Happy Thanksgiving

No substantive post today, weighed down by turkey (my share of 46 million turkeys, and 700 million pounds consumed this week!), and distracted by parades and football.  Happy Thanksgiving to all our loyal readers.

Of course, the modern Thanksgiving holiday is commonly traced to the 1621 celebration at Plymouth, Massachusetts, as the Pilgrims celebrated a good harvest with the Wamponoag tribe after a tough year. 

President  George Washington proclaimed the first national thanksgiving celebration in America setting  November 26, 1789, as a day of "public thanksgiving and prayer to be observed by acknowledging with grateful hearts the many and signal favours of the Almighty." 

Thanksgiving was first celebrated on the same date in all states in 1863 through a presidential proclamation by Abraham Lincoln. Because of the war, his concept of Thanksgiving did not fully take effect until the Reconstruction in the 1870's.  But he wrote it was fit and proper that the gifts and blessings received during the year "should be solemnly, reverently and gratefully acknowledged as with one heart and one voice by the whole American People. I do therefore invite my fellow citizens in every part of the United States, and also those who are at sea and those who are sojourning in foreign lands, to set apart and observe the last Thursday of November next, as a day of Thanksgiving and Praise." And so we do.

 

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Federalists Debate Business in Supreme Court

Let's get out of the weeds today and think lofty thoughts. The Federalist Society's 2012 National Lawyers Convention was held earlier this month in Washington, D.C.  Readers may know that the society is an organization of 40,000 lawyers, law students, scholars, and other individuals "who believe and trust that individual citizens can make the best choices for themselves and society."

The topic of this year's convention was: The Future of U.S. Constitutional Law in the Supreme Court. The Convention addressed the fact that, at the present time, the Supreme Court seems closely divided on many foundational topics in constitutional law, such as federalism, separation of powers, and religious liberties.

One interesting panel was - Litigation: Business Cases in the Roberts Court: Perception and Reality,  which included practitioners, professors, and judges.  Some participants argued that this Court has issued pro-business decisions in nearly every major case, while others noted that the issue was a bit more complex.  For example, was Citizens United v. Federal Election Commission, 558 U.S. 50 (2010), a pro-business decision, or better seen as a victory for free speech?   Other speakers observed that a significant part of the Court's docket is in fact business v. business cases, so, by definition, a business will prevail.  

Still other panelists noted that many of the pro-business decisions arose in the class action context, which the Court had left inadequately tended and which saw numerous splits in the lower courts.  It will be interesting to see what the Court does in Comcast on Daubert, and in Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, 81 U.S.L.W. 3258 (U.S. argued 11/13/12) on materiality.

Ninth Circuit Vacates Asbestos Verdict on Daubert Basis

The Ninth Circuit earlier this month vacated a $9 million award for a plaintiff who allegedly contracted mesothelioma working for decades at a paper mill, because the trial court failed to assess the reliability of expert testimony for the plaintiffs under Daubert v. Merrell Dow Pharm.,
Inc
., 509 U.S. 579 (1993). See Henry Barabin et al. v. AstenJohnson Inc., et al., Nos. 10-36142 and 11-35020 (9th Cir.). 

Plaintiff's employer used dryer felts containing asbestos allegedly made or sold by defendants. During his employment, he allegedly worked in various jobs that exposed him to the dryer felts that defendants had provided. He also took pieces of dryer felt home to use in his garden.  In November, 2006, Plaintiff was diagnosed with pleural malignant epithelial mesothelioma.  It was undisputed that exposure to respirable asbestos can cause mesothelioma (general causation).

Defendants filed a motion in limine to exclude plaintiff's expert witnesses on specific causation. The district court excluded one (Dr. Cohen) as an expert because of his “dubious credentials and his lack of expertise with regard to dryer felts and paper mills. . . ” Additionally, the district court limited a second (Dr. Millette), requiring disclosure to the jury that Dr. Millette’s tests were “performed under laboratory conditions which are not the same as conditions at [plaintiff's workplace].”  However, during a pre-trial conference, the district court reversed its decision to exclude Dr. Cohen’s testimony. The district court explained that plaintiffs had clarified Dr. Cohen’s credentials, including that he had testified in other cases. The district court did not hold a Daubert hearing.

