Evaluating Mass Torts In An M&A Context

For today’s post, MassTortDefense takes a step away from our usual fare of recent decisions and current events to discuss a broader topic: evaluating mass torts in a merger or acquisition context.

Acquiring Litigation Liability and Structural Considerations

An important aspect of evaluating the possible acquisition of a target company is the potential litigation liability that may be acquired simultaneously. If a target company is involved, or could potentially become involved, in mass tort litigation, it presents both risk and opportunity to the acquirer. The threat of this type of litigation may result in the opportunity to acquire a target at a below-market valuation multiple, and the uncertainty caused by mass tort exposure can result in valuation discounts that make the attendant risk acceptable. There are potentially significant risks, however, associated with mass tort litigation exposure, and thus buyers must proceed carefully. In the private equity context, in particular, mass tort litigation exposure can adversely impact the ability to secure third-party debt financing and can have an adverse impact on investment exit. Private equity purchasers may have shorter investment time frames than strategic buyers, and mass tort litigation often takes a substantial amount of time to resolve itself.

The general rule of law, and the typical structure of an asset purchase agreement, is that an acquirer of the assets of another corporation for cash does not acquire the liability for prior injuries caused by products sold by the target company prior to closing. Even when the parties purport to allocate such liability to the target, however, the buyer may find itself responsible for the litigation through the operation of various legal doctrines that are exceptions to the general rule.

The Restatement (Third) of Product Liability Law notes that a business entity that acquires assets of a predecessor business entity is subject to liability for harm caused by a defective product sold by the predecessor if the acquisition results from a fraudulent conveyance to escape liability for the liabilities of the predecessor, or results in the successor becoming a mere continuation of the predecessor. A few states also add the so-called “product line” exception, which allows a plaintiff to recover for injuries caused by a defective product sold by the predecessor in cases in which the successor corporation has continued the predecessor’s product line.

Thus, even in the absence of an actual merger or stock acquisition, it may be that a buyer of corporate assets will still face exposure to product litigation liability risks. Attempting to structure the deal to try to minimize the possible application of such theories will often be the first line of defense. In an asset sale, the buyer may also want to seek a provision that the seller shall not dissolve for some set period of time, so that the mass tort plaintiffs’ remedies seemingly are not destroyed. Special indemnification by the seller for the underlying exposure is another alternative. This indemnification should survive for a sufficient period of time, and ideally would not be subject to a special cap higher than is typical for representations made by a “clean” company. The use of a special escrow to set aside funds for the litigation indemnification may be important.

When the target company is involved in mass tort litigation, the successor liability risks to the buyer must be examined even more carefully. Buyers must recognize that the successor liability determination may be made by a state court confronting thousands of tort suits and applying the law of the home state of the plaintiff who, absent a finding of successor liability, may be without an adequate remedy. It may not be possible for a buyer to negotiate indemnification that lasts long enough, or is backed by a large enough escrow to eliminate material risks. Thus, it may be a mistake to rely too readily on contractual safeguards without a clear understanding of the future litigation risks.

Mass Tort Risks
A mass tort’s numerous claims pose incredible financial risks, as evidenced by the bankruptcies of large, otherwise prosperous entities because of such litigation. A simple snapshot of any current litigation may understate the potential number of claims, especially if there is a long latency period—the time between exposure to the product at issue and manifestation of the disease allegedly caused by the product. Aggregation of many claims in one procedure, such as a class action, may create an all-or-nothing risk for defendants, compelling what some courts term “blackmail settlements.” Even if the risks of being found liable as a successor seem small, the magnitude of the possible harm generated by the mass tort dictates that the due diligence process carefully evaluate the potential liability.

Mass Tort Due Diligence: Goals and Methodology

The due diligence analysis to help answer the question “What am I buying into?” may involve actual data and dollars. But, requiring as it does judgments about the future litigation environment, it may not result in a precise numerical risk estimate. Thus, the buyer will ultimately make a business judgment about the range of risks that are acceptable in light of numerous factors, including assets available to cover the risks (such as insurance and indemnifications), and the financial benefits of the deal.

Experience has shown the optimal approach to the mass tort due diligence inquiry is to approach the risk question from numerous distinct perspectives, and then combine the learning from the approaches to help minimize the impact of gaps in knowledge. This allows extrapolations to be made with greater confidence.

In the next post, MassTortDefense will describe three such perspectives that can offer insight.

FDA Advisory Committee Holds Meeting On Contrast Agents

A Cardiovascular and Renal Drugs Advisory Committee to the FDA held a public meeting last week to discuss safety considerations in the development of ultrasound contrast agents. Briefing information from the FDA found here.

The meeting comes in the midst of litigation concerning this important type of medical product. For example, about 70 cases have been filed in more than a dozen jurisdictions alleging that gadolinium-based injectable contrast agents cause serious health problems. Plaintiffs claim that gadolinium in contrast solutions used in magnetic imaging causes Nephrogenic Systemic Fibrosis. The federal suits were consolidated in February into an MDL in the U.S. District Court for the Northern District of Ohio. IN RE: GADOLINIUM BASED CONTRAST AGENTS PRODUCTS LIABILITY LITIGATION, MDL No. 1909. The parties made science presentations to the the Court in April, 2008.

Representatives for the makers told panelists this week that the agents are not unduly unsafe and noted that many patients given the agents are already very sick. A number of physicians speaking to the panel urged further study, but said medical information gathered through use of the contrast agents outweighed their side effects. The agents give life-saving information.

Ultrasound contrast agents are "microbubble" (or "microsphere") drugs that are injected into the vascular system in order to improve the diagnostic information obtained from ultrasound-based images. The ultrasound contrast agents approved by the FDA are used in ultrasounds, such as echocardiography, and assist in the diagnosis of various conditions. The uniqueness of the physical and chemical properties of the ultrasound contrast agents, the technicalities of the ultrasound field and its rapid technical advances, combined with the unique design considerations for clinical studies of diagnostic imaging agents have all presented special challenges in the clinical development and optimal use of these agents.

The advisory committee was created to provide a public forum for review of the history of the currently marketed ultrasound contrast agents, to obtain opinions from the advisors regarding safety considerations in the development of these agents, and to begin to familiarize the committee members with the review of diagnostic imaging agents.

According to the FDA, post-marketing reports and new animal data prompted label changes for certain of these products in October, 2007. These changes included a black-box warning and contraindication for use of the products in certain patients with underlying cardiopulmonary conditions.

FDA has most recently been working with the manufacturers to develop a risk assessment and management program. In addition to physician education and enhanced oversight of clinical studies, this program consists of two studies. One is an observational study to be conducted using an administrative database in which mortality will be compared between critically ill patients who receive a contrast-enhanced echocardiogram and critically ill patients who undergo echocardiography without contrast. The second study will obtain pulmonary hemodynamic data from patients who are undergoing right heart catheterization as well as contrast-enhanced echocardiography.

Institute Releases Report on Drug Innovation Through Industry Research

A report just released by the Center For Medical Progress At The Manhattan Institute indirectly undercuts a favorite theme of plaintiffs in pharmaceutical mass torts.

Entitled “The Truth About Drug Innovation: Thirty-Five Summary Case Histories On Private Sector Contributions To Pharmaceutical Science,” the analysis assesses -- and rejects -- the argument that most of the important scientific advances that yield new and improved medicines do not result from private sector research, but instead are the fruits of research efforts financed or conducted by public agencies, such as the National Institutes of Health. The paper also indirectly undercuts a favorite plaintiff theme that scientific research undertaken by, or funded by, private industry is biased, tainted, poor science, and not worthy of a jury’s serious consideration.

The study compiled summary case histories of thirty-five drugs and drug classes (a group of drugs used to treat a given medical condition in similar ways) identified in the scholarly literature as important and/or that were among the most prescribed in 2007. The authors’ conclusions:


• the scientific contributions of the private sector were crucial for the discovery and/or development of virtually all of the thirty-five drugs and drug classes examined in this study.
• The companies’ scientific advances included topics within the basic science of biology and disease, processes relevant for given medical conditions, the applied science of discovering compounds that treat particular conditions; and the development of compounds with improved clinical (medical) effects.

In short, almost all of the drugs and drug classes examined in this study would not have been developed—or their development would have been delayed significantly—in the absence of the scientific or technical contributions of the pharmaceutical firms.

Supreme Court Reduces Punitive Damages Award in Exxon Valdez Case

The U.S. Supreme Court has issued an opinion reducing the amount of the award of punitive damages against Exxon Mobil Corp. related to the 1989 Exxon Valdez oil spill – from $2.5 billion to just $507 million, an amount equal to the compensatory damages in the case. Exxon Shipping Co. v. Baker, 2008 WL 2511219 (U.S., June 25, 2008).

In a 5-3 decision, the Court found that a 1-to-1 ratio of compensatory to punitive damages was appropriate in the case, in which more than 32,000 fishermen and Alaska native citizens sought remedies after the tanker accident spilled approximately 11 million gallons of oil into Prince William Sound. At Phase I of the trial, the jury found Exxon and the ship’s Captain Hazelwood reckless (and thus potentially liable for punitive damages) under instructions providing that a corporation is responsible for the reckless acts of employees acting in a managerial capacity in the scope of their employment. In Phase II, the jury awarded compensatory damages to some of the plaintiffs; others had settled their compensatory claims. In Phase III, the jury awarded $5,000 in punitive damages against Hazelwood and $5 billion against Exxon. The punitive issue has yo-yoed between the District Court and the Ninth Circuit, which eventually in December 2006, reduced the award to $2.5 billion, saying ExxonMobil’s conduct was not intentional and that the rate of punitive damages to actual economic harm exceeded what was appropriate under recent Supreme Court precedent.

Supreme Court View

The Court addressed several issues:

1. Because the Court was equally divided on whether maritime law allows corporate liability for punitive damages based on the acts of managerial agents, it left the Ninth Circuit's opinion undisturbed in this respect (the Ninth Circuit found that ExxonMobil was not exempt from punitive damages).

2. The Clean Water Act's water pollution penalties do not preempt punitive-damages awards in maritime spill cases. Nothing in the statute points to that result, and the Court had rejected similar attempts to sever remedies from their causes of action. There is no clear indication of  congressional intent to occupy the entire field of pollution remedies, nor is it likely that punitive damages for private harms will have any frustrating effect on the CWA's remedial scheme.

3. The punitive damages award against Exxon was excessive as a matter of maritime common law. In the circumstances of this case, the award should be limited to an amount equal to compensatory damages.

And it is this last point likely of most interest to readers of MassTortDefense. Since maritime
law falls under federal jurisdiction, the Court served as a common law court in the case. Rather than the constitutional due process analysis seen in recent punitive damages decisions, see, e.g., State Farm Mut. Automobile Ins. Co. v. Campbell, 538 U.S. 408, the approach was one of fashioning federal common law, giving observers, perhaps, some insight into the Court’s views of punitive generally.


The Court observed that one of the real problems with punitive damages is the stark unpredictability of punitive awards. Courts ought to be concerned with fairness and consistency, and the available punitive damages data suggest that the spread between high and low individual awards is unacceptably large. The spread in state civil trials is especially great, and the outlier cases subject defendants to punitive damages that dwarf the corresponding compensatories. These ranges might be acceptable if they resulted from honest efforts to reach a generally accepted optimal level of penalty and deterrence in specific cases involving a wide range of circumstances, but evidence suggests that is not the case.

