State Supreme Court Postpones Third Restatement Issue

The Pennsylvania Supreme Court reversed field and recently dismissed the appeal of a closely watched failure-to-warn case alleging harmful asbestos exposure.  Bugosh v. I.U. North America, et al., No. 7 WAP 2008 (S.Ct. Pa. June 16, 2009).

One of the key issues presented by the case was whether Pennsylvania product liability law would change from its current unique form of somewhat extreme strict liability to the more mainstream Third Restatement approach to the issue of liability for  product sellers.

The divided ruling  by the Court involved the claim of a deceased mesothelioma patient, Edward Bugosh, whose widow had been awarded $1.4 million in damages by a jury in the trial court.  I.U.  North America was a non-manufacturer distributor named in the wrongful death suit, based solely on its predecessor’s sale of a small amount of asbestos-containing products.

Traditional products liability law in the state is based on Section 402A of the Restatement (Second) of Torts, and finds that every party in the distribution chain is strictly liable for any product defect in the product they sold. The Third Restatement treats intermediate sellers differently than manufacturers. Specifically, while under current law, liability can be imposed on manufacturers, retailers and distributors for injuries caused by products with manufacturing, design, or informational defects, regardless of whether a defendant acted reasonably in the preparation and sale of the product at issue, the appeal sought to persuade the state Supreme Court to adopt the approach of Section 2 of the new Restatement, which would require plaintiffs to prove that a defendant acted unreasonably. 

The dismissal order finds review was improvidently granted, but gives no further reason.  Speculation centers on this status of the defendant as an intermediate seller, rather than as an actual manufacturer.  The Court may have felt that this was not the best context to consider a major change in the law.

The case drew tremendous interest, with amici on the appellant’s side to include the Pennsylvania Defense Institute, the Product Liability Advisory Council, Inc., Pennsylvania Chamber of Business and Industry, Coalition for Litigation Justice, Inc., Chamber of Commerce of the United States of
America, National Association of Manufacturers, NFIB Small Business Legal Center, National Association of Wholesaler-Distributors, American Tort Reform Association, American Insurance Association, Property and Casualty Insurers Association of America, National Association of Mutual Insurance Companies, American Chemistry Council, and the Washington Legal Foundation.

This result arguably leaves Pennsylvania law very much muddled, as recently the Third Circuit predicted that Pennsylvania would adopt the Third Restatement. See Berrier v. Simplicity Manufacturing, Inc., 563 F.3d 38 (3d Cir. 2009).  In state court, the traditional Pennsylvania version (based on Azzarello v. Black Brothers Co., 391 A.2d 1020 (Pa. 1978)) of strict liability prevails, while the federal courts may be following Berrier to apply the Third Restatement in diversity cases based upon Pennsylvania law.

Plaintiff had argued that a return to a fault-based system would unfairly increase the plaintiffs’ burden of proof, and adoption of the Third Restatement would reduce the incentive to product manufacturers and suppliers to distribute safer products. 

In a sharply worded dissent to the dismissal, two justices called the current law severely
deficient, particularly when measured against developed understanding and experience, and argued that necessary adjustments are long overdue. The current distinctions that Pennsylvania law makes between negligence and strict liability have no place in any scheme purporting to recognize that manufacturers and distributors are not outright insurers for all harm involving their products.

Defense Experts Pass Daubert Test in Stand 'n Seal MDL

In the multidistrict product liability litigation over "Stand ‘n Seal," a federal judge is allowing, over plaintiffs' objections, testimony from the defendants' causation experts.  Judge Thomas W. Thrash of the U.S. District Court for the Northern District of Georgia has ruled that three experts, who opined that Stand ‘n Seal does not emit sufficient amounts of the chemical which plaintiffs allege caused their injuries, including chemical pneumonitis, may testify. In Re Stand ‘N Seal Products Liability Litigation, MDL NO. 1804 (N.D. Ga.).

Plaintiffs in the roughly 200 personal injury actions in the MDL assert that Stand ‘n Seal  manufactured with Flexipel S-22WS caused respiratory problems. Stand ‘n Seal is a consumer product used to seal ceramic tile grout in kitchens, bathrooms, and similar areas. The advertised advantage of Stand ‘n Seal was that users can easily stand and spray the sealant onto the grout without the strain of using a brush and manually applying the sealant. The plaintiffs say that the
problems with Stand ‘n Seal began when the manufacturer changed its chemical components to include Flexipel.

Part of the defense has been the dose-response issue that plaintiffs could not have inhaled a harmful amount of the chemical while using Stand ‘n Seal as directed. The plaintiffs urged the court to exclude this expert testimony of Drs. Mark Rigler, William Longo, and Mitchell Sauerhoff.  Rigler and Longo, industrial hygiene experts, tested samples of Stand ‘n Seal and concluded that plaintiffs did not inhale an “analytically detectable” concentration of Flexipel, the specific chemical at issue.  They did not, contrary to plaintiffs' arguments, opine that users of Stand ‘n Seal had absolutely no exposure to Flexipel.  Instead, they have said that users of Stand ‘n Seal were not exposed to “any significant” or “analytically detectable” amounts of Flexipel. In other words, there is a range between zero and the detection limit of their testing, but they believe that range is insignificant.

Instead, said the defense experts, the users of Stand ‘n Seal had a much higher probability of inhaling significant levels of Isopar-G, a solvent used in various formulations of grouting. Defendants intend to offer expert testimony from Mitchell Sauerhoff that overexposure to Isopar-G can cause respiratory injury.  Judge Thrash concluded that the experts’ opinions were admissible. 

“The plaintiffs' experts disagree with Sauerhoff’s opinions, but that disagreement by itself does not make Sauerhoff’s or Rigler and Longo’s testimony inadmissible.”  The court noted that "none of these [potential alternative] explanations seems especially conclusive."  But the alleged generality of the defense experts’ alternate explanations for the cause of the plaintiffs’ injuries affect the weight, not the admissibility, of the expert testimony.”   MassTortDefense notes that plaintiffs often forget that the defendant does not have the burden to disprove causation.  So defense evidence of alternative causes can be admissible even if such evidence would be insufficient when offered by a plaintiff who has the burden of proof on causation.