After the jury verdict and post-trial motions, defendants appealed.  The court of appeals noted that in its role as gatekeeper, the district court determines the relevance and reliability of expert testimony and its subsequent admission or exclusion. See Ellis v. Costco Wholesale Corp., 657 F.3d 970, 982 (9th Cir. 2011). Admission or exclusion under Daubert rests on the scientific reliability and relevance of the expert testimony.  The expert’s opinion must be deduced from a “scientific method” to be admissible. The test under Daubert is not the correctness of the expert’s conclusions but the soundness of his methodology. Compliance with Rule 702 is gauged by the district court’s assessment of the reliability of the proffered expert testimony. Specifically, the district court is charged with determining whether the proffered expert testimony is trustworthy. In a case involving scientific evidence, evidentiary reliability will be based upon scientific validity. Scientific validity is, in turn, assessed in large part by the degree to which the theories propounded by the expert have been subjected to and survived scrutiny in the relevant scientific community.  The "decision to admit or exclude expert testimony is often the difference between winning and losing a case."

Since the decision to permit the testimony was based on reconsideration, the record was limited. Once presented with the additional information in the response to the motion in limine, at a minimum the district court was required to assess the scientific reliability of the proffered expert testimony.  Unfortunately, said the court of appeals, because no Daubert hearing was conducted as requested, the district court failed to assess the scientific methodologies, reasoning, or principles Dr. Cohen applied. None of the Daubert factors was considered. "Instead, the court allowed the parties to submit the experts’ unfiltered testimony to the jury."  In failing to do so, the district court neglected to perform its gatekeeping role.  Rather than making the required determinations, the district court left it to the jury to determine the relevance and reliability of the proffered expert testimony in the first instance, said the panel. The 9th Circuit panel seemed influenced in part by the fact that, in its order, the district court wrote: In the interest of allowing each party to try its case to the jury, the Court deems admissible expert testimony that every exposure can cause an asbestos-related disease. (emphasis added).

"Let the parties try their cases; let the jury sort it out" is not what Daubert allows or requires.  The district court committed reversible error when it failed to assess the proferred expert testimony for relevance and reliability, concluded the court. Prior decisions dictated that a new trial be provided in this circumstance.

SHB in the News

If loyal readers will forgive a little puffing, Shook, Hardy & Bacon has been selected 2013 Product Liability Litigation Law Firm of the Year by U.S. News & World Report and Best Lawyers LLC, which collaborated to develop a listing of the nation’s most successful law practices. This top honor is one of the firm’s 12 national rankings.

U.S. News and Best Lawyers recognized SHB among the nation’s top law firms for mass tort litigation/class actions – defendants, commercial litigation, environmental law, employment law – management, environmental litigation, patent litigation, antitrust law, environmental law, antitrust litigation, labor and employment litigation, tax litigation, and patent law.

Also, Legal Media Group has published the 2013 edition of Benchmark Litigation: The Definitive Guide to America’s Leading Litigation Firms & Attorneys, recognizing Shook, Hardy & Bacon as a Tier 1 national leader in product liability.

Thanks go to our wonderful clients who entrust us with some of their most challenging matters. 

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Amicus Weighs In On Daubert Issue in Court of Appeals

The Product Liability Advisory Council weighed in as amicus earlier this month, asking the Eleventh Circuit to reverse a district court ruling that had allowed unreliable expert testimony in a case involving Jet Skis. See Megan Sands v. Kawasaki Motors Corp. U.S.A. et al., No.12-14667 (11th Cir.).

The PLAC brief  is part of the litigation arising from a complaint originally filed in Florida in 2007 by Georgia college student Megan Sands, who was riding as a passenger on a Kawasaki 2003 Ultra 150 Jet Ski in the Bahamas when she was thrown backward from her seat into the water.  She alleged this caused her to suffer severe, extensive and permanent damage to her lower extremities. Sands alleged that the device was defective because it did not have either a raised seat back or a “sissy bar” to prevent passengers from falling backward, or a kill switch that would allow an ejected passenger to cut off the engine.The case went to trial, resulting in a favorable verdict for Kawasaki on strict liability and negligent failure to warn claims but a finding in favor of Sands on design defect claims. Defendant appealed.

The amicus brief focused on the trial court's gate-keeping obligations under the Daubert standard, and the testimony of plaintiff's expert Burleson concerning an alternative seat design for the jet ski. PLAC argued that he presented no testing or engineering analysis to show that the alternative design would have improved the overall safety and utility of the product. Instead, his opinion rested
solely on an unsupported, conclusory statement in his report, which was precisely the kind of "analytical leap" and ipse dixit condemned in prior cases.  Kawasaki did not challenge the
admissibility of Burleson's assertion that his seat back concept, if used, might have eliminated or reduced the risk of injury to this plaintiff. Rather, as Kawasaki had argued below, Burleson had not tested whether a seatback would pose other dangers of equal or greater magnitude to the danger it would supposedly address.

