Food Safety Modernization Act Analysis

The recently enacted Food Safety Modernization Act implements a new system of federal oversight of food products. We have posted on it before. My colleague Philip N. Yannella has drafted a BNA Insight analyzing the new law, signed by President Obama Jan. 4, and  its potential impact on litigation against the food industry.

Worth a look. 

Third Circuit Affirms Forum Non Conveniens Dismissal

We have posted before about how foreign plaintiffs desire to take advantage of U.S. product liability law and remedies.  The Third Circuit last week affirmed the granting of a forum non conveniens motion against the claims of hundreds of Australian plaintiffs seeking to sue Alcoa Inc. in the U.S. over injuries allegedly caused by emissions at three refineries in Western Australia. See Cameron Auxer et al. v. Alcoa Inc., No. 10-2131(3d Cir. 1/20/11).

These five consolidated cases involved 244 plaintiffs who claim to have suffered personal injuries caused by their alleged exposure to emissions from three alumina refineries in Western Australia.  The plaintiffs filed suit in June, 2009, alleging that Alcoa was liable for exposing them to a variety of  toxic chemicals from the Wagerup, Kwinana and Pinjarra refineries, and allegedly intentionally concealing the dangers of the pollution.  Alcoa produces alumina or aluminum oxide at its Western Australia facilities. 

FYI, the state of Western Australia is Australia’s face on the Indian Ocean. Its capital, Perth, is closer to Singapore and Jakarta than it is to Canberra. The majority of people live in and around Perth. Western Australia is the largest Australian State. With an area of more than 2,500,000 sq km, a 12,500 km coastline, and spanning 2,400 km from north to south, it occupies a third of the continent.

Defendant moved to dismiss, and the lower court dismissed the five consolidated suits on forum non conveniens grounds. Plaintiffs appealed.

While plaintiffs acknowledged that their exposure, injuries, diagnoses, and medical treatment all occurred exclusively in Western Australia, and that none of the operative facts material to causation, injuries, diagnoses and treatments occurred in Pennsylvania, they insisted that the witnesses and documentary evidence necessary for the plaintiffs to prove liability are located at defendant’s corporate headquarters in Pittsburgh.  Thus, the cases should proceed in Pennsylvania.

The key issues to be considered in reaching a decision on the appropriate forum are: (1) what degree of deference is to be given the plaintiffs’ choice of forum, (2) whether there is an adequate alternative forum, (3) whether a balancing of the private factors weighs in favor of dismissal, and (4) whether a balancing of public factors weighs in favor of dismissal. See, e.g., Lacey v. Cessna Aircraft Co., 862 F.2d 38, 43 (3d Cir. 1988).

The court of appeals addressed the lower court's treatment of factors 2-4.  On the second, Alcoa was registered to do business and subject to service of process in Western Australia; the courts of Western Australia had jurisdiction over cases of this kind and recognize theories of liability for negligence, reckless conduct, and “damage caused by hazardous activities,” and, the applicable foreign court rules provide for discovery of documents, interrogatories, and the compelling of the attendance of witnesses and production of documents at trial by court-ordered subpoenas. For these reasons, numerous federal courts have found Australia to be an adequate alternative forum and dismissed on grounds of forum non conveniens. Some have specifically held that the mere absence of pretrial depositions does not render an alternative forum inadequate.

On factor three, the court observed that Pennsylvania evidence from a party would be much more accessible to plaintiffs for trial in a Western Australian forum than Western Australian evidence from non-parties would be for Alcoa for trial in a Pennsylvania forum. Because of this distinction between access to party and non-party witnesses and documents and the primary importance of a party’s being able to present its case at trial, the District Court correctly had concluded that this factor weighed heavily in favor of dismissal.

On the final factor, the lower court was fully aware that plaintiffs alleged culpable conduct in Pennsylvania and expressly recognized at the outset of its public interest factor discussion that it must consider the locus of the alleged culpable conduct and the connection of that conduct to plaintiff’s chosen forum.  But, said the Third Circuit, even if the District Court had failed to take this interest of Pennsylvania into account, it would not alter the outcome of these appeals. The applicable precedent does not suggest that, where culpable conduct takes place in a mass tort case in both jurisdictions and injury in only one, the interests of the two are in any way “comparable.”  This issue is "not a close call."

Supreme Court Hears Argument in Personal Jurisdiction Cases

Continuing our Supreme Court theme.  We have posted before about two cases involving personal jurisdiction over foreign corporations in state courts, now pending in SCOTUS.  McIntyre Machinery Ltd. v. Nicastro, U.S., No. 09-1343 (certiorari petition granted 9/28/10); Goodyear Luxembourg Tires SA v. Brown, U.S., No. 10-76 (certiorari petition granted 9/28/10). The former involves the assertion by New Jersey courts of jurisdiction over a European manufacturer of a machine that allegedly injured a state resident; the latter involves the assertion by North Carolina courts of general jurisdiction over the European affiliates of the manufacturer of tires allegedly responsibly for a vehicle accident in Europe injuring state residents on vacation there.