 

Bill to Beef Up FDA Food Safety Power Passes Committee

The House Energy and Commerce Committee last week approved legislation that would give the FDA more funding and power to police food safety.  The unanimous voice vote for a version of the bill offered by committee Chairman Henry Waxman (D., Calif.) came after extensive negotiations between Democrats and Republicans. The "Food Safety Enhancement Act of 2009,"  H.R. 2749, will now go to the entire House.

The bill comes at least in part in response to recent outbreaks of illnesses traced to tainted spinach, peanuts, hot peppers and other foods. The legislation would give the FDA greater authority to order food recalls, impose new civil penalties, and require inspections of so-called high-risk food facilities at least once a year.  It also calls for companies to keep detailed records to help the FDA more quickly trace the distribution of tainted foods and track the source of the contamination.  Specifically, the FDA would be required to issue regulations that require food producers, manufacturers, processors, transporters or holders to maintain the full pedigree of the origin and previous distribution history of the food and to link that history with the subsequent distribution history of the food.
 

The Grocery Manufacturers Association, a food industry group, released a statement in support of the bill, after Democrats agreed to a number of changes. (For example, they added a cap so no company would be charged more than $175,000 in fees to pay for the new bill.)  Critics of the bill argue that it would impose a one-size-fits-all regulatory scheme on big and small farms and on national and local food producers; does not address the major underlying causes of food safety problems such as industrial agriculture practices and the consolidation of our food supply. Others assert that the bill, by apparently empowering the FDA to regulate how crops are raised and harvested, puts the federal government right on the farm, dictating to farmers "good farming practices" on organic farming, use of manure, GMO animal feed, animal drugs, and petrochemical fertilizers and pesticide issues.

At last report, the House hasn't scheduled a vote on the legislation. In the Senate, Illinois Democrat Dick Durbin has introduced similar food-safety legislation.

 

Investor Report Questions Reporting About Nano-Risks

New and more extensive government regulation may be in the future for a host of industries and products we have blogged about at MassTortDefense, including tobacco, medical devices, food, and drugs.  A new report from the "Investor Environmental Health Network" calls for regulations not of the products themselves, but new rules governing disclosure of potential liabilities that can arise from emerging product technologies like nanotechnology.

EHN is a partnership of investment managers who report they oversee more than $25 billion in assets. The new report identifies alleged "loopholes" in the current system of securities and accounting regulation that the group says prevent a complete reporting of a firm's potential liabilities. They point, as a case study, to the alleged danger of asbestos-like litigation risks for nanotechnology companies and investors, as potentially "ultra-hazardous" nanotechnologies enter the market.

They argue that nanomaterials, lighter and stronger than other materials, are used in hundreds of products already on the market, including many cosmetics and skin care products. They cite a  study published in May, 2008 which suggested certain carbon nanotubes could have similar health effects as asbestos; and they point to a concern that particles at the nano level will be able to penetrate membranes in the brain in a way traditional particles do not.  Materials can take on new properties at the nano level, becoming stronger, or better conductors of heat or electricity, for example. But what creates their potential for new applications across a range of industries, may also be the source of their risk. 

The report calls for more consistent liability estimates made to insurers and investors; benchmarking liabilities against other companies whose published litigation results could offer another estimate of liability; and several new disclosure regulations from the SEC.

Companies developing or contemplating selling products with nanotechnology will, of course, want to monitor these efforts, which seem at times to call for a level of foresight requiring a working crystal ball. This particular report appears to assume that all the potential risks of nanotechnology are real; that manufacturers have no interest in exploring the potential risks; and, if they do, certainly won't ever disclose them.  Begrudgingly, it admits that "a number of questions remain regarding whether carbon nanotubes will actually cause health harms to the same degree that asbestos did."  That's an understatement.  In fact, the published studies relate to only some forms of carbon nanotubes, and like any potentially toxic substance, the levels of exposure to carbon nanotubes by workers or consumers is a key issue in assessing risk.  Many of the current uses of nanotechnology are in FDA-regulated products where there is a demonstrated lack of dermal absorption. Similarly, regarding potential nanotechnology in food packaging, substances used in food packaging are already regulated by FDA as “food contact substances” with the burden resting on the sponsor of a new food contact substance to demonstrate its safety.

Currently, companies involved in nanotechnology regularly disclose to investors that there is no scientific agreement on the health effects of nanomaterials; they note that some scientists believe that in some exposure contexts, nanomaterials may be hazardous to an individual’s health or the environment. They disclose that the science of nanotechnology is based on arranging atoms in way not made in nature; that future research into the effects of nanomaterials may thus have an adverse effect on products using the new technology.  They also typically disclose that the future regulation and limitation of the kinds of materials used in or used to develop nanotechnology-based products could halt or delay the commercialization such products. Such disclosures would seem to put investors on adequate notice of an uncertain future; speculative and alarmist predictions of the "next asbestos" seem unwarranted.

JPML Declines to Consolidate Metoclopramide Litigation

Some have expressed the sentiment that the the Judicial Panel on Multidistrict Litigation always grants requests for MDL status.  In reality, that is not the case, although opposition to MDL status can be an uphill battle in burgeoning mass torts. (FYI Volume 82, Number 6 (June 2008) issue of the Tulane Law Review is devoted to "The Problem of Multidistrict Litigation." )

The JPML recently declined to consolidate federal litigation involving the heartburn medication metoclopramide, finding that the pending actions do not share sufficient factual issues concerning whether the drug causes neurological injuries. (In re Reglan/Metoclopramide Products Liability Litigation, MDL No. 2049, 6/3/09).