The unpredictability of high punitive awards is in tension with their punitive function because of the implication of unfairness that an eccentrically high punitive verdict carries. A penalty should be reasonably predictable in its severity, so that even Justice Holmes's proverbial “bad man” can look ahead with some ability to know what the stakes are in choosing one course of action or another. And a penalty scheme ought to threaten defendants with a fair probability of suffering in like degree for like damage. Justice Souter thus argued that reducing punitive damages actually will better allow them to achieve their goal of acting as a deterrent and a punishment – by making them more predictable.


The Court was skeptical that verbal formulations are adequate insurance against unpredictable outlier punitive awards, and the option of setting a hard-dollar punitive cap was rejected because there is no “standard” tort or contract injury, making it difficult to settle upon a particular dollar figure that would be appropriate across the board. The most promising alternative was to peg punitive awards to compensatory damages using a ratio. This is the approach used in many states and in analogous federal statutes allowing multiple damages.

Based on studies of thousands of cases as to what punitive awards were appropriate in circumstances from the most blameworthy down to the least blameworthy conduct, from malice and avarice to recklessness to gross negligence, compensatory award exceed the punitive award in most cases. Accordingly, the Court found that a 1:1 ratio is a fair upper limit in maritime cases such as this.

Though the decision technically dealt only with maritime liability, some are hailing it as a reasonable way to assess punitive damages generally, particularly on a company that did not intentionally harm the environment. Time will tell whether the decision could have an effect far beyond federal maritime law, cabining unpredictable punitive damages (the way Metro-North Commuter R. Co. v. Buckley, 521 U.S. 424 (1997) impacted medical monitoring claims in the states).

FDA and China Issue Joint Progress Report on Food Safety

The United States and China issued a joint progress statement last week that described the measures both have recently taken to improve the safety of international food and feed imports.
The safety of a variety of products and substances imported from China have been in the news, ranging from pet food, to toothpaste, to toys, to pharmaceutical ingredients. MassTortDefense has posted on this here and here.

According to the statement, both countries have improved the exchange of information on food safety and on the relevant regulatory systems. The U.S. has agreed to conduct training for Chinese officials on U.S. regulatory standards. Each has designated new emergency contacts and notification thresholds for import safety issues. The two countries have also been working towards an electronic certification system between the FDA and China's General Administration of Quality Supervision, Inspection and Quarantine to ensure that Chinese exports meet FDA standards for safety and manufacturing quality. The countries also agreed to increase their focus on inspection, supervision and laboratory testing of Chinese imports.

The document outlines steps taken by both nations in implementing the 2007 Memorandum of Agreement (MOA) on food and feed safety. The MOA established a bilateral mechanism to provide greater information and other assurances to enhance the safety of food and feed products traded between the two countries.

Finally, the report described the establishment of a cooperative mechanism to notify each other of significant risks to public health related to product safety or the gross deception of consumers, and to share information to facilitate each other’s investigation.

The report comes as Senator Sherrod Brown (D.-Ohio), in a letter to the FDA's Center for Drug Evaluation & Research, called on the agency to investigate outsourcing of drug ingredients, and just as China has granted diplomatic approval for the FDA to open three inspections offices in China that also will help increase China's ability to ensure delivery of safe foods, drugs and other products. The FDA reportedly hopes to open the offices in Beijing, Shanghai and Guangzhou before the end of this year, with a total staff of around 12 people.

State Supreme Court Affirms Class Certification In GM Case

In a very disturbing opinion, the Supreme Court of Arkansas rejected General Motor's appeal of a trial court decision to certify a class in a case involving allegedly defective parking brakes in GM vehicles. General Motors Corp. v. Bryant, et al., No. 07-437 (Ark., June 19, 2008). The case was originally brought in 2005 by named plaintiff Boyd Bryant, who alleged that a defectively designed parking brake incurred excessive wear after only 2,500 to 6,000 miles of use. GM allegedly discovered the defect in 2000 and redesigned the part, a spring clip, in 2001. The proposed class included owners of "1500 Series" pickups and utilities that were registered in the U.S. and were originally equipped with an automatic transmission and a PBR 210x30 Drum-in-Hat parking-brake system utilizing the high-force spring clip retainer. Plaintiff alleged that some 4,000,000 pickup trucks and sport utility vehicles sold by General Motors 1999-2002 were equipped with the defectively designed parking brakes. As causes of action, Bryant alleged breach of express warranty, breach of implied warranty of merchantability, violation of the Magnuson-Moss Warranty Act, unjust enrichment, and fraudulent concealment/failure to disclose.

After a hearing, the trial court certified the class. GM appealed.

The Class Rule

Rule 23 of the Arkansas Rules of Civil Procedure governs class actions and requires, like the federal rule, numerosity, commonality of questions of law or fact, typicality of the claims or defenses, and adequacy of representation by named parties and their counsel. A class action may be maintained if the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.

The Appeal

General Motors asserted three main points on appeal worthy of our discussion: (1) that extensive legal variations in state laws defeated predominance; (2) that extensive factual variations in the millions of claims defeated predominance; (3) that class certification was not superior.

Choice of Law

General Motors noted that the significant variations among the fifty-one pertinent product defect laws should defeat predominance. [Most courts have accepted this notion.] The trial court had provided four reasons for its finding that the potential application of multiple states’ law did not create predominance concerns. First, the court noted that, unlike the federal rule which requires a rigorous analysis of class certification factors including the impact state law variations may have on predominance, no such rigorous analysis is required in Arkansas. Second, the potential application of many states’ laws was not germane to class certification, but was instead a task for the trial court to undertake later in the course of exercising its autonomy and substantial powers to manage the class action. Third, the trial court found that assessing choice of law was a merits-intensive determination and thus inappropriate at the certification stage. “It would be premature for the Court, at this stage in the case, to make the call on choice of law.” Fourth, if application of multiple states’ laws was eventually required, and it proved too cumbersome or problematic, the circuit court could always consider decertifying the class.

The state Supreme Court found that whether or not the class members’ vehicles contained a defectively designed parking-brake system, and whether or not General Motors concealed that defect, are predominating questions, notwithstanding the various states’ laws that may be required in determining the allegations of breach of express warranty, breach of implied warranty, a violation of the Magnuson-Moss Warranty Act, unjust enrichment, fraudulent concealment, damages, and restitution. The mere fact that choice of law may be involved in the case of some claimants living in different states is not sufficient in and of itself to warrant a denial of class certification. The Court viewed any potential choice of law determination and application as being similar to a determination of non-predominating individual issues, which would not defeat certification.

On the issue whether an Arkansas court must first conduct a choice of law analysis before certifying a multistate class action, the Court declined to follow the precedent of other jurisdictions, and rejected any requirement of a rigorous inquiry by the trial courts. Instead, it found that the circuit courts have broad discretion in determining whether the requirements for class certification have been met, recognizing the caveat that a class can always be decertified at a later date if necessary. Moreover, the Court believed that requiring the circuit court to conclude at this stage precisely which law should be applied could potentially stray into the merits of the action itself, which should not occur during the certification process.

The concurring opinion noted that this idea extended far past the holdings of prior case law, and potentially foreclosed analysis that could conceivably be required in some cases. A conclusion that choice-of-law issues not related to recovery or defenses will never predominate over common questions of law or fact is impermissibly overbroad.

MassTortDefense would suggest that most courts and commentators do not equate a choice of law analysis with an impermissible examination of the merits of the plaintiffs’ claims. Choice of law is a threshold question that ultimately permits a court to reach the merits of the dispute by establishing the governing legal rules. The selection of the proper law cannot fairly be termed a “merits-intensive determination” Moreover, the trial court need not make any determination about the merits of the causes of actions alleged in order to assess, based on relevant contacts, which state’s law ought to apply to those claims. Nor does the trial court even have to “make the final call” on what law will apply to each and every claim by every class member. It is sufficient for class certification for the trial court to discover that the law of many other states will likely have to be applied to many class members’ claims, and factor that into superiority and manageability of the proposed class.

Factual Variations

General Motors asserted that many factual variations preclude a finding of predominance, including issues of defect, causation, damages (was a parking brake repaired already under warranty and, if not, why not), notice of breach, class member knowledge about a potential parking-brake problem at the time of purchase, reliance, materiality, and affirmative defenses, such as comparative negligence.

The state Supreme Court found that the issue of defect was a predominating common issue. The Court viewed any need for individual inspections and/or the individual use factors merely as individual determinations relating to right to ultimate recovery or damages that pale in comparison to the purportedly common issues surrounding GM’s alleged defectively designed parking brake and alleged cover up to avoid paying warranty claims. (Of course, a proper choice of law analysis would have revealed that the issue of defect is not truly common.)

As is not uncommon, the trial court did not really address the question of how it would conduct a class trial, especially one involving legal standards from different states. But the Supreme Court stated, “We have repeatedly recognized that conducting a trial on the common issue in a representative fashion can achieve judicial efficiency.” The Court expressed general approval for the bifurcated approach to the predominance element by allowing circuit courts to divide a case into two phases: (1) certification for resolution of the preliminary, common issues; and (2) decertification for the resolution of the individual issues. Here, whether the parking-brake system installed in the class members’ vehicles was defective and whether General Motors attempted to conceal any alleged defect were “overarching issues” that could be resolved before the circuit court reaches any of the individualized questions raised by General Motors.

MassTortDefense notes that the courts rarely, if ever, focus on the manageability issues and due process concerns raised by this suggestion – devoid of analysis – that bifurcation of the trial and/or decertification following the “common” issues phase will somehow resolve all concerns. If separate juries are involved – and how can they not be with potentially millions of class members – the results of the first trial must be applied by the later juries. Fault of the defendant found in phase one must be compared with comparative fault of the plaintiff. The defect found in phase one must be shown to cause the injury and damages shown in the individual trial. False statements proven in phase one must be shown to have been relied on in the later phase. But the first trial, the common issues trial, is never tried in such a fashion (with verdict form and jury findings) that will allow that linking up to occur.

What is really happening is the transformation of class certification from a procedural tool for adjudicating large numbers of nearly identical claims into a device that aggregates disparate claims for the sole purpose of leveraging settlement. A grant of class status can put considerable pressure on the defendant to settle, even when the plaintiff’s probability of success on the merits is slight. Blair v. Equifax Check Servs., Inc., 181 F.3d 832, 834 (7th Cir. 1999); see also In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293, 1298 (7th Cir. 1995) (companies facing millions of dollars in potential liability “may not wish to roll the dice. That is putting it mildly.”). Certifying a class without knowing whether it satisfies the requirements of Rule 23 misuses a procedural device to create settlement pressure where none should exist.


Superiority

General Motors contended that the superior method of handling a claim that particular  vehicles are defective is by petition to the National Highway Traffic Safety Administration (NHTSA). The Court observed that the superiority requirement is satisfied if class certification is the more efficient way of handling the case, and it is fair to both sides. In determining whether class-action status is the superior method for adjudication of a matter, it may be necessary for the circuit court to evaluate the manageability of the class. The court assumed that opt outs and summary dispositions would shrink the class, and at the same time, that the proposed class of approximately 4,000,000 members makes it at least likely that without a class action, numerous meritorious claims might go unaddressed. [What happened to the hard and fast rule not to consider the merits?] While not the sole basis for certifying the class, the smallness of the individual claims is another factor to be considered in deciding superiority.