NICASTRO ORAL ARGUMENT
Several members of the Supreme Court were active in questioning the advocates in the Nicastro oral argument.  The defendant kept its argument focused on the “purposeful availment” branch of the prior case law on personal jurisdiction, the rule that a foreign company needs to intentionally take advantage of doing business in a state, and arguing that it matters whether the manufacturer directed the distributor to go to a certain state or controlled the relationship with customers in that state.

Several of the justices asked hypothetical questions about a variety of fact patterns beyond those presented by the case.  As difficult as the individual case may be per se, the Court recognizes that whatever rules it lays down here will have a potentially dramatic impact on foreign and domestic corporations, including small business, and the economy. Accordingly, a number of  questions were asked to help explore how the rules might impact other factual scenarios as well. Justice Kagan asked defense counsel to explain the difference between targeting the “United States” with your product and targeting one or more individual states, and whether targeting the country meant that you were automatically targeting each state within the country. (Traditionally, of course, the case law had focused on contacts with the individual state in which the defendant was being sued.) Justice Scalia asked whether the same issue arises for a domestic corporation; that is, a U.S. manufacturer could thus be sued in every state if it simply targeted the country as a whole.

Justice Ginsburg expressed concern about the whether plaintiff would be left with no forum (other than England) if New Jersey was not available, which led to a lengthy debate about Ohio, the home of the U.S. distributor, and the importance of the distributor contract. Justice Scalia returned to the notion of targeting the country, as opposed to a state, and wondered if the federal courts could be given jurisdiction over such cases by Congress, to which Justice Kennedy wondered aloud whether it would be “odd” to have federal courts but no state courts having jurisdiction over a state law-based product claim. This even led to a brief mention of the pending foreign manufacturer legislation in Congress, which we have posted on.

Justice Sotomayor asked about the facts in the record that the English company traveled to trade shows in the U.S., “approved” the marketing efforts of the distributor, or “suggested” certain advertising, and whether that would be enough to make it reasonable to be hauled into court where the product then has been sold. (Justice Kagan later asked plaintiff’s counsel about this, seemingly trying to get at whether the manufacturer knew and expected that people from all 50 states might attend the trade shows).  Chief Justice Roberts asked plaintiff’s counsel about what a manufacturer has to do to not be targeting a specific state, getting plaintiff to concede that both intent and conduct on the part of the manufacturer is needed to purposefully avail oneself. Justice Breyer and Justice Scalia seemed to observe that “availment” doesn’t mean much at all if the conduct of the English manufacturer here was sufficient.
 

Justice Breyer expressed the policy concern about subjecting every small business, even in developing countries, to the products liability law of each of the 50 states simply because they agreed to sell to an independent company that was going to sell in the U.S. generally. Justice Kagan and Justice Ginsburg prompted plaintiff’s counsel to say that a U.S. company doing the same thing in Europe as the English company did in this case would be subject to suit in the foreign country (implying that it was fair for the U.S. courts to do to foreign companies what foreign courts allegedly do to U.S. companies abroad). Chief Justice Roberts asked a hypothetical designed to address the issue of a plaintiff who lives in state A and commutes into state B to use the product at work, and whether he can also sue in his home state A, stating that “the stream of commerce doesn’t wash over the United States evenly.”

C.J. Roberts and Justice Kagan then asked about component parts makers. Plaintiff answered that there should be a different test for a component part maker and acknowledged that mere knowledge that the part would go into a machine to be sold in the U.S. was insufficient for the exercise of jurisdiction.

Justice Alito brought up the difficult issue of Internet websites, and Justices Breyer, Ginsburg, and Kennedy all later chimed in on this topic. Plaintiff drew a distinction (as some lower courts have) between a passive website, and an active site at which a plaintiff may have conducted the transaction for the product from his home computer. Plaintiff argued that the actual conduct of the sale was purposeful availment sufficient to be hauled into court there.


BROWN ORAL ARGUMENT
The Court then heard argument in the Brown case. Here, the argument generated far fewer questions.  While Justice Ginsburg seemed to ask the defendant difficult question in the New Jersey case, here she found “troubling” the North Carolina court’s apparent and questionable blending of the concepts of general and specific jurisdiction. Indeed, the argument focused on general jurisdiction as opposed to specific jurisdiction.

Much of the early part of the argument also involved a discussion of the relationship between the foreign subsidiary defendants and the parent U.S. corporation, which here had consented to jurisdiction. There were numerous questions about the subsidiaries and parent as a joint enterprise, the parent as agent of the subsidiaries, and whether the actions of the parent could be attributed to the subsidiaries for purposes of establishing jurisdiction over the subsidiaries. Justice Sotomayor asked whether plaintiff’s argument really was nothing more than a reverse of the typical principal-agent theory.