The Panel was not persuaded that Section 1407 centralization would serve the convenience of the parties and witnesses or further the just and efficient conduct of this litigation at the present time. The eleven actions at issue did share some factual issues as to whether the drug metoclopramide causes neurological injuries (principally, tardive dyskinesia). But there is no single common defendant, and some entities, are named in only one or two actions. Moreover, several of the actions appear to be substantially more advanced (five were commenced in either 2006 or 2007). Metoclopramide litigation thus has a somewhat lengthy history, and the record indicates that a significant amount of the common discovery has already taken place in some cases. The proponents of centralization failed to convince the Panel that any remaining common questions of fact among these actions are sufficiently complex and/or numerous to justify Section 1407 transfer at this time. Alternatives to transfer exist that may minimize whatever possibilities there might be of duplicative discovery and/or inconsistent pretrial rulings, concluded the Panel. 

Ruling on Contractors' Motion to Dismiss in FEMA Trailer MDL

The federal judge presiding over the MDL involving litigation claiming trailers issued after Hurricane Katrina allegedly exposed residents to formaldehyde has declined to dismiss government contractors that hauled and installed the trailers.  In re  FEMA Trailer Formaldehyde Products Liability Litigation, MDL No. 1873 (E.D. La.).  Judge Engelhardt rejected the motion of Shaw Environmental Inc. and CH2M Hill Constructors, Inc. to be dismissed from a multiple-plaintiff case in the trailer MDL.  The court rejected the contractors' arguments that the plaintiffs lacked standing;  he also rejected the contractors'  argument that the FEMA trailer residents failed to plead claims cognizable under the Louisiana Products Liability Act.

The plaintiffs in this case are Louisiana residents who had lived in trailers issued by the Federal Emergency Management Agency. They sued the makers and distributors of FEMA trailers
in November, 2007. Then in early 2009, the plaintiffs added trailer haulers and installers,
Shaw and CH2M Hill, as defendants.

The contractors argued first that the plaintiffs lacked standing because they had failed to link  particular plaintiffs to any particular defendant involved in their specific unit.  The court ruled that because the original complaint matched plaintiffs to trailer manufacturers, those originally named plaintiffs had standing to add defendants in the chain of distribution. Those plaintiffs who failed to assert any linkage at all were dismissed without prejudice.

Second, the contractors argued prescription, the Louisiana version of laches, asserting that the plaintiffs' products liability claims prescribed on May 18, 2007, or one year after the first trailer suit was filed. The contractors claimed that the plaintiffs should have known about their claim for formaldehyde exposure by that date. Judge Engelhardt, however, ruled that the clock started from the date of injury, and it is impossible to determine in advance exactly when each plaintiff became aware of his or her injuries.

"What each ... plaintiff knew about formaldehyde exposure or the possibility of legal claims relating thereto; what injury each such plaintiff allegedly experienced from such exposure, and when knowledge of these alleged injuries occurred, are questions that can be answered only a case-by-case basis. These facts are not evident from the face of the complaints,” Judge Engelhardt wrote.

Finally, Judge Engelhardt rejected the contractors contention that the state product liability act did not apply to them because they were not manufacturers of the trailers.  While Louisiana law determines that the proper assembly of a defective part does not create manufacturer liability, here, in contrast, plaintiffs contended that the alleged formaldehyde-related defect occurred in part because of the assembly process used by the contractors.  An alleged defect which manifests itself in the assembly process can impose Louisiana Products Liability Act "manufacturer" liability on a party when the defect is created by the assembly process, he concluded.

Readers will recall that last December, the court properly refused to grant class certification to the six proposed subclasses of plaintiffs in this MDL, finding they did not meet the standards required for class certification under Rule 23. The plaintiffs had sought certification of four state subclasses of individuals who resided in trailers provided by the Federal Emergency Management Agency in Louisiana, Texas, Alabama and Mississippi following hurricanes Katrina and Rita, as well as a future medical monitoring subclass, and an economic loss subclass.  And the court has begun selecting bellwether cases for the first trials.

 

Supreme Court Issues Opinion in Much-Watched Manville Insurer Asbestos Case

The U.S. Supreme Court has ruled that an injunction against lawsuits in the landmark bankruptcy case of asbestos manufacturer Johns-Manville does in fact bar claims now asserted by asbestos plaintiffs against the company’s insurer, Travelers Indemnity Co.  In a 7-2 decision, the Supreme Court reversed an opinion by the U.S. Court of Appeals for the Second Circuit, ruling that a bankruptcy judge properly interpreted the 1986 injunction to apply to the later claims.

MassTortDefense alerted readers to this case late last year. The case arises from the now-decades old Manville bankruptcy. From the 1920s until the 1970s, Johns-Manville was the largest manufacturer of asbestos-containing products and the largest supplier of raw asbestos in the United States. As a result, in the 1960s and 1970s, Johns-Manville became the target of many product liability suits. Johns-Manville filed for Chapter 11 protection under the federal bankruptcy law on Aug. 26, 1982. On that date, Johns-Manville was a defendant in more than 12,500 asbestos-related suits. To fund its reorganization plan, the bankruptcy court allowed Johns-Manville to settle its insurance claims for about $850 million.

Travelers, Johns-Manville's primary insurer from 1947 to 1976, paid about $100 million into the bankruptcy estate in exchange for a full and final release of Manville-related claims. In 1986, Bankruptcy Judge Lifland entered a series of confirmation orders, inter alia barring any person from commencing any actions based upon, arising out of, or related to insurance policies that Travelers issued to Manville. In 2004, Judge Lifland found that his injunction was being violated by a new species of asbestos-related lawsuits (referred to by some as “direct action” claims) against insurers. These new asbestos claims were part of a global strategy developed by the plaintiffs' bar to put insurers in Manville's shoes and thereby hold them liable on account of their insurance relationship with Manville. The injunction in the meantime had become the model for a statutory change adopted as part of the Bankruptcy Reform Act of 1994, establishing Section 524(g) of the Bankruptcy Code, which expressly authorized the Manville approach to be used in future asbestos bankruptcies.  So the attacks had potentially widespread significance.

