Class Action Complaint on 100% Natural Oil Dismissed

A federal court recently dismissed a proposed class action accusing a food company of misleadingly labeling cooking oils as 100% natural when they allegedly were made from genetically modified plants. Robert Briseno, et al. v. ConAgra Foods Inc., No. 2:11-cv-05379 (C.D. Calif.).

Quick research reveals that 88-94% of the nation’s crops of corn, soy and canola are grown from seeds that are the product of bioengineering.  There is no credible science that there are serious health issues with these products, and multiple peer reviewed studies on "GM" crops worldwide show farmers in underdeveloped countries have seen an increase in yield of about 29% from using them, along with decreased use of insecticide applications.

Plaintiff alleged that he regularly purchased Wesson Canola Oil, bearing labels that state the product is “100% Natural.” Plaintiff contended that contrary to these representations, ConAgra used plants grown from genetically modified organism seeds that have been engineered to allow for greater yield, and to be pest-resistant, to make Wesson-branded oils. He asserted that the genetically modified organisms are somehow not “100% natural,” and thus the labels and advertising are deceptive. Plaintiff filed a complaint seeking to represent a class of all persons in the United States who have purchased Wesson Oils from 2007 on. As is typical, he alleged
violation of California’s false advertising law (“FAL”), California’s unfair competition law (“UCL”), and California’s Consumer Legal Remedies Act (“CLRA”).

Defendant moved to dismiss. The first issue was preemption of the state law causes of action, based on FDA guidance regarding food labels. Federal preemption occurs, generally, when: (1) Congress enacts a statute that explicitly pre-empts state law; (2) state law actually conflicts with federal law; or (3) federal law occupies a legislative field to such an extent that it is reasonable to conclude that Congress left no room for state regulation in that field. Specifically, ConAgra argued that Briseno’s claims were preempted because the FDA has repeatedly concluded that bioengineered foods are not meaningfully different from foods developed by traditional plant breeding, and thus that the fact that a food product is derived from bioengineered plants need not be reflected on a product’s label. Plaintiff responded that he was not arguing that ConAgra was required to state whether its products were made from genetically modified plants. Rather, he contended that the decision to label its products “100% Natural” was misleading.

Courts have split on food preemption issues. Compare Dvora v. General Mills, Inc., 2011 WL 1897349 (C.D. Cal. May 16, 2011)(cereal-yes); Turek v. General Mills, Inc., 754 F.Supp.2d 956 (N.D. Ill. 2010)(snack bars-yes); Yumul v. Smart Balance, Inc., 2011 WL 1045555 (C.D. Cal. Mar. 14, 2011)(yes), with Lockwood v. Conagra Foods, Inc., 597 F.Supp.2d 1028 (N.D. Cal. Feb. 3, 2009)(pasta-no); Wright v. General Mills, Inc., 2009 WL 3247148 (S.D. Cal. Sept. 30, 2009)(granola bars-no).

Here, the court found no preemption on most of the complaint. The bulk of the complaint, said the court, alleged that use of the phrase “100% Natural” is misleading, and did not contend that additional information must be added to Wesson Oil labels. Regulations requiring that each product list its ingredients by their “common or usual name,” together with the regulations requiring that vegetable oils be denominated “ oil,” were inapplicable since plaintiff’s central argument was not that ConAgra cannot use the common or usual names of canola oil, vegetable oil or corn oil.

The FDA has expressed that it has no basis for concluding that bioengineered foods differ from other foods in any meaningful or uniform way, or that, as a class, foods developed by the new techniques present any different or greater safety concern than foods developed by traditional plant breeding. So, plaintiff, in essence, sought to create a distinction – between “natural” oils and those made from bioengineered plants when the FDA has determined that no such distinction exists. The court rejected this argument, refusing to read the FDA guidance as formal enough or clear enough on the issue.

Plaintiff did also seek an order requiring defendant to adopt and enforce a policy that requires appropriate disclosure of GM ingredients. Entering an order of this type would impose a
requirement that is not identical to federal law, and thus this particular prayer for such relief was preempted.

Rule 9(b) requires that in all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. The pleading must identify the circumstances constituting fraud so that a defendant can prepare an adequate answer to the allegations. While statements of the time, place and nature of the alleged fraudulent activities are often sufficient, mere conclusory allegations of fraud are insufficient. Even if fraud is not a necessary element of a claim under the CLRA and UCL, when a plaintiff alleges fraudulent conduct then the claim can be said to be grounded in fraud or to sound in fraud.

Plaintiff alleged that he regularly purchased Wesson Canola Oil for his own and his family’s consumption. But his complaint contained no allegations as to whether he became aware of the
representation through advertising, or labeling, or otherwise. He provided no information about how often he was exposed to the allegedly misleading statement. He did not allege how
frequently he purchased the product and over what period of time, whether he relied on
statements on canola oil labels, on a website, in advertisements, or all of the above,
whether the statements remained the same throughout the class period, or, if they did not, on
which label(s), advertisement(s) or statement(s) he relied.

Thus, this complaint did not afford ConAgra adequate opportunity to respond. Consequently, defendant's motion to dismiss was granted (without prejudice).


 

Appeals Court Unhappy With Plaintiffs' Advocacy

Today we note an opinion that, in its opening words, is about "two appeals that raise concerns about appellate advocacy." Both are appeals from grants of forum non conveniens in multidistrict litigation. See Gonzalez-Servin et al. v. Ford Motor Co. et al., No. 11-1665; Kerman et al. v. Bayer Corp. et al., No. 08-2792 (7th Cir. 2011).

The Ford case was an appeal from an order to transfer a case from the U.S. District Court for the Southern District of Indiana to the courts of Mexico, and was one of many offshoots of litigation arising out of vehicular accidents allegedly caused by defects in Bridgestone/Firestone tires installed on Ford vehicles.  All these cases have been consolidated in an MDL.

The 7th Circuit found the lower court's careful and thorough analysis demonstrated that it was acting well within its discretion in deciding that the Mexican courts would be a more appropriate forum for the adjudication of this lawsuit by Mexican citizens arising from the death of another Mexican citizen in an accident in Mexico.

What seemed to bother the panel is that plaintiffs did not cite an FNC case seemingly on all fours with the appeal in their opening brief, though the district court’s decision in their case was issued in 2011—long after the prior case.  In their response the defendants cited the case repeatedly and asserted that its circumstances were “nearly identical” to those of the present case. Yet, in their reply brief the appellants still didn't mention it, let alone try to distinguish it, said the panel.

The second case involved litigation against manufacturers of blood products used by hemophiliacs, which turned out to be contaminated by HIV.  This particular suit was brought by Israeli citizens allegedly infected by the blood products in Israel. The defendants, invoking forum non conveniens, moved to transfer the case to Israel.  There were two prior appellate decisions on point, said the panel, including Chang v. Baxter Healthcare Corp., 599 F.3d 728 (7th Cir. 2010), which arose from the same multidistrict litigation.  The court said that these plaintiffs' short treatment of the prior cases "left much to be desired." 

Overall, said the court, the plaintiffs' "advocacy is unacceptable." The panel then invoked a well-known symbol: "The ostrich is a noble animal, but not a proper model for an appellate  advocate."  The “ostrich-like tactic of pretending that potentially dispositive authority against a litigant’s contention does not exist" is "pointless,” said the court.

The opinion closes with pictures of an ostrich burying his head in the sand, and of a man in a suit doing the same.  The reminder here is, when there is apparently dispositive precedent, an appellant may urge its overruling, or distinguish it, or reserve a challenge to it for a petition for certiorari, but may not ignore it. 