In any event, NHTSA twice rejected petitions dealing with the allegations made in the instant case, so resolution by that agency cannot be superior to a class action when the agency has made such a rejection, observed the Court. Moreover, the rule was not intended to weigh the superiority of a class action against possible administrative relief. The superiority requirement was intended to refer to the preferability of adjudicating claims of multiple-parties in one judicial proceeding.

MassTortDefense would suggest that the repeated references to the trial court’s ability to later decertify the class smacks of the improper, rejected, concept of conditional certification – a practice that has been soundly rejected in recent years by state and federal courts and is now prohibited under both the Arkansas Rules of Civil Procedure and the federal rules on which they are modeled. After considerable time and effort is expended, courts are reluctant to decertify. Here, for example, GM presented the court with a thorough analysis of conflicts of laws regarding the state-law fraud claims, breach of warranty, applicable statutes of limitations, and unjust enrichment. It seems unlikely that the trial court (after its certification was affirmed) will ever seriously revisit this issue in the context of a new predominance determination. If the court’s approach were correct, class certification would be a meaningless exercise since courts would not address the most difficult and important class certification-related questions – i.e., whether a class trial is fair or feasible – until long after certification. 

MassTortDefense wonders, along with amicus the Chamber of Commerce, if Arkansas is likely become the latest “magnet” jurisdiction for the plaintiffs’ bar, imposing huge costs on companies that do business in the state and placing an unnecessary strain on Arkansas courts by forcing them to devote substantial resources to managing large-scale litigation matters that have only a minimal connection to Arkansas consumers.

Congress Still Wrestling with CPSC Legislation

MassTortDefense has posted before about the competing Senate and House bills to reform the Consumer Product Safety Commission. See here.


Media reports are suggesting that conferees on Consumer Product Safety legislation might not complete their efforts before Congress recesses June 27th. House Majority Leader Hoyer (D-Md.), had predicted that the compromise CPSC bill would come to the floor in June. But debate, and lobbying, on the bill continue.

As noted before, most of the more contentious issues in the bill were included in the Senate version of the legislation, which was passed in March. Sticky issues include provisions granting state attorneys general the power to pursue purported violations of laws enforced by CPSC; whistleblower protections for employees of manufacturers; and a public database for reports of injuries, illness, death, or risk related to consumer products submitted by consumers, local, state or national government agencies.


If the process is not completed by August, Congress will be in campaign mode and that may scuttle the reform legislation for this year.

Senate Judiciary Committee Holds Hearing on Preemption

The Senate Committee on the Judiciary recently held a hearing entitled “Short-Change for Consumers and Short-Shrift for Congress? The Supreme Court’s Treatment of Laws that Protect Americans’ Health, Safety, Jobs and Retirement.”

On June 11, 2008, the Committee discussed recent preemption decisions by the Supreme Court, and heard from several witnesses including consumers, academics, a representative of the United States Chamber of Commerce, and attorneys. See details here.

Committee Chair Senator Leahy (D. Vt.) took up the cry of Democrats who have suggested that the Supreme Court has narrowly interpreted the laws designed to protect Americans who rely on medical devices to keep them alive. This Supreme Court interpretation has transformed the law, he said, into one that takes away protections from people by extinguishing long-standing state law remedies which hold corporations accountable when they are aware of potential dangers but hide them from consumers. As a result, Americans are allegedly not only deprived of a remedy under state law but are offered no replacement remedy under Federal law.

Sen. Orrin Hatch’s questioning brought out the U.S. Supreme Court's decision in Riegel v. Medtronic, preempting state law claims relating to FDA approval of certain medical devices, was correctly decided. FDA approval of a device pre-marketing-approval application constitutes approval of the physical aspects of a device and its labeling, which results from a comprehensive review of the scientific and medical information relevant to the effectiveness and safety of the particular device. It also reflects FDA’s detailed resolution of tensions between aspects of the device that confer therapeutic benefits and aspects that present risks to safety.

Where the FDA has weighed the advantages and disadvantages of, and has approved, the design and labeling of a particular product, decision-makers applying state law should not be permitted to second-guess FDA’s approval, or re-weigh benefits and risks, or revise trade-offs FDA has already found acceptable, by finding the product’s design or labeling inadequate, Hatch was told.

Hatch noted that it would be difficult to characterize the Supreme Court's 8-1 decision as a ruling by an "activist" court. The court's decision was foreshadowed by prior Supreme Court and federal appeals court rulings.

The hearing was cut off before all witnesses testified live due to procedural issues in the Senate. Clearly, however, certain members of Congress are paying attention to the preemption issues.

State Appeals Court Orders Venue Changes in Benzene Litigation

The Texas Court of Appeals ruled last week that a trial court had erred in denying the defendants' motion to transfer venue in a multi-plaintiff benzene lawsuit. Shell Oil Co. v. Baran, 2008 WL 2369030 (Tex.App.-Beaumont June 12, 2008).

Location, location, location – crucial factors in real estate and potentially in product liability litigation as well. While plaintiffs traditionally have the right to select the forum of their choice, such discretion is not unfettered. Venue rules, jurisdictional requirements, forum non conveniens, and removal possibilities, may all be considered by defendants to level the playing field.

The litigation in Baran involved the claims of multiple plaintiffs who sued more than 40 chemical and oil companies in Orange County, Texas, alleging they developed leukemia and other serious illnesses as a result of exposure to benzene, benzene-containing products, naptha, mineral spirits, petroleum distillates, methyl ethyl ketone, solvents, paints, primers, coatings, paint thinners, toluene and xylene. Among the specific injuries alleged were myelodysplastic syndrome, acute myelogenous leukemia and non-Hodgkin's lymphoma.

Plaintiffs filed a “Motion to Sever and Motion to Consolidate,” in which they asked the court to sever each plaintiff's claims into a separate proceeding, but to consolidate the cases for pre-trial discovery purposes only, which the trial court granted. But the trial court denied the defense motions to transfer venue as to each plaintiff. The moving defendants then filed an accelerated interlocutory appeal.

The court of appeals acknowledged that a plaintiff is generally permitted to choose venue first, and the plaintiff's choice of venue cannot be disturbed if the suit is initially filed in a county of proper venue. In Texas, however, in a suit with multiple plaintiffs, each plaintiff must, independently of every other plaintiff, establish proper venue.

Plaintiffs relied upon the general venue statute, which provides that suit shall be brought in the county where all or a substantial part of the events or omissions giving rise to the claim occurred or in the county where the defendant's principal office is located.  Plaintiffs alleged that all or a substantial part of the events giving rise to their cause of action occurred in Orange County, Texas, contending that each plaintiff alleged and offered prima-facie proof of a disease caused by cumulative exposures to defendants' benzene containing products, which resulted in each plaintiff's suffering an indivisible injury.  Because the injury was allegedly indivisible, plaintiffs argued, each arose out of the same transaction, occurrence, or series of transactions or occurrences even with multiple exposures.

Defendants specifically denied this allegation of venue, and the court agreed appellees provided insufficient facts to support this allegation, in their petition, or by way of affidavit or attachments supporting their same transaction or occurrence theory. In fact, plaintiffs did not plead this alleged venue fact in their original petition.

Plaintiffs’ other alleged basis for maintaining venue in Orange County was the allegation that DuPont had a principal place of business there. However, because plaintiffs sued multiple defendants, the trial court cannot maintain venue as to all of the other named defendants unless plaintiffs' claims arose out of the same transaction, occurrence, or series of transactions or occurrences. Again, plaintiffs argued that their claims arose out of the same transaction, occurrence, or series of transactions or occurrences because they suffered from indivisible injuries. But they had not pled adequate facts to conclude that their claims arose from the same transaction or occurrence. Thus, the trial court erred in concluding that plaintiffs independently established venue in Orange County.

When a plaintiff files suit in a county where venue is not proper, the defendant may have the suit transferred to a proper venue. Thus claims against ConocoPhillips Company, and several other defendants, were transferred to Harris County, Texas. The trial court was directed to transfer all of plaintiffs' claims and causes of action against Berryman Products, Inc. to Tarrant County, Texas, and to transfer all of plaintiffs' claims and causes of action against Safety-Kleen Systems, Inc. to Collin County, Texas, and so forth.

House Committee Holds Hearing On Phthalates And BPA In Consumer Products

The House Energy and Commerce Committee’s subcommittee on Commerce, Trade, and Consumer Protection held a hearing last week on “Phthalates and Bisphenol-A in Everyday Consumer Products.” See webcast here.  (MassTortDefense has posted on BPA before, here and here and here.  Phthalates are chemicals used to soften polyvinyl chloride (PVC) and make it flexible.)


This testimony before Congress pointed out one of the major problems with the knee-jerk reaction of sensationalist media, liberal lobbyists, and uninformed legislators who quickly call for the banning of useful products as soon as any scientific reports even hint of a risk. A chemist from the Consumer Product Safety Commission noted that the banning of di-isononyl phthalate (DINP) from all children's products, could lead to substitute plasticizers that are not as fully studied, not as well known, or not as well characterized toxicologically. And banning BPA could lead to more children injuries.


In addition to the CPSC, officials of the FDA, NTP, and EPA testified as well before the House subcommittee on June 10th. Also, the Science and Environmental Health Network testified in favor of a ban, while the American Chemistry Council opposed it. The hearing came as House and Senate conferees are working out differences in their respective legislation to reform the CPSC. See the MassTortDefense post here on that. The industry voluntarily removed DINP from teethers, rattles, and pacifiers in the late 1990’s. The Senate version of the CPSC bill would essentially prohibit these phthalates from children's toys or child care articles: DINP, di-isodecyl phthalate (DIDP), di-n-octyl phthalate (DnOP), di-(2-ethylhexyl) phthalate (DEHP), dibutyl phthalate (DBP), and benzyl butyl phthalate (BBP).

Bisphenol-A (BPA) was the other chemical at issue in the hearing. The CPSC official testified that its beneficial uses in items such as helmets and other protective gear to prevent injuries in children needs to be considered. A ban could result in less effective protection of children from head, eye, or bodily injury. Rep. Edward J. Markey (D-Mass.), a member of the House Energy and Commerce Committee, has introduced legislation that would prohibit the use of bisphenol-A in all food and beverage containers. (The “Ban Poisonous Additives (BPA)” Act, text here.)  But the Food and Drug Administration associate commissioner for science testified that available evidence indicates that food contact materials containing BPA currently are safe as exposures from food contact materials are well below the levels that may cause health effects.

The FDA formed a BPA task force in April that is reviewing current research on BPA, and looking at all products regulated by the FDA to better understand potential routes of exposure. The FDA also is looking at concerns raised by the draft report by the National Toxicology Program. See our post here.

Latest BPA Update: Peer Review Panel Weighs In On NTP Draft Report

Latest BPA update. Readers of MassTortDefense know that a recent draft report by the Center for the Evaluation of Risks to Human Reproduction (CERHR) of the National Toxicology Program (NTP) examined bisphenol-A (BPA). The CERHR/NTP draft report, issued April 15th for public comment, expressed "some concern" based on animal studies that the chemical might affect the neurological systems and behavior of fetuses, infants, and children. See our post here.


Officials from the U.S. Food and Drug Administration and the U.S. Consumer Product Safety Commission both told the U.S. Senate Committee on Commerce, Science and Transportation subcommittee on consumer affairs recently that bisphenol-A did not appear to pose sufficient risks that the product should be banned. Although review is ongoing, at this time those agencies have no reason to recommend that consumers stop using products containing BPA. The FDA's associate commissioner for science said that a large body of evidence indicates that currently marketed products containing BPA, such as baby bottles and food containers, are safe and that exposure levels to BPA from these products are well below those that may cause health effects. See our post here on this.