The Second Circuit, rather than enforce the confirmation order as it was originally written, which had been affirmed on a prior appeal, ruled that Judge Lifland had exceeded the “subject matter jurisdiction” granted by the bankruptcy code. In re: Johns-Manville Corp., 517 F.3d 52 (2d Cir. 2008). The Second Circuit concluded that the bankruptcy court in 1986 was without power to enjoin all claims that literally arise out of the insurance policies that Manville purchased from Travelers. Thus, the bankruptcy court had also exceeded its authority in approving a multi–million dollar settlement of asbestos claims filed against Travelers. The appeals court said the bedrock issue in this case required a determination as to whether the bankruptcy court had jurisdiction over the disputed statutory and common law claims. While the bankruptcy court repeatedly used the terms “arising out of” and “related to,”  global finality for Travelers is only as global as the bankruptcy court's jurisdiction.

The Supreme Court, however, held "that the terms of the injunction bar the actions and that the finality of the bankruptcy court’s orders following the conclusion of direct review generally stands in the way of challenging the enforceability of the injunction.” Justice David Souter wrote for the majority. The 1986 Orders became final on direct review over two decades ago, and whether the Bankruptcy Court had jurisdiction and authority to enter the injunction in 1986 was not properly before the Court of Appeals in 2008. 

The respondents' position that the 1986 Orders only bar actions against insurers when those actions seek to recover derivatively for Manville’s wrongdoing, but not actions to recover for Travelers’ own alleged misconduct, simply is not what the 1986 Orders say. There is no language limiting it to derivative claims.  The Bankruptcy Court in this case plainly had jurisdiction to interpret and enforce its own prior orders, in part because it explicitly retained jurisdiction to enforce its injunctions.  Once the 1986 Orders became final on direct review (whether or not proper exercises of bankruptcy court jurisdiction and power), they became res judicata to the parties and those in privity with them, not only as to every matter which was offered and received to sustain or defeat the claim or demand, but as to any other admissible matter which might have been offered for that purpose. Those orders are not any the less preclusive because the attack is on the Bankruptcy Court’s conformity with its subject-matter jurisdiction, for even subject-matter jurisdiction generally may not be attacked collaterally.

The Court stated that "our holding is narrow."  They did not resolve whether a bankruptcy court, in 1986 or today, could properly enjoin claims against non-debtor insurers that are not derivative of the debtor’s wrongdoing. Still an important issue in a mass tort driven bankruptcy.  Nor did the Court decide whether any particular respondent is bound by the 1986 Orders.   Thus, the Court appeared to be making an effort not to address the actual underlying issue here.

In a dissenting opinion, however, Justices John Paul Stevens and Ruth Bader Ginsburg
sided with the Second Circuit, arguing that the bankruptcy court had exceeded its jurisdiction by barring the suits. 

State Supreme Court Affirms Summary Judgment Under Risk-Utility Test

The Texas Supreme Court last week upheld summary judgment in a design defect case, finding that under the risk-utility test, the commercial trailer at issue was not defective as a matter of law. See Timpte Industries Inc. v. Gish, Texas, No. 08-0043, (6/5/09).

Readers of MassTortDefense recognize that in a strict products liability claim, the risk-utility test has been the dominant test of "defectiveness" employed by state courts. The opinion offers an interesting example of the potential relevance of an obvious design risk (even in a jurisdiction that has rejected the obvious danger rule), and the interplay of warnings and design issues.

Plaintiff Gish was seriously injured when he fell from the top of a commercial “Super Hopper” trailer into which he was attempting to load fertilizer. He sued Timpte, the manufacturer of the trailer, alleging, among other things, that several features of the trailer were defectively designed, rendering the trailer unreasonably dangerous. The Super Hopper trailer is a standard open-top, twin hopper trailer, which is loaded from above through use of a downspout or other device and is emptied through two openings on its bottom. Once the trailer is loaded, a tarp is rolled over the top
to protect its contents.  A ladder and an observation platform are attached to the front and rear of the trailer to allow the operator to view its contents.

The downspout that was loading fertilizer into the trailer was not lowering properly on the day of the accident.  Gish pulled on a rope to lower it, but that was unsuccessful, so he climbed up the front platform ladder and climbed onto the top rail to work with the downspout. A gust of wind hit him from the back, causing him to fall.

Plaintiff alleged defects in the top two rungs of the ladders attached to the front and rear of the trailer which allowed a person to climb atop the trailer; and a defect as to the top rail of the trailer, which was allegedly too narrow and slippery and contained too many tripping hazards for a person to walk safely along it.

To recover for a products liability claim alleging a design defect, under Texas law, a plaintiff must prove that (1) the product was defectively designed so as to render it unreasonably dangerous; (2) a safer alternative design existed; and (3) the defect was a producing cause of the injury for which the plaintiff seeks recovery. To determine whether a product was defectively designed so as to render it unreasonably dangerous, Texas courts have long applied a form of the risk-utility analysis that requires consideration of the following factors: (a) the utility of the product to the user and to the public as a whole weighed against the gravity and likelihood of injury from its use; (b) the availability of a substitute which would meet the same need and not be unsafe or unreasonably expensive; (c) the manufacturer’s ability to eliminate the unsafe character of the product without seriously impairing its usefulness or significantly increasing its costs; (d) the user’s anticipated awareness of the dangers inherent in the product and their avoidability because of general public knowledge of the obvious condition of the product, or of the existence of suitable warnings or instructions; and (e) the expectations of the ordinary consumer.

The court emphasized that risk-utility analysis does not operate in a vacuum, but rather in the context of the product’s intended use and its intended users. Specifically, while Texas has rejected the “open and obvious danger rule” under which obvious risks are not design defects which must be remedied, the obviousness of the claimed defect is an important consideration in determining whether the product is unreasonably dangerous -- and may even be decisive in a particular case.