The trial court appeared to describe the issue merely as whether "adequate testing" was conducted, but the testing evidence was not responsive to the specific objection that Kawasaki had raised. Neither the Plaintiff nor the trial court, said PLAC, ever identified any test or other engineering data supporting Burleson's conclusory assertion about the overall safety of the alternative design.

PLAC also focused on the trial court's statement that it was "unable to say that Mr. Burleson's testimony regarding a fixed seatback is unreliable," which sounded like the court switched the burden to show unreliability to Kawasaki. The absence of an admission by Burleson that the
alternative design would introduce a risk of other hazards should not have permitted the jury to
conclude that the alternative design was reasonable. Substantive tort law places the burden on the plaintiff to establish that the proposed alternative design would have greater overall safety than the existing design, and procedural law  imposes the burden on the proponent of expert testimony to establish its reliability. PLAC argued that a trial court does not have discretion to switch the burden under Rule 702 from the proponent of expert evidence to the opponent of such evidence. 

One to keep an eye on.

 

Supreme Court Denies Cert in Case Excluding Treater Opinions

Readers may recall our post about Simmons v. Novartis Pharmaceutical Corp., a case in which the Sixth Circuit affirmed the exclusion of plaintiff's expert testimony seeking to link osteonecrosis of the jaw to plaintiff's use of two cancer medications. The issue was specific causation, and the court helpfully noted that a treating physician’s testimony is subject to Daubert; that an expert's statement that he found “a very close association” between ONJ and the class of drugs is not enough; and that while a treater may be qualified to diagnose a patient, a diagnosis is merely a hypothesis, which does not by itself satisfy Daubert and Rule 702.

The Supreme Court earlier this month denied the plaintiff's cert petition. See Simmons v. Novartis Pharmaceutical Corp., U.S., No. 12-283, cert. denied 11/5/12).

Plaintiff had argued that when a case involves medication that has not been widely studied, and thus published about, a different standard should apply.  She also argued that the opinions would have been admissible under the law of Maryland which, she said, requires only that expert opinions be expressed “to within a reasonable degree of medical/dental probability.”

Novartis has had a number of victories in similar cases, challenging treating physicians who seek to offer expert causation opinions. 

Supreme Court Hears Arguments in Comcast

We alerted readers before about the Supreme Court consideration of the role of Daubert at the class certification stage.   See Comcast Corp. v. Behrend, U.S., No. 11-864 (cert. granted 6/25/12). The Court had indicated it was interested in the question "whether a district court may certify a class action without resolving whether the plaintiff class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a classwide basis." Readers will recall that in Wal-Mart Stores Inc. v. Dukes, 131 S. Ct. 2541 (2011) the Supreme Court in dicta referenced the question. Justice Scalia observed that the district court had "concluded that Daubert did not apply to expert testimony at the certification stage of class-action proceedings," but the majority replied that "we doubt that is so." 131 S. Ct. at 2554. Thus, Dukes strongly suggested that it was appropriate for defendants to make the expert challenge at the class certification stage, and important for the court to resolve the issue then.

The justices heard arguments from both sides November 5th.  The district court in Comcast originally certified a class; following the court of appeals' decision in Hydrogen Peroxide, 552 F.3d 305, the district court granted in part Comcast‘s motion to reconsider its certification decision. After further briefing, plaintiffs got the case re-certified after convincing the district court that they could show that they had an expert methodology to prove damages on a classwide basis. On the current appeal, the Third Circuit agreed that the lower court had applied the "rigorous analysis," adding that at the class certification stage, "we are precluded from addressing any merits inquiry unnecessary to making a Rule 23 determination.” The Petitioners argued that the Third Circuit affirmed the certification order after expressly declining to consider several “merits” issues necessary to determine whether, as required by Rule 23(b)(3), common questions predominate over individual ones. The focus on damages, which some have viewed as narrowing the issue presented, still is a question that arises not just in antitrust cases, but also in mass torts, which are front and center for our readers.

Plaintiffs seemed to get more questions from the bench than did defendant, especially about any problem with allowing potentially inadmissible evidence to form the basis for the crucial class certification decision. 