The federal government appeared in the case as amicus curiae and argued on behalf of defendants, against the finding of jurisdiction. It argued that even if the contacts of the parent could be attributed to the subsidiaries, those contacts still did not rise to the level necessary for the finding of general jurisdiction; and that the consent to jurisdiction of the parent would not extend to every corporation in the corporate family. Justice Scalia, in particular, seemed to be expressing some doubt that the level of coordination between the defendants demonstrated a unitary enterprise. The last part of the argument concerned policy issues, such as whether the finding of jurisdiction would cause companies to move all operations out of the U.S. for fear that even the actions of a separate entity in the corporate family would keep them in the U.S. courts.

Both cases were submitted for consideration, with decisions expected late in the spring of 2011.

Supreme Court Hears Oral Argument in Class Action Preclusion Case

This week, we are going to explore some of the more interesting cases pending before the Supreme Court. In Smith v. Bayer Corp., No. 09-1205 (U.S., oral argument 1/18/11), the Court took up a case involving the preclusive impact of a decision denying class certification. We recently posted on a case involving the significant problem of plaintiffs hopping from court to court, state to state, shopping for a court that will certify their class after it has already been denied.

The Smith case involves the issue whether a federal court can enjoin class members from bringing a product liability class suit in state court after the federal court declined to certify a similar class.  Specifically, the Baycol MDL court in Minnesota had denied class certification, and the court of appeals upheld the injunction barring plaintiffs from bringing the same suit in state court. The court of appeals in fact unanimously affirmed, holding that the injunction was authorized by the All Writs Act and the re-litigation exception to the Anti-Injunction Act, and that petitioners did not have a due-process right to re-litigate class certification.

Plaintiffs have argued that they should not be enjoined, nor barred under the doctrine of collateral estoppel, because the state's (West Virginia's) rule for class certification is not identical to the federal rule:  while a putative class may not meet one test, it may meet the other. As plaintiffs told Justice Ginsburg, a state has the right to apply and interpret that rule of civil procedure "as it sees fit to manage its own docket and administrate its own docket as it sees fit."

The defendants argue that class members were adequately represented in the first class action, and whatever the technical differences may be, the heart of the West Virginia rule is substantively identical to the federal rule. Petitioners have not been foreclosed from seeking relief on their individual claims, but only from seeking to represent other people through a class action. Whether a class should be certified has been fully and fairly litigated in proceedings that are binding on petitioners and in which petitioners’ interests were adequately represented by an identically situated named plaintiff.  The plaintiffs' position is that class certification is a “heads-I-win, tails-you-lose” proposition. Under this theory, every unnamed plaintiff could re-litigate class certification, no matter how large the putative class, no matter how many times certification had already been denied, and no matter how adequately the class members’ interests were represented in the prior proceedings.

Part of the issue facing the Court is the application of preclusion to a non-party (as the class was not certified, absent class members were not "parties" for some purposes), and this was explored at oral argument. In response to questioning from the Court, plaintiffs argued that the re-litigation exception to the Anti-Injunction Act did not apply here. Because the plaintiffs are not the same "parties" that litigated the federal class action, and because the same issues were not litigated in the prior case -- that is, West Virginia's own class certification rule vs. Federal Rule 23.  Counsel argued that the state court has said "we do not want our legal analysis to be nothing more than a mere Pavlovian response to Federal decisional rules."

A number of Justices wondered what were the supposed differences, and part of the response to Justice Sotomayor was that the federal "court's not only trying to bind us on the procedural ruling, but is also trying to bind us in a substantive ruling as to what the elements of the claims in West Virginia are and as to what's needed to prove those claims." The state court was free to disagree with that federal ruling, counsel argued. In response to Justice Kagan, Bayer noted that the predominance requirement under the West Virginia version of Rule 23 is essentially identical to the Federal version, and there is no evidence of any content that's different from the Federal version on this point. But Justice Ginsburg pressed defendant on the issue that "sometimes Federal judges, they try their best, they're not the last word on what the State law is."

Several Justices raised the issue of forum shopping in their questions for petitioners' counsel. Justice Alito asked petitioners, whether after a class certification denial is entered in one federal court, a plaintiff's attorney could simply substitute the name of a new named plaintiff and file the same complaint in another federal court. Plaintiffs agreed that an attorney could do that.

Justice Alito asked about some of the possible implications of the plaintiffs' argument. If part of the issue is notice, would that compel federal courts to engage in a lengthy and expensive class notice period even in cases in which the class is denied? Plaintiff responded that notice would be required to bind the absent class members. Bayer argued in response to similar questions from Justice Sotomayor that the preclusion test focuses on whether the parties' interests are aligned, and the class members' interests were identical,  the first named plaintiffs understood that they was acting in a representative capacity, and the federal court took normal steps to protect the interests of non-parties, i.e., absent class members.  All that was met here. But Justice Scalia asked whether the counsel had ever been found adequate since the class was denied certification on other grounds.

Justice Kagan asked about CAFA, and Congressional intent to prevent forum shopping with classes and keep state courts from too freely certifying these kinds of class actions, which plaintiff had to concede.