Essentially, Gish complained that the trailer’s design failed to prevent him from climbing atop the trailer and then, once he was up there, failed to protect him from the risk of falling. The court found no evidence, however, that the top rail of the trailer was unreasonably dangerous in light of its use and purpose. The risk of falling while trying to balance on a 5 inch wide strip of extruded aluminum nearly ten feet above the ground is an obvious risk that is certainly within the ordinary knowledge common to the community. Timpte warned users to always maintain three-point contact with the trailer, which is impossible for a user standing on the top rail. Had Gish adhered to this warning, his accident would not have happened. Additionally, widening the side walls of the trailer so as to convert the top rail into a safe walkway, as Gish’s expert proposed, would have increased the cost and weight of the trailer while decreasing its utility.

Moreover, Gish’s injury was only remotely related to the ladder’s top two rungs: they allowed him to climb atop the trailer, where he was subsequently injured. Timpte warned users not to use the ladder to climb into the trailer itself, and the obvious nature of the risk of climbing onto the top rail negated  the need for any additional warning. The two top rungs were necessary to maintain the stability of the ladder and provide an emergency handhold in the event someone slips on the ladder. Their utility was high, the court concluded, and Gish's injury was “only remotely related” to those rungs.

 

MDL Created for Chinese Drywall Litigation

The U.S. Judicial Panel on Multidistrict Litigation has consolidated a number of lawsuits brought over Chinese-made drywall installed in U.S. homes. See In re: Chinese-Manufactured Drywall Products Liability Litigation, MDL-2047 (JPML).

The motion for consolidation encompassed ten actions, four actions in the Southern District of Florida, three actions in the Middle District of Florida and one action each in the Northern District of Florida, Eastern District of Louisiana, and Southern District of Ohio. The panel said it was aware of 67 related lawsuits that were pending in federal courts around the country. Those suits and any other related actions will be treated as potential tag-along actions.

The Panel found that all actions share factual questions concerning drywall manufactured in China, imported to and distributed in the United States, and used in the construction of houses; plaintiffs in all actions allege that the drywall emits smelly, corrosive gases. Centralization under Section 1407 will eliminate duplicative discovery, including any discovery on international parties; prevent inconsistent pretrial rulings, particularly those with respect to class certification issues; and conserve the resources of the parties, their counsel and the judiciary, said the Panel.

As is sometimes the case, no district was a clear focal point of this litigation. The common manufacturing defendant and its affiliates are foreign entities without a major presence in any of the suggested transferee districts. Most actions also name local entities, such as builders and suppliers, as defendants. Several parties suggested different districts, and all of the suggested districts, particularly those in the southeastern region, have a nexus to the litigation through allegedly affected houses built with the drywall at issue. On balance, the panel was persuaded that the Eastern District of Louisiana is a preferable transferee forum for this litigation. Centralization in this district permits the Panel to effect the Section 1407 assignment to a judge who has "extensive experience in multidistrict litigation as well as the ability and temperament to steer this complex litigation on a steady and expeditious course." That would be the Honorable Eldon E. Fallon of the Eastern District of Louisiana.

As posted on MassTortDefense before, the lawsuits allege that sulfur compound levels in the drywall are too high, causing issues with air conditioning systems, electrical appliances, internal wiring and other electrical systems in homes. Plaintiffs also allege the drywall produces a rotten egg-like stench and causes a variety of respiratory and other health problems for those who live in the affected homes. The lawsuits filed so far have named Chinese-based manufacturers, as well as importers, developers and builders, contractors, suppliers and others. Companies facing suits include Knauf Gips KG, Knauf Plasterboard Tianjin Co., Taishan Gypsum Co., L&W Supply Corp. and USG Corp. Lennar Corp., a major home builder, has brought in more than 20 manufacturers, suppliers and installers.  Some legislators have been critical of the CPSC's handling of the issue.  And bills have been introduced to ban the product.

FDA Issues New Draft Guidance on Presenting Risk Information

The FDA recently issued a new draft Guidance for Industry titled “Presenting Risk Information in Prescription Drug and Medical Device Promotion.”  This new guidance document represents a comprehensive and fairly detailed overview of the FDA’s approach to reviewing drug and device advertising, albeit with a somewhat surprising omission regarding Internet-specific guidance.

As readers of MassTortDefense know, promotional pieces: (1) cannot be false or misleading, (2) must reveal material facts, including facts about consequences, and (3) should present information about effectiveness and risk in a balanced manner. The guidance confirms that promotional pieces will be judged based on the “reasonable consumer” standard, essentially adopting the definition used by the Federal Trade Commission. Importantly, the FDA also adopts the FTC position that multiple interpretations of a claim are possible if they are all reasonable, and a violation will be found if any one reasonable interpretation violates regulations.

Finally, while the guidance acknowledges the different levels of expertise of consumers and healthcare professionals and notes that the FDA takes account the intended audience in determining compliance, the guidance specifically highlights the social science research finding that experts are “subject to the same cognitive biases and processing limitations as non-experts.”  As a result, it arguably gives insufficient credit to physicians’ abilities to understand important information and make appropriate prescribing decisions;  the recommendations listed in the guidance seemingly apply equally to promotional materials directed to consumers and healthcare professionals.

The general considerations the FDA will use in assessment include (1) use of language appropriate for the target audience, (2) appropriate use of signals (e.g., headlines, change of announcer), (3) appropriate framing of risk information (e.g., severity, specificity), and (4) hierarchy of risk information (i.e., most important risk information should come first).

More specifically, the FDA considers the quantity, materiality, and comprehensiveness of the risk information contained in the piece. Concerning quantity, the FDA notes that risk information should be comparable to benefit information and should include enough detail to convey an “accurate” impression of the product. Among the relevant factors are (1) the number of statements about benefits and risk, (2) the completeness and depth of detail about benefits and risks, (3) the amount of time or space devoted to benefits and risks, and (4) the use of components that enhance or distract from the presentation of risk or benefit information. In assessing materiality and comprehensiveness, the guidance notes that material risks are those that would influence a reasonable member of the target audience—often the most serious and the most frequently occurring risks.

Despite the guidance’s clear and intentional application to Internet advertisements, it makes no special mention of such advertisements and provides no specific guidance on issues unique to Internet promotion.

The comment period for this draft guidance ends August 25, 2009. Additional information, including information on how to submit comments, can be found here.