Comcast emphasized flaws in the expert's damages model, including that the damage model was not linked to the class theory certified by the lower court, that the alleged monopolization of the Philadelphia area through clustering deterred competitors, or “overbuilders,” from competing. The district court should not have relied on it to certify the class. Plaintiffs argued waiver, that the company failed to bring up Daubert v. Merrell Dow Pharmaceuticals Inc., 509 U.S. 469 (1993), until it was too late. That focus led Justice Kagan to note, “I am still in search of a legal question that anybody disagrees about here.” Justice Elena Kagan observed it seemed the parties apparently agreed that if the Daubert question was not waived, the lower court should have held a hearing on the admissibility of the expert opinions. Comcast emphasized it had argued to the trial court that this model did not work, ought to be precluded, and was not a valid methodology.

Plaintiffs argued that allowing district courts to defer admissibility determinations under Daubert  until after the class certification stage is consistent with the broad discretion given judges on evidentiary issues.  But that failed to address the pressure that class certification puts on defendants to settle, a point that was not a focus of the arguments. Plaintiffs also seemed to be arguing for a standard in which the district court has to decide simply that it is more likely than not that the damages model/expert opinion will be admissible at trial, and will meet the standard that’s required to get to a verdict.  But Justice Sotomayor asked "can a district court ever say that it’s persuaded by unreliable or not probative evidence.” Justice Alito similarly asked how could this expert "report be probative if it did not satisfy Daubert?”
 

Comcast argued that the trial court needed to conduct more than a limited Daubert hearing, agreeing with what defendant called the holding of the Seventh Circuit in American Honda that the question at the class cert hearing is not solely one of whether the evidence would be admissible, but also  -- keeping in mind that the focus of the class certification hearing is to decide whether the case should be tried as a class --  whether it is a methodology that sufficiently fits the facts and is reliably based on a scientific method so that plaintiffs will be capable of proving, class-wide, this issue at trial.

Justice Scalia asked about a hybrid approach where the court would focus at the class stage on reliability, and leave other Daubert inquiries (like fit)  for trial. But a focus of Justice Ginsburg's questions right out of the box was whether any finding of reliability was necessary on damages. She noted that in discrimination law contexts, courts may, if the liability questions can be adjudicated on a class basis, have the damages question adjudicated individually.  Of course, that view of class actions seems to slight the manageability requirement in a (b)(3) context, and invites truncated procedures that violate a defendant's due process rights.

One to watch for sure.
 

 

Mold Economic Injury Claim Rejected

The issue of mold-related litigation remains of interest to our readers, perhaps even more so in the aftermath of the widespread damage from Sandy.  Recently a federal judge rejected claims alleging that Welk Resort San Diego allowed mold to grow in its rooms causing plaintiffs' "Platinum Points" time share currency to lose value as a result.  See Martinez v. The Welk Group Inc. et al., No. 3:09-cv-02883 (S.D. Cal.).

Plaintiff alleged economic damages stemming from defendants alleged failure to abate and disclose the presence of mold at the Welk Resort San Diego. (Younger readers may not recall, but born in a German speaking town in North Dakota in 1903, Mr. Lawrence Welk didn’t learn to speak English until he was 21. This gave him the accent that marked his signature line: “Wunnerful, wunnerful.”  His Lawrence Welk Show was cheerful and wholesome with bubbles, the music that Welk called “champagne music,” and a parade of smiling dancers, singers and musicians that older audiences loved.)

 Plaintiff purchased "Platinum Points" from Welk Resort Group, Inc. in 2007, which provided him with the opportunity to stay at Welk resorts around the world or at any other time-share resort that accepts such Platinum Points for vacation stays. At some point during the sales process, plaintiff allegedly asked, and the sales agent assured him the Resort was clean, safe, and well maintained. Plaintiff said he purchased his Platinum Points solely for the purpose of staying at the Welk Resort San Diego, which is located in Escondido, California, and has more than 650 units in three subdivisions: the Lawrence Welk Resort Villas, the Villas on the Green, and the Mountain Villas. During a visit to the Resort in 2009, plaintiff notified the front desk that his room smelled musty. Later in a utility closet, he found something that may have been mold, but he could not be certain. A neighbor later told him him that there was mold at the Resort.

Subsequent to his 2009 stay at the Resort, Plaintiff decided he would never use his points again—either at Welk or any other timeshare resort. Additionally, Plaintiff did not attempt, nor was he willing to attempt, to sell his Platinum Points to another individual, as he did not believe it would be "ethical" given his knowledge of the alleged "mold issues" at the Resort. Consequently, plaintiff claimed his Platinum Points have diminished in value.