Plaintiff had a hard time with the Court's questions about due process and how it affects procedural rights as opposed to substantive or property rights, particularly, as Justice Sotomayor asked, where the Federal litigation has applied essentially the same standard that the State has, and there has been adequate representation on the procedural question, and where no substantive right of a plaintiff has been extinguished. Chief Justice Roberts similarly asked about line-drawing, with a hypo about the second court limiting discovery because of what happened in the first court: "So now it's not only that you're entitled to your day in court substantively; you're entitled to your day in court procedurally as to some procedural aspects but not others?"

Justice Ginsburg asked counsel for Bayer whether there was a difference between preclusion being applied by the state court and the federal court issuing the injunction based on preclusion, calling the latter a "heavy gun.”  Meaning we're "not going to trust the West Virginia court to apply issue preclusion. We're going to stop that court from proceeding altogether."  Bayer replied that the injunction was very important because trial courts in West Virginia need not follow other trial courts, and there is no intermediate appeals court.  Thus plaintiff could go from county to county until they found a court that refused to apply preclusion.  

 

State Court Affirms Dismissal of Consumer Fraud Claim Over Sodium Content

A New Jersey court last week affirmed a lower court's ruling dismissing a putative class action alleging the Denny's restaurant chain failed to disclose the sodium content of its foods.  See DeBenedetto v. Denny's Inc., No. A-4135-09T1 (N.J. Super. Ct. App. Div.,  1/11/11).

Plaintiff's second amended complaint alleged that meals he purchased from defendant, Denny's, consisting of ham, bacon, sausage and hash browns, contained excessive levels of sodium that Denny's failed to disclose. Plaintiff alleged that if consumers had been aware of the high sodium content, they would not have purchased those meals, and the failure to disclose the sodium content therefore violated the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -181.  Neither plaintiff nor the putative class he claimed to represent asserted any physical injury or harm as the result of
defendant's alleged failure to disclose the sodium content.

We have posted before about the risks of CFA claims, and plaintiffs' attempts to expand traditional product liability claims using this device.  And the food industry has been a recent prime target.

The appeals court concluded that the trial court correctly found that although framed as a CFA violation, the gravamen of plaintiff's second amended complaint was a products liability claim for which the New Jersey Products Liability Act (NJPLA), N.J.S.A. 2A:58C-1 to -11, established a sole and exclusive remedy. The judge found that although plaintiff argued otherwise, the complaint itself included allegations that excessive levels of sodium are dangerous, that such levels cause an increased risk of bodily harm, and that Denny's failed to warn of those risks.  This was, i n essence, a products liability claim, absent the physical injury the PLA requires.  Thus, plaintiff had failed to state a claim upon which relief can be granted.

On appeal, plaintiffs pointed to Lee v. Carter-Reed Co., L.L.C., 203 N.J. 496, 531 (2010), which discussed the potential viability of CFA claims concerning the dietary supplement Relacore.  But the court of appeals noted  that the claims made by the plaintiff class in Lee concerned affirmative acts of misrepresentation; here, in contrast, plaintiffs pointed to no such affirmative misrepresentation. Instead, the claim was limited to a failure to disclose the sodium content.

The court also rejected plaintiffs' claim that any defective product claim escapes the exclusive remedy provisions, and the physical injury requirements, of the PLA merely because the
plaintiff fashions the claim as one seeking recovery only for "economic loss."  While the PLA was not intended to be "a catchall remedy" when ordinary contract remedies were lost or unavailable, but claims for "'harm caused by a product' are governed by the PLA irrespective of the theory underlying the claim; and the PLA's long-understood requirement is that a plaintiff alleging a product is defective or dangerous must also allege personal injury or property damage.


 

Supreme Court Refuses to Reinstate 5th Circuit Global Warming Case

The U.S. Supreme Court last week declined to reinstate the climate change tort suit brought by Mississippi property owners against energy companies alleging a link between their greenhouse gas emissions and alleged harm from Hurricane Katrina.  In re: Comer, No. 10-294 U.S. petition for writ of mandamus denied 1/10/10).

We have posted on the climate change litigation, including inexplicable decisions such as the putative class action alleging that -- follow the chain -- dozens of oil and chemical companies emitted greenhouse gasses which contributed to an impact on the atmosphere which contributed to a rise in temperature of some parts of the ocean which contributed to making Hurricane Katrina stronger which contributed to additional damages to plaintiffs' property. Such decisions represent a clear and dangerous trend within certain courts to usurp Congress, warp the traditional nuisance doctrine, and plunge the federal courts into what are essentially political questions.

The procedural posture of the case was unique. The trial court properly dismissed the suit on political question and standing grounds. The Fifth Circuit panel reversed and ruled that private property owners under Mississippi law may have standing to bring climate change-related nuisance and trespass claims for both property and punitive damages.  The court then issued an order last Spring granting the defendants' petition for a rehearing en banc, vacating the panel decision. Then came a letter from the clerk noting the cancellation of en banc oral arguments. Apparently, since the en banc court was constituted, new circumstances had arisen that made it necessary for various judges to recuse, leaving only eight members of the court able to participate in the case. Consequently, said the clerk, the en banc court had lost its quorum. (Several members of the court had previously recused themselves from the case.) The court then asked for supplemental briefing on what should happen next.