 

 

Class Action Complaint Dismissed In Alleged Moldy Bed Litigation

A federal court has dismissed the class action claim made against a number of manufacturers and sellers of the “Sleep Number” bed products. Molly Stearns, et al.,  v. Select Comfort Retail Corporation, No. 08-2746 JF, (N.D. Calif. June 5, 2009).

Plaintiff filed a complaint alleging that she had found mold on her Sleep Number® bed purchased in 2000. The complaint alleged various causes of action, including for strict product liability, intentional misrepresentation, negligent misrepresentation, concealment, breach of express warranty, and breach of implied warranty. Stearns also sought to bring a class action on behalf of other  purchasers and users of Sleep Number® beds. An amended complaint added claims for alleged violation of the Magnusson-Moss Warranty Act, the California Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq.; the Racketeering Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962c; the  Consumer Product Safety Act;  in total, plaintiffs presently assert seventeen claims for relief.

Plaintiffs defined the purported class as all original purchasers of a Select Comfort® bed between January 1, 1987 and the present date, whose beds contained mold. At oral argument, and in response to defendants’ valid contention that a nationwide class would be overly ambitious in light of the differences in applicable state laws and the individualized circumstances of each bed purchaser, plaintiffs' counsel represented that they would be willing to limit the class to California residents. This concession, however, would have eliminated several of the putative class representatives. The court found that this alone would require denial of class certification based on the present state of the pleadings.

More importantly, the elements of proof with respect to the property damage alleged in the complaint likely will vary significantly among class members, depending on when the bed was purchased; whether any anti-fungal measures were included in the product; and the
surrounding environmental conditions. The amount of damage incurred also will vary among class members. Some class members might only require a new bed or a refund, while others conceivably might have suffered additional property damage from the spread of mold in their homes. Plaintiffs failed to show how these potentially diverging interests would be addressed in the single broadly defined class.

In addition, the court noted that Article III requires that the representative or named plaintiff must share the same injury or threat of injury.  DuPree v. U.S., 559 F.2d 1151, 1153 (9th Cir. 1977). See also Sosna v. Iowa, 419 U.S. 393, 403 (1975) (“A litigant must be a member of the class which he or she seeks to represent at the time the class action is certified”).  In the instant case, it was not yet clear whether any of the named plaintiffs had or could set forth a cognizable claim under any of their numerous legal theories. The court had done a claim by claim analysis leading to a dismissal with prejudice of several of the claims, including breach of implied warranty of fitness, breach of implied warranty of merchantability, fraud, intentional misrepresentation, racketeering, conspiracy, and violations of the Sherman Act and California's Cartwright Act. 

While the named plaintiffs, all of whom claim their Sleep Number beds are defective products, were given leave to amend their claims for negligence, strict product liability, breach of express warranty, and violations of the Magnusson-Moss Warranty Act, the current complaint failed to state a claim. For example, the generalized allegations of harm were insufficient for the court to know whether tort claims were barred by the economic loss doctrine. Accordingly the motion to strike was granted, without prejudice to plaintiffs filing an amended pleading consistent with the ruling.
 

Chambers USA 2009

If the faithful readers will permit me a non-substantive note:  I was pleased to learn that  your humble blogger was again listed nationally among Product Liability lawyers by Chambers and Partners. 

 

Federal Food Safety Working Group Invites Suggestions

The administration's Food Safety Working Group is collecting suggestions on its website for reforming federal food safety policy. Earlier this Spring, President Obama announced the creation of the Food Safety Working Group, chaired by the Secretaries of the Department of Health and Human Services and the Department of Agriculture. The President said in his address that the working group was designed to "bring together cabinet secretaries and senior officials to advise me on how we can upgrade our food safety laws for the 21st century; foster coordination throughout government; and ensure that we are not just designing laws that will keep the American people safe, but enforcing them."

The Working Group's charge is to ensure the country has safe food, to enhance food safety systems by fostering coordination throughout the government, and to enhance food safety laws for the 21st century. Apparently, the first work product from the Food Safety Working Group will be a set of principles and guidelines for improving food safety. The Working Group is receiving input from a broad range of stakeholders about their ideas for improving the food safety system. Others are invited to send their suggestions for reforming food safety policy, along with questions, comments, concerns. The Working Group can be reached through the White House comment form, or on twitter (hashtag #WHsafefood) or at their Facebook page.

Interested readers of MassTortDefense should think about reaching out to the Working Group with ideas for food safety that properly balance the importance of an adequate supply, the need for rapid transportation of foodstuffs, the public benefit of dietary choice and food options, the harmfulness of excessive governmental red tape; the need to avoid significant costs increases to the consumer in this challenging economic period, the inefficiency of government bureaucracy, the diversity and scope of the food service industry and its complex, multi-layered linkage with the supply chain, and other relevant concerns.

Most importantly to litigators, any thoughts would be welcome on safety steps that will not support or encourage additional litigation against the food industry. The CDC estimates that, each year, nearly 76 million people are affected by some type of food-borne illness, and approximately 325,000 Americans are hospitalized with a food-borne illness. Ultimately, this is because many pathogens continue to exist naturally in raw animal foods such as meat and poultry. Unfortunately, most food illness outbreak investigations fail to identify the real culprit, and some even identify the wrong source. In many cases, the claimants (who mistakenly think they got sick from the last thing they ate) sue the wrong party. Arguably, a significant part of the federal approach to food safety should focus on consumer and industry education, i.e., food safety educational programs that span the entire farm-to-table continuum, educating farmers, producers, distributors, food-handlers and consumers.

Supreme Court Orders State Court Justice Recusal

In a 5-4 decision, the U.S. Supreme Court yesterday issued an extraordinary decision that has potential impact not only on products liability and mass torts, but all litigation. The Court held that due process require a state supreme court justice to recuse himself from an appeal involving a major campaign contributor. Caperton v. A. T. Massey Coal Co., Inc., (U.S. S.Ct. 6/08/09).