 

Strict Liability Does Not Apply to Medical Devices

Another court has recognized that strict liability or breach of implied warranty claims do not lie against medical device makers. Horsmon v. Zimmer Holdings Inc., No. 11-1050 (W.D. Pa., 11/10/11).

Plaintiff had a total hip replacement whereby her right hip joint was replaced with implant components designed, manufactured, and sold by defendants. Ms. Horsmon alleeged she later began to experience pain in her right hip, which eventually required further surgery. She alleged this was due to a defect in the original liner that was used during the hip replacement.  She sued, and defendants moved to dismiss.

Defendants asserted that plaintiff‟s claim for strict liability was barred by Pennsylvania law. The Supreme Court of Pennsylvania in Hahn v. Richter, 673 A.2d 888 (Pa. 1996), held that strict liability claims cannot be brought against prescription drug manufacturers. The court relied on Comment k to the Restatement (Second) of Torts § 402A, regarding unavoidably unsafe products. The Superior Court of Pennsylvania and several United States District Courts applying Pennsylvania law have extended Hahn to bar strict liability claims against medical device manufacturers. E.g., Creazzo v. Medtronic, Inc., 903 A.2d 24, 31 (Pa. Super. Ct. 2006).  This court agreed that the reasoning of Hahn extends to medical devices.

Defendants further asserted that plaintiff's breach of implied warranties claim was also barred by Pennsylvania law. In a claim for breach of implied warranty of merchantability, the essence of the warranty of merchantability is that the item sold is fit for the ordinary purposes for which such goods are used. Under Pennsylvania law, the very nature of prescription drugs precludes the imposition of a warranty of fitness for ordinary purposes, as each individual for whom they are prescribed is a unique organism who must be examined by a physician who is aware of the nature of the patient's condition as well as the medical history of the patient. Breach of implied warranty of merchantability claims, therefore, are precluded for prescription drugs. Again, several courts have extended this reasoning to preclude claims against medical device manufacturers for breach of implied warranties of merchantability and fitness for a particular purpose.  And the district court here agreed; there was no compelling reason to distinguish between prescription drugs and medical devices.

The court then turned to the express warranty claim. Under Pennsylvania law, any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.  Here, plaintiff alleged that defendants expressly warranted in written literature, advertisements and representations of representatives and agents that the systems, bone screws, liners and other related components were safe, effective, fit, and proper for the use for which they were intended. But plaintiff did not allege any particular affirmation of fact or promise, as required under federal pleading rules, that would give rise to a reasonable inference that defendants expressly warranted that its products were safe, effective, fit, and proper for the use for which they were intended. Plaintiff failed to allege that any particular affirmation of fact or promise was made in any of those sources.  Plaintiff's allegations also did not support a reasonable inference that any affirmation of fact or promise by defendants became part of the basis of the bargain in plaintiff's purchase. (Of course, plaintiff could not allege that any particular affirmation of fact or promise became “part of the basis of the bargain” without alleging any particular affirmation of fact or promise.)  Thus, plaintiff failed to state a plausible claim for breach of express warranties under Pennsylvania law. (However, the court gave Horsmon another chance to amend and replead her breach of express warranty claim.)

 

Choice of Law Defeats Another Proposed Nationwide Consumer Fraud Class

A federal court recently ruled that a suit over alleged defects in an MP3 player's display screen could not proceed as a nationwide class action. See Maloney et al. v. Microsoft Corp., No. 3:09-cv-02047 (D.N.J.).

This dispute arose out of the sale of portable MP3 players, the 30 gb model Zune. Plaintiffs alleged that the 30gb-model Zune was defective because of alleged cracks on the liquid crystal display (LCD) screen. (News flash: if you drop an electronic device, it may crack.)

Plaintiffs moved for class certification, pursuant to Fed. R. Civ. P. 23(b)(3), of a national class of purchasers. The court concluded that each state‘s common law and consumer protection laws would apply, and therefore a nation-wide class could not properly be certified.

Attempts to structure and certify nation-wide classes involving plaintiffs in all fifty states often turn on whether the law of a single state or multiple states should be applied.  If all 50 states‘ laws apply to a class-action claim, the moving party must provide an extensive analysis of state law variances showing that class certification does not present insuperable obstacles. Plaintiffs bear this burden at the class certification stage, and rarely (we'd say never) can meet it.  Many courts have recognized that state implied warranty laws differ in significant and material ways. For example, states differ on: (1) application of the parole evidence rule; (2) burdens of proof; (3) statute of limitations; (4) whether plaintiffs must demonstrate reliance; (5) whether plaintiffs must provide notice of breach; (6) whether there must be privity of contract; (7) whether plaintiffs can recover for unmanifested defects; (8) whether merchantability may be presumed; and (9) whether warranty protections extend to used goods.

New Jersey courts have adopted the most significant relationship test of the Restatement (Second) of Conflicts of Law. Before applying the Restatement test, plaintiffs here contended that a choice-of-law clause contained in the limited warranty accompanying the product should apply to all of the claims. However, the court determined that the choice-of-law provision did not apply to any of plaintiffs‘ claims. First, the implied warranty claims asserted by the plaintiffs were not governed by the choice-of-law provision in the express warranty. As a plain reading of the text of the express warranty made clear, the choice-of-law provision applies only to the limited warranty, i.e., the express warranty.

To evade this plain reading of the express warranty, plaintiffs then attempted to shoehorn their implied warranty claims into the choice-of-law clause by conflating their implied warranty and Magnoson-Moss (MMWA) claims. Plaintiffs‘ argument was untenable because ultimately plaintiffs‘ MMWA claims rely on their implied-warranty claims, not violations of federal law. State warranty law lies at the base of all warranty claims under Magnuson-Moss. Plaintiffs wrongfully confused substantive MMWA violations and the right to recover under the MMWA.

Although federal substantive law—and not state law—prevents a seller from disclaiming implied warranties, plaintiffs‘ ultimate right to recover on their MMWA claims still depended on state law. When a defendant improperly disclaims an implied warranty, the MMWA provides a statutory remedy: such disclaimer would be void and plaintiffs would be able to proceed against defendant on breach of implied warranties claims, under state law.  Similarly, the choice-of-law provision contained in the limited warranty did not apply to plaintiffs‘ consumer-fraud claims.

Having determined that the choice-of-law provision in the limited warranty did not apply to any of the plaintiffs‘ claims, the court then applied  the choice-of-law rules of the State of New Jersey.  Considering all of the Restatement factors, the court concluded that the state with the most significant relationship to the implied warranty claims was each class member‘s home state.
First, the place of contracting occurred wherever each class member purchased their 30gb Zune, which was presumably in their home state. Second, there was no negotiation of the implied warranties. Third, the place of performance also occurred wherever each class member purchased their 30gb Zune. Fourth, the location of the subject matter of the implied warranties is wherever the Zune was physically located, also presumably in each class member‘s home state. Finally, the domicile of the plaintiffs varies between each class member. Weighing these considerations, the state with the most significant relationship to the implied warranty claims—and consequently, the MMWA claims— was each class members‘ home state.

Plaintiffs‘ consumer-fraud claims would also be governed by the laws of each class member‘s home state.  In this case, the place, or places, where the plaintiff acted in reliance upon the defendant‘s supposed representations; the place where the plaintiff received the alleged representations; the place where a tangible thing which is the subject of the transaction between the parties was situated at the time; and the place where the plaintiff is to render performance under a contract which he has been induced to enter by the alleged false representations of the defendant—all weighed in favor of applying the consumer fraud laws of each class member‘s home state.

