TEXTBOOK: Case Study

To aficionados of the bean, there’s nothing like a piping-hot cup of java to get the day off to a good start, and nothing more insipid than lukewarm coffee. That’s what McDonald’s thought, anyway—until it learned differently, the hard and expensive way, when seventy-nine-year-old Stella Liebeck successfully sued the company after she was burned by a spilled cup of hot coffee that she’d bought at the drive-through window of her local McDonald’s. The jury awarded her $160,000 in compensatory damages and a whopping $2.7 million in punitive damages. After the trial judge reduced the punitive damages to $480,000, she and McDonald’s settled out of court for an undisclosed sum.

Unlike the outcome of most other lawsuits, the hot-coffee verdict received nationwide attention, most of it unfavorable. To many ordinary people, the case epitomized the excesses of a legal system out of control. If hot coffee is dangerous, what’s next: soft drinks that are too cold? To conservatives, the case represented the all-too-familiar failure of consumers to take responsibility for their own conduct, to blame business rather than themselves for their injuries. More policy-oriented pundits used the case as an occasion to call for reform of product liability law—in particular, to make winning frivolous suits more difficult and to restrict the punitive awards that juries can hand down.

However, those who examined the facts more closely learned that the Liebeck case was more complicated than it first appeared. For one thing, Liebeck was hospitalized for a week because of third-degree burns on her thighs and buttocks, which were serious enough to require skin grafting and leave permanent scars. After her injury, she initially requested $10,000 for medical expenses and an additional amount for pain and suffering. When McDonald’s refused, she went to court, asking for $300,000. Lawyers for the company argued in response that McDonald’s coffee was not unreasonably hot and that Liebeck was responsible for her own injuries.

The jury saw it differently, however. First, McDonald’s served its coffee at 180–190 degrees Fahrenheit, significantly hotter than home-brewed coffee. The jury was persuaded that coffee at that temperature is both undrinkable and more dangerous than a reasonable consumer would expect. Second, before Liebeck’s accident, the company had received over 700 complaints about burns from its coffee. In response to the complaints, McDonald’s had in fact put a warning label on its cups and designed a tighter-fitting lid for them. Ironically, the new lid was part of the problem in the Liebeck case because she had held the coffee cup between her legs in an effort to pry it open.

Although the jury found that Liebeck was 20 percent responsible for her injuries, it also concluded that McDonald’s had not done enough to warn consumers. The jury’s $2.7 million punitive-damage award was intended, jurors later said, to send a message to fast-food chains. Although the judge reduced the award—equivalent to only about two days’ worth of coffee sales for McDonald’s—he called McDonald’s conduct “willful, wanton, reckless, and callous.”

This case study can be found in Business Ethics by William Shaw 9th Edition. If you click on the textbook link below you will go to the end of the chapter and see that it is case 6.2.