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The AMA has averted a potentially damaging trial by agreeing to pay Sunbeam Corporation $9.9 million after reneging on a deal that would have allowed Sunbeam to use the AMA logo on Sunbeam's home health care products in return for paying the AMA royalties.
The trial had been scheduled for November in U.S. District Court in Chicago.
The AMA will reimburse Sunbeam $2 million for expenses, including attorney's fees, and $7.9 million for "damages related to the AMA's decision last year not to proceed with the licensing agreement," according to a statement by the AMA.
Sunbeam had filed a $20 million suit against the AMA for breach of contract in September 1997, the same day that the AMA officially reneged on the contract.
The settlement ends one of the most embarrassing episodes in the AMA's history. In addition to costing the AMA $9.9 million, the abortive five-year licensing agreement led to the resignation of AMA Executive Vice President P. John Seward, M.D., and the firing of four other high-ranking AMA officials.
The licensing agreement, which was announced in August 1997, drew especially fierce criticism as the AMA had made no arrangements to test the Sunbeam products that would have borne the AMA logo. It also highlighted the way in which formerly clear lines between business and professional associations became blurred and caused soul-searching at the AMA regarding the organization's need to maintain revenue as it continues its struggle to retain members.
"Our agreement resolves all outstanding differences between our organizations," said Randolph Smoak Jr., M.D., chair of the AMA Board of Trustees. "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."
Sunbeam Corporation spokesperson Maureen Bailey said there would be no comment from Sunbeam officials.
The shakeup at the AMA led to the association's first-ever appointment of a nonphysician, E. Lynn Jensen, Ph.D., to lead the organization. This May, Jensen, who was appointed on an interim basis but remains chief operating officer, was replaced by former U.S. Air Force Surgeon General E. Ratcliffe Anderson Jr., M.D., who became the AMA's executive vice president.