Appeals Court Upholds Successor Liability Reform

A Pennsylvania appeals court issued has upheld an important statutory reform, a law limiting the liability of Pennsylvania-based businesses that have merged with companies facing a risk of asbestos liability. See James Markovsky, et al. v. Crown Cork & Seal Co., et al., No. 2755 EDA 2013 (Pa. Super. 12/22/14).

A 2001 law imposed a limitation on successor asbestos-related liabilities, such that the cumulative
successor asbestos-related liabilities of a domestic business corporation which was incorporated in the Commonwealth prior to May 1, 2001, shall be limited to the fair market value of the total assets of the transferor determined as of the time of the merger or consolidation, and such corporation shall have no responsibility for successor asbestos-related liabilities in excess of such limitation.

Defendant was alleged to be liable based on successor liability, and obtained summary judgment based on the statutory cap, and plaintiff appealed, arguing that the act was unconstitutional, inter alia, because the legislation containing the relevant Section 1929.1 supposedly violated Sections 1 (original purpose) and 3 (single subject) of the Pennsylvania Constitution. 

The court noted that It is well-settled that a statute may be deemed per se unconstitutional if, under the classification, the class consists of one member and is closed to future membership. See Pa. Tpk. Comm'n v. Commonwealth, 899 A.2d 1085, 1098 (Pa. 2006); accord Harrisburg Sch. Dist. v. Hickok, 761 A.2d 1132, 1136 (Pa. 2000) (“[A] classification is per se unconstitutional when the class consists of one member and it is impossible or highly unlikely that another can join the class.”). Here, Section 1929.1 was not per se constitutionally infirm because it does not contain an apparent class consisting of one member that is closed or substantially closed to future membership.  Moreover, based on the record, Appellant had not offered any relevant evidence suggesting that Section 1929.1 is limited to the defendant and that no other company could avail itself of the benefits of the law.  The Appellant carries a heavy burden of proof for purposes of challenging the constitutionality of the act. The statute’s legislative history reflected that its sponsors used the defendant as an example of the statute’s purpose, all the while emphasizing the potential benefit to other similarly situated corporations throughout the Commonwealth.  More importantly, Appellant did not show it is impossible or highly unlikely for other corporations to enjoy the statute’s protection.

The panel also rejected arguments that the law ran afoul of the equal protection provision of the U.S. Constitution by subjecting out-of-state corporations to disparate treatment.

Thus, the trial court did not err as a matter of law in granting the motion for summary judgment. 

A common sense decision, as the legislature clearly saw important policy benefits in terms of merger activity and protection of local employers.

Class Action on Smoke Detectors Dismissed: All Smoke No Fire

A California federal court recently rejected rejected a proposed class action in which plaintiffs alleged smoke alarms were defective in that the product’s packaging allegedly omitted safety information.  See Bird v. First Alert Inc. et al., No. 4:14-cv-03585 (N.D. Cal. ).

The defendant sells two types of smoke detectors — ionization, which the opinion said are better at catching fast-flaming fires, and photoelectric, which are reportedly more sensitive to smoldering fires. The basis of plaintiff's complaint is that the defendant failed to adequately disclose the
dangers of using ionization smoke alarms – specifically, that ionization smoke alarms do
not alert occupants of smoldering-type fires as effectively as photoelectric smoke alarms.  However, the ionization alarm, which Bird purchased, explains these differences clearly on its packaging and recommended the use of both types of alarms for “maximum protection." 

Defendant moved to dismiss. The allegations in the complaint "must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).  A motion to dismiss should be granted if the complaint does not proffer enough facts to state a claim for relief that is plausible on its face. See id. at 558-59. W]here the well-pleaded facts do not
permit the court to infer more than the mere possibility of misconduct, the complaint has alleged – but it has not shown – that the pleader is entitled to relief.  Although the court generally may not consider material outside the pleadings when resolving a motion to dismiss for failure to state a claim, the court may consider matters that are properly the subject of judicial notice. Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005); Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). Additionally, the court may consider exhibits attached to the complaint, see Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1989),

Plaintiff obviously had a high hurdle to overcome to state a claim here, given that the product packaging explains that the two types of smoke alarms respond differently to different types of fires, and recommends that consumers utilize both types. Nevertheless, plaintiff contended that the disclosures on the packaging did not constitute a "warning" and did not amount to a "sufficient disclosure" of the extent of the "safety defect" inherent in the ionization smoke detectors, because they allegedly failed to state that the ionization smoke detectors might not safely alert consumers in time to escape the deadly effects of smoldering fires.

The court recognized that even a nondisclosure claim sounding in fraud must still be pled with particularity. Kearns, 567 F.3d at 1126-27; see also Marolda v. Symantec Corp., 672 F.Supp. 2d 992, 1002 (N.D. Cal. 2009). Specifically, the plaintiff must set forth an explanation as to why the omission complained of  made the warning or label false and misleading in order to state a claim under Rule 9(b). Bias v. Wells Fargo & Co., 942 F.Supp. 2d 915, 935 (N.D. Cal. 2013). Thus, plaintiff must describe the content of the omission and where the omitted information should or could have been revealed, as well as provide representative samples of advertisements, offers, or other representations that plaintiff relied on to make her purchase and that failed to include the allegedly omitted information. See Eisen v. Porsche Cars North Am., Inc.,, 2012 WL 841019 at *3 (citing
Marolda, 672 F.Supp. 2d at 1002). While the complaint alleged that the "packaging" on plaintiff's ionization smoke detector did not contain any warning, instructions, or other information disclosing,
describing, or warning about the smoke detector's inability to adequately, effectively, and
safely detect, warn, alert, and protect occupants from smoldering-type fires,  in fact the packaging did disclose information regarding the performance of ionization alarms in smoldering fires.