In light of the court‘s determination that the laws of all 50 states apply to the claims, and because plaintiffs suggested no workable means by which to conduct a manageable trial—let alone the extensive analysis required of them—class certification was denied on a nation-wide basis. (The court reserved decision as to whether or not a New Jersey-wide class might be certified, subject to further briefing by the parties; clearly additional individual issues will predominate in that context as well, we predict at MassTortDefense.)


 

Two Summary Judgments for Ladder Defendants Affirmed

Ladders and scaffolds are two of the most valuable tools we know.  And as the season for decorating approaches, we know MassTortDefense will soon be utilizing some, with due care of course.

Two federal courts of appeal have separately affirmed the dismissal of claims about personal injuries caused by allegedly defective Louisville Ladder Inc. products, because plaintiffs failed to offer sufficient expert testimony.

In Raymond B. Bielskis v. Louisville Ladder Inc., No. 10-1194 (7th Cir.), the court considered the appeal of a claim resulting from an accident that occurred when a Louisville Ladder mini-scaffold allegedly collapsed while plaintiff on an acoustical ceiling project.  Following the accident that injured his hand and knee, Bielskis filed suit alleging the ladder company had been negligent in failing to properly test and inspect the threaded stud of the caster stem that allegedly caused the collapse and in failing to warn consumers of the alleged manufacturing defect.

The mini-scaffold is approximately four feet long with a hinged side that allows it to collapse for storage. The sides of the scaffold have rungs which are used to place planks where the user may stand. The entire unit is mobile: it has four wheels that may be locked while the user is working and unlocked when moving the unit. Plaintiff alleged that it had collapsed because the caster stem above one of the wheels had broken. Bielskis retained an expert (Mizen) to provide expert testimony at trial as to what caused the caster stem to break. He opined that the fracture was caused by excess tensile stress brought on by over-tightening the threaded stem. Mizen concluded that the brittle fracture could have been avoided by either attaching the wheel with a different
mechanism than the threaded stud or by not tightening the stud “beyond making it simply snug to the leg base.” Louisville Ladder also retained an expert who also concluded that the caster stem had sustained a brittle fracture. Unlike Mizen, however, he determined that the caster stem ultimately failed because it was too loose, not because it was too tight.

Louisville Ladder moved to bar Mizen’s testimony, arguing that it was insufficiently reliable under Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993). In particular, Louisville Ladder faulted Mizen for his failure to utilize any recognized scientific methodology to reach his conclusions. The district court granted Louisville Ladder’s motion, concluding that the methodology underlying
Mizen’s opinion was insufficiently reliable. The primary problem the court identified with Mizen’s opinion was his leap, without data or testing, from the accepted premise that a crack without plastic deformation is a brittle fracture to his ultimate conclusion that the caster was too tight. When questioned as to what scientific methodology he used to reach this conclusion, Mizen replied that he had relied on “basic engineering intelligence” and “solid engineering principles that any other engineer would use.”

After Louisville Ladder moved to exclude his testimony, Mizen supplemented his opinion with several articles that he claimed supported his conclusion. He located the articles by using the Internet search engine Google and typing in the phrase “brittle fracture.”

The court of appeals agreed the district court was within its discretion to conclude that Mizen’s methodology sounded more like the sort of talking off the cuff—without sufficient data or analysis—that courts have repeatedly rejected.

Mizen made no attempt to test his hypothesis. His theory was certainly capable of being tested. He did not take the time to measure the caster stem; he had no idea what alloy was used to construct the caster stem and made no effort to quantify its tensile strength or yield strength. In contrast, Louisville Ladder’s expert used digital calipers to measure the various components, created positive and negative replicas of the fracture surfaces so that the fractographic appearance of the surfaces could be examined in detail and then performed stress analysis calculations with the caster installed in two different configurations in order to assess the stresses present
at the stud site with different degrees of tightness.

Likewise, Mizen’s proposed design alternatives did not survive scrutiny.  When asked if those design alternatives had been tested, Mizen stated, “I don’t have to test it.” Likewise, he dismissed the question of whether any of his proposed design alternatives were used in the marketplace
on scaffolds or had been recommended or required by any industry-wide standards for climbing equipment.  Without more, there is no way to assure that Mizen’s proposed alternatives are “the product of reliable principles and methods.”

Absent expert testimony, summary judgment would follow, but plaintiffs argued res ipsa.  While plaintiff showed a scaffold could be expected not to break and collapse under the weight of a single individual working on it, he failed to prove that the scaffold was defective at the time it left Louisville Ladder’s control. The mini-scaffold was already assembled when Bielskis’s employer gave it to him.   Plaintiff did not present any evidence about who assembled the scaffold and whether it was assembled in conformity with the manufacturer’s warnings or specifications. Plaintiff's expert had neither reviewed the scaffold assembly instructions nor ascertained who had assembled the scaffold.

In Robert Cannioto et al. v. Louisville Ladder Inc., et al., No. 11-12885 (11th Cir.), the court concluded that the district court did not abuse its discretion in excluding the expert testimony
of the plaintiffs’ principal expert witness.  The court rejected plaintiffs "malfunction theory" under Cassisi v. Maytag Company, 396 So.2d 1140 (Fla. 1st DCA 1981).  There, the Florida appellate court held that a legal inference is created that a product was defective at the time of injury or the time of sale when it malfunctions during normal use. The district court correctly concluded that the Cassisi inference was not applicable to this case because the ladder in question still existed and had been inspected by the plaintiffs’ expert. The record also demonstrated that the plaintiff failed to subject the ladder to a normal operation. The ladder was set up at too steep an angle at the time of plaintiff's fall.  The court affirmed the grant of summary judgment in favor of the defendants.

 

Food Spread Class Action Certified: What Happened to Wal-mart?

A California federal judge recently denied certification of a nationwide class, but certified a statewide class of plaintiffs in a suit over allegedly misleading promotion of the hazelnut spread Nutella as part of a healthy breakfast for kids. Hohenberg et al. v. Ferrero USA Inc., No. 3:11-cv-00205 (S.D. Calif.).

This type of case falls squarely in the zone we have warned readers about: the aggressive and excessive use of consumer fraud act claims by plaintiff attorneys, and certification triggering the need to think about "blackmail settlements."

Plaintiffs brought a putative consumer class action lawsuit on behalf of people who purchased Ferrero’s Nutella spread after relying on allegedly deceptive and misleading labeling and advertisements. Specifically, Plaintiffs alleged that Ferrero misleadingly promoted its spread as healthy and beneficial to children when in fact it contains levels of fat and sugar inconsistent with that claim.  We have posted on this product before.

Typically, plaintiffs brought causes of action alleging (1) violations of California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code §§ 17200 et seq.; (2) violations of California’s False Advertising Law, (“FAL”), Cal. Bus. & Prof. Code §§ 17500 et seq.; (3) violations of California’s Consumer Legal Remedies Act (“CLRA”), Cal. Civ. Code §§ 1770 et seq.; (4) breach of express warranty; and (5) breach of implied warranty of merchantability.