The NTP collected public comments on the draft and scheduled a June 11 peer review meeting for the draft. In comments on the NTP draft report, the American Chemistry Council asserted that the program relied on numerous studies of dubious and limited quality. Certain environmental groups sought stronger statements of concern.

The expert review panel has now concluded that the National Toxicology Program overstated some of the concerns about bisphenol A's potential developmental effects. At a meeting in Research Triangle Park, the panel, called the Board of Scientific Counselors, voted to revise the levels of concern stated in the NTP draft report on bisphenol A. In particular the “some concern" is to change to "minimal concern" regarding the neurological system and behavior of fetuses, infants, and children as might be affected by exposure to low levels of bisphenol A. (The toxicology program regularly uses "statements of concern" about different types of exposures and different groups that may be exposed to a chemical. The five levels of concern used by NTP are from highest to lowest: serious concern, concern, some concern, minimal concern, and negligible concern. )

Following its review of the draft report, the BSC panel decided that NTP had overstated bisphenol A's potential effects on mammary glands and the onset of puberty in young females. The panelists generally felt that there were insufficient scientific data to support any stronger level of concern than minimal.

The review panel said there was sufficient evidence in the studies considered by NTP to support its other statements of concern –minimal and negligible.

• The BSC accepted (7 yes, 4 no, 1 abstention) that the scientific evidence cited in the draft NTP Brief on Bisphenol A supports the conclusion of minimal concern for bisphenol A exposure in fetuses, infants, and children at current human exposures based on effects in the mammary gland. • The BSC accepted (7 yes, 4 no, 1 abstention) that the scientific evidence cited in the draft NTP Brief on Bisphenol A supports the conclusion of minimal concern for bisphenol A exposure in fetuses, infants, and children at current human exposures based on an earlier age for puberty in females.
• The BSC accepted (11 yes, 1 no) that the scientific evidence cited in the draft NTP Brief on Bisphenol A supports the NTP conclusion of negligible concern that exposure of pregnant women to bisphenol A will result in fetal or neonatal mortality, birth defects or reduced birth weight and growth in their offspring.
• The BSC accepted unanimously (12 yes, 0 no) that the scientific evidence cited in the draft NTP Brief on Bisphenol A supports the NTP conclusion of negligible concern that exposure to bisphenol A causes reproductive effects in non-occupationally exposed adults.
• The BSC accepted (11 yes, 0 no, 1 abstention) that the scientific evidence cited in the draft NTP Brief on Bisphenol A supports the NTP conclusion of minimal concern for workers exposed to higher levels of bisphenol A in occupational settings.

The panel also accepted the mid-level “some” concern expressed in two areas.

• The BSC accepted unanimously (12 yes, 0 no) that the scientific evidence cited in the draft NTP Brief on Bisphenol A supports the NTP conclusion of some concern for neural and behavioral effects of bisphenol A in fetuses, infants, and children at current human exposures.
• The BSC accepted (10 yes, 2 no) that the scientific evidence cited in the draft NTP Brief on Bisphenol A supports the NTP conclusion of some concern for bisphenol A exposure in fetuses, infants, and children at current human exposures based on effects in the prostate gland.


The panel called for additional research to better understand bisphenol A's potential effects.

Public comments on the draft , transcripts, list of attendees, etc. found here.

MDL Judge Excludes Plaintiffs' Real Estate Expert Opinion in MTBE Litigation

The MDL judge overseeing the federal MTBE litigation, In re Methyl Tertiary Butyl Ether (MTBE) Products Liability Litigation, MDL 1358, recently issued a ruling excluding a plaintiff expert’s opinion that the gasoline additive's alleged contamination of private wells caused home values to drop 15%. In Tonneson v. Sunoco Inc., 2008 WL 2324112 (S.D.N.Y. 6/6/08), Judge Shira A. Scheindlin held that the real estate expert, Gregory Langer, failed to offer any valid methodology for his devaluation conclusion.

In property damage cases, the injury/damages expert issues can be crucial. While plaintiffs prefer to focus attention as much as possible on defendant’s conduct, whether it be the alleged creation of a nuisance, strict liability for ultrahazardous activities, negligence, etc., in reality the plaintiffs’ ability to prove impact, injury, and damages from the conduct is a central issue in these cases.

Expert Opinions

The expert proposed to offer several opinions:

1. Contamination of the exclusive source of drinking water for residents with a chemical such as MTBE, which received widespread local publicity, has a significant impact on the market value of the property.

2. There is credible evidence that publicity concerning MTBE contamination in the relevant area has materially impacted the ability of residential property owners to sell their homes within a reasonable period of time.

3. A reasonable seller of real estate would disclose to any prospective buyer the presence of MTBE contamination in the domestic well servicing the property to be sold.

4. The value of plaintiffs' property in the affected area decreased by 15% due to the effective MTBE contamination.

The expert admitted that there were not enough sales to generate the data for a regression analysis. Thus, it was necessary to provide trend data on sales by sub-markets, sales/list price analysis, and days on the market comparisons. Langer's report compared the real estate market in the County as a whole and the relevant local community, on such variables as average list price, percentage sale price/list price, average days on the market, and median price.

Daubert Analysis

The court noted that under Rule 702, if scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

In this case, the court concluded it was unable to discern any method -- much less a reliable method -- that Langer used to reach his conclusion that the value of plaintiffs' property decreased by 15% because of MTBE contamination. Langer merely compiled market data and then offered his conclusions, without any sufficient explanation of the relationship between the two. The expert provided a litany of “important factors” that can affect the value, without any explanation how these factors did affect the value of plaintiffs' property, beyond the obvious conclusion that it would better to have properly that has not been contaminated with MTBE.

Other problems included the fact that the expert also selectively chose data to highlight. For instance, Langer stressed days on market, without addressing the fact that the median price went up at the same time. Obviously, the average days on the market may have shot up because sellers were unwilling to negotiate downward on their selling price in such a hot market. Without good explanations, courts cannot assess the reliability of any conclusion drawn by an expert, even if he possesses relevant experience. The expert cited, but did not follow, suggested standards of the relevant appraisal industry group, the USPAP.

The ultimate problem with Langer's opinion was not his conclusion but the fact that he failed to identify any methodology. A court cannot assess the reliability of reasoning or methodology that is unexplained. The ipse dixit of the expert is insufficient.

Fact Testimony

While Langer's expert testimony did not satisfy Rule 702, the statistics that he gathered on retail property were deemed relevant to plaintiffs' action. Plaintiffs might argue to the jury that they should find, based on all of the evidence, that the sales figure statistics demonstrate that MTBE contamination was a cause of the alleged diminished value of plaintiffs' homes. Thus, he would be permitted to offer certain statistics as a fact witness.

NRDC Attacks Changes by EPA to Chemical Risk Assessment Process

MassTortDefense has blogged before about changes to the IRIS system. See here
A reminder: IRIS is a compilation of electronic reports on specific substances found in the environment and their potential to cause human health effects. IRIS was initially developed for EPA staff in response to a growing demand for consistent information on substances for use in risk assessments, decision-making and regulatory activities. For each chemical contained in IRIS, the database contains summary information on the studies evaluated, any uncertainties or assumptions made in the studies, a statement of the level of confidence that EPA has in the study, the names of EPA scientists to contact for more information, and complete bibliographic citations. Proffered experts in the toxic tort branch of products litigation may refer to and seek to rely on IRIS. E.g., Avance v. Kerr-McGee Chemical, 2006 WL 39124272 (E.D. Texas 1/1//07).


As noted, EPA has proposed various changes to the process for developing chemical assessments, including an expanded process for recommending a substance be assessed; the earlier involvement of other agencies and the public; hosting “listening sessions” to allow for the broader participation and engagement of interested parties; and an even more rigorous scientific peer review of IRIS assessments. The agency said the changes would make the process of assessing the risks of potential environmental contaminants faster, more predictable and more
transparent.

MassTortDefense predicted that environmental groups and Democratic legislators would complain. And they have.

The Natural Resources Defense Council testified before Congress last week that the proposed
changes would allow the White House to delay scientific assessments of chemicals’ health risks and hinder opportunities for public comment and scientific debate. An NRDC director told the House Science & Technology Committee’s Investigations and Oversight Subcommittee that the changes would damage EPA's ability to identify chemicals that pose the greatest risk to public health. The NRDC argues that instead of providing greater transparency, objectivity, balance, rigor and predictability to the IRIS assessments, as EPA claims, the process will somehow give industry more access and more influence to what has historically been an objective scientific evaluation process. The new IRIS process, NRDC claims, introduces steps that are time consuming and undermine the objectivity and transparency for credible and valid risk assessments. 

NRDC thus asked committee members to overturn or withdraw the new IRIS process and require IRIS health assessments to be reviewed in a more “open process.”

It seems like the thrust of the criticism relates to an obviously good thing, the proposal to have various interested federal agencies communicate and coordinate. The new steps in the process include greater opportunities for other federal agencies to conduct research to fill data gaps.

State Appeals Court Rejects Consumer Fraud Class Action

The Third DCA appeals court in Florida ruled last week that a class action involving consumers who bought Sephia model vehicles with allegedly defective brake systems from Kia Motors should not have been certified. Kia Motors America Corp. v. Butler, 2008 WL 2356354 (June 11, 2008, Fla. App. 3rd Dist.).

The panel held that the trial court in Miami-Dade County had abused its discretion by certifying the class. The named plaintiff, Yvonne Butler, had filed the proposed class action on behalf of all Florida purchasers of 1999-2001 Kia Sephia model passenger motor vehicles. The complaint alleged that all Sephias manufactured during those years contain a brake system design defect that causes premature wear of the brakes, as a result of which the vehicles fail to meet a U.S. market brake-wear expectation of 20,000-30,000 miles. According to the complaint, the defect caused the cars to be unable to stop, or to suffer impaired stopping performance, increased stopping distances, brake shudder, brake vibration, or brake lockup and loss of control. The class sought damages to each class member for economic losses, including the difference between the price paid for each vehicle and the value of the vehicle, reduced resale value, and any out-of-pocket repair costs on the cars. It was estimated that about 18,000 Sephia vehicles were sold or leased in the state during the class period.

Consumer Fraud Claim Made

Plaintiffs sought to proceed under the Florida Deceptive and Unfair Trade Practices Act (FDUTPA), Fla. Stat. §§ 501.201-.213, as well as breach of statutory, implied and express warranty. That makes the case one of the recent trend in which plaintiffs bring consumer fraud claims for what in the past might have been traditional products liability claims for product defects, under the theory that consumer fraud claims are easier to get certified as class actions. Not this time.

The Decision

The appeals court noted that class actions are an exception to the general rule that litigation is conducted by, and on behalf of, individual named parties only. For that reason, the trial court must conduct a rigorous analysis to determine whether the elements of the class action rule have been met. The first set of these requirements are referred to as the numerosity, commonality, typicality, and adequacy of representation elements of class certification. But in addition to satisfying those, a plaintiff also must satisfy one of the three subdivisions of Florida Rule of Civil Procedure 1.220(b). The relevant subdivision in this case was subsection (b)(3), which requires that common questions of law or fact predominate over any individual questions of the separate members, and that class representation is superior to other available methods for the fair and efficient adjudication of the controversy. Thus, to certify a class, this rule requires not only that common questions exist, but that those common questions predominate over individual questions; and that the class action to be manageable and superior to other proceedings. (much like the federal rule)

To determine if these requirements have been met, a trial court must envision how a class action trial would proceed. (MassTortDefense has frequently urged trial judges to "look down the road" and not blindly accept plaintiffs' bold assertions about trial procedures.) Under this analysis, the trial court must determine whether the purported class representatives can prove their own individual cases and, by so doing, necessarily prove the cases for each one of the thousands of other members of the class. If they cannot, a class should not be certified.