Yet, the complaint alleged no facts regarding these disclosures – in particular, when plaintiff looked
at the packaging (if ever), whether she reviewed the disclosures on the packaging (if at all),
or why she disregarded the clear recommendation that she use both ionization and photoelectric alarms. Nor did the complaint allege any facts showing that the disclosures were inadequate.

Motion to dismiss granted without prejudice.

Judicial Hellholes Report Released

The American Tort Reform Foundation issued its annual Judicial Hellholes® report this week, naming courts in New York City, California, West Virginia, Florida, Illinois, Missouri and Louisiana among the nation’s most unfair in their handling of civil litigation.

The hard-hitting 2014-15 report shines its brightest spotlight on seven courts or areas of the country that have developed reputations as "Judicial Hellholes". Several have become or continue to be hotbeds of asbestos litigation, even though the U.S. has long passed its epidemiological peak for mesothelioma, and even as civil courts and lawmakers in much of the rest of the country grow increasingly skeptical of a lawsuit industry that relentlessly generates new claims.   But asbestos litigation comprises only a fraction of this year’s report.  Courts willing to entertain preposterous consumer class actions also are highlighted. Also in focus, the dangerous trend of state attorneys general contracting with private-sector personal injury lawyers to pursue their self-interest instead of the public interest.  

New York makes the top of the list for its pro-plaintiff asbestos rules, including allowing plaintiffs’ lawyers to try multiple, dissimilar cases together. California remains on the list for the troubling use of “public nuisance” law and private sector contingency-fee lawyers by district attorneys seeking to "rifle the pockets" of corporate defendants, says the report. The report also examines personal injury lawyers’ exploitation of Prop 65 and California's consumer protection laws.

West Virginia, says the report, rarely misses an opportunity to abandon traditional tort law and adopt expansive theories of liability, and this year required certification of a class action of individuals united by the fact they suffered no injury, and permitted recovery of inflated damages for fictional medical costs.  Florida continues its reputation for an unfair civil justice system, according to the report, including through judicial nullification of valid legislative tort reform, such as a law intended to ensure access to healthcare in the state by limiting subjective damages for pain and suffering in medical liability lawsuits.  Missouri makes the report for outlier, liability-expanding rulings and for invalidating reasonable civil justice reforms.  

Of special interest to your humble blogger, hometown Philadelphia is on the "watch list" after seeing some decline in mass tort lawsuit filings but in light of impending retirement of key judges in the mass tort program.

This year’s report again emphasizes the good news from some jurisdictions across the country. Points of Light are examples of, among other things, fair and balanced judicial decisions that adhere to the rule of law and positive legislative reforms. For example, the Iowa Supreme Court, in contrast to the Alabama Supreme Court, rejected “innovator liability,” which allows plaintiffs to sue companies that developed a brand-name drug when they took the generic version.
 

Supreme Court Clarifies CAFA Amount in Controversy

Readers will recognize that the Class Action Fairness Act ("CAFA") provides a mechanism for removing to federal court various class actions, especially those implicating national or multi-state issues.  One of the hurdles in that removal process is establishing an amount in controversy under the amended statute--which gives federal courts jurisdiction over class actions if the amount in controversy exceeds $5 million, 28 U.S.C. § 1332(d)(2). Recently, the United States Supreme Court clarified this requirement. See Dart Cherokee Basin Operating Co. v. Owens, No. 13-719, slip op. (U.S. 12/15/14).   The Court held that removal under the Class Action Fairness Act does not require any special evidentiary submission regarding the amount in controversy beyond the facts alleged in the notice of removal.

As specified in § 1446(a), a defendant’s notice of removal need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold; the notice need not contain evidentiary submissions. Section 1446(a) in fact tracks the general pleading requirement stated in Rule 8(a) of the Federal Rules of Civil Procedure. By borrowing Rule 8(a)’s “short and plain statement” standard, as the legislative history indicates, Congress intended to clarify that courts should apply a liberal rule to removal allegations. See H.R.Rep. No. 100–889, p. 71. Nothing more in the way of evidence is required as a prerequisite to removal.

The amount-in-controversy allegation of a plaintiff invoking federal court jurisdiction generally is accepted if made in good faith. See, e.g., Mt. Healthy City Bd. of Ed. v. Doyle, 429 U.S. 274, 276. Similarly, the amount-in-controversy allegation of a defendant seeking federal court adjudication should be accepted when not contested by the plaintiff. In the event that the plaintiff does contest the defendant’s allegations, both sides submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied. See § 1446(c)(2)(B). That happens, of course, after removal – not as a prerequisite to removal. 

In remanding this case to state court, the District Court relied, in part, on a purported “presumption” against removal. However, no anti-removal presumption exists, at least not in cases invoking CAFA, a statute Congress enacted to facilitate adjudication of certain class actions in federal court. See Standard Fire Ins. Co. v. Knowles, 133 S.Ct. 1345. Note: that observation may be very useful in future CAFA removal cases. 

Thus, the District Court erred in remanding this case for want of an evidentiary submission in the notice of removal, and the Tenth Circuit abused its discretion in denying review of that decision. 

 

SHB Product Liability Depth Recognized

Just a quick note, Law360 just ranked your humble blogger's firm, Shook, Hardy & Bacon, first among law firms with the most product liability partners worldwide. Based on partner headcounts from more than 300 U.S.-based law firms, the ranking's methodology stipulated that partners in this category "had to spend at least 75 percent of their time on matters related to that practice." Shook has 133 partners dedicated to product liability.

 

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