Plaintiffs moved for class certification. Defendant Ferrero argued that plaintiffs did not satisfy the commonality requirement as clarified by the United States Supreme Court in Wal-Mart, because they did not offer evidence of a common injury. Indeed, plaintiffs did not support their motion with expert declarations that, for example, all class members were misled by a common advertising campaign that had little to no variation.  But the court, relying in part on pre-Wal-Mart decisions, e.g., Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019-20 (9th Cir. 1998), stressed that commonality under Rule 23(a)(2) only requires there be some common issues of fact. To the extent that defendant interpreted the decision in Wal–Mart as requiring plaintiffs to prove common class-wide injury at the class certification stage, the court disagreed. Rather, all plaintiffs must show, said the court, is that the claims of the class depend upon a common contention of such a nature that it is capable of class-wide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke. While that clearly was part of Wal–Mart, the decision is best read as finding that commonality requires the plaintiff to demonstrate that the class members have suffered the same injury, which means more than merely that they have all suffered a violation of the same provision of law.  Nevertheless, in this case, the court found sufficient the claims made on behalf of the proposed class based on a common advertising campaign,

But then there was the predominance issue of Rule 23(b).  Defendant disputed that common issues predominate, arguing that proposed class members’ injuries would require individualized assessment. Notably, one named plaintiff did not regret buying Nutella despite the alleged marketing, and continued using the spread after she learned about its sugar content. Another named plaintiff testified that her family loved Nutella and was upset when she took it away. Clearly, this case involved class members’ individual expectations, dietary preferences, nutritional knowledge, and the availability or non-availability of substitutes in the market. The court conceded that plaintiffs’ dietary choices may prove relevant to the merits of their case, but felt that it need not "decide the merits" of the case at this stage. However, as we have posted before, the Ninth Circuit has noted that it is not correct to say a district court may consider the merits to the extent that they overlap with class certification issues; rather, a district court must consider the merits if they overlap with the Rule 23(a) requirements. 


The court did reject the proposed national class, because plaintiffs made no showing that non-California class members saw the advertising at issue in California, purchased Nutella in California, or that their claims arise out of conduct that occurred in California. The choice of law issue thus overwhelmed the alleged common issues. So the certified class included “all persons who, on or after Aug. 1, 2009, bought one or more Nutella products in the state of California” for personal use.  Wal-Mart needs to have more impact than this.

"Infected" Tissue Claim Not A Consumer Fraud Claim

Readers have seen my warnings about plaintiff attorneys trying to turn every marketing statement of opinion or puffing into a consumer fraud claim. Now comes a decision about a non-consumer product consumer fraud claim. A federal court recently decided that a plaintiff failed to plead a proper consumer fraud claim against a human tissue product supplier for allegedly providing infected material that was implanted into his body. See Wamsley v. Lifenet Transplant Services Inc., No. 10-00990 (S.D.W. Va., 11/10/11).

Plaintiff sued non-profit corporations who were suppliers and distributors of human tissue products, such as human tendons. Plaintiff alleged that he underwent surgery to repair a rupture to the Achilles tendon in his left ankle, a procedure that involved the implantation of a human tendon obtained from defendants. Plaintiff alleged the product was defective because it was “infected.”  Consequently, plaintiff alleged he had to undergo additional surgeries “to correct the damage caused by the defective tendon.

Plaintiff claimed that supplying an infected tendon constitutes an unfair method of competition and unfair or deceptive act or practice as defined by the West Virginia Consumer Credit Protection Act.  Defendants moved to dismiss the complaint on the grounds that plaintiff had failed to allege any action or inaction on the part of the defendants which would constitute unfair competition, unfair acts or practices, deceptive acts or practices, or fraudulent acts or practices. Plaintiff only formulaically recited the elements of a cause of action under the WVCCPA.   the court agreed and had plaintiff file an amended complaint which alleged defendants concealed from plaintiff, his doctors, and his hospital, that the tendon was infected.  He claimed the alleged concealment
that a tendon provided for human implantation is infected constitutes an unfair method of competition and unfair or deceptive act or practice.
 

Defendants then filed a motion to dismiss the amended complaint arguing that plaintiff’s
amended complaint fails to meet the pleading standards articulated in Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). Defendants further contended that plaintiff did not have a private cause of action under the WVCCPA because no causal connection exists between the alleged unlawful conduct and the alleged ascertainable loss: because a physician (a “learned intermediary”) made the decision as to what product to use to repair the ruptured Achilles tendon, plaintiff could not establish the necessary causal connection between the alleged unlawful practice by defendants and the alleged injury.

The court began by outlining the relevant legal standard, familiar to our readers. The
plausibility standard requires a plaintiff to demonstrate more than a sheer possibility that a
defendant has acted unlawfully;  it requires the plaintiff to articulate facts, when accepted as
true, to state a claim to relief that is plausible on its face. While a court must accept the material facts alleged in the complaint as true, bare legal conclusions are not entitled to the assumption of truth and are insufficient to state a claim.  Facts pled that are merely consistent with liability are not sufficient.

Moreover, the court noted in an elegant way, "fraud is a generous tort, encompassing affirmative misrepresentations and omissions alike, its boundaries limited only by the imaginations of crafty and unprincipled minds."  A claim that “sounds in fraud” must satisfy Rule 9(b)’s more rigorous pleading standards. Rule 9(b)’s heightened pleading standards advance several interests, including protecting defendants’ reputations from baseless accusations, eliminating unmeritorious suits that are brought only for their nuisance value, discouraging fishing expeditions brought in the dim hope of discovering a fraud, and providing defendants with detailed information in order to enable them to effectively defend against a claim.

Plaintiff’s sole relevant factual allegation concerning defendants’ alleged unlawful conduct was that the defendants concealed from plaintiff, his doctors, and his hospital, that the tendon was infected. But he offered not a single fact in support of his theory that defendants concealed from surgeons the fact that the human tissue they provided was “infected” or knew that the surgeons would implant the diseased tendon into a human body.  (Indeed, the serious nature of this allegation made it more at home in a criminal court than a consumer fraud action.) Such an unadorned, conclusory averment leashed to not a single supporting fact failed to meet the pleading standard. Moreover, Plaintiff’s allegation that defendants concealed a material fact sounds in fraud
and, thus, triggered rigorous pleading requirements under Fed.R.Civ.P. 9(b).  However, the court called this a  "shoot-and-ask-questions-later lawsuit"  because it offered no facts to support a good faith belief that defendants knowingly distributed diseased or “infected” human body parts to plaintiff’s health care providers. No names, places, dates, or times, and no concrete facts to support the alleged conduct. No narrative on what was medically deficient about the tendon implant except to state that it was “infected.” In sum, plaintiff’s theory of liability failed to cross the line between possibility and plausibility of entitlement to relief. 

Even if the amended complaint had been "the model of perfect pleading," it would still fail because it does not state a cognizable claim under the WVCCPA. Plaintiff cannot shoulder his burden of stating a claim upon which relief can be granted because, within the meaning of the WVCCPA, the provisioning of blood and human tissue by the non-profit defendants to the health care providers was not “trade or commerce”; the service provided by the defendants was not performed “in connection with the sale or advertisement of any goods or services”; plaintiff was not a “consumer”; and the parities had not entered into a “consumer transaction.”

The West Virginia Legislature, in accord with many other jurisdictions, expressed its intent
that suppliers of human blood and tissue products be held to different legal standards than those
businesses that manufacture, distribute, and sell conventional goods and services. Blood and tissue distributors are rendering a service— and not making a sale—when they provide human blood and tissue products according to the West Virginia Legislature, which intended to limit the liability of such distributors in contract warranty and strict liability tort claims, plainly distinguishing human body products from ordinary goods. The court thus applied the West Virginia high court's decision in White v. Wyeth, 705 S.E.2d 828, 837 (W. Va. 2010), which held prescription drugs aren't proper subjects of consumer protection claims; the court refused to allow a plaintiff to morph what is most naturally a product liability or breach of warranty action into a purported statutory consumer protection claim would permit an end-run around the state's blood shield statute.