Following the briefing, in an opinion of the majority of the remaining judges, the 5th Circuit held that it could not give the climate-related lawsuit full court review because of the recusal issues. See Comer v. Murphy Oil USA, 607 F.3d 1049 (5th Cir. 2010). As a result, the court let stand the lower court's dismissal of the lawsuit.

The plaintiffs in this case then filed a petition seeking a writ of mandamus that would overturn the dismissal of their appeal. They raised not the merits of their convoluted causation theory, but the procedural questions about when an en banc court loses its quorum after granting rehearing but before hearing argument en banc, what happens to the appeal? And when an en banc court loses its quorum before deciding an appeal on rehearing en banc, does the original panel somehow still maintain control over the case? But the Supreme Court has declined to hear this.


The case was the second in which the Supreme Court has been asked to review an appeals court decision regarding suits against emitters of greenhouse gases. The Supreme Court, as we posted, had said last month that it would hear a challenge to another court of appeals decision allowing several states to continue with their public nuisance suit against American Electric Power Co. and other utilities for their greenhouse gas emissions. American Electric Power Co. v. Connecticut, No. 10-174 (U.S. certiorari granted 12/6/10). 

 

Supreme Court Passes on Case Involving State Retention of Private Counsel

The U.S. Supreme Court declined last week to review a California Supreme Court ruling that permitted cities and counties to engage private attorneys for public nuisance litigation against lead paint defendants on a contingency fee basis.  See Atlantic Richfield Co. v. Santa Clara County, Calif., No. 10-546 (U.S. cert. denied 1/10/11).

Readers may recall our previous posts on the important issue of  the power of government agencies to retain private plaintiffs attorneys on a contingency fee basis to prosecute nuisance litigation.  One case we posted on was County of Santa Clara v. The Superior Court of Santa Clara County, Cal., No. S163681 (7/26/10), in which a group of public entities composed of various California counties and cities were prosecuting a public-nuisance action against numerous businesses that manufactured lead paint.

The state supreme court permitted the use of contingency fee counsel with restrictions. To pass muster, neutral government attorneys must retain and exercise the requisite control and supervision over both the conduct of private attorneys and the overall prosecution of the case. Such control of the litigation by neutral attorneys supposedly will provide a safeguard against the possibility that private attorneys unilaterally will engage in inappropriate prosecutorial strategy and tactics geared to maximize their monetary reward. Accordingly, when public entities have retained the requisite authority in appropriate civil actions to control the litigation and to make all critical discretionary decisions, the impartiality required of government attorneys prosecuting the case on behalf of the public has been maintained, said the court. 

We noted that the list of specific indicia of control identified by the court seem quite strained, and to elevate form over substance, written agreements over human nature. Defendants sought cert review. In amicus filings, various trade organizations including the American Chemistry Council, the American Coatings Association, and the National Association of Manufacturers, argued that the financial incentives inherent in contingency-fee agreements simply distort the decision-making of both the government lawyers and the private attorneys they retain. Inadequately grounded contingency fee arrangements distort the state's duty of even-handedness not only to defendants, but also to the public. The amici argued that public nuisance cases are not typical tort lawsuits because they claim to be pursued in the public interest. It violates due process for the type of personal financial assessment made by contingency fee private lawyers to impact the decisions in a public nuisance action brought in the government's sovereign capacity. The briefing also raised another important practical issue: the attorney-client privilege and work-product doctrines will block any meaningful inquiry into whether the government is actually exercising the appropriate control that he state court said would solve these issues.

These kinds of contingency fee prosecutors threaten to diminish the public's faith in the fairness of civil government prosecutions. These arrangements frequently result in allegations that government officials are doling out contingency fee agreements to lawyers who make substantial campaign contributions.


 

California Postpones Green Chemistry Regulations

California has postponed final adoption of its green chemistry rules pending further review to address a variety of stakeholder concerns. As readers know from previous posts, "green chemistry" is the state's effort to require that chemical products be designed in such a way as to reduce the use or generation of hazardous substances and reduce health and environmental risks, with a clear emphasis on finding alternatives to "chemicals of concern."

Two bills passed in 2008 by the legislature mandated that DTSC develop regulations for identifying and prioritizing chemicals of concern, to create methods for analyzing alternatives to existing chemicals, and to create a mechanism for regulatory response, including possible restrictions or bans on certain chemicals. The laws also created a Green Ribbon Science Panel to advise DTSC, and provided for a Chemical Information Clearinghouse that will make chemical risk information more accessible to the public.

Now, the state environmental head, Secretary Linda Adams, has announced that the California Department of Toxic Substances Control will reconvene the Green Ribbon Science Panel to take another look at the proposed regulations. Those regulations, released by the DTSC last November, drew strong commentary  from both industry and environmental groups.  According to Adams, a wide range of stakeholders, including those from industry, environmental groups, scientists, and legislative leaders, have raised "substantive and valid concerns" about the most recent draft of the regulations. 

