With a $9.9 million check, the American Medical Association has officially put aside its Sunbeam controversy.
The AMA paid that amount to Delray Beach, Fla.-based Sunbeam Corp. to settle a lawsuit the company filed related to the association's decision to back out of a controversial licensing agreement. The AMA, drawing on its reserves, paid $7.9 million in damages and $2 million in out-of-pocket expenses, including attorney fees. The $2 million payment was mandated by the contract the AMA and Sunbeam signed in August 1997. The case was scheduled to go to trial in November.
"This chapter in the life of the AMA is closed once and for all," association Chairman Randolph Smoak, M.D., an Orangeburg, S.C., surgeon, said in a prepared statement issued July 31. Neither AMA nor Sunbeam officials were available for comment.
On Aug. 12, 1997, the AMA and Sunbeam signed a five-year, exclusive trademark licensing agreement that would put the association's logo on Sunbeam healthcare products, even though the AMA would not have tested those products.
On Sept. 8, 1997, the AMA Board of Trustees, after receiving intense criticism of the deal, voted to pull out of the contract. That day, Sunbeam filed a lawsuit against the AMA seeking $20 million in damages in U.S. District Court in Chicago.
The Sunbeam deal led directly to the resignations of four AMA executives. It also led to some soul-searching within the association. A resulting House of Delegates investigation determined association staff members failed to make the board aware that negotiations for a licensing deal were taking place, despite such a statement appearing in a board briefing.
Sunbeam, by happenstance, has fared far worse. Financial losses and accusations of improper accounting socked the company's stock price and led to the firing of Chairman and Chief Executive Officer Albert Dunlap, better known as "Chainsaw Al."