Finally, the court noted that plaintiff was correct in observing that if his WVCCPA complaint was dismissed, plaintiff would be left with no adequate legal remedy. Defendants had explained that the WVCCPA claim was a products liability claim in disguise, brought only because the statute of limitations had run on plaintiff’s traditional tort remedies. Thus, any difficulty plaintiff might having pursuing more traditional causes of action was likely his own fault.  The legislature did not intend that WVCCPA serve as "a Plan B litigation backstop" for claims when a plaintiff had—but did not pursue—appropriate traditional causes of action.


 

Alleged Chemical Release Did Not "Speak for Itself"

Contractors working at a refinery who were allegedly exposed to chemical fumes cannot rely on the venerable res ipsa loquitur theory because their claimed injuries may have had other causes. See Pearson v. BP Products North America Inc., 10-40442 (5th Cir., 11/10/11).

As a precaution due to Hurricane Rita, BP Products North America decided to shut down all of its Texas City Refinery.  before starting up again, BP decided to audit, evaluate, and “turn around” each of the units at the Refinery on an individual basis before resuming production. To complete the turnaround, BP used independent contractors for most of the work.

Plaintiffs were among the 450 contractors working on the turnaround when, one night in 2007, they 
began smelling an odor "unlike those one usually smells in a refinery."  None of the hundreds of monitors and detectors designed to detect the release of any harmful gases was triggered. The
foremen stopped work and allowed any worker to be examined at a local hospital; about one hundred workers went. Upon medical examination, no workers were found to have any exposure injuries that required hospital admission or required them to miss work.

Nevertheless, one hundred plaintiffs filed suit in the Southern District of Texas, claiming injuries from the incident. Ten workers' claims were consolidated for trial. None of these Trial Plaintiffs’ experts could identify the alleged odor’s source or its cause. The closest thing to proof that the Trial
Plaintiffs marshaled was that the gas was carbon disulfide was a mask worn by one of the Trial Plaintiffs was found to have had exposure to carbon disulfide. But, the laboratory technician who tested the mask admitted that the mask had not been appropriately maintained for proper scientific study.

BP moved for judgment as a matter of law, which the district court denied, and the claims were submitted to the jury. As part of the jury’s charge, the district court instructed the jury that it could infer the Appellant’s/BP's negligence through the doctrine of res ipsa loquitur. The jury returned a verdict for the Trial Plaintiffs and awarded approximately $325,000 in compensatory damages
amongst the ten Trial Plaintiffs and also $100 million in punitive damages ($10 million per Trial Plaintiff). The district court entered final judgment for the Trial Plaintiffs but vacated the jury’s award of punitive damages because the Trial Plaintiffs failed to prove gross negligence, as required under Texas law.  Already, red flags should be flying, as clearly the punitives claim should never have gone to the jury, and yet the ability to argue it would have inflamed the emotion of the jury, contaminating the compensatory award.

BP timely appealed. (Seven Trial plaintiffs settled, leaving the three for this opinion to handle.) BP argued that it was improper for the district court to have instructed the jury on res ipsa loquitur and that absent that instruction, Appellees could not show that it was negligent. Under Texas law, res ipsa loquitur, meaning “the thing speaks for itself,” is used in certain limited types of cases when the circumstances surrounding the accident constitute sufficient evidence of the defendant’s
negligence to support such a finding.  Res ipsa loquitur is applicable only when two factors are present: (1) the character of the accident is such that it would not ordinarily occur in the absence of negligence; and (2) the instrumentality causing the injury is shown to have been under the management and control of the defendant.  Res ipsa loquitur is simply a rule of evidence by which negligence may be inferred by the jury; it is not a separate cause of action from negligence.

 Importantly, the Texas Supreme Court had already noted in a chemical release case that a res ipsa instruction was inappropriate because escaping gas in the vicinity of a complex chemical plant could be due to an unexpected and unforeseeable mechanical failure or it could be due to negligence. The instrumentality causing the injury could have been in the control of the owner of the refinery or the contractors turning around the unit.

Here, none f the Appellants’ experts could identify where the odor came from or whether it was even from BP’s property. The Appellees had shown neither that the character of the accident was one that would not usually occur absent negligence nor that the injury-causing instrumentality was in BP’s control. In such circumstances, the district court should not have instructed the jury on res ipsa loquitur. Without a res ipsa instruction, the Appellees could not meet their burden of proof as to negligence. Judgment reversed.

 

Court Permits Plaintiffs to Evade CAFA Mass Action Reach

Readers know that one of the effects of the Class Action Fairness Act has been to encourage plaintiff counsel to get creative in ways to defeat federal jurisdiction and keep mass torts and class actions in state courts.  Last week, a federal court remanded several cases brought by individuals who claimed that they developed non-Hodgkins lymphoma as a result of exposure to PCBs, despite the “mass action” provisions of CAFA.  Nunn v. Monsanto Co., No, 4:11-CV-1657(CEJ) (E.D. Mo. 11/7/11).

Under CAFA, federal courts have jurisdiction over class actions in which the amount in controversy exceeds $5,000,000 in the aggregate; there is minimal diversity among the parties; and there are at least 100 members in the class. 28 U.S.C. §1332(d). CAFA also provides federal jurisdiction over a “mass action,” which is defined as “any civil action . . . in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact . . .” 28 U.S.C. § 1332(d)(11)(B)(i).

The district court stated that for it to have jurisdiction under the mass action provisions, defendants must demonstrate that there really are 100 plaintiffs. Defendants made a clever and powerful argument, pointing out that in addition to the cases and these plaintiffs subject to the remand motion,  plaintiffs’ counsel filed two separate, largely identical, cases in the state court (St. Louis City Circuit Court), one with 95 plaintiffs and one with 96 plaintiffs. This clearly evidenced plaintiffs’ counsel purposeful efforts to “splinter” a single mass tort case for the purpose of evading federal jurisdiction. That kind of rigging was rejected in cases like Freeman v. Blue Ridge Paper Prods., Inc., 551 F.3d 405 (6th Cir. 2008), and Westerfeld v. Independent Processing, LLC, 621 F.3d 819 (8th Cir. 2010), argued defendants.

The court felt obligated to disregard such manipulations, however.  Defendants’ contention that plaintiffs had deliberately divided their cases in order to avoid the mass action threshold was somehow "irrelevant."  Reference to the other identical cases was, the court thought, akin to defendant "consolidating" the cases; by excluding cases in which the claims were consolidated on
a defendant’s motion, Congress appears to have contemplated that some cases which could have been brought as a mass action would, because of the way in which the plaintiffs chose to structure their claims, remain outside of CAFA’s grant of jurisdiction. Citing Anderson v. Bayer Corp., 610 F.3d 390, 393 (7th Cir. 2010); see also Tanoh v. Dow Chem. Co., 561 F.3d 945 (9th Cir. 2009). 
 

So, another example of the numerical loophole to removal of mass actions, evading the Congressional intent. Plaintiffs' attorneys continue to resort to dividing their clients into groups of 99 or fewer plaintiffs to try to avoid federal court.


 

California Publishes New Draft of Informal Green Chemistry Regulations

Yesterday the California Department of Toxic Substances Control (DTSC) convened a Green Ribbon Science Panel (GRSP) to continue work on the state's Green Chemistry initiative.

