Justinian Lane

"The Formula"

Fight Club is without a doubt in my top five favorite movies. I remember when it was in theaters, I thought it was going to be a lame movie about yuppie jocks. One of my friends dragged me to see it, and within the first ten minutes, I was hooked. There are many memorable scenes in the film, but one stands out in particular: "The Formula."

In that scene, Ed Norton callously explains his job as a recall coordinator. Rather than try and describe his performance to you, watch it for yourself. Someone thoughtfully uploaded the scene to Youtube.

I remember when I saw the movie in the theater, the entire audience laughed nervously at the conclusion. We all suspected that there was more than a little truth in the fact that major corporations sometimes decide whether to let people die depending upon how expensive it would be to save lives. It wasn't until years later, that I learned that Fight Club's "The Formula" scene was loosely based upon the Ford Pinto.

The gas tank in the Pinto was known by Ford engineers to be defective. If a Pinto was rear-ended at under 30mph, there was a likelihood that the gas tank would be torn open by protruding bolts, causing gasoline to pour into the car's interior. At 40mph, the same thing would happen... except the doors would also be jammed shut and people would be trapped in their burning Pinto.

Even without the powerful computers available today, Ford's beancounters had a good idea of exactly how many accidents and deaths would occur due to the faulty gas tank. They also estimated how much it would cost to either fix the defect, or to let people die. The image below is from the actual Ford memo relied upon in deciding to let people die.

Unfortunately for Ford, their beancounters' estimates were wrong. In 1981, a 13 year-old boy was permanently disfigured by a fire caused by the defective gas tank. A California civil jury returned a $126 million dollar verdict against Ford, which was the largest verdict ever at that time. One single case had cost Ford almost three times as much as they estimated all 360 cases would cost.

Well, at least it would have if the trial judge hadn't reduced the verdict to about $6 million.

However, the damage to Ford's reputation was done, and the company itself was even indicted for homicide in Indiana after three teenage girls burned to death in their Pinto. The History Channel has a news report about the prosecution here. In short, the prosecution was outgunned, if for no other reason than it's entire trial budget was $20,000 while Ford literally had millions to defend itself. In what could possibly be called a forerunner to the O.J. Simpson case, Ford was acquitted.

The publicity surrounding the numerous civil trials contibuted towards the National Highway Traffic Safety Administration's decision to investigate the Pinto, which was eventually recalled due to the unsafe gas tank. Put another way, if not for personal injury lawsuits, more people surely would have been injured, and possibly killed by the dangerously defective gas tank.

They say that those who don't learn from history are doomed to repeat it. History was indeed repeated when Ford was selling Explorers with defective tires. Firestone and Firestone had been making confidential settlements with victims of the defective tires on Ford Explorers for at least eight years before their defects became public knowledge and the tires were pulled from the market. Apparently, application of "The Formula" revealed that it was cheaper to let people die than to recall the defective tires. Once again, personal injury lawsuits with large jury verdicts led to the recall of the defective tires and saved lives.

Of all the lessons to take away from the Ford Pinto disaster, take this one away: One of the stated goals of the ATRA is to bring "predictability" to the civil justice system, such as with damage caps. If a $250,000 damage cap had been in place during the 1970's, Ford would have been able to have confidentially settled every lawsuit that arose from the Pinto's design. If a $250k damage cap had been in place during the 1990's Ford and Firestone would have been able to have confidentially settled every lawsuit that arose from the defective tires. After all, if the most you can get is $250k in noneconomic damages, and you're offered $250,000 to confidentially settle, you're going to take the settlement. "Predictability" really means making it easier for corporations to decide whether to let consumers die in the name of profit.

Twenty years from now, if another manufacturer sells another defective car or tire, let's hope the civil justice system is still strong enough to hold the company accountable and contribute towards a product recall.

Posted by Justinian Lane at October 5, 2006 09:45 AM