 


 

CPSC to Hold Webinars on New Product Safety Database

The Consumer Product Safety Commission is holding two Web conferences to demonstrate to interested stakeholders various aspects of its new (and still controversial) consumer product safety information database.  The conferences will focus on the incident reporting form, industry registration and comment features, and the search function of the publicly available part of the database.

The first Web conference will be held from 10:30 a.m. to 12:30 p.m. today, January 11, 2011, and the second Web conference will be held from 10:30 a.m. to 12:30 p.m. on Thursday, January 20th. The first Web conference will focus on the incident form that the public will use to file a report of harm and the search function of the database. The Web conference is intended to inform all interested stakeholders of the information required on the form to be used to report an incident, in addition to an explanation of the public search function of the Database.  The second Web conference will focus on the industry registration and comment features, the process for reporting incidents, and the public search component of the database.  It will address how to access and use the new business portal, and how to register an account on the business portal, which is designed to facilitate more efficient electronic notice, review, and comment on reports of harm before they are published in the database.  The database is set to go live March 11 through the CPSC's website.

As we have noted, the database raises a number of significant issues for our readers, as the CPSC will not be able to guarantee the accuracy of reports before it publishes them on the database, important confidentiality concerns may be compromised, and the data appears vulnerable to trolling and misuse by plaintiff lawyers.  Reports of harm will be published in the database 10 business days after the company has been provided notice of the report of harm. The CPSC has acknowledged that it will not be able to independently verify the accuracy of the information in the reports in that time, so  manufacturers will need to attempt to ask the CPSC to remove “materially inaccurate information” and “confidential information” in the report before it is published, or file comments about the report of harm to be published along with the report in the database.  As a practical matter, it may be difficult for a company to fully investigate the allegations in the report in that time frame. Moreover, any such investigation will likely not include an interview of the person who filed the report, because the person filing the report can choose to not release his or her name.

Reports may be filed not only by consumers but by health care workers, attorneys, and many others. Plaintiffs' lawyers have an unhealthy incentive to seed the database with self serving reports, and, at the least, may search the database looking for products to go after.

Again, companies should register with the CPSC so that they can receive the most timely notice of a report filed about their products.  It may make sense to consider developing an SOP for reviewing and following up on reports in the database, including designation of a lead reviewer or team to follow through. This SOP may include a plan for quickly preparing the appropriate documentation that the company's products are in fact reasonably safe, and for dealing with any adverse PR.  


 

Products Liability Conference Worth A Look

As you plan your CLE activities for 2011, consider DRI’s Product Liability Conference, to be held at the Hilton New Orleans Riverside, April 6–8, 2011.

This conference promises to provide you with insight from in-house counsel, government attorneys, and experienced practitioners regarding national trends and important recent decisions in the products area. The presentations will also provide creative practice tips and invaluable information that may assist you and your clients. This conference offers unmatched opportunities to keep abreast of current issues, earn CLE credits, and network.

Scheduled speakers include Cheryl A. Falvey, General Counsel for the U.S. Consumer Product Safety Commission, and Prof. Dane S. Ciolino, Loyola University New Orleans College of Law.

The sub-committee or "Specialized Litigation Group" (SLG) sessions will offer detailed analysis in 18 different practice areas. Your humble blogger is Chair of the Mass Torts & Class Actions SLG.  Our scheduled topics for our session include:

  • Update on Climate Change/Global Warming Litigation
  • Medicare Reporting Requirements for Settling Defendants in Class Actions and Mass Torts
  • Impact of Shady Grove on Class Actions and the Plaintiffs’ Bar Response

 

State High Court Issues Consumer Fraud Act Decision

One of the dangers for defendants of claims based on state consumer fraud acts is the reluctance of some state courts to recognize the reliance and causation elements inherent in most such statutes.  The absence of a reliance element allows plaintiffs to argue that such claims are more amenable to class treatment, removing a significant individual element.  West Virginia's high court recently confirmed, however, that plaintiffs alleging affirmative misrepresentation claims under West Virginia's consumer protection law must show actual reliance on the allegedly misleading statement. White v. Wyeth, No. 35296 (W. Va., 12/17/10).
 

The underlying consumer fraud suit was filed pursuant to the WV Consumer Protection Act by purchasers of prescription hormone replacement therapy (“HRT”) drugs.  Plaintiffs alleged that the defendants used unfair and deceptive practices in promoting HRT prescription drug products to doctors and patients for treatment of serious menopausal disorders by allegedly using misleading statements in advertising, marketing and labeling.  Following completion of class certification discovery, defendant Wyeth filed alternative motions for dismissal or summary judgment, arguing that plaintiffs could not establish that they had standing to sue because they failed to meet their burden of showing a causal connection between their individual claims of injury and any alleged unfair or deceptive conduct attributed to Wyeth.