Readers may recall from previous posts that the GRSP was established with the passage of two "green chemistry laws" in 2008, and is charged with providing advice and serving as a resource to DTSC and the public regarding the California Green Chemistry Initiative. On the agenda for the meeting this week was input from the GRSP on the recently-posted “Safer Consumer Products Informal Draft Regulations”, which were published late last month.  An earlier draft of those regulations, released by the DTSC last November, drew strong commentary from both industry and environmental groups. According to DTSC, a wide range of stakeholders, including those from industry, environmental groups, scientists, and legislative leaders, raised "substantive and valid concerns" about the prior draft of the regulations. DTSC  eventually withdrew the draft regulations.

The latest draft regulations provide for a four-step process to identify safer consumer product alternatives: 1) create an immediate list of Chemicals of Concern (~3,000) based on the work already done by other organizations, and specify a process for DTSC to identify additional  chemicals as Chemicals of Concern (COCs); 2) require DTSC to evaluate and prioritize product/COC combinations to develop a list of “Priority Products” for which an alternatives assessment must be conducted; 3) require responsible entities (manufacturers, importers, and retailers) to notify DTSC when their product is listed as a Priority Product.  Manufacturers (or other responsible entities) must perform an "alternatives assessment" for the product and the Chemicals of Concern in the product to determine how best to limit potential exposures to, or the level of potential adverse public health and environmental impacts posed by, the Chemicals of Concern in the product; 4) require DTSC to identify and impose regulatory responses to effectively limit potential adverse public health and/or environmental impacts, if any, posed by the Priority Product/Chemical of Concern.

The draft regulations note that they would not apply to prescription drugs and devices; dental restorative materials; medical devices, and some other categories. But it is clear that they will impose significant new burdens on many product manufacturers, importers and sellers. The new regulations require risk assessments and life cycle analyses for prioritized products, which may lead to use limits for chemicals, reformulation requirements to eliminate targeted chemicals, or even a ban on sales of certain products in California.

And, of course, varying state regulations (in approach and content) frustrate the ability of those companies to design and market products in a global supply chain.

DTSC labels the new draft "informal," perhaps because they make substantial changes to the withdrawn set, which drew such intense scrutiny.   The initial list of “Chemicals of Concern” would be far broader than previously expected; the product prioritization criteria is revised, although it still appears likely to impact children's products, personal health, and other consumer products. But worker exposure has been added to the priority criteria as well. The regulations would also expand the list of hazards to include a wider range of hazard traits and environmental and toxicological testing endpoints. The previous exemption for unintentionally added chemicals would be eliminated, and, significantly, the “no exposure pathway” exemption would also be dropped.  

The regulations would require an alternatives assessment, conducted in two stages, with a report to DTSC regarding each stage. The first stage focuses on product criteria (function, performance, technical, and legal requirements), identification of alternatives to the COC, and screening of the alternatives.  The second stage would involve a detailed assessment of alternatives, focusing on exposure pathways and life cycle segments.

After evaluating the reports of the alternatives assessment, DTSC would then consider the appropriate regulatory response, which could involve a requirement of information disclosure, or more assessment, or limitation of certain uses, up to a ban.

The draft regulations would also require responsible entities to establish and pay for an end-of-life product stewardship program for any product that is to treated as a hazardous waste in California.

Materials for the meeting are here and here. On December 5, 2011, DTSC will hold a workshop on the informal draft regulations. The informal public comment period ends December 30, 2011.  DTSC apparently will then develop a formal new set of proposed regulations.   

Lower Courts Grapple With Meaning of Nicastro (Part II)

Last post we talked about a federal district court attempting to apply the Supreme Court's decision in J.McIntyre Machinery Ltd. v. Nicastro.  This time, a state court.

In Soria v. Chrysler Canada Inc., No. 2-10-1236 (App. Ct. Ill., 10/24/11), the court modified an earlier opinion to account for Nicastro. But it still concluded that a Canadian automobile assembler was properly subject to personal jurisdiction in Illinois, regardless of the new decision.

This suit arose out of a vehicle collision in which plaintiff alleged that she was a passenger in a 1998 Plymouth Voyager minivan assembled by Chrysler Canada in Windsor, Canada. Plaintiff alleged she suffered a severe eye injury after the door to a passenger airbag module fractured during airbag deployment, sending out plastic fragments. Plaintiff alleged that Chrysler
Canada was negligent in its manufacture, assembly, design, testing, inspection, and sale of the airbag module doors.

Regarding jurisdictional contacts, plaintiff alleged that Chrysler Canada knew that thousands of minivans and vehicles it manufactured were sold in the United States, including thousands in Illinois; about 85% of its production was exported to the United States in some years; it allegedly delivered its minivans and vehicles into the stream of commerce with the expectation that a certain percentage would be sold in Illinois; it did business in Illinois within the meaning of the Illinois long-arm statute; and it (along with Chrysler United States) designed, developed, assembled, manufactured, distributed, and transferred into the stream of commerce the Plymouth Voyager in which plaintiff was a passenger during the collision.

In contrast, Chrysler Canada argued that it was incorporated in Canada, had its principal place of
business in Canada, and never transacted business, entered into contracts, owned real estate,
maintained a corporate presence, telephone number, tax identification number, employees or agents in Illinois. Further, it contended that it did not ship, deliver, distribute, or sell the minivan in
Illinois. Finally, Chrysler asserted that its website was not directed to or interactive with Illinois
residents. 

The trial court denied defendant's motion to dismiss.

The appellate court noted the defendant's argument that mere awareness that vehicles it assembled might be distributed by Chrysler United States to Illinois did not show sufficient minimum contacts. Plaintiff responded that Chrysler Canada had sufficient minimum contacts and was subject to specific personal jurisdiction in Illinois because it knew that the vehicles it assembled for Chrysler United States entered Illinois through the stream of commerce and because it intentionally served the United States market, including Illinois, by indirectly shipping its vehicles to the forum.

Chrysler urged that beyond its mere awareness that some of the vehicles it assembled “may”
be swept into Illinois through the stream of commerce, there were no purposeful contacts (and,
therefore, no sufficient minimum contacts) by Chrysler Canada directed at Illinois. Specifically,
Chrysler Canada contended that it did not engage in commercial activities or other purposeful
contacts in Illinois. Further, it did not receive vehicle orders from United States customers or
dealerships; did not sell (or have control over the distribution of) vehicles to United States
customers or dealerships; and did not ship vehicles to United States customers or dealerships.
 

The court reviewed the Supreme Court jurisprudence on personal jurisdiction, and in particular, the debate over the so-called "stream-of-commerce" theory of jurisdiction, which has commanded the approval of as many as 4 Justices at various times.  The court concluded that under either a broad or narrow version of the stream-of-commerce theory, the trial court correctly found that sufficient minimum contacts exist to exercise personal jurisdiction over Chrysler Canada.

Chrysler Canada was not only aware that its products are distributed in Illinois (thus, the court thought, satisfying the narrow stream-of-commerce theory), but it had also purposefully directed its activities toward Illinois.  While it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws, when a commercial actor’s efforts are purposefully directed toward residents of a state, the absence of physical contacts does not alone defeat personal jurisdiction there, concluded the court.

The court found persuasive that the United States market, including Illinois, was Chrysler Canada’s primary market. Deposition testimony reflected that Chrysler Canada is aware that 82%
of its production (albeit not all of which consists of Plymouth Voyager minivans) was distributed,
through an established distribution channel, within the United States. During the relevant period,
Chrysler Canada indirectly shipped products into the American market, including Illinois, through
Chrysler United States, its parent corporation. The court agreed with plaintiff’s assertion that Chrysler Canada continuously and intentionally served or targeted this market and was set up to manufacture vehicles for (and derived significant revenue from) the United States market, including Chrysler dealerships throughout Illinois.

