The Beverly Hills Fire: A Revolution in Law
LITIGATION BULLDOZED TRADITIONAL LEGAL ROUTES
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BY BEN L. KAUFMAN
The Cincinnati Enquirer

For the plaintiffs
For the plaintiffs: Lawyer Stanley M. Chesley, right, and Cyril Wecht, a Pittsburgh pathologist, look for evidence among rubble at the Beverly Hills site a few months after the fire. At first, critics said he was ghoulish to seek evidence in the ruins. Mr. Chesley became one of an elite group of attorneys who represent plaintiffs in mass injury cases. Zoom
If they had followed traditional legal wisdom 20 years ago, attorneys for Beverly Hills victims and survivors probably would have sued only the supper club owners.

Lawyer Stanley M. Chesley had a better idea.

Suspecting that an electrical problem started the fire and toxic smoke from furnishings was the killer, he also sued Union Light Heat & Power Co. (ULH&P) and whole industries making aluminum wiring or supplying PVC wire covering, carpets, paneling, upholstery and similar products.

''In all fires, they sue those people now, but it was novel then,'' said William O. Bertelsman, the victims' co-counsel until becoming a federal judge.

Product liability suits weren't new, their colleague, Louis F. Gilligan, said. ''What Stan added was the concept of enterprise liability'' in which a whole industry was sued.

When the litigation ended, clients and their lawyers shared almost $50 million, some of it from major settlements, much of it -- more than $20 million -- from smaller, individual firm's payments.

Similarly, prior to 1977, lawyers would have pursued similar, separate suits for victims.

U.S. District Judge Carl B. Rubin -- the Cincinnatian who volunteered to handle the litigation -- had a better idea: He merged almost 300 claims into one class action. That gave him control over the case and attorney's fees, and it allowed victims' lawyers to pool resources.

''This is the first major disaster case in which it was done or one of the first,'' said Kenneth Abraham, professor of law at the University of Virginia.

''It was against the trend,'' according to Professor Linda Mullenix, professor of law at the University of Texas and author of Mass Tort Litigation Cases and Materials. ''It was very innovative.''

At the time, class actions most often were used for securities cases; Congress discouraged it for mass tort (mass injury) cases.

As a result, disasters, such as airliner crashes, generally were tried or settled one victim at a time, Judge Bertelsman said. ''Nobody even thought of handling those as class actions.''

Every mass class tort case finds its genesis in Beverly Hills, said Gerard G. Pecht, Judge Rubin's law clerk at the time.

Gilligan
''What Stan added was the concept of enterprise liability''
-Louis F. Gilligan, lawyer
A more daring innovation landed in the appellate court. When it was the aluminum wire industry's turn, Judge Rubin divided the trial into phases:

iInitially, jurors would be asked only whether wiring caused the fire. If the answer was no, wire makers would be out of the case.

iIf wiring caused the fire, jurors would reconvene to hear evidence on negligence and damages.

This reflected Judge Rubin's low boredom threshold and passion for court room efficiency, according to Linda Kloth, his administrative assistant until he died in 1995.

''Why should I sit there and listen to all the evidence about damages if it I don't what caused the fire,'' she recalled him saying.

Victims' lawyers said this ''sterile laboratory environment'' violated their clients' right to a jury trial and when they lost, they included that allegation in their appeal.

However, the U.S. Court of Appeals for the 6th Circuit left Judge Rubin's decision untouched and ''and it really has become the model for presentation of most mass tort cases,'' Professor Mullenix said. ''It's a very famous case.''

Judge Rubin's intervention was serendipitous.

Beverly Hills suits were filed mainly in federal court because the parties came from different states. But because Covington had no resident judge and was served only periodically by U.S. District Judge Eugene Siler, Judge Rubin's offer was welcomed by colleagues in Kentucky, Judge Bertelsman said. ''He was energy personified . . . He volunteered to take it because it was a challenging case.''