After a West Virginia jury found Massey liable for $50 million in damages, West Virginia held its 2004 judicial elections. Massey’s chairman and principal officer supported the eventual winning candidate for the state supreme court with $3 million in contributions. Caperton moved to disqualify new-Justice Benjamin under the Due Process Clause and the State’s Code of Judicial Conduct, based on the alleged conflict caused by this campaign involvement. Justice Benjamin denied the motion, indicating that he found nothing showing bias for or against any litigant. The West Virginia court then reversed the $50 million verdict in a 3-2 vote. During the rehearing process, Justice Benjamin refused twice more to recuse himself, and the state court once again reversed the jury verdict. Four months later, Justice Benjamin filed a concurring opinion, defending the court’s opinion and his recusal decision.

Caperton petitioned the U.S. Supreme Court. Writing for the majority, Justice Kennedy noted first that because the objective standards implementing the Due Process Clause do not require proof of actual bias, the Court did not have to review Justice Benjamin’s subjective findings of impartiality and propriety and did not need to determine whether there was actual bias. Rather, the question is whether, under a realistic appraisal of psychological tendencies and human weakness, the interest poses such a risk of actual bias or prejudgment that the practice must be forbidden if the guarantee of due process is to be adequately implemented. There is a serious risk of actual bias, wrote the majority, when a person with a personal stake in a particular case had a significant and disproportionate influence in placing the judge on the case by raising funds or directing the judge’s election campaign when the case was pending or imminent. The proper inquiry centers on the contribution’s relative size in comparison to the total amount contributed to the campaign, the total amount spent in the election, and the apparent effect of the contribution on the outcome. It is not whether the contributions were a necessary and sufficient cause of Benjamin’s victory. In an election decided by fewer than 50,000 votes, the campaign contributions—compared to the total amount contributed to the campaign, as well as the total amount spent in the election—had a significant and disproportionate influence on the outcome. The temporal relationship between the campaign contributions, the justice’s election, and the pendency of the case was also critical, for it was reasonably foreseeable that the pending case would be before the newly elected justice. There is no allegation of a quid pro quo agreement, but the extraordinary contributions were made at a time when the party had a vested stake in the outcome. Just as no man is allowed to be a judge in his own cause, similar fears of bias can arise when—without the other parties’ consent—a man chooses the judge in his own cause. Applying this principle to the judicial election process, there was here a serious, objective risk of actual bias that required Justice Benjamin’s recusal.

The dissent authored by Chief Justice Roberts argued that the Court’s new “rule” provides no guidance to judges and litigants about when recusal will be constitutionally required. This will inevitably lead to an increase in allegations that judges are biased, however groundless those charges may be. He lists more than 40 questions that are raised, not answered, by the majority’s analysis, noting lower courts will now have to determine things like: How much money is too much money? What level of contribution or expenditure gives rise to a “probability of bias”? How do we determine whether a given expenditure is “disproportionate”? Disproportionate to what? Are independent, non-coordinated expenditures treated the same as direct contributions to a candidate’s campaign? How long does the probability of bias last? Does the probability of bias diminish over time as the election recedes? Does it matter whether the judge plans to run for reelection? What if the “disproportionately” large expenditure is made by an industry association, trade union, physicians’ group, or the plaintiffs’ bar? Must the judge recuse in all cases that affect the association’s interests? Must the judge recuse in all cases in which a party or lawyer is a member of that group? Does it matter how much the litigant contributed to the association?

The dissent argues that the majority’s only answer -- that the present case is an “extreme” one, so there is no need to worry about other cases (“this is an exceptional case….our decision today addresses an extraordinary situation…. rule will be confined to rare instances”) – is just insufficient.
 

FDA To Revisit BPA Assessment

The U.S. Food and Drug Administration has reportedly agreed to take a further look at its 2008 decision that bisphenol A in certain food and drink containers doesn't pose a significant safety threat. Newly appointed FDA Commissioner Margaret Hamburg is reported to have put the agency's acting chief scientist in charge of the review, which could take 3-6 months. In her first appearance before Congress as commissioner, Hamburg told the House Energy and Commerce Subcommittee on Health that the FDA is re-examining its position on BPA.

Reps. Henry Waxman, D-Calif., and Bart Stupak, D-Mich., sent a letter to the FDA earlier this month asking the agency to revisit its earlier conclusion. The Committee on Energy and Commerce and its Subcommittee on Oversight and Investigations have been investigating the possible risks of the chemical BPA in consumer products and food product containers, particularly in infant formula containers and other items used by infants and children. The Congressmen pointed to the October, 2008, report of FDA's advisory Science Board Subcommittee, which raised questions about some data aspects of the agency's conclusion. "Based on this information, we request that FDA reconsider the Bush Administration's position that BPA is safe at current estimated exposure levels," said the letter.

In addition to their letter to the FDA, the legislators sent a request to the North American Metal Packaging Alliance, an industry group, creating a straw man about alleged tactics the industry might contemplate using in a future hypothetical public relations strategy to counter efforts to ban BPA. The duo requested a list of all attendees at group meetings, including their affiliations and contact information, certainly a chilling attack on the trade group member's right to free speech and freedom of association.

As reported here at MassTortDefense, FDA had already decided to support additional research with regard to its analysis of BPA safety in plastic baby bottles and food and drink containers. The FDA’s basic position remains that current human exposure to BPA in food-packaging materials provides an adequate margin of safety. FDA has been re-evaluating available data and planning for the acquisition of additional data that will strengthen the exposure estimates from all dietary sources of BPA, with particular attention to dietary sources relevant to infants and children.


Makers of BPA say that the chemical poses no known risk to human health at current exposure levels. In response to public demand, some manufacturers have begun introducing products for infants and children that are BPA-free. The Environmental Protection Agency has calculated that adults and infants can consume 50 micrograms of BPA per kilogram of body weight every day over a lifetime with little appreciable risk of harm.  But Democrats have introduced bills in Congress to ban the chemical.