Predominance Lacking


The class certification in this case failed, first, to satisfy the predominance criteria. While plaintiffs alleged a common defect, the evidence demonstrated that the brake systems found in the three Kia Sephia models in this case were far from uniform. The disc braking process in an automobile is a complicated mechanical and hydraulically assisted process. The Kia Sephia vehicle disc brakes installed during the model years at issue were comprised of component parts specific to that model year. For example, the pad material was changed, the pad shim material was changed, the pad shim protector was removed, and rotor material modified. The 2000 model Sephia was manufactured with a different brake pad design from the prior model. Additionally, the rotor thickness was changed. For the 2001 model-year, the Sephia's front brake system was completely redesigned.

Thus, the court concluded that the component and design changes resulted in significant  differences in the performance of the Kia Sephia's front brakes over the three model years at issue here. “It is therefore scientifically and logically impossible to conclude that any performance issues for these three model years were the result of a common design.”  And it follows that even if there existed a difference between the price paid for each vehicle and the value of the vehicle as delivered for any design period, that difference cannot be proven on a class-wide basis.

Due Process Concerns

Importantly, the court took on plaintiffs' vague trial plan assertions, noting that to proceed at the level of abstraction urged by plaintiffs would raise due process concerns. See Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367, 377-78 (1996). The Third DCA cited the famous language from Broussard v. Meineke Disc. Muffler Shops, Inc., 155 F.3d 331, 344 (4th Cir.1998), about a trial plan denying a class action defendant a fair trial when it is forced to defend against a composite “perfect plaintiff” pieced together for litigation. The court went on to note that due process requires that class actions not be used to diminish the substantive rights of any party to the litigation. See generally Moller, The Rule of Law Problem: Unconstitutional Class Actions and Options for Reform, 28 Harv. J.L. & Pub. Pol. 855 (2005); Epstein, Class Actions: Aggregation, Amplification, and Distortion, 2003 U. Chi. Legal F. 475 (2003).

Consumer Fraud Act Analysis

A claim for damages under FDUTPA has three elements: (1) a deceptive act or unfair practice; (2) causation; and (3) actual damages. The FDUPTA class claim failed in this case on both the causation and actual damages elements. Among the individual questions that can be reasonably envisioned in the prosecution of this count, said the court, are: (1) whether the purchaser had knowledge of the alleged brake defect and purchased the vehicle despite such knowledge; (2) whether a deficiency attributable to Kia manifested itself; (3) whether an individual vehicle suffered diminished value as a result of the alleged deficiency if the deficiency was repaired; and (4) whether the purchase price of the vehicle reflected the alleged defect at the time it was purchased. These issues are compounded by the fact that the class representative in this case sought compensation not only for class members whose brakes have manifested a deficiency, but also for those whose brakes have performed satisfactorily. In certifying the class, the trial court had deviated from the majority of jurisdictions which consistently have denied class recovery on this type of theory.

The court concluded that without individual inquiry, there is no way to adjudicate this case to determine whether the need for a particular repair made by a class member was based on normal wear, a defective original part, a defective after market part, environmental factors, such as weather or road conditions, the presence of foreign objects in the braking system, the failure of parts other than the braking system, poor workmanship by a third party, or individual driving habits.

Superiority Lacking Too

To find superiority, a court must find all other methods of resolving the issues in a case to be inferior to a class action. Here, fewer than half of the class members reported brake difficulty. An individual inquiry and an inestimable number of mini-trials would be necessary to identify the class. Class certification is not ipso facto required where there exist multiple claims and potentially low dollar recovery.

Accordingly, the class was decertified.  And a decision product sellers may be able to use.

State Supreme Court Adopts And Applies Forum Non Conveniens

Rhode Island's Supreme Court recently adopted the forum non conveniens doctrine and dismissed multiple asbestos suits filed there by Canadian residents. Kedy v. A.W. Chesterton Co., 946 A.2d 1171 (R.I. 2008).


Rhode Island becomes one of the last states to recognize the doctrine, which is an increasingly important procedural aspect of many mass torts. Large numbers of nonresidents will often file suit in the so-called “magic” jurisdictions -- judicial hellholes for defendants as coined by the American Tort Reform Association -- even though these plaintiffs and the facts of their cases may have no significant relationship with the chosen jurisdiction. The state may be attractive to plaintiffs because of perception of the jury pool, or because of procedural advantages such as when its trial courts employ mass consolidations of multiple individual claims that pressure defendants to settle and limit the ability of courts and defendants to focus on the individual claims. E.g., State ex rel. Mobil Corp. v. Gaughan, 563 S.E.2d 419 (W.Va. 2002). And foreign plaintiffs in general may be attracted to U.S.-style remedies, damages, and procedures.


The forum non conveniens doctrine has been employed by courts to dismiss claims by foreign and out of state plaintiffs in mass torts. The principle allows a court to decline to exercise jurisdiction when the plaintiff's chosen forum is significantly inconvenient and the ends of justice would be better served if the action were brought and tried in another forum. For example, in the In re Vioxx Products Liability Litigation, MDL No. 1657, 2006 WL 2504353 (E.D. La. Aug. 30, 2006), former Vioxx users from 11 foreign countries were dismissed from the MDL. Merck argued that the cases involve the prescription and use of Vioxx in foreign countries, and the drug was distributed under each nation's unique regulatory and legal structure. The plaintiffs were injured abroad and the injury-causing conduct occurred abroad. The foreign courts offered adequate alternative forums; American courts would not have easy access to the foreign documents and witnesses related to the claims. Finally, trying the plaintiffs' claims here in the U.S. risked disrupting the judgments of foreign regulatory bodies by imposing an American jury's view of the appropriate standards of safety and labeling on companies marketing and selling drugs in those nations.


In recent years, tort reform efforts in some states have made an impact on filing of suits by nonresidents that would otherwise swamp their courts. Mississippi has undertaken a series of legislative and judicial reforms to limit the number of out-of-state asbestos claims. For example, the Mississippi Tort Reform Act of 2004 tightened venue provisions and joinder rules and expanded the ability of courts to transfer or dismiss claims under the doctrine of forum non conveniens. Miss. Code Ann. § 11-11-3. As a result of the reforms, the "courts of Mississippi will not become the default forum for plaintiffs seeking to consolidate mass-tort actions." 3M Co. v. Johnson, 926 So. 2d 860, 18–19 (Miss. 2006). Similarly, Texas has expanded the power of courts to dismiss actions on forum non conveniens grounds. See Tex. Civ. Prac. & Rem. Code Ann. § 71.051.

Rhode Island
Several Canadian residents sued in a Rhode Island court, seeking damages for injuries associated with workplace exposure to asbestos in Canada. Several defendants sought dismissal under the doctrine of forum non conveniens. The trial court denied the motion, noting that Rhode Island had not recognized forum non conveniens outside in the tort context, and accepting plaintiffs’ arguments that forum non conveniens has led to confusion and inconsistency in federal and state courts, and that the legislature is the appropriate body to adopt the doctrine.

The state supreme court noted that the doctrine of forum non conveniens is founded in considerations of fundamental fairness and sensible and effective judicial administration. The doctrine has been recognized by common law, statute or rule of civil procedure in most states. Legal commentators are in general agreement that most states follow the federal forum non conveniens test. See Davies, Time to Change the Federal Forum Non Conveniens Analysis, 77 Tul. L.Rev. 309, 315 (2002) (thirty states have “effectively identical” analyses to the federal test, and thirteen other states employ a “very similar” test); Robinson & Speck, Access to State Courts in Transnational Personal Injury Cases: Forum Non Conveniens and Antisuit Injunctions, 68 Tex. L.Rev. 937, 950 (1990) (thirty-two states recognized “something very closely resembling” the federal doctrine, and four other states indicated they would follow the federal doctrine).

The first prong of the forum non conveniens analysis requires a determination of the existence of an available and adequate alternative forum. Second, the court must determine the inconvenience of continuing in the plaintiff's chosen forum by weighing private- and public-interest factors. The private interests of the litigants include the following factors: relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing, witnesses; possibility of view of premises, if view would be appropriate to the action; and all other practical problems that make trial of a case easy, expeditious and inexpensive. (Citing Gulf Oil Corp., 330 U.S. at 508.)

Other factors that may be relevant to the private-interest assessment include the enforceability of a judgment in the alternative forum, and the advantages and obstacles to a fair trial. A plaintiff may not, by choice of an inconvenient forum, vex, harass, or oppress the defendant by inflicting upon him expense or trouble not necessary to his own right to pursue his remedy. The private interest of a plaintiff should be afforded more weight when the forum choice appears to be based on legally valid reasons such as convenience and expense. Conversely, the private interest of a defendant should be afforded more weight when a plaintiff's choice of forum seems motivated by forum-shopping objectives such as tactical attempts to harness more favorable laws and damages remedies, taking advantage of jurisdictions with generous jury verdicts, or causing inconvenience and expense to a defendant.

Public interest factors include administrative difficulties for courts, that jury duty is a burden that ought not be imposed upon the people of a community which has no relation to the litigation; the local interest in having localized controversies decided at home; and the court in some other forum dealing with problems in conflicts of laws, and in law foreign to itself.

Application of the New Test
Applied here, the court noted that differences in discovery standards are not enough to establish the inadequacy of the forum. Although damages may be smaller in Canada, it was important that neither plaintiffs nor defendants in the underlying cases were residents of Rhode Island or domiciled there. Much of the evidence necessarily is in Canada; the injuries and treatment alleged occurred in Canada, where plaintiffs are residents. No witnesses, workplace sites, or any other relevant evidence appear to be situated in the state. Access to proof is clearly less convenient. Only Canadian courts have the legal power to compel the testimony of Canadian potential witnesses who are not under the control of any party. Furthermore, the likelihood that Canadian law would apply in these cases would place additional burdens upon the state court. Accordingly the foreign claims were dismissed.

State Supreme Court Upholds Reversal of Benzene Verdict on Daubert Grounds

The Mississippi Supreme Court earlier today upheld the reversal of a $2 million benzene verdict. In Watts v. Radiator Specialty Co., et al., No. 2006-CA-01128-SCT (Miss. June 12, 2008), the Court's opinion focused on the absence of scientific evidence linking non-Hodgkin’s lymphoma, plaintiff’s condition, to benzene exposure.

Plaintiff alleged that his use of the product “Liquid Wrench” during his employment as a mechanic exposed him to benzene, and in turn caused his non-Hodgkin’s lymphoma. Plaintiff was diagnosed with small-cell lymphocytic lymphoma, a subtype of non-Hodgkin’s lymphoma in 1999. Liquid Wrench is a liquid solvent used for cleaning tools and engine parts and loosening nuts and bolts. Beginning in 1947, and throughout much of his career, Watts allegedly used Liquid Wrench as many as five times a day. It was undisputed that during at least 18 years of his usage Liquid Wrench did contain benzene.  In the 2004 trial, a jury found defendants Radiator Specialty and U.S. Steel liable.