Much of that analysis skipped over the very thorny issue of the distinction between efforts to target the US market, in general, but including the forum state, and those that target a specific state, the forum state.  Perhaps the court was influenced by the fact that Chrysler Canada conceded that, during 2008 and 2009, Chrysler United States ordered 28,000 vehicles of various makes and models, including minivans, for its independently-owned dealerships in Illinois. Also, unlike some product sellers, Chrysler Canada was specifically aware of the final destination of every product (i.e., vehicle) that it assembled. Thus, according to the court, Chrysler Canada had an expectation that its products would be purchased by Illinois consumers and, given the continuous nature of its assembly relationship with Chrysler United States, its contacts with Illinois were not random, fortuitous, or attenuated.

 

Lower Courts Grapple With Nicastro Meaning

We have posted before about the thorny and important issue of U.S. courts exercising personal jurisdiction over foreign product sellers.  Earlier this year, the Supreme Court decided two important personal jurisdiction cases, J.McIntyre Machinery Ltd. v. Nicastro, U.S., No. 09-1343, and Goodyear Luxembourg Tires SA v. Brown, U.S., No. 10-76, the first high court opinions on this issue in two decades.  But because the former was a plurality decision, lower courts have continued to struggle.

In the past few weeks, two courts have confronted what type of conduct may subject a foreign product maker to personal jurisdiction.  The first today, and the second in a later post.

In Windsor v. Spinner Industry Co., No. 1:10-cv-00114 (D.Md., 10/20/11), plaintiffs alleged that the front wheel of their bicycle dislodged, causing him and his toddler son, Tyler, to be thrown to the ground. Defendant  Joy is a Taiwanese corporation that designs and manufactures bicycle components, including a mechanism called a “quick release skewer,” which is used to hold wheels in place. Plaintiffs alleged that their bicycle contained one of Joy’s quick release skewers and that a defect in the skewer contributed to the cause of their accident.

The parties agreed that Joy sells its products to distributors, manufacturers, and trading companies who then market them in every state in the U.S., but that Joy has no direct contacts with the forum state of Maryland. Plaintiffs contended that the nationwide marketing of Joy’s products by intermediaries created sufficient minimum contacts between Joy and Maryland to subject Joy to specific jurisdiction there. Joy moved to dismiss.

The district court noted that the Due Process Clause of the Fourteenth Amendment sets the outer boundaries of state judicial authority. See Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S.Ct. 2846, 2853 (2011). Consistent with due process, jurisdiction over non-resident defendants exists only to the extent that the defendants have certain minimum contacts with the state such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.

Readers know that such contacts, if they exist, can give rise to one of two species of personal jurisdiction: general or specific. General jurisdiction exists where a non-resident maintains “continuous and systematic” contacts with the forum state. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416 (1984). Under these conditions, courts of the forum state may exercise jurisdiction over the defendant in any suit properly before them, even if the subject matter is completely unrelated to the defendant’s activities in the forum. Specific jurisdiction arises where a non-resident lacks continuous and systematic contacts with the forum, but has nonetheless purposefully availed itself of the privilege of conducting activities within the forum state. Hanson v. Denckla, 357 U.S. 235, 253 (1958). Under these latter circumstances, courts of the forum state may exercise jurisdiction over the defendant only with respect to claims that arise out of the defendant’s activities in the forum.

The issue presented in this case was the extent to which a state may exercise specific jurisdiction over a non-resident manufacturer whose only connection to the forum is that its products were sold there by third-party distributors. Although the idea that jurisdiction automatically travels with the chattels has long been rejected, some courts have at times endorsed a so-called “stream of commerce” doctrine, approving the assertion of personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum state.

The Supreme Court in  McIntyre addressed, but split, on how to handle these issues. The deciding votes were cast by Justices Breyer and Alito, who concurred in the judgment reversing the New Jersey Supreme Court. In his concurring opinion, Justice Breyer rejected the notion that a non-resident defendant could be subjected to suit in a state based solely on foreseeability, agreeing with the plurality that personal jurisdiction required purposeful availment of a particular forum. He further explained that the standard of purposeful availment,  the correct legal standard, may still require further explication in the context of modern global commerce, but that the facts of that case did not present an adequate vehicle for crafting any new rules. Although the concurrence and the plurality differed as to what might constitute “purposeful availment” in the context of national or global marketing, they both firmly embraced the continuing significance of individual state sovereignty and, on that basis, noted that specific jurisdiction must arise from a defendant’s deliberate connection with the forum state.

With that understanding, the facts alleged, even if proven, would be insufficient to demonstrate jurisdiction over Joy, said the court. First, although plaintiffs made much of the Internet marketing of Joy’s products, the web presence of Joy or its distributors in Maryland was immaterial because plaintiffs did not purchase their bicycle on the Internet. Further, plaintiffs offered no details about the particular chain of distribution that brought the allegedly defective skewer to the end seller.  At best, plaintiffs’ theory of jurisdiction amounted to no more than the “knew or should have known” standard that the Supreme Court explicitly rejected in McIntyre.

The court also rejected the plaintiffs' arguments that jurisdiction was proper because certain of the manufacturers and distributors to whom Joy sold its products not only market their products in Maryland, but maintain established channels of distribution there.  The argument was that where a foreign manufacturer sells its products to large national retail chains that have an established and ongoing presence in every state in the U.S., such a relationship evinces more than the mere foreseeability, but an actual intent to serve the forum market, and hence purposeful availment. But the court found this line of reasoning indistinguishable from the clearly rejected position  that jurisdiction lies in a forum when a defendant places its product in the stream of commerce with the expectation that it will be sold there. 

NTP Proposes Changes to Process for Next Report on Carcinogens

The National Toxicology Program is accepting comments on a revised process for reviewing substances that may be added to its widely cited "Report on Carcinogens." NTP is accepting comments up to Nov. 30th.

The Report is required by Congress to be published every two years, and is designed to provide
information on substances that may pose a hazard to human health by virtue of their  carcinogenicity.  Substances are listed in the report as either known or reasonably anticipated human carcinogens. The 12th Report was published in June, 2011. But now, the NTP is proposing changes to the review process for listing substances in the 13th Report.

The NTP will hold a listening session on November 29, 2011, from 1–5 p.m. (EST), as well, to receive oral comments on the proposed review process.

Under the proposed process, NTP says it would make its substance review process more flexible, and more descriptive of the  reasoning it used to develop a proposed classification of an agent, and  thus would summarize the relevant science and also the agency's reasoning about how the agent should be classified.

Toxic tort practitioners among our readers may want to take a look (and have their experts do so).
 

Beverage Maker Not Liable for Alleged Failure to Warn

The maker of  a drink containing alcohol and caffeine was not liable to a woman allegedly injured when the driver of the motorcycle on which she was a passenger crashed, after the driver consumed the beverage.  See Cook v. MillerCoors LLC, No. 11-1488 (M.D. Fla., 10/28/11).

The operator of the motorcycle in the accident was killed, and plaintiff Cook, who was a passenger, was injured.  Prior to the crash, the driver allegedly had consumed several “Sparks”
alcoholic beverages containing caffeine and other stimulants, manufactured by defendant.

Cook argued that alcoholic beverages such as Sparks containing stimulants are “uniquely dangerous” because they appeal to younger drinkers and because the addition of caffeine enables one to drink more alcohol without feeling as intoxicated as one normally would. Thus, she alleged, consumers of these beverages are more likely to “engage in dangerous behavior such as driving.”  She asserted the driver did not appear impaired, even though toxicology reports from his autopsy revealed that his blood alcohol level was 0.10 at the time of the crash.

