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AMA Settles Sunbeam Fiasco

On July 31, 1988, the American Medical Association announced that it would pay $9.9 million to the Sunbeam Corporation to settle a breach-of-contract suit. The settlement amount included $7.9 million in damages and $2 million for the company's attorneys' fees and other out-of-pocket expenses. The suit was filed in September 1997 after the AMA announced it would not honor an exclusive 5-year royalty agreement under which the AMA logo would have been placed on Sunbeam's "Health at Home" products, which included heating pads and humidifiers [1]. The endorsement plan, which had no requirement that the AMA test the products, was widely criticized by ethicists, physicians, and newspaper editorialists who accused the AMA of compromising its credibility [2]. After the AMA Board of Trustees voted to withdraw from the deal, Sunbeam filed suit for breach of contract. An investigative report on the management decisions leading to the contract led the AMA's chief executive officer and two other top AMA executives to resign. The trustees also appointed a task force to develop standards for future business arrangements.

References

1. Klein SA. AMA-Sunbeam suit settled. American Medical News Aug 17, 1998.
2. AMA agrees to pay Sunbeam to settle $9.9 million lawsuit. Psychiatric News 33(17):1,19, 1998.

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