In May 2006, however, the trial court granted the defendants’ motion for judgment notwithstanding the verdict after finding that the testimony of the plaintiff’s expert on the issue of causation should have been excluded as scientifically unreliable. Dr. Levy testified as to general causation (that benzene causes non-Hodgkin’s lymphoma) and specific causation (that benzene-containing Liquid Wrench caused Mr. Watts’s non-Hodgkin’s lymphoma). In particular, the trial court found that neither the cohort studies nor the case control studies relied upon by Dr. Levy at trial supported his opinion that a causal connection exists between benzene exposure and non-Hodgkin’s lymphoma. (Cohort studies identify and study a group of people exposed to a certain element as compared to another group not exposed to the element to see if there is a higher incidence of disease in the group exposed.; case-control studies identify and study a group of people who have a disease as compared to a group of people who do not have that disease to see if there is a higher incidence of exposure to a certain element in the group that has the disease.) The trial court entered an order dismissing the plaintiff’s case with prejudice, and the plaintiff appealed.

The State Supreme Court’s Analysis

The high court noted the defendants’ central contention that there is no evidence of a link between benzene exposure and small-cell lymphocytic lymphoma. The defendants claimed that Dr. Levy thus had insufficient support for his testimony that a demonstrable causal association exists between benzene exposure and non-Hodgkin’s lymphoma.

Mississippi follows the standard for expert testimony described in Daubert v. Merrell Dow Pharmaceuticals Inc., 509 U.S. 579 (1993). Trial judges are expected to assume the role of gatekeeper on questions of admissibility of expert testimony. There was no dispute that Dr. Levy was properly qualified as an expert in epidemiology and occupational medicine, but there was an issue regarding the reliability of his causation testimony.

The methodology used in forming his opinion as to general causation was the review of eighteen case studies done by different researchers between 1979 and 2004 (nine cohort studies and nine case-control studies). While this type of epidemiological study review is certainly an accepted methodology in the state, an analysis of these case studies supported the trial court’s finding that Dr. Levy’s testimony as to the content of the studies and their relevance to the facts of this case could easily have misled the jury. (The Court believed that juries are often in awe of expert witnesses and their impressive lists of honors, education and experience.)

Dr. Levy admitted that only half the studies showed a statistically significant increase in risk due to benzene exposure. None of the studies specifically looked at the possible risks associated with use of Liquid Wrench. None specifically studied the risks of development of non-Hodgkin’s lymphoma in mechanics, Watts’s profession. (The studied occupations included oil refinery workers, gas station attendants, general chemical workers, and seamen on tankers. ) One of the studies suggested that the reported increase in risk of non-Hodgkin’s lymphoma was not occupationally related. Several of the studies did not provide a dose-response ratio. In short, the Court believed, none of these studies provide a basis for the conclusion that there is a causal connection between benzene exposure and non-Hodgkin’s lymphoma, much less small-cell lymphocytic lymphoma, the particular type from which plaintiff suffered. The Court also emphasized the fact that the expert’s testimony gave very little detail, if any, as to the specific findings of each case study and why it might be relevant.

While experts need not rely on studies that explicitly support their testimony, it is significant that none of the studies relied upon by Dr. Levy found a conclusive link between benzene exposure and non-Hodgkin’s lymphoma.

Dissent Misses the Mark

Three justices in dissent disagreed with this conclusion, arguing that the trial court abused its discretion in excluding Dr. Levy’s testimony. Specifically, the dissent took issue with the emphasis on the conclusion that none of the studies found a link between benzene exposure and non-Hodgkin’s lymphoma. But the majority found it crucial that the few positive findings were not statistically significant, and/or did not relate to the relevant type of lymphoma, and/or that the higher risk of non-Hodgkin’s lymphoma was found among chemical workers who were exposed to a number of chemicals other than benzene and thus the observed risks could be due to some other exposure.

The Court drew upon the language of the United States Supreme Court in General Electric Co. v. Joiner, 522 U.S. 136 (1997), in which the Court observed that an expert’s conclusions and methodology are not entirely distinct from one another. Trained experts commonly extrapolate from existing data. But nothing in either Daubert or the Rules of Evidence requires a district court to admit opinion evidence which is connected to existing data only by the ipse dixit of the expert. A court may conclude that there is simply too great an analytical gap between the data and the opinion proffered.

The dissent also asserted that the majority’s decision would effectively resurrect the Frye standard requiring an expert’s opinion to be generally accepted in the scientific community. Frye v. United States, 54 App. D.C. 46, 47, 293 F. 1013, 1014 (1923). Quite to the contrary, this case is a good example of how courts should apply Daubert. Acceptance remains a relevant factor for trial courts to consider under Daubert. And the gap between the data and the conclusion was simply too great.

Supreme Court Decides RICO Issue

The United States Supreme Court has just decided a case that may have significant impact on mass tort defendants. In Bridge v. Phoenix Bond & Indem. Co., 2008 WL 2329761 (U.S. June 9, 2008), the Court held that a plaintiff asserting a Racketeer Influenced and Corrupt Organizations Act (RICO) claim predicated on mail fraud need not show, either as an element of his claim or as a prerequisite to establishing proximate causation, that he relied on the defendant's alleged misrepresentations.

Why should readers of MassTortDefense care about RICO cases? Traditional claims such as strict liability and negligence still serve as the foundation of many mass torts. Increasingly, however, plaintiffs are looking for opportunities to bring novel and non-traditional claims as well, or instead of the traditional theories. Medical monitoring expands the pool of potential plaintiffs to those exposed to, but not yet injured by, a hazardous product. Consumer fraud claims may involve those with no personal injuries but only economic losses, and are, in the view of plaintiffs’ attorneys, theoretically easier to certify as class actions than traditional personal injury claims. A recent survey indicates that securities fraud cases filed against life sciences companies were up significantly in 2007 from the year before, often as plaintiffs try to turn a failure to warn claim into a securities class action. (When the market reacts to negative press about a product, the stock of a company could drop, opening it up to such claims.) And then there are civil RICO claims.

The Bridge case arose from the annual Cook County Treasurer's Office public auction to sell its tax liens on delinquent taxpayers' property. To prevent any one buyer from obtaining a disproportionate share of the liens, the county adopted the “Single, Simultaneous Bidder Rule,” which requires each buyer to submit bids in its own name, prohibits a buyer from using agents, employees, or related entities to submit simultaneous bids for the same parcel, and requires a registered bidder to submit a sworn affidavit affirming its compliance with the Rule. Respondents filed suit, alleging that petitioners (defendants below) fraudulently obtained a disproportionate share of liens by filing false documents, allegedly violating RICO through a pattern of racketeering activity involving mail fraud.

Defendants/petitioners argued that when basing a civil RICO claim on fraud, it is not sufficient for a plaintiff to show merely that some violation of a federal fraud statute has occurred. Rather, the plaintiff must show, like any other fraud plaintiff, that the plaintiff itself was defrauded. There is no indication that Congress, in authorizing a civil RICO action based on fraud, intended to permit such actions by persons who were not themselves defrauded. Here, because the alleged pattern of racketeering activity is predicated on mail fraud, respondents must show that they relied on petitioners' fraudulent misrepresentations, which they cannot do because the misrepresentations were made to the county. They argued that a proximate cause requirement inherent in the “by reason of” language of the statute demands that a civil RICO plaintiff asserting a claim based on fraud establish his reliance on a misrepresentation by the defendant. In the context of a civil RICO claim predicated on fraud, the required causal link demands a showing that the plaintiff relied on an alleged misrepresentation made to the plaintiff by the defendant. Otherwise, the causal relationship between the alleged injury and the alleged fraud is too attenuated.


The Court disagreed, finding that nothing on the statute's face imposes such a requirement. Using the mail to execute or attempt to execute a scheme to defraud is indictable as mail fraud, and hence a predicate racketeering act under RICO, even if no one relied on any misrepresentation. The Court rejected petitioners' arguments that under the “common-law meaning” rule, Congress should be presumed to have made reliance an element of a civil RICO claim predicated on a violation of the mail fraud statute. And rejected the argument that a plaintiff bringing a RICO claim based on mail fraud must show reliance on the defendant's misrepresentations in order to establish proximate cause. The Court felt it had no ability to respond to the policy argument that RICO should be interpreted to require first-party reliance for fraud-based claims in order to avoid the “overfederalization” of traditional state-law claims.

The Court noted that there is no general common-law principle holding that a fraudulent misrepresentation can cause legal injury only to those who rely on it. Of course, misrepresentation can cause harm only if a recipient of the misrepresentation relies on it. And a RICO plaintiff who alleges injury by reason of a pattern of mail fraud cannot prevail without showing that someone relied on the defendant's misrepresentations. But that does not mean that the only injuries proximately caused by the misrepresentation are those suffered by the recipient. There is a proximate cause element, and it requires a sufficiently direct relationship between the defendant's wrongful conduct and the plaintiff's injury. But here plaintiffs’ alleged injury --the loss of valuable liens-- is the direct result of petitioners' alleged fraud. It was a foreseeable and natural consequence of petitioners' scheme to obtain more liens for themselves, and that is sufficient.

The Court’s decision on reliance was based on statutory interpretation, rather than logic or common sense. It seems likely that it will create additional litigation in the lower courts over the meaning of the proximate cause element of a civil RICO claim. But the absence of a clear reliance requirement may in fact make this type of claim even more popular with mass tort plaintiffs. Product sellers, and especially those involved in RICO litigation already, will need to comb the opinion for ammunition to support their causation arguments.

FDA To Form Committee To Analyze BPA Issues

In the latest development on the issues surrounding Bisphenol-A in consumer products, the FDA announced that a subcommittee of the FDA's Science Board will hold a public meeting on the topic of BPA in plastics, review an Agency Task Force report on the topic, and deliver its findings to the Board's annual meeting this fall. Dr. Frank Torti, the FDA's principal deputy commissioner and chief scientist, has asked Science Board Chairwoman Barbara McNeil, head of Health Care Policy at Harvard Medical School, to establish a subcommittee to further assess BPA. (MassTortDefense has posted about BPA here and here.)

BPA is a chemical produced in large quantities for use primarily in the production of polycarbonate plastics and epoxy resins. Polycarbonate plastics in turn have many important applications, including use in certain food and drink packaging, e.g., water and infant bottles, compact discs, impact-resistant safety equipment, and medical devices. Polycarbonate plastic can also be blended with other materials to create molded parts for use in mobile phone housings, household items, and automobiles. Epoxy resins are used as lacquers to coat metal products such as food cans, bottle tops, and water supply pipes. Some polymers used in dental sealants or composites contain bisphenol A-derived materials.

This development comes on the heels of the FDA forming an agency-wide BPA Task Force to facilitate review of current research and new information on BPA. That Task Force is reportedly assembling an inventory of FDA-regulated products that contain BPA. Eventually, the Task Force may make recommendations to the Commissioner of Food and Drugs.

In April 2008, the National Toxicology Program (NTP) of the National Institutes of Health published a draft report indicating that some studies in animals suggest that BPA may raise “some concern” about potential developmental effects in humans. The NTP is still collecting public comments on the draft and has scheduled a June 11 peer review meeting for the draft.

In mid-May, FDA officials assured a congressional panel that the agency had no reason to recommend that consumers stop using products containing BPA, noting that a large body of evidence indicates that currently marketed products containing BPA, such as baby bottles and food containers, are safe and that exposure levels to BPA from these products are well below those that may cause health effects. See our post on the hearing.