Plaintiff sued for breach of contract, breach of fiduciary duty, negligence, nuisance, breach of the implied warranty of habitability, and for violations of California’s Unfair Competition Law (“UCL”).  (Earlier plaintiff's motion for class certification was rejected as the court determined that the claims were too individualized; Martinez’s reluctance to use his points was not typical of the  proposed class.)  Defendants then moved for summary judgment, contending that plaintiff could not prove he was injured as a result of defendants’ conduct.

Specifically, defendants contended that plaintiff offered no proof to support his contention that his
Platinum Points had diminished in value. In fact, plaintiff admits that when his Platinum Points “lost
value,” he meant they lost value to him because he was not using them.  In actuality, Welk Resort San Diego has maintained its premier rating since 2006, evidencing that Platinum Point Owners have maintained the same trading power since that time. Under this system, owners of Welk Platinum Points can exchange points for stays at non-Welk properties through a timeshare exchange company.  Therefore, defendants asserted that plaintiff’s damages were either “self-inflicted,”as he was unwilling to use his Platinum Points; or speculative, as he failed to present evidence of diminution of value.  In response, plaintiff alleged that his damages were not self-inflicted because he purchased the points specifically for the purpose of staying at Welk Resorts San Diego, and purchased the points specifically because he wanted to stay at a place that was clean, safe and well maintained.

To satisfy the damages element of a claim, a plaintiff must show appreciable and actual damages, that are clearly ascertainable in both their nature and origin. Here, however, plaintiff offered no evidence to rebut defendants’ proof that his Platinum Points currently have the same value on the exchange market as they did when he first purchased his points.  Additionally, plaintiff failed to address the depositions of other Resort guests, which stated that they enjoy the Resort facilities and believe that the Resort is well maintained.  Indeed, although more than 130,000 guests stay at the Resort each year, defendants were aware of fewer then 15 complaints regarding mold in the last 8 years.  Thus, the only evidence plaintiff produced in support of his claim that his points decreased in value was his own self-serving testimony as to his personal reasons for refusing to stay at the Resort, even though defendants did nothing to prevent plaintiff from using his points.
 

Plaintiff’s negligence claim alleged defendants breached their duty by selling time-share ownership points for dwellings that suffered from dangerous leaks, water intrusion, mold, mildew and/or fungus, and for failing to maintain and repair those units. The negligence claim  sought solely economic damages, so plaintiff was precluded because he sought recovery in tort for purely economic loss, and was thus barred by California’s economic loss doctrine. See KB Home  v. Super. Ct., 112 Cal.App.4th 1076, 1079, 5 Cal.Rptr.3d 587 (2004).  Under California law, the economic loss doctrine bars tort claims based on the same facts and damages as breach of contract  claims. The doctrine precludes recovery for purely economic loss due to disappointed expectations, unless the plaintiff can demonstrate harm above and beyond a broken contractual promise. The rule seeks to prevent the law of contract and the law of tort from dissolving one into the other.  Thus, conduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law and exposes a plaintiff to liability for personal damages independent of the plaintiff's economic loss.

Under the UCL claim, defendants argued plaintiff lacked standing to sue because plaintiff (1) had not suffered “injury in fact” because he had not experienced any physical injuries and the value of his Platinum Points had not diminished in value; (2) had not suffered a legally cognizable injury because he was still able to use his Points; and (3) even if plaintiff had evidence that his Platinum Points had diminished in value, there was no casual connection between the alleged wrongdoing and plaintiff’s speculation as to the value of his Platinum Points.

The court noted that to have standing under the UCL, a plaintiff must establish that he has (1) suffered an injury in fact; and (2) lost money or property as a result of the unfair competition. Walker v. Geico Gen. Ins. Co., 558 F.3d 1025, 1027 (9th Cir.2009). The “as a result of”  language requires the plaintiff to show a causal connection between the defendant’s alleged UCL violation and  plaintiff’s injury. Thus, to plead a UCL claim, a plaintiff must show he has suffered distinct and palpable injury as a result of the alleged unlawful or unfair conduct.  Here, the court found plaintiff’s claim failed as a matter of law because he failed to meet the standing requirement under the  UCL. Although plaintiff alleged that an employee of Welk stated that the Resort was “clean, safe, and well-maintained,” he offered no credible evidence to support the assertion that these statements were in fact false, other than his own self-serving declaration. Plaintiff’s own evidence supported the argument that when Welk was made aware of mold issues at the Resort,
it dealt with such issues in a timely fashion. As plaintiff was not barred from using his Platinum Points at the Resort or any other non-Welk facility, he had not shown that he has “lost money or profits” within the meaning of the statute.

The other claims had the same basic defect.  Motion granted.