AMA: Settles Sunbeam Suit For $10 Million
The American Medical Association announced Friday that it has settled the lawsuit filed against it by Sunbeam Corp. after the physicians group backed out of a controversial product-endorsement deal with the health care product manufacturer. The AMA will pay Sunbeam $10 million, "thus ending one of the most embarrassing chapters in the Chicago-based group's history." The Chicago Tribune reports that the deal comprises $2 million in "out-of-pocket expenses" including legal fees and $7.9 million in damages Sunbeam incurred due to the AMA's decision (Japsen, 8/1). The exclusive, five-year trademark licensing agreement was announced last August. It called for AMA health care information to be packaged with selected Sunbeam health care products, which would also bear the AMA name and logo. But shortly after the deal was announced, the AMA Board of Trustees announced that the contract was in conflict with AMA policy and principles and directed the AMA not go forward with the contract. Sunbeam initiated litigation to enforce the agreement (AMA release, 7/31). The Chicago Tribune reports that Sunbeam approached new AMA Vice President E. Ratcliffe Anderson with the settlement proposal, thereby avoiding the trial which was set to begin November 2 in U.S. District Court in Chicago.
"Our agreement resolves all outstanding differences between our organizations," said AMA Board Chair Dr. Randolph Smoak Jr. "This chapter in the life of the AMA is closed, once and for all. The AMA is now fully focused on its historic mission to serve America's patients and the quality of American medicine," he added (8/1). But, the Dallas Morning News reports that many AMA members are unhappy about the final terms of the deal. "It's going to make a lot of people mad when they find out how much money it is," said Dr. Robert Gunby, president of the Dallas County Medical Society. Dr. Carolyn Evans said, "That's just kind of mind blowing. I don't know what that's going to do in terms of our members." The AMA's House of Delegates has already adopted a list of 12 principles that it says will prevent a similar situation from occurring (Ornstein, 8/3). Still, the "settlement is sure to be an additional blow to the medical association, which had an operating loss of $1.7 million in 1997, after two years in the black, and suffers declining membership," with fewer than 43% of American physicians now enrolled. Dr. Jerry Schenken, a former AMA board member, said, "Sunbeam wasn't the only thing wrong, it just couldn't have come at a worse time. The AMA needs to viewed as an organization in which doctors can have confidence, and most doctors don't even want to be members" (Chicago Tribune, 8/1).