Of course, the litigation has already begun, notwithstanding the science, with a proposed class action filed over the use of BPA in baby bottles in the U.S. District Court for the Western District of Missouri.

Government Files Amicus Brief in Levine v. Wyeth

For those readers of MassTortDefense following the Levine v. Wyeth matter, here is the BRIEF FOR THE UNITED STATES AS AMICUS CURIAE SUPPORTING PETITIONER.

The agency, via the Solicitor General, argues that the FDA’s decision to approve a drug and its labeling reflects the agency’s expert evaluation of the health risks and benefits the product can provide; respondent’s claims are preempted because they challenge labeling that FDA approved after being informed of the relevant facts. When federal regulation is designed to strike a balance between competing risk/benefit considerations, state laws that strike a different balance are impliedly preempted because they interfere with the federal balancing. The amicus brief also notes that FDA’s labeling requirements do not qualify as a mere minimum safety standard, or floor, upon which state laws could add more stringent requirements.

The SG also addresses the Vermont Supreme Court’s conclusion that the FDA’s regulations allow drug manufacturers to easily change drug labels unilaterally. “Petitioner was not free to disregard FDA’s judgment concerning previously known risks.” Brief at 21. The “limited exception” to the general rule requiring FDA to approve any label changes requires submission of a supplemental new drug application to, albeit not prior approval by, the agency. And substantive changes may be made without prior FDA approval only to correct concerns about newly discovered risks from the use of the drug. If manufacturers were free to make unilateral changes to labeling the day after FDA’s approval based on information that was previously available to the agency, the approval process would be greatly undermined and the agency’s careful balancing of risks and benefits thwarted.

Class Action Decision in "Hurricane" Toxic Tort

An interesting class action opinion came out this week a suit claiming certain residents of St. Croix suffered personal injury and property damage during a hurricane due to negligent storage of toxic materials. In Henry et al. v. St. Croix Alumina LLC, No. 1:99-cv-00036 ( D.V.I), the District Court decertified a class of plaintiffs seeking past damages, but granted class certification to residents of certain neighborhoods on St. Croix who allege they may suffer injuries or property damages from future exposure to bauxite and red mud released from an aluminum refinery on the island.

The case arose out of the effects of Hurricane Georges, which hit the Virgin Islands in 1998. The plaintiffs filed suit in1999, alleging that during the storm two materials, bauxite and red mud, were distributed around the island. Bauxite is a red colored ore with the consistency of dirt or dust from which alumina is extracted and used to produce aluminum. A by-product of the alumina extraction process is a substance called red mud, which was stored in piles outside the refinery using a method known as dry-stacking.

The court originally granted certification in 2000 of a class defined as all individuals who lived or worked in six communities adjacent to and downwind from the refinery. The district court certified subclasses of plaintiffs seeking recovery for property damages and personal injury and those seeking medical monitoring and punitive damages. See 2000 WL 1679502 (D.V.I. Aug. 7, 2000).

In 2006, the district court decertified all subclasses but held that liability for personal injury and/or property damage, as well as whether punitive damages are appropriate, may be determined on a class-wide basis. Plaintiffs then submitted a trial plan: in Phase 1, plaintiffs would litigate liability and the possibility of a punitive damages multiplier on a class-wide basis, and in Phase II, individual plaintiffs would have the opportunity to prove "individual causation and all damages issues" independently in separate trials.

In late 2007, the district court began to express doubts about the class, noting that the formulation of a workable trial plan was elusive. Of course, a district court retains the authority to modify or decertify completely a class at any time before final judgment.  Fed. R. Civ. P. 23(c)(1)(C); In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 537 (3d Cir. 2004). Indeed, the Advisory Committee Notes on Rule 23 envision modification of a class certification if, upon fuller development of the facts, the original determination appears unsound. Zenith Labs., Inc. v. Carter-Wallace, Inc., 530 F.2d 508, 512 (3d Cir. 1976).

Decertification

In this week’s opinion, the court began by noting that class certification is ordinarily inappropriate in mass tort claims which present questions of individualized issues of liability, because such cases are unlikely to satisfy the requirements of Rule 23(b)(3). In actions for personal injury resulting from a sudden release of toxic chemicals, federal courts have regularly denied class certification for failure to satisfy the predominance requirement of Rule 23(b)(3). Here, even in the seeming mass accident context, whether defendants owed and breached specific duties to the plaintiffs also may not be common questions. The existence and scope of defendants' duties to warn or to protect, for instance, may depend on the exact path the hurricane took and the distance between the refinery and a particular plaintiff's dwelling.  Hurricane Georges buffeted St. Croix for over twenty-four hours, during which time the wind's speed and direction changed several times, as did the rain's severity. It is certainly not a given that the hurricane affected the people and properties in the neighborhoods of the proposed class in the same way over the entire course of the storm.

Readers of MassTortDefense know that courts have rejected classes in these contexts largely for reasons having to do with the concerns over issues of causation. The fact of each class member's personal injury and the causal link between that individual's injury and the spill are questions that cannot be answered meaningfully on a class-wide basis. Noting the general/specific causation distinction, the relevant question can be not whether the substance at issue has the capacity to cause harm, but whether it did cause harm and to whom.

Thus, with respect to personal injury claims, each plaintiff must prove causation. Each will need to prove the duration and nature of his or her exposure to the two released substances, bauxite and red mud. Some plaintiffs may have been exposed to only one substance, while those exposed to both may have been exposed in differing degrees or combinations. The possibly differing levels of toxicity of bauxite and red mud will further complicate matters. Defendants were able to show through discovery that among the seventeen named plaintiffs, the onset, duration, and severity of the alleged injuries varied enormously. Moreover, the possibility of alternative explanations for plaintiffs' injuries is real and can be explored only in light of a given plaintiff's pre-existing medical conditions whose symptoms may have matched the injuries allegedly caused by defendants' conduct.

Regarding property damage, the court found that each plaintiff’s property will be damaged to a different degree, if at all, based on its proximity to the plant site, topography, and the off-site migration or dispersal patterns of the toxic substances. Individual litigants will have to establish injury and causation in order to succeed on the merits. Each plaintiff will have to prove whether the substance that accumulated in and around his or her home or workplace was bauxite, red mud, or some combination of the two.

The court also commented on the plaintiffs’ “stigma” theory. Plaintiffs' expert asserted that the diminution in property value attributable to defendants' conduct is likely uniform across neighborhoods and can be estimated at roughly 30%. He further concluded that homes in the neighborhoods continue to suffer from a "stigma" as a result of the alleged contamination such that even uncontaminated houses show a marked drop in property value. Yet, discovery revealed that his approach excludes dozens of distinct factors that could impact the value of any particular house. So, the questions of causation as well as damages with respect to property damage claims do not predominate as required under Rule 23(b)(3).


Equitable Relief Class
However, the district court took a different approach to plaintiffs’ motion for certification of a new class which seeks only equitable relief, requiring defendants to remove the piles particulates from the island of St. Croix. While 23(b)(2) class actions have no predominance or superiority requirements, the class claims must be “cohesive." Barnes v. Am. Tobacco Co., 161 F.3d 127, 143 (3d Cir. 1998). Courts will deny certification in Rule 23(b)(2) cases in the presence of
disparate factual circumstances. There is case law that a court should be more hesitant in accepting a (b)(2) suit which contains significant individual issues than it should under subsection 23(b)(3). E.g., Santiago v. City of Phila., 72 F.R.D. 619, 628 (E.D. Pa. 1976).

While the court found the demand for injunctive relief to be unclear, it boiled down to two elements: safe containment of the bauxite and red mud as it currently exists on the refinery property; and removal from St. Croix of all bauxite and red mud from wherever it exists on the island. Citing the principle of cohesiveness, courts have granted certification where plaintiffs sought to have a single defendant cease emissions of toxic substances, see, e.g., Olden v. LaFarge Corp., 203 F.R.D. 254, 269 (E.D. Mich. 2001), aff'd, 383 F.3d 495 (6th Cir. 2004), but denied certification where plaintiffs sought individualized remediation in the form of real property cleanup for release of toxic substances, see, e.g., In re Methyl Tertiary Butyl Ether ("MTBE") Prods. Liab. Litig., 209 F.R.D. 323, 341-49 (S.D.N.Y. 2002). By contrast, only a handful of district courts have certified classes seeking individualized remediation under Rule 23(b)(2).

In this case, plaintiffs' request for remediation with respect to their real property would force the court to confront a host of heavily individualized factual questions for each parcel, including the nature and extent of contamination as well as the necessity and feasibility of remediation. But by contrast, the alleged nuisance stemming from the storage of possibly toxic substances at the refinery can likely be abated, said the court, with respect to all plaintiffs without separate determinations of individual causation, liability, or damages. A class seeking such relief is cohesive enough and can be the subject of an action under Rule 23(b)(2) -- only insofar as the plaintiffs seek cleanup, abatement or removal of the substances currently present on the refinery property.

New Jersey Supreme Court Decides Medical Monitoring Case in Drug Context

The Supreme Court of New Jersey has just issued its opinion in the closely watched medical monitoring case, Phyllis Sinclair v. Merck & Co. Because your faithful blogger’s firm is involved in the Vioxx litigation, MassTortDefense presents you with the opinion and, as Joe Friday said, just the facts. No commentary or editorializing.

In this products liability case the Court considered whether plaintiffs may recover the costs of medical monitoring despite their failure to allege a physical injury. This litigation arises from the use of Vioxx, a prescription drug manufactured and sold by Merck. In November 2004, plaintiffs filed a class action complaint on behalf of a proposed national class of individuals who ingested Vioxx and who allegedly may suffer from serious latent injury for which they may require medical monitoring. Plaintiffs later refined the factual allegations advanced in the complaint and alleged that as a result of the direct consumption of Vioxx, they are at enhanced risk of serious undiagnosed and unrecognized myocardial infarction, and other latent injuries. Plaintiffs sought the cost of medical testing in the form of a court-administered screening program to provide medical diagnostic tests for each member of the proposed class and follow-up with an epidemiologist.

The trial court reviewed the standards governing pleadings and motions to dismiss, as well as the
facts and holdings of several cases that addressed medical monitoring: Ayers v. Township of Jackson, 106 N.J. 557 (1987), Mauro v. Raymark Industries, Inc., 116 N.J. 126 (1989), and Theer v. Philip Carey Co., 133 N.J. 610 (1993). The trial court granted Merck’s motion and dismissed plaintiffs’ complaint. It found that the PLA limits compensation to harm as defined by N.J.S.A. 2A:58C-1b(2), and reasoned that medical monitoring has not been applied to a products liability action to which the PLA applies. Additionally, the trial court noted that the medical monitoring is an unavailable remedy under the New Jersey Consumer Fraud Act.

On appeal, the Appellate Division reversed and remanded for further proceedings. Sinclair v. Merck & Co., 389 N.J. Super. 493 (2007). The panel noted the lack of facts and expert testimony at the motion stage of the proceedings, and remanded for discovery and an evidentiary hearing. The state Supreme Court granted Merck’s petition for certification and also granted amicus curiae status to various entities.