Mr. Chesley filed the first federal suit five days after the fire. He had determined it was the only way he could get an emergency order from Judge Siler to stop demolition of the ruins, which would give victims' attorneys and investigators access to the site.

''But for that, a great deal of evidence would have been lost,'' Judge Bertelsman said.

Judge Siler's order ''was the single most important order . . . The evidence of the aluminum wiring was in the debris,'' said D. Arthur Rabourn, a law student working for Mr. Chesley who became an attorney in the firm.

Judge Rubin initially created the class action to assure everyone a fair share of what he assumed was a limited fund from Schilling insurance and the sale of the site.

As victims' lawyers brought in hundreds of defendants and the likelihood of a larger fund, Judge Rubin stuck with his decision to avoid individual trials.

He also accepted Mr. Chesley's ''enterprise liability'' theory. Victims' lawyers could not prove who made which aluminum wire or plastic furnishing, so they sued every manufacturer in each industry on the assumption anyone might have supplied the materials.

That sweetened the pot but left a harmful legacy, opposing lawyers say.

''The big innovation,'' complained attorney Jacob Stein, who opposed Mr. Chesley in Beverly Hills and since, ''was that they sued a huge number of people who had no liability and were willing to pay you several hundred thousand dollars to make you go away.''

Too often mass injury cases become so complex that obviously innocent defendants spend a great deal to persuade the judge to drop them from the litigation, said Dr. Frank Woodside III, attorney and physician who often opposes Mr. Chesley in court.

Those problems were evident early in the Beverly Hills litigation, Mr. Stein recalled, but it went forward anyway with similar defendants being grouped for trial.

First were the owners of Beverly Hills -- the Richard Schilling family and its 4-R Corp. -- and ULH&P.

Owners settled for $3 million in December 1978, and the elder Schilling cooperated with victims' attorneys' efforts to draw suppliers into their net of liability.

ULH&P -- a subsidiary of Cincinnati Gas & Electric Co. -- supplied power to the club although wiring was virtually uninspected. CG&E settled for $5.75 million in March 1979, as its trial began.

In February 1980, after an 11-week trial, jurors exonerated 28 firms making aluminum wiring and electrical devices.

The 6th Circuit reversed the verdict after Erlanger juror John Vories told The Enquirer he ignored the judge's instructions, experimented with aluminum wiring at home, and shared his pro-industry conclusions with other jurors.

Judge Rubin, who accomplished all he hoped, left the aluminum wire retrial to Judge Henry R. Wilhoit Jr. in Ashland, Ky. There, 14 defendants settled before trial. Thirteen settled for an estimated $4.2 million during the trial.

General Electric Co. (GE), the twenty-eighth defendant, stood alone when jurors said overheated aluminium wiring substantially contributed to starting the fire. Before the second phase of the trial -- to judge whether GE acted with others to conceal wiring safety problems -- GE settled for $10 million.

Meanwhile:

  • In 1980, Mr. Gilligan and Mr. Chesley persuaded a jury in Judge Rubin's court that makers of polyvinyl chloride (PVC) wire coating failed to warn users of potential hazards although the coatings were not an ''unreasonably dangerous product.'' Before the second phase of the trial to determine whether fumes from burning PVC killed the victims, PVC makers settled for $1.85 million.

    Before Beverly Hills, it was assumed fire victims died from carbon monoxide or burning, Mr. Chesley said. ''Nobody had really focused on these chemicals.''

    Since Beverly Hills, wherever toxic smoke is present, manufacturers of PVC and other plastics expect to be sued.

  • Twenty-one makers of other products, from foam rubber furnishings to ventilation systems, went to trial in March 1982 in Campbell Circuit Court. Twenty settled for a total of $3.8 million before a verdict.

    Of all the defendants, only Rash-Saville-Crawford, a Cincinnati air-conditioning firm accused in part for the spread of the fire and fumes, refused to settle and persuaded jurors it was not at fault.

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