Defendant Wyeth particularly noted the lack of evidence demonstrating that plaintiffs decided to purchase HRT drugs because of anything they learned from Wyeth, or that their treating physicians considered information from Wyeth when they issued the prescriptions for HRT drugs. Plaintiffs responded that the statutory language only requires that they prove causation by alleging that Wyeth engaged in deceptive practices and that Respondents were harmed. They maintained that reliance on deceptive statements or practices need not be demonstrated.  In essence, plaintiffs read out of the WVCCPA the requirement that they “suffered ascertainable loss”  as a "result of” various unfair and deceptive acts of Wyeth. W. Va. Code § 46A-6-106(a).  Wyeth argued that the “as a result of” language contained in the statute requires plaintiffs to allege that they relied, or their doctors relied, on Wyeth’s allegedly deceptive actions when they made the decision to purchase hormone replacement therapy -- the phrase “as of result of” has to be read to mean that a plaintiff relied on the improper act or practice alleged in order to satisfy standing requirements.  Plaintiffs, in turn, argued that if the plaintiffs received drugs that were different from or inferior to that which they were entitled to receive, they did not receive the benefit of their bargain, and they therefore suffered an ascertainable loss.

The court noted that the private cause of action provisions of twenty-eight states' consumer fraud acts contain the “as a result of” language.  Many of the decisions addressing the issue of reliance in the context of private consumer protection causes of action show courts struggling to arrive at a way to be faithful to the purposes of consumer protection statutes – promoting fair and honest business practices and protecting consumers – without inviting nuisance lawsuits which impede commerce. In determining the meaning of the phrase “as a result of” in the WVCCPA, the court agreed with those decisions requiring proof of a causal nexus between the deceptive conduct giving rise to the private cause of action and the ascertainable loss, and the conclusion that this may require proof of reliance in some but not all instances.  The court found that reliance and causation are twin concepts, "often intertwined, but not identical."

Following this reasoning, when consumers allege that a purchase was made because of an express or affirmative misrepresentation, the causal connection between the deceptive conduct and the loss would necessarily include proof of reliance on those overt representations. Where concealment or omission is alleged, and proving reliance is an impossibility, the causal connection between the deceptive act and the ascertainable loss is established by presentation of facts showing that the deceptive conduct was the proximate cause of the loss. In other words, the facts have to establish that “but for” the deceptive conduct or practice a reasonable consumer would not have purchased the product and incurred the ascertainable loss. 

The court determined that this approach best serves the WVCCPA’s dual purpose of protecting the consumer while promoting “fair and honest competition.” W. Va. Code § 46A-6-101. Thus, a private cause of action under the provisions of West Virginia Code § 46A-6-106(a) of the West Virginia Consumer Credit and Protection Act must allege: (1) unlawful conduct by a seller; (2) an ascertainable loss on the part of the consumer; and (3) proof of a causal connection between the alleged unlawful conduct and the consumer’s ascertainable loss. Where the deceptive conduct or practice alleged involves affirmative misrepresentations, reliance on such misrepresentations must be proven in order to satisfy the requisite causal connection

The court went on to address an important second issue, finding that prescription drug cases are not the type of private causes of action contemplated under the terms and purposes of the WVCCPA.  The consumer cannot and does not decide what product to purchase. The intervention by a physician in the decision-making process necessitated by his or her exercise of judgment whether or not to prescribe a particular medication protects consumers in ways respecting efficacy that are lacking in advertising campaigns for other products. Accordingly, the court found that the private cause of action afforded consumers under West Virginia Code § 46A-6-106(a) does not extend to prescription drug purchases. See also New Jersey Citizen Action v. Schering-Plough Corp., 842 A.2d 174 (N.J. Super. 2003). , in which a New Jersey appeals court emphasized the difference between the pharmaceutical industry and other companies. According to the West Virginia court, the New Jersey court noted that physician intervention in prescribing decisions protects consumers and observed that the high degree of federal regulation of prescription drug products “attenuates the effect product marketing has on a consumer's prescriptive drug purchasing decision.”
The court remanded for dismissal.
 

Dismissal of FEMA Trailer MDL Bellwether Plaintiff Affirmed

With the recognition by many courts of the inappropriateness of the use of the class action device for personal injury claims, the use of other methods to manage mass torts has emerged.  One approach frequently seen within MDLs is the bellwether trial.  Only a proportion of the cases are selected for case specific discovery; only a fraction of them go into a trial pool; and only a percentage of them are selected for trial, to serve as bellwethers for the remaining cases. The hope is that the trial-selected cases provide sufficient information, about claims and defenses, and case values, to inform and propel the disposition of the remaining cases. Such trials may force plaintiffs' counsel to prepare their standard trial package, and the trials may give some sense of how sound that package is. The bellwether trials may give the court a context to resolve legal questions that arise at a trial as witnesses begin to take the stand. Bellwether trials may test the expert witnesses and theories, and give both parties a sense of how much it costs to try a case to verdict. In theory, test trials are to produce valuable information that will allow the parties to assess the strength and settlement value of all the related cases. Accordingly, which cases go first, from among the hundreds or thousands in the mass tort can be extremely significant.