Today’s opinion holds that the N.J. Products Liability Act, which is the sole source of remedy for plaintiffs’ defective product claim, does not include the remedy of medical monitoring when no manifest injury is alleged. This Court reads the PLA to require a physical injury. And thus medical monitoring plaintiffs cannot satisfy the definition of harm to state a product liability claim under the PLA. The Court further holds that claims for harm caused by a product are governed by the PLA irrespective of the theory underlying the claim. The heart of plaintiffs’ case is the alleged potential for harm allegedly caused by Merck’s drug. It is thus a product liability claim. Consequently, plaintiffs may not maintain a CFA claim.

Chief Justice Rabner and Justices Lavecchia, Rivera-Soto and Hoens joined in Justice Wallace’s majority opinion. Justice Long filed a separate, dissenting opinion. Justice Albin did not participate.

Why Not File That Daubert Motion?

The typical fodder for MassTortDefense includes a recent case decision, new legislation or regulatory action, and developing science. Today’s post starts in a more local spot: in the midst of a recent strategy discussion, a young colleague asked, “If the motion is not frivolous, and you are not convinced the judge won’t consider it, why would you ever NOT file a Daubert challenge to a plaintiff’s expert?” Not a bad question, and maybe worth sharing the discussion.

Knowing when and when not to file a Daubert motion requires evaluating the risks of filing, and balancing a number of possibly competing relevant factors, even beyond the merits of the motion and the identity of the trial judge.

Our younger colleague knew that Federal Rules of Evidence 701-703 govern the admissibility of expert opinion evidence. And that in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), the Supreme Court re-emphasized the trial court’s role as gatekeeper of proper scientific evidence. In a nutshell the Court adopted a new or refined test for admissibility focused on relevancy, reliability, and fit of the proffered expert’s opinion. Important factors may include whether technique has been tested; subjected to peer review and publication; the potential and known error rates; any standards and controls applicable to the science; and the degree of acceptance in scientific community. And he knew that in Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999), the rule was applied not only to “scientific” evidence, but also to technical or other specialized knowledge. Stressing that the Daubert factors are flexible, not rigid, the application and importance of each one may or may not be pertinent, depending on the issues, the expert, and the opinion.

So why not make a seemingly valid motion? What’s the harm? Certain risks may exist. The first set of factors might loosely be thought of as timing issues. By filing the motion, are you showing your hand too soon? You may be losing the element of surprise, and suffer a loss of effectiveness in cross-examination. One of the issues here is whether you are showing a hand they have seen; or will see soon in Motions In Limines; or in defense reports or in the depositions of your experts, or are indeed giving them intelligence. Also, is the timing such that the plaintiff will still have a chance to cure? ATLA teaches young plaintiff attorneys to “ask the court to schedule Daubert motions before the discovery cut-off so that if there is a curable deficiency, there is time to cure it.” Ann.2003 ATLA-CLE 851 (July, 2003).

Whether the expert’s deficiency is correctable (and in time) depends on the specific issues. Arguably an incomplete analysis could be fixed. Viterbo v. Dow Chem. Co., 826 F.2d 420, 423 (5th Cir. 1987)(oral history taken by expert of plaintiff was incomplete). But the absence of peer review probably can’t be fixed in time in most cases. Valentine v. Pioneer Chlor Alkali Co., 921 F. Supp. 666 (D. Nev. 1996)(discussing meaning of peer review). A another type of issue, when the expertise of the witness is too far removed from the proffered area of testimony, arguably can be fixed only by substitution. Whiting v. Boston Edison Co., 891 F. Supp. 12 (D. Mass. 1995) (doctor with epidemiology experience excluded from opining on dose reconstruction). Similarly, ask whether the issue for the motion is an issue on which you can effectively lock in the expert before trial, or whether there is sliding room. It may be helpful to a motion that an expert says she or he has no knowledge on a key issue, but if cured after the unsuccessful motion and before trial, the cross at trial about “well, you know stuff now that you didn’t know then” may be ineffective.

A second set of concerns may relate to the court and judge. Even if the motion is not a “sure winner” (and are any?), how important is it to “educate” the judge? And perhaps it is important to educate the court as to key science and evidentiary issues sooner rather than later. However, there may be other opportunities to do so. Another issue related to the tendencies of the specific judge, is will the judge have expected you to file the motion, so that voir dire, motions in limine, trial objections, or other attacks on the expert will not be well received if you don't? Some issues may be more appropriate for judge than jury, which might push you in one direction. Technical errors in complex statistical analysis may bore the jury to tears, making the motion more valuable; but a doctor who offers a litigation opinion inconsistent with his clinical practice might be more vulnerable in front of the jury. And there may be some kinds of experts you don’t want a jury to hear no matter what the strength of the cross. E.g., In re Welding Fume Products Liab. Litig., MDL No. 1535, 2006 WL 4507859 (Feb. 19, 2008, N.D.Ohio) (plaintiff’s business ethics expert excluded).

A third factor that comes to mind is whether the challenge is to all or part of the opinion? If some opinion will survive, do you want the weak opinion left in to use on cross to discredit the rest of the testimony, which appears stronger? If some opinion will survive, and summary judgment is not available, will exclusion of weak opinion make expert more credible at trial—because what is left is less subject to challenge?


Two New Studies on the Potential Risks of Nanotechnology

Two studies have just recently been published describing some potentially important features of a promising form of nanotechnology. Articles in the Journal of Toxicological Sciences and Nature Nanotechnology have reported results of experiments in which some multi-walled carbon nanotubes seem able to induce in mice a response similar to that induced by certain asbestos fibers.

Nanotechnology
Many readers of MassTortDefense know that nanotechnology refers to a new field of technology that seeks to manipulate and control products, really matter, on the atomic and molecular scale, typically 100 nanometers or smaller. To give some sense of scale, one nanometer is one billionth, or 10-9 of a meter. A nanometer compared to a meter is the roughly the same ratio as that of a baseball to the size of the Earth. Or another analogy, a nanometer is the length a man's whiskers grow in the time it takes him to lift his razor to his face to shave.


Two main approaches are used in nanotechnology. In a bottom-up approach, materials and devices are built from molecular components which more or less assemble themselves chemically. In a top-down approach, nano-objects are de-constructed from larger entities. While scientists speculated about nanotechnology in the 1950’s, it is really the modern generation of analytical tools such as the most powerful atomic microscopes which allow the potential deliberate manipulation of nanostructures.


What is so fascinating, and potentially useful, about nanotechnology is that normal sized physical phenomena may be altered as the size of the product decreases. Some features may be enhanced, even dominant at smaller sizes. Moreover, a number of physical, mechanical, electrical, or other properties can change as the size of the particle decreases. As the ratio of surface area to volume changes, the mechanical, thermal and catalytic properties of materials may be altered. Third, novel mechanical properties of nanosystems have also been identified in the lab. For example, opaque substances like copper become transparent; inert materials like platinum become catalysts; some stable substances like aluminum become combustible. Similarly, some solids turn into liquids even at room temperature.


Examples of nanotechnology include new polymers, and computer chips. Nanotechnologies have already found commercial application in suntan lotions, cosmetics, protective coatings, and stain resistant apparel. Significant research is being done on the targeted delivery of drugs to tumors or infections sites using nanotechnology.


Potential Issues
As with any new technology, questions about potential health and environmental risks have been raised. The unique properties of nano-materials make them at once attractive to product makers, but also raise questions about whether conventional thinking about product safety are adequate. For example, the enhanced catalytic activity of certain nano-materials may raise potential questions about their theoretical interaction with biomaterials. Moreover, as seen in the two new studies, the size of the particles raises issues in their own right.


Carbon Nanotubes
In both studies, suspensions of carbon nanotubes were injected into the abdominal cavities of mice, and the results compared against asbestos as a positive control for mesothelioma. Carbon nanotubes are generally made from sheets of graphite no thicker than an atom—about a nanometer, or one billionth of a meter wide—and formed into cylinders, with the diameter varying from a few nanometers up to tens of nanometers. They are excellent conductors of electricity. Carbon nanotubes can also be used to reinforce polymers to create very strong plastics. Carbon nanotubes show promise as building blocks for computer chips that are smaller and faster than those made of silicon. Economists predict that the market for carbon nanotubes will grow to more than $1 billion by 2014.

The Studies
In the JTS study, Atsuya Takagi, et al., “Induction of mesothelioma in p53+/− mouse by intraperitoneal application of multi-wall carbon nanotubes,” J. Toxicol. Sci., Vol. 33: No. 1, 105-116 (2008), researchers tested the hypothesis that due to their fibrous shape and embedded iron content multi-walled carbon nanotubes would have carcinogenic potential similar to asbestos. Blue asbestos (crocidolite), which is known to cause mesothelioma, and fullerene aggregates, which were hypothesized not to cause mesothelioma, were also studied so the results could be compared. Examination of the mice from 10 days to 25 weeks after exposure revealed that the MWCNT and asbestos both resulted in the formation of cancerous lesions that the authors saw as consistent with the disease mesothelioma. (The mice exposed to the other control did not develop these lesions.) The authors suggest that these results point out the possibility that carbon-made fibrous or rod-shaped micrometer particles may share the carcinogenic mechanisms postulated for asbestos. The researchers suggest that the aspect (length/width) ratio and biopersistence of MWCNT may be important factors in understanding their effect on the body.


In the NN study, C. Poland, et al., Carbon nanotubes introduced into the abdominal cavity display asbestos-like pathogenic behavior in a pilot study, Nature Nanotechnology, Published online: 20 May 2008 (doi:10.1038/nnano.2008.111), researchers tested the hypothesis that long straight nanotubes act like long straight asbestos fibers and can cause injury like that seen in mesothelioma. They reported that exposing the mesothelial lining of the body cavity of mice, as a surrogate for the mesothelial lining of the chest cavity, to long multiwalled carbon nanotubes results in asbestos-like, length-dependent, pathogenic behavior. They used various materials for comparison: long, straight MWCNT, short tangled MWCNT, long-fiber amosite asbestos, short-fiber amosite, and a nonfibrous nanoparticulate carbon black material as a control. Tissue samples measured at 7 days were examined for the formation of scar-like lesions called granulomas that often typify the body's response to long fibers. They observed that the mice exposed to the long straight fiber asbestos and the long straight MWCNT showed the presence of inflammatory proteins, cells and granulomas, but not the other substances.

What to Make of the Results
The two studies suggest a need for a careful ongoing assessment of the potential for MWCNT to cause injury. They do not prove or even strongly suggest that nanotubes can cause cancer. The route of exposure is a crucial aspect of toxicology and here it was injection and not inhalation; neither study addresses the question whether inhalation of MWCNT leads to serious health effects like asbestos. It is not clear that carbon nanotubes will become airborne and be inhaled, or whether, if they do reach the lungs, they can get to the mesothelium to cause the effects seen here in mice. Another recent study showed that when mice inhaled nanotubes their lungs returned to normal within one or two months.


Of course, both studies are animal studies, and one used mice that have been specially bred to be susceptible to cancer. Measuring dose is not necessarily easy with nanomaterials, and it is unclear what constitutes an appropriate dose in mice to correlate with human exposures and risk. It is unclear that any humans are or can be exposed to MWCNT in quantities sufficient to induce the effect seen here in mice. If there is a potential hazard, there will be no disease if workers are not overly exposed to long nanotubes. Risk is composed of two parts – hazard and exposure.


Confounding factors involved include the presence of metals, like iron, in the nanotube samples. The JTS study explicitly could not rule out the iron contaminant within the MWCNT samples as the agent responsible for promoting the formation of the cancerous lesions.

Given the importance of this new field, and this new type of product, counsel involved in toxic tort and product liability  litigation will want to keep a close eye on the developing science.