Defendant responded that the risks associated with operating a motor vehicle while under the influence of alcohol are well known; therefore, it could not be held responsible for the operator's choice to consume Sparks then illegally operate his motorcycle. The addition of other ingredients to the beverage did not lessen his responsibility to refrain from operating his motorcycle after having consumed the alcohol, and his actions, not the manufacture of Sparks,
proximately caused Cook’s injuries.  The crux of the defense motion to dismiss thus was that there is no cause of action against a manufacturer of alcoholic beverages for injuries resulting from their consumption because the effects of alcohol consumption are well known. With a response from plaintiff that the legion of such holdings in courts everywhere apply to “conventional” alcoholic beverages, not to an alcoholic beverage mixed with stimulants which allegedly suppress the consumer’s subjective awareness of alcohol’s well-known effects.

Regarding the failure to warn theory, a plaintiff must establish the existence of a duty. A manufacturer’s duty to warn arises when there is a need to inform consumers of dangers of which they are unaware.  The effects of alcohol and the need to not drink and drive are universally known.  While plaintiff argued about the unconventionality of this product, plaintiff did not and could not allege that the driver was unaware that he was drinking alcohol. His alleged subjective awareness of the speed or impact of those effects did not alter the legal reasoning of precedent that holds that there is no duty to warn because of the universal recognition of all potential dangers associated with alcohol. 

Plaintiff also failed to adequately allege how the product was unreasonably dangerous for the design defect claim. The effects of alcohol are universally and objectively well known, irrespective of the operator's alleged subjective awareness of them. The defectiveness of a design is determined based on an objective standard, not from the viewpoint of any specific user, said the court.

Moreover, plaintiff's theories failed as to proximate cause. Plaintiff alleged that the manufacturer's negligence caused the driver to become intoxicated to the point of impairment,
causing the crash and Cook’s injuries. In Florida, however, voluntary drinking of alcohol is the proximate cause of an injury from an intoxicated driver, rather than the manufacture or sale of those intoxicating beverages to that person.  This doomed the negligence claim.

Readers can readily see why the court was reluctant to make an exception to the rule for the "unconventional" beverage.  There are hundreds of alcohol-containing products that are not "conventional" in one way or another, by taste, ingredients, color, manufacturing process, advertising... To shift responsibility from the person who over-consumes one of these and then drives impaired is to send the absolutely wrong policy message.

Courts have typically recognized no duty on the maker, regardless of plaintiff's attempt to differentiate either themselves or the product. See, e.g., Malek v. Miller Brewing Co., 749 S.W.2d 521 (Tex. App. 1988) (finding no duty to warn despite claim that advertising led plaintiff to believe that “Lite” beer was less intoxicating than other beer); Pemberton v. Am. Distilled Spirits Co., 664 S.W.2d 690 (Tenn. 1984); Greif v. Anheuser-Busch Cos., Inc., 114 F. Supp. 2d 100 (D. Conn. 2000)(particular, alleged tolerance of an individual consumer); MaGuire v. Pabst Brewing Co., 387 N.W.2d 565 (Iowa 1986).


 

EPA Issues New Proposed HPV Chemical Rules

The U.S. Environmental Protection Agency issued two proposed rules last week that would require manufacturers and importers of dozens of high production volume chemicals to provide health, environmental and usage data.  EPA also issued  a final rule that requires manufacturers to test the health and environmental effects of 15 high production volume (HPV) chemicals

In 1998, EPA concluded that there were significant gaps in the basic data needed to understand and characterize the potential hazards associated with certain HPV chemicals. HPV chemicals are classified as those chemicals produced or imported in the United States in quantities of 1 million pounds or more per year.  In the High Production Volume (HPV) Challenge Program, companies were "challenged" by EPA to make health and environmental effects data publicly available on chemicals produced or imported in the United States in the greatest quantities.  As of June 2007, companies sponsored more than 2,200 HPV chemicals, with approximately 1,400 chemicals sponsored directly through the HPV Challenge Program and over 860 chemicals sponsored indirectly through international efforts.

One proposal would require manufacturers to test the health and environmental effects of an additional 23 HPV chemicals, and the other proposal would require companies to notify EPA prior to new uses of an additional 22 chemicals that are widely used in commerce. Both new rules would be issued under the Toxic Substances Control Act, which itself is the subject of Congressional scrutiny.

The 1998 High Production Volume Challenge did not provide adequate data for the 45 chemicals covered by the two proposed rules, according to EPA. Observers believe the proposed rules will likely affect chemical manufacturing and petroleum refineries.

Public comments must be received on or before January 19, 2012.
 

Group News

If readers will forgive a small moment of bragging, I wanted to mention that U.S. News & World Report in conjunction with Best Lawyers® for 2011-2012 has just named my practice Group as “Law Firm of the Year” in the category of Mass Tort Litigation/Class Actions -Defendants.

Apparently only one law firm was selected in each of the 75 nationally ranked legal practice areas.

Proud of my team, but thanks are owed to the clients who entrust us with some of their most significant matters and give us a chance to show what we can do.

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House Committee Tackles Regulations

The House Judiciary Committee held a hearing last week on a bill that would require federal agencies to evaluate the costs of proposed regulations before adopting them, and that would arguably make it easier for product sellers to challenge onerous regulations in court.

The hearing focused on the Regulatory Accountability Act of 2011 (H.R. 3010). Rep. Lamar Smith (R-Texas), the committee chairman, introduced the bill this Fall to propel needed changes in the regulatory system, updating out of date aspects of the Administrative Procedure Act, a 1946 statute.  The Senate version of the bill (S. 1606), was introduced in September, and was authored by Sens. Rob Portman (R-Ohio), Mark Pryor (D-Ark.), and Susan Collins (R-Maine). The Regulatory Accountability Act would be the first major revision of the APA’s core regulatory procedures.

The bill would require a more formal rule-making process, under which agency officials would have to defend their regulatory proposals to affected persons. Federal agencies also would be required to give greater weight to the impacts and costs of the proposed rules.  The proposal would limit the ability of agencies to regulate in the guise of voluntary “guidance” documents. (Readers know hos such regulations can impact mass tort and product liability litigation in a real way.)

Witnesses included C. Boyden Gray, Christopher C. DeMuth of the American Enterprise Institute for Public Policy Research, and Arnold Baker, owner of Baker Ready-Mix Building Materials.  Gray argued that the bill would strengthen judicial review of agency actions on questions of regulatory interpretation, factual issues, and cost-benefit analysis, at least in cases where the agency’s own process fails to satisfy the Act’s heightened requirements. Judicial review of agency action requires a delicate balance—the applicable standards of review are somewhat deferential, but those standards must be firmly enforced. The proposed Act strikes that balance well. DeMuth focused on the requirement of a cost-benefit standard, and the provision that agencies must adopt the least costly approach to achieving statutory objectives unless they demonstrate that the additional benefits of more costly rules justify the additional costs.  And Baker offered the example of a business struggling to stay afloat in a sea of regulations, and the need for agencies to do a much better job of understanding the full impact that their regulations will have on businesses and jobs – along with possible alternatives – before they impose the most costly new rules.

A number of law professors oppose the bill, but seem to forget that it is Congress' job to decide if and when regulatory burdens have become too excessive.

Meanwhile, the House Judiciary Committee approved last week the Regulations from the Executive in Need of Scrutiny (REINS) Act (H.R. 10), which would require a vote in Congress before any regulation with an economic impact of more than $100 million could go into effect. Federal regulations cost the economy $1.7 trillion each year. Congress would take a simple up-or-down vote on such huge new government regulations before they could be enforced.