The process for selection of the bellwether cases is crucial.  If plaintiffs are permitted to handpick their best cases to go first, the process works only if plaintiffs lose their best cases; if they win their best cases, that comes as no surprise to anyone.  Ideally the court would pick truly representative cases. 

A significant, although less well recognized issue, is what happens when a bellwether plaintiff cannot or will not go to trial.  Plaintiffs often adopt this tactic to replace a plaintiff whose claim turns out to be, after discovery, not as strong as originally expected.  In the FEMA trailer formaldehyde MDL, the Fifth Circuit recently confirmed that plaintiffs cannot play fast and loose with the procedure, dropping plaintiffs from the line for trial without some sanction. The court of appeals refused to resuscitate a bellwether claim that was dismissed with prejudice after the plaintiff said he could not go forward with trial. In re: FEMA Trailer Formaldehyde Products Liability Litig., No. 09-31131 (5th Cir. 12/14/10).

Raymond Bell and his mother, like thousands of other plaintiffs, filed suit against multiple defendants who participated in the government’s program to supply temporary housing for victims of the devastating 2005 hurricanes. These cases were assigned by the Multi-District Litigation Panel for pretrial management by Judge Engelhardt in New Orleans. The MDL court set dates in 2009 and 2010 for four bellwether cases, each to be prosecuted by a plaintiff against one of the four trailer manufacturers estimated to have the most units at issue in the suits. The case of Diana Bell, Raymond’s mother, was identified as the bellwether case against Keystone RV, manufacturer of the trailer in which her family had lived.  Diana then dropped out, and voluntarily dismissed her case with prejudice. After consulting with counsel, the court promptly selected Raymond Bell as the next bellwether plaintiff in order to maintain the benefit of trial preparation concerning the particular trailer they both had lived in. The next Bell, however, also moved to substitute a new bellwether plaintiff or obtain a continuance of the 2010 trial date.

He made three arguments in support of this dual motion. He asserted he could not take two weeks off from his job to attend trial;  he could not afford to forego at least one week of income; and the trial dates would interfere with his participation in Community College classes at the beginning of the spring semester.

The trial court concluded that Raymond Bell really did not want to go to trial. He moved for a dismissal without prejudice and attached an affidavit asserting as fact the arguments noted above. He expressed doubt about the curative impact of the judge’s proposed instruction if he were to be absent from part of the trial.  The MDL court noted that plaintiffs’ counsel should take notice that all plaintiffs who assert claims in an MDL have to be ready and willing to serve as bellwether plaintiffs, if called upon to do so. The claims of those plaintiffs who refuse to do so, when called upon, will be dismissed with prejudice.

The reasoning was that the parties had expended much time, effort, and money into readying the case involving the Bell trailer for trial. Based on the decisions of the plaintiffs, all the pre-trial work and discovery relating to the Bell trailer was rendered utterly useless. All of the resources spent in preparing this case for trial had been wasted. Because the parties had to choose another bellwether plaintiff, which will involve conducting discovery on an entirely different trailer and readying a completely different case for trial, the claims of Mr. Bell, like those of Mrs. Bell, should be dismissed with prejudice.   Not doing so would possibly cause other bellwether plaintiffs to “jump ship” at the last minute; this is obviously a tactic that any MDL court does not wish to encourage.

On appeal the Fifth Circuit found that it was not hard to justify the court’s decision to deny the plaintiff's alternative motions. Raymond Bell’s attempt to withdraw as plaintiff or to continue seemed contrived, especially in light of his mother’s less than diligent prosecution of a claim bearing on the same trailer. Nothing in his motion papers distinguished Bell’s inconvenience in going forward with trial from the inconvenience that any plaintiff may suffer from having to try the case he has filed. The case had been pending for months, the parties had been actively preparing for trial.

Plain legal prejudice would have accrued to defendants from an unconditional dismissal of Raymond Bell’s case without prejudice. The court would have to realign Keystone RV with a new bellwether plaintiff who resided in a different trailer and whose suit would almost surely add a different group of subsidiary defendants. Not only would Bell be able to refile his suit, but the appellees were in no way spared the continuing costs of legal defense. Defendants'  investment in trial preparation for Bell’s case was wasted. Moreover, other plaintiffs in the FEMA trailer formaldehyde litigation were disadvantaged by the tactics employed on Bell’s behalf as they were delayed in acquiring trial information important for their cases. The size and scope of this multiparty litigation inescapably heightened the prejudice from Bell’s motion to dismiss.

Bottom line is that Bell wanted to have his cake and eat it too by withdrawing from a bellwether
trial and then sitting back to await the outcome of another plaintiff’s experience against the appellees. When a plaintiff files any court case, however, sitting back is no option. He must be prepared to undergo the costs, psychological, economic and otherwise, that litigation entails. That the plaintiff becomes one of a mass of thousands pursuing particular defendants lends urgency to this reality. Courts must be exceedingly wary of mass litigation in which plaintiffs are unwilling to move their cases to trial. Any individual case may be selected as a bellwether, and no plaintiff has the right to avoid the obligation to proceed with his own suit, if so selected.