third-degree burns on six percent of her skin, mostly in her thighs, buttocks and groin area. She was hospitalized for eight days and underwent skin grafting. She lost 20 Lbs. from her already frail frame. She required medical treatment on and off for two years.
Stella contacted McDonald’s and demanded that McDonald’s pay Stella’s medical bills, anticipated expenses and lost wages -- her past medical expenses were about $10,500; her future medical costs were approximated at $2,500; and her loss of income was about $5,000. Stella rounded up and agreed to settle her case for $20,000. Instead, McDonald’s offered $800.
Stella hired an attorney who engaged in some good lawyering. Stella’s attorney initially demanded $90,000 to settle her claim. When this demand was refused Stella’s lawyer dug in and prepared his case. He initiated a lawsuit against McDonald’s alleging that McDonald’s conduct was “grossly negligent” for selling coffee that was “unreasonably dangerous” and “defectively manufactured.” The attorney engaged in discovery with McDonald’s and learned what he had suspected – the temperature of that coffee was beyond the point of human consumption and never should have been served to consumers.
Through depositions and document reviews Stella’s attorney learned key facts that would result in a jury finding that McDonald’s conduct was beyond unreasonable. These key facts included:
a) McDonald’s coffee was served at 30 to 40 degrees hotter than other companies,
b) McDonald’s required franchisees to serve coffee at 180-190 degrees Fahrenheit. At this temperature, the coffee would cause a third-degree burn in two to seven seconds. Other companies served coffee at 160 degrees or less. At this 160-degree temperature you have closer to 20 seconds to wipe the coffee away before suffering third-degree burns,
c) From 1982-1992, McDonald’s received more than 700 reports of people burned by McDonald’s coffee, including children, and McDonald’s paid more than $500,000 to settle claims related to injuries suffered due to the coffee being so extremely hot, and
d) McDonald’s quality control manager testified that the number of injuries was insufficient to cause the company to evaluate its practices and change its conduct.
Based upon this information, Stella’s attorney increased his demand to settle to $300,000. A neutral and detached mediator recommended the case settle for $225,000. McDonald’s refused to settle.
The case went to trial. A twelve-person jury (here in New Jersey we have six-person civil juries) found that McDonald’s was 80% responsible for Stella’s injuries (Stella was 20% responsible for her injuries – this is the principle of comparative negligence). Though there was a warning on the coffee, the jury found that the warning was insufficient. The jury awarded Stella $200,000 in compensatory damages. These are damages designed to make Stella whole. This award was reduced by Stella’s 20% of liability, and, thus, her gross award was $160,000.
Here is where it gets fun. Here is where the media took liberties in presenting what occurred and created a false or incomplete narrative that still exists today. Here is why context matters and you must look deeper at all issues. Here is why this case is not the posterchild for frivolous lawsuits.
The jury awarded Stella $2.7 million in punitive damages. Punitive damages are not designed to make the plaintiff whole, but to punish the defendant or deter the defendant from engaging in the same conduct in the future. Having to pay $160,000 to Stella was not going to deter McDonald’s. McDonald’s has $160,000 sitting in its proverbial petty cash drawer. The only way to get McDonald’s to change it behavior was to inflict a modicum of financial pain that would cause the company to reevaluate its business practices. Stella’s attorney suggested to the jury that McDonald’s should be punished, and that punishment should be the loss of profits, nationally for the sale of coffee over a two-day period -- $1.4 million in profits per day.
Ultimately, the judge reduced the punitive damages award to $480,000, which was three times the compensatory damages award. Both sides appealed. The case settled out of court for an undisclosed amount less than $600,000.
There are two important lessons from this case. First, is that the headlines rarely tell the true story. Stella and our civil jury system were ridiculed as being broken. It is this case in which people seem to rely upon most when claiming we are too litigious of a society. However, this case proves the exact opposite. That a 79-yearold grandmother with little financial means can take down a Goliath like McDonald’s and force them to change their behaviors when that corporation puts its bottom line above the health and safety of its patrons.
Second, you need a lawyer when you are injured and you are dealing with large insurance companies/corporations. When McDonald’s refused to pay Stella the $20,000 that she thought was fair she got a lawyer. That lawyer through diligence and tenacity obtained a jury verdict that was 32 times greater than her initial demand ($640,000 jury award/$20,000 initial demand). A good attorney can help extricate the facts necessary to put your claim in proper context. A good attorney can explain why paying $2.7 million dollars for a cup of coffee makes perfect sense.
For another perspective on a cup of coffee see https://www.dispenzafinancial.com/blog/the-11900-cup-of-coffee.
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