 

FEMA Trailer MDL Decision on Preemption

The federal court overseeing the MDL involving trailers issued by the U.S. government following Hurricane Katrina has dismissed some of the plaintiffs' state law claims against mobile home manufacturer defendants, on the basis of the federal preemption doctrine. In Re: FEMA Trailer Formaldehyde Products Liability Litigation, MDL No. 1873 (E.D. La.)

As readers of MassTort Defense know, Hurricane Katrina impacted much of the Gulf Coast in August 2005, and Hurricane Rita followed in September 2005, causing extensive damage along the Louisiana and Texas coasts. In the wake of the hurricanes, many individuals whose homes were lost or damaged moved into temporary housing provided by FEMA. Plaintiffs allege that these trailers exposed residents to high levels of the chemical formaldehyde, about which they were not warned. The Judicial Panel on Multidistrict Litigation consolidated a number of suits against defendants, including the federal government and several trailer manufacturers, over the alleged formaldehyde exposure in 2007.

Judge Kurt Engelhardt of the U.S. District Court for the Eastern District of Louisiana last week granted the manufacturer defendants' motion to dismiss certain state law claims. The defendants asserted that the construction of these mobile homes was regulated by the Manufactured Home Construction and Safety Standards Act, 42 U.S.C. § 5401 et seq., (“the MHA”) and the regulations promulgated by the United States Department of Housing and Urban Development (“HUD”), pursuant to 24 C.F.R. § 3280 and § 3282 (“the HUD Code”). Pursuant to the MHA, HUD established the Manufactured Home Construction and Safety Standards (“MHCSS”), 24 C.F.R § 3208 et seq., which govern the standards for formaldehyde emissions from materials used in manufactured homes. This regulation expressly and specifically dictates the maximum level of formaldehyde gas that component products in mobile homes can emit. The regulations also specify that a health notice on formaldehyde emissions shall be temporarily displayed in the kitchen of each manufactured home.Accordingly, the defendants asserted that the federal statutes and regulation in the MHA and the HUD Code explicitly and impliedly preempt plaintiffs’ state law claims against them.

As several courts have previously noted, the MHA does not explicitly preempt state causes of action. Turning to implied preemption, the court noted that implied preemption exists when state law regulates conduct in a field Congress intended the Federal Government to occupy exclusively (also referred to as “field preemption”), or when state law actually conflicts with federal law (also referred to as “conflict preemption”). Conflict preemption exists in two scenarios: (1) when compliance with both a state and federal law is impossible, and/or (2) when the state law conflicts with the federal law such that it stands as an obstacle to the achievement of the federal law’s purposes and objectives.

After analyzing the statute and regulations, the MDL court concluded that if plaintiffs in the instant case were allowed to go forward with their state product liability claims raising the ambient air standard, then defendants in the mobile home industry would essentially be required to deviate (in ways variable from state to state) from those federal standards so carefully and thoroughly crafted by HUD. The MHA clearly states that if states want to regulate safety matters that federal law already covers (like formaldehyde emissions), those regulations must be “identical.” 42 U.S.C. § 5403(d). Furthermore, it was noteworthy that the plaintiffs contend that the moving defendants should have adhered to the ambient air standard, which differs from the HUD-accepted component products standard. Thus, cases that present situations where the plaintiffs are not arguing that the defendants should have adhered to a standard higher than, or different from what the MHA imposes, are inapplicable.

The court concluded similarly that any such claims relating to inadequate warnings of exposure
to purportedly high levels of formaldehyde contained in the units, that require more than the federal
label standards, should be dismissed. However, any of plaintiffs’ state law claims that advance non-compliance with federal formaldehyde regulations (to the extent that such claims exist) are considered to be parallel claims, are not preempted and, thus, are not dismissed. See Riegel v. Medtronic, Inc., 128 S.Ct 999, 1011 (2008).

Court Refuses To Consolidate Class Action Into Lexapro MDL

A federal court last week rejected an attempt to consolidate a newly filed proposed class action over Lexapro and Celexa with the multidistrict litigation involving the drugs. In Re: Celexa and Lexapro Products Liability Litigation, MDL No. 1736 (E.D. Mo.).

Judge Rodney W. Sippel said in his ruling that plaintiffs had not demonstrated that consolidation would be appropriate. The MDL is currently comprised of 42 cases brought by individual plaintiffs who claim Lexapro or Celexa caused or induced a suicide or suicide attempt. In originally creating this MDL in 2006, the Judicial Panel on Multidistrict Litigation noted that the actions shared allegations relating to the safety of Celexa or Lexapro and the adequacy of Forest's warnings concerning the possible adverse effects of using the drugs, in particular, the potential for each product to induce its users to commit, or attempt to commit, suicide. The JPML recently declined to transfer two personal injury cases to the MDL because they involved injuries other than suicide.

The new suit, Universal Care, Inc., et al. v. Forest Laboratories, Inc., et al., on the other hand, involves allegations relating to Forest Laboratories Inc.'s marketing of the drugs, and economic damages allegedly caused from the sale of Celexa or Lexapro. Specifically, the new suit alleges violations of the Missouri Merchandising Practices Act and makes claims for unjust enrichment,  fraudulent concealment , and misrepresentation. The plaintiffs in this case claim that Forest engaged in improper promotional activities, causing third-party payors to reimburse patients and health care institutions for prescriptions of Lexapro and Celexa that were written for patients for whom the drugs were not indicated.

Moreover, the cases pending in the MDL are individual actions, not a putative class actions. The extensive discovery and motion practice relating to the alleged appropriateness of class-wide treatment and the adequacy of the class representatives are not part of the current MDL. These factors could significantly delay the progress of the MDL proceedings, prejudicing both the MDL plaintiffs and Forest. A final factor is that the MDL is already more than 2 years old, with significant pretrial proceedings already haven taken place.

Even in the MDL context, Rule 42 applies, and the court has discretion to assess the impact of allegedly common questions.  Consolidation is inappropriate if it causes confusion or leads to delay, inefficiency, inconvenience, or unfair prejudice to a party. E.g., EEOC v. HBE Corp., 135 F.3d 543, 551 (8th Cir. 1998).